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Edited Transcript of RIGL earnings conference call or presentation 6-Nov-18 10:00pm GMT

Q3 2018 Rigel Pharmaceuticals Inc Earnings Call

South San Francisco Nov 7, 2018 (Thomson StreetEvents) -- Edited Transcript of Rigel Pharmaceuticals Inc earnings conference call or presentation Tuesday, November 6, 2018 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anne-Marie S. Duliege

Rigel Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer

* Dean L. Schorno

Rigel Pharmaceuticals, Inc. - Executive VP & CFO

* Dolly A. Vance

Rigel Pharmaceuticals, Inc. - Executive VP of Corporate Affairs, General Counsel & Corporate Secretary

* Eldon C. Mayer

Rigel Pharmaceuticals, Inc. - Executive VP & Chief Commercial Officer

* Raul R. Rodriguez

Rigel Pharmaceuticals, Inc. - President, CEO & Director

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Conference Call Participants

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* Anupam Rama

JP Morgan Chase & Co, Research Division - VP and Analyst

* Christopher Joseph Raymond

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* Guyn Kim

BMO Capital Markets Equity Research - Analyst

* Justin Alexander Kim

Cantor Fitzgerald & Co., Research Division - Analyst

* Kyung Yang

Jefferies LLC, Research Division - MD & Senior Equity Research Analyst

* Yigal Dov Nochomovitz

Citigroup Inc, Research Division - Director

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Presentation

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Operator [1]

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Good afternoon. And welcome to Rigel Pharmaceuticals Financial Conference Call for the Third Quarter of 2018. (Operator Instructions) I would now like to remind you that this call is being recorded for replay purposes from Rigel's website. (Operator Instructions)

And now, I will turn this conference over to our first speaker, Dolly Vance, who is Rigel's Executive Vice President, Corporate Affairs and General Counsel. Ma'am, you may begin.

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Dolly A. Vance, Rigel Pharmaceuticals, Inc. - Executive VP of Corporate Affairs, General Counsel & Corporate Secretary [2]

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The financial press release for the quarter of 2018 was issued a short while ago and can be viewed along with the accompanying slides for the presentation in the News & Events section of our Investor Relations page on our website at www.rigel.com.

As a reminder, during today's call, we may make forward-looking statements regarding our financial outlook, our partnering and commercialization efforts and our plans and timing for regulatory and product development. These statements are subject to risks and uncertainties that may cause actual results to differ than those forecasted. A description of these risks can be found in our most recent quarterly report in Form 10-Q on file with the SEC. Any forward-looking statements are made only as of today's date, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

At this time, I would like to turn the call over to our CEO, Raul Rodriguez.

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [3]

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Thank you, Dolly, and thank you for joining us in our third quarter financial call. Also joining me today are Eldon Mayer, our Chief Commercial Officer; Anne-Marie Duliege, our Chief Medical Officer; and Dean Schorno, our Chief Financial Officer.

And during today's agenda, on Slide 6, we will provide you with updates on a number of key Rigel objectives. Since our -- since this is our last financial quarterly call for the year, I'd like to review our accomplishments for 2018 and discuss what to look forward to in 2019. While we discussed some of these topics during our Analyst Day in early October, we will be able to provide you some additional detail and highlight a couple of recent events that are critical to our long-term success.

Now turning to Slide 8. During the third quarter, we made significant progress in executing on Rigel's growth strategy. In particular, we continued to experience great receptivity and interest for TAVALISSE from patients and physicians. We have net product sales of $4.9 million in what is the first full quarter of product revenue. This is an excellent achievement by our commercial organization and speaks to the traction we are seeing in the market.

Just last week, we signed a significant partnership agreement for the development and commercialization of fostamatinib in Asia. This is a very important milestone for Rigel and will serve as part of the foundation for expanding the global market for fostamatinib. We are happy to give you some additional color on today's call. We also filed the marketing authorization application or MAA in Europe for fostamatinib in adult chronic ITP, another milestone in our global commercialization effort. This application was then validated and accepted for review by the EU regulators. This is the equivalent of the U.S. new drug application, or NDA.

In our efforts to expand the opportunity for fostamatinib beyond chronic ITP, we're in the process of submitting final revisions to the pivotal Phase III trial for fostamatinib in warm autoimmune hemolytic anemia to the U.S. FDA. This will take place in the next few days, and we plan to initiate the trial in the first half of next year. In all, great progress with our current commercial opportunity, setting up for global expansion for fostamatinib and setting up for the next indication for this product.

