Schrödinger, Inc. (SDGR) Q2 2021 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the Schrodinger Conference Call to review the Company's Second Quarter Financial Results. My name is Kevin and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. [Operator Instructions]. Please be advised this call is being recorded at the Company's request. And now I would like to introduce your host for today's conference, Tracy Lessor, Executive Director of Corporate Communications. Please go ahead.

Thank you. And good morning, everyone. Welcome to today's call, during which we'll provide an update on the Company and review our financial results for the second quarter of 2021. Earlier this morning, we issued a press release summarizing our financial results and progress across the Company, which is available on our website at www.schrodinger.com. Here with me today are Ramy Farid, President and Chief Executive Officer, Karen Akinsanya, Executive Vice President, Chief Biomedical Scientists, and Head of Discovery R&D, and Joel Lebowitz, Executive Vice President and Chief Financial Officer. Following our prepared remarks, we'll open the call for Q&A. I'll remind you that during today's call, management will make statements related to our business that are forward-looking and are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, including without limitation, statements related to our future financial performance, including our outlook for the full year 2021; the potential advantages of our platform, our strategic plans to accelerate the growth of our software business and advance our collaborative in internal drug discovery programs, risks relating to the COVID-19 pandemic, our expectations related to the use of our cash, cash equivalents, and marketable securities, as well as our future operating expenses. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies, and prospects, which are based on the information currently available to us and on assumptions we have made. Actual results may differ materially from those described in the forward-looking statements and are subject to a variety of assumptions, uncertainties, risks, and factors that are beyond our control, including the demand for our software solutions, our ability to further develop our computational platform, our reliance upon our drug discovery collaborators and other risks detailed under the caption Risk Factors and elsewhere in our most recent Securities and Exchange Commission filings and reports. Except as required by law, we undertake no duty or obligation to update any forward-looking statements discussed in this call as a result of new information, future events, changes in expectations, or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today. With that, I'd like to turn the call over to Ramy.

Thanks, Tracy. And thank you, everyone, for joining us today. At Schrodinger, we have developed a computational platform that is transforming the way therapeutics and materials are discovered. The platform is enabling our customers and our internal teams to discover high-quality molecules for drug development and materials application faster, at lower cost, and with we believe a higher probability of success compared to traditional methods. We license our platform to pharmaceutical, biotech, and materials companies, and universities and government labs worldwide. As Karen will review shortly, we are also advancing an internal drug discovery pipeline and leveraging our platform in a number of drug discovery programs in collaboration with pharmaceutical and biotech companies. We announced a new drug discovery collaboration this month with Zai Lab. The collaboration marks the first time we have the opportunity to co-develop and co-commercialize a therapeutic. Zai Lab has a deep pipeline and oncology with multiple approved products that we are excited to be working with them. The collaboration with Zai will focus on a target in the area of DNA damage response and important therapeutic strategy for a broad range of cancers and builds on the knowledge we have gained working on our own programs in this area. Under the terms of the agreement, Zai will make an upfront payment to help fund our share of research costs. We have co-development and co-commercialization rights that will allow us to share equally in the profits of the future marketed product in the U.S. if we choose to co-fund U.S. development. We are also eligible to receive up to approximately 338 million in preclinical development, regulatory and sales-based milestone payments, as well as, royalties on net sales outside the U.S. This collaboration provides us with the opportunity to gain expertise in late-stage clinical development and commercialization, as well as the ability to participate more significantly in the downstream value of a program. As you will hear shortly from Joel, we reported a strong second quarter with 29% revenue growth compared to the same period last year. And we ended the quarter with cash resources of 617 million. Our financial strength allows us to continue to invest in advancing our science, invest in growing our software business, advance our internal pipeline and add new talent to support our strategic initiatives. We are excited by the progress we've made as we continue to transform the way therapeutics and materials are discovered. I'll now turn the call over to Karen for an update on our drug discovery programs.

