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BioMimetic Therapeutics, Inc. (NASDAQ:BMTI)

Q3 2008 Earnings Call Transcript

November 10, 2008, 4:30 pm ET

Executives

Kearstin Patterson – Director, Corporate Communications

Samuel Lynch – Chairman, President and CEO

Larry Bullock – CFO

Analysts

Imron Zafar – Deutsche Bank

Michael Matson – Wachovia Capital Markets

Bill Plovanic – Canaccord Adams

Debjit Chattopadhyay – Boenning & Scattergood

Erica Selin – Stanford Group

Operator

Good day, ladies and gentlemen, and welcome to the third quarter 2008 BioMimetic Therapeutics earnings conference call. My name is Eric and I will be your audio coordinator for today. At this time, all participants are in listen-only mode. We will facilitate the question-and-answer session at the end of the presentation. (Operator instructions)

I would now like to turn your presentation over to your host, Ms. Kearstin Patterson, Director of Corporate Communications. Please proceed.

Kearstin Patterson

Thanks, Eric. Before we begin, I would like to remind you that any statements made during this call can be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the current intent and expectations of the management of BioMimetic Therapeutics. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. There are many important factors that could cause actual results to differ materially from those indicated in the forward-looking statements. BioMimetic's actual results and the timing and outcome of events may differ materially from those expressed in, or implied by, the forward-looking statements because of risks associated with the marketing of BioMimetic’s products, unproven pre-clinical and clinical development activities, regulatory oversight, and other risks detailed in the Company's filings with the Securities and Exchange Commission. Except as required by law, BioMimetic undertakes no responsibility for updating the statements made during this call.

Please note that for your convenience this conference call web cast will be archived on the ‘Investor Information’ section of our website for at least 30 days.

Now, I would like to hand the call over to Dr. Samuel Lynch, President and CEO of BioMimetic Therapeutics.

Samuel Lynch

Thank you, Kearstin, and good afternoon everyone, and welcome to BioMimetic Therapeutics 2008 third quarter earnings conference call. I have with me on the call today Larry Bullock, our CFO, and Steven Hirsch, our COO and Executive Vice President of Orthopedics.

The first part of the call will address our product development programs and business activities, which will then be followed up with Larry reviewing our financial results for the third quarter of the year ending September 30, 2008, which were released this afternoon. We will also be happy to answer any questions that you may have during the Q&A portion of the call at the end of your conclusion of our opening remarks.

Let us begin with our lead orthopedic product candidate, Augment Bone Graft, which we formerly called GEM OS1. We will update you on our activities related to this product candidate including the progress towards completion of our ongoing pivotal studies in North America and the EU as well as our application for product licensing in Canada.

Let me first of about one of the important issues for the company which is the progress of our ongoing pivotal trial. In our earnings press release issued this afternoon, we announced that as of November 7, 330 patients have been enrolled in our North American pivotal in Augment Bone Graft which we are developing as a replacement for autograft for the treatment of foot and ankle fusions. There are currently 34 sites actively enrolling patients in the United States and Canada and we have made excellent progress since our second quarter earnings conference call on August 8th, during which we had reported 220 patients had been enrolled at that time.

The actions that we began several months ago that were targeted at improving performance and study enrollment has indeed proven very successful and we have driven a strong upward enrollment trend. We have been especially pleased with the positive reception that our new clinical specialists and monitors have received from the study sites. The specialists have indeed become parts of the teams of our sites resulting in greater visibility of our study and ultimately more patients enrolled.

Our challenge grants offered to the Outreach and Educational Foundation of the American Orthopedic Foot and Ankle Society and to the Canadian Orthopedic Foot and Ankle Society have also helped to create positive awareness among our investigators. The addition of several high volume sites has already delivered results for us and we have recently added two more new sites which brings again the total of 34 sites actively enrolling patients in this study.

