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spk02: Thank you for standing by, and welcome to the Akoya Biosciences first quarter 2022 earnings conference call. At this time, all participants are on listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question at that time, please press star then 1 on your touch-tone telephone. As a reminder, today's call is being recorded. I would like to introduce our host, Mr. Priyam Shah, head of investor relations. Please go ahead, sir.
spk04: Thank you, Operator, and thank you to everyone who is joining us today on this call. I'm Priyam Shah, Head of Investor Relations at Akoya Biosciences. On the call today, we have Brian McElligan, Chief Executive Officer, and Joe Driscoll, Chief Financial Officer. Earlier today, Akoya released financial results for the first quarter ended March 31st, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements with the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. For the list and description of the risks and uncertainties associated with ACOIA's business, please refer to the risk factor section of our Form 10-K filed with the Securities and Exchange Commission on March 15, 2022. We urge you to consider these factors, and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 5, 2022. ACOIA disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. Lastly, ACOIA will be participating in the upcoming Bank of America, UBS, and HC Wainwright investor conferences throughout May, and we hope to see many of you in person while we're on the road. And with that, I'll turn the call over to Brian.
spk01: Thank you, Priyam, and good afternoon or evening to everyone, and thank you for joining us today. Akoya had a very strong start to 2022, highlighted by the full commercial launch of our new phenocycler fusion system, the industry's fastest and most powerful spatial biology solution on the market. The first quarter was another record revenue quarter of $16.9 million, representing 38% growth over the prior year. During the quarter, we sold 51 instruments consisting of 14 phenocyclers and 37 phenon imagers. When you combine the four pre-release fusion instruments shipped at the end of Q4, as of March 31st, we have sold 28 of the new fusion instruments, resulting in an install base of 23 combined units of the phenocycler fusion system and five standalone fusion installations. We believe the strong initial adoption by new and existing customers of COIA, further demonstrates the confidence in our platforms. Our Q1 performance represents a signature quarter for Sequoia as it is the direct byproduct of the post-IPO commitments and investments made to scale our commercial organization and product development efforts. The launch of Fusion, our expanded commercial team, and strong execution were key drivers behind our solid performance. We expect this theme to continue through the remainder of the year as we launch new spatial biology solutions and gain additional momentum in the market. Here at Akoya, our sole focus is spatial biology. We have catalyzed the rapid growth of the industry over the past few years. The speed and robustness of our industry-leading optics and our cycling technologies are enabling whole slide, single-cell spatial phenotyping to become the go-to method for tissue analysis. Our platforms meet the needs of discovery, translational, and clinical customers across research verticals such as immunology, oncology, neurobiology, and more. We have installed nearly 750 instruments globally, which have been referenced in over 530 high impact publications. 530 publications more than doubles the number of publications we had at this time last year. The large install base is a confirmation of our success to date. and the rapidly accelerating publications is a key leading indicator that this trend will continue. In our continuing efforts to drive adoption of our spatial biology platforms, we embarked on a world tour starting in March of this year. Our team is holding seminars across 29 cities globally for hands-on demonstrations of the phenocycler fusion and to discuss our customers' spatial biology needs. We have been pleased with the overwhelming positive feedback received on the tour, and this, coupled to other high impact sales and marketing efforts, has enabled us to build a robust and growing pipeline of opportunities to support our commercial objectives in 2022. Our aim in the development of the phenocycler fusion was to improve customer workflow by providing the combination of speed, plex, and throughput that discovery and translational researchers desire. Additionally, by delivering the platform as a modular system, our customers can perform HyPlex discovery studies on the phenocycler fusion and then use the fusion as a standalone system to perform high-throughput validation studies. We are essentially providing two workflow solutions in one platform. Enabling both HyPlex and