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PHOENIX -- Zila, Inc. (Nasdaq: ZILA - news) announced it is selling its Zila Dental Supply. Total gross proceeds from the divestiture of the division's assets will be approximately $13.8 million in a combination of cash and notes. The gross proceeds will be subject to certain closing adjustments. The division's full-service operations have been sold to Henry Schein, Inc. (Nasdaq: HSIC - news). Definitive agreements also have been signed for the sale of the division's mail-order operations to PracticeWares, Inc., of Sacramento, California.

Zila President Joseph Hines said, "Approximately $3 million of the proceeds will be used to accelerate progress of the Phase III clinical trial presently underway in support of the OraTest® oral cancer detection product New Drug Application. Also, a portion of the proceeds will be used to pay off Zila's existing line of credit.

"The divestiture represents a major refocusing of Zila's strategic direction, allowing the Company to concentrate on the development and marketing of our own proprietary pharmaceutical, biotechnology and nutraceutical products," Hines continued. "While Zila Dental Supply accounted for a little more than 50 percent of fiscal year 2001 revenues, margins on the division's sales were substantially lower than margins on Zila's proprietary offerings.

"With a strong balance sheet, an unused credit line and improved cash reserves," Hines noted, "Zila will be well-positioned to grow its core business lines, fund a productive product development program, and seek out accretive, synergistic technologies and acquisitions. By focusing on proprietary pharmaceutical, biotechnology and nutraceutical products, rather than lower-margin distribution operations, we believe we can more quickly achieve revenue and income objectives and, in turn, build shareholder value."

Henry Schein Inc. is the largest distributor of healthcare products and services to office-based healthcare practitioners in the combined North American and European markets. Recognized for its excellent customer service and low prices, the Company serves more than 400,000 customers worldwide, including dental practices and laboratories, physician practices and veterinary clinics, as well as government and other institutions. For more information, visit the Henry Schein Web site at www.henryschein.com .

Headquartered in Phoenix, Arizona, Zila has five divisions: Zila Consumer Pharmaceuticals, marketer of Zilactin® oral healthcare products; Zila Professional Pharmaceuticals, marketer of Peridex® prescription mouthrinse, OraTest® oral cancer detection products, the Pro-Ties(TM) bundling system for instrument sterilization, and antiseptic Pro-Wash(TM) and Pro-Scrub(TM) products; Inter-Cal Nutraceuticals, manufacturer of patented Ester-C® branded products and botanicals such as Palmettx(TM) saw palmetto extract -- value-added ingredients for the global nutrition industry; Zila Europe, marketer of OraTest® products in the EU; and Zila Technical Operations, manufacturer of pharmaceutical-grade Zila® Tolonium Chloride, as well as dry-handled pre-moistened swab products at its Innovative Swab Technologies unit, and internal source of product development, technical and compliance services. For more information, visit www.zila.com ; register at "Investor RelationsEmail Alert" for e-mail notification of Company news.

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based largely on Zila's expectations or forecasts of future events, can be affected by inaccurate assumptions and are subject to various business risks and known and unknown uncertainties, a number of which are beyond the Company's control. Therefore, actual results could differ materially from the forward-looking statements contained herein. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate. For a more detailed description of these and other cautionary factors that may affect Zila's future results, please refer to Zila's annual report on Form 10-K for its fiscal year ended July 31, 2001, filed with the U.S. Securities and Exchange Commission.