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Post by matt on Oct 10, 2019 13:47:41 GMT -5
My sense for success in Brazil is not whether Afrezza sells $20m plus per year in Brazil but more the following: 1. Does mnkd sell enough to lower the average cost of goods sold here in the States, thus increasing margins, which may allow them to lower price in the States. 2. Does Afrezza get a better label or at least officially eliminate the need for refrigeration in Brazil. 3. How popular does it become in the pwd community in Brazil. As far as retail sales revenue, as many have mentioned, I would not count on very big numbers. GLTAL's!!! Here is my take-away from looking pretty hard at the Brazilian market, both now and over the past few decades: 1. Maybe. See comment 3. 2. I don't see how there will be a better label without better studies. CMED was established, in large part, to keep foreign drug companies from constantly ratcheting up prices for Brazil and the criteria they use to price new drugs requires that the drug do a better job of treating the disease than something already on the market (the other two permitted criteria are same efficacy with fewer adverse events and same efficacy with lower total cost of treatment). If the drug does not meet this requirement it is priced similar to other drugs containing the same active ingredient. See the table that I did above for competitive products and ask whether that pricing would be break-even for Mannkind given that Biomm has to make something on the deal as well. The Preço Fábrica (PF), or "Factory Price, set by CMED will determine the success or failure of Afrezza. 3. That will depend on CMED pricing in large part. If CMED prices Afrezza similar to Novolog and Humalog, then Afrezza may get its fair share of the market unencumbered by formulary restrictions. However, if the permitted PF is less than $20 for a comparable supply of Afrezza then it is not clear that this can be a profitable market. My guess, and this is purely a guess, is that Biomm is trying to get an introductory price as an innovative drug that does a better job of treating diabetes than products already on the market . However, that comment on the US label that points out that reduction in A1c was less than with Lispro may come back to haunt the company. As the regulations read in black and white, and based on what FDA has approved on the label, it is hard to argue that Afrezza meets any of the criteria for a Category I innovative drug, which then requires it to be a Category II drug where the price is set according to cost of treatment with drugs marketed for the same therapeutic indication and with reference to the same active ingredient. Trumpeting that Afrezza is "just insulin" is not helpful if the authorities are looking to price it based on market comparables. Recall that when Biomm attempted to have approval of Afrezza fast tracked they were shot down in part because ANVISA declined to characterize Afrezza as an "incremental innovation", looking only to the active ingredient (Amphastar supplied insulin) and not at all at the delivery method. Indeed, if the authorities focus on insulin as the comparable active ingredient without regard to the delivery method then it will be hard to get economically acceptable pricing. That is good for the diabetics, but not so good for Mannkind. While that may seem like CMED stacks the deck to keep foreign pharmaceuticals out of Brazil to give the local manufacturers a leg up, that is precisely what was intended when CMED was established. It is not a level playing field for foreign companies even if they have a local partner.
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Post by matt on Oct 10, 2019 7:47:17 GMT -5
This post was too long for me to actually read but I am amazed how much time and effort you put into researching mnkd. I spent a majority of my career in international operations for a large industry player with Latin America among my first responsibilities and, as such, I know a lot about how price controlled drug markets and international insurance plans work. I spent far less time researching this than you might expect; it is kind of like riding a bicycle. If you want to understand whether Brazil is really an upside for Mannkind, you need to understand which of the numerous published prices apply to the exporter, because Mannkind and Biomm will share that amount, and what price the average diabetic in Brazil will pay because price has been a significant impediment to adoption in the US where Afrezza is not on formulary. The comparison numbers come right off the monthly spreadsheets that CMED publishes, all I added was the GoodRx column and that took less than five minutes to create. If an investor does not understand the data at this summary level, then they cannot make an intelligent decision about whether Brazil will make a difference to Mannkind's future, and they will have no understanding of possible reasons why the CMED price lists for Afrezza have yet to be released. The alternative is guessing, and I prefer not to guess when there is data readily available.
