Kensey Nash Reports Third Quarter Fiscal Year 2006 Results at High End of Previously Announced Estimates

Kensey Nash Reports Third Quarter Fiscal Year 2006 Results at High End of Previously Announced Estimates

EXTON, Pa., April 24 /PRNewswire-FirstCall/ -- Kensey Nash Corporation (NASDAQ:KNSY) today reported results for its third quarter of fiscal year 2006, which were at the high end of previously announced estimates.

Third Quarter Results. Third quarter pro forma diluted earnings of $0.21 per share, excluding facility transition charges and equity compensation expense (see below), were at the high end of previously announced expectations of $0.19 to $0.21 per share and represented 75% sequential growth over pro forma earnings per share for the December 2005 quarter. Reported diluted earnings per share for the quarter was $0.15. Total revenues increased 6% to $15.7 million, for the third fiscal quarter, exceeding the Company's guidance range of $14.8 to $15.5 million, compared to $14.8 million in the comparable quarter of the prior fiscal year. Total net sales were stronger than expected and increased 6% year over year and 25% sequentially to $10.0 million compared to $9.4 million in the prior year period and $8.0 million in the December 2005 quarter. Royalty income increased 5%, to $5.7 million from $5.4 million in the prior year comparable period. Royalty income included $4.9 million in Angio-Seal(TM) royalties, up 2% from the comparable quarter of the prior fiscal year, and $777,000 in royalties from Orthovita (NASDAQ:VITA), up 36% from the prior year period.

During the quarter, the Company recognized both accelerated depreciation charges of $454,000 and moving costs of $59,000 related to its transition to a new facility. In addition, equity compensation expense of $649,000 was recorded, as is now required by the applicable accounting rules. On a pro forma basis, excluding these charges, earnings per share of $0.21 compared to $0.26 as reported in the prior year comparable period.

The following chart summarizes the results for the Company for the three months ended March 31, 2006 compared to the prior year period, the three months ended March 31, 2005, as well as the sequential period, the three months ended December 31, 2005. See attached schedules for the detailed reconciliation between the non-GAAP and reported GAAP results.

($ millions, except per share data) Three months Year over Three months ended Year % ended Sequential March 31, Change December 31, % Change 2006 2005 2005

Net Sales $10.0 $9.4 6% $8.0 25% Royalty Income $5.7 $5.4 5% $5.7 1% Total Revenues $15.7 $14.8 6% $13.6 15% Income (Loss) from Operations, As Reported $2.2 $4.2 (48%) ($0.9) n/a Adjust for: Facility Transition Charges $0.5 - n/a $1.9 n/a Equity Compensation Expense $0.6 - n/a $0.6 n/a Income from Operations, Pro forma $3.4 $4.2 (20%) $1.7 95% Earnings (Loss) Per Share, As Reported $0.15 $0.26 (44%) ($0.05) n/a Earnings Per Share, Pro forma $0.21 $0.26 (19%) $0.12 75%

Biomaterials Update. Net sales of orthopaedic products, which were $5.6 million in the third quarter of fiscal 2006, increased 13% over the prior year third quarter and 46% sequentially, which the Company believes signals the anticipated return to growth in this business. Orthopaedic sales included $3.1 million of sales to Arthrex, Inc., representing a 9% increase over the December quarter but a 7% decrease over the prior year comparable quarter. Sales of Vitoss(R) Foam(TM) products to Orthovita, Inc. were $1.2 million, an increase over the December quarter sales of 86%, or $575,000, but an 11% decrease compared to $1.4 million in the prior year period. As anticipated and previously reported by the Company, this decrease from prior year sales to Orthovita was related to Orthovita Vitoss Foam(TM) product launches for which a large volume of products was shipped to Orthovita and, for some products, continues to flow through the distribution channels. As evidenced by the third quarter sales, the Company is beginning to see a return to growth in its quarterly shipments to Orthovita. Meanwhile, Orthovita's end-user sales of the Vitoss(R) Foam(TM) products increased 44% over the prior year comparable quarter, indicating the increased acceptance of the products in the marketplace. The primary year-over-year growth driver for the quarter was sales to new customers, which accounted for sales of $1.1 million. The Company believes that the launch of new products in the current quarter and continued growth with both existing and new customers during the remainder of fiscal 2006 and into fiscal 2007 will continue to diversify the Company's revenue base in the orthopaedic sector.

