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BLUE -- Bluebird Bio


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They seem to have bona fide cures for several very bleak genetic diseases (adrenoleukodystrophy, sickle cell, thalassemia) , a viable CAR-T cell treatment for multiple myeloma, and obviously some expertise in gene therapy. $1.8B market cap with $1.2B in cash. Not paying much for some good science and it seems like big companies have paid a lot more for a lot less. Appreciate any input.

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I don't think it's much of a cliffhanger at this point on whether the treatments will work.  The trials of each of their genetic diseases showed pretty resounding effects.  The specter of induced cancer does loom but the management's suggestion that it may be unrelated seems pretty plausible to me at least (I'm a doctor, not an oncologist, but an oncologist friend did confirm that there's a ~1% baseline incidence of AML in these populations and he would not be particularly concerned about the recent news).  Whether they will be able to commercialize them profitably or not and whether a competitor will get a product out sooner seem like bigger questions.  But I am willing to bet that a company that can cure these diseases can figure out a way to make a profit as well.  Does anyone who follows biotech care to weigh in? Thanks.

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Bluebirds sickle cell gene therapy has composition from VRTX using CRISP. VRTX is now in Phase II. a bluebird used to be in the lead, but VRTX appears to be catching up:

https://www.fool.com/investing/2020/12/12/watch-out-bluebird-bio-crispr-is-on-your-heels/

 

I just took some interest in VRTX and bought a small position the last few days. I think it is a cheap way to own a bleeding edge biotech/Pharma hybrid that may have a lot of growth in front of them.

 

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Interesting post nsa122. Thanks for bringing to the attention of CoBF.

 

My high level understanding of bluebird's bear thesis is the following -

1. Their gene therapy LentiGlobin (bb1111) being tested for Sickle Cell has 2 patients develop AML and MDS and risk severe of side effect derailing the drug or lowering estimated revenue even if approved

2. Marketing for another approved drug Zynteglo suspended. It uses the same underlying technology (LentiGolbin) for thalassemia.

3. Their entire lentivirus based gene therapy pipeline is compromised as per analysts (see - https://finance.yahoo.com/news/don-t-bargain-hunting-bluebird-003840593.html)

4. Their other drug for Sickle Cell (BCL11A sh RNA) now is under competition from Vertex's competitor drug (based on crisper)

5. Bluebirds CAR-T is an important asset. But Ide-cel (tie up with BMS) has run into manufacturing issues with FDA delaying its approval.

 

I think the bear thesis has some legs but there is also some potential for mispricing due to the above information. Here are some thoughts -

1. For LentiGlobin in Sickle cell it is quite possible that the 2 patients would have developed these cancers as the disease itself is linked to higher incidence of cancer. (see - https://www.healio.com/news/hematology-oncology/20170920/sickle-cell-disease-doubles-risk-for-leukemia)

2. Drug companies frequently suspend clinical trials due to unrelated adverse events showing up in their cohort (clinical trial participants). An example is Astrazeneca's covid vaccine that was halted due to adverse effect with turned out to be unrelated to their vaccine.

3. Bluebird is still the leader as compared to Vertex (see - https://www.evaluate.com/vantage/articles/news/trial-results/bluebirds-early-stage-sickle-cell-gene-therapy-shows-promise) when it comes to curing severe Sickle Cell via targeting BCL11A gene.

4. The Vertex Crisper based (bleeding edge technology) for Sickle Cell targeting BCL11A gene has more uncertainty due to many unknowns. Crisper is very new tech that still has no approved drug on the market. Also it has been shown to have non-specific off-target mutagenesis (cutting off unrelated parts in your DNA) which can lead to severe side effects. This risk is not fully taken into account so far. Bluebird's tech also targets BCL11A but via shRNA. This tech has been around for some time now and has drugs approved (see - https://www.genengnews.com/resources/tutorial/a-new-lease-on-life-for-shrna/).

 

For the above reasons this may well indeed be a temporary set of hurdles for bluebird. If anyone here has more insights I am missing, I will appreciate their input.

