Q3 2019 Earnings Call
Good evening, ladies and gentlemen, and welcome to Anikas Therapeutics third quarter 2019 earnings Conference call. At this time all participants are in listen only mode. After the speaker presentation, there will be a question and answer session.
Good question during the session you will need to press star one on your telephone if you require any further assistance. Please press star Zero I'll now turn the call over to Sylvia Jones, Chief Financial Officer. Please proceed.
Thank you Andrew.
Good evening, everyone and thank you for joining us.
With me on the call today, as Anikas, President and Chief Executive Officer Joseph Darling.
During today's call, Joe and I will review, our third quarter 2019 financial results in key business highlights.
For summarized in our earnings release issued today.
A copy of the earnings release is available on the Investor Relations section of our web site at Annika Therapeutics Dot com.
In addition, a slide presentation is posted on our website and investors relations section under the events and presentations tab.
We invite you to take a moment now to open a file and follow the presentation along with us.
Please turn to slide number two.
Before we begin please remember that certain statements made during this conference call constitute forward looking statements as defined in the Securities and Exchange Act of 1934. These statements are based on her current beliefs and expectations and are subject to certain risks and uncertainties.
The company's actual results could differ materially from any anticipated future results performance and achievements.
Also see or SBC filings for more information about factors that could affect our results.
Certain financial measures, we will discuss on this call or non-GAAP financial measures.
We believe that providing these measures helps investors gain a more complete understanding or sorry resolve and is consistent with how management views our financial performance.
A reconciliation of these non-GAAP financial results to the most comparable GAAP measurement calculated and presented in accordance with U.S. GAAP is available in the Investor Relations section of our website.
I will now turn the call over to our CEO Joseph Darling Joe.
Thank you Silvia and good evening everyone.
Thank you all for joining us for third quarter 2019 printing Scott.
We're very pleased with the company's performance in the third plant.
Which would have to the progress we continue to make and executing a five year strategic plan to treat fields Utica.
Pershing properly positioned putting it through innovative products across the continuum, you have to Peter and regenerative medicine therapies.
As a testament to our teams strain execution too.
We successfully deliver double digit revenue and earnings growth and shrinking. We gave you demand pinnacles expanded commercial tariff him and continued fiscal discipline.
The third quarter two revenue increased one person.
Other income increased 21 person in adjusted EBITDA grew 32 person year over year, how do we continue to leverage a blending ugly networks have him of innovative therapies constrained demand for Penn state in the U.S. and internationally.
We successfully completed the in turn builder her U.S. hybrid commercial model and the shuffle lunch at her first Frank <unk> no.
Doctors.
Given restraint third Kemper County, we are raising her revenue and earnings guidance for the full year 2019 would show me will discuss in more detail turned her financial update encounter.
Needless to say execution is a team.
And I'm very proud of the continued package and collaboration I show no talented employees.
<unk> living Unico organization.
Please turn to slide number three.
As we disclosed center utilization Investor day last month.
This pivoting time represents the games, a new deeper unico.
Hello vision is to become the Navy leader in joint preservation and restoration with innovative technologies that exceed our customers' expectations.
Through a five year strategic plan, we're actively working to expand our portfolio beyond or primary historically, because I noticed your friends pain management into regenerative therapies for joint preservation and restoration.
We think this is a natural evolution given our strong foundation her established footprint in the U.S. and abroad.
Our proven expertise and product development.
The regulatory affairs manufacturing in commercialization.
This expanded therapeutic continue crush smoky fields represents an approximate 8 billion dollar combined global market opportunity, we have products in the market you know the pipeline to show both.
It's important to note that the two toward commercial segments are divided by in driven through two distinct cheers.
The office space call point for injectable pain management therapies, and an operating the ballpoint pen new orthopedic surgery and regenerative therapies.
As many of you know her legacy commercial publishers have historically focused on the office space call point exclusively.
The <unk> goal, we plan to activate the second important channel for their new hybrid commercial structure indirect sales team squarely focused on the operating room.
Through our efforts, you're a conflict or we can become important <unk>, providing value technologies to the surgical theater.
Please turn to slide number four.
As we continue to pursue leadership position and joint preservation restoration her great strategy is driven by refocusing Nicole the three piece.
People.
<unk> and performance.
First we want to ensure that we had the right skill sets and the right Tim to drive the organization toward operational excellence.
