Company Achieves Sequential and Year-Over-Year U.S. Sales Growth In Base
Business
EATONTOWN, N.J., Nov. 5 /PRNewswire-FirstCall/ -- Osteotech, Inc. (Nasdaq:
OSTE), a leader in the emerging field of biologic products for regenerative
healing, today reported financial results for the third quarter ended
September 30, 2009.
"During the third quarter of 2009, our focus was on the release of our three
new biologic products MagniFuse(TM) Bone Graft, FacetLinx(TM) Fusion
Technology and Plexur M® Innovative Grafting," said Sam Owusu-Akyaw, President
and Chief Executive Officer of Osteotech. "All of these products have
generated excitement among surgeons and our sales agencies. We have received
very positive feedback from our surgeon customers and believe these products
are well-positioned to become market leaders. Based upon the dynamic feedback
we've received to date, we made additional and necessary enhancements to these
product lines during the third quarter of 2009 incurring incremental costs and
expenses of approximately $.4 million. We are focused on learning from the
challenges associated with our previous product launches and working to ensure
we can be responsive to the market's needs and flexible as new opportunities
arise. We plan to continue to invest in these new products during the balance
of 2009 because our future growth and profitability will be driven by our
ability to be successful with the releases of these new and differentiated
biologics. We feel confident we are taking the steps necessary to successfully
position our new biologics in the procedure-specific markets they are designed
to serve, although the required investments will impact our 2009 revenue and
bottom line expectations."
"We have made notable progress in executing our product development and launch
strategies throughout 2009, but we have also faced considerable challenges",
continued Mr. Owusu-Akyaw. "Our domestic base business grew sequentially
compared with the second quarter and year-over-year, which we believe provides
tangible evidence that our growth strategy is gaining traction and that we are
successfully executing. While we were able to achieve domestic sales growth,
we have seen a slowdown in international sales, primarily due to our
self-imposed temporary suspension of Bulgarian tissue in a key Asian market
and the general economic and reimbursement conditions in Greece. Initially,
we anticipated recovering some of the lost market share in the second half of
2009, but we now believe we have lost traction in these markets. For the
three and nine months ended September 30, 2009, these markets generated
revenue of $.3 million and $2.0 million, respectively, compared with $1.6
million and $5.4 million in the comparable periods of 2008."
Recent and Upcoming Corporate Developments
-- During the third quarter, Osteotech commercialized FacetLinx Fusion
Technology for use in facet fusion procedures. Based upon surgeon
feedback following the initial introduction, the Company made
strategic
changes to the instrumentation set to enhance the product's
ease-of-use.
Early in the fourth quarter, the Company commenced a limited launch of
the product and early sales indicate that FacetLinx is quickly gaining
traction among key surgeons.
-- Early in the fourth quarter, the Company announced the first U.S.
spinal
surgery using MagniFuse PC (Posterior Cervical), which marked the
start
of the controlled release for the Company's family of products based
upon the MagniFuse technology platform. MagniFuse PC was utilized
during a posterior cervical fusion surgery and was cited as being
easy-to-use and intuitive with a differentiated self-contained
delivery
system unlike any other product on the market. Osteotech expects
MagniFuse technology to be used in 25 procedures by the time of the
North American Spine Society annual meeting in mid-November.
-- Osteotech intends to showcase its MagniFuse Technology and FacetLinx
Fusion Technology at the North American Spine Society annual meeting
in
San Francisco, California from November 10 - 14, 2009.
-- During the third quarter, Osteotech began the process of analyzing
data
from the 60-patient DuraTech BioRegeneration Matrix clinical trial.
Based upon the data analysis process, the Company now expects to file
during the fourth quarter of 2009 a 510(k) application with the United
States Food and Drug Administration (FDA) to secure marketing
clearance
for DuraTech. DuraTech is the first of several products under
development based upon Osteotech's proprietary human collagen
technology
(HCT(TM)) platform.
Financial Results
Revenue for the three months ended September 30, 2009 was $23.0 million
compared with $24.1 million for the three months ended September 30, 2008.
The decline in revenue for the third quarter of 2009 compared with the same
period of 2008 was primarily driven by the expected reduction in revenue from
the services businesses. The services businesses include client services and
private label demineralized bone matrix, which collectively declined $1.1
million to $.7 million in the third quarter of 2009 compared with the third
quarter of 2008. Excluding client services and private label demineralized
bone matrix revenue, third quarter 2009 revenues were essentially equivalent
with third quarter 2008 revenues. International revenue was $4.6 million, a
decline of $.5 million in the third quarter of 2009 compared with the same
period of 2008 primarily reflecting the challenging general economic
conditions and the lingering impact following the resolution of the Company's
self imposed temporary suspension of tissue products processed from tissue
recovered by its Bulgarian subsidiary. Domestic revenue in the Company's base
business was approximately $17.7 million in the third quarter of 2009 and grew
3% compared with the same period of 2008, and 6% compared with the second
quarter of 2009. The Company's base business excludes client services and
private label demineralized bone matrix product revenues.
