Osiris Therapeutics Management Discusses Q4 2012 Results - Earnings Call Transcript

| About: Osiris Therapeutics, (OSIR)

Osiris Therapeutics (NASDAQ:OSIR)

Q4 2012 Earnings Call

March 06, 2013 9:00 am ET


Charles Randal Mills - Chief Executive Officer, President and Director

Philip R. Jacoby - Chief Financial Officer, Treasurer and Corporate Secretary


Edward A. Tenthoff - Piper Jaffray Companies, Research Division


Good morning, everyone. Welcome to the Osiris Therapeutics Fourth Quarter 2012 Earnings Conference Call. Before we begin, I would like to remind everyone that this conference may include forward-looking statements that involve uncertainties and risks. Actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including factors described in the sections entitled Risk Factors in our filings with the Securities and Exchange Commission.

As a reminder, today's call is being recorded. I would now like to turn the conference over to Dr. C. Randal Mills, President and CEO of Osiris Therapeutics. Please go ahead, sir.

Charles Randal Mills

Thank you, and good morning, everyone. Welcome to our 2012 Year-end conference call. We are going to try something a little bit different today. We're going to try to do a presentation format for this. Hopefully, it will be a little bit more entertaining for you and provide you some more visibility and insight into what we think is a very exciting time at Osiris in our history.

Before we get started, as mentioned by the operator, I would like to draw your attention to our forward-looking statement disclaimer that we have and keep in mind that if we do make forward-looking statements, these statements certainly do come with risks, and those should be taken into consideration. For further information on risk statements, you can look at our filings with the Securities and Exchange Commission.

So let's get into the actual presentation. So for those new to the call, Osiris has really established itself as a clear leader in stem cell medicine. And we've not done this quickly, we've done this over a rather extended period of time. So 20 years ago, we entered the field of medicine and specifically and importantly, we did so in the field of stem cells. We have been working for 20 years on the same technology and developing that technology, and over that period of time have developed a tremendous competency in it that is unmatched from anyone else in the space.

We have 4 commercial products. We have 50 issued U.S. patents. We have over 1,500 patients treated in clinical trials with over 2,000 years of patient follow-up, which is an incredibly valuable database for us as we develop new technologies out of the mesenchymal stem cell.

Importantly, we've treated over 100,000 patients now commercially with our products. And one of the things that I would like to point out is our gross margin out of all of this is 70%. This isn't theoretical gross margin. This isn't hypothetical. This isn't one day when we hope to get the stem cell of the market, we think we'll be able to have good gross margins. Our actual gross margin today is 70% on these products, and that represents for us the makings of a real serious business opportunity in cellular therapy, which has the potential to be significantly profitable.

So turning now to just a rundown of 2012 and some recent highlights. 2012 was an exceptionally -- exceptional year for Osiris. At the top line, we had Ovation and Grafix revenue growth of over 500%, very important for our company. We received approval of the world's first stem cell drug, Prochymal, first in New Zealand -- or first in Canada and then in New Zealand. We've obviously had other positive regulatory feedback from other agencies and continue to move forward there. We launched Cartiform for acute articular cartilage injury, I'll talk more about that, but that is an incredibly exciting product coming up.

From a reimbursement standpoint, we were very fortunate to receive both CMS and Q-codes for Grafix. Out of that and because of the positive data that we continue to see a pile in on our Grafix product line, we've made the decision to establish a proprietary sales force, specifically for wound care and specifically selling Grafix. And so we're very excited about that.

And then lastly, and perhaps somewhat mechanically or operationally but it's very, very important, from an execution standpoint, we continue to fire on all cylinders. So we've increased our manufacturing capacity, 650% throughout the year. And we're able to improve our gross margins to 70%, up 12 points.