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Post by matt on Oct 9, 2019 7:39:49 GMT -5
PBMs negotiate with pharmaceutical manufacturers for rebates on products selected for the formulary. Technically, this is not the case. If a manufacturer and a PBM negotiate a deal effectively to exclude another provider from the formulary then this is generally interpreted as crossing the line with respect to anti-trust law. Similarly, contracts that require the PBM to fill a particular number of scripts with the manufacturer's product may run afoul of various federal and state laws on kick-backs, especially if there are lower priced products in the market. All of this may seem like a distinction without a difference, but that is not how the Justice Department views the world. However, a manufacturer can make a unilateral offer to grant a rebate based upon the percentage of scripts filled by the PBM that use the company's product. In such a contract the PBM is not obligated to buy anything at all, it can fill scripts with any brand of medication, and it is always free to accept rebates from other manufacturers. This is equivalent to a Ford dealer offering $2,000 cash back on the purchase of a new car. If the customer buys a Ford then the dealer is legally obligated to pay the money, but the consumer is always free to buy a Chevy and forego the rebate. It is the lack of mutual promises that makes rebates legal which is why PBMs choose from the rebates on offer rather than negotiating deals directly. That said, everybody in the industry knows how the game is played!
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Post by matt on Oct 8, 2019 12:49:14 GMT -5
Castagna also spent some time two conferences ago talking about the low cost of Phase 1 trials. Was he indicating some movement within the pipeline or blowing smoke? Inquiring minds want to know.., He might have just been commenting in general about the cost of Phase I, not specifically referring to a particular Phase I trial. In general I would agree with him that any Phase I trial using an already approved drug should cost relatively little, but then there is not much at state in any Phase I trial because most don't use patients with the actual disease. Showing that the drug is effectively delivered through the lungs into the blood stream in a small group of healthy volunteers should generally a simple exercise. The operative question is whether a Phase I trial on a generic drug is enough to get any third-party to partner with MNKD before the much higher costs of Phase II and III kick in. A collection of completed Phase I trials but without partners doesn't create value; a string of Phase I trials accompanied by partnership deals would. Generics is a tough place to play with new delivery methods simply because the payoff may not be enough to warrant the investment required. UTHR, attempting to keep the TreT train moving, is an exception rather than the rule.
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Post by matt on Oct 7, 2019 11:20:52 GMT -5
Any number given will be twisted to the full extent of people's imagination to fit their agenda. That is indeed a risk, but just because the numbers are out there does not mean the comments are unfair. I did merger & acquisition analysis for a substantial part of my career with a major industry player, and when doing those reviews I could always find spots of sunshine and identify some looming storm clouds on the horizon. No company is ever 100% good or bad; the trick is to take a balanced and realistic view of the overall enterprise. Those who discount the ability of Vdex to have a better understanding of how to market to patients forget the structure of the market. Mannkind does not market to the patient; mostly they market to the physician and in some cases the PBM. The patient pays, directly or indirectly, but most have little say over what goes on the script itself. Vdex is not a customer either, but they are much closer to one making the buying decision for the patient than Mannkind is, and that gives them better visibility to the real dynamics. Now you can fault Vdex for building an entire business around a single drug that they didn't control or didn't at least have an inked distribution agreement of some sort, but they know at least as much about getting Afrezza into the hands of diabetics as the revolving door that passes for a sales department at Mannkind. To be fair, both Vdex and Mannkind need a lot of work.
