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Edited Transcript of AIMT earnings conference call or presentation 27-Feb-20 9:30pm GMT

Q4 2019 Aimmune Therapeutics Inc Earnings Call

Brisbane Mar 11, 2020 (Thomson StreetEvents) -- Edited Transcript of Aimmune Therapeutics Inc earnings conference call or presentation Thursday, February 27, 2020 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew Oxtoby

Aimmune Therapeutics, Inc. - Chief Commercial Officer

* DeDe Sheel

Aimmune Therapeutics, Inc. - VP of IR

* Eric H. Bjerkholt

Aimmune Therapeutics, Inc. - CFO

* Jayson Donald Alexander Dallas

Aimmune Therapeutics, Inc. - President, CEO & Director

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Conference Call Participants

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* Bikramjot Singh

RBC Capital Markets, Research Division - Senior Associate

* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* Christopher Joseph Raymond

Piper Sandler & Co., Research Division - MD & Senior Research Analyst

* Corinne Jenkins

Goldman Sachs Group Inc., Research Division - Research Analyst

* Evan David Seigerman

Crédit Suisse AG, Research Division - VP & Senior Equity Research Analyst

* Vasiliana Vireen Moussatos

Wedbush Securities Inc., Research Division - MD of Equity Research

* Zegbeh Claudel Jallah

Roth Capital Partners, LLC, Research Division - Director & Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Aimmune Fourth Quarter 2019 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, DeDe Sheel, Vice President of Investor Relations. Thank you. And please go ahead, ma'am.

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DeDe Sheel, Aimmune Therapeutics, Inc. - VP of IR [2]

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Thank you, operator. Good afternoon and thank you for joining us today to discuss Aimmune's Fourth Quarter and Fiscal Year 2019 Financial Results and Operational Highlights. Today's call is being webcast, and a replay will be available on our corporate website at aimmune.com.

Joining me on the call today are Dr. Jayson Dallas, President and Chief Executive Officer; Andrew Oxtoby, Chief Commercial Officer; and Eric Bjerkholt, Chief Financial Officer. After our prepared remarks, we will open the call for Q&A.

Before we begin, I would like to remind you that during today's call and Q&A session, we will be making forward-looking statements. These forward-looking statements include Aimmune's expectations regarding the potential benefits of PALFORZIA; the commercial launch of PALFORZIA, including the timing for specialty pharmacies to be ready to dispense PALFORZIA, timing for payers in the United States to add PALFORZIA to formularies, and timing for PALFORZIA to be available in the market, the timing of potential approval of PALFORZIA by the EMA and Swissmedic, potential timing for completion of Aimmune Phase II clinical trial for AR201, potential timing for completion of enrollment of our Phase III POSEIDON clinical trial for PALFORZIA; the sufficiency of Aimmune's cash resources; plans to explore the use of biologics, including AIMab7195 as adjuncts to our CODIT programs; the potential benefits of using biologics as adjuncts to CODIT and Aimmune's expectations regarding potential applications of the CODIT approach to treat life-threatening food allergies.

Risks and uncertainties that contribute to the uncertain nature of the forward-looking statements include the expectation that Aimmune will need additional funds to finance its operations; Aimmune's dependence on the success of PALFORZIA; Aimmune's ability to build a commercial field organization and distribution network; the degree of acceptance of PALFORZIA among physicians, patients, health care payers, patient advocacy groups and the general medical community; Aimmune's ability to obtain favorable coverage and reimbursement from third-party payers for PALFORZIA; Aimmune's ability to implement and comply with the REMS for PALFORZIA; Aimmune's or any of its collaborative partners' ability to initiate and/or complete clinical trials; the unpredictability of the regulatory process; the possibility that Aimmune's or any of its collaborative partners' clinical trials will not be successful; the reliance on third parties for the manufacture of PALFORZIA and our product candidates; possible regulatory developments in the United States and foreign countries and Aimmune's ability to attract and retain senior management personnel.

These forward-looking statements are based on assumptions and are subject to risks and uncertainties that can cause actual results to differ significantly from those stated on this call. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Please refer to our Annual Report on Form 10-K for the year ended December 31, 2019, for some of the important risk factors that could cause actual results to differ materially from forward-looking statements made on this call. Except as required by law, Aimmune disclaims any obligation to publicly update or revise any information to reflect the events or circumstances that occur after this call.

