Enzo Biochem Inc (ENZ) 2009 Q3 法說會逐字稿

Good morning and welcome to the Enzo Biochem Inc. third-quarter 2009 operating results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Except for historical information, the matters discussed on this conference call may be considered forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended.

Such statements include declarations regarding the intent, belief or current expectations of the Company and its management. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results. The Company disclaims any obligation to update any forward-looking statement as a result of developments occurring after the date of this conference call.

Our speaker today is Barry Weiner, President. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions and comments following the presentation. I would now like to turn the floor over to your host. Mr. Weiner, the floor is yours.

Thank you very much for joining us this morning for our 2009 third-quarter conference call. I enjoyed today, in our corporate headquarters, by members of our senior management team, including Dr. Kevin Krenitsky and Dr. Christine Fischetti, as well as Mr. Drew Crescenzo and David Goldberg. Additionally, we are joined by Dr. Carl Balezentis, who is at our European headquarters in Lausanne, Switzerland.

Before we get into the financial results, I wanted to briefly discuss the reason why we were unable to file our 10-Q within the period of statutory extension. As many of you know, Enzo has always prided itself on financial transparency and making its financial and other disclosures in a timely manner. In fact, we never have been late in a quarterly or annual filing until today.

As you may be aware, on May 8, 2009 in an 8-K filing, we reported that Shahram Rabbani, the former President of Enzo Clinical Labs Inc., had been terminated and was seeking an arbitration hearing in an attempt to seek damages in connection with his termination. Among the claims that he brought, Mr. Rabbani alleged that the Company had violated Sarbanes-Oxley. As a result, the scope of our quarterly close procedures has been expanded, including the procedures relating to the purported claims, which has delayed the Company's ability to file its financial statements on time. We are moving forward in this process and expect to complete it expeditiously.

In any event, we do not believe that the process has or will have any material impact on our ongoing business. We look forward to filing our 10-Q as soon as possible.

Last night, we announced another record quarter for revenues at Enzo Biochem. Year-over-year, our revenues increased over 22% and were in excess of $23.1 million. We showed increases in revenue at both of our operating divisions. Enzo reported a loss of $0.11 a share, which was $0.05 greater than last year's. Our operating results were impacted by acquisition-related non-cash expense items such as fair value accounting and depreciation and amortization, which were derived from the acquired companies, as well as by sharply reduced interest income.

In a few minutes, I would ask Drew to provide additional color on our financials, but it is important to understand, unlike many of our peers, we are in extremely healthy financial condition. To underscore this point, at a leading biotech meeting just held in Atlanta, the group's Chairman stated in a keynote presentation that close to 50% of companies in our industry have less than one year of operating cash. We're very fortunate to have the ability to move forward and drive our strategic capabilities by our solid balance sheet and operating position.

Enzo Biochem has been and continues to be today structured to take advantage of the changing dynamics in healthcare. The financial environment is contributing to more companies seeking partnership -- acquisition, joint venture, among others. While no one knows when the capital markets will loosen up, you can be sure that Company management will continue to run Enzo in a financially prudent manner.

Additionally, we continue to execute on our strategies involving the creation of multiple centers of excellence designed to place our Company as first-in-class in serving a number of market segments.

At Enzo Clinical Labs, now under the leadership of Dr. Krenitsky from whom you will hear in a few minutes, we have begun the execution of our strategic operating plan. Among the initiatives, as an example, we have entered into a testmarketing agreement with the manufacturer of unique molecular diagnostics in the women's healthcare arena that our lab would ultimately provide. If this proves successful, we plan to expand this relationship.

Enzo Therapeutics for its part earlier this month released data from our most recent Phase II study on Alequel, our study compound for the treatment of Crohn's disease. It was extremely well received by the scientific and medical attendees. Dr. Fischette will provide detail on how we plan to proceed forward with this product, as well as update you on the progress of our other therapeutic programs.

And finally, Dr. Balezentis and his team continue on the process of integrating our latest acquisition, Assay Designs, Inc., which closed this March. They are also expanding the overall business into a world-class supplier of specialized research reagents and technologies to the scientific community.

In short, when many other companies are facing unprecedented challenges and liquidity issues and frankly are wondering if they will be around in a few months, Enzo is continuing not only to execute on its strategic growth plan, but thrive as well. I would like to turn the call over to Drew Crescenzo who will detail our operating results. Drew?