Really quickly on our intellectual property. We have now 50 issued patents in the United States that cover all aspects of the mesenchymal stem cell, regardless of its source. And without the requirement to enrich for any other cell population such as CD45, which is known to be immunogenic, this covers everything from how we manufacture the product, to how we use it, to how we release it. And we believe right now we are the only company with freedom to operate with alginate MSCs in every major indication.

From a development standpoint, as we think about new products that we developed, we've implemented some pretty strict criteria around those products. And there are a number of different aspects, and I'll go over them briefly. The first is whatever we're doing has to be -- has to represent a real value proposition to the patient. So we're not going to develop a cell therapy for the sake of it being a cell therapy. It's got to have a real significant benefit over other options. The second thing is there has to be a practical development pathway. We obviously can't develop a technology which is going to take 20 years to get to market. One of the key things that we've done though, and I think this is really important to understand and appreciate, is we have implemented, as part of our development criteria, the mandate that the new products, any new products we develop must reduce the overall health care cost to the payer. That is something, I think, that is relatively new in the field of cell therapy, that concept. But we have -- and the things we continue to experience have come to the realization that having these aspects to our development, it's going to give us the significant advantage going forward. And there are a number of ways that we can do that. There's a number of ways that we can meet the standard, but it is now a requirement that all products we have have, as part of its development criteria, the ability to reduce the overall health care cost. We think that's something that's here to stay.

Obviously, we're looking to go after medium-sized markets. This doesn't mean the market has to be huge, but we have to be able to extract a significant amount of money out of a market. And then lastly, good economics. Obviously, we're developing products. We would like to get solid gross margins out of those products. We'd like to have a distribution model where we can realize at the bottom line a healthy profit.

So currently we have 4 products that are on the market. Prochymal for graft versus host disease, Grafix for chronic wounds, Ovation for tissue repair and Cartiform, our newest product, for acute cartilage injury, and I'll go over some of these.

Quickly though, we'll turn to the financial section, and Phil and I will do these slides together. But first of all, just looking at our revenue growth since we've started launching these products, we are very, very pleased that we had a 520% growth in revenue over the year. We had sequential 36% quarter-over-quarter growth from the third quarter to the fourth quarter, and we're also very pleased with the trajectory that we're on with regards to revenue growth.

Philip R. Jacoby

No question. In our fiscal year 2011, our total sales on our Biosurgery products was $1.3 million. The sales in the fourth quarter of this year were $2.9 million, and that growth has been a minimum of 30% quarter-over-quarter throughout this past year.

We think that growth is going to continue pretty exponentially as well as we complete some more work in our diabetic foot ulcer study that Randy is going to talk about a little bit later in the presentation, that's going to give us some substantial reimbursement opportunities for the Grafix product. In addition to the strong sales growth, we've been very, very profitable on this at the stage of the game. Last year, our gross margin was about 58% in our Biosurgery products. And in the fourth quarter of this year, we experienced a 70% gross margin. The increase in gross margin is largely the result of improved utilization of our facilities as we gear up our commercial activity. And on the positive side, the existing plant capacity for substantial continued growth without the need for any material further investments in plant and equipment, we can continue to grow at this rate and keep the balance sheet pretty clean.

The balance sheet is very clean. We've had no debt whatsoever on the balance sheet since 2008. Our cash burn has steadily declined. In the fourth quarter of 2012, the cash burn was $3.2 million compared to $4.6 million in the fourth quarter of the prior year. For the full year, we burned $13.3 million in cash, and that's compared to $20.4 million in 2011. So we're pleased with how that progress is going.

But yet that same time, we are investing in the Biosurgery business. We've seen almost a threefold increase this year over last year in our combined accounts receivable and inventory. That's an increase of almost $3 million that we've had to invest cash in.

The other nice thing with our receivables, they're sitting a little over $3 million at year end. Our bad debt experience has been negligible. I think we've had one situation where collection has been a challenge, but we are going after it and confident that we will get it.

