We are a leader in the development, manufacture and sale of proprietary, disposable medical connection systems for use in vascular therapy applications. Our devices are designed to protect patients from catheter related bloodstream infections and healthcare workers from exposure to diseases through accidental needlesticks or hazardous drugs. We are also a leader in the production of custom infusion sets and we incorporate our proprietary products into many of those custom infusion sets. In addition, we are a significant manufacturer of critical care medical devices, including catheters, angiography kits and cardiac monitoring systems.

Business Overview

Until the late 1990s, our primary emphasis in product development, sales and marketing was disposable medical connectors for use in I.V. therapy, and our principal product was the CLAVE. In the late 1990s, we commenced a transition from a product-centered company to an innovative, fast, efficient, low-cost manufacturer of custom infusion sets, using processes that we believe can be readily applied to a variety of disposable medical devices. This strategy has enabled us to capture revenue on the entire I.V. delivery system, and not just a component of the system. We have furthered this effort to include all of our proprietary devices beyond the CLAVE.

We believe the success of the CLAVE has motivated, and will continue to motivate others to develop one-piece, swabbable, needleless connectors that may incorporate many of the same functional and physical characteristics as the CLAVE. We are aware of a number of such products. We have patents covering the technology embodied in the CLAVE and intend to enforce those patents as appropriate. If we are not successful in enforcing our patents, competition from such products could adversely affect our market share and prices for our CLAVE products. Although overall pricing has been stable recently, the average price of our CLAVE products may decline in the future. There is no assurance that our current or future products will be able to successfully compete with products developed by others.

We are reducing our dependence on our current proprietary products by introducing new products and systems and acquiring product lines. Under one of our Hospira Agreements, we manufacture custom infusion sets for sale by Hospira and jointly promote the products under the name SetSource. In 2005, we acquired Hospira's Salt Lake City manufacturing facility and entered into an agreement with Hospira to produce their critical care products, including invasive monitoring, angiography products and certain other products they had manufactured at that facility. On August 31, 2009, we purchased the commercial rights and physical assets from Hospira's critical care product line which provide us control over all aspects of our critical care product line. We also contract with group purchasing organizations and independent dealer networks for inclusion of our non-critical care CLAVE and custom products in the product offerings of those entities. We are expanding our custom products business through increased sales to medical product manufacturers, independent distributors and direct sales to the end users of our product. These expansions include our 2008 agreement with Premier and an agreement extension with MedAssets. Both organizations are U.S. healthcare purchasing networks. Custom products, which include custom infusion, custom oncology and custom critical care products, accounted for approximately $56.4 million or 35% of total revenue in the first nine months of 2009 and $70.2 million or 34% of total revenue in 2008. We expect continued increases in sales of custom infusion sets and custom oncology products. As part of this effort, we have recently introduced a number of new products: the TEGO for use in dialyses, the Orbit 90 diabetes set, and a line of oncology products including the Spiros male luer connector device, the Genie vial access device, custom I.V sets and ancillary products specifically designed for chemotherapy. There is no assurance that we will be successful in finding future acquisition opportunities or integrating these new product lines into our existing business.

Custom products and new products will be of increasing importance to us in future years. We expect continued growth in 2009 in our CLAVE products in the U.S., but at a modest growth rate. We also potentially face substantial increases in competition in our CLAVE business. Growth for all of our products outside the U.S., to date, has been relatively modest. Therefore, we are directing increasing product development, acquisition, sales and marketing efforts to custom products and other products that lend themselves to customization and new products in the U.S. and international markets.