Net sales of cardiology products during the quarter were $3.3 million, a 19% decline from the prior year and a 6% decrease sequentially over the second quarter of fiscal 2006. These decreases related strictly to the timing of shipments of the Angio-Seal collagen plug and anchor components to St. Jude Medical. Sales of the collagen component for the Angio-Seal, under the exclusive supply agreement with St. Jude Medical, decreased 12% from the prior year and 13% sequentially. Sales of the anchor component decreased 29% from prior year due to exceptionally large orders during the third fiscal quarter of 2005, however increased 26% sequentially over the December quarter.

Endovascular Update. Net sales of endovascular products were $204,000 during the quarter, and included $130,000 of U.S. sales through the Company's endovascular direct sales force selling the TriActiv(R) Embolic Protection System and the recently FDA approved QuickCat(TM) Extraction Catheter. The Company's QuickCat(TM) Extraction Catheter, launched in mid-March, has been well received in the marketplace.

The QuickCat(TM) device is one product in the Company's plan for product line expansion, which also includes a second-generation embolic protection device, the TriActiv FX(R) system, which not only has best-in-class clinical data but also enhances ease of use. In addition, a new thrombectomy product, the ThromCat(TM) Thrombectomy Catheter System, a fully disposable, easy to use mechanical device designed to remove moderate to heavy burdens of clot from the vasculature should be commercially available soon. Both U.S. FDA clearance and European CE Mark approval are anticipated during the fourth quarter of fiscal 2006.

The Company is also making progress on the expansion of indications of its TriActiv(R) Embolic Protection System. The Company is nearing enrollment completion in a U.S. pilot study of its TriActiv(R) ProGuard(TM) System in the carotid anatomy. The TriActiv(R) ProGuard(TM) System incorporates a Local Flush and eXtraction (LFX) technology designed for use in branched arteries, such as those of the carotid blood vessels. The Company anticipates enrollment completion in this study as well as in a European CE Mark study of the ProGuard(TM) system in the very near term. Approval in Europe is anticipated by December 2006. The carotid market represents an important annual market opportunity of over 500,000 people who suffer from carotid artery disease.

CEO Comments on Results. "We are very pleased by the acceleration in the biomaterials business that we are experiencing with both Arthrex and Orthovita, combined with the addition of new customers utilizing our biomaterials capabilities," commented Joseph W. Kaufmann, President and CEO of Kensey Nash Corporation. "This return to growth in the biomaterials business in conjunction with recent and upcoming launches of internally developed products in our endovascular business are all indicators for future significant growth for Kensey Nash."

Year-to-Date Results. Total revenues for the nine months ended March 31, 2006 were $42.0 million compared to $45.1 million in the prior year period. Net sales were $25.4 million down 14% from $29.7 million in the comparable nine months of the prior fiscal year. Royalty income increased 9% to $16.6 million from $15.2 million. Royalty income included $14.5 million in Angio- Seal(TM) royalties, up 7% from the comparable period of the prior fiscal year, and $2.1 million in royalties from Orthovita, up 29% from the prior year period.

As described above, the Company recognized accelerated depreciation charges of $3.8 million and moving costs of $329,000 as well as equity compensation expense of $1.7 million during the nine months ended March 31, 2006. On a pro forma basis, excluding these charges, diluted earnings per share were $0.42 compared to $0.79 as reported in the prior year comparable period. The reported diluted earnings per share for the nine-month period of fiscal 2006 was $0.09.

The following chart summarizes the results for the Company for the nine months ended March 31, 2006 compared to the nine months ended March 31, 2005. See attached schedules for the detailed reconciliation between the non-GAAP and reported GAAP results.

