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Alphatec Spine Announces Fourth Quarter and Full Year 2012 Revenue and Financial Results



Alphatec Spine Announces Fourth Quarter and Full Year 2012 Revenue and
Financial Results

CARLSBAD, Calif., Feb. 28, 2013 (GLOBE NEWSWIRE) -- Alphatec Holdings, Inc.
(Nasdaq:ATEC), the parent company of Alphatec Spine, Inc., announced today
financial results for the fourth quarter and fiscal year ended December 31,
2012.

"On behalf of the entire global Alphatec Spine team, I am pleased to report a
strong fourth quarter and a great finish to 2012," said Les Cross, Chairman
and Chief Executive Officer of Alphatec Spine. "Since I became CEO last year,
we have made significant changes to the organization through investments in
leadership talent, operational process improvements, product licenses and an
acquisition, which collectively contributed to our positive fourth quarter
result and should provide a strong foundation going forward.

"It was a challenging year for the entire organization to undertake Alphatec's
transformation, but with much of the heavy lifting now behind us our focus is
on performance execution in 2013. The Company's employees have fully embraced
a culture of continuous improvement to strengthen our competitive position.

"I remain excited and confident about the Company's potential to accelerate
revenue growth and profitability in U.S. and international markets in 2013,
driven by the combination of a strong pipeline of new products, new surgeon
conversions as a result of the Phygen acquisition, a more seasoned U.S.
commercial organization, and expanded penetration in international markets. We
believe that 2013 should be an exciting year at Alphatec Spine."

"As a result of our efforts in 2012, we have strong fourth quarter results to
report," Mr. Cross continued, "Alphatec posted global revenue growth of almost
7% compared to the fourth quarter of 2011, or 8% on a constant currency basis.
Furthermore, this result was driven by solid execution from both our U.S. and
International businesses. This is a substantially improved result over the
previous three quarters of 2012.

"Our U.S. business grew 4% in the fourth quarter of 2012, as compared to the
fourth quarter of 2011, driven by another great quarter from our Biologics
business and from the Company's acquisition of Phygen, which we completed in
November of 2012. Biologics and Phygen should represent two important growth
engines for Alphatec in 2013.

"Our international business reported growth in the fourth quarter of almost
12% compared to the fourth quarter of 2011, or approximately 16% on a constant
currency basis. International revenue levels in the fourth quarter represented
a new record for Alphatec, and were driven by growth in Japan and Latin
America.

"With respect to our Biologics portfolio and specifically PureGen, our stem
cell product, we wanted to provide an update related to the product's status
in the marketplace. A formal Request for Designation has been submitted to the
FDA to state our case that PureGen should be classified as a tissue-based
product and not a biologic product. We have also been engaged in discussions
with the FDA to understand the structure of a clinical trial that would be
required to obtain regulatory approval for PureGen should it not be classified
as a tissue-based product.

"Just recently we became aware that the FDA conducted site inspections at each
of the two vendors that are collectively responsible for the procurement,
processing, storage and shipment of PureGen. The FDA subsequently issued
several Form 483 observations related to PureGen. While the product has been
implanted in over 3,500 patients with no adverse event related to the product,
we have voluntarily taken the prudent approach to not ship any additional
product until the observations have been addressed to the FDA's satisfaction,
which we hope will take less than one month.

"While we continue to maintain a collaborative relationship with the FDA
regarding the classification of PureGen, given the ongoing uncertainty with
the regulatory status of the product and the Form 483 observations, we are
expecting only modest contributions from PureGen in our 2013 revenue guidance.
The potential impact from the loss of PureGen for the remainder of 2013 is
approximately $6 million."

Fourth Quarter 2012 Financial Results

Consolidated net revenues for the fourth quarter of 2012 were $52.7 million,
representing growth of approximately 6.5 percent compared to $49.5 million
reported for the fourth quarter of 2011, or 7.9 percent on a constant currency
basis.

U.S. net revenues for the fourth quarter of 2012 were $34.0 million,
representing growth of approximately 4.0 percent, compared to $32.8 million
reported for U.S. net revenues in the fourth quarter of 2011. U.S. net
revenues were driven by strong sales of the Company's Biologics products and
from revenues related to the Company's acquisition of Phygen, which
contributed $1.2 million in revenue following the closing in November of 2012.

