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Executives

Robert Taub – CEO

Sophie Hobbs – Interim CFO

Nissim Mashiach – President and COO

Analysts

Amit Hazan – Oppenheimer

Matthew Dodds – Citigroup

Eric Schneider – UBS

Eli Kammerman – Cowen & Co.

Vivian Cervantes – Rodman & Renshaw

Bruce Nudell – UBS

Omrix Biopharmaceuticals, Inc. (OMRI) Q2 2008 Earnings Call Transcript August 11, 2008 4:30 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Omrix second quarter 2008 financial results conference call.

Before we begin, I'd like to remind you that this call contains forward-looking statements. Forward-looking statements provide the company's current expectations or forecasts of future events. Forward-looking statements include statements about the company's expectations, beliefs, plans, objectives, intentions, assumptions, and other statements that are not historical facts. Forward-looking statements are subject to the known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by forward-looking statements. The company's actual results could differ materially from those anticipated in forward-looking statements for many reasons including the factors described in the sections entitled “Risk Factors” and “Management Discussion and Analysis of Financial Condition and Result of Operations” in the company's 10-K as filed with the Securities and Exchange Commission on March 17, 2008, and the company's most recent quarterly reports on Form 10-Q and its current reports on Form 8-K. Unless required by the law, the company undertakes no obligation to publicly update or revise any forward-looking statement to reflect circumstances or events after the date of this call.

At this time, I would now like to turn the conference over to Mr. Robert Taub, Omrix's Chief Executive Financial Officer. Mr. Taub, please go ahead.

Robert Taub

Thank you, Robert, and good afternoon to everyone. With me today here in the room are Nissim Mashiach, our President and Chief Operating Officer; Marc Droppert, Executive Vice President; Sophie Hobbs, our interim Chief Financial Officer; and Francesca DeMartino, the Senior Director of Investor Relations.

Following our formal remarks, we will open up the call to your questions. But first, I'm pleased to announce the appointment of our new CFO, Asaf Alperovitz, We conducted a lengthy search in the U.S. and in Israel and we thought it was very important to attract a CFO with U.S. public company experience, a strong financial background, leadership qualities, and work ethic, who could lead our finance team in Israel and in the U.S. Asaf, who joins us from Tefron, a publicly-traded company on the New York Stock Exchange, met all of our criteria and we welcome him to our management team. He's official start date is in October.

Our financial discussion will be covered by Sophie Hobbs, and before I turn the call over to her, I want to thank her as she acted as our interim CFO for the last three quarters. She has worked tirelessly with unwavering dedication, and Sophie will continue with Omrix through the transition period.

With that, I'll first now turn the call over to Sophie.

Sophie Hobbs

Thank you, Robert, and good afternoon, everyone. We're pleased to report a record quarter in biosurgery sales amounting to $8.4 million, a 155% increase over the second quarter of 2007. In the first half of the year, biosurgery sales increased by 140%, to $14.4 million. The increase is principally due to Evithrom sales and increased unit sales and unit price of our fibrin sealant Evicel.

Immunotherapy product sales were $7.9 million in the second quarter of 2008, a 36% increase compared to last year’s second quarter. The increase is primarily due to higher IVIG or Omrigam unit sales price.

This quarter we're also beginning to report immunotherapy byproduct sales. We have entered into a three-year agreement to supply a third party with a byproduct of our current production processes, which prior to this agreement was discarded. Sales of the byproduct were $1.4 million in the second quarter of 2008, and $700,000 in the first quarter. In addition to the $1.4 million we also had a $0.5 million of one-time sale of another byproduct to the same party.

Total product sales increased to $18.2 million, 100% increase when compared to the second quarter of 2007. Excluding immunotherapy byproduct sales, total product sales would have increased by 80% to $16.3 million from $9.1 million in the comparable quarter of 2007.

Total revenues increased by 72% to $19.2 million for the same period. Gross profit on product sales increased 130% to $7.8 million in the second quarter of 2008. As a percentage of product sales gross profit improved from 37% to 43% and was favorably impacted by increased sales volume. Gross profit as a percentage of development revenues and grants for the same period was unfavorably impacted by the mix between services and products and went down from 38% to 14%. Total gross profit increased 90% to $8 million or 42% of total revenues, reflecting the blended margin of product sales and development revenues and grants.

