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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-K
 
    /X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
       OF THE SECURITIES EXCHANGE ACT OF 1934
 
     For the fiscal year ended June               Commission file Number 0-26234
                30, 1997
 
                            ------------------------
 
                             METRA BIOSYSTEMS, INC.
             (Exact name of Registrant as specified in its charter)
 
               CALIFORNIA                                   33-0408436
      (State or other jurisdiction                       (I.R.S. Employer
          of incorporation or                         Identification Number)
             organization)
 
              265 NORTH WHISMAN ROAD, MOUNTAIN VIEW, CA 94043-3911
             (Address of Registrant's principal executive offices)
 
                                 (650) 903-9100
              (Registrant's telephone number including area code)
 
        Securities registered pursuant to Section 12(b) of the Act: NONE
 
          Securities registered pursuant to Section 12(g) of the Act:
                         COMMON STOCK, $.001 PAR VALUE
                        PREFERRED SHARE PURCHASE RIGHTS
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  /X/ Yes  / / No.
 
    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K  / /
 
    At August 30, 1997 there were 12,633,059 shares of Common Stock outstanding.
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $22,161,706 based upon the closing price of the Common Stock at
August 30, 1997. Shares of Common Stock held by each officer and director and
each person who owns 5% or more of the outstanding Common Stock have been
excluded from this computation in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the Proxy Statement of Registrant for the 1997 Annual Meeting of
Shareholders are incorporated in Part III of this Form 10-K.
 
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                             METRA BIOSYSTEMS, INC.
                                     INDEX
 
<TABLE>
<S>        <C>                                                                           <C>
PART I.
 
Item 1.    Business....................................................................          3
Item 2.    Properties..................................................................         21
Item 3.    Legal Proceedings...........................................................         21
Item 4.    Submission of Matters to a Vote of Security Holders.........................         21
 
PART II.
 
Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters.......         22
Item 6.    Selected Financial Data.....................................................         22
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of
             Operation.................................................................         23
Item 8.    Financial Statements and Supplementary Data.................................         28
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial
             Disclosure................................................................         48
 
PART III.
 
Item 10.   Directors and Executive Officers of the Registrant..........................         48
Item 11.   Executive Compensation......................................................         48
Item 12.   Security Ownership of Certain Beneficial Owners and Management..............         48
Item 13.   Certain Relationships and Related Transactions..............................         49
 
PART IV.
 
Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K............         49
           Signatures..................................................................         53
</TABLE>
 
                                       2
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                             INTRODUCTORY STATEMENT
 
    EXCEPT FOR HISTORICAL INFORMATION CONTAINED IN THIS ANNUAL REPORT ON FORM
10-K, THE MATTERS DISCUSSED HEREIN ARE FORWARD-LOOKING STATEMENTS THAT ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE PROJECTED. THESE RISKS AND UNCERTAINTIES INCLUDE,
BUT ARE NOT LIMITED TO, THE RISK THAT THE COMPANY'S PRODUCTS WILL NOT ACHIEVE
MARKET ACCEPTANCE, THE COMPANY'S RELIANCE UPON COLLABORATIVE RELATIONSHIPS AND
THE INTENSE COMPETITION IN THE MARKET FOR BIOCHEMICAL MARKERS, AS WELL AS THE
OTHER RISKS AND UNCERTAINTIES DESCRIBED HEREIN, UNDER THE HEADING "RISK FACTORS"
IN THE COMPANY'S PROSPECTUSES DATED APRIL 23, 1996 AND JUNE 30, 1995,
RESPECTIVELY, DELIVERED IN CONNECTION WITH THE COMPANY'S PUBLIC OFFERINGS, AND
AS DESCRIBED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE
30, 1996, AND OTHER RISKS INCLUDED FROM TIME TO TIME IN THE COMPANY'S OTHER SEC
REPORTS AND PRESS RELEASES, COPIES OF WHICH ARE AVAILABLE FROM THE COMPANY UPON
REQUEST. THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN. THIS REPORT ON FORM 10-K INCLUDES TRADEMARKS OF
COMPANIES OTHER THAN THE COMPANY.
 
                                     PART I
 
ITEM 1. BUSINESS
 
    Metra Biosystems, Inc. (the "Company" or "Metra") is a leader in developing
and commercializing diagnostic products for the detection and management of
metabolic bone diseases and disorders. The Company's strategy is to offer a
portfolio of diagnostic products that will provide physicians with comprehensive
clinical information regarding the metabolism of bone and other connective
tissues. The Company has developed and is currently marketing for either
research use or clinical use two immunodiagnostic tests to assess bone
resorption, two immunodiagnostic tests to assess bone formation and one
immunodiagnostic test to assess bone growth disorders. In addition, the Company
is currently developing a portable ultrasound device designed to assess bone
fragility, a bone-resorption test for use in the physicians offices, a
biochemical test to detect bone cartilage disorders, serum versions of its
Pyrilinks-Registered Trademark--D and Pyrilinks-Registered Trademark- bone
resorption tests (currently urine based), and other biochemical tests to detect
bone and joint disorders.
 
BUSINESS STRATEGY
 
    The Company is a leader in developing and commercializing innovative
diagnostic products for the detection and management of metabolic bone diseases
and disorders. The Company's general business strategy is comprised of certain
key elements: first, the continual development of new diagnostic products to
complement the Company's existing products; second, the establishment of
collaborative relationships with corporate partners for co-promotion (medical
education and awareness); third, the development of partnerships to maximize
distribution capabilities with established diagnostic companies; and fourth, the
expansion of the Company's own direct sales and distribution capabilities.
 
    During fiscal 1997 a number of significant events which support the
execution of the four basic elements of the Company's business strategy
occurred, including:
 
    - The establishment of a marketing and co-promotion alliance in the United
      States with Berlex Laboratories ("Berlex"), a provider of female
      healthcare products including hormone replacement products, and Norland
      Medical Systems, a provider of imaging systems for bone density
      measurement. This alliance will utilize the detail pharmaceutical sales
      force of Berlex to promote all three companies' products to OB/GYNs.
 
    - The establishment of a marketing alliance in the United States with
      Mission Pharmacal, a provider of calcium supplements; and a national
      supplier of laboratory services. The alliance will focus on educating
      consumers about Metra's bone resorption products and Mission Pharmacal's
      calcium supplements as well as provide information regarding where to
      obtain laboratory testing.
 
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    - The worldwide launch of the Company's lead product for bone resorption,
      Pyrilinks-D, on the automated immunoassay testing systems of Chiron
      Diagnostics and Diagnostic Products Corporation.
 
    - One of the Company's diagnostic partners in Japan, Sumitomo
      Pharmaceuticals, obtained regulatory approval for clinical use of the
      Company's Pyrilinks-D test for bone resorption in the Japanese market.
 
    - In January 1997, the American Medical Association ("AMA") published a CPT
      code to facilitate the reimbursement of the Company's Pyrilinks-D test.
      Subsequently, certain medical carriers are starting to establish
      reimbursement levels.
 
    The key elements of the Company's strategy are based upon a premise that
currently only a small percentage of the population at risk for certain bone and
connective tissue diseases and disorders, such as osteoporosis, rheumatoid
arthritis (RA), and osteo arthritis (OA), are diagnosed early enough for
preventative treatment to be effective. The Company believes that the historical
lack of consistent therapeutic intervention can be traced in part to the limited
availability of timely, cost-effective and accurate methods to detect and
monitor these diseases. The Company believes the demand for its products will be
driven in part by physicians' need to easily, inexpensively and accurately (i)
identify those persons most at risk before significant onset of these diseases,
(ii) quantify the parameters of each patient's disease progression, (iii)
determine therapeutic dosage and duration of therapy and (iv) monitor the
effectiveness of, and compliance with, prescribed therapies.
 
OSTEOPOROSIS
 
    The most widespread metabolic bone disease is osteoporosis, a disorder
characterized by a decrease in bone mass that leads to increased susceptibility
to fractures, particularly those of the hip, spine and wrist. There are two
major types of osteoporosis. The most common type is primary osteoporosis, which
includes post-menopausal osteoporosis, resulting from an estrogen deficiency in
women, and senile osteoporosis, an age-related condition primarily affecting men
and women over age 75. Secondary osteoporosis occurs as a side effect of some
medications, or as a consequence of another disease that causes a decrease in
bone mass.
 
    Osteoporosis is often called the "silent disease" because the process of
bone loss causes no physical symptoms. In many cases, doctors and patients are
not aware of the problem until certain bones in the skeletal system have become
so weak that a sudden strain, bump, or fall causes a fracture. If diagnosed
early enough, the rate of bone loss can be reduced using one or a combination of
drug therapies, dietary supplements, or changes in lifestyle. Consequently,
diagnosis of bone loss and preventive intervention is important for a physician
to develop an effective care plan for the patient.
 
    According to the National Osteoporosis Foundation ("NOF"), osteoporosis
afflicts over 25 million Americans and over 200 million people worldwide. In the
United States, approximately 1.5 million osteoporosis-related fractures occur
each year, including more than 250,000 hip fractures, 500,000 vertebral
fractures and 240,000 wrist fractures. For Caucasian women, it is estimated that
the risk of hip fractures approximates the combined risks of breast, endometrial
and ovarian cancers. In addition, approximately one in three women over age 65
will suffer vertebral fractures. By age 75, approximately one-third of all men
will also be affected by osteoporosis. Industry studies estimate that the
lifetime risk of hip fracture in men approximates the risk of prostate cancer.
 
    In the United States, annual cost to the Medicare system to treat fractures
among older adults in 1995 was $13.8 billion. The most severe
osteoporosis-related fracture is that of the hip. Over 95% of
osteoporosis-related hip fractures require hospitalization, between 12% and 20%
result in fatality from other health complications arising from the fractures
and half of the patients who survive are unable to walk
 
                                       4
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unassisted for the rest of their lives. Another 25% are confined to long-term
care under supervised conditions.
 
OTHER BONE-RELATED DISEASES
 
    In addition to developing diagnostic tests to assess osteoporosis, assays
for a number of other diseases that can adversely affect bone remodeling (a
metabolic process which consists of bone formation and resorption or loss),
including Paget's disease of bone, cancers that metastasize to bone,
hyperthyroidism, hyperparathyroidism, osteoarthritis, and growth hormone
deficiency are also being developed. Unlike osteoporosis, these diseases do have
physical symptoms that may alert a physician to the possibility of bone loss
and, accordingly, the need to monitor the bone remodeling process with
diagnostic tests.
 
THERAPIES FOR OSTEOPOROSIS
 
    During the past several decades, a number of therapies have been developed
to address bone diseases and disorders. Most of these are prescription
therapies, including hormone replacement therapy ("HRT"), calcitonins and
bisphosphonates, and are focused on preventing further bone loss rather than
systemically forming new bone. Other products include dietary supplements that
are available over-the-counter, such as calcium and vitamin D.
 
    The Company believes the market for drugs to treat osteoporosis will grow as
a result of several factors, including worldwide aging of the population,
heightened public awareness of osteoporosis, FDA approval of new therapeutics,
and the development and availability of effective diagnostic tests.
 
        HORMONE REPLACEMENT THERAPY.  Hormone replacement therapies, such as
    estrogen and progestin, are the most frequently prescribed drugs given to
    alleviate symptoms in post-menopausal women. HRT products act to decrease
    bone loss (are anti-resorptive) and are also approved for preventive
    treatment of osteoporosis. There are a number of estrogen products currently
    approved by the FDA and available worldwide for use in preventing or
    managing osteoporosis, including Berlex Laboratories' Climara, Wyeth-Ayerst
    Laboratories' Premarin, Ciba-Geigy Ltd.'s Estraderm, and Bristol-Myers
    Squibb Company's Estrace. In 1994, total sales of hormone replacement
    therapies, including oral, transdermal, and other formulations, were in
    excess of $1.5 billion in the United States.
 
        CALCITONINS.  Calcitonin acts to slow bone resorption and may be a
    viable substitute for estrogen as an anti-resorptive drug, especially in
    male patients or in those female patients who do not take hormone
    replacement therapy. In the United States, Sandoz Ltd.'s Miacalcin and
    Rhone-Poulenc Rorer Inc.'s Calcimar are FDA-approved calcitonin products.
 
        BISPHOSPHONATES.  Bisphosphonates are approved for the prevention and
    treatment of osteoporosis. Fosamax, a bisphosphonate from Merck & Co., Inc.
    was approved in late 1995 for the treatment of patients with low bone
    mineral density, and in 1997 expanded the claims to prevention of bone loss.
    Additionally, Didronel, a bisphosphonate from The Procter & Gamble Company,
    is currently approved for use in treating Paget's disease. Several next
    generation bisphosphonates are in various stages of development.
 
        OTHERS.  Other products used for the prevention of bone loss include
    vitamin D and calcium supplements such as Citracal, a leading calcium
    supplement from Mission Pharmacal. In addition, injectible vitamin D
    metabolites are a prescribed therapy for preventing bone loss that are
    widely used in Japan but are not approved in the United States. There are a
    number of other new therapies under development, including estrogen analogs
    designed to minimize the side effects of HRT and slow release sodium
    fluoride, which is believed to increase bone mineral density.
 
                                       5
<PAGE>
OSTEOPOROSIS-RELATED DIAGNOSTICS
 
    Diagnostics for bone health are based upon two paradigms; first, imaging
technologies which provide a primary assessment of bone density, commonly
referred to as the STATE of bone health; and second, biochemical tests which
provide real time information on the metabolic process of bone resorption and
formation, or RATE of change. The Company believes that as the medical
profession becomes more aware of the diagnostics and therapies available for
bone health, and consumers understand the benefits of early assessment of bone
health, the two types of diagnostics will provide highly complementary
information referred to as the "rate and state".
 
    IMAGING TECHNOLOGIES
 
    Imaging technologies provide varying degrees of sensitivity for the
assessment of bone density and have traditionally been based on x-ray
technology. The most advanced imaging technique currently available is Dual
Energy X-ray Absorptiometry (DXA) and can be performed in whole body scans or in
partial or peripheral measurements (such as the forearm, wrists, heel bone,
etc).
 
    Recently, additional technologies, such as ultrasound, have been developed
that have the potential to be less expensive than DXA, do not involve radiation,
and may provide additional diagnostic information concerning bone structure and
quality.
 
    BIOCHEMICAL TESTS
 
    Biochemical tests have been developed that can be used to assess the dynamic
rates of bone resorption and bone formation. Specifically, they measure certain
by-products of the bone remodeling process and through clinical trials, the
manufacturers of such tests have established normal and abnormal ranges.
 
    The Company believes its biochemical tests can be particularly useful at the
early stages of accelerated bone loss for determining individuals "at risk", and
upon the initiation of therapeutic intervention, to monitor the effectiveness of
the particular therapy.
 
ARTHRITIS
 
    Arthritis is generally characterized by joint pain and swelling. There are
more than 100 types of arthritis affecting approximately 40 million people in
the United States. The two most prevalent forms of arthritis are osteoarthritis
("OA") and rheumatoid arthritis ("RA"). Although the causes of OA and RA are
very different, both diseases result in the common problem of joint destruction.
 
    Osteoarthritis is the most common form of arthritis. The prevalence of
osteoarthritis among individuals aged 45 to 50 is estimated to be approximately
30%, and approaches a 60% prevalence rate for individuals over 65 years of age.
Osteo, or degenerative, arthritis is a disease believed to result from the
breakdown of cartilage in a specific joint or joints and bone proximate to
joints. Osteoarthritis can affect any type of joint, but the disease most
commonly occurs in weight bearing joints such as the hips, knees and spine.
 
    Rheumatoid arthritis is the second most common form of arthritis. In North
America, it is estimated that two million people are afflicted with this
condition, and in excess of $200 million dollars is spent each year for the care
and treatment of the disease. Rheumatoid arthritis can occur at any age, but the
onset of the disease typically peaks between ages 35 and 45. This disease is
thought to be a systemic autoimmune disorder in which the synovium becomes
inflamed, causing hot, tender, and swollen joints. Only the freely mobile joints
such as hands, feet and knees are affected by this form of arthritis. As the
disease progresses, the cartilage and eventually the bone are destroyed by
various autoimmune-mediated enzymatic responses. This process results in
continuous pain, progressive deformity, and disability.
 
                                       6
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ARTHRITIS THERAPIES
 
    No approved treatments stop or reverse osteoarthritis. Current treatment for
OA is primarily focused on reducing pain, minimizing inflammation, and improving
joint function. Physicians most commonly recommend analgesics to reduce pain and
non-steroidal anti-inflammatory drugs ("NSAIDs") such as ibuprofen to reduce
inflammation. In advanced OA, more invasive measures such as injection of
steroids into the joint space, arthroscopic surgery, and partial or total joint
replacement are examples of treatment options.
 
    For treatment of RA, physicians commonly prescribe NSAIDs in an effort to
reduce inflammation. Additionally, doctors often prescribe other non-specific
drugs designed to reduce the body's immune response and associated inflammation.
The effectiveness of these therapies is variable from patient to patient, and
may involve various side effects and complications.
 
    There are numerous pharmaceutical companies working to develop more
effective therapies which include the ability to regenerate cartilage to treat
OA and RA. During the early stages of arthritis, the patient is not necessarily
aware of the progression of the disease until the associated pain and swelling
occurs accompanied by reduced joint mobility. In certain patients who are
experiencing pain, there may be little correlation between the severity of
active disease and the amount of pain. The Company believes that if a
biochemical marker test were introduced and integrated into the overall health
care of a patient, it might help improve early detection of arthritis and enable
more effective treatments with emerging therapies along with subsequent
therapeutic drug monitoring.
 
