OMRIX Biopharmaceuticals Q3 2007 Earnings Call Transcript

OMRIX Biopharmaceuticals, Inc. (OMRI) Q3 2007 Earnings Call November 5, 2007 11:00 AM ET

Executives

Mathew Haines - Director of Corporate Communications

Robert Taub - President and Chief Executive Officer

Ana Stancic - Executive Vice President and Chief FinancialOfficer

Nissim Mashiach - Executive Vice President and ChiefOperating Officer

Analysts

Eli Kammerman - Cowen & Company

Angela Wood - CIBC WorldMarket

Matthew Dodds - Citi

Kevin Degeeter - Oppenheimer

Jonathan Aschoff - Brean Murray and Carret

Junaid Husain - Soleil Securities

Operator

Good day, ladies and gentlemen, and welcome to the ThirdQuarter 2007 OMRIX Biopharmaceuticals Earnings Conference Call. My name is Lacyand I’ll be your operator for today’s call. At this time, all participants arein a listen-only mode. We will conduct a question-and-answer session towardsthe end of this conference (Operator Instructions).

As a reminder this conference is being recorded for replaypurposes.

I would now like to turn the presentation over to our hostMathew Haines, Director of Corporate Communications. Please proceed.

Mathew Haines

Thank you, and good morning. I’m Mathew Haines; Director ofCorporate Communications for OMRIX. Before we begin, I’d like to remind youthat this call contains forward-looking statement. Forward-looking statementsprovide the Company’s current expectations or forecast of future events.Forward-looking statements include statements about the Company’s expectations,beliefs, plans, objectives, intentions, assumptions and other statements thatare not historical facts. Forward-looking statements are subject to known andunknown risks and uncertainties and are based on potentially inaccurateassumptions that could cause actual results to differ materially from thoseexpected or implied by the forward-looking statements.

The Company’s actual results could differ materially fromthose anticipated in forward-looking statements for many reasons including thefactor described in the section entitled risk factors and management’sdiscussion and Analysis of financial condition and results of operations in theCompany’s 10-K as filed with the Securities and Exchange Commission on March30, 2007 and the Company’s most recent quarterly reports on Form 10-Q and itscurrent reports on Form 8-K. Unless required by law, the Company undertakes noobligation to publicly update or revise any forward-looking statement toreflect circumstances or events after the date of this call.

At this time, I would like to turn the conference call overto Robert Taub, Omrix's President and Chief Executive Officer. Please go ahead,Robert.

Robert Taub

Thank you, Matt and good morning everyone and thank you forjoining us for today’s conference call to discuss the company highlights andfinancial results for the third quarter of 2007. I am Robert Taub, Presidentand CEO of Biopharm -- Omrix Biopharmaceuticals and with me in the room are AnaStancic, the Executive VP and CFO as well as Nissim Mashiach, Executive VP andChief Operating Officer.

Following our formal remarks, we'll then open the call toour questions. But here are the main highlights for the third quarter of 2007,which I am pleased to say reflect the successful execution of our strategy togrow top line revenue while continuing to build our R&D pipeline.

So regarding the top line growth, I am pleased to reportthat our product sales to Ethicon during the third quarter give a more accuratedepiction of what is actually happening in the end user market. Biosurgeryproduct sales for the third quarter was $6.8 million, a 107% increase ascompared to the second quarter of 2007.

It was indeed a clear positive reaction from surgeons to theindication expansion approval going to a liver plot vascular indication from aliver only indication, which we had before. Evicel end user data, so these arethe sales by Ethicon show that in the third quarter of 2007 sales grew by 16%when compared to the second quarter of '07 and if you take the full first ninemonths of '07 fibrin sealants end user sales grew in excess of a 100% ascompared to the same period in '06.

Including in their $6.8 million sales by OMRIX in the thirdquarter, there are some minor initial sales of Evithrom to Ethicon. Still on thetop line on our immunotherapy side, our non-biodefense passive immunotherapyproduct sales in the third quarter of '07 represent an increase of 25% ascompared to the same quarter in '06 and an increase of 24% as compared in thesecond quarter of '07.

Now, while all these sales were increasing in parallel, weachieved a number of notable milestones that we'll provide evidence for ourfuture growth objectives. These include, first of all the FDA approval, ofcourse, of Evithrom and the launch by Ethicon. We've received the FDA approvalto market Evitrom at the end of August with a General Hemostasis in surgeryindication and the sales by Ethicon, the first commercial sales occurred inOctober.

