ArthroCare Issues Updated Product Sales Outlook; Cites Combination Of Factors For Lower Than Anticipated Product Sales.

Business Editors/Health and Medical Writers

SUNNYVALE, Calif.--(BW HealthWire)--Sept. 22, 2000

ArthroCare Corporation (NASDAQ:ARTC) today revised the company's outlook for third quarter product sales. The company now expects product sales will be between $17 million and $18 million, an increase of approximately 50 percent compared with the same quarter of 1999 and relatively flat with the second quarter of 2000. The company believes earnings per share will fall between $.12 and $.14, as reported, or roughly double the prior year's quarter. ArthroCare's third quarter ends September 30, 2000 and third quarter financial results will be announced October 12.

ArthroCare said the company's arthroscopy business, which represents about 80 per cent of the company's product sales, remains on plan for the third quarter. International sales are also expected to be within the range of the company's third quarter expectations.

The company cited a combination of factors in newly commercialized businesses as the primary cause of the change in expected product sales. Sales of cosmetic surgery products are expected to be lower than anticipated due to the timing of U.S. regulatory approval for the company's skin-resurfacing products exacerbated by seasonal patterns in the summer months in this market. In the spinal surgery and the ear, nose and throat (ENT) markets, ArthroCare recently realigned its distribution network, replacing several distributors with direct sales people. While the company believes that these changes will have a positive long-term impact on sales in these markets, they are contributing to lower than anticipated net product sales growth in the current quarter.

"Our arthroscopy business has continued to perform as expected during the summer months but we underestimated the degree of seasonality associated with the spinal surgery and cosmetic surgery markets," said Michael A. Baker, ArthroCare's president and chief executive officer. "The strategic change in our distribution network in our ENT and spinal surgery businesses, designed to build on our success in these markets, has also temporarily dampened sales growth. These are normal business risks in the first year of any market commercialization and, while no one of them alone would have been material, the combination of factors has caused us to re-evaluate our short-term outlook.

"At this time, we believe that we are about one quarter behind where we anticipated we would be in these new businesses. We believe there has been no fundamental change to the company's opportunity or competitive position, and we are even more excited than ever about ArthroCare's future," Baker concluded.

ArthroCare will hold a conference call with the financial community at 12:15pm Eastern time today. The call will be simultaneously webcast on the company's website, www.arthrocare.com or through streetfusion.com and will remain posted on ArthroCare's website through September 26, 2000.

ArthroCare's products allow surgeons to operate with a high level of precision and control, limiting damage to surrounding tissue and thereby potentially reducing pain and speeding recovery for the patient. The company's products operate at lower temperatures than traditional electrosurgical or laser surgery tools and enable surgeons to remove, shrink or sculpt soft tissue and to seal bleeding vessels.

ArthroCare is a medical device company that develops, manufactures and markets products based on its patented Coblation technology. ArthroCare's soft-tissue surgery systems consist of a controller unit and an assortment of single-use disposable devices that are specialized for specific types of surgery. The company believes its Coblation technology can replace the multiple surgical tools traditionally used in soft-tissue surgery with one multi-purpose surgical system. Coblation technology is applicable across many soft-tissue surgical markets. The company's strategy includes applying its patented Coblation technology to a broad range of soft-tissue surgical markets, including arthroscopic surgery, cosmetic surgery, ear, nose and throat surgery, spinal surgery, neurosurgery, general surgery, and various cardiology applications. The company's website is www.arthrocare.com.

Except for historical information, this press release includes forward-looking statements including, but not limited to, the company's expectations for financial results in the third and fourth quarters, continued strength of the company's fundamental position, continued success of the company's arthroscopy product line in the third quarter, performance of the company's international business in the third quarter, continued strength of the company's market position, the temporary nature of lower than expected product sales, and other statements that involve risks and uncertainties. These risks and uncertainties are detailed from time to time in the company's Securities and Exchange Commission filings, including ArthroCare's Form 10-K for the year ended January 1, 2000 and Form 10-Q for the quarter ended July 1, 2000. Forward-looking statements are indicated by words or phrases such as "anticipates", "estimates", "projects", "believes", "intends", "expects", and similar words and phrases. Actual results may differ materially from management expectations.