All right. Good morning. Good afternoon, everyone. Thank you for joining the combined program offered by McDermott Will & Emery and EY on critical business considerations for life sciences and medical device companies amid the COVID 19 pandemic. My name is Steve Bernstein, I’m co-chair of McDermott’s life sciences practice, and we’re thrilled that you’re able to join us. McDermott, for those of you don’t know, is a global law firm with about 22 offices. My own focuses on digital health in the life sciences space and helping technology companies, investment funds, and various other companies deal with data and information in this context. I’m thrilled to turn the program over to my other co-chair, Kristian Werling, who will offer a few additional remarks. Welcome again.

Great. Thanks, Steve. And welcome, everyone. We tried to design today’s program with, with you in mind, understanding that this crisis has been underway for a number of weeks and probably even a full month now. Life sciences companies are coming to, are having to wrestle with this new normal. So, just wanted to give you a high level of the content today. The various panels are going to spend time talking about issues that we think are key to surviving and thriving through this crisis. One of the things that’s top of mind is how this will impact R&D and clinical trials on new products that are underway. So, we’ll have a great group of FDA and regulatory experts speaking about that. Supply chain is a critical concern right now for all companies, and making sure that supply chain is, is robust and place through this, this challenging time. Government assistance programs and ways to get funding, as well as thinking about dealing with creditors, distressed vendors and, and kind of issues related to bankruptcy. So, we hope that today’s panelists will bring you the practical advice that you need on these issues and will be of great interest. One of the things that we would love to do is to make this as interactive as possible. Zoom has a Q&A function that you’ll see on your screen. If you have a question that comes up, our panelists and moderators will be, will be monitoring the Q&A throughout. So, please type in your question, we’ll do our best to answer it live. We may chat respond to you directly, or if we can’t get to it during the event, we will do our best to follow up with you and help get you to the expert advice that you need. Like Steve mentioned, we are thrilled to be partnered with E&Ys Life Science team to bring you today’s event. To get us started, I’d like to introduce Arda Ural from EY’s Life Science transaction services team to give us a few remarks on the, kind of, history of resiliency of this wonderful industry.

Yeah, thanks, Kristian. Good morning, good evening, everyone. Thanks for joining us. Quite a few interests, for 500 people registered, and before I start, we do partner with McDermott, on an annual basis during the J.P Morgan conference. And, I’m just reminiscing, the last time we did this partnership was January 13th, and, boy, what a difference from the outlook we presented on that conference in San Francisco versus like what we’re going to talk through now. Clearly, you know, day and night, the difference, but clearly, there’s a way out of this and then we will discuss the implications, as this Kristian articulated on those four areas. Our panelists will take you through some live and specific, find examples, and will be able to answer questions. I see some questions already started to come in, so please let them come in and then the moderators will take them through the four panels that we’re going to kick off. So, the contrast between January 13th to April 17th, I think manifests itself in a couple ways. Obviously, the unemployment, now we are looking from people 5%, now in June is projected to be 13%. The IMF just came up, this week, this week about the GDP global projections. Now, they adjusted from 3.3% to -3% for 2020. There’s some silver lining in 2021. There is a, you know, I would say, optimistic, 4.7% overall for the U. S and 5.8% for the global. So, we are going through at, what I would call, a historical singularity. There’s no playbook. I’ll show you some data about the prior recessions and how this compares, but this is a different animal we have to tackle with, and there’s a lot of innovation. There are already 160 treatments, including 89 vaccines. There are over 300 clinical trials, half of which are retreating. And there’s, you know, innovation, we’ll innovate our way out of this, for sure, but it’s not in a path we have been there before. So, what that, what I’m going to do is I’ll take you through these five areas. Number one, comparing this to prior recessions. I have quite a few data points, which I would like to share with you on the CEO sentiment, and those data points are fairly recent. So, they would, I would say, still applicable. We will also show you some scenarios and how people think about the U-shape, V-shape. And then we’ll bring it to M&A. What does it mean? We’ are coming from a very strong year in 2019 and we are afraid to make any guesses for 2020. And then the framework which you may consider. The next slide we will start would be the, comparing the COVID 19 with the prior three recessions. In the next slide, you will see.

So, when we look at the three prior ones, we just used the deal volume, this is all life sciences, as a proxy for confidence in deploying capital. We know that when the outlook is positive, corporate well of men and executive teams are willing to deploy capital against the M&A or sell side, buy side, doesn’t really matter. So, they are showing, they are literally are indicating with their capital deployment, how they are looking at. So, when you look at life sciences isolated versus all other sectors combined including, by the way, healthcare and technology, between 91 and 2001, life sciences fared positively versus other negative ones. And in the last financial crisis, the life sciences did better, comparatively, although it was a negative percentage year over year change. Which is, I think, telling us that life science is probably more driven by its own intrinsic and internal dynamics such as loss of exclusivity, innovation cycles, versus availability of cash because of the strong balance sheets, that the biopharma typically possesses an end of strong cash flow. Having said that, this is not applicable universally. For example, if you’re in a medical device sector, which required some elective surgeries to be deferred, or if you are serving healthcare providers in ways that they are not accessible, I think you will see discriminative effects of it. But overall, what we can conclude from the three prior recessions is that life science typically tends to weather the storm better and faster. So, let me switch to the next slide, which is going to show you a couple data points in terms of where we found out the companies are spending their time.

First, when we asked about 75 CEOs, how did you, like this is March 27th, so just think about 20 days makes a big difference, but this is about, you know, how do you tackle the crisis? The response came overwhelmingly that framing the future. So how am I going to measure the government and the market outlook? How am I going to, kind of, make sense of all of that, was the number one response. And then, number two was the triaging. We had another CEO roundtable yesterday with life sciences executives and then they also emphasized overwhelming the insuring employees’ safety and health was very important. Also, liquidity issues also come up as a concern. So, this was a snapshot from March 27th. So, let’s take a look in the next slide, where, as we kind of progress this, through this crisis.

And then, the next question that was asked was that, which of these dimensions will likely have the most impact on your new normal? So, the interesting response was almost 60% of customer and how customers started to behave differently. Realize this is not a life sciences, it includes all, you know, retails and consumer products and all that. But, it has implications on us because it’s going to be digitalizing our operating model. You wanted a higher rate, so our digital capability should be looked in a new normal, again, that’s the one implication for life sciences. But moving on about the sentiment off the CEOs and executives on the recovery scenario is what they are thinking of. Next slide, you will see that, how did they feel about the shape of the recovery?

Obviously, it’s anyone’s guess. It is a modeling, it’s a modelers dream, I think, just having to come through with all these scenarios, but we have two data points here. One is on the top side Roundtable survey that when they were asked, do you see a V-shape, U-shape, or L-shape? So, obviously, the definitions matter. A V-shaped is you’re coming back faster in the last, in the second half of the 2020. Then U-shaped is you’re coming later in the mid to late 2022, 2021. And then a sustained recovery, the L-shape described is like nobody wants to talk about. But, you know, overwhelmingly, CEOs thought that the recovery will be U-shape. We replicated the same question with EYs 2000-people Global Confidence Barometer survey that was done, again late March, called about the same time. So that group also found the U-shaped recovery will be the one. And the, we did yesterday what, almost like less than 24 hours ago, another session with the life sciences CEOs and then they thought they also U-shaped is the one that we should be preparing for. Again, anyone’s guess, but I just want to share the data point with you all with that.

So, in the next slide you will see the implications on, on M&S. So how will you deploy your, your capital? And what would be, the outlook is going to be? And in that one, the number one was conserving, preserving cash and investing in core operations. So, that’s important, like, this is like the moment where cash is king. We know there was a myriad of forecasting scenario modeling, and if you haven’t done so, please, you know, we urge you to, to make sure that your P&L reflects the scenarios on the customer demand elasticity and what you’re going to do about preserving cash for fueling your operations, fueling your growth in 2020 and then, then beyond. So this, the top one is telling us about the 18 percent, the executives are still considering M&A, and I would think that it’s going to come back pretty strongly with the, you know, what were sold assets and then assets that you were looking in thought or value. So, with that, also, the bottom portion of the second data point is also indicating that people are looking at the different variety of strategies and probably observing evaluations is a good one. So, the second to last slide that I want to go is, what does it mean from a cash position perspective for life sciences? When we reported back in January 13th, I was referencing 1.2 trillion of firepower of life science companies combined. That is still there. It’s like a 1 trillion. So, yes, it’s a 20% drop is not insignificant, but the firepower is one trillion, it’s still strong. People just waiting for the uncertainty to, to settle down to pull the trigger on certain assets. And we are aware of some of that activity coming back.

And my final point before I turn it over to the clinical trial and R&D panel is, so this is a framework which, I think, is resonating with our clients. I think we are in the end of the containing the chaos. Now people are focusing on stabilizing their enterprise and then beyond, which is the normalizing for growth, looking beyond. Some of those, you will hear in the next four panels, which I’m looking forward to, I’m going to summarize what I’m hearing in the closing. Be encouraged to ask questions, some already came in. With that, let me turn it over to the clinical trial panel to my colleagues over there, to kick us off… So, thanks for joining us and stay with us with questions.