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More relevant information I could scrape -

 

Therapy regimen

 

Sickle Cell Disease -> Pre-therapy treatment using chemotherapy busulfan -> treat with bluebird bio drug LentiGlobin (lentiviral vector based) -> 2 patients develop leukemia in 2021, one in 2018 (reason for 2018 was claimed to be busulfan+patient specific issue)

 

Sickle Cell Disease -> Pre-therapy treatment using chemotherapy busulfan -> treat with VRXT/Crispr drug CTX0001 -> too early and very small sample size

 

beta-thalassamia -> Pre-therapy treatment using chemotherapy busulfan -> treat with bluebird bio approved drug Zynteglo ((lentiviral vector based)) -> no patients have developed leukemias so far

 

beta-thalassamia -> Pre-therapy treatment using chemotherapy busulfan -> treat with VRXT/Crispr drug CTX0001 -> too early and very small sample size

 

It is well known that busulfan treatment (e.g: for stem cell transplant conditioning) can cause rare secondary cancer (https://www.macmillan.org.uk/cancer-information-and-support/treatments-and-drugs/busulfan). Also sickle cell disease itself increase the risk of leukemia (see -  https://www.healio.com/news/hematology-oncology/20170920/sickle-cell-disease-doubles-risk-for-leukemia). This in addition to the fact that drug for beta-thalassamia using same lentiviral tech has not shown any issue so far may indicate sickle cell specific + pre-treatment issue. It does create issue with the entire class of gene therapies that use busulfan as pre-treatment in sickle cell (including for criper based therapy for sickle cell which also uses busulfan pre-treatment).

 

nsa122, if your oncologist friend can comment on this, it will be very useful. Right now the gene therapy side of bluebird is assumed to be of very little value to analysts due to the above issue.

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Yes, I asked him and he quotes a 1% risk of developing bone marrow side effects such as leukemia from alkylating agents. Hydroxyurea, another sickle cell drug, has also been implicated as having a risk of leukemia. It could end up that the gene therapy actually avoids exposure to leukemogenic drugs, rather than causing leukemia. In any event, I think they should be able to definitively figure out the genetic driver of the patient's cancer, and if the lentivirus did not insert at that gene, then the gene therapy is blameless as I understand it. This is how the exonerated their therapy in the previous MDS case a couple of years ago.

 

Just as a general note, if you compare this company to other biotechs in the ~$2B range, you are getting much more for your money in terms of pipeline and expertise. Most of these other $2B companies that I see have one main promising drug that is entering or midway through testing, with probably less than 50/50 odds that it will prove efficacy. Here you've got several proven treatments and the gene therapy expertise (and probably IP) that I would think is valuable apart from the drugs themselves.

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Thanks. Now looking at their latest 10-Q, the cash burn rate is roughly 400M per year. That is roughly 3 years of runway. There is an important FDA decision on ide-cel on March 27 2021 but ide-cel franchise rights for bluebird are only in US with 50/50 split in profits with Celgene (now BMS).

 

The indication for ide-cel for starters is multiply myeloma (MM) in R/R patients which will certainly be expanded. Celgene was predicting $2 billion per year peak revenue for ide-cel eventually which seems high (see- https://www.biopharmadive.com/news/bristol-myers-celgene-blood-cancer-cell-therapy/545205/). Let's take a 50% haircut on these projections and say it is 1B per year out of which US market is half that revenue. That is 500M per year in US out of which bluebird gets to keep 250M just in US for Multiple Myeloma. Then there are other potential indications to expand to for ide-cel which is certainly easier than getting a new therapy to the market. So I am expecting ide-cel to get in at least 500M / annum in 2-3 years. They still need to get their manufacturing straightened out.

 

All of this without any modeling of their gene therapy pipeline or  other CAR-T therapeutics. There is also optionality of M&A given their solid science in-house. So unless lentiviral tech is really kaput, this is a good play.

 

Disclosure: Started a small(ish) 3% position. Will buy more as I dig deeper and learn more about their platform for CAR-T.

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I did look at it before dipping. Right now split will be very hard sell to wall street unless they can show some solid data ruling out mutagenesis (I agree with the analysis here - https://www.evaluate.com/vantage/articles/news/trial-results/bluebird-split-looks-premature). Not all analysts were onboard in the first place when split was announced earlier in the year. The articles also suggests "resolution" of this matter in weeks than months. Although I doubt this fast timeline, it is still in the interest of the management to one way or another put this behind them rather quickly while conserving cash. They cannot proceed with the split until then realistically speaking.

 

Most of the current value comes from with newco (oncology) and gene therapy is left for dead (more or less). The bet is that even in worst case for gene therapy (they shut it down) current valuation holds up with high probability and any other scenario is a positive for the stock. This is also why I want to dig deeper into their CAR-T side. So far I have not been able to find any red flags. Infact BMS is doubling down on ide-cel by scrapping another program orva-cel (same anti-BCMA target but their in-house effort) to focus on "best-in-class" molecule ide-cel.

