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Anika Therapeutics, Inc. (NASDAQ:ANIK)

Q3 2012 Earnings Call

October 31, 2012 9:00 am ET

Executives

Kevin Quinlan - CFO

Charles Sherwood - President & CEO

Analysts

Mark Landy – Summer Street Research

Greg Garner - Singular Research

Lawry Anderson - Raymond James

Operator

Good day ladies and gentlemen and welcome to the Third Quarter 2012 Anika Therapeutics Investor Conference Call. My name is Delouse and I will be your coordinator for today. At this time, all participants are in a listen only mode. We will conduct a question and answer session towards the end of this conference. (Operator Instructions). As a reminder, this call is being recorded for replay purposes.

I will now turn the call over to Mr. Kevin Quinlan, Anika’s Chief Financial Officer. Please proceed, Mr. Quinlan.

Kevin Quinlan

Thank you, Delouse, and good morning everyone. If you have not received a copy of the Anika news release which was issued yesterday after the market closed or you would like to be added to our contact list, please contact Sharon Merrill Associates at 617-542-5300. The news release is posted in the investor relations section of our website at www.AnikaTherapeutics.com.

In addition, a slide presentation is posted on the Anika website that illustrates some of the points that we’ll be covering during today’s call. The slides can be found on the investor relations section under the Events, Webcasts, and Presentations tab. We invite you to take a moment to open the file and follow the presentation along with us.

Please turn to slide number two. Before we begin please remember that the statements made in this call which are not statements of historical fact are forward-looking statements as defined in the Securities Exchange Act of 1934. Words such as will, believe, appear, plan, expect, anticipate, forward, seek, continue, target, goals, objectives, on track, intend, pursue, outlook, as well as other expressions which are predictions or indications of future events or trends and which do not constitute historical matters identify forward-looking statements.

These statements are based on the current beliefs and expectations of management and are subject to significant risks and uncertainties. The company’s actual results could differ materially from any anticipated future results, performance, or achievements described in the forward-looking statements as a result of a number of factors which include those set forth in last evening’s press release and the company’s SEC filings.

Please turn to slide number three as I turn the call over to Anika’s President and Chief Executive Officer, Dr. Charles Sherwood.

Charles Sherwood

Thank you, Kevin, and good morning everyone. Thanks for joining us today. I'll begin today's call with the third quarter update. Kevin will review the financials and then I'll conclude our prepared remarks with comments on the business outlook. After that we'll open up the call to your questions.

The third quarter was one where the underlying fundamentals of Anika's business remains strong and we made good progress on many of our goals. But our financial results fell short of our expectations. Demand for Orthovisc is growing and we continue to see results from our expansion efforts in international markets.

Despite these positives total revenue was down 20% from the third quarter last year. Our major challenge was a manufacturing scale up issue in Bedford that prevented us from filling all of our Orthovisc orders in the quarter.

We also face some unexpected headwinds in our business in Italy and other parts of Europe, largely due to the recession in those markets.

In addition to these items, we saw the anticipated slowdown in the ophthalmic franchise as our business with Bosch and Lomb settles at a steady state. The lower revenue impacted our profitability for the quarter. Net income of $1.6 million or $0.11 per diluted share as compared to $3 million or $0.22 in Q2 last year.

While we have completed a successful shutdown of our Woburn facility and the transfer of full manufacturing to Bedford, the ramp up of production in Bedford was not uneventful, and scale up issues on one our manufacturing lines resulted in the unfilled orders in Q3.

We have resolved these issues and are now manufacturing legacy product at Bedford higher run rate and we expect to fill all of the delayed orders in the fourth quarter and finish 2012 on plan with a record fourth quarter.

At the same time, we made some important advances in product development in Q3 including progress on our P&S application for Monovisc. As the result, Anika is well position for stronger sales and profitability in 2013.

I will discuss this in more detail later in my remarks. Let's now turn to slide number four entitled Bedford Consolidation.

After completing the move from Woburn to Bedford on schedule during the second quarter, our objective in Q3 was to finish ramping up our new capacity in Bedford and exit the quarter operating at the largest scale we need to meet growing demands for our progress.

As I mentioned previously, a manufacturing problem encountered during scale up prevented us from filling all of our Orthovisc quarters in the quarter. The issue was very quickly resolved but not soon enough to avoid losses in some work in progress and inventory. (inaudible) low Orthovisc inventory, these issues impacted our ability to fill our orders and meet our ship in commitment in this quarter of Q3. Again, all issues have been resolved and we expect to catch up under delayed shipments during the current quarter and meet our 2012 volume target.

