Capstone Holding Corp (CAPS) 2002 Q4 法說會逐字稿

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the OrthoLogic fourth quarter 2002 conference call. At this time I'll put this event any listen-only mode. After this event, we will conduct a question and answer session. If anyone has difficulty hearing the conference, please press star 0 for operator assistance. This conference being recorded.

Good morning. Thanks for joining us to discussion fourth quarter 2002 financial results with management of OrthoLogic Corporation. OrthoLogic management will provide an overview of the results and then we will open up the call to your questions.

This call contains forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. Factors that could cause or contribute to such differences can be found in the statement accompanying this morning’s press release, as well as the company’s annual report on form 10k for the fiscal year ended December 31, 2001 and other documents filed by the company with the Securities and Exchange Commission. With that, I'll turn it over to Tom Trotter, OrthoLogic’s President and CEO.

Good morning, thank you for joining us today for the fourth quarter and full year 202 earnings call. Joining me on the call this morning are Sherry Sturman, Senior Vice President and Chief Financial Officer, and Dr. Jim Ryaby, Senior Vice President and Chief Technology Officer. I'll allow for overview comments for our operating results for the fourth quarter and full year 2002, Sherry will then follow with additional financial information, and Jim will provide an update on our Chrysalin program. Regarding the fourth quarter, we are pleads to report that double digit sales growth, coupled with improved margins and lower than expected expenses lead to another profitable quarter for OrthoLogic.

In addition, our year-long focus on asset management resulted in another quarter of positive cash flow from operations and to a year-end balance of over $35m in cash and equivalent. Generated another double digit increase of total sales of bone growth stimulation products this quarter compared to prior year. Sales of the OL1000 were particularly strong in the fourth quarter.

For the full year 2002, total bone growth stimulator sales finished 25% ahead of prior year. OL1000 sales increased 20%, and SpinaLogic sales increased 30% year over year. These year of year growth rates are well above the estimated 2002 growth rates for both the long bone market and the spinal fusion market. As a result, we believe both the OL1,000 and SpinaLogic continue to increase market share in 200 two.

For 2003, OrthoLogic is adding new direct sales representatives to our field sales force selling the OL1,000. In addition, our marketing partner [DuPuy AclaMed] is in the process of significantly increasing the number of their sales specialist selling SpinaLogic. We believe that these investments in additional sales personnel will allow OrthoLogic to continue to grow our total bone growth stimulation business and continue to increase our market share.

Turning to [Hyaligan] royalties, we recorded a final royalty payment from Santa Fe of $358,000 in the fourth quarter. Total royalties for the full year 2002 were approximately $[inaudible].2m, and brought to a successful conclusion the termination agreement we signed with Santa Fe in the fall of 2000. There will be no further royalty payments from Santa Fe to OrthoLogic [Hyaligan]. In addition, we are pleaded to report another strong quarter in the asset management area. For the full year 2002, our dsl and dsi increased significantly. And we achieved positive cash flow from operations every quarter. In a moment, Sherry will provide more details concerning our financial performance. During the fourth quarter, we began enrolling patients in both our Phase 3 human clinical trial of Chrysalin for fracture repair and our phase 1,2 human clinical trail of Chrysalin for spinal fusion. We also continue to make excellent progress with our potential Chrysalin product for cartilage defect repair. In a moment. Jim will provide an update on the overall Chrysalin product development program.

After we hear from Sherry and Jim, I will provide our updated guidance for 2003 before we move on to your questions. At this time, I'll ask Sherry to provide you with additional details regarding our financial performance for both the fourth quarter and full year 2002. Sherry?

Thank you, Tom. Good morning. The company is reporting very strong financial performance for both the fourth quarter, and for the 2002 fiscal year. I will give a brief financial overview starting with the income statement.

Our total revenues for the fourth quarter of 2002 were 10.3m, capable to 9m in the comparable quarter of the prior year. The combined bone growth stimulation revenues for fourth quarter were 9.9m compared to 8.3m in 2001, an increase of approximately 20% over the prior year. Final royalties from the [Hyalagen] agreement were $358,000 during the quarter, compared to $752,000 in the fourth quarter of 2001. Gross profit as a percent of sales for the quarter was 85% compared to 84% in the comparable quarter of the prior year. SG&A expenses for the fourth quarter were lower than anticipated at 6.1m, or 59% of sales. The company recognized some savings during the quarter, due to improved collection experience achieved on the bone stim. product, as well as some additional savings from previous reserves that are no longer required. SG&A expenses during the fourth quarter of 2001 were 5.9m or 66% of sales.