In 2005, we acquired Hospira's Salt Lake City manufacturing facility, related capital equipment and entered into the MCDA under which we produced for sale, exclusively to Hospira, substantially all the products, primarily critical care, that Hospira had manufactured at that facility. Under this agreement, prior to August 31, 2009, Hospira retained commercial responsibility for the products we produced, including sales, marketing, pricing, distribution, customer contracts, customer service and billing. The U.S. market for most of the critical care products that we sell to Hospira has been declining in recent years. Under the MCDA, we manufactured the products and Hospira was responsible for sales to end customers, and we had little ability to directly influence Hospira's sales and marketing efforts, and our sales under the MCDA were subject to fluctuations over which we had little control. On August 31, 2009, we completed an asset purchase with Hospira in which we acquired the commercial rights and physical assets of Hospira's critical care product line. This purchase provides us with complete control over worldwide commercial responsibility for the critical care products including sales, marketing, customer contracting and distribution. Under the MCDA, we were also committed to fund certain critical care research and to provide sales specialist support. Both obligations under the MCDA were released by Hospira upon the closing of this transaction. On August 31, 2009, we entered into a transition services agreement with Hospira to facilitate the transition of services that Hospira previously provided under the MCDA relating to the critical care products. Under the transition services agreement, Hospira will provide distribution services and light manufacturing for up to eighteen months from August 31, 2009, however, we currently expect these functions will be transitioned prior to the end of this eighteen-month period. We can provide no assurances that the transition will occur without delays or disruptions. Any delay or disruption in the transition may reduce or eliminate the expected benefits from the transaction.

Our largest customer is Hospira. Our relationship with Hospira has been and will continue to be of singular importance to our growth. In the first nine months of 2009 and years ended 2008, 2007 and 2006, our revenues from worldwide sales to Hospira were 60%, 69%, 73% and 77%, respectively, of total revenues. Although we can provide no assurances, we expect this percentage will decrease because of our purchase of Hospira's critical care product line that closed on August 31, 2009. Hospira has a significant share of the I.V. set market in the U.S., and provides us access to that market. We expect that Hospira will be important to our growth for CLAVE, custom infusion and oncology products, and our other products worldwide.

In February 2009, we acquired a small manufacturing and distribution company based in Germany for $5.7 million. The products and distribution from this company are in the oncology and neonatal markets.

We believe that achievement of our growth objectives worldwide will require increased efforts by us in sales and marketing and product development in these markets.

There is no assurance that we will be successful in implementing our growth strategy. The custom products market is small, when compared to the larger market of standard products, and we could encounter customer resistance to custom products. Further, we could encounter increased competition as other companies see opportunity in this market. Product development or acquisition efforts may not succeed, and even if we do develop or acquire products, there is no assurance that we will achieve profitable sales of such products. An adverse change in our relationship with Hospira, or a deterioration of Hospira's position in the market, could have an adverse effect on us. Increased expenditures for sales and marketing and product acquisition and development may not yield desired results when expected, or at all. While we have taken steps to control these risks, there are certain risks that may be outside of our control, and there is no assurance that steps we have taken will succeed.

The following table sets forth, for the periods indicated, total revenues by product as a percentage of total revenues:

                             Three months ended      Nine months ended
                               September 30,           September 30,         Fiscal Year Ended
Product Line                  2009        2008        2009        2008        2008        2007
CLAVE                             38 %        37 %        39 %        39 %        39 %        38 %
Custom products                   36 %        35 %        35 %        34 %        34 %        31 %
Standard Critical care            14 %        19 %        16 %        18 %        18 %        23 %
Other products                    12 %         8 %        10 %         8 %         8 %         7 %
License, royalty and
revenue share                      0 %         1 %         0 %         1 %         1 %         1 %
Total                            100 %       100 %       100 %       100 %       100 %       100 %

We sell our I.V. administration products to independent distributors, direct sales and through agreements with Hospira and certain other medical product manufacturers. Most independent distributors handle the full line of our I.V. administration products. We sell our invasive monitoring, angiography and I.V. administration products through three agreements with Hospira (the "Hospira Agreements"). Under a 1995 agreement, Hospira purchases CLAVE products,

principally bulk, non-sterile connectors and the CLC2000. Under a 2001 agreement, we sell custom infusion sets to Hospira under a program referred to as SetSource. Our 1995 and 2001 agreements with Hospira provide Hospira with conditional exclusive and nonexclusive rights to distribute all existing ICU Medical products worldwide with terms that extend to 2014. We sell invasive monitoring and angiography to independent distributors and through direct sales. We also sell certain other products to a number of other medical product manufacturers.

