I-Flow Reports 18% Increase in Regional Anesthesia Sales for the First Quarter of 2008 to $22.6 Million Versus $19.1 Million for the First Quarter of 2007

Business Wire,  May 2, 2008  

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Loss From Continuing Operations Narrows to $0.5 Million Versus $2.2 Million

Management Expects a Profitable 2008

LAKE FOREST, Calif. -- I-Flow Corporation (NASDAQ:IFLO) announced today that Regional Anesthesia revenues increased 18% for the first quarter of 2008 to a first quarter record $22.6 million compared to $19.1 million for the first quarter of 2007. Sales of its Acute Care products, which include Regional Anesthesia and AcryMed revenues, increased 21% for the first quarter of 2008 to $23.2 million compared to $19.1 million for the first quarter of 2007. Total revenue from continuing operations increased 17% versus the prior year. The loss from continuing operations narrowed to $0.5 million, or $0.02 per share, compared to a loss from continuing operations for the first quarter of 2007 of $2.2 million, or $0.09 per share.

"Our solid first quarter performance reflected I-Flow's continuing development into an integrated Acute Care products company focused on developing and marketing proprietary disposable medical devices that improve patient outcomes. We believe our strategy to leverage our sales and marketing infrastructure by layering in additional new products for our sales force to sell will deliver sustained rapid growth and enhance shareholder value for the long term," said Donald M. Earhart, Chairman and Chief Executive Officer.

"I-Flow is well positioned to achieve these goals. In our Regional Anesthesia business, underscoring the value of our ON-Q[R] franchise, sales of our proprietary ON-Q products for relieving pain after surgery without narcotics increased 18% in the first quarter, driving a significant improvement in our bottom line. That said, our sales were impacted by the timing of the March Easter holiday and Spring Break, which resulted in fewer selling days in the quarter. Compared to a year ago first quarter, our sales people found many surgeons to be on vacation in March so caseloads were lighter than usual, especially in the last two weeks of the month. ON-Q sales may also have been affected by a broader slowdown in surgical procedure volumes as demonstrated by fewer plastics and hernia surgeries. While these do not comprise a large part of our ON-Q procedure base, their absence likely impacted our growth," he commented.

"Still, the first quarter may not have been an accurate predictor of the future, since many of the surgeries may have only been postponed and not cancelled. We are monitoring these trends closely and are already encouraged by the level of surgical activity in April," Earhart added.

"AcryMed Incorporated, an Oregon-based developer of innovative infection control and wound healing products we acquired on February 15, 2008, contributed revenues of approximately $0.6 million since the acquisition date in this year's first quarter. While we continue building ON-Q in the multi-billion dollar market for post-surgical pain relief, we believe this acquisition will enable us to take advantage of an exciting new long-term growth opportunity for our ON-Q SilverSoaker(TM) Catheters and transparent wound dressings in the potentially even larger market for acute care products. In addition to having the right products and a dedicated sales and marketing organization with national reach, we also have the financial resources and experienced management team to effectively implement our plans," he remarked.

"We continue to expect I-Flow to be profitable for the year in 2008 on growth in Regional Anesthesia revenues of approximately 20% and growth in total revenue of approximately 20% with growth being stronger in the second half of the year as we launch new products. In our newly formed Acute Care business, consisting of Regional Anesthesia and AcryMed revenues combined, we expect growth of approximately 25% for the year," said Earhart.

AcryMed Acquisition

On February 15, 2008, the Company acquired AcryMed Incorporated for $26.7 million, which was paid in cash. The Company is seeking to expand its strategic focus to include general surgical site care and infection control in addition to its current leadership position in Regional Anesthesia for post-surgical pain management and believes AcryMed will play a key role in its strategy. The Company's first quarter 2008 results include the revenues and expenses of AcryMed from the date of acquisition and a preliminary purchase allocation. The Company has retained an external valuation consultant to assist in determining the fair values on the acquisition date of the tangible and intangible assets of AcryMed. To the extent, if any, that the purchase price is allocated to amortizable assets other than goodwill or to in-process research and development costs, the Company may record a non-cash charge related to the amortization or write-off of such costs consistent with the guidance in Statement of Financial Standards No. 141, Business Combinations.

First Quarter Results

For the three months ended March 31, 2008, revenue from continuing operations increased 17% to $28.4 million from $24.3 million for the first quarter of 2007. Sales of I-Flow's Acute Care products, which include Regional Anesthesia and AcryMed revenues, increased 21% to $23.2 million compared to $19.1 million for the first quarter of 2007.