You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report and with the audited consolidated financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Special note regarding forward-looking statements This report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are often identified by the use of words such as, but not limited to, "anticipate," "believe," "can," "continue," "could," "estimate," "expect," "intend," "may," "plan," "project," "seek," "should," "strategy," "target," "will," "would" and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" included under Part II, Item 1A below. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. OVERVIEWPortola Pharmaceuticals, Inc. (the "Company" or "Portola" or "we" or "our" or "us") is a biopharmaceutical company focused on the development and commercialization of novel therapeutics in the areas of thrombosis, other hematologic diseases and inflammation for patients who currently have limited or no approved treatment options. Our headquarters is located inSouth San Francisco, California . Our lead product is Andexxa [coagulation factor Xa (recombinant), inactivated-zhzo] which we are marketing under the brand name of Ondexxya inEurope . Andexxa is the first and only antidote approved by theU.S. Food and Drug Administration ("FDA") and theEuropean Commission ("EC") for patients treated with rivaroxaban or apixaban, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding. We are conducting clinical trials with cerdulatinib, an investigational oral, dual spleen tyrosine kinase ("SYK") and Janus kinase ("JAK") inhibitor to treat hematologic cancers. Pipeline Description Approved or Stage Commercial Investigational Indication rights Patients treated with U.S. Reversal agent for rivaroxaban or apixaban, Approval Andexxa certain Factor Xa when reversal of European Worldwide (fXa) inhibitors anticoagulation is needed Union ("EU") excluding Japan due to life-threatening or Approval uncontrolled bleeding Worldwide excluding
Cerdulatinib Oral, dual SYK and Relapsed/refractory B- and Phase 2a
topical JAK inhibitor T-cell malignancies formulation in non-oncology indications Approved Products Andexxa Andexxa is approved by the FDA as a reversal agent for patients treated with rivaroxaban or apixaban, when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding. Andexxa was approved under theFDA's Accelerated 1
-------------------------------------------------------------------------------- Approval pathway based on the change from baseline in anti-Factor Xa activity in healthy volunteers. Continued approval for this indication is contingent upon post-marketing study results that verify that clinical benefit is conferred to patients. We are conducting a randomized controlled trial of Andexxa (U.S. )/Ondexxya (EU) against a usual care cohort control arm (known as "ANNEXA-I") to provide clinical data supporting full approval. ANNEXA-I was initiated in early 2019 and we anticipate that it will include approximately 440 patients with intracranial hemorrhage and compare outcomes of patients treated with Andexxa to the usual care on a 1:1 randomized scheme. We plan to conduct this study globally with our expected completion date in 2023. We are also conducting the ANNEXA-S study: a single-arm, open-label clinical trial in approximately 200 patients enrolled from approximately 80 hospitals worldwide. ANNEXA-S will evaluate the efficacy and safety in patients requiring urgent surgery while taking apixaban, edoxaban, enoxaparin or rivaroxaban. The primary endpoint of ANNEXA-S is hemostatic efficacy, as assessed by intraoperative assessment of hemostasis. The study is expected to be completed in 2022. Inthe United States , we initially received approval from the FDA inMay 2018 to market product manufactured under our Gen 1 process using the clinical-scale process at the facility that produced material for our clinical trials. We conducted a limited launch in the second half of 2018 through an Early Supply Program ("ESP") intended to reach hospitals with a large number of patients with Factor Xa bleeds and that were able to start using Andexxa during the ESP period. OnDecember 31, 2018 , the FDA approved our Gen 2 manufacturing process, which provides commercial scale volume that we believe is sufficient to support a global launch. In earlyJanuary 2019 , we began shipping Gen 2 product and commenced a full-scale commercial launch inthe United States . Andexanet alfa received conditional approval under the brand name Ondexxya by the EC onApril 26, 2019 . This conditional approval included several post-authorization requirements, including specific obligations to submit a final clinical study report for ANNEXA-I, a final clinical study report for the ANNEXA-4 study, and an obligation to provide some additional pharmacokinetic data. We completed our first sales of Ondexxya inEurope inJuly 2019 and are executing a phased launch of Ondexxya inEurope , with an initial focus onGermany ,Austria ,Denmark ,Finland ,Sweden ,the Netherlands and theUnited Kingdom (together, the "Wave 1 Countries"). We also intend to launch Ondexxya in other countries yet to be determined and establish an early access program for Ondexxya through a