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Edited Transcript of PGNX earnings conference call or presentation 8-Nov-18 1:30pm GMT

Q3 2018 Progenics Pharmaceuticals Inc Earnings Call

Tarrytown Nov 8, 2018 (Thomson StreetEvents) -- Edited Transcript of Progenics Pharmaceuticals Inc earnings conference call or presentation Thursday, November 8, 2018 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bryce V. Tenbarge

Progenics Pharmaceuticals, Inc. - SVP of Commercial

* Mark R. Baker

Progenics Pharmaceuticals, Inc. - CEO & Director

* Melissa Downs

Progenics Pharmaceuticals, Inc. - Senior Manager of IR

* Patrick Fabbio

Progenics Pharmaceuticals, Inc. - Senior VP, CFO & Principal Accounting Officer

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Conference Call Participants

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* Chad Jason Messer

Needham & Company, LLC, Research Division - Senior Analyst

* Timothy Chiang

BTIG, LLC, Research Division - MD and Specialty Pharmaceutical Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Progenics Pharmaceuticals Third Quarter 2018 Results Conference Call. (Operator Instructions) Also as a reminder, this conference call is being recorded. At this time, I would like to turn the call over to your host, Melissa Downs, please go ahead.

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Melissa Downs, Progenics Pharmaceuticals, Inc. - Senior Manager of IR [2]

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Thank you, operator. On behalf of Progenics' management team, thank you for joining our conference call to review our third quarter 2018 financial results and provide a business update. Joining the call today are Mark Baker, Chief Executive Officer; Bryce Tenbarge, Senior Vice President, Commercial; and Pat Fabbio, Senior Vice President and Chief Financial Officer. Before we begin, I'll remind you that remarks made on this call that are not historical in nature may be forward-looking statements and are subject to a number of risks and uncertainties. Our actual results may differ materially. Such remarks may include, but are not limited to, those involving regulatory action, clinical development and other matters related to our prostate cancer pipeline, AZEDRA, RELISTOR and our other product candidates; our business and commercialization strategies; and expectations of future growth, revenues and assessments of our competitive positions. Please see our most recent Forms 10-Q, 10-K and other filings with the U.S. Securities and Exchange Commission for additional information on the risks that could cause our actual results to differ. As a reminder, statements we make today are as of November 8 only. I will now turn the call over to Chief Executive Officer, Mark Baker. Mark?

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Mark R. Baker, Progenics Pharmaceuticals, Inc. - CEO & Director [3]

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Thank you, Melissa, and good morning to everybody joining us today. The past few months have been a period of intense activity and significant progress at Progenics, as we have reported multiple developments with our unique portfolio of targeted radiopharmaceuticals designed to find, fight and follow cancer. In late July, we transitioned to become a fully-integrated biopharmaceutical company with the FDA approval and immediate launch of AZEDRA for the treatment of patients with unresectable locally advanced or metastatic pheochromocytoma or paraganglioma who require systemic anticancer therapy. The approval of AZEDRA marked a major milestone for Progenics. And a breakthrough for the pheo and para patients who are in critical need of treatment options. AZEDRA represents the first and only approved therapy for these indications. Launch is now underway, and Bryce will provide an update on our commercial efforts momentarily.