Research and development and clinical and regulatory expenses increased by 12% to $1.6 million in the second quarter of 2008 as compared to 2007. This increase is primarily driven by an increase in personnel expenses and expenses related to the development of Adhexil, the company's adhesion prevention product candidate, and other non-partnered products.

Selling, marketing, general, and administrative expenses, or SG&A, increased to $4.2 million in the second quarter of 2008, a 35% increase compared to the second quarter of 2007. SG&A expenses this quarter include a non-recurring expense of $0.5 million related to the relocation of the company's U.S. office, in the third quarter, to lower cost facility.

We continue to invest [ph] in our human capital and product development. To ensure that we can sustain the investment that we believe is needed for the long-term success of the company we have decided to implement a program to reduce fixed expenses such as rent, and thus, the move from our Rockefeller Center offices to lower cost facilities in New York City. Excluding the non-recurring expense, SG&A in the second quarter of 2008 would have amounted to $3.7 million, 19% of total revenues or a 20% increase. The increase is primarily due to $300,000 increase in personnel cost and related equity based compensation expenses.

Financial income this quarter amounted to $900,000. $600,000 of interest income compared to $1 million in the second quarter 2007 and $300,000 of foreign exchange gains compared to losses of $100,000 in the second quarter of 2007. Other income in the second quarter of 2008 includes a $200,000 non-recurring gain on the sale of excess plasma. In the second quarter of 2007, other income included a $900,000 non-recurring gain from the termination of an agreement with a distributor.

This quarter includes an income tax expense of $300,000. Net income for the second quarter of 2008 doubled to $3 million or $0.17 per share on a diluted basis versus $1.5 million or $0.09 per share in the second quarter of 2007.

Moving on to the balance sheet. Cash provided by operating activities for the second quarter 2008 amounted to $3.5 million. We invested approximately $1.5 million in fixed assets mostly in our new facility in Jerusalem. At June 30, our total investment in the new plant is $15.3 million. We ended the quarter with $83.1 million in cash, cash equivalents, and short term investments.

I will now turn the call back to Robert. Robert?

Robert Taub

Yes, thank you, Sophie. So, as Sophie mentioned, this quarter was a record quarter for biosurgery product sales, $8.4 million. Evicel is continuing to gain market share and meet our expectations. The near 700 accounts that purchased Evicel in quarter two included significant repeat business and additionally, approximately 11% of Evicel customers were new first-time buyers.

In a continuing effort to gain market share, Ethicon carried out several initiatives during the second quarter to increase Evicel sales. These efforts were focused on target segments such as burn surgeries, orthopedic, and plastic surgery. As the only product in the U.S. with a general hemostasis in surgery indication, we anticipated Evicel will continue to capture market share and increase the overall market size.

And you know in the past I've been frequently asked about Ethicon's commitment to our product line. They have made a concerted effort to educate their long-time surgeon customers about specific ways to use Evicel in their respective areas of specialty through hands-on, innovation lab and innovation lab experiences. Up to today more than 500 surgeons have been trained in those labs.

I would also like to share with you three major marketing activities and initiatives which were recently undertaken by Ethicon. First, Ethicon had a significant presence at the American Burn Association meeting, which was held in Chicago in late April. They also hosted a clinical symposium on the use of fibrin sealant in burn surgery. The event was designed to educate the medical community on the use of fibrin sealant in burn surgeries and to highlight the benefits of Evicel over competitive products. And finally, Ethicon hosted a booth at the American Academy of orthopedic Surgeons in March.

Since Evicel received earlier this year the extended general hemostasis approval from the FDA, Ethicon has increased its marketing effort by launching new marketing materials and an updated Evicel website where one can view numerous videos of Evicel's use in specific procedures and I encourage those of you who want to better understand Ethicon's commitment to our biosurgery products to visit Evicel website and review the materials that are available there. All of these activities are focused on driving awareness of the clinical benefits of Evicel and support the increasing adoption rate we are experiencing.

