Charles Sherwood - President and Chief Executive Officer Sylvia Cheung - Chief Financial Officer.

Mark Landy - Northland Capital Joe Munda - First Analysis Greg Garner - Millennium Asset Management Mike Petusky - Barrington Research.

Good morning, ladies and gentlemen, and welcome to the Anika Therapeutics first quarter 2016 earnings conference call. [Operator Instructions] I will now turn the call over to Sylvia Cheung, Chief Financial Officer. Please proceed..

Thank you, Brian. Good morning, everyone, and thank you for joining our first quarter earnings call. With me on the call today is Anika's President and Chief Executive Officer, Dr. Charles Sherwood.

During today's call, we will review our first quarter 2016 financial results and key business highlights, which were summarized in our earnings release issued yesterday and available in the Investor Relations section on our website at anikatherapeutics.com.

In addition, a slide presentation is posted on our website in the Investor Relations section under the Event, Webcast 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 2.

Before we begin, please remember that the statements made during this conference call constitute forward-looking statements as defined in the Securities and Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties.

The company's actual results could differ materially from any anticipated future results, performance or achievements. Please see our SEC filings for more information about factors that could affect our results. I'll now pass the call over to our President and CEO, Dr. Charles Sherwood..

global expansion; pipeline advancement; strengthening our infrastructure to support future growth; and strategic M&A to compliment organic growth. Now, please turn to Slide number 4. Let me start with global expansions. During the quarter we received CE Mark approval for CINGAL.

We plan to market CINGAL in Europe with existing and new distribution partners and expect commercial launches in EU to commence in the coming months.

CINGAL's formal product launch in Canada is planned for May to coincide with the Canadian Academy of Sport and Exercise Medicine Annual Conference in Vancouver, which will take place between May 18 and 21.

As we previously announced, we have also signed an agreement with a new partner for the commercialization of CINGAL and MONOVISC in China, which is the world's third largest viscosupplementation market. We are working with our Chinese partner on preparing for the clinical and product registration activities required to bring the products to market.

We view 2016 as an important year, as we continue to build global momentum surrounding CINGAL to drive future growth and create sustained value.

In addition, we recently expanded our commercial network footprint in the Asia Pacific region with MONOVISC product registrations underway in India, Australia and New Zealand to accompany the work being done in China.

These commercial developments should continue to fuel our healthy growth rate internationally and add to our global footprint and physician user base. Overall, our international product revenue increased 46% year-over-year and our international orthobiologics revenue was up 64% year-over-year.

The second pillar of our growth strategy is advancing our strong product pipeline. I'll start with two candidates you're familiar with, CINGAL and HYALOFAST, and then move to share two new pipeline projects we haven't yet publicly disclosed, all of which reinforce the company's legacy of innovation.

With regard to CINGAL, we continue to be in discussions with the FDA to understand the full scope of the clinical requirements to file a new drug application for the product in U.S. As we said before, we believe the U.S. approval of CINGAL is not a question of if, but when.

The recent approvals by the Canadian and European regulatory authorities underscore the clinical value of CINGAL, and further strengthen our resolve to collaborate with the FDA to bring this important treatment to patients in United States as quickly as possible.

Switching to HYALOFAST, we continue to enroll patients in our FastTRACK Phase III study, which is designed to yield pivotal clinical data to support an FDA approval for the repair of cartilage defect in the knee. In addition to CINGAL and HYALOFAST, our U.S.

commercial partner DePuy Synthes Mitek Sports Medicine has commenced patient enrollment in Phase III trial to support an expanded indication for MONOVISC for treatment of hip OA pain. This new indication represents a $600 million market opportunity in U.S., and our goal is to be the first market with this expanded indication.

Now, I'd like to share two new pipeline programs, which leverage our injectable and solid HA platforms and advance our vision to be the leader in regenerative joint preservation. The first program focuses on expanding the utility of our injectable technology to treat pain associated with common, repetitive, overused injuries.