ARTHRITIS DIAGNOSTICS
 
    Many non-specific diagnostic tools for OA and RA exist, but are not disease
specific enough for arthritis to confirm a diagnosis of either type of disease,
or accurately assess disease progression. Current diagnosis of arthritis is
based on:
 
    - Medical history and a physical examination;
 
    - Symptoms, i.e., swelling, red and hot joints, nodules under the skin, and
      stiffness;
 
    - X-rays (which are not designed for detection of soft tissue disorders)
      which can detect a pattern of visible damage only after multiple
      exposures; and
 
    - In the case of RA, laboratory tests for anemia, low white-blood-cell
      count, rheumatoid factor ("RF") and erythrocyte sedimentation rate
      ("ESR"). Anemia can be an accompanying symptom of rheumatoid arthritis but
      is not caused by or otherwise necessarily correlated to arthritis. RF is
      present in 85% of people with rheumatoid arthritis, but also does not
      necessarily indicate rheumatoid arthritis. ESR indicates a systemic
      inflammatory condition but not necessarily rheumatoid arthritis.
 
MARKET FOR IMMUNODIAGNOSTIC TESTS
 
    Diagnostic tests are widely used for both research and routine clinical use.
Academic and clinical researchers in universities, teaching hospitals,
pharmaceutical companies and government research units, such as the National
Institutes of Health, use research products routinely. However, not all research
products are introduced for routine clinical use for many reasons, including a
lack of clinical utility or cost of obtaining regulatory approval.
 
    Immunodiagnostic tests are performed in a variety of manual or automated
formats. A common format for research and clinical testing is the microtiter
plate format utilizing enzyme immunoassay ("EIA") detection. EIA utilizes an
immune reaction, that is, an antibody reacting with an antigen, and the
detection of the reaction using enzymes which are attached to the reactants as
indicators. Although this technology is considered an established industry
standard, a manual format is relatively slow, has low
 
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throughput, and requires skilled technicians. Instrument systems are in routine
use that automate tests to increase throughput and decrease the cost per test.
Most of the widely used immunodiagnostic tests have been adapted to automated
systems. These formats are used in hospitals and clinical laboratories
throughout the world. The Company believes that, in addition to the automated
systems, more convenient and faster formats are required for physicians' offices
or for home use.
 
PRODUCTS
 
    The Company has developed and is currently marketing for research and
clinical use four immunodiagnostic tests to assess bone resorption and formation
and one immunodiagnostic test to assess certain bone growth disorders. In
guidelines to pharmaceutical companies developing new osteoporosis drugs, the
FDA recommends using a combination of three biochemical markers that together
detect both resorption and bone formation to assess efficacy as part of their
pre-clinical and clinical testing. Metra has developed immunoassays which meet
all three of these requirements. Metra's immunoassays are (i) pyridinium
crosslinks, (ii) osteocalcin and (iii) bone-specific alkaline phosphatase. The
Company currently offers tests for each of these biochemical markers.
 
    The Company's Pyrilinks tests are proprietary and measure specific
biochemical markers. Although the Company's other tests such as Alkphase-B,
NovoCalcin, and Prolagen-C measure markers that are not proprietary, and similar
tests are available from other companies, these tests allow the Company to offer
a more complete line of relevant clinical and research use tests to measure
different aspects of bone metabolism. The following table identifies the
Company's products, their application, and their current regulatory status in
most major markets throughout the world.
<TABLE>
<CAPTION>
         MARKETED PRODUCTS                                     MARKETING STATUS
-----------------------------------      ------------------------------------------------------------
<S>                                  <C>
BONE RESORPTION
  Pyrilinks-Registered Trademark--D  -   Cleared for clinical use in US*, Europe, Japan and
                                           Asia/Pacific
                                     -   Available in automated formats through Chiron Diagnostics
                                           (ACS:180 DPD) and Diagnostic Products Corporation
                                           (IMMULITE-Registered Trademark- PYRILINKS-D)
                                     -   Cleared for clinical use in Japan as Osteolinks-DPD for
                                           marketing by Sumitomo Pharmaceuticals Ltd.
  Pyrilinks-Registered Trademark-    -   Cleared for clinical use in US*, Europe, and Asia/Pacific
                                     -   Research use only in Japan
BONE FORMATION
  Alkphase-B-Registered Trademark-   -   Cleared for clinical use in US*, Europe, and Asia/Pacific
                                     -   Research use only in Japan
  NovoCalcin-Registered Trademark-   -   Cleared for clinical use Europe and Asia/Pacific
                                     -   Research use only in US and Japan
GROWTH DISORDERS
  Prolagen-C-Registered Trademark-   -   Cleared for clinical use in Europe and Asia/Pacific
                                     -   Research use only in US and Japan
 
<CAPTION>
      PRODUCTS IN DEVELOPMENT                                       STATUS
-----------------------------------      ------------------------------------------------------------
<S>                                  <C>
Chondrex-TM- immunoassay for         -   Development--Expected to be available for research use only
  arthritis                                in calendar 1998
Portable ultrasound device to        -   Development--Expected to be launched internationally in
  assess bone fragility                    calendar 1998
Point-of-care version of             -   Development--Expected to be available for clinical use in
  Pyrilinks-D on Cholestech's L-D-X        calendar 1998
  Immunoassay System
Serum Pyrilinks                      -   Development--Expected to be available for research use in
                                           calendar 1998
Serum Pyrilinks-D                    -   Development--Expected to be available for research use in
                                           calendar 1998
</TABLE>
 
------------------------
*   Received 510(k) clearance from US Food and Drug Administration
 
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SALES AND MARKETING
 
    The Company's products are currently being marketed internationally for both
clinical and research use. The market for the Company's products consists of
clinical and reference laboratories, academic and clinical researchers in
universities, and physicians. The Company's approach is to initially market the
tests for research purposes to academic and clinical researchers in
universities, teaching hospitals, pharmaceutical companies and government
institutions. As regulatory clearances are obtained for clinical use, clinical
reference laboratories, hospital laboratories, and physicians are also targeted
as customers.
 
    The Company's marketing and sales strategy for its manual tests is to
provide its products on a worldwide basis either through its direct sales force
in selected countries or through established country specific distributors. The
Company currently has direct operations in the United States, United Kingdom,
and Italy and works with over 30 distributors of diagnostic products throughout
the rest of the world that have established distribution channels. The Company's
distribution alliances include Hoechst Behring (France), DPC Biermann (Germany),
Dade Diagnostics (Australia) and Sumitomo Pharmaceuticals, Inc. (Japan). Product
revenues from one distributor constituted 15%, 12% and 11% of total revenues for
the years ended June 30, 1997, 1996 and 1995, respectively. Product revenues
from another distributor constituted 12% of total revenues for the year ended
June 30, 1995. The loss (or poor performance) of one or more of these
distributors or the inability to find new distributors could have a material
effect on the Company's business, financial condition and results of operations.
The Company has limited experience in sales, marketing and distribution of its
products. The Company intends to expand its marketing staff and direct sales
force, and there can be no assurance the Company will do so cost-effectively, or
that the Company's direct sales and marketing efforts will be successful.
 
    International product sales accounted for approximately 77%, 78% and 78% of
product revenues for the fiscal years ended June 30, 1997, 1996, and 1995,
respectively. The Company expects that such sales will continue to account for a
significant portion of the Company's revenues in the future. In order to
successfully manage international sales, the Company may need to establish
additional foreign operations, hire additional personnel and recruit additional
international distributors and commissioned representatives. This will require
significant management attention and financial resources and could adversely
affect the Company's operating margins. In addition, to the extent the Company
is unable to effect these additions in a timely manner, the Company's growth, if
any, in international sales will be limited, and the Company's business,
financial condition and results of operations could be materially adversely
affected. In addition, there can be no assurance that the Company will be able
to maintain or increase international sales of the Company's products. The
Company's international sales to distributors are currently denominated in
United States dollars. As a result, increases in the value of the United States
dollar relative to foreign currencies could make the Company's products more
expensive and, therefore, potentially less competitive in markets served by such
distributors. Additional risks inherent in the Company's international business
activities generally include unexpected changes in regulatory requirements,
tariffs and other trade barriers, longer accounts receivable payment cycles,
difficulties in managing international operations, potentially adverse tax
consequences including restrictions on the repatriation of earnings, and the
burdens of complying with a wide variety of foreign laws. There can be no
assurance such factors will not have a material adverse effect on the Company's
future international sales and consequently, the Company's business, financial
condition and results of operations.
 
    The Company provides its products to the market in a microtiter plate
format, commonly referred to as a manual kit, through the Company's direct sales
force or distribution network throughout the world. In order to promote a broad
acceptance of its technology and, in particular, its lead product for bone
resorption, Pyrilinks-D, the Company has established collaborations with a
number of diagnostic companies that have an existing installed base of high
speed, automated laboratory testing systems. These partners include Abbott
Laboratories, Bayer Corporation, Chiron Diagnostics, and Diagnostic Products
Corporation (DPC). Together, these partners represent up to 80% of the installed
base of high throughput, automated immunoassay testing systems. In late fiscal
1997, both Chiron Diagnostics and DPC launched
 
                                       9
<PAGE>
the Company's Pyrilinks-D technology on their automated systems and commenced
marketing and selling efforts. The Company expects Abbott Laboratories and Bayer
Corporation to launch the Pyrilinks-D technology on their automated systems
after their 510(k) clearances are received. The Company receives a royalty on
sales from each of these automated partners.
 
    The Company will increasingly depend on its partners to sell the Company's
tests in automated formats. In particular, the Company relies on collaborative
partners to adapt the Company's technology to high-volume automated instruments
such as those sold by Abbott, Bayer, Chiron and DPC. Substantially all of the
Company's collaborative agreements are non-exclusive, and therefore such
partners are free to enter into similar agreements with third parties, including
the Company's competitors. In addition, the Company has not developed physician
office or home-use adaptations of its products and there can be no assurance
that the Company or its collaborative partners will either develop such formats,
obtain regulatory approvals, and sell the Company's tests on their formats.
There can be no assurance that any of these partners will perform their
contractual obligations or that such partners will not terminate their
agreements. The failure to adapt the Company's products to different formats and
instruments, or commercialize or co-promote such products, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
 
    The Company expects to enter into additional collaborative agreements in the
future to develop, commercialize and sell its products. There can be no
assurance that the Company will be able to negotiate acceptable agreements in
the future, or that such new agreements or existing agreements will be
successful. In addition, there can be no assurance that the Company's
collaborative partners will not pursue alternative competing technologies.
 
    The Company believes that educating patients and physicians about the
long-term health benefits and cost-effectiveness of diagnosis and treatment of
bone diseases and disorders at an early stage is critical to market acceptance
for the Company's products. The Company believes the trend toward management of
health care costs in the United States will lead to increased awareness of and
emphasis on disease prevention, and as a result, will increase demand for
cost-effective diagnostic tests.
 
    The Company has developed a number of proprietary marketing programs aimed
at educating both patients and physicians including, but not limited to:
establishing collaborative relationships with other pharmaceutical, diagnostic,
and laboratory testing companies; the establishment of a speakers bureau which
is comprised of nationally and regionally recognized physicians and researchers
who serve to educate their local communities; the sponsorship of a clinical
summit and director of medical education program on bone health in which leading
physicians and researchers from around the world discuss the current state of
assessing all elements of bone health; and numerous other programs managed
within the Company's marketing and sales organization all aimed at educating
patients and physicians.
 
    In the second half of fiscal 1997, the Company entered into two alliances in
the United States which the Company believes will further extend Metra's medical
educational focus. First, a three-way co-promotion agreement with Berlex
Laboratories, a provider of female healthcare products and in particular
Climara, a seven-day estrogen patch currently approved for marketing by the FDA
in the US, and, Norland Medical Systems ("Norland"), a distributor of imaging
systems that provide the current state of bone health. Under the terms of this
agreement, the companies will market to the OB/GYN physicians a suite of
products for the management of the symptoms and problems of menopause for women.
To reach the OB/ GYNs, the companies will utilize the direct detail
pharmaceutical force of Berlex Laboratories that call on over 30,000 OB/GYNs.
The Company will pay Berlex approximately $3.0 million for promotional
activities over the first year of the promotional agreement, record an expense
for the fair value of warrants issued of approximately $0.5 million, and pay
commissions on increased sales of the Company's Pyrilinks-D product. To the
extent Norland sells any scanning systems as a result of this promotional
alliance, Metra will receive a commission on such sales.
 
                                       10
<PAGE>
    Second, the Company entered into an alliance with two parties, Mission
Pharmacal and a leading provider of laboratory testing services, focused on
generating demand through consumers. Under the terms of this agreement the
companies will work together to educate consumers about assessing the current
rate of bone loss (Metra's Pyrilinks-D), the use of Citracal, which is the
second largest calcium supplement sold over the counter in the United States and
manufactured by Mission Pharmacal, and where to obtain the laboratory testing to
assess the effectiveness of the calcium supplement. One feature of the program
is to include information in every box of Citracal sold in the United States
that discusses the elements of the program as outlined. There are no material
financial commitments between the parties to this agreement.
 
    The Company will need to rely on current and any future collaborative
partners to help build market awareness and acceptance of the Company's
products. The Company, together with its partners, will continue to originate
research and clinical studies to demonstrate and explain how the Company's
products relate to improvements in early detection, disease management and drug
compliance. The commercial success of the Company's products will depend upon
their acceptance by the medical community and third-party payers as clinically
useful, cost-effective and safe. Market acceptance will depend on several
factors, including the establishment of clinical utility of these biochemical
tests, the receipt of regulatory clearances where required, the development of
diagnostic tests that can be processed using commercially available automated
systems, the availability of third-party reimbursement, extensive physician
education and the approval and commercial acceptance of therapies for the
treatment of osteoporosis. There can be no assurance that the Company's products
will gain market acceptance. Failure to achieve market acceptance would have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
RESEARCH AND DEVELOPMENT
 
    The Company's research and development efforts are currently focused in four
principal areas: (i) discovery and development of new biochemical marker tests
focused in the area of bone and cartilage diseases, (ii) conducting clinical
studies designed to broaden the clinical claims for its existing products; (iii)
formatting of Metra's existing tests in alternative formats to address different
segments of the diagnostic testing market; and (iv) development of its
ultrasound technology. The Company's expense for the increasing research and
development efforts for the years ended June 30, 1997, 1996, and 1995 was $5.7
million, $4.3 million, and $3.7 million, respectively.
 
    NEW BONE AND CARTILAGE TESTS
 
    The Company has entered into a license agreement with NovaDx Inc. to develop
and manufacture a microtiter plate assay for the measurement of YKL-40
("Chondrex"), a novel glycoprotein which has been shown to be significantly
elevated in OA and RA patients. The Company believes that YKL-40 may provide the
basis for a diagnostic test for the detection and management of OA and RA.
 
    The Company is funding internal and third-party research and development
efforts designed to identify additional markers for bone and other connective
tissue conditions and develop new immunoassays to measure markers that it
believes will have clinical utility. As new immunodiagnostic tests are
developed, the Company intends to offer them first to researchers, and to the
extent such researchers in the medical community validate the clinical utility
of the new tests, the Company will further develop and commercialize the new
tests based on existing immunodiagnostic testing formats. The Company currently
sponsors research at institutions including The Rowett Research Institute and
Sheffield University in the United Kingdom.
 
                                       11
<PAGE>
    CLINICAL STUDIES
 
    The Company is conducting clinical studies designed to gather data to submit
to the FDA for clearance to market the Company's existing products for broader
clinical claims. The Company is investigating use of its products in
applications including therapeutic drug monitoring, and fracture risk
assessment.
 
    ALTERNATIVE TEST FORMATS
 
    The Company has a collaborative agreement to develop and manufacture its
Pyrilinks-D test in a radioimmunoassay ("RIA") format which was launched for
clinical use in France in May, 1996. Reimbursement was recently established in
France for both RIA and EIA formats. The Company believes that less complicated
and capital intensive formats may be more suitable for decentralized testing in
physician office laboratories, small clinics, satellite laboratories and for
home use. Metra is also reformatting its lead bone resorption product,
Pyrilinks-D, for the Cholestech point-of-care analyzer (L-D-X) for use in the
physicians' offices.
 
    ULTRASOUND TECHNOLOGY
 
    In order to offer a broader portfolio of products to provide physicians with
more comprehensive clinical information regarding bone, Metra acquired Osteo
Sciences Corporation, a company developing applications of ultrasound technology
to bone based on proprietary algorithms and product designs. The Company is
developing a portable ultrasound device designed to evaluate certain
characteristics of bone that are associated with bone weakness and bone quality.
The target market for the device will be for physicians' offices or small group
practices. The Company expects this device will provide physicians and patients
with a convenient and cost effective alternative to the currently available
imaging techniques for assessing bone.
 
    There can be no assurance that Metra will be successful in developing new
products or that new products developed by the Company will receive necessary
government approval or, if approved, will gain market acceptance. Any failure by
the Company to successfully develop and introduce new products could have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
MANUFACTURING
 
    The Company's manufacturing operations are fully integrated and consist of
antibody production, reagent purification, reagent and microtiter plate
processing, filling, labeling, packaging and distribution. If the Company
experiences significant demand for its products, the Company will have to
manufacture its products in commercial quantities in compliance with regulatory
requirements at acceptable costs, and expend significant capital resources to
develop large-scale manufacturing capabilities. If the Company is unable to
develop large-scale manufacturing capabilities, the Company's competitive
position and financial condition would be adversely affected. Failure to
increase production volumes, if required, in a cost-effective manner or lower
than anticipated yields or production constraints encountered as a result of
changes in the manufacturing process could result in shipment delays as well as
increased manufacturing costs, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
 
    The majority of raw materials and purchased components used to manufacture
the Company's products are readily available. However, certain of these
materials are obtained from a sole supplier or a limited group of suppliers. The
Company does not maintain long-term agreements with any of its suppliers. The
reliance on sole or limited suppliers and the failure to maintain long-term
agreements with suppliers involves several risks, including the inability to
obtain an adequate supply of required raw materials and components and reduced
control over pricing, quality and timely delivery. Although the Company attempts
to minimize its supply risks by maintaining an inventory of raw materials and
continuously evaluating other
 
                                       12
<PAGE>
sources, any interruption in supply could have a material adverse effect on the
Company's business, financial condition and results of operations.
 
