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Selecta Biosciences, Inc. (SELB 0.63%)
Q3Â 2020 Earnings Call
Nov 7, 2020, 8:30 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning and welcome to the Selecta Biosciences Third quarter 2020 Financial Results and Corporate Update Conference Call. [Operator Instructions] This call is being webcast live on the Investors & Media section of Selecta's website at www.selectabio.com and it is being recorded.
For opening remarks, I would like to turn it to Brad Dahms, Chief Financial Officer of Selecta. Please go ahead.
Brad Dahms -- Chief Financial Officer
Thank you and good morning. Welcome to our third quarter 2020 financial results and corporate update conference call. The press release reporting our financial results is available in the Investors & Media section of our website www.selectabio.com and our quarterly report on Form 10-Q for the quarter ended September 30, 2020 will be filed later on today with the SEC.
Joining me today is Carsten Brunn, our President and CEO; and Dr. Peter Traber, our Chief Medical Officer. Takashi Kishimoto, our Chief Scientific Officer will be available for the Q&A portion of the call.
During today's call, we'll be making certain forward-looking statements including, without limitation, statements about the potential safety, efficacy and regulatory and clinical progress of our product candidates, financial projections and our future expectations, plans, partnerships and prospects. These statements are subject to various risks, including those related to the COVID-19 outbreak that are described in our filings made with the SEC, including our most recent quarterly report on Form 10-Q, which will be filed with the SEC later on today.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today, November 6, 2020 and Selecta disclaims any obligation to update such statements even if management views change.
I would now like to turn the call over to Carsten Brunn, our President and CEO. Carsten?
Carsten Brunn -- President and Chief Executive Officer
Thank you, Brad. Good morning. I appreciate you joining us today. This past quarter has been a busy and productive one for our team as we continue to progress our clinical programs, leveraging our ImmTOR platform. We reported top line data from the non-registrational Phase 2 COMPARE trial of SEL-212, which demonstrated the potential of ImmTOR when combined with a highly immunogenic enzyme, in this case pegadricase.
In September, we commenced the Phase 3 DISSOLVE program in partnership with Sobi and expect to have top line data from the two Phase 3 studies in the second half of 2022. We look forward to continuing to advance our gene therapy program in methylmalonic acidemia or MMA with AskBio having received rare pediatric disease designation from the FDA. Finally, we are excited to commence our IgA Nephropathy and anticipate an IND submission for this program in 2021, having recently announced an option and license agreement with IGAN Biosciences to give Selecta the access to an IgA protease.
Importantly, this program will build on SEL-212 in combining immunogenic enzyme with ImmTOR. In late September, we released and reviewed the top line data from the Phase 2 non-registrational COMPARE trial comparing the efficacy of once a month infusions of SEL-212, a combination of Selecta's ImmTOR immune tolerance platform and the therapeutic Uricase enzyme pegadricase to biweekly infusions of pegloticase that currently approved case Uricase in the US for the treatment of chronic refractory gout. We will not review all the details again on this call but we want to reiterate that while we missed statistical superiority in the primary endpoint in the per protocol set by one patient, the data were consistent with the stronger performance of SEL-212 with numerical superiority on all 12 of the endpoints reported and statistical superiority on six of the 12.
Unfortunately, the conduct of the trial was affected by the ongoing pandemic through the site closures, missed appointments or other non-drug related protocol deviations. Importantly, the data show the effectiveness of our ImmTOR platform at mitigating unwanted immune responses through immunogenic therapies. As a reminder, in our Phase 1/2 programs, when patients were dosed in two categories alone, only three out of 19 or 15% of patients made it to week 4. COMPARE demonstrated that 61% of patients in the per protocol set made it through to month six. We believe this data demonstrates the clinical benefit and broad applicability offer ImmTOR platform its enzyme specific immune tolerance.
Our strategy for ImmTOR we look forward is twofold, amplifying the efficacy of the logic therapies, including redosing of lifesaving AAV gene therapies, and restoring self-tolerance in autoimmune diseases. Our lead gene program in MMA which is being conducted in collaboration with AskBio is expected to enter the clinic in the first half of 2021, with preliminary data expected by the end of 2021. We recently announced that the FDA granted rare pediatric disease designation to MMA-101 formerly SEL-302 for the treatment of isolated MMA due to methylmalonyl-CoA mutase gene mutations. This highlights the significant unmet medical need that Selecta and AskBio are seeking to address with MMA-101. But it's a rare metabolic disorder and we look forward to advancing this program in the hopes of helping young patients affected by MMA and their families.
