Capstone Holding Corp (CAPS) 2005 Q1 法說會逐字稿

Good afternoon, and welcome for the OrthoLogic Corporation First Quarter 2005 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions following the presentation.

At this time, it is my pleasure to introduce Larry Delaney of The Berlin Group. Larry, the floor is yours.

Thank you, Ann. And thank all of you for joining us today to discuss first quarter 2005 results, financial and operational with the management of OrthoLogic. The management will provide an overview of the results, and then we'll open up the call to your questions.

But first, statements in this conference call or otherwise attributable to OrthoLogic regarding our business that are not historical facts 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 from predicted results. These risks are discussed in our Form 10-K for the fiscal year ended December 31st, 2004 and other documents we file with the SEC.

With that, I will turn the call over to Dr. James Pusey, President and CEO.

Good morning everybody, and good afternoon everybody for those who are on the East coast. It is indeed a pleasure to speak with the investment community on our quarterly conference call for the first time as CEO of OrthoLogic. Joining me today are Sherry Sturman, Senior Vice President and CFO, and Dr. Jim Ryaby, Senior Vice President and Chief Technology Officer.

Following my opening remarks, Sherry will provide additional financial information, and Jim will provide an update on the Chrysalin Product Platform. Then, before we move on to your questions, I will update financial guidance for 2005.

Firstly, and most importantly, as we announced in this morning's release, patient enrollment has been completed in the Phase III pivotal trial of Chrysalin for fracture repair. As many of you know, ours is the most advanced human clinical trial of a drug product candidate for this indication.

We have been collating the data from a total of 502 patients, and we expect to be able to share efficacy information during the first half of 2006. Safety data from this study is dependent on a 12-month follow-up period, and will be available in the second half of 2006 along with the full study report. Completion of patient enrollment in this trial is a major event for OrthoLogic, and a significant achievement for Dr. Jim Ryaby and the clinical development team. Jim will offer more detail on the Phase III trial in a moment, as well as an update on the Chrysalin Product Platform.

I will now turn the call over to Sherry, who will provide you with our financial information. Sherry?

Thank you, James. Good morning. I would like to direct your attention to the statement of operations, where I will provide a brief overview of the first quarter activity. The G&A costs for the first quarter of 2005 were 910,000, compared to the 555,000 during the first quarter of 2004. The increase in administrative expenses over prior year is due to the added expense of our Galveston location after the CBI acquisition, and an increase in our legal and patent-related costs for the additional indications and our formulation work.

The company spent 5.4 million on our R&D program during the first quarter of 2005, compared to 3.4 million in the same period of the prior year. The 2005 quarter increase of approximately 60% over prior year is due to additional patient cost due to a final enrollment of the Phase III fracture repair trial with startup cost of our Phase IIb dose ranging trial, and the spending for our pre-clinical and research programs for the other product candidates for Chrysalin. Full year R&D spending expected for 2005 is approximately 28 million, compared to 17.1 million spent in 2004.

Our total operating expenses were offset by the collection of 250,000 received during the quarter as a final settlement for the judgment assessed against the buyer of the CPM business. The prior year operating expenses were offset by 111,000. There will be no additional payments received on the settlement going forward.

The net loss for the continuing operations in 2005, following the 552,000 of interest income and the 12,000 in tax benefit, is 5.5 million or a loss of $0.14 per share. The company recorded a loss of 3.2 million in the prior year or $0.09 per share.

The column to the far right of the statement of operations relates to our expenses as a development stage company, starting from August 5th of 2004 to March 31st of 2005. The company's losses will be presented in this format until we are able to begin operations with a revenue-producing product or licensing agreement prior to commercialization. Combined with the CBI acquisition costs, the company has recognized 37.7 million loss for this accumulative period.

Turning to the balance sheet, our total cash and investments at March 31st 2005 was 97.2 million. The company started 2005 with 103.6 million. The cash and investments decreased by approximately 6.4 million during the first quarter, which also represents a drop in total assets of our fiscal year ending 2004.