Thank you, Ramy, and good morning everyone. We are continuing to make important advances on many fronts across our internal pipeline and Portfolio with collaborative programs. We have collaborations with both biotech and large pharmaceutical companies, spanning a broad range of target classes. And in these collaborations, we are leveraging our platform at the same scale we do internally. We believe this level of large-scale deployment enables us to more rapidly identify high-quality development candidates. We expect several collaborative programs to continue to advance in the clinic and new programs to enter the clinic this year. We are excited to begin working with our new partner, Zai Lab, on a program targeting DNA repair vulnerabilities in cancer that we anticipate will be synergistic with PARP inhibitors. Marketed PARP inhibitors have demonstrated efficacy in multiple cancers, but new regimens and combinations that results in durable responses are needed, especially in patients who relapse or become resistant to treatment. We are also continuing to build early-stage clinical experience to support the advancement of our internal program. Today, I will highlight through our three most advanced programs, MALT1, CDC7, and WEE1. We have initiated IND -enabling studies for our development candidate targeting MALT1, and we are working towards the nomination of development candidates for CDC7 and WEE1. Subject to completion of the preclinical data packages, we expect to submit up to 3 IND applications in 2022, with our first submission expected in the first half of next year. Starting with our MALT1 inhibitor program, MALT1 inhibition is gaining increasing attention as a therapeutic strategy to treat certain relapse store resistant B-cell lymphomas and chronic lymphocytic leukemia. The MALT1 enzyme is downstream of BTK in the NF kappa B signaling pathway. And constant activation of NF kappa B is a hallmark of several types of lymphoma. Preclinical data previously presented from our MALT1 program showed potent in vitro inhibition of MALT1 enzymatic activity, and in vivo anti-tumor activity in mouse xenograft models of diffused large B-cell lymphoma. Additionally, in in vivo patient-derived tumor mouse models, our MALT1 inhibitors demonstrated dose-dependent, anti-proliferative effects as monotherapy, and in combination with Ibrutinib and Venetoclax, which are approved BTK and BCL-2 inhibitors, respectively. In the second quarter, we selected a development candidate for this program and have since initiated GLP-tox studies required for IND submission. All our IND enabling activities are on track and we expect to submit the IND and begin Phase 1 studies in patients with hematological malignancies next year. Now, I will turn to CDC7 and WEE1, two programs that target cancer through replication stress and DNA repair mechanisms. CDC7 is thought to be linked to cancer cells' proliferative capacity and ability to bypass normal DNA damage responses. Targeting proteins that play important roles in DNA replication and replication strategy is gaining momentum as a therapeutic approach for cancer. Earlier this year we presented preclinical data from our CDC7 Inhibitor program, which showed the tower compounds are synergistic with several approved and investigational cancer therapies that modulate apoptosis, DNA repair mechanisms, and DNA checkpoints. These compounds significantly inhibited tumor growth in mouse models of both acute myeloid leukemia and colorectal cancer. The data we have generated to date suggests that we have an opportunity to develop a best-in-class inhibitor with a very favorable pharmacokinetic profile. Our other DNA damage repair program targets WEE1, a tyrosine kinase regulator of the G2/M cell cycle checkpoint, which when inhibited, reduces cell viability by inducing apoptosis of cancer cells. WEE1 inhibitors from other companies have shown clinical proof of concept as monotherapy in uterine serous carcinoma. Combinations with chemotherapy, PARP inhibitors, and PD-1 antibodies are being pursued by others in the clinic. We have identified multiple WEE1 inhibitors that are highly selective for WEE1 and shows strong pharmacodynamic responses and anti-tumor activity in vivo. Our molecules also have optimized drug-like properties, including no observable inactivation of CYP3A4, a key liver enzyme. We believe this profile limits the potential for accumulation and the need for dose adjustments with combination products. In summary, we have multiple programs advancing towards the clinic to enable up to 3 IND submissions in 2022. As these programs advance and transition into development, we are initiating new programs. We have began drug discovery on an undisclosed target in immunology and have prioritized several additional program opportunities with human genetic support and emerging pharmacology data in oncology and immunology that we expect to advance this year. We are excited about the progress that we and our collaborators are making, and look forward to updating you on our R&D activities throughout the year. I will now turn the call over to Joel to review our Financial results.