A targeted campaign to pharmacy and therapeutics, theP&T committees at several major hospital systems, where J&J has astrong presence with Evicel and, or, with their topical hemostasis is underway,and we are pleased with the initial receptions from surgeons. The launch isadvancing well and according to expectation.

Another important thing that happened during the lastquarter is that we submitted a Market Authorization Application or MAA to theEuropean Medicines Agency or EMEA for approval to market Evicel, so the sameproduct as the one, currently marketed in the U.S., our fibrin sealant with anindication of general hemostasis in surgery. The EMEA approval in all of the EUcountries including the new ones is expected in 2008 and we look forward tolaunching the product in the fourth quarter of 2008.

Next, another milestone, we announced positive Phase Isafety results with our Fibrin Patch, a breakthrough conversions productcandidate being developed in partnership with Ethicon. Based on the results ofa Pre-IND Meeting held during the third quarter, we now have a define clinicaldevelopment plan and we intend to file as a first step, a U.S. IND thisquarter.

Therefore, in the first quarter 2008, we plan to initiate aPhase III pivotal study in soft tissue in order to obtain an agent tohemostasis initial indication for our Fibrin Patch. If successful we then planto file a BLA in 2009. I remind you that Fibrin Patch is designed to address alarge and unmet market need and we believe that this product will be verysignificant contributor to our future growth.

The clinical development plan for the Fibrin Patchencompasses several studies, as it’s usually the case with the hemostasis. Thecurrent study is in soft tissue and we’ll facilitate our time to marketobjective, with more studies then to follow, in order to expand the indication.

Now, as we said in the past, we are also developing productsoutside of the Ethicon relationship. And during the third quarter, we initiateda Phase I/II study for Adhexil, our Anti-Adhesion product candidate to studywhat initiated in the U.S. and Europe.

The study will evaluate the safety and initial efficacy ofthe product in preventing and, or, reducing post-operative adhesions inpatients undergoing gynecological surgery. Assuming our data from this initialstudy is positive, we expect to initiate Phase III trial in 2008.

At this point I’d like to take a couple of minutes toexplain our biosurgery strategy, which has been developed in corporation withour partner Ethicon. Hence, this is the real value proposition. The partnershipwas focused on high value products in hemostasis.

The Fibrin Patch will set the goal standard, in terms ofefficacy to reduce intra and post-operative bleeding. The Fibrin Sealant andEvicel is another product that belongs to this portfolio in a market, which isvery much under penetrating. And last but not least of course the thrombincombination products belong to this category, as compared to thrombinstand-alone, with all these products we will create long-term defendable marketshare.

And in addition, we will develop and increase the overallmarket. ETHICON market leadership position, marketing expertise and intimateknowledge of the needs of the operating room, the OR of the surgeons in allspecialties will enable us to execute on our strategy.

With that I'll now turn the call to Ana.

Ana Stancic

Thank you Robert and good morning everyone. Since this is myfirst conference call with the company, I would like to take the opportunity tosay that I am very excited to be part of the Executive Management team at Omrixand that I look forward to working closely with our investor community.

I’ll begin my prepared remarks by discussing the thirdquarter results, and then I will provide some final guidance for the fourthquarter of 2007. So, let's begin with the third quarter results. Total revenuesfor the third quarter of 2007 were $15.8 million compared with $18.3 million inthe third quarter of 2006, a decrease of $2.5 million or approximately 14%.However, if we were to exclude the $8 million of VIG sales from the thirdquarter of 2006, revenue this quarter would have increased by $5.5 million or53% from the third quarter of 2006.

Product sales in the third quarter of ’07 amounted to $14million compared to $17.3 million in the comparable quarter of 2006, a decreaseof $3.3 million or approximately 19%. If we were to exclude the VIG sales fromlast year’s third quarter result product sales this quarter would haveincreased by approximately $4.7 million or 51%. Product sales from our biosurgeryline of business in the third quarter of ’07 were $6.8 million compared to $3.5million in the third quarter of 2006, an increase of $3.3 million or 94%.

