Highlights for second quarter and six months ended June 30, 2009:

Gross U.S. MEDIHONEY(R) sales increased $394,451, or 125%, to $664,766 in second quarter 2009, versus $295,315 in 2008. For the six months ended June 30, 2009, gross U.S. MEDIHONEY sales increased $555,042, or 94%, to $1,143.944 in 2009, from $588,902 in 2008.

BIOGUARD(TM), the Company’s new novel anti-microbial advanced wound care product, was launched in June and recorded gross sales of $58,458 in just one month’s time. This represents the strongest first-month sales for any of Derma’s new products.

Combined gross sales of key new advanced wound care products in the U.S. for the six months ended June 30, 2009, were $2,141,065, versus $1,109,282 in 2008, representing an increase of $1,031,783 or 93%.

Gross profit margin percentage increased to 29.6% in second quarter 2009, from 27% in second quarter 2008. Gross profit margin for the six-month period increased to 30.8% in 2009, from 26.9% in 2008. The increase in gross profit margin percentage is principally attributable to the successful establishment of quality, cost-effective manufacturing for the First Aid Division, coupled with the growth of the higher margin advanced wound care business.

Selling, general and administrative expenses decreased $780,518, or 17.4%, in the second quarter 2009, versus the same period in 2008. Selling, general and administrative expenses for the six months decreased $1,236,807 million, or 14%, in 2009 versus 2008.

The Company’s 2009 second quarter operating results improved by $709,986 as the net loss for the quarter was $560,502, or $0.01 per share, compared to a net loss of $1,270,488 million, or $0.03 per share, in 2008. Operating results for the first six months of 2009 improved by $1,361,695 million as the net loss was $1,318,581 million, or $0.03 per share, compared to a net loss of $2,680,276 million, or $0.07 per share, for the same period in 2008.

The Company’s overall cash flow has improved significantly in the first half 2009 versus 2008. This turn around is principally attributable to the Company’s positive cash flow from operating activities of $198,492 in 2009 versus a use of cash of $5,258,033 from operating activities in 2008.

For the six months ended June 30, 2009, net sales were $22 million versus $24.8 million for the six months ended June 30, 2008. The decrease of $1.5 million in sales for the quarter and $2.8 million for the six months in 2009 versus 2008, was principally driven by lower sales from the First Aid Division, attributed to a weakening of the economy. In addition there was a decrease in Canadian net sales attributable to unfavorable exchange and inventory rationalization on the part of the Company’s exclusive Canadian distributor.

Ed Quilty, Chief Executive Officer of Derma Sciences, commented, A steady performance from our core business during the second quarter generated improvement in operating results and cash flow, allowing us to continue to focus on driving revenue for some of our newer products such as MEDIHONEY and BIOGUARD. As our results indicate, our Advanced Wound Care Line is gaining traction through the efforts of our sales team. The decrease in year over year sales is mostly related to our First Aid Division, which has experienced recession-related challenges. Though sales decreased, our gross margins on the First Aid Division products have improved, putting Derma in a favorable position to see strong growth from this division in the future.

Quilty continued, We expect the positive Advanced Wound Care revenue growth to continue going forward, and we plan to expand our sales force to leverage this opportunity. Additionally, we will look for development and partnership opportunities in markets where the company does not currently have coverage. With regard to R&D, we continue to move forward with the clinical trial of DSC127, our novel pharmaceutical in development. DSC127 has the potential to be only the second approved drug on the market for accelerated healing. We are well on our way to completing enrollment in the Phase II trial and are very excited about the prospect of this product, which addresses a large unmet need.