Great, thank you Arda, very, very informational. I think, I think a lot of people are going to try and figure out what to do next, and people are looking around corners, so whether we have a V, a U, an L, hopefully there’s no more letters in the alphabet, but, and hopefully we get to a V, but we’ll see what happens. So, I’m thrilled to be here with two great colleagues Nick Davies, who’s a principal at EY-Parthenon and focuses on clinical trials. And my colleague at McDermott, Vernessa Pollard, who’s the chair of our FDA practice. And I think this area has really, COVID’s thrown a curveball, particularly when it comes to clinical trials. And I don’t think we’ve ever seen the FDA issue as many pronouncements, almost every day, sometimes multiple times a day, as it is the really the most prolific, I think, they’ve ever been. Even though, I think, on the last administration they were very forthcoming with information under Dr. Gottlieb’s leadership. So, I want to sort of map out, and, in terms of the clinical trial aspect, Nick has spent a lot of time analyzing the market, analyzing what’s been going on with regard to clinical trials. And so, let’s just get into it, in terms of where that aspect of the market is, and how it’s very operational, and obviously affects drug and device pipeline. So, Nick, what’s your sense of the overall impact, and are trials being stopped? Are they being redesigned? And what’s your view of the world?

That’s a good question, Steve. I mean, I’m thinking about this in three ways. So, one, obviously, is the, the impact, and we’ll talk about that in a second. The second piece is really immediate mitigation. Is there any way we can help the situation? Can we get trials going? Can we do other things immediately? And I think the third thing, which is probably the most important thing, whether we have a V or a year or now or whatever, whatever we have is that, you know, I see this is an opportunity to transform the clinical development model in a way that I think some of the industry have resisted. There’s an opportune moment now to kind of new forward the model to make it simpler, to make it decentralized, faster, and more patient friendly, quite, quite frankly. So, we’ll talk about, talk about that as well. So, it’s a real, this is actually an opportunity, to make some of the investments, I think, that people have been holding off on and making clinical trials a more efficient and patient friendly process. But if we look at the overall impact, and this is a snapshot of, of the top 20 pharma companies by sales last year, and in clinicaltrials.gov, you can see that there are a large number of studies going on. And we’ve, we’ve categorized them in three different ways. One is that they are, trials are active. They finished recruitment, but they are in the active phase. Giving drug, looking at safety data, et cetera. The second group of trials, if you like, is that they’re active but they’re still recruiting and enrolling by invitation. And the third, are really, they’re active trials. They have been given the go-ahead to start, but they’re not yet recruiting. So, let me talk about the impact on each one of those because it’s quite different. So, that, as you can see there, the active but not yet recruiting is really in the minority. And those trials are probably in the best scenario in this, in this current situation. They can simply slip the timeline of recruiting by 6 months, 8 months whenever there’s an appropriate movement in the in the infection, often probably by country. You know, so they can have a more predictable, if you like, a start. It’s still going to affect the launch date because the trial is going to be delayed before it starts, but nevertheless, it’s a little bit more predictable. But as you can see, most companies are not in that situation. We actually think that those that are not currently recruiting but are in their, you know, current run phase are the ones that are going to face most difficulties. And in talking to many of our clients in the last few weeks, it’s quite clear that there’s going to be a significant impact on these trials, particularly. So, we’re talking about, on average, our clients raise from anywhere between 90 days and 18 months in terms of the slippage because the patients, although they’re all recruited, obviously they have to come to a clinical trial center. Most of those, invariably are shut down. And then, and this is phase three, we’ll talk about the impacts of other phase in a second, the lapse for the safety data, et cetera, the blood works, they’re shut down, too. And, you know, it’s almost impossible to get patients to the clinic to, to dose them. And also, the other, the other problem is that many patients are simply just disappearing off the radar. They’re not communicating. They’re just not turning up. And there’s nowhere indeed for them to turn up to anyway. So, the amount of missing data in these trials is going to be, have a significant impact with many trials probably not reaching the end point from a statistical perspective, so, losing power. And it’s anybody’s guess in terms of how these might push out the, the launch dates, but as I said, as the clients are saying anywhere between 90 days to, in some cases, 18 months, and that’s obviously going to impact the bottom line and launch dates and forecasted revenue going forward. Some of the factors that do affect trials are obviously the severity of the disease that’s being treated, that there are efforts to keep oncology trials going, wherever possible. But even that’s proving difficulty, even that’s proving difficult. Trials where there are multiple doses that are not oral are also being obviously impacted because they require a physician, now they require presence at the clinic. So, there are all sorts of issues from a trial perspective that really, quite frankly, are quite stark for our clients right now. And there’s, there’s very little until the clinics can open, and for certain disease areas, there’s very little that can be done operationally, but we’ll talk about what could be done in the future in a second. So, I think I’ll, I’ll probably pause there and see if, is it Vernessa, or I think its Vernessa, that will make some from an FDA perspective. You know, maybe we could go back to some of the mitigations and future actions that might get us around some of these problems.

Vernessa, that was one of the questions I had for you. I mean, there’s certainly emergency use authorizations from the FDA. We’re hearing a lot about that, and one of the questions that came in was really, this is for really both of you, getting a new biological therapeutic candidate to trial. But I wonder if you could comment on what the FDA is doing in terms of emergency use authorizations and other aspects, when it comes to trials. I know they’ve issued some guidance.

If we could go to the next slide. I spent my formative years as a lawyer in FDA in the Office of chief counsel, and I’m sometimes accused of having a very sympathetic that view of the agency, which is not necessarily true. But I think the FDA has done a commendable job in responding to the COVID emergencies. You can see on this first slide, which is already outdated, as of today, FDA has issued several enforcement policies. And as you can see by far, most of them are in the medical device area.

If you go to the next slide, this one shows the emergency youth authorization, and comparatively, by far, the majority of them relate to COVID 19 test kits and diagnostic tools. So, not as many in the drug space. There’s the EUA for hydrochloriquine, but most of the drug, that’s the primary sort of drug EUA and most of the enforcement policies relate to things like FREMS and, and, of course, to the clinical trials. But I think overall, what we’re seeing is that the enforcement policies are flexible. FDA is taking a very risk-based approach, but they’re not a hall pass, and I think the agency is being thoughtful and deliberate and weighing risk, and inevitably, there’s going to be a review, an assessment after the emergency is lifted of what has worked and what didn’t, and what readjustments are necessary?

Yeah, Vernessa related to that, one of the questions came in, that was directed to you, was do you, I know they’re taking a risk-based approach, but are they, I won’t say taking shortcuts, but where are they, where are they looking to shorten the process on test kits or a vaccine and the like? Are there places where, you know, someone might say they were historically overregulated and they obviously don’t want to be underregulated now, how do you find that right balance? What’s, what are they thinking? To the extent that you can predict.

Well, I mean, I think it’s hard to predict. I think what we’ve seen with a couple of clients that we don’t within the clinical trial space, is that the agency has been responding to requests to modify clinical trial protocols within a 24-hour period. They’ve been very flexible in terms of the approaches that they’re taking, including allowing certain companies where they don’t have the whole population of patients in the trial to move forward and close the, close the trial with a smaller number than with what was anticipated in the protocol. FDA also announced recently a greater focus on a convalescent plasma. I think that’s a big area. There was an announcement yesterday about efforts to really do more research under an expanded access protocol, to assess whether patients who recovered from COVID, where the plasma is believed to have antibodies, may provide a pathway to develop some sort of treatment based on the blood plasma, where the thought is that those antibodies may either lessen the duration of disease for current COVID patients or minimize the impact. So, FDA has partnered with a number of organizations, including the American Red Cross, to set up a plasma donation facilities. So, I think that’s sort of a key area and a good example of where the agency is sort of taking a public private partnership approach, and really looking to kind of fast track things under expanded access trials.

Good. Thank you. So, launching off that, Nick, back to you, I’m curious, really, on two fronts. One is, you talked about potential work arounds for existing trials, almost regardless of what phase they’re in. So, I think, that would be useful for people to hear. And then I’ll come back to you after that on just mechanics of getting a new trial started, particularly for a test kit or other, other things that are emergency basis. So, if you could comment on both, that would be great.

Yeah, sure, Steve. I mean, you know, there are, there are some trials that are being run today virtually and we’ve spoken with some of the vendors that are enabling those trials. You know, from electronic data capture perspective with wearables from home delivery of the medicines from, from safety and efficacy monitoring for, for example, for a psoriasis trial. They did have a very high image, sorry, high definition imaging requirement which required the patient to go to a physician and have that image, but they agreed with the FDA and got through very quickly, using an app on, on a cell phone, almost a selfie of the plaque on the skin, which is, you know, acceptable and good enough. And the client did say that it took 6 months to approve the original imaging equipment by the FDA, but this time they’ve done it in four weeks to enable the trial. So, there’s some, you know, there’s some flexibility going on there, which is great. There are, you know, unfortunately, some trials and some therapeutic areas that it’s very difficult to self-dose in a safe manner. So, some of those trials, I’m afraid, are going to be very much delayed. But, but the trials where there’s probably oral administration and there’s more easier, easier monitoring, sorry, from electronic data capture perspective, then I think we’re going to see some of those workarounds, and it looks like, and Vernessa you’ll be, you’ll be able to tell me in more detail, but said the FDA are open to those sorts of protocol amendments. So, where applicable, you know, with these vendors are out there and do exist, it’s just the uptake of them. They’re seeing a massive increase in queries, let’s say, from other companies of that how do we virtualize and decentralize trials safely to the benefit of the patient. And keep these, keep these on the road. So, it is possible, just that the uptake so far at present is low. But, you know, these companies are, we’re hearing being inundated with queries from sponsors, Pharma companies.

Nick on, on that front, what one area that is a potential outgrowth or growth area as a result, is sort of the home of healthcare. So, a lot of companies are looking at how they can deploy nurse practitioners and other individuals to go into the homes of patients who are currently enrolled in trials to deliver therapies and allow the trials to go forward. So, we’re seeing those kinds of innovations in really what will be the long term, sort of, impact on trial design and the industry moving forward. But that’s one that we’ve definitely noticed.