 

As for what might happen in terms of split or otherwise, its completely uncertain at this point. I will be happy to listen to any alternative thesis poking holes in my argument.

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I agree BLUE seems too cheap with an EV ~$530M for some leading edge clinical programs. I think there is a chance that the gene therapy will get approved, but it is going to take some time.

I own some BMRN (bought after the crash) and they are looking at a 1-2 year delays for what looks like smaller issue.  Perhaps a larger Pharma or biotech becomes interested and takes them out. At this point, I do think the risk reward looks favorable.

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There's also their collaboration agreement with Regeneron.

 

Mr. Yancopoulos Regeneron's CMO and cofounder had said at a recent conference that Bluebird and Alnylam remind him of Regeneron when it was a young company and generally that the collabs are going very well.

Regeneron is not very promotional but has good science.

 

REGENERON AND BLUEBIRD BIO ANNOUNCE COLLABORATION TO DISCOVER, DEVELOP AND COMMERCIALIZE NEW CELL THERAPIES FOR CANCER

 

 

https://investor.regeneron.com/news-releases/news-release-details/regeneron-and-bluebird-bio-announce-collaboration-discover

 

 

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Thanks nsa122 for sharing. I like this idea a lot. Initiated a position today.

Agree with Spekulatis EV of ~500million seems too cheap especially considering a phase 3 CAR-T candidate.

Found these papers which I found helped:

https://www.ashclinicalnews.org/news/patients-sickle-cell-disease-increased-risk-hematologic-cancers-especially-leukemia/

https://ashpublications.org/bloodadvances/article/4/9/2058/455054/Myelodysplastic-syndrome-unrelated-to-lentiviral

https://pubmed.ncbi.nlm.nih.gov/23072778/

 

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The CEO and the CMO of Bluebird presented today at SVB Leerink Global Healthcare Conference. The fire chat was very informative re the two cancer cases. they said that the investigation is going in a positive direction and elaborated on each case.

They were very transparent but I know them to be promotional so..

 

https://investor.bluebirdbio.com/events/event-details/svb-leerink-global-healthcare-conference

 

 

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The CEO and the CMO of Bluebird presented today at SVB Leerink Global Healthcare Conference. The fire chat was very informative re the two cancer cases. they said that the investigation is going in a positive direction and elaborated on each case.

They were very transparent but I know them to be promotional so..

 

https://investor.bluebirdbio.com/events/event-details/svb-leerink-global-healthcare-conference

 

Thank you much for posting. This is very informative.

 

Agree that there is positive undertone (spin if you will) from the CEO Nick Leschly. But if we keep that aside and just hear the new information revealed by the CSO Philip Gregory, it is more matter of fact (for first 10 mins at least) and is indeed positive. For the first patient with AML and vector in the leukemic cell, they also found 11q abberation, monosomy 7 and other mutations. It will be very hard to prove that somehow the vector is root cause (driver) of these abberations in one patient (N=1) when they look at other subjects with equal disease severity in this and other arms of the clinical study and don't see any evidence of leukemia. Here is the original paper published last year on one patient who developed MDS following LentiGlobin a couple of years back - https://ashpublications.org/bloodadvances/article/4/9/2058/455054/Myelodysplastic-syndrome-unrelated-to-lentiviral. For example monosomy 7 is known to be a risk related to  busufan treatment and was alluded to in this paper-

 

"The finding of monosomy 7 in this patient is expected in secondary myeloid neoplasia, including following exposure to alkylating agents such as the busulfan."

 

Also if these 2 subjects are not treatment naive for Hydroxyurea (they switched therapies when getting on clinical trials for lentiviral therapy) then there is one more important potential driver of AML. I don't know if these subjects were on previous therapy. The CSO hints (starting at 7:40 min) they may do a genome wide RNASeq. I have worked with this kind of data. It very hard to figure out if there is a causal link between changes in transcription patterns and phenotypic findings. So the finding can be open to interpretation which may bode well for bluebird given all the other information.

 

I do think there is a risk of slow adoption of gene therapy in the clinic given the current life expectancy of sickle cell patients (and even for thalassamia) plus factors tied to gene therapy (cost, conditioning agent requirement, perceived risk of cancer etc).