None of these efforts though would have been successful without the commitment and the enthusiasm of our clinical investigators and we want to thank them all for their continuing efforts on our study. We do note that as we approach two significant holiday periods between now and year end that we would anticipate a slight decrease in enrollment rates due to the reduction of scheduled surgeries during these time frames. We do not in any way anticipate any changes in our trends for any other reasons. That being said we believe that we will remain well on track to complete enrollment around the end of this year or early in 2009.

Also in this quarter, we announce the results from the independent data monitoring committee that is overseeing our ongoing North American pivotal study. Based on the DMC’s review of all available safety data from the first 254 patients at the futility analysis on data from the first 79 patients to have completed their six month follow up visit, the independent data monitoring committee has recommended that the pivotal trial should proceed unchanged.

Although we certainly expected this outcome, we were pleased with the results of the DMC’s safety and futility analysis which are consistent with Augment technology’s substantially history of safety and efficacy. From the beginning our intent was run a scientifically valid and rigorously managed study and the DMC’s interim analysis were one more significant step in this deliberate process. We now continue to work hard with our investigators and their staffs to ensure that we will have high quality data to report at the conclusion of the study in the second half of next year.

Switching to the ongoing EU trials with Augment Bone Graft for Foot and Ankle Fusions as of today, November 10, this study has been completely enrolled with a total of 108 patients. This study is an open label trial and was initially designed to enroll 75 hind foot and ankle fusion patients which is the primary indication of interest in the same population as is being studied in the North American pivotal trial as well as an additional 50 midfoot cases, with 108 patients enrolled as of today, we have well exceed the goal already of the 75 hind foot and ankle fusion patients and therefore have decided to cease additional enrollment.

The nine-month patient follow up will continue and we except to have data available around the end of next year. We anticipate that the data from the study will support EU and other worldwide filings on Augment.

Regarding the approval of the Augment Bone Graft in Canada as you know, we submitted the Device License Application or DLA to Health Canada in the second quarter of this year. Furthermore as you know, the DLA submission is required for Canadian approval of commercialization of ABG or Augment as a medical device for use in the treatment of foot and ankle fusions. Last quarter we received questions back from Health Canada regarding our filing and we have now answered those questions. We would expect to receive our next letter with comments from Health Canada probably in the first quarter of ‘09.

Based upon the nature of Health Canada’s comments and questions we would expect a decision on our application by the middle of ’09 roughly on schedule.

Now to review the status of the Augment Injectable Bone Graft, our second orthopedic product candidate. As you may recall we have been investigating the safety and effectiveness of this product candidate in two pilot clinical trials, one in Canada for the treatment of foot and ankle fusions, and the other in Sweden for the treatment of distal radius or wrist fractures.

In August after a six-month follow-up of all patients we released the initial data from the Canadian study on foot and ankle fusions. Ten patients were enrolled in this pilot open-label study with all patients treated with the Augment Injectable Bone Graft to enhance healing of these fusion sites. The study design was similar to the previous 60 patients’ study we conducted for this indication in Canada except for the use of the injectable formulation in this study in place of the particular formulation which we had used previously.

The results of this study demonstrated that all ten patients achieved clinical healing at the six-month time point. Within the ten patients a total of twenty joints were treated with a 100% successful clinical outcome. In addition analysis of CT scans at 3 to 4 months after surgery showed that 90% of the patients had achieved radiographic fusion at that 3 to 4-month time point. This percentage is in line with what we had hoped to see and is similar to the results we obtained in the 60-patient Canadian foot and ankle trial. Consistent with our previous studies there were no serious adverse events related to the study device to the Augment or Augment Injectable.

Also let me reiterate that the steady entry criteria allows for high-risk patients such as smokers and obese patients just as the Augment 60 patient trial had also done. In total seven of the ten patients in the pilot Augment Injectable trial fell into one of these high risk categories. These results continue to support the value of the company’s PGF-based [ph] platform technology to enhance bone repair and as further support to the previously released results with the use of GEM 21S in periodontal bone defect and Augment Bone Graft in the company’s US pilot and Canadian registration studies evaluating the healing in foot and ankle fusion.

