OSTEOTECH INC
4, 1996-09-09
MISC HEALTH & ALLIED SERVICES, NEC
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<PAGE>

FORM 4 

                               U.S. SECURITIES AND EXCHANGE COMMISSION
                                        WASHINGTON, D.C. 20549
                       STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP

<square>Check this box if no longer
   subject to Section 16. Form 4   Filed pursuant to Section 16(a) of the
  or Form 5 obligations       Securities Act of 1934, Section 17(a) of the 
                             Public Utility Holding Company Act of 1935 
                             or Section 30(f) of the Investment Company
                                              Act of 1940
may continue.  SEE Instruction 1(b).


<TABLE>
<CAPTION>
1. Name and Address of Reporting Person        2. Issuer Name and Ticker or Trading Symbol   6.  Relationship of Reporting Person
                                                                                             to Issuer
Fallon III,          Kenneth          P.                    OSTEOTECH, INC. (OSTE)                  (Check all applicable)

                                                                                                   X     Director______ 10% Owner
<S>                                            <C>        <C>   <C> <C>      <C>    <C>      <C>            <C>         <C>
(Last)              (First)           (Middle) 3. IRS or Social     4. Statement for            _______ Officer      ______ Other
                                                  Security Number      Month/Year               (give title below)
33 POND AVENUE, APT 1211B                         of Reporting                               (specify below)
                                                  Person                  August 1996
                                                  (Voluntary)

                   (Street)                                         5. If Amendment, Date of
                                                                    Original (Month/Year)
BROOKLINE             MA            02146-7109
(City)              (State)              (Zip)
                                               TABLE I - NON-DERIVATIVE SECURITIES ACQUIRED, DISPOSED OF, OR BENEFICIALLY OWNED
1. Title of Security                           2. Trans-  3. Trans- 4. Securities Acquired   5. Amount of   6. Owner-   7. Nature
   (Instr. 3)                                     action     action    (A) or Disposed of       Securities     ship        of In-
                                                  Date       Code      (D)                      Beneficially   Form:       direct
                                                  (Month/  (Instr.     (Instr. 3, 4 and 5)      Owned at       (D) or      Bene-
                                               Day/       8)                                    End of         Indirect    ficial
                                               Year)                                            Month          (I)         Owner-
                                                                                                (Instr. 3      (Instr.     ship
                                                                                             and 4)         4)             (Instr.
                                                                                                                        4)
                                                          Code   V   Amount  (A) or Price
                                                                               (D)

Common Stock                                   8/19/96    M     v   5,000    A      $5.00    5,000          D           --

</TABLE>

Reminder: Report on a separate line for each class of securities beneficially
owned directly or indirectly.
                                               (Over)













<PAGE>

FORM 4 (CONTINUED)


                 TABLE II - DERIVATIVE SECURITIES ACQUIRED, DISPOSED OF, 
                                    OR BENEFICIALLY OWNED 
       (E.G., puts, calls, warrants, options, convertible securities)

<TABLE>
<CAPTION>
1. Title of Derivative 2.Conver-3.Trans-4.Transac-5.Number of6.Date    7.Title and Amount 8.Price9.Number 10.  Owner-  11.  Na-
Security                 sion     action tion  Deriv-       Exercisableof Under-lying       of    of        ship         ture
   (Instr. 3)            or       Date   Code  ative        and        Securities (Instr.   Deriv-Deriv-     Form         of In-
                         Exercise (Month/Day/(Instr.SecuritiesExpiration3 and 4)            ative ative      of De-       direct
                         Price    Year)8)      Ac-          Date                            Secur-Secur-     rivative     Bene-
                         of                    quired (A)   (Month/Day/                     ity   ities      Secur-       ficial
                         Deriv-                or Dis-      Year)                           (Instr.Bene-     ity:         Own-
                         ative                 posed of                                     5)    ficially   (D) or      ership
                         Security                (D)                                                Owned      Indi-     (Instr. 4)
                                               (Instr. 3,                                         at End     rect (I)
                                             4, and 5)                                            of        (Instr. 4)
                                                                                                  Month
                                                                                                  (Instr.
                                                                                                4)
<S>                    <C>      <C>   <C> <C><C>    <C>   <C>   <C>    <C>         <C>    <C>   <C>       <C>          <C>
                                      Code V    (A) (D)   Date  Expira-    Title   Amount
                                                          Exer- tion               or
                                                          cisableDate              Number
                                                                                   of
                                                                                   Shares
Stock Option+
(Right to Buy)         $5.00    8/19/96 M  v        5,000 6/8/96 6/8/05 Common      5,000  $5.00   0         --         --
                                                                       Stock
</TABLE>

  Explanation of Responses:

  +    Granted under the Company's 1991 Independent Directors Stock Option
       Plan, as amended, a Rule 16b-3 plan.


                                /s/ KENNETH P. FALLON III            9/9/96
                                **Signature of Reporting Person       Date
                                  Kenneth P. Fallon III
** Intentional misstatements or omissions of facts constitute Federal Criminal
   Violations.
   SEE 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).


Note:  File three copies of this Form, one of which must be manually signed.
   If space provided is insufficient, SEE Instruction 6 for procedure.
                                                      SEC 1474 (8-92)





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