And now I'll turn over the call to Jayson.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [3]

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Thank you, DeDe, and good afternoon, everyone. Thank you for joining us today to discuss our 2019 financial results and recent operational highlights.

This is a very exciting time for us at Aimmune as we're in the process of launching our first FDA-approved medicine, PALFORZIA, an autoimmune therapy for the mitigation of allergic reactions that may occur in peanut allergic patients following accidental exposure to peanuts. Since PALFORZIA was approved almost a month ago, our practice account managers have been actively meeting with our initial target group of allergists. We have also received strong inbound interest from other allergists who are looking forward to prescribing PALFORZIA for their patients. Andrew will provide additional details on the commercial launch progress shortly.

The FDA approval of PALFORZIA was a significant achievement for the peanut and food allergy community, and we have demonstrated that our immunotherapy using our CODIT platform can be a safe and effective therapeutic option. PALFORZIA offers peanut allergic patients, their caregivers and allergists a first-of-its-kind treat option. Unlike other immunotherapy made from food that you can buy at the grocery store, PALFORZIA has been subject to the rigorous requirements of an FDA-approved biologic pharmaceutical. Every lot of every dose of PALFORZIA has been prepared and analyzed for consistency of allergenic content and dose. In addition, since patients are ingesting the allergen, they get daily confirmation of their ability to tolerate it and a food challenge test is not required in clinical practice.

In our registration studies, the median amount of peanut protein that patients could tolerate at screening was only 10 milligrams. After 12 months of treatment with PALFORZIA, the median tolerated amount of peanut protein increased to 1,000 milligrams. This is a 100-fold improvement. This compares to a mere threefold improvement in the placebo arm. With treatment beyond 12 months, the median tolerated amount of peanut protein increased even further; likewise, the rate of adverse reactions which were predominantly mild and moderate decreased over time.

Our vision is to remain at the forefront of develop innovative therapies for food allergy. As such, we plan to explore the use of biologics as adjuncts to our CODIT program. As part of this vision, we're excited about the end licensing of AIMab7195, which we announced earlier this month. AIMab7195 is an investigational anti-IgE monoclonal antibody that has 3 distinct mechanisms of action to reduce blood serum IgE and to suppress IgE production. Our goal is to see if a larger proportion of patients can achieve remission from their food allergy more quickly than they may do on monotherapy alone as well as to make the journey to potential remission easier.

Before turning the call over the Andrew, I'd like to provide a brief update on our regulatory progress with PALFORZIA in Europe and our ongoing clinical trials. On the regulatory front outside of the U.S., our marketing authorization application for PALFORZIA is being reviewed by the EMA, and we expect this to be completed in the fourth quarter of this year. In addition, PALFORZIA is also currently being reviewed by Swissmedic, the authority responsible for the authorization and supervision of therapeutic products in Switzerland. We expect the review to complete in mid-2021.

On the clinical development front, our Phase III POSEIDON trial exploring the efficacy and safety of PALFORZIA in peanut allergic children aged 1 to less than 4 year olds, is ongoing and is expected to complete enrollment in the second half of this year. Regeneron's Phase II trial of PALFORZIA with dupilumab as an adjunctive therapy in patients with peanut allergy is also ongoing.

Beyond peanut allergy, we're remaining enthusiastic about the potential of our pipeline. AR201 is in Phase II clinical trial for egg allergy, and we expect to complete that study in the first half of 2021. Finally, we continue to evaluate a multi-tree nut therapeutic program and are working with regulatory authorities to determine next steps. Right now, I'll turn the call over to Andrew.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [4]

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Thank you, Jayson. As Jayson mentioned, our commercial field team of 80 purchase account managers has been meeting with U.S. physicians and their teams since February 4. Given that the approval of PALFORZIA occurred on January 31, this represents a gap of only one working day between the drug's approval and the deployment of the field organization. I want to thank and recognize our entire organization and, in particular, the field training team for their exception efforts in enabling this. As you might expect, feedback from our field team indicates that there was a high level of excitement from both allergists and their patients in starting treatment with PALFORZIA. And our efforts since approval have been focused on working through the final steps to enable product to be prescribed and dispensed to patients.