Let me just talk briefly about the R&D spending. The R&D spending in fiscal 2012 was a total of $14.1 million, that's compared to $19.2 million in the prior year. We're getting a little more focused there and some of the trials in the Prochymal area have been wrapping up. The Biosurgery R&D for fiscal year 2012 was about $4.5 million, that's compared to $3.3 million in the prior year. The majority of that increase is the spending on the DFU trial, and again Randy is going to chat about that shortly.

On the G&A side, for the first time in several years, we're seeing a trend that G&A is starting to increase and the reason behind that is, is we are starting to invest much more heavily in the sales and marketing efforts in our Biosurgery business. In Q4, G&A was $1.8 million and that compares to $1.5 million for the prior year, and you'll see that continuing.

Charles Randal Mills

Okay. Great. Now let's move on with the presentation. The next thing I want to talk about just very briefly, again, is our -- an actual core strength that we've developed at Osiris, and that's our manufacturing capability.

As Phil said, we have the ability right now to substantially grow our capacity with regards to manufacturing without the need for further investment, capital investment in that area. We also have a very high-end manufacturing facility and a high-end manufacturing staff. We're accredited by the American Association of Tissue Banks. We are registered with the Food and Drug Administration. We are licensed by several states. We are inspected routinely and have always had clean audits.

At the centerpiece of our manufacturing plant is our ability to deal with biological products in ways that otherwise haven't been possible, and we call that process BioSmart. When we're talking about BioSmart, we're talking about a process, proprietary process we've developed, that is basically able to retain the aspects of a biologic product that you want to have and remove those that you don't have. So for example, with a product like Grafix, being able to retain growth factors such as [indiscernible] and the like while also retaining cell viability. So when the surgeon goes to use the product, they have a viable cell therapy product that they open up and they implant in their patient.

At the same time, though, we also want to be very careful that we have a process that removes any immunogenic components. And so that's what we're able to do with BioSmart. We've branded it a little bit down. It's basically the sum of only what you want. So we keep the growth factors in the cell viability and the other aspects of the biologic that we want to have, while at the same time removing any immunologic or harmful elements.

Now talking about some specific products, obviously, our lead product, Prochymal, is for the treatment of graft versus host disease. We're very proud that not only is Prochymal the world's first approved stem cell drug, but it's also the first drug approved for the treatment of graft versus host disease. And GvHD is a horrifically devastating disease. Median survival of disease is 80 days, and with Prochymal, we're able to significantly improve that. We have recently announced that we received the orphan drug status back from EMEA, and so we hold title of that as we move through the European process. We have additional filings going on around the world, which we are making progress on. We also have a Phase III Crohn's trial, which we're active in and enrolling.

In addition, we are actively now seeking a partner for Prochymal for the future development and commercialization of this technology. Recall in 2012, we were able to win back all commercial rights for Prochymal and Chondrogen worldwide. We view that as a very positive move. We also do think, however, that Prochymal is a product that for us is best partnered.

I do want to make one other note while on this slide. As I'm sure everyone is aware of what is taking place in Washington, D.C. with regards to the sequestration, I will say that is not the first time, however, though, that Washington, D.C. has run into funding issues with continuing resolutions and the like. All of which have made working with the government on a government-developed product very impractical and without any good sense of predictability. And because of that, we have made the decision to discontinue all government-related programs, development programs and that includes acute radiation syndrome. This decision is based on our lack of visibility on what we would -- what we can reasonably expect and plan for out of government-associated programs combined with the other opportunities which we have, which we don't need the government to opine on or to move forward. So we're going to be diverting resources towards product development in areas that doesn't involve government funding.

The next I'd like to talk about is Ovation. Ovation is a wound care product that we have. It is a remarkable product, it was actually originally developed for wound care to cover very difficult to treat wounds and burns. It's a viscous solution, and so it can cover highly contoured areas. And it's an exceptionally good wound care product. It also has seen some pretty significant usage in the orthopedic space, specifically with regards to spinal fusion. That is a relatively big market in all. There's about $1.9 billion in bone grafting products that are used each year, specifically in spine fusion. There's over 400,000 procedures -- for spine fusion procedures performed each year. Recently, there's been a number of negative findings that have been reported regarding BMP-2 which was, by far, the dominant product in the market. That has created significant opportunity for us. In the near term, we think we have an annual revenue opportunity with this product in $30 million to $50 million range.

