Genaissance Reports First Quarter 2005 Results

Genaissance Reports First Quarter 2005 Results
Company Cites Progress In Key Areas, Including Recent Increase In Cash Reserves



NEW HAVEN, Conn., May 3  /PRNewswire-FirstCall/ -- Genaissance Pharmaceuticals,
Inc. (NASDAQ:GNSC) today reported its financial results for the first quarter
ended March 31, 2005, which include the results of operations of Lark
Technologies, Inc. since being acquired on April 1, 2004.

Financial Results

For the three months ended March 31, 2005, revenues increased to $5.6 million,
compared to revenues of $3.7 million for the three months ended March 31, 2004,
primarily as a result of the Lark acquisition.  Operating expenses for the
three months ended March 31, 2005, were $8.6 million, compared to operating
expenses of $8.2 million for the three months ended March 31, 2004. For the
three months ended March 31, 2005, Genaissance's net loss attributable to
common stockholders was $3.3 million, or $0.09 per share, compared to a net
loss of $4.8 million, or $0.21 per share, for the three months ended March 31,
2004.

As of March 31, 2005, Genaissance had cash and cash equivalents totaling $6.1
million, excluding the $2.0 million in new cash derived from the $4.5 million
secured debt financing that closed on April 21, 2005.

"We believe that this was an important quarter for the Company with the FDA
releasing its guidance for using pharmacogenomics in drug development and our
progress in certain key business segments," said Kevin Rakin, President and
Chief Executive Officer of Genaissance.  "Importantly, we improved our
financial position by substantially reducing our loss from operations and our
balance sheet was bolstered through refinancing our bank debt, giving us $2.0
million of new cash.  Our pharmacogenomic support and DNA analysis businesses
are developing positively and we are moving forward with our planning for a
pharmacogenomic-based Phase II clinical trial of the novel anti-depressive drug
vilazodone, licensed from Merck KGaA."

Recent Highlights

Highlights during the quarter and the subsequent period up to today included:
(1) issuance by the U.S. FDA of guidance that is expected to encourage the
development of genetically-targeted medicines through broader use of
pharmacogenomic technology; (2) a meeting with the FDA regarding the clinical
development of vilazodone; (3) closing of a $4.5 million loan agreement; (4)
increase in the sales of the FAMILION(TM) Test; (5) presentation of partial
results of the Company's CARING study that may lead to wider use of the only
antipsychotic known to reduce suicide among schizophrenics; (6) a joint license
and co-marketing agreement to provide the next generation genetic screening
assay for drug development and marketing; (7) receipt of a Notice of Allowance
of a U.S. patent for genetic testing of a patient's ability to metabolize
certain drugs, which could improve the safety or therapeutic outcome of more
than one-half of all drugs, including chemotherapeutic agents; and (8) a
collaboration with the U.S. government and Monsanto to provide genetic tools
for soybean breeding research.

FDA Guidance on Pharmacogenomics - In March 2005, the FDA issued its Guidance
for Industry on Pharmacogenomic Data Submissions, which is expected to increase
the pharmaceutical industry's confidence level in pursuing marketing approval
of targeted medicines guided by an individual's genetic makeup and to aid the
acceptance of pharmacogenomics into standard medical practice and prescription.
The guidance supports Genaissance's strategy of reviving failed late-stage
therapeutics with pharmacogenomic-based clinical studies.  (For an informative
article in the current issue of Pharmacogenomics, detailing Genaissance's
pharmacogenomic drug development strategy, including a special discussion on
vilazodone, please copy and paste the following link into your browser:
http://www.genaissance.com/pharmacogenomics/publications/reed_pharmacogenomics
_2005.pdf.)

The new guidance specifies when and how pharmacogenomic data need to be
submitted as part of applications for marketing approval of new drugs and
should eventually enable safer and better drugs to reach the market.  The
guidance also describes how pharmacogenomic data will be utilized by the agency
in regulatory decision-making.

Vilazodone Clinical Development - On March 1, our vilazodone development team
met with the Internal Pharmacogenomics Review Group at the FDA to discuss
development plans for vilazodone and to gain valuable feedback from FDA
personnel.  The IPRG consists of senior FDA officials representing CDER, CBER
and CDRH.  The compound failed to meet its broad endpoints in Phase II clinical
trials for depression, but did show signs of efficacy and a favorable side
effect profile in the more than 1,000 patients tested.  Our plan is to arrange
funding to conduct new Phase II trials using pharmacogenomics to identify the
patient population most likely to respond to the drug.