Moving on to Slide 9. As we execute on our global expansion strategy, our goal is twofold. First, we want to gain a presence in markets where there is significant financial opportunity, Europe and Asia. The EU is the second largest market for sales of ITP treatments, and Japan is the third largest.

Second, to do so, we will partner with companies that have significant experience in the local markets and with a proven track record of success. This quarter, we took 2 significant steps to execute on these objectives. We signed an exclusive license agreement with Kissei Pharmaceuticals for all indications for fostamatinib in Asia, and we submitted and validated the MAA for fostamatinib in Europe, initiating the review process there. And we are in active discussions with potential partners for commercialization of fostamatinib in the EU, and we expect to have a collaboration in 2019.

Turning to Slide 10. The Kissei agreement is a milestone event for Rigel. A way of background, Kissei is an R&D and commercially oriented Japanese-based pharmaceutical company with over 70 years of experience. They share Rigel's mission to bring new drugs to patients with significant unmet medical needs and focus on important specialty medical areas. We think they will do quite well with this orphan disease indications, such as chronic ITP. With this agreement, Kissei gains exclusive rights to fostamatinib in all indications in Japan, China, Korea and Taiwan. They will hold a preliminary meeting with the PMDA, which is Japanese version of the FDA, in early 2019. This will be the first step in the approval process of a marketing authorization application for fostamatinib in Japan for the treatment of chronic ITP.

Rigel is the beneficiary of what we think is an excellent, committed and rightsized partner for fostamatinib in Japan and Asia. In terms of financials, we will receive an upfront payment of $33 million -- actually, we received an upfront payment of $33 million, potential development and commercial milestone of $147 million. And as the exclusive supplier of fostamatinib, Rigel will receive a transfer price premium in the mid- to upper 20% range based on tiered net sales.

And finally, and perhaps most importantly, with Kissei, we are able to bring fostamatinib to patients in Japan and other important Asian countries. And doing so -- and in so doing it, furthering our mission of bringing new drugs to these patients.

I will now turn the call over to Eldon for a commercial update on the U.S. commercial launch of TAVALISSE. Eldon?

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Eldon C. Mayer, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Commercial Officer [4]

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Thank you, Raul. I'm pleased to share with you our commercial update, including an update on our momentum since the launch of TAVALISSE at the very end of May.

Moving to Slide 12. We've been focused on 4 core strategies thus far. One, build awareness of TAVALISSE and the unmet need in ITP. Two, educate our customers about TAVALISSE's clinical utility and labeled indication. Three, secure adoption across the prescriber base with an initial focus on top-tier physicians in hematology and the hem/onc community. And four, create distribution, reimbursement and patient support infrastructure that enables more seemless access and adoption, while providing an overall positive physician and patient experience. We're very encouraged by our results to date. TAVALISSE's mechanism of action and value proposition is resonating well with physicians and even better than expected. And we are seeing initial benefits of that and the TAVALISSE broad indication with demand for product across all lines of therapy.

TAVALISSE is being used by all customer types, large hospital clinics, integrated delivery networks or IDNs and both large and small practices. On the access side, we've already met with all of the top 25 payers that account for over 90% of covered lives. And we continue to receive a positive response from these payers regarding the product, its ability to address an unmet need with ITP and our attractive pricing model relative to the market. And we continue also to see favorable trends with reimbursement.

Now on to Slide 13. A look at early launch metrics gives us a lot to be excited about. At our recent Analyst Day, I walked through a lot of detail on how we are assessing this at the early stage of launch. And today, I'd just like to highlight some of the metrics to support our enthusiasm around the launch to date.

We are seeing demand for product across all lines of therapy, including use in first and second lines in the steroid-refractory market. To see this broad adoption at this early stage of launch is a very positive indication of physician interest. We're encouraged by reimbursement coverage with 85% to 90% payer approval rate and continuing to see payer wins, notably with several PBNs placing TAVALISSE on formulary for first line steroid refractory use, which is consistent with the broader indication of the label and essentially providing parity access to the oral TPO on the market. The payer mix is shaping up as we planned with about 45% being covered by commercial payers and 55% being covered by government payers and reimbursement is occurring as expected. A key indicator of early success is the number of patients that have remained on treatment after the first month. Although it's still early, we are tracking refills over time and are pleased to report that of those eligible for second month of treatment, 85% of patients continued on TAVALISSE. It's important to keep in mind that TAVALISSE label recommends a 3-month trial before discontinuing, if platelets don't increase sufficiently. So we'd expect a portion of those patients to discontinue treatment in the third or fourth month. We are collecting and analyzing data for patients and can report on that in the future. We expect that at least 4 months of data will be required to evaluate patient persistency beyond the initial 2 to 3 months trial period.