In parallel with our launch of AZEDRA, we have also reported progress across our portfolio of PSMA-targeted radiopharmaceutical imaging agents and therapeutics for prostate cancer. Most recently, we announced our plans to advance 1095, our small molecular radiotherapeutic into a Phase II clinical trial based on discussions with the FDA. We're very excited about the potential of this candidate. Radiopharmaceuticals have demonstrated utility in the treatment of prostate cancer, and 1095 with its PSMA-targeted approach, has unique potential on the treatment of metastatic prostate cancer. Data from our compassionate use study of 1095 indicates it was well tolerated, and demonstrated markedly reduced PSA levels and bone pain in a group of heavily pretreated advanced prostate cancer patients following a single cycle of treatment. The planned multicenter randomized controlled trial will evaluate 1095 in combination with standard of care enzalutamide, a novel androgen axis drug, or NAAD, in patients with metastatic castrate-resistant prostate cancer, or mCRPC, who are PSMA-Avid, chemotherapy-naïve and who have progressed on abiraterone, another NAAD. PSMA avidity will be determined with PyL, our PET imaging agent highlighting the potential integration of our products to improve patient treatment, a true theranostic approach. The rationale for this trial is based on recent preclinical research, which suggests the synergistic potential of 1095 plus enzalutamide in these patients. Specifically, the data suggests that the 1095 cytotoxic activity is further enhanced with enzalutamide, which sensitizes the cell to radiotherapy-induced cell death. We look forward to initiating the trial in early 2019. We plan to enroll approximately 120 patients. The study's primary endpoint will be PSA response rate according to the Prostate Cancer Clinical Trials Working Group 3 criteria. Secondary endpoints will evaluate radiographic response based on the response evaluation criteria in solid tumors, or RECIST, progression free survival and overall survival. Patients will be followed for one-year after their treatment for all efficacy endpoints. Survival and safety data will be collected for an additional year. Given the potential for 1095, and our confidence in the program, we are evaluating ways to accelerate the compound's development. In addition to executing this Phase II study, a key focus for 2019 will be determining whether there are opportunities to drive the program forward into Phase III, if initial data is positive. We plan to provide an update on our development strategy by the end of next year. We also recently announced encouraging top line results from our Phase II/III OSPREY study, examining the diagnostic performance of our PSMA-targeted radiolabeled imaging agent PyL, supporting advancement to Phase III. The OSPREY study dosed 385 patients with either high risk locally-advanced prostate cancer, or metastatic or recurrent prostate cancer. The PyL imaging results in this gold standard trial were compared to the true standard of the histopathology of tissue removed from the man, either through surgical removal of suspected lymph nodes, pelvic lymph nodes, or biopsy-suspected metastatic lesions. PyL was shown to be highly reliable in detecting metastatic prostate cancer lesions with 93% to 99% sensitivity, as well as in confirming the absence of pelvic node disease with 96% to 99% specificity.

In addition, PyL demonstrated strong positive predictive value and negative predictive values of 78% to 91% and 81% to 84%, respectively, in detection of prostate cancer in the pelvic lymph nodes. We also saw strong PPV in detecting metastatic disease ranging from 81% to 88%. Collectively, the data from the OSPREY trial show PyL to have impressive diagnostic performance. And it has the potential to improve how physicians can both detect disease and monitor response to therapies and ultimately, to inform the appropriate treatment decisions in patients. Based on the strength of this data, we are now moving forward with plans for our Phase III trial of PyL, which we expect to initiate later this year. Our Phase III trial is expected to have approximately 15 sites in the U.S. and Canada and planned enrollment of approximately 200 patients. The goal of the study is to evaluate the diagnostic performance and clinical impact of PyL in patients with suspected biochemical recurrence of prostate cancer. In September, we announced topline data from our Phase III study of 1404, our PSMA-targeted small molecular SPECT/CT imaging agent that is designed to visualize prostate cancer. While 1404 detected clinically meaningful prostate cancer with a specificity ranging among the 3 readers from 71% to 75%, the study did not meet the co-primary endpoint of sensitivity. Given the wealth of other development opportunities in our PSMA-targeted radiopharmaceutical program, at this point, we are suspending further investment in 1404.

Turning to PSMA-TTC, our earliest stage PSMA-targeted radiotherapeutic program, which has partnered with Bayer. We expected Bayer will initiate a Phase I study, which was recently posted to clinicaltrials.gov in patients with mCRPC by year-end. We are pleased to see the recent evidence that clinicians and pharmaceutical industry leaders are increasingly recognizing the value of radiopharmaceuticals to address a range of unmet needs in oncology. Progenics is proud to be at the forefront of this emerging approach for the detection and treatment of prostate cancer. As you can see, we've had a busy period across our pipeline of radiopharmaceuticals. I would like to turn the call over to Bryce for an update on the AZEDRA launch. Bryce?

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Bryce V. Tenbarge, Progenics Pharmaceuticals, Inc. - SVP of Commercial [4]

