BioMimetic Therapeutics Management Discusses Q3 2012 Results - Earnings Call Transcript

BioMimetic Therapeutics (NASDAQ:BMTI)

Q3 2012 Earnings Call

November 05, 2012 4:30 pm ET

Executives

Kearstin Patterson - Director of Corporate Communications

Samuel E. Lynch - Founder, Chief Executive Officer, President and Director

Lawrence E. Bullock - Chief Financial Officer, Principal Accounting Officer and Corporate Secretary

Analysts

Tao Levy - Loewen Ondaatje McCutcheon Limited

Mark Landy - Summer Street Research Partners

Kevin Kotler - Broadfin Capital, LLC

Operator

Good afternoon. My name is Therese, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2012 BioMimetic Therapeutics Earnings Conference Call. [Operator Instructions] Thank you. I would now turn the call over to Kearstin Patterson, Senior Director of Corporate Communications.

Kearstin Patterson

Thanks, Therese. Before we begin, I would like to remind you that statements made during this call about our prospects and plans are considered forward-looking statements. Such statements include those regarding our expectations regarding the timing and substance of our amendment to the Augment PMA and the FDA response, along with statements concerning plans of future clinical trials, anticipated regulatory actions, product development plans, business development initiative and potential protection provided by new patents.

These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. There are many important factors that could cause actual results to differ materially from those indicated in the forward-looking statements. BioMimetic's actual results and the timing and outcome of events may differ materially from those expressed in or implied by the forward-looking statements because of risks associated with the marketing of BioMimetic's products and improving preclinical and clinical development activities, regulatory oversights and other risks detailed under the heading Risk Factors on our Form 10-K filed with the Securities and Exchange Commission.

Except as required by law, BioMimetic undertakes no responsibility for updating the forward-looking statements made during this call. Please note that a press release was issued prior to this call. Additionally, for your convenience, this conference call webcast will be archived on the Investor Information section of our website for at least 30 days.

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

Samuel E. Lynch

Thank you, Kearstin. Good afternoon, everyone, and welcome to BioMimetic's 2012 Third Quarter Conference Call. Larry Bullock, our CFO, is joining me on the call today, as usual. During the first part of the call, I will update you on our product development programs and our business activities, then Larry will review our financial results for the third quarter ended September 30, 2012. We'll also be happy to answer any questions that you may have during the Q&A at the end of the call.

Our main business objectives, of course, consists of our efforts to pursue regulatory approvals and commercialization in the United States and in several markets located outside the U.S. and the continued development of our sports medicine product candidates, the introduction of Augmatrix to complement our existing Orthobiologics portfolio of product candidates, and of course, carefully managing our assets.

With that, let's discuss our third quarter 2012 activities and financials. As you know, the main priority requiring management's attention over this quarter and for, frankly, the last 1.5 years is the FDA approval of Augment for its use as an alternative to autograft in hindfoot and ankle fusion procedures.

And as we announced this summer, we've completed and filed an amendment to the Augment PMA, which provided a substantial amount of supplemental information that was requested by the FDA in its post-panel response letter.

Based on the results of these additional analyses across a full range of clinical and safety measures, it is our view, and continues to be our view, that the updated data provides sound scientific evidence and, in many cases, even stronger evidence than that previously available, demonstrating a reasonable assurance of Augment's safety and effectiveness.

To further strengthen the benefit risk profile of Augment, in September, we also submitted an additional amendment to our Augment PMA application that included the result of a study conducted on becaplermin or Regranex to evaluate cancer mortality. Regranex contains the same synthetic protein that is found in Augment, but is topically administered on to open skin sores daily for weeks to months compared to the onetime implantation of Augment during foot and ankle fusion surgery. The results of the study indicated no difference in either cancer incidence or cancer mortality between patients who received Regranex and those who did not. The retrospective follow-up analyses were conducted using patient records of 6,429 Regranex patients, compared to a match group of patients -- of patient records, of 6,429 similar patients that were treated without the use of Regranex. In other words, the study, an analyzed data, from over 12,858 total patients.

Patients with foot ulcers and no prior cancer incidence were selected from Veterans Affairs and Medicare patient records and were followed for up to 11 years, from 1998 through 2009, to identify new malignancies and any cancer-related death. These results are from a new study, which is not associated with any study or extension study that had been reported previously prior to September. Additionally, this study evaluates a completely different set of patient records, again, than any previously commissioned study, and involve, of course, a much larger patient population, followed for a much longer period of time.

