Cyanotech Corporation Reports Third Quarter Fiscal 2005 Financial Results; Company Reports Net Income of $326,000 on Sales of $3,180,000 KAILUA KONA, Hawaii--(BUSINESS WIRE)

CYANOTECH EX. 99.1 PRESS RELEASE

Cyanotech Corporation Reports Third Quarter Fiscal 2005 Financial

Results; Company Reports Net Income of $326,000 on Sales of $3,180,000

KAILUA KONA, Hawaii--(BUSINESS WIRE)--Jan. 27, 2005--Cyanotech

Corporation (Nasdaq:CYAN), a world leader in producing high-value

natural products from microalgae, today announced financial results

for the third quarter of its fiscal year 2005, ended December 31,

For the third quarter of fiscal 2005 the Company reported net

income of $326,000, or $0.02 per diluted share, on sales of

$3,180,000, compared to net income of $109,000, or $0.01 per diluted

share, for the comparable prior year period. Net sales for the third

quarter of $3,180,000 were 6% higher than the net sales for the prior

quarter and 5% higher than net sales for the comparable prior year

The Company achieved a gross profit margin of 37% for the third

quarter, an increase from 35% in the prior quarter and a decrease from

39% for the comparable prior year period. The year-over-year decrease

is attributable to a shift in product mix during the current quarter,

with more revenue generated from the sale of lower margin Spirulina.

During the third quarter, operating expenses amounted to $845,000, a

decrease of 4% and 5% from the prior quarter and the comparable

quarter of the prior year, respectively. Higher sales and a consistent

level of operating expense resulted in operating income of $318,000

for the third quarter, up 84% from the prior quarter result and up 9%

from that recorded for the comparable prior year period.

For the first nine months of fiscal 2005 the Company reported net

income of $560,000, or $0.03 per diluted share, on sales of

$8,885,000, compared to a net loss of $42,000, or ($0.00) per diluted

share, on sales of $8,292,000 for the comparable prior year period.

Gross profit for the first nine months of fiscal 2005 was $3,104,000,

with gross profit margin of 35%. This compares favorably to gross

profit of $2,749,000 and gross profit margin of 33% reported in the

comparable period of the prior fiscal year. Operating expenses of

$2,452,000 for the first nine months of fiscal 2005 decreased slightly

from the comparable prior year period. Improved gross profits on

higher sales, combined with stable operating expenses, resulted in

income from operations of $652,000, an improvement of 138% from

$274,000 reported for the first nine months of the prior fiscal year.

The Company enters the final quarter of fiscal 2005 with working

capital of $4,991,000 and cash and cash equivalents of $2,582,000.

This is an improvement from working capital of $4,083,000, and cash

and cash equivalents of $2,531,000 reported at the beginning of the

current fiscal year.

Gerald R. Cysewski, Ph.D., Chairman, President and Chief Executive

Officer, commented, "These results validate our strategic initiative

to increase flexibility in our production systems. Our Company's

results reflect the ongoing improvement we have made in our

operations, allowing us to meet changing market conditions while

increasing profitability. Sales of Spirulina Pacifica(R) and

BioAstin(R) products offset the disruption in sales of NatuRose(R)

caused in large part by last summer's typhoons in Japan. Natural

astaxanthin sales may decrease in the current fourth quarter, but we

believe that our market remains strong and anticipate resumed growth

in fiscal 2006 of such products. Moving forward, we remain confident

in our ability to leverage our improved operations to greater

advantage in the markets in which we compete."

Cyanotech Corporation, a world leader in microalgal technology,

produces high-value natural products from microalgae and is the

world's largest commercial producer of natural astaxanthin (pronounced

"asta-zan-thin") from microalgae. Products include BioAstin(R) natural

astaxanthin, a powerful antioxidant with expanding applications as a

human nutraceutical; NatuRose(R) natural astaxanthin for the

aquaculture and animal feed industries; Spirulina Pacifica(R), a

nutrient-rich dietary supplement; and phycobiliproteins, which are

fluorescent pigments used in the immunological diagnostics market.

Spirulina Pacifica and BioAstin are sold directly online through the

Company's website, www.nutrex-hawaii.com, as well as through resellers

in over 30 countries worldwide. Technical information for the

Company's phycobiliproteins products is available at

www.phycobiliprotein.com. Corporate data and other product information

are available at www.cyanotech.com.

"Safe Harbor" Statement under the Private Securities Litigation

Except for statements of historical fact, the statements in this

press release are forward-looking. Such statements are subject to a

number of risks and uncertainties that could cause actual results to

differ materially from the statements made. These factors include, but

are not limited to, general economic conditions, forecasts of sales in

future periods, changes in sales levels to our largest customers,

weather patterns, risks associated with the acceptance of new

products, competition, foreign exchange fluctuations, government

regulation, and other factors more fully detailed in the Company's

recent Form 10-Q and annual form 10-K filings with the Securities and

Exchange Commission.

Cyanotech Corporation will hold a conference call on Thursday,

January 27, 2005 at 5:30 p.m. Eastern Time to be broadcast live over

the Internet. It can be accessed by all interested parties by linking

through the Investor Broadcast Network's VCall website at

www.vcall.com or through Cyanotech's website,

http://www.cyanotech.com. To access the simultaneous webcast on the

Cyanotech site, select the Recent News section from Cyanotech's home

page. Click on the announcement entitled, "Cyanotech Announces Fiscal

Year 2005 Third Quarter Financial Results Webcast January 27, 2005."

To listen to the live call, please go to either website at least 15

minutes prior to the start of the call to register, download, and

install any necessary audio software. For those who are not able to

listen to the live broadcast, a replay will be available shortly after

the call and will be archived for a period of one calendar year.

CYANOTECH CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Three Months Ended Nine Months Ended