Principal target will be injuries to the soft and connective tissue components of the joint such as the elbow, rotator cuff and achilles tendon. Collectively, these conditions impact up to 9.5 million people in the U.S.

each year, and a-fifth of the people with these injuries report substantial pain and loss of function of the effected limb for over one year. The pain and associated function loss represents the burden on a persons quality of life.

Currently, these conditions are treated with bracing and physiotherapy, corticosteroid injections or in the case of severe tendon conditions, surgical resection of the damaged portion of the tendon.

We see a tremendous opportunity to introduce a minimally invasive, non-surgical treatment that can provide sustained pain relief during the body's natural healing process. During the first quarter, we submitted a CE Mark application for this treatment and are evaluating the requirements for submission to the U.S. FDA.

This new technology is an example of how our office orthobiologics business, including our viscosupplementation product, leverages our HA technology to focus on injections in and around joints to shift procedures from the operating room to the office.

This contrasts with our surgical orthobiologics business, which includes our HYALOFAST product, where we leverage our HYAFF technology to focus on treating the acute and chronic injuries in the joint and the surrounding tissue, before the joint has to be fused, replaced or disabled.

The second pipeline program is an extension of our proprietary and exclusive solid HA or HYAFF platform. To date, we successfully applied the HYAFF platform and HYALOFAST as a scaffold to aid with cartilage regeneration and in HYALOMATRIX to support dermal repair.

Now, we are exploring the potential of utilizing HYAFF as a synthetic bone graft to repair and reconstruct hips, extremities and the spine. For example, ankle, hind and midfoot fusions requiring bone grafts are used to treat the pain and loss of function associated with arthritis and deformities of the foot.

In the knee, bone grafts are used to repair tibial plateau fractures and in corrective osteotomies to relieve knee pain from osteoarthritis. The bone substitute and demineralized bone matrix segments representing U.S. marketing opportunity of over $500 million at present. So we see another potential, solid, platform for growth here.

This opportunity is a bit further out and we need to complete certain preclinical and product formulation testing during the remainder of 2016, and we hope to move towards completing a 510(k) submission in 2017. Please now turn to Slide number 5. Turning to the third pillar of our growth strategy, strengthening our infrastructure.

We continue the integration of our currently outsourced solid HA manufacturing operations at our Bedford headquarters. This includes the build out of the facility and the transfer of key equipment from Italy. We also began construction on a new office in Padova, Italy, which will serve as our European headquarters to support our international growth.

This quarter, we strengthen our medical and operational expertise with the appointments of Dr. Steve Mascioli as Chief Medical Officer; and Mr. Dana Alexander as Chief Operations Officer.

Stephen will work on strengthening our existing regulatory and clinical functions, and spearheading the development of a world-class medical affairs group as part of our effort to build a direct commercialization capability in United States.

Dana will build upon our strong operational framework to support our global commercialization expansion effort. We are thrilled with these additions to our leadership team, which will help ensure we are well-positioned to achieve our objectives and drive future growth.

Lastly, we continue to explore strategic acquisitions to augment our technology, complement our product pipeline or enhance our commercialization capabilities.

As we feel the company is currently performing at a high level, we plan to be highly disciplined in assessing potential assets and products, and to be very selective in how we engage on the M&A front. That said, there are interesting targets out there and we are actively looking for the right fit.

So in summary, we are pleased with the progress we've made advancing our growth strategy in the first quarter. We're excited about the opportunities in front of us to drive future growth, and we are positioned well to achieve our objectives in the year ahead. And with that, I will turn the call back to Sylvia..

Thank you, Chuck. Anika delivered strong financial results, continuing the momentum generated in 2015 into the first quarter, and we remain in an excellent financial position to fuel our growth for the balance of the year. Please turn to Slide number 6. Total revenue increased 44% year-over-year to $22.3 million for the first quarter.

