AVI BioPharma Reports Second Quarter Financial Results

Conference Call Begins Today at 11:00 a.m. Eastern Time

PORTLAND, Ore. (August 8, 2005) — AVI BioPharma, Inc. (Nasdaq: AVII) today reported financial results for the three and six months ended June 30, 2005.

The net loss for the second quarter of 2005 was $4.9 million, or $0.11 per share, compared with a net loss of $7.1 million, or $0.20 per share, for the second quarter of 2004. Revenues for the 2005 second quarter were approximately $39,000, up from approximately $36,000 in the prior–year quarter and reflecting higher grant revenues, partially offset by lower research contract revenues.

Research and development (R&D) expenses decreased to $3.9 million from $6.2 million last year, and general and administrative expenses increased to $1.3 million from $1.1 million in the 2004 second quarter. Approximately $2.7 million of the decrease in R&D expense was due to lower contracting costs for the production of GMP subunits, offset by increases in lab supplies, employee costs and clinical trial insurance.

For the six months ended June 30, 2005, AVI BioPharma reported a net loss of $10.4 million, or $0.24 per share, compared with a net loss of $14.7 million, or $0.41 per share, for the comparable period in 2004. Revenues for the first half of 2005 were approximately $85,000, compared with approximately $136,000 for the first half of 2004. This decrease was due primarily to lower research contract revenues, partially offset by increases in grant revenues.

R&D expenses for the first six months of 2005 decreased to $8.1 million from $12.8 million in the prior–year period, and general and administrative expenses increased to $2.7 million from $2.4 million. Approximately $5.1 million of the decrease in R&D expense was due to lower contracting costs for the production of GMP subunits, offset by increases in lab supplies, employee costs and clinical trial insurance.

AVI BioPharma had cash, cash equivalents and short–term securities of $32.2 million as of June 30, 2005, an increase of $12.7 million from December 31, 2004. This increase is due primarily to receipt of $22.3 million in net proceeds from a private equity financing with several institutional investors completed in January 2005, offset by $9.1 million used in operations and approximately $771,000 used for purchases of property and equipment and patent–related costs.

The company was informed in 2004 that it had been allocated $5 million in government funding for the 2005 fiscal year for work on two viral disease research projects. These funds have not yet been received and are not reflected in the financial statements.

“Final preparations are underway to begin clinical testing with our novel third–generation antisense NeuGene® compound AVI–4065 targeting the hepatitis C virus (HCV). Our IND was filed in late June and accepted by the U.S. Food and Drug Administration (FDA) in early August. While developing an effective treatment for HCV is challenging, this viral infection represents an ideal candidate for our NeuGene technology,” said Denis R. Burger, Ph.D., chief executive officer of AVI BioPharma.

“We are optimistic about the potential success of AVI–4065 for this indication based upon scientific evidence from our preclinical studies conducted over the past three years, as well as growing knowledge from our work in other viral research that has provided us with valuable insights on dosing, administration and pharmacokinetic data. Additionally, our NeuGene technology’s excellent safety record includes testing in more than 250 patients with no reported drug–related serious adverse events, setting our technology apart from earlier generations of antisense compounds,” commented Dr. Burger.

“We are also finalizing preparations to initiate a European trial with Resten–MP, our micro–particle formulation of AVI–4126 that allows for the systemic delivery of this novel NeuGene compound for the treatment of cardiovascular restenosis. We have received approval from the European regulatory agency to proceed and are currently awaiting an export license from the FDA. In addition, significant progress in our Resten–NG® drug eluting stent (DES) program has been achieved and we are currently conducting initial preclinical animal studies with our DES,” added Dr. Burger. “Our progress with our HCV and cardiovascular programs represents significant steps toward achieving our corporate goal of developing drugs for unmet medical needs with large commercial markets.”

Product Pipeline Update

Technology Overview

AVI has developed proprietary third–generation antisense compounds, called NeuGenes, which are characterized by a novel synthetic backbone, instead of the modified backbones of other antisense technologies. AVI is developing products principally based on its NeuGene antisense technology. NeuGene antisense compounds are designed to bind to specific disease–causing gene sequences to disable or inactivate the disease process. AVI believes that this chemistry allows NeuGene antisense agents to be more stable, specific, efficacious and safer than second–generation antisense compounds in clinical development by others. NeuGene technology is the only third–generation antisense drug technology in mid- to late–stage clinical trials.

AVI is focused on three disease categories, including infectious diseases, cardiovascular disease and oncology. In addition, AVI applies its technology to certain other clinical applications that are particularly amenable to antisense drug development.

Infectious Diseases Program

AVI’s infectious diseases program is extensive, encompassing research on 45 different viruses representing 17 viral families and involving collaborations with approximately 50 scientific investigators worldwide. The results from these studies have enhanced AVI’s ability to design effective agents for emerging as well as engineered pathogens. AVI’s antiviral research program has produced antisense drugs shown to be active in preclinical studies against a range of single–stranded RNA viruses, including HCV, West Nile virus (WNV), dengue virus, SARS coronavirus, influenza virus and Ebola Zaire virus. AVI plans to focus its antiviral drug development program on infectious diseases that represent large market opportunities. In late June 2005 the company announced submission of an IND application with the FDA for AVI–4065 targeting HCV and plans to initiate a clinical trial in HCV in the third quarter. The company is collaborating with the Centers for Disease Control and Prevention (CDC) in its dengue virus program and expects dengue fever/dengue hemorrhagic fever (DF/DHF) to be the next viral program to move into clinical development, following HCV.