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Thanks, Mark. Immediately born FDA approval of AZEDRA, we initiated our commercial launch efforts across the U.S. We are encouraged by the reception to date, including interest from institutions, physicians and patients in gaining access to this novel therapy. AZEDRA is the first product approved for this ultra-orphan disease and initial interest reflects the desperate need for new therapies. Since approval, our team of sales representatives, those individuals with dual oncology sales and nuclear medicine backgrounds, medical science liaisons and reimbursement specialists have been executing our launch strategy. Given the complexities in treating malignant pheo and para, treatment guidelines recommend that these patients be referred to multidisciplinary centers with specialized resources. So that the majority of patients are treated at approximately 25 centers across the country. Our cross-functional field team is actively involved with all the Tier 1 targets. We've also received inbound interest from other institutions in key geographic regions. As a result, we are now in active dialogue with over 30 centers as part of this initial launch effort. As we have mentioned before, AZEDRA is a complex radiotherapeutic, one that requires special handling procedures, training and licensure, and one that often requires review by internal committees such as pharmacy and therapeutics. We are working to ensure that the interested centers have completed the tasks necessary to begin administrating AZEDRA. Process does vary from center to center, and we are pleased that some institutions have already completed their internal processes. We are working closely with other institutions to help facilitate this process as we work to get AZEDRA to the patients who (technical difficulty) these treatment options.

Referral networks are also being established to enable patient access to treatment and we have created patient services program to support out-of-pocket needs, including travel. Our market access initiatives are ongoing to ensure reimbursement is in place and that the proper support is available to our hospitals who need coding and billing assistance. 100% of prioritized payer accounts have been engaged by our team and conversations have been positive. As a first-in-class ultra rare product, we are encouraged to see the number of payers that have been interested in and engaged in learning about AZEDRA. To date, the prior authorization criteria and policies that had been created are consistent with our FDA-approved label and published data. AZEDRA was also added to 4 drug compendia: Clinical Pharmacology, DrugDex, FlexiDrug and the NCCN. These compendia are recognized by private insurers and the centers for Medicare and Medicaid services, CMS, as authoritative sources to be considered in determining drug reimbursement. Our team has also applied for transitional path to reimbursement status, is pursuing new technology add-on payments, or NTAP, and a permanent payment code with CMS. We believe our efforts are laying the foundation to help bring further industry recognition to AZEDRA and help drive adoption and reimbursement of this designated breakthrough therapy.

In addition to our commercial launch efforts, the complete results of the Phase II clinical study of AZEDRA were published online in The Journal of Nuclear Medicine this past October. Our pivotal trial was the largest multi-center prospective to evaluate the safety and efficacy of any therapy in patients with pheo and para. With our approval, we are now considering the potential to expand the approved indications for AZEDRA, including the treatment of other iobenguane scan-positive cancer patients. At the upcoming annual meeting of the Radiological Society of North America later this month, we will have the opportunity to present a full safety analysis across multiple clinical studies evaluating AZEDRA in patients with iobenguane scan-positive cancers. This abstract was selected for the special interest session on high impact clinical trials. As you've heard, we have intensive and comprehensive efforts in place to secure utilization and access for AZEDRA. I would now like to turn the call over to Pat Fabbio, our Chief Financial Officer. Pat?

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Patrick Fabbio, Progenics Pharmaceuticals, Inc. - Senior VP, CFO & Principal Accounting Officer [5]

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Thanks, Bryce, you can review details of our financials in the press release we issued this morning and in the 10-K -- 10-Q that we will file later today. Third quarter revenue totaled $5.3 million, up from $2.7 million in the third quarter of 2017, reflecting RELISTOR royalty income of $5.2 million compared to $2.6 million in the corresponding period of 2017.

Third quarter research and development expenses decreased by $2.3 million compared to the corresponding period of 2017, resulting primarily from lower external costs associated with the completion of both of the AZEDRA pivotal trial and the Phase III trial for 1404. Third quarter 2018 selling, general and administrative expenses increased by $1.1 million compared to the corresponding period in 2017, primarily attributable to higher costs associated with the commercial launch of AZEDRA. We recorded a net noncash charge of $15.2 million in the third quarter related to changes in the fair value estimates of intangible assets and contingent consideration liability, primarily related to 1404. For the 3 months ended September 30, 2018, we recognized interest expense of $1.2 million related to the RELISTOR royalty-backed loan. Our net loss for the third quarter was $24.4 million or $0.30 per diluted share compared to a net loss of $15.4 million or $0.22 per diluted share in the corresponding 2017 period. In terms of our cash position, we ended the third quarter with cash and cash equivalents of $148.9 million. This reflects an increase of $58.2 million from the December 31, 2017 balance. We continued to strengthen our cash position by raising net proceeds of $70 million during the quarter from sale of common stock in underwritten public offering and $4.8 million through the sale of common stock in at-the-market transactions. And now I'll turn the call back over to Mark to conclude.

