Bacterin Announces First Quarter 2012 Revenue of $7.8 Million, Up 29% Year-over-Year, on Gross Margins of 76%, and 34% Reduction in Operating Loss Conference Call at 4:30pm ET to Discuss First Quarter 2012 Results

Bacterin Announces First Quarter 2012 Revenue of $7.8 Million,

Up 29% Year-over-Year, on Gross Margins of 76%, and 34% Reduction in Operating Loss

Conference Call at 4:30pm ET to Discuss First Quarter

3, 2012 - Bacterin International Holdings, Inc. (NYSE Amex: BONE), a leader in the development of revolutionary bone graft material

and antimicrobial coatings for medical applications, today announced its financial results for the first quarter ended March 31,

Management Commentary

"First quarter revenue was lower than anticipated, with

6 of our top 10 SKUs on backorder much of the first quarter. We have substantially increased the receipt of donor inventory as

well as production but don't believe it will have a positive impact on revenues until the third quarter of 2012," said

Guy Cook, Chairman and CEO of Bacterin. "We are confident we have overcome the short term production issues, however, when

our sales force is faced with limited access to products, it slows surgeon uptake when the product finally does become available.

Typically, surgeons who currently use the product continue to reorder, but to convert new surgeons, each new surgeon needs to be

approached, use the product in 1 or 2 cases, wait 60-90 days to see if they like the results, before using it in greater volume.

When product is constrained and goes into back order, it delays the uptake, and the growth we've come to expect is pushed

out by a few quarters. We are confident in our long term growth potential based upon our increased production and continuing demand

for our products. We were able to sign up 140 new accounts by the end of the quarter, continuing to build our pipeline, but converting

into meaningful recurring sales will take a little longer than we expected."

"With respect to our hMatrix product, uptake in the wound

care market was slower than expected due to reimbursement issues surrounding its use for the treatment of diabetic foot ulcers,

which we believe will be corrected with the expected issuance of a Q code by January 1, 2013. To address this issue, we have shifted

our manufacturing and marketing focus to address additional markets in sports medicine and reconstructive surgery that we expect

will drive higher sales over the last 3 quarters of 2012."

"A preclinical study recently completed at Hospital for

Special Surgery on our OsteoSelect DBM putty is expected to be a significant driver of sales in the remainder of 2012 and 2013.

OsteoSelect DBM putty proved equivalent to autologous bone graft, which is the current gold standard for spinal fusion, in the

posterolateral intertransverse rabbit model.

We are also expecting data on our coatings in the second half

of this year, as well as independent data on OsteoSponge SC."

Q1 2012 Financial Results

for the quarter was a $7.8 million compared to $9.1 million in the previous quarter and an increase of 29% compared to $6.0 million

in the first quarter of 2011. Excluding the $1.4 million stocking order sale in the fourth quarter of 2011, revenues increased

slightly from $7.7 million to $7.8 million on a sequential basis. The year over year increase was largely the result of

increased sales generated from the Company's direct sales force and independent distributors compared to the first quarter

sales consist primarily of tissue and medical device manufacturing costs. Costs of sales increased by 88% or $871,366

to $1.86 million from $987,356 for the three months ended March 31, 2011. The increase was largely the result of increased costs

associated with our higher sales. As a percentage of tissue sales, cost of tissue sales was 24% of revenues for the first quarter

of 2012 compared to 16% in the comparable prior year period.

Gross profit margin for the quarter was 76%, as compared to

44% in the previous quarter and 84% in the year-ago quarter. The fourth quarter 2011 gross margin figure was negatively impacted

by approximately $1.2 million of nonrecurring charges as well as a lower gross margin on a $1.4 million stocking order sale due

to a large volume pricing discount.

Operating expenses for the quarter totaled $7.2 million, as

compared to $6.7 million in the previous quarter, and $6.9 million in the first quarter of 2011. Operating loss for the quarter

was $1.3 million, compared to $2.7 million in the previous quarter, and $1.9 million in the first quarter of 2011. Net loss was

$1.0 million or $(0.03) per basic share for the quarter. This compares to a net loss of $4.4 million or $(0.11) per basic share

in the previous quarter, and net income in first quarter of 2011 of $4.9 million or $0.13 per basic share.

EBITDA for the quarter totaled a loss of $541,000, compared

an EBITDA loss of $1.5 million for the previous quarter, and an EBITDA loss of $1.2 million for the first quarter of 2011.

Cash and cash equivalents and net accounts receivable was $9.0

million at March 31, 2012, compared to a total of $7.8 million at December 31, 2012.

"We have added a second production shift and, later in

the year, will be expanding the number of clean rooms we devote to high demand products to a total of 13. Our plan is to optimize

production to process less SKUs with a higher concentration of our high demand products, and expect processing capacity to double

from current levels by the end of the year" said Mr. Cook. "In addition, we are also ramping up our donor inventory

levels to eventually support $100 million of annual revenue. There is a lag time with processing throughput since it takes approximately

2-9 months to clear a donor due to related paperwork and laboratory testing results. We believe that product constraints are a

short term issue we have resolved and that the future and long term opportunity for Bacterin products, in multi-billion dollar

addressable markets, remain very strong."

"Because our industry sells product on a consignment basis,

we have poor visibility on reportable revenues until a few weeks after the close of a month which makes it extremely difficult

to provide revenue guidance on a quarterly basis. Based upon production challenges in the fourth quarter of 2011; feedback from

the field with respect to second quarter sales; our decision not to pursue stocking order sales of slow moving inventory included

in prior revenue guidance as well as delays in revenues generated from our hMatrix, we feel it is prudent to revise guidance from

our previously stated expectation of 2012 revenues of $53 million -56 million down to $35 million - 40 million."

Conference Call Details:

Conference Call Details:

Date: Thursday, May 3, 2012

Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time)

Dial-In Number: 1-877-941-1429

International: 1-480-629-9857

Conference ID#: 4535021

The conference call will be broadcast

simultaneously and available for replay here and at the investor section of the company's Web

site at http://www.bacterin.com/index.htm.

Please call the conference telephone number 5-10 minutes prior

to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference

call, please contact Hayden IR at 1-646-755-7412.

A replay of the call will be available after 7:30 p.m. Eastern

time on the same day and until June 3, 2012.

About the Presentation of EBITDA

EBITDA is not a financial measure calculated and presented in

accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income,

operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating

activities as a measure of liquidity. The company defines EBITDA as net income/(loss) from operations before depreciation, amortization

and non-cash stock-based compensation. Other companies (including competitors) may define EBITDA differently. The company presents

EBITDA because management believes it to be an important supplemental measure of performance that is commonly used by securities

analysts, investors and other interested parties in the evaluation of companies in our industry. Management also uses this information

internally for forecasting and budgeting. It may not be indicative of the historical operating results of Bacterin nor is it intended

to be predictive of potential future results. Investors should not consider EBITDA in isolation or as a substitute for analysis

of the company's results as reported under GAAP. See "GAAP to non-GAAP Reconciliation" below for further information

on this non-GAAP measure.

About Bacterin International

Bacterin International

Holdings, Inc. (NYSE Amex: BONE) develops, manufactures and markets biologics products to domestic and international markets. Bacterin's

proprietary methods optimize the growth factors in human allografts to create the ideal stem cell scaffold to promote bone, subchondral

repair and dermal growth. These products are used in a variety of applications including enhancing fusion in spine surgery, relief

of back pain, promotion of bone growth in foot and ankle surgery, promotion of cranial healing following neurosurgery and subchondral

repair in knee and other joint surgeries.