As a point in reference, this issue only affected the line we reproduce Orthovisc and ophthalmic progress. Our cross-linked products both Anika's and S.r.l’s are manufactured in the separate line that is running well, and we had no problems filling orders and shipping cross-linked products to our customers.

I mentioned on our call last quarter that we had essentially completed the FDA approval process to manufacture the Bausch & Lomb ophthalmic product portfolio in Bedford for sale in United States. This represented the lack of the various regulatory steps necessary in order for us to consolidate all of our manufacturing in Bedford.

During the third quarter, we received the FDA's EIR report, which is the agency's final notice to us that our operations in Bedford have been fully approved.

Finally, with regard to Bedford we are preparing for the manufacture of S.r.l's gel based HA products in the new plant. Our timeline has extended slightly as we have experienced longer than expected regulator approval cycles in certain countries, but we have obtained approvals in other key markets. We now expect to begin manufacturing these products in Bedford by the end of this year. We should begin to see the resulting manufacturing cost savings in the first half of 2013 once we work down our current European contract manufactured inventory.

Next turning to slide number five, Q3 Franchise Review, let's look at the business at the franchise level. Starting with Orthobiologics, we continue to see strong demand for our flagship product Orthovisc particularly in the domestic market. Our US distribution partner for Orthovisc, DePuy Mitek, is continuing to do a great job of reaching out to physicians and backing up this outreach with effective strategies for both product distribution and reimbursement. As a result, Orthovisc continues to gain share in domestic multiple injection market, a market that continues to grow.

Given the state of the global economy, demand for Orthovisc outside the United States has held up very well. Growing numbers of physicians and patients are becoming advocates for the product in a number of international markets.

Moving to the other products in the Orthobiologics franchise, third quarter sales of our orthopedic products from Anika S.r.l roughly flat year over year. The economic crisis in Europe and especially in S.r.l's home country of Italy is clearly having an impact on the growth of the business. We are proactively addressing these challenges by accelerating our efforts to market S.r.l's orthopedic products in Asia and other ROW territories.

For the new term, these efforts are focused on driving growth for Hyalofast in Korea. Our licensing and distribution partner in Korea is making excellent progress marketing Hyalofast as a combination product in conjunction with BMAC, bone marrow asterisk concentrate for the management of osteochondral defects primarily those resulting from trauma. The Korean medical community seems to be highly receptive to innovation in tissue generation, Hyalofast among them. The next step for us is to build on this success in Korea by pursuing this and another innovative strategies to increase value and maximize revenue with the Hyalofast product.

The other key product in our Orthobiologics franchise is of course Monovisc. International sales of Monovisc were up year-over-year albeit of a small base. The global economy again here in particular is a factor. Monovisc is a superior product and should be growing in revenue at a much faster pace.

We are now actively and preferentially pursuing territorial expansion outside of the EU for this product. As we reported on our call last quarter, we engaged in what we believe was a positive and constructive dialog regarding Monovisc with the FDA in June. The FDA requested additional data analysis from us and some supplemental information from our consultants which we provided early in the third quarter. We recently responded to a follow-on set of questions from the FDA aimed at clarification of the material that we submitted. We currently expect a decision on our PMA application for Monovisc in the next two months.

On another front, the lawsuit that Genzyme filed against us in 2010 has been put on hold by the mutual consent of both party's pending a court ruling on Genzyme's appeal of the (inaudible) jury verdict finding Genzyme's patent invalid.

Moving to the second bullet on slide number 5, product revenue in the surgical franchise was up 33% year-over-year in Q3. This growth was driven primarily by strong sales of Hyalobarrier S.r.l's anti ageing product in Korea and Taiwan as well as ENT product.

Leveraging manufacturing improvements in Bedford, we expect to launch an improved version of the Marigel injectible ENT product no later than the first quarter of 2013.

Looking ahead longer term, our new capabilities in Bedford should enable us to enhance the marketability of our entire gel based product line encompassing both surgical anti-adhesion and ENT application. At the same time, we're concentrating our efforts to expand our international distribution partnerships from the highly successful Hyalobarrier product line.

Turning to bullet number 3, sales of S.r.l's advanced wound care products in the dermal franchise were down year-over-year primarily due to reduced shipments of our Hyalo matrix skin substitute in Italy and Europe as well as to our U.S distribution partner (inaudible).

