Orthovita Reports 2008 Second Quarter Financial Results

Sales growth for the reported periods in 2008 was primarily attributable to increased sales of our VITOSS(R) FOAM and VITAGEL(R) product portfolios in the U.S. as we further develop our U.S. field sales network. Approximately 60% of our product sales during the three and six months ended June 30, 2008 and 2007, respectively, were from products based upon our VITOSS FOAM platform co-developed with Kensey Nash Corporation. VITAGEL contributed approximately 25% of product sales for the three and six months ended June 30, 2008, as compared to approximately 19% and 20% of our product sales during the three and six months ended June 30, 2007, respectively.

Gross profit for the three months ended June 30, 2008 and 2007 was $13.0 million and $9.8 million, respectively. As a percentage of sales, gross profit was 67% and 66% for the three months ended June 30, 2008 and 2007, respectively. Gross profit for the six months ended June 30, 2008 was $23.3 million as compared to $18.2 million for the same period in 2007. As a percentage of sales, gross profit was 66% and 65% for the six months ended June 30, 2008 and 2007, respectively. The increase in the gross profit margins for the three and six months ended June 30, 2008, as compared to the gross profit margins for the corresponding periods in 2007, primarily reflects improved manufacturing efficiencies and lower VITAGEL royalty expense as a percentage of product sales.

Operating expenses for the three months ended June 30, 2008 and 2007 were $16.3 million and $12.8 million, respectively, which represent a 27% increase in operating expenses as compared to a 30% increase in product sales and a 33% increase in gross profit over the three months ended June 30, 2007. For the six months ended June 30, 2008 and 2007, operating expenses were $30.6 million and $24.4 million, respectively, which represent a 25% increase in operating expenses as compared to a 27% increase in product sales and a 28% increase in gross profit over the six months ended June 30, 2007. The increase in operating expenses for the three and six months ended June 30, 2008 was primarily due to higher selling and marketing expense, including salary and benefit costs incurred by expanding our field sales team in order to support the growth of U.S. product sales, as well as higher commissions paid in the U.S. as a result of increased product sales in 2008. The number of our direct sales representatives increased from 80 at June 30, 2007 to 92 at June 30, 2008.

The operating loss for the three months ended June 30, 2008 increased to $3.3 million from $3.0 million for the three months ended June 30, 2007. The operating loss for the six months ended June 30, 2008 and 2007 was $7.3 million and $6.2 million, respectively. The increase in operating loss for the three and six months ended June 30, 2008 as compared to the corresponding periods in 2007 primarily resulted from increased selling & marketing expenses, partly offset by increased gross profit.

The net loss for the three months and six months ended June 30, 2008 was $3.6 million and $7.8 million, as compared to $3.2 million and $6.1 million, respectively, for the corresponding periods in 2007. The increase in the net loss for the three and six months ended June 30, 2008 primarily resulted from increased selling and marketing expenses and increased interest expense, partly offset by increased gross profit. In addition, the six months ended June 30, 2008 included a $0.1 million loss on asset dispositions, while the same period in 2007 included a net gain of $0.4 million from the sale of the ENDOSKELETON product line and related assets. The net loss per common share for each of the three months ended June 30, 2008 and 2007 was $0.05, based upon 75.8 million and 61.4 million common shares outstanding, respectively. The net loss per common share for each of the six months ended June 30, 2008 and 2007 was $0.10, based upon 75.8 million and 61.3 million shares outstanding.

Cash, cash equivalents, and investments were $36.1 million at June 30, 2008 in comparison to cash, cash equivalents and investments of $48.4 million at December 31, 2007. For the six months ended June 30, 2008, the net cash and cash equivalents used in operating activities were $10.5 million, compared to $8.8 million for the six months ended June 30, 2007. Net cash and cash equivalents used in operating activities for the six months ended June 30, 2008 increased as compared with the six months ended June 30, 2007 primarily due to: (i) an increase in the operating loss, (ii) an increase in accounts receivable, and (iii) a decrease in accounts payable and accrued expenses.

