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Edited Transcript of TCDA.OQ earnings conference call or presentation 14-Nov-19 9:30pm GMT

Q3 2019 Tricida Inc Earnings Call

SOUTH SAN FRANCISCO Dec 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Tricida Inc earnings conference call or presentation Thursday, November 14, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Geoffrey M. Parker

Tricida, Inc. - CFO & Senior VP

* Gerrit Klaerner

Tricida, Inc. - Founder, President, CEO & Executive Director

* Jackie Cossmon

Tricida, Inc. - VP of IR & Communications

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Conference Call Participants

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* Alan Carr

Needham & Company, LLC, Research Division - Senior Analyst

* Graig Suvannavejh

Goldman Sachs Group Inc., Research Division - Executive Director & Senior Equity Research Analyst

* Jessica Macomber Fye

JP Morgan Chase & Co, Research Division - Analyst

* Philip M. Nadeau

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Tricida Third Quarter 2019 Financial Results Conference Call. (Operator Instructions) As a reminder, today's program may be recorded.

And now I'd like to introduce your host for today's program, Jackie Cossmon, Vice President of Investor Relations and Communications. Please go ahead.

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Jackie Cossmon, Tricida, Inc. - VP of IR & Communications [2]

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Thank you, Jonathan. Good afternoon, and thank you for joining the Tricida Third Quarter Financial Results Conference Call. In today's call, Gerrit Klaerner, our CEO, President and Founder, will discuss our business progress; and Geoff Parker, our CFO, will then discuss our financial results for the third quarter.

Please note that in today's call, we will be making various statements that include forward-looking statements as defined under applicable securities laws. Forward-looking statements include statements regarding our future development and commercialization plans, the conduct of our VALOR-CKD confirmatory post-marketing trial, recruitment milestones, anticipated activities related to our NDA filing, including the PDUFA goal date advisory -- and advisory committee topics, financial guidance and statements that are not historical facts. Management's assumptions, expectations and opinions reflected in these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements discussed in or implied by such forward-looking statements. Tricida can give no assurance that these statements will prove to be correct, and we do not intend and undertake no duty to update these statements. We also urge you to read the risks and uncertainties associated with our business that are described in our filings with the Securities and Exchange Commission. For copies of our press releases that were issued prior to this call, please go to www.tricida.com and follow the link to our Investor Relations page.

At this time, I'd like to turn the call over to Gerrit.

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Gerrit Klaerner, Tricida, Inc. - Founder, President, CEO & Executive Director [3]

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Thank you, Jackie, and thank you all for joining us on today's call. Let me move right into the most important news from today's press releases. We are pleased to report that our veverimer NDA has been accepted for review by the FDA under the Accelerated Approval Program with no filing review issues identified. The application is under review by the division of cardiovascular and renal product with a standard review designation and a PDUFA goal date of August 22, 2020.

As a reminder, this filing acceptance under the Accelerated Approval Program underscores the fact that metabolic acidosis is a serious condition, and as the veverimer, if approved, will address an unmet medical need. Given the commercial strategy outlined at our recent Investor Day, the August 22, 2020, PDUFA date will enable a launch at the beginning of the fourth quarter of next year and provide us with a full quarter of veverimer sales in 2020. The FDA has also indicated that they are currently -- that they currently plan to hold an advisory committee meeting or AdCom to discuss the application. We anticipate the AdCom would likely occur in the first half of 2020, and we will know the topics of discussion closer to the meeting date. Given that we are pursuing a potential disease-modifying indication in CKD utilizing the Accelerated Approval Program, we welcome this opportunity, and we will be prepared to present the underlying rationale and the considerable body of evidence supporting the treatment of metabolic acidosis slows the progression of kidney disease.

Furthermore, we'll be ready to walk through all of our veverimer clinical data, including results beyond the surrogate end point, such as improvements in how the patient feels and functions and the impact on the progression of CKD. We continue to evaluate the data from our Phase III trials in collaboration with thought leaders in the nephrology field to understand the implications of treating metabolic acidosis for patients with CKD. An interesting concept has emerged in the academic literature that describes CKD as a clinical model of premature aging, with CKD patients experiencing many of the complications of aging but at younger ages than the general population. They have elevated rates of aging-related disorders, including cardiovascular disease, cytopenia and frailty. This is a major problem because impaired physical function leads to significant morbidity, including higher rates of falls and fractures and is also a risk factor for death. Therefore, preserving physical function is critical in patients with CKD.