    The Company's business, financial condition and results of operations would
be adversely affected by the inability to obtain working capital, satisfactory
manufacturing facilities, equipment and qualified manufacturing personnel. In
addition, the Company's manufacturing facilities and its operations are subject
to periodic inspections conducted by the FDA and equivalent inspections
conducted by State of California officials, and its operations undergo current
good manufacturing practices compliance inspections conducted by the FDA and
equivalent inspections conducted by state officials. Because the Company has
received FDA clearance to market certain of its products for clinical use, the
Company expects that its facilities will be inspected by the FDA and by state
authorities. Failure to comply with applicable regulatory requirements can
result in, among other things, fines, suspension or withdrawal of clearances or
approvals, seizures or recalls of products, operation restrictions and criminal
prosecutions. Furthermore, changes in existing regulations or adoption of new
regulations could prevent the Company from obtaining, or affect the timing of,
future clearances or approvals. There can be no assurance that the Company will
be able to obtain necessary regulatory clearances or approvals on a timely basis
or at all. Delays in receipt of or failure to receive such clearances or
approvals or loss of previously received clearances or approvals could have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
    In September 1996, the Company received ISO 9001 certification for its
quality management systems. The Company's certification is officially recognized
by European and North American authorities and is accepted worldwide, and will
become a requirement for doing business in some countries in the future.
 
    The Company faces an inherent risk of exposure to product liability claims
in the event that the use of its products is alleged to have resulted in adverse
effects to a patient. The Company maintains a general insurance policy which
includes coverage for product liability claims. The policy is limited to a
maximum of $1.0 million per product liability claim and an annual aggregate
policy limit of $1.0 million. There can be no assurance that liability claims
will not exceed the coverage limits of such policy or that such insurance will
continue to be available on commercially reasonable terms or at all.
Consequently, a product liability claim or other claim with respect to uninsured
liabilities or in excess of insured liabilities could have a material adverse
effect on the Company's business, financial condition and results of operations.
 
COMPETITION
 
    Competition in the market for products that diagnose and monitor bone and
other connective tissue diseases and disorders is intense and expected to
increase. The Company currently competes with other medical technology
companies, biotechnology companies, pharmaceutical companies and research and
academic institutions, both in the United States and abroad. Metra believes that
its most significant competitors in the area of biochemical tests include
Bio-Rad Laboratories, a life sciences company, DSL, a diagnostic company that in
1996 received 510(k) clearance from the FDA to market Osteometer's bone
resorption product in the United States; IncStar, a diagnostic company; Quest
Diagnostics, a research laboratory and diagnostic company; Orion, a diagnostic
and pharmaceutical company in Finland; Osteometer, a diagnostic company in
Denmark; Hybritech, a division of Beckman Instruments, a diagnostic company that
in 1996 received 510(k) clearance from the FDA to market its test for bone
specific alkaline phosphatase; and Ostex International, Inc., a diagnostic
company that in 1995 received 510(k) clearance from the FDA to market an
immunoassay for bone resorption. In addition, the Company will compete with
companies that measure the same biochemical markers as Metra using different
testing methods. The most established of these are companies manufacturing high
pressure liquid chromatography (HPLC) assays, including Quest Diagnostics and
Bio-Rad Laboratories. The Company believes that although the HPLC method for
measuring pyridinium crosslinks is extremely accurate, it is primarily a
research tool and is unsuitable for routine clinical use because it has low
throughput, is expensive and labor intensive, and requires skilled technicians.
There can be no assurance, however, that competitors have not developed, or are
not developing, less expensive, more clinically useful HPLC products. In
addition, as the Company
 
                                       13
<PAGE>
licenses its technology to diagnostic companies for use in alternative formats,
tests sold by these licensees will compete with the Company's products.
 
    Certain diseases and disorders targeted by the Company's products can also
be diagnosed and monitored using existing imaging technologies, such as DXA.
Although DXA may be considered more expensive and less convenient than tests for
biochemical markers, there can be no assurance that competitors have not
developed, or are not developing, less expensive, more clinically convenient
imaging devices. The Company believes that, at least in their present forms,
current imaging systems and tests for biochemical markers are complementary
because one of Metra's tests can identify a patient's rate of bone resorption,
as compared to imaging analysis, which measures a patient's existing bone
density.
 
    The market for the Company's ultrasound product under development is
expected to be highly competitive and subject to rapid technological change and
evolving industry requirements and standards. The Company believes that these
trends will continue into the foreseeable future. The Company's ultrasound-based
diagnostic product currently under development could experience competition from
companies with DXA products, companies with biochemical markers, and makers of
ultrasound systems. Several companies, including Aloka Company Ltd., Hitachi
Instruments, Inc., Hologic, Inc., Lunar Corporation, Norland Medical Systems,
and Osteometer MediTech AS have developed systems to measure bone density which
may compete with the Company's ultrasound product under development. The Company
believes that competition in the field of bone densitometry is based upon price,
precision, speed of measurement, patient radiation dose, size, ease of
operation, product versatility, product reliability and quality of service.
There can be no assurance that the Company's product, if commercialized, will
compete effectively with respect to these criteria.
 
    Several companies, including Hologic, Inc., IGEA S.r.l., McCue PLC, Lunar
Corporation, Myriad Ultrasound Systems, Ltd., and Osteometer MediTech AS, have
developed ultrasound systems to assess bone fragility. The Company believes that
competition in the field of ultrasound systems is based on price, precision,
speed of measurement, size and ease of operation, product reliability and
quality of service. No ultrasound bone analyzer has been approved for commercial
sale in the United States although in August 1997, Hologic received a
recommendation for approval by an FDA advisory committee for its ultrasound
product, Sahara. When and if the Company's competitors obtain FDA clearance or
approval for ultrasound bone analyzers in the United States before the Company,
it could have a material adverse effect on the Company's ability to introduce
its ultrasound device (if developed), which in turn could have a material
adverse effect on the Company's business, financial condition and results of
operations.
 
    In addition, other companies have developed ultrasound technology for uses
unrelated to measurement of bone characteristics. There can be no assurance that
such companies will not successfully adapt their technology to the bone field,
and obtain significant market share. The entry of such companies into the market
for the Company's ultrasound product under development could have a material
adverse effect on its business, financial condition and results of operations.
 
    Many of the Company's competitors have substantially greater financial,
technical and human resources than the Company. In addition, many of these
competitors have substantially greater experience than the Company in research
and development, undertaking clinical trials, obtaining regulatory approvals and
third-party reimbursement and manufacturing, marketing and selling diagnostic
products. Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with larger companies.
Furthermore, academic institutions, governmental agencies, and other public and
private research organizations conduct research, seek patent protection and
establish collaborative arrangements for product development and marketing and
therefore could become significant competitors.
 
    A number of diagnostic tests and procedures for measuring bone metabolism
and other connective tissue diseases and disorders currently exist and others
are in development by other companies. These products, as well as products that
may be developed in the future, may be available for sale prior to the
 
                                       14
<PAGE>
Company's products, or at a lower cost, or with better technical
characteristics, rendering the Company's products less competitive or obsolete.
In addition, as the Company licenses its technology to diagnostic companies for
use in alternative formats, tests sold by these licensees will compete with the
Company's products. Any product that the Company succeeds in developing and for
which it gains regulatory approval must then compete for market acceptance and
market share. There can be no assurance that competitors' products will not be
found more competitive, either for general use or in specific applications such
as patients with particular medical conditions, or those who are receiving
certain therapies. The Company believes that for all of its immunoassay products
important competitive factors include the relative speed with which companies
can develop products, establish clinical utility, complete the clinical testing
and regulatory approval processes, obtain reimbursement and supply commercial
quantities of the product to the market. The Company's inability to compete
favorably with respect to any of these factors could have a material adverse
effect on its business, financial condition and results of operations.
 
PATENTS, PROPRIETARY RIGHTS AND RELATED LITIGATION RISKS
 
    The Company's success will depend in part on its ability to obtain patent
protection for its products and processes, to preserve its trade secrets and to
operate without infringing the proprietary rights of third parties. The Company
owns five United States patents for biochemical tests, two United States patents
for ultrasound, six pending United States patent applications, and corresponding
foreign patent applications, all in the area of biomedical diagnostics. The
Company is the exclusive licensee from The Rowett Research Institute in Scotland
of patents and patent applications directed to certain diagnostic methods of
detecting metabolic bone disorders, including a United States patent, four
pending United States patent applications, two European Patent Office patents, a
related Australian patent, a related Canadian patent and ten related foreign
patent applications. The Company pays The Rowett Research Institute royalties
upon sales of the Company's Pyrilinks products.
 
    The Company's ability to protect its proprietary position is in part
dependent on the issuance of patents on current and future applications. The
Company currently has applications pending in the United States, Europe, Japan,
Canada and Australia. The validity and breadth of claims covered in medical
technology patents involve complex legal and factual questions, and therefore,
are highly uncertain. Not all patent applications covering the technology
underlying the Company's products have been issued to date and no assurance can
be given that such and other pending patent applications or any future patent
applications will be issued, that the scope of any patent protection will
exclude competitors or provide competitive advantages to the Company, that any
of the Company's patents will be held valid if subsequently challenged or that
others will not claim rights in or ownership to the patents and other
proprietary rights held by the Company. The failure of the Company to obtain
issuances of patents that cover the technology underlying the Company's products
or any other outstanding patent applications, could have a material adverse
effect on the Company's business, financial condition and results of operations.
Furthermore, there can be no assurance that others have not developed or will
not develop similar products, duplicate any of the Company's products or design
around the Company's patents. In addition, others may hold or receive patents or
file patent applications that contain claims having a scope that covers products
developed by the Company. In the event that any relevant claims of third-party
patents are upheld as valid and enforceable, the Company could be prevented from
practicing the subject matter claimed in such patents or could be required to
obtain licenses from the patent owners of each of such patents or to redesign
its products or processes to avoid infringement. There can be no assurance that
such licenses would be available or, if available, would be on terms acceptable
to the Company or that the Company would be successful in any attempt to
redesign its products or processes to avoid infringement. The Company also
relies upon unpatented trade secrets to protect its proprietary technology, and
no assurance can be given that others will not independently develop or
otherwise acquire substantially equivalent techniques or otherwise gain access
to the Company's proprietary technology or that the Company can ultimately
protect meaningful rights to such unpatented proprietary technology.
 
                                       15
<PAGE>
    There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry, and although the
Company is not currently engaged in litigation regarding intellectual property
matters, from time to time the Company sends and receives communications to and
from third parties regarding such matters. Litigation, which would result in
substantial cost to and diversion of effort by the Company, may be necessary to
enforce patents issued to the Company, to protect trade secrets or know-how
owned by the Company, to defend the Company against claimed infringement of the
rights of others or to determine the ownership, scope or validity of the
proprietary rights of the Company and others. An adverse determination in any
such litigation could subject the Company to significant liability to third
parties, could require the Company to seek licenses from third parties, which
licenses may not be available or, if available, may not be on terms acceptable
to the Company, and ultimately could prevent the Company from manufacturing,
selling or using its products, any of which could have a material adverse effect
on the Company's business, financial condition and results of operations.
 
    Metra also relies on trade secrets and proprietary know-how in its
manufacturing processes. The Company requires each of its employees, consultants
and advisors to execute a confidentiality agreement upon the commencement of any
employment, consulting or advisory relationship with the Company. Each agreement
provides that all confidential information developed or made known to the
individual during the course of the relationship will be kept confidential and
not disclosed to third parties except in specified circumstances. In the case of
employees, the agreements provide that all inventions conceived of by an
individual shall be the exclusive property of the Company, other than inventions
unrelated to the Company and developed entirely on the employee's own time.
There can be no assurance, however, that these agreements will provide
meaningful protection or adequate remedies for misappropriation of the Company's
trade secrets in the event of unauthorized use or disclosure of such
information.
 
REIMBURSEMENT
 
    The Company's ability to successfully commercialize its products depends in
part on the availability of, and the Company's ability to obtain, adequate
levels of third-party reimbursement for use of its diagnostic tests. Although
the Company's products are available for clinical use in many European
countries, reimbursement is currently available in only certain of those
countries.
 
    In the United States, the Company has received FDA clearance for Alkphase-B,
Pyrilinks and Pyrilinks-D. Reimbursement for the Company's FDA cleared tests is
in part determined by CPT codes and may vary by state. Reimbursement under a
specific CPT code is available for Alkphase-B and as of January 1997, for both
Pyrilinks and Pyrilinks-D. In the United States, the cost of medical care is
funded, in substantial part, by government insurance programs, such as Medicare
and Medicaid, and private and corporate health insurance plans. The Company's
ability to commercialize its products successfully will depend in part on the
extent to which appropriate reimbursement levels for the cost of such products
and related treatment are obtained from government authorities, private health
insurers and other organizations, such as health maintenance and organizations
("HMOs"). In certain states, reimbursement levels have been established which
the Company believes are favorable to continued market acceptance for Pyrilinks
and Pyrilinks-D. The trend towards managed health care in the United States and
the concurrent growth of organizations such as HMOs, which could control or
significantly influence the purchase of health care services and products, as
well as legislative proposals to reform health care or reduce government
insurance programs, may all result in lower prices for the Company's products.
The cost containment measures that health care providers are instituting and the
impact of any health care reform could have an adverse effect on the Company's
ability to sell its products and may have a material adverse effect on the
Company's business, financial condition and results of operations.
 
    There can be no assurance that reimbursement in the United States or foreign
countries will be available for any of the Company's products, or if available,
will not be decreased in the future, or that reimbursement amounts will not
reduce the demand for, or the price of, the Company's products. The
 
                                       16
<PAGE>
unavailability of third-party reimbursement or the inadequacy of the
reimbursement for medical procedures using the Company's tests could have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, the Company is unable to forecast what
additional legislation or regulation, if any, relating to the health care
industry or third-party coverage and reimbursement may be enacted in the future
or what effect such legislation or regulation would have on the Company's
business.
 
GOVERNMENT REGULATION
 
    The manufacturing, testing, labeling, distribution, marketing, advertising
and promotion of the Company's products are subject to extensive and rigorous
regulation by the FDA and, to varying degrees of regulation, by state and
foreign regulatory agencies. The Company's products are regulated by the FDA
under the Federal Food, Drug and Cosmetic Act (the "Act"), as amended by the
Medical Device Amendments of 1976 and the Safe Medical Devices Act of 1990,
among other laws. Under the Act, the FDA regulates the clinical testing,
manufacturing, labeling, distribution, sale, advertising and promotion of
medical devices in the United States. In addition, various foreign countries in
which the Company's products are or may be sold, including, Germany, France,
Japan and Canada, impose local regulatory requirements. The testing for,
preparation of and subsequent FDA and foreign regulatory review of required
applications is expensive, lengthy and uncertain. Failure to comply with FDA and
similar foreign requirements could result in civil monetary penalties or
criminal sanctions, restrictions on or injunction against marketing of the
Company's products, as well as seizure or recall of the Company's products, or
other regulatory action. There can be no assurance the Company will obtain
necessary regulatory approvals or clearances on a timely basis or at all, and
delays in receipt of or failure to receive such approvals or clearances, the
loss or limitation of previously received approvals or clearances, adoption of
future regulations which may further restrict the production or sales of the
Company's products, or failure to comply with existing or future regulatory
requirements would have a material adverse effect on the Company's business,
financial condition and results of operations.
 
    The Act, among other things, classifies medical devices into three
categories over which the FDA maintains increasing levels of regulation: Class I
(general controls), II (special controls) and III (premarket approval). Although
most devices new to the marketplace after May 1976 are automatically classified
as Class III, the Company believes that many of Metra's products should be
classified as Class I or II devices and hence, not subject to the requirement of
premarket approval by the FDA. Prior to marketing any of these devices, the
Company is required to submit a 510(k) premarket notification to the FDA and
await the FDA's determination that the product may be marketed. In any 510(k)
premarket notification the Company must, among other things, demonstrate the
product to be marketed is substantially equivalent in performance, formula,
design and intended use to a legally marketed Class I or Class II predicate
device or to a Class III device for which the FDA has not required premarket
approval. Test data from clinical trials may be required to demonstrate
substantial equivalence and that the products are safe and effective, which may
delay the 510(k) premarket notification review period.
 
    Following submission of a 510(k) premarket notification, a company may not
market the device for clinical use until an order is issued by the FDA finding
the product to be substantially equivalent. The FDA has no specific time limit
by which it must respond to a 510(k) premarket notification. The FDA may agree
that the product is substantially equivalent to a predicate device and allow the
product to be marketed in the United States. The FDA, however, may (i) determine
that the new device is not substantially equivalent and require a premarket
approval application ("PMA"), or (ii) require further information, such as
additional test data, including data from clinical studies, before it is able to
make a determination regarding substantial equivalence. By requesting additional
information the FDA can further delay market introduction of a Company's
products.
 
    In August 1995, Metra received FDA clearance of its 510(k) premarket
notification for Alkphase-B for use as an aid in the management of patients
diagnosed with Paget's disease. In November 1995, Metra
 
                                       17
<PAGE>
received FDA clearance of its 510(k) premarket notification for Pyrilinks as a
measure of type I collagen degradation, especially bone collagen. In December
1995, Metra received FDA clearance of its 510(k) premarket notification for
Pyrilinks-D as a measure of bone resorption.
 
    There can be no assurance that the FDA will act favorably or quickly in its
review of the Company's future 510(k) submissions, if any, and significant
difficulties and costs may be encountered by the Company in its efforts to
obtain FDA clearance that could delay or preclude the Company from selling its
products in the United States. Furthermore, there can be no assurance that the
FDA will not request additional data, require that the Company conduct further
clinical studies or require a PMA, causing the Company to incur further cost and
delay. In addition, there can be no assurance that the FDA will not limit the
intended use of the Company's products as a condition of 510(k) clearance or PMA
approval. Further, if a company wishes to propose modifications to a product
after FDA clearance of a 510(k) premarket notification or approval of a PMA,
including changes in indications or other significant modifications to labeling
or manufacturing, additional clearances or approvals will be required from the
FDA. Failure to receive or delays in receipt of FDA clearances or approvals,
including the need for extensive clinical trials or additional data as a
prerequisite to approval, or any FDA limitations on the intended use of the
Company's products, could have a material adverse effect on the Company's
business, financial condition and results of operations.
 