International net revenues for the fourth quarter of 2012 were $18.7 million,
representing growth of 11.6 percent compared to $16.8 million reported for the
fourth quarter of 2011, or 15.7 percent on a constant currency basis.
International sales growth continues to be driven by strong sales in Japan and
Latin America.

Gross profit and gross margin for the fourth quarter of 2012 were $32.1
million and 60.9 percent, respectively, compared to $24.9 million and 50.3
percent, respectively, for the fourth quarter of 2011. The Company's ongoing
efforts to improve manufacturing efficiencies continued to yield benefits in
the quarter, however, gross profit and gross margin in the fourth quarter of
2012 included charges totaling approximately $1.3 million associated with the
write-off certain instrument sets and inventory in connection with the ongoing
product rationalization strategy for Scient'x's and its subsidiary's product
lines. This negative impact represented 250 basis points of gross margin.
Pricing remained relatively stable in the quarter and both product and
regional mix were less of an impact than observed in previous quarters.
Additionally, gross profit in the fourth quarter of 2012 was reduced by $1.0
million for the amortization of a licensed intangible asset as part of the
Cross Medical settlement described below.

As previously reported in January 2012, the Company announced that it had
reached a global settlement agreement with Cross Medical Products regarding a
license agreement dispute initiated by Cross Medical and a patent infringement
suit initiated by the Company. As part of the settlement, the Company agreed
to pay Cross Medical $18 million. An initial payment of $5 million dollars was
made in January 2012 and the Company will make thirteen payments of $1 million
per quarter thereafter, starting August 1, 2012. From an accounting
perspective, the Company expensed $9.8 million in the fourth quarter of 2011,
which was charged to operating expenses as a legal settlement adjustment. With
respect to the remaining $8.2 million, $8.0 million will be recorded as a
licensed intangible asset to be amortized over 2012 and the first three
quarters of 2013, plus imputed interest of $0.2 million.

Total operating expenses for the fourth quarter of 2012 were $36.1 million, or
68.5 percent of revenues, reflecting a decrease of approximately $5.3 million,
compared to the fourth quarter of 2011. The fourth quarter of 2011 included
$9.9 million in non-recurring expenses including $9.8 million expensed in
connection with the Cross Medical settlement noted above. Operating expenses
for the fourth quarter of 2012 included $1.1 million of transaction costs
associated with the acquisition of Phygen and certain IPR&D expenses, which
are excluded from adjusted EBITDA. Phygen business activities contributed $1.0
million of additional expenses and ongoing litigation expenses associated with
current matters accounted for $1.7 million.

GAAP Net loss for the fourth quarter of 2012 was $5.4 million, or ($0.06) per
share (basic and diluted), compared to a net loss of $16.0 million, or ($0.18)
per share (basic and diluted) for the fourth quarter of 2011.

Adjusted EBITDA in the fourth quarter of 2012 was $5.0 million, or 9.4 percent
of revenues, compared to ($1.2) million reported for the fourth quarter of
2011. Adjusted EBITDA represents net income or loss excluding the effects of
interest, taxes, depreciation, amortization, stock-based compensation, and
other non-recurring items, such as restructuring expenses, IPR&D and
transaction-related expenses.

Cash and cash equivalents were $22.2 million at December 31, 2012, compared to
$20.7 million reported at December 31, 2011.

2012 Financial Guidance

Financial guidance for 2013 is as follows:

The Company expects revenue for 2013 to be in a range between $204 million and
$210 million, or approximately 4 percent to 7 percent growth over
2012. Adjusted EBITDA guidance will be in the range of $24 million to $27
million, or approximately 21 percent to 36 percent growth over 2012,
representing approximately 12 percent and 13 percent of revenue. As previously
stated, this guidance assumes only modest contributions for PureGen.

Conference Call Information

Alphatec Spine has scheduled a conference call for today, February 28, 2013,
at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss its fourth
quarter 2012 financial results. The conference call ID is 99196876 and the
dial-in number is (877) 556-5251. A live webcast of the conference call will
be available online from the investor relations section of the Alphatec Spine
website at www.alphatecspine.com. The webcast will be recorded and will remain
available on the investor relations section of Alphatec Spine's website for at
least 30 days.