Second we are focused on developing and delivering innovative technologies and expanding our product offerings of press the joint preservation and restoration continuum of care.
And finally, we are committed to have never he's a hybrid commercial model and driving operational efficiencies throughout our business to drive margin expansion.
Please turn to slide number five.
Let's start with the first Pete people.
We're committed to building or Teletubbies for innovation and continue to enhance our teams knowledge and expertise to make sure. We have the strange team in place to support her transformation and future growth.
During the third quarter, we appointed James anyway to the newly created position of executive Vice President of business development in strategic planning.
Jim is a 30 year industry veteran who oversee our global business development function.
The answer efforts to identify and evaluate potential acquisitions partnerships alliances in licensing opportunities to expand our commercial portfolio global footprint.
We also recently appointed Mira Lee want to the newly created position a vice President of regulatory Affairs quality includes me fares.
Very well never say never did their regulatory strategy regulatory submissions and interactions with U.S. International government health authorities as rates or quality in clinical teams and new processes.
We believe mirrors rain becomes increasingly important as we accelerate the pace of product development regulatory submissions and ultimately product launches coming in coming years.
Please turn to slide number six.
We're very pleased to have completed the internal bill or hybrid commercial sales force in the U.S. during the third quarter.
We have successfully on boarded for highly skilled regional sales directors to manage the domestic northeast.
West South Beach in Central territories.
All we grew the leadership Vice President of U.S. is Steve Gold.
He says directors had extensive industry experience each product knowledge will support the launch of other joint preservation and restoration therapies currently in development.
In addition, we commenced the build out of a network of independent local and regional distributors aegions entering the process of adding additional partners throughout the U.S.
As I've noted on prior earnings calls our hybrid push model will provide units with a direct line insight to the market and more favorable economic result, and we are confident in our ability to take greater control of our future with this new commercial strategy.
Please turn to slide number seven.
Turning now to the second PV products.
In September we commenced the soft launch of tactile second the U.S.
As a reminder, tech to set as a surgical we delivered therapy for bone repair procedures in the first therapy launched on her hybrid commercial model.
The first surgical procedure attackers.
We completed in August we continue to receive positive feedback from the physician community regarding therapies ease of use the procedurally efficiency.
As we've discussed previously we have showcased Texas.
Multiple medical conferences during the quarter, we remain on track to execute the full scale commercial launch at the 20, Nike Orthopedics and evolving techniques conference or as we call. It all set which is being held in Las Vegas. This December .
As we've previously stated we estimate the both repair market to be $350 million to $400 million annually with approximately 900000 people eligible for treatment for bone void another bone defects of the need.
Factors that represents an attractive near term U.S. growth opportunity Franco.
Our near term goals for this program our crystal clear.
Number one.
A full scale waterjet offset in December .
Number two onboard five additional distributor arrangements with the goal of being in 10 surgical centers by the end of this year.
We plan to grow to 40 distributor Egypt ideas 2020.
These initiatives once again led her vice president of U.S. sales there are important building blocks for revenue growth in 2020 and market penetration thereafter.
I would now ask you to please turn to slide number eight.
We expect our rotator cuff therapy will be the second product launch in the U.S. under our hybrid commercial model and product development is currently progressing as planned.
As we have previously noted we believe this unique therapy is highly complimentary to innocent is growing regenerative therapy portfolio, and we estimate that the U.S. market opportunity.
Rotator cuff repair is 150 to 200 million either way.
In the third quarter, we've continued to refine the prototype and began surgical instrumentation design for this therapy.
Led by our Vice President of R&D.
We anticipate that we'll complete the instruments in the first half the 20, each one and plan to submit a fytwenty application to the FDA in late 2020 to the early 2021 timeframe.
Please turn to slide number nine.
[noise] single continues to perform very well in Canada and across Europe .
International revenue from single increased 35% year over year in the third quarter and 40% year to date.
The continued rockets and all this quarter has further reinforce our confidence in our decision to advance the gold towards regulatory approval in the U.S. market.
As we discussed last quarter. We're currently working to initiate a pilot study to confirm our trial design increase or probability of success in a phase three trial and generate data that ultimately will be needed to support FDA approval.
We remain on track to commence the single pilot study and the first half of 2020 and we're in the process finalizing the new design pilot clinical trial protocol.
