Hemagen Diagnostics, Inc. Reports Fourth-Quarter and Fiscal 1998 Year-End Results.

WALTHAM, Mass.--(BW HealthWire)--Dec. 29, 1998--Hemagen Diagnostics, Inc. (NASDAQ:HMGN)(NASDAQ:HMGNW)(BSE:HGN) a developer, manufacturer and marketer of proprietary medical diagnostic test kits, today announced its financial results for the fourth-quarter and fiscal 1998 year ended September 30, 1998.

The Company reported net income of $10,000, or $0.00 per diluted share, on revenues of $12,327,000 for fiscal 1998, compared with net income of $405,129, or $0.05 per diluted share, on revenues of $12,991,000 for fiscal 1997. The reduction in gross revenues was primarily the result of a significant decrease in contract manufacturing sales to one customer in the United States. The Company's Hemagen/Virgo products showed a nine percent increase in sales during the year while RAICHEM and Cellular Products, Inc. reported slightly lower sales in fiscal 1998.

"During the year, we established the necessary cornerstones to build Hemagen into a sizable medical device company," stated Dr. Carl Franzblau, Hemagen chairman, president and chief executive officer. "While we were very pleased with our fiscal 1998 financial performance through the third quarter, the decrease in revenues and net income during the fourth quarter led to a disappointing result for the year. As we enter fiscal 1999, however, we are extremely pleased with the market acceptance and the demand for our products, particularly our new Analyst(R) system. Furthermore, the contract manufacturing customer which was responsible for the revenue shortfall this year has indicated to us that sales are expected to increase during this coming fiscal year."

For the fourth quarter of fiscal 1998, Hemagen reported a net loss of $366,000, or $0.05 per diluted share, on revenues of $3,290,000, compared with net income of $185,000, or $0.02 per diluted share, on revenues of $3,555,000 for the same quarter last year. The earnings decrease in the fourth quarter of fiscal 1998 was due to higher sales of lower margin products and increased marketing expenses relating to establishing a new outside sales force for the Analyst(R) clinical chemistry system. The company acquired the Analyst(R) product in September 1998 from Dade Behring, Inc.

"With the acquisition of the Analyst(R) system, we now have the necessary product offerings to provide our customers with the complete diagnostic solutions that they seek," continued Dr. Franzblau. "The Analyst(R) is a compact centrifugal analyzer capable of performing 14 different blood chemistry tests in 8-10 minutes. This product enhances our opportunities in several high-growth markets. In 1999, we plan to leverage the Analyst's potential to increase our presence in the point-of-care, physician office laboratory and veterinary diagnostic markets."

"During fiscal 1998, we were pleased to obtain FDA clearance for six new products in our diagnostic family. In the coming year, we believe that our direct sales force and more aggressive new marketing efforts will help us to capitalize on the burgeoning growth opportunities in our target markets," concluded Dr. Franzblau.

Any statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve risks and uncertainties. Potential factors could cause actual results to differ materially from those expressed or implied by such statements. These statements include, but are not limited to, those relating to the sales of the company's Analyst(R) product, the company's contract manufacturing agreements, the company's increased presence in new and existing markets and the establishment of a direct sales force and more aggressive marketing efforts. Information on the potential factors that could effect the Company's actual results of operations are included in its fillings with the Securities and Exchange Commission, included but not limited to, its Annual Report on Form 10-K for the fiscal year ended September 30, 1998.

Hemagen Diagnostics, Inc. develops, manufactures and markets more than 110 FDA-cleared proprietary medical diagnostic test kits used to aid in the diagnosis of autoimmune and infectious diseases and to measure important constituents in human blood. The company focuses on markets which offer significant growth opportunities.

Consolidated Financial Statements
Hemagen Diagnostics Inc. and Subsidiaries
(Unaudited)

Statement of Operations

                          Three Months Ended     Twelve Months Ended
                               Sept. 30               Sept. 30
                            1998        1997       1998        1997


REVENUES                $3,290,076  $3,555,360 $12,327,352 $12,991,102

COSTS AND EXPENSES
 Cost of product sales   2,186,688   1,917,097   7,298,563   7,597,981
 Research and
  development              269,805     348,692   1,072,696   1,078,116
 Selling, general
  and administrative     1,128,828   1,062,258   3,855,215   3,808,000
                         ---------   ---------   ---------   ---------
                         3,585,321   3,328,047  12,226,474  12,484,097

OPERATING INCOME (LOSS)   (295,245)    227,313     100,878     507,005

Other income (expense)     (70,460)    (42,566)    (90,429)   (101,876)

INCOME (LOSS) BEFORE
 INCOME TAXES AND
 MINORITY INTEREST        (365,705)    184,747      10,449     405,129

Provision (benefit) for
 income taxes                    0           0           0           0

 NET INCOME (LOSS)     $  (365,705)  $ 184,747   $  10,449  $  405,129

Net income (loss) per
 share - primary       $     (0.05)  $    0.02   $    0.00  $     0.05

Weighted average
 shares outstanding      7,851,890   7,776,890   7,836,520   7,676,561

-0-

Balance Sheet (condensed)

                                     Sept. 30,      Sept. 30,
                                       1998           1997
ASSETS

Current assets:
 Cash and cash equivalent           $  412,193     $  294,086
 Short-term investments                     --        730,827
 Accounts receivable                 3,294,598      2,288,793
 Inventory                           6,212,254      3,953,601
 Prepaid expenses and other
  current assets                       273,909        221,646

TOTAL CURRENT ASSETS                10,192,954      7,488,953

Net property and equipment           4,367,196      2,545,470
Other assets                         1,403,486      1,512,227

TOTAL ASSETS                       $15,963,636    $11,546,650

LIABILITIES AND STOCKHOLDERS EQUITY

Current liabilities:
 Accounts payable and
  accrued expenses                  $1,093,532     $  785,135
 Deferred revenue                      152,929              0
 Current portion of long-term debt                    347,388
 Notes payable - Bank                3,500,000              0
 Notes payable - Other                       0        198,983

TOTAL CURRENT LIABILITIES            4,746,461      1,331,506

Long-term debt                       1,068,363        189,281

Minority interest in consolidated
 subsidiary                                  0              0

Stockholders equity                $10,148,812    $10,025,863

TOTAL LIABILITIES AND SHAREHOLDERS
 EQUITY                            $15,963,636    $11,546,650