We are also seeing a prescriber base that continues to grow with approximately 300 patients prescribing TAVALISSE through Q3, based on those with a shipped and reimbursed bottle of TAVALISSE. We're seeing good sales force engagement as well. Our current efforts are targeting approximately 3,250 hematologists and hem/oncs and our sales force has made over 7,000 calls to over 2,800 ITP treaters to date. We are executing as planned and having success with access to potential prescribers.

Slide 14. Our distribution network focuses on supporting access to patients that need TAVALISSE regardless of provider source, in private practice, hospital outpatient clinics, IDNs or in federal accounts such as the VA. Our specialty distributors and specialty pharmacy partners combined are providing good coverage across the U.S. to all provider sources, and this distribution model has been received well by community hemes and hem/oncs.

We're seeing broad utilization across -- of TAVALISSE across the channels of business. Starting at the top of the slide and working down, through September 30, we shipped 891 bottles from our 3PL to specialty distributors. From the specialty distributors, 319 bottles were shipped to community pharmacies and clinics, including in-office dispensaries, also known as IODs, and 436 bottles were shipped to specialty pharmacies. Then from the specialty pharmacies, 368 were shipped directly to patients. When combining the 319 shipped to community pharmacies and clinics, with 368 shipped from specialty pharmacies, we have total patient demand of 687 bottles from launch through the end of the third quarter.

With regard to our free trial program, through the third quarter, we shipped 63 bottles to patients, which represent less than 10% of total patient demand. This is an offering to patients with a prescription for TAVALISSE that may experience a delay in coverage as they navigate the reimbursement process and payer requirement. This supports patients getting prompt access to TAVALISSE, which has the potential to lead to sales, but more importantly provides patients with a much needed treatment option without any significant delay.

Now on Slide 15. I'd like to review some of our initiatives to maintain launch momentum in Q4 and into 2019. With regard to market access, we've ongoing engagement with the top 25 payers as well as with regional payers. We continue to enhance our distribution system and provide ongoing support and execution of RIGEL ONECARE patient and provider support center.

Our physician and customer engagement consists of promotional peer-to-peer speaker programs, which are ongoing, as well as medical conferences and medical society meetings at both state and regional levels.

The American Society of Hematology Annual Conference in December, also known as ASH, will be a key meeting for us and will be our first presence at this conference after launch. This will serve as a great opportunity to build awareness and engage with many hematologists and hem/oncs, and we intend to have a strong presence there with many key customer engagements planned.

On the advocacy front, we are deepening relationships with relevant patient advocacy groups by aligning on shared priorities that mutually benefit each party and continue to establish and maintain effective lines of communication with all groups, the patient community, KOLs and et cetera.

Slide 16. So just to recap briefly. All the trends we are seeing to date are headed in the direction that we had hoped. We are seeing strong demand and significant refill activity. We continue to receive a positive response from physicians, payers and patients. We're seeing usage across all lines of therapy. There has been good uptake and sales from a broad base of prescribers and community clinics. We have secured good coverage from payers with many recent positive formulary decisions, and there have been low abandonment rates, which is driven primarily by Medicare patients due to copay, which we had anticipated.

I'm confident in our ability to continue growing our commercial business and are excited about the receptivity we are seeing in the marketplace.

So with that, I'd like to hand the call over to Anne-Marie.

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Anne-Marie S. Duliege, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [5]

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Thank you, Eldon. Slide 18, I would like to round out the discussion of our fostamatinib program in chronic ITP by briefly highlighting the regulatory progress we are making.

As Raul mentioned in his comments, the EMA review process of our marketing authorization application is moving forward. We submitted the application in September, and it was accepted for review at the beginning of October. Based on the standard review process and taking into account the time required to respond to questions, we expect to receive an opinion from the CHMP by Q4 of next year. If we were to receive a positive opinion, we would expect to obtain official approval by the end of 2019.

Now on Slide 19. I would love to turn to our second indication for fostamatinib, which is autoimmune hemolytic anemia, or AIHA. This disease is characterized by lower survival and shorter lifespan of red blood cells, which become coated with an IgG antibody and then are attacked by the body's own immune system.