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Post by matt on Oct 4, 2019 9:20:42 GMT -5
I had expected the official prices for Afrezza to be released in the October update from CMED put that didn’t happen. The official web site gets updated on the 1st of the month (or a few days later) so we will have to wait for November. It took me a while to figure of the various prices and how pricing works in Brazil so I wrote the summary that follows and I will go ahead and post this even in the absence of officially announced Afrezza pricing. There may be some minor errors in this description since I don’t speak Portuguese, but it should be substantially correct. Prices are set by an agency of the government that goes by the acronym of CMED and these official prices are adjusted once a year in March (prices can go up or down, but usually down assuming neutral exchange rates). ANVISA is like the FDA, they are the regulator that decides if a drug may enter the Brazilian market, but once a drug is approved to be sold CMED regulates the price. CMED sets three different prices: PF (Factory or Wholesale Price): This is the maximum price that can be charged by the manufacturer or importer to a pharmacy. Private pharmacies and private hospitals will pay this price unless the manufacturer decides to offer a discount. The other two prices can be computed directly from the basic PF as described below. PF is the price that Biomm will receive for most Afrezza sales and this price will be divided between Biomm and Mannkind. Most international distribution agreements are written to guarantee the foreign distributor a modest profit, typically about 5% of sales before income tax. The wholesale price (PF) must cover the selling expenses of the distributor (Biomm), the distributor profit, import duties, and international transportation costs with the excess going to the manufacturer (Mannkind). Most of the economic risk is on the manufacturer in these deals, but the manufacturer enjoys most of the economic upside as well. Future changes in PF will have minimal impact on Biomm and will be substantially absorbed (whether good or bad) by Mannkind. PVMG (Government Price): This is the maximum price that can be charged to any government entity (national or state). The PVMG is 20.16%% lower than the PF, so if the wholesale price charged to a retail pharmacy is $1.00, then a government entity pays about 80 cents. This 20% discount is compulsory on all medicines purchased by government entities and that would include any Afrezza sales. PMC (Maximum Consumer Price): This is the maximum retail price that pharmacies can charge consumers. The price covers the wholesale price (PF) plus an allowed pharmacy profit of 38.2% plus ICMP and PIS taxes. ICMP is a sales tax, but unlike the US where sales taxes are added to the selling price at the checkout register, the sales tax is included in the selling price. The ICMP rate is between 17 20% depending on the state (18% is most common), and two states have a reduced tax rate of 12% for generic drugs. The PIS is an extra tax of 15.9% imposed on imported drugs which gives locally produced generic manufacturers an automatic price advantage over branded import products. Afrezza will be subject to both the ICMP and the PIS taxes. Most Brazilians buy their prescription drugs at the local pharmacy and pay the PMC for their state. Patients that are poor can get some medicines free from the government, but since the government buys at a 20% discount to the normal wholesale price this is not necessarily good for manufacturers. The government owned or subsidized pharmacies, the “Farmácia Popular” or Popular Pharmacies, have a limited selection and most of the drugs are low priced, locally produced, generic drugs. There are several government owned drug factories the largest of which are Farmanguinhos (Rio de Janeiro) and Fundação para o Remédio Popular (Sao Paulo), that produce about 80 critical generic medicines. These are the drugs that make up the bulk of the government formulary. Patients with qualifying chronic diseases, including diabetes, are also eligible for free drugs from the Farmácia Popular. The insulins from the government owned producers have no PMC price because they are sold only to the Farmácia Popular and are intended only for free distribution. Some posters have made a big deal out of the fact that diabetics and other patients with certain chronic conditions are entitled to free drugs, which is true to an extent, but patients are only entitled to the specific drugs listed on the government formulary. For diabetes the formulary is just six drugs (one form of glyburide, two dosages of metformin, one long acting form of metformin, one NPH injectable insulin, and one recombinant injectable insulin). The insulins are supplied in the typical 100U / 10ml multidose vials. The government owned drug manufacturers have a PF price for a 10ml vial of NPH insulin of 21 Brazilian Reals, which is about $5.00, and a vial of recombinant insulin of 31 Reals, which is about $7.50. When these are sold to the Farmácia Popular, the sales are eligible for the compulsory government discount making the net government purchase price (PMVG) $4.03 to $5.95 per vial; some states exempt these sales from ICMP tax and some do not. The other ANVISA approved insulin products, such as basal insulins and rapid acting formulations, are not on the government formulary so don’t expect to see Afrezza listed either. Since foreign