Yeah, absolutely. And obviously telemedicine, mobile nursing, consent, mobile consent or video consent in some cases. So, the whole telemedicine kind of video interaction. Chatbots, well not chatbots, but chat nurses as it would be, so there’s, there are a lot of workarounds, it’s just that they’re, you know, in terms of getting up to speed on their trials, they’re, you know, very much either in the middle or have finished recruiting and are very much active is difficult. And the problem still remains from a safety perspective, in terms of, you know, some of the bloodwork’s that need to be done in many trials, their labs are simply closed and they simply cannot be done at home and, you know, many companies are thinking of workarounds around that. But that’s going to take a considerable amount of time in some cases to resolve.

I think here as one, one question that came in is, and we’ve heard Bill Gates say this, that you’re going to, that the world is going to need run to run multiple trials, build multiple manufacturing facilities, knowing that some won’t work. I’m curious about your view, someone was asking on the Q&A, is the number of innovations and pushing for new tests and new antibody testing and new ways around this, is that muddying the waters? And is this a, a kind of a free for all? Or how does the FDA, kind of, prioritize or help the world prioritize what they want to go for first? Or is it just really free market at work and see who can really deliver the best, the fastest?

I think I’ll let Vernessa answer that first, then I’ll weigh in from an operational side, if that’s okay.

I, my sense is that there is no specific way that they’re prioritizing. My experience is that FDA is responding to all comers and all requests, at least in terms of first year responses, what sort of determines what goes forward is, you know, whether, again, there are significant potential benefits to the therapy, and whether FDA feels that it can relax some of the standards and manage the risks in a controlled way. I think, as I said before, we’re on the, sort of, front end of this, and I think the agency is really going to be focused on reexamining after the public health emergency is over, what worked and what didn’t. So, we have been advising companies, you know, when in doubt, you know, push forward, innovate, engage with FDA. But if the COVID 19 benefit to whatever you’re proposing is attenuated, just, just understand that it may be, sort of, deprioritized by FDA. But I, I don’t sense that they have a specific way that they’re prioritizing. It’s really the strength of the data in their own assessments about the potential benefits and risks.

Yeah, Nick, any thoughts on that?

Yeah, one of my clients described it as a wild, wild west when we were talking to them about antibody, the antibody test. And, you know, the paramount in the, in the test is obviously the high throughput scalability, the quality of the test in accuracy, that some of these tests are picking up a common cold, etcetera. So, you know, that really is the thing that will get everybody back to work. Hopefully it will enable us to assess the degree of penetrants of the infection in populations. And if we see, and we don’t really know that yet, but if we assume that everyone has been infected and has antibodies as a meaning to secondary infection, then that will be the way to get the population back to work. But we’re, we’re a very long way from that. And I, I actually personally think that everyone piling in isn’t necessarily, isn’t necessarily helping, cause it’s not really helping us to filter out the quality. But that’s just my, my personal opinion and not that of EY.

Duly noted. So, actually, I have a question for you, Nick, that relates to something that came in. Are you seeing, in terms of the company base, different types of trials being slowed or harmed more than others? So, someone was asking specific about on college trials? Are those continuing as usual, or has that been more difficult? For example, if there’s others, you know, I’d be curious about different drug sectors or device sectors that you’re seeing?

Sorry, Steve to interrupt. I mean, what we’re hearing for my clients is they’re certainly prioritizing trials where there is a clear threat, threat to life. And these would include some rare diseases. You know, SMA, for instance, there’s always some of Biotin. Newborns have to be treated within a week, otherwise it’s just not efficacious at all. So, there are, there are areas where they’re, with the best will in the world are trying to keep these things going. But it’s just the infrastructure around it, is not enabling that, you know, due to lack of personal protective equipment or just simply not enough staff of the facilities, all the facilities that completely shut down. And, in the case of early, very early, phase one trials, which are just for safety, you know none of those is, to our knowledge, they’re going on because the CREs are shut down and they’re very kind of high, high touch on the patient. So, wherever possible, where there’s a threat to life, I think, is the, the intent is to keep those trials going, but they usually are the trials that are the highest touch with patients and their patients are at most risk to infection. So, it’s a very difficult situation to balance.

To the person in the audience who asked the question about oncology, one thing that might be useful, I do know, and we’ve seen a lot of work in this area spike up, I do know that there’s been a huge uptick in different kinds of registries, disease registries, last post approval registries. But I know that the American site for clinical oncology is running a registry tie for COVID, people affected by COVID, who are have otherwise comorbidities is with cancer. So, there’s one registry there. There’s a few other registries have cropped up. So, that’s another area, not a clinical trial, obviously, but something that is a tracking tool that I think will be useful for short-term and long-term research. Just, kind of, about that. In the few minutes that we have left, I want to turn it back to you, Vernessa, on some other aspects of the FDA, that are not clinically trial based, necessarily, given their various pronouncements. And, you know, we could go back to one of your slides. I think we could, I’d be curious, you know, just some highlights on some of these various guidance documents and EUAs that FDA has offered that aren’t necessarily clinical trial related, but they are important pronouncements by the FDA that might be useful to the audience.

I think there’s sort of three segments. The first, obviously, relates to PPE. Masks, respirators, and the like. I think the key takeaway there is that FDA was, has been very flexible. Initially, there was some concern that FDA might have been, inappropriately blocking access to KN95 masks that are made in China because the N95s are an FDA cleared mask, and the FDA, I think recently under their enforcement policy have said that in the event that companies can’t access traditional N95 or NIOSH masks, that they’re willing to accept and allow importation of the KN95 which are manufactured under a slightly different, but some comparable standard in China. And so, I think that’s been a huge speed change for a lot of companies get access. The other area where we’re seeing a lot of movement is on the digital help front. Just yesterday, FDA issued a new policy enforcement discretion policy for digital health tools that treat psychiatric disorders. So, focused on the fact that a lot of patients who are under care or need to see a physician on a regular basis now may not have access to that, and so FDA is exercising enforcement discretion for psychiatric digital health tools that, that are meant to treat a number of sort of high risk disorders. One thing that they also made clear, which I think is very helpful, is that video conferencing tools that are used for telemedicine, they reiterated, are not medical devices simply because physicians are using them to access or talk to patients remotely. And then the other area is just the nontraditional medical, non-traditional industries of the airline industry, the automotive industry, that are stepping in to make ventilator and other products, and we’ve been helping a lot of companies sort of think through what that means and how to structure agreements and donation, intent letters to sort of try to mitigate downstream risks.

God. Very helpful. In the 30 seconds remaining, so you each have about 10, someone’s asking what are your predictions for a real vaccine, time wise? We won’t hold you to it. Nick?

I think we’ve got between 12 to 18 months away from a vaccine that is administered on a mass population level.

Vernessa?

I would agree with that.

Yeah, unfortunate, but appreciate the candor. And thank you for your remarks. I’m going to try to keep us on schedule and, you know, we try to answer as many questions as we can. I think someone else asked, the slides will be available, as will the recording for the whole program. So be aware of that, and I’m going to turn it over to Alex Jung from EY to talk about supply chain manufacturing, import export logistics. Thanks very much.

Thanks, Steve. Thank you, everyone. And I wanted to remind you all that during this next section to continue to send us questions in the Q&A panel. We’re going to pivot now and talk about supply chain. Everybody’s been seeing the supply chain issues on the news. We talk about shortages of equipment, and we’ve seen many companies form partnerships to try to alleviate the increased demand and find creative ways to get some of these devices and other things into the marketplace. Joining me today, I have Derron Stark and Katherine O’Connor. A little bit about their background, Derron is a managing director in EY’s strategy and transactions practice. He has over 29 years of experience in the supply chain field. He’s worked in manufacturing, distribution of procurement of life sciences supply chain. He previously held an operational role at Bristol Myers Squibb and advisory roles at Rondocks Pharma and Accenture. He has supported and lead a variety of pre and post M&A and restructuring initiatives, and he is currently supporting several large life science divestitures and a number of COVID 19 supply chain projects. I think you’re going to love to hear what he has to say about COVID 19 supply chain. And then Katherine O’Connor is a partner in the antitrust competition group at McDermott. She focuses on antitrust litigation, investigations, enforcement actions and defending mergers before the antitrust agencies, that’s got to be interesting. She also counsels clients, many in the healthcare and life sciences spaces on antitrust compliance. During the COVID 19 pandemic, she has been helping clients navigate the antitrust laws and understand how they enforce as worldview actions as they take in light of the national and global emergency. So, I’m going to turn it over, first to Derron to walk us through supply chain and the ripple effects. Derron.
Thanks, Alex. Yes, I’d like to just focus first on the various nodes of the life sciences supply chain and how the COVID 19 pandemic is impacting and creating a ripple effect across those nodes. Starting with raw materials, largely sourced chemical intermediates and APIs and components out of Asia, in particular China. I think there’s quite a bit of concern that there would be limitations or disruptions in supply. And, really, China has begun to reemerge, being the starting point of this and first really going to recovery. And though production has dipped a bit in the west, the supplies of raw materials out of China have shown no indications of supply disruption. I will caution that some of that may be due to the large, not large, but relatively larger amounts of inventory that life sciences companies carry at various nodes in the supply chain, and we might, ultimately, see some disruptions 3,6,9 months down the road, as the downstream disruptions might start to come through to the, to the end of the supply chain. On a manufacturing front, the manufacturing plants are facing unprecedented demand on COVID 19 products and trying to keep up with spikes and certain, certain other therapeutic areas that have seen increases. The industry has adjusted well, with limited workforce and constrained workforce because what happened is, ahead of many other industries, due to the understanding of what this pandemic might mean, many of our clients locked down manufacturing and restricted access to only critical personnel as early as late January and February, and then put in place, you know, very rigorous communications, testing, quarantining protocols to avoid any situations where plants would be shut down. So, there are plants that have been shut down due to outbreaks, but it’s been, I think, to a lesser degree in the life sciences industry. On the distribution front, there’s clearly been issues in distribution around hotspots where the COVID outbreaks are larger number of people on those, those traditional distribution channels have been stretched. Other non-hot spot areas, the service levels have been moderately impacted. But in general, been okay. And then on the access front to the, to the patients, you know, the biggest shortages we’re seeing right now are in pain killer, surgical anesthetics, asthma inhalers. As the number of patients treated in a hospital setting for COVID 19 have increased. And then, of course, there’s been quite a bit of hope and hype attached to hydroxychloroquine and then remdesivir. They are nearing shortages. I believe had got pumped again today, based on some news in the press about the potential efficacy of that product. And then, just on the general, prescription fill rates have increased, have been pulled forward by almost 12 days on non-COVID products, and that ultimate, and we’re also seeing spikes in certain types of, of their demand. For example, antidepressants and anti-anxiety drugs showed a 20% increase in prescriptions for, for most of the month of March, which all, ultimately, is going to ripple back into the supply chain as the demand signal has to be recalibrated to the supply and forecast signal. So, I think the industry is going to have to adjust to that, and then out and coming into recovery will have to adjust again. So, the supply chain is going to be disrupted a bit for probably the next 18 months, to get readjusted to the new world. Can we go to the next slide, please?