Let me provide some additional detail and color around our efforts on these final steps. The final specifics of the Risk Evaluation and Mitigation Strategy, or REMS program, were received as part of the FDA approval of PALFORZIA at the end of January. Since approval, we've been working to implement these final requirements, and I'm pleased to share that on February 21, our website palforziarems.com went live. This website allows prescribing physicians and their health care facilities to complete a one-time certification within the REMS framework and provides the enrollment form for physicians to download in order to enroll their patients in the program. The overwhelming feedback that we've received so far from allergists and their staff is that the REMS certification process is quick and straightforward. We already have over 300 allergists certified in the first 4 working days since the website went live.

The other elements of the REMS program is the preparation of our contracted specialty pharmacies to dispense PALFORZIA to patients. This work is well underway at all the specialty pharmacies and we anticipate that it will be completed in the next 2 weeks or so. The completion of this step will finalize the implementation of the REMS requirements and will mean that it has only been 6 weeks between the approval of the product label and the final implementation of the entire REMS program.

I would like to sincerely thank all of our employees who have worked diligently to enable this accelerated timing as well as the support and partnership of our third-party vendors involved in this effort.

The final step that will allow PALFORZIA to be prescribed to patients is the release of the finished product launch by FDA. This procedure is applicable to all approved biologic medicines, and we expect for it to be available at the very latest by the end of March. In the meantime, patients can be enrolled in the REMS by their physicians, prescriptions can be written and the benefits investigation process for patients can be performed, followed by the initiation of the medical exception process. While the requirements for the REMS program were being finalized as we highlighted earlier, our team of practice account managers, or PAMs, have been visiting physicians and their staff to educate and train them on PALFORZIA and its administration protocol.

In the first week following approval, we received dozens and dozens of calls from physicians to our support hub and medical information service requesting the visit of a PAM to their office. As we've highlighted on previous calls, the focus of our PAMs has been initially to engage with the 1,300 or so allergists who are identified by our research as seeing approximately 70% of the 4- to 17-year-old patients with a confirmed diagnosis of peanut allergy.

In addition to the outreach of our PAMs, we've had a strong response to a series of 1-hour virtual broadcasts on PALFORZIA, which we're calling the PALFORZIA National Event Series. This program consists of a series of 6 events presented by PALFORZIA clinical trial investigators who will discuss the profile and implementation of the drug and take question from physicians who are preparing to administer PALFORZIA in their own clinics. The series began this past Monday, February 24, and the response to these programs has been very positive, with over 1,700 registrations received from clinicians and their staff.

In addition to the efforts of our PAMs, our field payer team has been busy and have arranged post-approval meetings with 31 payer accounts which cover approximately 78% of the commercial and managed Medicaid lives in the U.S. The first of these meetings occurred this week and the remainder are scheduled over the next 6 to 8 weeks through April. The purpose of these meetings is to take the payer clinical committees through the details of the final product label to enable them to make a coverage recommendation to the payer's P&T committee, which will then make decisions on the final formulary positioning.

As we previously communicated, we expect that we'll begin to see meaningful increases in formulary adoption later this year as the process plays out. Until PALFORZIA is fully covered by payer formularies, PALFORZIA, like other newly approved medicines, will be available by the medical exception process.

As a reminder, we have a support hub fully staffed and trained with 40 professionals to complete the benefits investigation for patients as well as to provide guidance to allergists and their staff on how to complete the paperwork associated with this process.

With all the excitement around the approval and launch of PALFORZIA in the U.S., it's worth taking a minute to highlight that our preparation activities are also progressing well in Europe. As we previously noted, we're applying for a potential EMA approval in Q4 of this year and have also filed in Switzerland with a potential approval in mid-2021.

With these time lines in mind, we've begun the preparation of the dossiers that will eventually be submitted to European reimbursement authorities to facilitate the pricing and reimbursement discussions for PALFORZIA. We're also continuing to step up our commercial organization across Europe and have now hired a general manager for the U.K. and French markets, who joins the GM for Germany, Austria and Switzerland that we hired in Q3 of last year.

In summary, we're extremely pleased with the progress that we're making around the commercialization of PALFORZIA. Since the announcement of our U.S. approval, the enthusiastic response and engagement that we've received from both the physician and patient communities has been energizing and we're thrilled that we are now just a matter of a few weeks from the first patients being able to receive commercial product.

With this, I will now turn it over to Eric to discuss the 2019 financial results.

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Eric H. Bjerkholt, Aimmune Therapeutics, Inc. - CFO [5]

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Thank you, Andrew. We ended 2019 in a strong financial position with $158.2 million of cash, cash equivalents and investments compared to $303.9 million on December 31, 2018. The decrease primarily reflects net cash used in operating activities partially offset by cash provided by financing activities including net borrowings from our debt issuance in January 2019 of $36.1 million.