The next product I'll talk about is Grafix. And Grafix, from a clinical standpoint, has really been exceeding all of our expectations. We originally developed Grafix for the treatment of second and third degree burns, and secondarily for the management of chronic wounds. But with the size of the chronic wound market, being as large as it is and with the -- frankly, how poorly that market is currently served, we've really been able to make significant inroads there. But as I said, originally, the product was developed for burns. And one of the reasons it was developed for burns was because it has very significant anti-fibrotic or anti-scarring properties, which make using the product to heal in something like a facial wound, almost an ideal setting for this product. I'll give you an example. So this was a young girl who experienced -- a 2-year-old who experienced a very severe facial burns. She pulled a pot of boiling water off the stove down onto her face and burned off about half of her face. This is a burn, obviously, severe enough where she had to go to the operating room for treatment with it.

The picture in the middle is her 10 days after treatment with Grafix. And as you can see by day 10, already a very significant improvement. And then the picture on the far right was taken just a few months later and you can see completely healed up. When we're talking about a young girl with a very severe facial burn and the implications that could have for the rest of her life with regards to scarring and that the social implications that would go along with that, our product like Grafix in the setting has very significant meaning and benefit. We're very proud of -- to have developed Grafix and we're very proud of the results we're seeing in that space.

But clearly, our largest opportunity with Grafix centers in the wound care space. And so there's largely 4 major classes of wounds that exist. There's the diabetic foot ulcer, the venous stasis ulcer, the pressure ulcer and surgical dehiscence. We primarily focus right now on the diabetic foot ulcer. The figure on the right, you can see the number of dollars in billions in the U.S. spent on the health care, $25 billion. That's not all spent on wound care products, so I want to make sure that this number is put into appropriate context. There is, however, between $10 billion and $15 billion a year spent on actual wound care products. The subset of which we're going after, obviously, is a very small fraction of that. But the point of the slide is that the -- there is clearly a need in the marketplace for our products and that marketplace is quite large.

So why are we so excited about this product? Here's just an example. So this is a very severe diabetic foot ulcer, which in under normal circumstances would require amputation of this gentleman's foot. And so at times here, you can see a foot ulcer, which resulted in the loss of this patient's entire heel. The white substance you're looking at, that's actually the heel bone or the calcaneus protruding out. So this patient had lost tissue all the way down to the bone and actually had an infected bone that's called osteomyelitis.

At that time, the patient was recommended to have an amputation of the foot, which is, under almost any circumstance, what would happen here. The patient didn't want to do that because the patient had previously -- the year before, had the other foot amputated and didn't want to be without any feet. And so instead, the physician said, "Well, we could try this Grafix product, this new Grafix product we have." And then you can see over time, at 3 weeks, there's granulation tissue. By 9 weeks, this heel is fully granulated. 33 weeks, it starts epithelializing. And 45 weeks, it's close. This is an extreme example of the case, but it demonstrates the power of this product if able to close a wound like this, the ability for it to heal a typical diabetic foot ulcer.

And that's exactly what we have seen clinically. So we had -- we did a pilot trial, which was published out at the Desert Foot wound conference, which had 62 patients in it. And these were patients with refractory wounds, recalcitrant to other biologics and treatment methodologies. So established nonhealing wounds. And then, there's very difficult to treat case, we were able to close 70 -- 70% of the wounds by week 12. Importantly, we were able to do that with a meeting of only 3 applications. And so when we talk about having a positive impact on the health care system, Grafix is a product, which definitely meets that standard. It's a product which if we can close the vast majority of wounds with only 3 applications, that would offer significant savings to both current treatments, which would require more applications of the product, or the much higher cost of actually doing an amputation on the person.

