Cypress Bioscience, Inc.

Novel Nicotine Inhaler Technology
for Smoking Cessation Will Expand Cypress’s CNS Pipeline

Pulmonary Delivery of Pure Nicotine Aerosols May Address
Acute Cravings and Help Smokers Quit

SAN DIEGO, CALIFORNIA, August 26, 2010 – Cypress Bioscience, Inc. (NASDAQ:CYPB) today announced that it has licensed Alexza Pharmaceutical’s (NASDAQ:ALXA) Staccato nicotine technology – a novel electronic multidose delivery technology designed to help people stop smoking. The innovative Staccato nicotine technology is intended to improve on a well-validated smoking cessation approach by delivering nicotine via inhalation, thus mimicking the actual nicotine effects of smoking without the deleterious side effects associated with cigarettes.

Jay D. Kranzler, MD, PhD, Chairman and Chief Executive Officer of Cypress Bioscience, said, “We are pleased to expand our CNS pipeline with this novel Staccato nicotine technology. The electronics embedded within the Staccato delivery system allow for the programmed, over-time reduction of nicotine intake, and may ultimately lead to better management of nicotine cravings and sustained smoking cessation. Given that the vast majority of smokers trying to quit using existing therapies relapse within six months, we see great potential in this novel technology and we are excited about this transaction.”

Kranzler continued, “Today’s announcement demonstrates continued progress on our strategic plan to acquire and develop innovative CNS therapeutics that have the potential to address important unmet medical needs. Developing novel therapies such as effective nicotine replacement technology is consistent with our renewed focus on CNS drug development. We expect to take this technology into Phase 1 clinical trials in late 2011.”

Neal Benowitz, MD, Professor of Medicine, Bioengineering & Therapeutic Sciences, University of California, San Francisco, and a specialist in nicotine addiction and smoking cessation, said, "A pulmonary nicotine delivery device, like Staccato nicotine, may be useful in addressing a pressing pharmacological problem in overcoming nicotine addiction; namely, that acute cravings during quit attempts are inadequately treated by current nicotine replacement therapies. A device that provides for rapid absorption of nicotine, combined with electronic controls to adjust doses to facilitate tapering and cessation, is an advancement that the field has been waiting for."
About Smoking
Despite decades of public health and medical intervention, smoking remains one of the most preventable causes of death in the United States . Smoking continues to exact a staggering toll on human health, claiming more than 430,000 lives annually in the U.S. , One in five deaths in the U.S. are attributable to smoking related illness2, . While the vast majority of smokers indicate an interest in quitting , approximately 80% of smokers who try to quit on their own relapse in one month, and only 3% will remain abstinent at six months . Current nicotine replacement therapies (nasal, buccal and transdermal), nicotinic agonists, and other prescription therapies approximately double the rates of abstinence as compared to placebo, but even so the vast majority of smokers using these treatments relapse within six months . The scientific community has called for the development of a pulmonary nicotine delivery system that more closely mimics the blood levels of nicotine produced through smoking, as such a system could be differentially effective in helping smokers to quit7, , .
About Staccato Nicotine
Staccato nicotine is designed to help smokers quit by addressing both the chemical and behavioral components of nicotine addiction by combining nicotine replacement via inhalation with a user-friendly drug delivery device. The Staccato technology may be capable of mimicking the pharmacokinetics of smoking cigarettes through the delivery of optimally-sized nicotine particles to the deep lung. Staccato nicotine may also provide some of the psychological aspects of smoking (e.g., hand-to-mouth movement, oral inhalation) and could allow smokers to self-administer and possibly titrate to the dose to treat cravings. Importantly, the electronics embedded within the Staccato delivery system could allow for the programmed, over-time reduction in the overall daily dose of nicotine, and ultimately may lead to the better management of nicotine cravings and eventual sustained smoking cessation.

According to the terms of the agreement, Cypress will pay Alexza an upfront payment of $5 million to acquire the worldwide license for the Staccato nicotine technology. In addition, following the completion of certain clinical milestones relating to the Staccato nicotine technology, Cypress will be obligated to pay to Alexza an additional technology transfer payment of $1 million. Alexza will have a carried interest of 10% (subject to adjustment in certain circumstances) in the net proceeds of any sale or license by Cypress of the Staccato nicotine assets and the carried interest will be subject to put and call rights in certain circumstances.

Alexza Pharmaceuticals is a pharmaceutical company focused on the research, development and commercialization of novel, proprietary products for the acute treatment of central nervous system conditions. Alexza's technology, the Staccato system, vaporizes unformulated drug to form a condensation aerosol that, when inhaled, allows for rapid systemic drug delivery through deep lung inhalation. The drug is quickly absorbed through the lungs into the bloodstream, providing speed of therapeutic onset that is comparable to intravenous administration, but with greater ease, patient comfort and convenience.

