Q3 2022 Codexis Inc Earnings Call
[music].
Welcome to the Codexis third quarter 2022 earnings conference call at this time, all participants are in listen only mode.
And the answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
At this time I'll now turn the conference over to Brendan strong from Argot partners. Please go ahead. Thank you operator with me today are Dr. Stephen Dilly, Codexis as President and Chief Executive Officer, Kevin <unk>, Chief Operating Officer, and Ross Taylor Chief Financial Officer.
During this call management will be making a number of forward looking statements within the meaning of the private Securities Litigation Reform Act with 1995.
Including our guidance for 2022 revenue product revenues and gross margin on product revenues as well as our strategies and prospects for revenue growth and successful execution of current and future programs and partnerships.
To the extent that statements contained in the call are not descriptions of historical facts regarding codexis. They are forward looking statements, reflecting the beliefs and expectations of management as of the statement date November three 2022.
You should not place undue reliance on these forward looking statements because they involve known and unknown risks uncertainties and other factors that are in some cases beyond <unk> control and that could materially affect actual results additional information about factors that could materially affect actual results can be found in <unk> annual report.
<unk> on Form 10-K filed with the Securities and Exchange Commission on February 28, 2022, and on Form 10-Q filed with the SEC on August five 2022, including under the caption risk factors and in <unk>. Other periodic reports filed with the SEC Codexis expressly disclaims any intent or obligation to update these forward looking.
Except as required by law.
Now I'll turn the call over to Steven.
Thank you Brandon and thanks to everyone for joining.
Since our second quarter earnings call, we've been working to refine fedex's strategy by assessing the markets, where codexis and our proprietary code evolve a platform have a clear competitive advantage.
This review of Codexis ongoing programs enables us to make intentional choices about where we are best equipped to drive long term success and increased market penetration.
Ultimately, where we should focus our resources.
Although this is an ongoing process, we have the building blocks of our refreshed vision for the company I look forward to providing an initial high level view of this strategy during today's call and anticipate drilling further into the details in the first quarter of 2023.
We've recently made several exciting appointments to our leadership.
Kevin <unk>, who is with US on today's call recently joined Codexis as Chief operating officer.
We're also delighted to welcome makes it's Gerald as our new Chief Legal Officer General Counsel.
With Rahul singly rounding out the recent editions as a new member of our board of directors.
Each of these individuals brings valuable expertise to our team and will prove critical to executing on that vision.
Right now, we're very focused on prioritizing the most attractive market opportunities for our business segments.
Heightening, our commercial discipline across the company.
Our enzyme engineering platform has many potential uses and codexis has undertaken many exploratory projects reached an interesting science and both have performance enzymes and biotherapeutics business segments.
In fact, we increased our R&D investments significantly during the last two years.
Guiding factors is to ensure we maintained cash runaway through the end of 2020 for providing us with time and flexibility to leverage the extensive scientific capabilities and intellectual property that we have it could access.
Our comments today will focus on the opportunities in which we see the strongest potential for near term economic success.
Specifically when discussing outperformance enzymes segment, we will focus on our pharmaceutical manufacturing and life science businesses, which represent roughly 95% of the revenue that we generate in this segment today.
Within the life Sciences market as with the rest of our business, we aim to identify and invest in programs to drive deeper value from a more concentrated set of assets.
Similarly in our biotherapeutics business, we will highlight which of our assets based on analysis of the market opportunity and competitive environment, we view as having the greatest potential Greg significant value within the next few years.
We could ask us know how to create and build a profitable business.
Even when we exclude profit contribution from Pacs love. It we project our pharmaceutical manufacturing business when looked on as a standalone entity will generate a very healthy operating margin in 2022.
Furthermore, we can continue to grow pharmaceutical manufacturing with modest investment.
Reminder, today with selling enzymes or by catalysis Difama manufacturers for 14 therapeutic drugs that are currently approved for commercial sales.
Another 20 drug candidates currently in phase, two and phase III clinical trials use our enzymes and that chemistry manufacturing control process. This.
This pipeline of potential approvals reinforces our confidence in our ability to continue to grow this sector over time.
Although this is a healthy and growing business. We have work to do many of the larger companies have already developed or will soon develop their own by a catalytic capability.
To continue to compete effectively we must increase that commercial efforts to reach new customers.