In 2005, our anticipated spending is approximately 30 million 32 million, which will be partially offset by the anticipated collection of the 7 million escrow balance from the sale of the Boston business, resulting in net cash utilization of approximately 23 million to 25 million for the fiscal year. As of March 31st, the shares of common stock outstanding totaled 38 million. As we valuate the other indications for our Chrysalin Product Platform, we will continue to update our research and development focus and the potential effect on our financial forecast.

That concludes my summary. Back to you, James.

Thank you, Sherry. Jim will now provide you with additional information on the overall development program for the Chrysalin Product Platform.

Jim?

Thank you, James. Good morning everyone, and thank you for being on our call today. I will now provide an update for each of the product candidates currently in development. The overall Chrysalin Product Platform is focused on 3 major indication areas for the peptide. These are orthopedic tissue repair, diabetic ulcer repair, and cardiovascular repair.

First, I would like to provide an overview of our program focused on orthopedic indications, where we are evaluating several potential product candidates. These indications are for fracture repair, spine fusion and cartilage defect repair.

Our most advanced clinical program in orthopedics is for the fracture repair indications, and this product is currently being tested as a percutaneous injectable product for acceleration of fracture healing.

As you've heard earlier from James, enrollment in the Phase III clinical trial has been completed with no adverse events related to Chrysalin reported in the study to date. We have been collating the data from a total of 502 patients, and expect to be able to share efficacy information during the first half of 2006. Safety data from this study is dependent on a 12-month follow-up period, and will be available in the second half of 2006 along with the full study report.

During the quarter, we experienced a supply disruption for the injectable form of Chrysalin used in the Phase IIb fracture repair study. This interruption has been resolved. However, some delay in enrollment is expected. The IND remains active in the receipt of IRB approvals from the expanded list of clinical trial sites is continuing. We expect all sites will be recruiting patients following their respective IRB approvals by the end of 2005. Again, the primary purpose of this Phase IIb study is to provide additional dosing information to support an expected filing NDA filing, data permitting, for the acceleration of fracture repair indication.

During this past quarter, pre-clinical studies on bone repair have been published. The aim of these pre-clinical studies provides additional information on mode of action and potential novel formulations for the peptide in well-established orthopedic animal models. We published, with collaborators, a study showing Chrysalin increased bone formation in a rapid model of distraction osteogenesis in the January 2005 issue of "The Journal of Orthopedic Research".

The second publication on bone repair, conducted by an independent research group, showed that Chrysalin combined with a novel biodegradable scaffold increased bone growth in a rapid segmental bone defect model. This study appeared in the March 15, 2005, issue of "The Journal of Biomedical Materials Research". Overall, we are very pleased with the progress in the fracture repair program.

The second Chrysalin orthopedic program is in spine fusion. We completed enrollment in a pilot Phase I, II human clinical trial for this indication in spring of 2004. Following the completion of the 12-month follow-up, safety data from this trial is expected to be available this summer.

No adverse events related to Chrysalin have been reported in this study. During the quarter, our pre-clinical study of Chrysalin on spine fusion, conducted with Dr. Joseph Lane and colleagues from the Hospital for Special Surgery in New York, was featured as an article in the February 2005 issue of Orthopedics Today.

This study showed that Chrysalin in saline, or formulated in sustained released microspheres, stimulated spine fusion in a rapid lumbar spine fusion model. The results from this study are supportive of additional pre-clinical and potential clinical studies in spine fusion.

The third potential orthopedic indication is the use of Chrysalin for cartilage defect repair. During the quarter, we published a study with our collaborators led by Dr. Barbara Boyan from Georgia Tech in the February 2005 issue of "The Journal of Cellular Physiology".