Now, turning to Europe, sales of Quixil, our fibrin sealant that is sold in Europe currently, the sales of Quixil are growing nicely especially in orthopedic procedures as a direct result of gain of Ethicon's professional education efforts. Additionally, as mentioned in our recent press release, we received a positive opinion from the Committee for Medicinal Products for Human Use, or CHMP, for Evicel’s approval in Europe. We expect to receive the approval in the European market by the end of the third quarter of this year, which is on track. Once approved, Evicel will be licensed for marketing in 30 countries in Europe. Per the terms of our agreement, Ethicon has the marketing rights for these countries.

Now, about Evithrom, our human based thrombin stand-alone product. We continue to experience moderate growth in this market, yet based on currently available IMS or competitive data we are pleased with our current position in the market. Approximately 40% of customers purchasing in Q2 were new first-time buyers.

Now, I will provide you with an update on our breakthrough product, which is now being referred to as the Fibrin Pad instead of Patch, as Patch refers to a topical versus intra-operative solution, so the Fibrin Pad. We currently have two ongoing clinical trials with Fibrin Pad, one in the U.S., and the second, which we recently initiated in Israel. I will address each one separately.

So the U.S. trial is a Phase II clinical trial in mild-to-moderate bleeding. Patient enrollment continues at a very promising rate, and expectations regarding the number of participating centers and the number of enrolled patients are still being met. Therefore, we remain on target to complete enrollment of 130 patients by the end of '08 or early '09. I remind you the study includes two months of follow-up. Hence, we remain optimistic about our timelines, anticipating – we anticipate announcing our progress late this year or early next year and filing the BLA with the FDA in the first half of 2009, and then of course assuming a standard – 10-month review, we would expect approval in the first half of 2010.

Now, regarding the severe bleeding indication for the Fibrin Pad, we are finalizing the clinical and regulatory strategy, which we intend to present to the FDA before year’s end and we're doing this together with Ethicon with regulatory consultants and also with expert physicians.

The Phase II trial, which we initiated in Israel, is the first study that will evaluate the Fibrin Pad's performance in surgery where severe bleeding is present and the product is being applied directly onto a solid organ, specifically here, in a resected kidney. The Israeli trial is comparing the Fibrin Pad to the standard of care in Israel defined as suture, cautery, ligature or passive hemostats. In the U.S. study the control is SURGICAL, a widely used passive hemostat here in the United States. Besides, about the Fibrin Pad and the clinical study we're also waiting feedback from the European authorities regarding our plans to initiate a clinical study in Europe, which is expected to include the management of severe bleeding.

Moving on to our anti-adhesion product, Adhexil. We completed patient enrollment in the Phase I/II study in late July. The trial design calls for up to 10 weeks of follow-up. Thus we will report clinical trial data in the fourth quarter of this year. As a reminder, this trial is evaluating the safety and initial efficacy of Adhexil in preventing or reducing post-operative adhesions in patients undergoing laparoscopy gynecological procedures. We have developed Adhexil without a development partner and with enrollment behind us expect to initiate discussions with prospective distribution partners in the coming months. In the mean time we also are preparing for the Phase III trial, which we anticipate to initiate in early 2009.

I would now like to update you also on the recent development at Aeris Therapeutics. The company recently completed enrollment in its Phase II clinical trial of BLVR or the Biological Lung Volume Reduction for the treatment of emphysema, at 10 medical centers in the United States and one in Israel. Results which will be submitted for publication later this year indicate that BLVR is well tolerated and is associated with significant improvements in breathing function, symptoms, and quality of life. Based upon these results, Aeris is finalizing plans for a Phase III trial to confirm the safety and the favorable responses observed in Phase II. We will continue to update you on the progress of these clinical trials.

Moving on to our passive immunotherapy business. Immunotherapy product sales of $7.9 million in the second quarter of 2008 represent an increase of 36% as compared to the same quarter in 2007.

Now, regarding our Phase III clinical trial in the United States for IVIG, we have completed enrollment and as the study protocol calls for 12 months of IVIG infusion plus follow-up, the study is still ongoing. We had initially believed that we would be able to file based – file the BLA based on interim data analysis due to the shortage of IVIG in the United States, but that does not now appear possible, and therefore we anticipate filing in the third quarter of 2009.

