Orthovita, Inc. (VITA)

Orthovita is a biomaterials company involves in the development and commercialization of synthetic, biologically active, tissue engineering products for orthopedic and neurosurgical applications. Its products, used in the regeneration of bone, include Vitoss Foam pack generating nearly 27% of total revenues, Vitagel garnering up 23% of revenues, while the balance being contributed by Imbibe Bone marrow aspirate syringes, Aliquot Micro Delivery system and other structural devices.

In 2002, Orthovita was on the verge of bankruptcy but was able to resurrect itself through business deals with Angiotech and Kensey Nash for the development of Vitagel and Vitoss Foam pack respectively. Strengthened by these two products, Orthovita has witnessed a turnaround and has created a legitimate sales presence in orthopedics in recent times. However, the company has been longing to see a profitable daylight, owing to its rising operating expenses, royalty payments and product development costs.

For the nine months ended 30 September 2006, the company’s revenues have increased by 34% while net loss increased 31%. With revenues reflecting the effect of expansion of Vitagel and Vitoss Foam pack product portfolios, higher losses, on the other hand reflects a 37% increase in selling and marketing expenses, a 32% increase in general and administrative expenses. Research and development expenses, too shot in excess of 25% primarily due to costs associated with Vitagel product development, U.S. clinical trials and Cortoss product development, which will receive approval not before 2008.
The company seems to be an underperformer as the management expects to continue to incur significant operating losses at least in the near term due to continued expansion of sales and marketing activities, new product development efforts and development of manufacturing capabilities.