Synovis Life Technologies Reports 35 Percent Revenue Growth in the Third Quarter...

Synovis Life Technologies Reports 35 Percent Revenue Growth in the Third Quarter of Fiscal 2008; Diluted EPS from Continuing Operations Increases to $0.14 from $0.08

Company Achieves Ninth Consecutive Record Revenue Quarter
ST. PAUL, Minn.--(Business Wire)--
Synovis Life Technologies, Inc. (Nasdaq: SYNO), today reported
strong revenue and net income performance for the third fiscal quarter
and nine months ended July 31, 2008.

For the 2008 third quarter, net revenue rose to $13.4 million, a
35 percent increase over $9.9 million in the year-ago period and an 8
percent sequential gain over $12.4 million in the fiscal 2008 second
quarter. The company reported third-quarter income from continuing
operations of $1.8 million, or $0.14 per diluted share, up from income
of $1.0 million, or $0.08 per diluted share, in the year-earlier
period.

"We are happy to report our ninth quarter of record-setting
revenue based on continued growth in each of our product areas," said
Richard W. Kramp, Synovis Life Technologies' president and chief
executive officer. "We have differentiated product offerings in
several high-potential markets with significant growth opportunities
in those markets. Our 43 surgical and micro-surgical U.S. sales
representatives are working effectively to communicate the advantages
of our products, as well as the clinical and financial value those
advantages have for patients, hospitals and surgeons."

The third-quarter gross margin rose to 69 percent, a
four-percentage point gain over the third quarter of fiscal 2007.
Factors driving the improvement include increased sales of
higher-margin Veritas(R) and Peri-Strips(R) products, improved labor
and material utilization, lower obsolescence expense and increased
average net sales prices. Operating expenses rose approximately 26
percent in the third quarter compared to the prior-year period, well
below the revenue growth rate of 35 percent. The increase in operating
expenses was driven by higher sales and marketing costs primarily
attributable to the expansion of the company's direct sales force from
28 to 43 sales representatives in the last half of fiscal 2007.
Operating income totaled $2.3 million, up 151 percent from operating
income of $900,000 a year earlier.

In the first nine months of fiscal 2008, net revenue from
continuing operations rose to $37.1 million, up 35 percent from $27.4
million in the first nine months of the prior fiscal year. Net
earnings from continuing operations rose to $4.3 million, or $0.33 per
diluted share, up 92 percent from $2.2 million, or $0.18 per diluted
share, in the first nine months of fiscal 2007.

As previously announced, the company completed the sale of
substantially all of the assets of its interventional business on
January 31, 2008. Operating results for the interventional business
are reflected as discontinued operations for all periods presented. A
pre-tax gain on the sale of the interventional business of $11.4
million was recorded in the first quarter of fiscal 2008. Income taxes
recorded on the gain were $6.1 million, resulting in a net gain of
$5.3 million.

Multiple Product Lines Generate Growth

Synovis offers a full product portfolio which includes
tissue-based products, devices for microsurgery, and surgical tools
and instruments with applications in several surgical specialties,
including bariatric, general, vascular, neuro, micro and
reconstructive surgery. Product-related highlights from the third
quarter follow.

Peri-Strips Dry, or PSD, product sales reached $4.8 million, a 37
percent increase over the year-ago period. PSD is a bovine pericardium
based staple-line buttress used primarily to control bleeding and
leakage of gastric fluids in bariatric procedures to treat obesity.
Peri-Strips products have an exceptionally low adverse event rate.

Kramp said, "The sales momentum of our Peri-Strips product line is
continuing in the bariatric market, as surgeons recognize the clinical
advantages of using a buttress and the unique performance qualities of
PSD Veritas. Many bariatric surgeons do not yet use a buttress -
presenting a large market opportunity for Synovis. We believe two
major factors will encourage patients to take greater interest in the
gastric bypass procedure. First, recently published clinical data
point to the immediate, positive impact of gastric bypass surgery on
Type II diabetes. Second, long-term results from Europe with
alternative gastric banding procedures have been disappointing when
compared to gastric bypass surgery."

Revenue from tissue patch products, including the Tissue-Guard
product line and Veritas remodelable biomaterial, rose to $5.0 million
in the third quarter, a 31 percent increase over the year-ago period.
Veritas was introduced into the complex ventral hernia repair market
at the end of the fiscal 2007 first quarter, and the Veritas collagen
matrix patch has achieved an annualized sales rate of over $5.1
million. Veritas, which is extremely strong and supple, acts as a
"scaffold" to facilitate tissue regeneration. As in recent quarters,
Tissue-Guard sales for the vascular, thoracic and neuro applications
increased in both U.S. and international markets.