Looking for growth opportunities elsewhere we've reestablished our relationship with S.r.l's former Hyalo matrix distributor in South America. Hyalo Matrix has received marketing approval in two South American countries with several more expected next year. This sets the stage for sales growth in that region in 2013.

We're also working to establish additional distribution relationships for Hyalo Matrix and other advanced wound care products in the portfolio in the Pacific Rim.

Moving to the fourth bullet on slide number five, product revenue in the veterinary franchise was up 40% from Q3 last year driven apart by expanded distribution to Middle East.

And finally, as we forecasted on our last call for Q2, ophthalmic product revenue declined to just under $2 million in the third quarter of 2012 from nearly $4.6 million in Q3 last year.

It should be noted that we experienced extraordinarily high shipments to B&L in Q3 last year, strictly due to order timing and that as we have discussed previously we expect our business with B&L to settle in at a more normalized steady state level.

Let's turn now to slide number six which summarizes our product development initiatives. Near term our strategic goal is to drive revenue growth from a number of single line extension products as early as 2013. These will add to our surgical and dermal product portfolios.

Looking farther ahead, our goal is to fully leverage the vast S.r.l technology base and generate revenue from larger 510K or CE marked products in 2014-2015 timeframe.

As we have previously discussed many products from S.r.l's technology could be candidates for H510K approval. Previously we have submitted three of these products for clearance at a time of significant change in uncertainty within the FDA regarding the 510K approval process. The pathway and data requirements for clearance of these types of products are now more clearly defined. We are in a process of finalizing decisions about how and which candidate product to advance through this process. We will report more fully on this subject in our next earnings call.

Currently, our major clinical development activity is primarily focused on ortho-biologic products, namely Cingal and our cartilage regeneration technology. Cingal is a single injection viscosupplementation treatment for osteoarthritis and includes a therapeutic agent.

Among our regenerative technologies Hyalograft-C is our cell based bio-engineered product for cartilage regeneration.

Looking first at Cingal, we're continuing to make progress in the timeline we discussed on our call last quarter. Single will be considered a medical device in Europe and therefore qualifies for CE marking, a shorter approval pathway than what was expect in the United States. In order to receive a CE mark we need to provide clinical data. We advanced our preparations for European clinical trial in the third quarter with the goal of beginning patient enrolment after the first of the year. We continue to anticipate that this trail will provide key data to support for U.S. approval.

We are also very pleased to report that we received notice of allowance of our U.S. pattern application covering our Cingal technology. This is the major step in the development of Cingal.

With respect to Hyalograft-C, we continue to access the regulatory environment and development requirements to achieve ongoing marketing approval. As we have previously discussed, this class of products involving cell-based technologies is undergoing regulatory change in the EU and Italy and as we approach the end of year there will be more clarity around the application of these regulations. We expect that this additional clarity will allow us to finalize our plans and we look forward to discussing these plans on our fourth quarter conference call. Please keep in mind that we have a second cartilage degeneration product, which is (inaudible) and it is a non-sell based product and requires as single step surgical procedure.

With that I will turn the call the over to you Kevin.

Kevin Quinlan

Thanks Chuck. Please turn the slide number seven in the presentation. Chuck talked about the pluses and minuses from a business perspective. And as he said, total revenue is down 20% from the third quarter last year coming in a $14.8 million. As usual, revenue at the franchise level and by geographic region have been included in yesterday's earnings news release, so I won't repeat those details today. The more relevant point is what factors contributed to the $3.7 million declined in total revenue from Q3 last year.

Orthovisc revenue was down $1.1 million year-over-year, reflecting the impact of shipments delayed by the manufacturing issue in Bedford. Sales of Orthovisc worldwide would have been $2.8 million higher. In addition, S.r.l's Italian sales decreased by $470,000 year-over-year, 70% of which was in the advanced wound care area. Foreign currency rates also played a role negatively impacting revenue by over $320,000. Finally, US advance wound care sales were off a $175,000 as our U.S. partner under performed.

Finally, ophthalmic revenue was down $2.7 million from Q3 last year primarily because Q3, 2011 was a record quarter for ophthalmic revenue driven by the timing of orders from Bausch & Lomb, as previously discussed. We do still expect a strong revenue year for 2012 and towards that end year-to-date revenue is $2.4 million or 5% higher than last years same period lead by Orthovisc and our Veterinary product high disc.