About Alphatec Spine

Alphatec Spine, Inc., a wholly owned subsidiary of Alphatec Holdings, Inc., is
a medical device company that designs, develops, manufactures and markets
products and solutions for the treatment of spinal disorders associated with
trauma, congenital deformities, disease and degeneration. The Company's
mission is to combine innovative, surgeon-inspired solutions that will help
improve outcomes and patient's quality of life, with world-class customer
service. To achieve its mission, the Company strives to commercialize new and
innovative devices and technologies, including improved minimally invasive
surgery (MIS) products and techniques and integrated biologics solutions. The
Company markets its products and the products of its affiliates in the U.S.
and in over 50 countries internationally via a direct sales force and
independent distributors. Additional information can be found at
www.alphatecspine.com.

The Alphatec Holdings, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=3520

Non-GAAP Information

Non-GAAP earnings and earnings per share included in this press release are
non-GAAP (generally accepted accounting principles) financial measures that
represents net income (loss) excluding the effects of amortization and other
non-recurring or expense items, such as loss on extinguishment of debt,
restructuring expenses and transaction-related expenses. Management does not
consider these expenses when it makes certain evaluations of the operations of
the Company. Non-GAAP earnings and earnings per share, as defined above, may
not be similar to non-GAAP earnings measures used by other companies and is
not a measurement under GAAP. Adjusted EBITDA included in this press release
is a non-GAAP financial measure that represents net income (loss) excluding
the effects of interest, taxes, depreciation, amortization, stock-based
compensation expenses, and other non-recurring income or expense items, such
as severance expense and transaction-related expenses. Adjusted EBITDA, as
defined above, may not be similar to adjusted EBITDA measures used by other
companies and is not a measurement under GAAP. Though management finds
non-GAAP-based earnings or loss and EBITDA useful for evaluating aspects of
the Company's business, its reliance on these measures is limited because
excluded items often have a material effect on the Company's earnings and
earnings per common share calculated in accordance with GAAP. Therefore,
management uses non-GAAP adjusted EBITDA in conjunction with GAAP earnings and
earnings per common share measures. The Company believes that non-GAAP
adjusted EBITDA provides investors with an additional tool for evaluating the
Company's core performance, which management uses in its own evaluation of
continuing operating performance, and a base-line for assessing the future
earnings potential of the Company. While the GAAP results are more complete,
the Company prefers to allow investors to have supplemental metrics since,
with reconciliation to GAAP, they may provide greater insight into the
Company's financial results.

Forward Looking Statements

This press release may contain "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 that involve risks and
uncertainty. Such statements are based on management's current expectations
and are subject to a number of risks and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. Alphatec Spine cautions investors that there can be no assurance
that actual results or business conditions will not differ materially from
those projected or suggested in such forward-looking statements as a result of
various factors. Forward looking statements include references to Alphatec
Spine's 2013 revenue, adjusted EBITDA, and free cash flow projections; the
success of the Company's initiatives from 2012 and 2013 to drive global sales
growth, increase margins and increase operating efficiencies, the ability to
achieve surgeon conversions in connection with the Phygen acquisition and
reductions in the Company's manufacturing costs and operating expenses. The
words "believe," "will," "should," "expect," "intend," "estimate" and
"anticipate," variations of such words and similar expressions identify
forward-looking statements, but their absence does not mean that a statement
is not a forward-looking statement.  The important factors that could cause
actual operating results to differ significantly from those expressed or
implied by such forward-looking statements include, but are not limited to;
the success of the integration of the Phygen acquisition and realize the
benefits of such transaction; the uncertainty of success in developing new
products or products currently in Alphatec Spine's pipeline; the uncertainties
regarding the ability to successfully license or acquire new products, and the
commercial success of such products; uncertainties regarding the regulatory
status of the Company's PureGen product, and the ability to keep such product
on the market; failure to achieve acceptance of Alphatec Spine's products by
the surgeon community, including the products discussed in this press release;
failure to successfully implement streamlining activities to create
anticipated savings; failure to successfully begin in-house manufacturing of
certain products; failure to obtain FDA clearance or approval for new
products, including the products discussed in this press release, or
unexpected or prolonged delays in the process; Alphatec Spine's ability to
develop and expand its U.S. and/or global revenues; continuation of favorable
third party payor reimbursement for procedures performed using Alphatec
Spine's products; unanticipated expenses or liabilities or other adverse
events affecting cash flow or Alphatec Spine's ability to successfully control
its costs or achieve profitability; uncertainty of additional funding;
Alphatec Spine's ability to compete with other competing products and with
emerging new technologies; product liability exposure; failure to meet all
financial obligations in the Cross Medical Settlement or its credit agreement;
patent infringement claims and claims related to Alphatec Spine's intellectual
property. Please refer to the risks detailed from time to time in Alphatec
Spine's SEC reports, including its Annual Report Form 10-K for the year ended
December 31, 2011, filed on March 5, 2012 with the Securities and Exchange
Commission, as well as other filings on Form 10-Q and periodic filings on Form
8-K. Alphatec Spine disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new information, future
events, or otherwise, unless required by law.