($ millions, except Nine months ended March 31, Year over per share data) 2006 2005 Year % Change

Net Sales $25.4 $30.0 (14%) Royalty Income $16.6 $15.2 9% Total Revenues $42.0 $45.1 (7%) Income from Operations, As Reported $0.5 $12.8 (96%) Adjust for: Facility Transition Charges $4.1 - n/a Equity Compensation Expense $1.7 - n/a Income from Operations, Pro forma $6.3 $12.8 (50%) Earnings Per Share, As Reported $0.09 $0.79 (89%) Earnings Per Share, Pro forma $0.42 $0.79 (47%)

Cash and investments on Kensey Nash's balance sheet as of March 31, 2006 were $27.7 million, total assets were $117.5 million, stockholders' equity was $107.6 million and no debt was reported.

Facility Transition Plan. In conjunction with its move to a new 198,000- square-foot facility, the Company is recording an acceleration of depreciation charge related to the abandonment of leasehold improvement assets at its four leased facilities, which has been phased throughout fiscal year 2006. The total value of assets to be abandoned was $4.9 million at April 30, 2005 of which a charge of $813,000 was recorded in the prior fiscal year. During the three and nine months ended March 31, 2006, the Company recorded a pre-tax $454,000 and $3.8 million, or $0.03 and $0.22 per share tax effected, charge for the acceleration of depreciation, respectively. The Company will record the remaining acceleration of depreciation charge of $324,000, during the next fiscal quarter. In addition, moving charges associated with the transition to the new facility of approximately $330,000, or $0.02 per share tax-effected were incurred during the Company's second and third fiscal quarter. It is anticipated that moving costs to transition the remaining employees, furniture and equipment to the new facility during the fourth quarter of fiscal 2006 will cost approximately $140,000 to $190,000. The Company successfully completed the transition of the entire manufacturing operation to the new facility during the second quarter of fiscal 2006.

Equity Compensation Expense. Since the quarter ended September 30, 2005, the Company has been accounting for equity compensation under the provisions of Statement of Financial Accounting Standards No. 123(R), which requires the cost of share-based payment transactions to be recognized in the financial statements. The Company recorded a charge of $649,000 and $1.7 million, or $0.04 and $0.10 per share tax effected, for equity compensation for the three and nine-month periods ended March 31, 2006, respectively. The Company estimates a total fiscal year 2006 equity compensation charge of $2.4 million (or $0.13 per share tax effected).

Fourth Quarter Fiscal 2006 Forecast. The Company's expectations for the fourth fiscal quarter are net sales in a range of $11.0 to $11.5 million, royalties in a range of $5.8 to $6.1 million and earnings per share on a pro forma basis to be in a range of $0.24 to $0.26. As reported earnings per share is forecasted at $0.20 to $0.22, including estimated facility transition costs and equity compensation expenses of $499,000 and $645,000, respectively. Due to the recent U.S. launch of the QuickCat(TM) device, uncertainties related to the timing of approvals related to outstanding submissions for U.S. FDA 510(k) and European CE Mark clearance for new endovascular products, and the success of approved products in the marketplace, the Company will not be providing detailed guidance beyond the fourth quarter at this time.

Conference Call and Webcast. A live webcast of the third quarter fiscal year 2006 conference call will be broadcast April 24, 2006 at 9:00 AM Eastern Daylight Time. Please visit the financial information page at http://www.kenseynash.com/ for the link. To participate in the conference call, interested parties may call 1-612-332-0107. The teleconference call will also be available for replay starting Monday, April 24, 2006 at 12:30 p.m. Eastern Daylight Time through Monday, May 1, 2006 at 11:59 p.m. Eastern Daylight Time by dialing 1-800-475-6701 with an access code of 825913.