Cash Reserves - In April 2005, Genaissance closed on a two-year, $4.5 million
secured loan with Xmark Funds and its affiliates.  Proceeds from the loan were
used to repay the remaining $2.5 million term loan with Comerica Bank and to
provide additional working capital.  The loan bears interest at five percent
and has no scheduled principal payments.  Principal is due in full on April 21,
2007, or earlier, depending on the Company's cash liquidity and certain other
events.  The funding removed the minimum cash balance requirements that were
required under the Comerica Bank loan.

FAMILION(TM) Test Sales Gained Momentum - Since its launch in late spring 2004,
the FAMILION(TM) Test has gained acceptance with over 150 patient referrals
made by nearly 50 pediatric and adult cardiologists and electro- physiologists.
 Costs of the tests, which are performed in the Company's CLIA- certified
facility in New Haven, are reimbursed by Medicare and a significant number of
major insurance companies.  Specialists utilize the test as a vital component
in their evaluation and management of patients with inherited Long QT Syndrome
and other ion channel abnormalities, which, if left untreated, can cause sudden
cardiac death.

CARING Study Results - Preliminary data on genetic associations involved in a
life-threatening blood disorder caused by clozapine, a highly regarded but
under-prescribed medication for the treatment of schizophrenia, were presented
on April 15 at Pharmacogenetics in Psychiatry Conference. Genaissance believes
that these findings may lead to a simple DNA test that could broaden the use of
clozapine, the only approved antipsychotic known to reduce the incidence of
suicide in schizophrenics.  A test of the type envisioned would identify
individuals whose genetic signature predisposes them to clozapine-induced
agranulocytosis, a dramatic lowering of white blood cells that can result in
serious infection and death.  Individuals, who test negative for the gene
variants, would potentially be able to take the drug, with fewer restrictions
than exist today.

New Pharmacogenomic Services Focused on More Efficient Clinical Trials -
Genaissance signed a joint license and co-marketing agreement with privately-
held ParAllele BioScience, Inc. to provide genetic screening technology and
services for drug development and marketing.  Under the terms of the agreement,
ParAllele is licensing more than 400 proprietary single nucleotide
polymorphisms (SNPs) from Genaissance.  These SNPs will be combined with others
selected from the public domain, for a total of approximately 1,500 SNPs, which
are incorporated into the MegAllele(TM) DME-T assay panel developed and
marketed by ParAllele.  This new panel will provide full coverage of the
genetic variation for more than 160 genes that are involved in drug metabolism
and transport pathways. Genaissance will be the first company to offer the
panel for use in a GLP-compliant environment.

Patent Portfolio Expanded - Genaissance received a notice of allowance from the
U.S. Patent and Trademark Office.  The allowed patent, which is co- owned with
Duke University, claims testing for a common genetic variant in the CYP3A4 gene
to predict whether or not an individual is a poor metabolizer of certain drugs.
 It is estimated at least 50 percent of all drugs, including chemotherapeutic
agents and a wide variety of over-the-counter medications, are metabolized by
CYP3A4.  Individuals with a reduced ability to metabolize these drugs may be at
risk for adverse drug reactions.

Agricultural Genotyping - An agreement between Genaissance, Monsanto Company
and the Agricultural Research Service, the chief scientific research agency of
the U.S. Department of Agriculture, is expected to provide U.S. soybean plant
breeders with new technology for more accurate and efficient plant breeding
research.  The project's intent is to map SNP DNA markers in soybeans, creating
a detailed molecular genetic map of the soybean that includes a large number of
SNP DNA markers along with pre-existing SSR (simple sequence repeat) markers. 
In addition, all of the map position information and use of soybean SNP markers
covered by the agreement will be freely available to all U.S. soy breeders and
geneticists, creating the first publicly available map of its kind.

Conference Call

Genaissance will host a conference call and audio web cast to discuss events
disclosed in this press release. The previously announced call is scheduled for
today at 11:00 a.m., Eastern Time. To participate in this conference call, dial
719-457-2629, confirmation code 4544361, shortly before 11:00 a.m. ET.  A
replay of the call will be available from 2:00 p.m. ET through midnight Monday,
May 9, 2005.  The replay number is 719-457-0820, confirmation code 4544361.

