Zila, Inc. Reports Fiscal 2006 and Fourth Quarter Results.

PHOENIX -- Zila, Inc. (NASDAQ GM: ZILA) reported its financial results for the fiscal year and fourth quarter ended July 31, 2006.

Fiscal 2006 Financial Results:

-- Zila, Inc.'s (the "Company") net revenue for fiscal 2006 was $28.2
   million, compared with $43.5 million for fiscal 2005. For the year,
   net revenue for Zila Pharmaceuticals, Inc. ("Zila Pharmaceuticals")
   increased by 34%, while the net revenue of Zila Nutraceuticals,
   Inc. ("Zila Nutraceuticals") decreased by 44%.

-- Zila Pharmaceuticals' revenue increased 34%, to $6.7 million,
   compared with $5.0 million in the prior year. Pharmaceuticals
   represented 24% of revenue in fiscal 2006 compared with 12% of
   revenue for fiscal 2005. The growth in net revenue in Zila
   Pharmaceuticals was driven by increases in all product lines. Sales
   of ViziLite(R) and ViziLite(R) Plus were $2.7 million, a 128%
   increase over sales of ViziLite(R) in fiscal 2005. Peridex(R) sales
   increased by 5% to $4.0 million in fiscal 2006 compared with fiscal
   2005.

   Gross margins for Zila Pharmaceuticals for the fiscal year ended
   July 31, 2006 were 53%, compared with 64% for the fiscal year ended
   July 31, 2005. This decrease was primarily caused by incentives to
   support the launch of ViziLite(R) Plus.

-- The Nutraceuticals business was divested on October 2, 2006 to
   NBTY, Inc. in a cash transaction valued at up to $40.5 million.
   Zila Nutraceuticals' fiscal 2006 revenue was $21.5 million compared
   with $38.5 million for the fiscal year ended July 31, 2005. The
   Company believes the decline in revenue was primarily due to
   decreased sales to several of its largest customers as a result of
   the divestiture process.

   Gross margins for Zila Nutraceuticals were 61% compared with 68%
   for the fiscal year ended July 31, 2005. This decrease was caused
   largely by promotional discounts offered in an effort to stimulate
   sales.

-- Total operating expenses for Zila Biotechnology, Inc. ("Zila
   Biotechnology") for fiscal 2006 were $9.5 million, a 9% increase,
   compared with $8.7 million for fiscal 2005. This increase reflects
   the commencement of the new Phase III clinical trial for
   OraTest(R). Research and development expenses related to the
   OraTest(R) program were $7.2 million in fiscal 2006 compared to
   $6.7 million in fiscal 2005.

-- Zila completed the fiscal year with a net loss from continuing
   operations of $27.7 million, or $0.61 per diluted common share,
   compared with a net loss of $7.3 million, or $0.16 per diluted
   common share in fiscal 2005. Discontinued operations produced a net
   loss of $1.6 million, or $0.03 per diluted common share, in fiscal
   2006 but generated income of $8.4 million, or $0.18 per diluted
   common share, in fiscal 2005, largely from the gain on the
   divestiture of the Zilactin(R) business in June 2005.

-- Cash, cash equivalents and restricted cash at July 31, 2006 totaled
   $7.5 million, compared to cash, cash equivalents, restricted cash
   and short-term investments of $13.4 million at July 31, 2005.

Fiscal 2006 Business Highlights:

-- In December 2005, the Company reached an agreement with the United
   States Food and Drug Administration's ("FDA") regarding the FDA's
   Special Protocol Assessment process, on the Company's new Phase III
   clinical trial for OraTest(R), an oral cancer detection drug. To
   date, enrollment to accrue the fewer than 4,000 patients needed for
   the multi-center trial is proceeding on schedule. The trial may be
   approaching a point where an interim analysis of the test results
   could be required.

-- In January 2006, the Company rolled out ViziLite(R) Plus. This
   product combines its oral screening technology, ViziLite(R) with
   TBlue630, a marking system using Zila Tolonium Chloride (ZTC(R)),
   the only patented, pharmaceutical-grade form of toluidine blue.
   TBlue630 was FDA-cleared and contains the same active ingredient
   and formulation that is used in the Company's OraTest(R) product.

-- During fiscal 2006, the Company expanded ViziLite(R) Plus insurance
   coverage and added 500 group practices to its customer base,
   including some of the largest practices in the country.

-- In line with the Company's strategy to focus on cancer detection
   and divest non-core assets, the Company divested IST in July 2006
   and closed on the sale of Zila Nutraceuticals in October 2006.
   Further, the Company entered into a non-binding letter of intent to
   acquire a privately-held dental products company in order to reach
   the nation's dentists through a national sales force. There can be
   no assurance that this potential acquisition will be completed.

"Fiscal 2006 began a revolutionary transition for Zila as we continued our strategy to focus our business on high-growth cancer detection technologies. We succeeded in that mission with growth in ViziLite[R] Plus product awareness, dental office integration and insurance reimbursement, while OraTest[R] moved closer to completion of its regulatory objectives. We were also able to divest our Nutraceuticals business at a fair valuation in October 2006," said Zila Chairman, President and CEO, Doug Burkett, Ph.D.