distribution partner. We launched in the EU using Gen 2 product inJuly 2019 . Andexxa is administered almost exclusively in the hospital and urgent care settings and is reimbursed either under Medicare Part A through an applicableMedicare Severity Diagnosis Related Group ("MS-DRG") payment related to the patient condition for inpatient use, or separately reimbursed under a C code through Medicare with respect to outpatient usage covered by Medicare Part B based on Average Sales Price. In addition, theU.S. Centers for Medicare and Medicaid Services ("CMS") has supplemented Part A reimbursement with a New Technology Add-on Payment ("NTAP"), which was first effective inOctober 2018 at a maximum of 50% of wholesale acquisition cost ("WAC") for the standard dose, and increased inOctober 2019 to a maximum of 65% of WAC. The actual NTAP amount will vary based on the amount by which the cost of a case exceeds the MS-DRG payment. The CMS NTAP program was created byCongress to support timely access to innovative therapies used to treat Medicare beneficiaries in the hospital inpatient setting. For a new technology to qualify for an add-on payment, it must meet the NTAP definition of "new," demonstrate a substantial clinical improvement and meet specific cost thresholds. InMarch 2020 , we announced a data that demonstrated that Andexxa was associated with a lower rate of in-hospital and 30-day mortality in patients with life-threatening Factor Xa inhibitor-related bleeds compared with other treatment options. This included lower mortality across multiple bleed types including intracranial hemorrhage ("ICH"), gastrointestinal bleeding and bleeding due to trauma, when compared to 4-factor prothrombin complex concentrate ("4F-PCC") therapy, which is approved only for the reversal of warfarin and has no impact on anti-Factor Xa levels. In addition, inMarch 2020 , we announced a data that using Andexxa to treat patients with ICH associated with apixaban or rivaroxaban is projected to provide a net reduction in costs to an acute care hospital. The analysis compared a clinical scenario with Andexxa to one without it where patients were given 4F-PCC. Key findings from this analysis related to the net cost reduction Andexxa can provide for the treatment of ICH associated with oral Factor Xa inhibitors include: (1) The total cost per hospitalization, considering NTAP reimbursement for eligible claims, was lower for patients treated with Andexxa than it was for patients treated with 4F-PCC; and (2) Andexxa generated reductions in all cost components - intubation, intensive care unit and surgery costs - except drug costs, though drug costs were offset by the NTAP reimbursement. InApril 2020 , BMS and Pfizer and us agreed to terminate the Collaboration and License Agreement among the parties, datedFebruary 1, 2016 , for the development and commercialization of andexanet alfa inJapan . As a result, onApril 3, 2020 we received a written notice of termination from BMS and Pfizer and will regain full Japanese rights for andexanet alfa.Japan represents the third largest market for Factor Xa inhibitors afterthe United States and the EU 5 countries. Portola will have 2
-------------------------------------------------------------------------------- exclusive rights to develop and commercialize andexanet alfa inthe United States ,Europe ,Japan and rest of the world markets. Pursuant to the terms of the agreement, the termination will be effective onOctober 2, 2020 and over the next 180 days we intend to work collaboratively with BMS, Pfizer and Japanese regulators to transition the andexanet alfa Japanese development and commercialization program to Portola, and advance the plans for regulatory filing. In addition, inApril 2020 , CMS established a new permanent J-code for Andexxa, facilitating reimbursement in the hospital outpatient setting. This J-code will take effect onJuly 1, 2020 and it is expected to replace the previously issued temporary C-code. Bevyxxa Bevyxxa was the first anticoagulant approved inthe United States for hospital and extended duration prophylaxis of venous thromboembolism ("VTE") in adult patients hospitalized for an acute medical illness who are at risk for thromboembolic complications due to moderate or severe restricted mobility and other risk factors for VTE. Bevyxxa was approved by the FDA inJune 2017 and we commenced the commercial launch inthe United States inJanuary 2018 . Following the approval of Andexxa inMay 2018 , we made the business decision to focus our resources on the launch of Andexxa and significantly scaled back our commercial efforts on Bevyxxa. Throughout 2019, we engaged with potential business collaborators for Bevyxxa, and in the fourth quarter of 2019, we determined that it was unlikely that we will find a viable partner. Accordingly, we began to wind down Bevyxxa operations to eliminate future operational and financial obligations. Product Candidate Cerdulatinib Cerdulatinib is our investigational SYK and JAK inhibitor that uniquely inhibits two key cell signaling pathways implicated in certain hematologic malignancies and autoimmune diseases. There is a rationale for inhibiting both SYK (B-cell receptor pathway) and JAK (cytokine receptors) in