Compounds of the formula II: wherein R1 and R2 are independently H, F or CH3; or R1 forms an ethynyl bond and R2 is H or C3-C6 cycloalkyl which is optionally substituted with one or two substituents independently selected from methyl, CF3, OMe or halo; R3 is C1-C3 alkyl or C3-C6 cycloalkyl, either of which is optionally substituted with one or two methyl and/or a fluoro, trifluoromethyl or methoxy, when R3 is C3-C6 cycloalkyl it may alternatively be gem substituted with fluoro; R4 is methyl or fluoro; m is 0, 1 or 2; E is a bond, or thiazolyl, optionally substituted with methyl or fluoro; A1 is CH or N, A2 is CR6R7 or NR6, provided at 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, R6 can also be C1-C4 alkoxy or F; R7 is H, C1-C4 alkyl or F or a pharmaceutically acceptable salt, N-oxide or hydrate thereof, have utility in the treatment of disorders characterized by inappropriate expression or activation of cathepsin K, such as osteoporosis, osteoarthritis, rheumatoid arthritis or bone metastases.