Podcast - Increased Bankruptcies in the Pharmaceutical Sector

Morgan Ribeiro: Welcome to Holland & Knight's healthcare podcast. On today's episode, I'm joined by representatives from Gibbins Advisors, who recently released a report covering the state of healthcare bankruptcies at the end of 2022. And this report shares some fascinating data and findings regarding the drivers of healthcare bankruptcies and the sectors within healthcare that are experiencing the highest volumes of bankruptcies and what organizations can do to best position themselves into the future. I recently interviewed another member of the Gibbins team to discuss this report and the findings specific to hospitals and health systems. And today we are going to turn our attention to the report's findings related to pharmaceutical companies. Joining me are Ron Winters and Allan Shaw from Gibbins, along with Phil Nelson, a partner in Holland & Knight's bankruptcy practice. Everyone, welcome to the show.

Ron Winters: Thank you very much.

Morgan Ribeiro: So before we jump into the report, I would love if each of you could just take a few minutes to tell us more about yourself and your firm. So, Ron, I'll start with you.

Ron Winters: Sure. Thank you, Morgan. Again, Ron Winters. I'm one of the co-founders, along with Claire Moylan, who we spoke with last week. We're the co-founders of Gibbins Advisors. We're a boutique restructuring firm focused principally on healthcare in middle market cases. We also do some limited scope work on larger cases. Firm's coming up on the beginning of its fifth year. Prior to forming Gibbins in 2019, I spent most of my restructuring career at Alvarez and Marcell, where I worked with Allan. I was there for 16 years working principally on healthcare cases, and prior to that I worked as a special assets policy guy at a middle market lender.

Morgan Ribeiro: Excellent. Thank you so much. Allan?

Allan Shaw: Thank you, Morgan. I'm Allan Shaw, and I'm a five-time public company CFO, primarily in the biopharmaceutical space. I've been involved with large companies like Serono when they were the third-largest biotech company in the world. More recently at Syntax, an increasingly relevant clinical stage oncology company, which I helped take public. Suffice to say, I know what good looks like, I know what big looks like. I also know what bad looks like. I'm quite entrepreneurial as well, and I can roll up my sleeves and know how to get things done. All said, I've been involved with raising over $4 billion of public and private financings over the years, including several IPOs. I have also been involved with the sourcing, the development and commercialization of numerous drug products across an array of therapeutic areas. And lastly, I've had the privilege and burden of being a seven-time public company board of directors. Used to think audit was the worst part of governance until I got tasked with compensation, which is by far the most thankless part. Great to be here.

Morgan Ribeiro: Absolutely. Great. And then Phil?

Phillip Nelson: Morgan. My name is Phillip Nelson. I'm a partner at Holland & Knight. I practice in our Bankruptcy, Restructuring and Creditors' Rights practice group. I have been practicing for about 19 years. Joined Holland & Knight back in 2019 from my prior firm. And my experience in law was, I think, mirrors Holland & Knight generally. I interact in just about every area of restructuring and bankruptcy work. So I have been representing debtors. I've done trustee and creditor committee work. We also do both secured and unsecured creditor representations on a fairly regular basis, even some work in the Chapter 15 international bankruptcy arena as well, including a recent Canadian pharmaceutical that needed to seek Chapter 15 protection after filing a Canadian reorganization case. So really broad experience in bankruptcy areas and pretty much anything that is one way or another touched on a distressed debt sometime.

Exploring Bankruptcies in Pharma

Morgan Ribeiro: Great. Well, thank you all for those introductions. So, Ron, I want to turn my attention back to you and first get a general overview of the report's findings. Can you provide us with some key takeaways as we broadly look at healthcare bankruptcies in 2022?