Before I turn the call over back to Sophie to provide financial guidance, I would like to review our upcoming milestones for the remaining of 2008. Firstly, to obtain EMEA approval, European approval, of Evicel. Secondly, to complete the enrollment of 130 patients in the U.S. mild to moderate Phase II clinical study of the Fibrin Pad in late '08/ early '09. Thirdly, to announce a clinical trial data from the Phase I/II clinical Study of Adhexil, and lastly, to obtain the approval of hepatitis B immunoglobulin, or HBIG as we call it in Sweden.

So with that I'd like to turn the call over back to Sophie for the full year financial guidance.

Sophie Hobbs

Thanks, Robert. During the following prepared remarks I will recap the guidance we have already provided and give additional visibility on certain line items. As a reminder, our guidance is based on the following key assumptions – Ethicon's current biosurgery sales forecast, no product or business acquisition, and no VIG product sales.

Well, we reiterate the guidance of 75% growth in biosurgery sales 2008 over 2007. We foresee biosurgery product sales in the third quarter to be at approximately the same level as the second that is $8.4 million. We are increasing our annual immunotherapy sales guidance to reflect the addition of immunotherapy byproduct sales to approximately $34 million to $35 million for the full year 2008. Thus, we're increasing our guidance of total product sales from $64 million to $67 million to approximately $68 million to $71 million for the full year 2008.

We anticipate gross margin in 2008 and 2009 to remain at current levels. While economies of sales are positively impacting our margin, we are anticipating that they may be negatively impacted by appreciation of the Israeli shekel to the dollar and raw material cost increases.

As was mentioned in our previous call, we expect research and development expenses to continue growing as we increase the development of non-partnered products and work to balance delivering short-term results with investments for long term growth.

In 2007, our SG&A as a percent of total revenues were 22%. For 2008, we expect a slightly lower percentage when excluding non-recurring expenses. In 2009, we anticipate a reduction in absolute dollars and as a percentage of revenues of SG&A expenses, as a result of our program to reduce fixed cost.

Regarding our interest income, I repeat that our investment strategy is to put safety and liquidity ahead of yield. We have not incurred any losses related to auction rate securities and we have invested the company's cash reserve in safer instruments such as bonds and market-rate securities. Our current internal forecast assumes a return on cash of approximately 2%, or $1.5 million annualized. We have made the same assumption in the coming years, and we have not forecasted any further foreign exchange gain for the remainder of 2008.

Now, we would like to open up the call for questions.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Amit Hazan from Oppenheimer. Please proceed.

Amit Hazan – Oppenheimer

Thanks Good afternoon guys. Can you hear me okay?

Robert Taub

Yes, good afternoon, Amit.

Sophie Hobbs

Hi Amit.

Amit Hazan – Oppenheimer

Thanks. I was hoping first to get a little bit more information on this new bypass product, if you can just give us a little bit more detail on what it actually is. And then in terms of modeling, you have a three year contract. How do we think about that product contributing to your sales kind of longer term or over the next couple of years?

Sophie Hobbs

The first question is what kind of byproduct and the second question was how should you model it?

Robert Taub

Yes.

Sophie Hobbs

Okay. It's a byproduct of our production process. It's a three year agreement and currently we are forecasting for 2009 approximately $4 million to $5 million – for 2008, sorry. You can do the same for 2009.

Amit Hazan – Oppenheimer

Okay, great. And then can you just, I want to ask about the interest income line again because I think Street models are all over the place for that line item, so just to get us all on the same page, what are you exactly asking us to do to get to the interest income line? Should we be at about $4.5 million or so for the year? Is that the right calculation?

Sophie Hobbs

What you should – or what we do is we – our third and fourth quarter, we are actually using 2% interest income. So about that.

Robert Taub

Yes, we did hear – you are coming out from far away there, like from a tunnel there, so I think Amit was also asking not just in percent but in actual figures.

Sophie Hobbs

Oh, okay. Well, year-to-date, we have 2.6 including also foreign exchange gains, but we are not anticipating more foreign exchange gains so if you take the 2% we come up with about $3.5 million.

