LAKE FOREST, Calif.--(BUSINESS WIRE)--Nov. 4, 2004--

   Nine-Month Revenue Increased 50% to a Record $50 Million On 102%
   Increase in Regional Anesthesia Sales; Oncology Infusion Services
     Third Quarter Revenue Increased 59% to A Record $5.2 Million

I-FLOW CORPORATION (NASDAQ:IFLO) announced today that revenue for the third quarter of 2004 increased 58% to a record $18,688,000, compared to $11,822,000 for the third quarter of 2003, reflecting a 117% increase in Regional Anesthesia sales and continued growth in revenue for the Company's Oncology Infusion Services and Infusion Therapy segments. Revenue for the first nine months of 2004 increased 50% to a record $50,024,000 from $33,340,000 for the first nine months of 2003 on the strength of a 102% increase in Regional Anesthesia sales.

"Our focus on increasing awareness and driving adoption of our proprietary ON-Q(R) family of products for narcotic-free relief of post-surgical pain is delivering the growth we anticipated," said Chairman, President and Chief Executive Officer Donald M. Earhart.

Third Quarter Results

For the three months ended September 30, 2004, net revenue increased to a record $18,688,000 from $11,822,000 for the third quarter of 2003. Gross profit improved to 71% of revenue for this year's third quarter, compared to 64% for the same period last year. The net loss for this year's third quarter was $1,770,000, or $0.08 per share. This compares to a net loss for the third quarter of 2003 of $386,000, or $0.02 per share.

Nine Month Results

For the nine months ended September 30, 2004, net revenue increased 50% to a record $50,024,000, compared to net revenue of $33,340,000 for the first nine months of 2003. Gross profit rose to 69% of revenue for the first nine months of 2004, compared to 65% for the same period last year. The net loss for this year's first nine months was $4,774,000, or $0.24 per share, compared to a net loss for the first nine months of 2003 of $347,000, or $0.02 per share.

Strategic Highlights

"Each year, millions of surgical patients potentially could benefit from our ON-Q technology in the United States alone. This is a tremendous opportunity for sustained growth. Our goal is to establish our ON-Q brand as the new 'best practice' in post-surgical pain relief, and, ultimately, to replace narcotics as the standard of care. Our four-pronged strategy of building our direct sales force, supporting independent third-party clinical studies that demonstrate the benefits of ON-Q in an expanding number of surgical applications, offering innovative programs to facilitate reimbursement and reduce reimbursement risk, and promoting ON-Q with carefully targeted marketing campaigns is moving us steadily toward our objective," Earhart said.

    Recent highlights include:

    --  Further expansion of the Company's distribution capabilities,
        with ON-Q now available in more than 900 hospitals and
        ambulatory surgery centers (ASC's) throughout the United
        States. At the end of the third quarter, I-Flow's
        hospital-focused direct sales force numbered 106
        quota-carrying sales professionals calling on hospitals and
        surgeons, compared to 60 at the end of last year and 87 at the
        end of the second quarter of 2004. Since its launch just a few
        months ago, I-Flow's other ON-Q sales force targeted
        exclusively at ASC's and other outpatient settings already
        numbers 20 sales professionals.

    --  The receipt of CE Mark approval for I-Flow's ON-Q brand for
        additional indications for use within the European Union.
        "These additional indications are identical to the FDA
        clearance that ON-Q received in May 2004, and allow I-Flow to
        market ON-Q as superior to narcotics alone for reducing pain
        after surgery. Now, all ON-Q branded products sold within the
        United States, Canada, and the European Union's 25 member
        states are cleared to carry this enhanced labeling. We believe
        that this will dramatically enhance our ability to market ON-Q
        in Europe, and will facilitate the development of a
        distributor network for this large market," Earhart explained.