Work tirelessly to improve our responsiveness in value add proposition.
Shifting now to our life Science business. We believe this is an area with significant growth potential for could exits in 2023 and beyond we.
We believe a code of all the technology can make important contributions across a broad range of life Sciences applications.
Inevitably this means we need to carefully choose where to invest ourselves aware to leverage others, specifically, we view genomic sequencing DNA, an RNA synthesis as attractive markets, and which could Texas technology and products can deliver strong competitive advantage.
To date. This has been publicly demonstrated by our licensing to rush of an improved DNA ligase for Mgs Library prep, which continues to progress towards commercialization and new kids.
As well as a development and what we believe to be a best in class terminal transferase enzyme friends Rhematic DNA synthesis in collaboration with molecular assemblies.
We will continue to leverage our core strength of developing unique engineered enzymes or indeed, sweets thereof that either enable or improve our genome is customers product offerings or a biopharma customers manufacturing processes.
Our goal is to focus on identifying opportunities for could exit Dwight is a long term partner ultimately providing end to end solutions to customer needs as opposed to being limited to a standalone enzyme product offerings.
We also remain optimistic about the value that are innovative partners molecular assemblies of sequel bring to the equation.
Confidence they will play a key role in our path to success in the life Sciences Arena.
Not rounding out the performance enzymes segment, there are clearly applications for our technology in other areas such as food nutrition and industrial enzymes. However, these end markets represent a very small component of our current revenue on there is considerable if needed both in terms of investment.
And expertise to turn this into a profitable business.
Given the market reality I outlined earlier will be very thoughtful about how we spend resources here moving forward.
Shifting to our biotherapeutics business.
<unk> advanced asset is CTX seven one O eight a drug candidate for the treatment of exit crime pancreatic insufficiency RPI.
This asset is being co developed without partners it necessarily health science.
Epi occurs when a patient cannot produce sufficient pancreatic enzymes, specifically lipase to digest fat protease to digest protein and amylase Digest sugars.
And leads to weight loss metabolic disturbances and fat Mal absorption.
DPI is currently treated with preparations of porcine derived pancreatic enzymes that are inherit coated to survive.
Acidity of the stomach.
Although the existing therapies are reasonably effective at delivering amylase in protease activity, achieving adequate levels of lipase activities challenging and patients often experiencing continuing symptoms of fat Mal absorption.
Despite that current limitations the two leading therapeutics on the market today have combined annual sales of roughly $1.5 billion.
[noise] CDA seven one O eight is a potent lipase that has been specifically engineered to remain highly stable and stomach acid.
Come the limitations of existing therapies by delivering improved lipase activity with a less burdensome dosing schedule.
Ah partners it necessarily health science currently dosing our first patients in a phase one be multi those trial, having successfully completed the volunteer portion of the study we.
We anticipate that in the first quarter of 2023 will have sufficient data to support moving forward with a phase two clinical trial on assuming positive data, we'd expect to stop the phase two trial in late 2023.
E D X seven one O eight is an attractive first entry into the biotherapeutic space, we using our technology to improve upon proven approach and a multibillion dollar existing market with a partner that has already achieved commercial success.
A second clinical stage asset CTX 6114, fully Outlicensing athlete Nestle Health Science is an oral enzyme candidate to treat patients with phenylketonuria one of the most common inborn errors of metabolism or IMS.
Naturally health Sciences currently optimizing the formulation of Cvs 6114 to improve performance and we expect them to initiate a phase one clinical trial in 2023.
If this collaboration can successfully demonstrated benefit and PKU patients with Cvs six one month for this will inform our decisions around the oral enzyme approach to other iems.
Switching now to gene therapy.
While our Codeevolver technology undoubtedly has many potential applications in gene therapy, we're very well aware that this is a complex and competitive arena.
Specifically, we can use codeevolver to engineered proteins that may improve targeting an expression within the body when administered this transgenes and gene therapies offering potentially improved therapeutic benefit as compared to the current options for treatment for conditions like fabry disease pump a disease and hemophilia a.
On this front, we have a fruitful partnership with Takeda.
As without collaborations with Nestle partnership with Takeda is structured to help us learn derisk Calvert costs, and ultimately leverage the power of a transgene engineering capabilities to introduce new therapeutic options for rare diseases and in markets, where the unmet need remains high.
