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Heska Announces Q4 and Annual 2007 Results

Wednesday, February 27, 2008 General News J E 4
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LOVELAND, Colo., Feb. 26 Heska Corporation(Nasdaq: HSKA) today reported financial results for its fourth quarter, thethree months ended December 31, 2007, and year ended December 31, 2007.

"2007 was another record year for Heska. We experienced broad growth withseveral product areas in our Core Companion Animal Health segment increasingcompared to 2006. We also had a solid year in our Other Vaccines,Pharmaceuticals and Products area, with product revenue up 25% from 2006,"said Robert Grieve, Heska's Chairman and CEO. "In the fourth quarter of 2007,we continued the steady growth of our Core Companion Animal Health segmentwith 11% product revenue growth compared to prior year period. As we havepreviously predicted, the fourth quarter of 2006 presented a difficultcomparison for us due to the impact of an allergy-related patent portfoliosale in December 2006. As we look to 2008, we are particularly excited by theprospects for our diagnostic instruments, where we launched three major newproducts in 2007."

Total Revenue

Total revenue for the fourth quarter of 2007 was $20.0 million, a decreaseof 2% compared to the fourth quarter of 2006. 2007 total revenue was $82.3million, up 10% compared to $75.1 million in 2006. Total revenue consists ofproduct revenue and research, development and other revenue, both of which arediscussed below.

Segment Product Revenue

Total product revenue for the fourth quarter of 2007 was $19.7 million, up7% from $18.5 million in the fourth quarter of 2006. For the year endedDecember 31, 2007, total product revenue was $80.8 million, up 13% from $71.8million in 2006. Heska Corporation's business is comprised of two reportablesegments -- Core Companion Animal Health and Other Vaccines, Pharmaceuticalsand Products. Product revenue from these segments is as follows:

Core Companion Animal Health This segment includes revenue from theCompany's diagnostic instruments and supplies as well as single use,point-of-care tests, vaccines and pharmaceuticals, primarily for canine andfeline use. In the fourth quarter of 2007, this segment generated productrevenue of $17.1 million, up 11% as compared to $15.4 million in the fourthquarter of 2006. For the year ended December 31, 2007, this segment generatedproduct revenue of $65.9 million, up 10% from $59.9 million in 2006.

Other Vaccines, Pharmaceuticals and Products This segment includesrevenue from private label vaccine and pharmaceutical production, primarilyfor cattle but also for other animals including small mammals and fish. Inthe fourth quarter of 2007, this segment generated product revenue of $2.6million, down 15% as compared to $3.1 million in the fourth quarter of 2006.In 2007, this segment generated product revenue of $14.9 million up 25% from$11.9 million in 2006. Results for the year ended December 31, 2007 includeapproximately $1.6 million in revenue recognized in the first quarter uponreceipt of a payment for product previously shipped and "take-or-pay" minimumsfor 2005 and 2006 which previously had not been paid as part of a now settleddispute with United Vaccines, Inc. ("United"), a former customer.

Research, Development and Other Revenue

Research, development and other revenue was $325 thousand in the fourthquarter of 2007, a decrease of approximately $1.6 million when compared to$1.9 million in the prior year period. The fourth quarter of 2006 resultincludes approximately $1.5 million in revenue from previously deferredlicensing fees recognized upon the completion of the sale of a worldwidepatent portfolio covering a number of major allergens and the genes thatencode them to Allergopharma Joachim Ganzer KG (the "Allergopharma Portfolio")in December 2006. For 2007, research, development and other revenue was $1.5million, a decrease of approximately $1.7 million compared to $3.2 million in2006. For 200
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