Sequana Medical — Additional POSEIDON data confirm benefits

Sequana Medical (BRU: SEQUA)

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Research: Healthcare

Sequana Medical — Additional POSEIDON data confirm benefits

Sequana Medical has reported additional data on safety, quality of life (QoL) and survival from the POSEIDON North American open-label pivotal study assessing the company’s implantable alfapump device in patients with recurrent and refractory ascites (RRA) due to liver cirrhosis. The company previously reported in Q422 that the study met the primary efficacy endpoint, and that the primary safety endpoints were in line with expectations. The additional data, reported at the EASL Congress 2023, show that alfapump was effective in controlling ascites, by virtually eliminating the need for needle paracentesis. Sequana also confirmed that the additional safety data were in line with expectations, while a clinically relevant and statistically significant improvement in patients’ QoL was also shown through validated and pre-specified health survey questionnaires. We believe that the additional data suggest a strong clinical and commercial profile, and support the likelihood of US alfapump approval.

Written by

Pooya Hemami

Analyst - Healthcare

Healthcare

Sequana Medical

Additional POSEIDON data confirm benefits

POSEIDON data update

Pharma and biotech

28 June 2023

Price

€3.14

Market cap

€89m

$1.1/€

Pro forma estimated net cash (€m) at 31 March 2023 (including April 2023 equity financing)

10.4

Shares in issue

28.2m

Free float

45%

Code

SEQUA

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.2)

(37.6)

(36.4)

Rel (local)

2.9

(35.5)

(33.1)

52-week high/low

€7.4

€2.9

Business description

Based in Belgium, Sequana Medical develops products to treat diuretic-resistant fluid overload, a frequent complication of liver disease and heart failure. Its proprietary alfapump and DSR approaches aim to provide significant clinical and quality-of-life benefits in these fluid overload conditions.

Next events

Start MOJAVE US Phase I/IIa study for DSR 2.0

Q223

Alfapump PMA submission to US FDA

H223

Analyst

Pooya Hemami OD MBA CFA

+1 646 653 7026

Sequana Medical is a research client of Edison Investment Research Limited

Sequana Medical has reported additional data on safety, quality of life (QoL) and survival from the POSEIDON North American open-label pivotal study assessing the company’s implantable alfapump device in patients with recurrent and refractory ascites (RRA) due to liver cirrhosis. The company previously reported in Q422 that the study met the primary efficacy endpoint, and that the primary safety endpoints were in line with expectations. The additional data, reported at the EASL Congress 2023, show that alfapump was effective in controlling ascites, by virtually eliminating the need for needle paracentesis. Sequana also confirmed that the additional safety data were in line with expectations, while a clinically relevant and statistically significant improvement in patients’ QoL was also shown through validated and pre-specified health survey questionnaires. We believe that the additional data suggest a strong clinical and commercial profile, and support the likelihood of US alfapump approval.

Year
end

Revenue
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/21

0.4

(24.4)

(1.36)

0.0

N/A

N/A

12/22

0.9

(30.9)

(1.37)

0.0

N/A

N/A

12/23e

0.7

(26.3)

(0.93)

0.0

N/A

N/A

12/24e

1.7

(28.1)

(0.99)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. EPS are fully diluted.

POSEIDON data pave the way for FDA PMA filing

Sequana intends to submit a US premarketing approval (PMA) application for the alfapump in RRA in Q423, which we estimate could lead to US market launch in H224. The alfapump met its objective in significantly reducing the need for therapeutic paracentesis (TP) procedures in recruited RRA patients, whom on average required 3.2 TP procedures per month prior to implantation. The near elimination of the need for TP is very meaningful, given that ascites episodes themselves and TP procedures place a significant burden on patients’ QoL. The reduction in the need for TP (and implied reduced ascites burden) led to material and statistically significant QoL improvements (n= 26, p<0.001) in both the physical component score of the SF36 scale and the Ascites Q scores. This, combined with favourable safety, bode well for the product’s potential US approval, in our view.

Favourable trend in overall 12-month survival rate

Patients in the pivotal cohort (n=40) showed a 70% one-year survival rate, which compares favourably to literature citing a c 50% one-year survival rate for refractory ascites patients. Although there are limitations in comparing data across different time points and study/monitoring protocols, this is an encouraging finding.