suppliers cannot compete with the ultra cheap prandial insulin products, most of their business relies on rapid acting formulations and value added products such as pre filled injector pens. These products are probably the best comparison for Afrezza as the foreign importers are subject to the same regulations as Mannkind. Biomm has a locally manufactured biosimilar to Basaglar that was award a price about 30% higher than the Sanofi price for Lantus, and because the Sanofi product is imported Lantus is also subject to the PIS tax. Government policy in Brazil is designed to make the country self sufficient in the production of critical medicines without the need for any imported drugs to satisfy those needs. The fact that Biomm got a premium over Lantus for a biosimilar is reflective of the desire of the government to keep their limited foreign exchange reserves in the country rather than see them go to foreign drug companies. Biomm will likely not get such preferential pricing treatment on Afrezza since it is not manufactured in Brazil. Price controls are as much about conserving foreign exchange reserves as they are about controlling healthcare costs so foreign companies will always be at a disadvantage. Relatively few Brazilians have private health insurance, only about 20% of the population have comprehensive health insurance comparable to a typical US plan, and the vast majority of insurance plans only cover prescription drugs administered during a hospital stay. If a free drug is not available from the Farmácia Popular, the consumer pays the PMC price at their local pharmacy for the drug of their choice. Since few insurance plans cover outpatient drugs the PMC represents an out of pocket expense for the patient but, in countries with price controls the economic burden on the patient is much less than in the US. If you compare the dollar based PMC 20% column in the table to the GoodRx price, you can see that the full retail price, including taxes, of drugs in Brazil is generally 10% to 30% of the lowest GoodRx price, which is presumably stated before state and local sales tax. There are more than 120 different insulin formulations and dosages available in Brazil so I am not going to list them all, but the ones shown in the table below are probably the most relevant comparisons. If you want to see the complete list of drugs, the latest PMC and PMVG spreadsheets can be downloaded in Excel format from this link: portal.anvisa.gov.br/listas-de-precos. To find competitive products search the first column of the spreadsheet for the phrase “insulina” since the sheets are arranged by active ingredient. Note that the first three products listed in the table below are locally manufactured for sale to the Farmácia Popular so there is no PMC price, just a PF and PMVG. The first three columns are prices in Brazilian Reals while the last four are in US Dollars (the exchange rate is 1 Real to 0.24 dollars). The PMC prices shown are for the State of Rio de Janeiro where the local ICMP sales tax rate is 20%; the PMC for other states will be slightly lower. Finally, the last column is the lowest price shown on the GoodRx site for the comparable product, and that price includes the effect of a discount coupon is some cases.
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Post by matt on Oct 4, 2019 8:09:08 GMT -5
Not to mention that the Big 3 insulin companies are doing business in Brazil and may be influential with the Brazilian regulatory authoritie$. Not so much. If you look at the prices for all insulin products in Brazil, none of the traditional players is getting rich down there. Recombinant insulin (Humulin R, Novolin R) have a maximum importer price of about $9 for a 10ml vial, which competes with the locally-manufactured product which is free. Humalog and Novolog are about $19 per vial. Meanwhile, Biomm was awarded a price for their locally produced Lantus biosimilar that is about 30% higher than the Sanofi price and the Biomm product does not attract the extra 16% PIS tax on imported drugs. If the big three have any influence with the regulatory authorities, they are not using it very well. I wrote up a summary of how pricing works in Brazil that I had planned to post along with the price for Afrezza, but I may post that today as it might clear up a few questions. It also makes clear how ANVISA and CMED operate and who pulls their strings (hint: not foreign companies!).
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Post by matt on Oct 3, 2019 14:46:31 GMT -5
Yeah, I was surprised not to find it in this month's spreadsheet as well. The ANVISA site suggests that there are other sources for the data, but it is not clear to me what those are and in any event I don't have access to them. Biomm may be in negotiations with CMED trying to get a better price, or there may be some administrative delay that we are not aware of. Delays are fairly common in Brazil; things don't work down there the way we think they will work, but it gets done eventually.
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Brazil
Oct 3, 2019 8:06:34 GMT -5
Post by matt on Oct 3, 2019 8:06:34 GMT -5
FYI, the updated pricing matrix for October was posted by CMED site last evening. There is still no listing for Afrezza, Mannkind, or Biomm (other than their biosimilar glargine insulin product). The next update is due November 1 and it usually takes an extra day or two to get posted so expect the data around Monday, November 4.