We are hopeful that one of our transgene therapy assets with gene therapy partnered with Takeda should enter phase one clinical trials in late 2023, or 2024, and we look forward to providing further updates.
In summary, as a relatively small company, we have an abundance of opportunities to build value both on our own and carefully chosen partnerships, but we need to be disciplined about how much. We can successfully take on given that finite resources.
Now I'd like to turn the call over to Kevin to discuss in greater detail or go forward commercials strategy.
Thank you Steven.
As many of you know I've been with Kodak since since the beginning of October and since then I've been spending my time understanding our capabilities and assessing current market opportunities to determine our best bets for future commercial.
I joined could access because of the impressive core science validating partnerships existing profitable business and vast potential for growth across a variety of life science markets.
I thought I had gotten to know the company over the past five weeks I recognize that there are opportunities to increase our understanding of the commercial opportunity and to refine our customer strategy.
My work is focused on driving consistent short term revenue growth within pharmaceutical manufacturing and life sciences, and as well as delivering long term value creation through our biotherapeutics pipeline.
We have a real opportunity to further communicate that codexis value proposition to downstream customers and I will be driving and increased commercial focus throughout the organization and the process. Let me provide you with some examples.
In pharmaceutical manufacturing, we have strong relationships with many of the top pharmaceutical manufacturers in the world building. Upon the strong foundation. My goal is to improve our targeted identification process with a focus on customers require support for both farmer manufacturing and DNN RNA synthesis.
By focusing on adjacent customers and markets, we can leverage our expertise to quickly drive commercial engagement.
One near term focus area will be increasing our reach to mid sized pharma companies, who are looking for cost effective solutions to manufacture their drugs.
To do this we plan to make some refinements tour selling model and modestly increase our sales footprint.
In addition, we have begun a process to take a closer look at how we are organized geographically to ensure efficiency as it relates to increase customer touch points.
And life Sciences, our initial forays have typically focused on specific enzymes for insertion into customer workflows as replacements for a particular step.
While this remains and ask a key aspect of our strategy is far from the only approach to this market.
As we have all of our strategy in this space, we expect to target workflows more holistically co optimizing several enzymes for combination by our customers and longer term considered developing and sewing kits, which could provide our customers with a more complete solution.
Our overall strategy here is to move from R&D focused revenue streams towards recurring product sales to accomplish this we need to develop suites of enzymes that work in tandem for our customers.
For example, improved library prep workflows for next generation sequencing or PCR based approaches for RNA sequences.
Finally in our biotherapeutics business, we are in the process of prioritizing our pipeline of assets and clarifying the investment required to reach the next critical value inflection point to support partnering or Codexis driven clinical development.
With a focus on the market opportunity competition reimbursement potential pricing, we plan to develop a deep understanding and clear parameters about how much to invest in an asset when new partner and when to stop investment.
This is an exciting time for Codexis and a key thing I want to convey today is as.
As we shape. The go forward plan, we are committed to prioritizing our time and financial resources on areas, where we believe we have the strongest commercial opportunity.
And the greatest probability of success with that I will now turn the call over to a Roth to discuss our financial results for the quarter.
Thank you, Kevin and good afternoon, everyone [noise].
Let me dive into our third quarter of 2022 financial results, which are summarized here.
Total revenues for the third quarter of 2022 were $34.5 million a decrease of 6% from the prior year period.
On a segment basis 31 $131.1 million in revenue was from the performance enzymes segment $3.3 million was from biotherapeutics.
This compares to $32.6 million and $4 $2 million for the performance enzymes and biotherapeutics segments, respectively for the prior year period.
Product revenues for the third quarter of 2022 or $28.0 million compared to $28 $7 million in the third quarter of 2021.
The decrease was due to lower enzon sales related to Pax, Logan, which were $12.9 million in the third quarter of 2022 compared to $18 $9 million in the third quarter of 2021.
Excluding packs Logan in both periods product revenues grew 53%.
For the first nine months of 2022 product revenue growth excluding pack of fluid was 16%.
R&D revenues were $6 $4 million compared to $8.0 million last year. The decrease was driven by revenue declines across a number of large existing customers.
Product gross margin for the third quarter of 2022, with 65% compared to 76% in the third quarter of 2021 the.