Working with Dr. Matthew Abramowitz, who is an Associate Professor of medicine at the Albert Einstein College of Medicine, we've recently performed additional analysis of the physical function improvements we observed with veverimer in our 301E long-term extension trial. We'll be submitting this work to a major nephrology congress this month, so I will just share a couple of top line results with you today. First, Dr. Abramowitz found that at baseline 45% of our study population was slower in performing the repeated chair stand test than the average 80 to 89 year old despite an average age of approximately 62 years. Second, the mean improvement of repeated chair stand test time observed in veverimer-treated patients in the 301 study, 4.3 seconds, was greater than the difference in test time between individuals in their 80s and those in their 60s. Therefore, looking at the results of the length of CKD as a model of accelerated aging, the effect of 1 year of treatment with veverimer on repeated chair stand test performance appears to be equivalent to approximately a 20-year reduction in age.

Now I'd like to provide you with an update on the VALOR-CKD post-marketing trial. This is a large outcome trial that is being conducted in 33 countries at approximately 350 sites. At this point, close to 95% of our target sites have been opened for recruitment. We anticipate randomizing 1,600 subjects in the trial, and we believe that we are on track to complete enrollment around mid-2020.

Let me now turn to our significant presence at the American Society of Nephrology Kidney Week Meeting. The meeting provided a great venue to reach a large audience with our metabolic acidosis disease awareness campaign. Attendance and interest at the exhibitor booth were significant, and nephrologists were highly engaged. Over 1,000 nephrologists and health care providers visited our booth. They interacted with our medical science liaisons, downloaded the Neph+ app and viewed video presentations by experts discussing the pathophysiology and clinical consequences of metabolic acidosis and the importance of assessing physical functioning in patients with CKD.

Our scientific presentations were very well received. We presented our veverimer long-term extension data that was published in The Lancet as well as data on the mechanism of action of veverimer. Also, for the first time, we included a medical affairs section in our booth, which provide a forum to answer questions about veverimer clinical trials. The attendance was significant with unsolicited requests coming not only from the presentation of our long-term extension data at the meeting but also driven by unaffiliated third-party presentations of veverimer data, suggesting it as a promising new therapy for the potential treatment of metabolic acidosis. The serious consequences of metabolic acidosis were quantified in 3 new studies sponsored by Tricida that were also presented at the meeting.

In these studies, a cohort of over 51,000 patients with nondialysis-dependent CKD stages 3 to 5 was analyzed longitudinally. In the first study, metabolic acidosis was shown to be an independent predictor of adverse renal outcomes as well as of higher health care costs. In fact, each 1 milliequivalent increase in serum bicarbonate was associated with a 13% decrease in the 2-year composite end point of death, dialysis, kidney transplant or greater or equal 40% eGFR decline and a 7% decrease in monthly health care costs. The second study showed that metabolic acidosis is associated with an increased risk of major adverse cardiovascular outcomes, with each 1 milliequivalent increase in serum bicarbonate associated with a 2.4% decrease in new onset heart failure, a 2.1% decrease in stroke and a 3.6% decrease in myocardial infarction.

And in the third study, metabolic acidosis was shown to be an independent predictor of adverse bone and muscle outcomes. Each 1 milliequivalent increase in serum bicarbonate was associated with a 5% decrease in bone fractures and fall risk and a 12% decrease in failure to thrive over a 2-year period. One of the striking and important results of these 3 distinct analyses is that there's a linear relationship for all adverse outcomes across the range of serum bicarbonate levels from 12 to 29 milliequivalents per liter. In each instance, there's incremental benefit from each 1 milliequivalent increase in serum bicarbonate across the entire serum bicarbonate range.

On the disease awareness front, Dr. Tangri presented his recent work describing longitudinal analyses using a database of over 35 million de-identified patients. In these analyses, diagnosis and treatment rates for metabolic acidosis were assessed in a cohort of over 86,000 patients with unequivocal laboratory evidence of stage 3 to 5 chronic kidney disease and metabolic acidosis. Surprisingly, a diagnostic code for metabolic acidosis was present in only 21% of this population. The overall frequency of oral alkali therapy used in the large cohort of patients with laboratory-confirmed metabolic acidosis was only 15%. Dr. Tangri's work underscores a significant underdiagnosis and undertreatment of metabolic acidosis.

The presentations of new data at the recent ASN meeting are the foundation for successful veverimer commercial launch. They show the true impacts of metabolic acidosis on a wide range of adverse clinical outcomes. We also now have the veverimer disease-modifying data published in The Lancet in June and the recent BiCARB study result that show commonly used doses of oral sodium bicarb appeared to be not efficacious and not cost-effective. And we have identified undertreatment of metabolic acidosis to be the key barrier to account for our commercial launch.