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Brazil
Sept 30, 2019 16:51:31 GMT -5
sr71 likes this
Post by matt on Sept 30, 2019 16:51:31 GMT -5
Potential vs projections. This is hardly worth a fight over. Nobody can really know how Afrezza sales will grow in Brazil. Unfortunately, shareholders have no choice but to wait and see, right? That is correct; you can argue all day but until you see real numbers none of it matters. What might be relevant though is how well Biomm does with their other products, for example they sell a biosimilar that competes with Basaglar and a biosimilar of Herceptin. Their sales for 2018 were Reals 1566 thousand = US$377 thousand with losses of more than US$10 million. They are a real company with an established presence, but that seems like a pretty modest sales result. It might take them some time to make a dent in the insulin market since they will be going up against Sanofi, Lilly, and Novo plus some local producers. BTW, the pricing matrix has not yet been updated for October. Last month it came out after the close of business on September 2nd so we may not see it for a few days. I will post it when I have it.
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Post by matt on Sept 29, 2019 7:22:24 GMT -5
"For imported drugs there are no issues with formulary restrictions since most private health plans only cover drugs administered while the patient is in the hospital while outpatient prescriptions are almost always self-pay. When drugs are cheap enough at the pharmacy the cost of administering an insurance plan outweighs the savings from bulk purchasing so that levels the playing field between importers. The government controlled price is the maximum price the importer can charge and there is nothing preventing Biomm from pricing the drug lower, but since competitive insulins are priced aggressively in Brazil the manufacturing cost of Afrezza may ultimately be the barrier to being cost competitive in the private market." Matt, are you suggesting our management did not correctly analyze the above? I am not implying anything; I am just stating the facts. Those who cannot afford drugs, and those who have certain chronic conditions (including diabetics, hypertensives, and asthmatics) can get free drugs from the Farmacia Popular. Most such pharmacies are run by the government, and there are also some hybrid pharmacies that will dispense free drugs to the indigent and also sell not-free drugs for cash. Essentially all the drugs available for free come from government owned manufacturing plants that compete with private drug companies. Brazil has two motives to reduce drug prices. One is to limit healthcare costs, and the second is to conserve precious foreign exchange reserves that can be used to import critical items not available on the local market. Brazil traditionally had hyperinflation and exchange controls that made it very difficult to get dollars or Euros, and there is no desire to return to those days. When drugs are cheap, the cost to administer insurance is as much or more than the drug (which is why there was no drug benefit for Medicare when it was created in the 1960's). In Brazil today there are limits to prices on all drugs, imported or not, and all the usual suspects (Sanofi, Lilly, Novo) do business there. MNKD will have to price Afrezza to be competitive with whatever price the competition has accepted as a cost of doing business in Brazil. I am sure management knew the system when they signed up with Biomm, but it may partially an experiment to see how much consumers are really willing to pay in a market unencumbered by restricted formularies. Afrezza can never compete with recombinant insulin that is given away free, but it can possibly compete with injector pens, fast acting analogs, and similar innovations.
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Post by matt on Sept 28, 2019 8:34:37 GMT -5
I believe the shipment of Afrezza has likely been in Brazil for 3 weeks now. Regardless, the difficult thing isn't accomplishing an international shipment (a vast majority of which happen without incident), it is establishing a market for Afrezza in Brazil. I don't see that as an obstacle. From recent posts via Twitter or Youtube - the Medical (Endo) community seem to be very excited and have been talking about Afrezza. My concern is the price point. What will the Gov't allow for a price? Will it be for the MASSES or the PRIVILEGE? Time will tell.... The pricing will be such that only the well-off can afford it. The maximum price is controlled for everybody, but imported drugs carry an extra 15% sales tax and locally produced insulins are very cheap by US standards and are produced in government owned manufacturing facilities. A 100 ml vial of recombinant insulin sells for around $6 in Brazil versus a US price of around $35 after recent manufacturer price reductions. Any Brazilian can get free drugs from the government subsidized pharmacies, but the formularies are limited to locally produced drugs and the list of approved drugs is short with just 6 products listed for diabetics (a three versions of metformin, glyburide, one NPH insulin and one recombinant insulin). Other insulin varieties are not covered by the government so, for example, long-acting glargine insulin would be self-pay. For imported drugs there are no issues with formulary restrictions since most private health plans only cover drugs administered while the patient is in the hospital while outpatient prescriptions are almost always self-pay. When drugs are cheap enough at the pharmacy the cost of administering an insurance plan outweighs the savings from bulk purchasing so that levels the playing field between importers. The government controlled price is the maximum price the importer can charge and there is nothing preventing Biomm from pricing the drug lower, but since competitive insulins are priced aggressively in Brazil the manufacturing cost of Afrezza may ultimately be the barrier to being cost competitive in the private market.