To reiterate what we have previously said, we're targeting autoimmune hemolytic anemia for 3 primary reasons. One, other than steroids, there are currently no options approved in the U.S., specifically for this indication. Two, we're targeting antibody-mediated destruction of red blood cells, similar to the targeting of antibody-mediated platelet destruction in ITP, and hence, investigating a mechanism of action that we are very familiar with. And third, there is a significant opportunity for this indication in the U.S. and other leading pharmaceutical markets.

What is also important is that Eldon and our commercial team have already begun to build an infrastructure for TAVALISSE in the U.S., which we could leverage to potentially enter the market efficiently and effectively.

On Slide 20, you will see the Phase III trial designed for autoimmune hemolytic anemia. In the coming days, we will be submitting to the FDA our final revisions to our pivotal trial design, which were based on the agency's recent feedback. Importantly, we are on track to initiate the trial in the first half of next year as planned. This will be a randomized, placebo-controlled, 24-week trial, which will involve approximately 80 patients with warm autoimmune hemolytic anemia who have failed at least one prior therapy. So the patients also have a hemoglobin count of less than 10 grams per deciliter at screening.

Turning to Slide 21. The primary endpoint is going to be similar to the one we have used in the Phase III program -- in the Phase II program. We're looking for durable hemoglobin response by week 24, which is defined as a hemoglobin greater than 10 grams per deciliter and greater than 2 grams per deciliter above baseline.

We're finalizing how we will define durability of response with the FDA and expect to have all of the requirements in place in the coming weeks.

We have a lot of experience recruiting patients with hematologic disorders and plan to leverage all the knowledge we have gained from conducting the Phase II trial in autoimmune hemolytic anemia as well as our clinical trials in ITP. This will be a great benefit, as we look to achieve a timely enrollment and strong trial execution. We will be conducting the trial normally in North America and in Europe and possibly in Australia as well, if it makes sense.

Finally, I would like to mention the 3 abstracts that we have -- that had been accepted for presentation at this year's ASH annual meeting. We will report extension study data on TAVALISSE in chronic ITP in an oral presentation. Additionally, we have 2 abstracts accepted for poster presentation, one, which analyzes prediction of response to fostamatinib in the presence of autoantibodies to platelets. And then we have the extension study results of the autoimmune hemolytic anemia study that will be presented as a poster as well.

Dean?

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Dean L. Schorno, Rigel Pharmaceuticals, Inc. - Executive VP & CFO [6]

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Thank you, Anne-Marie. Starting on Slide 25. Here are some of the financial highlights from the quarter.

First, let me remind you that we recognize revenue using the sell-in methodology when our products are delivered to our specialty distributors. For the third quarter of 2018, 649 bottles were shipped to our specialty distributors, resulting in $6.1 million of gross product sales. 610 of those bottles were shipped to patients and clinics, while 39 of those bottles remained in our distribution channel at the end of the quarter. As of September 30, a total of 204 bottles remained in our distribution channels.

We reported net product sales from TAVALISSE of $4.9 million, which was recorded net of estimated discounts, chargebacks, rebates, returns, copay, assistance and other allowances of $1.2 million, or gross to net adjustment.

Progressing on to the next slide. Our cost of product sales was approximately $69,000 or about 2% of net product sales. We reported total cost and expenses of $29.2 million in the third quarter of 2018 compared to $18.8 million for the third quarter of 2017. This increase was primarily due to the personnel costs for commercial and medical teams as well as third-party costs related to our commercial launch of TAVALISSE. We expect quarter-over-quarter increases in our total cost and expenses as we initiate our pivotal trial in autoimmune hemolytic anemia, advance our early-stage R&D programs and continue to invest in our commercial launch of TAVALISSE.

We reported a net loss of $23.8 million or $0.14 per share in the third quarter of 2018 compared to a net loss of $17.7 million or $0.14 per share in the third quarter of 2017.

On to the next slide. We ended the third quarter of 2018 with cash and short-term investments of approximately $116 million. As Raul described, we're extremely excited about our collaboration with Kissei that we announced last week. While we plan to more fully describe the details and accounting for this arrangement with our fourth quarter results, let me highlight some of the key financial elements of our collaboration with Kissei.