So, what we’re, what we’re hearing about the supply chain, new developments and what we’re hearing in a marketplace, you know, as I mentioned, companies are pivoting to COVID 19 products. This includes 90 drugs and vaccines and new diagnostics and still trying to address the non-COVID product shortages. Regulators in the US and the EU are adapting regulations. I think Mitnick mentioned this, and accelerating approvals for certain COVID 19 diagnostics and therapies, even with limited clinical trials, which is, you know, potentially great for the general public, but will create problems for life sciences supply chains and being able to ramp up manufacturing capacity and put in place new distribution channels that, if they don’t already exist, to get those, those medicines and diagnostics to market. On the flip side, you know, the potential impact of non-COVID 19 products, especially new products, is delays in foreign and domestic inspections of manufacturing sites for those preapproval inspections as part of the approval process and, ultimately, potentially delaying those products coming to market. There’s also, one of the, I intended to mention this earlier about distribution, one of the other impacts that we’re seeing to distribution is in a transaction sale of assets, where we have clients that are investing assets and often times new legal entities are formed to convey those assets as part of the spin or the carve out, and where there’s new legal entities, there’s a need for new import, export and distribution licenses. Where government agencies have been impacted or shut down, there’s been delays or even a lack of ability to apply for those new licenses and it could have downstream effects and distribution of those, those spin out companies. One of the other things that we’re seeing quite a bit of press about is new partnerships between nontraditional organizations, government agencies, life sciences companies to meet demand for current needs, like ventilators, where you’ve got Ford and GE Healthcare working together, where Ford’s providing manufacturing assets, and GE Healthcare is providing increased procurement capacity to get component parts to feed that increased demand for ventilators. And then, to you know, to accelerate the access to new medicines like that, the vaccines that way talked about, J&J and BARDA are partnering and, you know, traditional competitors like Sanity and GSK are partnering on vaccine products. So, it’s a whole new world in how companies are interacting, and governments and other agencies are supporting the response to this. I will throw it over to Katherine at this point, because I know she has a perspective on these new relationships and some of the compliance issues that might create.

Yeah, absolutely. Thanks, Derron. So, it’s precisely in these types of partnerships that Derron was talking about, where, between private sector actors trying to solve supply chain logistic issues during the pandemic, where the supply chain issues intersect with antitrust compliance. So many private actors are seeking to alleviate the manufacturing, distribution and access issues Derron mentioned through partnerships, including partnerships with competitors. So, in manufacturing, we see competitor collaborations to share knowledge or know-how on, for example, identifying new sources of supply or potentially new ways to manufacture critically needed supplies for the pandemic. In distribution, we’ve seen collaborations between private actors both in consolidating orders and responding to government direction on where products need to go. So, for example, where those hot spots are and where private actors should be focusing for distribution. And an access, we’ve seen competitors working together to identify ways to share supplies. For example, ventilators that aren’t currently in use, can hospital systems, health systems share those ventilators that aren’t unused? Is there a way to do that? So, when a partnership involves actual, potential competitors, that’s where we come into play, and the pandemic is not a carte blanche to engage in anti-competitive activity. I think a lot of people out there might think, okay, anything goes right now it’s an emergency, you know, just similar. So, that isn’t, that is not true, but similar to what Vernessa mentioned with respect to the FDA. The US antitrust agencies have been very engaged and are very open to being flexible with private actors to identify unique solutions with some caveats, So, they’re still not going to, you know, if you have, you’re still not going to be able to do things that are never okay like fixed prices, allocate customers among yourselves. But there are special rules that do come into play during an emergency. So, just as when there’s no global pandemic, US regulators recognize that agreements between competitors are pro-competitive. The traditional examples here are joint purchasing, joint procurement, R&D partnerships, sharing know-how. We see all of these in the life sciences area right now to try to get product to people in desperate need, and they’re truly working. If you could move to the next slide, please.

But also, like, before agreements between direct competitors regarding price, market allocation and wages, any type of compensation for your employees is illegal and subject to criminal liability. And just briefly, so price agreements can involve agreements on price or terms, and wage fixing can involve agreements on wages, compensation over time, any other type of compensation. And then, the allocation could be something like, I’ll take the customers in Manhattan. You take the customers in Long Island. So, with that said, though, what we’ve seen is an eagerness by the government to engage with the private sector, to partner with the private sector, to be flexible. And so, never say never. There are exceptions that apply during an, an emergency and, for example, the government is not subject to antitrust liability. So, if the government is controlling the arrangement, then private actors can engage in activity that they wouldn’t be able to do otherwise. And there are provisions in these national emergency laws like the Defense Production Act for agreements that, typically, are not allowed. They have, these types of agreements are very sensitive, and you need to evaluate them very carefully, obviously, but there’s a newfound flexibility.

Great. I have a question for both of you. These partnerships were formed rather quickly to respond to the crisis. I’d like to hear from both of you, to what degree do you think some of these partnerships will become more formal and permanent after the crisis? And then, secondly, do you see these becoming potential transactions at any point? Do we believe that this consolidation, if you will, of resources, across the United States and across the globe, could at some point become another wave of mergers and acquisitions? Derron, what do you think? You’re a transactions guy.

I’m a transaction person, I think most of the opportunities will be created in the smaller, mid-tier market where there might be revenue disruptions and those assets might become more attractive to the larger players. But to your question, Alex, are these partnerships going to create transaction opportunities? That may very well, often times, how these things begin is with joint venture vehicles. And then those joint venture vehicles could, ultimately, turn to spinouts of a targeted, you know, … and GSK. They may create an environment where, you know, there’s a specific COVID 19 or new virus research and manufacturing group of people that they could spin out into its own entity. So there, there could be those types of opportunities. Katherine, if you have anything you want to add.

Yeah, well, the one the one arrangement that’s actually been brought to the DOJ, the USA antitrust division to discuss with them, they a, was a collaboration among medical and surgical distributors. And the DOJ blessed that collaboration, in part because it was limited in time and limited to, it was part of their rationale that this is a collaboration that is specifically limited to addressing the pandemic. And for issues not related to the pandemic, the competitors are still engaging in their normal activity, and when it’s over, it will go away. And so, competition will remain the same. So, I think it depends, but the, the short duration and the limited focus of the collaboration can be part of the consideration for the regulators.

Do you think that we’ll see consolidation like we have in other components of the value chain? For example, we’ve seen significant consolidation in the payer market and significant consolidation in the pharmacy benefit managers space, do you think that will occur here, with drug companies? And I mean, I know I’m asking you to prognosticate, but are these conditions the types of conditions that potentially would be positive indicators for a surge of consolidation? And how would the regulators feel about that? Do you think there would be any softening of the acceptance of larger mergers?

So, from, I don’t think that there is going to be a softening of the merger regulation. 2019 was, and early 2020, the U.S. Regulators have been very aggressive in merger control, and I don’t see a softening of that. But the softening or the ability, the openness, to unique ideas is more specifically related to collaborations for COVID relief, and I don’t see that carrying over into the merger area. They remain very aggressive right now, I think.

Okay, Derron, do you agree?

I would agree with that.

Okay. Derron have a question for you. What advice do you have for the clients that are listening in this call, in terms of one of the top two or three things they ought to be thinking about in their supply chain for the next 6 to 12 months? If you could just give us, kind of, your top of your head, what do you think they ought to be prioritizing? And Katherine we’ll come back to you with the same question.

