Osteotech Reports Fourth Quarter and Full Year 2009 Financial Results

EATONTOWN, N.J., March 4 /PRNewswire-FirstCall/ -- Osteotech, Inc.
(Nasdaq: OSTE), a leader in the emerging field of biologic products for
regenerative healing, today reported financial results for the fourth
quarter and full year ended December 31, 2009. Results were in-line with
the limited, preliminary financial results the Company released on January
14, 2010.

    "2009 was a challenging year as we focused on launching several new,
proprietary biologic products, pursuing regulatory approval for our
Duratech(TM) BioRegeneration Matrix and making further enhancements to our
distribution and sales strategy," said Sam Owusu-Akyaw, President and Chief
Executive Officer of Osteotech. "We successfully initiated the
commercialization process for the MagniFuse(TM) Bone Graft and Plexur M®
Innovative Grafting product families, and we improved the instrumentation
of the FacetLinx(TM) Fusion Technology product. With these significant
steps forward, we continued the transformation of Osteotech to a business
that is leveraging its technology assets into a portfolio of innovative and
clinically efficacious procedure-specific products."

    Recent and Upcoming Corporate Developments

    --  Early in the fourth quarter, the Company announced the first U.S. spinal
        surgery using MagniFuse PC (Posterior Cervical), which officially marked
        the start of the controlled release for the family of products based
        upon the MagniFuse technology platform.  MagniFuse PC was used during a
        posterior cervical fusion surgery and the surgeon cited the specialized
        biologic as being easy-to-use and intuitive with a differentiated
        self-contained delivery system.
    --  In the fourth quarter, Osteotech signed a multi-year tissue supply
        agreement with Community Tissue Services (CTS) with an initial term
        spanning 10 years. The agreement replaced a previous contract between
        the two companies that would have expired in 2011. Under the terms of
        the agreement, CTS will supply Osteotech with whole donors and cortical
        shafts based upon periodic forecast requirements and available tissue
    --  Also during the fourth quarter, the Company announced Plexur M had been
        utilized in a variety of surgeries focused on orthopedic trauma, joint
        replacements and oncology-related procedures.
    --  Late in the fourth quarter, Osteotech submitted a 510(k) application to
        the U.S. Food and Drug Administration (FDA) to obtain marketing
        clearance for the use of its Duratech BioRegeneration Matrix to repair
        or replace the dura mater in various cranial surgical procedures.  The
        Company expects to receive preliminary feedback from the FDA regarding
        the pending application late in the first quarter of 2010.
    --  Early in the first quarter of 2010, the Company announced that it
        expanded its financial flexibility with a new, unused $10 million line
        of credit established in late December.  This new line of credit,
        coupled with the Company's cash position and the consideration it will
        receive from a new licensing agreement, should provide the resources
        necessary to allow Osteotech to continue to execute its growth strategy.
    --  The Company is scheduled to make a corporate presentation to investors
        at the Canaccord Adams Musculoskeletal Conference on March 9, 2010.
    --  Osteotech intends to showcase its new proprietary biologic product
        portfolio at its booth (Booth No. 1061) during the Annual Meeting of the
        American Academy of Orthopaedic Surgeons (AAOS), in New Orleans,
        Louisiana from March 10 to 12, 2010.  A number of surgeons will present
        the clinical results stemming from their use of MagniFuse and Plexur M
        at the Osteotech booth during the meeting.
    "We have worked diligently to engineer products that meet the
procedure-specific needs of the markets we serve, and based upon the
feedback and excitement among our surgeon customers, we believe we have
successfully achieved that goal," continued Mr. Owusu-Akyaw. "Throughout
2009, we made progress bolstering our go-to-market and distributor channel
strategy, and in 2010 our goal is to significantly strengthen the selling
process within the channel. We are working toward an important inflection
point where our superior products and technology and our sales strategy all
converge to support long-term revenue growth and profitability. We will
continue to invest prudently in enhancing all of these essential elements
of our growth strategy."

    "The new products are the key to our revenue growth in 2010 and we
expect them to generate $10 million to $12 million in revenue during 2010,"
continued Mr. Owusu-Akyaw. "This assessment reflects the delays we
experienced in launching our new products, the timing of submissions to the
FDA for marketing clearance and the recognition that the hospital product
approval process will need to be managed differently than originally

    Financial Results

    Revenue for the three months ended December 31, 2009 was $26.3 million,
including $1.0 million from new products, compared with $24.6 million for
the three months ended December 31, 2008. The increase in revenue for the
fourth quarter of 2009 compared with the same period of 2008 was primarily
driven by the $3.3 million in revenue realized from an agreement to license
certain of the Company's tissue processing technology. This increase in
revenue was partially offset by the anticipated reduction in revenue from
the client services business and a decline in domestic unit sales volume.
Excluding client services, private label demineralized bone matrix and the
license agreement revenue, fourth quarter 2009 revenue declined 3% compared
with fourth quarter 2008 revenue.

    Revenue for the full year ended December 31, 2009 was $96.7 million
compared with $103.8 million reported for 2008. New product revenue was
$1.3 million for 2009. The decline in revenue for the year was primarily
driven by: the anticipated reduction in revenue from the Company's services
businesses, which declined $6.4 million; a decline in international revenue
reflecting the challenging general economic conditions and the impact from
the temporary suspension of tissue products from the Company's Bulgarian
subsidiary instituted in December 2008 and removed in late July 2009; and
lower domestic unit sales volume. This decline was partially offset by the
revenue received in conjunction with the Company's aforementioned license

    Net income for the fourth quarter ended December 31, 2009 was $890,000,
or $0.05 per diluted share, compared with net loss of $409,000, or $0.02
per share, for the fourth quarter of 2008. Net loss for the full year ended
December 31, 2009 was $4.0 million, or $0.22 per share, compared with net
income of $2.2 million, or $0.12 per diluted share, for 2008. The net loss
in 2009 is primarily due to the Company's anticipated reductions in service
revenue and the resulting lower gross margins. Net loss for 2009 was
partially offset by the $2.3 million in profit that the Company's agreement
to license certain tissue processing technology contributed to net income.