About Kensey Nash Corporation. Kensey Nash Corporation is a leading medical technology company providing innovative solutions and technologies for a wide range of medical procedures. The Company provides an extensive range of products into multiple medical markets, primarily in the endovascular, sports medicine and spine markets. Many of the products are based on the Company's significant expertise in the design, development, manufacturing and processing of absorbable biomaterials, which has led to partnerships to commercialize technologies. Recently, the Company has created an endovascular division to launch its novel TriActiv(R) Embolic Protection System, a device designed to prevent debris from traveling downstream from the treatment site during stenting procedures. Kensey Nash is bringing several versions of the device to market, including the TriActiv FX(R) and TriActiv(R) ProGuard(TM) Systems, and has also launched the QuickCat(TM) Extraction Catheter as a new endovascular product. The ThromCat(TM) Thrombectomy System clearance is pending at the FDA. Kensey Nash is also known as a pioneer in the field of arterial puncture closure, as the inventor and developer of the Angio-Seal(TM) Vascular Closure Device, which is licensed to St. Jude Medical, Inc.

Cautionary Note for Forward-Looking Statements. This press release contains forward-looking statements that reflect the Company's current expectations about its prospects and opportunities including the Company's guidance regarding operating results for the fourth quarter of fiscal 2006. The Company has tried to identify these forward looking statements by using words such as "expect," "anticipate," "estimate," "plan," "will," "forecast," "believe," "guidance," "projection" or similar expressions, but these words are not the exclusive means for identifying such statements. The Company cautions that a number of risks, uncertainties, and other important factors could cause the Company's actual results to differ materially from those in the forward-looking statements including, without limitation, the ability of the Company and its customers to obtain necessary regulatory approvals (including future regulatory approvals for the TriActiv(R) and thrombectomy product pipelines) and the timing thereof, the Company's dependence on three major customers: St. Jude Medical, Arthrex and Orthovita, St. Jude Medical's success in marketing the Angio-Seal(TM) device, Orthovita's success in selling co-developed products, demand for and the Company's ability to develop and manufacture biomaterial products, including Angio-Seal(TM) components, sales and marketing success of the TriActiv(R) System, and competition from other technologies in the marketplace. For a more detailed discussion of these and other factors, please see the Company's SEC filings, including the disclosure under "Risk Factors" in those filings. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason.

- FINANCIAL INFORMATION TO FOLLOW -

KENSEY NASH CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

Three Months Nine Months Ended March 31, Ended March 31, 2006 2005 2006 2005 Revenues: Net sales $9,963,727 $9,365,150 $25,424,448 $29,664,812 Research and development - - - 253,292 Royalty income 5,711,798 5,425,668 16,604,214 15,170,825 Total revenues 15,675,525 14,790,818 42,028,662 45,088,929 Operating costs and expenses: Cost of products sold 4,545,175 3,856,404 14,586,672 12,206,764 Research and development 4,635,501 3,636,957 14,499,053 11,755,406 Selling, general and administrative 4,301,450 3,101,907 12,445,351 8,365,363 Total operating costs and expenses 13,482,126 10,595,268 41,531,076 32,327,533 Income from operations 2,193,399 4,195,550 497,586 12,761,396 Interest and other income, net 244,055 353,073 863,929 994,833 Pre-tax income 2,437,454 4,548,623 1,361,515 13,756,229 Income tax expense 649,820 1,364,587 312,492 4,126,869 Net income $1,787,634 $3,184,036 $1,049,023 $9,629,360 Basic earnings per share $0.16 $0.28 $0.09 $0.84 Diluted earnings per share $0.15 $0.26 $0.09 $0.79

Weighted average common shares outstanding 11,477,601 11,377,587 11,470,282 11,421,073

Diluted weighted average common shares outstanding 12,263,183 12,199,697 12,287,701 12,218,812

