February 10, 2009

Maxygen Reports Fourth Quarter and Year End 2008 Financial Results

REDWOOD CITY, Calif., February 10, 2009 ─ Maxygen, Inc. (Nasdaq: MAXY), a biotechnology company focused on the development of improved protein drugs, today announced financial and business results for the quarter and year ended December 31, 2008.

Fourth Quarter 2008 Financial Results

Maxygen reported a GAAP net loss of $7.7 million, or $0.21 per basic share, for the fourth quarter of 2008, compared to a GAAP net loss of $11.3 million, or $0.31 per basic share, for the same period in 2007. The decrease in net loss was primarily due to a decrease in research and development expenses and restructuring charges, offset in part by a decrease in revenue.

Revenue for the fourth quarter of 2008 was $6.0 million, compared to $11.0 million for the same period in 2007.  The decrease in revenue resulted from a decrease in revenue under Maxygen’s license agreement with Codexis related to biofuels, offset in part by revenue received under the company’s collaboration agreement with Astellas for its MAXY-4 program which began in September 2008.  Total expenses were $14.5 million in the fourth quarter of 2008, compared to $23.7 million in the fourth quarter of 2007. The decrease in expenses was primarily due to reduced salaries and benefits resulting from the cessation of operations in Denmark in the first quarter of 2008, decreased external expenses associated with the costs to manufacture MAXY-VII for clinical trials, and decreased restructuring charges.

Full Year 2008 Results

Maxygen reported net income of $30.3 million, or $0.82 per basic share, for the year ended December 31, 2008, as compared to a net loss of $49.3 million, or $1.34 per basic share, for the prior year.

Excluding the impact of non-cash stock compensation expense under SFAS 123(R) and goodwill impairment, Maxygen reported non-GAAP net income of approximately $50.7 million, or $1.37 per basic share, in 2008, compared to a non-GAAP net loss of approximately $42.8 million, or $1.16 per basic share, in 2007 (see Footnote A). 

At December 31, 2008, cash, cash equivalents and marketable securities totaled $206.5 million.

Business Results

During the fourth quarter of 2008, Maxygen completed a Phase IIa clinical trial of MAXY-G34, the company’s next-generation long-acting G-CSF for the treatment of chemotherapy-induced neutropenia. Initial audited results from this trial were reported in November 2008 and indicated that MAXY-G34 is safe and well tolerated in breast cancer patients, with no drug-related serious adverse events, drug-related grade 3 or 4 adverse events or immunogenicity reported in any patient receiving MAXY-G34. 

Also during the fourth quarter of 2008, Maxygen announced plans to reduce its spending on MAXY-G34 while seeking a partnership for the program and implemented a restructuring plan that will result in the termination of approximately 30% of its workforce. Maxygen also announced that it would be evaluating potential strategic options, including a sale or disposition of one or more corporate assets, a strategic business combination, or other transactions, and that it had hired a financial advisor to assist it in this process.

Conference Call

Maxygen will host a conference call today at 4:30 p.m. ET (1:30 p.m. PT) to discuss fourth quarter and year end 2008 financial results. Participants in the U.S. can access the call by dialing 866.221.6685 and using the passcode 93293610. International participants can dial 617.896.9885 and use the same passcode. A live webcast of the conference call will be available on the Maxygen web site at www.maxygen.com/webcasts.

Telephone and webcast replays of the conference call will be available until March 10, 2009. To access the telephone replay, dial 888.286.8010 (U.S.) or 617.801.6888 (international) and use the passcode 40855606. To access the webcast archive, go to www.maxygen.com/webcasts.

About Maxygen

Maxygen is a biopharmaceutical company focused on developing improved versions of protein drugs. The company’s portfolio includes MAXY-G34, designed to be an improved long-acting G-CSF for the treatment of neutropenia. Maxygen also has a MAXY-4 program, partnered with Astellas Pharma, Inc., under which the company and Astellas are exploring new CTLA4-Ig product candidates for the treatment of a broad array of autoimmune disorders and transplantation rejection. Maxygen uses its proprietary DNA shuffling technology and extensive protein modification expertise to pursue the creation of biosuperior proteins. www.maxygen.com

Forward-Looking Statements

This news release contains forward-looking statements about our research and business prospects and financial position, including our ability or plans to continue the development of our MAXY-G34 product candidate or enter into a collaborative or other arrangement with a third party to fund the further development of this product candidate; our continued evaluation of strategic options and whether such evaluation will result in any specific transactions or outcomes; and the plans of either us or Astellas Pharma, Inc. to commence or continue the development of our MAXY-4 product candidates.  Such statements involve risks and uncertainties that may cause results to differ materially from those set forth in these statements. These and other risk factors are more fully discussed in our Form 10-K for the year ended December 31, 2007, including under the caption “Risk Factors”, and in our other periodic SEC reports, all of which are available from Maxygen at www.maxygen.com. Maxygen disclaims any obligation to update or revise any forward-looking statement contained in this release as a result of new information or future events or developments.

Selected Consolidated Financial Information

Condensed Consolidated Statements of Operations

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Condensed Consolidated Balance Sheets

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