Osiris Therapeutics CEO Discusses Q4 2013 Results - Earnings Call Transcript

| About: Osiris Therapeutics, (OSIR)
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Osiris Therapeutics (NASDAQ:OSIR) Q4 2013 Results Earnings Conference Call March 5, 2014 9:00 AM ET


Lode Debrabandere - President and CEO

Philip Jacoby - CFO


Ted Tenthoff - Piper Jaffray

Eun Yang - Jefferies

Bill Plovanic - Canaccord


Good morning, everyone. Welcome to the Osiris Therapeutics fourth quarter and full year 2013 earnings conference call.

Before we begin, I would like to remind everyone that this conference may include forward-looking statements that involve uncertainties and risks. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the section entitled Risk Factors in our filings with the Securities and Exchange Commission. As a reminder, today's call is being recorded.

I would now like to turn the conference over to Lode Debrabandere, president and CEO of Osiris Therapeutics. Please go ahead, sir.

Lode Debrabandere

Thank you, operator. Thank you, and good morning everyone. Welcome to our 2013 year-end conference call. As mentioned by the operator, I would like to draw your attention to our forward looking statement disclaimer and you should keep in mind the risk associated with any possible forward looking statements made today. For further information on risk statements, you can look at our filings with the Securities and Exchange Commission.

As you know, I was appointed CEO of Osiris Therapeutics last December, and succeeded Dr. Randal Mills. Randy was the CEO of Osiris for 10 years, and I’ve worked closely with him since my start at Osiris eight years ago. Our eight year working relationship starting with me as the general manager of Prochymal, and later as chief operating officer, were just outstanding.

Randy is still my dear friend and advisor. The transition for me and the company was seamless, and I’m looking forward to leading the company into a new era. I plan to direct the company to commercial success and provide patients with new, innovative products that solve real problems.

For the call today, I will highlight our most important accomplishments and recent performance. I will then spend a couple of minutes explaining my vision for our business strategy as we continue to position the company as the leader in wound care and sports medicine.

Phil will then discuss in more detail the financial performance, and lastly, we will conclude the call with our key priorities moving forward. Let’s now review our recent highlights and developments.

The most impactful event for our company was the reporting in August of the overwhelming efficacy results in our randomized blinded multicenter clinical trial of Grafix in diabetic foot ulcer patients. This study represents the first and only high-quality clinical program that has been conducted in the past decade. DermaGraft and [unintelligible] both completed similar clinical trials over 10 years ago.

For this study, quality was included in the design in many different ways. First, we used an independent academic clinical research organization to execute the clinical monitoring, databasing, and statistical analysis. Second, it was a multicenter study covering 20 clinical sites across the United States, a true sample of the real world. Third, it was randomized and blinded. And lastly, an imaging core lab with two independent, blinded wound experts verified the primary endpoint of complete wound closure.

As you know, we reported statistically significant results for the primary endpoint of complete wound closure, but also statistically significant results were all secondary efficacy endpoints. Additionally, we reported statistically significant fewer adverse events in the Grafix arm compared to the standard of care arm.

We learned that this difference was largely driven by reduced incidence of wound infections in the Grafix arms. These efficacy and safety observations, along with the observation of fewer hospitalizations in the Grafix group, offer significant cost savings for the payers.

The second very recent development at Osiris is the acceleration of the commercial expansion plan. In 2013, we initiated Osiris’ transformation from a scientifically focused company to a fully integrated commercial enterprise. We started with distribution partnerships and a sales force of 10 representatives focusing on the VA hospital system.

We purposefully chose to pursue a limited commercial effort last year because our Grafix clinical trial was still underway. We wanted to first complete and report the well-controlled multicenter randomized clinical trial before making more significant investments in our commercial infrastructure.

Today, with the Grafix study behind us, we have accelerated our expansion efforts and hired on average one sales rep per day, every day, for the past 10 weeks. Our sales force expanded from 10 to 58 representatives, including six regional business directors. We also strengthened the home office management team and hired additional leadership in field operations, customer service, market access and reimbursement, and marketing.

At the revenue level, we tripled our sales compared to 2012 and pleased to report 2013 annual sales of $24.3 million. This sales growth went hand in hand with a continued improvement in gross margin. Margins improved from 67% in 2012 to 73% in 2013 and we continue to make improvements to our margins as volumes increase.

In 2013, Osiris reported income from continuing operations of $1.1 million and finished the year with a rock solid balance sheet, including total assets of $92 million.