In February of this year, we received a new $200 million equity investment from Nestle Health Science, bringing their total investment in Aimmune to $473 million. Following FDA approval, we also received the second tranche of our loan from KKR, which was $85 million.

Our year-end cash, together with the Nestle investment and the KKR loan brings our year-end pro forma cash to $443 million. Based on our current business plan, we expect that these financial resources fully fund the company.

For the 12 months ended December 31, 2019, net loss was $248.5 million compared to a net loss of $210.8 million for the year ended December 31, 2018. On a per share basis, net loss for the 12 months ended December 31, 2019 was $3.97 compared to a net loss per share of $3.67 for the comparable period the year before. R&D expense for the 12 months ended December 31, 2019, was $124 million compared to $133.4 million in 2018. The decrease was primarily due to lower clinical-related expenses partially offset by increases in regulatory, quality and manufacturing expenses.

G&A expense for the 12 months ended December 31, 2019, was $125.8 million compared to $81.9 million for the comparable period in 2018. The increase was primarily due to additional employee-related costs and external professional services as we continued to build our infrastructure to support the commercialization of PALFORZIA.

With that, we'll open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Chris Raymond with Piper Sandler.

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Christopher Joseph Raymond, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [2]

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Just a couple things. Andrew, I was kind of struck by your comments on the number of physicians that have been certified that are on the PALFORZIA REMS website. We were kind of hunting around and looking at it and just kind of cross-referencing the docs that are on that site that are listed with another list of docs who are listed as private practice OIT practitioners. It doesn't seem like there's much overlap.

So first of all, I guess is that analysis correct? Or maybe could you give us some sort of view of the population of these physicians in terms of how many are actually practicing OIT docs now versus the sort of ready-and-waiting pool that you've described?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [3]

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Yes. Thanks for your question, Chris. And worth pointing out that this is day 4, so we're only 4 days into this. So I haven't done a comprehensive check of what you've just suggested, which is cross-referencing across, looking at list of people currently performing OIT. Certainly there are some people on that list that are performing OIT today. But I haven't done an exhaustive comparison of the 2 lists. And again, we're only 4 days into.

So what we are encouraged by is the fact that after 4 days, we've had 300 allergists that have certified. But we will look at that analysis and track that in the coming days and weeks.

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Christopher Joseph Raymond, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [4]

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Okay. And then just on the, I guess the [gating] factors to launch. You mentioned FDA approving the release of actual product and lots. Can you just remind us, is that just the one time? Or does have lot have to be approved? And what's the sort of frequency of that, if so?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [5]

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Yes. Thanks, Chris. So every biologic product has to have every lot that it manufactures released by FDA. That's standard operating practice. And it's perfectly normal for this to happen just after approval. FDA actually has up to 60 days to release the launch lots after approval, once you file the data with them. And actually, normally what FDA does is they go through our release documents. We've obviously QA'd and released these lots. They go through those documents. In a traditional sense, they also actually do their own testing on some of those launch batches. With our lots, FDA have actually told us they're not going to be doing any of their launch testing. They're just going to go through our quality release documents. And in fact, they've actually started to release some of those lots. So we do expect this to not be a hold up in the process and happen relatively quickly over the course of next week.

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Operator [6]

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Our next question comes from the line of Charles Duncan with Cantor Fitzgerald.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [7]

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Jayson and team, congrats on a great year of progress. Had a couple of questions, perhaps for Andrew or you, Jayson, relative to all the activity metrics that shared. That was really helpful. Try to get our arms around this new business model. I guess going also to the REMS website that was mentioned in the previous question, I'm wondering if you think that it really reflects, call it physicians' experience, given the clinical trial experience that they had or if you think about the doc locator function on that website, do you think that there's broader interest in PALFORZIA than perhaps even you saw in the clinical trial protocols?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [8]

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Well, to be honest, Charles, it's a little hard to speculate after only 4 days' worth of data. I think what we are seeing is quite a mix of people that we knew would be registering and certifying pretty much immediately, but also people that weren't on our radar screen are certifying early. So it's only 4 days in, and we'll continue to track it. But we're really heartened by the fact that it's over 300 after only 4 days. And the actual rate of certification has been pretty steady over that 4-day period as well. So there doesn't seem to be any slowing down so far. And we'll continue to guide to that on future calls as well as well as the actual number of health care settings that are certifying, because we can track that as well.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [9]