As you know, biosurgery sales in the third quarter of 2007include approximately $1 million of Evicel product that we were not able toship in the second quarter of 2007, or say we sold of not obtaining timelyapproval from the FDA for using Cryo in the production of BAC, one of the twocomponents of Evicel. Even if we were to exclude from our third quarter resultsthe effect of this delayed shipment of $1 million the growth in biosurgicalproduct sales this quarter would be approximately 65% compared to the thirdquarter of 2006.

Product sales from our passive immunotherapy line ofbusiness in the third quarter of 2007 amounted to $7.2 million compared to$13.8 million in the third quarter of 2006, excluding VIG sales from the 2006third quarter results, our product sales would have increased by approximately$1.5 million or 25%. Gross profit on product sales in the third quarter of ’07was $5.8 million or 41%, compared to gross profit on product sales in thecomparable period of ’06, up $10.6 million or 61%. Total gross profit for thethird quarter of ’07 was $6.3 million or 40%, compared to $10.9 million or 60%for the current earning quarter in 2006. The main reason for the fluctuation ingross margin in the third quarter of ’07 compared to the third quarter of ’06is due to the absence of VIG product sales.

Research and development, clinical and regulatory expensesfor the third quarter of 2007 were 900,000, compared to a million in the thirdquarter of 2006. The majority of the cost reflected in this category consistsof salaries and employee benefits and expenses associated with CROs for the developmentof the pipeline product that we are pursuing on our own.

Selling, marketing, general and administrative expenseamounted to $3 million for the third quarter of 2007, compared to $2.4 millionin the third quarter of 2006. The increase of 600,000 or 25% is mainly due toincreases in salaries and employee benefits as a result of increase in ourheadcount to support our projected growth and increases in professionalservices, primarily relating to expenses associated with the implementation ofsection 404 of the Sarbanes-Oxley Act.

Net income in the third quarter of 2007 was $3.7 million or$0.21 per diluted share, compared to $8.1 million or $0.53 per diluted sharefor the third quarter of 2006. From a balance sheet perspective on September30, ’07 we had approximately $85.4 million in cash and short-term investments,and working capital of approximately $100 million.

We generate a profitable cash flow from operating activitiesfor the nine months ended September 30, 2007 of approximately 600,000 and wehave invested approximately $5 million in fixed assets during the first ninemonths of the year mainly related to our new manufacturing plant in Jerusalem.

Now turning to our full year 2007 guidance on productrevenue. Our previous guidance for product sales for the full-year 2007 wasbetween $42 million to $47 million. Due to the strong sales result that weexperience in the biosurgical line of business, during the third quarter of2007. We now expect that our full year 2007 product sales will be in the rangeof $46 million to $49 million.

I’ll now turn the call back over to Robert for some finalremarks. Robert?

Robert Taub

Thanks Ana. So, in conclusion, our third quarter results andachievements are evidence of the progress we are making across the company inexecuting our strategies. We expect a fourth quarter of this year and the firsthalf of 2008 to be highly productive with the following milestones.

First of all, the ramp-up of AV from sales by ETHICON, aswell as the continuing growth in Adhexil sales. Obviously, as soon as we willobtain the General Hemostasis in surgery indication for Adhexil there will bean additional launch and some kick-up.

Another milestone will be the filing of a U.S., IND in thefourth quarter of this year for our Fibrin Patch and the initiation of apivotal study in the first quarter of 2008. Another milestone to be expected in2008 in the first half will be conclusion of our Phase I/II study of Adhexil.

We will also during the period complete the Phase III trialsand the filing of the BLA for IVIG in the United States and we expect to obtainthe Swedish approval for Hepatitis B Immunoglobulin, our hydro immune products.Well, I thank you for attention and of course for the support that you’regiving OMRIX.

And I’d now like to open the call for questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Eli Kammerman from Cowen &Company. Please proceed.

Eli Kammerman - Cowen & Company

Thanks very much and good morning.

Robert Taub

Good morning.

Ana Stancic

Good morning, Eli.

Eli Kammerman - Cowen & Company

First question is, what was the stock options amounted inthe quarter please, for our competition expense?

Ana Stancic

Included MG&A, I think it was about -- for the quarterit was approximately $360,000.

Eli Kammerman - Cowen & Company

Okay. Next question is, do you all record the milestonepayments from J&J for Thrombin approval somewhere and which line was thatin?