                                                          
                                                          
ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands - unaudited) 
                                                          
                                                          
                                            December 31, December 31,
                                            2012         2011
ASSETS                                                    
Current assets:                                           
 Cash and cash equivalents                   $ 22,241     $ 20,666
 Accounts receivable, net                   41,012       41,711
 Inventories, net                           49,855       45,916
 Prepaid expenses and other current assets  5,953        6,888
 Deferred income tax assets                  2,991        1,248
Total current assets                        122,052      116,429
                                                          
Property and equipment, net                 30,403       31,476
Goodwill                                    180,838      168,609
Intangibles, net                            46,856       47,144
Other assets                                1,978        3,034
Total assets                                 $ 382,127    $ 366,692
                                                          
LIABILITIES AND STOCKHOLDERS' EQUITY                      
Current liabilities:                                      
 Accounts payable                            $ 15,237     $ 17,390
 Accrued expenses                           38,490       32,583
 Deferred revenue                           1,361        2,768
 Current portion of long-term debt          1,700        4,396
Total current liabilities                   56,788       57,137
                                                          
 Total long term liabilities                 55,920       40,624
 Redeemable preferred stock                  23,603       23,603
 Stockholders' equity                        245,816      245,328
Total liabilities and stockholders' equity   $ 382,127    $ 366,692

                                                                    
                                                                    
ALPHATEC HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts - unaudited) 
                                                                    
                                                                    
                                Three Months Ended     Year Ended
                                December 31,           December 31,
                                2012       2011        2012        2011
                                                                    
Revenues                         $ 52,743   $ 49,510    $ 196,278   $ 197,711
Cost of revenues                 19,988     24,209      70,761      79,168
Amortization of acquired         635        390         1,749       1,613
intangible assets
 Total cost of revenues         20,623     24,599      72,510      80,781
Gross profit                    32,120     24,911      123,768     116,930
                                                                    
Operating expenses:                                                 
 Research and development        3,883      3,235       14,886      16,888
 In-process research and         341        --          341         -- 
development
 Sales and marketing             19,335     18,124      75,177      75,189
 General and administrative     11,226     9,660        39,939     36,367
 Amortization of acquired       605        523          2,180      2,152
intangible assets
 Transaction related costs      718         --          1,082       -- 
 Restructuring expenses          --         57          --         1,050
 Litigation settlement           --         9,800       --         9,800
 Total operating expenses       36,108     41,399      133,605     141,446
Operating loss                  (3,988)    (16,488)    (9,837)     (24,516)
 Interest and other income      (1,767)    (941)       (6,781)     (2,172)
(expense), net
Loss from continuing operations (5,755)    (17,429)    (16,618)    (26,688)
before taxes
 Income tax benefit              (400)      (1,463)     (1,159)     (4,507)
Net loss                         $ (5,355)  $ (15,966)  $ (15,459)  $ (22,181)
                                                                    
Net loss per common share:                                          
 Basic and diluted net loss per  $ (0.06)   $ (0.18)    $ (0.17)    $ (0.25)
share
                                                                    
Weighted-average shares - basic 93,209     88,918      90,218      88,798
and diluted

                                                                    
                                                                    
ALPHATEC HOLDINGS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share amounts - unaudited) 
                                                                    
                                                                    
                                Three Months Ended     Year Ended
                                December 31,           December 31,
                                2012       2011        2012        2011
                                                                    
Operating loss, as reported      $ (3,988)  $ (16,488)  $ (9,837)   $ (24,516)
Add back:                                                           
 Depreciation                    3,647      3,684       14,184      14,789
 Amortization of intangible      1,481      340         5,679       1,322
assets
 Amortization of acquired        1,241      913         3,929       3,765
intangible assets
Total EBITDA                    2,381      (11,551)    13,955      (4,640)
                                                                    