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

March 31, June 30, 2006 2005 Assets Current assets: Cash, cash equivalents and investments $27,665,575 $44,889,435 Trade receivables 5,953,734 7,863,940 Other receivables 6,859,705 6,594,240 Inventory 7,614,648 5,657,791 Prepaids and other assets 1,481,869 3,568,141 Deferred tax asset, current 1,739,696 656,047 Total current assets 51,315,227 69,229,594 Property, plant and equipment, net 58,916,394 38,607,641 Acquired patents and proprietary rights, net 3,940,032 4,515,583 Deferred tax asset, non-current - 37,347 Goodwill 3,284,303 3,284,303 Total assets $117,455,956 $115,674,468

Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued expenses $8,354,090 $10,811,430 Deferred revenue 195,827 271,681 Total current liabilities 8,549,917 11,083,111 Long term portion of deferred revenue 653,098 738,719 Deferred tax liability, non-current 695,862 - Total stockholders' equity 107,557,079 103,852,638 Total liabilities and stockholders' equity $117,455,956 $115,674,468

Non-GAAP Financial Measures and Reconciliations

We use various numerical measures in conference calls, investor meetings and other forums which are or may be considered "Non-GAAP financial measures" under Regulation G. We have provided below for your reference supplemental financial disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation.

Kensey Nash Corporation Non-GAAP Financial Measures and Reconciliations Adjusted Income and Earnings Per Share Reconciliation

Non-GAAP Adjustments Acceleration As Reported of Pro forma Three Months Depreciation Equity Three Months Ended March and Moving Compensation Ended March 31, Costs Expense 31, 2006 2006 2006 2006

Revenues: Net sales $9,963,727 $- $- $9,963,727 Research and development - - - - Royalty income 5,711,798 - - 5,711,798 Total revenues 15,675,525 - - 15,675,525 Operating costs and expenses: Cost of products sold 4,545,175 (268,014) (46,409) 4,230,752 Research and development 4,635,501 (169,998) (241,134) 4,224,369 Selling, general and administrative 4,301,450 (74,335) (361,776) 3,865,339 Total operating costs and expenses 13,482,126 (512,347) (649,319) 12,320,460 Income from operations 2,193,399 512,347 649,319 3,355,065 Interest and other income, net 244,055 - - 244,055 Pre-tax income 2,437,454 512,347 649,319 3,599,120 Income tax expense 649,820 158,483 200,852 1,009,155 Net income $1,787,634 $353,864 $448,467 $2,589,965 Basic earnings per share $0.16 $0.03 $0.04 $0.23 Diluted earnings per share $0.15 $0.03 $0.04 $0.21 Weighted average common shares outstanding 11,477,601 11,477,601 11,477,601 11,477,601 Diluted weighted average common shares outstanding 12,263,183 12,263,183 12,263,183 12,263,183

Note: To supplement our consolidated financial statements presented in accordance with GAAP, Kensey Nash Corporation uses non-GAAP measures of pro forma net income and earnings per share, which are adjusted from our GAAP results to exclude certain expenses. These non-GAAP adjustments are provided to enhance the user's overall understanding of our historical and current financial performance and our prospects for the future. We believe the non-GAAP results provide useful information to both management and investors by excluding certain expenses that we believe are not indicative of our core operating results.

We have adjusted our GAAP results for equity compensation expense and an acceleration of depreciation charge. The Company has excluded the impact of equity compensation related to adopting Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, which became effective for the Company July 1, 2005 and the impact of the acceleration of depreciation charge related to the Company's move to a new facility expected in June 2006. For the period ending March 31, 2006 equity compensation has been and will continue to be included in the Company's consolidated results of operations. The acceleration of depreciation charge began in May 2005 and will be complete by June 2006. Both of these non-GAAP measures are non-cash charges and will have no impact on the cash flows of the Company.

These non-GAAP measures will provide investors and management with an alternative method for assessing Kensey Nash's operating results in a manner consistent with the presentation prior to the adoption of FAS 123(R) and the acceleration of depreciation charge related to the transition to the new facility. Further, these non-GAAP results are one of the primary indicators management uses for planning and forecasting in future periods. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.