And lastly, at the product level, we first partnered Prochymal in a transaction worth up to $100 million and then launched Cartiform OvationOS. And I’m pleased to announce that the first patients have been treated with OvationOS last month. We look forward to improving their outcomes and collecting clinical data from these patients.

In the next slide, let’s have a quick look at the quarter over quarter revenue growth for the past two years. This graph demonstrates eight consecutive quarters of revenue growth, with this last quarter ending up just over $8 million or a 175% increase from the fourth quarter of last year. As I mentioned earlier, these revenue numbers were achieved with the limited commercial infrastructure we had available in 2013.

The next slide shows the year over year comparison from a revenue and gross margin perspective. Revenue tripled from $7.9 million to $24.3 million. Gross profit for the year was $17.7 million, an increase of 234%. Gross profit for the fourth quarter alone was $5.9 million, which is greater than the gross profit for the whole year 2012. Gross margins stand at 73% right now.

Before Phil discusses in more detail the financial performance, I will spend a couple of minutes explaining the key components of Osiris’ future business strategy and how we will maximize long term value. My goal is not to engage in a lengthy strategy discussion, but share with you how our day-to-day decision making is driven and guided by these three key pillars of our business strategy.

We are focused on creating value and preparing the company for long term growth, innovation, commercial transformation, and differentiation, our key drivers of our strategy. We have the right people, culture, and processes in place to continue to innovate and develop proprietary products, transform to a commercial enterprise, and leverage our competitive advantages, which are those things that differentiate our company and our products and create barriers to entry for everyone else.

As you know, ever since our founding in 1992, we have dedicated ourselves to developing great new products that solve real medical problems. We are pioneers in the field, first with Osteocel, then with Prochymal, and now with Grafix, Cartiform, and OvationOS. Osiris was the first in the world to safely administer allogeneic mesenchymal stem cells to a patient, the first to submit a license application for a stem cell drug, and the first to obtain approval of a stem cell drug.

We will leverage our scientific leadership, develop and launch intelligent new products not me-too products, and focus our efforts in two specific areas: wound care and sports medicine. Essential for successful innovation is that your products offer a strong value proposition, and must demonstrate a pharmaco-economic benefit. I will come back to this in a minute and discuss our work on Grafix’s value proposition as an example of the execution of this strategy.

In the past, Osiris has sought innovation in a wide variety of therapeutic areas. We are changing this, and in the future all our R&D activities are focused on two very specific large business opportunities. One is tissue repair and reconstruction in the acute and chronic wound market, and the second area is motion preservation in the orthopedics and sports medicine markets.

Both of these markets have significant unmet medical needs, have real problems to solve, and represent multibillion market opportunities. We are currently working on some great new products in these specific areas, and will provide more details on these discoveries during future calls.

A nice example of the implementation of our innovation strategy is Cartiform. To support our scientific leadership, Osiris always generates data that clarifies the underlying biology of our differentiated products.

Cartiform is a viable cartilage mesh available at the point of care, used for augmentation of microfracture or marrow stimulation procedures. This allograft matrix is designed to optimize interactions with the mesenchymal stem cells from the patient’s own bone marrow to stimulate chondrogenesis and articular cartilage repair.

The signs and data generated behind Cartiform will be presented next week by Dr. Vangsness at the 2014 American Academy of Orthopedic Surgeons annual meeting in New Orleans. As mentioned in previous calls, Cartiform is in a soft launch, and we are focused first on collecting long term data on our patients.

The second pillar of our business strategy is commercial transformation. To accomplish a swift commercial transformation of the company, Osiris is investing heavily to expand our sales capabilities. This transformation towards commercial excellence is well planned and represents a significant change for us. In 2014, for the first time in the company’s history, our commercial spend will significantly exceed the R&D spend.

Let me share with you some specifics of this transformation. Our commercial strategy has three very specific areas of focus. First, obtain full market access and reimbursement for our products, two, invest heavily to build a competitive commercial infrastructure, and three, provide the customer with the best service and experience.

Now a little bit more on each of these areas. First, our top priority is to obtain reimbursement for Grafix. Essentially, to obtain Medicare reimbursement with most carriers, evidence of a randomized controlled blinded clinical study needs to be provided through a published, peer-reviewed manuscript.

Osiris has submitted, earlier this quarter, the 302 study manuscript to a very reputable journal. We expect this important manuscript to be published in the next couple of months. Once published, the 302 data will immediately be leveraged to secure broad Medicare and commercial coverage.