 

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Jacob Plieth of Evaluate Vantage is critical of Bluebird for disclosing the latest news about the two cancer cases in the SVB Leerink healthcare conference rather than in a regulatory filing. He's not wrong but

this webcast was advertised well in advance and was just one day after Q4 2020 release. I couldn't find the traditional quarterly CC, strange and the next day as the encouraging news flowed through the WC the stock got weaker(thanks for the chance to pick up some more BLUE)

 

Nevertheless, he's very informative and has a timeline I don't recall from listening to the webcast.

 

"Bluebird is continuing its investigation, and the complete analysis of the AML case could now come in a couple of weeks"

 

Bluebird sings to a select group of investors

 

https://www.evaluate.com/vantage/articles/news/snippets/bluebird-sings-select-group-investors?mkt_tok=NjA3LVlHUy0zNjQAAAF7fhmtGOJ-j85TkXGM3hx0v1YGdf2VQbtsHM_emXDJXc37jTySIrtpWgQbeBNe6xa4nTreR5JoA_1y2CmRJsCzLyFzPt-_OOXQsaQlNFHDMYpNrQ

 

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It is remarkable to me that there are so many holders of bluebird that were so unsophisticated as to dump the stock leading to a 50% decline on news that would not really surprise anyone with some hematology/oncology expertise. I think even anyone with any general medical background would at least think to say, hmm, is this a result of the treatment or the disease? and do a little research on that before selling. And then you wonder, did the management anticipate such a dramatic market response to the news? Either way, not a data point in favor of argument for efficient markets.

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  • 2 weeks later...

Company statement: https://investor.bluebirdbio.com/news-releases/news-release-details/bluebird-bio-provides-updated-findings-reported-case-acute

 

“In totality, the data from our assessments provide important evidence demonstrating that it is very unlikely our BB305 lentiviral vector played a role in this case and we have shared with the FDA that we believe these results support lifting the clinical holds on our β-thalassemia and sickle cell disease programs.”

 

On SA someone however mentioned the following:

 

Likely accurate but disingenuous announcement. I would have sold premarket if possible at $34 but the gain now is under 10%.

There are two possible mechanisms for MDS/AML in the setting of BLUE's strategy:

1. Viral integration and leukemogenesis. As I have mentioned in my posts previously, this is less likely because these malignancies typically tend to be lymphoid rather than myeloid.

- This is what has been excluded based on the announcement.

2. Effect of the conditioning chemotherapy for the stem cell transplant. Again, as I have mentioned, this is the likeliest explanation.

- This has not been excluded. One way to look at it would be to retrieve backup bone marrow or blood-derived stem cells from before viral transduction - and I bet these specimens do exist - and analyze those to see of molecular markers of MDS/leukemia are present. If not, the problems are likely due to the treatment strategy. This is the much likelier of the two scenarios. The second scenario (*) is that the abnormalities were present - and therefore the Zynteglo treatment strategy had nothing to do with it. This theory has been pushed by BLUE (blaming hydroxyurea instead) without any evidence.

- If BLUE does not make any attempt to analyze pre-treatment cells (and they have had a long time to do it in the one case that was reported a couple of years ago), to me that is strong evidence that they suspect scenario 2 above (*) and do not want to find out a major weakness in the strategy. Sort of no ask, no tell!

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Company statement: https://investor.bluebirdbio.com/news-releases/news-release-details/bluebird-bio-provides-updated-findings-reported-case-acute

 

“In totality, the data from our assessments provide important evidence demonstrating that it is very unlikely our BB305 lentiviral vector played a role in this case and we have shared with the FDA that we believe these results support lifting the clinical holds on our β-thalassemia and sickle cell disease programs.”

 

On SA someone however mentioned the following:

 

Likely accurate but disingenuous announcement. I would have sold premarket if possible at $34 but the gain now is under 10%.

There are two possible mechanisms for MDS/AML in the setting of BLUE's strategy:

1. Viral integration and leukemogenesis. As I have mentioned in my posts previously, this is less likely because these malignancies typically tend to be lymphoid rather than myeloid.

- This is what has been excluded based on the announcement.

2. Effect of the conditioning chemotherapy for the stem cell transplant. Again, as I have mentioned, this is the likeliest explanation.

- This has not been excluded. One way to look at it would be to retrieve backup bone marrow or blood-derived stem cells from before viral transduction - and I bet these specimens do exist - and analyze those to see of molecular markers of MDS/leukemia are present. If not, the problems are likely due to the treatment strategy. This is the much likelier of the two scenarios. The second scenario (*) is that the abnormalities were present - and therefore the Zynteglo treatment strategy had nothing to do with it. This theory has been pushed by BLUE (blaming hydroxyurea instead) without any evidence.