    If the FDA indicates that a PMA is required for any of the Company's
products, the application will require the results of extensive clinical
studies, manufacturing information and likely review by a panel of medical
experts outside the FDA. Clinical studies would need to be conducted in
accordance with FDA requirements. Failure to comply with FDA requirements could
result in the FDA's refusal to accept the data or the imposition of regulatory
sanctions. FDA review of a PMA application can take significantly longer than
that for a 510(k) premarket notification. There can be no assurance that the
Company will be able to meet the FDA's PMA requirements or that any necessary
approvals will be received. Failure to obtain necessary regulatory approvals,
the restriction, suspension or revocation of regulatory approvals, if obtained,
or any other failure to comply with regulatory requirements could have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
    The Act and California laws also require the Company to be licensed and to
manufacture its products in compliance with current good manufacturing practices
("GMP") regulations. These regulations require that the Company manufacture its
products and maintain related documentation in a prescribed manner with respect
to manufacturing, testing and control activities. The Company is also required
to comply with various FDA requirements for labeling and marketing, and the FDA
prohibits a device, whether or not cleared under a 510(k) premarket notification
or approved under a PMA, from being marketed for unapproved clinical uses. If
the FDA believes that a company is not in compliance with the regulations, it
can institute proceedings to detain or seize a product, issue a recall, prohibit
marketing and sale of the company's products and assess civil and criminal
penalties against the company, its officers or its employees. There can be no
assurance that Metra will receive marketing clearance or approval for any of its
future products or that its manufacturing facility will satisfy GMP or
California manufacturing requirements. The Company's facilities and
manufacturing processes have been periodically inspected by the State of
California and other agencies, but remain subject to audit from time to time.
The Company believes that it is in substantial compliance with all applicable
federal and state regulations. Nevertheless, there can be no assurance that the
FDA or a state agency will agree with the Company's position, or that its GMP
compliance will not be challenged at some subsequent point in time. Enforcement
of the GMP regulations has increased significantly in the last several years and
the FDA has publicly stated that compliance will be more strictly scrutinized.
In the event that the Company is determined to be in noncompliance with FDA
regulations, to the extent that the Company is unable to convince the FDA or
state agency of the adequacy of its compliance, the FDA or state agency has the
power to assert penalties or remedies, including injunction or temporary
suspension of shipment until compliance is achieved. Noncompliance may also lead
to a recall of product. Such penalties or remedies could have a materially
 
                                       18
<PAGE>
adverse effect on the Company's business, financial condition and results of
operations. In addition, the manufacture, sale or use of the Company's products
are also subject to regulation by other federal entities, such as the
Occupational Safety and Health Agency and the Environmental Protection Agency,
and by various state agencies, including the California Environmental Protection
Agency. Federal and state regulations regarding the manufacture, sale or use of
the Company's products are subject to future change, which changes could have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
    Distribution of the Company's products outside the United States may be
subject to FDA export and extensive foreign government regulation. These
regulations, including the requirements for approvals or clearance to market,
the time required for regulatory review and the sanctions imposed for
violations, vary from country to country. There can be no assurance that the
Company will obtain regulatory approvals in such countries or that it will not
be required to incur significant costs in obtaining or maintaining its foreign
regulatory approvals. In addition, the export by the Company of certain of its
products which have not yet been cleared for domestic commercial distribution
may be subject to FDA export restrictions. Failure to obtain necessary
regulatory approvals, the restriction, suspension or revocation of existing
approvals or any other failure to comply with regulatory requirements outside
the United States could have a material adverse effect on the Company's
business, financial condition and results of operations.
 
    Many of Metra's customers using its diagnostic devices for clinical use in
the United States may also be regulated under the Clinical Laboratory
Improvement Amendments of 1988 ("CLIA"). CLIA is intended to ensure the quality
and reliability of all medical testing in laboratories in the U.S. by requiring
that any health care facility in which testing is performed meet specified
standards in the areas of personnel qualification, administration, participation
in proficiency testing, patient test management, quality control, quality
assurance and inspections. The regulations have established three levels of
regulatory control based on test complexity ; "waived," "moderately complex" and
"highly complex". Metra's Alkphase-B test is categorized as a highly complex
test for clinical use in the United States, and the Company believes that its
other tests will also be categorized as highly complex. Laboratories that
perform either moderately or highly complex tests must meet certain standards
with the major difference in requirements being quality control and personnel
standards. Personnel requirements for highly complex tests are more rigorous
than those for moderately complex tests, requiring that personnel have more
education and experience than personnel conducting moderately complex tests.
Under the CLIA regulations, all laboratories performing high or moderately
complex tests are required to obtain either a registration certificate or
certification of accreditation from the Health Care Financial Administration
("HCFA"). As a result of the CLIA requirements, physician office laboratories
and small volume test sites may be dissuaded from initiating, continuing or
expanding patient testing, particularly if the tests are classified as
moderately or highly complex tests. There can be no assurance that the CLIA
regulations and future administrative interpretations of CLIA will not have an
adverse impact on the potential market for the Company's products.
 
EMPLOYEES
 
    As of June 30, 1997, the Company had 70 full-time employees, 11 of whom were
engaged in, or directly supported, the Company's research and development
activities, 26 of whom were in sales and marketing, 23 of whom were in
manufacturing operations, and 10 of whom were in administration. The Company
also employs several part-time employees and uses outside consultants. The
Company considers relations with its employees to be good. None of the Company's
employees is covered by a collective bargaining agreement.
 
                                       19
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
 
    The following table sets forth certain information with respect to the
executive officers and certain other officers of the Company as of June 30,
1997:
 
<TABLE>
<CAPTION>
NAME                                          AGE                        POSITION
----------------------------------------      ---      ---------------------------------------------
<S>                                       <C>          <C>
George W. Dunbar, Jr....................          50   President, Chief Executive Officer and
                                                         Director
 
Ronald T. Steckel.......................          44   Senior Vice President
 
Gerald J. Allen, Ph.D...................          46   Vice President, Research and Development
 
Kurt E. Amundson........................          44   Vice President and Chief Financial Officer
 
John F. Coombes.........................          53   Vice President, Sales & Marketing
 
Debby R. Dean...........................          41   Vice President, Human Resources and
                                                         Administration
</TABLE>
 
    The officers of the Company are appointed by the Board of Directors and
serve at the discretion of the Board. There are no family relationships among
the directors or officers of the Company.
 
    MR. DUNBAR joined the Company as President, Chief Executive Officer and
Director in July 1991. Prior to joining the Company, he was the Vice President
Licensing and Business Development of The Ares-Serono Group ("Ares-Serono"), a
Swiss health care company that markets pharmaceutical, diagnostic and veterinary
products worldwide, from 1988 until 1991, where he established a licensing and
acquisition group for its health care divisions. From 1974 until 1987, he held
various senior management positions with Amersham International ("Amersham"), a
health care and life sciences company, where he most recently served as Vice
President for its Life Sciences business in North America. Mr. Dunbar also
served as Amersham's General Manager of Pacific Rim markets and Eastern Regional
operations and, prior to that, he managed the international marketing of
Amersham's medical and industrial radioisotopes. Mr. Dunbar also serves as a
director of DepoTech, a public biotechnology company, LJL Biosystems, a life
sciences systems company and Metra Biosystems (U.K.) Ltd., the Company's wholly
owned subsidiary. Mr. Dunbar holds a B.S. in electrical engineering and an
M.B.A. from Auburn University, and sits on the Auburn School of Business M.B.A.
Advisory Committee.
 
    MR. STECKEL joined the Company as Vice President, Development and
Operations, in February 1992. He was promoted to Senior Vice President in August
1996. From 1990 until 1992, he was Vice President of Operations of Leeco
Diagnostics, a medical diagnostics company, where he was responsible for
manufacturing, quality assurance, materials management and facilities. Prior to
his employment at Leeco, Mr. Steckel worked for Ares-Serono from 1986 to 1990,
in various positions including Director, Corporate Projects and Vice President,
Operations of Serono Baker Diagnostics ("Serono"). At Serono, Mr. Steckel
managed the successful launches of immunoassay analyzers and hematology
instruments to the international marketplace. Mr. Steckel holds a B.S. in
biology from Blackburn University and an M.B.A. from Lake Forest College.
 
    DR. ALLEN joined the Company as Vice President Research and Development in
June 1997. Dr. Allen has worked in the commercial immunoassay industry since
1975 with various companies including Amersham International, Serono
Diagnostics, and G.D. Searle. From 1991 to 1997, Dr. Allen was Vice President
Diagnostics at R & D Systems, Inc. in Minneapolis. Dr. Allen received his B.S.
and Ph.D. degrees from The University of Bristol.
 
    MR. AMUNDSON joined the Company as Vice President and Chief Financial
Officer in January 1996. From 1994 until 1996, Mr. Amundson was Vice President
and Chief Financial Officer of Shaman
 
                                       20
<PAGE>
Pharmaceuticals, Inc., a biopharmaceutical company ("Shaman"). Prior to his
employment with Shaman, he was Chief Financial Officer at Abaxis, Inc., a
biomedical instrumentation company. From 1986 to 1991, Mr. Amundson was Vice
President, Finance at Proxim, Inc., a maker of wireless network products. Mr.
Amundson is a Certified Public Accountant and received a B.A. in Graphic
Communications from California Polytechnic University, San Luis Obispo.
 
    MR. COOMBES joined the Company in November 1993 as Director European Sales.
Mr. Coombes was appointed Vice President Sales and Marketing in June 1997 after
serving as Vice President International since August 1996 and previously as
Director--European Operations and Managing Director of Metra Biosystems (U.K)
from November 1994 to August 1996. From 1992 to 1993, Mr. Coombes was European
Sales Manager of T Cell Diagnostics, a division of T Cell Sciences, a
biotechnology company. Prior to his employment at T Cell Diagnostics, Mr.
Coombes established Digen Limited, a distributor for Gene Trak Systems. From
1989 to 1991, Mr. Coombes was Director of European Operations for Gene Trak
Systems, a human diagnostics, food industry and industrial biotechnology
company. Mr. Coombes received an Ordinary National Diploma in chemistry from
Bromsgrove College in Worcestershire, England and Higher National Diplomas in
chemistry and analytical chemistry from Lanchester Polytechnic in Coventry,
England.
 
    MS. DEAN joined the Company as Senior Director of Human Resources and
Administration in September 1995, and was appointed Vice President Human
Resources and Administration July 1997. From 1992 to 1995, Ms. Dean worked at
DNX Corporation, a biopharmaceutical company, in the positions of Vice
President, Corporate Administration & Communications. Prior to DNX, Ms. Dean
worked with Serono, from 1988 to 1992 as Director, Human Resources. Ms. Dean
received a B.S. in Management from Allentown College, and an M.B.A. from Lehigh
University.
 
ITEM 2. PROPERTIES
 
    Metra currently leases approximately 30,600 square feet of laboratory and
office space at two facilities in Mountain View, California. The Company leases
these facilities under operating leases which last through May 2001, each with a
renewal option that, if exercised, would extend the term of the lease through
May 2003. In addition, the Company leases approximately 1,600 square feet of
office space in Lake Oswego, Oregon under an operating lease which lasts until
February 1998. The Company also leases space in England, Italy and Germany under
operating leases which expire at various times. The Company believes that its
existing facilities will be sufficient for its operational purposes through
1998.
 
ITEM 3. LEGAL PROCEEDINGS
 
    None.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    Not Applicable.
 
                                       21
<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
    The Company's Common Stock is traded on the Nasdaq National Market under the
symbol MTRA. The range of reported high and low bid quotations for the shares of
the Company's Common Stock, as reported by the Nasdaq National Market, are set
forth below for the periods indicated:
 
<TABLE>
<CAPTION>
 FISCAL 1997      HIGH        LOW      FISCAL 1996      HIGH        LOW
--------------  ---------  ---------  --------------  ---------  ---------
<S>             <C>        <C>        <C>             <C>        <C>
1st Quarter...  $    7.25  $    4.50     1st Quarter  $   21.75  $   12.38
 
2nd Quarter...  $    6.00  $    3.75     2nd Quarter  $   21.88  $   16.75
 
3rd Quarter...  $    6.75  $    3.75     3rd Quarter  $   18.25  $   13.50
 
4th Quarter...  $    5.00  $    2.63     4th Quarter  $   14.50  $    4.50
</TABLE>
 
    The above quotations represent prices quoted between dealers, do not include
retail markup, markdown or commissions and may not represent actual
transactions. On September 15, 1997, the closing price of the Company's Common
Stock was $3.75.
 
    HOLDERS
 
    As of September 15, 1997 the Company had approximately 141 shareholders of
record, including several holders who are nominees for an undetermined number of
beneficial owners.
 
    DIVIDENDS
 
    The Company has never declared or paid any cash dividends or made any other
cash distribution on its Common Stock, and the Company anticipates that in the
foreseeable future it will follow a policy of retaining any earnings for use in
its business. Any future determination as to declaration and payment of
dividends will be made at the discretion of the Board of Directors.
 
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 
    The following selected financial data are derived from consolidated
financial statements of Metra Biosystems, Inc. The consolidated balance sheet as
of June 30, 1997 and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year ended June 30, 1997 have been
audited by Ernst & Young LLP, independent auditors. The consolidated balance
sheets ended June 30, 1996, 1995, 1994 and 1993 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the four-year period ended June 30, 1996 have been audited by other
 
                                       22
<PAGE>
independent auditors. The data should be read in conjunction with the
consolidated financial statements, related notes, and other financial
information included herein.
 
<TABLE>
<CAPTION>
                                                            1997        1996        1995        1994       1993
                                                         ----------  ----------  ----------  ----------  ---------
<S>                                                      <C>         <C>         <C>         <C>         <C>
                                                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Product sales..........................................  $    6,405  $    4,413  $    2,552  $    1,439  $     617
Partner revenue........................................         320       2,057         744       2,032      2,062
                                                         ----------  ----------  ----------  ----------  ---------
Total revenues.........................................       6,725       6,470       3,296       3,471      2,679
Total operating expenses(1)............................      22,035      29,670      10,436       7,211      6,349
Net loss(1)............................................  $  (13,127) $  (21,399) $   (6,803) $   (3,575) $  (3,583)
Net loss per share.....................................  $    (1.04) $    (2.04) $    (1.08) $    (0.69) $   (0.87)
Shares used to compute net loss per share..............      12,610      10,515       6,303       5,156      4,119
 
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................  $   30,729  $   44,231  $    2,759  $    9,803  $   2,749
Total assets...........................................      47,768      60,193       7,400      12,807      4,431
Long-term portion of capital lease obligations.........       1,574       1,367          40          93        293
Redeemable preferred stock.............................      --          --          23,260      23,260     11,616
Total shareholders' equity (deficit)...................      42,077      54,424     (17,856)    (11,650)    (8,092)
</TABLE>
 
------------------------
 
(1) The fiscal 1996 total operating expenses and net loss include $11,291 of
    acquired in-process research and development associated with the acquisition
    of Osteo Sciences Corporation in January, 1996.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
OVERVIEW
 
    Since its commencement of operations in March 1990, Metra has been engaged
in the development and commercialization of diagnostic products for the
detection and management of metabolic bone diseases and disorders. The Company
has developed and is currently marketing for research and clinical use four
immunodiagnostic tests to assess bone resorption and formation and one
immunodiagnostic test to assess bone growth disorders. In the United States,
three of these tests have received 510(k) clearance from the FDA for clinical
use and two of these tests are being marketed for research use only. The Company
is currently marketing its products for clinical as well as research use on a
world-wide basis.
 
    The Company's principal sources of revenue are product sales and partner
revenues. Product sales are principally derived from sales of the Company's
biochemical tests for research and clinical use. Partner revenues result from
certain collaborative relationships and primarily consist of milestone payments
and licensing fees received from these partners and revenues from sales to these
partners of proprietary reagents for use with the test formats of these
partners.
 
    The Company's revenues from product sales have historically resulted from
worldwide sales for clinical and research use. In November and December of 1995,
the Company received 510(k) clearance from the FDA for its Pyrilinks and
Pyrilinks-D products. Revenues from clinical sales in the United States will be
dependent, in part, upon the rate at which the Company can increase awareness
and acceptance of its products among clinicians. The Company commenced its
marketing efforts in the United States upon receiving 510(k) clearance, and does
not anticipate significant revenues from clinical sales of its products in the
United States unless and until the results of its marketing efforts are realized
and overall consumer awareness of management of bone and joint health increases.
There can be no assurance that the Company can successfully increase market
awareness or acceptance of the Company's products in a timely manner or at all,
and failure to do so would have a material adverse effect on the Company's
business,
 
                                       23
<PAGE>
financial condition and results of operations. Due to seasonal factors such as
customer and distributor vacations, the Company expects reduced product sales
during the summer months, particularly in Europe. As a result of this seasonal
effect, the Company's revenues could be lower in the quarter ending September 30
than in the other quarters.
 
    In April 1997, the Company entered into a Co-Promotion Agreement with Berlex
Laboratories, Inc. ("Berlex") which includes the utilization of the direct
detail pharmaceutical force of Berlex. Over the first year of the promotional
agreement, which begins July 1, 1997, the Company will pay Berlex approximately
$3,000,000 for promotional activities, record an expense for the fair value of
warrants issued to Berlex of approximately $506,000, and pay commissions on
increased sales of the Company's Pyrilinks-D product. After the first
promotional year, the future continuance of the promotional agreement and the
associated financial cost to Metra is, in part, dependent upon the achievement
of certain milestones and the mutual consent of both parties.
 
    Historically, the Company's quarterly revenues have fluctuated
significantly. Partner revenues have fluctuated primarily as a result of the
timing of milestone payments received from corporate collaborations. Product
sales have fluctuated primarily as a result of the introduction of new products,
seasonal variations in demand, the rate of acceptance of the Company's products
and variations in the timing and volume of distributor purchases. The Company
expects that total revenues will fluctuate as a result of these and other
factors and that international sales will continue to account for a significant
portion of its revenues in the future. The Company expects to incur increased
costs related to sales and marketing, clinical studies, manufacturing, research
and development and general and administrative expenses. As a result, the
Company expects its results from operations will vary significantly from quarter
to quarter and from year to year and will depend on, among other things, gaining
regulatory clearances in the United States and elsewhere, the rate of acceptance
of the Company's products in the marketplace, the availability of reimbursement,
the timing of fees and milestone payments from its partners in collaborative
relationships, the execution of new collaborative relationships, costs
associated with the development of the Company's products and costs associated
with and the financial impact of acquisitions.
 
