Cerus Corporation (CERS) Q3 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Cerus Corporation Q3 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time [Operator Instructions]. As a reminder, this conference call is being recorded today November 2, 2017. I would now like to introduce your host for today’s conference, Tim Lee, Investor Relations. You may begin.

Thank you, operator, and good afternoon. I’d like to thank everyone who joined us today. With me on the call are Obi Greenman, Cerus’ President and Chief Executive Officer; Vivek Jayaraman, our Chief Commercial Officer; Kevin Green, Cerus’ Chief Financial Officer; Dr. Richard Benjamin, our Chief Medical Officer and Carol Moore, our Senior Vice President of Regulatory Affairs and Quality. Cerus issued a press release today, announcing our financial results for the third quarter ended September 30, 2017, and also describing the Company’s recent business highlights. You could access a copy of this announcement on the Company Web site at cerus.com. I’d like to remind you that some of the statements we will make on this call relate to future events and future performance rather than historical facts and are forward-looking statements. Examples of forward-looking statements include statements related to our 2017 product revenue guidance, gross margin, operating expenses, cash burn and sufficiency of cash, future product sales, mix and volume, future regulatory-related events, clinical trials and other product development activities, including risks with respect to our cryoprecipitate, activities with respect to our red cell program, our commercial goals and initiatives, including new contracts, customer activity under existing contracts and hospital implementation, the potential approval of our red cell product in Europe and the U.S. and commercial launch thereof, and the timing of the foregoing events and activities. These forward-looking statements involve risks and uncertainties that could cause actual events, performance and results to differ materially. These risks and uncertainties are identified and described in today’s press release and under risk factors in our Form 10-Q for the quarter ended September 30, 2017, that we expect to file shortly. We undertake no duty or obligation to update any forward-looking statements we make today. This call will be archived temporarily on our Web site and will not be updated during that time. On the call today, we’ll begin with opening remarks from Obi, followed by a commercial overview from Vivek then we’ll have Q3 financial results from Kevin and finally Obi will conclude the final remarks. And now, it’s my pleasure to introduce Obi Greenman, Cerus’ President and Chief Executive Officer.

Good afternoon. And thank you for joining the call today. Overall, we are encouraged by the progress we are making, both commercially and in product development. During the past two weeks, we have announced national reimbursement for pathogen reduced platelets in Germany; the tender award in Madrid for one of the largest blood centers in Spain; and our partnership with Kedrion in Italy, together with our expanded EFS contract announced this summer. Our commercial operations in Europe are gaining significant traction. While we’ve been working diligently to unlock key European markets, the progress in Germany and in France, during the last several months, has exceeded our expectations. Since July, we have installed illuminators at all EFS blood centers and the French Transfusion Service has rapidly implemented to INTERCEPT platelet system. As a result of these efforts, we have begun shipping platelet kits under the expanded agreement. Given the large national conversion and past experience in EFS centers, we are confident in their ability to implement INTERCEPT for 100% routine use during the contract period. In Germany, with reimbursement now in place, the blood centers should be ready to implement INTERCEPT as soon as they receive their marketing authorization approvals, or MAAs with the Paul Ehrlich Institute. Pathogen inactivation allows for extended days of shelf life in Germany compared to conventional platelets, which should reduce waste from expired products at the hospitals and at blood centers. With favorable reimbursement and extended shelf life in hand, we believe the German blood centers have some strong incentives to provide INTERCEPT platelets to their hospital customers. In the U.S., we saw a distinct shift in sentiment toward INTERCEPT at last month's AABB Meeting in San Diego. During previous AABB Meetings, conversations with potential customers usually revolved around live blood banks and hospitals should adopt pathogen reduction. At this year's meeting, however, blood center and hospitals clearly understood the clinical need for pathogen reduction and the focus shifted to the specifics of how to integrate the technology into their operations. More encouragingly, this dialogue became their shared cause, independent of our support. On the red cell development front, our team continues to make progress on the new UPLC assay for commercial production of the active ingredient for our red cell product. Development of the assay is moving forward as scheduled. We will provide regular updates on the development progress for our red cell product as we move towards an anticipated CE mark submission. But I would point to three key milestones in the coming quarters; number one, the UPLC assay development; secondly, the method transferred to our contract testing lab and validation; and third, retesting of the validation loss in release of the commercial components. Finally, in regard to the submission pathway for INTERCEPT cryoprecipitate, we are working on expediting the studies required for our expected PMA submission. INTERCEPT Cryo is a new major opportunity for us that addresses significant unmet clinical need. The business model that we've chosen for this product will allow us to directly interface with hospitals and transfusing physicians, thereby allowing Cerus greater control over the commercial uptick of the product. Given our year-to-date results and the momentum we have seen in France, Italy and Spain and our understanding of blood center production and ramp in the U.S., we're tightening our 2017 global product revenue guidance to the range of $41 million to $43 million compared to our previous guidance of $40 million to $46 million. Vivek will now provide a detailed update on our commercial efforts. As many of you know, Vivek joined us a little over year ago as Chief Commercial Officer and has been instrumental in shaping and refocusing our commercial operations. I'm delighted to have someone with his extensive commercial experience, leadership skills and fortitude at Cerus. And with that, let me turn it over to Vivek.

