Osteotech Reports First Quarter 2010 Financial Results

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First Quarter Results Include 88% Sequential Sales Growth for New Products
                      Company Reiterates 2010 Guidance

    EATONTOWN, N.J., May 10 /PRNewswire-FirstCall/ -- Osteotech, Inc.
(Nasdaq: OSTE), a leader in the emerging field of biologic products for
regenerative healing, today reported financial results for the first
quarter ended March 31, 2010.

    "During the first quarter our focus on building on the initial, strong
interest in our newly launched Plexur M® Innovative Grafting and
MagniFuse(TM) Bone Graft products resulted in overall sequential revenue
growth of 117% compared with the fourth quarter," said Sam Owusu-Akyaw,
President and Chief Executive Officer of Osteotech. "We have been preparing
for the national launches of both product families, which will each be
fully executed during the second quarter of this year. In addition, we have
recently released an expanded instrument set for our FacetLinx(TM) Fusion
Technology. We believe that the national launches and increased
functionality of FacetLinx will continue to drive our new product growth
trajectory throughout 2010 as well as begin to provide new sales
opportunities for our other core bone grafting family of products.
Throughout 2010, we will continue to focus on creating opportunities to
capitalize on our innovative technology and procedure-specific biologics,
which should result in meaningful improvements to our financial results. As
a result, we remain on track to achieve our guidance for 2010."

    Recent and Upcoming Corporate Developments


    --  Osteotech showcased its new proprietary biologic product portfolio at
        its booth 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 presented clinical results stemming from
        their use of MagniFuse and Plexur M at the Osteotech booth during the
        meeting.
    --  During the first quarter of 2010, the MagniFuse customer base grew
        nearly 90% to a total of 84 accounts, with a re-order rate of 73%. 
        MagniFuse revenue was $1.1 million in the first quarter of 2010 after
        only its second quarter on the market.
    --  75 new accounts were added to the Plexur M customer base, bringing the
        total number of accounts to 111 at the end of the first quarter of 2010.
        Plexur M revenue grew 72% sequentially to $.6 million in the first
        quarter of 2010.
    --  Sales of new products, including MagniFuse, Plexur M and FacetLinx, were
        $1.8 million during the first quarter of 2010, up 88% compared with the
        fourth quarter of 2009.  The Company is currently executing national
        launches for both MagniFuse and Plexur M.
    Financial Results

    Revenue for the three months ended March 31, 2010 was $22.5 million,
including $1.8 million from new products, compared with $23.9 million for
the three months ended March 31, 2009. Revenue from client services and
private label DBM declined, as expected, by $1.8 million year-over-year.
Excluding client services and private label DBM revenue, first quarter 2010
revenue was $21.6 million compared with $21.1 million in the first quarter
of 2009 with the increase in revenue reflecting sales of new products
during the first quarter of 2010.

    Net loss for the first quarter ended March 31, 2010 was $1.6 million,
or $0.09 per diluted share, compared with a net loss of $1.8 million, or
$0.10 per share, for the first quarter of 2009.

    "Looking ahead, we remain excited about the opportunities for our new
products," continued Mr. Owusu-Akyaw. "We were pleased with the interest
our innovative biologics generated at AAOS and the encouraging clinical
results surgeons presented based upon their use of both MagniFuse and
Plexur M. Our national launches for both products are well underway and we
look forward to gaining market share as the year progresses. Our results
this quarter are in line with our expectations and place us squarely on
track to achieve our 2010 guidance. Based upon our anticipated sales
trajectory, we expect the second half of 2010 to be stronger than the first
half of 2010."

    Guidance

    Osteotech is reiterating the financial guidance it previously
established for 2010:


    --  Total revenue is expected to range between $97 million and $101 million;
        and
    --  Net income is expected to range between breakeven and a loss of $.05 per
        share.
    Conference Call Today, May 10, 2010

    The Osteotech management team will host a conference call on May 10,
2010 at 9:00 a.m. (EDT) to discuss first quarter 2010 financial results,
recent corporate developments and guidance for 2010. The call can be
accessed by dialing 1-866-783-2142 (domestic) or 1-857-350-1601
(international) and indicating access code 45753886. The conference call
will also be simultaneously webcast at http://www.osteotech.com. A replay of the
call will be available two hours after completion of the live call through
midnight, Monday, May 24, 2010 by dialing 1-888-286-8010 and indicating
access code 86998695.

    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 http://www.osteotech.com.

    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 May 10, 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)
                               (unaudited)

                                                         Three Months
                                                       Ending March 31,
                                                       ----------------
                                                         2010        2009
                                                         ----        ----

    Revenue                                           $22,527     $23,931
    Cost of revenue                                    11,557      11,964
                                                       ------      ------
    Gross profit                                       10,970      11,967

    Marketing, selling and
      general and administrative expenses              10,703      11,618
    Research and development expenses                   1,208       1,653
                                                        -----       -----
                                                       11,911      13,271

    Operating loss                                       (941)     (1,304)

    Interest expense, net                                (339)       (354)
    Other                                                (187)        (83)
                                                         ----         ---

    Loss before income taxes                           (1,467)     (1,741)
    Income tax provision                                  116          55
    Net loss                                          $(1,583)    $(1,796)
    ========                                          =======     =======
    Loss per share:
         Basic                                         $(0.09)     $(0.10)
         Diluted                                       $(0.09)     $(0.10)
    Shares used in computing loss per share:
         Basic                                     18,073,471  17,874,236
         Diluted                                   18,073,471  17,874,236

                   CONSOLIDATED SEGMENT REVENUE DETAIL
                          (dollars in thousands)
                               (unaudited)

                                                         Three Months
                                                       Ended March 31,
                                                       ---------------
                                                        2010        2009
                                                        ----        ----
    DBM                                              $13,133     $14,026
    Hybrid/Synthetic                                   2,380         748
    Traditional Tissue                                 5,070       5,277
    Spinal Allografts                                  1,699       1,880
    Client Services                                       12       1,633
    Other Product Lines                                  233         367
    Revenue                                          $22,527     $23,931
                                                     =======     =======

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

                                                    March    December
                                                     31,        31,
                                                      2010        2009
                                                      ----        ----
                       Assets

    Cash and cash equivalents                      $10,271     $10,708
    Accounts receivable, net                        16,424      16,165
    Deferred processing costs                       34,123      38,562
    Inventories                                      1,589       1,819
    Prepaid expenses and other current assets        2,908       3,247
                                                     -----       -----
                 Total current assets               65,315      70,501
    Property, plant and equipment, net              28,300      29,575
    Other assets                                    17,649      16,861
                                                  $111,264    $116,937
                                                  ========    ========

        Liabilities and Stockholders' Equity

    Accounts payable and accrued liabilities       $12,302     $16,206
    Current maturities of capital lease
     obligation                                      1,020         994
                                                     -----         ---
                 Total current liabilities          13,322      17,200
    Capital lease obligation                        11,916      12,181
    Other liabilities                                7,167       7,270
                                                     -----       -----
                 Total liabilities                  32,405      36,651
    Stockholders' equity                            78,859      80,286
                                                  $111,264    $116,937
                                                  ========    ========

SOURCE Osteotech, Inc.

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