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Osteotech Reports 2008 Third Quarter Financial Results

EATONTOWN, N.J., Nov. 7 /PRNewswire-FirstCall/ -- Osteotech, Inc. (Nasdaq: OSTE), a leader in the emerging field of biologic products for regenerative healing, reported today that revenue for the three months ended September 30, 2008 was $24.1 million compared to $25.7 million for the three months ended September 30, 2007. The decline in third quarter 2008 revenue compared to the prior year was primarily driven by a $2.8 million reduction in private label DBM revenue, which was partially offset by a 6% increase in our base line revenue, which includes our Grafton, Xpanse, Plexur and traditional tissue franchises. Gross margin was 54% and 55% in the third quarter of 2008 and 2007, respectively. Net income for the three months ended September 30, 2008 was $58 thousand compared to net income of $1.6 million, or $.09 diluted earnings per share, for the third quarter of 2007.

Revenue for the nine months ended September 30, 2008 increased 2% to $79.2 million from $77.3 million for the nine months ended September 30, 2007. The revenue growth in 2008 compared to 2007 is mainly driven by a 6% increase in our base line revenue and $1.0 million in incremental revenue from the processing of donors, partially offset by a $3.1 million decline in private label DBM revenue. Gross margin was 53% for the first nine months of 2008 compared to 51% for the first nine months of 2007. Net income for the nine months ended September 30, 2008 was $2.6 million, or $.15 diluted earnings per share, compared to net income of $1.8 million, or $.10 diluted earning per share, for the same period in the prior year. Net income in 2008 included $1.0 million associated with the settlement of certain litigation, while net income for 2007 was negatively impacted by costs of $1.1 million related to the settlement of certain litigation.

Sam Owusu-Akyaw, Osteotech's President and Chief Executive Officer, stated, "The transition of our business model is almost complete. Our new product development strategy is on track to deliver new biologic products to the marketplace. We continue to execute on our access distribution strategy and we built leverage into our back office structure and systems. I continue to be encouraged by the progress we are making. We are confident the new product introductions scheduled for 2009 and increased effectiveness of our distribution system will be the catalysts to allow us to continue the growth of our base line business."

Mr. Owusu-Akyaw will host a conference call on November 7, 2008 at 9:00 a.m. Eastern Time to discuss 2008 third quarter financial results. You are invited to listen to the conference call by dialing 1-973-200-3375. The conference will also be simultaneously webcast at Automated playback will be available two hours after completion of the live call, through midnight, on Friday, November 21, 2008, by dialing 1-706-645-9291 and indicating access code 66480835.

Osteotech, Inc., headquartered in Eatontown, New Jersey, is a global leader in providing OsteoBiologic solutions for regenerative medicine to support surgeons and their patients in the repair of the musculoskeletal system through the development of innovative therapy-driven products that alleviate pain, promote biologic healing and restore function. For further information regarding Osteotech, this press release or the conference call, please go to Osteotech's website at

Certain statements made throughout this press release that are not historical facts contain forward-looking statements (as such are defined in the Private Securities Litigation Reform Act of 1995) regarding the Company's future plans, objectives and expected performance. Any such forward-looking statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties and, therefore, there can be no assurance that actual results may not differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the Company's ability to develop and introduce new products, differences in anticipated and actual product and service introduction dates, the ultimate success of those products in the marketplace, the continued acceptance and growth of current products and services, the impact of competitive products and services, the availability of sufficient quantities of suitable donated tissue and the success of cost control and margin improvement efforts. Certain of these factors are detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. All information in this press release is as of November 7, 2008 and the Company does not intend to update this information.

Osteotech, Inc. and Subsidiaries

Consolidated Segment Revenue Detail

(dollars in thousands)

Three Months Nine Months

Ended September 30, Ended September 30,

2008 2007 2008 2007

DBM $ 14,023 $ 17,044 $ 47,564 $ 48,687

Hybrid/Synthetic 816 528 2,187 1,169

Traditional Tissue 5,246 3,963 15,606 13,132

Spinal Allografts 1,943 2,292 6,479 8,301

Client Services 1,706 1,664 6,527 5,536

Other Product Lines 329 160 884 513

Revenue $ 24,063 $ 25,651 $ 79,247 $ 77,338

Consolidated Statements of Operations

(dollars in thousands, except per share data)

Three Months Nine Months

Ended September 30, Ended September 30,

2008 2007 2008 2007

Revenue $ 24,063 $ 25,651 $ 79,247 $ 77,338

Cost of revenue 11,182 11,443 37,622 38,023

Gross profit 12,881 14,208 41,625 39,315

Marketing, selling and

general and administrative 10,476 10,981 33,479 33,105

Research and development 1,739 1,248 5,273 3,693

Operating income 666 1,979 2,873 2,517

Interest expense, net (276) (157) (762) (459)

Other income (loss) (270) (208) 953 (186)

Income before income taxes 120 1,614 3,064 1,872

Income tax provision 62 10 452 61

Net Income $58 $1,604 $2,612 $1,811

Earnings per share:

Basic $- $.09 $.15 $.10

Diluted $- $.09 $.15 $.10

Shares used in computing

earnings per share:

Basic 17,881,018 17,573,134 17,749,402 17,494,807

Diluted 17,993,900 17,990,101 17,854,319 17,858,501

Osteotech, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(dollars in thousands)

September 30, December 31,

2008 2007


Cash and cash equivalents $19,331 $ 22,777

Accounts receivable, net 20,420 19,353

Deferred processing costs 34,478 30,850

Inventories 1,375 1,171

Prepaid expenses and other current assets 2,842 3,957

Total current assets 78,446 78,108

Property, plant and equipment, net 35,427 34,508

Other assets 12,081 7,735

$125,954 $120,351

Liabilities and Stockholders' Equity

Accounts payable and accrued liabilities $ 21,659 $ 19,364

Current maturities of capital lease obligation 871 807

Total current liabilities 22,530 20,171

Capital lease obligation 13,407 14,069

Other liabilities 7,165 7,083

Total liabilities 43,102 41,323

Stockholders' equity 82,852 79,028

$125,954 $120,351

SOURCE Osteotech, Inc.
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