To support these reimbursement efforts, we have hired an experienced reimbursement team, built relationships with the medical directors of [unintelligible], and launched a reimbursement hotline. But there is more work to be done than just obtaining immediate coverage.

We do expect the reimbursement landscape to become even more challenging in the future, when large payers will insist on more evidence based medicine and a well-defined value proposition. Therefore, Osiris is partnering with key payers to provide them with comprehensive data sets quantifying the cost effectiveness and cost benefit of our therapies.

A good example of evidence based medicine and value proposition is the 302 clinical study, that not only provided evidence of clinical benefit, but also of a cost benefit compared to currently used treatment options.

To fully leverage our clinical trial, we have joined forces with the Division of Healthcare Policy and Research at the University of Colorado and this team of health economics experts is analyzing our 302 database and recent animal databases of the Centers of Medicare and Medicaid Services, containing millions of claims related to wound care management to evaluate the cost benefits of Grafix.

This analysis takes into account cost drivers like types of treatment, use of additional medications, incidence and different types of adverse events, serious adverse events, hospitalizations, and the potential need for additional clinical procedures. This type of in depth analysis has never been done before, and will be of great future importance to the reimbursement decision makers.

On a more tactical level, we are also addressing the issue of wastage in the skin substitute market. Grafix will be introduced in four optimal sizes to mimic wound size reduction and we will be able to offer these smaller sizes at reduced cost.

Second, to drive the revenue growth, Osiris is building a best in class commercial infrastructure. As I’ve mentioned, in the previous 10 weeks, we have hired on average one sales representative per day. This first wave of transformation, mostly driven by the hiring of these sales professionals, will be complete in the second quarter.

In the short term, we will focus our sales team efforts to the VA hospitals. There are 145 VA hospitals in the country. The goal in 2014 is to expand usage to 80 hospitals. These 80 high-volume VA hospitals represent 85% of the overall VA business in wound care.

Once reimbursement is obtained, which we expect in the next couple of months, we will launch Grafix in the commercial space. The ability to target nongovernment accounts will be a key driver for future growth.

Our sales force expansion and deployment is targeted to maximize penetration in the high volume wound care accounts. In the United States, wound care is provided in about 20,000 facilities with about 7,300 prescribers of skin substitutes. Osiris’ initial sales force deployment will focus its efforts on 485 high volume facilities that represent 50% of the business. It’s quite remarkable that these 485 facilities, which represent just 2.5% of the overall number of facilities, generate 50% of the wound care business.

In a second, future, wave of commercial expansion, we plan to expand the number of targets from 485 to over 1,000 and bring on additional sales professionals to optimally cover these additional accounts. These 1,000 accounts represent over 66% of the wound care market.

And lastly, we have initiated some very specific initiatives that will make the customer experience with Osiris valuable and unique. One of my top priorities throughout this transformation is focusing Osiris’ culture and DNA towards making every customer experience with our company a better one compared to any other competitor.

Our technologies and products require customer interactions at a different level. Physicians and nurses are interested to learn more about the uniqueness and differentiation of our products. Practically speaking, I insist our sales reps understand our science and are able to provide a valuable, scientific interaction with the surgeon.

We will also invest heavily in medical education, including education to the residents and the nurses; expand our customer service department; and build a reimbursement hotline for general reimbursement information, patient insurance verifications, and prior authorizations assistance.

The third pillar of our strategy is differentiation. We will use differentiation as a competitive advantage and key strategy to offer better products and introduce barriers to entry for our

competitors. We differentiate our company and our products mainly through our manufacturing knowhow, our science, our clinical development programs, and our IP.

For example, our proprietary BioSmart manufacturing process ensures that the full integrity and functionality of the original tissue is kept intact. Osiris’ BioSmart tissue processing techniques are designed to maintain this tissue’s full integrity and more importantly its three-dimensional extracellular matrix structure.

We just don’t only differentiate through our manufacturing processes, we also differentiate clinically from other skin substitutes, in this particular example, Grafix. A powerful example of such a clinical differentiation is the execution of robust, high-quality clinical trials like the 302 protocol in Grafix. I will not repeat efficacy and safety endpoints of the trial, but just wanted to remind you of the overwhelming efficacy report of 191% relative improvement over standard of care.

As a reminder, a decade ago the similar clinical trials of DermaGraft and [unintelligible] obtained a 64% and 47% relative improvement respectively. Grafix, with 191% improvement, performed three times better.

