Compounds of the formula II: wherein R1 and R2 are independently H, F or CH3;or R1 forms an ethynyl bond andR2 is H or C3-C6 cycloalkyl which is optionally substituted with one or twosubstituents independently selected from methyl, CF3,OMe or halo; R3 is C1-C3 alkyl or C3-C6 cycloalkyl, either of which isoptionally substituted with one or two methyl and/or a fluoro,trifluoromethyl or methoxy, when R3 is C3-C6 cycloalkyl it may alternativelybe gem subsituted with fluoro; R4 is methyl or fluoro;m is 0, 1 or 2; E is a bond, or thiazolyl, optionally substituted with methylor fluoro; A1 is CH or N, A2 is CR6R7 or NR6, providedat least one Of A1 and A2 comprises N; R6 is H, C1-C4 alkyl, C1-C4 haloalkyl,C1-C3 alkyl-O-C1-C3 alkyl, or when A2 is C, R6can also be C1-C4 alkoxy or F; R7 is H, C1-C4 alkyl or F or a pharmaceuticallyacceptable salt, N-oxide or hydrate thereof, haveutility in the treatment of disorders characterized by inappropriateexpression or activation of cathepsin K, such as osteoporosis,osteoarthritis, rheumatoid arthritis or bone metastases.