Thank you, Barry and good morning. I will take this opportunity to discuss our financial position and then our results for the fiscal third quarter. As Barry indicated and as reported on previous calls, our financial position is strong, especially in the present economic market. Currently, we have $55 million in cash, cash equivalents and short-term investments. During the third quarter, our cash and cash equivalents and short-term investments decreased by approximately $18 million, reflective of the cash used to acquire Assay Designs in March 2009 of approximately $12.7 million, capital expenditures paid in cash of approximately $600,000 and the balance used to fund our operations.

We limit our investments for our cash to high-grade and highly liquid money markets and US government-backed securities. As noted on our previous conference call, and as all of you certainly are aware, interest income has sharply declined over the previous period.

Underscoring our financial position, we have working capital of nearly $64 million and our stockholders' equity is nearly $129 million at April 30, 2009 and again, as repeated in previous quarters, Enzo remains debt-free.

Turning to our operating results for the quarter, total revenues for the fiscal 2009 period increased $4.1 million or to $23.1 million from $18.9 million in the corresponding year-ago period. We experienced higher expenses resulting from additional revenue volume and higher selling, general and administrative costs primarily attributed to our fiscal 2008 and 2009 acquisitions in Life Sciences. These items, along with the previously noted lower interest income, primarily resulting from the lower yields, resulted in the third-quarter loss of $4.2 million equal to $0.11 per diluted share compared to a year ago of a $2.1 million loss and $0.06 per diluted share.

It is important to note that fiscal 2009 results were negatively impacted by non-cash pretax charges of approximately $1.3 million attributed to the Life Science-acquired companies. These items included, among others, $900,000 in purchase accounting adjustments for inventory and $400,000 in depreciation and amortization related to the acquired entities. Comparable expenses such as that in the prior year were approximately $500,000. So therefore, in the current period, there's approximately $800,000 in incremental costs that were non-cash relating to these acquired entities.

As to more specifics on our operating results, the Life Science segment revenue increased to nearly $12.4 million, more than a 44% increase over the year-ago period. Product revenues were $10.5 million as compared to $7 million in the 2008 period, an increase of $3.5 million, or 50%. Acquisition growth represented $4 million, or a 59% increase over product revenues in the 2008 period, primarily from BIOMOL and Assay Designs. This was offset by a 7% negative impact from the fluctuations in foreign currency and a 2% decline from existing companies. Our royalty and licensing income increased 20% to $2 million for the quarter as compared to $1.6 million for the year-ago period.

Clinical Lab revenues increased by 3% to $10.6 million due to the increased service volume.

At Enzo Life Sciences, gross profits were positively up and increased 34% to $5.6 million. This figure includes the previously mentioned fair value inventory adjustment of $900,000 in the current quarter arising from the BIOMOL and Assay Designs acquisitions. We expect this type of adjustment, which negatively affects our gross margin, to continue through the second quarter of 2010 as we will be impacted by the Assay Designs acquired inventory.

At Clinical Labs, revenue increases were impacted by higher cost of services and our gross profit declined by almost $700,000 to $4.5 million. These costs are being focused on today and looked at to improve future margins.

On a consolidated basis during the current quarter, research and development costs increased by approximately $400,000 from the year-ago period due to expansion of product development efforts at Enzo Life Sciences of approximately $700,000, mainly attributed to BIOMOL and Assay Designs. This was offset by a $300,000 decline in lower clinical trial activities at Enzo Therapeutics. Our consolidated selling and general and administrative expenses increased $2.1 million or 25% over the prior year period. Of this, $1.5 million was attributed to the Enzo Life Sciences division, mostly arising from BIOMOL and Assay Designs. And the balance was due to increased consulting and professional fees and information technology costs.

In addition, interest income was off nearly $700,000 in this quarter as previously noted due to significantly lower interest rates and lower invested balances.

Lastly, and very important to note, we continue to not record the corporate income tax benefit up to the effective statutory rate, which would not be less than 34% on our pretax losses. This affected both the current and prior period results. Had we had the ability to recognize this income tax benefit, it would positively impact our net loss and EPS.

Let me turn to the Life Science and Clinical Lab segment operating results. Life Science overall revenues increased. Product revenues benefited from acquisitions and were offset negatively by the effects of foreign currency and slight declines at existing companies. Higher royalty on licensing income also contributed to the increase over the prior year period. Life Science growth profit in the third quarter increased 34% and for product revenues alone increased $3.7 million or 43%.