Thank you, Karen, and hello, everyone. This morning, I'm pleased to discuss our financial results for the second quarter of 2021, and I'll also review our outlook for the year. We reported total revenue of 29.8 million for the second quarter, up 29% compared to the second quarter of 2020. Software revenue was 24.1 million, representing 15% growth compared to the second quarter of 2020. The growth in software continues to reflect increased adoption of our platform by existing customers and the addition of new customers. Drug discovery revenue was 5.7 million for the second quarter, compared to 2.2 million in the second quarter of 2020. Second Quarter drug discovery revenue included 3.3 million recognized from our collaboration with Bristol Myers Squibb. Discovery revenue also included a payment from a collaborator associated with the acquisition of intellectual property following the achievement of a lead optimization milestone. Gross profit was 12 million in the second quarter of 2021, compared to 13.6 million in the second quarter of 2020. Software Gross margin was 77% in the second quarter of 2021 compared to 82% for the same period in the prior year, reflecting our planned investment to drive and support long-term large-scale adoption of our platform. Operating expense was 42.3 million compared to 30.7 million in the second quarter of 2020, reflecting our investment in R&D to advance our pipeline and our technology, the addition of staff to drive long-term software sales growth, and expenses required to build a public Company infrastructure and support the Company's Growth as we scale globally. Another expense which includes changes in the value of equity investments was 4.6 million in the second quarter of 2021, driven primarily by a loss of 4.9 million from the mark-to-market of our shares in Morphic Therapeutic. This compared to the 13.1 million in income for the second quarter of 2020. As we revalue our shares each quarter, we can experience significant fluctuations in the value of our holdings depending on stock price movements. The value of our shares in Morphic recorded on our balance sheet as of the end of the second quarter was 48 million, demonstrating the value we have helped create through this collaboration so far. We recorded a Net loss after adjusting for a non-controlling interest of 34.6 million for the second quarter of 2021 compared to a Net loss of 3.4 million for the same period last year. This year-over-year change is driven by quarterly fluctuations in the value of our collaboration equity, particularly our shares in Morphic, as well as planned investment in our business to drive long-term growth. We ended the second quarter with cash resources of 617 million, compared to 649 million at the end of the first quarter of 2021. In March, we provided our financial outlook for the full year and today, we are reaffirming that guidance. We expect total annual revenue in 2021 to be in the range of 124 million to 142 million, which includes software revenue of 102 million to 110 million and discovery revenue of 22 million to 32 million. Also, we expect the majority of our second-half growth in software revenue to occur in the fourth quarter. Drug discovery revenue can be highly variable based on the timing of potential milestones related to collaboration agreements. As we've said before, we anticipate that full-year operating expense growth will be higher than the 42% annual growth rate we saw in 2020, primarily driven by our commitment to fund R&D to advance our technology and our internal drug discovery pipeline. We also anticipate that software gross margin will be lower than the 81% reported in 2020, reflecting investment to drive and support large-scale adoption by our customers. We continue to execute on our strategy across our business. Our new collaboration with Zai Lab enables us to more significantly participate in the downstream value of the programs. Our collaboration programs and internal pipeline are progressing, and we are continuing to make scientific advances in our software to drive large-scale utilization, both in drug discovery and material science. And finally, we have the resources to invest in our long-term growth strategy. I will now turn the call back over to Ramy.

Thanks, Joel. As we pass the halfway point in the year, we're very pleased with the progress we're making across our business. We continue to innovate and our technology is having a significant impact on our collaborative and internal drug discovery programs. Our internal programs are advancing toward the clinic. Our software customers are increasingly recognizing the benefits to deploying our solutions at scale. And we are growing our team of exceptional scientists and professionals to deliver on our mission of transforming drug discovery and materials design. At this time, we'd be happy to take your questions. Operator?

[Operator Instructions] Our first question comes from Michael Yee with Jefferies.

Hi, good morning, and thanks for the update. Thanks for the question. We wanted to ask around the confidence around your guidance and reflecting the confidence in your business. Specifically, you're maintaining the guidance halfway through the year of 102 to 110 for software. But it feels like the low end of that would be a pretty big deceleration not only year-over-year, but also just from the first half of what is going on this year. Two parts, one, can you just comment on the lower half of your guidance and why you're maintaining the overall guidance, your confidence in hitting the higher end. And then secondly, if COVID may or may not be picking up, is that actually a headwind or tailwind of your business? Maybe just talk about how COVID, if at all, impacts things. Thank you so much.

Sure. Joel, you want to take the first part of that question, and I can answer the next one?

