Report On Six Months Ended June 30, 1997: Gambro's Invoiced Sales Increased by 18 Percent.

LUND, Sweden--(BUSINESS WIRE)--Aug. 12, 1997--Gambro's invoiced sales for the first six months of 1997 amounted to SEK 6,341 million (5,380), an increase of 18 percent.

Adjusted for the acquisition of Vivra, the increase amounted to 12 percent (and adjusted for exchange-rate effects, to seven percent). Operating earnings amounted to SEK 776 million (709), an increase of approximately nine percent.

--The acquisition of Vivra was implemented and consolidated,

effective June 1.

--The number of dialysis patients in clinics operated by the

Gambro Group at the end of the period under review was

approximately 28,500.

--The disputes with the U.S. medical-technology company Baxter

Healthcare Corp. over patents were concluded during the

six-month period.

Business area trends

The Dialysis Products business area's reported sales for the period totaled SEK 3,587 million, an increase of four percent. The volume trend largely followed market growth. Moderate sales increases continued to be noted in Italy, France, the U.K. and Japan, while the trend of sales in the United States largely followed market growth.

The favorable trend of sales for disposable products continued, especially for the BiCart bicarbonate cartridge. As was the case during the first quarter, the increased demand for dialyzers - primarily those with synthetic membranes - could not be fully exploited. Accordingly, a decision was taken to proceed with investments aimed at substantially increasing production capacity for dialyzers with synthetic membranes at the production plants in Hechingen, Germany, and Meyzieu, France.

The introduction of the new generation of AK-series dialysis machines and the Prisma emergency dialysis machine continued to develop favorably.

Two new concentrate products - a sodium chloride cartridge and an ion bag - were introduced in May. Both products are further developments of the concentrate concept represented by the BiCart bicarbonate cartridge. For the first time, dialysis fluid can now be prepared entirely on-line, using BiCart and new the products.

The restructuring program within the Dialysis Products business area, started in 1995/96, progressed according to plan, which meant that the production of blood lines in Portugal and Japan ceased and corresponding production volumes were transferred to other Group facilities, such as the plant Shanghai, China.

The Dialysis Care business area reported sales of SEK 1,802 million for the January/June 1997 period, corresponding to an increase to 44 percent.

Earlier in the year, clinics were established in Denver, CO.; Goldsboro, N.C.; San Diego, CA.; and Crossville, TN. Cooperation agreements were entered into with clinics in Niagara Falls, N.Y., Brooklyn, N.Y., and the Johns Hopkins University Hospital in Baltimore, MD. A joint venture, with Gambro Healthcare as majority owner, was formed to operate five dialysis clinics in Cincinnati, OH. In Europe, three clinics were acquired in Hungary.

In June, Gambro Healthcare Patient Services established a joint venture in Argentina which has so far acquired five clinics in Argentina with a combined total of 280 patients.

The outstanding shares in the Residence du Parc dialysis clinic in Marseilles, France, were also acquired during the six-month period.

The Blood Component Technology business area continued to develop favorably during the period, reporting sales of SEK 503 million, an increase of 10 percent.

Sales in the U.S. continued to increase at a rate exceeding market growth, while certain export markets showed slightly weaker sales growth. As before, the Spectra blood separator and related disposable products accounted for the growth in sales.

Clinical trials of the Aastrom Cell Production System (CPS), a cell-cultivation system which can be used in the treatment of patients suffering from various blood diseases, continued according to plan.

The Cardiopulmonary Care business area reported sales of SEK 580 million, which is on a level with the preceding year. After starting weakly at the beginning of the period, sales showed a progressively more positive trend.

Total sales in the U.S. remained at the level achieved earlier, while certain export markets noted weaker sales trends. The earlier decline in the price of oxygenators in the U.S. leveled off. The rationalization program within the business area, which has been under way since the end of 1996, proceeded successfully. The measures implemented enabled the business area to achieve a sharp improvement in earnings.

Operating earnings

Operating earnings amounted to SEK 776 million (709).

The operating margin (excluding Vivra) amounted to 13.3 percent during the second quarter, compared with 11.9 percent for the first quarter. The effects of the weakening of the krona had only a marginal positive impact on operating earnings for the six-month period.

Acquisition of Vivra

On May 5 it was announced by Incentive AB, Gambro's owner, and Vivra Inc., whose assets included the second-largest chain of dialysis clinics in the U.S., that Incentive planned to acquire Vivra's dialysis operation, Vivra Renal Care (VRC), for a purchase price of $33.90 per share, corresponding to a total cash sum of approximately $1,515 million. In May, VRC had some 15,800 patients at 262 clinics located in 28 U.S. states and the District of Columbia. During 1996, VRC had operating revenues amounting to $411 million and pre-tax earnings in excess of $100 million.

Incentive's aim in making the acquisition was to strengthen Gambro's position as a leading, fully integrated, multiregional dialysis company in the U.S. The acquisition was expected to generate tangible synergistic effects.

The bid having been accepted by 97 percent of the shareholders and no objections having been raised by the relevant authorities, the deal was concluded in June. The newly acquired dialysis clinic operation was integrated with Gambro's U.S. dialysis operation, Gambro Healthcare Patient Services, effective June 1, and was consolidated as of the same date.

Korean acquisition

An agreement was concluded on July 1 for the acquisition, from the Korea Green Cross Corp. company, of the market rights for dialysis in the South Korean market. The company's fixed assets, in the form of leased dialysis machines and the associated supply contracts relating to disposable articles, were acquired at the same time. Under the terms of the agreement, Gambro Korea Ltd also becomes the sole supplier of hemodialysis concentrates and peritoneal dialysis solutions produced by Korea Green Cross Corp.

The agreement gives Gambro Korea Ltd. a leading position in the South Korean dialyzer and concentrate market. A further consequence of the agreement will be a sharp increase in the number of PD patients in South Korea who are treated with Gambro's products. Annual sales are expected to increase by SEK 80 million.

Patent issues

In 1989, the American medical-technology company Baxter Healthcare Corp. filed a lawsuit against COBE relating to the technology used in COBE's Spectra blood separator.

In another lawsuit which Gambro filed against Baxter in 1992, the U.S. Court of Appeals in Washington ruled, in a decision made on April 8, that Gambro's patent on a so-called flow meter for use in dialysis machines is valid, and that the Baxter's dialysis machines infringe this patent.

On May 28, Gambro and Baxter announced that they had reached an agreement regarding both actions. As a result of the ruling regarding the various patents in the disputes, a modest amount of the dialysis machines is valid compensation was paid to Gambro. Lund, August 12, 1997

The next financial report from Gambro will be published on November 10, 1997.

This report is a separate account of Gambro as the Medical Technology business area within the parent company, Incentive AB. It has not been subject to special examination by the company's auditors. -0-

CONTACT: Gambro AB, Lund

Berthold Lindqvist, [phone]

Jan Gustavsson, [phone]

Inger Larsson, [phone], [phone]

or

Incentive AB, Stockholm, Sweden

Bengt Modeer, [phone]

or

Citigate Communications, New York 

Ray McNulty, 212/508-3400