Conference Call

Antony Koblish, President and Chief Executive Officer, and Albert J. Pavucek, Jr., Chief Financial Officer of Orthovita, will host a conference call at 8:30 a.m. Eastern time on August 7, 2008 to review and discuss the second quarter 2008 financial results. The phone number to join the conference call from within the U.S. is (888) 815-2919, and from outside the U.S. is (706) 643-3675; the conference identification number is 54484614. Listeners are advised to dial in ten minutes prior to the scheduled start time for the conference call. The replay of the conference call will be available for one week beginning August 7, 2008, at 11:30 a.m. Eastern time, and ending August 14, 2008, at 11:59 p.m. Eastern time. You may listen to the replay by dialing within the U.S. (800) 642-1687 or by dialing from outside the U.S. (706) 645-9291. The replay identification number is 54484614.

About the Company

Orthovita is a spine and orthopedic biosurgery company with proprietary biomaterials and biologic technologies for the development and commercialization of synthetic, biologically active, tissue engineering products. We develop and market synthetic-based biomaterials products for use in spine surgery, the repair of fractures and a broad range of clinical needs in the trauma, joint reconstruction, revision and extremities markets. Our near-term commercial business is based on our VITOSS(R) Bone Graft Substitute technology platforms, which are designed to address the non-structural bone graft market by offering synthetic alternatives to the use of autograft or cadaver-based bone material, and VITAGEL(R) Surgical Hemostat, which is an adherent matrix and an impermeable barrier to blood flow. Our longer-term U.S. clinical development program is focused on our internally developed CORTOSS(R) Bone Augmentation Material technology platform, which is primarily designed for injections in osteoporotic spines to treat vertebral compression fractures. We work jointly with Kensey Nash Corporation to develop and commercialize certain products based on our VITOSS platform, we market VITAGEL under a license agreement, we market VITASURE(TM) Absorbable Hemostat under a distribution rights agreement, and we continue to pursue similar relationships with other biomaterials companies.

Disclosure Notice

This press release may contain forward-looking statements regarding Orthovita's current expectations of future events that involve risks and uncertainties, including, without limitation, the development, regulatory clearance or approval, demand and market acceptance of our products, including CORTOSS; the development of our sales network; and other aspects of our business. Such statements are based on management's current expectations and are subject to a number of substantial risks and uncertainties that could cause actual results or timeliness to differ materially from those addressed in the forward-looking statements. Factors that may cause such a difference are listed from time to time in reports filed by the Company with the U.S. Securities and Exchange Commission (SEC), including but not limited to risks described in our most recently filed Form 10-K under the caption "Risk Factors". Further information about these and other relevant risks and uncertainties may be found in Orthovita's filings with the SEC, all of which are available from the SEC as well as other sources. Orthovita undertakes no obligation to publicly update any forward-looking statements.

