Respironics Continues To Grow

New Products, Global Expansion and a Corporate Alignment Pave the Way for Reaching a Billion in Revenues in 2006

Atlanta, GA - October 18, 2005

Respironics, Inc. closed out fiscal year 2005 reporting record financial results. The year was marked by the Company's continued leadership in the global obstructive sleep apnea (OSA) marketplace, further acceptance and adoption of the Company's ventilation therapies in various geographic markets, successful international expansion and the emergence of Children's Medical Ventures as a growth driver for the Company. Additionally, Respironics made significant progress in fostering the development of new growth drivers for its business, including advanced respiratory drug delivery and the screening, diagnosing and treatment of other sleep disorders.

In his second year of leading the Murrysville, PA - based company, John Miclot, President and CEO, reported that Respironics has completed another exceptional year and is positioned for continued success as a leader in the sleep and respiratory markets. For the year ending June 30, 2005, net sales increased to $911.5 million, a 20 percent increase over the $759.5 million reported a year ago. "Our fiscal year ended with the 23rd consecutive quarter of the Company meeting or exceeding its financial expectations," said Miclot. "Record results across our business units, combined with organizational growth and increased global market penetration, illustrate again the strength and balance of our Company and our strategy." 

Sleep Therapy at the Forefront 

Domestic home care product sales for fiscal year 2005 were driven primarily by growth in the sales of sleep apnea therapy devices, masks and accessories (the Company's largest product line), which represented 19 percent growth, or $62.8 million of the increase over the prior year. Growth in OSA therapy products was achieved through successful product introductions and the Company's overall product breadth. Continued acceptance and recognition of C-Flex™ technology among patients and providers, the strength of our sales force, strong sales channels with sleep labs, thought leaders, and home care providers, and the success of customer programs further contributed to the growth of the domestic OSA therapy market (estimated to be approximately 15-20 percent a year).

Respironics' innovative solutions for the OSA market have helped to reinvent standards in sleep diagnosis, therapy and compliance. The increasing acceptance of the Company's proprietary C-Flex and Bi-Flex® technology for comfort and compliance during OSA therapy have strengthened Respironics' leadership position in the market, according to Miclot. Building on the success of the REMstar® family and its C-Flex and Bi-Flex technology, Respironics will soon release the REMstar M Series, which is targeted at improving patients' acceptance to therapy.

The recently launched BiPAP® Auto is the first auto-adjusting bi-level positive airway pressure sleep system for adults who have OSA. The BiPAP Auto, designed to help improve sleep therapy Acceptance, Comfort and Results (ACR), features Bi-Flex technology that softens the airflow during exhalation to provide increased pressure relief, making breathing more comfortable and natural for the patient. Additionally, bi-level therapy has been shown to deliver a higher level of success for patients that require an alternative to CPAP therapy. One study has shown that 54 percent of non-compliant CPAP users were able to remain compliant with their therapy when introduced to Bi-Flex.

Complementing our therapy devices, Respironics will soon release two new additions to the Comfort Series™ of masks making it easier for healthcare professionals to fit 100 percent of their patients 100 percent of the time. The ComfortLite™ 2 offers more features in a smaller, lighter mask. With improved headgear and stronger, more comfortable components, this new mask's unique design helps minimize facial contact and reduce pressure points by using the headgear and forehead mechanism for stability rather than the patient's nostrils, thereby allowing the cushion to provide a comfortable, reliable seal.

The new ComfortFull™ 2 full face mask will have a simple, lightweight design and a polished cushion on the outside for a better seal and improved comfort. The one-piece cushion and faceplate also make this mask easier to clean and the new entrainment valve split-washer connection improves swiveling of the elbow and provides a more secure connection.

Respironics also introduced a new approach to oxygen management with ePOD™ - an Electronic Pulse Oxygen Device. Previous electronic oxygen conservation devices have presented barriers to widespread patient acceptance such as too many alarms, lights or buttons and limited battery life. These devices have generally been too complicated for patients to use with confidence. ePOD eliminates these problems by giving users a guaranteed two-year battery life that should last over three and a half million breaths (based on 20 breaths per minute over two years).