We and AskBio believe that this product candidate is differentiated that it could allow for retreatment when combined with ImmTOR. As you likely saw last week, Bayer announced that they will be acquiring AskBio to broaden the innovation base in cell and gene therapy. As a result, AskBio will operate as a wholly owned subsidiary of Bayer. We do not believe this will affect our current partnership with AskBio, and our program MMA is expected to progress as planned as well as the license agreement with AskBio in Pompe disease. We are looking forward to working with the teams at AskBio and Bayer.
You may know that prior to my joining Selecta in 2018, I spent nearly 10 years at Bayer in various roles, most recently as President of their pharma in the Americas and expect to have a strong working relationship going forward. We continue to push our proprietary gene therapy program in OTC deficiency forward and we'll provide updates on this program at a later date. To wrap up on gene therapy, Selecta continues to do conduct predictive work, looking at the combination of ImmTOR in certain neuromuscular disorders, including Duchenne muscular dystrophy and Limb girdle muscular dystrophies.
If Selecta exercise its option to enter in any commercial license agreements, we will be eligible for significant economics including additional development, regulatory and commercial milestone payments as well as tiered royalties on net product sales.
Moving onto IgA nephropathy. During the quarter, we entered into a research license and option agreement with IGAN Biosciences, which provide Selecta with the option to an exclusive license for the rights to develop and commercialize the ImmTOR platform in combination with IGAN's immunoglobulin A protease for the treatment of IgA nephropathy. [Indecipherable] of IgA protease formulization is the bacterial origin of the protease which makes it immunogenic. As demonstrated with SEL-212, ImmTOR has shown the ability to mitigate the formation of anti-drug antibodies to immunogenic enzymes and we intend to leverage our learnings from the SEL-212 program as we advance this product candidate forward. We intend to submit its IND by the end of 2021.
I will now turn the call over to Peter Traber for a more detailed update on Selecta's pipeline. Peter?
Peter G. Traber -- Chief Medical Officer
Thanks, Carsten, and good morning everyone. As Carsten mentioned, we had an exciting quarter with several updates to the pipeline. Let me start with SEL-212 and our focus on the Phase 3 pivotal program. As Carsten mentioned, we commenced the DISSOLVE program with Sobi in September. The clinical program consists of two double-blind placebo-controlled trials of SEL-212, in which SEL-212 will be evaluated at two doses of ImmTOR, 0.1 milligrams per kilogram and 0.15 milligrams per kilogram, and one dose of pegadricase, 0.2 milligrams per kilogram in both studies.
Each trial will aim to enroll 105 patients with 35 at each dose level and 35 on placebo. In DISSOLVE I, in which the first patient was dosed in September, safety and efficacy will be evaluated at six months and we'll have a six-month extension. DISSOLVE II will assess safety and efficacy at only the six-month time point with no extension. We expect to dose the first patient in DISSOLVE II later this quarter. The primary endpoint in both studies is serum uric acid levels at six months, a well-validated measure of disease severity in chronic refractory gout.
Based on learnings from the COMPARE study, we intend to enroll a higher proportion of patients with visible tophi. As you'll recall, a delta of 19 percentage points was observed on the SEL-212 versus pegloticase for patients with visible tophi at baseline on the primary endpoint, and only 41% of patients in COMPARE had visible tophi at baseline. We believe the proportion of patients with chronic refractory gout with visible tophi is closer to 60% to 70% of the patient population in specialty care in the United States.
Secondary endpoints include gout flare incidents, tender and swollen joint counts and tophus burden as well as patient reported outcomes of activity limitation and quality of life. Chronic refractory gout remains a disease with a significant unmet medical need with an estimated 160,000 patients in the US and only a fraction receiving treatment with the currently approved Uricase. We and Sobi are confident that SEL-212 if approved, could be transformative for patients living with this debilitating condition. The Phase 3 DISSOLVE program is under way. Together with Sobi, we look forward to reporting top line data from this program in the second half of 2022.