Ron Winters: Sure, Morgan. And what we're talking about now is a report that our firm came out with a couple of months back, sort of reviewing healthcare restructuring commencing in 2019. Holland & Knight is going to provide a link to the report through our website. In the show notes, you can look at it at your convenience. So I think the takeaway that I was going to bring to today's podcast is that in 2022 there was a pretty pronounced increase in bankruptcy filings. Pretty quiet, had been declining since 2019, 2020, that wasn't that much. 2021, there was less. In 2022, there were 46 healthcare restructurings as we followed them, and that would be bankruptcies with at least $10 million of liabilities. About half of them were in senior care or pharmaceutical senior care, being skilled nursing, assisted living, independent living, CCRCs. Half of them were in either senior care or pharmaceuticals. The rest were in hospitals, medical equipment, physician practices and miscellaneous, other. So last year there were 46 filings, which was an 84 percent increase from 2021. And of the 46, 31 of them were in what I would characterize as smaller cases, $10 to $15 million of liabilities. And that was a pronounced increase from 2021, nearly three and a half times. $50 to $100 million, pretty good size flat from last year with eight. $100 million to $500 million, a significant decrease from all of the prior years at just two, and then very large ones, over $500 [million], there were five, and that was a significant increase from 2021 and the largest of any of the last four years.

Morgan Ribeiro: Great summary. So now we'd like to turn our attention to specifically talking about the pharmaceutical activity that you saw in this report. Ron, I'll start with you. And of course, I want Allan to provide any other takeaways from that piece of the report.

Ron Winters: Sure. So in terms of pharmaceuticals, specifically, of the 46, 14 of them were pharmaceutical or pharma related. Those were significant amount of them in the smaller amount. Eight of them were in the $10 to $50 million range. Three were in the very large range. And again, two were between $50 and $100 million and one between $100 and $500 million. That 14 is about a quarter of all of the pharma cases filed in the last four years, 38 filed in total, and again, 14 of them last year and principally focused again, at least half of them, in the smaller cases.

Allan Shaw: I think when you talk about bankruptcies in the pharmaceutical sector, I think they fall into kind of two different categories. They're the revenue-generating companies to be pharmaceutical companies that have found themselves with the balance sheet that's not quite right sized with the expectations they had for operations. And I think those are probably more prevalent. And arguably there is more of a potential recovery because of the cash flow. Associated with that, I'd say that a lot of companies in the sector right now are really running into what I would call an inability to fund their businesses. They don't necessarily have debt. So it's hanging over their heads. But the fact is that they just can't necessarily keep their lights on. And I think the market is anticipating that right now. And if you look at the public markets in particular, there is over 200 companies right now that are trading with negative enterprise value. Many of them don't have debt. But, you know, you can think of it almost like a reality show in terms that effectively being voted off the island. And you're starting to see now companies that are deciding to wind up operations, certainly seeing a few people, some companies that are deciding to give the money back and say that's the foreign view between. I would say a lot of them are now looking at reverse merger opportunities. I would also say, given the fact that the IPO market is backed up quite a bit, people are now kind of viewing this as negative enterprise value companies, as opportunities to kind of go public through them. You know, when I reflect on the environment and look back, I think it's important to understand how we got here. And, you know, we've had a wonderful, glorious run in the sector for the last 10 years. It's been one hell of a party. You know, when money's free and everyone can look like a rock star. And we certainly saw the excesses of that over the last 10 years. So I would say, you know, we all know how we feel after a night out. Think about it. Doing this for 10 years consecutively. You know, these 200-plus negative enterprise value companies are effectively akin to empty beer bottles after a party that require recycling. So, you know, they're neither fish nor fowl. Certainly some of them the babies being thrown out with the bathwater. But a lot of them really serve as an opportunity for, I guess, a form of reincarnation or recycling where people can go public. And I'm actually involved with a company that just went public yesterday through a reverse merger, and I've quipped that reverse mergers will be the new IPO during 2023. And there's certainly some evidence of that. But what I've observed is the biggest rate limiting factor are actually the companies themselves. You know, a lot of the management teams of these empty beer bottle companies are rather contrite. You know, they actually like to continue to pay themselves. They like, you know, they're living. And when we've been going through the process of trying to engineer a reverse merger, you know, we kissed a lot of frogs. We shook a lot of hands. And suffice to say, the pushback we got was many of these management teams actually wanted to stay in the seat. You know, certainly a breach of fiduciary responsibility. Here you are bringing another asset to the equation. You'd want people to have some institutional knowledge of how to maximize the value of this. And these folks really didn't get it. You know, I would also take a step back. Is that really the phenotype that you want in a management team to lead a company? Either — and I can speak to the transaction we're in — if they had recognized that the car was running out of gas earlier on, they would have gotten a much better deal on the exchange ratio. But they squandered years overhead and certainly did not engineer as good a transaction as they might have otherwise. And when I've talked to people about this, and what I'm getting, it's not just the management teams, it's the boards themselves. You would think a lot of these companies should be running around with their hair on fire, and in many cases it couldn't be further from the truth.