Amit Hazan – Oppenheimer

Okay. That's helpful and then Robert, can you give us a little bit of a sense of how the Phase II Fibrin Pad study is going in terms of enrollment? Are we halfway through? Can you give us a little bit of a sign of where we are in the process of the 130?

Robert Taub

Nissim will answer.

Nissim Mashiach

Hi, Amit. In terms of the Fibrin Pad’s enrollment, we are pleased with the pace of the enrollment and we are on track to enroll the patient by the end of the year and we will communicate to the Street once we are going to hit the 90 patients.

Robert Taub

Because remember, Amit, that at 90 patients we are allowed to have a look, so you should expect news around that time.

Amit Hazan – Oppenheimer

Okay, guys thanks very much. I'll jump back in queue.

Robert Taub

Thank you.

Operator

Your next question comes from the line of Mr. Matthew Dodds from Citigroup. Please proceed.

Matthew Dodds – Citigroup

Hi, good afternoon.

Robert Taub

Hi, Matt.

Matthew Dodds – Citigroup

A couple questions, Robert, Sophie. On the gross margin, I thought last quarter, you thought '09 would be on its way to 50%. It sounds like you just said kind of similar in '09 to '08 on higher costs. Can you give me, A, is that correct, we are talking about that kind of delta and difference, and then on the cost is that just your plasma cost or your cost for (inaudible), what's changing there that's going to impact the cost so much? That's the first question and then I have a follow-up.

Sophie Hobbs

Well you're correct. We anticipate gross margin in 2008 and 2009 to remain at current levels. We have seen a positive impact from economies of scale; however, we are anticipating negative impact from the Israeli shekel to the dollar and also raw material cost increases, so plasma and cryo.

Matthew Dodds – Citigroup

Well, which one of the two is more because I can't imagine the shekel is going to move it that much.

Sophie Hobbs

You mean in terms of the negative impact?

Matthew Dodds – Citigroup

Right.

Sophie Hobbs

Raw material.

Matthew Dodds – Citigroup

And that's plasma from your collections? Your source?

Sophie Hobbs

Correct.

Matthew Dodds – Citigroup

Okay, and then the follow-up, on the biosurgery guidance, if you look at the full year, third quarter, you've got the flat quarter-over-quarter in Q3, and then it looks like to get to the number, 30% growth in Q4. Robert, is that just the guidance sort of from J&J now that you're close to finishing the year?

Robert Taub

That's just reflecting the order pattern.

Matthew Dodds – Citigroup

Okay, but because we're already in August, I think they usually give you like a five month lead time. You now can kind of see through the full year pretty well?

Robert Taub

Precisely.

Matthew Dodds – Citigroup

Alright, thanks, Robert.

Operator

Your next question comes from the line of Eric Schneider from UBS. Please proceed.

Eric Schneider – UBS

Hi, good afternoon.

Robert Taub

Good afternoon, Eric.

Sophie Hobbs

Hi Eric.

Eric Schneider – UBS

Just a question first on the plasma byproducts or immunotherapy byproducts. What was it that got you over the hurdle from discarding these, selling them? Was there some volume or did somebody approach you with a contract or was it pricing in the market that suddenly made it profitable to sell it? Just what was it so we can get a sense of other latent capacity out there for that?

Sophie Hobbs

Smart business decision. Actually, extracting and selling as many plasma derivatives as we can from one liter of plasma is definitely one of our goals.

Nissim Mashiach

I think in general, I would say that we are all the time trying improve our yields and our production processes and actually this byproduct is an outcome of this kind of efforts that is done on an ongoing basis.

Eric Schneider – UBS

So it was just that yield got to the point now where it was profitable to sell it or you were able to sell it?

Robert Taub

I mean it's an ongoing effort and it's a combination of certain process related efficiencies and market conditions.

Eric Schneider – UBS

Okay. And then on Aeris with their Biologic Lung Volume Reduction you mentioned going to probably starting Phase III in the second half of this year, which is in line with what they'd previously discussed.

Robert Taub

Yes.

Eric Schneider – UBS

Do you know if they're going to do longer follow-up in the Phase III study since one of the concerns we've heard on the new emerging therapies for emphysema treatment is that they appear not to have the same durability as lung volume reduction surgery, although the initial outcomes look pretty similar.

