ZILA REPORTS 36% REVENUE GROWTH FOR FISCAL 2ND QTR.

Zila, Inc. (NasdaqNM: ZILA), Phoenix, Ariz., has announced results for its fiscal second quarter ended January 31, 2003. Highlights of those results, compared with the same period a year ago, are as follows:

-- Revenues increase 36 percent.

-- Net loss improves to $0.02 per share vs. $0.16 per share.

-- EBITDA improves by $2.2 million.

Douglas D. Burkett, Ph.D., chairman, CEO and president, said, "I'm extremely proud of the progress that our management team and employees made in the second quarter. Our 36 percent revenue growth rate is exceptional, given the state of the U.S. economy. I look forward to continuing our financial progress through the end of our fiscal year in July and into fiscal 2004."

Zila said its revenues were $12.0 million for the three months ended January 31, 2003, up from revenues of $8.8 million in the same period in the prior year. The fiscal second-quarter net loss was $876,000, or $0.02 per share in 2003, compared with a net loss of $7.0 million, or $0.16 per share in the second quarter of fiscal 2002. Included in last year's quarter is approximately $290,000 of goodwill amortization and a $3.9 million income tax expense that was not included in the quarter ended January 31, 2003.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) from continuing operations improved $2.2 million to a negative $170,000 compared to negative $2.4 million EBITDA in the second quarter of fiscal 2002. Second-quarter EBITDA was also improved when compared with negative $950,000 in the first quarter of fiscal 2003.

Revenues for the first-half of fiscal 2003 were $22.7 million, up 28 percent from $17.7 million in the first half last year. The first-half net loss was $2.5 million, or $0.06 per share, compared with $8.0 million, or $0.18 per share in the first half of fiscal 2002.

Dr. Burkett reemphasized Zila's goal to be EBITDA break-even to positive for fiscal 2003, and said the company would continue to adhere to the financial discipline required to achieve that goal. Zila uses EBITDA as a measure of cash flow.

"We are committed to keep our costs in line, while pushing forward to develop and grow our core products. As we continue our strong marketing support for Ester-C(R), carry out new brand-strengthening initiatives for our pharmaceutical products, and accelerate our clinical program for OraTest(R), we are confident in our cash position."

Nutraceuticals: Revenues increased 36 percent during the quarter from last year on accelerating Ester-C(R) sales. Gross margin as a percent of sales was nearly two points higher due to improvements in manufacturing efficiency. Saw palmetto sales increased 34 percent in part due to a single large sale of $347,000 during the quarter, as part of the company's strategy to liquidate current inventory.

Pharmaceuticals: Revenues were up 36 percent as Peridex(R) sales more than doubled, primarily due to restructuring of the sales contract that requires our largest distributor to purchase its annual requirement during the first three quarters of FY03. Also, swab sales increased fourfold. Gross margins as a percent of sales were lower due to the increase in sales of our lower margin swab products and temporarily higher manufacturing and packaging costs.

Biotechnology: Investment in the OraTest(R)clinical study increased 58 percent to $634,000. Zila's strategy is to curtail non-U.S. marketing programs to focus resources on the OraTest(R)clinical trials. The operational focus on cost control within the division yielded overall decreased costs of 15 percent to $1.0 million.

Second Quarter FY 03 Highlights:

-- Significantly increased quarterly gross profit, despite one-time new supplier costs.

-- Near breakeven EBITDA even as investment increased in most of Zila's core areas.

-- Completed agreement with Quintiles Transnational to become our clinical research organization and expand the OraTest(R) clinical trial.

-- The Quintiles strategic investment group, PharmaBio Development, invested $500,000 in exchange for a royalty of five percent of European OraTest(R) sales and, once approved, U.S. sales until a maximum of 2.5 times the investment has been repaid.

-- Hired new CFO, Larry Batina, to lead our finance group.

Dr. Burkett said that he is working closely with Mr. Batina and the rest of Zila's senior management team to develop an in-depth plan for completing the OraTest(R) Phase III clinical trial as quickly as possible while rolling out the ViziLite(TM) product and supporting continued growth within the company's pharmaceutical and nutraceutical businesses.

About Zila

Zila, Inc., headquartered in Phoenix, is an international provider of healthcare and biotechnology products for dental/medical professionals and consumers. Zila has three business units:

Zila Nutraceuticals, manufacturer and marketer of Ester-C(R), a branded, superior efficacy nutrition product.

Zila Pharmaceuticals, "The Oral Soft Tissue Experts" marketing Zilactin(R) OTC oral care products, Peridex(R) prescription periodontal rinse and ViziLite(TM) examination kits.

Zila Biotechnology, a research, development and licensing business specializing in pre-cancer/cancer detection through its patented OraTest(R) and Zila(R) Tolonium Chloride technologies.

For more information, visit http://www.zila.com or call 602/266-6700.