Orthobiologics revenue increased 64% year-over-year in the quarter, due primarily to an increase of approximately $6 million in ORTHOVISC and MONOVISC product sales to our U.S. commercial partner Mitek.

As discussed on our prior earnings call, first quarter 2015 orthobiologics revenue was negatively impacted by Mitek's inventory rebalancing activities. U.S.

ORTHOVISC and MONOVISC end-user revenue grew 11% year-over-year in the first quarter of 2016, which reflects the continued solid growth of end-user demand for our effective and differentiated products. We delivered a strong gross margin of 76% in the first quarter, driven primarily by a more favorable product mix.

Total operating expenses in the quarter was $11.6 million compared to $10 million in the first quarter of 2015. Income from operations increased $5.2 million to $10.7 million in the first quarter compared to $5.5 million for the first quarter of last year.

Net income in quarter grew by $3.4 million to $6.9 million compared to $3.5 million in the first quarter of 2015. Diluted EPS per share was $0.45 in this quarter, up $0.22 from the first quarter of last year. The strong financial performance was primarily due to robust revenue and timing of operating expenses in the R&D and SG&A areas.

We expect operating expenses to increase during the remaining quarters of 2016, as a result of our planned product development and marketing initiative. We ended the quarter with approximately $116 million in cash and investments on our balance sheet.

The sequential decrease in cash from the end of 2015 was primarily due to the commencement of our $25 million accelerated share repurchase program or ASR, and the investments that we made to strengthen our infrastructure to support the future growth. During the first quarter we repurchased approximately 377,000 shares under the ASR program.

This represented approximately 70% of the shares we expect to be repurchased under the ASR program. We expect the program to be completed in August of this year.

We also continue to invest in the integration of our manufacturing operations at our Bedford headquarters, and began the build-out of our European headquarters in Italy to support sustained growth.

As Chuck discussed, strategic M&A is also an integral part of our cash deployment strategy, and we plan to be highly disciplined and very selective in how we engage on that front. Lastly, turning to guidance. We expect product revenue growth for the full year of 2016 to be in the mid-teen percentage range.

We do not expect to recognize any milestone revenue in 2016. Total revenue growth for the full year 2016 is expected to be in the high-single to low double-digit percentage range.

Based on the expected timing of orders by our commercial partners, total revenue growth for the second quarter of 2016 is expected to be in the low double-digits on a sequential basis. In conclusion, we are proud of our financial results for the first quarter and we are well-positioned for the continued growth throughout the year.

The market for our commercialized products is growing, we are expanding globally, we have a deep and advancing product pipeline and we have a very clear strategy to achieve our objective. We're now happy to take your questions. Thank you..

[Operator Instructions] Our first question comes from the line of Mark Landy with Northland Capital..

Sylvia, as a first-up, there was a pretty big decrease in accounts receivable, I think around $7 million.

Can you just give us some clarity around that?.

At the end of last year accounts receivable reflected the $5 million of milestones that we achieved in the fourth quarter of last year as well as royalty, the quarterly royalty, both of which were reflected during the first quarter. So those were the primary reasons for the decrease..

And then, Chuck, just focusing on single, and I don't know how much you can give us in the discussions with the FDA, but when do you plan on filing your IND? And should we be thinking more along the lines of randomized clinical trials or do you think you'll be able to convince them to do something like an open registry and open label?.

Well, we are still, as I said in the prepared script, we are still in some active discussions with the FDA. I think one thing to keep in mind, which gets forgotten, is that this product concept is a combination of an approved viscosupplementation device with a steroid, which is also approved. Neither of the components interact with one another.

As a consequence, this is a very unique situation for the FDA and that is not a new molecular entity. So our discussions now center around how and what needs to be done in addition to the already highly successful Phase III trial that we have and the repeat study.

So until we come to some agreement on this, there will be no IND, because there is nothing to file. But, I want to differentiate that, and I think it's important that people understand. This is not like some of the other products that are being developed that potentially could be competitive, it's a special and unique situation.