Thank you, Obi. This is an exciting time for Cerus. The events of the past quarter and the compelling market opportunities in front of us give me great confidence that we can meaningfully expand patient access to safer blood. So today, Cerus is the pioneer and undisputed leader in providing pathogen reduced blood components. The market potential for our approved products is approximately $1 million. Furthermore, with line of sight for potential INTERCEPT Cryo and red cell approvals, we may soon have the opportunity to participate in segments of the transfusion medicines space with an aggregate market size north of $5 billion. Initial feedback from clinicians for pathogen reduced Cryo, which offers an extended post-thaw shelf life and immediate availability for transfusion, is very encouraging. Few companies have the potential to create and build opportunities at this magnitude. Cerus is well positioned to be first mover in many product categories, and also in many key geographies. Key to our success is pairing intelligent go-to-market strategies with disciplined commercial execution. Our results this past quarter give me confidence in our ability to deliver solid execution, going forward. Starting with the U.S., we have gained a great deal of valuable insight in the past year. This knowledge has come to a close partnership with blood centers, hospitals and clinicians. We are smarter today about the platelet production realities facing our blood center customers, and also better understand the efficiency gains required to make INTERCEPT a standard of care. Furthermore, we are more confident than ever in the clinical interest-in and demand-for pathogen reduction. Our cross-functional filed team, which includes sales, marketing, deployment and hospital affairs, are working hand-in-hand with blood banks to integrate INTERCEPT into their operations. They are also working closely with the hospitals to ensure that they are ready to receive product and with clinicians to drive education and raise awareness. During the last few months, our focus on optimizing the number of pathogen reduced units produced by our blood center customer has yielded significant results. As an example, during the recent AABB Meeting, a case study presented by the American Red Cross show that our collaborative efforts could increase the potential percentage of treatable platelets to over 70% by implementing modification for the collection and manufacturing process. Beyond the ARC, other blood centers presented similar findings when discussing their ability to optimize INTERCEPT production. Accordingly, we are confident that we have a clear path to addressing the early challenges that are unique to the U.S. market. Blood centers are no longer asking why they should adopt INTERCEPT. Instead, there is a clear focus on determining how to optimize production of INTERCEPT platelets. Another initiative for our field team is create awareness and to educate hospitals, administrators and transfusing clinicians. It is a balancing act to generate clinical demand, while making sure that blood banks are well positioned to supply INTERCEPT. Encouragingly, clinicians are stating a desire to move to an 100% adoption of INTERCEPT platelets. In response to this demand, many blood centers are diligently implementing production modifications to enable them to increase supply of INTERCEPT platelets. As hospital demand for pathogen reduced platelets continues to grow, blood centers are moving with increased urgencies to ramp up supply. Our activities at both the blood center and hospital level are generating results. U.S. sales were up both year-over-year and on a sequential basis. Q3 2017 U.S. platelet kit sales were up 90% when compared to Q3 2016. Through the first nine months of 2017, U.S. platelet kit sales were up nearly 140% when compared to the first nine months of 2016. It’s critical to increasing availability of supply as the BLA process for blood centers. BLAs allow for shipment of INTERCEPT components around the country from a centralized manufacturing location. As we announced last month, Rhode Island Blood Center was the first to receive