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I think what I would say, Charles, is that our goal at this point and our focus is on making certain that we continue to get folks signing up just as both prescribers and practices into the program, rather than spending too much time doing analytics on who has or who hasn't signed up yet. I think we'll do that when we've got a bit more data in there. It's really about certain that we're focused on getting this medicine to the patients who need it right now.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [10]

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It does seem to be a very helpful functionality for a patient or a caregiver, though. Maybe I could ask another question related to, I guess the upcoming AAAAI meeting. Are there any key takeaways with the information that you plan to be presenting at that that you think perhaps are being overlooked by the market?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [11]

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Yes, Charles, actually, there's quite a lot of interesting stuff that we're presenting at AAAAI. We did a press release out on this already. I think probably the places that are most important to go are -- and we mentioned this a little bit in the call, is increasing amounts of data on the fact that both the efficacy and the tolerability of PALFORZIA get better over time. So we'll be presenting the 18-month data on the efficacy. We'll be presenting some more longer term safety data; that's the more quality of life data that we're going to be presenting at the meeting as well, right? And all of these things just continue to build on the story that staying on PALFORZIA drives up efficacy and makes the product more tolerable over time. So there are some very interesting abstracts, I think.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [12]

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Yes. And last question is, given the recent acceptance for review of a potential competing product. I guess I'm wondering, as you thought through the strategy toward the end of the year and the sizing of the sales force and the messaging with PALFORZIA, has any of that changed? And do you have perspective on that potential competition?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [13]

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I'll let Andrew answer the question, the second. But I think at a macro level, our thinking hasn't changed at all. We have built what we think it the right infrastructure to launch PALFORZIA successfully today. What we've always said is, as we learn how that goes, we may tweak it a little bit. If we find that a territory is too big or that there are more interested targets in a territory than we may have initially anticipated, we will expand our field team to be able to address that need. But we really don't feel like we have to make any changes at all, in fact, from our field deployment right now.

Andrew, did you want to talk a little bit about . . .

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [14]

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Yes. I don't have a great deal to add to that. As we've said, we've got 80 account managers out there right now spread over 10 areas. We have the flexibility within that to add more if we wish. But certainly, as we look toward the end of this year and into next year, there's nothing currently that would lead us to think we need to change that at all.

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Operator [15]

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Liana Moussatos with Wedbush Securities.

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Vasiliana Vireen Moussatos, Wedbush Securities Inc., Research Division - MD of Equity Research [16]

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I have 2 questions. Given that the FDA is releasing lots and you can't get prescriptions until the lots are released, how should we think about Q1 revenues?

And my second question is, I've been getting question from investors about home brew OIT. Can you remind us why Aimmune was founded based on home brew OIT problems?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [17]

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Sure. So let me start with the second one first, right? Sort of recall that the company was founded in 2011 when a group of very frustrated patients, parents, physicians, researchers, the NIH, the FDA and a bunch of other invested parties were extremely frustrated that there was not sufficient attention being paid to the development of treatments for food allergies, despite huge advances being made in other fields of medicine. And one of the reasons that that was true was simply because there wasn't a well-established regulatory pathway to get a treatment for food allergy approved. And obviously, that has evolved tremendously up until now when we actually have not only a pathway but we have a clear direction on how to design clinical trials in the treatment of food allergy and actually an approved product now.

Along that journey, the demand from patients and parents for something to treat their children has been extremely high. And so some physicians have been using normal food or variance of peanut-derived food products to do OIT. And the thing about an FDA-approved product, there are sort of 2 major things that make an FDA-approved product significantly better than food that you can buy in the grocery store. The one is the certainty of the allergenic expression. So there is published data out there that shows that if you went into a store and bought 2 different peanut flours that were side by side on the shelf, you can have up to a 400-fold delta in the expression of the allergen in those 2 different kinds of peanut flours.

And in order to make certain that not only are we desensitizing people but that that desensitization is sustained and that immunomodulation continues and we have a shot at getting these people ultimately to remission, you need to expose them to all 3 of the critical allergens consistently over time. And that is really hard with foods because of the change in the allergenic profile of each kind of food that you use. The second one is that at least very early on in the up-dosing phase, it's extremely hard to know exactly what dose you're giving when you use food. And some of these doses are very low.

