Osteotech Announces Acquisition of OST Developpement SA; Major Initiative Underway to Expand
European Allograft Business
PR Newswire, Thursday, July 02, 1998 at 08:24
EATONTOWN, N.J., July 2 /PRNewswire/ -- Osteotech, Inc. announced today
that it will acquire a majority interest in OST Developpement SA, a subsidiary
of Transphyto SA of Clermont-Ferrand, France, in a two step transaction. On
June 25, 1998, Osteotech acquired a 5% interest in OST, and will acquire an
additional 85% interest no later than March 1999, provided that certain
milestones are achieved by OST. The aggregate cost of the transaction will be
FF 9,000,000 (about $1.5 million at current exchange rates). The acquisition
will not be dilutive to Osteotech in 1998, and is expected to contribute about
$4 million in revenues and be accretive to net income in 1999. The agreement
also provides for the future purchase by Osteotech of the remaining 10% of OST
at a price to be determined at the time of the acquisition of the remaining
shares.
OST, a unit of the privately held drug development company, Transphyto SA,
was founded to address the shortage of safe and effective allograft tissue in
France and certain other countries outside the United States. OST initially
developed a proprietary processing system to produce LUBBOC(R) and LADDEC(R)
bovine bone grafts for orthopaedic and dental use, respectively. OST received
a CE Mark for these biocompatible grafts and for the validated viral
inactivation process used to produce them, and it has been using the same
processing technology to develop an automated system to cost effectively
process human allograft tissue. It recently concluded a long term agreement
with a French tissue bank, OsteoBanque D'Auvergne, in which the tissue bank
receives donated tissue and OST provides tissue processing, logistical support
and distribution services.
Richard W. Bauer, Osteotech's President and Chief Executive Officer,
stated, "This acquisition represents an important milestone in our strategic
initiative to expand Osteotech's allograft business globally. With the
acquisition of OST, we expect to establish a strong market position in France
and utilize this as a base for expansion into all the major European markets.
During the initial stages of integration and market expansion, OST will report
to Richard Russo, Osteotech's Executive Vice President for Strategic Planning
and Business Development."
Mr. Russo commented, "OST operates an ISO certified plant with advanced
processing and quality assurance systems and a skilled staff, as well as a
small direct sales force experienced in the French bone grafting market. OST
will process allograft bone recovered during the course of total hip
replacement procedures in addition to its LUBBOC and LADDEC bovine bone
grafts. Our strategy, in the short term, is to expand the range of bone grafts
available to French surgeons by supplying Grafton(R) Demineralized Bone Matrix
(DBM) and other tissues processed by Osteotech in the U.S. to complement OST's
processed allografts and its LUBBOC and LADDEC product lines. Concurrently, we
plan to build a cadaveric donor tissue recovery network in medical centers
throughout France and other European countries in conjunction with OsteoBanque
D'Auvergne and other tissue banks in order to meet a growing European demand
for allograft tissue. Starting with France, we plan to penetrate the European
market on a country by country basis, with Germany being the next major
expansion opportunity. Osteotech has also filed a product master file to gain
approval for Grafton DBM grafts in Germany and we expect to begin marketing in
the first half of 1999."
Mr. Russo continued, "In the U.S., Osteotech has rapidly grown its
allograft business and we fully expect to realize similar success in Europe.
We have invested heavily in the U.S. in processing technology, research and
development, clinical studies, and medical education, and we believe that
these strengths will serve as a solid foundation for the development of a
similar and comprehensive program to serve the needs of the European markets.
The advantages of locating our European operations in France are significant.
The French market is one of the larger and more sophisticated European markets
for bone grafts. Also, French laws and regulations governing tissue banking
are well defined and the most advanced of all the major European countries.
For example, although tissue-banking operations in France are generally
restricted to nonprofit public health organizations approved by the
government, French regulations also provide for governmental approval of
for-profit organizations as tissue banks if the tissue banks are able to
provide haut technicite (high technology) unavailable in the nonprofit sector.
We believe that Osteotech's tissue processing technology meets this
requirement and that we will be able to provide contract processing, marketing
and management services to tissue banks as well as operate independently as an
approved tissue bank."
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. All 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 market place, the need to
obtain regulatory approvals in France and other European countries, the impact
of competitive products and services, and other factors detailed from time to
time in the Company's periodic reports and exhibits thereto (including the
Annual Report on Form 10-K for the year ended December 31, 1997 and the Form
1O-Q for the period ended March 31, 1998) filed with the Securities and
Exchange Commission.
Osteotech, Inc., headquartered in Eatontown, New Jersey, is a leading
provider of human bone and bone connective tissue for transplantation and an
innovator in the development and marketing of biomaterial and implant products
for musculoskeletal surgery.
SOURCE Osteotech, Inc.
-0- 07/02/98
/CONTACT: Michael J. Jeffries of Osteotech, 732-542-2800/
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