An illustration of the performance of Grafix is the [unintelligible] in the next slide, where probability of complete wound closures [unintelligible] over time. This graph demonstrates the 70% probability of wound closure in treated with Grafix compared to just over 20% with standard of care. It also shows the extraordinary fast onset of wound closure with 50% of Grafix patients closed in 50 days, compared to less than 10% in stand of care patients.

So, Grafix closed not only significantly more wounds, it also closed them much faster. This type of trial is very much needed and appreciated by the physician community. Wound care doctors should demand better quality trials and not be satisfied with single center open label clinical trials of a handful of patients that have no statistical power or meaning.

At Osiris, we are committed to continue to conduct such well-designed large clinical trials to fully test and differentiate our products. The regulators want it, the payers will require this type of robust evidence, and frankly speaking, the physicians should demand it.

Now, I’m going to let Phil discuss in more detail the financial aspects of our business, and following that, I will conclude the call with our key priorities. Phil?

Philip Jacoby

Thanks, Lode. When looking at our financial statements, it’s important to note that we are now using the discontinued operation presentation. This is required by generally accepted accounting principles in the U.S., and while on the positive side, it does provide a much better focus on our core business, it also results in more cost being absorbed by our continuing operations.

For example, historically, we allocated the cost of our facilities between our biosurgery and therapeutics operations. Upon the sale of our Prochymal assets, 100% of the facility costs are now charged to biosurgery. Basically, today, any expense that didn’t go away when Prochymal was sold is now fully absorbed by biosurgery.

If you look at our balance sheet, we’re reporting a very solid financial position, including almost $82 million in cash, investments, and receivables at year-end. Our operating metrics are also very strong. The days sales outstanding of our trade receivables are under 60 days presently. Our inventory is turning over very, very rapidly, and we presently have less than 30 days sale in inventory.

Our current assets include trading securities of $17.1 million at year-end. This represents the $15 million in stock paid to us on the Prochymal sale, plus the value of the downside protection against price declines that could occur between the date we received the stock and when we’ll be able to sell it in December of this year. Our current assets also include other receivables of $15 million, which is the balance of the cash initial consideration to be paid to us next month in connection with the Prochymal sale.

We have utilized some of our substantial deferred tax assets through the release of almost $6 million of our valuation allowance. In fiscal 2013, we paid approximately $500,000 in cash taxes on net income of $41.6 million. This represented the alternative minimum tax on our currently taxable income.

For tax purposes, the $15 million in cash to be received in April of this year becomes taxable in fiscal 2014, under the installment sale deal. We ended the year with $92 million in total assets, including $84.1 million of current assets. Our total liabilities were just over $11 million and we continue to have zero debt.

Turning to our income statement, revenues from product distribution during the fourth quarter of this year of $8.1 million exceeded the total product revenue for the full fiscal 2012. Our fiscal year product revenues of $24.3 million represent a three-fold increase over the fiscal 2012 product revenue.

As Lode mentioned earlier, our gross margin increased to 73% for the fiscal year, compared to 67% in fiscal 2012. This is largely the result of gaining manufacturing efficiencies through the higher volumes of production.

We do continue to operate our facilities using a single shift. We have plenty of room for additional growth without making substantial capital investments in our facilities. We have invested, however, in a comprehensive enterprise resource planning system to increase our operational efficiencies, and we implemented this system for our supply chain management, manufacturing, and distribution channels during the recently completed fiscal quarter.

We’ve spent approximately $5 million on research and development at our biosurgery business during the past fiscal year, much of it on the successful DFU trial, but we are continuing to invest in new product development as well as product improvement.

Our selling, general, and administrative expenses grew to $15.5 million from $5.6 million in the past year, representing almost 64% of our product revenue. As Lode discussed a few minutes ago, we are continuing to invest very heavily in building our sales, marketing, and reimbursement infrastructures to support and promote our continued sales growth.

We reported net income from continuing operations of $1.1 million for the fiscal year and that’s after absorbing substantial costs that were previously allocated to our former therapeutics business. Income from discontinued operations of $41.6 million was recognized in fiscal 2013, including the gain on the sale of Prochymal assets of $47.2 million, which was partially offset by the $6.7 million loss from the operations of discontinued operations.

The gain on the sale of discontinued operation includes the $50 million of initial consideration that will be fully paid to us in April of this year. The contingent milestone based additional consideration of up to $50 million will be recognized if and when the milestones have been achieved.