R&D expenses in the fourth quarter of 2002 were 1.4m, compared to $741,000 during the fourth quarter of 2001, the increased spending is directly related to the progress we are making on the Chrysalin trials. Net income for the fourth quarter was 1.5m or 5 cents per share. For the same period in the prior year, net income was 1.1m or 3 cents per share.

Focusing on the 12 month comparison, the company recorded net revenues of $40.4m in 2002 compared to $62.4m in 2001.

The prior year comparison includes 28.9m in revenue, related to the divested CPM business. The combined revenues for the bone stim. products totaled 38.2m during 2002 compared to 30.5m the prior year, resulting in an overall growth rate of 25%. The [Hyalagen] royalties during 2002 totaled 2.2m compared to 3m during 2001.

Gross profit as a percent of sales for the fiscal year 2002 was 85% . Gross profit and other expense comparisons during the 12 months ended 2001 are not comparable due to the exclusion of the divested CPM expenditures during the first six months of 2001. SG&A expenses for the twelve month ended 2002 were 26.6m or 66% of sales. In future periods the termination of the [Hyalagen] royalties will cause the SG&A expenses as a percent of sales to increase over our current year experience. The company anticipates SG&A expense for 2003 to be approximately 70% of sales. Total R&D expense for 2002 was 3.8m compared to 3.9m in the prior year. In 2002, the company made a $500,000 milestone payment to Chrysalis related to the spine fusion [IND]. During 2001, the company paid a $1m license fee to expand its worldwide license of Chrysalin to include orthopedic soft tissue application. The company expects R&D expenses to continue to increase quarterly during 2003 as the company continues enrolling patients in a Chrysalin clinical trial for both fracture repair and spinal fusion. The twelve month operating expenses in 2002 include 1m in additional accounts receivable collection relating to the divested CPM business. The prior year expenses include the recognition of 14.3m for the CPM divestiture and related charges.

Operating income for fiscal year 2002 was 4.9m, compared to operating loss of 13.8m during 2001. The other income of 706,000 during 2002, and 682,000 in 2001 is purely interest income. The net profit for the twelve month ending 2002 is 5.6m, or 17 cents per share, compared to a net loss of 13.1m or 42 cents per share the comparable period in 2001.

Turning to the balance sheet, the company ended 2002 with cash and investments totals 35.6m, compared to 30.5m at the end of 2001. The company increased cash and investments by 5.1m during the preceding twelve month period. As we have discussed, the increased R&D spending for 2003 to offset our continued positive cash flows provided by the operating at which times related to the bone stim. business. However, we are confident that the cash balances available, coupled with the positive continued cash flows from the bone stim. business will adequately cover our cash flow needs of the operations and the R&D programs for 2003. The accounts receivable balance decreased from 11.4m at December 2001 to 9.6m at the end of fiscal year 2002. The 1.7m decrease between fiscal years was directly related to the discontinuation of the [Hyalagan] royalties and the excellent collection results the company has experienced during the last fiscal year. The DSO in December of 2002 was 90 days. The inventory balances increased from 1.5m at the fiscal year of 2001 to 2.6m at the end of fiscal year 2002. DSI for the fiscal year ended 2002 was 127 day, compared to 189 days in 2001. That concluding my review of the financial statements. Tom.

Thank you, Sherry. Now, Dr. Ryaby will provide you with an update on our Chrysalin program.

Good morning. During the fourth quarter of 2002, the company made significant process regarding the Chrysalin product platform. We continue to make progress on initiation of our two clinical trials, a phase three trial for fracture repair, and a phase 1, 2 trial for spine fusion. We are very encouraged that a number of prominent physicians and expressed interest in this program and will be participating in these clinical trials. The company is very satisfied with the accomplishments to date, and I will discuss the details in a few minutes.

