October 29, 1998

RECOMMENDATION: BUY

CYPRESS BIOSCIENCE, INC. (NASDAQ: CYPB)

"FDA Panel Recommends Approval of Prosorba Column for Moderate to Severe RA"

RESEARCH UPDATE — REITERATE "BUY" RECOMMENDATION

As anticipated in our report of October 14, 1998, an FDA Advisory Panel voted 10-to-1 today to recommend approval of CYPB’s Prosorba Column for the treatment of rheumatoid arthritis ("RA"). The Panel recommended that the FDA approve the column for the treatment of patients with moderate to severe RA, that have failed second-line therapies, or DMARDs, such as methotrexate. The Company anticipates formal FDA approval by the end of this year. We are very encouraged that the recommendation included patients with moderate, in addition to severe, RA patients, as we believe this significantly increases the potential market for the Prosorba Column.

The panel’s recommendation is conditional on CYPB conducting a post-marketing study of the Prosorba Column in conjunction with other second-line therapies, or in repeated therapy. We are not surprised by this development and, in fact, it is our understanding that CYPB had already submitted such a proposal to the FDA and planned to complete these additional studies anyway.

CYPB has been preparing for this outcome, and is currently in process of hiring its internal salesforce. CYPB is planning to train its salesforce over the next couple of months, and commence a "rolling" product launch (concurrent with additional salesforce training) during the first quarter of 1999. With respect to marketing towards the medical community and leading rheumatologists, CYPB management has scheduled a number of mailings and speaking engagements, including the presentation of scientific papers at the upcoming American College of Rheumalologists (ACR) annual meeting in San Diego in mid-November. Additionally, CYPB is hosting satellite symposia at that conference (on November 12, 1998) entitled "Emerging Role of Apheresis with Protein A Immunoadsorption," which includes presentations by leading investigators of the Prosorba Column.

Our basic research report on CYPB, dated October 14, 1998, is available on our website at www.SmallCapsOnline.com, and we recommend investors review this report for details on the Company, the Prosorba Column, the market for RA therapies and competition. We believe CYPB is undervalued based on Prosorba for RA alone, without regard for the significant potential of its Cyplex technology, and are reiterating our BUY recommendation for investors tolerant of risks associated with small-cap and micro-cap investments.

1. Valuation and Timing

• We believe CYPB shares offer very good value at current levels based on the potential for Prosorba for RA alone; and that likely milestones in 1998 should positively affect institutional interest, Wall Street sponsorship and, ultimately, the share price. We have a 12-month target price range of $5 to $7 per share.

2. Prosorba for RA

• The Company is actively seeking alliances with marketing partners for Prosorba for RA. We believe the Panel’s recommendation for approval will strengthen CYPB’s negotiating position with potential partners, and that CYBP will establish one or more such alliances in the coming months.

FOR ADDITIONAL INFORMATION

Contact SmallCaps Online LLC — 212-554-4158

For corporate inquiries: Jeffrey B. Davis

For investor inquiries: Jennifer LaVin

For media inquiries: Jeni Gray

RISK CONSIDERATIONS

This section of the document is to remind potential investors to undertake a prudent level of due diligence prior to making an investment in securities of Cypress Bioscience, Inc. For a complete description of risks and uncertainties to CYPB’s business, see the Risk Factors section in CYPB’s SEC filings, which can be accessed directly from the SEC Edgar filings at www.SEC.gov on the internet. Other potential risks include:

• Market risk: Like many small-cap and micro-cap stocks, CYPB’s share price is trading near its 52-week low. Investors should consider technical risks common to many small-cap or micro-cap stock investments, including liquidity levels, small float, risk of dilution, dependence on key personnel, and dependence on single products or technologies.
• Business risk: CYPB has limited experience in the marketing of the Prosorba column for the RA indication. Although it is seeking a corporate partner to assist in marketing of Prosorba for RA, there can be no assurance that such an alliance will materialize, or that the market will accept the product.
• Regulatory risk: There can be no guarantee that Prosorba for RA will be approved by the FDA. In addition, after commencing its Phase II clinical trials for Cyplex, there is no indication the FDA will approve the initiation of a Phase III trial or approve Cyplex for use by the general public.
• Competitive risk: There are many new drugs in development targeting the RA indication, and we anticipate the competition to be intense. Many of CYPB’s competitors may be larger, better capitalized and hold dominant market positions.

SOURCES FOR ADDITIONAL INFORMATION

The following are website addresses offering related information, and links to other sources of information.

www.CypressBio.com CYPB’s corporate website

www.SmallCapsOnline.com SmallCaps Online’s site for company information and research

www.FDA.gov US Food and Drug Administration homepage

www.rheumatology.org American College of Rheumatology homepage

www.arthritis.org Arthritis Foundation homepage

www.WHO.int World Health Organization homepage

www.AABB.org American Association of Blood Banks homepage

www.AMA-Assn.org American Medical Association homepage

www.SEC.gov U.S. Securities and Exchange Commission, with links to EDGAR filings

The information in this report has been obtained from sources which we believe to be reliable, but we do not guarantee its accuracy or completeness. Neither the information nor any opionion expressed constitutes a solicitation by SmallCaps Online LLC for the purchase or sale of any securities. SmallCaps Online LLC has performed investment banking, consulting or other services for or may solicit investment banking, consulting or other business from, any company mentioned in this report. SmallCaps Online LLC or persons associated with SmallCaps Online LLC may at anytime be long or short any of the securities referred to herein and may make purchases or sales thereof while this report is in circulation or posted on the SmallCaps Online LLC website at www.SmallCapsOnline.com. This material, or any portion thereof, may not be reproduced without prior permission from SmallCaps Online LLC. SmallCaps Online LLC is not responsible for the contents of this document which is intended for electronic transmission and could be thus subjected to tampering or alteration. Copyright © 1998 by SmallCaps Online LLC. All rights reserved.