Our gene therapy programs continue to advance. We expect to file the IND for MMA-101 in the first quarter of 2021, and commence the Phase 1 clinical trial for this product candidate in the first half of 2021. We expect to report preliminary data on the first patient cohort by the end of 2021. With this preliminary data, we will be looking at biomarkers of disease and the formation of neutralizing antibodies to the AAV capsid. Our proprietary SEL-313 program in OTC deficiency continues to progress. We continue to work on the IND-enabling activities for this program in anticipation of moving this program into the clinic. We will share updates on this program in early 2021.
OTC deficiency is a rare genetic disorder that causes ammonia to accumulate in the blood due to mutations in the OTC gene, which is critical for proper function of the urea cycle. Severe symptoms include inability to control body temperature and breathing raise, seizures, coma, developmental delays and intellectual disability. For IgA nephropathy, we are moving forward aggressively on our IND enabling work, which we expect to have as Carsten mentioned earlier, an IND by the end of 2021, so we can commence our first clinical study in 2022. IgA nephropathy is characterized by a deposition of a new complexes of galactose-deficient IgA1 immunoglobulin in the glomerular mesangium and is a leading contributor to the development of chronic kidney disease and renal failure.
Genetic or environmental factors that cause this abnormal IgA1 and its accumulation in the kidney can result in the development of IgA nephropathy, one of the most common causes of kidney disease. Hypertension, proteinuria and decreased estimated GFR at the time of diagnosis are associated with poor prognosis. It can result in incremental loss of renal function and results in end stage renal disease in approximately 30% to 40% of patients. There are no proved therapies for the treatment of IgA nephropathy. Previous studies in animal models conducted at independent laboratories established the ability of IgA protease to remove injurious IgA from kidneys and improved the markers of renal dysfunction. These results suggest that it is an excellent candidate to decrease the rate of disease progression and possibly even reverse the disease.
The barrier to IgA protease commercialization is the bacterial origin of the protease, which makes it immunogenic. With ImmTOR, we intend to develop a combination product candidate to treat the root cause of this disease, in which there are currently no approved therapies. We are excited also to look at the potential of ImmTOR in restoring self-tolerance in autoimmune diseases, where we believe this is a natural fit for the platform. Our lead autoimmune diseases indication is primary biliary cholangitis or PBC, a T-cell driven autoimmune disease that causes destruction of the bile ducts. Patients with PBC are in need of a highly targeted liver-directed approach to treating the root cause of the disorder.
PBC has a well-defined target antigen and a significant unmet medical need. We are currently working on IND enabling activities for this program and we'll share specific guidance on timings later.
Now I'll turn the call over to Brad to run through this quarter's financial results. Brad?
Brad Dahms -- Chief Financial Officer
Thank you, Peter. We're very well capitalized having ended the quarter with $147.6 million in cash, cash equivalents and restricted cash. We believe our liquidity position will enable us to fund our operating expenses and capital expenditures into the first quarter of 2023, and this guidance excludes any impact of incoming milestone payments, which could further extend our runway.
I'll discuss a few highlights on our financial results, which we issued in detail this morning in the press release. Revenue recognized for the third quarter 2020 was $4.6 million. During the three months ended September 30, 2020, we recognized $4.3 million under the Sobi license resulting from the shipment of clinical supply and the reimbursement of costs incurred for the Phase 3 DISSOLVE clinical program, and $300,000 for shipments under our collaboration agreement with Sarepta.
Net cash provided by operating activities was $42.1 million for the nine months ended September 30, 2020 as compared to $38.6 million used in operations for the same period in 2019. The increase in net cash provided by operating activities was primarily due to the collection of $99.5 million in deferred revenue, a $7.4 million change in accrued expenses and other liabilities, offset by $10.1 million in changes in prepaid expenses, deposits and other assets, and accounts receivable -- excuse me, accounts payable and a $7.6 million change in accounts receivable compared to the prior year.
Research and development expenses for the third quarter 2020 were $14 million, which compares with $8.1 million for the same period in 2019. The increase in cost was primarily the result of the initiation of the Phase 3 DISSOLVE clinical program. These costs are subject to the cost reimbursement arrangement under the Sobi license. The increase in expense is also the result of the completion of our Phase 2 COMPARE trial for SEL-212 and for work done under the AskBio collaboration.
