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Cupertino, CA - (April 16, 1998) - General Surgical Innovations, Inc. (GSI) (Nasdaq: GSII) today announced financial results for the fiscal 1998 third quarter and nine-month period ended March 31, 1998.

For the third quarter, the company reported total revenues of approximately $894,000 compared with total revenues of $2.2 million for the third quarter of fiscal 1997. For the quarter, product sales rose 29 percent to approximately $894,000 from $693,000 for the same period last year. As anticipated and in connection with the conversion of Ethicon Endo-Surgery, Inc. to a non-exclusive distributor, there were no guaranteed payments in the quarter. The company reported a net loss of approximately $(3.0) million, or $(0.22) per share, compared to a net loss of $(439,000), or $(0.03) per share, for the same quarter of fiscal 1997.

For the first nine months of fiscal 1998, total revenues were $5.5 million compared with total revenues of $6.5 million for the same nine-month period in fiscal 1997. The company reported a net loss of $(6.2) million, or $(0.46) per share, for the nine-month period, versus a net loss $(905,000), or $(0.07) per share for the comparable period last year.

At March 31, 1998, the company’s balance sheet remained healthy with virtually no long term debt and approximately $40.0 million in cash, cash equivalents and available-for-sale securities.

Gregory Casciaro, president and chief executive officer of GSI, stated, “We are encouraged by our progress in the marketplace as we continue to build commercial sales of our technology throughout our targeted markets. During the quarter we signed exclusive agreements with nine international distributors, including Baxter International, to distribute GSI’s cardiovascular products in 18 European countries, enhancing our ability to penetrate the worldwide market. Additionally, GSI received 510(k) approval from the United States Food and Drug Administration (FDA) to expand the indications for use of our proprietary SPACEMAKER® surgical balloon dissection products in minimally invasive surgical procedures.”

“As we pursue our goal of becoming a leading provider of surgical balloon dissection products and complete systems used in the growing minimally invasive surgery market, we continue to invest in our sales and marketing organization and to expand our product portfolio. Additionally, through vigorous defense of our intellectual property position, we have incurred non-recurring legal expenses that have negatively impacted our financial results. We remain confident, however, that our position will prevail,” concluded Casciaro.

Also during the quarter, GSI and Ethicon Endo-Surgery, Inc. (EES) signed a non-exclusive agreement enabling EES to sell GSI’s products for the laparoscopic hernia repair and urinary stress incontinence (USI) markets. This agreement supersedes the December 1996 contract which granted EES exclusive worldwide sales and marketing rights to distribute GSI’s SPACEMAKER® balloon dissector products in the laparoscopic hernia repair and USI markets. More importantly, this revised agreement enables GSI to expand its channels of distribution in the general surgery and incontinence market segments.

Effective April 1, 1998, the company promoted Gregory D. Casciaro, formerly President and Chief Operating Officer, to President and Chief Executive Officer. Roderick A. Young, formerly Chairman of the Board of Directors and Chief Executive Officer, continues to serve as Chairman.

GSI’s SPACEMAKER tissue dissection systems, based on the company’s patented balloon technology, rapidly and gently create surgical working spaces by separating natural tissue planes without resorting to blunt dissection used in conventional open surgery or minimally invasive surgery conducted outside of a natural body cavity. In procedures using SPACEMAKER dissectors, a surgeon creates a small incision through which the balloon is inserted and placed between naturally occurring tissue layers such as muscle, fat, and skin. Subsequently, the balloon is filled to a specific volume with air or saline, causing the desired dissection of the tissue planes. The system is then removed and the dissected space can be insufflated with gas to create a surgical operating space.

Headquartered in Cupertino, California, General Surgical Innovations, Inc. develops, manufactures, and sells tissue dissection systems based on the company’s patented balloon technology for minimally invasive surgical procedures. The company’s products are specifically designed for endoscopic and laparoscopic techniques for use in general, cardiovascular, orthopedic, cosmetic and reconstructive surgeries to create an operating space at the surgical site, lessen tissue damage and improve patient recovery time. The company has developed a broad range of balloon shapes and sizes to be used for various surgical techniques, procedures, and market segments. GSI distributes its products worldwide through a network of distribution partners and a direct sales force. For additional information, please visit the company’s World Wide Web site at www.gsii.com.

Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements, the accuracy of which is necessarily subject to risks and uncertainties. Future market development and demand for the company’s products, among other matters discussed in this release, may differ significantly from the discussion of such matters in the forward-looking statements. Such differences may be based upon factors within General Surgical Innovations’ control, such as strategic planning decisions by management and reallocation of internal resources, or on factors outside of General Surgical Innovations’ control, such as scientific advances by third parties, introduction of competitive products and delays by regulatory authorities, as well as those factors set forth under the heading “Factors Affecting Future Results” in General Surgical Innovations’ Annual Report on Form 10-K for the year ended June 30, 1997, Form 10-Q for the quarters ended September 30, 1997, December 31, 1997, and other company filings with the Securities and Exchange Commission.

For more information on General Surgical Innovations, via fax at no cost,
dial 800-PRO-INFO (908-544-2850 outside the U.S.) ticker symbol: GSII.