OrthoLogic Reports First Quarter 2005 Results; Company Announces Completion of Patient Enrollment for Pivotal Phase 3 Trial of C

OrthoLogic Corp. (Nasdaq:OLGC) today announced financial
results for the quarter ended March 31, 2005.
   The company also reported that patient enrollment has been
completed in a pivotal Phase 3 human clinical trial evaluating
Chrysalin in patients with unstable distal radius (wrist) fractures.
Chrysalin, or TP508, is a 23-amino acid synthetic peptide representing
a receptor-binding domain of the human thrombin molecule, a naturally
occurring molecule in the body responsible for both blood clotting and
the potential to accelerate the natural cascade of healing events in
both soft tissue and bone repair.
   OrthoLogic reported a net loss of $5.5 million, or $(0.14) per
share, for the quarter ended March 31, 2005. First quarter operating
expenses totaled $6.1 million, an increase of $2.2 million compared to
the first quarter of 2004. The increase was the result of the
company's expanded efforts in research, development and clinical
activities, and was in line with expectations.

   Collection Process Begins for Phase 3 Data

   A total of 502 patients with unstable and/or displaced distal
radius fractures have now been enrolled in 27 U.S. centers, which
constitutes full enrollment for this Phase 3 human clinical trial. The
primary efficacy endpoint in the trial is to measure how quickly wrist
fractures in patients injected with Chrysalin heal as measured by the
removal of immobilization, which allows the patients to initiate hand
therapy and regain full function of their wrists and hands. The
clinical trial's secondary efficacy endpoints include radiographic
healing, as well as clinical, functional and patient outcome
parameters. To date, no adverse events have been reported to be
related to Chrysalin in this trial.
   "We have achieved an important milestone in the development of
this novel product candidate," said James M. Pusey, M.D., president
and chief executive officer. "With the conclusion of patient
enrollment, we now are working diligently to collect the data and
expect to release initial efficacy results in the first half of 2006."
   The pivotal trial is a Phase 3 double-blind, randomized,
placebo-controlled trial to compare the safety and efficacy of a
single percutaneous injection of Chrysalin in saline at 10 ug/ml
versus a saline placebo control. The trial includes physician
evaluations and radiographs at multiple points in the study, from the
time of a patient's first visit to a final safety evaluation at 52
weeks. The trial's hypothesis is that time to removal of rigid
immobilization is shorter in the recipients of a single 10 ug/ml dose
of Chrysalin than in the recipients of the saline placebo.
   Preclinical development of Chrysalin for fracture repair began in
1998, and clinical studies were initiated in 2000. In addition to the
Phase 3 clinical trial, a Phase 2b dosing trial is underway to explore
the impact on the time to removal of all rigid immobilization of
Chrysalin at several doses versus a placebo control.
   "I am impressed with the profile of the Chrysalin peptide and the
potential therapeutic value of the Chrysalin Product Platform,"
continued Dr. Pusey. "Our Chrysalin Product Platform includes three
formulations and indications designed to address unmet medical needs.
The board of directors and I believe the diabetic foot ulcer healing,
spinal fusion and cartilage defect repair indications represent
compelling development opportunities for our gel and microsphere
formulations."

   Update on Chrysalin Clinical Trials and Preclinical Studies

   Fracture Repair: OrthoLogic is currently collecting the data for
the fully enrolled Phase 3 study and expects to release initial
efficacy results in the first half of 2006. During the first quarter
of 2005, the company experienced a disruption in its supply of the
Chrysalin-based injectable used in the Phase 2b dose-ranging human
clinical trial. The interruption was resolved by amending the
Investigational New Drug (IND) protocol for the Phase 2b trial to
utilize a different supply source of Chrysalin. Enrollment in this
trial has been slowed as the company continues to obtain Institutional
Review Board (IRB) approvals of the amended protocol from the clinical
trial sites.
   Diabetic Foot Ulcer Healing: The company is developing a gel
formulation for a Chrysalin-based product candidate for diabetic foot
ulcer healing in preparation for the next human clinical trial for
this indication. The start date for this study will depend on
successful completion of the gel formulation work,
formulation-bridging preclinical studies and the submission of a
formulation amendment to the existing and active IND application for
this indication.
   Spinal Fusion: OrthoLogic is currently collecting data from its
pilot Phase 1/2 clinical trial for spine fusion, which completed
enrollment in the spring of 2004, and expects to have preliminary
results this summer. To date, there have been no adverse events in
this trial that were reported to be related to Chrysalin and patient
follow-up has been excellent.
   Cartilage Defect Repair: OrthoLogic has completed several steps
necessary to submit an IND application for a Chrysalin-based product
candidate for cartilage defect repair. The company is working on
completing the remaining steps and submitting an IND application for
this indication.
   Cardiovascular Repair: OrthoLogic is evaluating various delivery
mechanisms for a Chrysalin product candidate for myocardial
revascularization, as well as completing a series of preclinical
studies to support clinical development for this indication.

