WAYNE, Pa., May 13 /PRNewswire/ -- Escalon Medical Corp. (Nasdaq: ESMC)
today announced results for its fiscal third quarter ended March 31, 1999 and
the recent initiation of a Phase I human clinical trial for Ocufit SR(R), its
proprietary ophthalmic drug delivery system which is being jointly developed
with West Pharmaceutical Services, Inc. (NYSE: WST).

    Third Quarter Results
    For the third quarter of fiscal 1999, Escalon Medical reported net income
of $841,800 compared to net income of $27,702 in the third quarter of fiscal
1998.  Net income for the current quarter includes a gain of $879,159 from the
sale of the Company's Betadine(R)5% Sterile Ophthalmic Prep Solution product
line.  Due to the recognition of a non-cash dividend, accreted as a result of
the retirement of convertible preferred stock, the Company reported a net loss
of $0.001 per basic share in the third quarter, compared to a net loss of
$0.090 per basic share in the third quarter of 1998.  All share amounts
reflect the retirement of this preferred stock and the issuance of the
associated common shares during the third quarter of 1999.
    Revenues in the third quarter of fiscal 1999 increased 38% to $2,066,009
from $1,496,301 in the third quarter of fiscal 1998.  The increase reflects
growth in unit sales of Adatosil(R)5000 Silicone Oil, ISPAN(TM) Intraocular
Gases, disposable products and accessories as well as sales from the January
acquisition of the vascular access product line, which represented
approximately 25% of sales in the quarter.  Sales for Betadine(R)5% Sterile
Ophthalmic Prep Solution decreased by 38% to approximately $150,000 in the
quarter, reflecting its sale in early March 1999.  During the quarter, the
Company also experienced a decrease in sales of its capital equipment and OEM
manufactured products.  OEM revenues continue to vary quarter to quarter
depending on timing of orders and lead-time needed to produce the product.
    Marketing, general and administrative expenses rose 31% in the third
quarter compared to the same period last year due to the acquisition of the
vascular access business in the quarter.  Despite minor acquisition-related
costs, marketing, general and administrative expenses declined to 46.7% of
sales compared to 48.6% of sales in the year ago period.
    Research and development costs increased 90% in the current quarter from
the comparable quarter of fiscal 1998.  The majority of the increase reflects
expenditures related to pre-clinicals and the start of the human clinical
trial for Ocufit SR(R).  Additional costs related to povidone-iodine 2.5%
solution, ISO/CE certification, prototype development and increased staffing
were also incurred in the quarter.

    Ocufit SR(R) Human Clinical Trials
    Escalon Medical also announced that it has recently initiated a Phase I
human clinical trial for Ocufit SR(R).  The goal of Ocufit SR(R), which is
designed to fit comfortably under the eyelid for seven or more days, is to
make eye disease treatment easier and more effective for people requiring
topical eye drop therapy.
    The Ocufit SR(R) system currently being studied contains the non-steroidal
anti-inflammatory drug diclofenac sodium and is designed to treat post-
operative inflammation in patients who have undergone cataract extraction.  A
total of 32 healthy volunteers are participating in this dose-rising safety
and tolerability study which begins by treating the subjects with a placebo
and then progressively increases the dosage of diclofenac sodium received.
Approximately two million patients receive cataract surgery annually in the
U.S.
    "We have accomplished a great deal in the third quarter," said Richard J.
DePiano, Chairman and Chief Executive Officer.  "We are very pleased with the
progress to date integrating our recently acquired vascular access business
which, combined with the sale of Betadine(R)5%, has diversified our target
markets, allowing us to focus less on distributed products and more on
profitable niche products that we own."
    Mr. DePiano added, "We have also made significant progress in our research
and development programs, particularly with Ocufit SR(R)'s entry into Phase I
human clinical trials.  Although the associated research and development
spending led to an operating loss in the quarter, we remained cash flow
positive, with working capital rising to $3.8 million at March 31, 1999.  We
continue to believe that our strategy of using the profits from a diversified
portfolio of niche businesses to fund our promising R&D programs will enable
us to continue to grow the Company and create value for our shareholders."

    Year-to-date Results
    For the nine months ended March 31, 1999, Escalon reported net income of
$1.1 million, or $0.087 per diluted share, compared to net income of $79,146,
or a loss of $0.070 per diluted share in the comparable period.  Revenues for
the first nine months of fiscal 1999 increased 26% to $5,526,106 from
$4,376,941 for the comparable nine month period.
    Founded in 1987, Escalon develops, markets and distributes ophthalmic
surgical and pharmaceutical products as well as vascular access devices which
provide a base of positive cash flow to fund a targeted research and
development effort.  The Company utilizes strategic partnerships to help
finance its development programs and is also seeking acquisitions to further
diversify its product line to achieve critical mass in sales and take better
advantage of the Company's distribution capabilities.  Escalon has
headquarters in Wayne, Pennsylvania and manufacturing operations near
Milwaukee, Wisconsin.
    Note:  This press release contains statements that are forward-looking,
including statements about the Company's future prospects.  They are based on
the Company's current expectations and are subject to a number of
uncertainties and risks, and actual results may differ materially.  The
uncertainties and risks include whether the Company is able to improve upon
the operations of the vascular access business, continue to make gains in its
research and development programs as well as general economic conditions.
Further information about these and other relevant risks and uncertainties may
be found in the Company's report on Form 10-K, and its other filings with the
Securities and Exchange Commission, all of which are available from the
Commission as well as other sources.


                     ESCALON MEDICAL CORP. and SUBSIDIARY
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)

                            Three Months Ended         Nine Months Ended
                                 March 31,                 March 31,
                             1999          1998        1999         1998

    Product revenues      $2,066,009  $1,496,301   $5,526,106    $4,376,941

    Costs and expenses:
     Cost of goods sold      922,168     648,169    2,431,172     1,925,744
     Research and development242,251     127,719      583,502       344,197
     Marketing, general and
      administrative         951,845     727,094    2,349,818     2,186,855
       Total costs and
        expenses           2,116,264   1,502,982    5,364,492     4,456,796
    Income (loss) from
     operations              (50,255)     (6,681)     161,614       (79,855)

    Other income and
     expenses:
      Sale of Betadine
       product line          879,159          --      879,159            --
      Other income                --          --           --        75,000
      Interest income         31,246      34,383      101,264        84,150
      Interest expense       (18,350)         --      (19,802)         (149)
       Total other income
        and expense          892,055      34,383      960,621       159,001
    Net income              $841,800     $27,702   $1,122,235       $79,146
    Basic net income
     per share *             $(0.001)     $(0.090)     $0.087       $(0.070)
    Diluted net income
     per share *             $(0.001)     $(0.090)     $0.087       $(0.070)

    Weighted average
     shares - basic        3,158,962   2,629,375    3,071,465     2,629,375
    Weighted average
     shares - diluted      3,158,962   2,629,375    3,071,465     2,629,375

    *  Negative amounts reported in basic and diluted earnings per share
       relate to a deemed dividend on  convertible preferred stock as a result
       of EITF Topic No. D-60 and SFAS No. 128.

    SELECTED BALANCE SHEET DATA:           March 31,          June 30,
                                             1999               1998
                                                    (Unaudited)

    Cash, cash equivalents and
     investments                          $3,627,013         $2,593,983
    Total current assets                   6,148,211          4,150,491
    Total assets                           9,288,471          6,734,128
    Current liabilities                    2,298,987            685,476
    Long-term debt                           783,333                 --
    Total shareholders' equity             6,206,151          6,048,652

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