During the fourth quarter, we received $33 million upfront payment from Kissei. We expect that a substantial portion of this $33 million upfront payment to be recognized as revenue in the fourth quarter of 2018 and defer revenue recognition of approximately 10% of this upfront payment in the future. Our agreement also provides for potential milestone payments totaling $147 million, of which approximately 2/3 are related to development milestones and 1/3 related to sales milestones. Additionally, as the exclusive supplier of fostamatinib, Rigel will receive transfer price payments in the mid- to upper 20% range based on net sales.

With this $33 million upfront payment from Kissei, we expect our cash runway will now extend into the first quarter of 2020 and provide for our continued commercial costs, along with expansion of certain clinical programs.

I'll now turn the call back to Raul.

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [7]

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Thank you, Dean. On Slide 28. I'd just like to reiterate what a remarkable year this has been for Rigel. Frankly, I hope we have quite a number like this in the future because it's been a great one. Most importantly, we received approval for TAVALISSE in adult chronic ITP in April. We then build a sales organization and launched the product in May. And the initial traction of the product has really been excellent. We're really happy about that. We've made excellent strides in advancing the global strategy for fostamatinib with acceptance of the MAA for fostamatinib in Europe and just signed a partnership agreement with Kissei for fostamatinib in all the indications in Asia. And in consultation with the FDA, we designed a pivotal Phase III trial for AIHA.

So with these achievements, I think we're really well positioned for 2019. What we hope to achieve is, we hope to continue to drive revenue for TAVALISSE in the U.S. and provide the product to chronic ITP patients. We plan to establish a European partnership and potentially even see approval for fostamatinib in Europe. And we expect that Kissei will be able to move forward with fostamatinib in Asia as planned. And we hope to initiate the pivotal Phase III trial in AIHA some time in the first half of next year. So really quite a lot to look forward to.

So with that, I will turn the call over to you -- to the operator for your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question comes from Eun Yang from Jefferies.

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Kyung Yang, Jefferies LLC, Research Division - MD & Senior Equity Research Analyst [2]

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So Kissei partnership, it is for all indications of fostamatinib. So is the partner also interested in IgA nephropathy?

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [3]

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Thank you, Eun. Yes, the partnership with Kissei includes all potential indications for fostamatinib. ITP, of course, AIHA and also IgA nephropathy. We may have discussed in earlier calls, IgA nephropathy is a sizable indication in the U.S., in Japan with a prevalence rate maybe 9x that in the U.S. So a substantial burden on the health care system in Japan. And it's -- they have the rights to move forward with that as well.

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Kyung Yang, Jefferies LLC, Research Division - MD & Senior Equity Research Analyst [4]

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Okay. And then just a quick question on this $33 million milestone payment. Is it going to be booked at once in fourth quarter?

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Dean L. Schorno, Rigel Pharmaceuticals, Inc. - Executive VP & CFO [5]

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We expect about 90% of the $33 million to be recorded as revenue in the fourth quarter. And then the last 10% will be deferred into the future, the timing of which was -- is a bit uncertain right now. But the majority of that will be in the fourth quarter.

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Kyung Yang, Jefferies LLC, Research Division - MD & Senior Equity Research Analyst [6]

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Okay. And the last question is, third quarter looks great. I don't know if you can comment on what you are seeing in October so far?

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Eldon C. Mayer, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Commercial Officer [7]

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Eun, it's Eldon here. We're not going to give any specifics, but I can tell you that we're pleased with the trend that we are seeing in early Q3. Prescriber count continues to increase. We're beginning to see more repeat prescribers and patients with more than one prescription fill. We continue, of course, as I -- you've heard me say, to receive good physician -- excuse me, good feedback from physicians as well as from payers through the sales force and other channels. And we continue to gain access over time and refine our targeting base. So overall, lots of good signs going forward. Lots on specifics, of course, in the future for you.

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Kyung Yang, Jefferies LLC, Research Division - MD & Senior Equity Research Analyst [8]

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At the Analyst Day event, I think you guys have kind of indicated that the physicians who have prescribed so far, they may want to have to wait to see how their patients are responding to TAVALISSE before they prescribe in additional patients. Is that what you are seeing through October as well?

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Eldon C. Mayer, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Commercial Officer [9]

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Yes. We continue to see that. So we are adding prescribers, and we do, as I mentioned, see more patients on therapy. But we have a lot of physicians who are -- have one patient on drug and are -- want to see how that patient does before they are adding. However, we do also see a number of prescriptions with -- excuse me, physicians with 2 and more patients on therapy. So we are beginning to see that as well.