Morgan Ribeiro: Is that because the board members are not educated on the business itself?

Ron Winters: I think they're sitting on a lot of cash and they're not seeing the immediacy of the problem. Isn't that commonly the situation?

Allan Shaw: You know, I would say generally speaking, that's correct. I would say they're not always sitting on a lot of cash. I guess a lot of cash is a relative statement for people. You know, certainly they can pay themselves for the foreseeable period of time, you know, and it seems to me when you have leadership that's more focused on paying themselves as opposed to, you know, kind of swinging for the fences and creating real value, it's not the right leadership. You know, it's wrong on a number of different levels. And to your point, Morgan, you know why I would assume that people aren't necessarily always aware with their options and you think that requires a little bit of thinking out of the box? You know, you're thinking about the people who comprise these boards. You think about the operators. You know, they're drug developers. They're not necessarily financial engineers. So when you're talking about a reverse merger, I think you're asking people to do things that are probably beyond their pay grade in some respects, and they don't necessarily understand how they can create value. You doubly concluded that your technology isn't going to work. It would seem to me that you're now captive on a burning bridge. You're beholden to really do something while you still can.

Restructuring Debt, Operations and Focus

Ron Winters: Can I jump in here for a sec? Tell me if you agree with this. I think we're going to see restructuring activity really on the smaller ones, because I think some of these larger ones still have at least a good amount of cash where they're not sort of missing the end of the road yet. You and I spoke yesterday, and you shared with me some research from a month or two ago by Jefferies where they sort of isolated, I think, 24 companies with more capital, $100 million or more, where they did have negative enterprise value, as you mentioned. And so I dug a little bit more on those, and of the 24, only eight of them have debt. And in each case, they had more cash than they had debt. I figured that's not sort of fertile ground in terms of restructuring, although I would think we're all following the larger ones. I think there's probably a lot of activity with much smaller ones. What do you think, Allan, might I be right about that?

Allan Shaw: I think it really comes down to how do you define what is restructuring. I would say that even if you don't have the debt on your balance sheet, a lot of companies are restructuring their operations, their focus. There's certainly been a lot of layoffs. I think before people did things because they can, and now they're realizing that they've got to rationalize their resources. The punch bowl wasn't getting replenished so quickly. And I think there's been a lot of latency in people recognizing that. So I think a lot of people are waking up and smell the coffee this year when they really blew a year where they could better manage their cash resources. And I think a lot of it had to do with people. Whatever their reasons were, felt that this was just going to be a passing storm. And I think it's really clear that it's not a passing storm. It's the consequences of living high on the hog for the last decade. And a lot of the stuff is zero sum. So a lot of people were sitting around with their fingers crossed and hoping. Suffice to say, hope is not a strategy. And I think in many respects people are now realizing that they've got to do something. So they are restructuring their businesses, Ron, but it's not the traditional sense in terms of the debt restructuring. But they are working on their cash burn and figure out how to do more with less.

