OrthoLogic Reports Second Quarter 2005 Results

OrthoLogic Reports Second Quarter 2005 Results 


TEMPE, Ariz., July 26  /PRNewswire-FirstCall/ -- OrthoLogic Corp. (NASDAQ:OLGC)
today announced financial results for the second quarter ended June 30, 2005.

OrthoLogic reported a net loss of $6.6 million, or $(0.17) per share, for the
second quarter of 2005, compared to a net loss of $4.2 million, or $(0.12) per
share in the second quarter of 2004.  Second quarter operating expenses totaled
$7.3 million, compared to operating expenses of $4.5 million in the second
quarter of 2004.  The increase over prior year operating costs was primarily
the result of the company's expanded efforts in research, development and
clinical activities for multiple indications of the Chrysalin(R) Product
Platform.  Pursuant to the Patent Assignment Agreement entered into in
connection with the acquisition of substantially all the assets and
intellectual property of Chrysalis BioTechnology, Inc., the company paid
$400,000 to the University of Texas for certain patent rights related to the
Chrysalin development program.  Chrysalin, or TP508, is a 23-amino acid
synthetic peptide representing a receptor-binding domain of the human thrombin
molecule, a naturally occurring molecule in the body, that has the potential to
accelerate the natural cascade of healing events in both soft tissue and bone
repair.

At June 30, 2005, OrthoLogic had cash, cash equivalents, and investments of
$91.1 million.

"During the second quarter and moving forward through 2005, we have directed
our focus toward advancing our lead program in fracture repair at an
accelerated pace," stated James M. Pusey, M.D., president and chief executive
officer.  "We are also dedicated to optimizing the efficacy of the Chrysalin
compound in several delivery mechanisms, including an injectable formulation, a
gel formulation, and time released microspheres."

Updates on Chrysalin Clinical Program

Fracture Repair:  In the second quarter, OrthoLogic completed enrollment in its
pivotal Phase 3 human clinical trial for fracture repair.  The trial is a Phase
3 double-blind, randomized, placebo-controlled trial to compare the safety and
efficacy of a single percutaneous injection of Chrysalin in saline at 10
micrograms/ml versus a saline placebo control.  The trial includes 503 patients
with unstable and/or displaced distal radius fractures enrolled in 27 U.S.
centers, and is designed to measure how quickly wrist fractures in patients
injected with Chrysalin heal as measured by the removal of immobilization. 
Accelerated removal of immobilization allows patients to initiate hand therapy
and regain full function of their wrists and hands sooner.  The clinical
trial's secondary efficacy endpoints include radiographic analysis of healing,
as well as clinical, functional and patient outcome parameters.  OrthoLogic
expects to release initial efficacy results for the Phase 3 trial in the first
half of 2006.

In addition to the Phase 3 clinical trial in fracture repair, a Phase 2b dosing
trial is underway to establish the lower dose range of Chrysalin versus a
placebo control.

Diabetic Ulcer Healing:  OrthoLogic has completed a Phase 1/2 study of
Chrysalin in diabetic ulcer healing, which showed significant effects in the
foot ulcer sub-population of 35 patients.  Final study results will be
submitted to a peer-reviewed journal this year.  The company is developing a
gel formulation of Chrysalin for diabetic ulcer healing and plans to submit a
formulation amendment to the existing and active Investigational New Drug
("IND") application for this indication.

Cartilage Defect Repair:  OrthoLogic is preparing for an IND application for a
Chrysalin-based product candidate for cartilage defect repair, and is
developing a sustained microsphere formulation for delivery of Chrysalin in
this indication.

"We are excited by the potential that Chrysalin has shown in many of our
preclinical studies toward the treatment of traumatic and chronic orthopedic
indications in bone and soft tissue as well as cardiovascular repair and wound
healing," concluded Dr. Pusey.  "With the additional potential indications,
plus our ongoing late-stage trials in fracture repair, we are forging ahead as
a biotechnology and drug development company focused on developing therapeutic
peptides."