And the reason it's taking so long in discussions with the FDA is initially they just didn't understand the perspective. I think we are getting close to them understanding exactly what this product is. And I am optimistic that we we'll get to sit down fairly soon and have a meaningful discussion about how to get this product approved.

As soon as we reach an agreement upon any additional work to be done, we will be totally forthcoming in communicating that..

Our next question comes from the line of Joe Munda with First Analysis..

Chuck or Sylvia, could you talk a little bit about the delta between the growth in orthobiologics and the end-user demand? I mean that's a pretty substantial delta there and any help in kind of understanding that would be extremely helpful..

We get a little or more clarification, Joe, on --.

The Orthobiologics..

Could you rephrase that a little?.

Sure. Revenue growth for orthobiologics was up 64%, but end-user demand growth was up 11%. So there's a little bit of a delta there.

Are we looking at large stocking orders at J&J?.

Not large stocking orders. This is really a year-over-year comp issue, if you will. If you recall, in the first quarter of last year we got hit with the early stage of the inventory reset at Mitek to bring their number of weeks of inventory on hand from a certain level to a lower level, which was roughly about a 50% cut.

So as a result, Q1's product sales in 2015 from us to Mitek was very low, and the year-over-year approximately $6 million increase in product shipment is the result of we exited Q3 of last year with normal inventory purchase patterns with Mitek.

And the end-user revenue, 11% is really a reflection of the -- is really a calculation of the royalty revenue that we earn as a result of Mitek's end-user revenue and that grew year over year at 11%..

Also, Joe, you threw out a number of 64% or 60% in the script, that was the international orthobiologics revenue growth, up 64%. So our international viscosupplementation business is actually growing much faster than the business in United States, albeit on a much smaller basis..

It says that on Page 6 of your presentation, orthobiologics revenue grew 64% year-over-year..

Yes, that is correct. If you look at the press release, the product revenue by franchise table, that's what the numbers are derived from..

So Sylvia, taking your last comment of, saying, the 50% down, so a 50% cut in last year. So can we assume on an apples-to-apples basis, if everything was normalized, you take 64% minus the 50%, you get really 14% growth, if it was all normalized.

Is that the way to look at this?.

I understand what you're saying, but I'm not sure if that is also -- I am not sure if that is the right way of describing it, because there are a couple of other changing factors. One, the MONOVISC franchise has been growing at a higher rate. So from an inventory standpoint, the growth rate between ORTHOVISC and MONOVISC are different.

I think the best way of looking at this is really from Q1 through Q3 of this year, the collective three quarters will have good year-over-year comparison, because of the obvious inventory reset situation that took place last year.

For the full year, we are expecting overall a good growth from orthobiologics contributing to the mid-teen percentage growth for our overall business from a product revenue standpoint. So I think we should keep our focus to the combined franchise as well as the full year growth rate..

And let me throw in a qualitative point, not a quantitative point. I was trying to make the point that, first of all, the Mitek does a phenomenal job of marketing our products in the United States, and we participate in that process, but not in a fully direct way.

However, our international revenue is fully our responsibility, reporting a lot of effort in there. It is much smaller than our revenue from the United States. However, we've seen really good growth there and we saw a lot of demand being generated for MONOVISC as an innovative product. And we think that the same thing will happen with CINGAL.

So again, small, but growing..

And I guess the follow-up, Chuck, you talked about the new pipeline of products.

The injectable product that you are talking about, I mean, are we looking at stuff like tennis elbow, tendonitis, torn rotator cuff? Is that the type of injuries you're talking about? And then, the second part of that, the demineralized bone matrix market is pretty entrenched with a lot of large players in there.

I know you said the timeline is a little bit out a ways here, but it is a pretty competitive and entrenched market. Any thoughts there would be great..

On the first one, the answer to your first question is yes. And then now on the bone situation, I was being a little bit -- we promised we'd put out information on the pipeline. And so I wanted to give some visibility into what we are working on.