their BLA approval. With the BLA in hand, Rhode Island is now shipping INTERCEPT platelets across state lines to places like Yale University. Seven other blood banks have submitted their BLAs, and we expected to see more approvals in the coming weeks and months. Driving a tighter connection between clinical demand at the hospital and available supply from the blood center continues to be our main focus. To that end, we made encouraging process in Q3. Now, turning to Europe. Obi mentioned our continued March forward in France, which is certainly exciting news. Also encouraging is the recent announcement by InEK, the German institute for hospital rumination to reimburse pathogen reduced platelets. This is a significant development and is a big step in opening up the largest platelet market in Europe. Based on the number of platelets produced, we believe that the German market opportunity is in excess of $30 million annually. As Obi mentioned, pathogen reduction allows German blood centers to store platelets for up to five-days versus four-day storage for conventional platelets. The ability to store pathogen reduced platelets for up to five days should decrease wastage rate, both at the blood centers and hospitals where platelet discards are currently as high as 20% of overall production. The combined potential improvement in platelets -- PLT logistics and favorable reimbursement makes us confident that the German market could be a significant growth driver for our European business in the years to come. In the immediate term, the usual budgeting process for German blood centers and the MAA process by the PI will take time. Right now, our goal is to facilitate the implementation and MAA submissions broadly in the German market. Once completed, we expect the German platelet market to be a key growth driver for our EMEA franchise. As we announced earlier this week, we secured a meaningful win in Spain. We were recently awarded a tender for the transfusion center of the community in Madrid, or CTCM. CTCM is one of the largest blood centers in Spain. We believe this contract award provides direct evidence of the value of our INTERCEPT products portfolio. It is encouraging to see this large and influential customer chose to follow up the standards been established in other European countries. We also announced our new Italian distribution agreement with Kedrion. Some of you may be familiar with Kedrion, a global manufacturer and distributor of blood products, with expertise in plasma collection and fractionation. With their global headquarters in Italy, they bring deep market knowledge and key customer relationships that we believe will be instrumental in defining new standards in Italian blood safety. This is also our first distribution agreement that encompasses all three blood components, platelets and plasma today and red cells, when they're launched in Europe upon receipts of the anticipated CE mark approval. Realizing importance of pathogen reduction and the manufacturer of plasma derivatives, Kedrion has fully engaged on this significant opportunity to establish INTERCEPT as a standard of care nationwide in Italy. As more countries across Europe adopt INTERCEPT as a standard of care, we are moving forward towards a tipping point across the continent. These are exciting times. In summary, I believe that we are on the cusp of significantly expanding patient access to safer blood. One of the things that most excites me about Cerus is the platform that our technology provides to positively impact healthcare on a major scale. We operate in $1 billion market today and expect to soon operate in markets that are in excess of $5 billion with inclusion of red cells and Cryo. From a commercial perspective, we made meaningful progress in this past quarter. I am excited to drive strong results in the years to come and feel confident that we have the right products, plans and people in place to deliver compelling sustainable top line growth. I'll look forward to continuing to update you on our commercial progress in the quarters to come. With that, let me turn it over to Kevin for a review of the financial results.