And with our product, each dose has to be measured and has to fit within a very specific analytic range to be able to actually make it through our QA process and to be released. And so the amount of dose that you're getting in each product is consistent. So those 2 things make us unique from trying to do this with food. So that was the second part of your question. I'll let Andrew take the first part.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [18]

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Yes. On the first question, I'll let Eric address the Q1 revenue in a minute. But just to add a point of clarity around the first question. Prescriptions can be written down. So from a process standpoint, once the allergist and the health care facility have been certified in the REMS process and they can enroll the patients in the REMS program, they can then write a prescription and that prescription can be sent either to the hub that we have to perform the benefits and get investigation procedure or the specialty pharmacy that can equally perform that as well. And so prescriptions can be written. And yes, we are dependent on what's being released to be able for them to receive product. But prescriptions can be written now, actually, based on that. Eric, do you want to speak to the Q1 revenue expectations?

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Eric H. Bjerkholt, Aimmune Therapeutics, Inc. - CFO [19]

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Yes. Liana, as you know, we are not going to provide revenue guidance. But what I will say is that we record revenues when the specialty pharmacy irrevocably takes control of product. So assuming that, as we expect, we get lots released in January and shipped them to specialty pharmacies, we will be recording revenues in the first quarter.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [20]

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In March. You said January.

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Eric H. Bjerkholt, Aimmune Therapeutics, Inc. - CFO [21]

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In the first quarter.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [22]

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So we do expect to record revenue in the first. I think the reality is that we expect patients to start going on treatments in a couple weeks. But I think the point you're making Liana is that as we think about the first quarter, it really will be a few weeks of revenue generation.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [23]

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Yes.

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Operator [24]

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Our next question comes from the line of Kennen MacKay with RBC Capital Markets.

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Bikramjot Singh, RBC Capital Markets, Research Division - Senior Associate [25]

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This is Bikram on for Kennen. One quick one for us. Could you elaborate how allergists are preparing for the increased patient flow in their practices with the launch? And are there any capacity constraints that we should be thinking about?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [26]

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Well, it's a good question, and it really does vary by allergy practice. So you have in some cases they're ready to go, they've been planning for this for a while now, and so they know during the week what slot in their schedule they will be seeing patients. In some cases, they may have opened up a couple of afternoons. In other cases, they may be going to a Saturday morning clinic or something of that nature. And if they need to, to hire additional nursing staff, they may have done so to be able to accommodate that. In other cases, they may be working through that. And so what we expect is to see a steady build of capacity through this year, which is why we've said we do expect to see a relatively gradual build through the year of patients on the product as that capacity grows through clinics. So it really does vary across the board. What is I think consistent with all the folks is the level of enthusiasm to do it. It's just a question of them working through the logistics of their individual circumstance.

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Bikramjot Singh, RBC Capital Markets, Research Division - Senior Associate [27]

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Got it. That's super helpful. Then I have a follow-up. You said 300 practices have been enrolled over 4 days and the rate has been steady. I guess maybe you can comment on going forward how shall we be thinking about that number?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [28]

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Well, that is something that we will be providing an update on every earnings call. So we'll be providing an update on that. As we've said, our initial focus in terms of where the practice account managers are spending their time is discussing and working with the 1,300 allergists that we had identified as seeing about 70% of patients with a confirmed diagnosis of peanut allergy, so they'll be working with that group. And we'll be providing updates on the number of registered allergists every quarter.

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Operator [29]

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Our next question comes from the line of Evan Seigerman with Credit Suisse.

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Evan David Seigerman, Crédit Suisse AG, Research Division - VP & Senior Equity Research Analyst [30]

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Congrats again on the approval last month. Just a few on kind of the commercial build-out. First of all, have reps been visiting the physicians now that the product's been approved? Has that actually been happening?

And how should we be thinking about the potential SG&A expense over the course of the year and if there's any sort of ramp and weighting towards maybe the back half or is it now?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [31]

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Evan, I'll take the first part of that question and I'll let Eric talk through the SG&A portion. Yes, we received the approval on the 31st of January. And upon approval, we then became aware, obviously, of the final label specifics and also the final specifics around the REMS program. And so the one thing we had to do at that point was provide the final training to our practice account managers on those 2 things that we received at approval. And so that actually happened on the ensuing Monday, which was February 3. And as of February 4, which is the Tuesday following the Friday we got approval, we've had practice account managers out there across the United States talking to allergists and their staff.

Eric, on the SG&A, please?