Phillip Nelson: Let me make an observation with respect to the smaller firms, smaller companies that are attempting to develop new medical technology or new pharmaceuticals. It's going to be an opportunity for these larger entities to do some consolidation, to do some acquisition, if they can do it smartly and maybe find more useful products in there, whereas the products they're already pursuing either are going to end up going anywhere or maybe there's some additional technology or some additional products that they can bring to market. If, for example, a smaller company, which you're going to see a lot of terms, is not a real restructuring in the traditional sense, but you'll see a Chapter 11 filing that's going to lead to a sale of the assets and then some distribution, either under a plan or otherwise to the remaining creditors. But that does create opportunities for larger companies that have the money to spend. I did have a thought, and I wanted to see what you thought of this, which is with respect to some of these larger, better funded and even investment-funded companies, I wonder to what extent pharmaceutical space, this sort of tech world fail fast and iterate by ideology, is driving this lack of urgency that you kind of describe around the efficiency of the company and the company's ability to actually generate a profit in this idea. Well, we'll put a lot of assets together and we'll try to discover a useful technology or something we can take to market. But it's really sort of about getting through the process of making attempt, failing and iterating and seeing where that development takes us. And less of an urgency, you know, when interest rates were low, when capital was available, around what is this going to yield something that's going to be a useful product or allow us to generate profitability.

Allan Shaw: You know, an interesting question. I would say that a lot of the companies, you're really investing in them or buying into them really more on a promise of the science working as opposed to necessarily expecting them to turn around and being a cash flow company paying a dividend. I've often quipped that I think for companies, right, particularly in life sciences, where you're making decisions in resource allocation, that really you're looking at five- and 10-year time horizons. So to me, the interest rate dynamic is less about the expectations of becoming cash flow positive sooner than later, other than that collateral implications on our cost of capital. And I think the macro really drives the sector in this point. Why did we have a party for 10 years? It's because interest rates were very low, and because interest rates were very low, people were looking for returns, and they were getting aggressive with their returns, and they were looking at the biotech and the pharma sector to get extra yield. As a consequence, we had a real inflow of generalist investors that went beyond the traditional specialist folks that comprise our sector. And I think now with reflection, those generalists were really tourists. They were in and they were out, and the flow of funds is really pulled itself out. So I think the higher interest rates, rather than putting pressure on development timelines, interest rates aren't going to necessarily change the pace of development itself. I still think capital-efficient companies will kill their experiments as quickly and run the killer experiments to get answers as opposed to turning it into entitlement. I think that there is a way to distinguish that, and good run companies will continue to do that respectively. But I do think that because of the cost to capital factor, it becomes much harder to finance a company these days. And it kind of goes back to some of the informal restructuring that people are doing by killing programs, rationalizing, focusing on just one thing, because right now, of course, the financing is really, really, really punitive. You know, I think it really comes into a different several sets of flavors. You know, if you have data, which is really the currency of the industry, you can raise money, maybe not necessarily as effectively as you could do before, but you can still have access to capital. I would say for those who do not have data, it becomes a little harder for folks. And I think it falls into a couple of different categories that companies can go about trying to raise money, but you don't have insider support and you don't have data. You're probably likely going to be doing more of a Band-Aid type of financing, which will find you to the next milestone. And right now those financings are extremely punitive. Usually you're doing no matter around a 20 percent discount the way the market's trading. And these days they also come with warrant coverage that can really increase the level of dilution. With that said, I've never seen a company go bankrupt from dilution, but the key factor is that dilution is becoming more and more punitive. And I think you're also seeing more of the specialist funds gravitating away from those Band-Aid financings because, you know, those are not holistic solutions for companies. And I think they're really looking at holistic solutions and willing to make bets on selective situations where the technology is really differentiated. With a jockey's and management team have a history and they want to make sure you're funded really through all of your valuation inflection points. And that's also going to be very expensive because when you look at these companies, you know, a lot of their market caps are under $100 million now. So if you develop drugs, you know, you're raising $50 million, $80 million. Those recapitalizations are going to be hard on companies and hard on investors. I think as an industry, no pun intended, but we have to take our medicine and rip that Band-Aid off. You need to capitalize yourself. And I think trying to raise money and so you turn over your next card, it's kind of like doing a high wire act without a safety net.