   "For the remainder of 2005 and beyond, OrthoLogic is committed to
focusing on completing patient enrollment and analyzing data from the
fracture repair clinical trials, and accelerating the development
timeline for the additional product formulations. This is a very
exciting time to lead the OrthoLogic team," concluded Dr. Pusey.
   OrthoLogic management will provide an update on the Chrysalin
development program during its conference call later today.

   Conference Call Information

   As previously announced, a conference call hosted by OrthoLogic
management is scheduled for later today at 12:00 p.m. EDT (9:00 a.m.
PDT). To participate, please use the following numbers: 877-297-4509
(domestic) or 973-935-2402 (international). No reservation number is
required.
   A replay of this call will be available beginning May 10, 2005 at
2 p.m. EDT until May 17, 2005 at 12 p.m. EDT. To access the replay,
dial 877-519-4471 (domestic) or 973-341-3080 (international) and enter
the following access code: 5989795.
   A live Webcast and Internet replay of the call will also be
provided and can be accessed by visiting
http://www.viavid.net/detailpage.aspx?sid=000024E3. The live Webcast
and Internet replay can also be accessed from the Investor Relations
section of OrthoLogic's Web site at www.orthologic.com. Additionally,
all StreetEvents subscribers can access the Webcast from
www.streetevents.com.

   About Chrysalin(R)

   Chrysalin (TP508) is a 23-amino acid peptide that represents the
receptor-binding domain of the human thrombin molecule, the naturally
occurring agent responsible for blood clotting and initiating many of
the cellular events responsible for repair in both soft tissue and
bone.
   All cells contain high-affinity thrombin receptors, which led to
the hypothesis that thrombin did more than form blood clots after
wounding. It was discovered that thrombin acted as a signaling
molecule to initiate the early stages of tissue repair. The basis for
the development of Chrysalin started in 1985, when a class of
synthetic peptides was developed representing a specific
receptor-binding domain of thrombin that activates specific
wound-healing signals.
   Drugs based on the Chrysalin peptide can be used to mimic part of
the thrombin response without stimulating the events associated with
blood clotting and therefore have the potential to accelerate the
natural cascade of healing events.

   About OrthoLogic Corp.

   OrthoLogic is a drug-development company focused on
commercializing several potential therapeutics comprising the
Chrysalin(R) Product Platform, a series of product candidates aimed at
treating traumatic and chronic orthopedic indications in bone and soft
tissue as well as cardiovascular repair and wound healing. All of
these potential products are based on the Chrysalin synthetic peptide,
also known as TP508.
   OrthoLogic owns an exclusive license for all worldwide medical
indications for the peptide, and is actively pursuing five orthopedic
indications for Chrysalin. These include fracture repair and spine
fusion, which are in human clinical trials, and cartilage defect
repair, which is in late-stage preclinical trials. Ligament and tendon
repair indications are in the preclinical studies stage. In
non-orthopedic areas, a human clinical trial for chronic diabetic foot
ulcers has been completed. OrthoLogic's product development pipeline
also includes Chrysalin-based product candidates for dental bone
formation and myocardial revascularization.
   For more information, please visit the company's Web site:
www.orthologic.com.

   Statements in this press release or otherwise attributable to
OrthoLogic regarding our business that are not historical facts are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements, which
include the timing and acceptability of FDA filings and the efficacy
and marketability of potential products, involve risks and
uncertainties that could cause actual results to differ materially
from predicted results. These risks include: delays in obtaining or
inability to obtain FDA, institutional review board or other
regulatory approvals of preclinical or clinical testing; unfavorable
outcomes in our preclinical and clinical testing; the development by
others of competing technologies and therapeutics that may have
greater efficacy and/or lower cost; interruptions in the availability
of our supply of Chrysalin for clinical trials; delays in obtaining or
inability to obtain FDA or other necessary regulatory approval of our
products; our inability to successfully and cost effectively develop
or outsource manufacturing and marketing of any products we are able
to bring to market; changes in FDA or other regulations that affect
our ability to obtain regulatory approval of our products, increase
our manufacturing costs or limit our ability to market our products;
our possible need for additional capital in the future to fund the
continued development of our Chrysalin Product Platform; and other
factors discussed in our Form 10-K for the fiscal year ended December
31, 2004, and other documents we file with the Securities and Exchange
Commission.