Revenue for the nine-month period ended September 30, 2009 was $70.4 million
compared with $79.2 million reported for the same period of 2008. The decline
in revenue for the nine-month period ended September 30, 2009 was primarily
driven by: the expected reduction in revenue from the Company's services
businesses, which declined $5.2 million, the aforementioned decline in
international revenue and lower domestic unit sales volume.
Net loss for the third quarter ended September 30, 2009 was $1.9 million, or
$0.11 per share, compared with net income of $58,000, or breakeven for the
third quarter of 2008. Net loss for the nine-month period ended September 30,
2009 was $4.9 million, or $0.27 per share, compared with net income of $2.6
million, or $0.15 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 lower gross margins and, in the third quarter,
higher-than-anticipated costs related to a variety of enhancements to its new
procedure-specific biologic solutions.
Guidance
Based upon the results achieved to date and the additional expenditures the
Company expects to incur to support its enhanced launch strategies and product
updates, Osteotech is updating the financial guidance it previously
established for 2009:
-- Revenue is expected to range between $92 million and $94 million;
-- Net loss for 2009 is expected to be between $0.32 and $0.36 per share;
and
-- The Company expects to exit 2009 with $9 million to $10 million in
cash.
Conference Call Tomorrow, November 6, 2009
The Osteotech management team will host a conference call on November 6, 2009
at 9:00 a.m. (EST) to discuss third quarter 2009 financial results, recent
corporate developments and guidance for 2009. The call can be accessed by
dialing 1-866-770-7129 (domestic) or 1-617-213-8067 (international) and
indicating access code 27776012. The conference 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, Friday, November
20, 2009 by dialing 1-888-286-8010 and indicating access code 24133940.
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
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. 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 5, 2009 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 Nine Months
Ended Ended
September 30, September 30,
2009 2008 2009 2008
Revenue $22,961 $24,063 $70,363 $79,247
Cost of Revenue 12,502 11,182 36,406 37,622
Gross profit 10,459 12,881 33,957 41,625
Marketing, selling and
general and
administrative
expenses 10,648 10,476 33,034 33,479
Research and
development
expenses 1,544 1,739 5,195 5,273
12,192 12,215 38,229 38,752
Operating income
(loss) (1,733) 666 (4,272) 2,873
Interest expense,
net (354) (276) (1,063) (762)
Other 58 (270) 106 953
Income before
income taxes (2,029) 120 (5,229) 3,064
Income tax
provision (benefit) (122) 62 (322) 452
Net Income $(1,907) $ 58 $(4,907) $ 2,612
Earnings per share:
Basic $ (0.11) $ - $ (0.27) $ 0.15
Diluted $ (0.11) $ - $ (0.27) $ 0.15
Shares used in
Computing
earnings (loss)
per share:
Basic 18,120,350 17,881,018 17,925,718 17,749,402
Diluted 18,120,350 17,993,900 17,925,718 17,854,319
CONSOLIDATED SEGMENT REVENUE DETAIL
(dollars in thousands)
(unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
2009 2008 2009 2008
DBM $14,611 $14,023 $43,445 $47,564
Hybrid/Synthetic 894 816 2,289 2,187
Traditional Tissue 5,101 5,246 15,821 15,606
Spinal Allografts 1,966 1,943 5,708 6,479
Client Services 125 1,706 2,013 6,527
Other Product Lines 264 329 1,087 884
Revenue $22,961 $24,063 $70,363 $79,247
OSTEOTECH, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
September 30, December 31,
2009 2008
Assets
Cash and cash equivalents $10,607 $18,823
Accounts receivable, net 19,393 17,968
Deferred processing costs 45,476 38,715
Inventories 1,683 1,467
Prepaid expenses and other current assets 2,303 3,115
Total current assets 79,462 80,088
Property, plant and equipment, net 30,894 34,005
Other assets 8,718 13,022
$119,074 $127,115
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $19,973 $23,569
Current maturities of capital lease
obligation 968 895
Total current liabilities 20,941 24,464
Capital lease obligation 12,439 13,175
Other liabilities 6,742 6,626
Total liabilities 40,122 44,265
Stockholders' equity 78,952 82,850
$119,074 $127,115
SOURCE Osteotech, Inc.
Company: Mark H. Burroughs, +1-732-542-2800; or Investors: Jennifer
Beugelmans, +1-646-596-7473; Media: Dan Budwick, +1-973-271-6085