ORTHOVITA, INC. AND SUBSIDIARIES Summary Financial Information (Unaudited) Statements of Operations Three Months Ended Data: June 30, 2008 2007 ------------ ------------ PRODUCT SALES $19,340,714 100% $14,851,943 100% COST OF SALES 6,355,907 33% 5,073,113 34% ------------ ------- ------------ ------- GROSS PROFIT 12,984,807 67% 9,778,830 66% ------------ ------- ------------ ------- OPERATING EXPENSES: General & administrative expenses 3,072,327 16% 2,836,696 19% Selling & marketing expenses 11,070,617 57% 8,312,483 56% Research & development expenses 2,132,680 11% 1,638,410 11% ------------ ------- ------------ ------- Total operating expenses 16,275,624 84% 12,787,589 86% ------------ ------- ------------ ------- OPERATING LOSS (3,290,817) (17%) (3,008,759) (20%) (less than INTEREST EXPENSE (473,983) (2%) (61,652) 1%) REVENUE INTEREST EXPENSE - - (351,865) (2%) (LOSS) ON SALE OF ASSET (145,983) (1%) - - GAIN ON SALE OF PRODUCT LINE AND RELATED ASSETS - - - - INTEREST INCOME 302,507 2% 252,255 2% ------------ ------- ------------ ------- LOSS BEFORE INCOME TAX (3,608,276) (19%) (3,170,021) (21%) (less than INCOME TAX EXPENSE (14,350) 1%) - - ------------ ------- ------------ ------- NET LOSS $(3,622,626) (19%) $(3,170,021) (21%) ============ ======= ============ ======= NET LOSS PER SHARE, BASIC AND DILUTED $ (0.05) $ (0.05) ============ ============ SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER COMMON SHARE 75,795,861 61,378,088 ============ ============ Statements of Operations Six Months Ended Data: June 30, 2008 2007 ------------ ------------ PRODUCT SALES $35,504,996 100% $28,002,629 100% COST OF SALES 12,168,116 34% 9,782,202 35% ------------ ------- ------------ ------- GROSS PROFIT 23,336,880 66% 18,220,427 65% ------------ ------- ------------ ------- OPERATING EXPENSES: General & administrative expenses 5,530,732 16% 5,308,103 19% Selling & marketing expenses 21,278,992 60% 15,726,623 56% Research & development expenses 3,836,289 11% 3,411,728 12% ------------ ------- ------------ ------- Total operating expenses 30,646,013 86% 24,446,454 87% ------------ ------- ------------ ------- OPERATING LOSS (7,309,133) (21%) (6,226,027) (22%) (less than INTEREST EXPENSE (1,162,182) (3%) (127,549) 1%) REVENUE INTEREST EXPENSE - - (671,494) (2%) (less than (LOSS) ON SALE OF ASSET (145,983) 1%) - - GAIN ON SALE OF PRODUCT LINE AND RELATED ASSETS - - 372,375 (1%) INTEREST INCOME 811,003 2% 538,306 2% ------------ ------- ------------ ------- LOSS BEFORE INCOME TAX (7,806,295) (22%) (6,114,389) (22%) (less than INCOME TAX EXPENSE (28,700) 1%) - - ------------ ------- ------------ ------- NET LOSS $(7,834,995) (22%) $(6,114,389) (22%) ============ ======= ============ ======= NET LOSS PER SHARE, BASIC AND DILUTED $ (0.10) $ (0.10) ============ ============ SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER COMMON SHARE 75,774,893 61,344,966 ============ ============

ORTHOVITA, INC. AND SUBSIDIARIES Summary Financial Information (Unaudited) (Audited) ------------- ----------------- Balance Sheet Data: June 30, 2008 December 31, 2007 ------------- ----------------- Cash and cash equivalents $ 11,878,131 $ 10,185,775 Short-term investments 21,672,895 38,222,113 Accounts receivable, net 9,841,373 8,437,917 Inventories 17,064,516 15,611,769 Other current assets 516,931 633,058 ------------- ----------------- Total current assets 60,973,846 73,090,632 Long-term investments 2,506,230 - Property and equipment, net 10,686,693 8,252,394 License Right Intangible, net 7,724,412 8,149,608 Other assets 742,053 724,504 ------------- ----------------- Total assets $ 82,633,234 $ 90,217,138 ============= ================= Current liabilities $ 10,344,811 $ 11,281,583 Notes payable, net of debt discount 24,016,022 23,895,376 Other long-term liabilities 203,121 510,762 ------------- ----------------- Total liabilities 34,563,954 35,687,721 Total shareholders' equity 48,069,280 54,529,417 ------------- ----------------- $ 82,633,234 $ 90,217,138 ============= ================= Cash Flow Data: Six Months Ended June 30, 2008 2007 ------------- ----------------- Net cash used in operating activities $(10,463,612) $ (8,782,011) ============= ================= Net cash provided by investing activities $ 11,811,737 $ 1,411,852 ============= ================= Net cash provided by (used in) financing activities $ 87,511 $ (149,506) ============= ================= Effect of exchange rate changes on cash and cash equivalents $ 256,720 $ (68,873) ============= =================

SOURCE: Orthovita, Inc.

Orthovita, Inc. Albert J. Pavucek, Jr. Chief Financial Officer 610-640-1775 or 800-676-8482