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Cupertino, CA - (January 28, 1999) - General Surgical Innovations, Inc. (GSI), (Nasdaq: GSII) today announced financial results for the fiscal 1999 second quarter and six-month period ended December 31, 1998. In addition, the Company announced that in the Company's ongoing patent dispute with Origin Medsystems, Inc., a division of Guidant Corporation (GDT), the Board of Patent Appeals has recently affirmed a prior interference ruling against Origin. Also, the Company announced today that the United States Patent and Trademark Office has now issued GSI patent number 5,860,997 entitled "Method of Dissecting Tissue Layers".

Total revenues for the second quarter of fiscal 1999 decreased 59 percent to approximately $926,000 from $2.3 million for the second quarter of fiscal 1998. The company reported a net loss of approximately $4.5 million, or $0.33 per share, for the second quarter of fiscal 1999 compared to a net loss of $1.9 million, or $0.14 per share, for the same quarter of fiscal 1998. Revenues in fiscal 1999 consisted entirely of product sales, while revenues for the fiscal 1998 three and six month periods ended December 31, 1997 consisted of $860,000 and $1.6 million, respectively, in guaranteed payments from Ethicon Endo-Surgery. For the six-month period ended December 31, 1998, total revenues were $2.9 million and the net loss was $7.1 million, or $0.53 per share, as compared to total revenues of $4.6 million and a net loss of $3.2 million, or $0.23 per share, for the six-month period ending December 31, 1997. The Company ended the quarter with approximately $29.6 million in cash, cash equivalents and available-for-sale securities.

Gregory D. Casciaro, President and Chief Executive Officer of GSI, commented, "We continue to stay focused on building our sales and marketing infrastructure to meet the growth strategy we put into place during the fourth quarter of fiscal 1998. During the first six months of fiscal 1999, we added direct sales resources and realigned our regional distribution in the United States. Outside the United States, we have also realigned distribution channels and have GSI employees in Europe to manage those distributors."

Casciaro added, " The hernia repair and stress urinary incontinence (SUI) markets represent significant growth opportunities for GSI's proprietary technology. In the United States, GSI's sales and marketing infrastructure has continued to shift from one consisting of mostly distributors to a combination of distributors and a GSI direct sales force. Controlling our distribution channels more directly gives us greater impact on the growth of these markets.

"We believe that this more balanced approach to distribution will strengthen our position in the marketplace. GSI is committed to achieving its goal of making GSI's SPACEMAKER® solutions available to a broader group of surgeons and patients through training and complete procedural kits used specifically for those surgeries," commented Casciaro.

The United States Patent and Trademark Office had previously ruled favorably in the patentability and priority phases of GSI's interference proceedings against Origin. Origin then asked for reconsideration of the patentability ruling. The affirming of the prior interference rulings and of previous rulings by the Patent Office, means that GSI alone is entitled to a patent including the contested claims and to all resulting patents based on the contested technology.

The patent issued by the United States Patent and Trademark Office (number 5,860,997) is entitled "Method of Dissecting Tissue Layers". This patent provides further broad coverage of the Company's tissue dissection technology.

Casciaro stated, "This ruling by the Board of Appeals combined with this latest patent issuance is further confirmation of our right to this technology and, we will continue to assert our rights where appropriate. We continue to believe the use of Origin's VasoView, ExtraView, and PDB products, infringes GSI's patents".

GSI and Origin are currently in trial in the United States District Court in San Jose, California on validity and damage issues concerning GSI's patent number 5,514,153, which the Court has already held to be infringed.

The United States Court for the Northern District of California previously awarded GSI recovery of approximately $1,000,000 in attorneys' fees involving its litigation with Origin relating to a suit filed by Origin in May of 1996. Origin sued GSI for infringement under its patent number 5,520,609, on the day Origin's patent issued. In April 1998, the United States District Court found that Origin had obtained this patent through inequitable conduct by misrepresenting material facts to the Patent Office. The Court therefore found this patent to be unenforceable and ruled that GSI is entitled to recover attorney fees.

GSI's SPACEMAKER® tissue dissection systems are based on the company's patented balloon dissection technology and incorporate ancillary instruments to facilitate minimally invasive surgical procedures. Minimally invasive, or "keyhole," surgeries were initially limited to procedures carried out within the abdominal cavity which provided a working space for the surgeon. Balloon dissection methods are used to create working spaces where no naturally occurring space exists and have enabled surgeons to extend their use of minimally invasive techniques to a broader range of procedures. With the use of GSI technology, patients may receive such benefits as reduced pain and faster recovery times.

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 used 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 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 the outcome of patent litigation, 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, 1998, Form 10-Q for the quarter ended September 30, 1998 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.