Well, what I think they should be prioritizing, what I’m working with some of our clients as the top priority right now is crisis responses pretty much been in place, is in place and is running, what now is, should be the focus is recovery. What we’re calling our next phase is how are we planning to come out of this pandemic and the scenarios it’s imposed on the industry? And what are the various scenarios of coming out of that, you know, depending on how we phase the reopening of our country, other countries, you know, how is the supply chain going to respond at the different nodes in the supply chain? And having a plan for that, a playbook, for, for how people are going to get back to work, how sites are going to open back up, how distribution centers are going to, you know, potentially behave differently. What are the potential technology impacts that we’re experiencing, and, you know, really understanding that playbook to recovery is priority number one. And then a same time, and on a longer-term basis, you know, how do we, we always talk about it as the supply chain organizations manufacturing organizations, but it usually takes something, a crisis situation to really get a new focus on supply chain resiliency and creating redundancy into the supply chain. There’s been quite a bit of talk in various of parts of the world about, you know, bringing near sure resiliency to, you know, active pharmaceutical ingredients supply, in particular. And how do you do that? You know, building new manufacturing and standing up in country capabilities is a very long-term solution and very capital intensive. And the industry spent a better part of 20 years, moving the supply chain into low-cost countries and moving it back would be a monumental task. What are the strategies that they could employ qualifying near sure alternative sources of supply and keeping those sources active so that there’s an ability to respond in a shorter period of time? It’s really, you know, laying out what the options are and coming up with a supply chain resiliency plan would be my second area of focus.

Great, Katherine, anything to add to that before we wrap up?

So, I guess I’m going to have the legal answer to that Alex, which is during a crisis, you know, there’s a lot of opportunity, a lot of potential. But there is also a potential for risk because people are moving very, very quickly. Everybody is working at home, potentially a little bit more relaxed. So, when we think about antitrust compliance, everybody needs to, sort of, double down on, how they communicate with partners, how they communicate with competitors, and be sure that, you know, you’re exercising the appropriate amount of oversight. Yes, discretion oversight, you know, the regulatory landscape is not going to change 100% if, you know, after the dust settles, the regulators will be looking for people who took advantage of the situation.

Great. I want to thank the panelists for their time this morning and I’m going to turn it over to Kris for the next section. Thanks, guys.

Thank you.

Great. Thanks, Alex. Our next panel is going to address the government assistance programs that are available for life sciences companies. I’m really pleased to have with me Ray Beeman from Washington Council of E&Y, my partner, James Kim from our DC office. James is a government contracts lawyer, government contracting lawyer, and his expertise around the ability to access these various government assistance programs has been critical for many of our clients in the last few weeks. And we’re also joined by Emmanuelle Trombe from our Paris office, who will bring us some of the global perspective on government assistance that is out there and available. So, I wanted to start with the CARES Act. I think most folks are familiar, by now, with the CARES Act program, and its aid. It was really an act that was driven by providing funding for individuals and small businesses to weather this storm. The secondary focus was some of the aid that was provided directly to healthcare providers. And life sciences composed a small part of the act. There was some funding provisions related to the BARDA funding for development of vaccines and preventative measures related to Coronavirus. But by and large the CARES Act didn’t provide direct funding to life science companies to help respond to this crisis. But it did provide funding to life sciences, many life science customers, ie. hospitals and physicians, as well as funding to consumers who need to be in a position to continue to, to continue to have health insurance to afford many of the life science products in the US, as well as out of pocket expenditures. One of the interesting developments that we are watching is the potential shift of employees, to, out of employer sponsored health plans and some of the implications for that are it could be significant for the life of sciences industry, but that’s a little off topic for today. Our panel, we’re going to get in some of the ways that life sciences companies are accessing the government assistance that’s available, and also what the implications of some of the tax provisions of the Act for life sciences companies. So, I want to start with James, James, the Payroll Protection Program and those loans and, Paycheck Protection Program loans, have really been, kind, of front-page news every day. Yesterday’s news, of course, was that the loan program was out of money, even though that it’s out of money, as think it’s worth addressing. Can you start by walking us through the Paycheck Protection Program?

Sure thing. Thank you, Kris. So, first and foremost, it’s the CARES Act expanded an existing SBA loan program of existence, called the 7a program. They’ve expanded the eligibility criteria, the maximum loan amount, as wel as the total amount of funding through the program, which is, I’m sure people know, it was $349 billion in natural loan amounts. As you have stated, this has expired, but the program does provide for loans based upon a payroll calculation. Approximately 2.5 months of payroll for eligible organizations, capped at $10 million, and they forgive, of that amount, a significant portion, up to, the entire amount, theoretically, could be forgivable. Generally speaking, we’re talking about organizations that are 500 employees or fewer, as well as certain categories, as exempted has described below the slide here. In particular, for organizations on the call here today, the SBIC exemption or small business investment company funding exemption could be applicable. But for the general summary criteria, there are some limitations with to keep in mind.

Yeah, those SBA affiliation rules can be pretty sticky. As you know, James, this, life science industry requires a ton of capital to develop new products, and frequently that capital is investments from venture funds and hedge funds and other forms of private equity. What’s the state of play with the availability of this program for venture or funded companies?

I think that’s various too, the affiliation rules in this question just, if you haven’t heard about them, I’m sure most people have, are, look at the backers of control, right? Whether there’s a shared control between two entities. And in the case of venture funded private equity owned or invested organizations, it becomes an analysis based on facts and circumstances and existing prior case law. But we have seen the affiliation rules become a significant hurdle to many organizations, but not necessarily a bar to a qualification under the PPP.

Yeah, I mean, I’ve heard that one of the base rules is that if you have a venture fund that has portfolio companies it’s invested in, that it owns less than 50% of those companies. So, typical venture fund that invests in a series A or series B of a biotech company may own 15% to 20% of that biotech company after the investment. Is that company that they own less than 50% of, does that automatically mean that they could be eligible for, they could be independent, and thus eligible as a small business?
Not necessarily. So, it becomes an analysis of the actual controls and many of the, it depends on the nature of the investment and the specific controls, both positive and negative, within the actual relationship agreements. It is an opportunity to it to investigate, I stated here, it’s a case-by-case basis of looking at the actual relationship, but it, is at because it is below the 50% threshold terms of owning equity, that would be a possible pathway for a qualification.

Could you explain in, kind of, plain language, what, what’s the SBAs view of these like negative controls that venture funds frequently have? What are some common negative controls that the SBA might look at and determining affiliation?

Sure, things that are common are studying budgets, control of bank accounts, control of personnel, hiring, firing, compensation. Those things are commonly seen, not all the time, but those are ones that could be considered often kinds of the SBA indicia of control.

Interesting. I’ve heard that some venture funds are working with their portfolio companies to amend their organizational documents to remove some of those controls. Is that a… that that’s okay?

So, there are circumstances where that is permissible. There are limitations on that ability to do so, primarily through what’s called the present effect rule, where the SBA would look forward potentially at a deal and the potential consequences of that. But it is circumstance, but absolutely it is a possible method of qualification. But it does, in most circumstances, require pretty significant changes.

Okay, interesting. Obviously, the program, like we mentioned, has run out of funding. What are you hearing from your other colleagues in DC about a refreshing of the funding of the Paycheck Protection Program?

Absolutely. We have a number of colleagues who are, every day, trying to have conversations with people on the hill. Our understanding, I think, is not contrary to what other people have heard, which is there a sufficient momentum and wherewithal within the both sides of the aisle to provide for the funding itself. There is significant disagreement on the nature and the specific details of how that funding will work going forward. So, there are some issues to work out, but we do anticipate the funding to go forward with most, most likely, sometime in the future, maybe not right away.

Yeah. I want to hit you with a couple hypotheticals. I know that this funding, the availability of the loan is calculated based on payroll amounts, historical payroll. If a life sciences company, a biotech startup, for example, takes the loan out, based on historical payroll, what kind of restrictions on are there on use? For example, life sciences is an industry where there’s a lot of outsourcing of activities. So, hypothetically, if the loan is taken out, is there a restriction on how it’s used, does it have to be used to pay payroll? Or could it be used for other parts of development of a, of a drug or device product?

Absolutely so, in fact, there are very limited uses, on this slide you’ll see here. The loan can be used for specific enumerate purposes. Those include payroll, included in the definition of payroll are costs related to group health care benefits and premiums, mortgage, interest, rent, utilities, and interest and other preexisting debt obligations. Notice the principle is not included in those definitions.

And is that that use restriction, is that in order to get forgiveness that applies? Let’s say you’re not interested in having the loan forgiven, could you still use it for other development related purposes? It’s not just kind of these, these enumerated items?

You’re required to use it for those purposes during the covered period, so you would you be advised to make sure you have sufficient expenses. There’s no requirement that you have accounts be the same, of course, a direct funding. But yes, it is limited by statute in terms of the purpose of use.

Okay, thanks. We’re getting that questioning from a variety of our life science clients because this industry does have so many kinds of virtual biotech, virtual development companies, and this concept of employment is somewhat difficult one for many life sciences companies.

For some purposes, there, for some of the smaller companies, the department for the economic Injury Disaster Loan program from the from the SBA, a $2 million cap program does provide greater flexibility in terms of use of funds. But that is not a forgiven amount that is simply loaned.

Yeah, you know, life sciences is a global industry. I want to open this discussion up to Emmanuelle. Emmanuelle are you seeing non-US companies able to take advantage of some of these US programs for their, their US subsidiaries. Maybe you’re on mute. I’m not hearing you.

Okay. Sorry. Hi, thank you. We have seen a number of European companies with employees in the US who could took advantage of the stimulus package in the US, and they were very appreciative of the speed and yeah, the response and the stimulus package. And I would say these are better for the measures, that there are equivalent measures in Europe in number of countries, and also at the European level, and that US group with operations in Europe will be able to take advantage of these European measures. So, that’s definitely something to consider for the US.

Yeah. Are we, James, in order for a non… company to take advantage of that? Are there some legal requirements? Do they have to have a US subsidiary, or how does that work?

Generally speaking, a US subsidiary usually required, as well as having employees with their principal place of residence in the United States, not just in principle operations themselves. But it’s the principle place of residence in the United States in terms of PPP implication.

Okay, great. Emmanuelle, back to you. What types of, how does this stack up against globally available programs? And what are you seeing in the EU as available to support operations during this challenging time?