Thanks, Vivek. Earlier today, we reported product revenue from the most recently completed quarter of $10.8 million, up 6% from the $10.2 million reported a year earlier. This growth was derived from strong demand in platelet kits in both EMEA and the U.S., as well as from an increase in illuminator sales. Importantly, the majority of illuminator sales were the results of early deployment in France. As we speak today, illuminators have now been deployed to all EFS sites, providing a foundation for the EFS to ramp INTERCEPT production. Worldwide, platelet kit demand was up 12% or 15% on a dollar basis when comparing Q3 2017 to the same prior year period. Those gains were largely offset by a decline in plasma kit sales from both France and as a result of ordering patterns from certain Middle Eastern distributors. With the growth of platelet cells globally, platelet kits now account for more than 90% of our kit revenue. The contribution margin from product sales was also healthy during the quarter. Gross margins on product revenue were 50% compared to 46% for the prior year period. The improvement in gross margin was largely the result of sales mix with the most recent quarter dominated by platelet kit sales, which have a higher margin than plasma sales. This margin differential is driven by the lower cost of platelet kits relative to the cost of plasma kits. For the year-to-date period, margins were 51% compared to 46% for the same period in the prior year. Similar to the quarterly results, a higher proportion of platelet kits was the primary driver for the improved year-to-date margins, along with overall more efficient inventory management. I’d like to turn now to operating expenses. Total operating expenses for the most recently completed quarter were $20.1 million compared to $19.2 million for the prior year period. Throughout 2017, we have had increased activities for our red blood cell BARDA initiatives, and also enrolled more sites in our U.S. Phase 4 platelet study. As we noted during our second quarter call, we have improved the utilization of our clinical and R&D staff on the BARDA program. As such, while R&D spending increased by 12% that was more than offset by BARDA reimbursement, which is recorded as government contract revenue. Going forward, we expect this trend to continue as U.S. red blood cell development efforts under the BARDA contract continue to ramp. SG&A expenses during the quarter were flat year-over-year as we begin to realize leverage from our commercial and support infrastructure. On a year-to-date basis, operating expenses were $66 million compared to $59 million for the prior year period. Completion of the U.S. commercial team build out and elevated red cell clinical development activities contributed to the increased year-to-date operating expenses. Net losses for the third quarter were $13.4 million or $0.12 per diluted share compared to $14.4 million or $0.14 per diluted share in the prior year period. Improved contribution margins from product sales and higher BARDA revenue help narrow the reported net losses for the most recent quarter over the prior year period. On a year-to-date basis, net losses were $49.1 million compared to $49.4 million for the prior year period. During the nine months ended September 30, 2017, we sold our holdings of Aduro, which provided a $3.5 million gain. Looking at the balance sheet. We ended September 30 with cash and short-term investments of approximately $60 million compared to $72 million at December 31, 2016 and $51 million at June 30, 2017. The recently completed refinancing of our growth capital facility provided us with additional capital. Importantly, the facility also provides for an extended interest-only period and an option on additional capital, allowing us to focus on global business growth as we build inventory to meet the increasing growth coming from EMEA, as well as from the U.S. And with that, I’ll now turn the call back over to Obi. bi Greenman: Thank you, Kevin. I would like to close by emphasizing the commercial progress we are making as an organization. We work diligently to introduce the INTERCEPT paradigm shift, and are now gaining significant momentum in two of Europe's largest markets, France and Germany. We estimate that those two markets combined represent an opportunity greater than $50 million annually, which gives us conviction in our ability to drive revenue growth into 2018 and beyond. This progress towards the standard of care is also influential within the transfusion medicine space across the rest of the EU. We also continue to see market adoption of INTERCEPT in the U.S. with an increasing number of major academic medical centers moving towards routine use. Our INTERCEPT red cell development program is advancing both in the EMEA and in the U.S.; the Phase III SPARK study evaluating repeated INTERCEPT red cell transfusion in thalassemia patients with chronic anemia has completed our study transfusions. We're working towards database lock this quarter with a study readout in Q1. To-date, while the study is still blinded, there've been no antibodies detected that are specific to INTERCEPT treated red cells in this study, which has transfused over 2,000 units in more than 80 patients. We've also reached agreement with the FDA on the endpoints of the Phase III BARDA supported ReCePI study, assessing INTERCEPT red cells in cardiovascular surgery patients with acute anemia at 15 to 20 sites in the U.S. We're currently expanding the number of blood center sites in the U.S. that will be manufacturing red cells for this study, as well as for our future chronic anemia transfusion study and are currently enrolling RedeS study. And finally, we are increasingly excited about the opportunities afforded by our INTERCEPT Cryo program, and its importance for critically bleeding patients. Given our near term market opportunities and our development pipeline, we believe that we have the programs in place to drive revenue growth for the coming years. But even more importantly, we are confident that we are redefining the field of transfusion medicine with proactive measures for addressing blood safety and availability concerns. Before we open the call for questions, I would like to acknowledge the many contributions of the Cerus employees, both abroad and in the U.S. Our team members have done a fantastic job in providing deployment in clinical and scientific support to our customers worldwide. It was great to see this acknowledged broadly in the many presentations by our customers at this year’s AABB Meeting, and the heartfelt appreciation for the support from the Cerus team. We have a great team here at the Company that is very focused on its important mission for patients and physicians. Operator, please open the call for questions.