Segment operating expenses, which include selling, general and administrative expenses, legal and research and development, increased by approximately $2.3 million during the 2009 period, primarily due to the inclusion of costs from BIOMOL and Assay Designs. Segment operating income was $200,000 after reflecting the incremental non-cash charges related to the acquisitions previously mentioned -- both the inventory adjustment and depreciation and amortization, which aggregated $1.3 million.

Looking now at Clinical Labs, for the fiscal third quarter, the Clinical Labs reported an operating loss of $400,000 as compared to an operating income of $400,000 in the year-ago period. This was the result of higher cost of services, including reagent and laboratory costs and higher personnel costs that lowered our gross profit by $700,000 to $4.5 million from $5.1 million in the prior year. Other operating expenses, including SG&A and the provision for uncollectible accounts receivable, have remained comparable as a percentage of revenues. Barry?

Thank you very much, Drew. I would like to turn this over to Dr. Balezentis, the President of our Life Sciences group, who will discuss our latest acquisition, as well as share his thoughts on the continued execution of the division's strategic plan. Good morning, Carl, or I should say good afternoon.

Good morning and good afternoon and thank you, Barry. Without a doubt, the third quarter at Enzo Life Sciences was the most active in terms of projects related to integration, consolidation and infrastructure-building activities. As a result of this increased project load, we recently restructured the executive management team in order to more efficiently address the greater demands and to facilitate the integration of the newly acquired Assay Designs.

Over the past two years, we have been methodically building the necessary infrastructure to support a worldwide organization with direct sales in seven countries, distributed sales in the rest of the world, as well as multiple sites located throughout the world for manufacturing and distribution of the approximately 12,000 in-house products and 20,000 distributed products that we offer.

One of the significant projects we initiated in the quarter was the establishment of a single worldwide enterprise resource planning system, or ERP system, responsible for managing and coordinating all the resources, information and functions of our business worldwide from a unified database. The acquisitions we made over the past two years resulted in us having five disparate ERP systems, which were unable to communicate and effectively consolidate financial and other business information in a somewhat automated manner.

The result has been to manually track and consolidate information resulting from this inefficient and time-consuming process. In order to integrate the recently acquired Assay Designs group, as well as facilitate future acquisitions, it was essential that we standardize in a single worldwide platform capable of dealing with the complexities associated with our multiple locations in different countries and their respective currencies. This standardization will allow us to manage our business units on a real-time basis, enabling us to better react to opportunities in the market.

A second significant project initiated in the quarter is a major rebuild of the seven-year-old Life Sciences website with a new modern Web infrastructure capable of performing the necessary e-commerce functions, providing state-of-the-art search capabilities for our numerous products and seamlessly integrating the acquired brands of BIOMOL, ALEXIS and most recently the Assay Designs and Stressgen brands acquired in the third quarter under the single Enzo Life Sciences corporate identity.

In our Life Sciences reagent market, the Web and e-commerce are becoming the preferred method for identifying and securing products and services by our customers and we need to offer the most advanced Web functionality in order to best serve them and remain competitive.

During the third quarter, we also initiated a greater number of consolidation activities that we believe can result in annual savings of over $1.5 million. These projects focus primarily on site and manufacturing consolidation, as well as headcount reduction. We expect these activities to contribute to both improved gross margins and improved operating revenue.

On the integration front, we have established a timeline for fully integrating the recently acquired Assay Designs, which extends into the middle of the next calendar year. The group in Ann Arbor is already participating fully in consolidation and integration activity across all aspects of their business. We are also looking to conclude the final integration steps for BIOMOL and ALEXIS, which includes, but is not limited to, the aforementioned upgrade to the website, the installation of the standardized worldwide ERP system, as well as the continued promotion of the new ELS corporate identity through these brands, migration from distributed sales to direct and the product consolidation and rationalization across all of our productlines.

We have also put a final plan in place to effectively complete the separation of our Axxora distribution business from our in-house product businesses, which are promoted and sold under the ELS corporate identity. We expect this separation to be completed by the start of our next fiscal year, allowing us to report this as a standalone business unit.

Now while Drew has already reviewed the financials in detail, I did want to highlight that, for the quarter, our non-GAAP gross margin increased to 43.2% as compared to 40.9% for the period last year. As we continue to increase operating efficiencies, shed lower-margin revenue and increase the percentage of direct sales across all of our products, we expect to continue to realize improvements on our gross margins for the next and subsequent quarters.

