Heska Corporation Signs Letter of Intent to Sell U.K. Diagnostic Laboratory

Fort Collins, Colo. (PROTEXT) - Heska Corporation (Nasdaq:HSKA), a leader in the companion animal health market, todayannounced that it has signed a letter of intent to sell itsUnited Kingdom subsidiary, Heska UK Limited, formerly BloxhamLaboratories. Heska UK is a veterinary diagnostic laboratory thatalso provides veterinary allergy products and services toveterinarians and sells Heska's diagnostic and monitoringinstruments in the U.K. Robert Grieve, Chief Executive Officer of Heska, said, "Aftera thorough review and analysis of this business, we haveconcluded that continuing to be in the veterinary diagnosticlaboratory business in the U.K. is not strategic to our future.Furthermore, this business has failed to meet our financialexpectations. Therefore, we have entered into a letter of intentfor the sale of the business. The letter of intent provides forHeska to retain its veterinary allergy business in the U.K. Weplan to continue marketing our allergy-related products andservices directly in the U.K. and to sell our veterinary medicalinstrumentation in the U.K. through an independent distributornetwork." The Company expects to sign a definitive agreement and closethe transaction in the first quarter of 2000. "The sale of thisbusiness is expected to reduce annual operating losses byapproximately $1.0 million," said Grieve, "and will result in theCompany taking a fourth quarter charge, currently estimated atless than $1.0 million." "The pending sale of Heska UK is the latest in a series ofactions taken to sharpen our strategic focus, improve operatingefficiency and position the Company for improved performance. Thepast year has been a time of remarkable change for Heska," saidGrieve. "In December of 1998, we initiated a cost reduction andrestructuring plan designed to reduce 1999 operating expenses byapproximately $8.0 million, and we remain generally on track forachieving that goal. "Shortly after the restructuring was announced, the Companyreorganized its executive management team. This reorganization ofour executive ranks retained the entrepreneurial spirit andscientific talent upon which Heska was built, and complemented itwith executives experienced in building and leading successfulcommercial organizations. I am personally delighted with the wayin which this new management group is coming together as a team. "Throughout the year, we have conducted a comprehensive reviewof our operations. Products which were not strategic to ouroperations or were not meeting acceptable gross profit targetswere identified and evaluated. As a result of this review, wediscontinued the sale of numerous low volume and low marginproducts. While it is always difficult to eliminate products thatgenerate revenue, we are committed to build this business basedon high quality and high margin products. "In August, we announced the consolidation of our diagnosticequipment operations located in Waukesha, Wisconsin. Thisinitiative was designed to reduce operating expenses, furtherintegrate our sales and marketing activities into one locationand better serve our growing customer base. We continue to expectthat this consolidation will generate annual savings ofapproximately $2.0 million and improve operating efficiency. "We are also announcing today that our allergy extract andtreatment set manufacturing subsidiary, Center Laboratories inPort Washington, New York, is under strategic review. We areevaluating this business from both a strategic and operationalperspective, and looking for opportunities to optimize the valueof this business. "Upon completion of this review, the actions taken torationalize our business will be largely complete. I believe thatthe plan we have implemented during the past year has resulted ina stronger, leaner and more focused Company," said Grieve. "Weenter the new year with a growing business and a solid foundationfor continued commercial success." Heska discovers, develops, manufactures and markets companionanimal health products, primarily for dogs, cats and horses.Heska has a large and sophisticated scientific effort devoted toapplying biotechnology to the large and growing companion animalhealth market. Heska also offers diagnostic and patientmonitoring instrumentation and supplies, as well as laboratorydiagnostic products and services in the United States and Europeto veterinarians, and operates USDA- and FDA-licensed facilities,which manufacture vaccine, pharmaceutical, and allergyimmunotherapy products. For additional information on Heska andits products, visit the company's web site at www.heska.com. With the exception of historical matters, this press releasecontains express or implied forward-looking information aboutHeska, including statements concerning the pending sale of itsU.K. business, anticipated cost savings and increased operatingefficiencies and the future prospects for the Company. Suchforward-looking statements involve known and unknown risks,uncertainties and other factors which may cause actual results,performance or achievements of Heska to be materially differentfrom any future results, performance or achievements expressed orimplied by such forward-looking statements. Heska's achievementof these results may be affected by many factors, including amongothers, the following: the ability to negotiate a definitivepurchase agreement for the sale of the U.K. business; the abilityto negotiate a continuing relationship with the purchaser forfuture consulting services in the U.K., the ability to identifyindependent distributors to sell Heska's medical instrumentationin the U.K. and negotiate satisfactory distribution agreementswith these distributors, the ability to realize reduced operatinglosses, delays in or failure to achieve market acceptance ofproducts, delays in or failure to achieve future productdevelopment, quality of management, competition, changes inbusiness strategy or development plans, and the risks set forthin Heska's filings and future filings with the Securities andExchange Commission, including those set forth under "RiskFactors" in the Prospectus dated December 1, 1999 contained inHeska's Form S-1 Registration Statement (File No 333-90433).ots Original Text Service: Heska Corporation Internet:http://www.newsaktuell.de Contact: Ron Hendrick, Executive VicePresident & CFO, 970-493-7272, or Robert Grieve, Chief ExecutiveOfficer, 970-493-7272, both of Heska Corporation Web site:http://www.heska.com

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