This study showed that Chrysalin stimulates proliferation and extracellular matrix synthesis in chondrocytes, the cells that constitute cartilage. The references from the cartilage and bone repair studies will be available on our website shortly. Regarding our planned clinical program, many prominent investigators have expressed interest in participating in our first human clinical trial for our cartilage defect repair indication. We intend to submit an IND application for our cartilage defect repair indication once all necessary manufacturing in pre-clinical studies are completed.

Turning to the other indications for Chrysalin, there are 2 major areas of focus where the peptide has shown promising results. These are diabetic ulcer repair, and cardiovascular repair. The most advanced area is diabetic ulcer repair, where Chrysalin has been evaluated in both pre-clinical and clinical studies. We completed a Phase I, II human clinical trial evaluating the use of Chrysalin on diabetic ulcers, and promising results were observed with Chrysalin treatment.

In the diabetic foot ulcer subgroup, statistically significant results were reached showing an increase in the number of patients whose wounds completely healed. In addition, no drug related adverse events were reported in the study.

We are currently developing a gel formulation for our Chrysalin-based product candidate for diabetic foot ulcer healing in preparation for a pivotal human clinical trial for this indication. The start date for this pivotal study will depend on successful completion of the gel formulation work, and the submission of a formulation amendment to the existing and active IND for this indication.

In the cardiovascular area, we are focusing on evaluating various delivery mechanisms for our Chrysalin product candidate for myocardial revascularization, as well as completing a series of pre-clinical studies to support clinical development for this indication.

Finally, the clinical development team deserves recognition and congratulations on the achievement of our first major milestone for 2005, the full enrollment of our Phase III fracture trial.

In conclusion, we continue to make excellent progress with our pre-clinical and clinical studies of Chrysalin.

James, back to you.

Thank you, Jim. Now, before moving on to your questions, I will reiterate the financial guidance for 2005. And, as previously mentioned by Sherry, we began 2005 with more than $100 million in cash and investments. We expect our cash expenses for 2005 to be between 30 to 32 million, depending on the timing and progress of our clinical and pre-clinical studies. We expect to receive an additional $7 million in escrow before the end of 2005, and this means that our net cash expenses will be between 23 million and 25 million in 2005.

Now, all in all, my first 50 days as President and CEO of OrthoLogic have been exciting times. I am a believer in the therapeutic potential of Chrysalin delivered in 3 formulations. Including saline, a gel, and time released microspheres.

The initial proof of principle data supports development for specific and targeted orthopedic and diabetic foot ulcer indications. This diversity within the product pipeline to some extent mitigates the traditional technical risk of drug development and enhances shareholder value for our company.

I am now going to turn back to Lynn, our operator, and we will open the call up to your questions.

Thank you. The floor is now open for questions.

[Operator Instructions]

Our first question comes from Bill Plovanic from First Albany Capital.

Great. Good morning.

Hi there, Bill.

Just some clarifications on the Phase III fracture repairs. You've completed enrollment of the Phase III. So, the 52 weeks, is that from complete -- the last patient enrollment, or is that from -- I guess it is a single injection. So I take it the 52-week is from last ...

I can handle that for you, Bill. And if there is a follow-up, then perhaps Jim and I can take it together. Essentially, the protocol calls for after the last patient's first visit, there is a 6-month efficacy, follow up period and that 6 months is adjusted by a 2-week. We call that scheduling two weeks. So, it could be as much as 6 months plus 2 weeks to allow the patients to schedule their last visit.

Following that, there is another 26 weeks, or another six weeks, of additional safety follow-up. So, the total time for data collection after the last patient's first visit is 52 weeks plus a 2-week scheduling period.

So, after their last visit -- then how many visits they typically do post treatment?

I'm going to hand that detail over to Jim.

Well, Bill, so the patients are followed in the Phase III study weekly for the first 8 weeks, which includes full clinical radiographic and functional evaluation. Then, at 10 weeks, 12 weeks, 26 weeks, and 26 weeks as James said is the last efficacy evaluation. And then 26 weeks later, there is an additional safety evaluation.

