The company disclosed today that the bankruptcy court has entered orders on the company's initial motions in the bankruptcy proceedings. On the "363 motion" to allow the sale to Smith & Nephew of the company's interest in the Dermagraft joint venture, the court granted the order approving the sales procedures and set a hearing date for Nov. 15, 2002. If approved by the court on that date, the parties, or other successful over-bidder, would close the transaction as soon as practical after that date.

As previously reported, if approved by the court, Smith & Nephew would purchase the company's interest in their joint venture and related assets for $12 million which includes $10 million in cash and assumption of $2 million of indebtedness. As a result, after the closing of the transaction, Advanced Tissue Sciences will cease to fund the costs of the joint venture.

The court also issued an interim order related to the proposed loan by Smith & Nephew of up to $5 million to Advanced Tissue Sciences as Debtor-in-Possession financing to cover the operations of the company and the company's share of the Dermagraft joint venture pending the proposed sale. The court approved interim funding of up to $3 million and set a hearing date of Nov. 6, regarding the remaining amount. As a result, the company today received the first $3 million of that financing from Smith & Nephew. The funds were advanced pursuant to a Loan and Security Agreement and will be offset against the purchase price set forth by the sale agreement.

If the sale to Smith & Nephew is consummated, the companies will enter into a manufacturing and supply agreement under which Smith & Nephew will manufacture products for Advanced Tissue Sciences including dermal fibroblast products for future applications other than wound care (such as cardiovascular and periodontal), human collagen and extra cellular matrix for aesthetic and surgical products markets, and NouriCel(TM) for cosmetic and other applications. The rights for uses of these products outside of wound care will remain with Advanced Tissue Sciences. Since collagen has been manufactured by the Dermagraft joint venture for the company, that manufacturing relationship is expected to continue and the company expects to receive collagen royalty payments from Inamed Corporation.

The court also approved administrative motions and motions related to the ongoing operations of the company.

Listing Status

The company also announced today that an application for quotation of its shares on the Over the Counter Bulletin Board has been submitted and is awaiting clearance. It is hoped that the application process will allow for a smooth transition from the NASDAQ. This follows a notification from the NASDAQ that the stock will be delisted effective Oct. 21, 2002.

Statements in this press release that are not strictly historical may be "forward-looking" statements, which involve risks and uncertainties. Risks and uncertainties exist in the company's operations, including, without limitation, uncertainties related to the impact of the Chapter 11 filing on the company's operations and prospects, the ability of the company to successfully reorganize, whether the sale of the company's joint venture interest to Smith & Nephew will be consummated, the quotation of the company's shares on the OTC Bulletin Board, the ability to obtain additional milestones and financing to continue operations, a history of operating losses and accumulated deficits, the company's reliance on collaborative relationships, the outcome of clinical trials, the ability to obtain the appropriate regulatory approvals, the company's ability to develop and successfully commercialize products, market acceptance of products, the company's ability to obtain and retain patent protection, as well as other risks detailed from time to time in publicly available filings with the Securities and Exchange Commission including, without limitation, Advanced Tissue Sciences' Annual Report on Form 10-K for the year ended December 31, 2001 and the company's quarterly reports on Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002. The company undertakes no obligation to release publicly the results of any revision to these forward-looking statements to reflect events or circumstances arising after the date hereof. This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

-------------------------------------------------------------------------------- Contact:
Advanced Tissue Sciences, Inc., La Jolla
Abe Wischnia, Senior Director, Investor Relations
858/713-7992