Net income for the third quarter of 2012 was $1.6 million or $0.11 per diluted share versus $3 million or $0.22 per diluted share in Q3 of 2011. The decline was primarily due to lower sales just outlined. For the year, at $0.51 earnings per share we are running 31% or $0.10 per share higher than we did in the first nine months of 2011 on the strength of increased revenue and lower strengthening.

Gross margin for the third quarter of 2012 declined to 48.6% from 58.4% in Q3 of 2011. The lower gross margin with a function of lower production volume in the third quarter again reflecting the manufacturing issue in loss of Orthovisc work in process inventory.

Q3 operating expenses were down 23% year-over-year driven by slower than anticipated development spending and our continued focus on cost savings and SG&A. R&D and SG&A expenses were down 21% and 24% respectively from Q3 of 2011. Approximately half of the reduction in SG&A was attributable to the classification of our unused Bedford manufacturing facility costs as G&A in 2011 and subsequently classifying is manufacturing space this year based on the FDA approvals received with the balance representing true cost savings. Year-to-date operating expenses are down $2.5 million, lower than last year reflecting the impact of our U.S. facilities consolidation in Bedford.

Operating income for the third quarter of 2012 was down 43% from Q3 of 2011, reflecting the decline in operating leverage on lower sales volume. But operating income is $2.9 million year-to-date based on higher sales and lower spending.

Our effective tax rate for the third quarter was 38.6% compared to a tax rate of 37.6% in the third quarter of 2011 primarily due to higher than expected losses at S.r.l in 2012 versus 2011. And for the year we expect to be at approximately 38% to 39% tax rate likely comparable with 2011.

On a very positive note as slide number 8 shows we are continuing to generate strong cash flow from operations. We generated more than $2.2 million of cash from operations during the third quarter putting us at $5.7 million to-date and well ahead of last year’s pace. At the same time CapEx spending remains below depreciation and our Q3 working capital benefited from strong collection of S.r.l's receivables.

As a result and as summarized on slide number 9, Anika closed the third quarter of 2012 with $39.9 million in cash in equivalence compared with $29 million on September 30th, 2011. We are tightly monitoring working capital and continue to reduce our long-term debt.

Looking ahead, we’re expecting a very strong record fourth quarter on the top line as well as improved profitability driven by increased sales of Orthovisc to meet the growing demand for this product.

With that, I’ll turn the call back to Chuck.

Charles Sherwood

Thanks Kevin. Picking up where Kevin left off on the business outlook as summarized on slide number 10, our business remains strong and growing. We weathered a difficult third quarter and are well on our way to a financially successful 2012. For the year, we expect to be in the range of $70 million in revenue and $0.74 for EPS. Underlying product demand for Orthovisc continues to grow and our partner Mitek is doing a great job in capitalizing on this potential.

We have a major pipeline product in Monovisc that we continue to believe will receive FDA marketing approval. We’re leveraging our S.r.l technology platform with short and medium term product development initiatives. We see growth in other existing S.r.l products Hyalobarrier and Hyalofast among them. We are also gaining traction in our strategy to diversify our international geographic presence. Bedford is fully inspected and approved in transferring S.r.l's gel based product manufacturing to Bedford will be an important advance for us in terms of future growth and profitability.

And looking farther ahead, we are strategically focused on both our product pipeline and our distribution network to drive top line growth.

And with that, I will turn the call back over to [Dalu]so that we can take your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions)

And the first question comes from the line of Mark Landy of Summer Street Research. Please go ahead, sir.

`

Kevin, just a quick clarification. Did I hear you correctly you said around $2.8 million of the bills were impacted in the quarter?

Kevin Quinlan

That’s correct.

Mark Landy – Summer Street Research

Okay, let’s assume there were $2.9 million impacted your number would have been close to $12 million for the quarter, is that correct?

Kevin Quinlan

$12 million for the quarter?

Mark Landy – Summer Street Research

Yeah, doing the math on Orthovisc.

Kevin Quinlan

Oh on the Orthobiologics franchise, yes. That’s correct, Mark.

Mark Landy – Summer Street Research

Okay, great. And then Kevin how much, what is the cost of working process from the glitch, can you clarify that for us?

Kevin Quinlan

Well, it was a significant number which is why we mentioned it. It’s a significant portion of the decline in the gross profit margin to 48%. Without that and with a higher sales volume we would have had a much more comparable gross margin versus the prior year.