Ron Winters: There will be some companies, Allan, don't you think, who are already under 18 months, maybe under a year of cash left, unable to raise money at any price? I mean, those are the ones that presumably have the worst science of the most vulnerable. And I see that the way you do?

Resource Allocation Issues in the Healthcare Industry

Allan Shaw: Yeah. I mean, there's always a market clearing price, but I think it's becoming harder. And of these companies, just to illustrate, I think the industry itself has had a little bit of a resource allocation issue. For instance, there's over 100 (inaudible) 19 companies out there. And there's absolutely no reason for that. So, you know, I think a little bit of this is that we have not been very good stewards in terms of the resources that have been allocated to a lot of these companies. So yeah, I think we are seeing some Darwinism here. There's some companies that are just not fit to be out there, and some of them are going away. You're hearing about them. I don't think you're really going to see a lot of Chapter 11. I think these are all Chapter 7.

Ron Winters: I think the ones that have the greatest likelihood of a Chapter 11 filing to the ones that do have some debt for various reasons, they were able to raise some under more favorable circumstances, or they had a product that then later faltered, or they had litigation or they were opioid. I mean, I did a quick tour of some of the 14 that went bankrupt last year, and sort of that seemed to be the common theme, as far as I was concerned. What forced it was they had probably secured that in many cases that they had to answer to and the securities weren't with the transaction ought to take the asset themselves, they had to.

Phillip Nelson: Although in that case, a lot of times you do end up seeing it as an 11 with a (inaudible) sale as opposed to putting it into the hands of a Chapter 7 and getting a trustee who maybe they can manage the process sufficiently well, and maybe they can. I think particularly sophisticated secured lenders have a lot of suspicion around what they're going to get if they get a panel trustee, feel much more comfortable leaving management in place, particularly where they’ve already arranged for what the sale process is going to look like.

Ron Winters: The couple of sort of mid-sized, actually, they were on the smaller end of the range, as I described before that I looked at preparing for today. I mean, they made an effort to sell the company at the urging or requirement of the secured. They were unsuccessful doing it out of court, probably because they also had some trade liabilities of significant size. And they went in and immediately continued their sale process and were able to get transactions done at pretty unhappy prices relative to the secured that they got something done.

Morgan Ribeiro: So I'm curious, you know, we talked about some of the drivers, either when you're smaller pharma company or a larger company. A lot of attention out in the market right now. It seems on this is more specific to the larger companies that have successful drugs out there but may have patents expiring soon. I mean, is there any sort of financial strain that we're seeing on those businesses, particular to either patents expiring or other issues that are greatly impacting the larger pharma companies?

Allan Shaw: I think there are certainly a lot of pad and expiration. You know, Merck's has their checkpoints, got a couple of years left on those patents, and that's a $20 million product and is becoming a significant portion of Merck’s revenue. So, you know, there's definitely concentrations. You've got Chimera that's recently just gone off pad. So that is an issue for folks. I think on the flip side, I think there's a lot of speculation, a lot written about how much the biotech sector is really the minor league proving ground for a lot of these companies. And they're really looking to solve their issues by picking up additional products from the developmental stage companies. So I think that's what the expectation is on many of them.

Ron Winters: I mean, that's a general business plan. Most of these companies, they never intend to actually be in business producing and selling. They get proof of concept and get acquired by a big guy. Right?