So we are really going to drive home this point about Grafix. We have a large randomized clinical trial in using Grafix in diabetic foot ulcers. We're going to enroll up to 266 patients in this multi-center trial, randomized one-to-one with Grafix to control. There's 28 leading wound care centers across the United States. We're currently enrolling this trial, about halfway done. We -- depending on enrollment, we think we could have data on this trial by the end of the year. It's a very sophisticated trial. So the primary endpoint is closure by the 12th week. There's an independent laboratory analysis that uses advanced imaging that's blinded, that makes this determination. And so it's a very good sophisticated trial. This trial, we believe, is the cornerstone to us being able to move from -- primarily right now being in the hospital setting to moving into the outpatient wound care setting. About 80% of the market is treated in the outpatient setting, and we think this trial is going to enable us to move into that marketplace.

So just to sort of wrap up commercially on Grafix. We have very high confidence in the product's performance. We are very pleased that we've received CMS and Q-codes for the product. As mentioned in the press release last week, I believe, we have established a proprietary sales force. We have those individuals up and running now in 10 metropolitan areas. They are just the beginning. It will take us time to continue to grow. Near term, we think annual revenue opportunity between $30 million and $50 million. We do think, however, there is significant upside to that market with either of 2 events positive, diabetic foot ulcer trial data, as I mentioned on the previous slide, and expansion into other forms of wounds, such as the venous stasis ulcer.

The last part I'd like to talk about is Cartiform. And this product is just an exceptional example of the kind of innovative revolutionary work that's being done. So this is -- what you're looking at in this picture on the right is an example of Cartiform implanted in a human where this product was used. It's a viable cartilage mesh that we've been able to engineer here at Osiris. And we use it for fixing cartilage defects. And so where a patient loses their cartilage, it'd otherwise progress to osteoarthritis or in a lot of cases, need a knee replacement. Here, we're able to resurface that cartilage. And this is just a great picture of how Cartiform gets implanted and how it fits into articular cartilage defect.

The picture on the left is an example of what you can't see about the sophistication of this product. And so what you're looking at on the left is one of those pores in the graph on the right microscopically. And what we've been able to do here is we've been able to engineer this product such that not only is the product itself viable cartilage, but it's able to capture and bind with high efficiency, endogenous mesenchymal stem cells. So all those green dots are actually mesenchymal stem cells that have been grabbed by the Cartiform and will participate in the healing process going forward.

So cartilage injury is also a very significant unmet medical need. 78% of microfracture procedures, which is standard of care for this type of injury, fail. 78%, that's a remarkable number. That said, there are still 500,000 surgeries performed each year to repair a cartilage. When you have a number like 78%, you know you have a significant unmet medical need. And that meets, obviously, one of the criteria which we laid out from a development standpoint.

So Cartiform is addressing about a $500 million market. That market is not that easy to tackle. So manage your expectations, we won't be receiving -- we won't be capturing all of that market certainly instantaneously. We are establishing a direct sales team in this area as well. We do think -- we think this is an appropriate and good area for us to increase our direct distribution presence. From a near-term standpoint, we think there's a $15 million to $30 million revenue opportunity in this product. We think long term, though, this product has the ability to grow.

We also are looking at developing additional sports medicine products that we're going to put around this product and be able to utilize and leverage that sales channel more efficiently.

Just to give you a couple of just examples on why this product is so exciting. So this is -- like a lot of things we do at Osiris, this is a product that's been developed -- in development actually for several years, and we have only recently brought it out and talked about it. But one of the studies we have done in the past that really started -- that really got our attention was the study where we compared -- in identical full thickness cartilage lesions, we compared the addition of Cartiform to what would happen with microfracture. Again microfracture is the standard of care. And so on the top, you can see the -- this is that implantation, the Cartiform versus the microfracture procedure on the right. At 6 months, you can see the Cartiform graft has completely filled in and remodeled, while the microfracture procedure has put on some level of cartilage. But there is a giant divot in that knee.