Ana Stancic

Okay. The milestone payments that we received and that $2million dollars was deferred, just like we have done with the other milestonehave received in the past. So, the way in which we account for that is that, weamortize it over the life of the contract, which is 22013, so it’s sitting inthe deferred revenues on the balance sheet.

Eli Kammerman - Cowen & Company

Okay. So, what’s…

Robert Taub

This quarter was minimal.

Eli Kammerman - Cowen & Company

Minimal impact this quarter?

Robert Taub

Minimal impact.

Eli Kammerman - Cowen & Company

All right. And next question is, can you tell us what theactual sales volume was for Evithrom at J&J?

Robert Taub

No. Of course no. So, we cannot, we don’t even give that forEvicel. We have, as you notice we started last quarter to talk about percentagegrowth in the -- and due of sales, but not even the actual figures. And wecertainly are not going to do that now. We cannot actually.

Eli Kammerman - Cowen & Company

Okay. And then finally, can you reconfirm the number ofpatients for the Phase III pivotal for the Fibrin Patch in are you going to bebearing any portion of the expenses for that trial?

Robert Taub

Nissim, are you going to -- how many patients.

: Yeah, the patient according toour IV would be between – minimum number would be 90 subjects and the maximumwould be 210. And this is a joint product that we are running of to withJ&J. So, the cost for the clinical study is covered by J&J.

Eli Kammerman - Cowen & Company

So there won’t be any expense for that in the fourth quarterfor how much time?

Robert Taub

Royalty expense, whether its growth stops and you will seewe reimburse that expense in our revenue on.

Eli Kammerman - Cowen & Company

Okay. Thanks very much.

Robert Taub

Okay.

Operator

Our next question comes from the line of Amit Hazan withCIBC World Market. Please proceed.

Angela Wood - CIBCWorld Market

Hi, this is actually Angela Wood(ph) calling in on Amit’s behalf.

Robert Taub

Hello.

Angela Wood - CIBCWorld Market

I just have a question actually about VIG? Could you give anupdate on the VIG contract sitting?

Robert Taub

Yes. We bid it in September and we're expecting a responsewithin three months. So it should be early December and that’s about all Icould say. It looks good, but we don’t have any, it's with the governmentbodies. So, you don’t get really any feedback until it really happens.

Angela Wood - CIBCWorld Market

Okay. And also the IVIG sales from last quarter the one thatwere actually not accounted for in the revenue because of the issue that wehad. Did you see any progress there this quarter, or did you recognize anysales?

Robert Taub

No, we did not recognize any sales because the problem hasnot been resolved. However, I could say that we are still diligently trying toresolve the situation and I feel, lets say a little more optimistic. So it maybe result satisfactorily in the near term but if not, we will then be able toresell the product to another customer.

Angela Wood - CIBCWorld Market

Okay. Also could you give a little bit more on the specificsfor the J&J marketing strategy in terms of Evithrom and what we shouldexpect for next quarter?

Robert Taub

Well in terms of what you should expect for the nextquarter, I don't think we can comment. But on the strategy, yes, I think theyare going first to accounts where they have a strong presence, that is -- wherethey sell their regular line of products like SURGIFLO, SURGIFOAM, thesetopical hemostat, and where they have been selling Evicel.

It's interesting also to note that there is very, verylittle of way (ph) and that's above the black box warning on the bovineproduct, but then once this is brought up, there is a pretty good response. Andthey are using all of their resources and things are looking okay.

Angela Wood - CIBCWorld Market

Okay, great. Thank you very much.

Operator

Our next question comes from the line of Matthew Dodds withCiti. Please proceed.

Matthew Dodds - Citi

Hey, good morning.

Robert Taub

Good morning, Matt.

Ana Stancic

Good morning, Matthew.

Matthew Dodds - Citi

Morning. So a couple of question. First on Evithrom, therehas been some discussion about the impact of formularies for the rollout ofEvithrom. I was just wondering if you could comment on any barriers thatformularies may present or this product, in particular.

And then Robert, on Evithrom as well, when do you think youwill get a powdered version of that out as a complete suite of products? Andthen, as final follow-up on Fibrin Patch, when you look at the opportunities ofthe indications for that, you're starting off with soft tissue, is that abiggest indication where potentially the quickest to enroll?

How should we look at soft tissue versus sort of thedifferent indications you make after in the Fibrin Patch?

Robert Taub

Hey, Matt. I am disappointed that you didn't ask me anythingabout Evicel.