Yeah. First, I want to say award to echo what was discussed in the FDA and supply chain panels because besides the financial measures, there have been a number of measures in Europe to relax the rules on clinical trial market access, competition low and to facilitate the development, important manufacturing of treatment, tests, and equipment in the context of COVID. So that’s general measures to facilitate the response to the crisis and also support the companies in life science and their afford to, to tackle this crisis. On the financial side, there have been measures at the European levels for the European Investment Bank and the other firms as well as a local government of the member states. And these measures are loans at very favorable conditions. State guarantee of bank loan also a number of subsidies. And on the employment side, the governments in France, in Germany, in the UK, have put in place furlough programs, so action unemployment programs, allowing employees to work part of the time, not work at all, but maintain their salary. So that’s, those measures are in place in a number of European countries. It is also, in France, worth noting that the government has accelerated the repayment of the research tax credit, which could represent a significant amount in the life science industry.

Yeah. Emmanuelle, are those programs generally available if a US company has employees in France, for example?

Yeah, definitely. There is no, as long as the US companies have employees in France, Germany, UK, or other countries, there would be measures available.

Okay, great. James, I saw question come in through the Q&A line about the CARES Act. The CARES Act has a need certification for the 7a loans. How is that being interpreted, generally? And the question is, how does it apply, for example, a life science company has enough cash to fund its operations force, say, 6 months or more? Can you comment on that?

Absolutely. So, the way has been interpreted, fortunately for, well, I’ll give you a lawyerly answer, it’s based upon your individual circumstances. So, if you read it carefully, it stays based upon economic uncertainty that you believe that the loan can best serve you to do operations. The key to that is essentially for you to carefully understand the breath of that, that it is a broad statement that allows for a number of interpretations. The fact that you have, simply cash on hand is not sufficient, is, again, would not disqualify you from, by in and of itself or mean for being able to sign that certification in good faith. But it is, unfortunately, an individual determination that has to be made. Again, we can provide some guidance about specific things that you might consider, making a determination, but it’s basically your own specific circumstances. And it’s not based upon available credit. It’s not based on available cash. Effectively, the CARES act, effective, eliminated by statute, what is commonly called the credit elsewhere test under the 7a loan program, which would require the SBA to be putting out specific analysis of other credit available, including the credit of the owner off the facility as well. Those are waived by statute, so that is not what they are asking. They are asking for a good faith certification of statement that’s in the application itself.

Okay, great. Question came in on the line about independent contractors, which again, just like out of sourcing, that’s a very common use of a way to get expertise in the life sciences industry. Is independent contractors in eligible use of PPP loans?

So, independent contractors are not considered payroll costs and employees, for purposes of PPP. They are separately eligible for their own PPP loans themselves. And so, you not be eligible to qualify using independent contractors, nor would you be using them for payroll calculation purposes for the spend under the loan itself, or for forgiveness.

Okay, great. Keep the questions to coming in. We’ll pop back to James and Emanuel if others have questions about that type of government assistance. Ray, thank you for your patience, I want to shift over now to discussing, you know, the interesting different tax levers that the federal government pulled as part of the CARES Act and beyond. Ray why don’t you start telling us a little bit about your background in Washington counsel and then take us through some of the key provisions that you’re seeing life science companies take advantage of from a tax perspective here.

Sure, Kris. Thank you. I’m Ray Beeman and I’m one of the co-leaders of Washington Council Ernst & Young in Washington DC. We are part of the national tax practice, and so we focus mostly on the tax area and mostly on tax policy, as opposed to transactional merits. We also have pretty good-sized healthcare policy practice as well and some other industries. So overall, we’re not sectors focused, we have clients across all sectors, but we do spend a little bit more time on healthcare than maybe some of the other ones given our background in that area? I formally was on Capitol Hill with the ways and means committee for several years, and so that’s my background, Kris. Flipping to the CARES tax package, I just want to hit on a few high points. The overall package is, in terms of cost, is roughly about 15% of the overall CARES package. So, just the business tax provisions alone, are about $350 billion. In and of itself, that would be a really big tax bill, but of course, it’s just 15% of the overall CARES package in general. Importantly, it’s not sectors specific, so, really, the two themes of the CARES Act were immediate cash liquidity and worker retention, and the tax package reflects that. So, really no sector specific provisions in here, although obviously they impact different sectors differently. And I was thinking earlier, you know, when you look across all the different sectors, I think you can kind of make a general statement about how certain sectors have been impacted. Airlines, hotels, the bad, others to the good, Netflix. You know, life sciences are really diverse. And so, I think it’s really hard to just make a general comment about the impact and how these tax provisions are affecting them. Some companies are very focused on the NOL carry back provisions, that’s a big, tax provision, others less so. I think when you look at the package overall, a couple of themes are emerging. One, the IRS and treasury are actively seeking to implement and interpret to CARES package. And it runs a really wide range between very, kind of, esoteric questions about, do your employees qualify for the employee retention tax credit? Because one of the requirements of that credit, which is very lucrative, is that at the employee, you’re shut down, but your employees also are not providing services. That’s obvious if you have employees working in a store or factory, and on the other end, it’s just as obvious. If you’ve got an employee that was teleworking already before COVID 19. But, that gray area in the middle is going to be like trying to draw a line through Jell O for the IRS. Figuring out what it does, what does it mean not to be able to provide services? Because it’s, we’re all doing here, we’re doing kind of what we’d be doing in the office if it were open. And then on the very practical side for the NOL carryback provision for companies to claim the NOL carryback for a 2018-19 or 20. Some of the forms, as you file, have been our paper forms, and all the IRS offices are shut down. There are stories about IRS just storing mail in trailers. So, IRS is trying to kind of adjust to, you know, that reality and issuing guidance as we saw with the NOL provision. What was a paper form can now be fact. So hopefully everybody’s fax machine at home is working because you can now do faxes and so, IRS is grappling with this.

I’m going to go grab mine from the basement later and dust it off.

Right. And so, again, it’s hard to pin down a particular impact for the sector. One important point to make, I think most people understand this point, but, kind of connecting with James’s presentation, is that companies really, if they’re looking at the SBA loans and they’re also looking at the payroll tax relief, which is in two pieces, there’s a payroll tax deferral and, and the tax credit for retaining employees, there’s an interconnection there with the SBA loan program where you really need to do an either-or analysis. And for some companies, it’s been better actually to claim the employee retention tax credit than the SBA loan because if you take out the SBA loan, you are no longer eligible for the employee retention tax credit. And so, you really have to balance those two. And then, secondarily, that the SBA loan, which is intended to be forgiven on the back end if you spend the proceeds the right way, once that loan is forgiven, you can no longer continue to defer your payroll taxes, employer social security. So, the interconnections in this bill across all these different big levers that were put in there are very important to understand. And so, I think we’re going to continue to see more coming out of the IRS, trying to interpret these provisions. I think we’re now down to kind of the third- and fourth-degree level questions of specificity around how these are supposed to apply. Again, we are waiting for some kind of guidance from the IRS around this employee retention tax credit question that I think many companies right now are grappling with. So, I’ll turn back to you, Kris.

Yeah, Ray, one question came in that I think an interesting one for you. I’ll put you on the spot, but do you think that expenses that are paid by a forgivable PPP loan, are those going to be deductible for federal income tax purposes?

That is a really good question. And it’s a question that we’ve raised with the Hill staff. So normally, if you are reimbursed for any expenses that might otherwise be deductible, of course, you don’t get to deduct those because that’s sort of double dipping. That question is actually sitting in the IRS right now and I think we’re going to probably get an answer of some sort to that very question, probably sooner rather than later. I can’t really handicap how they’re going to come out on that question. I think in a normal environment, we might say, no you can’t deduct those, but I think there’s such an urgency to, kind of, find a way to yes on so many of these questions right now that I’m not comfortable handicapping that.

That would be important to know, because I would imagine, as you’re constructing an analysis of, do I take the loan? Do I take forgiveness? You know, that’s an important part of the, kind of, the longer-term manual tax bill that the company should know. So, we’ll watch for that clarification. I want to, kind of, bring this panel to a close by asking a little bit about what’s next. What’s on the horizon from a government assistance standpoint. Emmanuel, are you hearing of any, any interesting programs there in France or the rest of the EU that may be coming out to help life sciences companies? I don’t hear Emmanuelle, why don’t I kick it to James first. Oh, yeah, go ahead.

What, what issues we’re hearing our other, the practicality off implementation of the existing measures, because they have been adopted very fast, and there are a number of holes and question marks and some of that have not been properly designed to achieve the very objective. For example, we know they have to benefit from some of the measures you need to qualify as an innovative company, but the definition off innovative company is not, probably, defined, and so it creates difficulties for a company in the life sciences. Then the other question is going forward when the economy will open up. So now, in France, we have a date on May 11th, and whether some of the measures will remain available, for example, on the furlough programs, because even if the economy officially opens up, it will be slower, there will be still some social distancing some… work, so, the question is whether the government will maintaini these measures passed the, the opening date. So, a lot of question marks still to be, to be addressed.

Yeah. James, from your perspective aside, from replenishing the PPP program, any other programs you’re hearing about that may come out in the next round of federal legislation?

There’s significant discussion on expansion of the existing PPP beyond its existing orders right now. Relaxation of the additional waivers, of additional categories, names code. Of course, in the fourth round of COVID assistance, there are a number of distant, different existence packages also being discussed as well. Still to be determined what those shape out to be, but a lot of discussion on, on various different assistance packages.

Ray, what are you hearing in DC about just timing of this, this next federal program or federal legislation?