So, in other words, looking at this if it helps everyone. Obviously, from the press release, you will know that the last patients were entered into the study in May of this year. That means that the last safety evaluations will be done in May of next year.

Okay. And then just a follow-up on the IIB study. The delay in that year, when do you expect enrollment to be complete in the IIB study? Is that data necessary for the submission package for final approval?

I think that's a great question and it's a question that many people will want to ask. Essentially, the IND in the IIB remains active, and the supply issue is resolved. So, the IRB approvals that we were gaining are now on going and all sides will be enrolling patients by the end of 2005.

As you probably remember, this study has 60 sites, so more than double the number of those sites in the Phase III study. And there are sites in both North America and Canada. Now, the new enrollment timetable bills will depend on the new enrollment rate, once the study is fully enrolling. And, our expectation is that enrollment rate will be faster than the Phase III study.

Now, your second part of the question was, will that affect the NDA submission time? Well, really the NDA submission is going to depend on the Phase III study. We have fully enrolled that Phase III study. It will depend on the efficacy data that we get in the first half of 2006, and it will also depend on a discussion of that efficacy data with the stakeholders. That discussion will not only take into account the Phase III efficacy data, but it also takes into account the development program. So, we will know more in the first half of 2006.

And how many patients are in the Phase IIB?

It is a large study, 500 patient study. And, again, these 2 studies I think as everyone knows are really the first, first time that a treatment of this kind has been studied to such depth. And it is a real breakthrough from the point of view of actually completing the enrollment.

So, are you saying is if the efficacy data is solid enough, you will be able to submit the NDA without the Phase IIB?

No, we do not know that. And in fact I would say our anticipation is that, that will not be the case, but we will not know that until we see the data.

So I guess what I am trying to add here is, it sounds like while you have the Phase III data by the fall of the followed by the end of '06, it sounds like the Phase IIB study will be still enrolling in '06. And you need a 6-month follow-up after that?

Again, the follow up -- you are absolutely right. The efficacy follow-up is 6 months for each patient and the safety follow-up is one year for each patient. I think the issue that we're all facing is that the regulatory environment, especially from a safety point of view, has changed. And until we are able to discuss the development program with all stakeholders in the first half of 2006, we will not know exactly how the IIB study is going to affect the NDA submission.

Okay. Great. Thank you very much.

Thank you. Your next question comes from Justin Cable of B. Riley.

Hi, just a couple of questions on some of the pre-clinical work that you had touched on. In terms of the cartilage repair and cardiovascular repair. Can you talk about maybe some of the details of these pre-clinical studies and perhaps a timeframe as to when you might feel ready to submit an IND?

I'm going to hand that one over to Jim. But Justin, can I ask the clarification for all of us -- which particular pre-clinical indications are you most interested in?

Cartilage and cardiovascular.

Thank you.

Hi Justin. How are you?

Good. Good. How are you?

I mean basically, there are really 4 steps to moving ultimately to submitting an IND, for example, for cartilage repair. And that is number one -- to develop the manufacturing capability, which we have successfully done, then to ensure that the product is both sterile as well as stable in that new microsphere formulation. And this is an ongoing effort, which we are very highly focused on.

The third part of that is to, in fact, develop all the necessary pre-clinical safety studies, which would allow you to move into a human clinical trial from the FDA perspective. As James said, the scrutiny of safety studies has definitely increased in the past several months, and so we are being very cognizant of the need to have a complete safety package pre-clinically. And then, fourth of course is to develop the clinical trial protocol, all of which comprises a new IND with a new formulation.

So we're making great progress on this and we will definitely keep you informed. And certainly as I said in comments back, when we complete all those studies, we will be moving forward with an IND submission for Cartilage Defect Repair.