B-cell malignancies where both targets have been shown to promote cancer cell growth and survival. In addition, pre-clinical data suggest an important role for SYK and JAK in Peripheral T-Cell Lymphoma ("PTCL") tumor survival. There is a significant unmet need for the treatment of patients with relapsed/refractory PTCL. Current approved therapies for relapsed/refractory PTCL are all given via IV infusion and have limited activity with overall response rates of approximately 30%. In addition, most of these responses are partial responses. Based on the unmet need and on the activity to date with cerdulatinib, we have prioritized development in PTCL. Following our End of Phase 2 meeting with the FDA inJanuary 2019 , the FDA requested additional data supporting the proposed dose and we submitted the requested data. We have reached an agreement with the FDA on the design of a registration study ("CELTIC-1"). InFebruary 2020 , we announced that due to internal restructuring to align resources to drive Andexxa growth, we decided not to initiate the CELTIC-1 trial for the SYK/JAK inhibitor cerdulatinib until a partner is identified. Other early stage programs We continue to progress certain early discovery activities that align with our scientific expertise. Reallocating Resources to Drive Growth InFebruary 2020 , we undertook an organizational realignment to focus our resources on the maximizing the Andexxa and Ondexxya commercial opportunity, which included a reduction in headcount in order to conserve resources. These actions result in a pre-tax charge of approximately$1.9 million in the first quarter of 2020. Related to this organizational realignment, we do not expect any further significant restructuring costs to be incurred. See Note 11, Restructuring, to the Condensed Consolidated Financial Statements for further discussion COVID-19 Update InMarch 2020 , theWorld Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to be spread throughoutthe United States and the world. The impact from the rapidly changing market and economic conditions due 3
-------------------------------------------------------------------------------- to the COVID-19 outbreak is uncertain, disrupting the business of our clients, and will impact our business and consolidated results of operations and could impact our financial condition in the future. Due to the concerns over the COVID-19 pandemic, effectiveMarch 13, 2020 , we suspended face-to-face field activity and instituted a mandatory work from home policy for all employees, including those in ourSouth San Francisco and European headquarters. The broader implications of COVID-19 on our results of operations and overall financial performance remain uncertain. The COVID-19 pandemic and its adverse effects have become more prevalent in the locations where we, our customers, suppliers or third-party business partners conduct business and as a result, we have begun to experience more pronounced disruptions in our operations. We may experience constrained supply or curtailed customer demand that could materially adversely impact our business, results of operations and overall financial performance in future periods. The effect of the COVID-19 pandemic will not be fully reflected in our results of operations and overall financial performance until future periods. See "Risk Factors" section below for further discussion of the possible impact of the COVID-19 pandemic on our business. Critical accounting policies and significant judgments and estimates Our management's discussion and analysis of our financial condition and results of operations is based on our Consolidated Financial Statements, which have been prepared in accordance withUnited States generally accepted accounting principles, ("U.S. GAAP"). The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the Condensed Consolidated Financial Statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant or material changes in our critical accounting policies during the three months endedMarch 31, 2020 , as compared to those disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 filed with theSEC onFebruary 28, 2020 . Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding recent accounting pronouncements. Results of operations Comparison of the three months endedMarch 31, 2020 and 2019 Revenue Three Months Ended March 31, 2020 2019 Change % Change (in thousands, except percentages) Andexxa$ 23,055 $ 20,285 $ 2,770 14% Ondexxya 2,582 - 2,582 * Bevyxxa - 77 (77 ) * Total product revenue, net 25,637 20,362 5,275 26% Total collaboration and license revenue 752 1,807 (1,055 ) (58%) Total revenues$ 26,389 $ 22,169 $ 4,220 19% * Percentage not meaningful The increase in total revenues during the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 was primarily attributable to: • an increase in net revenue of Andexxa during the first quarter of 2020 compared to the same period in 2019; and 4
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• Ondexxya revenue which started from the third quarter of 2019; offset by
• a decrease in Phase 3 collaboration revenue from certain collaboration
partners as related performance obligations had been mostly fulfilled by
the first quarter of 2019.
