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Biotech / Medical : ORTC Ortec International

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To: INVESTOR who wrote (5)	9/29/1997 2:28:00 AM
From: Rick Strange	of 272

Sorry to take so long to answer your question but I didn't notice your post until today. First of all, I don't anticipate any significant revenue until the year 2000, when, if all goes well, they will have FDA approval for Second Degree Burns, Diabetic Foot Ulcers, and Epidermolysis Bullosa (EB). The Second Degree Burn market is estimated at $350mm/yr. A 1% market share is worth $3.5mm/yr in revenues. The Diabetic Foot Ulcer market is estimated at $1billion/yr. A 1% market share equates to $10mm/yr. The market is valuing ORTC's technology at $55mm (4.62mm shares at 13-1/2 less $7mm cash). ORG has a similar product, in fact so similar that ORG forced ORTC to defend their patent which was successfully defended upon re-examination. ORG's market cap is $515mm. ORG's Venous Ulcer PMA has languished at the FDA going on two years this week. ORG recently released a study of Apligraf(TM) used in conjunction with autograft (patient skin) that showed impressive results it terms of skin scarring and more normal pliability. They indicate that they will seek FDA approval once the PMA for Apligraft for Venous Ulcers is approved. To me the ORG burn study represents a paradox since they have represented Apligraf(TM) as the ideal tissue engineered product that would act as a total skin equivalent comprising both epidermis and dermis. But, in these trials they have used Apligraf(TM) as a seedbed for autografts. ORTC's burn trials will be using Composite Cultured Skin (CCS)(TM)as a stand alone wound closure. Since there is no autograft, there is no secondary site to heal nor additional risk of infection. In Austrailia, sites treated with CCS for the treatment of EB were preferable for recropping during subsequest reconstruction procedures. In short, I consider ORTC's technology to be selling at a substantial discount at the current market price.

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