Valuation: Maintaining current assessment

Our financial estimates and valuation are unchanged, and we maintain our pipeline rNPV of €334.1m. After adding €10.4m pro forma Q123e net cash (ex lease liabilities), we obtain an equity valuation of €344.5m, or €12.22/share (€11.14 fully diluted given options outstanding).

Building on positive top-line POSEIDON data

Sequana Medical initially reported positive results in Q422 from the POSEIDON North American pivotal study of its implantable alfapump device in patients with RRA due to liver cirrhosis. The study met the primary efficacy endpoint and the primary safety endpoints were in line with expectations. Recently the company provided additional details on secondary safety endpoints and QoL data, which affirm our favourable view on the product’s likelihood of obtaining approval and we maintain our US commercial probability of success estimate of 80% in our valuation. Sequana expects to file a US PMA in Q423, which we continue to believe could lead to commercialisation in H224.

The alfapump device was shown in the POSEIDON study to lead to significant reductions in the need for RRA patients to undergo burdensome TP procedures, which should lead to improved patient independence and QoL given the limitations of current treatments, as discussed in our Outlook report.

Review of POSEIDON trial structure and results

The POSEIDON registration trial, which started in 2019, is designed to support alfapump approval and reimbursement in the United States and Canada. The study is a single-arm, open-label, within-subject crossover study, whereby patients serve as their own controls. Following enrolment, patients entered a three-month pre-implant observation period in which they received standard of care therapy, consisting of TP, before the alfapump was implanted. The study consisted of a roll-in (‘training”) cohort of 29 patients, followed by a pivotal cohort of 40 implanted patients.

Exhibit 1: POSEIDON study design

Source: Sequana Medical

As explained in a prior note and reported in the Q422, data from the 40 enrolled patients in the pivotal cohort of the POSEIDON study met the key primary efficacy outcomes. The first effectiveness endpoint is the median reduction in TP, where among the 40 patients, POSEIDON achieved 100% median reduction (p<0.001) in the post-implant implantation period (reflecting months four to six) compared to the pre-implant observation period, while the study’s aim was to show at least a 50% reduction.

For the second effectiveness endpoint, 77% of the 40 patients experienced at least a 50% reduction in the frequency of TP procedures in the post-implant observation period versus the three-month pre-implant observation period (p<0.001). The study’s aim was to show that at least 50% of patients achieve a 50% reduction in TP procedures.

Exhibit 2: Efficacy endpoints in per-protocol pivotal cohort (n=40)

Source: Sequana Medical

Effectively, the 100% median reduction in TP procedures post- versus pre-implantation (the first effectiveness endpoint) indicates that the majority of POSEIDON patients required zero TP interventions during the post-implant observation period, as shown below.

Exhibit 3: Distribution of reduction in TP post-implant versus pre-implant (n=26)

Source: Sequana Medical. Note: Distribution is among the 26 patients who completed the 180-day post-implant observation period.

We believe the results exceeded the pre-defined efficacy success thresholds required for approval by a reasonable margin, and should pave the way for the company to file a US PMA with the FDA in Q423, potentially leading to US market launch in H224. The company still needs to complete further product validation and verification work prior to submitting the PMA for the alfapump in RRA, but we do not expect any challenges in this process.

The reduction or near-elimination of the need for TP procedures is very meaningful, in our view, given that prior to enrolment, these patients required on average 3.2 TP procedures per month and had an average Model for End-Stage Liver Disease (MELD) score of 15.2, reflecting the highly decompensated state of these enrolled patients.

Statistically significant improvements in QoL shown

Altogether the POSEIDON results demonstrate that the alfapump is very effective at controlling RRA, virtually eliminating the need for large volumes of TP procedures and significantly improving patients’ QoL at life at six months post-implantation.

As we expected, the reduction in the need for TP procedures led to meaningful and statistically significant QoL improvements. Ascites, being the accumulation of protein-containing fluid in the abdomen and a frequent complication of late-stage liver disease, results in loss of appetite, shortness of breath, and mobility and sleeping difficulties. The conventional treatment, TP, to drain the excess fluid, can often take between one and five hours and sometimes longer. TP often requires patients to stay in hospital for up to 48 hours and only provides temporary relief, as often a cycle develops where patients undergo TP, feel much improved for up to a week but then ascites accumulates with symptom worsening before another TP procedure is needed. Hence, the ascites/TP cycle results in a heavy burden for patients, with the patients recruited for the POSEIDON trial requiring an average of 3.2 TP procedures per month prior to implantation.