The pilot study is expected to enroll approximately 240 patients across 30 sites in the U.S.
Randomized to receive either single the steroid tree trimming some context to see line for say we'd placebo.
As a reminder, there are three different key differentiators in this revised protocol compared to the prior phase 360 onto study.
The first is the inclusion of a placebo or.
The second to the addition of a much larger THR.
Try and settle on Texas seat.
Meeting the steroid are.
In the third is the modification of the patient enrollment selection criteria to target the ideal patient profiles.
We believe these elements will enable us to generate the Dave needed in a subsequent phase three trial.
We continue to expect that the pilot study will take approximately one year to complete.
Despite the delay in time to market, we remain confident in singles U.S. market opportunity, which we have estimated to be approximately $1 billion.
Turning now to slide number 10.
We are focused on accelerating the pace of enrollment and the ongoing hyalofast phase three trial for U.S. approval.
During the quarter, we continue to implement the changes following the protocol Amendment approved last quarter and are currently in the process of adding eight new sites outside the U.S. in Europe .
Patient enrollment is currently in the 60 percentile range, we expect to complete enrollment by the end of 2020.
Additionally, we look forward to benefiting from the leadership of Merrill Lynch.
Our new Vice President regulatory affairs quality in clinical affairs, as we continue to advance the trial.
We recently held an educational symposium for speed surgeons on Hyalofast at the 20, Nike World Congress of the international cartilage regeneration in joint Preservation Society held in Vancouver, Canada.
Over 80 surgeons participated to the symposia would continue to see a very high level of enthusiasm among physicians and patients for this innovative regenerative therapy.
Hyalofast represents another significant U.S. market opportunity, which we conservatively estimated key more than half a billion dollars.
We're very pleased with our third quarter business results and the continued progress we are collectively making across our organization as we execute our growth strategy.
I will now turn the call back over to Sylvia to review, our third quarter financial results in greater detail Sylvia.
Thank you Joe.
Please turn to slide number 11.
Total revenue for the third quarter increased 11% year over year to $29.7 million compared to 26.8 million for the third quarter last year.
Revenue growth for the quarter was driven primarily by Monovisc, and Cingal, which delivered worldwide revenue growth of 15% and 35% year over year, respectively.
Local viscosupplement revenue in a third quarter increased 9% here over here.
Domestic disco supplement revenue increased 7% year over here for the quarter.
On a sequential quarter basis domestic end user net sales price decreased around the high single digit percent range for Orthovisc and increased around the low single digit percent range for Monovisc.
On a year over year basis, and use our volume for the quarter increased 6% for Orthovisc and 26% for Monovisc.
Of note the end user volume for Monovisc has grown in a double digit percentage is year over year each quarter for 18 consecutive quarters since its launch in the second quarter of 2014.
International fiscal supplement revenue increased 17% year over year for the quarter, driven primarily by single and Orthovisc.
Joe noted the 40% year to date revenue growth of single demonstrates the continued strong demand for this therapy internationally.
Product gross margin increased to 80% for the quarter compared to 69% for the third quarter of 2018.
The strong revenue sorry, this strong year over year increase was primarily due to more favorable changes in product revenue mix in particular, an increase in U.S. royalty revenue for Monovisc.
As a reminder, 2018 product gross margin was negatively impacted by a voluntary product recall, which was resolved in a fourth quarter 2018.
Total operating expenses in a quarter.
Were 17.6 million compared to 18.2 million in the third quarter 2018.
The year over year decrease in total operating expenses was due primarily to lower cost of product revenue, partially offset by higher selling general and administrative expenses.
Net income for the quarter with 9.2 million or 64 cents per diluted share compared to 7.6 million or 53 cents per diluted share in the third quarter 2018.
Adjusted EBITDA earnings before interest taxes, depreciation and amortization increased 32% year over year to $14.9 million for the quarter compared to 11.3 million for the third quarter last year.
The increases in net income and adjusted EBITDA were due primarily to the increase in total revenue and decreasing cost of product revenue.
During the third quarter, we generated 21.8 million any cash from employee stock option exercises and approximately 10 million and cash from operating activities.
We ended the quarter with cash and investments totaling approximately $173 million.
Our cash deployment strategy remains focused on making organic investments to drive top line growth pursuing strategic M&A to augment organic growth and returning capital to shareholders through share repurchases.
