SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 28, 1996
OSTEOTECH, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19278 13-3357370
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification)
51 James Way, Eatontown, New Jersey 07724
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 542-2800
(Former name or former address, if changed since last report)
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Item 5. Other Events
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Osteotech, Inc. (the "Company") is restructuring its
operations in Leiden, The Netherlands to focus the Company's entire efforts on
building its current revenue producing ceramic and titanium plasma spray coating
services and ceramic powders and products. As a result of this restructuring,
the Company will immediately discontinue investing in its long-term
PolyActive(Trademark) polymer research and development program, which includes
the development of an adhesion barrier product and an artificial skin product.
OsteoActive(Trademark) Bone Void Filler, the lead product from the polymer
research and development program, will also be discontinued. This determination
has resulted in cessation of all marketing efforts as well as clinical trials
which were initiated to pursue a Council of Europe designation. Since its market
introduction, the only revenue derived from OsteoActive has been from stocking
orders to distributors in the third quarter of 1996, which have been previously
reserved, totaling approximately $48,500.
Other than OsteoActive stocking orders and annual polymer
research and development grant revenues of approximately $600,000, the
restructuring of The Netherlands operations will have no impact on the Company's
revenue base but will result in the reduction of expenses in excess of $1
million annually. As a result, the Company's original goal to turn foreign
operations profitable during the second half of 1997 should be accelerated with
the expectation that these operations will become profitable during the first
half of 1997.
Since the Company's acquisition of The Netherlands operations
in May, 1992, these operations have incurred pretax losses in each year,
including a loss of $1,384,000 in the year ended December 31, 1995 and a pretax
loss of $721,000 in the six month period ended June 30, 1996. These losses have
been a burden on the Company's consolidated earnings. Moreover, since the
Company cannot take these losses into account when determining its consolidated
tax provisions until such time as The Netherlands operations report a pretax
profit, the Company has been reporting unusually high effective tax rates, which
in the six months ended June 30, 1996 was 72.5%. As these operations move toward
profitability due to the restructuring, the Company's effective tax rate will
move toward a more normal 40% level. Additionally, when these operations become
profitable, the Company will recognize the benefit of approximately $8 million
in net operating losses accumulated since the acquisition and will begin to
utilize these losses to offset future tax liabilities when it files its tax
returns.
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As a result of the restructuring of its foreign operations,
the Company expects to record a pretax restructuring charge in its fourth
quarter of 1996 of approximately $1,350,000. For the full year ending December
31, 1996, the Company still anticipates reporting a pretax profit (excluding the
restructuring charges) in excess of the $1,653,000 pretax profit reported in
1995, before unusual items.
Certain of the statements contained in each paragraph of this
Form 8-K, with the exception of the first paragraph, that are not historical
facts, are forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995). Because such statements include risks
and uncertainties, actual results may 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 recording of a
restructuring charge less than or greater than the charge indicated in the
fourth paragraph above, the timely development, launch and acceptance of new
products, the continued acceptance and growth of recently launched products, the
impact of competitive products and other risks and uncertainties detailed from
time to time in the Company's periodic reports (including the Annual Report on
Form 10-K for the year ended December 31, 1995 and Form 10-Qs for each of the
first three quarters of 1996) filed with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: October 30, 1996
OSTEOTECH, INC.
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(Registrant)
By: /S/ MICHAEL J. JEFFRIES
Michael J. Jeffries
Executive Vice President,
Chief Financial Officer
and Secretary
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