To review of the Chrysalin program, there are four orthopedic indications envisioned in the product pipeline for Chrysalin. Three of these indications are being actively pursued. These are fracture repair, spine fusion, and cartilage defect repair. The fourth indication, ligament and tendon healing is in preclinical planning stages. As stated, we have active development programs for Chrysalin in three indications. The most advanced program is for the fracture repair indication. The results of the phase 1, 2 fracture study were presented last October at the American Society for Surgery for the Hand annual meeting held in Phoenix, and will be in April at the combined American and British hand surgery meeting. Results of the trial showed that there were no safety issues related to the Chrysalin as compared to the placebo saline controls. Based on radiographic assessment, the Chrysalin treated fracture group healed approximately 25% faster than make placebo patients.

As we stated last quarter, our phase 3 clinical trial is under way. This phase 3 study will enroll approximately 500 patients in 25 to 30 centers, as in the phase 1, 2 clinical trials, patients with unstable [distil radius] fractures will be enrolled in this study. Patients will be randomized to receive either Chrysalin or placebo treatment by a single injection into the fracture Site. These patients will be followed radiographicly and clinically for 6 months. We are currently enrolling patients at a number of sites, with approximately half of the sites identified and in the rnb process. It is estimated that patiet enrollment will take 18 to 24 months based on the timeline, data permitting, we now anticipate potential commercialization of a fracture repair product in late 2005 to early 2006.

Regarding the use of Chrysalin in spine fusion last year we received authorization from the FDA to conduct a combined phase 1,2 human clinical trial. This study will include approximately 300 patients at 15 to 20 centers. Patients will be randomized through a progress of Chrysalin with [Alagraph] at 2 Chrysalin doses, and compared to patients randomized for [autograph] and spine fusion surgery. We have received several IRB approvals and are currently enrolling patients. In an effort to accelerate patient enrollment in this trial, we are in the process of submitting a protocol amendment to the FDA, which, if authorized, would broaden the inclusion criteria. The patient enrollment process for the spine fusion trial expected to take approximately 24 months.

The third indication in the Chrysalin product platform is the use of Chrysalin for cartilage defect repair. As we have reported previously, initially preclinical study of Chrysalin for repair of cartilage defects showed significant results. We had pre-IND meeting with the FDA in the fourth quarter of 2002, and the company now indicates filing an IND for the cartilage indication in mid-2003.

Regarding the management of our Chrysalin clinical trials, we are pleased to announce that Maria Walker will be joining the company as Senior Director of Clinical Affairs in February. Maria has over 15 years experience in human clinical trial management. She is joining us from Human Genome Sciences where she directed several clinical programs.

In conclusion, we continue to make progress in our Chrysalin program, and are very excited about the Chrysalin product pipeline. Tom, back to you.

Thank you, Jim. Before moving on to your questions. I'll now provide you with our updated financial Guidance for 2003. Regarding revenue guidance for the full year 2003, we are anticipating a continuation of double-digit sales growth for our bone growth stimulation products with estimated total revenues in the range of 46m to 47m. As mentioned earlier, both OrthoLogic and [DePuy AcroMed] are in the process of adding additional sales representatives. Consequently, we expect that the growth in revenues for the year will build over time with the majority of the year-over-year sales growth coming in the second half of 2003.

Regarding earnings for the full year 2003, we anticipate investing more than $6m in the Chrysalin Othrobiologic product platform this year, and as a result, expect to finish the year around breakeven. With more than 35m in cash and equivalents, and no long-term debt on our balance sheet at the end of 2002, we remain very confident in our overall financial position. With that, we'll now turn the call over to the question and answer session. Operator?

Ladies and gentlemen, thank you. If you have a question, please press a star, follow followed by a one on the touch tone phone. If you would like to decline, please press a star followed by the 2. One moment please for your first question. Our first question comes from Bill Plovanic, First Albany, please go ahead.

Thank you. Good afternoon, Tom. How are you.

Good, thank you.

Thanks, Sherry, and Dr. Ryaby. You gave us a little guideline on how long it's going to take and when you expect commercialization on the fracture repair. On the spine study, I was wondering it's a phase 2, 3 study you're looking at. Do you expect you're going to have to have another phase 3 study after this, or is this the final study for the spine fusion.

Let me begin with that, and I'll ask Jim to comment also. Actually we are in a phase 1, 2 spinal fusion study, not a phase 2, 3. It is a combined phase 1, 2. The study goal is primarily a safety study, and we’ve mentioned previously that this is Chrysalin in combination with [alagraph] comparing to [autograph]. But it is primarily a safety study with hopefully some preliminary data on efficacy that would help us design a phase 3 trial, so we do anticipate in the normal process having to run a phase 3 trial that would follow this.