high-throughput across whole tissue samples enables our customers to do spatial biology at a scale never before possible. To support this accelerated workflow, the phenocyclic fusion platform also has a proprietary file compression algorithm that can reduce file sizes from terabytes to gigabytes, making data analysis, sharing, and storage a much simpler task. At the AACR meeting in New Orleans last month, we were excited to share the full data set of our HyPlex antibody modules with over 100 Plex markers for deep spatial phenotyping using the phenocyclic fusions. This expanded capability demonstrates the breadth of unique cellular interactions that we can capture, giving researchers unprecedented insights into tumor immune biology. Throughout 2022, ACOYA will continue to expand both our antibody content menu and multiplexing capability as we move to commercialize these higher plex modules. Our commitment to increasing speed and throughput is ongoing, and we plan to release workflow improvements that drive discovery throughput from 10 samples to 30 samples per week on the phenocyclic fusion. The fusion standalone for biomarker validation already enables throughput of over 100 samples per week. Also previewed at AACRO was our new universal protein chemistry that will further accelerate biomarker discovery and validation. This new assay combines the core components of our CODEX assay with the high sensitivity of our OPAL assay. The combination into a single method will simplify our phenol imager workflow and bring more value to our customers, simplifying panel design, automation, and will drive higher platform utilization and reagent revenue. The universal chemistry technology will allow us to own the biomarker journey from discovery to clinical research. Biomarkers discovered on the phenocycler fusion will be validated on the fusion. and then will advance to larger-scale studies on the phenohemiger HT. Commercial rollout of the universal chemistry will commence at the end of this year. Okoye also remains committed to providing a true multi-omic platform. We will be delivering a suite of whole-slide spatial transcriptomic solutions on the phenocycler fusion. Our first product launch for RNA analysis comes out of our partnership with Biotechnique. which is designed to automate their RNAscope chemistry on our phenocycler fusion system. As many of you know, RNAscope is the industry's most widely adopted solution for spatial RNA with over 4,500 publications and thousands of customers. We expect to launch RNAscope on our platform later this year and anticipate it will be used primarily for targeted applications and validation studies in the lower Plex range. Simultaneously, for upstream and broad-scale RNA discovery applications, we are working on our own proprietary spatial transcriptomics technologies, which will enable us to offer up to 1,000 flex capability. We expect to launch this proprietary spatial transcriptomics solution in 2023, and we'll provide an update at the AGBT conference next month in Orlando. In the late translational and clinical markets, partnerships are central to our success. Our Advanced Biopharma Solutions Group, or AVS, out of Marlboro is fundamental to this effort. We continue to see rapid expansion of our pipeline of translational and clinical trial studies run through AVS. And as with our total revenue instrument placements, Q1 was a record quarter for our AVS business. ABS is central to ACOIA's aim to extend our spatial platforms, workflows, and reagents into higher-value clinical applications, supporting clinical trial enrollment and diagnostic assay development. The CLIA certification of our ABS lab, our network of KOL partners, and the robustness of the PhenoImager-HT workflow are key drivers of our ongoing success in the translational and clinical research markets. To guide us on our clinical journey, we recently announced the appointment of Dr. Ehab El-Gabri as Chief Medical Officer. Ehab brings over 20 years of leadership in pathology and IVD development, critical knowledge that will help drive Akoya's vision of advancing spatial phenotyping in precision medicine and cancer care. To summarize our first quarter update, we are pleased with our strong financial and commercial performance, We continue to expand our leadership position in the spatial biology market and remain focused on the following initiatives for the balance of the year. First, continued adoption of our newly launched fusion instrument standalone or paired with the phenocycler. Second, drive further workflow and speed improvements on the phenocycler fusion and launch additional protein panels, RNA capabilities, and our new universal chemistry. And third, continue to partner with leading biopharma and industry KOLs to drive the adoption of our platform in translational and clinical research. And with that, I will now turn the call over to Joe to discuss our financial results. Joe?