We reported basic earnings per common share of $1.25 for fiscal 2013, altogether a pretty strong year. With that, Lode, I’ll turn it back to you.

Lode Debrabandere

Thanks, Phil. So I’ll wrap up here with our near term strategic priorities. First, as mentioned before, obtain reimbursement for Grafix. This is the most important priority for Osiris. We have completed the well-controlled studies, submitted the manuscript, built relationships with all medical directors of [unintelligible], hired a reimbursement team, and set up a reimbursement hotline. So I’m confident that we will make significant progress in the next couple of months.

Second, grow revenue. We have a new sales team in place, and are focusing now on getting them trained and up to speed. In just a few months, this team will be laser focused on increasing revenue.

Third, educate physicians and wound care nurses on the 302 data. As mentioned before, we conducted the first high quality study with Grafix since DermaGraft and [unintelligible] completed their clinical programs 10 years ago. A manuscript of this study will be published soon, and will be very helpful to further educate physicians on the data. Physicians have indicated that they expect this kind of evidence and nothing less.

Fourth, improve our gross margin. We improved the gross margin from 58% in 2011 to 67% in 2012 to 73% in 2013, and will continue to make improvements. And lastly, orthopedic surgeons implanted the first patients with OvationOS, and we will collect clinical outcomes data during the course of the year.

So with that, I will end my comments here, and I invite everyone to see us at the many, many upcoming events. We will be at the Canaccord Musculoskeletal Conference in New Orleans next week, followed by the Alliance of Regenerative Medicine and the Jefferies Global Healthcare Conference in New York.

If you’re a healthcare practitioner, please stop by and visit us during one of the many meetings we participate at between now and the end of June. Next week, we are at the American Academy of Orthopedic Surgeons annual meeting, followed by the Superbones East conference at the end of March.

In April, we are present at the Midwest [Dietary] Conference and SAWC, or the Symposium of Advanced Wound Care. And lastly, in May and June, we exhibit at the Arthroscopy Association of North America annual meeting and the Western Foot and Ankle Conference.

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

Question-and-Answer Session


[Operator instructions.] Our first question comes from Ted Tenthoff of Piper Jaffray.

Ted Tenthoff - Piper Jaffray

I just want to get a sense of what’s taking so long to publish the 302 data. Is it just typical peer review, or is there something else that’s taking so long to get those results in publication?

Lode Debrabandere

That’s a good question, and I think to answer this question, I need to take you a little bit through the design of the study again. As you know, this study had, first, a 12-week blinded treatment phase. At the end of this 12-week treatment phase, the patient had two options. First, if the wound was not closed and the patient was on standard of care, the patient was crossed over to Grafix and was allowed another 12 weeks of Grafix applications.

However, in case the wound did close, and it doesn’t matter if it closed under standard of care or Grafix, there was a 12-week blinded additional follow up phase. Now, during this 12-week blinded follow up phase, we assessed durability of wound closure. And so we kept the patient totally blinded for an additional three months.

So when we reported interim results in August, this was only for the first 12 weeks blinded treatment phase. And so we unblended at this point in time those patients that completed that first 12 weeks, and announced the results. But we did not lock the database, and we did not unblind the second follow up phase.

So, in order to keep the full integrity of the study, we decided to basically keep that second group of patients totally blinded, which basically, in essence, means that this is not a three-month study but a six-month study. And so we planned ahead here, and in keeping the full integrity of the study, that was, in our opinion very important for potential future evaluation of the [unintelligible] and the potential future interactions with the regulators.

Ted Tenthoff - Piper Jaffray

So it’s really just a matter of waiting for that final durability data. Have you received that?

Lode Debrabandere

Yes. In August, we finished the first 12 weeks, and then adding three more months in a blinded manner, that brings us to November. And in November, we locked the database and then everything is very normal. And it’s very much as planned. You know, when you lock it end of November, the PI and seven or eight other investigators - this was a large study - went through the manuscript preparation, the review, and then early January it was submitted.

So this all went pretty fast, if you know that, indeed, it was a six-month study, not a three-month study. So this is nothing out of the ordinary. The review is underway, and it’s going fine.

Ted Tenthoff - Piper Jaffray

And just to follow up with that, you went into detail about the top priority, about expanding reimbursement. Give us a little bit more color about what those steps are once you have publication in hand. What is the plan to get that data out into the hands of the private payers to actually get Grafix paid for and hopefully increase sales in the private payer community?