Upcoming Milestones

OrthoLogic expects to complete data collection in the Phase 3 trial for wrist
fractures as well as follow-up for the Phase 1/2 spine fusion safety trial by
the end of 2005.  In addition, the company seeks to submit Phase 1/2 data from
the diabetic foot ulcer trial to a peer-reviewed journal and develop a Phase 2
protocol for the first Chrysalin gel formulation for use in a diabetic foot
ulcer trial.  By year-end, the company also expects to prepare an IND for an
initial human clinical trial for cartilage defect repair.

Conference Call Information

As previously announced, management will host a conference call and webcast
today at 4:30 p.m. EDT (1:30 p.m. PDT).  To access the call, participants may
dial 800-289-0544 (domestic) or 913-981-5533 (international) and provide the
access code 6064597.

A replay of the call will be available beginning July 26, 2005, at 7:30 p.m.
EDT until August 25, 2005, at 12:59 a.m. EDT.  To access the replay, please
dial 888-203-1112 (domestic) or 719-457-0820 (international) and provide the
access code 6064597.

Additionally, the conference call will be webcast on the Investor Relations
section of the company's website, http://www.orthologic.com/.

About Chrysalin(R)

Chrysalin (TP508) is a 23-amino acid peptide that represents the
receptor-binding domain of the human thrombin molecule, the naturally occurring
agent responsible for initiating many of the cellular events responsible for
repair in both soft tissue and bone.

All cells contain high-affinity thrombin receptors, which led to the hypothesis
that thrombin does more than form blood clots after wounding.  It was discovered
that thrombin acted as a signaling molecule to initiate the early stages of
tissue repair.  The basis for the development of Chrysalin started in 1985,
when a class of synthetic peptides was developed representing a specific
receptor-binding domain of thrombin that activates specific wound-healing
signals.

Drugs based on the Chrysalin peptide can be used to mimic part of the thrombin
response without stimulating the events associated with blood clotting and
therefore have the potential to accelerate the natural cascade of healing
events.

About OrthoLogic Corp.

OrthoLogic is a drug-development company focused on commercializing several
potential therapeutics comprising the Chrysalin(R) Product Platform, a series
of product candidates aimed at treating traumatic and chronic orthopedic
indications in bone and soft tissue as well as cardiovascular repair and wound
healing.  All of these potential products are based on the Chrysalin synthetic
peptide, also known as TP508.

OrthoLogic is actively pursuing multiple indications for potential
Chrysalin-based products.  These include product candidates for fracture repair
and chronic diabetic ulcers which are in human clinical trials, and cartilage
defect repair, which is in late-stage preclinical trials. OrthoLogic's product
development pipeline includes several other indications for which the company
has positive preclinical results or clinical results, including spinal fusion,
dental bone formation and myocardial revascularization.

For more information, please visit the company's website:
http://www.orthologic.com/.

Forward-Looking Statements

Statements in this press release or otherwise attributable to OrthoLogic
regarding our business that are not historical facts are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
 These forward-looking statements, which include the timing and acceptability of
FDA filings and the efficacy and marketability of potential products, involve
risks and uncertainties that could cause actual results to differ materially
from predicted results.  These risks include: delays in obtaining or inability
to obtain FDA, institutional review board or other regulatory approvals of
preclinical or clinical testing; unfavorable outcomes in our preclinical and
clinical testing; the development by others of competing technologies and
therapeutics that may have greater efficacy or lower cost; delays in obtaining
or inability to obtain FDA or other necessary regulatory approval of our
products; our inability to successfully and cost effectively develop or
outsource manufacturing and marketing of any products we are able to bring to
market; changes in FDA or other regulations that affect our ability to obtain
regulatory approval of our products, increase our manufacturing costs or limit
our ability to market our products; our inability to raise additional capital
in the future needed to fund the continued development of our Chrysalin Product
Platform; and other factors discussed in our Form 10-K for the fiscal year ended
December 31, 2004, our Form 10-Q for the quarter ended March 31, 2005, and other
documents we file with the Securities and Exchange Commission.

