Martek Triples Sales Dollars in 2Q02,OmegaTech Acquisition Adds to Net Loss

Martek Triples Sales Dollars in 2Q02,OmegaTech Acquisition Adds to Net Loss

COLUMBIA, Md.--Martek Biosciences Corp. (NASDAQ:MATK)reported June 5 that for its second quarter (2Q02), ended April 30, revenueexperienced a marked boost, but cost of sales and the April 2002 acquisition ofBoulder, Colo.-based OmegaTech contributed to a widening net loss.

Net sales nearly tripled to $11.4 million in 2Q02, a vastimprovement over 2Q01's revenue of $4.0 million. Gross margin, however, dippedto 27.5 percent of sales from the same period last year's 40.5 percent of sales.This was due to a 73-percent increase in the cost of product sales androyalties, up 60 percent from 2Q01. Also, the cost associated with theproduction of the company's arachidonic acid (AA), manufactured by third partyDSM Gist B.V., significantly impacted gross margin. Martek expects AA costs todecrease considerably during 3Q02 due to complete amortization of start-up costsat DSM and increasing volume purchases.

Operating expenses also contributed to a poorer bottom line; dueto a one-time expense of $15.8 million related to the April 25 acquisition ofOmegaTech Inc., Martek registered $21.3 million in operating costs for 2Q02compared to 2Q01's $5.2 million. Net income, not surprisingly, was affected,with the company posting a net loss of $17.9 million, or $.84 per share lost,compared to 2Q01's net loss of $3.2 million, or $.17 per share lost.

For the quarter, sales of nutritional products increased by $8.0million. To improve this number, Martek expects the docosahexaenoic acid (DHA)manufacturing agreement with FermPro Manufacturing of Kingstree, S.C., and theexpansion of Martek's Winchester, Ky., plant to meet market demand for DHA infiscal 2003.

During the quarter, the company also signed a non-exclusivelicense agreement with a subsidiary of the H.J. Heinz Co. to market infantformula using Martek's oils in Australia, New Zealand and certain PacificIslands. Martek received an initial cash payment from Heinz and will receiveongoing royalties from the company. To date, five of Martek's licensees,including two that received regulatory approval to market products in the UnitedStates, have the go-ahead to sell infant formula supplemented with the company'soils to more than 60 companies.

"I am pleased that nutritional oil sales are continuingtheir rapid growth in infant formula," said Henry Linsert, Jr., chiefexecutive officer. "With the recent OmegaTech transaction, they now arepoised for introduction into more general food and beverage products aswell."

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