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Derma Sciences Reports Fourth Quarter, Year-End Results for 2008

PRINCETON, N.J., April 1 /PRNewswire-FirstCall/ -- Derma Sciences, Inc. (OTC Bulletin Board: DSCI), a provider of advanced wound care products, reported that sales for 2008 rose 47.1% year-over-year, reflecting incremental sales from its First Aid Division (FAD) and higher sales of proprietary advanced wound care products led by MEDIHONEY(R). Sales for the year were $50.2 million vs $34.1 million in 2007. The Company's loss increased consistent with expectations to $4.0 million or $0.10 per share, compared to 2007's loss of $2.3 million or $0.09 per share, as Derma Sciences implemented its advanced wound care growth strategy, integrated FAD into the company and continued its investment in R&D. Fourth quarter 2008 sales were $12.6 million versus $10.7 million in 2007. Net losses diminished each quarter during the year, and the 2008 fourth quarter loss was $0.6 million versus $2.0 million in 2007.

Chairman and CEO Ed Quilty commented, "Our advanced wound care products made great strides in 2008. Sales for our silver alginate product, ALGICELL(R) Ag, nearly doubled to over $1.1 million. Sales of our MEDIHONEY product, launched in October 2007, grew consistently each quarter, and ended the year at $1.5 million in 2008 versus $0.1 million for the final three months of 2007. MEDIHONEY continues to get great media coverage, typified by a cluster of television and print articles reporting that the product was credited for saving a patient's leg from having to be amputated at Long Island Jewish Hospital in January 2009. Its coverage in medical journals continues to be strong, as seven separate articles on the emerging use of MEDIHONEY were published in the major wound care journals since December of 2008.

"In the fourth quarter and early 2009, we launched three additional promising new products," Quilty stated. "Our proprietary lines now include the TCC-EZ(TM) Total Contact Casting system, XTRASORB(TM) Super Absorbent Dressings and the MOBILITY1(TM) Intermittent Pneumatic Compression Therapy system for ambulatory patients. Last month we received clearance from the Food and Drug Administration for the marketing and sale of BIOGUARD(TM) Barrier Dressings, our novel line of infection control products. We are also pleased to report that patients are currently enrolling into the Phase II efficacy study of DSC127, a novel angiotensin analog licensed from the University of Southern California in November 2007 for use in wound healing and scar reduction. The great synergies between all these innovative products will get us closer to our goal of becoming a leader in the $4.1 billion advanced wound care market."

At December 31, the Company had a current ratio of 1.6:1. Total assets were $36.2 million vs total liabilities of $14.8 million. Shareholder's equity grew to $21.4 million, or approximately $0.53 per share. Quilty pointed out that the Company's common stock is trading below book value, in spite of growing sales and successful proprietary products added to the company's portfolio. "It's a sign of the times," he said, "but clearly not a satisfactory valuation from our point of view. We will stick to our strategic plan, reduce expenses wherever we are able to without adversely affecting our products and customer service, and continue to build sales and value for our shareholders.

"Getting through a difficult economic time like this requires hard work and dedication on the part of our staff, and a willingness to follow financial priorities rigorously," Quilty continued. "The integration of our FAD acquired in November 2007 was more costly than we had expected in 2008, and we had to continue working in a high-cost plant until we successfully transitioned manufacturing. Although that manufacturing transition took significantly longer than expected, we achieved our target margins for FAD in Q4. We expect further margin improvements in 2009, and we anticipate continuously improving EBITDA and cash flow as well."

Conference Call / Webcast

Today at 11:00am EDT (8:00am PDT), a conference call will be held to review the DSCI results; interested parties should call 866-271-5140 (domestic) or 617-213-8893 (international), with passcode 42480759 to access the call. You may also access this call via the Internet at:

For those who are unavailable to listen to the live broadcast, a replay will be available through May 1, 2009 and can be accessed by dialing 888-286-8010 (domestic), and 617-801-6888 (international). The passcode is 36656033.

About Derma Sciences

Derma Sciences is a global manufacturer and marketer of advanced wound care products. Its key product, MEDIHONEY(R), is sold throughout the world by Derma Sciences and Comvita New Zealand -- the licensor of the patented honey-based technology -- and is the leading brand of honey-based dressings for the management of wounds and burns. The product has been shown to be effective in a variety of wounds and burns, and was the focus of a positive large-scale randomized controlled trial on leg ulcers. Derma's recently FDA cleared BIOGUARD(TM) Barrier Dressing is the Company's latest new product entrant into the $14 billion global wound care market. The barrier technology was licensed from Quick-Med Technologies, Inc. in Q1 of 2007. Derma also has in development DSC127, a novel angiotensin analog for accelerated wound healing and scar reduction. DSC127 was licensed from the University of Southern California in Q4 of 2007. Patient enrollment for a Phase II study began in Q4 of 2008. Results from this study are expected to be submitted to the FDA in Q2 of 2010.