G&A expenses for the third quarter of 2020 were $4.4 million, which compares to $3.7 million for the same period in 2019. The increase in cost was a result of expenses incurred for facilities, legal and professional fees, offset by decreased travel expenses. During the quarter, we also announced the debt financing facility up to $35 million with Oxford Finance and Silicon Valley Bank, of which $25 million was drawn at closing. Proceeds from the financing used to retire $12.6 million of existing debt and associated fees. This debt was amortizing at $700,000 per month. The additional proceeds will be used to support further advancement of our ImmTOR pipeline and for selected business development activities.
I'll now hand the call back over to Carsten. Carsten?
Carsten Brunn -- President and Chief Executive Officer
Thank you, Brad. As mentioned earlier, the third quarter was very productive for Selecta. The Phase 2 COMPARE data of SEL-212 validates the ImmTOR platform and its potential to mitigate unwanted immune responses. We look forward to continuing to advance SEL-212 in our ongoing Phase 3 result program and providing updates on the progress with Sobi. We continue to leverage the learnings of the SEL-212 program as proof of concept for what is to come for ImmTOR, simplifying the efficacy of logic therapies, including the dosing of life saving AAV gene therapies and restoring sales tolerance in autoimmune diseases.
To quickly recap our upcoming milestones, on the gene therapy front, we and AskBio expect to file the IND for MMA-101 in Q1 2021, commence the Phase 1 trial in the first half of 2021, and report preliminary data, look at biomarkers of disease and the formation of those antibodies to the AAV capsid by the end of 2021. For IgA nephropathy, we expect to file the IND for the combination of IgA protease and ImmTOR by the end of 2021, commencing the first clinical study in 2022.
For SEL-212, we have kicked off the Phase 3 DISSOLVE program and expect to report top line data from these two trials in the second half of 2022. We also intend to advance a proprietary gene therapy program in OTC deficiency and our proprietary program in autoimmune diseases in PBC. Lastly, we look forward to sharing updates from our collaboration partners, including AskBio and Sarepta. This is an exciting time to Selecta and we will continue to provide updates on our programs as they advance. With that, we're happy to take questions. Operator?
Questions and Answers:
Operator
We will now begin the question-and-answer session. [Operator Instructions] The first question comes from John Newman from Canaccord. Please go ahead.
John Newman -- Canaccord Genuity -- Analyst
Hi guys, good morning. Thanks for taking my question and congrats on all the progress. So, Carsten, I wonder if you could talk to us a bit about really both the MMA and the OTC gene therapy programs and just trying to help us understand sort of what success would look like here in these two different indications. We know that you've shown preclinically that your technology is very effective in mitigating the formation of neutralizing antibodies. I'm just curious as to how you will look to demonstrate that in the clinical setting. Thanks.
Carsten Brunn -- President and Chief Executive Officer
Thanks, John. Yeah, that's an excellent question. Obviously, primarily we are looking here to address the underlying disease. But in terms of biomarkers but in terms of success, and that's why it's a fairly quick readout. We will look at, can we prevent the formation of neutralizing antibodies, and I think there is probably a couple of different scenarios in terms of outcomes as you can expect with any therapeutic effects in the immune system. There'll be a set of patients that will respond and will completely prevent the formation of neutralizing antibodies.
So they can be retreated immediately which might actually not be needed them as there's usually quite a duration between treatment cycles. But there is potentially also a number of patients where we are able to significantly reduce these antibodies, but still have titers that don't allow immediate retreatment, but we also think that is acceptable as well as in many indications, it takes sometimes years in order to retreat, and there is of course a chance that titers go down over time. There's other interventions like couple of reasons that we can also deploy potentially your physicians can deploy, and then might be also a subset where we are not able to reduce these antibodies. So, we think the first two buckets will make a tremendous difference from a clinical perspective.
As a physician, you can tell patients that there is a chance that you actually are eligible to retreatment and as I said earlier, we can assess this fairly quickly 30, 60, 90 days after you get the combination of the gene therapy with ImmTOR.
John Newman -- Canaccord Genuity -- Analyst
Great, thank you. If I could just ask one additional question. Could you talk about how this technology, excuse me, could better enable dose escalation in gene therapy studies and just what that would have been for patients whereas now they sort of get their single dose and that's all they are able to receive.