In addition to these data, we recently released results from the Swedish pilot study evaluating use of Augment Injectable and the healing of distal radius or wrist fractures. In the 21 patient randomized controlled study evaluating the distal radius fractures treated with either external fixation alone or external fixation combined with Augment Injectable. Patients treated with the Augment Injectable demonstrated earlier bone formation at the 3 and 6 week time point as measured by CT scan. The six-month evaluation of complete bone fill was 100% or 10 of 10 patients for the Augment Injectable group, as compared to 82% or 9 of 11 patients for the control group.

These results represent the second study in fractures demonstrating a positive response to BioMimetic’s RHPGDF platform technology. The earlier study evaluated safety and clinical utility of Augment Bone Graft what was formerly called GEM-OS1 in the same indication utilizing an more open surgical approach. We announced results from that earlier study in January of 2007.

In both of these studies the product candidates were demonstrated to be safe with no reported adverse events related to the study devices. We should point out that the primary end point in both studies was grip strength. The results of this measure were roughly equivalent for both the AIBG group and previously the ABG group and the control group. It was in the area of early bone formation that there were substantial differences between the treatment and control groups in favor of the PGDF treated site. A measure of bone formation is also of course the primary end point for our ongoing foot and ankle pivotal trial.

We believe that these injectables data are encouraging and future support the unique properties RHPGF as a biologic for use in orthopedic indications. Further, we believe the promising bone growth data are very relevant not only in fracture repair but also in our foot and ankle fusion study.

These data are consistent with the clinical data we have seen to date with our rhPDGF technology, whereby we are seeing robust bone formation in different anatomical sites throughout the body.

As you know our Marketing Authorization Application or what is called the MAA for GEM 21S, our periodontal product, has been validated and is under review by the European Medicines Agency or the EMEA. We have received the EMEA’s list of questions and are in the process of addressing those questions. With that in mind, we expect approval of this product in Europe in mid-2009. Let me remind you that approval of GEM 21S in the EU will trigger a $10 million milestone payment from Luitpold Pharmaceuticals, which owns and markets GEM 21S through its Osteohealth Company.

As you can imagine we are certainly working diligently towards completion of the review process and gaining product approval in Europe for that product.

Now moving on to corporate highlights. BioMimetic along with many other large and small companies across the country has invested in marketable securities which consist of student loan backed auction rate securities that are classified as available-for-sale. These auctions, certain auctions for these securities however, have failed during the first nine months of 2008 and the company has not been able to achieve liquidity from these investments. To address this liquidity issue last month we announced that we had reached an agreement with Deutsche Bank to provide a low cost loan facility enabling the company to borrow up to 70% of the par value of FFELP backed – guaranteed student loan backed auction rate securities which will serve as collateral for the credit facility. Through this credit facility we have gained $39 million of liquidity on our auction rate securities portfolio of $60 million. We’re working diligently towards achieving full liquidity on these securities. Larry will address further details on this topic in just a few minutes.

As the company focuses on completion of our pivotal trials our attention and allocation of resources have turned more heavily to further strengthening clinical expertise and relationships, the development of our current pipeline of product candidates and precommercialization activity. And away from the – for the time being from early stage discovery type research. As a result of this change in focus in October we announced the resignation of Dr. Charles Hart from this position as Vice President and Chief Scientific Officer. Dr. Hart had the primary responsibility for the company’s preclinical research and was head of the company’s corporate communications department.

Doctor Hart’s responsibilities regarding preclinical research have now been assumed by Leo Snel, Senior Vice President of research in Protein Biochemistry and Conan Young, Director of Pre-clinical Biology. Steven Hirsch our COO has assumed responsibilities for the company’s corporate communications department with Kearstin Patterson, Director of Corporate Communications reporting directly to him.

Briefly let me provide you with some background on the folks that you probably gotten to know yet. Leo joined the company in August of 2007 and brings over 30 years of protein science and product development expertise to the company. Most recently he was with Amgen for several years where he headed a global operations team to develop and launch Amgen’s oncology protein therapeutics. Prior to that Leo spent 2 years at ZymoGenetics as senior director of analytical sciences and contract manufacturing and 24 years at NovoNordisk where he held a variety of positions including six years as director of Biologics development for their healthcare division.