On purpose, I was not totally forthcoming about the bone graft, because we think we have some unique concepts, which we are working on some IP. So I didn't want to be too specific about what our aims were there.

If we can't do something innovative and unique, I don't think that that's going to be an area where we're just going to jump in with the me too product, if that helps you at all. I think as we move forward and as we develop more, I could be a little bit more open about what we are try to do there..

Our next question comes from the line of Greg Garner from Millennium Asset Management..

So in any event, a couple of questions just on the Phase III. I came in a little delay, so I was just in the queue for a long time to get registered. So you might have mentioned this, but I wanted to ask you about the Phase III for the HYALOFAST and the MONOVISC.

Can you just give us some rough parameters as to number of patients, primary endpoint, length of time for the Phase III for what you might know today?.

For the two, which is HYALOFAST, and what was the second one?.

For the MONOVISC, for the hip?.

MONOVISC hip?.

Yes..

You want to take that, Sylvia?.

Sure. The HYALOFAST FastTRACK study is a Phase III study. We are targeting approximately 200 patients at roughly about 30 sites in the U.S. and in Europe, and the study is a prospective randomized controlled study to establish superiority of our HA scaffold. And it's going to be used in conjunction with BMAC or bone marrow aspirate concentrate.

So we're currently in the early stages in enrolling patients. We have a few sites up, a few patients in the study. We'll be using two-year data to start the FDA submission process, but the trial is a three year follow-up trial. So that is roughly the trial timeline that we are looking at.

Does that answer your question?.

Yes. A three year follow-up study after this initial enrollment. So we're talking a couple years before this is going to be done. I just wanted to get --.

Yes, quite a few. I would throw one thing about that trial, so as long as it is in the spirit of full disclosure. So this product is approved in Europe.

And actually there is an upcoming meeting of the Cartilage Repair Society in September in Italy, and at that meeting we'll have a lot of, well, at least a couple and maybe several papers being presented on HYALOFAST and its effectiveness in this particular treatment and used in other ways.

So the trial that we're running in the state, we're very confident that we'll be successful, since so much work has been done commercially and before that in pilot studies. It's just a matter of -- the biggest hurdle we have, I think, is patient recruitment and getting those patients into the trial on a good pace. I know we'll run a good trial.

And, of course, the timeframe is the timeframe. We can't slow down the follow-up time. And I think that based on the negotiations we've had with the FDA to get this trial started.

And if this run properly, which I totally assume it will, I believe on the backend in terms of actually getting this approved, once they have all the data, might not be such a long and arduous process. But, it is, as you point out, still several years out..

And then for the MONOVISC?.

Yes, for the hip. This particular study is sponsored by our commercial partner, DePuy Synthes Mitek Sports Medicine, so they are paying for the study and executing the trial..

The clinical portion. We still own the regulatory portion..

Exactly. And the trial's current status is it started at the end of last year. We have approximately about half a dozen sites initiated with some patients enrolled. It's rather a large trial, I think over 500 patients, and we'll be following the patients for six months.

Currently, we are looking at last patient follow-up completed in the Q3, Q4 timeframe of 2019..

So it looks like the mid-2017. Well, the IND probably wouldn't take too long to put together, I wouldn't think..

They restarted the trial, so it's an IDE and it is finished..

I mean, the final FDA process..

It's PMA. It's PMA supplement, right? No, that won't take too long. Just like I said in HYALOFAST, I mean, this is a big trial. And so getting all the patients enrolled and follow it up is probably going to be -- it is a variable time, but it's going to be a fairly long time. We could put the data together and file the application pretty quickly.

And if the data are very strong, as we hope they will be, I think the approval process, since it's a PMA supplement and the product is already approved for another indication, it shouldn't take that long either. So it's all about how fast we get the patients into the trial..

