March 8, 1999 RECOMMENDATION: BUY

CYPRESS BIOSCIENCE, INC. (NASDAQ: CYPB)

"CYPB Announces Definitive Licensing and Distribution Agreement with Fresenius; Deal Includes Upfront Equity Investment, License Payments, Profit Sharing and LOC"

Exchange Symbol.....................CYPB (NASDAQ)
Price of Common Stock (03/05/99).............$3.19
30-Day Average Trading Volume............172,000
Shares Outstanding.........................39.5mm
52-Week High/Low......................$3.96/$1.43

Address...............4350 Executive Drive, Suite 325
.................................San Diego, CA  92121
Telephone/Fax.............619-452-2323 / 619-452-1212
Chairman & CEO............Jay D. Kranzler, M.D., Ph.D.
President & COO.......................Carl Bobkoski

Recent Developments

As anticipated following the late-January announcement of a signed a letter-of-intent, CYPB announced that it had signed a definitive licensing and distribution agreement with Fresenius AG for the Prosorba® column, and provided further details on the transaction. The partnership is contingent upon final FDA approval of the Prosorba column for rheumatoid arthritis (RA), which we believe will occur very soon.

We continue to recommend purchase of CYPB stock, as we anticipate FDA approval of Prosorba for RA and a successful launch of the product during 1999. With its international presence and leadership in worldwide dialysis and other acute care centers and services, we believe Fresenius represents the ideal partner for CYPB to market the Prosorba column for RA. In addition, once the launch is underway, we are confident that CYPB will reallocate some resources to the development of Cyplex, a platelet substitute, the value of which we believe is not currently reflected in CYPB’s stock price.

Terms of the Agreement: Under the agreement, Fresenius receives an exclusive license to distribute the Prosorba column in the US, Europe, Latin America and, subject to certain conditions, Japan and certain Asian countries. CYPB will be responsible for continued research, clinical and regulatory activities in the US, while Fresenius will lead international development and registration efforts. Also, CYPB will control sales and marketing efforts to the 3,900 US rheumatologists, while Fresenius will serve as exclusive distributor in the territory and will participate as a co-marketer in the US. Fresenius will also design what CYPB is calling "Prosorba-friendly" instruments and disposables for use in apheresis, dialysis and other centers of treatment. A majority-owned Fresenius company called Fresenius Medical Care ("FMC") is a leading provider of dialysis services in the world, with 770 dialysis sites in the US and contracts with more than 500 hospitals to offer services that include apheresis. CYPB will work with FMC to increase the availability of the column once approved, and will include the column in its services.

Financially, Fresenius is making an upfront $1.5 million equity investment in CYPB and could make an additional $54.0 million in license payments based on sales. CYPB and Fresenius will split profits on a 50/50 basis in countries outside the US. In the US, the profit split will be 50/50 until an undisclosed sales threshold has been reached and then CYPB will receive 60% of the profits to Fresenius’ 40%. Fresenius has agreed to a purchase option of the Prosorba column manufacturing facility and has extended a line of credit to CYPB that would offset the purchase price if exercised. CYPB expects to have access to $7.0 million during 1999 under the line of credit. We believe that through these payments, and the significant reduction in burn rate (Fresenius will pick 50% of the costs going forward), CYPB will be able to reach breakeven earlier, perhaps without additional financing.

Background on Prosorba: The Prosorba column, which is used in conjunction with an apheresis procedure, is currently being reviewed by the FDA for the treatment of moderate to severe RA. The column has been on the market since 1987 for the treatment of Idiopathic Thrombocytopenic Purpura (ITP), a bleeding disorder, and was recommended for approval by an FDA advisory panel in October 1998. In late January, CYPB received a letter of deficiency from the FDA with several audit questions and a request for approval of a Phase IV study design prior to approval. We believe that the compliance audit questions were routine, and that this request will result in only a short-term delay in the approval of Prosorba for use in RA.

CYPB develops, manufactures and markets medical devices and therapeutics for certain types of immune diseases and is engaged in the development of a novel blood platelet substitute. CYPB is currently awaiting FDA review of its completed PMA to the FDA for the Prosorba column for Rheumatoid Arthritis (RA). CYPB currently markets the Prosorba column for treatment of idiopathic thrombocytopenic purpura (ITP), an immune disorder where platelets are depleted, reducing the clotting potential of blood. CYPB is also in Phase II clinical trials for Cyplex, a substitute for blood platelets which offers substantially longer shelf life and a greater safety profile than traditional platelet alternatives.

For Additional Information

Sources for Additional 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

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