Cardica, Inc. 2007 Annual Report

Anastomoses Made Fast and Simple™

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C-Port xA Head Configuration

Cardica designs and manufactures proprietary products that automate the connections, or anastomoses, of blood vessels during coronary artery bypass graft (CABG) and other grafting surgeries.

CommerCial Progress

•IncreasedthecumulativenumberofsurgeonstrainedintheUnitedStatesonC-Port® Distal Anastomosis Systems to 163

•IncreasedcumulativeworldwideshipmentsofC-Portsystemstoover1,900units

•Received510(k)clearancefromtheU.S.FoodandDrugAdministration(FDA)tomarketthe C-Port® xA Distal Anastomosis System (November 2006)

•Received510(k)clearancefromtheFDAtomarkettheC-Port® Flex A Anastomosis System, avariationoftheC-PortxAsystemproductlinethatfurtherfacilitatesautomatedanastomosisduring minimally invasive CABG procedures (March 2007)

•Increasedsell-throughofthePAS-Port®ProximalAnastomosisSysteminJapanfromanaverageof 120 units per month in fiscal 2006 to an average of over 150 units per month in fiscal 2007

•IncreasedcumulativeworldwideshipmentsofPAS-Portsystemstoover5,900units

•ExtendedthePAS-PortsystemdistributionagreementwithCenturyMedicalthroughJuly2014(April 2007)

•Presenteddatahighlightinglong-termpatencyfortheC-PortandPAS-Portsystemsatkey national and international medical meetings

CliniCal DeveloPment anD Collaborations

•CompletedpatientenrollmentinapivotalclinicaltrialtoevaluatethesafetyandefficacyofthePAS-Portsystemduringbypasssurgery(March2007)

•MadesubstantialprogressinthedevelopmentandtoolingoftheCookVascularClosureDevice,resultinginthereceiptof$1.75millioninadditionalmilestonepaymentsfromCookMedical

•EnteredintoanewagreementwithCookMedicaltodevelopandcommercializeaspecializeddevicedesignedtoclosethepatentforamenovale(PFO),arelativelycommonheartdefectpresentinapproximately15to20percentofthegeneralpopulation(June2007)

FinanCial strength

•Raised$10.9millioninnetproceedsfromthesaleofCardica’scommonstockandwarrants (June2007)

•Reducedlong-termdebtfromapproximately$16millionto$2million

Fiscal 2007 Accomplishments

Fiscal2007wasayearofremarkableachievementforCardica.Our

innovative products are gaining acceptance and clinical adoption for

the automation of the connection, or anastomosis, of blood vessels

during bypass surgery, which is often considered the most critical aspect

oftheprocedure.Eachoftheyear’saccomplishmentscontributesto

ourmarketpositionandbuildsmomentumfortheyearsahead.

WebelievethattheclinicaladoptionofourC-Portsystemsandour

successingainingU.S.andEuropeanregulatoryclearancesforour

C-Portsystemsreflectthequality,reliabilityandconsistencyofour

proprietaryanastomosisproducts.InJapan,sell-throughratesfor

ourPAS-Portsystemincreased25percentforthesecondconsecutive

year,andintheU.S.andEurope,wecompletedenrollmentinapivotal

clinicaltrialforthisuniquedevice.Throughtwoindependentcollaborations

withCookMedical,weareusingourproprietarymicrocliptechnology

toaddressthegrowingmarketneedfornext-generationclosuredevices,

specificallytargetingthepatentforamenovale(PFO)andvascular

accesssites.Tostrengthenourbalancesheet,wereducedourdebt

substantially from approximately $16 million to $2 million, and we

completedanequityprivateplacementresultingin$10.9millionin

net proceeds to Cardica.

Wearebeginningtorealizeourvisionofenablingless-invasive,

sometimescalledsternum-sparing,bypassprocedures.Withsafety

concernsplaguingstentsandtheadoptionofless-invasiveCABG

surgery methods growing, we believe that many cardiologists will

increasingly recommend CABG surgery to patients with cardiovascular

diseasebecauseofitsprovenlong-termefficacyandlowermortality,

andadecreasedneedforre-interventioncomparedtostents.

C-Port sYstems: groWing PhYsiCian aDoPtion

In our first full fiscal yearofcommercializationofourC-Port

systemsintheU.S.,wehaveseenincreasedcommercialadoption

from cardiothoracic surgeons at bypass centers across the country,

manyofwhomuseourproductsonaroutinebasis.Overthecourse

oftheyear,weexpandedourC-Portproductlinewiththeintroductionof

ourC-Port®xADistalAnastomosisSystem,ournext-generationC-Port

systemwithenhancedfeatures,andtheC-Port® Flex A Anastomosis

System,avariationoftheC-PortxAsystemwithaflexibleshaftthat

allows surgeons to perform anastomoses in areas of the heart that are

particularlydifficulttoreachandhand-suture.Wehaveshippedover

1,900C-Portsystemsworldwideandhavetrainedatotalof163

surgeonsintheUnitedStatessinceweintroducedtheC-Portsystem

in the second half of fiscal 2006. During fiscal 2007, we added four

salespeople, bringing our sales force to ten.