We continue to expect our 30 million a salary to share repurchase program to be complete it no later than the first quarter 2020.
And we have not yet had any share repurchases under our board approved $20 million open market share repurchase program.
Turning to guidance on slide number 12.
Based on our strong third quarter results.
We expect total revenue to increase 6% to 7% above the prior year for the full year of 29 teens.
We now expect total operating expenses to be in the mid $70 million range for the here.
Adjusted EBITDA is anticipated to be in the mid to high $40 million range for 29 team based on a net income expectation around the mid to high 20 million dollar range for the year.
And we expect capital expenditure to be around $5 million for 2019.
This concludes our financial review and I'd like to turn the call back to Joe to discuss near and long term growth drivers and our strategic priorities to deliver on our five year strategic plan.
Thank you Sonia please turn to slide number 13.
Before I open the call for questions I'd like to review the five key business and financial objectives that we aim to achieve through our strategic plan over the next five years.
As discussed last month sales stayed.
You want to first accelerate profit growth and deliver sustained sustainable double digit revenue growth.
Second we want to diversify revenue stream and enhanced her doesn't capture.
We're also diversifying through different sales channels, he and international expansion.
Third increase our vitality index to greater than 25%.
In the five years.
As a reminder, vitality index is defined as the percent of new product revenue compared to total revenue.
Fourth pursue strategic M&A focus on tuck in acquisitions Todman organic growth.
And finally said.
Continue to maintain disciplined and balanced approach to capital allocation focused on the highest return opportunities for our shareholders.
We're very committed to sustaining her legacy of trust operational excellence and financial discipline as we execute our growth plan to transform Utica into a global commercial company focused on joint preservation and restoration.
And turning to slide number 14.
I'd like to close my comments on quarter by highlighting what we view is the four key elements for strategic growth plan.
First as talented culture.
Focused on fostering innovative environment across our organization.
Second is commercial acceleration through our U.S. hybrid Herschel model in international expansion, both end market penetration and then spending in the countries, where we currently don't have a presence.
Third is R&D innovation.
Through investments in R&D to explain in advance or game pipeline across the joint preservation and restoration continuum of care.
Fourth is inorganic growth.
This is focused on tuck in acquisitions that will complement our existing in future product portfolio.
All of our strategic initiatives are focused on positioning unica to achieve a leadership position in joint preservation restoration and also doubling our total revenue within the next five years.
I'm confident that we can achieve our goal of becoming a leader in joint preservation and restoration successfully double our total revenue within the next five years.
This quarter is just to begin and we look forward to delivering continued progress.
Operational and financial performance and value for both patients and shareholders as we execute on these initiatives in coming quarters.
We're not happy to take your questions. Thank you.
Thank you as a reminder to ask a question you will need to press star one on your telephone and to withdraw your question. Please press the pound key.
We ask that you please limit yourself to one question and one follow up.
Then you may we entered the Q with any additional questions.
Our first question comes from the line of Jim Sidoti with Sidoti and company. Your line is now.
Good afternoon, and can you hear me.
Good afternoon good afternoon.
Great Great I felt when you talked about pricing earlier were you referring to end user pricing or the transfer pricing.
Yes, Jim I was referring to the end user pricing.
And end user volumes. So the stats that were stayed at where they end market information.
Which impacted the royalty revenue.
Okay, and I know, you're right, you're not going to water gear with.
2020 gardens until at least for next quarter, but can you just give us directionally, where you think pricing going over the next 12 months do you think that will continue to move up.
Or do you think it will level off from here.
Yes, so I can comment on.
What we have seen is in 2019, we certainly have seen the stabilization of pricing.
Amount of its pricing actually increased on a sequential basis for three quarters in a row now.
If we look back a little bit further I think the pricing volatility is certainly was strong in particular for 2018. So this is a topic that we are.
Actively discussing with our commercial partner JNJ diffuse since these mitek sports medicine, and we're closely monitoring the development I think that year to date results are good whether or not it's going to sustain I think we need to keep keep monitoring the progress going forward.
Alright, and then at one point you you would you might we see a 5 billion dollar milestone payment and then when that pricing came down there went away is there any chance that that comes back in 2020.
Unfortunately, there isn't.
This is a contractual terms under the existing Monovisc agreement that Annika haslett, Mitek and that particular term has a.