Finally, a key family of products released this past quarter includes a range of novel fluorescent-based assays for monitoring drug and toxic agent effects on the function and viability of cells, including the monitoring of cell viability, proliferation, toxicity, cell cycle dynamics, stress response and death. These products include proprietary Enzo dye technology and are targeted to popular drug discovery platforms such as flow cytometry, microplate-based cytometry, on focal fluorescence microscopy and high-content screening.

Early secondary screening of candidate drugs for potentially adverse cell activity in the drug discovery phase could predict later risks in drug development arising from drug safety issues. Such a screening approach could aid in selecting the best candidate compounds for further drug development efforts, as well as provide preliminary benchmarking of dosing limits and preclinical toxicity studies. We are very excited about these and the many other new products in our pipeline and despite the economic conditions, we are very optimistic about our future and expect to continue to report positive progress. Barry?

Thank you, Carl. As you can see, Enzo Life Sciences is aggressively developing the infrastructure needed not only to integrate our latest acquisition, but to build organically as well. Our catalog of reagents and kits for the academic and pharma markets now exceeds over 30,000 offerings -- both manufactured in-house and available through other manufacturing covering numerous Life Science research applications.

Reflected increases in research and development expense, we have been investing prudently into areas where we believe our intellectual property portfolio and technology expertise can allow us to market novel, high-growth -- in novel, high-growth niche areas, which we feel may be growing faster than others. I would like to segue into Dr. Krenitsky who can give you some insight into the developments at the Clinical Laboratory. Kevin?

Thank you, Barry. Good morning, everyone. My first quarter at Enzo has been a very busy one. During the last three months, we have made substantive changes to our management team, including recruiting and hiring a Vice President of Scientific Affairs who will join us later this month and be responsible for the implementation and execution of our molecular diagnostic expansion strategy.

In addition, a new Senior Director of Technical Lab Operations and a Senior Director of Nontechnical Lab Operations were hired and have begun to evaluate and restructure their various teams. We are attracting and hiring additional sales personnel as we expand our geographical reach further into New Jersey as a result of our recent agreement with Horizon. We have hired additional billing personnel and hired an outside billing and collection firm to review our current billing and collection policies. The quality of our services is increasing as is the quality of our people.

To help manage the operation more efficiently, we have implemented a lean inventory management approach, which will increase our inventory turns and free up cash. We are currently heavily engaged in the scientific and business analysis of multiple novel esoteric and molecular diagnostic assays with the goal of significantly expanding our test menu in these areas.

With the national average reimbursement for a routine diagnostic test at $30.36 and the national average reimbursement for a molecular diagnostic test at $176.79, it represents a market far too lucrative to ignore. We are currently offering one new novel esoteric test in a confidential partnership to a few select clients in our region and we hope to convert that to an exclusive regional offering within the next three months. We are also working with payers to ensure appropriate reimbursement for these new offerings.

Additionally, we are beginning to position Enzo as a provider for the companion diagnostics market and let me explain to you what I mean by this. Companion diagnostics is the development of a test that can let a physician know if a patient may or may not respond to a particular therapy or avoid certain side effects. It also can refer to the simultaneous development of a test with the drug to be able to measure that particular drug's efficacy.

Today, it is estimated by a leading healthcare research firm that the total revenues generated by companion diagnostics is about $150 million. This is expected to grow tenfold to $1.5 billion in about a six-year timeframe. These special assays have historically been developed late in the drug development cycle, but with a dearth of many candidates in the pipelines of large pharma, coupled with the enormous cost of drug development, exacerbated by the high failure rate, we are observing that such diagnostics are being developed far earlier on in the development process, sometimes as early as mid to late Phase I.

With third-party payers taking an ever increasing role in the entire healthcare economic process, companion diagnostics will become more and more commonplace as these payers look to reduce the high cost of therapies that may only work in small subsets of the general populace.

Enzo's drive to becoming a molecular and esoteric center of excellence, coupled with our extensive IP and technology estate, as well as our experience in the drug development process gleaned from Enzo Therapeutics, provides us with a unique set of skills and experience that few, if any, other biotechs can match. Furthermore, our CLIA and New York State certifications provide us with a less formidable path to market than many other diagnostic companies need to follow. In short, I am very excited about both the near and long-term prospects at Enzo Clinical Labs. Barry?

Thank you, Kevin. I would like to ask Dr. Fischette who would be kind enough to give us a brief update on what is happening in the Therapeutics group.