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Mark R. Baker, Progenics Pharmaceuticals, Inc. - CEO & Director [6]

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Thanks, Pat. As I outlined earlier, we have an eventful remainder of the year, with several key pipeline initiatives planned for our PSMA-targeted imaging and therapeutic agents for prostate cancer as well as the ongoing commercial U.S. launch of AZEDRA. As we enter this new chapter of growth for our company and pipeline, we remain motivated by our vision to find, fight and follow cancer with our targeted radiopharmaceuticals. With that, I'll open the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Chad Messer from Needham & Company.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [2]

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I wanted to start with the PyL and the imaging agents actually. Following kind of a bit of a complicated Phase II/III design, can you share some more details about what this Phase III will look like? And then, in particular, have you settled on the primary, is that going to be PPV? And have you settled on what a hurdle rate might be?

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Mark R. Baker, Progenics Pharmaceuticals, Inc. - CEO & Director [3]

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So, thank you, Chad. We just had our interactions with the FDA. The endpoint is PPV-like. And the setting is in patients with rising PSA, a biochemical recurrent setting. We've been in interactions with the FDA over what the hurdle is, and I think you'll see us speak to that soon in terms of what the exact rate is. But I was very pleased with the outcome of those discussions with the FDA, and our interactions with the KOLs who will participate in the trial lead us to believe that the trial should enroll well and that the endpoint looks achievable. So we are very pleased with that. Particularly, pleased to see the FDA moving away from these sensitivity and specificity end points, which we've dealt within the past and focus now on what I do believe, the KOLs in the space believe to be the most appropriate measure, which is this PPV-like measure that we'll use in this Phase III trial, a single endpoint.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [4]

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Okay. Great. And then maybe a couple on your use of artificial intelligence in this and past studies. Can you describe in any kind of detail, what might be going on in the Phase III? And then when can we expect -- or can we expect, I guess, to hear more about the kinds of analyses you're doing with the existing data sets you have for PyL and 1404?

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Mark R. Baker, Progenics Pharmaceuticals, Inc. - CEO & Director [5]

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Yes. The AI is moving ahead very nicely. We've been able now to work with exactly what we were hoping to get, which are extensive databases from our proprietary tracers under well-controlled clinical trial circumstances, where we have FDA-mandated blinding in effect. So we now have very clean data sets. At the beginning, which, of course, you would expect, the initial data sets are generated in single center, with people who've been involved in the development of the tracer. But now we have those rigorous data sets, and that's exactly what the artificial intelligence needs. We've seen efforts with artificial intelligence in the health care system looking broadly at all EDRs or diving deeply into a diverse databases, but the problem there is there is just so much noise in that data. And so our data sets are creating the opposite of that, well-controlled. As we've been working with the 1404 data, for example, we are seeing the ability of the artificial intelligence to significantly move the ROCC curve. And so that's coming just from our initial work, in automatically segmenting the body and then using the deep learning algorithms to analyze the PSMA expression in the patients. So we are at the beginning stages. I think that you'll see this data, Chad, come out in scientific and medical papers. The pace of this AI work will be significantly quicker than the pace of clinical trials. And so I expect that this will begin to come out over 2019 in a way that will give you some strong insight into it. So for us that's a very exciting chapter. And I think that really Progenics is at the forefront of the use of the artificial intelligence in prostate cancer imaging.

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Operator [6]

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(Operator Instructions) Our next question comes from Tim Chiang from BTIG.

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Timothy Chiang, BTIG, LLC, Research Division - MD and Specialty Pharmaceutical Research Analyst [7]

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Mark, just on 1095, I know you highlighted you're going into Phase II in that product next year. Could you sort of compare and contrast 1095 with Endocyte's product? Obviously, you guys are using a different radioisotope, I think, what is it, iodine and their product's lutetium. Are there any potential benefits you see using iodine instead of lutetium, one. And then how quickly do you think you can enroll the Phase II study?