Acquisition Provides Entry to Broader Sleep Market

In April of 2005, Respironics acquired 100 percent of the outstanding shares of Mini Mitter Company, Inc, a 34-year-old, privately held company located in Bend, OR. Mini Mitter, which has revenues of approximately $5.5 million, develops and sells sleep and physiological monitoring products to commercial sleep laboratories and other medical, pharmaceutical and health research institutions involved in clinical trials.

"This acquisition is consistent with Respironics' strategic direction to broaden our presence in the sleep market beyond our core obstructive sleep apnea business," said Miclot. "Mini Mitter's innovative technology will enable us to expand our current position and access new markets that we have identified as key to assuring our continued growth and leadership in the broader sleep market."

According to a National Sleep Foundation poll, three-quarters of adults say they frequently have a sleep problem, such as snoring or waking during the night. "We believe that Mini Mitter's technologies have broad applicability to market segments including sleep research, clinical trials, and the sleep lab or other sleep assessment settings," explained Miclot. "Mini Mitter's strong customer and thought-leader relationships, well-respected technology, and research and development competencies are an excellent complement to our business. We are happy to have Mini Mitter as part of our organization, contributing to our future growth," he added.

Total Ventilation Solutions SM Gains Momentum

Within domestic hospital product sales, Respironics' ventilation growth was five percent during the year ending June 30, 2005. During the 2005 fiscal year, Respironics initiated a change in the distribution of its BiPAP Vision® Noninvasive Ventilation system and transitioned from distributor-based sales to a direct-sales model. Beginning July 1, 2005, the Company began selling the Vision ventilator directly to its domestic hospital customers. This transition, contributed to the lower overall hospital ventilation growth in fiscal year 2005.

Respironics remains committed to Total Ventilation Solutions - an "end to end" approach that combines the therapeutic benefits of noninvasive and invasive ventilators with advanced patient monitoring technology. The Esprit® critical care ventilator continued to gain market acceptance in 2005, evidencing the growing acceptance of the Company's approach to the management of ventilated patients in the hospital setting. The Esprit offers noninvasive ventilation, monitors exhaled gases and can also provide invasive ventilation if necessary.

Broadening Total Ventilation Solutions to the neonatal intensive care unit (NICU) and the home setting, his past year, Respironics introduced three new devices. The BiPAP® S/T Ventilatory Support System is the newest addition to Respironics home ventilator fleet. This easy to operate unit and offers a straightforward user interface and an integrated heated humidifier for easier set-up and management. The BiPAP S/T is compact and lightweight, and is the first noninvasive device to combine Respironics' proven Bi-Flex technology with SmartCard for use with Encore® Pro, which facilitates more accurate tracking of data management. In addition to integrated alarms, it also features Digital Auto-TRAK™ Sensitivity and adjustable rise time.

The NeoPAP™ System offers comfortable respiratory support to neonates suffering from a range of respiratory difficulties. "Leveraging its strong relationship via Children's Medical Ventures and the Company's presence in hospital ventilation, Respironics is positioned to expand its penetration in NICUs," says Miclot. The PLV® Continuum™ is the latest addition to the Company's line of ventilation products, offering healthcare professionals and their patients a portable ventilation solution for a wide range of respiratory support.

Investments Accelerate International Growth

Through a series of strategic acquisitions and alliances over the past three years, as well as investments in the Company's international sales and marketing infrastructure, Respironics' international sales now account for nearly 30 percent of the Company's total revenues, up from 20 percent just three years ago. The Company's international growth included increased sales of both home care and hospital products. The most significant increases were reported from sleep therapy devices and accessories ($24.5 million increase over the prior year, representing 31 percent growth), home ventilation systems and accessories ($14.4 million over the prior year, representing 33 percent growth), and hospital ventilation products ($7.8 million increase over the prior year, representing 21 percent growth).

Recent acquisitions, including Profile Therapeutics plc and Caradyne Limited, contributed $27.2 million in international sales. The primary geographic locations experiencing organic revenue increases were Europe and Asia Pacific, where the Company has made significant investments in sales force and marketing programs.

"Our strategy and vision focus on strengthening our leadership position in the sleep and respiratory markets by understanding and anticipating our customers' needs," said Miclot. "We challenged ourselves this past year to not only identify needs through a deep understanding of the marketplace, but to answer those needs with innovative solutions."