Time element to it and we are beyond that window.
Okay, and then last one from me you said you received about $22 million inquiry options.
And I was not is that spread out over a number of employees or were there any was there one or two employees.
It was spread out over a number of employees, but I can now also tell you that included a couple of former executives of the company.
Okay. So it was unusually large from this quarter Council.
That is correct.
Okay. Thank you.
Thank you.
Thank you and our next question comes from a line of Joe Munda with first analysis. Your line is now.
Good afternoon can you hear me okay.
Are you ready Joe how come in France.
So first off can you give us what.
The split well first off can you give me a Swiss re singles revenue contribution was in the quarter.
[noise] singles revenue contribution for the quarter is roughly about 5% and it's been pretty consistent.
In terms of percentage of total revenue, it's been pretty consistent on a quarter as lies on an annual basis.
And then the split on Orthovisc and Monovisc.
Domestically or.
Total.
Global.
Global.
So international fiscal supplementation is in the high teen percentage.
Range and the domestic is roughly around low 70 percentage.
I'm, sorry, so international Heis high teens domestic 70%.
Give me okay.
Did you get okay.
Yes, I got it.
And then I guess.
You know as we look out Q2 thousand 20.
You know, Joe you're talking about adding 40 distributors for for the strategic to said.
I mean is there a specific bogey that these distributors need to hit in addition can you give us some center what that's going to look like are we talking 10, a quarter or is it going to be you know.
Failed evenly or throughout the year any color there would be great.
Yes, sure that's a good question Joe.
The way we look at Headingley distributors is first to the high prioritization areas. So we've mapped out the priorities across the geographic U.S.
So that's number one number two is we certainly want to get to the high volume search surgical centers.
You really start to.
Ramp up TACTRESS sales.
So we've looked at that as well so the answer to your question. We would expect is to be.
Smooth transition.
Adding the distributors when we find the right ones. So I don't want to limit us to just say 10 per quarter from a numbers perspective, let's say what I wanted to go after the best the brightest the most collected in the ones that had the.
Experiencing going after the bone therapy product. So we're going to do this in a very systematic manner.
To address the market opportunity.
That is okay.
Yes, yes, it does and then I had just wanting more.
Gross margin up now nicely, 80% for me you made some comments about the mix as well as the royalty can you give us some sense of how much the royalty what percentage of revenue was that royalty component in the quarter.
Yep.
Yes, so we're definitely pleased with the strong improvement and product gross margin a 11% this quarter versus.
Last last year's Q3, they're really two key factors and I'll comment on each of them on the revenue side. We saw an increase in revenue of 2.9 million year over year, and 2 million out of the 2.9 is related to U.S. Monika.
It's royalties so that is a big driver and as I mentioned on the earlier part of this earnings call. We saw volume increased about 26%. So both volume and price I was a positive trend this quarter versus last year's Q3, so that is a meaningful margin.
Contribution for the quarter contributing to at 11% uptick from last year on the cost side as you can see another CNL our costs a good decreased by about 2 million year over year and there are two drivers there one is product mix, meaning that we are.
We have a larger portion of our product revenue. This quarter. This Q3 from higher margin products like Monovisc, Cingal and hyalofast comparing to the year before so positive product mix and the second factor it's related to higher production volume in the current year comparing to previous.
Here as a reminder, the voluntary recall that took place last year had impacted our product margin throughout 2018. So those are really the key drivers contributing to the 11% increase of product gross margin.
Can you just remind us what how much of an impact it was last year on the margin roughly if you were than what they normalize that.
I would say that it would be around.
Low to mid single digit percent, yes from from margin standpoint.
Just looking at.
Looking at the production side.
Yes.
Okay. Thank you.
Thank you Joe.
Thank you and our next question comes from the line or Brian Gagner with Degnan Securities. Your line is now open.
Hi folks.
It appears the JNJ switched from whack price thing back they S.P. pricing models that Scott October 1st what would this mean for pricing a monovisc a few quarters out because I know it doesn't change things in the current quarter.
That is true so will you observed in the press right. This is Joe by the way.
Obviously, the they really started reporting reporting to see Max.
And.
Hey, you look at pricing in this market.
We have limited visibility for me actual true pricing perspective until you get towards the end of course.
So we see volatility potentially on a quarterly basis than we saw last year.