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Eric H. Bjerkholt, Aimmune Therapeutics, Inc. - CFO [32]

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Yes. I mean our field force started January 2. The bulk of the increase relative to last year already occurred when that field force came into the organization. So there will be some growth throughout the year in SG&A, but really not materially beyond the first quarter. And we're not going to provide specific guidance. But I will say, as we start to ramp revenues, we do expect that our losses will decrease throughout the year quarter-to-quarter.

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Evan David Seigerman, Crédit Suisse AG, Research Division - VP & Senior Equity Research Analyst [33]

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And then just one quick follow-up. So you said that the reps have been seeing physicians in practices. Has there been any feedback from the physicians? I know they don't have the products in their hands. But are they generally excited? Kind of what's the buzz among the physicians and the practices when they interact with your field force?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [34]

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Yes. I mean I think excited is a good word to use. I mean I have to say, we've had a team of 20 medical liaisons out engaging in medical exchange for over a year. So the level of excitement wasn't a surprise from that perspective and the feedback that was received through our PAM since then has been entirely consistent with them.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [35]

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Evan, I'd say that's one place we get feedback from is from the field team. The other place is from our hub. And we had physicians calling our hub within the first day asking for us to send people to go and meet with their practices. And I've been involved in many launches in my day, and this is the first time ever we've had doctors calling us on day 1 asking us to send people to visit them.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [36]

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Yes, that's a great point, actually, Jayson. I've worked in the industry for 16 years myself, Evan. And I cannot think of, with maybe 1 exception for specific oncology drug, any time where we were getting certainly this volume of calls from prescribing physicians saying, could you come and talk to me about the product, please.

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Operator [37]

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Our next question comes from the name of Zegbeh Jallah with ROTH Capital Partners.

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Zegbeh Claudel Jallah, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [38]

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I think the first of a few would be any additional details on the possible scenarios from the conversations with peer accounts that are expected to happen in the near term?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [39]

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Yes. We're just starting the sort of next round of those discussions. Those discussions are very focused on conversations with the clinical committees of the payers, because by process at the payer, what happens is, the clinical committee makes an evaluation based on the clinical benefit of the drug once we're able to review it in detail now that we have the final label because of the approval. And so those are discussions that are happening over the next sort of 6 to 8 weeks.

Once those discussions have [happened], the clinical committee will make a recommendation to the P&T, and then there'll be the discussion around the formulary status as a result of that. So very early days in terms of the discussions. I think we've had 4 of those already this week, and we are progressing through those over the next 6 to 8 weeks.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [40]

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I would make one other comment, Zegbeh. And that is, you'll recall that we very consciously put our field payer team in place about a year ago so that we could have our initial discussions with payers actually prior to approval, just to make certain that they understood what the product was and what it did and to give them a heads up of what was coming. And that has been extraordinarily helpful in terms of getting into these clinical discussions really quickly and ideally on to some of the very early P&T committee agendas.

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Zegbeh Claudel Jallah, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [41]

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And Jayson, are you guys presenting some of the data that you're going to have at the AAAAI meeting in terms of patient responses, I believe after 12 months, because I think that's really helpful?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [42]

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Yes, we actually have 18 months which we've presented already. And I think we've got 2-year data that's coming soon, and the cohort continues, right? So absolutely. I think this is a really important piece of data that we want to keep sharing. This, by the way, is the cohort that will get to the sort of 3 and 4 and 5 years of therapy the first time around, and so it's a very, very important group for us to continue to follow.

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Zegbeh Claudel Jallah, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [43]

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Great. And then another follow-up question. I know you have a really good relationship with the [Patient] Foundation. So Andrew, just kind of want to get a sense of how you're leveraging that relationship ahead of the launch strategy.

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [44]

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Well, certainly from the, I think from the founding of the company and certainly all the way through the developments of the drug and now, obviously, we're commercialized, we've been engaged with the patient support and advocacy groups across the U.S. and also in Europe. And so we'll continue to have those discussions. And they're as excited or more excited about the availability of this now for the patients than we are. And so they're very valuable allies as we work with the food allergy community. I was just going to make one more comment, which is go back to the question someone asked us earlier about the founding of the company. The company was founded by the advocacy community largely. And so we're very much aligned with the needs to get these treatments to the patients as soon as we can.