Doctor Conan Young joined the company in December of 2005 and has worked in the field of tissue engineering, repair, and regeneration for over eight years. Since joining the company, Conan has had direct responsibility for the company’s preclinical research programs. Prior to joining BioMimetic he worked at the Forsyth Institute in Boston developing methodologies for tissue regeneration and bioabsorbable scaffolding material.

Both Leo and Conan will continue to work closely with Dr. Russ Pagano, the company’s director of regulatory and clinical affairs, to address any preclinical issues necessary for regulatory approval of the company’s product candidate. Dr. Pagano joined the company in May of ’07 and is head of the company’s regulatory and clinical departments every since. Russ has had an extensive background in regulatory and clinical affairs having been with the FDA for 7 years, including 4 years as a branch chief within the Office Of Device Evaluation of CDRH, which regulates many types of orthopedic products including some orthobiologics such as INFUSE and Augment. In addition he spent six years as a partner in M Squared Associates a consulting firm in Washington DC. While at M Squared he served as a regulatory consultant to BioMimetic and numerous other companies and help prepare PMAs for filing and provided panel preparation services. I would not like to pass the call over to Larry Bullock BioMimetic’s Chief Financial Officer to briefly discuss our third quarter financial results. Larry.

Larry Bullock

Thanks, Sam. Our third quarter 2008 financial results reflect the ongoing progress in our orthopedic product development programs that you just heard about. We continue to strive to be financially prudent in managing our business as well as make the important investment decisions to advance our product candidates through clinical development.

Our net loss for the quarter ending September 30, 2008, was $18 million compared to $5.6 million for the third quarter of 2007. The net loss for the third quarter of 2008 includes $10.2 million noncash adjustment to the carrying value of our auction rate securities that I will describe more completely in a few moments. Total revenue for the third quarter of 2008 was approximately $400,000, primarily consisting of royalty income and sublicense fee income. This compares to total revenue of approximately $1.7 million for the third quarter of 2007. As disclosed earlier this year, we do not expect product sales revenues of GEM 21S in 2008 and going forward due to our January 2008 sales of our remaining orofacial therapeutic business to Luitpold.

Research and development expenses were $5.7 million for the quarter compared to $4.6 million for the third quarter of 2007. The increase in 2008 research and development expenses was primarily due to new and ongoing clinical trials of the Company's orthopedic product candidates in the United States, Canada, and the European Union, as well as continuing expenses associated with preclinical studies and regulatory filings. In addition, expenses for salaries, wages, benefits, stock based compensation, travel, supplies, and other employee costs were higher in 2008 than in the comparable period in 2007.

General and administrative expenses were $2.2 million for the current quarter compared to $1.8 million for the third quarter of 2007. These expenses consist primarily of salaries, wages, and related benefits for employees and general and administrative functions, plus professional services, rents, and utility costs for our facilities, and minimum royalty payments for our patent licensing agreements.

Turning to the balance sheet, we ended the quarter with total cash and investments of $69.7 million, which consists of cash and cash equivalents of $19.9 million and investments of approximately $49.8 million as of September 30, 2008.

As of January 1, 2008 we adopted FAS 157, which defines fair value, establishes a hierarchy for measuring the fair value of the assets and liabilities measured at fair value, and requires expanded disclosures about the methodology used in establishing these fair value measurements.

BMTI holds $60 million at par value in auction rate securities in its investment accounts. As you know, the auctions for these securities began failing in February of this year and virtually all the auctions have failed since that time. Our funds are invested in very high quality bonds, a significant majority of which are government backed through the Federal Education Loan Program, all of which have been deemed investment grade by the ratings agencies.

However as a decline in fair value of our investments and auction rate securities we recorded an unrealized temporary impairment charge of $10.2 million on our balance sheet at June 30, 2008.