Cost of Sales Three Months Ended March 31, 2020 2019 Change % Change (in thousands, except percentages) Cost of sales $ 4,320$ 7,150 $ (2,830 ) (40 )%
The decrease in cost of sales during the three months ended
first quarter of 2019 related to Gen 1 transition of Andexxa manufacturing process; and
• a decrease in cost of sales for Andexxa Gen 2 inventories in the current
period as compared to mostly Gen 1 inventories costs in the first quarter
of 2019. Cost of product sales also consists of certain finishing costs incurred after FDA approvals related to approved products sold, in addition to certain distribution and overhead costs. We expect costs of sales to increase in relation to product revenues as we deplete inventories that we had expensed prior to receiving FDA approvals. Research and development expenses Three Months Ended March 31, Phase of 2020 2019 Change % Change Product candidate Development (in thousands, except percentages) Andexanet alfa Phase 2/3/4$ 15,986 $ 24,890 $ (8,904 ) (36 %) Betrixaban Phase 1/3 1,195 566 629 111 % Cerdulatinib Phase 1/2a 7,171 7,197 (26 ) - % Other research and development expenses(1) 1,737 2,931 (1,194 ) (41 )% Total research and development expenses$ 26,089 $
35,584
(1) Amounts in all periods include costs for other potential product candidates.
The net decrease in total research and development expenses during the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 was primarily attributable to: • a decrease in Andexanet alfa program costs during the first quarter of 2020; • a$5.8 million charge for Lonza's first tranche purchase right that was
measured up to the settlement date in the first quarter of 2019; and
• a decrease in program costs related to other potential product candidates.
Selling, general and administrative expenses
Three Months Ended March 31, 2020 2019 Change % Change (in thousands,
except percentages)
Selling, general and administrative expenses
3 % The increase in selling, general and administrative expenses during the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 was primarily attributable to: 5 --------------------------------------------------------------------------------
• an increase in building rent and insurance of
the headquarters office lease renewal inJune 2019 and expansion of EU operations.
Interest and other (expense) income, net
Three Months Ended March 31, 2020 2019 Change % Change (in thousands, except percentage) Interest and other (expense) income, net (2,186 ) 1,984
The decrease in interest and other (expense) income, net, during the three months endedMarch 31, 2020 compared to the three months endedMarch 31, 2019 was primarily attributable to • an increase in net loss on remeasurement from embedded derivatives by
• a decrease in interest income earned from investments.
Interest expense Three Months Ended March 31, 2020 2019 Change % Change (in thousands, except percentages) Interest expense $ 8,147$ 6,481 $ 1,666 26 % The increase in interest expense during the three months endedMarch 31, 2020 compared to the three and three months endedMarch 31, 2019 was primarily due to: •$62.5 million of funding received in each of March andNovember 2019 under the Credit Agreement with HCR and Athyrium. Liquidity and capital resources Due to our significant research and development and selling, general and administrative expenditures, we have generated significant operating losses since our inception. We have financed our operations primarily through sales of our equity securities, collaborations, including loans from our collaboration partners and third parties, a royalty-based financing arrangement, and sales of commercial and development rights to some of our product candidates. Our expenditures are related to research and development activities, including clinical trial and manufacturing-related costs and selling, general and administrative costs, including commercial preparation, launch and operating costs. AtMarch 31, 2020 , we had cash, cash equivalents and investments of$394.1 million which includes$50.0 million minimum cash holdings required by our secured term loan agreement (See Note 7, Long Term Obligations, to the Condensed Consolidated Financial Statements). Our cash, cash equivalents and investments are held in a variety of interest-bearing instruments, including investments backed byU.S. government agencies, corporate debt securities and money market accounts. Cash in excess of immediate requirements is invested with a view toward liquidity and capital preservation, and we seek to minimize the potential effects of concentration and degrees of risk. We estimate our existing capital resources, together with interest thereon, to be sufficient to meet our projected operating requirements into the second quarter of 2021 while maintaining compliance with covenants pursuant to the 2019 Credit Agreement of a minimum of$50.0 million of cash on hand. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. In light of the estimated costs to support the global launch and continued development of Andexxa, we will need to implement cost saving measures, defer the timing of capital expenditures and potentially raise additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and/or other marketing and distribution arrangements. We currently have no credit facility or committed sources of capital other than potential milestones receivable under our current collaboration and license agreements. Our future funding requirements will depend on many factors, including the following: 6 --------------------------------------------------------------------------------