From the hip to the knee, it seems like there is very similar articular cartilage issues that this MONOVISC addresses. Are there any real physiological differences between those two joints that you think there might be anything that slow it down? I mean, I'm trying to think that there would be. I just can't. My medical knowledge is a bit old..

Certainly, injection into the knee is more difficult than -- in the hip is more difficult than in the knee. As with other things, this product is already used in the hip outside the United States, we have data. And we sell for this indication.

So again, I think that the protocol was designed on all of the information we had, both from our work and what we could garner from other people who have tried to do this and have not been successful.

And so we think there is a high probability we will, because of the number of patients, because of the way we decided trial, that we're going to achieve success here..

I'm surprised that the practitioners weren't naturally using it as a secondary indication on their own, which is typically done for, well, different drugs and such.

But it's great that you're going through the Phase III, but maybe it's the fact that the needle needs to be longer, so you really can't or there is a reluctance to use it on [multiple speakers]..

They do, do it, Greg, but [multiple speakers] and certainly so then we can't promote it. And because we can't promote it, we can't provide the training and all of the other things that would really -- and position the product, which would really have it take off in this use.

And then the FDA requires that you go into every single joint and run a study separately, so we wanted to next transition into shoulder, we'd have to do yet another trial..

Yes, I understand that aspect from the FDA..

Our next question comes from the line of Mike Petusky with Barrington Research..

I may have missed this, but did you guys give an estimate of the current market share between the -- in aggregate, the MONOVISC and ORTHOVISC?.

Do you mean our products current market share exiting Q1 of 2016?.

Yes..

No, we have not. We did not give one. At the end of last year, we were at 25%, 26%. The competitor information will never be all publicly available, but the key competitor information will be available later this week, so at this point, we have some estimates. But we're waiting for some new data..

Mike, it's difficult to piece this together because there is no one source that you can go to get all the information, so you patch data from various sources and coordinate it to get these estimates. So we have what we think are some pretty good estimates exiting 2015, which show us that 25%, 26% market share, as Sylvia said.

And, basically, I guess that's about 6% MONOVISC and 19%, 20% ORTHOVISC. We are growing. That keeps going up. And the market leader keeps going down, so that's a good thing as we try to become the market leader. But it's really tough to get accurate market share numbers we can -- because it's to tough to piece the data together..

Do you have enough to go on that you believe that you took market share in the first quarter from Synvisc?.

We would, I think, be in a better position to comment when they come out with their Q1 results later this week..

I guess I also wanted to ask, in kind of broad terms, is your expectation for the commercial launches in Europe, for CINGAL, as well as the Canadian launch, I mean, is that in incremental maybe $1 million, $2 million hitting '16, something like that? Is that in the ballpark or are you more bullish on what kind of revenue contribution you could get there?.

Do you mean $1 million up to $2 million from international?.

Yes, the commercial launches as well as the launch in Canada?.

I think that is a reasonable expectation. I think it's also consistent with our commentary during the last call..

One of the things, though, that we're doing and we learned that it's very important is we are spending a lot of time trying to make sure that we have key opinion leaders' support for the use of the product, so in addition to the revenue that is a very important thing to do right out of the box to build a sound foundation for the development of the product..

And I guess quickly on Sylvia's comment around operating expenses. This is an area that we've had a difficult time. We always hit you guys too hard and then you guys -- the expenses don't ramp like we estimated they would.

Obviously they are going to, though, and I guess my question is would you expect that to be, essentially I guess the operating expenses being higher in the fourth quarter then maybe in the second quarter.

In other words, then truly ramping throughout the rest of the year or are they going to escalate pretty quickly here?.

I think it's the former scenario that you mentioned. I think fourth quarter will be the quarter with pretty significant expenses based on the timing of the activities, both in the product development as well as in the marketing and other corporate areas..

If I had my way, I would spend a ton of money in Q2 and try to completely enroll the HYALOFAST patients, which would represent a pretty significant expense outlay. Unfortunately, that's not under my control..