However, there are some other potentials that could be operating here, and we really need to see the data from the phase 1 phase 2 trial to comment as to what a phase 3 might look like, and whether or not we would be performing one. Jim, do you have anything you want to add to that?

I think Tom gave you a good overview, so I think the important thing, really, to remember is this is the same formulation that we're using the fracture trial, so we think that there might be some room to think about label expansion, if this trial really showed significant success, but I think, Tom and I are both cautious about this, and we believe that probably this data would support maybe a more streamlined phase 3 approach, which then we could move to commercialization of a spine product.

Okay. And then Sherry, you mentioned there was a positive impact in SG&A in the fourth quarter, due to a couple of different reason you say gave us. Wondering if you could tell us what the impact of that was and the dollar amount, if you can quantify it.

I can, Bill. I mentioned, I think the most significant is we have continued to improve our collections across the board for our bone stimulation products. We had great collections this year. I think the effect in fourth quarter was anywhere from $200,000 to $300,000 that was positive if you were to look at what did we expense quarter to quarter throughout the year. Fourth quarter had some benefit there for the excellent collections we experienced during third and fourth quarter.

Okay. And then, you know, looking at the numbers, if I do look at the bone stim., something that I'm seeing is that actually it was down sequentially on an absolute basis versus the fourth quarter of last year, and you actually had a sequential up tick from 3Q ’01 to 4q ’01. I was wondering if you could give a little color into why that occurred.

I want to make sure we've got this right. Sequentially the bone stim. sales were somewhat reduced in the fourth quarter versus the third quarter of 2002. They were significantly ahead of the fourth quarter of 2001, as Sherry mentioned, about 20 percent ahead. I think we would point out again that a 20% growth in our total stim sales well ahead of overall market growth rate so we did significantly, we believe, continue to increase our position and gain share. There was some impact in the fourth quarter on the [Spinologic] sales, and it was due to a larger than normal number of prescriptions for [Spinologic], which came in the quarter, which had a service date that was later than December 31st, had to have some impact on the sales. Normally in any quarter on the scripts that we receive, we get some of those that come in that are for a future service date. We had a larger percentage than normal of those in the fourth quarter. I think counterbalancing that, however, was we had a significant increase in script, overall scripts for both the total stim. business and SpinaLogic versus prior year, so we consider the business to be moving again about ath the rate we talked about. We came into the year at 25% total increase for bone stim for the year, about 20% of OL1000, and about 30% on spine, and we feel very comfortable with the 20% projection that we've got for 2003, particularly based on the increased investments that are being made by both us and [DePuy AcroMed] in additional sales talent.

Okay and then looking at your product gross margins in the quarter, they were 84.5%. And it has been around that 84% - 85% level, is that a level that we should look at on a product gross margin basis going forward?

Yes, I think we can, Bill, in fact, when look at what we’re forecasting future periods we’re looking in that same ballpark. As well as our engineering department, we’re constantly looking at ways we can improve our product. So we anticipate that we should be in that ballpark for next year as well.

Our next question comes from Chris Shibutani, JP Morgan. Please go ahead.

Chris, are you there?

Thanks very much. I had the mute button. [inaudible] mentioned having a proposal for this spinal enrollment potentially broadening the protocol, could you describe what it is now and what the impact of what you are looking to do is?

Sure. Jim?

Yes, Chris, in the current [IMB] protocol, we actually only have single level fusions, which are with a diagnosis of degenerative disk disease, so what we've done in terms of this protocol amendment is expand this to two level fusions, which we think will literally triple the amount of potential patients who would meet the inclusion criteria for enrollment. And this is what we've experienced at the four sites that are currently enrolling patients is the fact that many two level patients in fact would be candidates to enroll in the clinical trial, but since we were limited to only single level fusions, they were not able to participate, so we believe that this will really allow to us accelerate the enrollment rate.

And what's the timing for which you expect to hear from the FDA in regard to this?

By mid-year, we should know whether this protocol amendment is effective.

Thanks, I'll get back in the queue.

Our next question comes from Robin Young from HealthPoint please go ahead.