• the timing, receipt and amount of sales, profit sharing or royalties, if any, from our current and potential products; • the cost of manufacturing our current products and product candidates, including process improvements in order to manufacture product candidates at commercial scale, and establishing commercial supplies of our product candidates; • the cost and timing of establishing sales, marketing and distribution capabilities inthe United States and abroad; • the terms and timing of any other collaborative, licensing and other arrangements that we may establish;
• the receipt of any collaboration payments;
• the number and characteristics of product candidates that we pursue;
• the cost, timing and outcomes of regulatory approvals;
• the scope, rate of progress, results and cost of our clinical studies, preclinical testing and other related activities; • the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; • the extent to which we acquire or invest in businesses, products or technologies, although we currently have no commitments or agreements relating to any of these types of transactions; and • partnerships and other strategic options for our products and product candidates. If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain needed financing, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our ability to execute on our business plan, and have an adverse effect on our business, results of operations and future prospects. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders' rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. The following table summarizes our cash flows for the periods indicated: Three Months Ended March 31, 2020 2019 (in thousands) Cash used in operating activities$ (71,100 ) $ (63,635 ) Cash provided by investing activities 52,927 82,103 Cash provided by financing activities 101 69,840 Effect of exchange rate changes on cash, cash equivalents (23 ) - and restricted cash Net (decrease) increase in cash, cash equivalents and$ (18,095 ) $ 88,308 restricted cash Cash used in operating activities Cash used in operating activities for the three months endedMarch 31, 2020 reflected a net loss of$68.8 million , offset by a non-cash stock-based compensation charge of$9.5 million , non-cash interest incurred on the Notes payable, royalty-based debt and Secured Term Loans of$5.1 million , remeasurement loss on our embedded derivatives of$3.2 million , a provision for excess and obsolete inventories charge of$2.1 million , and amortization on the lease right-of-use assets of$1.2 million . Cash used in operating activities also reflected a$15.6 million decrease due to an increase in inventories as we build out commercial inventory supplies, a$6.1 million increase due to a decrease in trade and other receivables, net from our Andexxa and 7
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Ondexxya customers, a$3.7 million decrease due to royalty payments made to BMS, Pfizer and HCR, and a$10.2 million decrease due to a decrease in accrued and other liabilities. Cash used in operating activities for the three months endedMarch 31, 2019 reflected a net loss of$78.1 million , offset by a non-cash stock-based compensation charge of$17.9 million , non-cash interest incurred on the Notes payable and royalty-based debt of$6.5 million , and a provision for excess and obsolete inventories charge of$3.9 million . Cash used in operating activities also reflected a$1.5 million increase due to a decrease in inventories as we use commercial inventory supplies, a$5.9 million decrease due to an increase in trade and other receivables, net from our Andexxa customers, a$2.0 million decrease due to royalty payments made to BMS, Pfizer and HCR, and a$4.5 million decrease due to a decrease in accounts payable. Cash provided by investing activities Cash provided by investing activities for the three months endedMarch 31, 2020 was primarily related to proceeds from maturities of investments of$100.4 million , partially offset by investment purchases of$46.5 million and fixed asset purchases of$1.0 million . Cash provided by investing activities for the three months endedMarch 31, 2019 was primarily related to proceeds from maturities of investments of$124.1 million , partially offset by investment purchases of$41.7 million and fixed asset purchases of$0.4 million . Cash provided by financing activities Cash provided by financing activities for the three months endedMarch 31, 2020 was primarily related to net proceeds from the issuance of common stock pursuant to equity awards of$0.4 million , offset by payments of long-term obligation to a collaborator of$0.3 million . Cash provided by financing activities for the three months endedMarch 31, 2019 , was primarily related to net proceeds from debt issuance of$59.2 million and net proceeds from the issuance of common stock pursuant to equity awards of$10.1 million . Off-balance sheet arrangements and contractual obligations We lease our corporate headquarters, laboratory and otherU.S. facilities under an operating lease expiring inMarch 2023 . These leases require us to pay taxes, insurance, maintenance and minimum lease payments. There were no material changes during the three months endedMarch 31, 2020 outside of the ordinary course of business and in our specified contractual obligations as disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2019 filed with theSEC onFebruary 28, 2020 .
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