Thank you, Barry and good morning. First, an update on our latest clinical data. Alequel, our autologous individualized therapy for Crohn's disease, has been shown to demonstrate positive signals in our recently completed, double-blind, placebo-controlled study. These findings were submitted and presented earlier this month at the prestigious Digestive Disease Week, DDW, in Chicago. As we indicated in our press release, the study met its primary endpoint. In addition, patients reported an improved quality of life with Alequel treatment. Considering there are a limited number of effective Crohn's treatments in development, Alequel generated a lot of intense interest at the meeting.

Going forward, we are evaluating the various options available to us, including possible partnerships with those companies who have a business model capable of exploiting the technology, considering the unique commands of tissue transfer and reintroduction of the orally-delivered therapeutics as a personalized medicine approach.

Let me now turn to a brief discussion of Optiquel, our candidate for the treatment of autoimmune uveitis. Our goal was to complete all of the preclinical pharmacokinetic, toxicologic and manufacturing studies required by the FDA and to file an IND with the FDA in order to initiate a clinical study in the US. We are nearing the finish line in accomplishing this goal.

All FDA-required toxicology studies have been completed satisfactorily and all reports are in final form. Our preclinical pharmacokinetic study to determine the extent of absorption is 100% completed. We have successfully completed the analytical portions of the study for manufacturing and we have progressed to the point where we now have a method of manufacture suitable for FDA scrutiny. We have executed a supply agreement with a contract research organization and we have now manufactured clinical supplies. The material has been packaged and is undergoing labeling and maskings -- we don't call it blinding in a study associated with eye disorders -- in order to be ready for shipment for the clinical site.

The chemistry, manufacturing and control information necessary for our IND has been generated and incorporated into our waiting IND. The only outstanding item necessary to complete the filing of the IND are the clinical documents from the investigator. We have made considerable progress on the clinical investigative front and we are in final contract negotiations with the institution. We hope to announce approval and final contract execution in the next month or two and optimistically, it could even be sooner.

If all goes as planned, the new arrangement will allow us to share the costs of the next phases of the clinical trial while allowing Enzo to retain the commercialization rights going forward.

With regard to our preclinical program, we are continuing the exciting preclinical work involving the Wnt signaling pathway and its co-receptors, an area of research, which is presently at the forefront of discovery at a number of major pharmaceutical and biotech companies.

As I have stated before, the Wnt pathway is involved in many normal physiological processes in human adults, as well as disruptions associated with cancer. We are very excited about the new work that is being generated in our laboratories in metabolic diseases. But first, let me remind you about our proprietary technology. Enzo has identified key targets on macromolecular structures that we believe are promising areas of exploration. Based on the work of Enzo scientists, we have found a number of proprietary compounds that are active in standard animals models of disease that are in high-profile areas such as bone pathology, osteonecrosis of the jaw, diabetes and others.

As we look to monetize these assets, Enzo Therapeutics is in dialog with a number of companies concerning our new proprietary compounds and their activities. We have been encouraged by initial meetings, which have proceeded to the confidential stage and we are looking to move this process forward as rapidly as possible.

To summarize our therapeutic strategy, we will develop our drug candidates with a view to outlicensing, or partnering, or commercializing specialized niche products in the US, tending data that confirm efficacy and safety while moving candidates along the drug development process. Barry?

Thank you, Chris. It has been a very intense period in the Therapeutics group and we have been very pleased with the process and development so far.

In this environment of required cost control, we are attempting to be measured and prudent in our expenditures that are required for our Therapeutic programs. We have a pipeline of potential developmental products that surpasses the financial capabilities of the Company. In an environment such as we are facing today, we need to make strategic decisions as to where we allocate and utilize our capital that will result in the best return in the shortest timeframe.

We are, among others, exploring approaches to self-funding, partnering and perhaps even selling off given products and technologies that will allow us to focus on areas that we can return to the Company the highest benefit.

I would like to conclude with a few general comments before turning the call over for questions. Overall, as you are aware, these have been very trying times for many companies. We are fortunate to have the financial capabilities to take advantage of the unique opportunities as they appear in the market.

We continue to look at the value proposition of our Company and explore approaches for value optimization, which presents themselves due to the integrated structure of our three operating units. Our Company has changed significantly over the last 18 months in terms of revenue growth, staffing, which we are now approaching close to 700 employees, seven locations in the US and abroad and a dedicated strategic focus.