Carsten Brunn -- President and Chief Executive Officer
Yeah, I mean, that's definitely a big unmet need as we all know, John, that the translation from end models to humans is not very accurate. So if you give too high of a dose initially, you're running into toxicity issues, if we give too low of a dose, you still expose the patients to AAV capsid, you remain below their therapeutic window, but you still trigger the formation of antibodies, so you can't give a second dose. I think that's really where ImmTOR can be very helpful to give a dose and that dose was too low, you actually are able to escalate and give a second dose and it's definitely an interesting, an important application.
Along the same lines another potential application is in indications where you have to give very high viral vector loads like in neuromuscular disorders, where you can potentially also spread out the dosing over numerous -- add doses as well. So great, great question, John. Thank you.
John Newman -- Canaccord Genuity -- Analyst
Sure. Thank you.
Operator
Our next question comes from Kristen Kluska from Cantor Fitzgerald. Please go ahead.
Kristen Kluska -- Cantor Fitzgerald -- Analyst
Hi, good morning. Thanks to everybody for taking my questions. So the first one is in regards to the ImmTOR platform in gene therapies. So given that we're at a unique time where there have now been over 4,000 clinical trials in gene therapy, either conducted or ongoing, coupled with the fact that we've now seen some long-term results for pediatrics and adults. I wanted to ask, broadly speaking, where you think this platform has the most potential outside of where you are conducting studies, both internally and with your collaborators?
Carsten Brunn -- President and Chief Executive Officer
That's a great question, Kristen. We obviously believe that the applicability is very broad actually. Right. It's just that we as a company are right now focused on liver-based diseases as that's the data we have generated. There is a natural fit with ImmTOR as ImmTOR accumulates in the liver and we have demonstrated that we see a first dose effect actually where we get higher expression of the transgene. So that's definitely a focus area. The partnerships are focused on liver diseases and neuromuscular disorders, which is a big unmet need where you can get a very high vector doses and you have to retreat, but there's also other -- or other therapeutic areas outside of neuromuscular disorders and liver diseases, where this can be applicable.
Obviously, as a small biotech, we stay focused on one area and then we picked indications where we feel there is the big -- the biggest unmet medical need and the highest chance of success, and that's why we picked MMA which is a rare disease in kids where we know that deliver actually grows up to 20 folds between birth and the adult, there is sort of high chance that you actually have to redose.
Kristen Kluska -- Cantor Fitzgerald -- Analyst
Okay, great. Thank you. And the second question is on the DISSOLVE study. So given that there were some protocols deviations in the COMPARE study, just wondering how you're thinking about this current study in the current pandemic situation. So for example, with the understandings and the findings from COMPARE whether there are any protocol items in place to collect data by other means if necessary in the future.
Carsten Brunn -- President and Chief Executive Officer
Yes. So I'll let Peter to answer this question, I mean one of the changes we have made in the protocol based on COMAPRE is to ensure we have a set of patients with tophi in this study, that's definitely one change, but there are also indeed changes in the way we got to conduct the study due to the pandemic. Peter?
Peter G. Traber -- Chief Medical Officer
Yeah. Thank you. It's a very -- it's a very important question that that everybody doing clinical trials today needs to address. We are very fortunate that we have a lot of learnings from the COMPARE study which have all been implemented in the DISSOLVE study, just to name a couple of them. We're having virtual study initiation visits for all of the sites, we just had a virtual investigator meeting for both DISSOLVE I and DISSOLVE II, but those are kind of operational things on how we get this study up and going in a time of COVID pandemic.
In terms of addressing the direct patient needs, we have implemented home healthcare visits for both drawing blood samples within the appropriate windows, doing examinations etc across both studies. So we are spending the extra time, effort and money to make sure that we can go to patients with individual home healthcare. We have also implemented electronic iPad that each of the patients have for entering patient reported data at the appropriate time slot, so that doesn't have to be direct interaction between sites or medical personnel for the patients to comply with entering data. We're receiving RO and CRO [indecipherable] receiving information to keep up with ensuring that patients fill those out, joint diaries etc.
So all of the things that we may have encountered issues with in the COMPARE study, we have addressed in the DISSOLVE study.
Kristen Kluska -- Cantor Fitzgerald -- Analyst
Thank you. That's very helpful.
