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Hollis-Eden Announces Financial Results for First Quarter 2004; Names Two New Nominees to the Company's Board of Directors

SAN DIEGO--(BUSINESS WIRE)--May 7, 2004--Hollis-Eden Pharmaceuticals, Inc. (Nasdaq:HEPH) today announced financial results for the first quarter of 2004. For the quarter ended March 31, 2004, the Company reported a net loss of $5.9 million (or $0.31 per share), compared to a net loss of $5.2 million (or $0.40 per share) in the first quarter of 2003.

First quarter 2004 research and development expenses totaled $4.7 million, compared to $2.6 million in the first quarter of 2003. The increase in research and development expense in the first quarter of 2004 was due mainly to the growth in the Company's laboratory operations, preclinical activities and personnel, ongoing testing of the Company's radioprotection drug development candidate, NEUMUNE(TM), as well as its investment in Congressional Pharmaceutical Corporation (CPC), which was expensed as in-process R&D.

General and administrative expenses for the first quarter of 2004 were $1.4 million compared to $2.3 million in the first quarter of 2003, which included $1.4 million in non-cash charges related to the issuance of a warrant to a director and issuance of stock options to an officer and a director. Excluding non-cash charges, general and administrative expenses increased by $0.5 million for the comparable three-month periods.

As of March 31, 2004, the Company reported $79.2 million in cash and cash equivalents. Cash used in operations for the first quarter of 2004 totaled $5.4 million versus $2.8 million for the first quarter of 2003. As previously announced, anticipated cash usage for operations for full year 2004 is expected to be in the range of $23 million to $27 million.

During the first quarter of 2004, Hollis-Eden continued to make progress in the development of NEUMUNE for protection from radiation injury and in its efforts to advance second-generation compounds that have demonstrated improved activity in protecting the bone marrow in preclinical models of chemotherapy-induced bone marrow suppression. NEUMUNE is being developed in conjunction with the U.S. military for use in protecting soldiers and civilians from the acute effects of radiation injury. The compound is being developed pursuant to a new rule enacted by the U.S. Food and Drug Administration (FDA) for medical countermeasures to weapons of mass destruction under which approval may be granted on the basis of efficacy in animals and safety in humans. As discussed in the Company's recent year-end conference call, Hollis-Eden is utilizing new discoveries around structure activity relationships, pharmacokinetics and formulations for immune regulating hormones to optimize product opportunities in both its radiation program and its chemotherapy protection program. Once these activities are completed, the Company anticipates entering into a pivotal efficacy study in non-human primates and Phase I clinical studies in humans to support a potential New Drug Application (NDA) for the radiation injury indication and also to open an Investigational New Drug (IND) application for the chemotherapy protection indication.

Hollis-Eden expanded its product opportunities in radiation and chemotherapy protection in the first quarter of 2004 through the acquisition of CPC, a company that was formed to commercialize a series of compounds that have the potential to protect against DNA mutations that can occur as a result of radiation injury or chemotherapy. These genetic mutations are believed to be an underlying cause of the increased incidence of cancer that has been demonstrated as a late effect of radiation injury and is also associated with secondary cancers following chemotherapy. The lead compound in the series being developed for radiation protection is PHOSPHONOL(TM), which, like NEUMUNE, may be eligible for approval under the FDA's new animal efficacy rule in this indication.

In the Company's global infectious disease program, Hollis-Eden is continuing active discussions with a number of governmental and international healthcare organizations about collaborating in a public-private partnership to develop and potentially commercialize its compound IMMUNITIN(TM) for a number of global infectious diseases. In the area of inflammation and autoimmune disorders, Hollis-Eden is profiling potent second-generation compounds in preclinical models for selection as development candidates.

New Nominees for Board of Directors

In keeping with its goal of positioning the Company as a leading biotechnology company developing medical countermeasures for weapons of mass destruction, Hollis-Eden announced two new nominees to its Board of Directors with extensive experience in bioterrorism and Homeland security, and in biotechnology and healthcare corporate finance.

Jerome M. Hauer, currently Executive Director of the Response to Emergencies and Disasters Institute (READI) and Associate Professor, School of Public Health at The George Washington University, is recognized as one of the nation's leading experts on bioterrorism and emergency preparedness, with over 20 years of experience in emergency management. During the events of September 11, 2001 and the nation's anthrax crisis that followed, Mr. Hauer served as Senior Advisor to the Secretary of Health and Human Services (HHS) for National Security and Emergency Management. In June 2002, HHS Secretary Tommy G. Thompson named Mr. Hauer as Acting Assistant Secretary for the Office of Public Health Emergency Preparedness. In this role, Mr. Hauer was responsible for coordinating the country's medical and public health preparedness and response to emergencies, including acts of biological, chemical and nuclear terrorism. Prior to serving at HHS, Mr. Hauer worked with Mayor Rudolph W. Giuliani as the first Director of the Mayor's Office of Emergency Management for New York City, charged with coordinating the city's emergency response plans. In his current capacity, he is working with the Department of Homeland Security to coordinate and deliver first responder training for the National Capitol Region, as well as the nation. Mr. Hauer graduated from New York University with a B.A. degree in psychology and history and from the Johns Hopkins School of Public Health with a Master's degree.

