EXHIBIT 99.1
 

FOR IMMEDIATE RELEASE                                     

BIO-VASCULAR TO SPIN OFF VITAL IMAGES SUBSIDIARY
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Projects in Surgical Business Include Small Diameter Graft,
Use of Tissue for Heart Valve Repair
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     ST. PAUL, Minn., Nov. 26 -- Bio-Vascular, Inc., (Nasdaq:BVAS) announced
today the company's Board of Directors has approved the spin-off of its
Vital Images subsidiary to the company's shareholders after the
appropriate filings are reviewed by the Securities & Exchange
Commission. The spin-off is expected to be complete by the end of March
1997, at which time Vital Images will trade as an independent public
company.
     The company has attempted to structure the transaction as tax-free, but
since no revenue ruling will be sought, no assurance can be made about
the final tax treatment of the transaction. Vincent Argiro, chief
technology officer of Vital Images, vice president of Bio-Vascular and
founder of Vital Images, will be divesting shares of Bio-Vascular stock
to bring his ownership in the company to under 5 percent, increasing the
likelihood that the spin-off will be deemed a tax-free transaction. He
currently owns approximately 5.6 percent of Bio-Vascular.
     "Strategically and financially, the timing and circumstances are right
to separate the two businesses for the long-term benefit of our
shareholders," said John T. Karcanes, president and chief executive
officer of Bio-Vascular. "Both organizations will benefit from a tighter
focus on their respective markets. Additionally, each company will be
able to invest in research and development at levels appropriate to
their respective stage of development and to evolve unique
organizational and marketing structures to better serve their
substantially different markets. Key managers of each will have the
added motivation of a more direct equity stake in their companies. We
also expect that both companies would benefit from the stock market's
preference for 'pure play' and highly focused companies, one in medical
software and services, the other in medical devices, leading over time
to a fuller valuation of each."
     It is expected that one share of Vital Images common stock will be
distributed for every two Bio-Vascular shares in the spin-off. Also,
prior to the spin-off, Bio-Vascular will make a capital contribution to
Vital Images currently estimated to include $3.3 million of intercompany
debt and $10 million in cash for working capital purposes. Cash and
equivalents retained by Bio-Vascular are estimated at $19 million.

 
     Karcanes said, "We have made tremendous strides with Vital Images,
especially during the past year. A new, more powerful clinical
diagnostic product, considerably more flexible and much easier to use,
will be ready to ship early in 1997. A stronger, more experienced
management team, led by Andy Weiss and Vincent Argiro, has been put in
place to execute Vital Images' aggressive strategic plan. However, there
still is much to accomplish in product development, in market
penetration and in the infrastructure needed to accomplish the company's
long-term goals.
     "Concurrently, we have been working in the surgical business to develop
new products and applications that can have a positive impact on growth
in both the near term and in the long run. The final animal study phase
is underway testing the patency of a new, tissue-based small diameter
graft. Results thus far have been very promising for its use in coronary
artery bypass and in peripheral vascular applications. We have also been
extensively testing our tissue properties and effectiveness of our
processing techniques in inhibiting mineralization on the tissue after
implant.
     "Animal tests utilizing our tissue for aortic valve repair showed very
favorable results when compared to current tissue heart valves,"
Karcanes continued. "We recently commissioned an animal study with the
Cleveland Clinic to test this tissue as part of a tissue heart valve
implanted in the critical mitral valve position. If the tests are
successful, we will evaluate the potential to become a component
supplier to manufacturers of heart valves.
     "Nearer term, we will soon file a 510(k) application with the U.S. Food
and Drug Administration (FDA) for clearance to market a new version of
Peri-Strips}, designed to be much more efficient for surgeons performing
lung volume reduction via thoroscope. We will also file to market
Tissue-Guard(TM) as an intracardiac device to provide the opportunity to
greatly expand its usage in cardiac surgery. And we continue to work
with Mentor Corporation to develop urology applications. Currently, we
are revising the Bio-Sling(R) insertion procedure and material to
prevent infection during the transvaginal insertion to treat stress
incontinence in women. Finally we are evaluating applications for
Tissue-Guard in colo-rectal, bladder, stomach and opthalmic surgeries.
     "These products and applications expand existing markets or open up
new, potentially large markets. Finally, we are doing everything we can
to influence the lung volume reduction study being conducted by the
federal government to greatly expand the number of patients in the
surgical arm of the study.
     "All of these actions are being taken to position Bio-Vascular to
return to rapid growth and create the best opportunity for Vital Images
to achieve its strategic plan, ultimately producing greater shareholder
value."

 
     Bio-Vascular, Inc., based in St. Paul, develops, manufactures and
markets proprietary specialty medical products for use in thoracic,
cardiac, neuro and vascular surgery. Its Vital Images subsidiary is a
leading developer of 3-D volume rendering software for medical research,
clinical diagnosis and surgical planning.

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