spk06: Thanks, Brian. Hello, everyone. As Brian highlighted, total revenue for the first quarter of 2022 was $16.9 million, as compared to $12.2 million in the first quarter of 2021. representing 38% growth. Product revenue, which includes instruments, reagents, and software, was 13.3 million compared to 10 million in the prior year period, representing 34% growth. Within product revenue, instrument revenue was 8.3 million compared to 6.7 million in the prior year period, representing growth of 24%. We had another strong quarter with 51 total instruments sold of which 14 were pheno cyclers and 37 were from the pheno imager portfolio. The total installed base of instruments is now 748 as of March 31, 2022, which includes 196 pheno cyclers and 552 pheno imagers. We are pleased to announce that as of March 31, 28 fusion instruments have already been shipped including four early access purchases shipped in Q4 of 2021 and we now have a total installed base of 23 for the combined phenocycler fusion system sold either directly as a combined system or upgraded from a previous standalone instrument. The five additional fusion instruments were sold as standalone units. We are currently tracking a very impressive fusion to phenocycler attach rate driven by the ongoing global launch efforts that Brian described. However, our longer-term estimates remain at a 50 to 60 percent attachment rate, factoring in that many labs who have purchased or will purchase the phenocycler may already have an existing microscope or may prefer another microscope based on their specific needs. We will have more clarity over subsequent quarters on purchasing patterns of standalone versus combined units of the phenocycler and the fusion. Reagent revenue was 4.6 million for the quarter versus 2.5 million in the prior year period, representing growth of 82%. Reagent revenue is a crucial part of ACOIA's business model that has started to show tremendous strength since Q2 of 2021. Recall that in Q2 of 2021, we saw a significant improvement in customer activity as COVID shutdowns started to pull back, and we saw a corresponding increase in our reagent revenue to 4.3 million. Therefore, reagent growth in Q2 2022 is expected to be in the 10% to 20% range compared with the 82% growth we experienced in the first quarter. Our annualized pull-through exceeds $30,000 per instrument for both the PhenoCycler and the PhenoImager HT. It is still early days with the PhenoCycler fusion, but over time we expect two to three times the annualized pull-through of the combined unit compared to the PhenoCycler standalone, given that the increased speed and higher plex will in turn increase utilizations. We have disclosed in previous earnings calls that our high-volume phenocycler users achieve annual pull-through of more than $175,000 per instrument, and high-volume phenol imager HT users achieve annual pull-through of more than $200,000 per instrument. So there is a precedent for significantly higher pull-through based on the legacy instruments and reagent chemistry. Looking at the utilization experience of these power users, we are seeing that the discovery to translational high-volume users are either individual or core labs that were often early adopters of the phenocycler, with a strong focus on a single-cell, whole-flight, multi-omics approach, primarily in oncology. The PhenoImager HT high-volume users are more varied, consisting of core labs at academic medical centers, biopharma companies, and CROs participating in high-volume clinical trials, drug development, and a variety of IO applications. We expect that the rollout of our higher-plex multi-omic and universal chemistry solutions throughout 2022 and 2023 will drive meaningful growth in pull-through. Services and other revenue totaled $3.6 million as compared to $2.2 million in the prior year period, representing 58% growth. We are very enthusiastic about the scaling of our services business, namely our advanced biopharma solutions CLIA lab services, and we believe this operation has a significant opportunity to contribute meaningfully to the top line. Following the CLIA certification in November 2021, we are seeing a substantial increase in orders for our service lab and have hired aggressively to support this demand. Gross profit was $10.1 million in the first quarter compared to $7.4 million in the prior year period. This resulted in a gross profit margin of 60%. For the first set of phenocycler fusion orders, we did offer promotional pricing to drive early adoption of the platform. This had a slight impact on Q1 gross margin. Margin was also somewhat impacted by the investments we made in the service lab to support future growth. Operating expenses for the quarter totaled $25.7 million as compared to $12.8 million in the prior year period. Included in this number is $3.2 million of non-cash expenses such as depreciation, amortization, and other non-cash items. This is a reduction from the 27 million of total OpEx we incurred in Q4 2021. Throughout 2022, we will continue to make targeted investments in the company with a near-term focus on the commercial launch of the Phenocycler Fusion and R&D efforts to further enhance our speed, multi-omic menu content, and ABS service capabilities. We ended the quarter with $94 million of cash. The first quarter of each fiscal year typically is the highest cash use quarter of the year due to certain expenditures that only happen once a year, such as bonus payments and other annual payments. In addition, we are maintaining higher levels of inventory to cushion any impacts from global supply chain challenges. This includes making certain prepayments to suppliers to secure a consistent supply of inventory. We project that cash will be in the $70 million range as of the end of fiscal 2022, which provides ample runway to continue to invest in the business. Common shares outstanding are $37.5 million as of March 31st, and fully diluted shares, including the impact of outstanding options and warrants, totals $39.4 million. To summarize, we had another record-breaking quarter with $16.9 million in revenue, a 38% increase over Q1 2021. We sold 51 instruments in Q1 across the product portfolio, and the initial sales of the fusion instrument have exceeded our expectations. We remain very confident in our ability to deliver strong growth this year, barring extensive lockdowns in China, which may impact our distribution capability in Asia Pacific if they remain in effect longer than expected. At this time, we are increasing our full year 2022 preliminary revenue guidance range to 70 to 73 million as we continue to see tailwinds for our business and the spatial biology market. Now, I'll turn it back over to Brian for closing remarks.