Given this, we believe this study exonerates PDGF from being associated with any risk of cancer mortality in diabetic foot ulcer patients using Regranex, which in turn, certainly should further alleviate any residual FDA concern regarding Augment.

Given that the same protein therapeutic is used in both Regranex and Augment, the company believes these data provide compelling evidence for a case of Augment approval. Moreover, even before this new information was available, we had communication with the FDA that led us to believe that there would be no need for a black box warning on Augment. Of course, there can be no assurances as to what the impact of these new findings may have on product labeling or the approval of the Augment Bone Graft PMA.

As we previously reported, by statute, the FDA has 180 days from the date of the initial filing this summer to review and respond to our PMA amendment. The additional amendment that we submitted in September that included the Regranex study did not change this expected time line. Assuming that the FDA takes the full 180 days post-submission to respond, we continue to expect to receive a complete response letter from them around year-end, and we continue to anticipate a final approvability decision between April of next year and January 2014.

Moreover, we remain optimistic that Augment should and will be approved. In the meantime, we have been diligent in following up with the agency over the last several months. We expect to relay appropriate information to the market upon receipt of the FDA's complete response, but we will not be able to provide further details until that time.

Now moving on to other product development updates. In Australia, Augment Bone Graft was recently listed on the Australian Private Health Insurance Prostheses List. The listing enabled a full launch of Augment in Australia as of September. And we commenced sales there and are offering the product to our customers through an experienced medical device distributor and are so far very pleased with this initial launch.

Following the June release of top line data from the Canadian registration study comparing Augment injectable to autograft in foot and ankle fusion surgery, we filed a Device License Application, or what's called a DLA, with Health Canada requesting approval to market this product candidate in Canada. The agency is currently reviewing the submission, and we will provide updates as they are available. The surgeons in the trial continued to tell us that they have been impressed with both the handling and delivery characteristics of Augment Injectable, as well as the results they saw, which compared quite favorably to other available bone grafting alternatives. And they continue to be excited about the potential for approval of this new product candidate in Canada. We also intend to file for approval of Augment Injectable in other countries within the coming months.

Regarding Augment Injectable in the U.S., we previously announced that we voluntarily suspended additional screening and enrollment of patients in the study as of the first of this year to focus our attention on addressing the FDA's questions related to the Augment PMA. We believe that there were some questions regarding study design that the FDA will address in their review of the Augment PMA, which could also impact the Augment Injectable pivotal study design. All 105 patients that were previously enrolled in the Augment Injectable study in the U.S. as of the first of this year, have, of course, now passed their 6-month primary endpoint, and we will continue to follow them for safety. If we determine that we won't reinitiate enrollment, we expect the results from the 105 patients already enrolled in this trial to be unblinded and available in the first half of next year.

Moving on to Sports Medicine. Now that the PMA amendment for Augment has been filed, we have been actively assessing our sports medicine development strategy, where we see great potential for both Augment Chronic Tendinopathy and Augment Rotator Cuff product candidates.

After considering the cost benefit analyses, we are gearing up to start a Phase II trial in the first half of next year, with Augment Chronic Tendinopathy for lateral epicondylitis, just also known as tennis elbow.

As a reminder, we have an FDA approved IND to enroll 100 patients in a dose ranging trial with a 6-month follow-up for the primary endpoint. And we recently reengaged with several interested surgeons to determine their current patient load and research staff availability for participation in this trial.

The study procedure simply consists of a nonsurgical simple injection of rhPDGF sterile solution into the affected tendon. There are 3 million to 4 million patients that are affected by chronic tendinosis in the U.S. and currently, there are very limited treatment options available. So we are certainly eager to address this large unmet medical need. We will provide further updates on this trial once we enroll our first few patients.

Additionally, investigators in our completed Augment Rotator Cuff 30-patient trial have expressed a desire to continue to follow their patients to assess retear rates up to at least 1 year. We have agreed to this study extension, which will provide further evidence of Augment Rotator Cuff's safety and efficacy in this indication. Therefore, we are working with investigators to facilitate the longer-term follow-up and have received approval from Health Canada and the REBs, which are the same as the institutional review boards in Canada, to perform this extension study.