Looking Ahead to a Milestone Year in 2006

In 2006, Respironics will continue to focus on its two primary markets of Sleep and Respiratory. "Offering innovative solutions will continue to drive our business. Acquiring talent and advanced technologies to expand our offerings beyond traditional therapies will remain a priority," said Miclot. "As we grow and gain greater presence in our key markets, we need to continue to ensure that our organization is aligned with the growth opportunities in each market segment. For each business area to excel, it needs to function autonomously - making decisions that promote growth, lead to innovation and support market foresight for future success."

To emphasize the market-needs approach, several changes were made at the beginning of fiscal year 2006, including an alignment of the business from four divisions into three groups: Sleep and Home Respiratory Group (Don Spence, president), Hospital Group (Derek Smith, president) and International Group (Geoffrey Waters, president).

Homecare was renamed the Sleep and Home Respiratory Group to reinforce the strong position and relationships that Respironics has with home care providers and sleep professionals. This group is comprised of three business units: Sleep Disordered Breathing, Sleep Well Ventures and Home Respiratory Care. "Our core sleep business has been providing growth by focusing on the diagnosis and treatment of OSA, but expansion beyond this core business to include products and services for other sleep disorders presents us with a significant opportunity through our Sleep Well Ventures business," said Miclot. The Home Respiratory Care business unit will support the respiratory-impaired patient in the home and will focus on growing Respironics' market share in home ventilation and expanding the oxygen product line.

The Hospital Group was created to reinforce the application of Respironics' products in acute and sub-acute settings such as pre-hospital, emergency room, critical care and neonatal intensive care. Three business units comprise this group: Critical Care (previously Hospital), Respiratory Drug Delivery and Children's Medical Ventures (ChMV). ChMV, which achieved $55.5 million in revenue in fiscal year 2005 (24 percent growth over the prior year) will continue to focus on sleep and respiratory solutions that promote the best developmental outcomes for premature babies and older hospitalized infants in the NICU.

Continued expansion within the International Group will be accomplished through acquisitions, joint ventures and organic growth. International will continue to take the products from our Sleep and Home Respiratory Group and Hospital Group to the 125 countries Respironics serves globally. The International Group will focus on growth in its three regions: EAME (Europe, Africa and the Middle East), Asia Pacific and Latin America .   

"As we grow, we have more to offer one another - more opportunity for collaboration, greater resources for problem solving, a broader scope of reach and impact," said Miclot. "We envision that fiscal year 2006 will be a milestone for Respironics - the year in which we exceed a billion dollars in revenue. It is an achievable goal, and one the Company has worked toward steadily."

About Respironics

Respironics is a leading developer, manufacturer and distributor of innovative products and programs that serve the global sleep and respiratory markets. Focusing on emerging market needs, the Company is committed to providing valued solutions to help improve outcomes for patients, clinicians and healthcare providers. Respironics markets its products in 131 countries and employs more than 4,000 associates worldwide. Further information can be found on the Company's Web site: http://www.respironics.com.

This document contains forward-looking statements, including statements relating to, among other things, developments in the healthcare industry; the success of the Company's marketing, sales and promotion programs; future sales and acceptance of the Company's products and programs; the timing and success of new product introductions; new product development; anticipated cost savings; FDA and other regulatory requirements and enforcement actions; future results from acquisitions; growth rates in foreign markets; regulations and other factors affecting operations and sales outside the United States (including potential future effects of the change in sovereignty of Hong Kong); the effects of a major earthquake, cyber-attack, or other catastrophic event that results in the destruction or disruption of any of our critical business or information technology systems; foreign currency fluctuations; customer consolidation and concentration; increasing price competition and other competitive factors in the sale of products; interest rate fluctuations; expiration of intellectual property rights; intellectual property and related litigation; other litigation; future levels of earnings and revenues; the number of equity awards granted to employees and changes to the Company's stock price; and third-party reimbursement, all of which are subject to change. Actual results may differ materially from those described in any forward-looking statements. Additional information on potential factors that could affect the Company's financial results are included in the reports filed with the SEC, including the reports on Forms 10-K, 10-Q and 8-K.