During the third quarter, we continue to monitor the deterioration of the general credit markets. As you know the credit markets have sustained unprecedented challenges particularly since July 2008. Based on the continued failure of auctions for auction rate securities combined with the deterioration of the general credit markets we are determined to adopt a more conservative treatment and characterize the impairment charge as other than temporary.

This reclassification recognizes the significant uncertainty in the credit markets that we are currently experiencing and (inaudible) as a non-cash expense the charges is now reflected in our income statement. I would also point out that our third party valuation experts and our independent counsel both agreed that the impairment charge we had taken at the end of the second quarter is still an appropriate amount based on the current market situation. And therefore there has been no change in the fair value of our auction rated securities portfolio since June 30, 2008.

Additionally, as Sam pointed out earlier we have entered into a credit facility with Deutsche bank whereby we have the ability to borrow against these securities up to 70% of the par value of the securities. We have affirmed that credit facility and have borrowed $29 million from DB during the month of October. I will refer you to our quarterly financials for more complete disclosure on these subjects.

Finally, I will provide an update on our financial outlook for 2008. Please note that these projections are based on our current expectations and assumptions related to the costs and timing of our ongoing and anticipated activities such as clinical trials, preclinical studies, and regulatory filings. As noted a moment ago, we ended the quarter with approximately $70 million in cash and investments, consisting of $20 million of cash and cash equivalents and $50 million of investments.

As a result of the sale transaction of our remaining orofacial therapeutic businesses, we will receive an additional $10 million payment not later than December 2009. At September 30, 2008 we have recorded a long-term receivable of $9.7 million, which represents the discounted balance of that $10 million, due from Luitpold in future periods. In addition, we expect to receive a $10 million milestone payment upon the future European Union approval of GEM 21S. We anticipate receiving this milestone in 2009.

We continue to believe these resources position the Company very well to complete the development of our initial orthopedic product candidates. For 2008, based on our current operating plans and forecasted timing and costs of our clinical trials and other product development programs we expect our year-end cash and cash equivalents balance to range from $46 million to $53 million, not including approximately $50 million in investments. I should point out that the cash balance includes the full proceeds of the Deutsche bank loan facility.

Loss before income taxes for the year ended December 31, 2008 is forecasted to be in the range of $1 million and $8 million, including the impairment charge of $10.2 million on our investments in auction rate securities.

With that I would like to thank you for your interest in BioMimetic. And at this time I'll turn the call back over to Dr. Lynch.

Samuel Lynch

Thanks, Larry. So in closing, let me briefly review our progress over the last few months and summarize our upcoming goals. First, it was a great sigh of relief that we received the Independent Data Monitoring Committee’s recommendation that our pivotal trial should proceed unchanged based upon their review of all available safety as well the futility assessment based upon approximately 20% of the patient study population having completed their six- month follow up.

Second, we have enrolled 330 patients or approximately 83% of the patients in our North American Augment Bone Graft pivotal trial and have 34 sites actively enrolling patients. This enrollment rate has ramped up significantly this fall and we’re on track to complete enrollment around the end of this year or early in 2009.

We have now completed our enrollment in our EU foot and ankle pivotal trial with Augment Bone Graft with 108 patients and expect to see the results around the end of ’09.

We have released results in this quarter in the Canadian pilot trial demonstrating that Augment Injectable Bone Graft product candidate achieved 100% clinical fusion rate by six month and a 90% fusion rate at 3 to 4 months on CTs.

Further, we have released results from the Swedish pilot study investigating the use of the Augment Injectable formulation in the healing of distal radius fractures. These results show that patients treated with Augment Injectable demonstrated earlier bone formation at the 3 and 6-week time point again as measured on CTs. I would like to point out that CTs are the assessment tool for our primary endpoint in our foot and ankle fusion trials.

And finally also this quarter we reached an agreement with Deutsche bank to provide a loan facility enabling the company to borrow up to 70% of the par value on the self guaranteed student loan backed auction rate securities the company had purchased. We now have available liquidity of over $39 million on our $60 million auction rate securities portfolio.