We believe that as healthcare providers continue to either consolidate or join major buying organizations, the success of our products will depend, in part, on our ability, either independently or through strategic relationships such as our Hospira relationship, to secure long-term contracts with large healthcare providers and major buying organizations. As a result of this marketing and distribution strategy we derive most of our revenues from a relatively small number of distributors and manufacturers. The loss of a strategic relationship with a customer or a decline in demand for a manufacturing customer's products could have a material adverse effect on our operating results.

We have an ongoing program to increase systems capabilities, improve manufacturing efficiency, reduce labor costs, reduce time needed to produce an order, and minimize investment in inventory. These include the use of automated assembly equipment for new and existing products and use of larger molds and molding machines. In 2006, we centralized our proprietary molding in Salt Lake City and expanded our production facility in Mexico which took over the majority of our manual assembly previously done in Salt Lake City. In 2007, we began a significant initiative to improve production processes, called the "ICU Production System" or "IPS", which we believe will enable us to further improve our manufacturing efficiency. We started IPS in our Mexico facility in 2007 and in our Salt Lake City facility in 2008. These efforts are ongoing in both facilities and will continue into 2010. In July 2009, we purchased land in Slovakia. In the third quarter of 2009, we started construction on an assembly plant in Slovakia that will serve our European product distribution. We expect this plant to be operational in the second half of 2010. We may establish additional production facilities outside the U.S. There is no assurance as to the benefits of IPS or our success in establishing manufacturing facilities outside the U.S.

We distribute products through three distribution channels. Product revenues for each distribution channel were as follows:

                             Three months ended      Nine months ended
                               September 30,           September 30,         Fiscal Year Ended
Channel                       2009        2008        2009        2008        2008        2007
Medical product
manufacturers                     42 %        67 %        56 %        67 %        67 %        71 %
Domestic
distributors/direct               35 %        18 %        24 %        18 %        18 %        16 %
International
distributors/direct               23 %        15 %        20 %        15 %        15 %        13 %
Total                            100 %       100 %       100 %       100 %       100 %       100 %

Sales to international customers do not include bulk CLAVE products sold to Hospira in the U.S. but used in I.V. products manufactured by Hospira and exported. Those sales are included in sales to medical product manufacturers. Other sales to Hospira for destinations outside the U.S. are included in sales to international customers.

With the completion of our purchase of the commercial rights and the physical assets of Hospira's critical care line in August 2009, we began selling critical care products to domestic distributors, through direct sales and to international customers instead of to Hospira in September 2009. As a result, we expect to continue to see a shift in sales from medical product manufacturers to domestic and international distributors and direct sales.

Quarter-to-quarter and nine month-to-nine month comparisons: We present summarized income statement data in Item 1- Financial Statements. The following table shows, for the year ended December 31, 2008 and the three and nine months ended September 30, 2009 and 2008, the percentages of each income statement caption in relation to total revenues.

                                                  Three months ended      Nine months ended
                                  Fiscal Year       September 30,           September 30,
                                     2008          2009        2008        2009        2008
Revenue
Net sales                                  99 %       100 %        99 %       100 %        99 %
Other                                       1 %         - %         1 %         - %         1 %
Total revenues                            100 %       100 %       100 %       100 %       100 %

Gross profit                               44 %        46 %        46 %        48 %        43 %

Selling, general and
administrative expenses                    26 %        31 %        25 %        30 %        27 %
Research and development
expenses                                    2 %         1 %         2 %         1 %         3 %
Total operating expenses                   28 %        32 %        27 %        31 %        30 %

Income from operations                     16 %        14 %        19 %        17 %        13 %
Other income                                2 %         1 %         2 %         1 %         2 %
Income before income taxes                 18 %        15 %        21 %        18 %        15 %
Income taxes                                6 %         3 %         7 %         6 %         5 %
Net income                                 12 %        12 %        14 %        12 %        10 %

Quarterly results: The healthcare business in the United States is subject to seasonal fluctuations, and activity tends to diminish somewhat in the summer months of June, July and August, when illness is less frequent than in winter months and patients tend to postpone elective procedures. This may cause seasonal fluctuations in our business. In addition, we can experience fluctuations in net sales as a result of variations in the ordering patterns of our largest customers, which may be driven more by production scheduling and their inventory levels, and less by seasonality. The current challenging economic environment has not had a meaningful impact on our business in the operating results reported in this report, however, towards the end of the first quarter of 2009, some of our customers stated their intent to take a more conservative stance on inventory levels. Through the end of the third quarter of 2009, this has not caused a significant impact to our earnings. Our expenses often do not fluctuate consistently with net sales, which may cause fluctuations in operating income that are disproportionate to fluctuations in our revenue.