    The Company's gross margin is affected by a number of factors, including
product mix, product pricing, the extent of diagnostic test sales compared to
reagent sales and royalty revenue, the percentage of direct sales compared to
distributor sales and manufacturing costs, including overhead and material
costs.
 
RESULTS OF OPERATIONS
 
    FISCAL YEARS ENDED JUNE 30, 1997 AND 1996
 
    Product sales for the year ended June 30, 1997 increased to $6,405,000 from
$4,413,000 for the year ended June 30, 1996. The increase in product sales was
due to increasing volume from broader adoption of the Company's biochemical
tests for clinical and research use worldwide. The Company's bone resorption
products were cleared for marketing in the U.S. by the FDA in the second fiscal
quarter of 1996. International product sales accounted for 77% and 78% of
product revenues the fiscal years ended June 30, 1997 and 1996, respectively.
The adoption rate in the U.S. (post clearance) has been slower than anticipated
and the Company is focused on increasing marketing efforts for medical
education.
 
    Partner revenues for the fiscal year ended June 30, 1997 decreased to
$320,000 from $2,057,000 for the fiscal year ended June 30, 1996. This decrease
resulted primarily from a decrease in non-recurring milestone payments from
corporate partners, earned upon receipt of FDA clearance of Pyrilinks (November
1995) and Pyrilinks-D (December 1995), which were received in fiscal year 1996.
 
    Cost of product sales for the fiscal year ended June 30, 1997 increased to
$3,982,000 from $3,276,000 for the fiscal year ended June 30, 1996, reflecting
the increased volume of products sold and associated production costs. The gross
margin on product sales for the fiscal year ended June 30, 1997 was 38%,
 
                                       24
<PAGE>
compared to 26% for the prior fiscal year. The increase in the gross margin was
due to production volume increases and efficiency gains in the production
process.
 
    Research and development expenses for the fiscal year ended June 30, 1997
increased to $5,670,000 from $4,308,000 for the fiscal year ended June 30, 1996.
This increase resulted from increased internal product development,
collaborative programs, and the on-going research costs of the ultrasound
program which was acquired in January 1996. Until the completion of the
development of the ultrasound system, the Company expects research and
development expenses to approximate current levels.
 
    Sales and marketing expenses for the fiscal year ended June 30, 1997
increased to $8,838,000 from $7,725,000 for the fiscal year ended June 30, 1996.
The increase is due to increased expenses associated with medical education
programs, and sales related spending increases at international locations. The
Company believes that sales and marketing expenses will increase in subsequent
periods due to fees and commissions payable to Berlex in connection with the
Co-Promotion agreement entered into between the Company and Berlex in April
1997.
 
    General and administrative expenses for the fiscal year ended June 30, 1997
increased to $3,545,000 from $3,070,000 for the fiscal year ended June 30, 1996,
due to increased personnel costs as well as additional legal and consulting
expenses necessary to support the Company's expanded operations. The Company
expects future general and administrative expenses to approximate current
levels.
 
    Net interest and other income for the fiscal year ended June 30, 1997
increased to $2,183,000 from $1,801,000 for the fiscal year ended June 30, 1996
primarily as a result of the interest earned on the investment of the proceeds
from the Company's follow-on offering in April 1996.
 
    FISCAL YEARS ENDED JUNE 30, 1996 AND 1995
 
    Product sales for the year ended June 30, 1996 increased to $4,413,000 from
$2,552,000 for the year ended June 30, 1995. The increase in product sales was
due to increasing volume from broader adoption of the Company's biochemical
tests for clinical use internationally and in the United States. The Company's
bone resorption products were cleared for marketing by the FDA in the U.S. in
the second fiscal quarter of 1996. International product sales accounted for 78%
of product revenues for both the fiscal years ended June 30, 1996 and 1995.
 
    Partner revenues for the fiscal year ended June 30, 1996 increased to
$2,057,000 from $744,000 for the fiscal year ended June 30, 1995. This increase
resulted primarily from an increase in non-recurring milestone payments from
corporate partners, earned upon receipt of FDA clearance of Pyrilinks (November
1995) and Pyrilinks-D (December 1995), and to a lesser extent an increase in
reagent sales to collaborative partners.
 
    Cost of product sales for the fiscal year ended June 30, 1996 increased to
$3,276,000 from $1,987,000 for the fiscal year ended June 30, 1995, reflecting
the increased volume of products sold and associated production costs.
 
    Research and development expenses for the fiscal year ended June 30, 1996
increased to $4,308,000 from $3,717,000 for the fiscal year ended June 30, 1995.
This increase resulted from increased product development and collaborative
programs and the on-going research costs of the ultrasound program which was
acquired in January 1996.
 
    Sales and marketing expenses for the fiscal year ended June 30, 1996
increased to $7,725,000 from $2,881,000 for the fiscal year ended June 30, 1995.
The increase is due to increased staffing in domestic and international
locations, the costs of additional marketing programs which were implemented to
support the clinical launch of the Company's products in the United States
following the clearance by the FDA, and the addition of a direct sales force in
the United States.
 
                                       25
<PAGE>
    General and administrative expenses for the fiscal year ended June 30, 1996
increased to $3,070,000 from $1,851,000 for the fiscal year ended June 30, 1995,
due to increased personnel costs and additional expenses associated with being a
public company for all of fiscal 1996.
 
    Acquired in-process research and development costs for the fiscal year ended
June 30, 1996 resulted from a one-time charge of $11,291,000. This charge was
primarily composed of the purchase price of approximately $10,017,000, with the
balance related to costs and expenses associated with the acquisition, the fair
value of liabilities assumed including reserves for future costs related to the
acquisition, less the fair value of tangible assets acquired. The value of the
research and development acquired from Osteo Sciences was determined based upon
an analysis of the present value of expected future cash flows related to the
technology. At the date of acquisition, technical feasibility of the acquired
technology had not yet been established and the technology had no foreseeable
future alternative uses. The Company expects product development of the
ultrasound system to be completed in calendar 1998. However, due to the inherent
uncertainty of the development process and of obtaining approval to market the
proposed products from the FDA and comparable regulatory bodies internationally,
the Company cannot precisely predict the timing of completion or the total
expenditures necessary to complete product development.
 
    Net interest and other income for the fiscal year ended June 30, 1996
increased to $1,801,000 from $337,000 for the fiscal year ended June 30, 1995
primarily as a result of the interest earned on the investment of the proceeds
from the Company's initial public offering in July, 1995 and the Company's
follow-on offering in April, 1996.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    The Company has financed its operations from inception primarily through the
sale of preferred and common stock, payments received under to collaborative
research and development agreements, sales of the Company's diagnostic products
for research and clinical use and, to a lesser extent, through equipment
financing. In July 1995, the Company completed its initial public offering of
3,450,000 shares of common stock. All preferred stock was automatically
converted into shares of common stock upon closing of the offering. The cash
proceeds from the initial public offering, net of underwriters discounts were
$32,085,000. Total additional expenses associated with the offering were
$727,000, resulting in net proceeds from the offering of $31,358,000. In April,
1996, the Company had a follow-on offering of 2,300,000 shares of Common Stock.
The cash proceeds from the Company's follow-on offering completed April 22,
1996, net of underwriters' discounts were $29,187,000. Total additional expenses
associated with the follow-on offering were $450,000, resulting in net proceeds
to the Company from the follow-on offering of $28,737,000.
 
    As of June 30, 1997, the Company had cash and investments of $39,140,000.
During the fiscal year ended June 30, 1997 the Company's use of cash in
operating activities was $12,516,000 compared to $10,730,000 for the fiscal year
ended June 30, 1996. The increase in cash used in operating activities was
primarily due to the increased net loss (excluding the write-off of in-process
research in development in fiscal 1996 as a result of the acquisition of Osteo
Science Corporation for consideration which primarily consisted of stock).
 
    The Company has historically utilized leasing arrangements to finance
capital purchases. As of June 30, 1997, $2,140,000 was outstanding in
conjunction with these leases. The leases are classified as capital leases and
expire in fiscal years 2000 and 2001. The Company's leasing agreements include
negative covenants which require an irrevocable letter of credit in the event of
non-compliance of the covenants.
 
    The Company's future capital requirements depend upon, among other things,
the costs of research and development programs, the funding of clinical and
regulatory related studies, the expansion of marketing and selling activities,
costs involved in filing, prosecuting and enforcing patent claims, and the time
and costs associated with obtaining regulatory approvals for future products.
Funds may also be used for investments in, or acquisitions of, complementary
businesses, products or technologies; in expanding
 
                                       26
<PAGE>
the Company's manufacturing capacity; or in improving its existing facilities.
Although the Company believes that its current cash, cash equivalents and
investment securities will be sufficient to meet the Company's operating
expenses and capital requirements through at least fiscal 1999, the Company's
future liquidity and capital requirements will depend on numerous factors,
including regulatory actions by the FDA and other international regulatory
bodies, market acceptance of its products, expansion of the Company's marketing
and sales activities, the cost of intellectual property protection and the costs
associated with any company or product acquisitions . The Company may, however,
seek additional equity or debt financing to fund further expansion of its
operations, other projects or acquisitions. The timing and amount of such
capital requirements cannot be precisely determined at this time and will depend
on a number of factors, including demand for the Company's products, product mix
changes, industry conditions and competitive factors. There can be no assurance
that if it becomes necessary to raise additional capital, that such capital will
be available on acceptable terms, if at all.
 
                                       27
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
 
                 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
The Board of Directors and Shareholders
Metra Biosystems, Inc.
 
    We have audited the accompanying consolidated balance sheet of Metra
Biosystems, Inc. as of June 30, 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended. Our
audit also included the financial statement schedule for the year ended June 30,
1997 listed in the index at Item 14(a)(2). The consolidated financial statements
and schedule of the Company as of June 30, 1996 and for the two years then
ended, were audited by other auditors whose report dated July 18, 1996,
expressed an unqualified opinion on those statements and schedule. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit.
 
    We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
    In our opinion, the 1997 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Metra
Biosystems, Inc. as of June 30, 1997, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein for the year ended June 30, 1997.
 
                                          ERNST & YOUNG LLP
 
Palo Alto, California
July 16, 1997
 
                                       28
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors and Shareholders
Metra Biosystems, Inc.
 
    We have audited the accompanying consolidated balance sheet of Metra
Biosystems, Inc. and subsidiaries (the Company) as of June 30, 1996, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the two-year period ended June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Metra
Biosystems, Inc. and subsidiaries as of June 30, 1996, and the results of their
operations and their cash flows for each of the years in the two-year period
ended June 30, 1996, in conformity with generally accepted accounting
principles.
 
                                          KPMG PEAT MARWICK LLP
 
San Francisco, California
July 18, 1996
 
                                       29
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
                             JUNE 30, 1997 AND 1996
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                               1997        1996
                                                                                            ----------  ----------
<S>                                                                                         <C>         <C>
                                                      ASSETS
Current assets:
  Cash and cash equivalents...............................................................  $   11,709  $   19,217
  Short-term investments..................................................................      18,876      26,283
  Accounts receivable, net of allowance for doubtful accounts of $147 and $101 at June 30,
    1997 and 1996, respectively...........................................................       1,576       1,266
  Interest receivable.....................................................................         503         578
  Inventories.............................................................................       1,446       1,040
  Prepaid expenses and other current assets...............................................         736         249
                                                                                            ----------  ----------
    Total current assets..................................................................      34,846      48,633
Property and equipment, net...............................................................       4,182       4,314
Long-term investments.....................................................................       8,555       6,747
Other assets..............................................................................         185         499
                                                                                            ----------  ----------
                                                                                            $   47,768  $   60,193
                                                                                            ----------  ----------
                                                                                            ----------  ----------
 
                                       LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
  Accounts payable........................................................................  $    1,068  $    2,185
  Accrued expenses........................................................................       2,483       1,810
  Current portion of capital lease obligations............................................         566         407
                                                                                            ----------  ----------
    Total current liabilities.............................................................       4,117       4,402
Long-term portion of capital lease obligations............................................       1,574       1,367
Commitments and contingencies
Shareholders' equity:
  Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued or
    outstanding...........................................................................      --          --
  Common stock, $0.001 par value, 50,000,000 shares authorized; 12,628,618 and 12,598,768
    shares issued and outstanding at June 30, 1997 and 1996, respectively.................          13          13
  Additional paid-in capital..............................................................      95,219      94,539
  Notes receivable from shareholders......................................................         (40)        (90)
  Deferred compensation...................................................................         (70)        (79)
  Unrealized loss on investments..........................................................         (13)        (83)
  Cumulative translation adjustment.......................................................         (16)         13
  Accumulated deficit.....................................................................     (53,016)    (39,889)
                                                                                            ----------  ----------
    Total shareholders' equity............................................................      42,077      54,424
                                                                                            ----------  ----------
                                                                                            $   47,768  $   60,193
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       30
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                   YEARS ENDED JUNE 30, 1997, 1996, AND 1995
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                    1997        1996       1995
                                                                                 ----------  ----------  ---------
<S>                                                                              <C>         <C>         <C>
Revenues:
  Product sales................................................................  $    6,405  $    4,413  $   2,552
  Partner revenue..............................................................         320       2,057        744
                                                                                 ----------  ----------  ---------
    Total revenues.............................................................       6,725       6,470      3,296
                                                                                 ----------  ----------  ---------
Operating expenses:
  Cost of product sales........................................................       3,982       3,276      1,987
  Research and development.....................................................       5,670       4,308      3,717
  Sales and marketing..........................................................       8,838       7,725      2,881
  General and administrative...................................................       3,545       3,070      1,851
  Acquired in-process research and development.................................      --          11,291     --
                                                                                 ----------  ----------  ---------
    Total operating expenses...................................................      22,035      29,670     10,436
                                                                                 ----------  ----------  ---------
  Loss from operations.........................................................     (15,310)    (23,200)    (7,140)
Interest income................................................................       2,430       1,947        367
Interest expense...............................................................        (214)       (106)       (30)
Other expense..................................................................         (33)        (40)    --
                                                                                 ----------  ----------  ---------
    Net loss...................................................................  $  (13,127) $  (21,399) $  (6,803)
                                                                                 ----------  ----------  ---------
                                                                                 ----------  ----------  ---------
Net loss per share.............................................................  $    (1.04) $    (2.04) $   (1.08)
                                                                                 ----------  ----------  ---------
                                                                                 ----------  ----------  ---------
Shares used to compute net loss per share......................................      12,610      10,515      6,303
                                                                                 ----------  ----------  ---------
                                                                                 ----------  ----------  ---------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       31
<PAGE>
                             METRA BIOSYSTEMS, INC.
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                   YEARS ENDED JUNE 30, 1997, 1996, AND 1995
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                               NOTES
                                             COMMON STOCK      ADDITIONAL    RECEIVABLE
                                          ------------------    PAID-IN         FROM         DEFERRED
                                            SHARES    AMOUNT    CAPITAL     SHAREHOLDERS   COMPENSATION
                                          ----------  ------   ----------   ------------   ------------
<S>                                       <C>         <C>      <C>          <C>            <C>
Balances as of June 30, 1994............     729,510   $  1     $    95        $ (59)         $--
 
Issuance of common stock under stock
  option plan...........................     111,253   --           120         (110)         --
Issuance of common stock under agreement
  for licensed technology...............      33,332   --           200        --             --
Deferred compensation related to
  granting of stock options.............      --       --           575        --              (575)
Amortization of deferred compensation...      --       --         --           --               388
Unrealized loss on investments..........      --       --         --           --             --
Net loss................................      --       --         --           --             --
                                          ----------  ------   ----------      -----          -----
Balances as of June 30, 1995............     874,095      1         990         (169)          (187)
 
Issuance of common stock under employee
  stock option and purchase plans.......      98,927   --           205           79          --
Issuance of common stock related to
  acquisition of Osteo Sciences
  Corporation...........................     541,072      1      10,000        --             --
Conversion of preferred stock into
  common stock..........................   5,324,685      5      23,255        --             --
Conversion of warrants into common
  stock.................................       9,989   --         --           --             --
Issuance of common stock related to
  public offerings......................   5,750,000      6      60,089        --             --
Amortization of deferred compensation...      --       --         --           --               108
Translation adjustment..................      --       --         --           --             --
Unrealized loss on investments..........      --       --         --           --             --
Net loss................................      --       --         --           --             --
                                          ----------  ------   ----------      -----          -----
Balances as of June 30, 1996............  12,598,768     13      94,539          (90)           (79)
 
Issuance of common stock under employee
  stock option and purchase plans.......      46,344   --           157           50          --
Repurchase of common stock..............     (16,494)  --           (20)       --             --
Deferred compensation relating to
  granting of stock options.............      --       --            37        --               (37)
Amortization of deferred compensation...      --       --         --           --                46
Issuance of warrants....................      --       --           506        --             --
Translation adjustment..................      --       --         --           --             --
Unrealized gain on investments..........      --       --         --           --             --
Net loss................................      --       --         --           --             --
                                          ----------  ------   ----------      -----          -----
Balances as of June 30, 1997............  12,628,618   $ 13     $95,219        $ (40)         $ (70)
                                          ----------  ------   ----------      -----          -----
                                          ----------  ------   ----------      -----          -----
 