Allan Shaw: I would say when you look at some of the productivity or the lack of productivity of a lot of large shops, it has proven to be much more effective to go and fill your pipeline that way. I think Pfizer, I think 60 percent of what's expected in two years has to come from M&A. So yet, I think that's something that people have accepted and have come to terms with. And I think a lot of people would have expected a higher volume of them. And so far this year, and they haven't seen it, you know, with the drop in the prices, you would have thought. And I think, you know, for the larger transactions, I think there is concern that the government might get involved with some of that. That's been a little bit of a drag there. And I think on the other side is it really speaks to the resource allocation that, you know, people are saying, "Well, something was selling for a billion dollars and now it's from $100 million swimming by." I guess that all assumes that at $1 billion that there was something of value because then, yeah, if it was something, I bet $1 billion then $100, it should be valuable. But what happens if that thing is simply not valuable at all?

Phillip Nelson: What happens if that valuation is just money, you know, chasing a place to go, which is looking for a place to go?

Allan Shaw: Exactly. And I think these guys, you know, to your point, Ron, they'd rather pay a multiple and get it right than to pay something and get it wrong, because it's not just the cost of buying it. It's the cost of developing it, too. You know, I was involved with buying a distressed asset this past summer and, you know, and I was talking to a lot of buy side people. And the threshold for that was that if you give it to me, would I want to invest money in developing it? Right. That's kind of where the buyer is right now. It's who cares if it's free? Is it worth my money? And I think a lot of people are starting to realize that some of their projects aren't passing that litmus test. And if you have 100 CD19 companies, how do you differentiate yourself? Even going back to the Merck situation, they have the best-selling cancer drug ever. There's been $30 billion of PD-L1 checkpoint to date. Merck represents $20 billion of that market. Yet there's watching approved checkpoint drugs now. So what we've done is really commoditize some really fabulous science. And now you've got Merck trying to protect that $20 billion. And you've got folks like GSK and Regeneron who are trying to break into that. So if you can demonstrate proof of concept and expand the addressable market right now, those checkpoints only work on about 30 percent of the patient population. If you can increase that to 50 or 60, be a doubling the size of the market and the durability of that as well. And you know, you're going to create a food fight, right. To your point, once you demonstrate proof of concept over $30 billion market, that's potentially $60 billion market. It's going to be a pretty interesting dynamic.

Ron Winters: Early in my career, Allan, back then I was a lender looking at cash flow and working opposite a guy who was involved in pre-revenue kinds of companies. And I said to the guy, "David at some point, don't you need to make a profit here?" And he said to me, "Ron, the only thing worse than earnings are revenues, because once we put any number up on the board, it's bound to disappoint." Which I thought was an interesting observation.

Allan Shaw: I've heard it characterized as "the earnings curse" when you're not generating money. You know, you can be whatever you want to be, right? When you start making money now, you're getting graded on traditional metrics like growing up. But it's more fun to be a kid, wasn't it?

Advice for Present Challenges

Morgan Ribeiro: So we talked about some of the drivers, and one of the other areas that is getting a lot of attention right now in the media is obviously the opioid crisis and some of the bankruptcies that have come as a result of that bill. Any thoughts on what we continue to see that or what can we anticipate to see surrounding the opioid crisis?

Phillip Nelson: I think that's a difficult question. It feels like we've seen the crest of the wave. There have been several really large cases, whether that's Insist or Melanoid, Perdue and Endo. But I think beyond that, you're starting to see significant settlements being put in place to resolve this litigation. I don't think that you're going to see a large wave of additional pharmaceutical bankruptcies related to opioids or opioid litigation. Now, could you see one of these entities try to take advantage of what we've seen in the case of, for example, Johnson & Johnson's talc liabilities with the Texas to set device of merger, which is the same thing that 3M has done with plug liabilities. Could you see that? I suppose so. But I think the recent Third Circuit decision in LTL, which has sort of drawn into question the ability of a divisive merger that CO to file for bankruptcy, get bankruptcy protection, I think that would put a lot of limitations on that as a response or as a way of dealing with these remaining liabilities that these entities have. So I think they're likely to try to find a way to enter a settlement and stick to that settlement as opposed to looking for bankruptcy as a way out.

