SEROLOGICALS FIRST QTR 2004 REVENUES UP 66%.

Serologicals Corporation, Atlanta, (NASDAQ:SERO) has announced financial results for the first quarter 2004.

"The first quarter of 2004 was marked by several significant accomplishments which continue to advance our strategy of expanding our market position in the life sciences industry by providing products that support our customers in the entire biomedical pipeline," said David A. Dodd, president and CEO.

"Our financial results were consistent with our expectations, although we were impacted during the quarter by a temporary production halt at our Toronto BSA facility related to the "mad-cow" case in Washington State. Despite the temporary halt of our production in Toronto, we were able to fulfill all customer orders during the period from this facility.

We just recently passed the one year anniversary of the acquisition of Chemicon International, and by all measures it has been an excellent acquisition for the company. Now that we have successfully operated this business for a year and completed the Therapeutic Plasma divestiture, we are focusing our attention on evaluating a number of potential acquisition opportunities as we begin the process of accelerating the growth of the Corporation in 2004. I believe the company is well-positioned to continue to expand into greater leadership positions in our markets in 2004 and beyond," Dodd stated.

Significant achievements in the first quarter 2004 included the following:

* We completed the divestiture of our Therapeutic Plasma business in January. This represented another defining milestone in the continuing evolution of our company to a life science company focused on high-growth, high-margin markets and products.

* The U.S. Patent Office awarded a patent on Serologicals' proprietary purification process used in the production of EX-CYTE(r) that inactivates prions. The patent will remain in force until 2021.

* We signed an expanded agreement with Novo Nordisk extending our arrangement to distribute their human recombinant insulin into the world-wide cell culture market. This agreement extends our relationship through 2006.

* Chemicon's licensing revenue during the quarter set a new record. In addition, Chemicon entered into licensing arrangements with Promega Corporation and Myriad Genetics, Inc. The Promega agreement provides Chemicon the rights to use DNA-directed RNA interference technology ("ddRNAi"). The Myriad agreement provides Chemicon rights to use several of Myriad's proprietary tumor suppressor and breast cancer susceptibility proteins and antibodies. Also during the quarter, Chemicon filed one provisional patent application.

* The construction of our new EX-CYTE(r) plant in Lawrence, Kansas is essentially completed. The project remains on schedule and under budget. We are now preparing for commencement of process and customer validation which will likely last into late 2004.

* One of our significant EX-CYTE(r) customers received FDA marketing approval for their drug during the first quarter 2004. European approval is expected to follow later this year.

* We have seen extremely positive results in our EX-CYTE(r) evaluation program which is a key objective of our field representatives in 2004 and beyond. Nearly 100 new customers began evaluating EX-CYTE(r) during the first quarter of 2004, and there are currently nearly 150 projects ongoing that we are aware of that are using EX-CYTE(r) and various other of our proprietary supplements. This level of new evaluations of EX-CYTE(r) during the first quarter of 2004 exceeded the entire number of new evaluations achieved during the full year 2003.

* We recently commenced implementation of our enterprise resource planning system using SAP at Chemicon. The financial implementation is the first phase of this project and is expected to be complete by the end of the third quarter 2004. We will be adding other SAP functionality onto the platform over the next 12-14 months at Chemicon as we standardize our operations and reporting systems.

* Chemicon introduced 110 new products during the first quarter of 2004, and continues to focus on product selection as we seek to generate increasingly higher revenues at higher margins on our new products.

* Over 60% of our product sales in first quarter 2004 represented patented, exclusively licensed or proprietary products. We continue to build a strong revenue position and growth based on exclusive, value-added products.

Dodd stated, "We are very pleased with the first quarter performance and the ways in which we dealt with several challenges. We are currently on plan to meet our previously stated financial objectives for 2004. This year will be one of aggressive development of our corporation as we continue to pursue growth opportunities through acquisition and licensing, expand our product branding and customer base, complete validation of our new plant and continue to invest in our research and development programs."