What was more interesting, though, for us was what we saw histologically when we looked at the quality of the cartilage in the Cartiform repair. So on the left is a typical stain, where you see continuous cartilage between on the right, the normal tissue, and on the left, the defect. It's very difficult to tell. That's telling us that, that graft is actually engrafting and taking root. On the right though, what was really so promising was the type of cartilage. So when somebody has a microfracture procedure done and cartilage fills in, the quality of the cartilage is not the same as the normal hyaline type 2 cartilage, which exists. It's instead this type 1 fibrocartilage. And it's that fibrocartilage, which lacks the structural integrity over time, that ultimately leads to that procedure failing and the person going on and needing a total knee replacement.

What we saw here was that not only with this -- not only was Cartiform engrafting and remodeling, but the remodeling is all type 2 cartilage. That's what the stain on the right shows us. There's no difference in the type of cartilage. That's a stain specifically for type 2 cartilage. And so that's telling us we're building in here hyaline type 2 cartilage, that's never been done before, and it offers a significant advantage to the patients getting this procedure.

Last thing I'll show you is just basically how easy this product is to use if you're a physician. It is an off-the-shelf product. They don't have to plan, the patient doesn't need multiple surgeries. This is a case done by Dr. Tom Vangsness. He is the Chief of Sports Medicine at the University of Southern California, a dean physician for the University of Southern California. And this was a case where he used Cartiform. The picture on the left is Cartiform rolled up, the flexible substance, on a cartilage defect. And so the center picture, you can see how huge this is a defect in the femoral condyle, and that's about a 2.5-centimeter defect full thickness all the way down to the bone. Absent putting Cartiform in here, this patient is going to either have to have a knee implant or a knee transplant. And so a very significant in second surgical procedure.

So what Dr. Vangsness is able to do is simply take the Cartiform, place it over that defect, suture it at one end, and then cut it, fit it to shape and suture it in. So here you can see an example of that. There is Cartiform post-implant. So he implanted the Cartiform, got it in, then took a scope, went back and took picture of his work to make sure that the Cartiform had been placed properly and was sitting properly. And you can see the Cartiform sitting on the femoral condyle, completely covering the -- completely covering the defect which was there. But more significantly, at 6 weeks, the implant is starting to graft. And there is the MRI at 3 months, you can see a highly engrafted Cartiform product there.

So a very exciting product for us going forward. We look forward to having success there with the direct sales team. As I mentioned, we also look forward to surrounding it with a few complementary products that will also be used in the sports medicine space.

So I'll wrap up here with just a key -- a couple of key strategic goals for success. Since we've now become a commercial company, our primary goal is to grow revenue and look to do that quarter-over-quarter and year-over-year. We also want to do that in a very practical and sensible way. So while we are growing revenue, we are also doing everything we can to control cost and grow in the most practical fashion possible.

Our long-term goal isn't just to have a large company with big revenue. It's to have a profitable and sustainable company going forward. And so tackling both ends of this equation are important for us.

We're also working on very focused product development. As I mentioned, laid out the criteria we used. We have a lot of things in development. And just because we're not talking about them doesn't mean the work isn't being done. We just don't feel the need to share with our competitors the things that we're working on and give them any advantage. But that product development, I will say, is very focused now against the criteria which we've laid out.

We look forward to receiving data on our clinical trial, and we hope that data is positive on the DFU trial. And if so, we think that will be a pretty significant inflection point with regard to that product and our ability to take it to the outpatient setting and substantially increase its market presence.

And then lastly, at the end of the day, there's just some nuts-and-bolts execution that's -- that needs to go on, and we're working on that. And that centers around things like making sure we have enough product, we deliver the product on time, we manage the growth rate internally, and importantly, we manage and improve. We think there's opportunity to improve our product, our gross margin going forward.