Right. So, what’s expected to be a fourth policy response to COVID, which was originally supposed to come later this month or even early next month, I think really realistically, with Congress not coming back to town, at least until early May, could stretch into June. And I think, you know, when you think about what would be in that bill, you know, with that time frame, look for some focus on research incentivizing companies when we start looking at vaccines and testing, trying to encourage both the development and the manufacturing of those products, that I think you’re going to see some policies, including potentially tax, targeted at those. So, I think that’s, that’s a way off. The discussions really are very ground level right now, but we’re kind of sensing that that’s where the focus could end up being.

Okay, great. Well, thank you so much Ray, James, and Emmanuelle. Thanks for joining this panel. Now, I’m going to throw it over to my partner, Felicia Perlman for the, for our final panel today.

Let’s give one more second for our other panelists, there we go, Ben Pickering to join. Thank you. Thank you so much for joining us today and want to welcome you to the last panel, which is, we’re here to discuss with you restructuring and solvency issues and just stress of both pharma and life science companies, as well as those companies that are impacting your own companies and how to get from where we are now, successfully, from a financial point of view to the other end of this situation. I’d like to initially introduce my two panelists. We have Ben Pickering, who is a partner in the Earnest & Young restructuring group. He is also the global leader of the Earnest & Young life sciences restructuring subsector. He has over 30 years of experience in restructuring, generally across many sectors, but for the last three years, he has focused almost exclusively on the life sciences sector, both in in court and out of court restructurings. And we also have from McDermott Will & Emery, Maris Kandestin, who is a restructuring partner. Maris actually filed one of the very first cases coming out of the COVID situation of a pharma company impacted by the pandemic in China. And with that, if we could go to the next slide.

Ben, if you could set the stage for us a little bit and talk about the different parts of the life cycle of a pharma product and how you briefly might see some of the impact. Ben, I think you’re still on mute.

Can you hear me?

Yes. Thank you.

Yes. Okay. Good. This slide we’re on actually is the legal perspectives, I wasn’t sure who wanted to start there.

Yeah. Perfect. Perfect slide. Thank you.

Perfect, okay. Yeah, I know this slide is a bit of a spaghetti chart, and I think for many folks on the phone who have who have dealt with pharmaceutical companies, and we’re going to focus on pharma here for a second, this is very familiar, but I think it’s, it briefly touches on, to me, the sale cycle. I’m not going to talk about supply chain in here. This is really the, the keys to the sale cycle as you see at the top of the chart in the middle is the, is the company, and the patient in the bottom right hand corner is obviously important to that. How that, how the product gets into the patient’s hands and, and why it gets into their hands is a very tangled web in this sector and I’ll briefly touch on areas where we’re already seeing the stress across the board. First stop is the company that obviously ships into wholesalers who hold their products, for the most part, and that is obviously through their manufacturing, which again, supply chain, I’ll leave to the side. We are seeing some distress now in some of the wholesalers where there is an outbreak, and as a result they have had to reduce their activity level, which means that supply is, supply shortages are a potential risk. We’re not seeing it yet, but that is a potential risk there on the wholesaler side. Obviously, if you go out further, the key to getting a patient incentivized is in a large part, you know, prescribers, so doctors. Obviously, sales forces are now grounded. They can’t go out and get the time and attention of the doctors that they like. My experience is that they’re doing their best to get it from them virtually or by phone. But obviously it’s not just, it’s not as effective as they, they would be if they got in front of them directly. Same thing for patients getting in front of the doctors. It’s also now an issue in certain situations. Yes, telemedicine can help a lot in certain cases, but in some cases, you know, patients need to go to a clinic either for a test or injection, and, and that’s becoming more difficult to execute on that as well, which means that’s creating an issue on the on the patient’s side. All that leads to, of course, is, a number of prescriptions that are being presented at the pharmaceutical level, at the pharmacy level, at the retail level to fill. And so, while I would say we’re not seeing that issue, you know, at this moment, we are beginning to see that in a trend going forward, that in some cases script levels are coming down, and that’s obviously going to have an impact on the pharmaceutical company sales in the future once that supply chain is much of what the retail chain is exhausted. So, that’s the right-hand side of the chart. The left-hand side of the chart, really, the most important part there is, is the pharmacy benefit managers or the MCOs who are judicating the claims and providing insurance. What I’ll stop on here is, obviously the, the 22 million people, and it’s 22million if I remember correctly, that have filed for unemployment. Yeah, it’s wiped out the job gains since 2010, obviously, that level of employment means you’re going to have a lot more people that, ultimately, are not going to have insurance. Some of those jobs will come back, obviously, but without insurance, it means that the cost of the pharmaceutical product goes up significantly for the patients, which may drive decisions around what product they use and have an impact on the pharma company. So, so I wanted to lay that stage out as some of the major impacts just on the sales cycle itself. So that’s an issue. I don’t know if you want me to go on.

We can go on to the next slide. So obviously, when you’re looking at the current situation, life sciences companies have to take steps to evaluate their, their own financial health as well as those of the companies they interact with. Their trade creditors, vendors, the consumer on the one end and side chain. You think you need to look at it over a timeline of where that impact will start. So, let’s look at impact in the immediate term. What have you seen now, and what companies should be considering now. First, Ben and then Maris, I’ll turn it over to you as well.

Sure. Yeah, I think in the immediate term, and when I refer to immediate term, I’m really talking about today, not, not, you know, a month from now, but really, just today. Where we’re seeing the impact and some of its public, for example, the acorn situation where they were looking at, you know, and M&A process of a sale of the assets in order to maximize value. As COVID hit right towards the end of their sale process, that called off the deal. And so, as a result, now holders are now having to look at that. It’s a much different situation for them where perhaps they were looking at a sale, now they must be assessing for themselves whether or not that’s an asset that they want to retain. And how do they want to retain it? And what is it going to cost them to maintain that in this situation? So failed M&A is a big one. Failed financing or refinancing is another, as there are deals that were in place to either generate additional cash or refinance potential upcoming debt walls. Those are beginning to fall apart as well and, and as a result, again, creating more strain on the company. Of course, liquidity strains and themselves are a big issue. Some companies were running pretty tight, and I always say to folks, the first question that you should ask any client charity or yourselves if you are a company is, what does my liquidity position look like? And the second question, you should ask is, what does my liquidity position look like? It’s really all about having cash available.

Yeah, and I’d say that when we’re talking to clients, you’re asking them what liquidity position looks like and to evaluate that over a longer period of time than I think anybody, initially, was considering. So, to really see what your liquidity hole is likely to be for the duration. Maris, what are you seeing in the immediate term in terms of conversations on either financing or negotiations with vendors or trade creditors who are themselves distressed, or with the pharma and life science companies distressed?

I’m seeing a lot of mentality of were all in this together, and that everybody is going to have to make concessions and situations where folks would not normally agree to things at the priming, or, you know, things like that, they’re considering it more often. Senior lenders are providing we’re bridge financing to get to a Chapter 11 so that there isn’t a freefall situation, but on the other hand, if a company just doesn’t have its, its very asset light and doesn’t have a lot of availability for collateral, then there will be situations where we’ll see a freefall chapter 11 with no DIP or the DIP is shopped during the case, with the potential that if there’s no DIP in place and cash runs out that, you know, it converts chapter 7. But at least it gives it a fighting chance in an 11 before you have to file for 7.

And, you know, when referring to DIP, that’s, that’s the financing that is provided in a bankruptcy case. I do think it’s a really important point, though, in terms of the sense of collaboration where I think outside of the situation, traditionally, we have all seen interactions be perhaps more, I don’t want to say adversarial, but now it really is. I think when any of you are dealing with parties in your supply chain or other trade creditors, there’s has to be an understanding that either everybody’s going to get to the other side financially, stable or not, so that if actions are taken with respect to any of your key supply parties that would render them in solvent, that would have an impact on you as well. Ben, are you seeing that?

Yeah, as well. Yeah, I am, and I think one of the, one of the things is also weighing in on those types of decisions around that, that financing is the nature of the product or products that the company has. To the extent that the products are, I would call them more, you know, necessary or urgent. Clearly, I think there’s a lot of stickiness that goes with that. For products that are more like this, say, nonurgent or maybe lifestyle type drugs, that becomes more of a concern. Again, as I think, people begin to have an option of whether they need the drug or not or want to drug or not opposed to need the drug, unemployment will create a big issue here, and that’s, that has to be factored in as you’re looking forward. Which then, of course, means that anyone looking at financing into these things has to really take a step back and consider whether that’s something they want to put their dollars at risk in this particular case.

So, now life sciences companies kind of address their immediate term issues and taking a look at what they should today. So now, to kind of combine the near term and medium term, what should they be thinking about next, either for their own financial health or for the financial health of any of the parties they deal with and how that may impact them?