Regarding cardiovascular, I think we've said before that cardiovascular is certainly an indication that is promising but much earlier in its developmental stage. So, clearly, what we're doing in cardiovascular is continuing some pre-clinical work, as well as, designing a pre-clinical safety study. And I think we will be able to give you more guidance on where we are with cardiovascular in the next, say, 6 to 9 months.

Okay. Thanks. And as far as the Cartilage Defect Repair, with the submission of an IND by the end of this year be too early to assume?

I will take that. I fully understand the reason for the question. And very much we appreciate that. I think what we want to do is to provide as much certainty and as much concreteness in the response to these timing questions as we can. And I think as Jim said, there are 4 elements to the development of that IND. And those elements have really all got to be completed before we submit the IND.

What we will do is communicate very clearly, and very quickly, when each of those elements are achieved. And I think that is probably better for everybody than specifically providing you with a date at this time.

Okay. That is fine. As far as the fracture repair on the Phase IIB trial, and in terms of getting the IRB approvals, do you have to go back to those initial 27 that you previously had gotten approvals from as far as the clinical sites?

What we have is -- we've already got more than 10 IRB full approvals. You have actually, Justin, just described one of the administrative issues of running clinical studies, which is yes, during the study you are actually constantly keeping IRBs updated, especially if there are things like changes to a protocol. Sometimes those changes are very straightforward.

And in this case, as I say the supply interruption has been resolved. And we are already getting IRB approval. So we are very positive about the way that the IIb study is moving forward.

And in terms of getting the rest of the approvals, for that should be right the 50 other sites, what kind of process does that entail?

Sometimes it's a centralized IRB. So, there are some clinical trial centers that are part of a centralized independent review board system. And when you put the protocol or amendments, or communication, to that centralized independent review board, it automatically covers approval for more than one site, multiple sites.

Sometimes, as in the case of a large academic center, it's an independent IRB board that some has to be gone through, and that does tend to take longer. It can take up some months. It can take days or weeks. And what we're confident about is that every single one of the 600-sorry, the 60 sites-- that would be a statistical challenge if it were 600...every single one of the 60 sites will be up and running by the end of this year.

Okay. Great. Thank you.

Thank you.

Thank you. Once again, the floor is open for questions.

[Operator Instructions]

Our next question comes from Eric Miller of Heartland Advisors.

Congratulations again for completing the enrollment.

Thank you, Eric. I think the congratulations really should go to Jim, Ryaby and his team. But thank you very much for saying that publicly.

A question on the efficacy analysis, again just to make sure I understand the time line. You've got 6 months now from the last enrollment plus that 2-week scheduling. So you should shut down the database for efficacy analysis say, roughly the end of November, correct?

Well, I'll take it first, and then again if it needs expanding, Jim can handle it. This is a study with a primary endpoint, and 2 secondary endpoints as probably everyone knows. The primary endpoint is removal of an external fixation, time to remove with external fixation and the secondary endpoints are radiographic evidence of healing and evidence of mean bone density improvement towards extra scan this is -- the amount of data is actually adds up to 40,000, we call them CRX, so 40,000 forms. And, so the answer Eric, is actually, no, the data will not be ready to be closed down in November.

There is a period of collecting the data and cleaning the data, basically called getting ready to lock the database. And that is going to take weeks. It's not going to be days. And that is why we say that the database will be locked during 2006 and that the data will be available for communication within the first half of 2006.

And when you communicate that data in the first half of 2006, and you'll have a complete efficacy analysis but you still could have some loose ends on the safety side and that has to go out a little longer?

Yes. That is correct. Now, I think we should all be aware and we are very clear and it's the case again as of today there have no safety issues associated with the use of Chrysalin.

Right. Now from the competitor standpoint, do you know, I know in the past, I think we've mentioned that Pfizer had a somewhat similar product will not starting in Phase III, do you know any updates on what you see out there in the competitive landscape for fracture healing?

I'm going to have that one for Jim.