Key upcoming milestones include completion of enrollment in our North American study for Augment Bone Graft for the treatment of foot and ankle fusions again, by the end of this year or early in ‘09. Approval of Augment Bone Graft in Canada around the middle of ’09, approval of GEM 21S in the EU again around the middle of ‘09 and filing of two of the three modules for our Augment PMA next spring. That would be the pre-clinical modules and the CMC modules.

We are making significant strides in our clinical programs and now have the liquidity necessary to fund the business operations well past completion of our U.S. and EU foot and ankle pivotal trials for Augment Bone Graft. We believe that BioMimetics has great potential in the orthobiologics market and we will maintain our focus on the goals ahead of us and our vision of becoming a leading company in the development and marketing of protein based regenerative orthobiologics.

We would now be happy to answer any questions that you may have. I will turn the call over to Eric, the operator, for further instructions for the Q&A portion of the call. Eric.

Question-and-Answer Session

Operator

Thank you very much. (Operator instructions) Your first question comes from the line of Imron Zafar with Deutsche Bank. Please proceed.

Imron Zafar – Deutsche Bank

Hi, good afternoon. Thanks for taking my questions. My first question is on the injectable formulation. Sam can you just talk to us what your latest thinking is on the pivotal trial strategy there. Have you had any discussions with either FDA or the European regulators or even your advisory committee?

Samuel Lynch

Well we certainly have had discussions with our scientific advisory board and our clinical advisory board and with our – some of our investigators in our ongoing clinical trials. We have not yet had any discussions with the FDA or any other regulatory body per se. We will look at having those discussions probably in the first half of next year. We’re focused Imron currently on completing enrollment in the ongoing pivotal trials making sure that we have excellent follow up and tracking of those patients so that we maximize our opportunity for success with our ongoing pivotal trials. And frankly not distract any regulatory body right at this critical juncture with additional product candidates or additional filings. So again with our two PMA modules going in next spring for Augment, again we’re focused on preparing those and on focusing our discussions with the FDA on those modules. So we’re totally focused on maximizing our opportunity for success of Augment at this point, and well certainly having ongoing discussions with clinicians relative to the AIBG formulation, I wouldn’t expect that we would initiative substantially like another pivotal trial program any time in the near future for that product candidate.

Imron Zafar – Deutsche Bank

Okay. And then in talking about your European trial you mentioned that those data you gather from the European study would be used for regulatory filings in other markets. Can you be a little more specific on what other geographies you’re looking at?

Samuel Lynch

Well as you know, I’m sure we’re taking a global approach to product development with trials not only in the U.S. and Canada but in several countries in Europe through – for – as part of that EU study of course then in Sweden as well and we think that collectively that data from the North American study as well as the EU study should be sufficient for approval of Augment worldwide.

Imron Zafar – Deutsche Bank

Okay. And then very good question for Larry. Larry, did you say that you had drawn down from your auction rate backed credit facility $39 million?

Larry Bullock

Yes, that is correct. We have activated the facility and drawn down against it already.

Imron Zafar – Deutsche Bank

Was there any specific reason why you drew down? Was it just purely for liquidity purposes or –

Larry Bullock

Yes. We just wanted to make sure we had sufficient cash in hand.

Imron Zafar – Deutsche Bank

Got you. Great. Thank you very much.

Operator

The next question comes from the line of Michael Matson with Wachovia Capital Markets. Please proceed.

Michael Matson – Wachovia Capital Markets

Hi. I have a question. I wanted a little bit more information on Charlie’s decision to leave. I was just wondering was he able to keep his stock and or stock options in BMTI?

Samuel Lynch

Michael, we want go into a lot of details on the arrangements there but yes, internally and certainly he was able to keep his stock and a significant portion of his options.

Michael Matson – Wachovia Capital Markets

Okay, so the wasn’t necessarily foregoing some potential upside which could obviously be interpreted negatively by investors?

Samuel Lynch

Well let us say he’s certainly has an opportunity to realize a lot of upside potential as the company makes further progress.