Quarter Ended September 30, 2009 Compared to the Quarter Ended September 30, 2008

Revenues were $54.0 million in the third quarter of 2009, compared to $54.7 million in the third quarter of 2008.

Distribution channels: Net U.S. sales to Hospira in the third quarter of 2009 were $21.4 million, compared to net sales of $35.7 million in the third quarter of 2008. The $14.3 million decrease was primarily due to minimal standard and custom critical care sales to Hospira as a result of the critical care asset purchase from Hospira. We entered into the asset purchase agreement with Hospira on July 8, 2009 and closed the transaction on August 31, 2009. The sales for all standard and custom critical care shipments to Hospira between signing the agreement and closing the transaction were not recognized as revenue. The gross profit from these sales of $1.9 million was deferred and will be recognized when the inventory is sold to the end customer. We had $0.7 million of standard and custom critical care sales to Hospira in the third quarter of 2009 compared to $13.7 million in the third quarter of 2008. Excluding standard and custom critical care, our sales to Hospira decreased $1.3 million in the third quarter of 2009 compared to the third quarter of 2008. The decrease was primarily due to lower sales of custom oncology of $1.0 million, CLAVE of $0.4 million, CLC of $0.3 million, partially offset by increased custom infusion set sales of $0.9 million. The decrease in CLAVE sales was from lower unit sales as Hospira began to reduce their inventory levels due to their stated objective to reduce their overall inventory balances. The decrease in custom oncology products was primarily due to lower unit sales. We may look for alternative distribution if this trend continues. The increase in infusion set sales is from higher unit sales primarily attributable to the conversion by certain of our customers from a competitor's standard sets to our custom systems. Excluding critical care products, we expect minimal growth in sales to Hospira in 2009 as Hospira continues to take a more conservative stance in their inventory levels. There is no assurance that these expectations will be realized.

Net sales to domestic distributors and through direct sales in the third quarter of 2009 (including Canada) were $18.8 million compared to $9.5 million in the third quarter of 2008, an increase of 98%. The increased sales were primarily from new standard and custom critical care sales, increased oncology and TEGO sales, both newer product lines and increased custom infusion set sales. We began selling standard and custom critical care products directly to distributors and through direct sales in September 2009. New standard and custom critical care sales in the third quarter of 2009 were $5.8 million and $1.0 million, respectively. The increase in custom infusion set sales was primarily in increased unit volume sales. We expect increased sales in domestic distributor and direct sales in 2009 compared to 2008 from new standard and custom critical care sales, growth in custom infusion sets, custom oncology products and other new product sales, although there is no assurance that these expectations will be realized.

Net sales to international distributors and through direct sales (excluding Canada) were $12.6 million in the third quarter of 2009, compared with $8.2 million in the third quarter of 2008. The increased sales were primarily from new standard critical care sales of $1.0 million, new custom critical care sales of $0.4 million and increased custom infusion set sales of $1.2 million. The majority of the increase was attributable to increased sales in Europe and the Pacific Rim. We expect increases in international sales in 2009, primarily from new standard and custom critical care sales and increased CLAVE , custom infusion and oncology products and standard oncology product sales and additional sales of our new products from our recent acquisition in Germany, although there is no assurance that these expectations will be realized.

Product and other revenue: Net sales of CLAVE products were $20.5 million in the third quarters of 2009 and 2008. Increased international CLAVE sales were offset by lower sales to Hospira of $0.4 million. We continue to expect increases in CLAVE product sales in 2009 compared to 2008, although there is no assurance that these expectations will be realized.

