Biotech News - Zila Completes Strategic Divestiture of Nutraceuticals Division

Zila Completes Strategic Divestiture of Nutraceuticals Division
Company Focuses on Cancer Detection Technologies

PHOENIX, AZ - Oct 03, 2006 -- Zila, Inc. (Nasdaq GM: ZILA) has
completed the divestiture of its wholly-owned subsidiary Zila
Nutraceuticals, Inc. for a total cash transaction of $37.5 million
with up to an additional $3 million to be paid through an earn-out
formula dependent upon the future performance of the business. Zila
Nutraceuticals, manufacturer and marketer of Ester-C(R) and Ester-E
(R), was purchased by NBTY, Inc. (NYSE: NTY). The sale is consistent
with Zila's strategy of focusing its business on cancer detection
technologies and divesting its non-core assets.

"This sale accomplishes several very important objectives for Zila
by completing our exit from the nutraceuticals space on favorable
financial terms and providing capital to fund our future strategic
business objectives and operations," said Zila Chairman, President
and CEO, Douglas D. Burkett, Ph.D.

The Company has used part of the net proceeds from the sale to repay
the remaining outstanding funds owed in connection with the $40
million Black Diamond Credit Facility. With the exception of
approximately $500,000 of capital lease obligations, Zila now has no
debt.

The balance of the proceeds may be used to (i) pursue opportunities
focused on the development and commercialization of cancer detection
products by its Pharmaceuticals and Biotechnology Business Units,
including a potential acquisition currently under a non-binding
letter of intent, and (ii) for general corporate purposes.

Alvarez & Marsal Corporate Finance served as exclusive financial
advisor to Zila, Inc. in connection with the sale of Zila
Nutraceuticals, Inc., as well as in the securing of the $40 million
credit facility with Black Diamond Commercial Finance, L.L.C. that
was retired from the proceeds of such sale.

About Zila, Inc.

Zila, Inc., headquartered in Phoenix, is a leading cancer diagnostic
company initially focused on oral cancer:

• Zila Pharmaceuticals is dedicated to establishing ViziLite(R) Plus
as the new standard of care for the early detection of oral
abnormalities that could lead to cancer.
• Zila Biotechnology is focused on achieving regulatory approval for
the next generation oral cancer diagnostic, OraTest(R), followed by
the development of additional applications of its cancer detection
technologies including products for the early detection of cervical
and esophageal cancer.

For more information about Zila, visit www.zila.com.

This press release 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
press release 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 Form
10-K for its fiscal year ended July 31, 2005.

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