Now turning our attention to our Augmatrix BioComposite Bone Graft product line, we continue to work through the hospital value analysis committee approvals, which are required before a product can be offered at a new facility. Most importantly, we believe this process is indeed providing us with valuable experience and knowledge that will be quite relevant when working through these same processes for Augment. These activities have allowed BioMimetics to establish itself as an accepted vendor within many of the major hospitals in the U.S, while implementing our internal commercial infrastructure. Both of these activities should facilitate a successful launch of Augment and our future products.

With that, I'd now like to pass the call over to Larry Bullock, our CFO, to briefly discuss our third quarter financial results. Larry?

Lawrence E. Bullock

Thanks, Sam. Our third quarter financial results reflect our ongoing commitment to carefully manage our assets, including our cash and investments balances. We believe it is appropriate to conserve our resources until there is proven clarity from the FDA regarding Augment. We continue to focus our attention on the Augment PMA application and other foreign regulatory processes, so that we are in a position to quickly address requests from the FDA or other foreign regulatory bodies and effectively begin commercialization of Augment in the United States, as well as other parts of the world.

As identified in previous quarterly earnings calls, some of our expense management efforts have included the suspension of additional screening and enrollment of patients in our Augment Injectable study, a reduction in our employee work force, delaying certain development programs where appropriate, and an overall emphasis on eliminating noncritical expenditures. We believe these efforts have been successful as evidenced by significant reductions in both our research and development, as well as our SG&A expenditures. I will discuss both of these expense categories in a few moments.

As we discussed earlier, while we await the FDA's response, we have continued to pursue regulatory approvals and subsequent commercialization of Augment in other parts of the world, the commercialization of Augmatrix in the United States, and to evaluate our other product development programs, such as Augment Injectable, Augment Rotator Cuff and Augment Chronic Tendinosis.

So now to summarize the third quarter 2012 results. Our net loss for the third quarter of 2012 was $4.6 million, compared to a net loss of $7.1 million for the same period in 2011. Total revenue for the quarter was approximately $689,000, and includes approximately $360,000 of product sales, $73,000 of royalty income and $245,000 of sublicense fee income. These 2012 revenues are an improvement compared to the same period in 2011, for which we recorded approximately $429,000 of total revenue.

In 2012, product sales revenues were derived from sales of both Augment and Augmatrix, as we began to sell Augment in Australia and New Zealand through an exclusive medical device distributor experienced in Orthobiologics and we began to market Augmatrix in the United States through our network of independent distributors.

Our efforts to control expenses helped contribute to significant reductions in research and development, as well as SG&A expenses as follows. Research and development expenses were $1.9 million for the third quarter of 2012, compared to $3.6 million for the same period in 2011. Our R&D expenses relate, primarily, to clinical trials of our product candidates in the U.S., Canada and the EU, as well as continuing expenses associated with the preclinical studies and regulatory filings. Our R&D expenses included outside professional service fees in addition to internal staffing costs, such as salaries, benefits, payroll taxes, stock-based compensation and travel. These R&D costs have decreased for the quarter, as compared to 2011 as follows: First, salaries, benefits, payroll taxes and stock-based compensation, or employees in the R&D functions, decreased by approximately $900,000, due to reduced staffing levels.

Second, our expenditures for outside professional fees, clinical trials and contract manufacturing activities decreased by approximately $600,000, as certain clinical trials and preclinical studies have been delayed to conserve resources and focus our attention on addressing the Augment PMA. For example, our Augment Injectable clinical trial expenditures have decreased since we voluntarily suspended additional screening enrollment of patients. And third, expenses for general business activities in the R&D function such as travel, recruiting and relocation and lab supplies decreased in 2012 by approximately $200,000.

SG&A expenses were at $3 million for the third quarter of 2012, compared to $3.6 million for the same period in 2011. These expenses consist primarily of outside professional services, rent, utility, taxes, licenses and maintenance cost for our facilities, as well as internal staffing costs for employees in selling, general and administrative functions.

Our third quarter 2012 expenses for SG&A activities decreased primarily as a result of our efforts to carefully manage our expenses and conserve resources, given the uncertainty surrounding the FDA review process for our Augment PMA application, offset partially by our commercialization activities surrounding the launch and selling of Augment and Augmatrix. These SG&A costs have decreased for the quarter as compared to 2011 as follows.