Eric, all we know is that they are enrolling patients in their Phase I/II trial. Which is actually, it's a tibial fracture trial, and this is also across the gland and receptor agonist product that's administered as a single injection into the fracture site much like ours is. And that's all we know at the present time is that they are enrolling patients in that study.

Okay. For the Phase IIb, is the protocol the same as your Phase III for fracture as far as having weekly visits and X-rays taken on a weekly basis?

And I guess, it is. Eric, it's the same follow-up schedules as in the Phase III protocol.

Okay. And the doses that are being crusted out in that Phase IIb again are what?

1, 3, 10 and 30 micrograms as compared to placebo.

Okay. And then I just, I guess, my last question would be back to James. On anything new right now on strategic discussions as far as partnering, or is that pretty much still on the back burner until you really get through to these analyses of the fracture side?

I think it's probably important for me to talk about my philosophy on strategic partnerships and then relate to that to OrthoLogic. Now, my personal philosophy is that it can be an appropriate way of moving development program forward.

If that development program requires additional resources, or additional expertise, or there is some synergy in relation-- it would really have to be a the situation, where two plus two equals five, which is a great situation to be in, because if you are not doing that, then essentially the strategic partnership is just giving away some value of the company's assets.

Now, that's where I am at. Now, right now we do not have any strategic partnerships. We are definitely an opportunistic team. I think the board is open-minded in all things. And we would, of course, immediately communicate, if there was a major collaboration in the offing. But, that is not currently the case.

Okay. Great. Thanks a lot.

And your next question is from Larry Smith of Midwest Research.

I have a question on the filing strategy, first one is this an NDA or DLA?

It's an NDA.

Okay. On the - but my understanding is in the superiority trial, the FDA will except one trial, if it's meets the clinical endpoint. Is this why you're kind of uncertain as whether of the delay in the Phase IIb trial will effect your filing strategy, that you may not need that supported data?

Larry, it's a great point and I need to put this in context. You are absolutely correct. And as you also know, increasingly nowadays, there is the issue of unmet medical needs and value to patients, value to physicians, and value from a socio-economic point of view, or if you like to manage care.

All of these things are factors that are taken into consideration. We are not -- I mean to at this time we are not expecting that the fracture repair indications, I think it would be inappropriate of us to expect that this would be looked upon by stakeholders as something that could be fast-tracked or something that would get priority review, which of course is another reason for -- as you sort of bring up the idea of just having one study, it would be another reason for being able to submit an NDA with one study.

But you know, when we boil this all down, until we see the efficacy data, until we see what effect Chrysalin has had not just on healing rates but on quality of life for patients, especially the more elderly patients with, potentially, osteoporosis. And this of course is why the secondary endpoint of mean bone density is so important.

Until we have that full story, I think the specific answer to your question is not going to be known. But, that you are absolutely correct, where there are situations where one study does suffice.

And as kind of a follow-up to that, if you were given a standard review, which I think, you are indicating, is it possible to submit the Phase III study before the results of the Phase II study -- Phase IIb study are known to get the FDA becoming familiar with the data and, hence, from that the Phase II as it becomes available?

Or do you have to wait, if the FDA does want to see the Phase IIb data, do you have to wait until the study is completed and include that with the Phase III data?

That is a great point. There is a situation known as a rolling submission where there is a lead study, which of course, would have to be a pivotal Phase III study with a very clear, clinically relevant primary endpoint. So, one can submit in circumstance -- some circumstances, stakeholders are - and when I say stakeholders it isn't just the FDA, it's often an advisory panel, experts in the whole area of the indication.

But, if stakeholders are comfortable with a rolling submission, then what you have described is possible whereby you put in your primary Phase III study and then you have a rolling submission with, especially safety data, coming from a follow on study.

And if I may ask one further question. What was the nature of the manufacturing issue? And could you explain to us who does the synthesis of the peptide and who does the sterile bill a product?