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Operator [10]

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And next question comes from Anupam Rama from JPMorgan.

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Anupam Rama, JP Morgan Chase & Co, Research Division - VP and Analyst [11]

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Congrats on all the projects on the TAVALISSE launch as well as the broader pipeline. Just a quick one for me. Once you guys get the final regulatory sign offs here for AIHA Phase III, what are the gating factors to initiate in that study? And how much site overlap should we be expecting from the Phase II SOAR Study as well as the FIT Studies in ITP?

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Anne-Marie S. Duliege, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [12]

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So in terms of site overlap from the Phase II study in autoimmune hemolytic anemia, we'll certainly be using the sites that have been familiar with the program and continue to use some of them. But we plan to enroll -- to open large number of sites, and we'll go much beyond the Phase II program in terms of sites.

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [13]

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I think there is going to be substantial overlaps from the ITP enrolling sites across Europe and the U.S., I think.

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Operator [14]

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And next question comes from Do Kim from BMO Capital Markets.

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Guyn Kim, BMO Capital Markets Equity Research - Analyst [15]

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I was hoping if you could provide some additional background on the ITP market in Asia, on the patient size and the use of (inaudible) and other therapies? And how that might differ from the U.S. and Europe? And if Kissei will need to run additional clinical trials with Asian patients before filing?

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [16]

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Thank you, Do. I'll handle that one. So the prevalence rates for chronic ITP is comparable in most of the countries around the world, including Japan. Japan has roughly 1/3 the population of the U.S. So the prevalence rate is about 1/3 of the U.S. And you may recall, we've said 65,000 is the number of adult chronic ITP patients in the U.S.. So I've seen estimates of about 30,000 and as low as 25,000. So it's 25,000 to 30,000 is the number of patients, adult chronic ITP patients in Japan. It's treated fairly similarly except not as much Rituxan use. That's, I think, the biggest difference between the market there and the market here. In terms of size -- revenue size, what some of our partners -- potential partners in Japan have told us is it's about $125 million in revenue. That's substantially smaller than the U.S. in terms of dollar revenue because the pricing is a bit lower than it is in the U.S. for these treatments. Primarily driven by the two TPO agents. Of the 2, the oral version is substantially higher than the injectable product, though both are approved there. And so it's an attractive market, overall. I've seen -- and the $125 million is, probably doesn't include all the off-label products that are used that are now generic as well. So might be a little bit higher than that. So very attractive market in Japan. Kissei is very well positioned to execute on this specialty market, that is really their sweet spot. And we couldn't have asked for a better partner, we are absolutely delighted to have them on board. They've been very eager to move forward with it obviously, and obviously, we were able to conclude this deal successfully well ahead of our expectations.

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Guyn Kim, BMO Capital Markets Equity Research - Analyst [17]

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And do you think Kissei will have to run additional clinical trials in the Asian population?

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [18]

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Thank you for reminding me to answer that question. Typically, the answer to that is yes. But I think that we're going to leave for them to have the discussions with the PMDA first, and then they will tell us about that.

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Guyn Kim, BMO Capital Markets Equity Research - Analyst [19]

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Okay, great. And a question on AIHA, the Phase III trial. Would you consider the primary endpoint for that trial less stringent than it was for ITP? And should we expect -- since it is a similar endpoint for the Phase II, should we expect the same high response rates? And what kind of placebo response should we expect in that trial?

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Anne-Marie S. Duliege, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [20]

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So we're not making any parallel, honestly, between the ITP program and the autoimmune hemolytic anemia program. We're -- currently, we're finalizing a formal definition of the endpoint with the FDA. And we will report on it at another time. In terms of the placebo patient population, we're taking into account this into our design of the program.

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [21]

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So Do, we will provide further information a bit into the future after this is finalized with the FDA.

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Guyn Kim, BMO Capital Markets Equity Research - Analyst [22]

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Okay. Okay. And just on enrollment, what was the pace of enrollment you were seeing towards the end of the Phase II study? And would you expect that to accelerate in the Phase III for you to reach your first half 2020 enrollment completion target?

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Anne-Marie S. Duliege, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [23]

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We were seeing approximately 1 to 2 patients per site overall of enrollment, given that this is such a rare indication. And we expect to see the same in the Phase III trial and hence we'll size the number of sites accordingly.