Dr. Burkett continued, "As our ongoing efforts will be focused on growing ViziLite[R] Plus and subsequently OraTest[R], we sought to acquire a dental company with a national sales force in order to provide the infrastructure required to establish our oral cancer detection products as the standard of care within dental offices nationally. We reviewed over 200 potential dental companies and we have entered into a non-binding letter of intent to acquire a privately-held dental products business. We believe this potential acquisition will enable us to reach the nation's dentists through a highly regarded and profitable company with a national sales force."

The acquisition, if completed, would provide Zila with a national sales and marketing organization that has a small suite of proprietary, high margin dental products that would complement Zila's cancer screening and detection products. The sales and marketing programs currently conducted by the target company reflect the focused, hands-on approach that is required to integrate ViziLite[R] Plus into dental practices and to establish the test as the standard of care. The target company generates approximately $35 million in annual revenue and is profitable. The anticipated acquisition price is $34 million. There can be no assurance that this potential acquisition will be completed.

Fiscal 2006 Fourth Quarter Results:

-- The Company's net revenue for the fourth quarter of fiscal 2006 was
   $4.2 million, compared with net revenue of $11.2 million in the
   fourth quarter of fiscal 2005.

-- Zila Pharmaceuticals' revenue decreased 40% in the fourth quarter
   to $1.0 million, compared with $1.7 million during the same quarter
   of fiscal 2005. The decline in fourth quarter revenue was primarily
   due to lower ViziLite(R) Plus sales as we prepared for a potential
   acquisition of a company with a national sales force that would
   provide Zila the option to offer ViziLite(R) Plus directly to
   dentists. Zila focused its fourth quarter efforts toward the
   adoption and integration of ViziLite(R) Plus within dental offices
   resulting in continued increases in acceptance, growth and repeat
   orders by dental offices as they purchased from dental
   distributors. However, deliberate reductions in sales into our
   existing distribution channel were made as we optimized our
   flexibility to modify and expand our means of distribution. The
   upward trend of quarterly ViziLite(R), and subsequently ViziLite(R)
   Plus, revenues that were generated during the preceding seven
   quarters has been temporarily disrupted to maximize our future
   growth options.

-- Zila Nutraceuticals' revenue in the fourth quarter was $3.2
   million, compared with $9.5 million during the prior year's fourth
   quarter. Zila believes the decrease in sales was affected by the
   process of seeking to divest the business unit.

   Gross margins for Zila Nutraceuticals were 53% for the three months
   ended July 31, 2006 compared with 63% for the three months ended
   July 31, 2005. This decrease was caused primarily by discounts
   offered to customers to stimulate sales.

-- Total operating expenses for Zila Biotechnology in the fourth
   quarter was $2.1 million compared with $2.3 million in 2005. This
   decrease is primarily due to reduced cost within the Zila Tolonium
   Chloride manufacturing facility that was undergoing a
   recommissioning in the prior year quarter.

The Company made progress in the furtherance of its OraTest[R] regulatory program during the quarter. We believe that the current study enrollment can be completed in approximately one year from the beginning of enrollment at most clinical sites in spring 2006, although no assurances can be given in this regard. The on-going trial is expected to require fewer than 4,000 patients. Upon completion of the clinical program and assuming that all clinical requirements are achieved, we estimate that it will require approximately six months to complete our regulatory objectives in order to prepare the NDA supplement for submission to the FDA.

Conference Call

Zila, Inc. will host a conference call to discuss these results today at 4:30 p.m. EDT (1:30 p.m. PDT). To participate in the teleconference, please call toll-free 877-407-8031 (or 201-689-8031 for international callers) approximately 10 minutes prior to the above start time. You may also listen to the teleconference live via the internet at www.zila.com. Investors should visit the website prior to the call to download any necessary audio software.

A telephone playback of the call will be available for 48 hours, two hours after the completion of the call, and can be accessed by calling 877-660-6853 (or 201-612-7415 for international callers) and providing passcode 286 and conference ID 215747. The webcast will be archived on the Company's website for one week.

About Zila, Inc.

Zila, Inc., headquartered in Phoenix, is a leading cancer diagnostic company initially focused on oral cancer:

* Zila Pharmaceuticals is dedicated to establishing ViziLite([R])Plus as the new standard of care within dental offices nationally for the early detection of oral abnormalities that could lead to cancer.

* Zila Biotechnology is focused on achieving regulatory approval for the next generation oral cancer diagnostic, OraTest([R]), followed by the development of additional applications of its cancer detection technologies including products for the early detection of cervical and esophageal cancer.

For more information about Zila, visit www.zila.com.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based largely on Zila's expectations or forecasts of future events, can be affected by inaccurate assumptions and are subject to various business risks and known and unknown uncertainties, a number of which are beyond the Company's control. Therefore, actual results could differ materially from the forward-looking statements contained herein. A wide variety of factors could cause or contribute to such differences and could adversely impact revenue, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this press release will, in fact, transpire or prove to be accurate. The Company makes no commitment, and disclaims any duty, to update or revise any forward-looking statements to reflect future events or changes in expectations. For a more detailed description of these and other cautionary factors that may affect Zila's future results, please refer to Zila's Form 10-K for its fiscal year ended July 31, 2006

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