Add back significant items:                                         
 Stock-based compensation        1,330      497         3,540       2,425
 In-process research and         341        --          341         --
development
 Acquisition-related inventory   191        --          191         751
step-up
 Transaction related expenses    718        --          1,082       -- 
 Restructuring and other         --         57          794         1,050
expenses
 Litigation settlement           --         9,800       --          9,800
                                                                    
EBITDA, as adjusted for          $ 4,961    $ (1,197)   $ 19,903    $ 9,386
significant items
                                                                    
                                                                    
Net loss, as reported            $ (5,355)  $ (15,966)  $ (15,459)  $ (22,181)
Add back:                                                           
 In-process research and         341        --          341         --
development
 Acquisition-related inventory   191        --          191         751
step-up
 Amortization of acquired        1,241      913         3,929       3,765
intangible assets
 Amortization of intangible      1,481      340         5,679       1,322
assets
 Loss on extinguishment of debt  --         --          2,910       -- 
 Transaction related expenses    718        --          1,082       -- 
 Restructuring and other         --         57          794         1,050
expenses
 Litigation settlement           --         9,800       --          9,800
                                                                    
Net loss, as adjusted for        $ (1,383)  $ (4,856)   $ (533)     $ (5,493)
significant items
                                                                    
                                                                    
Net loss per common share -      $ (0.06)   $ (0.18)    $ (0.17)    $ (0.25)
basic and diluted
Add back:                                                           
 In-process research and         0.00       --          0.00        -- 
development
 Acquisition-related inventory   0.00       --          0.00        0.01
step-up
 Amortization of acquired        0.01       0.01        0.04        0.04
intangible assets
 Amortization of intangible      0.02       0.00        0.06        0.01
assets
 Loss on extinguishment of debt  --         --          0.03        -- 
 Transaction related expenses    0.01       --          0.01        -- 
 Restructuring and other         --         0.00        0.01        0.01
expenses
 Litigation settlement           --         0.11        --          0.11
                                                                    
 Net loss per common share -
basic and diluted, as adjusted   $ (0.01)   $ (0.05)    $ (0.01)    $ (0.06)
for significant items
                                                                    
Weighted-average shares - basic 93,209     88,918      90,218      88,798
and diluted

                                                                 
                                                                 
ALPHATEC HOLDINGS, INC.
RECONCILIATION OF GEOGRAPHIC SEGMENT REVENUES AND GROSS PROFIT
(in thousands, except percentages - unaudited) 
                                                                 
                                                                 
                                                                 
                           Three Months Ended                   Impact from 
                           December 31,                         Foreign
                           2012         2011         % Change   Currency
                                                                 
Revenues by geographic                                           
segment
 U.S.                       $ 34,046     $ 32,752    4.0%       0.0%
 International             18,697       16,758       11.6%      -3.7%
Total revenues              $ 52,743     $ 49,510    6.5%       -1.3%
                                                                 
Gross profit by geographic                                       
segment
 U.S.                       $ 22,575     $ 18,728                
 International             9,545        6,183                    
Total gross profit          $ 32,120     $ 24,911                
                                                                 
Gross profit margin by                                           
geographic segment
 U.S.                      66.3%        57.2%                    
 International             51.1%        36.9%                    
Total gross profit margin  60.9%        50.3%                    
                                                                 
                                                                 
                                                                 
                           Year Ended                           Impact from
                           December 31,                         Foreign
                           2012         2011         % Change   Currency
                                                                 
Revenues by geographic                                           
segment
U.S.                        $ 130,476    $ 133,824   -2.5%      0.0%
International              65,802       63,887       3.0%       -3.7%
Total revenues              $ 196,278    $ 197,711   -0.7%      -1.2%
                                                                 
Gross profit by geographic                                       
segment
U.S.                        $ 89,360     $ 87,085                
International              34,408       29,845                   
Total gross profit          $ 123,768    $ 116,930               
                                                                 
Gross profit margin by                                           
geographic segment
U.S.                       68.5%        65.1%                    
International              52.3%        46.7%                    
Total gross profit margin  63.1%        59.1%                    
                                                                 
Footnotes:                                                       
1) The impact from foreign currency represents the percentage change in 2012
revenues due to the change in foreign exchange rates for the periods
presented.

CONTACT: Investor/Media Contact:
        
         Mark Francois
         Senior Director, Investor Relations
         Alphatec Spine, Inc.
         (760) 494-6610
         mfrancois@AlphatecSpine.com

Alphatec Spine
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