Michael Matson – Wachovia Capital Markets

Okay, all right. And then given that your EU trial stopped a little bit short of your target, is there any potential that the U.S. trial could be stopped before you reach the 396 patients?

Samuel Lynch

No I don’t think so Michael. Again in the EU trial it was – we stopped it because our main focus has been the hind foot and ankle fusion cases. It was from the (inaudible) in that study we had far exceeded the enrollment target for that group of patients and frankly had so far exceeded that we were not ever going to reach our target for enrollment in the midfoot area, which was 50 of course. So, it just didn’t really make any sense in that particular case to continue to enroll any additional patients in that trial but in the U.S. trial it is a different situation because again we were only enrolling the hind foot and ankle cases in our U.S. trial. So we will certainly expect to fully enroll the 396 patients in the U.S. and Canadian study.

Michael Matson – Wachovia Capital Markets

Okay. And then in the Swedish AIBG pilot trial on wrist fractures. Did – was there any difference in the patient makeup between the two groups in terms of the high risk patients?

Samuel Lynch

The AIBG group did have a somewhat higher T-score. The bone density score meaning it was that group of patients was somewhat more osteoporotic, which we would interpret as meaning that actually it was a somewhat more difficult or challenging patient population and of course that was just by random chance based upon 10 to 11 patients in each group.

Michael Matson – Wachovia Capital Markets

Yes, and then question for Larry on the impairment charges, is there any risk of further charges in the future?

Larry Bullock

Michael, I wish I could answer that definitely but of course I really can’t. I think what we have done is take a very conservative approach at this point in time and we will continue to monitor the situation in the credit markets and I don’t have a credit crystal ball at his point in time. So really can’t tell you what might happen in the future. We are certainly hoping that we will be able to recover full value on those securities.

Michael Matson – Wachovia Capital Markets

So if you recovered full value you would have to write it back up then?

Larry Bullock

Yes we would have to do that exercise and certainly that would be a favorable exercise that will be well worth it.

Michael Matson – Wachovia Capital Markets

Yes. All right. That is all I have got. Thank you.

Larry Bullock

You are welcome.

Samuel Lynch

Thank you.

Operator

(Operator instructions) Your next question comes from the line of Debjit Chattopadhyay with Boenning & Scattergood. Please proceed. Debjit your line is open. The next question comes from the line of Bill Plovanic with Canaccord Adams. Please proceed.

Bill Plovanic – Canaccord Adams

Good afternoon Sam. Just one quick question. In terms of your pivotal trial have there been any new resources added to the trial in terms of clinical specialists or anything and that needs sort of drive this acceleration or has it just been everything that was put in place during the second quarter?

Samuel Lynch

It really is the result of the activities that we initiated during the summer Bill. There really have not been any further resources supplied to the trial at his point, other than just qualifying and initiating those last two or three sites. But that is it.

Bill Plovanic – Canaccord Adams

All right. Thank you very much.

Operator

Your next question comes from the line of Debjit Chattopadhyay. Please proceed.

Samuel Lynch

Debjit. We lost him again.

Operator

(Operator instructions) Your next question comes from the line of Erica Selin with Stanford Group. Please proceed.

Erica Selin – Stanford Group

Hi, good afternoon. Thanks for taking the call. I’m not sure if I missed it but it looks like you’ve had a really nice decrease in expenses this quarter. Is it something which you would look for continuing both next quarter and into 2009?

Samuel Lynch

Erica, I think you should anticipate that our expenses will not decrease substantially. You know we will be in a similar burn rate next year.

Erica Selin – Stanford Group

Great. Thank you very much.

Samuel Lynch

You are welcome.

Operator

(Operator instructions) Your next question comes from the line of Debjit Chattopadhyay. Please proceed. Your line may be on mute.

Debjit Chattopadhyay – Boenning & Scattergood

Hello, can you hear me now.

Samuel Lynch

Yes, we have got you Debjit. Thank you.

Debjit Chattopadhyay – Boenning & Scattergood

Thank you so much. Thank you for your patience. Sam I was just wondering if you could walk us through the steps that would be involved once the 6 months follow up is complete to the time when the data becomes available and are you planning on enrolling filings for the ex-GEM OS1 products?