Exhibit 4: Conventional burden of required repeated TP in ascites

Source: Sequana Medical

Patient’s QoL was assessed via established health-survey questionnaires. Despite RRA progression in these patients, both the physical component score of the SF36 scale (a QoL measure assessing a general health QoL) and the Ascites Q score (a QoL measure specific for ascites patients) indicated clinically meaningful and statistically significant improvements six months post-implant compared to pre-implant (n= 26, p<0.001).

Exhibit 5: Improvements in QoL measures post-implantation

Source: Sequana Medical

In our view, the improvements in QoL, accompanied by a favourable overall safety profile as described below, bode well for the product’s potential US approvability.

Safety results in line, post-implant monitoring for kidney injury suggested

As stated with the Q422 top-line study results, primary safety endpoint data, including the rate of alfapump-related open-surgical re-interventions, explants or deaths adjudicated by the study’s Clinical Events Committee (CEC), were in line with expectations. Altogether, there were six primary safety events, of which three were explants due to wound or skin erosion, and three were explants due to patient-reported discomfort (all such patient-reported discomfort events were determined to be of moderate severity by the CEC).

Key secondary endpoints within six months, also adjudicated by the CEC, include the number of major adverse events (MAE), serious infections and acute kidney injuries (AKI). MAEs were pre-defined in the protocol as one of the following events: AKI > stage 2, hepatorenal syndrome, hepatic encephalopathy > grade 2, spontaneous bacterial peritonitis and recurrent or refractory infection related to paracentesis or the alfapump system, procedure or therapy.

As a reminder, all implanted patients were monitored for 90 days prior to alfapump implantation. The company noted that despite ongoing RRA disease progression, there was a similar number of MAEs in the 90 days post-implant versus the 90 days pre-implant (n=5 each), and a comparable number of serious infections post-implant versus pre-implant (n=3 vs n=2), with only one of the post-implant infections determined to be device-related.

The study’s principal investigator remarked that patients implanted with the alfapump need to be closely monitored for the development of AKI or infection. Fortunately, in the POSEIDON study, kidney-related events were readily resolved with the standard of care, according to the trial’s principal investigator, Dr Florence Wong. Sequana noted that there were 16 stage 1 AKIs in the six months post-implantation, which are not believed to be clinically significant. AKI stage 2 (n=4) and stage 3 (n=2) post-implantation events were resolved in three of the instances and unresolved in the three other instances at the time of patient death (from unrelated causes, which is not surprising given the level of underlying illness in recruited patients). Importantly, the company noted that notable measures of kidney health, creatine and eGFR, were stable over long-term follow-up (for the surviving patients), indicating that these AKI events had no material effect on their renal health.

Trends towards improved survival were shown

Similar to preliminary interim data shown in the roll-in cohort of 29 patients for the POSEIDON study, which showed a 70% one-year survival rate among this group, data from the subsequent pivotal cohort (n=40) showed a 70% one-year survival rate. This compares favourably to published literature citing a c 50% one-year survival rate1 for refractory ascites patients.

Exhibit 6: 70% Survival rate at one-year post implantation

Source: Sequana Medical

We note that there are limitations in making direct comparisons between distinct populations across different time periods, given, among other factors, possible variances between the standard of care and the ongoing monitoring and treatment protocols between patients enrolled at POSEIDON study sites and the historical data. Nonetheless, we view this trend as potentially favourable for the product’s approvability and in eventual post-approval sales and marketing related discussions with stakeholders and physicians.

NASH prevalence in POSEIDON population affirms opportunity

Among the 40 patients with RRA due to liver cirrhosis implanted with the alfapump in the POSEIDON trial’s pivotal cohort, 48% had an underlying aetiology of alcoholic liver disease and 38% suffered from non-alcoholic steatohepatitis (NASH). This NASH proportion among enrolled patients is suggestive of the growing prevalence and contribution of NASH as a key driver of liver cirrhosis, in our view.

Our underlying assumptions for the market opportunity for the alfapump in RRA are underpinned by the expected growth in the NASH population, which in turn should lead to a rise in RRA cases.

While the US population is growing at 0.6% pa, we expect the NASH population to grow at a faster rate (Estes et al2 estimate a c 3.3% CAGR between 2015 and 2030), aided in part by an ageing population. Our overall US RRA market growth rate estimates are consistent with Estes et al’s (2018) estimates for the growth in the decompensated cirrhosis population of a 7.1% CAGR through to 2030 in the US, due largely to increased NASH prevalence. We maintain our forecast for FY32 alfapump sales in North America of €190m, driven by a c 15% assumed market share of the c 40,000 new annual RRA cases estimated to arise in the region in FY32.