Mark Landy – Summer Street Research

Okay, so I know that I suppose that gets into some of your competitive issues that you don’t want to make public but if I kind of normalize the PNO versus a run rate closer to around $17 million to $18 million. Would that be a fair way to try and understand the impact?

Kevin Quinlan

Yes.

Mark Landy – Summer Street Research

Okay. And then you did mention that most of that shortfall would be picked up in the fourth quarter and obviously that gets you to a guidance of $70 million. Is 100% of that $2.8 million going to be picked up in terms of committed orders or just the vast majority being kind of in the 70% to 80% range?

Kevin Quinlan

We are expecting all of that 2.8 to be made up in the fourth quarter.

Mark Landy – Summer Street Research

Okay. So just for modeling purposes it would be fair to just move that 2.8 into the fourth quarter?

Kevin Quinlan

Yes.

Mark Landy – Summer Street Research

And then would we, you know, obviously the equity have an impact on the margins so do we, should we think about the margins being impacted from that volume increase or shall we just think about a normalized margin in terms of gross margin running through the fourth quarter?

Kevin Quinlan

You will see a pick up in the margin for the quarter to bring us to that level and for the year it will be somewhat comparable, little bit lower than the prior year because of the working process loss.

Operator

Thank you. The next question is last from the line of Greg Garner from Singular Research. Please go ahead, sir.

Greg Garner - Singular Research

A follow up on the Orthovisc issue. Are you hearing anything from Mitek about the any issues regarding the difficulty in delivering during the quarter? Is there any impact there in the marketplace?

Charles Sherwood

This is Chuck speaking, we ran the inventory, their inventory down pretty low but if you are , if you are speaking to harming the brand or reducing the sales potential, no, we didn’t, we didn’t have any issues and we don’t anticipate any issues.

Greg Garner - Singular Research

Okay, and so I guess I am glad to hear that but also want to get a clarification about you record sales to the end customer as they through Mitek or so there is no -- did they have ex inventory or they had to work down, was there any of that going on in the quarter with Orthovisc?

Kevin Quinlan

Greg, a portion of our revenue is from the product that we shipped to Mitek and then another portion is based on a percentage of what they actually sell during the quarter. So that latter piece may have been impacted a little bit.

Greg Garner - Singular Research

Okay. Yeah, yeah I understand.

Charles Sherwood

Actually both these is likely had an impact.

Greg Garner - Singular Research

So no problem in meeting the additional 2.8 million for the current quarter and are there any production constraints in meeting the higher revenue the 2.8 million adding that on to the fourth quarter?

Charles Sherwood

No, we don’t see -- we don’t see any issues at this point in achieving that.

Greg Garner - Singular Research

Okay. And absent that additional 2.8 moving into the fourth quarter are you still seeing sort of the same demand factors that have caused Orthovisc to have normally a little bit higher fourth quarter seasonally? I mean looking back over the last few years it seems like that’s the pattern so just want to see is that still happening in the absent this you know, movement of revenues from third quarter to fourth quarter?

Kevin Quinlan

We do expect the fourth quarter to be stronger than typically stronger than the other three quarters. So at this point not a whole lot of feedbacks to suggest otherwise.

Greg Garner - Singular Research

And on the ophthalmic you mentioned that it has settled at a steady stage does this appear to be the quarterly run rate for a while, where the 1.8 million I think it was for the quarter?

Charles Sherwood

We are not clear yet what that amount would be for 2013 but we do know that will be in a likely in a lower run rate than what you have been seeing so far.

Greg Garner - Singular Research

Okay, and when S.r.l gel products come over to the Bedford couple of items question on that, how long do you think it would take to work down the inventory in Europe and what might be the margin impact be there after that’s worked down?

Kevin Quinlan

Product by product thing.

Charles Sherwood

Yeah, it does very considerably -- without going into too much detail, there is certain minimum purchase requirement under the existing third party contract and so some products will carry into the first quarter that there was still so in the old inventory and others we will be able to start earlier on in the first quarter, but certainly by the middle of the year we should be, the vast majority of the sales of the ACP products will be manufactured here in Bedford.

Greg Garner - Singular Research

For the Monovisc was mentioned that looking for geographic expansion outside the US, can you tell us a little bit more about that as to what areas and what kind of timeframe might be involved with that?