<CAPTION>
                                                                                         TOTAL
                                          UNREALIZED     CUMULATIVE                  SHAREHOLDERS'
                                            LOSS ON     TRANSLATION    ACCUMULATED      EQUITY
                                          INVESTMENTS    ADJUSTMENT      DEFICIT       (DEFICIT)
                                          -----------   ------------   -----------   -------------
<S>                                       <C>           <C>            <C>           <C>
Balances as of June 30, 1994............    -$-            -$-          $(11,687)      $(11,650)
Issuance of common stock under stock
  option plan...........................    --             --             --                 10
Issuance of common stock under agreement
  for licensed technology...............    --             --             --                200
Deferred compensation related to
  granting of stock options.............    --             --             --             --
Amortization of deferred compensation...    --             --             --                388
Unrealized loss on investments..........       (1)         --             --                 (1)
Net loss................................    --             --             (6,803)        (6,803)
                                            -----          -----       -----------   -------------
Balances as of June 30, 1995............       (1)         --            (18,490)       (17,856)
Issuance of common stock under employee
  stock option and purchase plans.......    --             --             --                284
Issuance of common stock related to
  acquisition of Osteo Sciences
  Corporation...........................    --             --             --             10,001
Conversion of preferred stock into
  common stock..........................    --             --             --             23,260
Conversion of warrants into common
  stock.................................    --             --             --             --
Issuance of common stock related to
  public offerings......................    --             --             --             60,095
Amortization of deferred compensation...    --             --             --                108
Translation adjustment..................    --                13          --                 13
Unrealized loss on investments..........      (82)         --             --                (82)
Net loss................................    --             --            (21,399)       (21,399)
                                            -----          -----       -----------   -------------
Balances as of June 30, 1996............      (83)            13         (39,889)        54,424
Issuance of common stock under employee
  stock option and purchase plans.......    --             --             --                207
Repurchase of common stock..............    --             --             --                (20)
Deferred compensation relating to
  granting of stock options.............    --             --             --             --
Amortization of deferred compensation...    --             --             --                 46
Issuance of warrants....................    --             --             --                506
Translation adjustment..................    --               (29)         --                (29)
Unrealized gain on investments..........       70          --             --                 70
Net loss................................    --             --            (13,127)       (13,127)
                                            -----          -----       -----------   -------------
Balances as of June 30, 1997............     $(13)          $(16)       $(53,016)      $ 42,077
                                            -----          -----       -----------   -------------
                                            -----          -----       -----------   -------------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       32
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                   YEARS ENDED JUNE 30, 1997, 1996, AND 1995
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                     1997        1996       1995
                                                                                  ----------  ----------  ---------
<S>                                                                               <C>         <C>         <C>
Cash flows from operating activities:
  Net loss......................................................................  $  (13,127) $  (21,399) $  (6,803)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization...............................................       1,295         610        543
    Compensation expenses paid in stock.........................................          46         108        588
    Forgiveness of notes receivable from officers...............................          37          29         57
    Loss on disposition of property and equipment...............................          52          19         16
    Write-off of in-process research and development............................      --          11,291     --
    Changes in operating assets and liabilities:
      Trade accounts and interest receivable....................................        (235)     (1,284)      (187)
      Inventories...............................................................        (406)       (402)      (267)
      Other current assets and other assets.....................................         265      (1,046)      (777)
      Accounts payable and accrued expenses.....................................        (442)      1,344      1,000
                                                                                  ----------  ----------  ---------
        Net cash used in operating activities...................................     (12,515)    (10,730)    (5,830)
Cash flows from investing activities:
  Purchases of investments......................................................     (28,111)    (46,837)    (1,571)
  Maturities of investments.....................................................      33,780      14,725      2,109
  Purchases of property and equipment, net......................................      (1,215)     (3,048)      (657)
  Proceeds from sale of property and equipment..................................      --          --             15
  Issuance of notes receivable to officers......................................      --          --           (170)
  Repayment of notes receivable from officers...................................          50          79     --
                                                                                  ----------  ----------  ---------
        Net cash provided by (used in) investing activities.....................       4,504     (35,081)      (274)
Cash flows from financing activities:
  Proceeds from capital lease financing.........................................         847       1,922     --
  Repayment of capital lease obligations........................................        (481)       (240)      (201)
  Proceeds from sales of common stock, net......................................         137      61,029        120
                                                                                  ----------  ----------  ---------
        Net cash provided by (used in) financing activities.....................         503      62,711        (81)
                                                                                  ----------  ----------  ---------
Net increase (decrease) in cash and cash equivalents............................      (7,508)     16,900     (6,185)
Cash and cash equivalents at beginning of year..................................      19,217       2,317      8,502
                                                                                  ----------  ----------  ---------
Cash and cash equivalents at end of year........................................  $   11,709  $   19,217  $   2,317
                                                                                  ----------  ----------  ---------
                                                                                  ----------  ----------  ---------
 
Supplemental disclosure of cash flow information:
  Cash paid during the year for interest........................................  $      214  $      106  $      30
 
Supplemental disclosure of noncash investing and financing activities:
  Assets acquired from purchase of Osteo Sciences Corporation...................  $   --      $     (605) $  --
  Liabilities assumed from purchase of Osteo Sciences...........................  $   --      $      686  $  --
  Issuance of warrants under Co-Promotion agreement (Note 10)...................  $      506  $   --      $  --
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       33
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                                 JUNE 30, 1997
 
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
(a) THE COMPANY
 
    Metra Biosystems, Inc. ("Metra" or the "Company"), a California corporation,
is engaged in the development and commercialization of diagnostic products for
the detection and management of metabolic bone diseases and disorders. The
Company primarily markets its products for clinical and research use in Europe,
the United States and Pacific Rim countries.
 
(b) PRINCIPLES OF CONSOLIDATION
 
    The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. The operations of Osteo
Sciences Corporation are included in the Company's results of operations
beginning February 1, 1996 (see note 14).
 
(c) CASH AND CASH EQUIVALENTS
 
    The Company considers all highly liquid debt instruments purchased with an
original maturity of less than three months to be cash equivalents.
 
(d) INVESTMENTS
 
    The Company accounts for investments in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company's policy is to protect
the value of its investment portfolio and to minimize principal risk by earning
returns based on current interest rates. The Company, by policy, invests
primarily in highly rated debt instruments and limits the amount of investment
with any one issuer. The Company's marketable investments are classified as
available-for-sale as of the balance sheet date and are reported at fair value,
with unrealized gains and losses recorded as a separate component of
shareholders' equity. The cost of securities sold is based on the specific
identification method. Realized gains or losses and declines in value, if any,
judged to be other that temporary on available-for-sale securities are reported
in other income or expense. Fair values of cash and cash equivalents approximate
cost due to the short period of time to maturity. Fair values of long-term and
short-term investments are based on quoted market prices.
 
(e) MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK
 
    Financial instruments which potentially expose the Company to a
concentration of credit risk consist primarily of investments and trade accounts
receivable. As of June 30, 1997, no single customer accounted for greater than
10% of accounts receivable. As of June 30, 1996, approximately 14% of recorded
trade receivables were concentrated with one customer. To reduce credit risk,
the Company performs ongoing credit evaluations of its customers' financial
condition. The Company does not generally require collateral on credit sales to
its customers.
 
    The Company earns revenues primarily through product sales to distributors
and through collaborative agreements with partners. Product revenues from one
distributor constituted 15% of total revenues for the year ended June 30, 1997.
Product revenues from one distributor constituted 12% of total revenues for the
year ended June 30, 1996. Product revenues from two distributors constituted 12%
and 11%, respectively, of total revenues for the year ended June 30, 1995. For
the year ended June 30, 1997, no
 
                                       34
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
corporate partner constituted greater than 10% of total revenues. Revenues
related to milestone payments from one corporate partner constituted 16% and 13%
of total revenues for the years ended June 30, 1996 and 1995, respectively.
 
(f) INVENTORIES
 
    Inventories are stated at the lower of cost or market, with cost determined
on a first-in, first-out basis.
 
(g) PROPERTY AND EQUIPMENT
 
    Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the respective
assets, which generally range from three to five years. Assets under capital
leases and leasehold improvements are amortized using the straight-line method
over the shorter of the lease term or the estimated useful lives of the related
assets.
 
(h) REVENUE RECOGNITION
 
    Revenue from development contracts is recognized as the relevant technical
milestones are attained. Revenue from licensing is recognized when the
nonrefundable fees are received and the license is executed. Revenue from
product sales, net of estimated product returns, is recognized upon product
shipment when title passes to the buyer.
 
(i) PARTNER REVENUE
 
    Partner revenue consists principally of milestone payments, licensing fees
and proceeds from sales of reagents to collaborative partners for research
purposes.
 
(j) ADVERTISING COSTS
 
    All costs related to marketing and production costs of advertising the
Company's products are expensed in the period incurred.
 
(k) FOREIGN CURRENCY
 
    Foreign currency transactions and financial statements are translated into
U.S. dollars at current rates, except that revenue, costs and expenses are
translated at average rates during each reporting period. Gains and losses
resulting from foreign currency transactions and intercompany balances expected
to be paid in the foreseeable future are included in results of operations.
Gains and losses resulting from translation of financial statements are excluded
from results of operations and are reflected as a cumulative translation
adjustment, which is reported as a separate component of shareholders' equity.
The Company has sales denominated in foreign currencies, primarily the British
pound and the Italian lira. The Company offsets the foreign currency exposure of
these sales with expenses denominated in local currencies. The Company does not
utilize foreign currency forwards or option contracts to manage its foreign
currency exposure. As of June 30, 1997, the Company has not experienced material
gains or losses from foreign currency fluctuations.
 
                                       35
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) STOCK SPLIT
 
    In April 1995, the Company's Board of Directors approved a one-for-six
reverse split of the Company's common and preferred stock. All references in the
accompanying financial statements to the number of shares of common stock and
per share amounts have been retroactively restated to reflect this stock split.
 
(m) NET LOSS PER SHARE
 
    Except as noted below, net loss per share is computed using the weighted
average number of shares of common stock outstanding. Common equivalent shares
from stock options and warrants are excluded from the computation as their
effect is anti-dilutive, except that, pursuant to the Securities and Exchange
Commission Staff Accounting Bulletin No. 83, common stock issued for
consideration below the Company's initial public offering (IPO) price and stock
options granted with exercise prices below the IPO price during the 12-month
period preceding the date of the initial filing of the IPO Registration
Statement, even when anti-dilutive, have been included in the calculation of
common equivalent shares for all periods prior to the closing of the Company's
IPO (using the treasury stock method for stock options based on the initial
public offering price).
 
    Furthermore, pursuant to Securities and Exchange Commission staff policy,
common equivalent shares from convertible preferred stock and warrants that were
converted upon the completion of the Company's IPO are included (using the as
if-converted method) for all periods prior to the closing of the Company's IPO.
 
    In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which the Company is required to adopt in the second
quarter of fiscal 1998. At that time, the Company will be required to change the
method currently used to compute earnings per share. Since the Company has
reported losses since inception, SFAS No. 128 will not result in a change in the
reported earnings per share.
 
(n) USE OF ESTIMATES
 
    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual amounts could differ from those estimates.
 
(o) STOCK-BASED COMPENSATION
 
    In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation". As permitted by SFAS No. 123,
the Company accounts for stock options under the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, the Company does not record compensation expense for stock option
grants to employees and directors when the exercise price equals or exceeds the
market price of the Company's common stock on the date of grant. The Company
recognizes compensation expense for options granted to consultants and other
non-employees based upon the fair value of the options granted at the grant
date. Such amounts have not been material in any period presented.
 
                                       36
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(2) INVESTMENTS
 
    Investments consisted of the following at June 30:
 
<TABLE>
<CAPTION>
                                             1997                                          1996
                         --------------------------------------------  --------------------------------------------
                                   UNREALIZED   UNREALIZED     FAIR              UNREALIZED   UNREALIZED     FAIR
                           COST      GAINS        LOSSES      VALUE      COST      GAINS        LOSSES      VALUE
                         --------  ----------   ----------   --------  --------  ----------   ----------   --------
                                                               (IN THOUSANDS)
<S>                      <C>       <C>          <C>          <C>       <C>       <C>          <C>          <C>
Corporate bonds and
  notes................  $ 18,635    $  13        $  (4)     $ 18,644  $ 12,188    $--          $ (14)     $ 12,174
Commercial paper.......     3,492    --           --            3,492     7,640    --           --            7,640
U.S. government
  securities...........     4,499        5        --            4,504     8,527    --             (11)        8,516
Mortgaged-backed
  securities...........     6,284    --              (5)        6,279    12,148        1          (17)       12,132
State and municipal
  obligations..........     3,327        1        --            3,328     2,400    --           --            2,400
Other debt
  securities...........     2,461    --                         2,461     4,434    --           --            4,434
                         --------    -----        -----      --------  --------    -----        -----      --------
                           38,698       19           (9)       38,708    47,337        1          (42)       47,296
Marketable equity
  securities...........     2,450    --             (23)        2,427     4,750    --             (42)        4,708
                         --------    -----        -----      --------  --------    -----        -----      --------
Total
  available-for-sale
  securities...........    41,148       19          (32)       41,135    52,087        1          (84)       52,004
Less amounts classified
  as cash
  equivalents..........   (13,704)   --           --          (13,704)  (18,974)                            (18,974)
                         --------    -----        -----      --------  --------    -----        -----      --------
Total investments......  $ 27,444    $  19        $ (32)     $ 27,431  $ 33,113    $   1        $ (84)     $ 33,030
                         --------    -----        -----      --------  --------    -----        -----      --------
                         --------    -----        -----      --------  --------    -----        -----      --------
</TABLE>
 
    There were no material proceeds or gross realized gains or losses in the
years ended June 30, 1997, 1996 or 1995.
 
    The cost and estimated fair value of securities available-for-sale as of
June 30, 1997, by contractual maturity, consisted of the following:
 
<TABLE>
<CAPTION>
                                                                                       FAIR
                                                                            COST       VALUE
                                                                          ---------  ---------
                                                                             (IN THOUSANDS)
<S>                                                                       <C>        <C>
Due in one year or less.................................................  $  23,870  $  23,874
Due in one to three years...............................................      8,544      8,555
                                                                          ---------  ---------
                                                                             32,414     32,429
Marketable equity securities............................................      2,450      2,427
Mortgage-backed securities..............................................      6,284      6,279
                                                                          ---------  ---------
                                                                          $  41,148  $  41,135
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
                                       37
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(3) INVENTORIES
 
    Inventories consist of the following:
 
<TABLE>
<CAPTION>
                                                                    JUNE 30,
                                                              --------------------
                                                                1997       1996
                                                              ---------  ---------
                                                                 (IN THOUSANDS)
<S>                                                           <C>        <C>
Raw materials...............................................  $     224  $     216
Work in process.............................................         95     --
Finished goods..............................................      1,127        824
                                                              ---------  ---------
                                                              $   1,446  $   1,040
                                                              ---------  ---------
                                                              ---------  ---------
</TABLE>
 
(4) PROPERTY AND EQUIPMENT
 
    Property and equipment consists of the following:
 
<TABLE>
<CAPTION>
                                                                  JUNE 30,
                                                            --------------------
                                                              1997       1996
                                                            ---------  ---------
                                                               (IN THOUSANDS)
<S>                                                         <C>        <C>
Machinery and equipment...................................  $   4,023  $   3,014
Furniture and fixtures....................................        171        164
Leasehold improvements....................................      2,999      2,987
                                                            ---------  ---------
                                                                7,193      6,165
Less accumulated depreciation and amortization............     (3,011)    (1,851)
                                                            ---------  ---------
                                                            $   4,182  $   4,314
                                                            ---------  ---------
                                                            ---------  ---------
</TABLE>
 
    Included in property and equipment is approximately $2,770,000 and
$2,063,000 of equipment recorded under capital lease agreements at June 30, 1997
and 1996, respectively. Accumulated amortization related to this equipment was
approximately $1,083,000, and $367,000 as of June 30, 1997 and 1996,
respectively. During the years ended June 30, 1997 and 1996, the Company
disposed of and retired fully depreciated property and equipment having a
historical cost of $135,000 and $247,000, respectively.
 
(5) ACCRUED EXPENSES
 
    A summary of accrued expenses follows:
 
<TABLE>
<CAPTION>
                                                                    JUNE 30,
                                                              --------------------
                                                                1997       1996
                                                              ---------  ---------
                                                                 (IN THOUSANDS)
<S>                                                           <C>        <C>
Promotional and educational marketing expenses..............  $      19  $     422
Payroll-related.............................................        525        363
Contract manufacturing......................................        400     --
Other.......................................................      1,539      1,025
                                                              ---------  ---------
                                                              $   2,483  $   1,810
                                                              ---------  ---------
                                                              ---------  ---------
</TABLE>
 
                                       38
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(6) LEASE COMMITMENTS
 
    The Company leases certain equipment and its facilities under leases
classified as capital and operating leases, respectively. These leases expire at
various dates through 2002. Future minimum lease payments relating to these
non-cancelable leases are as follows:
 
<TABLE>
<CAPTION>
                                                                            CAPITAL    OPERATING
YEAR ENDED JUNE 30:                                                         LEASES      LEASES
-------------------------------------------------------------------------  ---------  -----------
<S>                                                                        <C>        <C>
                                                                               (IN THOUSANDS)
    1998.................................................................  $     767   $     581
    1999.................................................................        767         341
    2000.................................................................        768         341
    2001.................................................................        245         315
    2002.................................................................     --              13
                                                                           ---------  -----------
Total minimum lease payments.............................................      2,547   $   1,595
                                                                                      -----------
                                                                                      -----------
Less amount representing interest........................................       (407)
                                                                           ---------
Present value of minimum lease payments..................................      2,140
Less current portion of capital lease obligations........................       (566)
                                                                           ---------
Long-term portion of capital lease obligations...........................  $   1,574
                                                                           ---------
                                                                           ---------
</TABLE>
 
    Interest expense related to capital leases was $210,000, $106,000 and
$30,000 for the years ended June 30, 1997, 1996 and 1995, respectively. Rent
expense for the years ended June 30, 1997, 1996, and 1995 was approximately
$317,000, $322,000 and $169,000, respectively.
 
(7) SHAREHOLDERS' EQUITY
 
(a) COMMON STOCK SUBJECT TO REPURCHASE
 
    Since inception, 289,165 shares of common stock have been issued to certain
individuals under stock purchase agreements that permit the Company to
repurchase, at the original issuance price, a portion of such shares in the
event an individual shareholder ceases to be associated with the Company. The
shares subject to repurchase generally expire on a pro-rata basis over a
four-year period. As of June 30, 1997 and 1996, there were approximately 15,626
and 51,563 shares, respectively, subject to repurchase.
 