Matthew Dodds - Citi

Not going to get an answer.

Robert Taub

All right. Let's go back one after the other. Regarding theformulary and EVITHROM, we haven't heard anything back from J&J thatthey're having any issue. I don't know exactly what you're referring to.

Matthew Dodds - Citi

I guess sometimes there's a question on in the hospitalshelves, they may have to go through a formulary to get on the shelf, ifthere's already in the product there.

Robert Taub

I mean, with P&T committee, you mean?

Matthew Dodds - Citi

Yes.

Robert Taub

No, no. I mean it's not an issue. You have to -- yeah, it’sa drug and it has to go through the P&T committee, and you have to knowwhen the P&T committee takes place. And because sometimes there's onlytwice a year, or every quarter, and so yeah that, this whole knowledge and youhave to schedule that the product will be approved by them. So there is acertain timeframe and it doesn't just happens, it's not like a medical devicethat you just go in and that’s it. So, there is a certain ramp up, which willtake -- which is taking place now, which -- I mean it's not overnight. That I agreewith you.

Matthew Dodds - Citi

Okay. And then on the other version?

Robert Taub

Well, let me say this, you heard when I was speaking, that Iwas taking about Thrombin combination products.

Matthew Dodds - Citi

Yes.

Robert Taub

And we've used in the past many times the word that J&Jis becoming a one-stop-shop for all Hemostasis. And so, I can't say too muchabout what the -- let's the line of product based on Thrombin will be. But Ican assure you that Thrombin's stand-alone is not the only product.

Now, right now we don’t see any problem with the frozenthrombin it’s doing extremely well and there is absolutely no push back onthat. I know that it was speculated in the past. So, I can’t specificallyanswer your question about lifelines thrombin because I can’t say too muchabout the other products that are being developed. But eventually I haveexplained in the past that the thrombin market will not be just one what oneuse to see in the IMS figures because it wont be like that any more, it will beall kinds of other products.

Matthew Dodds - Citi

And then could I have one follow up on that before we hitthe Fibrin Patch for the pricing, the numbers out there anywhere from 10 to20%, is that what you’re hearing out there and the price premium J&J islooking at?

Robert Taub

You mean the Evithrom?

Matthew Dodds - Citi

Evithrom versus the kind...

Robert Taub

Starting first of all it’s difficult, the range is very bigbecause King has reacted and has put the price down in order to obtainlong-term contracts. And so it all depends on what you comparing it with, butat 10 to 20% price premium over King is what I hear.

Matthew Dodds - Citi

Okay. And then, the last one, on the patch, the soft tissueindication?

Robert Taub

Yes. That is correct. That is the regulatory route, whichhas been discussed with the FDA and excuse me…

Matthew Dodds - Citi

Pre-IND Meeting.

Robert Taub

At the Pre-IND Meeting, so as we assume and of course themarket is much bigger then just that particular indication. Now, we will begiving more details on the complete clinical development trend as we go along,and even possibly in this Healthcare Conference in that we are going to be speakinglater this week. But, it will be several studies, not just one study obviously.

Matthew Dodds - Citi

Great. Thank you very much.

Robert Taub

But -- some of them will be done in parallel.

Matthew Dodds - Citi

Okay. Got it. Thank you.

Robert Taub

Thanks a lot, Matthew.

Operator

Our next question comes from the line of Kevin Degeeter withOppenheimer. Please proceed.

Kevin Degeeter - Oppenheimer

Hi, I have couple questions here, most of mine have beenanswered I guess, on the operational side, but maybe one or two financialquestions. Can you give us any sense here in terms of remind us how therevenues from J&J and Evithrom is going to be recognized in other words.You said there was a little bit in the third quarter whether that's stockingrevenue and then how will that sort of flow through in subsequent quarters?

Robert Taub

Well, we said there was a small amount of everything salesin the third quarter because as you know, it takes time for J&J to launchthe products, who -- they only had small order that hit September, so sort ofthe last week or couple of weeks in September. In terms of -- I'm not clear,what else you were asking me.

Kevin Degeeter - Oppenheimer

I guess -- what I'm really trying to get at is anappreciation because I'm trying to reconcile the revenue guidance for the year,which you would suggest or even if you have a flat quarter -- fourth quarterwould suggest that you’re already coming in you've $40 million or so towardsthe up-brand of the range you put out there.

