Hemagen Diagnostics, Inc. Announces Gain on Sale of Baltimore Property, Books Approximately $1 Million in Cash on Balance Sheet

Hemagen Diagnostics, Inc. (OTC:HMGN.OB) a biotechnology
company that develops, manufactures, and markets more than 150
FDA-cleared proprietary medical diagnostic test kits, today announced
the sale of a manufacturing building that was purchased in June 2005.
The building was purchased for $800,000 plus regular and customary
expenses and was sold in July 2006 for $1,800,000, less expenses. As a
result of the sale, the Company will record a gain in the fourth
quarter of 2006.
   The building was originally purchased to house the company's
headquarters, to combine certain manufacturing processes, and to
provide additional space for expansion and acquisition.
   William P. Hales, President and CEO, said, "We were pleased to be
able to sell our building and to realize a substantial profit on the
sale. Likewise, we also expect to be able to achieve our operational
goals in our current leased space. In recording this transaction, we
eliminated approximately $665,000 in short-term liabilities related to
the construction financing and recorded approximately $1 million
dollars in additional cash to the balance sheet. This transaction will
significantly improve the company's current ratios and working
capital, which were impacted by the loan on the building and the use
of working capital for the building. We continue to focus on improving
our operations, increasing revenues through core growth and containing
costs. We remain focused on our number one goal of building
shareholder value and positioning the company for sustained
profitability."

   Hemagen Diagnostics, Inc., is a biotechnology company that
develops, manufactures, and markets more than 150 FDA-cleared
proprietary medical diagnostic test kits. Hemagen has three different
product lines. The Virgo(R) product line of diagnostic test kits is
used to aid in the diagnosis of certain autoimmune and infectious
diseases, using ELISA, Immunofluorescence, and hemagglutination
technology. Hemagen manufactures and markets a complete line of
clinical chemistry reagents through its wholly owned subsidiary
Reagents Applications, Inc., under the brand name Raichem, as well as
under various OEM arrangements. In addition, Hemagen manufactures and
sells the Analyst(R) an FDA-cleared clinical chemistry analyzer used
to measure important constituents in human and animal blood, and the
Endochek, a clinical chemistry analyzer used to measure important
constituents in animal blood. In the United States, the Company sells
its products directly to physicians, veterinarians, clinical
laboratories and blood banks and on a private-label basis through
multinational distributors of medical diagnostics and supplies.
Internationally, the Company sells its products primarily through
distributors. The Company sells the Analyst(R) and the Endochek both
directly and through distributors servicing physicians' office
laboratories and veterinarians' offices. Hemagen's products are used
in many of the largest laboratories, hospitals, and blood banks around
the world. The Company focuses on markets that offer significant
growth opportunities. The Company was incorporated in 1985 and became
a public company in 1993.

   Except for any historical information contained herein, the
matters discussed in this press release contain forward-looking
statements that involve risks and uncertainties, including those
described in the Company's Securities and Exchange Commission Reports
and Filings.
   Certain Statements contained in this News Bulletin that are not
historical facts constitute forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, and
are intended to be covered by the safe harbors created by that Act.
Reliance should not be placed on forward looking statements because
they involve unknown risks, uncertainties and other factors which may
cause actual results, performance or achievements to differ materially
from those expressed or implied. Forward looking statements may be
identified by words such as estimates, anticipates, projects, plans,
expects, intends, believes, should and similar expressions and by the
context in which they are used. Such statements are based upon current
expectations of the Company and speak only as of the date made. The
Company undertakes no obligation to update any forward-looking
statements to reflect events or circumstances after the date on which
they are made.
   Statements concerning the establishments of reserves and
adjustments for dated and obsolete products, expected financial
performance, on-going business strategies and possible future action,
which Hemagen intends to pursue to achieve strategic objectives,
constitute forward-looking information. The sufficiency of such
reserves and adjustments, expected performance, implementation of
on-going business strategies and possible future action, the
achievement of financial performance are each subject to numerous
conditions, uncertainties and risk factors. Factors which could cause
actual performance to differ materially from these forward looking
statements, include without limitation, management's analysis of
Hemagen's assets, liabilities and operations, the failure to sell date
sensitive inventory prior to its expiration, the inability of
particular products to support goodwill allocated to them,
competition, new product development by competitors which could render
particular products obsolete, the inability to develop or acquire and
successfully introduce new products or improvements of existing
product costs and difficulties in complying with laws and regulations
administered by the U. S. Food and Drug Administration and the ability
to assimilate successfully product acquisitions.