According to Kramp, "We have in Veritas an outstanding product for
the hernia market and have just begun to establish market share.
Surgeons who have used the Veritas collagen matrix patch in routine or
difficult hernia cases are impressed with its handling characteristics
and performance, as well as patient outcomes. We believe we can
continue to gain market share with early adopters and those surgeons
who are dissatisfied with the product they are currently using.
Furthermore, we are planning to invest in additional in vivo and
clinical studies to document the comparative strengths of Veritas
versus its biological competitors. To be effective, these studies will
run over a two- to three-year period and are a necessary and
worthwhile investment to meet our goal of establishing Veritas as a
major player in the complex ventral hernia market."

Revenue from the company's microsurgical product line rose 55
percent over the same quarter last year to $2.2 million. Sales of the
Microvascular Anastomotic Coupler, the primary microsurgery product -
a device for connecting small blood vessels without sutures - led the
growth of micro-surgical sales with a 77 percent revenue gain over the
year-ago quarter. The Coupler facilitates connecting extremely small
blood vessels in about one-fourth of the time required by hand
suturing. The vessel is supported at the connection site, resulting in
no compromise of short- or long-term patency compared to hand
suturing.

Kramp noted, "We completed the transition to a direct sales force
for our microsurgical line early this year, and our sales people are
focused on expanding our customer base of micro- and reconstructive
surgeons. Their efforts combined with a line of high-performance
products for this specialty have resulted in strong revenue growth and
unit volume increases."

Balance Sheet and Cash Flow

Synovis had $50.4 million in cash and cash equivalents as well as
$2.9 million in restricted cash and $26.7 million in investments, for
a total of $80.0 million of cash, cash equivalents and investments as
of July 31, 2008, up from $53.7 million at the fiscal 2007 year-end.
The increase was primarily due to the proceeds from the sale of the
interventional business in January 2008. Included in long-term
investments are seven auction rate securities that continued to fail
at auction in the third quarter. The company obtained an external
valuation of these auction rate securities in the third quarter, and
along with an internal assessment, has estimated the fair value of
these securities at $8.3 million, resulting in a temporary impairment
of $2.0 million when compared to their par value of $10.3 million. The
impairment is recorded as "accumulated other comprehensive loss" in
the equity section of the balance sheet due to its classification as
temporary, and as such, had no impact on net income or earnings per
share in the quarter or the year-to-date period.

Cash provided by operating activities from continuing operations
was approximately $1.9 million in the third quarter of fiscal 2008 and
approximately $4.2 million for the first nine months of fiscal 2008.
The company repurchased 87,585 shares of its common stock during the
third quarter for a total cost of $1.6 million, or an average of
$17.82 per share.

Conference Call and Webcast

Synovis Life Technologies will host a live Webcast of its fiscal
third-quarter conference call today, August 27, at 10 a.m. CT to
discuss the company's results. To access the live Webcast, go to the
investor information section of the company's Web site,
www.synovislife.com, and click on the Webcast icon. A Webcast replay
will be available beginning at noon CT, Wednesday, August 27.

If you prefer to listen to an audio replay of the conference call,
dial (888) 286-8010 and enter access number 18442690. The audio replay
will be available beginning at 1 p.m. CT on Wednesday, August 27,
through 6 p.m. CT on Friday, August 29.

About Synovis Life Technologies

Synovis Life Technologies, Inc., based in St. Paul, Minn., is a
diversified medical device company that develops, manufactures and
markets medical devices for the surgical treatment of disease. The
company's products include implantable biomaterials for soft tissue
repair, devices for microsurgery and surgical tools - all designed to
reduce risks and facilitate critical surgeries, leading to better
patient outcomes and/or lower costs. For additional information on
Synovis Life Technologies and its products, visit the company's Web
site at www.synovislife.com.