Moving forward, we expect to continue to expand our user base,

facilitate routine usage by trained physicians and maintain our

strongcommitmenttothehighest-qualitycustomerserviceand

follow-up.Weplantointroduceacartridge-basedC-Portsystem

formultipledeploymentsandplantolaunchtheC-Port®xVDistal

AnastomosisSystem,anextensionoftheC-Portproductline

designed to accommodate larger grafts. With the addition of the

C-PortxVsystem,webelievethatwewillbeofferingafullspectrum

of devices that will allow surgeons to complete over 90 percent of all

distal anastomoses and all of the bypass conduits typically employed

in these procedures.

PAS-Port Deployment

To Our Stockholders

Pas-Port sYstem: ContinUeD marKet groWth

InJapan,whereCenturyMedicaldistributesourPAS-Portsystem,

salescontinuetogrow.Infiscal2007,weincreasedthesell-through

inthismarkettoanaverageofover150unitspermonth,witha

cumulativetotalofover5,900PAS-Portunitsshippedworldwide.

Based on our successful partnership with Century, we extended

our distribution agreement by five years, with it now scheduled to

continue until 2014. We believe that this extension is a testament to

our productive partnership and the value of our proprietary product

inthismarket.

IntheU.S.andEurope,wecompletedenrollmentofourpivotal

clinicaltrialtoevaluatethesafetyandefficacyofthePAS-Port

system during CABG surgery in approximately 220 patients. All

patientswererandomizedtoreceivebothaPAS-Portautomated

anastomosisandahand-sewnanastomosisasacontrol.Weintendto

submita510(k)applicationtotheFDAinthefirsthalfofcalendar

year 2008 assuming successful trial results.

neW marKet oPPortUnities

We are expanding the reach of our proprietary technology through

twoindependentpartnershipswithCookMedical.Overthecourse

of the year, we made substantial progress in the development of the

CookVascularClosureDevice,formerlycalledtheX-Port®Vascular

Access Closure Device, and received an additional $1.75 million

inmilestonepayments.WeexpectCooktolaunchthisproductin

Europeinthefirsthalfoffiscal2008.

InadditiontotheCookVascularClosureDevice,wesigneda

newagreementwithCookMedicaltodevelopandcommercialize

aspecializeddevicedesignedtoclosethepatentforamenovale

(PFO),acongenitalheartdefectpresentinabout15to20percent

ofthegeneralpopulation.Thispartnershipallowsustoleverageour

proprietary technology to potentially offer a new treatment alternative

forpatientswhohaveexperiencedtransientischemicattack,stroke,

paradoxical embolism or debilitating migraine headaches.

It has been a tremendous year at Cardica, and we believe that our

momentumisbuilding.Iwanttothankeachofthemembersofthe

Cardica team for contributing to a year of excellence, express my

gratitude to our customers who are using our devices on a routine

basis to perform bypass procedures and extend our appreciation to

ourinvestorsfortheircontinuedsupport.Lookingahead,weintendto

continue to expand our product offerings to further enable minimally

invasiveCABGsurgery.Welookforwardtoreportingourprogress.

Sincerely,

C-Port Deployment

Bernard A. Hausen,M.D.,Ph.D.

PresidentandChiefExecutiveOfficer

KevinT.Larkin

Chairman of the Board

Cardica designs and manufactures proprietary automated products

thataredesignedtoreplacehand-sewnanastomoses,whichare

time consuming and difficult to perform.

Our Products

C-Port® sYstems Pas-Port® sYstem

Pas-Port® Proximal anastomosis sYstem

OurPAS-Portsystemisafullyautomateddeviceusedtoperforman

anastomosisbetweenasaphenousveinandtheaortaduringeitheron-or

off-pumpCABGsurgery.ThePAS-Portsystemisapprovedforsaleand

marketedinEuropeandJapan.

Pas-Port sYstem

•allowsthesurgeontocompletetheanastomosisrapidly,typicallyin approximately two minutes;

•isusedwithoutclampingtheaorta,potentiallyavoidingassociatedriskssuchasstrokeandneurologicalcomplications;

•attachestheveingraftsecurelytotheaortainsecondsoncethevein graft is loaded; and

•producesconsistent,reproducibleanastomoses,largelyindependentofsurgicaltechniqueandskillset.

C-Port® Distal anastomosis sYstem

OurC-Portsystemsaredesignedtoperformadistalanastomosisby

attaching the end of a bypass vein graft to a coronary artery using

miniaturestainlesssteelstaples.Incontrasttoanon-compliant

hand-sewnanastomosisusingacontinuoussuture,thecompliant

natureoftheC-Portanastomosispotentiallyallowstheconnection

toadapttochangesinbloodfloworpressure.