    --  An agreement to make ON-Q available to health care
        organizations that purchase supplies through Novation LLC, the
        supply company of VHA Inc. and University HealthSystem
        Consortium that serves more than 2,300 health care
        organizations nationwide, including 1,400 acute care
        facilities. Also, the award of a contract by MedAssets, a
        fast-growing group purchasing organization and supply chain
        management company, under which MedAssets will offer ON-Q to
        its network of healthcare providers, including hospitals and
        ASC's. "We now have established relationships with four of the
        largest group purchasing organizations in the United States.
        This is a major accomplishment for I-Flow that demonstrates
        how far we have come in increasing acceptance for our ON-Q
        products, and demonstrating ON-Q's value in enhancing patient
        care. These contracts open the doors for our direct sales
        force to make the benefits of ON-Q available to a
        significantly expanded target market," Earhart said.

    --  The publication of a study of abdominal surgery that found
        that continuous post-surgical wound infiltration with a local
        anesthetic delivered by ON-Q increased tissue oxygenation at
        the surgical site, which may enhance wound healing and prevent
        post-operative wound infections. Another study following
        gynecologic oncology surgery also supported the use of ON-Q to
        provide pain relief after surgery without increasing the risk
        of wound infections. "These are compelling results that
        support our belief that the use of ON-Q helps increase
        oxygenation, which promotes faster wound healing, and does not
        cause an increase in surgical-site complications such as
        infection," Earhart said.

    --  Other recently published studies demonstrated the
        effectiveness of ON-Q in treating pain while minimizing the
        use of narcotics in additional surgical procedures, including
        outpatient bariatric (weight loss) surgery, outpatient total
        hip replacement surgery, and radical prostatectomy surgery
        performed with a robotic, minimally invasive technique. "In
        trial after trial, and in indication after indication, the
        clinical results have been remarkably consistent -- ON-Q helps
        surgical patients recover faster, with less pain and less
        narcotics use," Earhart said.

    Regional Anesthesia

Sales in I-Flow's Regional Anesthesia market segment, which includes the ON-Q(R) PainBuster(R) Post-Operative Pain Relief System, the ON-Q(R) C-bloc(R) Continuous Nerve Block System and the Soaker(TM) Catheter, increased 117% to $8,735,000 for this year's third quarter, compared to $4,032,000 for the same period a year ago. Excluding sales in the prior year quarter to the Company's former distributor dj Orthopedics, the increase in U.S. ON-Q sales was 138%. For the first nine months of 2004, Regional Anesthesia sales increased 102% to $21,969,000 from $10,886,000 for the first nine months of 2003.

Oncology Infusion Services

Third quarter revenue for I-Flow's InfuSystem subsidiary increased 59% to $5,212,000, compared to $3,275,000 for the third quarter of 2003. For the first nine months of 2004, sales increased 45% to $13,951,000 from $9,619,000 for the same period of 2003.

Earhart noted that, "With the emergence of additional protocols requiring the use of electronic ambulatory infusion pumps, we believe there are excellent opportunities for further growth in this business."

Infusion Therapy

Sales of IV Infusion Therapy products, which include the Company's intravenous elastomeric pumps, mechanical infusion devices and disposables, and recently discontinued electronic infusion pumps, increased 5% to $4,741,000 for the third quarter of 2004 versus $4,515,000 for the same period last year. For the first nine months of 2004, IV Infusion Therapy sales increased 10% to $14,104,000 versus $12,835,000 a year ago.

Balance Sheet

At September 30, 2004, I-Flow reported net working capital of $66 million, including cash and equivalents of $46.4 million, no long-term debt, and shareholders' equity of $87.1 million. On April 19, 2004, I-Flow announced the completion of its public offering of 2,990,000 shares of common stock, including the underwriters' over-allotment option, for net proceeds to the Company of $43.1 million.

Conference Call

I-Flow has scheduled a conference call today at 11:00 a.m. ET. A simultaneous webcast may be accessed from the Investors' "Event Calendar" link at www.IFLO.com. A replay will be available after 1:00 p.m. ET at the same Internet address. For a telephone replay, dial 800-633-8284, reservation #21210715, after 1:00 p.m. ET.

About I-Flow

I-Flow Corporation (www.IFLO.com) designs, develops and markets technically advanced, low cost ambulatory infusion systems that are redefining the standard of care by providing life enhancing, cost effective solutions for pain relief.