In its WNV program the company filed an IND application with the FDA in June 2003 and in September 2003 initiated a Phase Ib clinical trial with its drug candidate AVI–4020. This trial met its primary safety endpoint and also demonstrated a favorable pharmacokinetic profile with drug detected in cerebrospinal fluid. In August 2004 the company initiated a clinical trial with AVI–4020 for the treatment of patients with acute WNV disease who have serious neurological impairment. This trial remains open for enrollment for the 2005 WNV season and is referenced on the CDC and National Institute of Allergy and Infectious Diseases (NIAID) Web sites.

Cardiovascular Disease Program

Resten–NG (AVI–4126) is a NeuGene antisense drug for treating cardiovascular restenosis, the re–narrowing of a coronary artery following angioplasty. Resten–NG inhibits the expression of the c–myc gene, which plays a key role in the development of the pathology leading to restenosis. In a Phase II study, AVI demonstrated that Resten–NG delivered by a catheter into the site of balloon angioplasty demonstrated statistically significant efficacy in preventing restenosis as measured by angiography and intravascular ultrasound at six months. Based on these findings AVI has acquired expertise in the cardiovascular device field, including drug–eluting stents (DES), and plans to initiate studies leading to marketing approval in Europe with a DES incorporating the advantageous characteristics of AVI–4126. AVI also is using a proprietary micro–particle formulation in clinical studies of AVI–4126 delivered systemically after angioplasty, which may ultimately be used with all types of bare metal and drug–eluting stents.

Oncology Program

AVI has completed a Phase Ib clinical trial with its NeuGene drug candidate AVI–4126, which demonstrated the effectiveness of systemic delivery into solid tumor tissues for both breast and prostate cancer patients. AVI–4126 targets the oncogene c–myc, the over–expression of which has been described in many types of cancers. AVI plans to initiate a Phase II study in bladder cancer patients in 2005.

Conference Call

AVI BioPharma has scheduled an investor conference call regarding this announcement, and its current and planned business activities, to be held today, beginning at 11:00 a.m. Eastern Time.

Individuals interested in listening to the conference call may do so by dialing (888) 803–8271 toll free within the U.S. and Canada, or (706) 634–2467 for international callers. A telephone replay of the conference call will be available for 48 hours beginning August 8 within two hours of the conclusion of the call, by dialing (800) 642–1687 for domestic callers, or (706) 645–9291 for international callers, and entering reservation number 7792057.

The live conference call also will be available to private investors via the Internet at www.avibio.com. A replay of the call will be available on the company’s web site for 14 days following the completion of the call. A transcript is also available.

About AVI BioPharma

AVI BioPharma develops therapeutic products for the treatment of life–threatening diseases using third–generation NeuGene antisense drugs. AVI’s lead NeuGene antisense compound is designed to target cell proliferation disorders, including cardiovascular restenosis and cancer. In addition to targeting specific genes in the body, AVI’s antiviral program uses NeuGene antisense compounds to combat disease by targeting single–stranded RNA viruses, including West Nile virus, hepatitis C virus, dengue virus and Ebola virus. More information about AVI is available on the company’s Web site at www.avibio.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: The statements that are not historical facts contained in this release are forward–looking statements that involve risks and uncertainties, including, but not limited to, the results of research and development efforts, the results of preclinical and clinical testing, the effect of regulation by the FDA and other agencies, the impact of competitive products, product development, commercialization and technological difficulties, and other risks detailed in the company’s Securities and Exchange Commission filings.

[Tables to Follow]

AVI BioPharma, Inc.
(A Development-Stage Company)

STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended
June 30,		 Six Months Ended
June 30,
2005 2004 2005 2004
Revenues, from license fees, grants & research contracts $39,317 $36,271 $84,509 $135,722
Operating expenses:
Research and development 3,915,155 6,151,870 8,057,059 12,765,858
General and administrative 1,272,529 1,116,027 2,721,059 2,354,228
5,187,684 7,267,897 10,778,118 15,120,086
Other income:
Interest income, net 215,725 83,664 261,788 303,890
Net loss $(4,932,642) $(7,147,962) $(10,431,821) $(14,680,474)
Net loss per share — basic and diluted $(0.11) $(0.20) $(0.24) $(0.41)
Shares used in per share calculations 44,167,565 36,109,016 43,316,268 35,859,852

BALANCE SHEET HIGHLIGHTS
(unaudited)

June 30, 2005 December 31, 2004
Cash, cash equivalents and short-term securities $32,186,238 $19,515,316
Total current assets 32,430,934 20,198,391
Total assets 40,542,949 28,518,631
Total current liabilities 1,926,660 2,249,598
Total shareholders' equity $38,616,289 $26,269,033