Robert Taub

Nissim—

Nissim Mashiach

At this point, we cannot disclose any information about Aeris plans for the Phase III and once we know more, we will be more than happy to share it with you.

Eric Schneider – UBS

Okay, thank you.

Operator

The next question comes from the line of Eli Kammerman from Cowen. Please proceed.

Eli Kammerman – Cowen & Co.

Yes, good afternoon. Let me start with a relatively simple one, but mathematically confusing and that is the immunotherapy byproduct sales of $1.9 million for the six months, that $1.9 million doesn't match the total of $1.4 million plus $0.7 million, which would give you $2.1 million, so that’s–?

Sophie Hobbs

Okay, the $1.9 million is actually for the quarter, so you have $1.4 million plus $0.5 million. And then for the six months you have – you are at $0.7 million.

Eli Kammerman – Cowen & Co.

So the immunotherapy byproduct was $1.9 million, which came as $1.4 million plus $0.5 million, both in the second quarter?

Sophie Hobbs

Correct. Eli the $0.7 million was recorded in the first quarter.

Eli Kammerman – Cowen & Co.

And where was that $0.7 million previously classified?

Sophie Hobbs

It was classified under immunotherapy products.

Eli Kammerman – Cowen & Co.

Okay. What country is the customer in for that product?

Robert Taub

Sorry, we cannot disclose that. We cannot disclose it contractually. It's by contract.

Eli Kammerman – Cowen & Co.

All right.

Sophie Hobbs

In the first quarter, we did not anticipate the level of demand so we did not show it separately.

Eli Kammerman – Cowen & Co.

All right. Can you tell us anything at all about this product like whether or not it's infused by IV or if it's applied topically?

Sophie Hobbs

No, it's just a byproduct of the production process.

Eli Kammerman – Cowen & Co.

Is it used on human beings?

Robert Taub

Sure, sure, sure, but it's not a biosurgery product. That's why we call it immunotherapy byproduct and for your modeling we have now a three-year contract, and we hope it is going to be a long lasting relationship and so that's all we can say I'm afraid.

Eli Kammerman – Cowen & Co.

Okay. Looking at the R&D spending, it seemed strange that it was down quarter-to-quarter with all of the clinical trial activity you have going on. What is the trend likely to be for the rest of the year? Will it go up each quarter for the rest of the year?

Sophie Hobbs

Research and development is not always flat throughout the quarters. You can't just divide the quarters by four, for example. It depends on some of the studies that we have and the timing of these studies. For the full year, we feel comfortable with the consensus of $8 million.

Eli Kammerman – Cowen & Co.

All right and finally, is your market share for Evithrom thrombin larger or smaller than the market share held by ZymoGenetics for RECOTHROM?

Robert Taub

Yes, I think on the last quarter you asked the same – well, I don't know if it was you, but somebody asked the same question and I was asked to rank and I would rank the three competitors King one, Ethicon Omrix two, and ZymoGenetics three.

Eli Kammerman – Cowen & Co.

That's what you said last quarter.

Robert Taub

And I repeat this for this quarter.

Eli Kammerman – Cowen & Co.

Okay. Thank you very much.

Robert Taub

Thank you, Eli.

Sophie Hobbs

Thank you.

Operator

(Operator instructions) Your following question comes from the line of Vivian Cervantes from Rodman & Renshaw. Please proceed.

Vivian Cervantes – Rodman & Renshaw

Hi. Thank you for taking the question. Good afternoon.

Robert Taub

Good afternoon, Vivian.

Vivian Cervantes – Rodman & Renshaw

I wanted to quickly follow-up on the enrollment for the Fibrin Pad. We're talking about 90 completed by the end of the year or are we talking about the full 130 completed by end of year and then we're going to get unblinded the 90 person data?

Robert Taub

Yes, it's the 130 by the end of the year.

Vivian Cervantes – Rodman & Renshaw

And do we expect to be – to get some data on the 90 patient, the results of that by the end of year as well?

Robert Taub

Absolutely.

Nissim Mashiach

Yes.

Vivian Cervantes – Rodman & Renshaw

Terrific. Thanks for clarifying. I'm going to follow-up a little bit on some of the new products that are coming to market in thrombin, Bayer Zymo came up with a new 10,000 vial size and wanted to get a sense for what this impact may have had with you knowing that you had 60% new customers last quarter and you had 40% this quarter.

