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Osteotech Reports 2007 Third Quarter Financial Results; Core Segment Revenue Increased 28%; Gross Margin Improved to 55%; Diluted Earnings Per Share of $.09
Date:11/6/2007

EATONTOWN, N.J., Nov. 6 /PRNewswire-FirstCall/ -- Osteotech, Inc. (Nasdaq: OSTE) announced today that third quarter 2007 revenue increased $2.3 million to $25.7 million from third quarter 2006 revenue of $23.4 million. Revenue from Osteotech's "core" DBM and Hybrid/Synthetic Segments increased 28% to $17.6 million for the three months ended September 30, 2007 as compared to revenue of $13.7 million from the same segments for the third quarter of 2006. Gross margin improved to 55% in the third quarter of 2007 as compared to 49% in the third quarter of 2006. Net income for the three months ended September 30, 2007 was $1.6 million, or $.09 diluted earnings per share, compared to net income of $.2 million, or $.01 diluted earnings per share, for the three months ended September 30, 2006.

Sam Owusu-Akyaw, Osteotech's President and Chief Executive Officer, stated, "We are very pleased with the results of the productivity initiative started two and one-half years ago to turn the company around. We are very proud of the discipline and focus the team has demonstrated to drive the improvement in gross margin, the increase in our cash position, and the return of the Company to profitability. The team is now focused to deliver new and innovative products and to drive revenue growth."

Revenue for the nine months ended September 30, 2007 increased 5% to $77.3 million from $73.8 million for the nine months ended September 30, 2006. Revenue increased 14% to $49.9 million in the DBM and Hybrid/Synthetic Segments for the nine months ended September 30, 2007 as compared to revenue from the same segments for the nine months ended September 30, 2006 of $43.6 million. Gross margin improved to 51% for the nine months ended September 30, 2007 as compared to 48% in the same respective period in 2006. Net income for each of the nine months ended September 30, 2007 and 2006 was $1.8 million. Diluted earnings per share were $.10 and $.11 for the nine months ended September 30, 2007 and 2006, respectively.

Mr. Owusu-Akyaw will host a conference call on November 6, 2007 at 9:00 a.m. Eastern Time to discuss third quarter financial results. You are invited to listen to the conference call by dialing 1-706-643-1624. The conference will also be simultaneously webcast at http://www.osteotech.com. Automated playback will be available two hours after completion of the live call, through midnight, November 20, 2007, by dialing 1-706-645-9291 and indicating access code 22211822.

Osteotech, Inc., headquartered in Eatontown, New Jersey, is a global leader in providing OsteoBiologic solutions to surgeons and patients for 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 http://www.osteotech.com.

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, 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 6, 2007 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,

2007 2006 2007 2006

(restated) (restated)

DBM $17,044 $13,379 $48,687 $42,701

Traditional Tissue 3,963 4,166 13,132 12,281

Spinal Allografts 2,292 3,159 8,301 10,768

Hybrid/Synthetic 528 325 1,169 938

Client Services 1,664 2,289 5,536 6,672

Other Product Lines 160 130 513 450

Revenue $25,651 $23,448 $77,338 $73,810

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

Three Months Nine Months

Ended September 30, Ended September 30,

2007 2006 2007 2006

(restated) (restated)

Revenue $25,651 $23,448 $77,338 $73,810

Cost of revenue 11,443 11,994 38,023 38,117

Gross profit 14,208 11,454 39,315 35,693

Marketing, selling

and general

and administrative 11,051 9,751 33,341 29,856

Research and development 1,178 1,192 3,457 3,507

12,229 10,943 36,798 33,363

Operating income 1,979 511 2,517 2,330

Interest expense, net (157) (219) (459) (738)

Other (208) (131) ( 186) 359

Income before

income taxes 1,614 161 1,872 1,951

Income tax

provision (benefit) 10 (74) 61 105

Net Income $1,604 $235 $1,811 $1,846

Earnings per share:

Basic $.09 $.01 $.10 $.11

Diluted $.09 $.01 $.10 $.11

Shares used in computing

earnings per share:

Basic 17,573,134 17,295,314 17,494,807 17,281,703

Diluted 17,990,101 17,352,420 17,858,501 17,356,109

OSTEOTECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

September 30, December 31,

2007 2006

Assets

Cash and cash equivalents $20,840 $17,946

Accounts receivable, net 19,194 18,507

Deferred processing costs 32,038 29,067

Inventories 879 1,005

Prepaid expenses and other current assets 2,817 2,795

Total current assets 75,768 69,320

Property, plant and equipment, net 33,980 36,340

Other assets 6,061 7,373

$115,809 $113,033

Liabilities and Stockholders' Equity

Accounts payable and accrued liabilities $17,286 $15,861

Current maturities of capital lease obligation 786 727

Total current liabilities 18,072 16,588

Capital lease obligation 14,279 14,876

Other liabilities 5,789 7,716

Total liabilities 38,140 39,180

Stockholders' equity 77,669 73,853

$115,809 $113,033


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SOURCE Osteotech, Inc.
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