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Epitope Announces Fiscal 1997, Fourth Quarter Results

    BEAVERTON, Ore., Dec. 12 /PRNewswire/ -- Epitope, Inc. (Nasdaq: EPTO)
today reported its fourth quarter and fiscal 1997 operating results.  Revenue
for the year amounted to $9.4 million, up from $5.6 million in the prior year.
Revenue for the quarter ended September 30, 1997 totaled $1.5 million,
compared with $2.1 million for the fourth quarter in fiscal 1996.  For the
year ended September 30, 1997, the Company reported a net loss, including
discontinued operations, of $22.4 million, or $1.67 a share, compared with a
net loss of $1.4 million, or $0.11 a share, in fiscal 1996.  The Company
reported a net loss of $5.6 million, or $0.42 per share, for the fourth
quarter ended September 30, 1997, compared with a net loss of $1.4 million, or
$0.11 a share, for prior year period.
    The loss from continuing operations was $4.1 million for fiscal 1997
compared to a profit of $1.1 million for fiscal 1996.  The major factors
affecting this change were:  (1) a gross profit increase from product sales of
$2.4 million in fiscal 1997, (2) a one-time $5.0 million fee paid by
SmithKline Beecham in 1996, (3) a $0.5 million reduction in interest earned
because of lower levels of cash, (4) a $1.0 million increase in R&D expense
primarily from over-the-counter market clinical studies, offset by
$0.5 million in added funding from SmithKline Beecham, and (5) a $1.6 million
increase in selling, general and administrative expense primarily attributable
to the expansion of the Company's direct sales effort.

    Epitope Medical Products
    Epitope's medical products sales increased 67% in 1997, to $9.4 million.
Sales of Epitope's oral specimen collection device were $6.3 million,
representing an 89% increase over levels achieved in 1996.  The device is
marketed by Epitope under the name EpiScreen(R) in the life insurance industry
and the name OraSure(R) for public health and professional use.  The continued
increase in sales volume resulted from the growing number of life insurance
companies adopting the device for testing insurance applicants and extending
its use to broader age and policy ranges, as well as increasing sales to the
public health market.  Fourth quarter sales were affected by one distributor's
decision to adjust inventory levels.
    Gross margins on EpiScreen/OraSure product sales improved from 54.1% of
sales in 1996 to 65.0% of sales in 1997 as a consequence of increased sales
volume of EpiScreen/OraSure devices.
    As of September 30, 1997, Epitope had firm orders totaling $0.9 million
and $450,000, respectively, for delivery of EpiScreen/OraSure and HIV
confirmatory tests in the first quarter of fiscal 1998.

    Discontinued Operations
    As announced previously, Epitope has decided to spinoff its Agritope
agricultural biotechnology subsidiary through a dividend distribution to its
shareholders.  As a result of the spin-off, Agritope will cease to be a wholly
owned subsidiary of Epitope and will operate as an independent public company.
Because the distribution is expected to occur shortly, Agritope is accounted
for as a discontinued operation in 1997, with comparative presentation for
1996 financial results.  Discontinued Operations results for 1997 include
$8.7 million in Agritope losses for this period, as well as estimated
continuing Agritope losses and spin-off related expenses of $1.2 million for
the months in fiscal 1998 prior to the spin-off.  Also included in
Discontinued Operations is a loss of $8.4 million attributable to the former
Epitope subsidiary Andrew & Williamson Sales Co., which was returned to its
former owners in May 1997 when Epitope rescinded its acquisition of that
company.

    Epitope, Inc.
    A tabulation of operating highlights and selected balance sheet data
follows (in thousands, except per share data):

                               Three months ended            Year ended
    OPERATING HIGHLIGHTS       9/30/97     9/30/96       9/30/97      9/30/96

    Revenues                  $ 1,500     $ 2,055       $ 9,360      $ 5,594
    Net loss
    (Continuing Operations)    (1,878)       (663)       (4,081)       1,101
    Net loss                   (5,576)     (1,431)      (22,440)      (1,400)
    Net loss per share
    (Continuing Operations)     (0.14)      (0.05)        (0.30)        0.08
    Net loss per share          (0.42)      (0.11)        (1.67)       (0.11)

    SELECTED BALANCE SHEET DATA                      9/30/97      9/30/96

    Cash and marketable securities                   $ 9,076      $24,041
    Working capital                                    9,532       24,793
    Total assets                                      17,019       29,784
    Shareholders' equity                              15,014       27,967

    Epitope, Inc. is an Oregon corporation which develops and markets medical
diagnostic products.  The current focus of the products is in the use of oral
fluid in the detection of HIV infection, with emphasis in the life insurance
and public health markets.

Source: EPITOPE Inc.


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