(b) SHAREHOLDER RIGHTS PLAN
 
    Under the Company's Shareholder Rights Plan, adopted in August 1996, one
preferred share purchase right (a "Right") is attached to each share of common
stock of the Company. Each Right will entitle shareholders to purchase 1/1000 of
a share of Series A participating preferred stock of the Company, a designated
series of preferred stock for which each 1/1000 of a share has economic
attributes and voting rights equivalent to one share of the Company's common
stock, at an exercise price of $50. The Rights only become exercisable in
certain limited circumstances involving acquisitions of 20% or tender offers for
30% or more of the Company's common stock. For a limited period of time after
the announcement of any such acquisition or offer, the Rights are redeemable at
a price of $.01 per Right. After becoming exercisable, in certain more limited
circumstances, each Right entitles its holder to
 
                                       39
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(7) SHAREHOLDERS' EQUITY (CONTINUED)
purchase for $50 an amount of common stock of the Company, or in certain
circumstances, securities of the acquiror, having a then current market value
equal to $100. The Rights expire in August, 2006.
 
(c) NOTES RECEIVABLE FROM SHAREHOLDERS
 
    At June 30, 1997, the Company had one note receivable from a shareholder
totaling $40,000 for a purchase of common stock at an interest rate of 7.60%. At
June 30, 1996, the Company had two notes receivable outstanding from
shareholders totaling $90,000 for purchases of common stock at an interest rate
of 7.60%. At June 30, 1995, the Company had five notes receivable outstanding
from shareholders totaling $169,000 for purchases of common stock at interest
rates ranging from 5.47% to 7.60%. Full payment of principal and accrued
interest on the notes is due four years from the date of purchase of the common
stock.
 
(8) STOCK OPTION AND PURCHASE PLANS
 
(a) 1990 INCENTIVE STOCK PLAN
 
    The Company has reserved 700,000 shares for issuance under its 1990
Incentive Stock Plan which provided for stock options to be granted to employees
(including consultants, officers, and directors). Upon the adoption of the
Company's 1995 Stock Option Plan, the Company's Board of Directors determined to
make no future grants under the 1990 Incentive Stock Plan. Options available for
grant and options outstanding as of June 30, 1997 under the 1990 Incentive Stock
Plan were 81,131 and 161,372, respectively.
 
    The Company has recorded deferred compensation of $575,000 related to
certain of the Company's common stock options granted for the year ended June
30, 1995 under the 1990 Incentive Stock Plan. This amount is being amortized
over the relevant period of benefit. For the years ended June 30, 1997, 1996 and
1995, $38,000, $108,000 and $388,000, respectively, was amortized.
 
(b) 1995 STOCK OPTION PLAN
 
    The Company's 1995 Stock Option Plan (the "1995 Option Plan") was adopted by
the Board of Directors in April 1995 and was approved by the Company's
shareholders in June 1995. An aggregate of 1,000,000 shares of the Company's
common stock were initially reserved for issuance under the 1995 Option Plan. An
additional 500,000 shares were reserved for issuance in December 1996. The 1995
Option Plan provides for the granting to employees of incentive stock options
and for the granting to consultants of nonstatutory stock options. The exercise
price of all incentive stock options granted under the 1995 Option Plan must be
at least equal to the fair market value of the common stock of the Company on
the date of grant (at least 85% of the fair market value for nonstatutory stock
options). The exercise price of any incentive stock option granted to an
optionee who owns stock representing more than 10% of the voting power of the
Company's outstanding capital stock must equal at least 110% of the fair market
value of the common stock on the date of grant. Options generally become
exercisable over 4 years and have a ten year term. With respect to any
participant who owns stock possessing more than 10% of the voting power of all
classes of stock of the Company, the maximum term of the option must not exceed
five years. If not terminated earlier, the 1995 Stock Option Plan will terminate
in 2005.
 
    Options available for grant and options outstanding as of June 30, 1997
under the 1995 Option Plan were 502,073 and 993,709, respectively.
 
                                       40
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(8) STOCK OPTION AND PURCHASE PLANS (CONTINUED)
 
(c) 1995 DIRECTOR STOCK OPTION PLAN
 
    The 1995 Director Stock Option Plan (the Directors' Plan) was adopted by the
Board of Directors in April 1995 and was approved by the Company's shareholders
in June 1995. A total of 200,000 shares of common stock has been reserved for
issuance under the Directors' Plan. The Directors' Plan provides for the grant
of nonstatutory stock options to nonemployee directors of the Company. The
Directors' Plan provides that each person who was a nonemployee director of the
Company on the date of the Company's IPO and each person who first becomes a
nonemployee director of the Company after the date of the Company's IPO shall be
granted a nonstatutory stock option to purchase 10,000 shares of common stock
(the First Option) on the effective date of the Company's IPO or on the date on
which the optionee first becomes a nonemployee director of the Company.
Thereafter, on the date of each annual meeting of the Company's shareholders at
which such director is elected, each such nonemployee director shall be granted
an additional option to purchase 5,000 shares of common stock (a Subsequent
Option) if, on such date, he or she shall have served on the Company's Board of
Directors for at least six months. The Directors' Plan provides that the First
Option shall become exercisable in installments as to 25% of the total number of
shares subject to the First Option on each of the first, second, third and
fourth anniversaries of the date of grant of the First Option; each Subsequent
Option shall become exercisable in full on the first anniversary of the date of
grant of that Subsequent Option. The exercise price of all stock options granted
under the Directors' Plan shall be equal to the fair market value of a share of
the Company's common stock on the date of grant of the option. Options granted
under the Directors' Plan have a term of ten years.
 
    Options available for grant and options outstanding as of June 30, 1997
under the Directors' Plan were 95,000 and 105,000, respectively.
 
                                       41
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(8) STOCK OPTION AND PURCHASE PLANS (CONTINUED)
(d) SUMMARY STOCK OPTION INFORMATION
 
    The following table summarizes option activity under the stock option plans:
 
<TABLE>
<CAPTION>
                                                            OPTIONS         TOTAL        RANGE OF       WEIGHTED
                                                         AVAILABLE FOR     OPTIONS       EXERCISE     AVERAGE PRICE
                                                             GRANT       OUTSTANDING      PRICES        PER SHARE
                                                         -------------   -----------   -------------  -------------
<S>                                                      <C>             <C>           <C>            <C>
Balances as of June 30, 1994...........................        262,489      164,682     $0.03-$1.20      $ 0.44
  Options authorized...................................        200,000       --             --           --
  Options granted......................................       (342,707)     342,707     1.20-10.00         3.73
  Options exercised....................................       --           (111,253)     0.24-1.20         1.08
  Options canceled.....................................         24,477      (24,477)     0.24-9.00         1.88
                                                         -------------   -----------
Balances as of June 30, 1995...........................        144,259      371,659     0.03-10.00         3.18
  Options authorized...................................      1,000,000       --             --           --
  Options granted......................................       (937,733)     937,733     0.46-20.88        14.29
  Options exercised....................................       --            (79,813)    0.03-14.50         1.07
  Options canceled.....................................        349,529     (349,529)    0.48-20.88        15.34
                                                         -------------   -----------
Balances as of June 30, 1996...........................        556,055      880,050     0.24-19.81        10.38
  Options authorized...................................        500,000       --             --           --
  Options granted......................................     (1,115,165)   1,115,165      4.50-5.88         5.00
  Options exercised....................................       --            (14,314)     0.46-6.00         1.86
  Options canceled.....................................        720,820     (720,820)    0.46-15.50        11.93
  Shares repurchased...................................         16,494       --             --           --
                                                         -------------   -----------
Balances as of June 30, 1997...........................        678,204    1,260,081    $0.24-$19.81        4.83
                                                         -------------   -----------
                                                         -------------   -----------
</TABLE>
 
    The following table summarizes information about options outstanding as of
June 30, 1997:
 
<TABLE>
<CAPTION>
                                                  OUTSTANDING                       EXERCISABLE
                                   -----------------------------------------  ------------------------
                                                                  WEIGHTED                  WEIGHTED
                                              WEIGHTED AVERAGE     AVERAGE                   AVERAGE
RANGE OF                           NUMBER OF  CONTRACTUAL LIFE    EXERCISE     NUMBER OF    EXERCISE
EXERCISE PRICES                     SHARES       (IN YEARS)         PRICE       SHARES        PRICE
---------------------------------  ---------  -----------------  -----------  -----------  -----------
<S>                                <C>        <C>                <C>          <C>          <C>
$0.24-$2.29......................    154,221            5.8       $    0.83      124,948    $    0.76
$4.50-$6.00......................  1,018,363            8.7       $    4.99      171,987    $    5.10
$9.00-$19.81.....................     87,497            8.0       $   10.05       29,418    $   10.33
                                   ---------                                  -----------
  Total..........................  1,260,081            8.3       $    4.83      326,353    $    3.91
                                   ---------                                  -----------
                                   ---------                                  -----------
</TABLE>
 
    At June 30, 1997, 1996 and 1995 options for 326,353, 139,389 and 119,169
shares, respectively, were exercisable under the stock options plans.
 
    In 1995, 19,343 options were issued at prices ranging from $0.46-$2.29 per
share due to the conversion of options held by Osteo Science option in
connection with the Osteo Sciences acquisition. On January 31, 1996, the
Company's Board of Directors approved an option exchange, subject to election by
the option holders, whereby options to purchase 272,400 shares of the Company's
common stock at prices ranging from $17.00 to $20.88 per share were canceled and
reissued at $15.25 per share which was the fair market
 
                                       42
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(8) STOCK OPTION AND PURCHASE PLANS (CONTINUED)
value of the Company's common stock on that date. The new options generally vest
over four years beginning January 31, 1996. On August 21, 1996, the Company's
Board of Directors approved an option exchange, subject to election by the
option holders, whereby options to purchase 550,485 shares of the Company's
common stock at prices ranging from $6.50 to $15.50 per share were canceled and
reissued at $5.00 per share which was the fair market value of the Company's
common stock on that date. The new options generally vest over four years
beginning August 21, 1996.
 
(e) PRO FORMA INFORMATION
 
    If the Company had elected to recognize compensation cost based on the fair
value of stock options granted, as prescribed under SFAS No. 123, net loss and
net loss per share would have been increased to the pro forma amounts indicated
in the table below:
 
<TABLE>
<CAPTION>
                                                                        1997        1996
                                                                     ----------  ----------
<S>                                                                  <C>         <C>
                                                                     (IN THOUSANDS, EXCEPT
                                                                       PER SHARE AMOUNTS)
Net Loss--as reported..............................................  $  (13,127) $  (21,399)
Net loss--pro forma................................................  $  (14,471) $  (22,152)
Net loss per share--as reported....................................  $    (1.04) $    (2.04)
Net loss per share--pro forma......................................  $    (1.15) $    (2.11)
</TABLE>
 
    The fair value of each option grant, for purposes of calculating the pro
forma net loss above was estimated using the Black-Scholes option-pricing model
with the following assumptions:
 
<TABLE>
<S>                                                               <C>
Expected stock price volatility.................................     .67
Risk-free interest rate range...................................   5.5-6.5%
Expected life of options........................................  1-4 years
Dividend yield..................................................      0%
</TABLE>
 
    The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in the opinion of management, the
existing models do not necessarily provide a reliable single measure of the fair
value of its options. The weighted average estimated fair value of employee
stock options granted during 1997 and 1996 computed using the Black-Scholes
method was $2.13 and $5.75 per share, respectively.
 
    Because SFAS No. 123 is applicable only to options granted subsequent to
June 30, 1995, its pro forma effect will not be fully reflected until 1999.
 
(f) 1995 EMPLOYEE STOCK PURCHASE PLAN
 
    The Company's 1995 Employee Stock Purchase Plan (the Purchase Plan) was
adopted by the Board of Directors in April 1995 and was approved by the
shareholders in June 1995. A total of 200,000 shares of common stock has been
reserved for issuance under the Purchase Plan. The Purchase Plan has two six-
month offering periods each year. The Purchase Plan is administered by the Board
of Directors.
 
                                       43
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(8) STOCK OPTION AND PURCHASE PLANS (CONTINUED)
Employees (including officers and employee directors) of the Company, or of any
majority owned subsidiary designated by the Board, are eligible to participate
if they are customarily employed by the Company or any such subsidiary for at
least 20 hours per week and more than five months per year. The Purchase Plan
permits eligible employees to purchase common stock through payroll deductions,
which may not exceed 5% of an employee's compensation, at a price equal to the
lower of 85% of the fair market value of the Company's common stock at the
beginning or end of the offering period. Common stock purchased under the
Purchase Plan must be held for a period of six months before it may be sold.
Employees may end their participation in the offering at any time during the
offering period, and participation ends automatically on termination of
employment with the Company.
 
    Purchases of shares made under the Purchase Plan were 32,030 and 19,114 for
the years ended June 30, 1997 and 1996, respectively.
 
(9) DEVELOPMENT AND LICENSE AGREEMENTS
 
    The Company has a significant number of development and license agreements,
most of which relate to the use of the Company's technology on the automated
diagnostic testing systems of the partner. Revenues earned from milestone and
licensing fees under development and license agreements were $100,000,
$1,670,000 and $414,000 for the years ended June 30, 1997, 1996 and 1995,
respectively. No royalty payments have been received by the Company. Other
partner revenues were earned for sales of reagents to customers.
 
    Significant development and license agreements include the following:
 
    SUMITOMO PHARMACEUTICALS CO., LTD.
 
    In March 1993, the Company entered into a research and development agreement
with Sumitomo Pharmaceuticals Co., Ltd. (Sumitomo). Under the terms of the
agreement, the Company will update existing, and develop new, diagnostic assay
kits for the detection and management of bone and other connective tissue
diseases. The marketing and distribution rights resulting from this agreement
will be held by Sumitomo in Japan. Under certain circumstances, Sumitomo will
also have the right to acquire marketing and distribution rights in certain
Asian markets. Under the agreement, the Company will also manufacture and supply
the products at formula prices which are subject to periodic renegotiation. The
term of the agreement is for an initial ten-year period with options to extend
the term upon mutual consent. Sumitomo has the right to terminate the agreement
upon six months written notice. Payments for certain ongoing costs of research
and development incurred by the Company are payable to the Company under the
agreement upon the achievement of certain milestones and regulatory approvals.
 
    In June 1994 and February 1995, the Company entered into two additional
agreements with Sumitomo, granting Sumitomo certain additional marketing and
distribution rights. These agreements call for Sumitomo to pay the Company
certain amounts upon the achievement of certain milestones and regulatory
approvals.
 
    THE ROWETT RESEARCH INSTITUTE
 
    In May 1990, the Company licensed certain technology from The Rowett
Research Institute (Rowett) in exchange for 25,000 shares of common stock, an
obligation to pay royalties on a percentage of net sales
 
                                       44
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(9) DEVELOPMENT AND LICENSE AGREEMENTS (CONTINUED)
for a period of approximately 10 years and an obligation to issue additional
common stock upon attainment of certain milestones. In February 1994, the first
milestone was attained in the United Kingdom. Accordingly, in September 1994,
the Company issued 16,666 shares of common stock to Rowett valued at $3.00 per
share. In May, 1995, the other milestone was attained and the Company issued the
second 16,666 shares of common stock to Rowett valued at $9.00 per share.
 
(10) OTHER AGREEMENTS
 
    In April 1997, the Company entered into a Co-Promotion Agreement with Berlex
Laboratories, Inc. ("Berlex"). The Company will pay Berlex approximately $3
million in December 1997 for promotional activities performed by Berlex over the
first year of the promotional agreement, starting on July 1, 1997. The $3
million will be recognized as expense ratably over the initial one year term. In
connection with this agreement, the Company issued Berlex warrants to acquire
413,233 shares of common stock at an exercise price of $4.84 per share. The
warrant has a four year term. The fair value of the warrants issued to Berlex,
as measured using the Black-Scholes pricing method, of $506,000 will also be
amortized over the initial one year service period. In addition, the Company
will pay Berlex additional commissions based upon increased sales of the
Company's products to the extent such sales are above previously established
levels. After the first promotional year, the future continuance of the
promotional agreement and the associated financial cost to Metra is, in part,
dependent upon the achievement of certain milestones and the mutual consent of
both parties.
 
(11) INCOME TAXES
 
    Due to the operating losses incurred since inception, income tax expense for
all periods has consisted only of minimum state taxes.
 
    Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34% of pretax losses as a result of the following:
 
<TABLE>
<CAPTION>
                                                               JUNE 30,
                                                    -------------------------------
                                                      1997       1996       1995
                                                    ---------  ---------  ---------
                                                            (IN THOUSANDS)
<S>                                                 <C>        <C>        <C>
Computed "expected" tax benefit...................  $  (4,193) $  (7,276) $  (2,313)
Losses and credits for which no benefit has been
  recognized......................................      4,145      3,139      1,988
Purchased research and development................     --          3,839     --
Change in the beginning of the year valuation
  allowance, including use of net operating loss
  carryforwards and foreign losses................         23        280        315
Other.............................................         25         18         10
                                                    ---------  ---------  ---------
                                                    $  --      $  --      $  --
                                                    ---------  ---------  ---------
                                                    ---------  ---------  ---------
</TABLE>
 
                                       45
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(11) INCOME TAXES (CONTINUED)
 
    The tax effect of temporary differences that give rise to significant
portions of the Company's deferred tax assets and liabilities is presented
below:
 
<TABLE>
<CAPTION>
                                                          YEAR ENDED JUNE 30,
                                                          --------------------
                                                            1997       1996
                                                          ---------  ---------
                                                             (IN THOUSANDS)
<S>                                                       <C>        <C>
Deferred tax assets:
  Employee benefit reserves, including accrued
    vacation............................................  $     152  $      64
  Other operating reserves..............................        314        173
  Amortization of deferred compensation.................     --            199
  Inventory capitalization..............................        146        162
  Start-up and other capitalization.....................         52        140
  Patent and licensed technology amortization...........        203        113
  Capitalized research and development..................        285     --
  Book depreciation in excess of tax....................        269     --
  Charitable contribution...............................         27         19
  Net operating loss carryforwards......................     13,771     10,090
  Research and development credits......................        844        631
                                                          ---------  ---------
    Total gross deferred tax assets.....................     16,063     11,591
  Less valuation allowance..............................    (16,042)   (11,569)
                                                          ---------  ---------
    Net deferred tax assets.............................         21         22
Deferred tax liabilities:
  Tax depreciation in excess of books...................     --            (22)
  Other.................................................        (21)    --
                                                          ---------  ---------
    Deferred tax assets (liabilities)...................  $  --      $  --
                                                          ---------  ---------
                                                          ---------  ---------
</TABLE>
 
    Management believes significant uncertainty exists regarding the ability to
realize the Company's deferred tax assets and accordingly, a valuation allowance
has been established. The valuation allowance for deferred tax assets as of July
1, 1995 was $7,214,000. The net change in the valuation allowance for the years
ended June 30, 1997, 1996 and 1995 was an increase of $4,473,000, $4,355,000 and
$2,531,000 respectively. If realized, approximately $231,000 of deferred tax
assets will be credited to paid-in-capital.
 
