ArthroCare Completes Acquisition of Opus Medical; $130 Million Acquisition Expected to Break Even in 2005 and Be Accretive in 2006

SUNNYVALE, Calif.--()--Nov. 15, 2004--

  Opus on Track to Generate $16-17 Million in Revenues in 2004  



ArthroCare(R) Corp. (Nasdaq:ARTC), a multi-business medical device company that develops minimally invasive surgical products, announced today it has completed the acquisition of Opus Medical, a maker of soft tissue orthopedic repair systems.

ArthroCare acquired Opus for $30 million in cash and $60 million of ArthroCare stock. The agreement also calls for an additional delayed payment of $40 million and a contingent payment based on Opus' 2005 net sales, payable in cash or stock at ArthroCare's election (subject to certain restrictions) in the first quarter of 2006.

ArthroCare expects the transaction to break even from an earnings per share (EPS) standpoint in fiscal 2005, be accretive thereafter and be operating cash flow accretive in 2005.

In addition, Opus remains on track to generate $16-17 million in revenues in 2004 from its first commercial product -- the AutoCuff(R) Anchoring System. The AutoCuff System is designed to enable surgeons to easily perform total arthroscopic rotator cuff surgery in combination with arthroscopic tissue modification or ablation devices, such as ArthroCare's Coblation(R)-based ArthroWands(R).

"The innovative AutoCuff System is gaining acceptance rapidly among the medical community and has tremendous potential for continued growth in an under-penetrated market, where only 10-20 percent of all rotator cuff repairs are performed arthroscopically," said Michael A. Baker, president and chief executive officer (CEO) for ArthroCare. "The AutoCuff System greatly enhances our Sports Medicine product portfolio and allows us to increase revenue and profit per procedure in the largest single indication for our Coblation technology -- rotator cuff repair. This transaction also immediately positions ArthroCare as a leader in the fastest-growing and most-profitable segments of the sports medicine market."

"Thousands of patients worldwide stand to benefit from total arthroscopic rotator cuff repair, which results in decreased pain, fewer complications and accelerated rehabilitation compared to open-surgical techniques," said James W. Hart, president and CEO for Opus Medical. "I am proud of the Opus team for all of its accomplishments, and equally excited that the marriage of our technology with ArthroCare's devices will lead to even better patient outcomes."

Additional Acquisition Details

ArthroCare will provide additional financial information related to the Opus acquisition -- including the amount of non-cash charges and one-time expenses -- when it announces its fourth quarter and year-end financial results for fiscal 2004.

Conference Call

ArthroCare will hold a conference call with the financial community to discuss the Opus acquisition at 4:30 p.m. ET/1:30 p.m. PT today. The dial-in number for the call is (800) 443-6290. The call will be simultaneously Webcast by CCBN and can be accessed on ArthroCare's Web site at www.arthrocare.com. A telephonic replay of the conference call can be accessed by dialing 800-633-8284 and entering pass code number 21214407. The Webcast and telephonic replay will remain available through Nov. 29, 2004.

About ArthroCare

ArthroCare Corp. (www.arthrocare.com) is a highly innovative, multi-business medical device company that develops, manufactures and markets minimally invasive surgical products. With these products, ArthroCare targets a multi-billion dollar market opportunity across several medical specialties, significantly improving existing surgical procedures and enabling new, minimally invasive procedures. Many of ArthroCare's products are based on its patented Coblation technology, which uses low-temperature radiofrequency energy to gently and precisely dissolve rather than burn soft tissue -- minimizing damage to healthy tissue. Used in more than three million surgeries worldwide, Coblation-based devices have been developed and marketed for sports medicine; spine/neurologic; ear, nose and throat (ENT); cosmetic; urologic and gynecologic procedures. ArthroCare also has added a number of products to its portfolio to complement Coblation within key indications. Founded in 1993, ArthroCare is headquartered in Sunnyvale, Calif.

Safe Harbor Statements

Except for historical information, this press release includes forward-looking statements. These statements include, but are not limited to, the company's stated business outlook for fiscal 2004 and 2005, continued strength of the company's fundamental position, the strength of the company's technology, the company's belief that strategic moves will enhance achievement of the company's long term potential, the potential and expected rate of growth of new businesses, continued success of product diversification efforts, and other statements that involve risks and uncertainties. These risks and uncertainties include, but are not limited to the uncertainty of success of the company's non-arthroscopic products, competitive risk, uncertainty of the success of strategic business alliances, uncertainty over reimbursement, need for governmental clearances or approvals before selling products, and the uncertainty of protecting the company's patent position, the risk that the acquisition of Opus may not occur or that sales of Opus products will not be as high as anticipated, and the risk that we may incur unanticipated or unknown losses or liabilities if we complete the acquisition of Opus. These and other risks and uncertainties are detailed from time to time in the company's Securities and Exchange Commission filings, including ArthroCare's Form 10-K for the year ended December 31, 2003 and the 10-Q for the quarter ended June 30, 2004. Forward-looking statements are indicated by words or phrases such as "anticipates," "estimates," "projects," "believes," "intends," "expects," and similar words and phrases. Actual results may differ materially from management expectations.

Contacts

ArthroCare Corporation
Fernando Sanchez, 512-391-3967 (Investors)
or
Haberman & Associates
Jon Zurbey, 612-372-6446 (Media)
jon@habermaninc.com

Contacts

ArthroCare Corporation
Fernando Sanchez, 512-391-3967 (Investors)
or
Haberman & Associates
Jon Zurbey, 612-372-6446 (Media)
jon@habermaninc.com