"Safe Harbor" Statement

Certain disclosures made by the Company in this press release and in other reports and statements released by the Company are and will be forward-looking in nature, such as comments that express the Company's opinions about trends and factors that may impact future operating results. Disclosures that use words such as the Company "believes," "anticipates," or "expects" or use similar expressions are intended to identify forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ from those expected, and readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to republish revised forward-looking statements to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures made by the Company in this release which seek to advise interested parties of the risks and other factors that affect the Company's business, as well as in the Company's periodic reports on Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission. The risks affecting the Company's business include, among others: implementation of our direct sales strategy; dependence on our suppliers and distributors; reliance on the success of the home health care industry; our continuing compliance with applicable laws and regulations, such as the Food, Drug and Cosmetic Act, and the FDA's concurrence with our management's subjective judgment on compliance issues; the reimbursement system currently in place and future changes to that system; competition in the industry; economic and political conditions in foreign countries; currency exchange rates; inadequacy of booked reserves; technological changes; and product availability and acceptance. All forward-looking statements, whether made in this release or elsewhere, should be considered in context with the various disclosures made by the Company about its business.

I-FLOW CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except for per share data)(Unaudited)

                               Three Months Ended   Nine Months Ended
                                  September 30,       September 30,
                               ------------------- -------------------
                                 2004      2003      2004      2003
                               --------- --------- --------- ---------

Net Revenues                    $18,688   $11,822   $50,024   $33,340
Cost of sales                     5,377     4,312    15,280    11,799
                               --------- --------- --------- ---------
  Gross Profit                   13,311     7,510    34,744    21,541

Costs and expenses:
  Selling, general &
   administrative                15,564     7,730    40,627    20,916
  Product Development               743       589     2,013     1,611
                               --------- --------- --------- ---------
     Total expenses              16,307     8,319    42,640    22,527
                               --------- --------- --------- ---------

Operating loss                   (2,996)     (809)   (7,896)     (986)

Interest expense (income), net     (182)       41      (292)       38
                               --------- --------- --------- ---------

Loss from continuing
 operations before income
 taxes                           (2,814)     (850)   (7,604)   (1,024)

Provision for income taxes
 (benefit)                       (1,044)     (343)   (2,830)     (417)
                               --------- --------- --------- ---------

Loss from continuing
 operations                      (1,770)     (507)   (4,774)     (607)

Income from discontinued
 operations, net of tax              --       121        --       260
                               --------- --------- --------- ---------

Net income (loss)               $(1,770)    $(386)  $(4,774)    $(347)
                               --------- --------- --------- ---------

Net income (loss) per share
 from continuing operations
   Basic and Diluted             $(0.08)   $(0.03)   $(0.24)   $(0.04)

Net income (loss) per share
   Basic and Diluted             $(0.08)   $(0.02)   $(0.24)   $(0.02)
                               --------- --------- --------- ---------

Weighted average shares
   Basic and Diluted             21,501    16,445    20,185    15,827
                               ========= ========= ========= =========


CONDENSED CONSOLIDATED BALANCE SHEET
($ in thousands)(Unaudited)
----------------------------------------------------------------------
ASSETS              Sep. 30, Dec. 31, LIABILITIES &  Sep. 30, Dec. 31,
                      2004     2003    EQUITY          2004     2003
----------------------------------------------------------------------

Cash & Equivalents                    Current
                    $46,400  $15,185   Liabilities    $7,215   $7,123

Other Current
 Assets              26,831   23,405

Property, Plant &                     Long-term
   Equipment, Net    10,250    6,744   Liabilities        --       --

                                      Shareholders'
Other Assets         10,883    6,562   Equity         87,149   44,773
                    -------- --------                -------- --------

Total               $94,364  $51,896  Total          $94,364  $51,896
                    ======== ========                ======== ========

    CONTACT: I-Flow Corporation
             James R. Talevich, 949-206-2700
             www.iflo.com
             or
             Berkman Associates
             Neil Berkman, 310-277-5162
             info@BerkmanAssociates.com

    SOURCE: I-Flow Corporation