                             OrthoLogic Corp.
                      (A Development Stage Company)
                         Statements of Operations
                  (in thousands, except per share data)
                               (Unaudited)

                                                                   As a
                                                                Development
                               Three months      Six months        Stage
                             ending June 30,   ending June 30,    Company
                                                                8/5/2004 -
                                2005     2004     2005    2004   6/30/2005

  OPERATING EXPENSES
     General and
  administrative              $1,273     $616   $2,183  $1,171      $4,061
     Research and
  development                  5,991    3,987   11,394   7,358      19,474
     CPM divestiture and
  related gains                           (81)    (250)   (192)       (375)
     CBI in process research
  and development                           0        0       0      25,840
        Total operating
  expenses                     7,264    4,522   13,327   8,337      49,000

     Other income, net           654      301    1,206     607       1,957
     Loss from continuing
  operations                  (6,610)  (4,221) (12,121) (7,730)    (47,043)
     Income tax benefit                     0      (12)   (294)       (654)

        Net loss from
  continuing operations       (6,610)  (4,221) (12,109) (7,436)    (46,389)

  Discontinued operations

     Net gain on the sale of
     the bone device
     business, net of taxes
     of $0, $0, $0, $0, ($363)
     respectively                  0        0        0       0       2,048

  Net income from
  discontinued operations          0        0        0       0       2,048

  NET LOSS                   ($6,610) ($4,221)($12,109) ($7,436)  ($44,341)
  Per Share Information:
      Net loss from
  continuing operations
            Basic             ($0.17)  ($0.12)  ($0.32)  ($0.22)
            Diluted           ($0.17)  ($0.12)  ($0.32)  ($0.22)
      Net loss
            Basic             ($0.17)  ($0.12)  ($0.32)  ($0.22)
            Diluted           ($0.17)  ($0.12)  ($0.32)  ($0.22)

  Basic and diluted shares
  outstanding                 38,220   34,528   38,134   34,419


                             ORTHOLOGIC CORP.
                      (A Development Stage Company)
                              BALANCE SHEETS
              (in thousands except share and per share data)

  ASSETS                                              June 30,  December 31,
                                                        2005       2004
                                                    (Unaudited)
  Current assets
    Cash and cash equivalents                         $34,733     $38,377
    Short-term investments                             49,847      53,642
    Accounts receivable, net                                8          34
    Prepaids and other current assets                   1,470       1,019
         Total current assets                          86,058      93,072

  Furniture and equipment, net                            458         478
  Escrow receivable, net                                6,895       6,828
  Long-term investments                                 6,500      11,558
  Deferred income taxes - non-current                   1,106       1,106
  Trademarks and patents                                2,351       2,142
       Total assets                                  $103,368    $115,184

  LIABILITIES AND STOCKHOLDERS' EQUITY

  Current liabilities
    Accounts payable                                   $1,243        $833
    Accrued compensation                                  566         648
    Accrued taxes                                         114         114
    Excess space reserve                                  160         559
    Accrued clinical                                    1,111       1,236
    Other accrued liabilities                           1,034         727
       Total current liabilities                        4,228       4,117

    Deferred rent and capital lease obligation            101         137
    Non-current portion of excess space reserve           174           0
       Total liabilities                                4,503       4,254

  Stockholders' Equity

  Common Stock  $.0005 par value;                          19          19
    100,000,000 and 50,000,000 shares authorized;
     38,224,742 and
     38,011,642 shares issued and outstanding
  Additional paid-in capital                          170,949     170,905
  Accumulated deficit                                (72,103)    (59,994)
      Total stockholders' equity                       98,865     110,930

       Total liabilities and stockholders' equity    $103,368    $115,184


DATASOURCE: OrthoLogic Corp.



CONTACT:  Sherry A. Sturman, Chief Financial Officer of OrthoLogic,

[phone], or Melanie Friedman of Stern Investor Relations, Inc.,

[phone]



Web site:  http://www.orthologic.com/

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