The change was largely driven by changes in product mix, particularly from the decline an enzyme sales related to pack Logan.
<unk> and prices for volume sold and higher shipping costs.
Turning to operating expenses are R&D expenses for the third quarter of 2022 or $21.8 million compared to $15.2 million in the third quarter of 2021.
The increase was primarily driven by increases in costs associated with higher headcount and salaries as well as with higher expenses for facilities and outside services.
SG&A expenses for the third quarter of 2022 were $13.5 million essentially flat with $13.4 million in the third quarter of 2021.
Head count and compensation related expenses were higher than last year, but this was offset by lower legal costs.
The net loss for the third quarter of 2022 was $10.0 million $10.0 million for a loss of 15 per share compared to net income of $2.2 million for three per share for the third quarter of 2021.
As of September 30th 2022, the company had $109 million in cash and equivalents.
In addition, we have not drawing any funds from our $50 million ATM equity facility that we put in place in may of last year.
I would like to spend a moment breaking down our financial results by segment as outlined here on slide seven.
Revenue in our performance enzymes business decreased 4% to $31 $1 million in the third quarter of 2022.
Before the allocation of corporate overhead expense operating income for this segment was $10 $8 million in the third quarter for an operating profit margin of 35%.
And our biotherapeutics business revenue was $3.3 million and we generated an operating loss of $11 $4 million again before the allocation of corporate overhead expenses.
Operating losses in this business increased year over year, because we grew and advanced ourself funded programs.
Moving to slide eight we are reiterating our 2022 guidance previously issued on July 14th and reiterated on August 4th.
We expect full year 2022, total revenues to be in a range of $135 million to $141 million.
We expect product revenues to be solidly in the range of 100 $112 million to $118 million, which includes approximately $75 million related to code excesses proprietary enzyme used by Pfizer Canadian factor packs Logan.
We expect R&D revenues to be lower we expect R&D revenues to be in the lower half of the range of $20 million to $25 million that we provided during our queue to call. We continue to see softness in R&D revenues in both our performance enzymes and biotherapeutics segments.
Gross margin on product revenue is expected to be in the range of 65% to 70% consistent with prior guidance.
We anticipate R&D and SG&A expenses combined will be in a range of $136 million to $138 million for the full year compared to the range of $136 million to $140 million that we disclose in our last earnings call due to.
<unk> expense reduction imprudence around cash burn.
Also in.
Q3, we incurred approximately $1 million in non-cash stock compensation expense related to our CEO transition, which is included in the revised expense expectations that I just outlined.
Ah Steven noted, we expect our existing cash and equivalents combined with our future expectations for product revenues R&D revenues and expense management will be sufficient to fund our planned operations through the end of 2024 without any contribution from new financing.
Now I'll turn the call back to Steven.
Thank you Ross.
In closing our ongoing aim is to focus simplified and execute on what we're good at.
As part of a refresher that could exit strategy, we're making strategic organizational and cultural changes to refine on commercial focus enhance both short and long term revenue opportunities and concentrate our spans of programs, where we are best positioned to win.
And we'd be happy to take your questions operator.
Thank you.
At this time will be conducting a question and answer session if.
If you would like to ask a question. Please press star one on your telephone keypad and a confirmation tone indicate your lines and the question Q U.
Can we first start to if you would like to remove your question from the queue.
For business using speaker equipment, it may be necessary to pick up your handset before pressing the star Keith.
One moment. Please so we poll for questions.
Thank you.
Alright first question is coming from the line of Brandon Cool yard with Jeffries. Please proceed with your questions.
Hey, Thanks. This is Matt on for Britain today.
I appreciate all the initial color on the reshaped corporate vision, that's coming together and look forward to some more details there over the coming months, but I guess, maybe one for Kevin.
A lot of really good color and the and the slides on the enhanced commercial focus excuse maybe talk a little bit more about what's more actionable here in the near term versus what might be more kind of mid to longer term focus for you and the team. Thanks.
Sure it's nice to meet you at.
The near term actionable thing is really too.
Focus on our existing customer base in terms of <unk> [noise].
[noise] and our pharmaceutical manufacturing looking at additional coming down the pipe.
Can potentially add some value with our Ah catalysis.
The second thing is probably the focus on medium sized emerging pharma in order to create a backlog.
For future revenues in the.