    As of June 30, 1997 and 1996, the Company had federal tax net operating loss
carryforwards of approximately $38,174,000, and $27,193,000, respectively, which
expire in 2004 through 2011. The Company also had foreign loss carryforwards of
$1,070,000 and $806,000 at June 30, 1997 and 1996, respectively, which extend
indefinitely.
 
    The Company also has federal research and development credit carryforwards
of approximately $572,000 and $436,000 at June 30, 1997 and 1996, respectively,
which will expire in 2004 through 2011.
 
    State tax net operating loss carryforwards were approximately $13,572,000
and $13,206,000 and research and development credit carryforwards were $370,000
and $295,000 at June 30, 1997 and 1996, respectively. The state losses expire in
1997 through 2001 and the credits expire in 2004 through 2011.
 
                                       46
<PAGE>
                             METRA BIOSYSTEMS, INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1997
 
(11) INCOME TAXES (CONTINUED)
    The Company's ability to utilize federal and state net operating loss
carryforwards and research credits may be subject to a substantial annual
limitation due to the "change in ownership" provisions of the Internal Revenue
Code of 1986 and similar state provisions. The annual limitation may result in
the expiration of net operating loss carryforwards and credits before
utilization.
 
(12) EMPLOYEE BENEFITS
 
    The Company has a deferred savings 401(k) plan for its domestic employees.
The Company may make matching contributions to the plan at its discretion. To
date, no contributions have been made by the Company to the plan.
 
(13) INDUSTRY AND GEOGRAPHIC INFORMATION
 
    The Company markets its products in the United States and in foreign
countries through its sales personnel and distributors. Export sales account for
a significant portion of the Company's product sales which are summarized by
geographic area as follows:
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED JUNE 30,
                                                      -------------------------------
                                                        1997       1996       1995
                                                      ---------  ---------  ---------
                                                              (IN THOUSANDS)
<S>                                                   <C>        <C>        <C>
United States.......................................  $   1,480  $     987  $     569
Export sales:
  Europe............................................      3,581      2,279      1,231
  Pacific Rim.......................................        993        917        624
  Other international...............................        351        230        128
                                                      ---------  ---------  ---------
    Total export sales..............................      4,925      3,426      1,983
                                                      ---------  ---------  ---------
    Total product sales.............................  $   6,405  $   4,413  $   2,552
                                                      ---------  ---------  ---------
                                                      ---------  ---------  ---------
</TABLE>
 
(14) ACQUISITION OF OSTEO SCIENCES CORPORATION
 
    On January 31, 1996, the Company purchased Osteo Sciences Corporation
("Osteo") in a tax free exchange which resulted in shareholders of Osteo
exchanging all of their shares of preferred and common stock for shares of the
Company's common stock. The Company issued 541,072 shares of common stock to
Osteo shareholders valued at approximately $9,672,000 and assumed options to
purchase 19,343 shares of the Company's common stock valued at approximately
$345,000. The transaction was recorded using the purchase method of accounting
and resulted in the Company incurring a one-time charge of $11,291,000 for
acquired in-process research and development. The operations of Osteo were
included in the Company's results of operations beginning February 1, 1996. The
value of the research and development acquired from Osteo Sciences was
determined based upon an analysis of the present value of expected future cash
flows related to the technology. At the date of acquisition, technical
feasibility of the acquired technology had not yet been established and the
technology had no foreseeable future alternative uses.
 
                                       47
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
    Effective May 2, 1997, the Board of Directors of the Company engaged the
accounting firm of Ernst & Young LLP as independent public accountants for the
Company. The Company's former independent public accountants, KPMG Peat Marwick
LLP, were dismissed effective May 2, 1997. The Company's audit committee
recommended, and the Company's Board of Directors approved, these actions.
 
    During the two most recent fiscal years and subsequent interim periods prior
to May 2, 1997, there were no disagreements with KPMG Peat Marwick LLP on any
matter of accounting principles or practices, financial statement disclosure,
auditing scope or procedure, or any reportable events, which disagreements, if
not resolved to the satisfaction of KPMG Peat Marwick LLP, would have caused it
to make reference to the subject matter of such disagreements in connection with
its reports.
 
    The reports of KPMG Peat Marwick LLP on the financial statements of the
Company for the past two years contained no adverse opinion or disclaimer of
opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
 
    The Company did not consult with Ernst & Young LLP during the two years
prior to their appointment as independent accountants of the Company regarding
either (i) the application of accounting principles to a specified transaction
or transactions, either completed or proposed, or (ii) the type of audit opinion
Ernst & Young LLP might render on the Company's financial statements.
 
    The Company requested that KPMG Peat Marwick LLP furnish a letter addressed
to the SEC stating whether they agree with the above statements. A copy of the
KPMG Peat Marwick LLP letter to the SEC, dated May 8, 1997 was filed as an
exhibit to the Form 8-K filed by the Company on May 9, 1997.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    Information regarding Registrant's directors will be set forth under the
caption "Election of Directors--Nominees" in Registrant's proxy statement for
use in connection with the 1997 Annual Meeting of Shareholders ("1997 Proxy
Statement") and is incorporated herein by reference. The 1997 Proxy Statement
will be filed with the Securities and Exchange Commission within 120 days after
the end of the Registrant's fiscal year.
 
    Information regarding Registrant's executive and other officers is set forth
in this Form 10-K in Part I, Item 1.
 
ITEM 11. EXECUTIVE COMPENSATION
 
    The information required by this item is incorporated by reference into this
Form 10-K from the information set forth under the caption "Compensation of
Executive Officers" in the 1997 Proxy Statement.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The caption "Common Stock Ownership of Certain Beneficial Owners and
Management" in the information required by this item is incorporated by
reference into this Form 10-K from the information set forth under the 1997
Proxy Statement.
 
                                       48
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    The information required by this item is incorporated by reference into this
Form 10-K from the information set forth under the caption "Certain
Relationships and Related Transactions" in the 1997 Proxy Statement.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
(a) CERTAIN DOCUMENTS FILED AS PART OF THE FORM 10-K
 
<TABLE>
<CAPTION>
   1.      Financial Statements                                                                   PAGE
                                                                                                  -----
<C>        <S>                                                                                 <C>
           Reports of Independent Auditors...................................................          28
           Consolidated Balance Sheets.......................................................          30
           Consolidated Statements of Operations.............................................          31
           Consolidated Statement of Shareholders' Equity (Deficit)..........................          32
           Consolidated Statements of Cash Flows.............................................          33
 
       2.  Financial Statement Schedules
</TABLE>
 
SCHEDULE II. VALUATION ACCOUNTS
 
<TABLE>
<CAPTION>
                                                           BALANCE AT     PROVISION
                                                           BEGINNING       CHARGED         AMOUNTS    BALANCE AT
                                                            OF YEAR     TO OPERATIONS     UTILIZED    END OF YEAR
                                                           ----------  ----------------  -----------  -----------
<S>                                                        <C>         <C>               <C>          <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
  Year ended June 30, 1995...............................  $   18,385     $   22,000     $    (7,197)  $  33,188
  Year ended June 30, 1996...............................      33,188         70,500          (3,000)    100,688
  Year ended June 30, 1997...............................     100,688         55,410          (8,754)    147,344
 
INVENTORY RESERVES:
  Year ended June 30, 1995...............................  $   91,696     $  236,597     $   (64,248)  $ 264,045
  Year ended June 30, 1996...............................     264,045        177,979        (112,105)    329,919
  Year ended June 30, 1997...............................     329,919        166,553        (148,472)    348,000
</TABLE>
 
    Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
 
(b) REPORTS ON FORM 8-K
 
    The Company filed a Report on Form 8-K, dated January 23, 1997, reporting
the approval of an amendment to the Rights Agreement to increase the ownership
threshold required to trigger the Rights Agreement from 15% to 20%.
 
    The Company filed a Report on Form 8-K, dated May 5, 1997, reporting the
change in certifying accountants from KPMG Peat Marwick LLP to Ernst & Young LLP
effective May 2, 1997.
 
                                       49
<PAGE>
(C) EXHIBITS
 
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER     DESCRIPTION OF DOCUMENT
-----------  -----------------------------------------------------------------------------------------------------
<C>          <S>
   3.1*      Articles of Incorporation of Registrant
 
   3.2*      Form of Amended and Restated Articles of Incorporation of Registrant
 
   3.3*      Bylaws of Registrant
 
   4.2*      Rights Agreement among the Registrant and certain security holders of the Registrant, dated as of
               January 11, 1994
 
   4.99(b)   Amendment No. 1 to Preferred Shares Rights Agreement, dated as of January 17, 1997, between Metra
               Biosystems, Inc. and the First National Bank of Boston
 
  10.1*      Form of Indemnification Agreement
 
  10.2*      1990 Incentive Stock Plan
 
  10.2a*     Forms of agreements under 1990 Incentive Stock Plan
 
  10.3*      1995 Stock Option Plan
 
  10.3a*     Form of Option Agreement under 1995 Stock Option Plan
 
  10.4*      1995 Employee Stock Purchase Plan
 
  10.4a*     Form of Subscription Agreement under 1995 Employee Stock Purchase Plan
 
  10.5*      1995 Directors' Stock Option Plan
 
  10.5a*     Form of Option Agreement under 1995 Directors' Stock Option Plan
 
  10.6+*     Industrial Real Estate Lease (Single-Tenant Facility) and Lease Addendum, dated November 1, 1993,
               between the Registrant and State Teachers Retirement System, and First Amendment, dated as of July
               26, 1994, thereto
 
  10.7+*     License Agreement between the Registrant and The Rowett Research Institute, dated as of April 30,
               1990
 
  10.8+*     License Agreement between the Registrant and Collagen Corporation, dated as of June 30, 1990
 
  10.9+*     Distribution and License Agreement between the Registrant and Haematologic Technologies, Inc., dated
               as of September 1, 1992
 
  10.10+*    Product Research and Development Agreement between the Registrant and Sumitomo Pharmaceuticals Co.,
               Ltd., dated as of March 29, 1993
 
  10.11+*    License Agreement between the Registrant and Celtrix Pharmaceuticals, Inc., dated as of July 28, 1993
 
  10.12+*    License, Supply and Development Agreement between the Registrant and Hybritech Incorporated, dated as
               of September 15, 1993
 
  10.13+*    Development and License Agreement between the Registrant and Ciba-Geigy Limited, dated as of June 26,
               1990, as amended by the Agreement between Registrant and Ciba-Geigy Limited, dated as of November
               5, 1993
 
  10.14+*    License, Supply and Development Agreement between the Registrant and Ciba Corning Diagnostics Corp.,
               dated as of November 5, 1993
 
  10.15+*    OEM Agreement between the Registrant and Diagnostic Products Corporation, dated December 22, 1993
</TABLE>
 
                                       50
<PAGE>
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER     DESCRIPTION OF DOCUMENT
-----------  -----------------------------------------------------------------------------------------------------
<C>          <S>
  10.16*(c)  Product Research and Development Agreement between the Registrant and Sumitomo Pharmaceuticals Co.,
               Ltd., dated as of June 29, 1994
 
  10.17+*    IDS OEM Agreement between the Registrant and Immunodiagnostic Systems Ltd., dated as of January 19,
               1995
 
  10.18+*    License Agreement between the Registrant and BioQuant, Inc., dated as of February 15, 1995
 
  10.19+*    Product Research and Development Agreement between the Registrant and Sumitomo Pharmaceuticals Co.,
               Ltd., dated as of February 28, 1995
 
  10.20*(c)  International Distributor Agreement between the Registrant and Amersham K.K., dated as of April 8,
               1993
 
  10.21+*    International Distributor Agreement between the Registrant and DPC Biermann GmbH, dated as of January
               1, 1995
 
  10.22*     Series D Preferred Stock Purchase Agreement, dated as of January 17, 1992, among the Registrant and
               certain Investors listed on Exhibit A thereto
 
  10.23*     Series E Preferred Stock Purchase Agreement, dated as of January 11, 1994, among the Registrant and
               certain Investors listed on Exhibit A thereto
 
  10.24*     Letter Agreement, dated as of May 24, 1991, between the Registrant and George W. Dunbar, Jr.
 
  10.25*     Letter Agreement, dated as of February 1, 1992, between the Registrant and Ronald T. Steckel
 
  10.26*     Promissory Note, dated as of September 11, 1991, executed by George W. Dunbar, Jr. and Lucy H. Dunbar
               in favor of the Registrant
 
  10.27*     Promissory Note, dated as of June 24, 1992, executed by Ronald T. Steckel and Laurie A. Steckel in
               favor of the Registrant
 
  10.28*     Promissory Note, dated as of July 16, 1992, executed by Ronald T. Steckel in favor of the Registrant
 
  10.29*     Promissory Note, dated as of July 18, 1993, executed by George W. Dunbar, Jr. in favor of the
               Registrant
 
  10.30*     Promissory Note, dated as of November 1, 1994, executed by Colette Z. Andrea in favor of the
               Registrant
 
  10.31*     Promissory Note, dated as of December 30, 1994, executed by George W. Dunbar, Jr. in favor of the
               Registrant
 
  10.32*     Promissory Note, dated as of December 30, 1994, executed by Colette Z. Andrea in favor of the
               Registrant
 
  10.33*     Promissory Note, dated as of December 30, 1994, executed by Ronald T. Steckel in favor of the
               Registrant
 
  10.34+     License and Supply Agreement between the Registrant and Bayer Corporation dated as of July 26, 1995
 
  10.43(a)   Separation and Mutual Release, dated September 18, 1996, between the Company and Colette Z. Andrea
 
  10.44+     Co-Promotion Agreement, dated April 25, 1997, between the Company and Berlex Laboratories, Inc.
</TABLE>
 
                                       51
<PAGE>
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER     DESCRIPTION OF DOCUMENT
-----------  -----------------------------------------------------------------------------------------------------
<C>          <S>
  10.45      Form of Change in Control Agreement
 
  11.1       Computation of Earnings Per Share
 
  22.1*      List of Subsidiaries of the Registrant
 
  23.1       Consent of Ernst & Young LLP, Independent Auditors
 
  23.2       Consent of KPMG Peat Marwick LLP, Independent Auditors and Report on Schedules
 
  27.1       Financial Data Schedule
</TABLE>
 
------------------------
 
 * Incorporated by reference to identically numbered exhibits filed with the
    Company's Registration Statement (No. 33-92452) filed on May 18, 1995, or
    with Amendments No. 1 or Amendment No. 2 thereto, which became effective on
    June 30, 1995.
 
 + Confidential treatment granted or requested as to a portion of this Exhibit.
 
(a) Incorporated by reference to identically numbered exhibit filed with the
    Company's Form 10-Q/A filed on February 10, 1997.
 
(b) Incorporated by reference to identically numbered exhibit filed with the
    Company's Form 8-A/A filed on January 24, 1997.
 
(c) Incorporated by reference to identically numbered exhibit refiled with the
    Company's Form 10-Q filed on May 14, 1997.
 
                                       52
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
 
                                METRA BIOSYSTEMS, INC.
 
                                By:          /s/ GEORGE W. DUNBAR, JR.
                                     -----------------------------------------
Date: September 24, 1997               PRESIDENT AND CHIEF EXECUTIVE OFFICER
 
    KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints George W. Dunbar and Kurt E. Amundson and each of
them, his attorneys-in-fact and agents, each with the power of substitution and
resubstitution, for him in any and all capacities, to sign any and all
amendments to this Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully as to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitute or substitutes, may do or cause to be done by virtue
hereof.
 
    PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED:
 
<TABLE>
<CAPTION>
          SIGNATURE                        TITLE                    DATE
------------------------------  ---------------------------  -------------------
 
<C>                             <S>                          <C>
                                President and Chief
  /s/ GEORGE W. DUNBAR, JR.       Executive Officer
------------------------------    (Principal Executive       September 24, 1997
    George W. Dunbar, Jr.         Officer)
 
                                Vice President and Chief
     /s/ KURT E. AMUNDSON         Financial Officer
------------------------------    (Principal Financial and   September 24, 1997
       Kurt E. Amundson           Accounting Officer)
 
  /s/ CLAUDE D. ARNAUD, M.D.
------------------------------  Director                     September 24, 1997
    Claude D. Arnaud, M.D.
 
  /s/ MARY LAKE POLAN, M.D.,
            PH.D.
------------------------------  Director                     September 24, 1997
 Mary Lake Polan, M.D., Ph.D.
 
   /s/ LEONARD D. SCHAEFFER
------------------------------  Director                     September 24, 1997
     Leonard D. Schaeffer
</TABLE>
 
                                       53
<PAGE>
<TABLE>
<CAPTION>
          SIGNATURE                        TITLE                    DATE
------------------------------  ---------------------------  -------------------
 
<C>                             <S>                          <C>
 /s/ COSTA G. SEVASTOPOULOS,
            PH.D.
------------------------------  Director                     September 24, 1997
Costa G. Sevastopoulos, Ph.D.
 
     /s/ CRAIG C. TAYLOR
------------------------------  Director                     September 24, 1997
       Craig C. Taylor
 
       /s/ SAMUEL URCIS
------------------------------  Director                     September 24, 1997
         Samuel Urcis
</TABLE>
 
                                       54