Sure. One of the things that we’re now looking at is, obviously, Q1 is over, especially for a publicly traded company, but anyone with a loan facility that has covenants around it now is what are the Q1 results going to look like, and how does that impact the covenant testing? I’m getting in front of that and Maris as you mentioned, you know, getting out to your lenders to have that discussion around, you know, how to negotiate that, that potential default coming, is probably big issue right now. I think we’re going to start to see that that Q2 impact is going to be even larger as the Q1 impact. We really didn’t have a whole shut down until, until March. So, I think that’s the issue. Predicting the duration is going to have an impact as well as you’re looking forward, ongoing concern, like Arda mentioned that, you know, you’ve got a V-shape, a U-shape and whatever others you want to throw in there as far as the type of recovery, and as you’re running those different scenarios, it’s going to become obviously impactful on the overall operations of the company, its liquidity, and certainly it’s covenants, and ability to access capital is another one. And some of the stimulus availability is something that some of our clients are moving quickly towards, and even before they got approved, they were already beginning to, you know, situate themselves to apply quickly, knowing that the money was, has happened, is going to runout. The last thing I want to touch on is just working capital. As we see, we’re doing our cash flow analysis, typically, if we see a company whose scripts are in decline, there’s a large working capital tail which burns cash. And the reason for that is several things. It could be the fact that you know, Medicaid and Medicare, and even the PPMs and the MCOs are, are slow in in billing, particularly on the government side. So, you could have higher levels of claims that are related to periods from 6 months ago, when it comes to Medicaid, as an example, that don’t come through until now. So, you’re paying at a higher level as your income is going down because your current level of scripts is reduced. That’s a major problem. The other one is returns. As, again, a script levels come down, there will be more of a build in the retail channel, in the wholesale channel of unutilized product, and, you know, standard in the industry is 6 months before the expiry date, 12 months after, they could return that for a full refund. That wave is going to come through to pharma companies as well. So, I think the working capital analysis is very important.

That makes sense. And I would note that in terms of the government funding, one thing that becomes problematic if a life sciences company is experiencing significant distress is that many of the opportunities for funding there are actually not available if you are filing or considering filing for bankruptcy. So, unfortunately, those that are the most distressed have the least access to the capital. Maris, what are you hearing? Clients that are reaching out to you, what are you suggesting to them in terms of near term, medium term issues, or what are you hearing from lenders as they’re negotiating amendments, what they’re thinking about in terms of the next step in the process?

So near term, definitely reaching out to your lender is being proactive and presenting it as something that needs to be done with everybody involved. And then, that’s immediate term. Near term and medium term, it’s, it’s, you know, seeing what you can do to reduce costs and plan for the future, and if that’s a Chapter 11 filing, then you need to get ramped up for that as soon as possible and figure out what creative financing you can come up with. So, if we go to the next slide.

We talk about, you know, getting creative with financing, especially with some companies that are traditionally asset light, like some of these pharma companies. So what we’re going to be seeing, and what I have been seeing is increased interest from private equity funds, lenders and fulcrum creditors to, either provide the DIP financing or consent to priming, and acquire the companies where, you know as early as 6 months ago, that wasn’t an option. They just didn’t want the companies. And, there’s a couple, a couple of advantages to that. One is that, you know, they can take advantage of a future upswing and get these assets, basically on the cheap. And also, it keeps existing jobs intact because these financial parties don’t have a workforce in place to run these companies that like strategic investor or a purchaser would. So, that’s one thing that would be good down the road, is that it would keep the jobs intact. Also, lenders and creditors who have been institutional creditors for a while, the sort of old and stale creditors have been focusing more on the tax attributes that companies that have been distressed for years have, including that operating losses. And there have been some suggestions, and I’ve seen in place a couple of plans that are dual track processes where there’s a sale through a plan and there’s a debt for equity swap, and then there’s a parallel sale process. And because NOLs cannot be used by most people outside of a certain number of people in the company and related to the company, the competing bids just don’t come forth. So, it’s a good way to, you know, expand value where there wasn’t value before, where people weren’t focused on value, and it’s another attractive feature of sort of an institutional creditor taking the company, and a way to save the company instead of having it convert to 7 and liquidate.

Yeah, Maris, I’ll back that up completely. We just did one that was completed, I guess in January or February of this year, it was a medical device company, and the main attractiveness around it was two-fold. One was the device was fairly new and had just launched. But the NOLs that were there, the incumbents lenders restructured around those NOLs were able to preserve some of those, and as a result, you know, that became a real value driver for them as well. So, I think, it’s an interesting play we’re beginning to see, not only in pharmaceutical, but across other industries as well. But particularly in pharmaceutical, you’re going to see that, especially where you either have a non-commercialized or about to be commercialized or newly commercial product, with all these are NOLs sitting there, it can become a very, very attractive asset. The other thing I find interesting, Maris, maybe you’ve seen the same thing as well, is, you know, from the funds perspective, sort of pre COVID, I would think this is going to continue on now is, there’s been a lot of interest in the funds converting into equity and basically owning a plaque one, you know, what they, what they then establish as a pharmaceutical platform where they can add new drugs to it. And we’ve seen this now several times in the marketplace where you know the company will go through, which, after 11 filing with the, with that fulcrum being, you know, a non-strategic, who then ends up owning the company and uses it as a platform to add more drugs is becoming very attractive. And I would think, in this marketplace, if there’s a company that’s getting distressed the, you know, the potential to make a lot of money in a longer term is probably fairly, fairly good, I would think, as asset values are going to be lot cheaper.

Exactly, Ben. It’s going be very attractive, especially when you have all these distressed assets at the same time, it’s going to be easier to get involved in these cases and build that platform out very quickly. And another thing is that you’re going to see more interest, I think, from foreign companies trying to get a foothold in the US market, where they wouldn’t have gone to the trouble, in the past, just to jump over a bunch of hurdles. But we might see some of those restrictions and requirements from the US government relaxing so that those foreign companies can get in to purchase the US company and get into the US market. And also, you’re going to see some strategic purchasers who want to extend their existing portfolio to include maybe something, a company that’s in distress, a particular product to say, get into the diabetes market or a market that’s not going to necessarily go away anytime soon that, you know will be profitable in the future.

We just had a, kind of related question that came in that said, given the development of the private sectors over the past decade, are either of you seeing different, different financing, availability, use of different types of financing now, then we might have seen in previous downturns?

I would say one of things that we’ve seen is, is I would call them more, you know, sponsored financing in the sense that they provide access to cash for investment, but not necessarily for operations. So again, I think looking at platforms that they’ve built, you know, there’s financing that becomes available on, on approval of the lender, where they see it as an opportunistic buy and the creative to the business. So, it’s kind of an interesting triggers as to how they, they, they, you know, limited how the use of these what had happened was strictly for M&A. So, I would say, since we’re almost out of time and we’re just getting to the long term, I’ll turn to each of you. First, Ben and then Maris, thinking long term, what do you think is the most important consideration for any life sciences company? What would your one piece of advice be to them? Ben?

Yeah, I, I would have a real serious look at, really just it’s two things and I’ll kind of get, come back too liquidity. One is the unemployment levels and what impact that’s going to have on your pay or coverage for your, for your drugs. And take a realistic view of where your, your future script levels might be as a result. And also, if you’re doing anything, that is development and clinical trials and things like that, obviously, we’re seeing that being impacted now, with the ability of the patient to come into to do testing and be available. So, I think the development, you know, launch of new products probably used to have some, some caution in its delay of being available to the market.

Great. Thank you. And Maris, I would suggest that companies that see distress on the horizon, or, or even in distress now, get, you know, in touch with restructuring council as soon as possible. This isn’t the situation, where, in the past, like a lot of companies put their head in the sand and deny that they have these troubles. And then, you know, the restructuring attorneys come in at the last minute, and other professionals, and they have to physically jam a case into bankruptcy in the short term. There are going to be so many of these that, I think, the best practice, best practices would be to, even if you don’t think you’re going to file, to at least get somebody on board who can sort of advise you of what your options are as soon as possible.

Great. And I will add with one last thought, which is that for me, it has been, consider the ramp and what the ramp backup will be, which ties into what you were saying, Ben. And where you are in the life sciences industry and not to underestimate the ramp when you’re trying to figure out your liquidity situation. And with that, I want to thank both of you, Maris and Ben and I will turn it back over to Arda.

Thank you very much. I think, really interesting comments, you know. I’m going to try to summarize them in a few minutes. Updates, how to… On the clinical trial panel, what I heard is there’s an opportunity now… simple, faster. There’s telemedicine and video consent remote enrollment. And not all trials are being impacted. Similarly, … trial will be a more risk than others. There’s much more to talk about, but let’s move to supply chain. What I heard is it’s just not a supply chain problem, but also the erratic demand problem that puts pressure on the supply chain. I heard 18 months to take an adjustment to the new world, and what we heard was interesting was public private partnerships and how people collaborated in the corporate agreements is competitive agreements, which in a post competitive world will be very important, but we also heard, don’t drop your guard. If you do something, kind of, not lawful, you will be It will be thinking in the aftermath. CARES Act was an interesting conversation. What I heard there was that the, every company’s DIP unique, and every company has to really see grounds a little differently. Patient protection from grand eligibility, permissibility, affiliation rules. All that is very unique, so you have to really kind of look at it. There’s no blanket situation. Buying takes, you’ve got to watch out loans versus brands and there’s some consideration about economic injury disaster loan. But again, there implications. So, you’ve got to watch out. Restructuring panel, we just heard about was really just a lot of thoughts here to think about, but disruption to the system created a liquidity position not just in the short term, but in the long term. We’ve got to watch the therapeutic area impact because considered disposable income and discretionary spending on certain products will be affected differently. And obviously, if you’re looking for negotiating with lenders, collateral situation is very important to determine chapter 11 vs chapter seven. That’s what we heard. And then, finally, obviously giving good guidance on the Q2 versus Q1 will be super important. So, in summary, what I would like to wrap this up with is a personal thank you for all panelists. We had over a dozen experts here. I hope they were really helpful. I certainly learned quite a few new things. Watch out for an email coming from EY, WE for slides and replay. But we’ve be gotten over 30 questions. So, we’re going to try to address all of them as much as we can, we’ll do our best to email that as well. And also, we’re going to send you what we heard in the top 10 takeaways from the two hours that you have been participating in. And we will also put a name to graph infographic and send it to you. So, with that, thanks to all panelists. Thanks to you all for watching us and stay safe, and we’ll will be connected by e-mail. Thank you very much.