In a period of intense belt-tightening in our industry, we have grown dramatically. We are seeing our vision of the power of genomic information that we perceived years ago emerging in concrete products and scientific contribution. Our revenue-generating businesses are growing and they are supported by a robust intellectual property estate and technology estate.

Our infrastructure is solidifying and consolidating as we move to the next level of growth and we have an experienced and diverse management team to execute on our goals. With that, I would like to turn the call over to our operator who will poll for questions.

(Operator Instructions). [Georgianna Masseyudo], Private Investor.

Barry?

Yes.

Could you clarify a couple of points on the Therapeutics that the ASM has indicated that you had already a meeting set up with the FDA on clinical trials in the US for Alequel Crohn's and also a lot of people are wondering whether HGTV43 is out there blowing in the wind or is there going to be a day when you will actually talk to us about its progress and where it is going or whether it is being set aside? Could you give us an answer to those two things?

Yes. First of all, in terms of Crohn's, we have multiple interactions with the FDA as we move through the regulatory process. So depending upon the point in time and the issues at hand, we do interface with the FDA, so I am not particularly certain what you are referring to exactly. But there has been a continuous interaction here as we move any product through the regulatory process of interacting with the regulatory agencies.

In terms of HGTV43, this is a product, which we have been following for the last number of years. We believe in the science. The issues with it have been basically the regulatory and scientific environment revolving around the concept of gene medicines. As you know, there has been a long history with gene medicine in the last 5 to 10 years.

From our point of view, we have a strong sense of belief in what we have done and belief in the science. We feel compelled in this environment to look at the resource allocation of the Company and where we will be able to fund and extend product development activities. As I mentioned in my comments, we cannot do everything that we have in the pipeline. We are closely watching the environmental resources and appearances that are going forth with the gene therapy industry. And it is something that is high on our plate. But at this point in time, we feel very compelled to do a watch and wait until we see a clear pathway to commercialization with this product. Next question, please.

Robert Smith, Center for Performance Investing.

Good morning. Could you give us a relative timeline over the next year as to what your expectations are for the Therapeutics products? And also of the past work that you have done in several areas and put aside so to speak, are you at all interested in pursuing joint ventures or other working relationships to move that work forward?

The answer to your question, your last part of the question is absolutely yes. We have been extremely actively engaged over the last six months in dialog with companies in all aspects of our Therapeutic programs. We made the strategic decision to monetize to the best of our advantage many of our Therapeutic opportunities. The reason being, because of the high nature of cost of product development and the lack of capabilities to obtain money in the capital markets, what you are witnessing with so many biopharma companies today being in significant financial trouble is a paradigm that we will not fall into.

As a result, we made the strategic decision to outreach aggressively. We are in dialog with multiple companies over many of the products in our approach. At the same time, with the realization that we have viable options in front of us in terms of lead candidates, we have made the commitment to proceed forward, as you heard from Dr. Fischette's comments, aggressively with the Optiquel product. We have just reported the Crohn's and we are moving forward in many different directions on that product. We are exploring partnering and licensing opportunities with some of our other key products, our technologies. So we have a full commitment to this area, but we are operating within the realistic financial constraints that are apparent to everyone.

In terms of specific timelines, as Dr. Fischette said, we hope to announce soon the IND for Optiquel. We have -- much of the process is completed. We are just waiting for the final crossing of the Ts and the dotting of the Is and we will initiate that activity.

In terms of the Crohn's, we just completed -- reported the study. We are in dialog over potential relationships in that particular product and we are also exploring the extension of our clinical trial program in that area. So we are very defined and committed to those two areas.

Our preclinical work in the osteoporosis area is one that is of high interest to multiple parties and we are pursuing that area. We are in a, I would say, watch and wait mode on the HG43, watching -- depending where that will emerge in terms of the regulatory environment.

So we are moving -- we are attempting to move forward within a reasonable and defined approach to building our Therapeutics program. But at the same time, we do realize that our medtech side of our operation, the Clinical Laboratory in association with the Life Sciences company has tremendous growth potential and opportunity in this environment and is uniquely strategically positioned to capitalize on so many of the trends that are taking place. And we are forcefully moving in that area as well. Next question, please.

(Operator Instructions). At this time, there are no further questions.

Thank you very much. We thank you for joining with us on the call. We look for a very interesting exciting summer in front of us and we look forward to reporting to you at our year-end. Thank you so much. Bye-bye.

This concludes today's conference call. You may now disconnect.