Given all these factors, we believe we can mobilize nephrologists to adopt an urgency to treat attitude for the patients with CKD and metabolic acidosis. In our commercial launch, we'll be targeting a concentrated market of 5,000 nephrologists that we believe treat the vast majority of the 600,000 patients with CKD and MA. Based on our market survey, nephrology product analogs and payer input on potential coverage decisions, we believe that we will achieve a peak market penetration of approximately 150,000 of these 600,000 patients, resulting in U.S. peak revenue of over $2 billion per year. We are truly excited about the veverimer opportunity.

With that, I'll turn the call over to Geoff.

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Geoffrey M. Parker, Tricida, Inc. - CFO & Senior VP [4]

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Thank you, Gerrit. And thank you all for joining the call today. I will now provide a brief overview of our financials. Additional detail on our third quarter financial results can be found in our press release issued earlier today and in our 10-Q, which will be filed with the SEC. We are pleased to report that we remain in a strong financial position. As of September 30, 2019, Tricida had cash, cash equivalents and investments of $363.6 million. In the third quarter, our research and development expenses were $32 million. General and administrative expense was $13.1 million. Our net loss for the third quarter was $44.1 million or $0.89 per share, including noncash stock-based compensation expense of $8.7 million.

As we look forward to the completion of 2019, our quarterly research and development expense will likely be in the range of $35 million to $40 million in the fourth quarter given the timing of veverimer drug substance production and an increase in our clinical trial expenses related to VALOR-CKD. General and administrative expense is likely to increase to be in the range of $20 million to $25 million in the fourth quarter given the steady increase in expenses related to our commercial preparations for the anticipated launch of veverimer. These combined R&D and G&A fourth quarter expenses include an estimated $12 million to $14 million in noncash stock-based compensation.

From a cash burn perspective, we reiterate our guidance that our use of cash in 2019 will be between $135 million and $145 million. We project that our cash on hand, together with our borrowing availability under our Hercules debt facility will be sufficient to fund the anticipated launch of veverimer in 2020 and to support our operations well into 2021.

Finally, I am pleased to report that we hosted our first Investor Day on October 15 in New York City. If you would like to listen to the event, it is available as a replay on our website. The event included a panel of medical experts who discussed the serious consequences of metabolic acidosis and its link to CKD progression and presentations from our medical affairs team and our commercial team, who discussed our veverimer launch dynamics and preparations.

I would now like to turn the call over to the operator for any 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 the line of Phil Nadeau from Cowen and Company.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [2]

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First question is on your announcement of the FDA advisory committee. Appreciating that -- the reviews in the early days, did the FDA provide any reason for wanting an AdCom for the filing?

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Gerrit Klaerner, Tricida, Inc. - Founder, President, CEO & Executive Director [3]

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So -- no, I mean, they did not. And I think typically, what they do is they communicate the specific topics shortly before a potential advisory committee meeting.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [4]

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Do you have any theories as to why they might want one?

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Gerrit Klaerner, Tricida, Inc. - Founder, President, CEO & Executive Director [5]

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Yes, I've learned over the years not to speculate, and I think we're obviously very excited to actually present our data. I think both from the perspective of standard review and the outcome, when you look at our program, we are amongst the first to really utilize the accelerated approval path with a renal indication. And when we had our pre-NDA meeting, I think we shared all the data with them that we had available, including the data beyond the surrogate.

So -- but again, I'm not speculating about any potential topics for the AdCom, but this is exciting. I mean I think not many people have pursued a major disease-modifying renal indication under Subpart H.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [6]

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Right, right. Okay. That is helpful. And second question, I apologize, when -- you mentioned the physical function analyses that were new, I only got the very basics of the second one, the 4.3 seconds, good 4.3 seconds -- could you review that again? What was that finding?

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Gerrit Klaerner, Tricida, Inc. - Founder, President, CEO & Executive Director [7]

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So I think there's always a quest to translate the finding in that test, right, the 4.3 second improvement from baseline into something that basically the treating physician can understand. And what Dr. Abramowitz has is a model that expresses these physical functioning results in terms of aging. And when you -- when he basically did a post-hoc analysis with our 1-year data, he found that, effectively, the improvement seen with veverimer equates to about a 20-year reduction in physical function age.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [8]

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Got it. Okay. That is very clear. Third question is on the completion of enrollment for the confirmatory study now being in mid-'20. That struck me somewhat later than we had been anticipating. Is my memory incorrect there? And if not, if it is a little bit later, what is -- what has left to the delay? What has resulted in the delay?