spk01: Thank you, Joe. In summary, we are very pleased to report a strong quarter and announce exciting new developments as we track the launch of the phenocycler fusion program. expand our menu offerings, and build on our first mover advantage in the clinic. We are thankful for the hard work of our fellow dedicated Okoyans as well as for the support of our customers and shareholders. Okoya remains very well positioned for growth and we are excited about the opportunities that lie ahead as we deliver new spatial solutions from the discovery to the clinical markets. At this point, we will open up the call for questions. Operator?
spk02: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touch-tone telephone. Again, to ask a question, please press star then 1. One moment, please. We have a question from David Westenberg of Piper Stanley. Your line is open.
spk03: Hi, guys. Thank you for taking the question, and congrats on the good quarter here. I'm going to go ahead and – I hope you don't mind. I'm going to go ahead and – I think you commented that, you know, you don't really know the behaviors of the – it's so early in the fusion launch. But, you know, I do think it's so important to the story. So I'm going to try to press my luck a little bit. And, you know, if you guys say no, that's perfectly fine with me. You know, starting with, like – Placements are really good. Can you just kind of maybe remind us about the seasonality of the business? I typically think of a business like yours as having, you know, with funding cycles in Q3 with, like, NIH budgets, and then, you know, of course, the budget flush in commercial with Q4, but you had a nice beat in this quarter, so... You know, can you maybe walk us through that seasonality and how you were able to, you know, get a lot of good instruments this quarter?
spk01: Sure. Yeah, so thanks, David. We really appreciate your time. I'll let Joe handle that question.
spk06: Yes. So the seasonality in our business has been consistent for the past few years. So Q1 is typically the lowest quarter of the year. Q2 is generally a little bit better. Q3 is a little bit better than Q2. And then Q4 is generally a step up of several million dollars from Q3. So we expect that trajectory this year. So from the 16.9 we did in Q1, you should expect Q2 to be somewhat higher than that, and Q3 to be a little bit higher than Q2, and then the Q4 kind of budget flush, as you noted.
spk03: Okay. Well, I mean, it just makes the placements pretty, you know, exciting. So can you, and again, I know you talked about not really wanting, you know, talking about how early it is, but, you know, you have mentioned that with the fusion, you do expect the phenocycler consumables to, you know, increase, at least in that early trends. I mean, are you seeing an immediate bump? And I get that, you know, you said that you don't know yet, but I do want to press my luck a little bit with that.
spk01: No, look, it's a fair question. And I think the reality is, David, with most of the shipments, well, frankly, all the shipments save the four happening throughout the quarter, and generally installations and trainings happening a month or two following that, that's why we're sort of saying it's too early because they're literally just getting installed. Then, you know, but again, just to reiterate what we talked about on the prior comments in the call, With that increased speed relative to the phenocycler, there's an expectation that the average plexing will go from, call it a 25 would be the median, up to closer to 50. And then the samples per unit time is also going to increase. So you have a revenue per sample bump and you have a sample per unit time bump. And that's why in the comments we're talking about a two to threefold expected pull through increase over the phenocycler alone.
