"Successfully completing the $4.15 million public offering in difficult capital markets, together with securing additional AVAC funding were fundamental to strengthening our balance sheet and extending our development runway into 2010," said James Szarko, Chief Executive Officer of SemBioSys. "In addition, we are encouraged by the positive preclinical data that have been obtained for Apo AI(Milano) in collaboration with Dr. Prediman K. Shah at Cedars-Sinai Heart Institute and other leading experts in cardiovascular research. Our top priorities are now advancing partnership discussions for our Apo AI(Milano) and Biosimilar Insulin programs and executing on other non-dilutive funding opportunities."

Highlights

Corporate

- Completed a public offering of 11,865,341 units at a price of $0.35

per unit for total gross proceeds to SemBioSys of $4,152,869

subsequent to the end of the quarter

- Completed a transaction with Botaneco and Avrio Ventures Limited

Partnership where SemBioSys secured a 20% equity interest (on a fully

converted basis) in Botaneco subsequent to the end of the quarter.

The purpose of the transaction was to amend the capital structure of

Botaneco to facilitate discussions that are underway related to a

potential transaction between Botaneco and an independent third

party.

Apo AI(Milano)

- Received positive results from in vivo plaque remodelling and

regression studies confirming the anti-atherosclerotic effects of

plant-derived Apo AI(Milano). The results demonstrated the regulation

of cholesterol mobilization from the arterial wall, decreasing lipid

content of atherosclerotic plaques, and reduction of overall volume

of atherosclerotic plaque after multiple injections. In all, seven

different types of studies have been performed at four outside

laboratories with each demonstrating the molecule to be biologically

active.

- Completed a pre-IND (Investigational New Drug) meeting during which

the U.S. Food and Drug Administration (FDA) confirmed SemBioSys'

development plan necessary to file an IND application and addressed

the proposed design of clinical trials for Apo AI(Milano)

Insulin Program

- Presented the results of the Phase I/II study with its Biosimilar

Human Insulin, demonstrating that SBS-1000 was bioequivalent to Eli

Lilly's Humulin(R) R in a late-breaking scientific poster at the

American Diabetes Association's (ADA) 69th Scientific Sessions

- Granted U.S. patent US 7,547,821 entitled "Methods for the Production

of Insulin in Plants"

Outlook

The Company anticipates a number of milestone events in the coming months including:

- Insulin: post-phase II meeting with the U.S. FDA regarding further

development of SBS-1000;

- Apo AI(Milano): development of a pilot scale manufacturing process;

- Apo AI(Milano): completion of additional in vivo studies; and

- Further progress with the partnering of both insulin and Apo

AI(Milano).

Financials

The second quarter financials compare SemBioSys and Botaneco's financial and operating results for the three-month and six-month periods ended June 30, 2009 to SemBioSys and Botaneco's financial and operating results for the three-month and six-month periods ended June 30, 2008. Due to the completion of the divestiture of Botaneco on July 31, 2009, third quarter 2009 financials will be presented such that Botaneco's financial results will be segregated from SemBioSys' financial results.

Net loss for the second quarter of 2009 was $3,886,112 or $0.13 per share, compared to a net loss of $6,414,856 or $0.25 per share for the same period last year. Net loss for the six-month period ended June 30, 2009 was $7,714,565 or $0.27 per share, compared to a net loss of $11,431,911 or $0.44 per share for the same six-month period last year.

Total revenue for the three-month and six-month periods ended June 30, 2009 was $489,530 and $1,788,994 respectively, compared with $62,207 and $272,234 for the corresponding periods in 2008. The difference is due mainly to the recognition of licensing option fees in the first half of 2009 from the option agreement entered into with MannKind Corporation in the fourth quarter of 2008. In addition, $252,048 of licensing fees were recognized in the second quarter of 2009 related to the Company's GLA program.

Total expenditures (net of cost recoveries) for the three-month and six-month periods ended June 30, 2009 were $4,173,518 and $9,105,465 respectively, compared with $6,542,258 and $11,799,869 for the corresponding periods in 2008. However, total expenditures excluding non-cash items (stock-based compensation and amortization) and cost recoveries for the three-month and six-month periods ended June 30, 2009 were $3,502,553 and $7,618,814 respectively, compared with $5,826,373 and $10,942,616 for the corresponding periods ended June 30, 2008. The decrease is primarily due to the cost reductions implemented in the Biopharmaceuticals and Bioproducts segment in the fourth quarter of 2008 and in 2009, and decreased preclinical costs as the majority of the preclinical work for the insulin clinical trial was completed in 2008. This decrease was offset by a modest increase in costs of the Specialty Ingredients segment. The reduction in cost recoveries for the three-month and six-month periods ended June 30, 2009 as compared to the corresponding periods ended June 30, 2008 resulted from the achievement of all outstanding milestones related to the agreement with AVAC Ltd. for the insulin program in 2008.

As of June 30, 2009 the Company had cash and cash equivalents of $850,780 and a net positive working capital balance of $807,933, compared to $3,819,796 and $3,730,413 respectively at December 31, 2008. Subsequent to the end of the quarter, the Company completed a public offering which resulted in total gross proceeds to SemBioSys of $4,152,869. Total long-term debt and convertible debentures was $6,672,098 at June 30, 2009 compared to $5,127,829 at December 31, 2008.

The decrease in cash and working capital during the period resulted primarily from net cash burn, which includes significant costs for the insulin clinical trial that was completed in the first quarter of 2009. The increase in long-term debt and convertible debentures is a result of the $500,000 of funding received from AVAC in the first quarter of 2009 that is secured by certain Botaneco assets, as well as the $950,000 of funding SemBioSys received from AVAC in the second quarter of 2009 that is secured by certain SemBioSys assets.