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Gerrit Klaerner, Tricida, Inc. - Founder, President, CEO & Executive Director [9]

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Yes. We -- I think we are very happy. I think this is one of the fastest recruiting outcome trials. And I think we obviously had the -- this tied to the NDA submission, which we were able early on to really to remove that as a provision or as a hurdle for NDA submission. But the trial is going extremely well. And I think we are excited to really follow our post-marketing or post-approval commitment.

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Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [10]

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Okay. That is helpful. And then, Geoff, last question is for you just on the G&A for Q4. Should we consider that as the baseline off of which we grow our 2020 estimates? Or are there any onetime charges in Q4, specifically in G&A that won't repeat in 2020?

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Geoffrey M. Parker, Tricida, Inc. - CFO & Senior VP [11]

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I do think you should begin to use that as a baseline, and we'll be -- we'll plan to talk about 2020 early in 2020. But as you begin to adjust your model, I think that's a fair baseline. Remember, G&A will begin to include S in the G&A. So it will be SG&A.

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Operator [12]

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Our next question comes from the line of Jessica Fye from JPMorgan.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [13]

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With the VALOR trial expected to complete enrollment in the middle of 2020, can you remind us when we should expect the interim and the full readout? I think in the past, you were indicating that the interim could come 2 to 3 years after full enrollment and the full readout would be 3 to 4 years after full enrollment. Is that still accurate? Or if not, can you update those time lines?

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Gerrit Klaerner, Tricida, Inc. - Founder, President, CEO & Executive Director [14]

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Yes, that's still accurate. It's an event-driven trial. And I think those estimates are correct.

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Operator [15]

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Our next question comes from the line of Alan Carr from Needham.

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Alan Carr, Needham & Company, LLC, Research Division - Senior Analyst [16]

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Can you talk a bit more about commercial prep? What are the -- when do you plan to -- or how are you going to stage this over time in terms of MSLs and sales force and that sort of thing?

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Gerrit Klaerner, Tricida, Inc. - Founder, President, CEO & Executive Director [17]

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Yes, Alan, I think you've seen, I think, our presence at ASN and that was an important tentpole event. I think the -- from an MSL perspective, we plan on really ramping this up early in the year to really do the disease awareness and really the NKF spring meeting is, I think, the key kickoff for some of the field-based activities.

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Operator [18]

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Our next question comes from the line of Graig Suvannavejh from Goldman Sachs.

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Graig Suvannavejh, Goldman Sachs Group Inc., Research Division - Executive Director & Senior Equity Research Analyst [19]

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Congrats on the progress. I've got 2 questions if I may. One, with respect to the cardiovascular and renal products division, maybe from a high level, can you give us some perspective on, historically speaking, the division's, I don't know, openness to innovation? Or are they more conservative type of division? So any color from your perspective would be helpful there.

And then my second question does have to do with kind of payback on Alan's question around commercial readiness. Do you have an idea of when you might be able to more granularly detail kind of the commercialization efforts and/or spend? Is that something you plan to provide, say, at -- a view around 2020 financial guidance? Or just kind of how do you expect to communicate numbers and strategy around commercialization?

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Gerrit Klaerner, Tricida, Inc. - Founder, President, CEO & Executive Director [20]

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Thanks, Graig. So on cardiorenal, I think we've really worked closely with them since the early days of the program. And I think they're very aware of the need for new disease-modifying treatment, specifically in the renal portion of cardiorenal, and really has been an excellent partner in helping us do and pursue this program under Subpart H. And I think that this is something that we've been working on a meeting with them quite frequently even this year on some of the physical functioning end points. So really open for innovation and engaged and interested, I think, in enabling new disease-modifying treatment in CKD. On the commercial planning, I think we started to provide some of the details and more on a strategic level, at our Investor Day, now that we have the dates. I think, Geoff, I think towards the middle of the year, I think we'll provide more detail on...

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Geoffrey M. Parker, Tricida, Inc. - CFO & Senior VP [21]

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That's right. I would add that, in addition, our guidance on sales force size continues to be -- originally, we had always talked about 80 to 100 reps in the field. We've narrowed that down closer to 85 as the appropriate number that can effectively detail the 5,000 key nephrologists who are in the market, who represent the vast majority of the scripts and the patients we are seeking. So a classic specialty sales force size and -- but we will anticipate giving more guidance in 2020 on that.

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Operator [22]

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And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Jackie Cossmon for any further remarks.

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Jackie Cossmon, Tricida, Inc. - VP of IR & Communications [23]

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Thank you, Jonathan, and thank you all for joining us today on the call. If you have questions, please don't hesitate to contact us. You can reach us at tricidair.com. And we look forward to helping you further. Thank you, and goodbye.

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Operator [24]

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Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.