First, salaries, benefits, payroll taxes and stock-based compensation for employees in the SG&A function decreased by approximately $300,000 due to reduced staffing levels. Second, expenses for general business activities in the SG&A function, such as outside professional fees, rent, utilities, dues, subscriptions, recruiting and relocation, repairs and maintenance and taxes and licenses decreased in 2012 by approximately $400,000. And third, these savings were offset slightly by an increase of approximately $100,000 in sales, commissions and milestone expenses, which corresponds to increased sales activity experienced so far in 2012.

Now turning to the balance sheet. We ended the quarter with $44.3 million of cash, cash equivalents and investments. This includes $15.5 million of cash and cash equivalents and $28.8 million of short-term investments classified as available for sale and consisting of U.S. government-sponsored enterprise securities, corporate bonds, bank bonds and commercial paper.

Next, I will provide our financial outlook for 2012. Please note that these projections are based on our current expectations and assumptions relating to our operating plans, which include our efforts to focus our attention on addressing the FDA's request related to our Augment PMA. Our sales and marketing cost associated with the launch of Augment in various countries outside the United States, as well as the launch of Augmatrix in the U.S. and our forecasted timing and cost clinical trials and other product development programs.

We expect our year-end 2012 cash and investments balance to range between $32 million and $39 million. We expect our net cash used to be between $22 million and $29 million. And finally, our net loss for the year is expected to be between $23 million and $30 million. We believe these resources position the company very well to continue the development of our very exciting platform technology and to continue the process for global commercialization of Augment Bone Graft, as well as development of our other product candidates.

With that, I'd like to thank you for your interest in BioMimetic. And I'll turn the call back over to Dr. Lynch.

Samuel E. Lynch

Great. Thank you, Larry. In closing, let me remind you of our recent key activities and our upcoming milestones. Based on the 180-day time line, we anticipate official communication from the FDA regarding the PMA for Augment Bone Graft around the end of this year. We reiterate our guidance for an April 2013 to January 2014 FDA approval decision for Augment. Augment Bone Graft was also recently listed on the Australian Private Health Insurance Prostheses List, enabling a full launch of this product into this market in September. And we filed the DLA for approval of Augment injectable in Canada.

Further, all 105 patients in the North American Augment Injectable trial have reached their 6-month primary endpoint, and we will continue to follow these patients for safety, while we await FDA's further review of our Augment PMA.

We are also gearing up to begin a clinical trial using Augment Chronic Tendinopathy for treatment of chronic tennis elbow. And we'll update you once we have the first few patients enrolled. And finally, we continue to secure favorable Hospital Value Analysis Committee approvals for Augmatrix BioComposite Bone Graft and gain valuable commercialization experience that will be extremely useful when we launch Augment.

With that, I would like to thank all of our stockholders for their ongoing support of BioMimetics. We remain confident in the future of BioMimetics and will maintain our focus on the most important goals ahead of us.

I would now like to open the call up to any questions. So I will turn the call back over to Therese for further instructions on the Q&A portion of the call.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Tao Levy with LOM.

Tao Levy - Loewen Ondaatje McCutcheon Limited

So the first question is, Sam, you mentioned in the press release, you've been having some dialogue, obviously, with the FDA and you expect some additional feedback from the agency in the coming weeks. What type of feedback are you expecting? Just the back and forth that's been going on since you filed the amendment?

Samuel E. Lynch

Yes, Tao, we really can't get into -- well, certainly, a lot of the specifics, of course. But it's just further clarifications back and forth. We do know that they are certainly actively reviewing the file. And as they do that, there are occasional questions that come up or requests for Word versions, Microsoft Word versions, of our amendment, for example, on things like that. So that's really about all we can go into at this point.

Tao Levy - Loewen Ondaatje McCutcheon Limited

Okay. The timing of the DLA approval of Augment injectable in Canada, do you have an estimate how long it could take them to approve the product, or review it?

Samuel E. Lynch

Really don't have a firm guidance on that yet. As you know, to some extent, depends upon the agencies workload and so forth. But I would generally guide towards second half of next year.

Tao Levy - Loewen Ondaatje McCutcheon Limited

Okay. And then just last one, you also mentioned that you're going to file Augment Injectable in some other countries in the interim. Any notable ones you could highlight?

Samuel E. Lynch

Well, obviously, we have a commercial presence already in Australia. So we will be looking to file it in Australia. They did accept the Canadian -- they accepted the sort of the precedent or the approval in Australia as was followed the approval in Canada for Augment. So we think that's certainly another substantial market opportunity and would be one that we would look to file as fairly soon for approval of Augment Injectable in Australia. And then there are other countries where we are getting Augment approved, in other markets. And once we have Augment approved, we will certainly look to follow that on fairly quickly with Augment Injectable.