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Operator [24]

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Our next question comes from Chris Raymond from Piper Jaffray.

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Christopher Joseph Raymond, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [25]

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So just a quick question. At your R&D Day, I think you talked about over 40% of use of TAVALISSE being in first or second line steroid refractory patients. Just wondering if maybe you can sort of describe if there is a trend since then or give an update as to where that number might lie at this point? And maybe talk about where you think that number might go over time? Do you think it'd go much higher? And I think you were saying at that time that, that was a bit of surprise? So any sort of color there would be great?

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Eldon C. Mayer, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Commercial Officer [26]

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Yes, Chris, this is Eldon. And let me just say before I address your question that one of the things that's nice about the analysis of how our product is being used is -- I did mention, of course, it's being used across all lines of therapy. But we're seeing that following all therapies, including steroids, TPO agents, both of the TPO agents, Rituxan, et cetera, according to the data that we're gathering. So we're seeing pretty broad usage. And I did want to characterize this. Overall, we're very pleased with the trend that we're seeing there. But -- and while we're encouraged by this broad adoption, these data should be considered directional, given the limited sample size of the data. And I just wanted to speak to that a little and why it is limited. As a reminder, we have visibility into the specialty pharmacy channel, which represents roughly half of our total demand. And so a portion of that comes through RIGEL ONECARE, where we have some visibility into the treatment history. So it's a portion of a portion of our demand data. So we don't plan to report this level of detail in the future. However, we will continue to monitor it and report on overall trends we do observe. So although I can't give you a specific number on that today, I can tell you we are pleased with the trends that we're seeing there overall, and we're going to continue to look at this. It's just -- we want to accumulate more data there and then see how it goes. So hope that answers your question.

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Operator [27]

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Our next question comes from Justin Kim from Cantor Fitzgerald.

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Justin Alexander Kim, Cantor Fitzgerald & Co., Research Division - Analyst [28]

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Just maybe a couple from me. Can you tell us at what stage the company might have sufficient commercial experience to provide guidance for 2019? And I think 4 quarters was mentioned earlier as sort of a benchmark for understanding maybe with the -- how patients are coming on and potentially off the drug.

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Dean L. Schorno, Rigel Pharmaceuticals, Inc. - Executive VP & CFO [29]

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This is Dean. So from a guidance perspective, we're -- this was our first full quarter. So we're looking -- we want to continue to analyze data as Eldon said and as Raul said. We'll as we -- we haven't decided whether we'll provide guidance or not. But as we head into the end of the year, we'll make that determination and we'll update you then.

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Justin Alexander Kim, Cantor Fitzgerald & Co., Research Division - Analyst [30]

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Okay, great. And then maybe just piggybacking off of maybe a question beforehand. In terms of the bottles that are shipped and where they are placed, is that going to be a regular update? Or -- and maybe if it is, is that a January event or a quarterly call event?

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Dean L. Schorno, Rigel Pharmaceuticals, Inc. - Executive VP & CFO [31]

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Yes. So I'll take that. So we will continue to provide data on, for example, we said there are 204 bottles in our distribution channel. Eldon walked us through kind of the details of the distribution channel. We'll continue to provide certainly that 204 bottles, the number in the distribution channel. And then we'll from time to time, provide the level of detail that Eldon described.

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Justin Alexander Kim, Cantor Fitzgerald & Co., Research Division - Analyst [32]

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Okay. And then maybe just one on AIHA. Without going into too much detail, could you describe sort of what size of patient data sets might be available at the meeting and presented?

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [33]

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You mean, at the ASH meeting?

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Justin Alexander Kim, Cantor Fitzgerald & Co., Research Division - Analyst [34]

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Yes.

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Anne-Marie S. Duliege, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [35]

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At the ASH meeting, we will report on the extension of -- the extension trial of patients in the Phase II trial, which will be less than 10 patients.

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Operator [36]

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(Operator Instructions) Our next question comes from Yigal Nochomovitz from Citigroup.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [37]

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On the free drug that you mentioned, what is the trend expected to be there? And will you expect some to convert to revenue generating over time?

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Eldon C. Mayer, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Commercial Officer [38]

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Eldon again here. We've been tracking this metric in 2 different ways. One is looking at the bottles and one is looking at the patients; the number of patients and the number of bottles. The number of bottles, as I mentioned, is below 10%. Number of patients is below 15%. So we don't see any really a trend there. We don't see it increasing or decreasing. It's -- these are, of course, early data. So again directional, I think that goes without saying, but we're just not seeing any trends there that we can comment on at this early point. But of course, as I mentioned before, we'll continue to monitor and tell you what we see. We are seeing them convert over to pay prescriptions. I don't have specific number for you there, but I can tell you that we are seeing that, and it's consistent.