Sure, and thanks, Mike for your -- yeah, thanks, Ramy. Thanks, Mike for your question. Sure. So as you mentioned, we're maintaining our overall guidance and our software guidance as a part of that. And obviously that annual guidance provides you with our expectations for the back half of the year. We have pretty good visibility on our business, based on the fact that we have very high historical customer renewal rates. But there is some inherent variability in the business, particularly with regards to new customers that we add each quarter, as well as decisions from our large customers who might be making commitments for much larger deployment of our solutions in a particular quarter, which as you know, is a key growth strategy for us. Some of these decisions, actually individual decisions can be quite large and can have pretty significant impact on our particular quarter growth rate. So as we look out to the rest of the year, we think that the guidance that we've provided appropriately captures some of this inherent short-term variability. And we're -- and so that's why we reaffirmed the guidance.

And with regards to COVID, as we talked about in 2020, I think a lot of software companies did the same thing. There did seem to be some sort of interesting uptakes and renewed interest in computational methods as a result of scientists essentially being locked out of their labs. I'd say at this point, and I think this is what we're hearing from a number of other companies, the accumulation of the long term absence of travel and face-to-face interaction, I would say is not helping. It's making it, of course, more challenging to initiate strategic discussions -- not impossible obviously. But it's more challenging, again, especially given that it's now been a year - and-a-half or so of essentially zero travel.

Yeah. That's very helpful. Thank you, guys [Indiscernible].

Absolutely, yes.

Our next question comes from Michael Ryskin with Bank of America.

Hey guys, thanks for taking the question. Really quick follow-up on what Mike was just asking about. You mentioned strong renewal rates and softer business. Could you give us -- could you quantify that a little bit? How has that trended in the first half of the year? You're still in that zone -- in the high 90s. Any impact as we pull up the comps from last year?

Sure. Thanks, Mike, for the question. So that's one of our annual key performance indicators and we don't provide specific guidance or reporting on the mid-year numbers as they can be affected by timing. But what I'd say is that last year we came in at 99% renewal and of those contracts over $100,000. And over the last 7 years, it's never dipped below 96%. So we're pretty confident in our ability to continue to achieve a very high customer renewal rate.

Okay, I'll take that. And then on the Zai Lab collaboration you announced recently. You mentioned, first of all, the upfront payment. Could you give us a sense of how sizable it would be? We saw some details there in terms of the potential milestones, but specifically about the upfront and when it will be recognized. And then big break -- bigger picture question on that. Should we expect more deals like that? You have a couple of different ways of working with BioPharm or between the software business, the JVs, the partnerships. And now this is again something a little bit new. Is this another avenue we expect you to explore more going forward?

Sure. I'll answer the first part and maybe --

Yeah, and I can.

-- Ramy, you might want to add to the third.

Yeah.

With regard to the size of the upfront payment, we didn't disclose that. It is to help us fund some of our research activities. And we are still evaluating the accounting around this deal, but we expect that many of these types of deals, that the upfront payment will be recognized over a period of time. And I think if you think about typical deals, where there's upfront payments that we've talked about in the past, that has been the case, and in many cases, it's been over several years.

Okay.

And with regard to this kind of deal, we're very excited about this kind of deal. We are in discussions with a number of companies around innovative types of deals. This is the kind of thing as we've talked about before. We're not only innovating in the science, we're definitely pretty creative in the types of deals we've done, as you can see from the history of the Company going all the way back to Nimbus. And we're very pleased with the nature of those interactions now, and certainly expect to do other collaborations in the future.

Okay. Thanks so much.

Of course.

Our next question comes from Gary Nashman with BMO Capital Markets.

Hi, good morning. First, for MALT1, what's involved in the IND enabling studies? What will be included in the preclinical package that you plan to file next year? And I think you'll be presenting some preclinical data for one of your programs in the second half. In what form do you think that's going to be? And then last one. It seems like you're looking to expand your platforms to other areas in materials, like aerospace and electronics. How much of an initiative will you have behind those efforts? And how aggressively you'll be finding partnerships in those areas relative to the live sciences that you've been doing more often? Thanks more of. Thanks.

Karen, do you want to take the first two and I'll cover the last one?