Tao Levy - Loewen Ondaatje McCutcheon Limited

Are they mostly smaller kind of geographies?

Samuel E. Lynch

Yes.

Tao Levy - Loewen Ondaatje McCutcheon Limited

Okay. And then, actually, I have one more last question. You mentioned you may not reinitiate the enrollment of the U.S. Augment Injectable trial. Now that -- is that just because there might be changes in a potential new pivotal trial that would not allow you to use the data that you accumulated thus far?

Samuel E. Lynch

Yes, Tao, I think it's just -- it's a little too early to tell for sure until we receive the FDA response to our PMA amendment for the Augment, for the Augment PMA. We believe, as you know -- as you know, the Augment Injectable pivotal trial was designed on the basis of the Augment pivotal trial. And given some of the comments that have been made regarding that clinical trial design, we just want to make sure that we get complete clarity on the FDA view of that trial design before we continue to enroll patients in the Augment Injectable study. And we think we will get that clarity as the agency completes its review of the Augment PMA. So that's one big consideration. The other consideration, of course, is at this point, those first 105 patients that were enrolled in the U.S., primarily in the Augment Injectable trial, have, as I mentioned, already completed their 6-month endpoint, which is the primary endpoint for that study. And frankly, by the time, again, we get the FDA decision on the Augment PMA, even the complete response letter that we expect at the end of this year, those patients will have completed the full one-year follow-up in the Augment Injectable study. So we will -- we'll continue to assess that, but there is, I think, a lot of data that suggests that we haven't gotten this far along with the first 105 patients, may want to take a look of the data from those patients, given that it's going to be available on the first part of next year, and before we decide what to do as a next step for development of the Augment Injectable product in the U.S. Finally, there -- and I hesitate to mention this a little bit, but there is a potential that with the 105 patients enrolled in the U.S. plus the 75 patients treated in Canada, so that's 180 patients plus, then we've got 10 patients, 10 or 20 patients that were treated in pilot studies. So we have close to 200 patients worth of data on Augment Injectable, or will have by the end of the year, around the end of the year. So in some ways, that's a fairly robust data set. At a minimum, it would, I think, allow us to design a very robust pivotal clinical trial if we restarted it. And if the data are quite compelling, and Augment gets approved, there might, and I emphasize, might, be at least a strategy by which we could pursue approval of Augment Injectable just based on those 200 -- the data from those first 200 patients. That's certainly some risk involved with that strategy. It wouldn't be a slam dunk by any stretch. But it certainly, also, wouldn't be out of the realm of possibility either.

Operator

Your next question comes from Mark Landy with Summer Street Research.

Mark Landy - Summer Street Research Partners

Just looking at the dose ranging study for the chronic tendinopathy, what's your full cost of that study?

Samuel E. Lynch

Mark, we haven't fully released that. But the direct patient cost, of course, are very reasonable because it's a nonsurgical trial. So compare the direct patient cost in a foot and ankle Fusion study of maybe 20,000 a patient, and for a chronic tendinopathy study with just an injection and 6-month follow-up, you're probably looking at maybe 5,000 a patient. I mean you have to add the CRO cost, certainly, on top of that. But it's significantly less expensive than a foot and ankle fusion surgery trial.

Mark Landy - Summer Street Research Partners

And then how long are you expecting enrollment to take, Sam?

Samuel E. Lynch

I hate to speculate at this point, Mark. Let us get the sites fully activated and look at the enrollment in the first few months of that study, and I can give you, certainly, a better estimate. Obviously, we are spending a fair amount of time qualifying the sites so that we know that they've got a significant patient load. I would say that it has not been a problem to find a number of sites that have a significant patient load in this area, so we are optimistic that the sites that we do end up qualifying and initiating will be able to enroll a substantial number of patients. But I hesitate to give a lot of guidance at this point on how long the enrollment will be. But I think it will be reasonably quick.

Mark Landy - Summer Street Research Partners

Okay. And then just, I suppose, my last question is on that subject. How many sites are you targeting? And is it just a single injection, or some of its dosing is going to be multiple injection?

Samuel E. Lynch

This trial is designed as a single injection dose escalation study. So we start with the lowest dose, which is a dose is yielded from the concentration of the PDGF solution. So it's a constant volume of solution that's injected to the tendon. So we've controlled for that variable. And it's the dose of protein, the concentration of the protein that is varied. So the volume of the injection is consistent. And as I said, we start with the lowest concentration, and there are 4 dose ranges.

