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C O R R E C T I O N -- Osteotech, Inc.

Osteotech Reports Second Quarter 2009 Financial Results

Company Updates 2009 Guidance and Prepares for Two Product Launches and Unveilings in the Third Quarter

Company Building Field Marketing Specialist Team to Support MagniFuse(TM) Launch

Call on July 30, 2009 at 10:00 a.m. EDT

EATONTOWN, N.J., July 29 /PRNewswire-FirstCall/ -- Osteotech, Inc. (Nasdaq: OSTE), a leader in the emerging field of biologic products for regenerative healing, today reported financial results for the second quarter and six months ended June 30, 2009.

"During the second quarter, we successfully completed several steps that have further cleared the pathway toward the achievement of our 2009 and 2010 goals," said Sam Owusu-Akyaw, President and Chief Executive Officer of Osteotech. "On the clinical development side of our business, we completed the enrollment for our DuraTech(TM) BioRegeneration Matrix clinical trial, positioning us well for both regulatory clearance and a commercial launch by the end of 2009. In addition, we also completed two six month studies utilizing MagniFuse(TM) Bone Graft in advanced animal models, results of which we hope to present at various medical meetings in 2010. We also plan to use this data as well as a specialized field marketing team to support our third quarter product unveiling as well as our full commercial launch for MagniFuse at the North American Spine Society meeting in November 2009. On the commercialization side of the business, we completed the limited launch of our Plexur M(TM) Biocomposite and are well prepared for the August launch of our FacetLinx(TM) Fusion Technology for use in facet fusion procedures. In support of our overall commercialization strategy, we have continued to roll out training and education programs focused on highlighting the superior characteristics of our broad technology platforms and product portfolios. From a trajectory perspective, we are looking forward to the release of our new product pipeline in the second half in 2009."

Recent 2009 Corporate Developments

  • Osteotech completed the 60-patient enrollment for its DuraTech clinical trial. In the initial feedback from physicians participating in the trial, DuraTech was characterized as a unique, easy to use solution that possesses several important characteristics making it ideal as an onlay graft. Based upon this timely completion of trial enrollment, the Company remains on track to file a 510(k) with the U.S. Food and Drug Administration in the third quarter of this year to secure marketing clearance for DuraTech. The Company also continues to expect to unveil DuraTech at the 2009 Annual Meeting of the Congress of Neurological Surgeons in October. DuraTech is the first of several products under development based upon Osteotech's proprietary human collagen technology (HCT(TM)) platform.

  • During the second quarter, the Company completed its six month posterolateral fusion study of its proprietary MagniFuse Bone Graft in primates. The Company also completed its six month sheep study focused on interbody fusion, comparing MagniFuse directly with INFUSE(R) Bone Graft distributed by Medtronic, Inc. The initial analysis of the data indicates that MagniFuse was able to produce robust bone formation in both models. Of particular significance was the ability of MagniFuse to produce similar results against INFUSE in interbody fusion. Osteotech is currently compiling the histological results for both studies for inclusion in a clinical data package to be available later this year. These studies support the Company's strategy to introduce application-specific products with documented scientific and technical support.

  • In July, Osteotech received notification from the French Regulatory Agency, afssaps, indicating that the Agency has rescinded its December 17, 2008 order establishing restrictions on the importation and distribution of tissue products processed from donors procured by TB OsteoCentre Bulgaria EAD ("OCBG"), a subsidiary of Osteotech. As a result of this favorable outcome, Osteotech lifted its self-imposed temporary suspension and will begin distributing tissue grafts processed from OCBG donors to its foreign distributors immediately.

Financial Results

Revenue for the three months ended June 30, 2009 was $23.5 million compared with $27.6 million for the three months ended June 30, 2008. Revenue for the six month period ended June 30, 2009 was $47.4 million compared with $55.2 million reported for the same period of 2008. The decline in second quarter and first half of 2009 revenue compared with the same periods of 2008 was primarily driven by: the expected reduction in revenue from client services and private label demineralized bone matrix, which declined $2.5 and $4.1 million, respectively; the anticipated decline in international revenue stemming from the temporary suspension of distributing OCBG tissue, which the Company estimates impacted revenue by $1.0 and $1.7 million, respectively; and lower domestic unit sales volume.

Net loss for the second quarter ended June 30, 2009 was $1.2 million, or $0.07 per share, compared with net income of $1.8 million, or $0.10 per diluted share, for the second quarter of 2008. Net loss for the six month period ended June 30, 2009 was $3.0 million, or $0.17 per share, compared with net income of $2.6 million, or $0.14 per diluted share, for the comparable period of 2008. The net loss in 2009 is primarily due to the Company's anticipated reductions in revenue and increased expenses as it invests in launching products based upon its new proprietary technology platforms.

"The first half of 2009 has been a major tipping point in the Company's three year strategic plan to transform from a processor of allograft tissue to a technology driven organization focused on advanced biologics," continued Mr. Owusu-Akyaw. "The successful execution of our strategy has helped us self-fund this transformation even during the current economic crisis. Our investment has yielded exceptional new technologies and products that have put us on a dynamic growth path. For 2009, this means that we will launch or unveil four new products, a testament to the investment we have made in our proprietary technology platforms and our commitment to remaining on the cutting edge of biologics. To aggressively support our largest product launch, MagniFuse, we will be investing more aggressively than we originally anticipated in a team of field marketing specialists. These marketing specialists will be responsible for the focused execution of the educational programs at the surgeon level to teach implanting techniques and effectively differentiate MagniFuse as a procedure-specific biologic, initially focusing on the spine. We believe that this investment will allow us to capitalize on recent failings of similarly used products marketed by our competitors and quickly position MagniFuse as a market leader in the posterolateral spine and inter-vetebral surgery markets. We expect all of these efforts in 2009 to provide substantial returns in 2010 including at least $25 million in incremental revenue stemming from the new products introduced in 2009. We remain excited about our future and believe we are well positioned to achieve sustainable, profitable revenue growth over the long-term."