Thank you [Operator Instructions]. And our first question comes from the line of Drew Jones from Stephens. Your line is now open.

I wanted to start with France and the illuminator placements that you guys referenced for 3Q. Is that sufficient capacity to handle a full run rate? And then along those lines what, when we look at the kits that are getting placed there in 4Q, is there any stocking there or is it going to ramp from 4Q levels?

I'll take the first part of that question and then turn it over to Kevin. So I think the nature of your question was do they need to install any more illuminators at the regional blood centers sites at the EFS. And the answer to that question is no. So they're fully implemented and are in routine production as of today. With regard to kits that are needed for routine use, going forward, I'll turn that over to Kevin.

Yes, and I would just provide one caveat. So as reported in Q3, not all sites were up. But as we speak today, the illuminators have been deployed to all sites. It’s our understanding that the French plan, as we’ve mentioned, to make INTERCEPT standard the care over the base period. As they rollout the technology to those 17 sites, I think there will be a ramp period. There may be some stocking certainly since it's their first large orders. But we really don’t know where that is in the scheme over that base contract period.

And then maybe shifting to domestically for just a couple of quick questions, the seven BLA facilities that are pursuing BLA, what’s the total capacity in aggregate of all those blood centers?

Yes. I don’t think I can answer that precisely. But one of them is obviously the Red Cross, and so that’s 40% to 45% of the overall market. There is other -- the blood systems is another big chunk, and I think that’s on the order of 20%, 25%. So those seven additional BLAs cover the majority of the rest of the market.

And then last one for me. It sounds like there were no hiccups in terms of RBC trails as a result of Puerto Rico Hurricanes?

I’ll turn that over to Richard. Obviously, things have been shut down there and the hospitals are on generators to-date. But Rich can give you an update as to where we are today?

I guess, as you know, Puerto Rico was devastated by the Hurricane and that did shutdown enrollment at our three hospitals. And the blood centers had to import blood for a period. The blood center is back-up manufacturing blood for general use, and will soon be back-up making blood for our trial. The hospitals will take a little longer as they are still on generators, and communications are a real problem. So we are working with them as we speak to get them backup in enrollment. More importantly, I believe, we have a mainland blood center that will be up in Q1 producing red cells. And we have identified I think three sites on the mainland that we plan on bringing to recruit and enroll patients for Q1. Does that answer the question?

Thank you. And our next question comes from the line of Josh Jennings from Cowen and Company. Your line is now open.

Congrats on the recent successes in Europe and on the quarter. I was hoping to just start off and ask about the 2017 guidance update. It implies a nice ramp in the fourth quarter at the mid-point of the range. And I was just hoping you could give us a little bit of color in terms of what’s the drivers there that give you confidence in the sequential top-line acceleration?

So I think, obviously, the French coming online is going to be an important driver. We don’t know exactly how that is going to shape up for the entirety of Q4. But we believe Q4 is going to be a strong quarter. And going into 2018, there is a lot of growth drivers that will support growth, going forward.

And is there anything in the U.S. or anything outside of France that we should be considering as well as we look at the implied fourth quarter revenue number?

I’ll let Kevin handle that one.

Josh, U.S. is definitely ramping as Vivek’s prepared comments alluded to, there’s nice strong growth in kit demand. Q4, as you’ll recall last year in the U.S., was dominated by illuminator sales. So we won't have that going forward, but the kit demand will be very healthy. And then beyond that, we do expect fairly strong growth in Q4 coming from certain distributor regions, in particular, the Middle East.

And more broadly, Josh, I think we're seeing growth in multiple geographies right now in multiple countries. So it's confident going into next year that there's multiple leverage to pull.

And just I wanted to see if there's any update in terms of the ramp at the American Red Cross manufacturing ramp, that's going to be in play just getting out of AABB, InterSol issues is weighing the rear view mirror, BLA [Biolon] mask could come for the American Red Cross in first quarter next year. Is there any update in terms of your discussions with them in terms of how they plan on ramping up manufacturings. Any incremental sites or anything new that you can share?

I'll turn this over to Vivek in a second. But I think fundamentally what Vivek and his team have been focused on successfully over the last three months is really been to match hospital demand with production from those sites that are in routine use, and how do we ramp that production to meet that demand. But the team and I think it was evidenced t the AABB Meeting. But I think Vivek can give you specifics about what’s going on with the Red Cross?