About Genaissance

Genaissance Pharmaceuticals, Inc. is developing innovative products based on
its proprietary pharmacogenomic technology and has a revenue-generating
business in DNA and pharmacogenomic products and services.  Genaissance also
markets its proprietary FAMILION(TM) Test, designed to detect mutations
responsible for causing Familial Long QT and Brugada Syndromes, two causes of
sudden cardiac death.  The Company's product development strategy is focused on
drug candidates with promising clinical profiles and finding genetic markers to
identify a responsive patient population.  This strategy is designed to enable
Genaissance to leverage existing clinical data and, thus, reduce the costs and
risks associated with traditional drug development and increase the probability
of clinical success and commercialization.  The Company's lead therapeutic
product, vilazodone for depression, is in Phase II of development.  For more
information on Genaissance, visit the Company's website at:
http://www.genaissance.com/.

This press release contains forward-looking statements, including statements
about the expected growth and development of Genaissance's business, such as
Genaissance's ability to effectively complete its vilazodone and clozapine
programs, detect associations between clinical outcomes and genetic variation,
the ability to assess how genetic variation can affect drug response, efforts
to build a drug candidate pipeline, the timing and outcome of its genetic
testing programs and the ability of Genaissance to apply its technologies to
the development, marketing and prescribing of drugs and Genaissance's ability
to detect associations between clinical outcomes and genetic variation.  Such
statements are subject to certain factors, risks and uncertainties that may
cause actual results, events and performance to differ materially from those
referred to in such statements, including, but not limited to, Genaissance's
ability to fund its drug development efforts, the extent to which genetic
markers (haplotypes) are predictive of clinical outcomes and drug efficacy and
safety, the attraction of new business and strategic partners, the adoption of
the Company's technologies by the pharmaceutical industry, the acceptance of
the Company's cardiac tests by health care providers, the timing and success of
clinical trials, competition from pharmaceutical, biotechnology and diagnostics
companies, the strength of the Company's intellectual property rights and those
risks identified in the Annual Report on Form 10-K for the year ended December
31, 2004, filed with the Securities and Exchange Commission on March 15, 2005,
and in other filings the Company makes with the Securities and Exchange
Commission from time to time.  The forward-looking statements contained herein
represent the judgment of Genaissance as of the date of this release.
Genaissance disclaims any obligation to update any forward-looking statement.

                    GENAISSANCE PHARMACEUTICALS, INC.
                         Statements of Operations
                               (Unaudited)
                  (In thousands, except per share data)

                                                     Three Months Ended
                                                          March 31,
                                                     2005          2004

  Revenues:
  License and research                              $2,853         $2,868
  Laboratory services                                2,735            860

  Total revenue                                      5,588          3,728

  Operating Expenses:
    Cost of laboratory services                      2,027            861
    Research and development                         3,301          5,012
    Selling, general and administrative              3,240          2,358

     Total operating expenses                        8,568          8,231

     Loss from operations                           (2,980)        (4,503)

  Other income                                          34             75
  Interest expense                                    (157)          (180)

    Loss before income taxes and
     equity in loss of affiliate                    (3,103)        (4,608)

  Income tax (expense) benefit                         (26)            49

    Loss before equity in loss of affiliate         (3,129)        (4,559)

  Equity in loss of affiliate                            -           (150)

    Net loss                                        (3,129)        (4,709)

  Preferred stock dividends and accretion             (136)          (110)
  Beneficial conversion feature of preferred
   stock and warrant                                     -             (6)

  Net loss applicable to common stockholders       $(3,265)        $(4,825)

  Net loss per common share, basic and diluted      $(0.09)         $(0.21)

  Weighted average shares used in computing
   net loss per common share                        34,629          23,194


                            Balance Sheet Data
                              (in thousands)
                               (unaudited)

                                                  March 31,      Dec. 31,
                                                     2005          2004

  Cash and cash equivalents                         $5,880         $9,174
  Working capital                                    5,247          4,818
  Total assets                                      46,023         50,038
  Long-term debt                                     6,050          3,692
  Stockholders' equity                              16,238         19,102


DATASOURCE: Genaissance Pharmaceuticals, Inc.



CONTACT:  Kevin Rakin, President & Chief Executive Officer, Genaissance

Pharmaceuticals, Inc., [phone], ; or Rhonda

Chiger (investors), Rx Communications, [phone], , or

Tom Redington (media) of Redington, Inc., [phone],

  



Web site:  http://www.genaissance.com/ 

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