Hi, it’s John [Showpack] for Robin. A couple of questions regarding Chrysalin, we were wondering if there would be any release in data, particularly in the cartilage or spine studies coming up in any periodicals or anything like that?

Well, generally, let me make the comment, and I think we have been consistent with this all along, we really don't disclose any clinical data until we've had time to inform the FDA and we have found an appropriate point has been reached in the trial where we can make an announcement. We are obviously continuing to enroll patients in the human clinical trials. We need to reach a certain point in those trials, and that point is probably beyond this year in term of any additional data in the fracture trial or the spine trial. In the cartilage -- in the cartilage program, we presented last year in June, at the world cartilage meeting, some preliminary preclinical data on cartilage. Jim, I don't know if we have thoughts about additional preclinical data before we start clinicals or not.

John, we are still continuing other preclinical studies, basically having to do with the formulation change. As you know this is a sustained release formulation and a [PLGA] microsphere, which will be implanted into those cartilage defects, so this is something that we're currently working on. We also have submitted a manuscript to one of the orthopedic journals describing the original rabbit studies, but as Tom said, there's certainly not any human clinical data. That will be forthcoming this year.

Okay. Thank, I understand that. Just a follow-up. On previous calls, you had discussed potential development of distribution agreements for Chrysalin. How does that stand, or are you still pursuing that arena?

Yes, let me make a point on that. We have in the past had partnership discussions. We have mentioned that he previously. We also mentioned on the October conference call that at least at the present time, we have decided to put those discussions on hold. Now, that was a point in time -- comment I made at that time, and changes, depending upon the circumstances, but at least for 2003, our feeling was that we would take the Chrysalin program forward ourselves, develop it internally, and we believe we can significantly enhance the value of it before, perhaps, moving again foward with partnership discussions. We do have an understanding with Chrysalis Biotechnology, that by the time we have a file-able NDA for one of these products, we will have reached some sort of a partnership agreement for assistance in distribution of the product. We have a little time ahead of that. The more time we have the more we can build though the feeling is at this time, anyway, we are going to continue to manage that process on our own. Obviously things are happening in the orthobiologic arena. We saw some announcements this week regarding [inaudible] and there is obviously a lot of interest in terms of getting involved with companies who have advanced products particularly in human clinical trials in OrthoBioLogics. So that could also change the dynamics depending on the interest level, and frankly the opportunity as it might be presented to OrthoLogics.

Okay. Thank as lot.

Your next question comes from Justin Cable from bee line and company.

: Just two questions.

Can't hear you, Justin. Can't you speak up a little?

: First can you tell us what the increase in sales force is going to be, for you guy, as well as DePuy, and second could you talk a bit more about the ligament and tendon repair, any new developments there? What we should expect over the next year or two.

Sure. I'll take the sales force, and then I'll ask Jim to speak on the tendon and ligament repair preclinical work. We have decided to expand, I don't want to give exact numbers out here, but we are looking to expand our sales force somewhere in the range of 15% to 20% for 2003, and we think that, in addition to additional distributors, that we're going to be adding, will significantly enhance our presence for the OL1000. We have -- we had, last year, in the range of are 35 reps or so, so that is should give you an idea of what we're talking about. On the DePuy side last year, they had approximately 30 sales specialists, in a specialists group who were primarily responsible for selling SpinaLogic, as well as a few other OrthoBioLogic products that they had for their specialists. They have made the decision to more than double the size of that group for 2003, so we believe that is a significant change and will be very helpful to us going forward in terms of as driving sales of SpinaLogic. You have to remember that these resources both that we are committing and DePuy is committing will be done over a period of time here, particularly during the first six months, so it's probably going to be a year before all of those additional assets are in place, so that's why in my comment, I alluded to the fact that the bulk of the increase we are expecting for year-over-year growth would come in the second half of 2003.

Okay. Just a quick follow-up on that onebased on your historical knowledge, how long does it usually talk for a sales rep to get up to speed?

Okay. Well are that of course, depends on what their Background and experience is coming in the door. We have been fortunate in the past to hire some folks that have a significant amount of experience in this area that can be actively contributing within a two to three month period. But really you are looking at something in the four to six month range before you can get significant contribution from these sales people.

