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SHPI News Specialized Health Products Reports Third Quarter Financial Results

BOUNTIFUL, Utah--(BUSINESS WIRE)--Specialized Health Products International, Inc. (“SHPI”) (OTCBB: SHPI), a manufacturer and marketer of proprietary safety medical devices, today announced consolidated financial results for the three and nine-month periods ended September 30, 2006.

Third quarter highlights are as follows (financial comparisons are to third quarter 2005):

• Revenues increased 139% to $4.1 million
• Manufactured product sales increased 239% to $3.0 million
• Reported net income of $557,000, an improvement of $908,000
• Initiated shipment of two new manufactured product lines under exclusive supply agreements with large corporate customers
• Completed post-merger integration with The Med-Design Corporation, and terminated the lease on Med-Design’s Ventura, California facility
• Ended the quarter with $7.1 million in cash and cash equivalents and was cash flow neutral for the quarter

Total revenues for the third quarter of 2006 were $4.1 million, representing a $2.4 million or 139% increase compared to $1.7 million reported for the third quarter of 2005. Consolidated financial results include the first full quarter of revenue from the Med-Design products following the Company’s merger with The Med-Design Corporation on June 2, 2006. SHPI revenue streams contributed approximately $2.8 million of total revenue in the third quarter, representing a 62% increase on a stand alone basis compared to the revenue reported by SHPI for third quarter 2005. Med-Design revenue streams contributed approximately $1.3 million of total revenue for the quarter, representing a 53% increase on a stand alone basis compared to the revenue reported by Med-Design for third quarter 2005.

Gross profit for the third quarter more than doubled to $2.7 million, reflecting a 65% gross profit margin. The Company reported net income of $557,000 for the quarter, representing an improvement of $908,000 compared to a net loss of $351,000 reported in the third quarter of 2005. Net income for the third quarter of 2006 was $0.01 per diluted share compared to a net loss of $(0.01) per diluted share for the same period last year.

Manufactured product sales increased $2.1 million or 239% to $3.0 million and accounted for 73% of total revenue in the third quarter. This growth was driven primarily by increased sales of the Company’s two leading safety Huber needle product lines, MiniLoc™ Safety Infusion Set, launched by SHPI in September 2005, and SafeStep^® Huber Needle Set, acquired in the Med-Design merger in June 2006. Revenue growth from increased MiniLoc and SafeStep sales was partially offset by decreased sales of LiftLoc^® Safety Infusion Set, related to the anticipated cannibalization of this product line by the Company’s second generation safety Huber needle products. Initial shipments of two new manufactured product lines under exclusive supply agreements, PowerLoc™ Safety Infusion Set to Bard Access Systems and bone marrow biopsy needles to Tyco Healthcare, contributed to revenue growth late in the quarter.

Royalties from licensed products increased $480,000 or 109% to $923,000 and accounted for 22% of revenue in the third quarter. This increase was related exclusively to the addition of royalties from Med-Design’s licensed products during the quarter.

Revenues for the nine months ended September 30, 2006 were $9.5 million, an increase of 88% compared to $5.0 million reported for the same period in 2005. Manufactured product sales increased 166% to $6.9 million and accounted for 73% of total revenue for the nine-month period. Royalty revenue increased 34% to $1.9 million. The Company reported net income of $241,000 and was breakeven on an earnings per diluted share basis for the nine months ended September 30, 2006, compared to a net loss of $1.1 million or $(0.02) per diluted share for the same period in 2005.

“We made significant progress in the continued execution of our business plan during the third quarter,” commented Jeff Soinski, President and Chief Executive Officer. “More than $1.0 million in new sales of our MiniLoc™ product line, the addition of our first full quarter of revenue from the Med-Design products, and the launch of two new manufactured product lines all contributed to our revenue growth. By efficiently completing the integration of our merger with Med-Design and maintaining our blended gross margin at 65%, we have been able to immediately realize cost-savings associated with the merger and enhance profitability.”

“The addition of the SafeStep^® Huber Needle Set acquired in the merger with Med-Design and launch of PowerLoc™ Safety Infusion Set by Bard Access Systems strengthens our presence in the safety Huber needle market and, we believe, positions us for continued year-over-year growth in our core safety needle franchise,” continued Mr. Soinski. “When we reported our second quarter earnings, we increased our revenue projection for full year 2006 to $12.6 to $13.3 million, representing 80% to 90% revenue growth compared to 2005. Based upon our performance in the first nine months of the year and anticipated fourth quarter results, we reaffirm this guidance and expect to end 2006 with revenue within the top half of this range. We also anticipate being profitable on a GAAP accounting basis for the year.”

Conference Call

SHPI will conduct a conference call to discuss third quarter 2006 financial results on Thursday, November 9, 2006, at 4:30 p.m. Eastern time. Investors can participate in the conference call live by dialing (866) 233-3843 in the U.S. and (612) 288-0318 internationally. In addition, the call will be webcast live and available for playback within one hour of completion of the call through a link on the company’s website at www.shpi.com. A replay of the call will also be available for one week after the event by dialing (800) 475-6701 in the U.S. and (320) 365-3844 internationally and entering access code: 846257.

About Specialized Health Products International, Inc.

Specialized Health Products International, Inc. (“SHPI”) is a leading developer, manufacturer and marketer of proprietary disposable medical devices for clinician and patient safety. SHPI has developed multiple safety needle products based upon a broad intellectual property portfolio that applies to virtually all medical needles used today. SHPI manufactures and markets certain products, including three of the leading brands in the safety Huber needle market, under its own label. It licenses or supplies other products to leading manufacturers and marketers in the global disposable medical products industry, including Tyco Healthcare, Bard Access Systems, and BD Medical. In June 2006, SHPI merged with The Med-Design Corporation, another leading technology provider in the safety medical needle space. For more information about SHPI, visit the company’s website at www.shpi.com.

This news release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended. Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in the forward-looking statements. The Company may experience significant fluctuations in future operating results due to a number of economic conditions, risks in product and technology development, the effect of the Company's accounting policies and other risk factors detailed in the Company's SEC filings. These factors and others could cause operating results to vary significantly from those in prior periods and those projected in forward-looking statements. Additional information with respect to these and other factors, which could materially affect the Company and its operations, are included on certain forms the Company files with the Securities and Exchange Commission.