As part of the reason why we're moving towards a direct hybrid sales organization. So we can ever more predictable business that ties back to our five year strategy.
Utilizing the hybrid commercial model, but from a.
From a perspective of you know what impact it's going to be.
I could tell you that.
Throughout the year, it's been pretty consistent.
But as you start to take a different.
Pathogens strategic front that they've taken.
Yes.
Still limited visibility for us Unfortunately.
[noise]. So they were reporting why are they weren't reporting a S.P. at all.
So pricing went up quite a bit and then what the switch you're looking at this and not necessarily sure how what the volatility or pricing is going to look like going forward.
We have limited visibility to it so we have to triangulate all the data that we get I think the good news is now that we have seen on the street indirect line of sight to customers all the different call points, we're hoping that will pick up on some competitive intelligence and feed it back into us.
But really from a pricing perspective.
Pricing question is really supposed to be directed towards JJ mitek.
Due to more contract in the non disclosures that we have so I really can't comment much further than that right.
Okay second time plus point.
Thank you.
Thank you.
And as a reminder, ladies and gentlemen, if you have a question. Please press star one.
Our next question comes from a lot of Mike Petusky with Barrington Research. Your line is now.
Hey, good evening so on the.
R&D.
R&D ramp associated with.
Hi.
You know when should that.
Three quarters of R&D expense have been pretty consistent for one for too I mean, when should that sort of take that step up more toward I don't know, maybe five and a half.
Well, maybe seven a quarter win win when does that start to ramp I mean is there something in advance of sort of mid year 2020.
To speak to that.
Yes.
So the pilot study.
We had.
Share that the timing of commencing that study would be in the first half of 2020, but from a expense standpoint, we actually have a preparatory a startup activities that is actually happening right now in a fourth quarter at this year. So we do expect expect R&D.
<unk> expense to pick up in the fourth quarter from Q3, and the first half of this year due to.
The starting activities related to this end Gol pilot study as well as a couple of small scale European post market studies, one for Monovisc and one for or tennis elbow product. So these activities are incremental to earlier year R&D expense.
Yes, and on top of that obviously, we're rapidly advancing with the rotator cuff repair program, which Joe commented about so these are the key drivers for the increase in R&D expense as we head into to the Q4 2019.
And any sort of <unk>.
Is it going to essentially the R&D line.
To go to sort of what will be kind of a consistent R&D spend roughly going forward in Q4 or towards the kind of the first step.
Further as we got closer to the.
Yes, it will.
Scaled up next year as we start to enroll so as you know one patient enrollment take place this incremental costs will be picked up and.
Further along once the phase three studies starts up that trial cost for me dollar standpoint would be more expensive expensive as we previously talked about so.
For us it's difficult to pick a baseline number a lot of the R&D expenses as you know scale with the timing of.
Clinical studies as well as dependent upon the size of the clinical studies that we take on.
Right.
So with your Capex, a andy for the quarter inherit a few comments.
I think.
It's between four to $500 year to date, it's roughly 2.3 million up I remember correctly.
Oh I'm sorry.
Four to 500000 for the third quarter.
2.3 million for the first one yes, just went through 2.5 million Yep.
All right.
You expect that through quite a bit.
Fourth quarter obviously.
Yeah, we have some plant.
Silly and improve minutes.
Equipment purchases.
Toward the.
Toward the end of year.
And just last one for.
Uh huh.
If one were to attend that Las Vegas comp.
What.
White paper.
Demonstrations.
Approximately.
So what do you see good question, but.
So see a couple of things, we'll see podium presentations.
I believe we have to physicians presenting.
Based on their experiences with Texas.
You'd also see in both demonstrations of the product.
And we will also have.
Physicians in the booth as well he is really.
Technical surgical questions on technique where were you.
Having their presence in the book is always a strong strong point for.
Communicating message and they'd be they're not required pardon me.
These are dr. of actually already done surgical procedures.
Okay actors that abused status.
Yes.
Alright, thanks, guys.
Thank you Mike.
[laughter], Thank you and I'm showing no further questions. So with that I'll turn the call back over to CEO Joseph Darling for closing remarks.
Well first of all thank you all for your time today.
We look forward to continuing to update you as we execute on growth strategy.
So I want to take all of you have a great even.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating and you may now disconnect.