Josh as we correctly pointed out and as Obi mentioned before, the ARC is one of those sites where we anticipate a BLA approval here in the coming weeks and months. They currently are manufacturing at 10 sites and know their plans to expand their manufacturing footprint for INTERCEPT products. And as I indicated, they presented about their experience with increasing INTERCEPT production at the AABB, and noted that their data and analysis shows that they can get north of 70% production. So they're actually in process in terms of adopting those collections and manufacturing modifications to allow for the increase in production. So we're encouraged by the progress that they're making. We continue to find them to be a good partner and so our expectation is that their partner hospitals be able to offer more of their patients INTERCEPT created platelets here in the near future.

And then last question, just on INTERCEPT cryoprecipitate. You guys were working for PMA submission. Any type of timelines in terms of when we could potentially think about approval in the U.S. and how are you thinking about that product outside the United States as well? Thanks a lot.

So the focus of 2018 is really going to be completing the in-vitro studies, the coagulation factor studies, for the final product and then running the stability time points. So that's what taking longer than we would like. I think obviously you just have to hold the product for the different stability time points and you can't really change that. So that would be to a submission in the 2019 timeframe and it's roughly six month PMA review clock. With regard to the Cryo outside of the U.S., there are several markets that use a lot of Cryo and are very interested in this five day thought label, shelf life label claim. And I think the other thing that we've seen is increasing interest in Cryo, in general, just because there are important coagulation factors in Cryo that are seen to be critical for bleeding patients, especially in the pre-hospital trauma environment. I think the increasing recognition of the need for [31.25] [indiscernible] agent, specifically but it also factor XIII and other factors early on and the treatment of these patients is driving demand or interest -- further interest in Cryo in markets that we wouldn’t have anticipated. Josh, did that answer your question?

Thank you. And our next question comes from the line of Emily Stent from Robert W. Baird. Your line is now open.

First off, congrats on the Italian distribution agreement announced earlier week. Just curious how much revenue do you think you can generate in Italy, and how quickly do you think the distributor can ramp?

We’re just starting with them. I think the nice thing is that they are a partner that really understands need for this product and is looking to establish INTERCEPT as a standard of care across all blood components to Italy. It’s a very significant market in Italy. So roughly 2.5 million red cells, I think roughly 200,000 platelet doses annually and I think close to 300,000 to 400,000 plasma units annually. And so, obviously the market, just for platelets alone, is roughly in the range of $10 million to $15 million annually. I don’t want to speculate today on what their target are, because we just announced the agreement this week. But I think there is strong interest in Italy as of late and where the chikungunya outbreak in Rome and the hospitals in Rome have been in routine use with INTERCEPT, and are ramping their demand for the product just because they’ve got this issue.

And then could you breakout how much revenue French generate in the quarter, and what level of revenue do you think France can generate this year and in 2018?

We’re not going to break it out for the quarter. And obviously, it’s early on with the contract being signed at the end of July, the new contract. I think as we said, there is about 330,000 platelet doses transfused annually in France. And so that’s roughly $20 million plus annual market opportunity for us. And so in routine that’s what you’d expect. It’s just when we get to routine production at all the sites.

Emily, what I’d say is that the Q3 French platelet demand was up just slightly from Q2. So really we’ll see the effect of this new contract as we move forward in time?

And last one for me. So after having the first customer get BLA approval last month, have seen any change in the way that Rhode Island blood veterans producing? Did the blood centers that are applying for BLAs have incremental capacity in supply to fill that out of state demand that they’re seeing?

We’ll have to see on your lateral point. And we have seen them already shipping products across the state-lines and we’re aware that they are supplying customers in Connecticut and elsewhere. So I think that this is exciting times and then we probably have an alternative way to address some of the lack of supply that we see in the market today from across interstate shipments from blood centers.

I’m not showing any further questions, at this time. I would now like to turn the call back over to Obi Greenman for any closing remarks.

Thank you all for joining us today and for your interest in Cerus. We will be presenting at two investor conferences later this month, and we look forward to seeing many of you in person at that time. Our Q4 call will be in early March and we look forwarding you at that time. Thanks very much.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a nice day.