So with that, I will end my comments on this. I will say invite everyone to see us at some upcoming events from an investment standpoint. We will be at the Cannacord Musculoskeletal Conference in Chicago in the 19th. We'll be at the Needham health care conference at the end of April. From a commercial standpoint, if you're a health care practitioner, please stop by and visit us, we'll be at the Academy of Orthopedic Surgeons. Coming up in March, the American Burn Association and the symposium on advanced wound care.

With that, I will conclude my comments and turn the floor over to the operator for questions.

Question-and-Answer Session


[Operator Instructions] Our first question today comes from the line of Ted Tenthoff from Piper Jaffray.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

I like the new format and like even more the progress that you guys are making, really great numbers coming out of Biosurgery. Exciting to see that.

Charles Randal Mills

Great, thanks. I do promise going forward to have a more brief version of this. We thought that -- we thought that for the first one, we -- if we're going to go to this model and introduce people to the company this way that we should probably do it comprehensively. Going forward, it will be more of an update basis than an introduction to the company.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Got you. So my question had to do with this diabetic foot ulcer study and sort of thinking about R&D spending. Again, I think you mentioned that, that's about halfway under -- halfway completed enrollment. What should we be thinking about the cost from that study? And what R&D should look like this year? Will that go higher from sort of where we were in the 2012 range?

Charles Randal Mills

Yes. So obviously, going back to my fallback line, which has been instructed by the board not to give forward-looking financial guidance, I will say this, the trial is about half enrolled, and that trial has been enrolling for a while. And so it's in the numbers now, and so I certainly don't expect any major changes there.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Okay, good. Now you mentioned to -- that you're expanding the Grafix sales force, and I think that's a great opportunity, and that you're also going to build out the Cartiform sales force or maybe a broader sports medicine sales force. Can you give us a sense on timing there and kind of what size that sales force would be? Obviously, that's a little bit different calling pattern.

Charles Randal Mills

Right. So it's in -- I think one of the things that's important to keep in perspective where those 2 products are from a launch size, they are separated by nearly 18 months in launch. So the expectations around Cartiform shouldn't be the same as that of Grafix right away. With that said, we have a couple of people already on board that are handling the sales and distribution of the Cartiform product. Because of the way that procedure works, what we're really interested in doing is complementing, as I mentioned, with a few other products. That will give the sales team more frequent access to the search, and so that's sort of key. But over time, we do expect to continue to build this effort. I think the key takeaway message here is we've been so impressed with this product that we didn't want to entertain any other distribution model other than fully owning it, having a proprietary direct professional sales force.

Edward A. Tenthoff - Piper Jaffray Companies, Research Division

Great. And I guess if I may, just one last one. Any update on status with respect to Prochymal BLA?

Charles Randal Mills

So right now, we are filing in a number of different countries. We've had -- we continue to have correspondence with FDA. I am not particularly clear where that conversation is ultimately going. Obviously, if anything significant happens there, we will update it. We are making progress in other countries, but basically continue to get asked certain questions and things like that with the FDA. So I don't have any greater visibility in the United States with regards to Prochymal. Outside of the United States, the regulatory process is moving along quite well. As I said ultimately, though, this is really a product for the development of Crohn's disease, for the development of acute myocardial infarction, which leads to really serious blockbuster indications. That's the development and the commercial launch of those indications, just beyond the capacity that we have, particularly given the opportunities we have with regards to our other products. And so we are in the process of talking with a number of different companies right now for a -- to have a developed and a commercial partner for Prochymal.


[Operator Instructions] And I'm showing no additional questions. I'd like to turn the conference back over to Dr. Mills for any closing remarks.

Charles Randal Mills

Thank you, guys, very much for listening if any of you are still on the call. We hope you had fun. I hope you enjoyed this new format. We look forward at these upcoming presentations, and we will see you then. Have a good day.


Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect. Have a great rest of the day.

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