Non-GAAP Financial Measures and Reconciliations

Kensey Nash Corporation Non-GAAP Financial Measures and Reconciliations Adjusted Income and Earnings Per Share Reconciliation

Non-GAAP Adjustments Acceleration As Reported of Pro forma Nine Months Depreciation Equity Nine Months Ended March and Moving Compensation Ended March 31, Costs Expense 31, 2006 2006 2006 2006

Revenues: Net sales $25,424,448 $- $- $25,424,448 Research and development - - - - Royalty income 16,604,214 - - 16,604,214 Total revenues 42,028,662 - - 42,028,662 Operating costs and expenses: Cost of products sold 14,586,672 (2,220,881) (125,882) 12,239,909 Research and development 14,499,053 (1,318,369) (618,872) 12,561,812 Selling, general and administrative 12,445,351 (589,335) (972,104) 10,883,912 Total operating costs and expenses 41,531,076 (4,128,585) (1,716,858) 35,685,633 Income from operations 497,586 4,128,585 1,716,858 6,343,029 Interest and other income, net 863,929 - - 863,929 Pre-tax income 1,361,515 4,128,585 1,716,858 7,206,958 Income tax expense 312,492 1,193,665 496,381 2,002,538 Net income $1,049,023 $2,934,920 $1,220,477 $5,204,420 Basic earnings per share $0.09 $0.26 $0.11 $0.45 Diluted earnings per share $0.09 $0.24 $0.10 $0.42 Weighted average common shares outstanding 11,470,282 11,470,282 11,470,282 11,470,282 Diluted weighted average common shares outstanding 12,287,701 12,287,701 12,287,701 12,287,701

Non-GAAP Financial Measures and Reconciliations

Kensey Nash Corporation Non-GAAP Financial Measures and Reconciliations Adjusted (Loss)/Income and Earnings Per Share Reconciliation

Non-GAAP Adjustments As Reported Acceleration Three of Pro forma Months Depreciation Equity Three Months Ended and Moving Compensation Ended December 31, Costs Expense December 31, 2005 2005 2005 2005

Revenues: Net sales $7,962,264 $- $- $7,962,264 Research and development - - - - Royalty income 5,664,701 - - 5,664,701 Total revenues 13,626,965 - - 13,626,965 Operating costs and expenses: Cost of products sold 5,247,868 (1,071,470) (53,870) 4,122,528 Research and development 4,913,131 (597,514) (241,597) 4,074,020 Selling, general and administrative 4,331,881 (274,128) (351,326) 3,706,427 Total operating costs and expenses 14,492,880 (1,943,112) (646,793) 11,902,975 (Loss)/income from operations (865,915) 1,943,112 646,793 1,723,990 Interest and other income, net 310,055 - - 310,055 Pre-tax (loss)/income (555,860) 1,943,112 646,793 2,034,045 Income tax (benefit)/expense - 464,258 154,535 618,793 Net (loss)/income $(555,860) $1,478,854 $492,258 $1,415,252 Basic (loss)/ earnings per share $(0.05) $0.13 $0.04 $0.12 Diluted (loss)/earnings per share $(0.05) $0.12 $0.04 $0.12 Weighted average common shares outstanding 11,476,546 11,476,546 11,476,546 11,476,546 Diluted weighted average common shares outstanding 11,476,546 12,245,612 12,245,612 12,245,612

We have adjusted our GAAP results for equity compensation expense and an acceleration of depreciation charge. The Company has excluded the impact of equity compensation related to adopting Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, which became effective for the Company July 1, 2005 and the impact of the acceleration of depreciation charge related to the Company's move to a new facility expected in June 2006. For the period ending December 31, 2005 equity compensation has been and will continue to be included in the Company's consolidated results of operations. The acceleration of depreciation charge began in May 2005 and will be complete by June 2006. Both of these non-GAAP measures are non-cash charges and will have no impact on the cash flows of the Company.

DATASOURCE: Kensey Nash Corporation

CONTACT: Joseph W. Kaufmann, President and Chief Executive Officer of

Kensey Nash Corporation, +1-484-713-2100

Web site: http://www.kenseynash.com/