We -- from the point of your our chemistry, manufacturing, and control strategy, we ensure that we have multiple -- more than one supplier because as you know, clinical trials apply, is a crucial thing to have nailed down. We have more than one peptide supplier. And in fact, we also have more than one sterile bill supplier.

The suppliers are managed very tightly. We have a small functional team, which is not only manufacturing executives for those regulatory affairs, executives that follow this from a auditing process as well as from an actual management of those supply lines. The manufacturing issue was that one of the supply lines was unacceptable, and we were able to very quickly switch to another batch. And, essentially resolved the issue very fast.

Why was it unacceptable?

I don't think I need to go into the details of that except to say that it was a simple quality issue in relation to one of the batches. And I should be very swift and say that no patients received product that was outside specifications. All product was inside specifications. We just have very high standards in terms of those specifications. And we wanted to be absolutely sure that the clinical trial supply going into the study was not going to be compromised in the future.

Thank you.

Thank you. [Operator Instructions]

Our next question comes from Alexander MacMan of Montauk Financial.

Good afternoon, gentlemen. Welcome to board.

Hi, Alex.

Is that the new president. Good morning. Just a quick question to try to clarify the timelines and what stages of what we are in, I understand it's a first part of the Chrysalin development will be out in the first half of '06 and then apparently the cartilage, which will be out on the Web site soon.

With regard to the second -- for the spinal fusion, you're saying some over to '05, now is that result -- I was under the impression that it has a two-leg or two-part trial, 2 segments of Phase III. Is that result from the first set of Phase III or from both? Or have I been away for so long that it's only on say part two?

James is going to handle that, but I don't think his is been away, I don't his been away and you'll welcome back,

However long you have been away. And then I'll hand it over to Jim.

Alex actually of the spine fusion study that is currently underway is only a Phase I to pilot human clinical trial. And that's why we said on the call today and we've said that primarily there's going to be safety data available from this trial, clearly another orthopedic indications spine fusion as opposed to fracture repair. But, that's why we'll certainly have safety data from that study available this summer.

To date, all patients have been enrolled and followed up through 12 months and there have been no drug-related safety events to date in that study. So, I think that's good news. But, clearly, I think we are evaluating other pre-clinical work as well as other approaches in terms of future human clinical trials for the spine fusion indication.

Okay. And with regards to the efficacy data, would that come in at the same time in '06 -- would that be more in accordance?

I mean it's a small pilot study, so it's unclear whether there's really going to be any statistical basis for efficacy data.

Okay.

So Alex, James here. The patients are fully enrolled. The data is essentially being collated and cleaned. But, that data will be safety data. The group of patients was not powered to produce a statistical result. Now, it is possible that there maybe a trend, but let's be clear here, was not powered to produce a statistical result.

Okay. And then, with regards to the cartilage defect, you said that you are taking enrollment on that. How would one get involved in such a study, quite frankly?

I can tell you that. Actually what we said is that, there are four actually aspects or segments of the program that need to be totally completed to submit an IND. So, we will keep you informed as to when we would submit an IND for this indication. And then, clearly, in terms of anyone being in this study, you would have to be fortunate enough to have a doctor who is participating in the study and meet the inclusion criteria for participation in that study. But, these are clearly going to be patients with acute traumatic defects localized in the knee.

And I would just say something about that, there is a very significant a medical need here that there isn't actually a routinely available drug for Cartilage Defect Repair. And so this would be a very exciting program, which many centers would wants to be involved in. And so I think the study will be available broadly. I predict the study would be available broadly across the country if we got to that point.

Okay.

Thank you. At this time there are no further questions. I would like to turn the floor over back to Mr. James Pusey for any closing remarks.

Thank you, Lynn. And thank you very much everybody on the call. We look forward to updating you all as key events occur in the development program for the Chrysalin Product Platform. And until then, thank you once again for your time and attention. Goodbye.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day.