Lode Debrabandere

It’s a two-pronged approach. Indeed, we’ve got to get the manuscript out. And then we first work with CMS, and there are eight Medicare administrative contractors throughout the nation. And we have relationships already with all eight of those, and we will submit the results of the manuscript to these eight, to the medical directors of these eight, have discussions with them, and we expect to get pretty fast reimbursement, knowing the quality of this study and the robustness of the study.

And then after that, we will move to the more commercial payers, and approach the large commercial payers first. And I would say the top five first. That will be in the second half of the year. So I think everything is pretty straightforward in what you need to do to get reimbursement, but for us, we need to get this manuscript out, and as soon as this is out, next steps are pretty clear.


Our next question comes from Eun Yang with Jefferies.

Eun Yang - Jefferies

If you could just comment briefly on the VLU trial that you’re currently running? My understanding is that this is not required to market for this indication. Just comment on that briefly?

Lode Debrabandere

Very similar to the strategy we have with Grafix on DFU, so we’re executing a similar strategy on VLU, which is we first run a more exploratory program, where we get a good feeling of the characteristics of the product and how it behaves in those patients, and then we move to a real large Phase III quality kind of a program.

Where we are at right now with the VLU is we are doing this exploratory phase right now, and then we are already at this point in time, also designing a larger study, but we’ll wait to fully go ahead on that one when we have more exploratory data on this program. And this is in the next couple of months. So this is not long term. We do plan to get those data soon from the exploratory study, and then we do plan to immediately go full speed with the larger clinical program as well, similar to the 302 study.

Eun Yang - Jefferies

So you still expect initiation of the large VLU trial, the [unintelligible] trial, the 302, in 2014?

Lode Debrabandere

Absolutely, yes.

Eun Yang - Jefferies

And then on the planned [BLA] filing for Grafix for enhanced label claims, any updates on that, timing-wise?

Lode Debrabandere

It’s really hard to comment. We are in dialog with the FDA and if there is anything meaningful to report, we will report. But at this point in time, yes, we are working with the FDA and that goes well, and we’ll give updates as appropriate.

Eun Yang - Jefferies

And then lastly, on the manuscript for 302, you said it’s under review currently, but had you mentioned when it’s going to be published?

Lode Debrabandere

Well, ASAP. These reviews take anywhere between six to 12 weeks. Sometimes it takes even more. It depends also on the reputation of the journal. When you go to some journals they can probably turn it around in two weeks, but it is what it is. We have chosen quite a reputable journal, and it takes its course. This is out of our control, actually.


The next question comes from Bill Plovanic with Canaccord.

Bill Plovanic - Canaccord

In your prepared comments, you talked about different sizes of products. And I was just curious, timing on the introduction of the different sizes?

Lode Debrabandere

Well, we plan to introduce those in the second quarter. That’s our plan.

Bill Plovanic - Canaccord

And then on the [macs], and I just want to make sure I understand this, you plan on getting publication then submitting to them. And how long do you think it will take to get all the [macs] onboard? Do you think you’ll have them completed by the end of ’14? Do you think it’s going to flow into ’15? I mean, just kind of your internal expectations, or at least what you want to share with investors.

Lode Debrabandere

Absolutely in 2014. We are having a great study, we’re having great results. We have already contacted all of the [macs], we are in discussion with them. So absolutely all in 2014. There’s no doubt about that.

Bill Plovanic - Canaccord

And just remind me, in terms of the reimbursement, do you get passthrough this year?

Lode Debrabandere

Yes, we have passthrough status from CMS this year, indeed.

Bill Plovanic - Canaccord

And will you have that in 2015 as well? Or just in 2014?

Lode Debrabandere

We don’t know yet. It’s for sure 2014.


Our next question comes from Eun Yang with Jefferies.

Eun Yang - Jefferies

Just a quick follow up. On the VLU trial, is this just for marketing purposes? It’s not required for anything, it’s just for increased marketing, correct?

Lode Debrabandere

Yes, indeed.

Eun Yang - Jefferies

Enhanced claims, then? Similar to the DFU?

Lode Debrabandere

You know, Grafix, with this regulatory pathway, we don’t need that. But we still like to run good quality clinical studies. That’s a different thing.


I’m not showing any further questions at this time. I would like to turn the conference back over to Lode for closing remarks.

Lode Debrabandere

Thank you so much, everybody. We’ll see you soon in the next coming meetings, and looking forward to keeping you abreast of our progress we are making. Have a wonderful day. Thank you so much.

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