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Zegbeh Claudel Jallah, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [45]

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Okay. Then just a last one about POSEIDON with the study wrapping up in late this year. So just kind of want to get a sense of how has enrollment been? And then maybe kind of try to extrapolate some points from that as to how the reception could potentially be versus in the current population that we're exploring, the 4 to 17.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [46]

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Yes. So if you recall, the rationale for doing a study in the younger children is that it increasingly is clear that the earlier you start therapy once food allergy is diagnosed, the better the outcome. And of course, the sooner you can get your child on treatment and the sooner you can get them on that path down to immunomodulation the better. We did the initial study in 4 to 17 year olds just because we wanted to make certain that we had a nice window and understood how this product was going to work. And it was actually as early as the pre-BLA meeting when we had a discussion with the FDA around getting into this earlier population, given the very robust profile that we saw of the molecule in the PALISADE study. So that study is critical. That's a label-expanding study for us.

We do expect to expand the label down to 1 year old so that the patients can initiate therapy very early. The study is recruiting really well; it's on track with where we want to be. There's very high demand for treatment in the earlier age groups. And so sort of the back end of your question is, once we get that data, yes, we will file that to expand the label and we will publish and obviously present those data once we see them.

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Operator [47]

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Our last question comes from the line of Paul Choi with Goldman Sachs.

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Corinne Jenkins, Goldman Sachs Group Inc., Research Division - Research Analyst [48]

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This is Corinne Jenkins on for Paul. Maybe taking a different track here. Could you talk a little bit about the Xencor asset that you in-licensed recently and what it was that drew you to that asset or you found attractive in particular about that?

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [49]

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Sure, Corinne. So we're very excited about the molecule, the AIMab7195 that we've licensed from Xencor. The thing that really excites us about this molecule is that we know that the suppression of IgE and IgE production have both been shown to be very helpful in the management potentially of allergic diseases. And this is a molecule that actually has 3 mechanisms of action. It binds to IgE; it suppresses upstream IgE production and it helps IgE get cleared through the liver, right? And in the regard of having all 3 of those mechanistic approaches, it is unique. There are molecules that do 1 or maybe 1-and-a-bit of those. But this is the only molecule that we know of that does all 3 of those.

And we're really excited about using that in combination with immunotherapy, because the one thing we know so far is that a monoclonal IgE suppressing agent on its own, while it certainly can enhance the ability to tolerate food does not cause the immunomodulation process that immunotherapy does. And so it doesn't get you down that path of sustained remission over time that we think we can get to with immunotherapy. However, if we can combine the 2 and have the immunomodulation happen maybe more robustly, maybe more quickly, and maybe in more patients than monotherapy alone, that's a great win, because the more patients that we can treat to essentially remission sooner in the therapeutic process, the better. And that's what excites us so much about using these 2 treatments in combination.

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Corinne Jenkins, Goldman Sachs Group Inc., Research Division - Research Analyst [50]

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Great. And then you mentioned that you hired 2 additional general managers in Europe. Can you talk about what your next priorities are to build out the commercial infrastructure in that region?

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Andrew Oxtoby, Aimmune Therapeutics, Inc. - Chief Commercial Officer [51]

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Yes, absolutely. With the general managers, they will be looking at the field organizations as we prepare for the approval towards the end of the year. As you may be aware, in certain countries in Europe, particularly in Germany, the notice periods for folks can often be 3 months or longer. And so getting started on those recruiting efforts early is what we need to do. And so we're looking at that right now and we'll be looking to bring those folks in the second half of the year.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [52]

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Corinne, I'd make one other comment about this. What's really important in Europe is not just building out a management structure, but centrally being able to work on very robust reimbursement dossier submissions because other than Germany, which is a market that you can launch straight into when you get approval, all the other markets in Europe are bound by the need to submit reimbursement dossiers and go through the local reimbursement process. And so we've built that capacity in our European office in London, and we will be ready to submit reimbursement dossiers in the core markets at approval in Europe.

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Operator [53]

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This concludes today's question-and-answer session. I would now like to turn the call back to Jayson Dallas for closing remarks.

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Jayson Donald Alexander Dallas, Aimmune Therapeutics, Inc. - President, CEO & Director [54]

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Thank you, everyone, for your participation in the call today and for your ongoing support of Aimmune. And I'd also just like to thank the entire company for their contributions that have made Aimmune the global leader in food allergy treatments and particularly the commercial team, which has worked tirelessly to get PALFORZIA to patients.

We look forward to providing you with additional updates on our next quarterly call. Thanks, everybody.

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Operator [55]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.