I'm trying to understand whether or not you've got somerelatively conservative investment on the fourth quarter, whether there was alittle bit more, in addition to the million in Evicel, that might have been inthe third quarter for Evithrom. I got to think about, that’s really want totrying that off shore?

Robert Taub

Okay. Basically, what I can tell you about the thirdquarter, and why we have such a positive third quarter is that you're reallyseeing the effect of the second indication, the vascular indication that weobtained from the FDA in the second quarter of this year. You are -- we arebasically seeing that effect in Q3 and that is why Q3 came in so strong. We arerating our forecast for the remainder of the year having experienced the uptakebecause now J&J has the ability to glass bearing not just sell based on oneindication but two indications. So that’s basically, why the third quarter isso great from clinical test (ph).

Kevin Degeeter - Oppenheimer

Okay. Fair enough. I think I understand. Thank you.

Operator

Our next question comes from the line of Jonathan Aschoffwith Brean Murray and Carret. Please proceed.

Jonathan Aschoff - Brean Murray and Carret

Hi.

Robert Taub

Hi Jonathan.

Jonathan Aschoff - Brean Murray andCarret

Hi guys. Congrats on a great quarter. I was wondering, isthat R&D going to be choppy or is it going -- find some level and sort ofgrow from there?

Robert Taub

Well I mean -- you've see about a $1 million in R&D andas I said before in my prepared remarks that basically reflects expensesassociated with developing our pipeline products that we are doing on our own.Obviously, we are looking to increase that as far as we can develop a valueproposition for the company going forward, so we are going to look to do that.

And right now we are going to our budgeting process and weare looking very closely at all of our pipeline products and for those productsthat we see a positive energy and growth for the company evaluated in the nextthree or five years, we are going to spend more money next year.

Jonathan Aschoff - Brean Murray andCarret

How about the accounts receivables? That kind of continuedto run a little higher, or does it seems me to be a little high?

Robert Taub

Well, I mean, accounts receivable, actually you've got,maybe half of it is related to J&J and just because we sold a lot of partsin Q3 and there is 45 days that we wait in order to receive the money fromthem, that’s one. And two is our sales to mainly customers in Israel and thereis actually no issues regarding the receivables, they're not at all recurrent.

Jonathan Aschoff - Brean Murray andCarret

That’s great. Thank you.

Robert Taub

Okay.

Operator: Our next question comes from the line of JunaidHusain with Soleil Securities. Please proceed.

Junaid Husain - Soleil Securities

Good morning, everyone.

Robert Taub

Good morning.

Junaid Husain - Soleil Securities

Robert, relative to IVIG, could you give a sense as to whereyou are with pricing in Israel on a per gram basis? And if memory serves mecorrectly, is really pricing for IVIG two-thirds of that in the U.S.?

Robert Taub

No, no, no. The range of -- I mean I'm not going to give youmy price, but I'm giving you the range for the market in Israel is about 50 to60 and in the U.S. it’s all the way up to 70. But there are also products ofthe lower quality that are sold at 50 or 55 particularly in the U.S.

Junaid Husain - Soleil Securities

Okay, good. Thanks, that's helpful. And then as a follow upto that, I think a lot of us were a little surprised about your IVIG contractwith the EU country that you signed late last year. Robert, our IVIGopportunities in markets outside of Israel, looking more and more attractiveespecially as pricing gets better and you currently have any additional EUcountries on your radar screen in terms of signing new IVIG contracts? Is thisopportunistic business or are you consciously making an effort to go after thisbusiness and do we need bake this into our expectations?

Robert Taub

No, it is -- I would say that I have repeated many, many,many times toning for the IPU date, that the business concept of Omrix is notto grow the IVIG line because we will not invest in large cone fractionationcapacities, we do not want to compete on a grand scale in this genericbusiness. And although it’s a fantastic market at the movement I agree theprices are high, high, it has a -- it is a business that has a cyclical nature,now of course, its more and more of these ultra-immune diseases are evidencefor the efficacy I confirm like the Alzheimer disease etcetera.

Then, it may be that this time it will be a bullish marketfor many, many, many, many years, but nonetheless it is not the core of ourbusiness. Having said that we will try to send a regram of IVIG that comes outof our raw material, which we use for our biosurgery line, and within thelimitation of our capacity. So, we are always on the lookout, if you want butmaybe so pursuing like you said on an active basis other opportunities inEurope.