Financials and valuation

In addition to the commercial opportunity for alfapump in RRA, we highlight other recent operational advancements for Sequana’s Direct Sodium Removal (DSR) programme in congestive heart failure (CHF), including positive SAHARA data for the DSR 1.0 product in diuretic-resistant CHF patients with persistent congestion, and positive preclinical GLP and Phase I CHIHUAHUA study data for the second-generation DSR 2.0 product candidate. The company expects to recruit the first patient in the MOJAVE Phase Ib/IIa study of DSR 2.0 in Q223, as discussed in our prior note.

After including the €15.8m April financing, we estimate a pro forma (at 31 March) gross cash position of €22.9m and a net cash position of €10.4m. We have maintained our forecasts and valuation, as described in our prior note. We calculate a pipeline rNPV of €334.1m. After adding €10.4m pro forma Q123e net cash (ex lease liabilities), we obtain an equity valuation of €344.5m or €12.22/share (€11.14 fully diluted given options outstanding).

Exhibit 7: Sequana Medical rNPV assumptions

Product contribution

Indication

Stage

NPV (€m)

Probability of success

rNPV (€m)

rNPV/ basic share (€)

Launch year

Sales in 2032 (€m)

alfapump in North America (net of R&D and SG&A costs)

Refractory and recurrent ascites and malignant ascites

Pivotal studying ongoing

263.6

80%

210.9

7.48

H224

189.9

alfapump in Europe and ex-NA regions (net of SG&A costs)

Refractory and recurrent ascites and malignant ascites

Commercial/ marketed

(1.5)

100%

(1.5)

(0.05)

2013

1.0

DSR 2.0 (short-term DSR)

Fluid overload in heart failure

Human feasibility studies

806.9

25%

190.7

6.77

2028

347.1*

Corporate costs

(66.0)

100%

(66.0)

(2.34)

Total

1,003.0

334.1

11.85

Pro-forma net cash (31 March 2023) excluding lease liabilities

10.4

10.4

0.37

Total equity value

1,013.3

344.5

12.22

Basic shares outstanding (000s) (following April 2023 equity offering)

28,192

Outstanding warrants and share options (000s)

2,722

Fully diluted shares outstanding (000s)

30,914

Source: Edison Investment Research. Note: *Reflects estimate of projected royalty revenue to Sequana Medical rather than end-market commercial sales.

As a sensitivity, our equity valuation per basic share would be adjusted to €7.29/share if we assume that our total assumed future funding need (€105m) is met through equity issuances at the current share price (c €3.14/share).

Exhibit 8: Financial summary

€’000s

2018

2019

2020

2021

2022

2023e

2024e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,029

971

963

371

923

673

1,738

Cost of Sales

(158)

(198)

(202)

(77)

(205)

(135)

(348)

Gross Profit

871

773

761

294

718

538

1,390

General & Administrative

(8,206)

(7,102)

(6,738)

(7,177)

(8,927)

(9,741)

(14,983)

Net Research & Development

(5,816)

(7,652)

(11,835)

(16,935)

(20,416)

(16,000)

(12,050)

Operating profit before exceptionals

(13,150)

(13,981)

(17,813)

(23,818)

(28,625)

(25,203)

(25,643)

EBITDA

 

 

(13,070)

(13,737)

(17,506)

(23,409)

(28,313)

(24,500)

(25,083)

Depreciation & other

(81)

(244)

(307)

(409)

(312)

(703)

(560)

Operating Profit (before amort. and except.)

(13,150)

(13,981)

(17,813)

(23,818)

(28,625)

(25,203)

(25,643)

Exceptionals including asset impairment

74

18

41

1,205

530

0

0

Operating Profit

(13,077)

(13,964)

(17,771)

(22,613)

(28,095)

(25,203)

(25,643)

Net Interest

(883)

(878)

(1,178)

(608)

(2,282)

(1,124)

(2,446)

Profit Before Tax (norm)

 

 

(14,033)

(14,859)

(18,991)

(24,426)

(30,907)

(26,327)

(28,089)

Profit Before Tax (FRS 3)

 

 

(13,960)

(14,841)

(18,949)

(23,221)

(30,377)

(26,327)

(28,089)