Yeah, sure. So with respect to the MALT1 program, we will be presenting the IND -enabling package to the FDA, which will include the results of GLP-tox studies, all of that CMC support that we've got for our clinical product, and really the typical package that you would expect to see going into the FDA to support approval of the IND and initiation of clinical studies. With respect to the science, we've continued to make great progress there. We've characterized down MALT1 inhibitors in a number of different models and have new data with respect to how MALT1 performs, both alone as monotherapy and in combination with other products. As you can imagine, we've been putting together abstracts and sending them out to the regular scientific forums. And so we expect to be able to share some of that in one of those scientific meetings later on this year. So looking forward to that.

Yeah, and with regard to material science, thanks for asking about that. We're, of course, very, very excited about the progress we're making on that business; the increased adoption of the technology by, as you correctly pointed out, by a pretty diverse set of industries. We are -- as we've said before, we aren't leveraging a lot of the existing technology. But as we get deeper and deeper into this field, we are recognizing areas where we can build on the existing technology and develop new advances. And we are absolutely investing in that, as a result of the clear interest in computation in quite a number of these different fields. So it's a very active area of research. Again, it's very important to point out it leverages a lot of the existing technology and we're building on that. And then you asked about collaborations. That's absolutely something, as we've talked about before, that we're pursuing. We're very pleased with the progress that's being made there with regard to the discussions around collaborations, and you should absolutely expect to hear more about that in the future about collaborations, following a very similar path that we took with Life Sciences a number of years ago, I already mentioned Nimbus, and of course, we've mentioned Morphic. We learned so much from those collaborations. They generated a lot of value. Those were incredibly important for Schrodinger. That's not lost on us, and that's something that we absolutely intend to pursue on the material science side as well.

Okay, great. Thank you.

Our next question comes from David Lebowitz with Morgan Stanley.

Thank you very much for taking my question. When you look back at 2020, there was a huge step-up in ACV, I believe 10 companies went to 6 -- they went from 10 to companies -- 6 Company -- 16 companies for --

That's right.

-- over an ACV. What quarters did you see the bulk of that shift? And I guess when do renegotiations of -- with those particular companies; when are they on tap?

Sure. I can talk about that. Thanks, David. So I think consistent with what we've been talking about this year, that fourth quarter is expected to be -- provide most of the growth in the second half of the year. A lot of -- just because of the seasonality in calendarization of our business on the software side, we do see a lot of contracts and a lot of large contracts renewing and obviously making decisions on what size to renew at in the fourth quarter. We see it throughout the year really, but the fourth-quarter there can be a concentration. I'm sorry, and the second part of your question was, again, remind me, please?

I guess following up on that is just, when do negotiations for those particular contract started? Is it something that would start this early or does it really come down much closer to the actual renewal date when the discussions occur? And --

Yeah. I can answer.

Sorry. Sorry. Go ahead.

Historically, what's the precedents or -- is our big purchasers typically more likely to continue being big purchasers?

Well, with regard to your question about when the negotiations start, they actually really are -- happen throughout the year. There is constant interactions with the companies throughout the year. We're not just sending the software over the fence and not speaking to them until a few weeks before the renewal. So we're learning about the impact the software is having on the technology -- talking to them about new advances. Remember, we have 4 releases a year. So every time there's a release, that's an opportunity to reach out, talk about the new tech -- new products that have come out, new technologies, new impacts that we're seeing from the collaborations. And so the discussions are really happening throughout the year, obviously intensify as you get closer to the renewal. I hope that answers that part of the question. And I think you asked --

[Indiscernible] their propensity to -- are they the ones that usually to a moving height?

Yeah. Well, again, when you see the kind of retention rate that we're having and the very high 90s, there is no -- that's the answer there. If there were -- we wouldn't have that kind of retention rate if a meaningful [Indiscernible]any number -- any Company -- yeah.

And the one thing -- and sorry, Ramy. And one thing I can add to that, David, is that we're very pleased that in this quarter that we're seeing the continued momentum and trends that we saw in previous quarters, which is driving the growth on the software side, which is not just the addition of new customers, but also customers increasing the adoption of our solution. We've seen that for several quarters as an ongoing trend. And so we think that we can continue in the future in encouraging customers to increase adoption of the solutions at higher levels. Yeah.

And one additional question on the drug discovery side, is it possible you could run through the drugs from partners that we could expect to see data from before year-end and which drugs might actually step into the clinic?