Marc R. Sarni, presently a Principal at Cornerstone Investment LLC, a group engaged in the investment, development and property management of both residential and commercial real estate, worked as an investment banker at A.G. Edwards and Sons, Inc. for 17 years. From 1997 until 2003, Mr. Sarni was the Managing Director at A.G. Edwards responsible for establishing and managing the Healthcare Industry Group within the corporate finance department's Emerging Growth Sector. Prior to joining A.G. Edwards, Mr. Sarni spent three years working as a Certified Public Accountant at PriceWaterhouse (now PricewaterhouseCoopers LLP). Mr. Sarni also currently serves as a member of the Investment Advisory Committee for Ascension Health Ventures, the strategic health venture-investing subsidiary of Ascension Health, the nation's largest Catholic and not-for-profit healthcare system. Mr. Sarni graduated from the University of Missouri at Columbia with a BSBA degree in Accounting and from the University of Chicago with an M.B.A. in Finance.

"During the first quarter of 2004, we focused first and foremost on advancing our program for developing medical countermeasures against nuclear threats," stated Richard B. Hollis, Chairman and CEO of Hollis-Eden. "Toward that end, we continue to make good progress in our NEUMUNE optimization program and I look forward to giving investors a more detailed description of our activities in the coming months. We also expanded our product pipeline for compounds that protect from radiation and chemotherapy injury through the acquisition of Congressional Pharmaceutical Corporation and its rights to promising technology for protecting against DNA damage, and have begun to profile those compounds for near-term development as a medical countermeasure for nuclear threats. In addition to our development activities, we continue to work with legislators and administrators in Washington, D.C. in support of a potential stockpiling order, and remain optimistic that we will succeed in securing such an order. Relative to our broader drug development pipeline, during the first quarter we continued to study a number of second-generation candidates for both chemotherapy protection and autoimmune disorders, and are excited about the encouraging data we are generating. We continue to add to the strength of our scientific and management teams to facilitate identification of promising second-generation compounds, and to advance those candidates into clinical stage development. In addition, with the nominations of Jerry Hauer and Marc Sarni to our Board of Directors, we have an opportunity to strengthen our leadership in areas of great importance to the Company. Mr. Hauer and Mr. Sarni each bring valuable experience, knowledge and vision to Hollis-Eden, and we look forward to benefiting from their contributions to the Board."

More detailed information is available in the Company's Form 10-Q, which is also scheduled to be filed today with the Securities and Exchange Commission (http://www.sec.gov/cgi-bin/browse- edgar?action=getcompany&CIK=0000899394).

Conference Call: Hollis-Eden will conduct a conference call and live webcast on Friday, May 7, 2004 at 2:00 p.m. Eastern (11:00 a.m. Pacific) to discuss first quarter 2004 financial results. The conference call can be accessed by dialing 800-599-9795 (domestic) or 617-786-2905 (international) and requesting the Hollis-Eden conference call. A live webcast of the conference call will be available under "Event Calendar" on the Investors section of Hollis-Eden's website at www.holliseden.com. The webcast will be archived at the Company's website for 30 days, and a replay of the call will be available by phone for 24 hours beginning approximately one hour after the call is completed, and can be accessed at 888-286-8010 (domestic) or 617-801-6888 (international), passcode 93898424.

Hollis-Eden Pharmaceuticals, Inc. is a development-stage pharmaceutical company based in San Diego, California, working to become the world leader in the development of a new class of investigational drugs known as Immune Regulating Hormones (IRHs). The goal of IRH therapy is to direct, through controlling gene expression, the production of key cytokines and enzymes that re-regulate immune and metabolic functions toward homeostasis, a profile that could be useful in a wide variety of diseases. The Company has a number of investigational IRHs under development, including NEUMUNE(TM), which the Company is co-developing with the U.S. military for use in protection from radiation injury; PHOSPHONOL(TM), a candidate for providing protection against DNA mutations from radiation exposure and chemotherapy treatment; and IMMUNITIN(TM), which has shown activity in a variety of infectious diseases, including HIV/AIDS, tuberculosis and malaria. Hollis-Eden is also developing IRHs for protection from chemotherapy and other conditions of immune dysregulation. For more information on Hollis-Eden, contact the Company's website at www.holliseden.com.

This press release contains forward-looking statements concerning the potential and prospects of the Company's drug discovery program and its drug candidates. Any statement describing a goal, expectation, intention or belief of the Company is a forward-looking statement and should be considered an at-risk statement. Such statements are subject to certain risks and uncertainties, including the failure to successfully complete clinical trials, the Company's future capital needs, the Company's ability to obtain additional funding and required regulatory approvals, the ability of the Company to protect its intellectual property rights and to not infringe the intellectual property rights of others, the development of competitive products by other companies and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. The actual results may differ materially from those contained in this press release.

CONTACT: Hollis-Eden Pharmaceuticals
Dan Burgess or Scott Rieger, 858-587-9333

SOURCE: Hollis-Eden Pharmaceuticals

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Hollis-Eden Pharmaceuticals's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.