First Quarter Results Summary

Net sales for the first quarter of 2004 totaled $36.5 million compared to $22.0 million in the first quarter of 2003, an increase of 66%. Net income for the first quarter 2004 was $3.0 million, or $0.11 per diluted share, an increase of 48% over the prior year net income of $2.0 million, or $0.08 per diluted share. The increases over the prior year were primarily due to the contribution of Chemicon, which is included only in the 2004 period.

Performance Highlights: Research Products

Sales of Research products in first quarter 2004 increased $14.1 million over the prior year quarter as a result of the Chemicon acquisition in April 2003. Chemicon's sales for the first quarter of 2003 (prior to the acquisition) were $11.3 million. Chemicon reported sales increases of 16% in the United States, 26% in Europe and 53% in Asia, compared to the first quarter of 2003. Specific product lines that reported strong growth over the prior year were apoptosis, cell signaling, neuroscience antibodies and molecular biology.

Performance Highlights: Cell Culture Products

Sales of Cell Culture products increased 5% to $14.4 million over the first quarter 2003. Sales of EX-CYTE(r) in the quarter were $3.6 million, compared to $4.6 million in the first quarter of 2003. The decrease was primarily due to timing of customer shipments in 2004. Sales of the company's proprietary bovine serum albumin (BSA) in the quarter were $4.3 million in the first quarter of 2004 and 2003. Sales of recombinant insulin increased $2.4 million, or 84%, from $2.8 million in 2003 to $5.2 million in 2004.

Gross margins for Cell Culture products decreased in the current year quarter primarily due to product mix and expenses of approximately $0.5 million related to the production halt at our Toronto facility early in the first quarter 2004 due to the "mad-cow" scare. The expenses resulted from our inability to transport raw materials from our U.S. supplier to our facility in Toronto. As a result, much of our plant was idle for approximately a month until all of the importation clearances from the Canadian government were obtained. The plant is now fully operational and running near capacity in order to meet customer demand for the remainder of 2004.

Performance Highlights: Diagnostic Products

Sales of Diagnostic products were down slightly in the first quarter of 2004 compared to the first quarter 2003. Sales of diagnostic monoclonal antibodies and related products were $5.4 million in the first quarter 2004, compared with $5.3 million in the prior year quarter. Sales of disease state antibodies, detection products and other diagnostic products decreased from the prior year, primarily because the prior year quarter included sales of diagnostic products that were sourced from our donor center network, which was sold as part of the Therapeutic Plasma divestiture. Gross margins on diagnostic products were 43% for the first quarter of 2004 compared with 54% in the first quarter of 2003. The decline in gross margin is due to the impact of operating the Scotland facility at a lower percentage of capacity in order to more accurately match inventory levels to anticipated customer demand.

Other Q1 2004 Financial Information

* Selling, general and administrative (SG&A) costs increased 68% from $7.0 million (32% of net sales) in the first quarter of 2003 to $11.7 million (32% of net sales) in the same period of 2004. Research and development expense increased 112% over the prior year quarter, and represented over 5% of sales in the current year period, compared with 4% in the prior year. The majority of the increase in both of these categories was due to the acquisition of Chemicon.

* The company's cash balance at the end of March 2004 was $58.5 million, compared with $48.6 million at the end of 2003. Accounts receivable totaled approximately $20.6 million at the end of March 2004, compared with $34.1 million at the end of 2003.

* Capital expenditures for the first quarter of 2004 were $5.5 million, of which approximately $4.7 million related to the construction of the company's new EX-CYTE(r) manufacturing facility in Lawrence, Kansas.

* Depreciation and amortization for the first quarter of 2004 totaled $2.6 million, compared with $1.7 million in the first quarter of 2003. The increase is due to the Chemicon acquisition.

* Recognized losses on foreign exchange totaled approximately $200,000 for the first quarter 2004, compared to a loss of approximately $80,000 in the first quarter 2003.