Samuel Lynch

Yes, certainly Debjit. If I understood the question correctly it was one of the steps involved after the completion on the six month follow-up on all the patients in the pivotal trial and I think that the timing of the filing of the clinical PMA module. Certainly we will be working diligently throughout the first half of the year to monitor all the sites to generate queries of the data wherever appropriate and really to clean the data. We are using an electronic data capturing system, which does significantly facilitate that process and facilitate the final close out of the trial. That being said this is obviously a large study with 34 clinical sites and almost 400 patients. So it will take us obviously some time and I hate to speculate here in November, 08, how long that it will take. But it will certainly take a period of a few months potentially. Two to three, may be something along that line fully (inaudible) the data and lock the database once the last patient has completed their six month follow-up. So assuming that we complete the patient enrollment again around the end of this year, early ‘09 you can see that that would put us into the third quarter to really do all the database cleaning and lock the database into the fourth quarter than really to have the data from the trial and be able to prepare the clinical PMA module. So I think that is very consistent with the guidance that we have given again to submit the clinical PMA module for Augment in the fourth quarter of next year.

Debjit Chattopadhyay – Boenning & Scattergood

And looking at the overall data from the Augment Injectable product, I realize that you are not going to pursue a pivotal trial right now, but what would you think as the likely indication that you would like to go after given the market opportunity for the second product?

Samuel Lynch

Okay. Let me actually finish the thought on your first question. Then I will take the question on AIBG and indications. The other point that I should have made is that for Augment we are doing as I mentioned in the presented earlier remarks a rolling or modular PMA filing. I think we have mentioned that in the past. So we would expect again to file the first two modules, the two of the three modules for the Augment PMA in the spring of next year. That would be all the preclinical modules and the pharmacology, toxicology module as well as the, what is called the CMC module for next spring as well. So that hopefully throughout the course of next year, we would be getting those – the two-thirds of the PMA reviewed by the agency and addressing any questions that they may have during that review process, which should hopefully expedite then the review and finalization of the final clinical module and hopefully the final PMA review and approval based upon the clinical data. So, we are trying to be as efficient as possible in the approval process for Augment. Related to your question regarding the indications that we might pursue with AIBG, certainly we would look in the midpoint of these initial pilot studies was to generate the data so we can compare the safety and clinical utility of that product formulation in both a long bone fracture indications such as the distal radius wrist fractures as well as in foot and ankle fusions. You know, we now have the I guess, the pleasant dilemma of having gotten encouraging data in both long bone fractures and in the foot and ankle fusion which we – at least for our part have interpret as confirmation of the paradigm that we put forth all along, which is essentially that bone is bone and even though there are different biomechanical forces, the cellular forces involved in bone regeneration are equivalent throughout the skeletal system and we believe that these data continue to support that hypothesis. So, you know we will look at all potential clinical indications. AIBG was also the formulation that we were potentially going to take forward into the spine [ph] for increasing bone density in vertebral bodies adjacent to the vertebral compression fractures. So, that is also a potential indication but I think we want to be while prudent in advancing additional product candidates and we feel like we have now positioned ourselves extremely well to efficiently develop AIBG or other product candidates that we might have in the pipeline. We don’t want to rush into taking on another large scale pivotal trial though we will continue to strategize about the best indications and the best formulations to take forward and do so very deliberately and carefully so that we can have additional – or continuing to advance additional product formulations but not at the expense of any sort of compromising on our tremendous focus towards successful execution of the ongoing pivotal trial.

Debjit Chattopadhyay – Boenning & Scattergood

Thank you. That was very helpful and good luck.

Samuel Lynch

Thank you.

Operator

Ladies and gentlemen, this concludes our Q&A session and our presentation. Thank you for participating in the call. You may now disconnect. Have a good day.

Samuel Lynch

Thank you.

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Source: BioMimetic Therapeutics, Inc. Q3 2008 Earnings Call Transcript
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