C-Port sYstems

•canbeusedon-oroff-bypasspump(forstoppedheartorbeatingheart CABG surgeries);

•createcompliantanastomosesthatexpandandcontractwithbloodflow;

•reducetimerequiredforananastomosisfrom10-15minutestoaslittle as two minutes;

•produceconsistent,reproducibleanastomoses,largelyindependentofsurgicaltechniqueandskillset;

•donotrequireinterruptionofbloodflowwhiletheanastomosisisbeing completed; and

•workonverysmallcoronaryarteries.

InadditiontothefeaturesoftheC-Portsystem,theC-Port

Flex A system

•hasaflexible,ratherthanrigid,shaft;

•allowssurgeonstopositionthedevicetocreateasecure connection in more difficult to reach areas of the heart; and

•helpsfacilitateminimallyinvasiveCABGsurgerywitha surgical robot.

boarD oF DireCtors

KevinT.Larkin Chairman of the Board Cardica, Inc. and PresidentandChiefExecutiveOfficer TherOx,Inc.

J.MichaelEgan ChiefExecutiveOfficer SteadmanHawkinsResearchFoundation

BernardA.Hausen,M.D.,Ph.D. President,ChiefExecutiveOfficer andCo-founder Cardica, Inc.

RichardP.Powers VicePresidentand ChiefFinancialOfficer Anesiva, Inc.

JeffreyL.Purvin Chairman,Presidentand ChiefExecutiveOfficer SeattleMedicalTechnologies,Inc.

Robert C. Robbins, M.D. Chairman, Department of Cardiothoracic Surgery,StanfordUniversitySchoolofMedicine and Director, Stanford Cardiovascular Institute

JohnSimon,Ph.D. Managing Director Allen & Company LLC

StephenA.Yencho,Ph.D. President Water of Life, LLC

WilliamH.Younger,Jr. Managing Director SutterHillVentures

management team

BernardA.Hausen,M.D.,Ph.D. President,ChiefExecutiveOfficer andCo-founder

DouglasT.Ellison VicePresident WorldwideSalesandMarketing

BryanD.Knodel,Ph.D. VicePresident Research and Development

Robert Y. Newell ChiefFinancialOfficerand VicePresident FinanceandOperations

Ric Ruedy VicePresident Regulatory, Clinical and Quality Affairs annUal meeting

Theannualmeetingofstockholderswillbeheldon November14,2007at11:30a.m.Pacific time at Cardica, Inc., 900 Saginaw Drive, Redwood City, California. investor inFormation

Recent press releases and other Cardica infor-mation are available without charge on Cardica’swebsiteatwww.cardica.comoruponwrittenrequestto:

Cardica, Inc. 900 Saginaw Drive Redwood City, CA 94063 Tel:(650)364-9975 Fax:(650)364-3134 Email:investors@cardica.com stoCK listing

Cardica’scommonstocktradesontheNasdaqGlobalMarketunderthe symbol CRDC. transFer agent

Computershare Investor Services 250 Royall Street Canton, MA 02021 (781)575-4238

inDePenDent registereD

PUbliC aCCoUnting Firm

Ernst&YoungLLP Palo Alto, California CorPorate CoUnsel

CooleyGodwardKronishLLP PaloAlto, California

ForWarD looKing statements

ThisAnnualReportcontains“forward-looking”

statements, including statements relating to

commercialization,developmentandregulatory

expectationsforCardica’sC-PortDistalAnastomosis

systems,includingtheC-PortxAandFlexA

systems,PAS-PortProximalAnastomosissystem,

CookVascularClosureDeviceandotherproducts

and product candidates. Any statements contained

in this Annual Report that are not historical facts

maybedeemedtobeforward-lookingstatements.

Thewords“believe”,“plan”,“expect”,“estimate”,

“intend”and“will”orsimilarexpressionsare

intendedtoidentifyforward-lookingstatements.

Thereareanumberofimportantfactorsthatcould

causeCardica’sresultstodiffermateriallyfrom

thoseindicatedbytheseforward-lookingstatements,

includingrisksassociatedwithmarketacceptance

ofCardica’sC-PortDistalAnastomosissystems,

manufacturingoftheC-PortDistalAnastomosis

systemsandPAS-PortProximalAnastomosissystem,

Cardica’ssales,marketinganddistributionstrategy

and capabilities, the timing and success of clinical

studiesrelatedtotheCookVascularAccessDevice

and the timing of completion and success of the

multi-nationalclinicaltrialusingCardica’sPAS-Port

system,aswellasotherrisksdetailedfromtimeto

timeinCardica’sSECreports,includingitsAnnual

ReportonForm10-KforthefiscalyearendedJune

30,2007.Cardicadoesnotundertakeanyobligation

toupdateforward-lookingstatements.Youare

encouragedtoreadCardica’sreportsfiledwiththe

U.S.SecuritiesandExchangeCommission,available

at www.sec.gov.

Corporate Directory

Cardica, Inc.900 Saginaw DriveRedwood City, CA 94063www.cardica.com650.364.9975

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