Financial Report

For the quarter ended December 31, 2008, the company reported a net loss of $5 million, or $(0.11) per share, which included research and development costs totaling $2 million and selling, general and administrative expenses of $2.6 million. Research and development costs in 2008 were $12.3 million compared to $13.1 million for fiscal year 2007, and selling, general and administrative expenses were $11.6 million in 2008 compared to $12.1 million in 2007. The decrease in research and development costs was primarily due to a reduction in the development costs for InnerCool’s RapidBlue system as it has moved from development to production, increased expenses in our efforts to advance our Excellarate product candidate in its Phase 2b clinical trial, offset by reductions in the AWARE Phase 3 clinical trial costs. Non-cash charges relating to stock-based compensation, depreciation and amortization for the year ended December 31, 2008 totaled $4.0 million compared to $3.5 million in 2007.

Total revenue for fourth quarter 2008 was $559,000 compared to $683,000 for fourth quarter 2007. The increase in 2008 product revenues was in large part a result of an increase in InnerCool sales resulting from the launch of the CoolBlue surface cooling system in late 2007 and the launch of the RapidBlue in late 2008. Cardium Therapeutics ended the year with cash and cash equivalents totaling $1.1 million compared to $7.7 million the previous year.

During 2008, the company completed three follow-on registered direct investments by institutional and other accredited investors with gross proceeds totaling around $11.9 million, and the completion of a secured debt financing resulting in gross proceeds of around $6.0 million, before placement agent fees and offering expenses and excluding any future proceeds from the exercise of the warrants issued in the financings. On March 5, 2009, the company reported closing a credit facility in the amount of $3.5 million, before placement agent fees and other expenses.

The total shares of common stock outstanding at December 31, 2008 were 46.9 million compared to 41.0 million at December 31, 2007.

Recent Developments and 2009 Outlook

Cardium Therapeutics’ business is focused on the acquisition and strategic development of product opportunities or businesses having the potential to address significant unmet medical needs, and definable pathways to commercialization, partnering or other monetization. As our product opportunities and businesses are advanced and corresponding valuations established, we intend to consider various corporate development transactions designed to place our product candidates into larger organizations or with partners having existing commercialization, sales and marketing resources, and a need for innovative products. Such transactions could involve the sale, partnering or other monetization of particular product opportunities or businesses. In November 2008, Cardium Therapeutics reported that it was focusing principal near-term efforts on its InnerCool Therapies and Tissue Repair subsidiaries – both of which we believe are nearing completion of their strategic development programs initiated in 2006.

InnerCool Therapies completed its high-performance endovascular-based cooling system, RapidBlue, and the system was cleared by the FDA in late 2008. InnerCool also developed a new class of targeted organ-specific cooling applications, including its UroCool pelvic cooling catheter system, which is designed to induce localized cooling during surgery for prostate cancer. An application for FDA 510(k) clearance of the UroCool system was submitted in the first quarter of 2009.

Tissue Repair company successfully advanced its MATRIX Phase 2b clinical study, which is principally designed to evaluate the ability of Excellarate to promote rapid closure of previously non-healing diabetic foot ulcers, and to gather additional information regarding safety and clinical use. Enrollment in the MATRIX clinical study is expected to be completed and select top line data announced shortly. In keeping with Cardium Therapeutics’ business model, we expect to consider strategic partnering or other transactions designed to further advance these products to commercialization.

InnerCool Therapies

InnerCool was acquired by Cardium Therapeutics in 2006. As a result of Cardium Therapeutics’ efforts, InnerCool is now positioned with a portfolio of temperature modulation therapy products and products under development that include endovascular and surface-based systems (for cooling and warming) that are easy to use and address a wide range of care environments, such as emergency vehicles, emergency rooms and intensive care units, and in operating room settings such as in neurology, cardiac and urology surgeries. In addition, through Cardium Therapeutics’investment, InnerCool’s product portfolio and pipeline of new and innovative future products are supported by a fully-integrated 29,000 square foot cGMP facility with R&D and manufacturing capabilities. InnerCool is also positioned to benefit from participation in cutting-edge research efforts with the potential to broaden the applicability of patient temperature modulation for advanced therapies.

Consistent with Cardium Therapeutics’ business strategy, the company believes that InnerCool has reached a significant valuation inflection point within Cardium Therapeutics’ investment portfolio, and with the appropriate strategic positioning, best-in-class products and a pipeline of innovative product opportunities, Cardium Therapeutics intends to advance InnerCool’s therapeutic cooling and warming products into corresponding markets through the strategic sale of the business to a large and diversified medical device company or through various vertical partnering opportunities with established companies having existing sales and marketing organizations but with a continuing need for innovative, high-value content products. The company believes this strategy is more cost-effective than building InnerCool into a fully integrated manufacturing, sales and marketing organization. Recent highlights and ongoing product development and clinical research activities at InnerCool include the following:

The US Food and Drug Administration (FDA) 510(k) clearance to market RapidBlue System, an endovascular temperature modulation device:

The new RapidBlue System is believed to be easy to use endovascular-based system available. InnerCool has obtained CE mark approval and Underwriters Laboratories, Inc. (UL) certification for the new RapidBlue system. The CE mark allows InnerCool to market the Rapid Blue system in Europe and many other countries that recognize the certification.

InnerCool’s establishment of commercialization agreements with distributors of medical products for exclusive marketing, sales and distribution rights in Austria, Germany, Italy, Switzerland, Australia and New Zealand for InnerCool’s RapidBlue endovascular system and CoolBlue surface temperature modulation system. During the year, InnerCool was also awarded a new supplier contract with Novation, LLC, a leading health care contracting company.

Cardium Therapeutics is a US-based developer, manufacture and marketer of therapeutic products and devices for cardiovascular, ischemic and related indications.