Coming years in terms of making sure that we have a pipeline of products coming down when you talk about this later on as well in terms of the 20 or so products that are in phase two phase III development that could eventually turn into real revenue products for us in the near term.
Thanks. So it's helpful and then you're back in July when you noted a few different reasons for the reduced R&D Oh look one of them was around kind of this macro impact driving a slowdown in partnering activity and then cadence of kind of <unk>.
New client conversations on both the performance anxiety.
Biotherapeutics I'd love to just kinda get updated thoughts on where those today macros still pretty choppy those conversations kind of improving worse Jane unchanged and your outlook.
For those as we got into the end of the year.
Yeah sure <unk> Ross.
Start and Stephen May add some color afterwards, but I think in terms of our overall macro environment and certainly our expectations for our our the revenue it's really not change materially from what we outlined.
Several months ago, there were some.
Fairly large partnering deals we were expecting to get this year that.
Seem to have been put off due to.
Macro issues are specifics when the partner and don't much has changed there I would note that and.
In terms of our expectation to have two years of cash runway at the end of this year that really is reliant on deals we have in hand, now and not anticipating any large future deals just to just to be conservative in our outlook.
Yeah.
Then.
Steven there I would like to add a little bit of color to that which is the thing that we really tracking and hanging a hat on is the product revenues because product revenues have a very good margin and they can bring.
Money the bottom line in terms of our R&D revenues. They really consist of fee for service work, which is kind of breakeven or reimbursement for shared expenses, which is actually negative margin. So it's not a driver of profit the bottom line also increasingly as we change.
<unk> focus to decrease barriers to entry partners. It becomes a less good metric for future revenues in future commercial sales. So we really want to focus on the product line is the most important part about revenue story.
Thanks, and then one last quick one maybe Ross for you on the three different therapeutic pipeline items outlined 71 O 86114, then the Takeda.
Gene therapy events that could happen in 23 are there any potential revenue milestones tied.
Tied to those.
Along the clinical pipeline. Thank you.
Potentially there is a milestone or two we could get mad I would I would say, they're not overly material in size, but but there are some potential milestone opportunities there.
Super I'll, even though thanks guys.
Our next question is from the line of Chad Myers.
He was Cowan C with your question.
Hey, everyone. Congrats on the beach chat on for Steven Ma.
Yeah, just just in terms of the commercial efforts.
I appreciate the Prudence there could you give sort of a <unk> a ballpark size of the commercial organization to date, and then maybe how how much that expansion.
Won't be materially.
Sure This is Kevin.
Nice to meet you Chad.
The commercial organization is around.
20, or so folks today, we're looking at a modest expansion on the order of another say.
Five to 10 folks to be able to expand our reach both in farmer manufacturing as well as life Sciences.
Still working through that in specific areas specifically as we.
Look at how we're organized geographically, but it's not completely just a sales effort. It's also looking at our service organization support other pieces of running a smooth and efficient commercial organization that we're looking at as well. So net net that's probably a good way to think about it.
Great and could you speak to me the competitive environment that you're seeing in biocatalyst, namely there's some other partnerships I've seen in the space could you speak to how you guys are differentiated from a tech snack point of view and then how sensitive that businesses too too and expanding.
Organization versus just sort of the tax tax showing itself.
Yeah.
Great questions. So the the short answer is that the recently announced deals really don't affect our short to medium term perspective, we've already got relationships with the vast majority of the big companies and for the short to medium term trajectory.
Trajectory is pretty well set we've yet if you look back to 2018, we had 14 molecules in partnership in phase two and phase III farmer manufacturing certain of which you have converted to be commercial products now right. Now if you take the same cut we've got 20 products.
In phase two and phase three so we would expect about 10 of those to convert over the next four or five years. So in terms of Ah. So thats short to medium term trajectory.
Those are in the bag already now.
What's happening is the big companies are developing their own by catalysis capability, all that partnering for it and it's becoming sort of a baseline capability for the big players. So that's why Kevin and team so interested in looking towards the sort of meet more medium size.
<unk> companies, where they they have much more need of a of a technology like hours also.
Really really good at what we do because we've we've spent many years evolving these enzymes and yeah.
They tend to be in fairly narrowly defined families such as keto reductase for instance, where if you've made one it enables you to make the next one much more rapidly and much more effectively than if you are starting from ground zero. So we feel.