spk03: Got it. Okay. You got it. No, that's really helpful. Can we talk a little bit about on the competitive landscape? I mean, I think, you know, some of your competitors had a little bit more challenges than you seem to have. I definitely don't, I'm definitely not asking you to throw them under the bus, but I do want to maybe get on, you know, what might be different about your macro or, you know, your target customer that made your placement or, like, you have a maybe better being expectations relative to some of the others in the space.
spk01: And specifically the challenge that you're referring to are COVID-type challenges, you know, the ones we've been talking about.
spk03: COVID-type challenges, exact. I mean, a lot of them calling out COVID-type challenges, getting into labs, the sales force, you know, that kind of thing.
spk01: So, you know, I think one way to think about the specific COVID challenges, for example, as you look at China and certain other countries, um, geographies, we're still, um, you know, 60, 70% instrument revenue driven. And, um, so a lot of our revenue is driven on the instrumentation side. Um, if we were heavily, if, you know, we were 80, 70% consumables, it might be a different story, but I, but I think because we're so heavily instrument dominated, um, and we're able to get those instruments placed in those geographies, um, that might be one reason why, um, that there was perhaps less of an impact.
spk03: Got it. Okay. That's helpful. And then, you know, there's a lot of attention in spatial biology at HBT. I mean, you look at the gold, the silver, the sponsors all the way down the line. I mean, I think like two-thirds of the top tier sponsors at HBT are spatial biology companies. Any thoughts to what might come out of there? Any thoughts to maybe some freeze in acquiring your product due to the fact that there's some interesting stuff coming out of AGBT?
spk01: Well, so maybe take those in reverse order. I don't anticipate any freezing of our purchases. I think as we look at the robustness of our pipeline, its breadth and depth, and the eagerness for people to have a solution that works today that's got the capabilities that we already talked about, we don't anticipate a freeze. But to the first part of your question, what to expect at AZBT, I don't know what they're going to come across with, but I think our main point is, I think as you noted in your note, we have largely been focused on protein, and now the reason why we're spending so much energy at AZBT is with the capabilities now of the fusion and the expanded RNA team, we now have the energy capabilities and technologies to go multi-ohmic. And I think that's the trend that you're going to start to see is more multi-omic. But, again, speed is becoming a standard mantra in the market as a requirement, and I think that's an area where we still have a lot of headroom.
spk03: Got it. Okay. And actually, great, because that's a great segue into my next one here, and that is why do you think it's – And this is my last question. Why do you think it's going to be a protein provider adding transcriptomic or RNA versus the other way around? I mean, what kind of advantages do you think you have going after it from your angle?
spk01: And I'll jump off. Thank you, David. I really like that question. You know, what first comes to mind when you ask that question is image acquisition and image processing. And we've got decades of experience in that. So the underlying microscopy technology, the image analysis methodologies, and the ability to do that at both high throughput and high plex, that is a capability that is a profound challenge to be great at. And I think that's an area where I think starting with protein provides us, as you layer into multi-omic, provides us a great technology foundation to build upon.
spk03: Okay, perfect. Thank you very much. Good and grats, guys.
spk01: All right. Thanks, David. Thank you.
spk02: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then one on your touchtone telephone. Our next question comes from Drahad Savant of Morgan Stanley, your line is open.
spk07: Hey, guys. This is Edmund on for pages. Thanks for taking the questions. I've been hopping around calls. Hey, hopping around calls tonight, so apologies if I missed this, but... Just wondering, what is the expected pull-through revenue of a combined phenocycler fusion unit a year after installation, and how would this pull-through revenue differ between a phenocycler and a pheno-imager HT?
spk06: Yeah, so today, just with a phenocycler paired with a third-party microscope, we're doing about $32,000 per instrument on average of pull-through. So with the With the phenocycler paired with the fusion, we expect two to three times that pull through just based on the higher speed, the higher flexing. So that's really the theory right now. And so we haven't really seen it in action yet. These instruments are just getting installed as we speak. But that's kind of our outlook. And then in terms of an HT pull-through, so today on average it's a little over $30,000. You know, we think that number is going to grow. I mean, there's no question about it. You know, there's a lot of things we've got going on, universal chemistry, things like that. And so we want to get that number up to, you know, 50 or 60,000 over the next several years. So that's kind of how we're looking at reagent pull-through.
