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Osteotech Reports 2008 Results

Osteotech, Inc. (Osteotech), an orthopedic devices company, has reported revenue of $103.8 million for the full year of 2008, compared with the revenue of $104.3 million in the previous year-end. It has also reported a net income of $2.2 million, or $0.12 per diluted, for the full year of 2008, compared with the net income of $2.6 million, or $0.15 diluted per share, in the previous year-end.

“The last twelve months were an important transitional time for Osteotech. Our entire team worked diligently to execute our corporate strategy to leverage the company’s proprietary technology portfolio into unique, procedure-driven products providing a stable platform to support long-term sales growth and profitability,” said Sam Owusu-Akyaw, president and chief executive officer of Osteotech. “We continued to receive U.S. Food and Drug Administration (FDA) clearances for new products and our 2009 plan includes the launch of our MagniFuse(TM) Bone Graft and Plexur M(TM) Biocomposite, the re-launch of the Plexur P(R) platform and the unveiling of our first product based upon our proprietary human collagen technology platform, the DuraTech(TM) BioRegeneration Matrix. Complementing our progress within product development, we have also continued to execute our strategy to streamline and strengthen our access-based agency sales model. We remain encouraged by the progress we are making in these strategies and believe that once these initiatives are fully executed we will be well positioned to emerge as a leader in regenerative and biologic healing.”

Recent and 2008 Corporate Developments

Product Development and Regulatory

In February 2009, the company announced that it received 13485:2003 ISO certification indicating that its facilities meet the international standards for medical device manufacturing.

In December 2008, Osteotech initiated a pivotal clinical trial for its DuraTech BioRegeneration Matrix. DuraTech is the first of several products under development based upon Osteotech’s proprietary human collagen technology platform. The company expects to file a 510(k) with the FDA to secure marketing clearance for DuraTech in the third quarter of 2009.

In December 2008, Osteotech temporarily suspended the distribution of tissue grafts processed from allograft tissue recovered by its Bulgarian operations as a result of deficiencies identified during an inspection by the French regulatory agency Afssaps. Pursuant to a notice from Afssaps, Osteotech recalled 37 tissue grafts previously distributed in France that were processed from tissue recovered in Bulgaria.

In October 2008, Osteotech received FDA clearance for its next generation grafting material, MagniFuse Bone Graft. MagniFuse will provide a range of market opportunities with products specifically designed for use in posterolateral spine, deformity and minimally invasive procedures.

In May 2008, Osteotech announced its Plexur(R) Technology was to be used in the Craniofacial Reconstruction Program Funded by the Armed Forces Institute of Regenerative Medicine.

In April 2008, Osteotech received FDA clearance to market its Plexur P(R) Biocomposite in spinal applications. Plexur P is a porous, resilient scaffold which allows for the rapid absorption and retention of cells to facilitate bone growth.

In March and July 2008, Osteotech received FDA clearances for its Plexur M(TM) Biocomposite for application in the pelvis, extremities and spine. Plexur M is a uniquely moldable, settable biomaterial, which when heated gives surgeons the ability to contour the product into almost any shape.

Corporate

In January 2009, Osteotech expanded its senior management team with two new executives, Michael P. McCarthy to spearhead sales force strategies and Robert C. Cohen to focus on therapy-based solutions for the company’s proprietary biologics.

In December 2008, Osteotech established a stock repurchase program. The management team and board of directors believe that shares of the company’s common stock are undervalued and that a share repurchase program has the potential to enhance the long-term value of the company.

During 2008, Osteotech invested $7.3 million to solidify its tissue supply position and expanded certain of its tissue supply arrangements.

Financial Results

Revenue for the fourth quarter ended December 31, 2008 was $24.6 million against $26.9 million for the three months ended December 31, 2007. The decline in fourth quarter 2008 revenue against 2007 was primarily driven by the expected reduction in private label Demineralized Bone Matrix (DBM) revenue of $2.6 million. Revenue for the full year was negatively impacted by the 62% reduction in private label DBM revenue, which was partially offset by the 15% growth achieved in the company’s international business and 2% growth in its domestic business.

Net loss for the fourth quarter ended December 31, 2008 was $409,000, or a net loss of $0.02 per diluted share, against net income of $806,000, or $0.04 diluted earnings per share, for the fourth quarter of 2007. Net income in 2008 included a gain of $1.0 million associated with the settlement of certain litigation, while net income for 2007 was negatively impacted by costs of $1.0 million related to the settlement of certain litigation.

“Looking ahead, we expect 2009 to be an exciting year that will include the re-launch of Plexur P and the anticipated launches of MagniFuse, Plexur M and DuraTech,” continued Owusu-Akyaw. “In addition, we expect our access-based agency sales teams to continue to develop and to successfully bring our new procedure-driven products to market. Three years ago we began developing our proprietary, high-technology product roadmap and by the fourth quarter of 2009, we expect to see tangible results stemming from the successful execution of our growth strategy. As a result, we believe we will be well positioned for long-term, profitable revenue growth in 2010 and well into the future.”