Sorry, I'm thinking about who should answer that. So I think Joel hinted at that, it's very difficult to -- first of all, it's difficult for us to predict when those events will happen, but it's also because of the nature of the agreements, and confidentiality and so on. That's not for us to be presenting; that's really for the collaborators. A number of them have been pretty open about that. I mean, one of them is a public Company. A number of them have been very open about where their programs are and their plans for the clinic. So I think that's the kind of information that's pretty straightforward to get from the collaborations that we have where they have more advanced programs. A number of the other collaborations that we started more recently, of course, are earlier and are still in a stealthy mode, so it'll take a little bit longer, of course, to hear about that. But I hope that's answering the question. If not please, ask it a different -- yeah, go ahead.

Thank you very much for taking my questions.

Okay. Great.

Our next question comes from Matt Hewitt with Craig-Hallum.

Good morning. And thank you for taking the questions. A couple on utilization, then I've got one regarding the new collaboration. But regarding utilization, can you give us a sense for how many of your customers are coming back multiple times during the year to increase their capacity, versus just coming in once a year and adding what they believe they will need for the upcoming year?

Sure. Yeah, that's a good question. We can't really quantify that. But what we can say is the very, very large majority of deals are annual. There are a few examples of customers that purchased the software in a way that does require upping during the year as the number of compounds that they're running calculations on as they hit the limits that they purchase, but that's unusual. The large, large majority are annual licenses. Just going back, I think to the question just before, just one -- I'm really sorry to do this. Just a little bit of information that might be useful to have. We currently have -- six of the collaborative programs that we're involved in are in IND enabling studies and four in Phase 1, just to give a sense of where there's focus on. I'm so sorry to do that, but I just wanted to throw that in there. Did you have another question or did I answer your? Yeah, go ahead.

Yeah, I did. And then that's fine. Regarding visibility, how much visibility do you have into your current customers' utilization trends? And what -- does that enable you -- given where we're at this point in the year, you know where the customer is at from a utilization perspective and you can see the growth. Does that really help you from a projection standpoint on what that customer is likely to renew at?

No. We do not have insight into their usage. That's something that is closely held to the customers. That's not something that we have the ability to quantitatively look into that. We do, however, of course, know one thing that's important here, which is, we know how they're kept. Obviously, we know how many licenses they have. We don't know if there are maxing those out, but we know what their maximum is. And we know that in almost every one of our customers, including the largest customers, the maximum number of calculations they can run is still in order to 200 of magnitude lower than what our -- what we're using in our collaborations than what we're using internally. And we can have those sorts of discussions, and we're engaged in those discussions. So even though again, we don't have access to the exact usage day-to-day, there is that general knowledge, and that's what the nature of the discussions generally are. First of all, pointing that fact out what I just said and then talking about how -- what's the -- how are we going to get to those higher usage? And often that requires training, expertise, both -- by the way, technical -- both on the technical side. So for example, obviously, to be able to run that number of calculations, you need access to a lot of computers and that has to -- that generally occurs through the cloud, so there's training there in how to use the cloud at this large scale, and obviously deploying the technology from the point of view of the science as well.

That's really helpful. Thank you. And then I guess one last one from me shifting gears a little bit. Regarding the collaboration with Zai Lab, were there any existing customer? Or how did that relationship come about? And as you look at it adding more of these types of partnerships, are you typically seeing that these are -- these customers are new to the platform, or are the existing customers saying that we would really appreciate your help and assistance to work through these calculations and this work?

Yeah. Thinking back at all of the collaborations we've done, either they were with companies that were newly created. So, of course, where didn't know, but there was somebody in the -- either in the VC that's funded them or one of the founders that knew Schrodinger from a previous interaction. Remember we're pretty well known in the field, and I think it's hard to find somebody who doesn't know who Schrodinger -- had some kind of experience with the software, either in the current position they're in or from a previous position. That was the case with Zai as well. We've known them for a while. We've known members of the Board, they were inv -- things like that. And so that's generally how it's -- there isn't usually some sort of surprise or an interaction where there wasn't already some previous sort of interaction with some key person at the Company. I hope that's answering the question.

Yeah. That helps. Thank you.

Ladies and gentlemen, this concludes the Q&A portion of today's conference. It also concludes the conference call for today. You may all disconnect, and have a wonderful day.

Thank you.

Thank you, everybody.