Based upon the results achieved to date and the Company's strategy to build a team of field marketing specialists to support the MagniFuse launch, Osteotech is updating the financial guidance it previously established for 2009:

  • Overall revenue expectations remain unchanged and 2009 revenue is expected to range between $96 million and $100 million;
  • Net loss for 2009 is expected to be between $0.08 and $0.10 per share; and
  • The Company expects to exit 2009 with approximately $14 million in cash.

Conference Call Tomorrow, July 30, 2009

The Osteotech management team will host a conference call on July 30, 2009 at 10:00 a.m. (EDT) to discuss second quarter 2009 financial results, recent corporate developments and guidance for 2009. The conference call may be accessed by dialing 1-800-901-5217 (domestic) or 1-617-786-2964 (international) and indicating access code 41441773. The conference will also be simultaneously webcast at A replay of the conference call will be available approximately two hours after completion of the live call, through midnight, on August 14, 2009, by dialing 1-888-286-8010 and using access code 26957556.

About Osteotech

Osteotech, Inc., headquartered in Eatontown, New Jersey, is a global leader in providing biologic 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 or the conference call, please go to Osteotech's website at

Certain statements made throughout this press release that are not historical facts are forward-looking statements (as 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 July 29, 2009 and the Company does not intend to update this information.

                         OSTEOTECH, INC. AND SUBSIDIARIES

                   (dollars in thousands, except per share data)

                                    Three Months          Six Months
                                   Ended June 30,         Ended June 30,
                                   --------------         --------------
                                 2009        2008        2009         2008
                                 ----        ----        ----         ----

    Revenue                     $23,471     $27,553     $47,402     $55,184

    Cost of revenue              11,940      13,051      23,904      26,440
                                 ------      ------      ------      ------

    Gross profit                 11,531      14,502      23,498      28,744

    Marketing, selling
     and general and
     administrative expenses     10,768      11,323      22,386      23,003
    Research and development
     expenses                     1,998       1,774       3,651       3,534
                                  -----       -----       -----       -----
                                 12,766      13,097      26,037      26,537

    Operating income (loss)      (1,235)      1,405      (2,539)      2,207

    Interest expense, net          (355)       (274)       (709)       (486)
    Other                           131         945          48       1,223
                                    ---         ---          --       -----

    Income before income taxes   (1,459)      2,076      (3,200)      2,944
    Income tax
     provision (benefit)           (255)        330        (200)        390
    ----------                     ----         ---        ----         ---
    Net Income (loss)           $(1,204)     $1,746     $(3,000)     $2,554
    ================            =======      ======      ======      ======
    Earnings (loss) per share:
         Basic                    $(.07)       $.10       $(.17)       $.14
         Diluted                  $(.07)       $.10       $(.17)       $.14
    Shares used in computing
     earnings (loss) per
         Basic               18,004,217  17,771,799  17,882,059  17,744,656
         Diluted             18,004,217  17,919,695  17,882,059  17,904,128

                           (dollars in thousands)

                             Three Months              Six Months
                            Ended June 30,           Ended June 30,
                            --------------           --------------
                           2009        2008          2009       2008
                           ----        ----          ----       ----

    DBM                 $14,808     $16,575       $28,834    $33,541
    Hybrid/Synthetic        647         727         1,395      1,371
    Traditional Tissue    5,443       5,250        10,720     10,360
    Spinal Allografts     1,862       2,286         3,742      4,536
    Client Services         255       2,397         1,888      4,821
    Other Product Lines     456         318           823        555
                            ---         ---           ---        ---
    Revenue             $23,471     $27,553       $47,402    $55,184
                        =======     =======       =======    =======

                        OSTEOTECH, INC. AND Subsidiaries
                            (dollars in thousands)

                                                  June 30,  December 31,
                                                     2009          2008
                                                     ----          ----
    Cash and cash equivalents                     $11,799       $18,823
    Accounts receivable, net                       20,967        17,968
    Deferred processing costs                      44,044        38,715
    Inventories                                     1,911         1,467
    Prepaid expenses and other current assets       2,354         3,115
                                                    -----         -----
              Total current assets                 81,075        80,088
    Property, plant and equipment, net             31,913        34,005
    Other assets                                   10,820        13,022
                                                   ------        ------
                                                 $123,808      $127,115
                                                 ========      ========

            Liabilities and Stockholders' Equity
    Accounts payable and accrued liabilities      $22,799       $23,569
    Current maturities of capital lease
     obligation                                       943           895
                                                      ---           ---
              Total current liabilities            23,742        24,464
    Capital lease obligation                       12,691        13,175
    Other liabilities                               6,749         6,626
                                                    -----         -----
              Total liabilities                    43,182        44,265
    Stockholders' equity                           80,626        82,850
                                                   ------        ------
                                                 $123,808      $127,115
                                                 ========      ========

SOURCE Osteotech, Inc.
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