In good shape in the short term a well placed provided we can increase our customer base to those other companies and be responsive and a thing that Kevin you've been talking about a law is actually lowering the barriers to entry. So we're very easy.
Decision to partner with us because remember these companies that taking the decision to go to the buyer catalysis route as they're moving into phase two.
So there are often relatively cash constrained if they're not one of the big players. So yeah. We have to that's one of the reasons I made the comment that I did about R&D revenues not being a very good forward looking indicator in the future.
Super helpful. Yeah. Congrats again, thanks for all the questions.
Thank you as a reminder to ask the question is name of your press Star one from your telephone keypad.
The next question is from the line of human with Craig Helen Capital. Please proceed with your question.
Good afternoon, thanks for taking the questions and for the strategy update maybe first up.
One of the things they I guess they didn't hear is the the Codeevolver platform is that something that you still intend to potentially.
Since out or is this is it now going to be kept in the house and with focus on the commercial.
Items that you listed all today.
So we don't have any plans and really don't need to do for the code of all the licensees.
Licences right now in our focus is on <unk>.
Continuous improvement of that platform and.
The metrics that we can improve things like a cycle time to do a.
And evolution stat.
Things like that the footprint, but you need to actually do that so that we can be very responsive.
So we think that the world has changed now what people actually want is the enzymes and those specific deals. So we're not planning on further code of all the.
Licenses right now.
Understood and and then maybe regarding your one of the new focus items is actually producing and selling the kids. How quickly do you think you could ramp that type of a business up is that something we should be thinking about in 2003 or do you think it will take a little bit longer than that.
No I think this is early stages and first ensuring that we understand what the key customer needs are in terms of this market. We've had some successes Steven highlighted the DNA ligase.
Roche as a success, there and we need to be looking at the.
The customer workflows here a lot more over the next couple of months to ensure that we know exactly what the need is we can co optimize sets of enzymes to be able to fit into full test kids I think we're.
We're at the early stages of.
Our strategy in terms of full test kits, but it is something on our radar as a key strategic investment going forward. So I think not necessarily near term other than continuing with some of our evolving and preparing a new enzymes for that customer said, but we want to make sure we really understand the customer needs before we.
Dive head first into that in terms of full testicles Wanna see now having downplayed the importance of R&D revenue earlier, what I'm going to say is one interesting signal that we've got in the in the <unk> space is the increasing number of R&D collaborations we've got people.
Testing are enzymes on that platform that kind of stuff. So.
We think we have real opportunity here, we're going to spend the next three to six months really nailing go to market strategy because you get.
These are pretty.
Difficult investments if you choose to make kids. So we're not going to do that until we know it's the right way forward.
Okay got it maybe one last one little hop back into the queue.
It sounds like you're deemphasizing, the food and beverage to focus on the the larger more profitable markets in life science tools and pharma, but you've got an existing relationship with pain Lyle.
Should we be thinking about that business going forward. Thank you.
Answer the larger picture and then Ross you might want to talk about the specifics into the expectations on Tate and Lyle one of the lenses were looking through is how big a list is it to go from what we are extremely good at which is inventing an improved enzyme to actually addressing a market and.
There are synergies in focusing on particular areas. So we know how to do this in the former manufacturing space when you move into things like food. It impacts the amount you have to make the expression system you have to use that kind of structure of the customer you are trying to address.
All really rather more complicated than just making making the enzyme and so what I'm, saying is when we move out of a sweet spot we have to be.
Super cautious that we understand the market there'll be going full and just right now it's about emphasis in the coal areas of former manufacturing and life Sciences.
Yeah, no it got it.
Just add Matt.
Food industrial part of our business, it's about 5% of our revenues today have spread across both.
R&D as well as product revenue.
Mentioned, Tate and Lyle specifically, but that is an existing customer relationship that's kind of well established there's some investment and support we give to that but but not much. So I would assume that that status quo.
Got it that's helpful. Thank you.
Thank you I'm showing there are no further questions I'll turn the call back to Steven Daily for closing remarks.
Well, thanks, again, and thank you all for joining us.
Kevin Russ and I'm really looking forward to meeting with many of you in person the investor confidence is in New York in Nashville.
So thanks for tuning in.
Thank you. This concludes today's call you may now disconnect your lines at this time.
[noise].