LA JOLLA, Calif., July 13 /PRNewswire/ -- Advanced Tissue Sciences, Inc.
(Nasdaq: ATIS) announced that it has completed a private placement of
$25 million of Series B Convertible Preferred Stock to a group of investors.
Separately, the Company reported that it has extended its existing equity line
to February 2000.  Under the equity line, the Company could receive up to
$50 million from the sale of Common Stock to an investor group.  Drawings
under the equity line are at the Company's discretion and are subject to
certain restrictions.
    "This financing was primarily necessary to support clinical trials for
Dermagraft(R) in the treatment of diabetic foot ulcers in the U.S. and for
additional indications of Dermagraft such as in venous and pressure ulcers,"
stated Arthur J. Benvenuto, Chairman and Chief Executive Officer, in
addressing the placement of the Preferred Stock.  "Combined with the
$15 million due in January 1999 related to the expansion of our Dermagraft
Joint Venture with Smith & Nephew, we believe these financing actions provide
us substantial flexibility in meeting the Company's future financing needs.
We are particularly pleased to have negotiated a structure which increases the
conversion price of the Preferred Stock if the trading price of our Common
Stock increases beyond certain levels."
    The Series B Preferred Stock is convertible into Common Stock of the
Company at 120% of the "Initial Market Price," a five-day average of the
Common Stock's current market price.  The conversion price will be increased
by one-half the amount by which the market price of the Common Stock on the
date of conversion exceeds 200% of the Initial Market Price.  Conversely,
should the average daily trading price (as defined in the agreements) prior to
a conversion be equal to or below 90% of the Initial Market Price, the
conversion price will be equal to such average daily trading price.
    The Series B Preferred Stock accrues dividends at 5% per annum.  Dividends
are payable quarterly in Common Stock or cash at the option of the Company.
To the extent not previously converted, the Series B Preferred Stock is, at
the election of the Company, redeemable at par value plus accrued dividends or
convertible into Common Stock three years from the date of issuance subject to
extension in certain circumstances.  The Series B Preferred Stock is
redeemable at the option of the holders upon the occurrence of certain events.
The Common Stock issuable upon conversion of the Series B Preferred Stock will
be registered for resale under the Securities Act of 1933.  The investment
group participating in the private placement was advised by the Promethean
Investment Group L.L.C.
    The Company originally entered into an investment agreement for the equity
line in February 1996.  Pursuant to this most recent amendment, the Company
may be able to access up to $50 million until February 2000.  The decision to
draw any funds under the equity line remains at the Company's sole discretion.
Under the provisions of the equity line and subject to applicable rules and
regulations, the Company can obtain up to $15 million at any one time through
the sale of Common Stock.  Any sales against the equity line will be at a
five percent discount to the average low sales prices of the Company's Common
Stock over a specified period of time as determined by market volume at the
time of the draw.  The Company's ability to draw under the equity line is
subject to certain conditions including, but not limited to, registration of
the shares, a minimum trading price per share, and certain limitations on the
number of shares of Common Stock held by the investment group at any point in
time.
    Advanced Tissue Sciences is a tissue engineering company utilizing its
proprietary core technology to develop and manufacture human tissue products
for tissue repair and transplantation.  The Company currently has two products
on the market, Dermagraft-TC(R), a temporary covering for full and
partial-thickness burns, and Dermagraft, a living, permanent dermal
replacement for the treatment of diabetic foot ulcers (currently available in
Canada and the United Kingdom).  The Company is pursuing the worldwide
commercialization of Dermagraft through a fifty-fifty joint venture with Smith
& Nephew plc.  The joint venture includes the worldwide development and
marketing of Dermagraft and Dermagraft-TC, and future product developments for
diabetic, venous and pressure ulcers, burns and other skin wounds.  Advanced
Tissue Sciences has retained rights to market Dermagraft-TC for burns in the
United States.  In addition to Dermagraft and Dermagraft-TC, the Company is
also developing products for cartilage and cardiovascular applications.
    The matters discussed in this press release involve risks and
uncertainties.  In particular, there can be no assurance the Company will
satisfy the conditions to sell any additional Common Stock under the terms
described above nor can the Company predict the conversion rate at which the
Series B Preferred Stock may be converted into Common Stock.  There can be no
assurance that funds will be available when needed or on terms favorable to
the Company under existing arrangements or otherwise.  Further, no assurance
can be given that the Company will successfully develop additional products,
obtain further regulatory approvals (or that any such approvals will be
obtained on a timely basis), complete clinical trials, scale up manufacturing
processes, launch its products within reasonable timeframes, obtain
reimbursement for, or successfully commercialize any of its products.  These
and other risks are detailed in the Company's publicly available filings with
the Securities and Exchange Commission, including the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.  Actual results may differ
materially from those currently anticipated as a result of such risks.

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