Robert Taub

You are talking of the 20 ml right?

Vivian Cervantes – Rodman & Renshaw

The 10,000 vial, yes.

Nissim Mashiach

Yes, it’s 20 ml.

Robert Taub

Yes, the 20 ml. Yes, yes, the 20 ml.

Vivian Cervantes – Rodman & Renshaw

Yes. Correct, correct.

Robert Taub

Well, I mean, the 20 ml is mainly used in a spray – being sprayed in burn therapies and you probably heard that we are focusing on, or let’s say our partner is focusing in the burn segment of the hemostasis market with Evicel, but we also have a 20 ml, so it's not – we've had a 20 ml, and we have it so I mean it's part of our product portfolio already.

Vivian Cervantes – Rodman & Renshaw

Okay, so it sounds like there wasn't much of an impact? You've already been there and–?

Robert Taub

Correct, correct, correct.

Vivian Cervantes – Rodman & Renshaw

Okay, thanks. And then quick question on the build out that's going on in Jerusalem. I know that there's a new manufacturing facility. Where are we with that? It looks like the CapEx is going up nicely. Are we expecting a wrap up soon or are we on schedule for the '09 start to get that rolling?

Robert Taub

This is Nissim.

Nissim Mashiach

Nissim here, I would say that in terms of the new manufacturing facility in Jerusalem everything is on track and we are still with our plans and the facility will be operational by the end of 2009, meaning that it will be both FDA and EMEA approval, and all activities in terms of building the system, building the facility including initial validation are on track, so everything is according to the plan.

Vivian Cervantes – Rodman & Renshaw

Terrific. Thank you very much. I'll get back in the queue.

Robert Taub

Thank you, Vivian.

Operator

Your next question is a follow-up question, is your final question, is from Eric Schneider from UBS. Please proceed.

Robert Taub

Eric?

Bruce Nudell – UBS

Hi, Robert, Bruce Nudell here.

Robert Taub

Hi, Bruce [ph].

Bruce Nudell – UBS

How are you? I had a question regarding the burn application. The Baxter product has a lower concentration of thrombin to kind of to delay the ceiling process or the gluing process in the case of GRAS. Could you talk a little bit about that strategy versus the one that you have in your product? Thanks so much.

Robert Taub

Bruce, I am afraid I can not. Actually I discussed this specifically with J&J and it's part of their marketing effort and I prefer not to disclose, but it's a different strategy.

Bruce Nudell – UBS

And just more broadly, are there application-specific concentrations of fibrin – fibrinogen and thrombin that might be appropriate? Is there a product family concept that could evolve over time?

Robert Taub

In which–?

Bruce Nudell – UBS

In your product family.

Robert Taub

Well, within, let's say, the partnered products with J&J, which is hemostasis mostly, we think that we have the right combination of thrombin and fibrinogen or the back. I can tell you that the efforts that are ongoing, for example, in the orthopedic area in Europe, but also in the future in the United States, seems to bear fruit. It's all around professional education and how to bring to the knowledge of the surgeons the various procedures that can be done with our product, and I think that with Ethicon and their knowledge of procedures and also their excellent relationship that they have with their customers, we are well positioned.

So if you now look at non-partnered products, which means the development of a biosurgery pipeline outside of the hemostasis field, then I would say yes, but we are working on certain things and at this stage we're not prepared yet to give you details of that, probably on our next earnings call, but I had mentioned in the past that we're working in the area of spine and of course. Adhexil, you already know, it's a different formulation and there are other areas that we are working on but that is a non-partnered products at this stage.

Bruce Nudell – UBS

Thanks so much.

Operator

At this time there are no further questions in the queue. I'd like to turn the call back over to management for closing remarks.

Robert Taub

Well, I thank you everybody for the interest in Omrix and we look forward to the next quarter. Thanks a lot.

Sophie Hobbs

Bye, everybody.

Nissim Mashiach

Thank you.

Operator

Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day.

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Source: Omrix Biopharmaceuticals, Inc. Q2 2008 Earnings Call Transcript
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