Mark Landy - Summer Street Research Partners

Okay. And how many sites then?

Samuel E. Lynch

5 to 7 is what we're looking at right now.

Mark Landy - Summer Street Research Partners

Okay. And then just moving onto the Luitpold dispute. Any movement there?

Samuel E. Lynch

Sorry, Mark, moving on to what?

Mark Landy - Summer Street Research Partners

The Luitpold dispute?

Samuel E. Lynch

Oh, yes. No, nothing that we are willing to talk about publicly yet at this point. We continue to have dialogue. We continue to work towards a resolution there, hopefully, amicably. But we will continue to pursue that one way or the other.

Mark Landy - Summer Street Research Partners

Okay. So at this point, can I still assume that it's an amicable settlement, or can't you comment on that?

Samuel E. Lynch

Well, I would say, so far, yes, we're certainly continuing to have discussions with them.

Mark Landy - Summer Street Research Partners

Okay, fair enough. And then, lastly, if I can just drill down a little bit into the Australian launch. How many territories are there? And how many are you -- have you ruled out?

Samuel E. Lynch

I -- Mark, I'm going to have to get back to you on that.

Mark Landy - Summer Street Research Partners

Okay. ASP?

Samuel E. Lynch

Right now, we are launching with the 1.5 cc unit size, and the pricing on that is USD 1,520 -- USD 1,520, for the -- that's for the 1.5 cc.

Mark Landy - Summer Street Research Partners

And that's U.S., not Aussie dollars?

Samuel E. Lynch

Yes, that's U.S. As you recall, the most common volume of Augment used in the North American pivotal clinical trial was between 3 and 4 cc, so they will -- in many of these cases, would be using 2 of those kits.

Mark Landy - Summer Street Research Partners

Okay. And then lastly, how many procedures have been done thus far in Australia? In the commercial selling?

Samuel E. Lynch

We haven't released that information at this point.

Mark Landy - Summer Street Research Partners

So then you're not prepared to share what the revenues coming out of Australia are?

Lawrence E. Bullock

No, Mark. This is Larry Bullock. At this point, we're really not breaking out our revenue for Canada, Australia, et cetera. So at some point, we may choose to do that. But so far, we haven't.

Samuel E. Lynch

Mark, I'll -- yes?

Mark Landy - Summer Street Research Partners

And last question, and I'll step back in line. Are you guys a stocking, or a carrying stocking distributor, or is it just a -- is it started as a pass through?

Samuel E. Lynch

Mark, they are a stocking distributor.

Mark Landy - Summer Street Research Partners

Okay, okay. And minimum commitments, I'm assuming?

Lawrence E. Bullock

Yes, we have budgets with them and stuff, but -- or quotas with them. But there isn't a minimum purchase commitment from them at this point.

Operator

[Operator Instructions] Your next question comes from Kevin Kotler with Broadfin Capital.

Kevin Kotler - Broadfin Capital, LLC

So just a couple of quick ones. You had a nice-sounding cadence about how you're controlling costs, but then you started talking about starting this tennis elbow trial and then following these rotator cuff patients for a year. It sounds like they're all triggered -- they both start in next year, or are they starting this year? I think the tennis elbow is next year?

Lawrence E. Bullock

Kevin, this is Larry again. So we certainly will have some startup costs for the tendinosis trial in late 2012. So you can certainly anticipate that those costs will start to come in, in fourth quarter. We haven't talked about how much will be in 2012 versus 2013 at this point, though.

Kevin Kotler - Broadfin Capital, LLC

And how about following these patients, these 30 patients for a year versus...

Samuel E. Lynch

Yes, that's going to be very minimal because we'd already reported the data through 6 months, so it's just getting one additional follow-up. So it's really very minimal.

Kevin Kotler - Broadfin Capital, LLC

Right. And this -- I guess, this study, did you talk about how many patients you're going to have in this tennis elbow trial? And what would be a good assumption for cost per patient?

Samuel E. Lynch

Yes, it's 100 patients in total. And as I just mentioned previously, the direct cost are around 5,000 a patient and we'll have to add on some CRO costs on top of that.