Tax

(24)

(136)

(157)

(393)

(387)

0

0

Profit After Tax and minority interests (norm)

(14,057)

(14,995)

(19,148)

(24,819)

(31,294)

(26,327)

(28,089)

Profit After Tax and minority interests (FRS 3)

(13,983)

(14,977)

(19,106)

(23,614)

(30,764)

(26,327)

(28,089)

Average Number of Shares Outstanding (m)

10.0

12.3

15.3

18.2

22.8

28.2

28.3

EPS - normalised (€)

 

 

(1.41)

(1.22)

(1.25)

(1.36)

(1.37)

(0.93)

(0.99)

EPS - normalised and fully diluted (€)

 

(1.41)

(1.22)

(1.25)

(1.36)

(1.37)

(0.93)

(0.99)

EPS - (IFRS) (€)

 

 

(1.40)

(1.22)

(1.25)

(1.30)

(1.35)

(0.93)

(0.99)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

242

829

772

1,814

2,936

2,502

2,359

Tangible Assets

184

765

705

1,732

2,850

2,416

2,273

Investments in long-term financial assets

58

63

67

82

86

86

86

Current Assets

 

 

3,099

8,522

13,441

12,890

23,089

7,699

10,504

Short-term investments

0

0

0

0

0

0

0

Cash

1,318

5,586

11,016

9,600

18,875

7,413

9,649

Other

1,782

2,935

2,425

3,290

4,214

287

855

Current Liabilities

 

 

(18,727)

(5,315)

(5,966)

(7,180)

(15,149)

(10,086)

(10,250)

Creditors

(6,654)

(4,855)

(5,966)

(7,180)

(10,666)

(5,603)

(5,767)

Short term borrowings

(12,073)

(459)

0

0

(4,483)

(4,483)

(4,483)

Long-term Liabilities

 

 

(3,374)

(3,110)

(8,135)

(8,312)

(13,030)

(13,030)

(43,030)

Long-term borrowings

(2,582)

(2,261)

(7,473)

(7,325)

(12,193)

(12,193)

(42,193)

Other long-term liabilities

(792)

(849)

(662)

(987)

(837)

(837)

(837)

Net Assets

 

 

(18,760)

926

113

(788)

(2,154)

(12,915)

(40,417)

CASH FLOW

Operating Cash Flow

 

 

(8,987)

(17,596)

(15,791)

(22,786)

(24,822)

(25,060)

(24,901)

Net interest and financing income (expense)

(883)

(878)

(1,178)

(608)

(2,282)

(1,124)

(2,446)

Tax

(5)

(9)

(36)

(222)

(378)

0

0

Net Operating Cash Flow

 

 

(9,875)

(18,482)

(17,005)

(23,616)

(27,482)

(26,184)

(27,346)

Capex

(39)

(106)

(138)

(326)

(677)

(269)

(417)

Acquisitions/disposals

0

0

0

0

0

0

0

Financing (net of costs)

2

26,165

19,000

22,771

28,420

14,991

0

Dividends

0

0

0

0

0

0

0

Other

0

0

0

0

0

0

0

Net Cash Flow

(9,912)

7,576

1,857

(1,171)

261

(11,462)

(27,763)

Opening net debt/(cash)

 

 

0

13,337

(2,866)

(3,543)

(2,275)

(2,199)

9,263

HP finance leases initiated

0

0

0

0

0

0

0

Other

(3,425)

8,627

(1,179)

(97)

(337)

0

0

Closing net debt/(cash)

 

 

13,337

(2,866)

(3,543)

(2,275)

(2,199)

9,263

37,027

Lease debt

N/A

504

387

760

916

916

916

Closing net debt/(cash) inclusive of IFRS 16 lease debt

13,337

(2,362)

(3,157)

(1,515)

(1,283)

10,179

37,943

Source: Company reports, Edison Investment Research


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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Molecure has filed an Investigational New Drug (IND) application with the US FDA for OATD-01. Clearance of the application will enable the company to initiate a global (US and EU), multi-centre, randomised, double-blind, placebo-controlled Phase II study (expected n=90) to assess the safety and efficacy of OATD-01 in patients with pulmonary sarcoidosis. Management anticipates that the trial will commence in Q423. Results from this double-blind study will be shared once it has been completed, expected to be in H125. We view the filing of this IND application as a key milestone for Molecure, and believe that the results from the trial will be an important catalyst for investor attention.

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