For more information about Derma Sciences, Inc., visit

Forward-looking Statements

Statements contained in this release that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" are intended to identify forward-looking statements. Readers are cautioned that certain important factors may affect the Company's actual results and could cause such results to differ materially from any forward-looking statements which may be made in this release or which are otherwise made by or on behalf of the Company. Factors which may affect the Company's results include, but are not limited to, product demand, market acceptance, impact of competitive products and prices, product development, completion of an acquisition, commercialization or technological difficulties, the success or failure of negotiations and trade, legal, social and economic risks. Additional factors that could cause or contribute to differences between the Company's actual results and forward-looking statements Include but are not limited to, those discussed in the Company's filings with the Securities and Exchange Commission.


    Derma Sciences, Inc.
    Edward J. Quilty
    Chairman and CEO
    (609) 514-4744

    Allen & Caron Inc
    Rudy Barrio (US Investors)
    (212) 691-8087

    Brian Kennedy (Media)
    (212) 691-8087

                            -FINANCIAL TABLES FOLLOW-

                       Consolidated Statements of Operations

                                                  Three months ended
                                                     December 31
                                                2008              2007
    Net Sales                               $12,558,067       $10,651,944
    Cost of sales                             8,148,059         7,231,758
    Gross Profit                              4,410,008         3,420,186
    Operating expenses
      Selling, general and administrative     4,277,737         3,968,259
      Research and development                  414,127           868,069
        Total operating expenses              4,691,864         4,836,328
    Operating loss                             (281,856)       (1,416,142)
    Other expense, net:
      Interest expense                          191,405           270,605
      Loss on debt extinguishment                     -           256,628
      Other expense, net                         44,426            35,699
        Total other expense, net                235,831           562,932
    Loss before provision for income taxes     (517,687)       (1,979,074)
    Provision for income taxes                   62,355            66,869
    Net Loss                                  $(580,042)      $(2,045,943)
    Net loss per common share - basic
     and diluted                                 $(0.01)          $(0.07)
    Shares used in computing net loss per
     common share - basic and diluted        40,140,743       30,289,386

                                               Year ended December 31
                                                2008              2007
    Net Sales                               $50,199,428       $34,135,401
    Cost of sales                            35,289,684        22,530,986
    Gross Profit                             14,909,744        11,604,415
    Operating expenses
      Selling, general and administrative    17,196,863        11,885,368
      Research and development                  653,326           993,069
        Total operating expenses             17,850,189        12,878,437
    Operating loss                           (2,940,445)       (1,274,022)
    Other expense, net:
      Interest expense                          940,148           413,992
      Loss on debt extinguishment                    --           256,628
      Other expense, net                         22,529            77,929
        Total other expense, net                962,677           748,549
    Loss before provision for income taxes   (3,903,122)       (2,022,571)
    Provision for income taxes                   58,815           262,034
    Net Loss                                $(3,961,937)      $(2,284,605)
    Net loss per common share - basic
     and diluted                                 $(0.10)           $(0.09)
    Shares used in computing net loss per
     common share - basic and diluted        38,606,779        26,523,541

                           Consolidated Balance Sheets
                                                     December 31
    ASSETS                                      2008              2007
    Current Assets
      Cash and cash equivalents                $391,038          $577,096
      Accounts receivable, net                3,892,523         3,667,119
      Inventories                            12,423,042         9,935,977
      Prepaid expenses and other
       current assets                           397,117         1,210,135
    Total current assets                     17,103,720        15,390,327
    Cash - restricted                         2,014,422                 -
    Equipment and improvements, net           3,977,853         4,909,049
    Goodwill                                  7,119,726         9,524,305
    Other intangible assets, net              5,310,129         5,537,653
    Other assets, net                           681,472           509,507
    Total Assets                            $36,207,322       $35,870,841
    Current Liabilities
      Line of credit borrowings               3,446,605         1,219,197
      Current maturities of long-term debt    1,298,207         1,288,532
      Accounts payable                        3,614,764         4,092,278
      Accrued expenses and other current
       liabilities                            2,004,493         3,421,282
    Total current liabilities                10,364,069        10,021,289
    Long-term debt                            4,065,036         5,292,136
    Other long-term liabilities                  44,848            82,402
    Deferred tax liability                      340,871           420,059
    Total Liabilities                        14,814,824        15,815,886
    Shareholders' Equity
    Convertible preferred stock, $.01 par
     value; 11,750,000 shares authorized;
     issued and outstanding:  2,280,407 at
     December 31, 2008 and 2007 (liquidation
     preference of $4,210,231 at December
     31, 2008)                                   22,804            22,804
    Common stock, $.01 par value, authorized
     shares 150,000,000; issued and
     outstanding shares:  40,140,743 at
     December 31, 2008 and 33,829,755 at
     December 31, 2007                          401,407           338,298
    Additional paid-in capital               40,027,645        33,540,952
    Accumulated other comprehensive income -
     cumulative translation adjustments         604,465         1,854,787
    Accumulated deficit                     (19,663,823)      (15,701,886)
    Total Shareholders' Equity               21,392,498        20,054,955
    Total Liabilities and Shareholders'
     Equity                                 $36,207,322       $35,870,841

SOURCE Derma Sciences, Inc.
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