Morgan Ribeiro: Awesome. OK, so before we wrap up, I, of course, want to talk about more about forward looking and solutions. Conversation and other report talked about what "self-help" that organizations can engage in. Any thoughts or recommendations for entities that at this point are at a crossroads where they need to be making some tough calls? And what are some tips you have on engaging in self-help?

Allan Shaw: I guess I would really encourage people to be, you know, objectively honest with themselves and take their rose-colored sunglasses off. A lot of people have experienced failure, and they really drag their legs in terms of accepting it. And it doesn’t necessarily have to be a failure. But, you know, people do have a hard time coming to terms with that. And I think like alcoholism, you have to identify the problem before it can be cured. And I think a lot of people try to drag their legs and are looking at rearview mirrors. I think you really got to understand and take inventory of where you’re at and also recognize that you don’t have all the answers and you only know what you don’t know. And you do probably want to expand the circle of friends. I think cash management and resource allocation is really important, and you need to have a strategy of how you're going to get to the other end. And I think you've got to also be mindful of the fact that however painful it is, and even if you think your stock is really worth a lot more, you know, you need to get over that and just rip the Band-Aid off and start taking your medicine. Like I said earlier, sitting around with your fingers crossed is not a strategy.

Morgan Ribeiro: Excellent. Thanks. Ron?

Ron Winters: It always starts with liquidity management, religiously doing a monthly or 13-week cash flow for the first quarter and then monthly for maybe a year after that so that you know where you are on cash and which runway is that you can survive. Obviously, in the event you have secured debt, you also have some covenants that you need to be mindful of and engagement with the secured lenders note holders to be sure you're able to access the cash that might really be part of their collateral package. I think, you know, as Allan often says, you also have to sort of prioritize your spending on investment, on development of pharmaceuticals, to the extent you have limited cash because your cash is beginning to deplete, you need to sort of triage that to prioritize what you're going to put your money into. And you've got to be really mindful of your cost. And I think probably most of all, it's always nice to hire restructuring professionals, but I think maybe the most important thing is to take action while you still have money, because that's going to give you some ability to have flexibility and try to find a transaction where you're not on your heels.

Morgan Ribeiro: Phil, anything else you'd add to that?

Phillip Nelson: One observation I would have is when you find yourself any number of occasions that you see in the bankruptcy context, and I'm thinking of a case that I'm involved in right now, you find a company that has a product that they were going to take to market, and they have some expectations of what that product is going to be able to generate. And they make investments based on that. But there's no accounting for the unforeseeable factors, the unpredictable aspects of the market and the ways in which the winds of fortune can change. One example I'm thinking in particular is a pharmaceutical company that I've been working with where they developed a really useful revolutionary product. It's not the opioid space. It's a post-menopausal medication that can really revolutionize treatment. And they thought they had a winner, so they ramped up their facilities, their production capabilities, and then COVID hit and nobody was going to their doctors and their reps couldn't get in to see the doctors. And it put their product on a completely different timeline in terms of development. Based on what I've seen, I think they have a very profitable product going forward, but in the short term they were faced with a lot of invested capital, a lot of debt that they'd taken on and no real ability in the timelines that they required to service that debt to be able to take advantage of it. And so being nimble in the face of changing economic circumstances, changes in the market and sort of not assuming that the current path that the market is on is going to continue indefinitely is a very important aspect of how do you plan for the future, how do you plan to go to market when you actually have something that's useful that it can be profitable.

Morgan Ribeiro: Excellent. Well, I think those are great parting words. I always like ending on a positive, forward-looking note, and I know that these can be sort of dark and challenging conversations to look at, you know, the distress in the market. But I also think that with that comes opportunity. So appreciate everyone's time. Appreciate Gibbins sharing insights from your report and look forward to connecting again soon.

Ron Winters: Thank you very much, Morgan.