Real quick, last question, being out of your control, I guess this is hopefully within your control, but in terms of the commentary around M&A, do you believe there are true front burner M&A candidates that we could hear about fairly soon, or are you guys still in the fairly early stages of having maybe exploration and discussions with in regards to M&A candidates?.

I would say it's probably the latter. We're not close to consummating anything. The surveying of what's out there, it's more difficult than it might have been a couple years ago, because some of the things that might have been of interest to us now, companies got purchased a couple years ago. So, the pool isn't as rich as it was.

And because we want to be prudent and it is very important to us, we're not taking our time, but we're being very thorough..

We have follow-up questions from line of Joe Munda with First Analysis..

Just two, actually, real quick follow-ups here. Chuck, I guess the question is, I mean, as far as CINGAL goes, how incremental is that to the future growth of the company? I mea, you have a lot of interesting pipeline products here.

Timeline might be a little variable, but how incremental is CINGAL to the story going forward? And if the FDA were to come back and require data that makes you guys spend anywhere, let's call it $30 million, is that something you guys are willing to digest to get CINGAL to market? And then on the second part, the new facility in Padova, any color on what the potential cost would be there would be great..

Well, CINGAL is important to our future. And we think it represents a fairly substantial revenue opportunity for us and it will be a pivotal product and a good portion of the reason why we're establishing our commercialization capability. So that's the answer to the first one.

The second one is like it is pretty inconceivable to me that we could spend $30 million, since we spent a fraction of that to run the two studies that already ran. So I don't know where that number came from, but it seems quite, quite high.

And since CINGAL is very important to us, we are definitely willing to invest as long as there is reasonable justification as to why we have to invest from the FDA.

And if we don't think that's reasonable, we will continue our dialogue and discussions with them until we wind up at a point that makes sense for the patients in the U.S., and also, Anika as a company..

In terms of your question about the Padova, Italy office build out cost, it's actually a build-to-suit lease arrangement for us. So the cost of building the facility is borne by the landlord and we will be incurring a smaller amount for just the office outfit portion of the build out work.

And net-net, the new lease is much more space, a lot more technologically advanced, and it's at a lower rental expense comparing to the existing lease. So it's a pretty nice set-up for us for the future..

Also, another benefit of that is it will certainly be our European and highly likely international training center for cartilage regeneration, first HYALOFAST and then other products. So part of the reason to build this was to establish that training center.

And that will be very, very important and we are already lining up KOLs as instructors and we think this will really catalyze the HYALOFAST business, certainly internationally. And then when the U.S. comes online, it will be an important component as well.

As a matter of fact, we may end up -- there's a fair number of doctors, surprisingly, who practice in the United States, also practice outside the United States in other facilities, quite often Abu Dhabi and places like that. So having, even training U.S.

physicians for procedures that they can't necessarily practice in the United States at this time will be useful from this facility..

Chuck, I mean the $30 million that I came up with is my number. I'm saying that I took a look at trials and that's a number that I was coming up with. So it's not like I was pulling it from somewhere.

But I was just wondering, is there a threshold where it's just not worth your, the time or the money?.

First, let me make a comment, Joe. If you had any aspirations of running our clinical department, please don't continue with both..

I am good where I am, thank you..

Second, at this juncture, I can't conceive of a threshold that is reasonably negotiated that is too much for us..

Ladies and gentlemen, this is all the time we have today for questions-and-answers. I would now like to hand the call back to Dr. Charles Sherwood, President and Chief Executive Officer. Please proceed, sir. End of Q&A.

Thank you, Brian. And I would like to thank everyone once again for participating on this call. Again, I think the questions were excellent, and allowed everyone to understand what we're trying to do a little bit better. And we look forward to the next quarterly call and updating our progress.

So thanks for your interest and thanks for being on the call today..

Ladies and gentlemen, this does conclude today's program and you may all disconnect. Everybody, have a wonderful day..