Operator
[Operator Instructions] Our next question comes from Raju Prasad at William Blair. Please go ahead.
Raju Prasad -- William Blair -- Analyst
Thanks for taking the question. I was wondering a little bit, if we can get a little bit more color on what's left to do for the MMA trial and what you expect as far as kind of durability or what you're expecting with durability to have data by the end of '21. I'm just trying to figure out the cadence of other events that are going to happen and whether the IND filing is based on interrelated stuff that needs to be submitted or gene therapy related stuff from AskBio? Thanks.
Carsten Brunn -- President and Chief Executive Officer
Yeah, maybe I'll start, Raj, and then have either Peter or Kei jump in as well. So obviously we are working on the preclinical studies that is looking both at ImmTOR. But also, of course, the impact of ImmTOR in the specific disease model as well. So that work is ongoing and almost done and on track actually for an IND filing early next year. So we're very excited about that. So we feel very much on track to file in Q1 and then have the first patient dosed in the first half of next year. But Peter or Kei, if you want to add some more color.
Takashi Kei Kishimoto -- Chief Science Officer
Yeah. So this is Kei. As Carsten said, we're doing the preclinical IND enabling studies. So that includes both pharmacology studies as well as toxicology studies. So it's a combination of both the ImmTOR component as well as the gene therapy component. And again, the study are on track for this ambition.
Raju Prasad -- William Blair -- Analyst
Great. And just a quick follow-up on the potential durability of response, we'd want to kind of see to put out clinical data. We had one month, three months. I mean can you just comment on the preclinical studies, where you might see a potential --
Carsten Brunn -- President and Chief Executive Officer
Yes, I mean it's hard to speculate, but we will look basically at 30, 60 and 90 days after we gave the combination of the vector and ImmTOR for neutralizing antibodies. I mean that's kind of the initial setup where we believe because we know from published data that antibody titers go up very quickly after the administration. So that's why we believe at least from that aspect is a fairly fast readout.
Raju Prasad -- William Blair -- Analyst
Got it, thanks.
Operator
Our next question comes from Difei Yang from Mizuho. Please go ahead.
Dan Clark -- Mizuho -- Analyst
Dan Clark on for Difei. Thank you for taking our questions. For the preclinical work for IgA nephropathy, can you just help us understand like what data you're looking for out of that program before you decide to exercise your option. Thank you.
Carsten Brunn -- President and Chief Executive Officer
Yes. So I'll hand the question to Kei, but obviously we, as I said in during the call, we're very much taking the learnings from SEL-212 where we're able to address immunogenicity of the enzyme. So the approach will be very, very similar that you combine -- that you combine the IgA protease with ImmTOR to prevent the formation of ADAs over certain period of time in order to dissolve the IgA1 immunoglobulin deposits in the kidney, but I'll let Kei, provide a bit more color on this.
Takashi Kei Kishimoto -- Chief Science Officer
Yeah, I mean I think it's a really interesting approach because this enzyme has been around for a while, but what's really limited from being tested in the clinic is immunogenicity. So I think combining it with ImmTOR, we have the chance to really enable a novel therapy that addresses the underlying mechanism that this will be.
Dan Clark -- Mizuho -- Analyst
Great, thank you.
Operator
This concludes our question-and-answer session. I will now turn the call back over to Selecta's CEO, Carsten Brunn for closing remarks. Carsten?
Carsten Brunn -- President and Chief Executive Officer
Thank you operator, and thank you to everyone who joined us this morning. We're extremely excited about the continued growth of our company and our platform as we head into the end of the year. We look forward to sharing more information about the growth of the ImmTOR platform. Please stay safe and healthy. This concludes today's call. Thank you.
Operator
[Operator Closing Remarks]
Duration: 37 minutes
Call participants:
Brad Dahms -- Chief Financial Officer
Carsten Brunn -- President and Chief Executive Officer
Peter G. Traber -- Chief Medical Officer
Brad Dahms -- Chief Financial Officer
Takashi Kei Kishimoto -- Chief Science Officer
John Newman -- Canaccord Genuity -- Analyst
Kristen Kluska -- Cantor Fitzgerald -- Analyst
Raju Prasad -- William Blair -- Analyst
Dan Clark -- Mizuho -- Analyst
