Biospherics Incorporated (Nasdaq: BINC), today reported significant progress on commercialization of its natural sweetener, Tagatose, following a meeting in Denmark with Arla Foods.

Officials at Biospherics said that Arla Foods believes that the low- calorie, sugar-like sweetener is in the homestretch to permit its sale and use in the United States. Government approvals in other countries are being addressed.

The recent merger of MD Foods, Biospherics’ licensee, with Arla Foods, to form the world’s second largest volume producer of milk products, has brought additional focus to bear on the tagatose project. Biospherics’ officials also came away with the welcome news that Arla Foods is responding to the escalating market trend for enriched snack bars with nutritional benefits. When added to the food and beverage market, Biospherics officials said, this should significantly increase potential royalties to the company.

This was Biospherics’ first meeting with Arla Foods since MD Foods was merged with the Swedish company, Arla, to form the new entity. Officials of Biospherics probed the new organization to learn how it will continue the development program for tagatose. Arla Foods reported excellent progress on the regulatory, technical and marketing fronts. Food product corporations continue their interest in using tagatose in existing products, with some having developed new proprietary products formulated with the sweetener.

Dr. Gilbert V. Levin, Biospherics’ President/CEO; David H. Affeldt, Executive Vice President; and Richard C. Levin, Vice President of Finance and Administration, attended the meeting in Denmark with Peter Lauritzen, Divisional Director; Henrik Andersen, Executive Director; and Kristian Eriknauer, Business Development Manager, of Arla Foods. The new company, headquartered at the former MD Foods site in Aarhus, Denmark, has maintained the MD Foods tagatose team.

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Arla Foods also reported to Biospherics that it has established a new business development team, which aims to bridge the gap between confectionery and functional foods. Ulla Skytte, appointed to the new position of Tagatose Business Development Manager, said, “In the U.S. alone around 25% of the adult population eat lunch while driving a car. Protein bars made palatable with tagatose will widely increase consumer appeal.” Ms. Skytte added, “Once tagatose is approved for use in foods in the U.S., the business development team expects to create functional solutions using whey protein isolates (an Arla Foods product) and tagatose in combination.” Protein bars presently “suffer from a poor flavor or texture, essential to a bar’s success”, according to Dr. Michael Lindley, recently featured in the UK magazine, Confection. An Arla Foods article provided at the meeting highlights that “tagatose is also thought to have huge potential in such health snacks.” Mr. Andersen said, “We can establish an ingredient that is healthy, but we also want to insure that the final product tastes good.” He added that this could also take advantage of tagatose’s beneficial digestive, or “pre-biotic” properties.

Welcoming the new developments, Biospherics CEO Gilbert Levin said, “Watching the unprecedented growth of the health food industry, and the entry into it by leading food brands, has made us eager to make our unique product available in that market as well. Arla’s decision to enter this arena should add greatly to Biospherics’ future earnings. Bringing tagatose to market has been a long and determined fight by Biospherics, and I am very pleased at the assurances and commitment we bring back from Arla Foods.”

Certain statements contained herein are “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. Because such statements include risks and uncertainties, actual results may differ from those expressed or implied. Factors that could cause actual results to differ materially from those expressed or implied include, but are not limited to, those discussed in filings by the Company with the Securities and Exchange Commission, including the filing on Form 8-K made on March 3, 1999.

Under its motto, “Technologies for Information and Health,” Biospherics’ mission is to provide guidance and products to improve the quality of life. Biospherics offers biotechnology innovations, information technology solutions, and information center services.