Net sales of custom products, which include custom infusion, custom oncology products and custom critical care products, were $19.4 million in the third quarter of 2009 compared to $18.9 million in the third quarter of 2008. This increase was primarily comprised of increased sales of custom infusion sets of $3.0 million, partially offset by lower custom critical care sales of $1.8 million and lower custom oncology sales of $0.8 million. The unit growth in custom infusion sets was primarily due to the conversion by certain of our customers from a competitor's standard sets to our custom systems. The lower custom critical care sales are due to lower unit volumes. We expect increases in custom infusion set sales and new custom oncology sales in 2009 compared to 2008. We expect comparable to slightly lower custom critical care sales in 2009 compared to 2008 because of higher unit volumes expected in the fourth quarter of 2009 that should offset the lower unit sales in the first nine months of 2009.

Standard critical care product sales were $7.4 million in the third quarter of 2009 compared to $10.4 million in the third quarter of 2008. This decrease was due to the deferral of revenue on critical care sales to Hospira from July 8, 2009 to August 31, 2009, the period between signing and closing the asset purchase transaction with Hospira. We expect comparable to slightly higher standard critical care sales in 2009 compared to 2008 because of higher volumes expected in the fourth quarter of 2009 that should offset the lower sales of the third quarter caused by the revenue deferral.

Our standard oncology product sales were $1.6 million in the third quarter of 2009 compared to $0.9 million in the third quarter of 2008.

Other revenue consists of license, royalty and revenue share income and was approximately $0.1 million in the third quarter of 2009 and $0.4 million in the third quarter of 2008. We may receive other license fees or royalties in the future for the use of our technology. There is no assurance as to amounts or timing of any future payments, or whether such payments will be received.

Gross margins for the third quarters of 2009 and 2008 were each 46%. Favorable exchange rates contributed two percent in our gross margin in the third quarter of 2009 compared to the third quarter of 2008. This was offset by expenses in our Salt Lake City manufacturing facility related to our investment in new manufacturing processes related to our IPS initiative.

We estimate our gross margin in 2009 will approximate 46-47%. There is no assurance that these expectations will be realized.

Selling, general and administrative expenses ("SG&A")were $16.8 million and 31% of revenues in the third quarter of 2009, compared with $13.6 million and 25% of revenues in the third quarter of 2008. The increase was primarily from increased legal expenses of $0.9 million, increased compensation and benefits of $1.4 million and higher travel costs of $0.3 million. The increase in legal expenses is primarily from higher patent litigation costs. The increase in compensation and benefits is primarily from 29 new hires in sales, which include the addition of personnel from our acquisition in Germany, the increase in our sales force in September to take over the sales function of our critical care product line and higher salary costs. We expect SG&A in 2009 to be approximately 29-30% of revenue with the increase principally from the addition of sales personnel, increased travel related expenses, increased compensation and stock compensation expense and higher legal expenses from ongoing litigation. There is no assurance that these expectations will be realized.

Research and development expenses ("R&D") were $0.7 million and one percent of revenue in the third quarter of 2009 compared to $0.9 million and two percent of revenue in the third quarter of 2008. The decrease is primarily due to our increased focus on our core projects that started in the latter half of 2008. We expect R&D in 2009 to be one to two percent of revenue, although there is no assurance that these expectations will be realized.

Other incomedecreased $0.6 million to $0.4 million in the third quarter of 2009 compared to $1.0 million in the third quarter of 2008. Other income in the third quarter of 2009 is primarily comprised of interest income. Other income in the third quarter of 2008 includes $0.5 million of interest income and $0.4 million from a payment under a settlement agreement. The decrease in interest income was due to lower interest rates.

Income taxes were accrued at an estimated annual effective tax rate of 21.5% in the third quarter of 2009 compared to 33.6% in the third quarter of 2008. The 2008 rate differed from the statutory corporate rate of 35% principally because of the effect of foreign and state income taxes, tax credits, tax exempt income and deductions for domestic production activities. We expect our effective tax rate to be approximately 34% in 2009, before discrete items. The majority of the discrete tax benefits are attributable to tax credits for research and development.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Revenues were $161.7 million in the first nine months of 2009, compared to $148.0 million in the first nine months of 2008.

Distribution channels: Net U.S. sales to Hospira in the first nine months of 2009 were $88.0 million, compared to net sales of $95.4 million in the first . . .