Justin, as you know next week is the orthopedic research meeting, so we are going took meeting with two groups of investigators who have history with ligament and tendon repair models, and try to develop a protocol and really initiate that preclinical program in terms of tendon and ligament repair. I think it's important to always remember that in terms of ligament repair, there's a lot of remodeling that happenes over time, so these are longer term preclinical studies, so I think we want to be cautious and let you know that it's going to be a longer preclinical program than maybe you expect prior to us thinking about moving into human clinical trials for ligaments and tendons, but it's certainly something that's on our plate for this year.

Okay. Thanks.

Ladies and gentlemen, if there are any additional questions at this time, please press star followed one. Our follow up question comes from Bill Plovanic, First Albany. Go ahead. 1

Thanks. Just a clarification question for Sherry, if I could. As you begin enrollment in some of these clinical study, it sounds like it's really going to start spilling off around the second and third quarter, so while would be break even for the prior year may be a penny or two profit in the first quarter, kind of decreasing as we move through the year, is that the way you say spending patterns.

Well, Bill, actually there are a lot of upfront startup costs as we bring the sites up and get them ready. So I think we'll be closer to break even. Not that we'll have all the patients enrolled that we were discussing today, but the certainly the upfront costs are going to be hit immediately on our R&D experiences. So I anticipate us to be around breakeven in Q1.

And should I model through the whole year that it would be break even give or take every quarter?

I think so. And each quarterly conference call we will be discussing how quickly we are getting our patients enrolled, so that's really what's bringing us to our break even point for next year, so that depends on our R&D programs and how quickly we get them up and running.

As you exit the year and go forward with these studies, would you expect ’04, at this pointto be breakeven,assuming the stim. business continues to grow, and you can use the profitability of that?

Bill, let me see we really have not modeled up in enough detail of ‘04 to make that comment. I think a lot of it is going to depend on what we hear from the FDA during this year relative to the clinical trials. Are we going to be in a cartilage trial, a human clinical trial which we hope to be in ‘04. How many patients? How fast the ramp up on the other programs, so we have some models internally that we've looked at, and there is a scenerio that says the growth of the bone stim business and the profitability and positive cash flow from it could be sufficient enough to put us into a breakeven position again in 2004, but we really don't have enough data yet, there's too much unknown relative to the FDA and timing of these clinical trials to get there. In addition, we have not said, relative to corporate partnership possibilities and so forth, what we might do beyond 2003. As I’ve indicated before, we have a point time decision here that says for 2003, we're going to carry the program ourselves. In the event we would reach that kind of conclusion, and the opportunity presented itself, which was attractive to us, we could very well do something like that, which would have a significant impact on our [PNL] for 2004 in a positive way in all likelihood, so I think it's premature, I think it's a good question, we can just tell you that there is a scenario that says that could happen, but there’s some unknowns here in terms of the pace of enrollment, and what happens to the cartilage human clinical trial that we need a little bit more visibility in the year 2003 before we could give you a really good answer.

Great. Thank as lot. Tom appreciate it.

Our next follow-up question comes from Chris Shibutani, J.P. Morgan. Go ahead.

Thank you. Again. What is the sustainablility of the SG&A margin? Sherry, I would like to know what's it going to like going forward. I know you outlined what some of the factors were that helped you in the quarter. What are your thoughts going forward? Can we carry, that was a good several basis points – I mean, percentage points below where we were looking for.

I think when we look at 2003, once I pull out those [Hyalagan] royalties that have assisted us when you look at gross profit as a percent of sales during this fiscal year, without those next year, we are anticipating around the 70% mark for all of 2003.

Chris Shibutani for SG&A as a percentage of revenues?

Yes, that's correct.

And then the total R&D spend, I know there is going to be some incremental spend and most of it is focused on the Chrysalin efforts. Are you therefore saying that R&D experience for the next year is close to 6m, or higher than that? 6m in addition to what you have been historically?

No in total we are anticipating between 6m to 7m. When we talk about breakeven, it would be around 6m. We are expecting a little above 6m but it would be great if we were at 7m it would be great, because it would mean we were enrolling patients fast faster than we had anticipated.

There are no further questions a this is time. Please continue.

Okay. Let me conclude Li by thanking you again for joining us today. We are looking forward to 2003, think it's going to be a great year for OrthoLogic, and have a great day.

Ladies and gentlemen, this completes our conference call for today. Thank you for participating, and please disconnect your lines. Time call completed