Forward-looking statements contained in this press release are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The statements can be identified by
words such as "should", "could", "may", "will", "expect", "believe",
"anticipate", "estimate", "continue", or other similar expressions.
Certain important factors that could cause results to differ
materially from those anticipated by the forward-looking statements
made herein include the timing of product introductions, the ability
of our direct sales force to grow revenues, outcomes of clinical and
market trials as well as regulatory submissions, the number of certain
surgical procedures performed, the ability to identify, acquire and
successfully integrate suitable acquisition candidates, the cost and
outcome of intellectual property litigation, current market conditions
affecting our investments and any claims for indemnification related
to the sale of the interventional business, as well as the other
factors found in the company's Annual Report on Form 10-K for the year
ended October 31, 2007 and its Quarterly Reports on Form 10-Q for the
quarters ended January 31 and April 30, 2008.

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SYNOVIS LIFE TECHNOLOGIES, INC.

Condensed Consolidated Results of Operations (unaudited)
(In thousands, except per share data)

Three Months Ended Nine Months Ended
July 31 July 31
2008 2007 2008 2007
------ ------ ------ ------

Net revenue $13,366 $ 9,902 $37,085 $27,416
Cost of revenue 4,171 3,491 11,866 9,913
Gross margin 9,195 6,411 25,219 17,503
Gross margin percentage 69% 65% 68% 64%

Selling, general and
administrative 6,070 4,823 17,925 14,163
Research and development 847 682 2,336 1,785

Operating income 2,278 906 4,958 1,555

Interest income 430 490 1,590 1,467
Income from continuing
operations before provision for
income taxes 2,708 1,396 6,548 3,022
Provision for income taxes 948 419 2,292 807

Income from continuing
operations 1,760 977 4,256 2,215

Discontinued operations:
Income (loss) from operations of
discontinued business, net of
tax provision (benefit) of
$204, ($10) and $120,
respectively --- 253 (20) 38
Gain on sale of discontinued
operations, net of taxes of
$6,083 --- --- 5,340 ---

Net income $ 1,760 $ 1,230 $ 9,576 $ 2,253

Basic earnings per share
- Continuing operations $ 0.14 $ 0.08 $ 0.34 $ 0.18
- Discontinued operations --- 0.02 0.43 ---
--------- -------- -------- --------
Basic earnings per share $ 0.14 $ 0.10 $ 0.77 $ 0.18

Diluted earnings per share
- Continuing operations $ 0.14 $ 0.08 $ 0.33 $ 0.18
- Discontinued operations --- 0.02 0.42 ---
--------- -------- -------- --------
Diluted earnings per share $ 0.14 $ 0.10 $ 0.75 $ 0.18

Weighted average basic shares
outstanding 12,433 12,249 12,406 12,194
Weighted average diluted shares
outstanding 12,740 12,538 12,737 12,422
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SYNOVIS LIFE TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets (unaudited)
As of July 31, 2008, and October 31, 2007
(In thousands, except share and per share data)

July 31, October 31,
2008 2007
----------- -----------

ASSETS
Current assets:
Cash and cash equivalents $ 50,354 $ 9,578
Short-term investments 3,781 44,100
Accounts receivable, net 6,344 5,094
Inventories 5,419 4,900
Deferred income tax asset, net 313 805
Other current assets 1,293 942
Current assets - discontinued operations --- 8,921
----------- -----------
Total current assets 67,504 74,340

Restricted cash 2,950 ---
Investments 22,921 ---
Property, plant and equipment, net 3,126 3,279
Goodwill and other intangible assets, net 5,207 5,256
Deferred income tax asset, net 197 676
Other assets - discontinued operations --- 11,126
----------- -----------
Total assets $101,905 $ 94,677
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 6,647 $ 4,421
Current liabilities - discontinued
operations 253 3,303
----------- -----------
Total current liabilities 6,900 7,724

Shareholders' equity:
Preferred stock: authorized 5,000,000 shares
of $.01 par value; none issued or
outstanding at both dates --- ---
Common stock: authorized 20,000,000 shares
of $.01 par value; issued and outstanding,
12,410,521 at July 31, 2008 and 12,359,302
at October 31, 2007 124 124

Additional paid-in capital 78,727 78,347
Accumulated other comprehensive loss (1,904) ---
Retained earnings 18,058 8,482
----------- -----------
Total shareholders' equity 95,005 86,953
----------- -----------
Total liabilities and shareholders' equity $101,905 $ 94,677
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Padilla Speer Beardsley Inc.
Nancy A. Johnson, 612-455-1745
or
Marian Briggs, 612-455-1742
or
Synovis Life Technologies, Inc.
Richard Kramp, 651-796-7300
President and CEO
or
Brett Reynolds, 651-796-7300
CFO

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