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Mark R. Baker, Progenics Pharmaceuticals, Inc. - CEO & Director [8]

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So if you're looking at the Endocyte product 617 like our product 1095, both are small molecules that target PSMA. The molecular structure of the targeting moiety for 617 and 1095 are very close, very similar. So I don't think you'll see a significant differences there in terms of the targeting ability of the agent. The difference as you point out Tim is in the isotope, with our 1095 using iodine-131, and the 617 drug using lutetium. What is the possible impact of the different isotopes? Well, I think first you would look at the ability to ablate the tumor. That's what these drugs are, targeted tumor ablators. And with the beta radiation of iodine having a longer path life, we feel that iodine has a significant potential advantage in bystander killing that -- the drug will ablate tumor cells not just of the tumor cell that it attaches to, but of nearby cells. And for bulky tumors, we are thinking that, that could make a difference. I think as you're looking at the 2 different isotopes you're saying, what is the likely side effect profile of them. In the compassionate use that was done in Germany, the 2 isotopes looked quite similar in their side effect profile. But those were small data sets and now we'll be running large scale trials, where I think we'll be able to tease those differences out. As you know, there are also alpha-emitters in the space, Tim. And in fact, our collaboration with Bayer involves the use of an alpha-emitter. The Bayer collaboration is based on our antibody. So these other drugs we've been talking about, small molecules. So there is a differentiation with the Bayer-Progenics program with the use of an antibody. And then the alpha-emitters, when they were tested at small molecules did generate some significant toxicity in the salivary glands. So an important question is as you're looking at toxicity, can it be reversed. And I think the Bayer program presents a great opportunity to see if the use of the antibody can have a significant effect on toxicity in the salivary gland. Some recent data coming out indicating that, that is possible with antibodies. So I think you're handicapping over a wide space. Not only is it the Endocyte 617 compound soon to be acquired by Novartis, but you're also looking at the alpha-emitters in the space. And with Progenics, we have made 2 significant bets in the space, our 1095 small molecule with iodine. Iodine, it's been around for a long time, its side effect profile well-understood, the supply of it quite good. And then our Bayer antibody with the alpha-emitter and you're contrasting that with the 617 compound, which is lutetium. It's a interesting compound, less data available on lutetium. And the last thing I would say Tim is, you see us differentiating our approach compared to 617 with the setting that we are testing the drug in this Phase II. The 617 drug being tested in a post-chemo setting, but as we discussed earlier today, our 1095 drug, we're looking at a pre-chemo setting using it in a combination of standard of care enzalutamide in patients who have failed abiraterone. And we think that's an attractive commercial setting. We think that we can really make a difference for patients, if the combination of our 1095 with enzalutamide allows the patients to overcome the resistance that in the current standard of care almost inevitably results as they are taking enzalutamide. So I realize it's a lot of information Tim, maybe more than you wanted, but there are lot of ways to look at this space. And with the Novartis acquisitions of advanced accelerator and now the pending acquisition of Endocyte, we see big pharma moving into the space and taking a significant interest.

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Timothy Chiang, BTIG, LLC, Research Division - MD and Specialty Pharmaceutical Research Analyst [9]

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That's helpful, mark. I just have one follow-up and that's on AZEDRA, actually. I know you guys are making progress to launch. Maybe this question is for Bryce. Have you guys identified maybe -- how much progress have you guys made in identifying the target patient population that AZEDRA would be used in? Obviously, I think you guys are in active dialogue with 30 centers, I think you guys said. So I was just sort of wondering how many patients does that sort of reflect?

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Bryce V. Tenbarge, Progenics Pharmaceuticals, Inc. - SVP of Commercial [10]

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Tim, I mean, I don't -- we're not providing specific guidance on today's call, but the numbers we've given previously, we have no reason to come off of those, right? I mean, the 400 to 800 that then you apply an avidity number to. Again, I have been encouraged from the beginning at the acceptance and enthusiasm from the sites that we have been engaging and whether it be in prelaunch profiling or in the clinical trial setting. But then also and importantly, because of the geographic gaps that remain after you think about those centers from those that have come forward, and oftentimes those centers are coming forward because they have patients identified. And so that's been encouraging. It's still early days and some of those centers then, we are starting at a earlier place from a readiness standpoint, but nonetheless the center interest is, of course, spurred primarily by patients.

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Operator [11]

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I show no further questions in the queue at this time. I would like to turn the call back over to Mark Baker, CEO, for closing remarks.

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Mark R. Baker, Progenics Pharmaceuticals, Inc. - CEO & Director [12]

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Thank you all, again, for joining us this morning to review our continued progress, financial results and upcoming milestones. We look forward to speaking to you again soon at several upcoming investor conferences this month. Thank you.

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Operator [13]

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Thank you, ladies and gentlemen, for attending today's conference. This concludes the program. You may all disconnect. Good day.