   Note to Editors: A "u" represents the micron symbol when used as
part of "um/gl" throughout this release.
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                           ORTHOLOGIC CORP.
                     (A Development Stage Company)
                       STATEMENTS OF OPERATIONS
                 (in thousands, except per share data)
                              (Unaudited)

                                   Three months      As a Development
                                    ended March 31,    Stage Company
                                  ------------------
OPERATING EXPENSES                   2005     2004     8/5/04-3/31/05
                                  ------------------------------------

 General and administrative          $910     $555             $2,788
 Research and development           5,403    3,371             13,483
 CPM divestiture and related
  gains                              (250)    (111)              (375)
 CBI in process research and
  development                           0        0             25,840
                                  -------- -------- ------------------
   Total operating expense         (6,063)  (3,815)           (41,736)
 Interest income, net                 552      306              1,303
                                  -------- -------- ------------------
 Loss from continuing operations
  before taxes                     (5,511)  (3,509)           (40,433)
 Income tax benefit                   (12)    (294)              (654)
                                  -------- -------- ------------------
  Net loss from continuing
   operations                     $(5,499) $(3,215)          $(39,779)
Discontinued operations
 Net gain on the sale of the Bone
  Device
   Business, net of tax benefit
    of ($363)                           0        0              2,048
                                  -------- --------  -----------------
 Net income from discontinued
  operations                            0        0              2,048
                                  -------- --------  -----------------
 NET INCOME (LOSS)                $(5,499) $(3,215)          $(37,731)
                                  ======== ========  =================
Per Share Information:
 Net loss from continuing
  operations
   Basic                           $(0.14)  $(0.09)
                                  ======== ========
   Diluted                         $(0.14)  $(0.09)
                                  ======== ========
 Net income from discontinued
  operations
   Basic                           $(0.00)  $(0.00)
                                  ======== ========
   Diluted                         $(0.00)  $(0.00)
                                  ======== ========
 Net income (loss)
   Basic                           $(0.14)  $(0.09)
                                  ======== ========
   Diluted                         $(0.14)  $(0.09)
                                  ======== ========

 Basic and diluted shares
  outstanding                      38,047   34,310
                                  ======== ========


                           ORTHOLOGIC CORP.
                     (A Development Stage Company)
                            BALANCE SHEETS
            (in thousands except share and per share data)

                                          March 31,      December 31,
                                       ---------------- --------------
                                            2005            2004
-------------------------------------- ---------------- --------------
ASSETS                                   (Unaudited)
Current assets:
 Cash and cash equivalents                     $29,993        $38,377
 Short-term investments                         61,828         53,642
 Accounts receivable                                29             34
 Prepaids and other current assets               1,104          1,019
                                       ---------------- --------------
       Total current assets                    $92,954        $93,072

Furniture and equipment, net                       424            478
Escrow receivable, net                           6,857          6,828
Long-term investments                            5,347         11,558
Deferred income taxes -- non-current             1,106          1,106
Trademarks                                       2,142          2,142
                                       ---------------- --------------
       Total assets                           $108,830       $115,184
                                       ================ ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                  501            833
 Accrued compensation                              302            648
 Accrued taxes                                      80            114
 Excess space reserve                              461            559
 Accrued clinical                                1,230          1,236
 Other accrued liabilities                         706            727
                                       ---------------- --------------
       Total current liabilities                 3,280          4,117
                                       ---------------- --------------
 Deferred rent and capital lease
  obligation                                       119            137
                                       ---------------- --------------
       Total liabilities                        $3,399         $4,254
                                       ---------------- --------------

Stockholders' Equity
 Common stock, $.0005 par value;
  100,000,000 and 50,000,000 shares
  authorized; 38,211,642 and
  38,011,642 shares issued and
  outstanding                                       19             19
 Additional paid-in capital                    170,905        170,905
 Accumulated deficit                           (65,493)       (59,994)
       Total stockholders' equity              105,431        110,930
                                       ---------------- --------------
       Total liabilities and
        stockholders' equity                  $108,830       $115,184
                                       ================ ==============
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