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Post by matt on Sept 27, 2019 10:46:30 GMT -5
Actually, CEO's love going to these events. They get a free trip, free hotel, free meals, link up with other CEO's, maybe get hired by a larger company, family often come along for free, etc, etc. Only the lowly accountant from Hawaii get's sent to Georgia ... and wonder why did they send me here? But, that's mytakeonit I never liked going to those events, but maybe that is just me. The trip is not free (the company pays flight, hotel, meals, etc.) and I think my wife accompanied me on business a total of three times in 36 years of marriage using my accumulated frequent flyer points (of which I had bucket loads). Time to schmooze with other CEO's is extremely limited since you are there to chat up investors, fund managers, and the bankers plus there are meetings to do outside the conference, especially in places like New York and San Francisco. The best part of the meeting is always the taxi ride back to La Guardia because that means you are done until next time, and there is always a next time. It is part of the job, just like anything else. The job is to create interest in the company so that investors will take a position or if they have a position they will increase or at least hold the stock. A lot of investors will only write a check after they have eyeballed the CEO in a one-on-one meeting to figure out if he is for real or just another empty suit that has no idea what he is doing. My impression is that Mike does a decent job of getting investors to hold, but not such a good job of getting them to increase their holdings. If a CEO has had a big impact speaking to a conference it is generally reflected in the stock price within minutes, and that price movement could be either up or down.
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Post by matt on Sept 20, 2019 12:24:26 GMT -5
Translation suggests it is still a case of hurry up and wait. "According to Biomm, the company responsible for manufacturing and distributing the product in Brazil, inhaled insulin should be available for purchase from the fourth quarter of the year, depending on the price registration process by the Drug Market Regulation Chamber (CMED)." As of today, Afrezza is not on the official price list. CMED updates the price list, normally on the first of the month, and it was not listed as of September 2. As I understand the regulations, that does not prevent Biomm from placing a stocking order with MNKD, but it does prevent Biomm from selling any product to pharmacies or the government since the CMED approved price list is a de factor price limit on all sales in Brazil. We should see the next price list in about ten days. Biomm might already know the answer on the pricing decision, but the monthly price list is the only public information I could find and, importantly, it is what the pharmacies have to use to price the product to the final consumer.
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Post by matt on Sept 20, 2019 7:01:54 GMT -5
I contacted them again to find out how best to obtain Afrezza in the UK; no reply to date. I am fairly certain that would be illegal since it is not approved in the UK. You wouldn't need NHS or NICE approval, but you would still need EMA approval. Correct that you don't need NHS or NICE approval for anything that the patient pays for. They would need either EMA or MHRA (Ministry of Health and Regulatory Affairs, the UK version of FDA) to import the drug. Traditionally, MHRA was fairly east to deal with but as the role of EMA expanded the agency shrunk and depended more and more on EMA for drug regulation (it didn't help that EMA was based in Canary Wharf, London). With Brexit upon us (or not, who the heck knows) the Brits may have put more resources into re-staffing MHRA. Once you lose regulatory expertise it is hard to rebuild it quickly. At any rate, I expect that Tanner's business focuses on countries that cannot afford a full-scale drug agency. In many countries if a drug is approved by FDA or EMA then it is legal to import, and any FDA approved drug is legal to export.
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