AZ-004 (Staccato loxapine) is Alexza’s lead program, which is being developed for the rapid treatment of agitation in schizophrenic or bipolar disorder patients. Alexza has submitted a New Drug Application for AZ-004 and has a PDUFA goal date of October 11, 2010. For more information about Alexza, the Staccato technology or the Company’s development programs, please visit www.alexza.com.

Cypress Bioscience is a pharmaceutical company dedicated to the development of innovative drugs targeting large unmet medical needs for patients suffering from a variety of disorders of the central nervous system. Since 1999, Cypress has received multiple FDA approvals, including for Prosorba™, a medical device for rheumatoid arthritis, and Savella® (milnacipran HCl), for fibromyalgia. The Company focuses on generating stockholder value by reaching clinical development milestones as quickly and efficiently as possible. Cypress’ currently marketed products include Savella and the Avise PGSM and Avise MCVSM therapeutic monitoring, diagnostic and prognostic testing services for rheumatoid arthritis. Development-stage assets include CYP-1020 for cognitive impairment in schizophrenia, as well as AVISE-SLESM, a lupus diagnostic testing service. More information on Cypress and its products and development assets is available at http://www.cypressbio.com/.

This press release, as well as Cypress' SEC filings and website at http://www.cypressbio.com, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements with respect to the potential of Staccato nicotine technology to improve upon existing smoking cessation approaches and lead to better management of nicotine cravings and sustained smoking cessation, statements with respect to Staccato nicotine’s mechanism of action, statements with respect to Cypress’s ability to license or sell the Staccato nicotine technology, statements regarding the timing of Phase 1 clinical trials relating to the Staccato nicotine technology and statements with respect to Cypress’s ability to execute on its strategic plan. Actual results could vary materially from those described as a result of a number of factors, including risks involved with the high uncertainty that characterizes research and development activities in general, particularly those of drug development, including the risks that the Staccato nicotine technology may not demonstrate adequate safety and/or efficacy in clinical trials to continue with its development, may not have adequate intellectual property right protection to support its continued development, may be unable to obtain FDA or similar regulatory approval as a drug candidate for any of many reasons relating to the regulatory approval process, or may address a commercial market that is smaller than currently anticipated by Cypress and that does not support its continued development, or that Cypress may otherwise fail to successfully develop and commercialize the Staccato nicotine technology, and other risks and uncertainties described in Cypress’ most recent Annual Report on Form 10-K, most recent Quarterly Report on Form 10-Q and any subsequent SEC filings. You are urged to consider statements that include the words “may,” “will,” “would,” “could,” “should,” “believes,” “potential,” “expects,” “plans,” “anticipates,” “intends,” or the negative of those words or other comparable words to be uncertain and forward-looking. The statements in this press release speak only as the date hereof, and neither Cypress nor Alexza undertakes any obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
# # #

Danaei G, et al. (2009) The Preventable Causes of Death in the United States: Comparative Risk Assessment of Dietary, Lifestyle, and Metabolic Risk Factors. PLoS Med 6(4): e1000058. doi:10.1371/journal.pmed.1000058.

Centers for Disease Control and Prevention. The health consequences of smoking: a report of the Surgeon General. Atlanta, GA: US Department of Health and Human Services, CDC; 2004. Available at http://www.cdc.gov/tobacco/data_statistics/sgr/sgr_2004/index.htm.

Centers for Disease Control and Prevention. Smoking-Attributable Mortality, Years of Potential Life Lost, and Productivity Losses—United States, 2000–2004. Morbidity and Mortality Weekly Report 2008;57(45):1226–8 [accessed 2010 Jul 25].

Centers for Disease Control and Prevention. Health, United States, 2008. Hyattsville (MD): U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics, 2006.

Centers for Disease Control and Prevention (2002). Cigarette smoking among adults—United States, 2000. MMWR Morbidity Mortality Weekly Report, 51, 642– 645.

Hughes, JR, et al. (1992). Smoking cessation among self-quitters. Health Psychology, 11, 331–334.

Henningfield, JE, et al. (2005). Pharmacotherapy for Nicotine Dependence. CA Cancer J Clin 2005;55;281-299 DOI: 10.3322/canjclin.55.5.281.

Henningfield, JE, et al. (2009). Tobacco dependence and withdrawal: Science base, challenges and opportunities for pharmacotherapy. Pharmacology & Therapeutics, 123, 1–16.

Schroeder, SA & Warner, KE. (2010). Don’t forget tobacco. New England Journal of Medicine: 10.1056/NEJMp1003883.