Charles Sherwood

We are looking to, there are some markets in Europe that we are looking to get more deeply entrenched in or to begin to get some sales. There are other places of big markets some of these which you might be called the BRIC countries where we are not present. We also have some opportunities to move more strongly into Asian countries, maybe outside of China. Those moves will require some clinical investments and as a consequence will take longer time. So those are really investments for the future. Those will also require that we execute some partnership agreements because we will be expecting our partners to fund that clinical endeavor. So there is some short term Europe type possibly South America type things that we may be able to expect in 2013, early 2014 and some of the other Far East type initiatives are going to take longer, because they are going to require clinical efforts.

Greg Garner - Singular Research

Okay. And the US progress as I recall excuse me, they ask for additional information about some of the data from the clinical tests and you provided that in other, they are asking for more clarification on that data. They are just drilling deeper into that as that the extent of this last request from the FDA?

Charles Sherwood

We submitted some additional data from consultants about the way to look at the clinical benefits of these products and we submitted some additional analysis of our clinical study data that we had not submitted in that format before. This information was accepted by the FDA, although they didn't have to accept it. So we believe that's a good sign and they sent back some clarification questions on all of that material that we submitted which were relatively straight forward and we provided that information a few weeks ago and so we expect, as I said a response back from the FDA within a month or so.

Greg Garner - Singular Research

Okay. And if that's were to be favorable, so that would have come by the end of the year, how long would it take to start marketing that ramping that up?

Charles Sherwood

We are having those discussions with Mitek as we speak, but I think you have to believe that it would take, you will have to negotiate the labeling, you have to get a lot of the launch strategy in place. So it is going to take I would expect at least six months.

Operator

Thank you. The next question comes from the line of Wally walker from (inaudible). Please go ahead, sir.

Unidentified Analyst

A couple of clarifications for these. When you talk about reporting record fourth quarter revenue, is the comp fourth quarters or all quarter implied in your guidance of $70 million which seem to be record quarter period?

Kevin Quinlan

Yeah, well, the intention there was all quarters and not just referring to fourth quarters.

Unidentified Analyst

And when you talk about improved profitability, by what metric that you are talking about and compared to what?

Kevin Quinlan

We will look at both operating and net income.

Unidentified Analyst

And margins?

Kevin Quinlan

You know, you are asking like an operating income margin?

Unidentified Analyst

Yes.

Kevin Quinlan

We haven't been really, I am not sure that I would describe it that way, but I think as Chuck mentioned in his comments, in his wrap up a range of getting EPS in the range of $0.74 would not be an unreasonable expectation based on that revenue accomplishment. So, that should give you an idea as to what kind of margin that would turn into.

Unidentified Analyst

Okay. And lastly, in August, there was a comment about the second half of 2012 starting with strong fold momentum. When did the manufacturing issue the lack of <> manifest itself?

Charles Sherwood

Yeah, with shortly after that, Wally.

Operator

(Operator Instructions). Thank you, and the next question comes from the line of Lawry Anderson from Raymond James. Please go ahead, sir.

Lawry Anderson - Raymond James

Earlier this year you gave us rather favorable progress report regarding the possibility of having Orthovisc approved for a trial of the shoulder through your partnership with Mitek, could you comment on this at this time?

Charles Sherwood

I can comment on that, its Chuck. We have been -- it was a little bit of a complicated situation but the trial for the shoulder was run by Mitek even though it was our PMA. Three weeks ago we finally or two weeks ago or so we finally got all of the data in our hands and we were running through the analysis and more analysis now and it would be our intention to file that data with the FDA but I cannot at this point give you a specific timeframe for that.

Lawry Anderson - Raymond James

Understood.

Charles Sherwood

I say file that data with the FDA you understand I believe that these viscosupplementation products receive a significant amount of scrutiny and the rules sometimes change in the middle of the exercise. So all I can really commit to at this juncture is that we will file and enter into negotiations with the FDA I had no idea really of the timing of being successful at the end of the process but well I shouldn’t say that I say the timing at the end of the process is really could be cover a very wide range.

Operator

Thank you. We have no further questions I would now like to turn the call over to Mr. Sherwood for closing remarks.

Charles Sherwood

Okay, thank you, Dalu, and thank you to everyone who joined us today. I think as we went through our comments there are a lot of things that we projected to happen over the next quarter and we look forward to reporting our progress on those to you in our fourth quarter conference call thanks again.

Operator

Thank you for your participation in today’s conference. This concludes the presentation you may now disconnect have a great day, thank you.

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