And as a remind -- I remind you that of course it’s also adrug and therefore you need to have a registration, I remind you that in theU.S., there is a Phase III study which is ongoing. So, that that alone is morethan enough, if that -- if the product would become registered here; although,it would be a drop in the ocean in the total market. I think that where we arefocusing much more and we are filing systemically new registration in variouscountries and particularly in Asia, is for the Hepatitis B Immunoglobulinbecause we believe much more in a hyperimmune business. And so, that’s really,if you want the answer to your question.

Junaid Husain - Soleil Securities

No, thanks. That’s helpful. Ana then, your product responseswere slightly better than I was modeling. I’m assuming that Telicris Cryo ishaving the impact on gross margin fund. Could you tell us what portion of aproduct this quarter was made with the Telicris Cryo? Was it all of it, was ithalf of it? And then as a follow-up, could you remind me if Evithrom will bemade use in the Talecris cryo?

Ana Stancic

All right. To answer your question in terms of what portionwas with cryo, it is about 80% of the product we make this quarter was made incryo.

Robert Taub

And to ask your second question, that’s not a question toAna, it’s impossible. The answer is impossible. You cannot make Evithrom fromcryo.

Junaid Husain - Soleil Securities

Okay. Okay. Got it. And then, finally last question for Ana,you are about a month into the job. So, may I ask an unfair question? At somepoint are you guys going to help us that with your earnings guidance goingforward? And maybe you can help us out with your philosophy on given guidance?

Ana Stancic

What you mean by help you out?

Junaid Husain - Soleil Securities

Just in terms of, if earning guidance is on your radarscreen, if you’re going to be doing and moving forward?

Ana Stancic

To be honest with you, since I have been only here for amonth, we haven’t had a full discussion on that yet. When we got to ouryear-end budget announcement in the next couple of weeks or so and we talkedabout next year maybe we'll have that conversation, but as of now -- I can't --I don’t even have any answer.

Junaid Husain - Soleil Securities

Okay. Fair enough. That’s all I got for you. Thanks so much.

Robert Taub

Thanks.

Operator

Our next question is a follow up from the line of EliKammerman with Cowen and Company.

Eli Kammerman - Cowen & Company

Thanks very much for the taking the follow-up. Couple ofquick questions here. Firstly what review time length do you expect for the BOAfor IVIG?

Robert Taub

The normal review time, which is 10 months.

Eli Kammerman - Cowen & Company

Okay. Any reason you think there could be abbreviated?

Robert Taub

Normally the abbreviated review time is only when there isan unmet medical need and I don’t think that this is the case in another statesfor IVIG.

Eli Kammerman - Cowen & Company

Okay. Thanks for that. Next question is, do you expect tosee any kind of positive impact on sales of ever sold related to the withdrawalof Telicris by there from the marketplace?

Robert Taub

I don’t think so. I don’t think that two are really relatedI think if you ask the question about the awareness of Talecris being acomponent of the competitive Fibrin sealant in the market maybe so. But I thinkany such impact is going to duo by the impact of obtaining the generalhemostasis indication in January '08.

Eli Kammerman - Cowen & Company

Okay. And, what if any impact you expect to see from theCitizens' Petition that King filed to try to block ZymoGenetics from reachingthe market?

Robert Taub

That, in my crystal ball here -- I don't know. I don't know.I mean the FDA usually doesn't like that but on the other hand they actuallytake care of you. I mean this -- we are just observers here.

Eli Kammerman - Cowen & Company

Okay. Has King taken any action in your direction related tothe use of competitive product data?

Robert Taub

Yes. They dropped the price.

Eli Kammerman - Cowen & Company

Okay. Thanks very much.

Robert Taub

Yes. Thanks for the question.

Operator

Our next question comes from the line of Amit Hazan withCIBC World Markets.

Angela Wood - CIBCWorld Market

Hi. Just a quick follow-up. Could you tell us about anyplans you have to bring Evithrom to outside U.S. sales?

Robert Taub

Evithrom outside U.S. sales? No, I don't -- we cannotdivulge what our plans are.

Angela Wood - CIBCWorld Market

All right. Thanks.

Operator

(Operator Instructions) At this time, there are no questionsin queue. Thank you for your participation in today's conference. Thisconcludes your presentation. You may now disconnect.

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