    Based upon current market conditions, the exit of certain lines of
business in 2009, the realization of all of revenue under the licensing
arrangements in 2009, the regulatory environment and the Company's internal
expectations, Osteotech is providing the following financial guidance for

    --  Total revenue is expected to range between $97 million and $101 million,
        with between $10 million and $12 million in revenue stemming from new
        products; and
    --  Net income is expected to range between breakeven and a loss of $.05 per
    Conference Call Today, March 4, 2010

    The Osteotech management team will host a conference call on March 4,
2010 at 9:00 a.m. (EST) to discuss fourth quarter and full year 2009
financial results, recent corporate developments and guidance for 2010. The
call can be accessed by dialing 1-866-202-4367 (domestic) or 1-617-213-8845
(international) and indicating access code 56692568. The conference call
will also be simultaneously webcast at A replay of the
call will be available two hours after completion of the live call through
midnight, Thursday, March 18, 2010 by dialing 1-888-286-8010 and indicating
access code 47904889.

    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. For a more detailed discussion of
certain of these factors, see the Company's periodic reports filed with the
Securities and Exchange Commission from time to time, including the latest
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. All
information in this press release is as of March 4, 2010 and the Company
does not intend to update this information.

                         OSTEOTECH, INC. and Subsidiaries                     
                       CONSOLIDATED STATEMENTS OF OPERATIONS                  
                   (dollars in thousands, except per share data)              

                                  Three Months Ending          Year Ending    
                                       December 31,            December 31,   
                                  -------------------        ---------------- 
                                     2009        2008        2009        2008 
                                     ----        ----        ----        ---- 
    Revenue                       $26,315     $24,567     $96,678    $103,814 
    Cost of revenue                12,702      11,148      49,108      48,770 
                                   ------      ------      ------      ------ 
    Gross profit                   13,613      13,419      47,570      55,044 

    Marketing, selling and                                                    
     general and administrative 
     expenses                      10,962      11,553      43,996      45,032 
    Research and development                                                  
     expenses                       1,291       2,162       6,486       7,435 
                                    -----       -----       -----       ----- 
                                   12,253      13,715      50,482      52,467 

    Operating income (loss)         1,360        (296)     (2,912)      2,577 

    Interest expense, net            (349)       (310)     (1,412)     (1,072)
    Other                             (64)          8          42         961 
                                      ---          --          --         --- 

    Income (loss) before income 
     taxes                            947        (598)     (4,282)      2,466 
    Income tax expense (benefit)       57        (189)       (265)        263 
                                       --        ----        ----         --- 
    Net income (loss)                $890       $(409)    $(4,017)     $2,203 
                                     ====       =====     =======      ====== 
    Earnings (loss) per share:                                                
      Basic                         $0.05      $(0.02)     $(0.22)      $0.12 
      Diluted                       $0.05      $(0.02)     $(0.22)      $0.12 
    Shares used in computing 
     earnings (loss) per share:                       
      Basic                    18,028,682  17,918,606  17,968,971  17,833,902 
      Diluted                  18,163,717  17,918,606  17,968,971  18,083,584 

                           CONSOLIDATED SEGMENT REVENUE DETAIL        
                                  (dollars in thousands)              

                                          Three Months Ended     Year Ended 
                                             December 31,        December 31,
                                             ------------       -------------
                                             2009    2008       2009     2008
                                             ----    ----       ----     ----
    DBM                                   $13,337 $14,398    $56,782  $61,961
    Hybrid/Synthetic                        1,286     900      3,575    3,087
    Traditional Tissue                      5,713   4,651     21,534   20,258
    Spinal Allografts                       1,918   2,020      7,626    8,499
    Client Services                           130   1,674      2,143    8,201
    Other Product Lines                     3,931     924      5,018    1,808
                                            -----     ---      -----    -----
    Revenue                               $26,315 $24,567    $96,678 $103,814
                                          ======= =======    ======= ========

                              OSTEOTECH, INC. and Subsidiaries              
                            CONDENSED CONSOLIDATED BALANCE SHEETS           
                                   (dollars in thousands)                 

                                                     December 31, December 31,
                                                            2009         2008
                                                            ----         ----

    Cash and cash equivalents                            $10,708      $18,823
    Accounts receivable, net                              16,165       17,968
    Deferred processing costs                             38,562       38,715
    Inventories                                            1,819        1,467
    Prepaid expenses and other current assets              3,247        3,115
                                                           -----        -----
        Total current assets                              70,501       80,088
    Property, plant and equipment, net                    29,575       34,005
    Other assets                                          16,861       13,022
                                                          ------       ------
                                                        $116,937     $127,115
                                                        ========     ========

        Liabilities and Stockholders' Equity                             

    Accounts payable and accrued liabilities             $16,206      $23,569
    Current maturities of capital lease                                  
     obligation                                              994          895
                                                             ---          ---
        Total current liabilities                         17,200       24,464
    Capital lease obligation                              12,181       13,175
    Other liabilities                                      7,270        6,626
                                                           -----        -----
        Total liabilities                                 36,651       44,265
    Stockholders' equity                                  80,286       82,850
                                                          ------       ------
                                                        $116,937     $127,115
                                                        ========     ========

SOURCE Osteotech, Inc.

Josh Sandberg

Josh Sandberg is the President and CEO of Ortho Spine Partners and sits on several company and industry related Boards. He also is the Creator and Editor of OrthoSpineNews.

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