spk07: Got it. Thank you for that color. And I know it's still early days, but based on your conversations, are you seeing any specific customer types that seem to be gravitating more towards the phenocycler fusion?
spk01: You know, today, the phenocycler fusion customer base looks largely similar to the original phenocycler customer base. I think the one potential exception is it does have It is more attractive to core labs and service labs that are making money on a per-sample basis for obvious reasons. With higher throughput and higher plexing, now you can do more samples per unit time, and you can charge more per sample. So it is more attractive to the service groups. But, again, in terms of broad strokes directionally, the customer base is largely overlapping with what we see with the current phenocycler standalone install bases.
spk07: Got it. And for my last question, I was wondering if you guys can talk about the customer excitement around the new universal chemistry antibody that's launching at the end of this year. And what type of projects do you envision being early adopters?
spk01: Yeah, it's a good question. So the customer base and the excitement around the universal chemistry, it's really those groups that are currently using, for example, the current opal chemistry on the HD system to design panels. And the early excitement around the underlying technology of the universal chemistry, the excitement is for two reasons. Number one, it leverages our antibody base for codecs. So having an inventory of antibodies that have been tested. But equally important, the excitement is around the simplification of the automation and the workflow to get panels up and running. So the excitement there is around their ability to build panels faster and to have a larger library of panels. And I think that the The early customer bases, I think, like your phenocycler fusion question, are likely to be those same customers that are running, you know, large studies, large number of panels, and developing new panels. So I think a lot of it's going to be, frankly, around new panel development because of the benefits it provides.
spk07: Great. Thank you.
spk02: Thank you. Our next question comes from Kyle Mikeson of Canaccord Genuity. Your line is open. Thank you.
spk05: Thank you. So this is Alex McKayson on for Kyle Nixon. I just want to pause this in advance. I've had to jump the call a little bit, so if you've already touched upon this, apologies. But given that it's already been on the market for a few months, what do you think from customers that gives you confidence that the phenocyclofusion is differentiated from other conceit-to-illness or emphasis, and what attributes contribute to that differentiation? And my second question would be, can you speak to the proprietary nature of a client's intellectual property? And moreover, are you confident that the company is not prone to litigation and other IP challenges next time?
spk01: So let me let me take those in reverse order. Everything that we're selling on the market is covered by issued intellectual property. So we have a really strong patent portfolio. The second part, the first part of your question, I was a little bit choppy. So let me answer. Hopefully I hit your question. So the differentiation of the phenocycler fusion versus other products on the market really comes down to two things. Number one is the speed of that workflow, the ability to do a large number of samples per unit time, and an understanding that we have got a foundation to continue to build on that speed to have a platform that's future-proof. The second thing that is differentiating about it is that it is true whole slide multi-omic. That's why we're talking about the forthcoming RNA chemistries at HBT. A huge benefit that our customers see is the ability to have this dual workflow. Classically in the life sciences markets, instruments are rolled out and they're sort of monolithic standalone instruments that do a single thing. What we have with the phenocycler fusion, as I noted in my earlier comments, is the ability for this system to really do two workflows, and that's very unique. It can do high-plex multi-omic discovery, and when you identify something that you then want to validate, you can use the fusion as a standalone for more focused panels at much higher throughput. So you can swing your workflow between doing a 100-plex protein study, for example, And then you can run a hundred samples in a validated manner on the fusion standalone. So those are really the three things. I think the speed, the multiomic, all of this being whole slide, single cell, and thirdly, the, um, the dual workflow. And given how quickly our pipeline has expanded since the announcement of the, of the phenocyclic fusion at spatial day in December 17th, we feel really confident in the ability of this growing pipeline to meet our expectations for the year. Got it. Thank you very much.
spk02: Thank you. Sure. I'm showing no further questions at this time. I'd like to turn the call back over to Brian McCulligan for any closing remarks.
spk01: All right. Well, thank you, Valerie, and thank you, everyone, for your time. We really do appreciate it, and we look forward to catching up with each of you soon in the coming weeks and months. Have a great rest of the day and rest of the week.
spk02: Thank you. Ladies and gentlemen this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.
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