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [39]

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Which is really the objective of it, to make sure we don't lose valuable patients that might benefit from the product and providing them for, say, 3 months, so that they get coverage in that period of time. So we're delighted some of them are converting.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [40]

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Okay. And then I think Eldon, you mentioned that you -- that there may be a portion of patients that by the third or fourth month of therapy would discontinue if they don't get a sufficient platelet recovery. What are the expectations there in terms of what percent may discontinue? Is it similar to what you expect in the clinical trials? Or is there a different view of the commercial picture for that?

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Eldon C. Mayer, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Commercial Officer [41]

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Yes. I mean, it's a great question. The real world clinical experience can often be different than the clinical studies. And I think we're just -- on that, we're just going to need to accumulate data over time, as I mentioned. We have visibility on this on half of our business at this time. So we're accumulating data. We'd like to accumulate at least 4 months of data until we can provide additional metrics on how that's looking. I wouldn't want to make any projections at this point.

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [42]

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Yes. And we need enough of volume of patients to say something. We can't base that just on a small number of patients. We'd like to be a little confident on that, but it's a very -- it's a critical question.

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Eldon C. Mayer, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Commercial Officer [43]

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I can tell you anecdotally. And we do stay in touch with our sales force, and we hear information at various meetings and advisory boards and through the medical affairs team. And we're hearing positive feedback, genuinely, on the clinical response overall and the tolerability of the drug. Physicians seem to be comfortable with the AE profile, they have their protocols of how to manage diarrhea and monitor for blood pressure and liver function. So that hasn't been a barrier to prescribe, and we don't hear anything that concerns us, actually to the contrary.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [44]

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Okay. And then on the...

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [45]

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Yes, go ahead.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [46]

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Sorry, I just had one more question. And then on -- so on the AIHA, on the finer point about defining the durability. Is that just like dotting the i's and crossing the t's on the final definition? Or is there some more conceptual gap between you and what the FDA would like to see? And that -- and how that's defined? Can you just clarify a little bit?

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Anne-Marie S. Duliege, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [47]

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No. There is no gap. It's actually going to the finalization of the definition.

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [48]

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So it is just crossing the i's -- dotting the i's and crossing the t's.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [49]

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Okay. Like -- okay. Like how many visits they have to be above a certain level, is that something like that, is that just what you're working on?

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Anne-Marie S. Duliege, Rigel Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [50]

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Yes.

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Operator [51]

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Our next question comes from Eun Yang from Jefferies.

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Kyung Yang, Jefferies LLC, Research Division - MD & Senior Equity Research Analyst [52]

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And then in the press release, you said that you guys are in active discussion for European partnership. So can you expect that partners to come before approval?

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [53]

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Thanks for the follow-up, Eun. We really can't give greater guidance than that. We're comfortable that we will have a partnership in place in 2019. What exactly when, that's the case that we really can't give greater granularity at this point. And also in terms of the -- predicting the exact month of the approval itself is a little dicey. So one relative to the other is cumulatively doubly dicey. So we're comfortable that the partnership is 2019. And we're hopefully -- hopeful that the partner -- approval is also 2019.

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Kyung Yang, Jefferies LLC, Research Division - MD & Senior Equity Research Analyst [54]

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Okay. And then $147 million milestone payments are from Kissei. What's the kind of breakdown between development and commercial?

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [55]

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Yes, so 2/3 is development, 1/3 is commercial.

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Operator [56]

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Now I'd like to turn the call back to Raul for closing statement.

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Raul R. Rodriguez, Rigel Pharmaceuticals, Inc. - President, CEO & Director [57]

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Great. Well, thank you for your questions. We appreciate all your interest in the company. It really has been an amazing year for the company. And we're really delighted that we were, for the first time, being able to get an approved product onto the market and provide it to patients. That's really the mission of the company and something we really are very proud of. We're also proud that we're seeing some good rewards in terms of revenue and uptake on that investment. And we have a lot more coming. So it's been an exciting year. Thank you for your support this entire year. Next year is going to be even greater. Have a good day.

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Operator [58]

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Thank you, ladies and gentlemen, for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.