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Sunshine Heart announces A$20m institutional capital raising

06 / 09 / 2006

Significant investment from major institutional investors
A$8m investment from specialist venture capital investor CM Capital
A$8.5m follow-on investments from founding shareholders
Key step in delivering on North American clinical trial strategy
Third party validation of C-PulseTM heart assist technology

Sunshine Heart Inc (ASX: SHC) today announced that it has received binding commitments from institutional and other sophisticated investors to invest A$19.5 million in new shares at $0.15 per share. The Company expects to raise a further A$0.5 to $1.0 million over the next week. The new money, together with existing cash, will be used by Sunshine Heart to fund the ongoing development of the Company's C-PulseTM heart assist device. Specifically, this will include completing the Australian clinical trial and a proposed 2007 application to the United States (US) Food and Drug Administration (FDA) to conduct an Investigational Device Exemption (IDE) human clinical trial.

Placement of new shares and options
A raising of A$20 million will result in the issue of 133.3 million new shares and investors participating in the placement will also receive 40 million options (3 options for every 10 shares acquired). The options will have an exercise price of A$0.20 each and a 3 year term. Assuming the exercise of 40 million options, the Company would raise a further A$8.0 million.

The placement will be in two tranches. The first tranche will raise approximately A$14 million and the second A$6 million. Both tranches are subject to shareholder approval and a shareholder meeting is currently scheduled for 16 October 2006. The second tranche (in which only CM Capital and GBS Venture Partners will participate) is also subject to FDA approval of the Company''s application for its US IDE human clinical trial of the C-PulseTM device.

A$8.0 million investment by CM Capital
The placement is to be led by Brisbane based life sciences and technology venture capital investment firm CM Capital. CM Capital will invest up to A$8.0 million, payable in two tranches.

"One of the key findings of our US-based Advisory Board was a strong endorsement of the leadership of Sunshine Heart's CEO and medical device industry veteran Don Rohrbaugh. This financing should enable the Sunshine Heart team to exploit the exciting potential of the C-PulseTM device and advance it into a US feasibility trial." said Andy Jane, Partner at CM Capital.

"Many small cap biotechnology and medical device companies on the ASX are faced with the uncertainty of raising additional development capital from the public markets. This A$20 million capital raising provides the company with sufficient capital to reach a significant value creation milestone and has been engineered to remove the financial risk in the intervening period." said John Brennan, Partner at CM Capital.

He added, "The fact that GBS Venture Partners an existing shareholder and knowledgeable institutional life sciences investor was prepared to support this capital raising with a significant investment was a major vote of confidence in the Company."

Following the Board''s resolution on 1 September 2006 to increase the number of directors from 7 to 8, it is proposed that subject to shareholder approval, CM Capital will have a nominee appointed to the Board.

A$7.0 million follow-on investment by GBS Venture Partners
Founding shareholder GBS Venture Partners, the Melbourne based life sciences specialist venture capital investor, will make a further investment in Sunshine Heart of up to A$7.0 million, payable in two tranches.

Investment timing
Subject to shareholder approval, the first tranche investment is expected to occur in October, 2006. The Company expects to lodge an application for the US IDE human clinical trial approval with the FDA by mid-2007 and the second tranche of funds will be received following approval of that application.

A$5.0 million placement to institutional and sophisticated in