Kevin Kotler - Broadfin Capital, LLC

Okay, I just would like you guys to focus on just getting this Augment approved by the FDA and/or follow-up with these injectable patients, which seems to have so much promise than trying to sell this product, your current products or in other parts of the country. It seems like most investors are focused on just getting this through the FDA. So maybe put a moratorium on spending until you get this through the FDA, and then you could decide whether it's best to another trial in the U.S. or to do this launch plan. I mean, what kind of data -- what kind of data are you presenting to distributors on your graft material that would get any type of traction in a market that is so competitive?

Samuel E. Lynch

First of all, just to -- Kevin, to address the first part of your comment or question there. Look, we've certainly understand and appreciate the focus on the approval of the Augment PMA. We are totally in agreement on that. That's why, obviously, we stopped the enrollment of the Augment Injectable trial at the beginning of this year and put any further work in the sports medicine area on hold. Also, they're for 9 months, while we really focused on that Augment PMA. So we are totally focused on getting that across the goal line. And we understand that's where a lot of the immediate value creation is going to be. So please be assured that, that continues to be a major focus of ours.

Kevin Kotler - Broadfin Capital, LLC

Okay. And as far as the data on the graft material and why you spent time on -- like, trying to warm up your marketing and sales capability with a graft product through U.S. distributors? What data do we have, if this is anything better than anyone else's?

Samuel E. Lynch

Yes, so we certainly have a -- as we looked at this particular -- I think you're referring to Augmatrix, and show that to a lot of the surgeons, we got a lot of very good feedback on its ability to be used with bone marrow aspirate, its ability to incorporate bone marrow aspirate very efficiently and to serve as a good substrate for cell adhesion and attachment. And so we think that those are all good properties that can distinguish it from other bones, synthetic bone substitutes that are on the market. But certainly, you're right, in the sense that there are a lot of, those kinds of products already on the market and it's such a very crowded, noisy space. And really, one of our main objectives here was to really vet out our commercialization processes, both internal and through distributors, so that we weren't trying to launch Augment from a standing start. We wanted to get some experience in the marketplace. We've been, within BioMimetics, a very R&D focused company for the last many years. And while many of us have, certainly, commercialization and product launch experience, the organization of BioMimetics has not had that recently. So we wanted to vet out any kinks in our system here internally before we took on a major product launch like Augment.

Kevin Kotler - Broadfin Capital, LLC

Yes, I mean, it seems like to me you can hire that person who has that experience, but you're not going to gain anything from doing it only because, I mean, and talking to the analyst, the experience of selling products like this, it's basically once it comes down to having a salesperson in the OR for this surgery with your metal implants and then you get the ancillary business. So I mean, maybe, I guess, generally speaking, it just seems like -- the focus should be just beyond this approval. And also, I would say that it seems like the injectable -- I think everyone who I've spoken to says that's the really hot product and it's encouraging that you're being optimistic that you may be able to get -- maybe that as a supplement off a PMA approval. But on the other hand, it could be -- it could also be the data that gets you over the edge with the FDA. And I don't know if there's any way of -- I was in favor of continuing that or continue to figure out. I was a little confused. I guess my question to you is, I was a little confused saying -- when you said that the injectable had some clinical trial issues, design issues, that you -- waiting for the FDA. Could just be specific on, like, what did you learn from the non-injectable to the injectable that, in the FDA's questions, gave you -- give me 2 or 3 examples of things that you want us -- why you stopped it and why you want to wait for the decision before moving forward with it?

Samuel E. Lynch

Well, sure. So some obvious ones that came out of the Augment panel discussion, for example, would be things like using CT scans to asses a primary endpoint. That was viewed by the agency as the gold standard and the definitive way to assess fusion initially up until very near the panel meeting and then there was a lot of discussion at the panel about whether or not that had been validated and obviously, the when we got the post-panel response letter, there was the request to go back and have the CT scans reread by both the original radiologist and a new radiologist. So that is one area where we, for example, are looking to -- for the review of this Augment PMA, to provide clarity on the use of CT scans as a component in the primary endpoint for Augment injectable. That's one sort of obvious example. There are many others like that.

Operator

We have reached our allotted time for questions. Are there any closing remarks?

Samuel E. Lynch

Well, great. Well, thank you, Therese, and thank you to all of our investors. We certainly appreciate your support very much. We remain very enthusiastic about our prospects moving forward. And with that, let me close. And again, thank you, all, for joining us today.

Operator

Ladies and gentlemen, thank you for joining today's conference. This concludes our conference. You may now disconnect.

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