- If BLUE does not make any attempt to analyze pre-treatment cells (and they have had a long time to do it in the one case that was reported a couple of years ago), to me that is strong evidence that they suspect scenario 2 above (*) and do not want to find out a major weakness in the strategy. Sort of no ask, no tell!

 

 

I don't pretend to understand the medical logic of the busulfan explanation.

First, they pre-condition the patient with busulfan chemo.

then they insert the gene via the lentivirus vector into the patient DNA.

They find AML blasts in the patient stem cells with the lentivirus present.

How does finding the lentivirus exonerates busulfan?

The lentivirus is infused a short time after the busulfan chemo, had the chemo been the cause for AML what prevents the lentivirus to be present in the blasts, it comes after busulfan.

 

 

Relief for gene therapies as Bluebird exonerates busulfan

 

"Bluebird had largely ruled out the role of its lentivirus in an AML case that has caused Lentiglobin sickle cell trials to be halted, but there was another vital snippet of information in today’s analyst call on the matter. This concerned the possible role of busulfan preconditioning – separately posited as a possible cause of the AML – which now too has apparently been ruled out. On the call, seemingly convened to formalise what the company had controversially told an investor conference two weeks ago, Bluebird’s chief medical officer, Dave Davidson, said vector was present in the AML blasts. This suggested that these cells were not in the patient during preconditioning so, barring a role for residual busulfan, preconditioning was not to blame. This is important for the entire gene therapy field, which frequently uses busulfan with lentiviral gene transfer. Bluebird also said the vector in the AML patient had integrated in the VAMP4 gene, which has no known association with AML. As for a separate MDS case, Bluebird again strongly hinted that this might not have been MDS since no blasts were present. It is not clear when trials might restart, but Bluebird’s business split could be back on."

 

https://www.evaluate.com/vantage/articles/news/snippets/relief-gene-therapies-bluebird-exonerates-busulfan?mkt_tok=NjA3LVlHUy0zNjQAAAF7u-XC2PiqL-CzssYqPwF7g_EjYWjEqTYN2Xl4Ht2UbC5tYovRab_2rkRasw2Dm6yZ8-nC2GISnmFkZ53kRQNYxFJ4XaRPo3VSs8b7PrD_iv-RAQ

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This is good outcome for their LentiD platform in CALD -

 

https://investor.bluebirdbio.com/news-releases/news-release-details/bluebird-bio-presents-long-term-data-elivaldogene-autotemcel-eli

Effectiveness (Efficacy): 2 year MFD-free survival of 90%. "90% of evaluable patients (27/30) alive and free of major functional disabilities (MFDs) at two years follow-up in Phase 2/3 Starbeam study (ALD-102). Patients in long-term follow-up study (LTF-304) continue to remain alive and MFD-free through up to nearly seven years of follow-up, suggesting eli-cel stabilizes the progression of disease"

Adverse Effects: "No events of acute or chronic GvHD have been reported post-eli-cel treatment. There have been no reports of graft failure or graft rejection. In addition, there have been no cases of replication competent lentivirus or insertional oncogenesis to date."

 

 

The alternative treatment of HSCT does not seems to have either a better efficacy or a better safety profile -

https://pubmed.ncbi.nlm.nih.gov/30292747/

Effectiveness (Efficacy): 2 year MFD-free survival of 84%. "For patients who underwent HSCT with GdE+ at baseline, with an NFS ≤1 and Loes score of 0.5 to ≤9 (n = 27), the 2-year MFD-free survival was 84% (95% CI, 62.3% to 93.6%)."

Adverse Effects: "Adverse events post-HSCT included infection (29%; 19 of 65), acute grade II-IV graft-versus-host disease (GVHD) (31%; 18 of 58), and chronic GVHD (7%; 4 of 58). Eighteen percent of the patients (12 of 65) experienced engraftment failure after their first HSCT."

 

Disclosure: long BLUE. Significant holding at this point.

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I am somewhat concerned at this point but not enough to fundamentally change my thesis. I also think I have a bit of cushion in cost basis in the event some new information around this comes out to be super negative. My mental model on these departures (there are at least 2 high level) is as follows -

 

(a) Insiders know something negative about the overall corporate picture that we don't and are leaving; hence it is a negative. But I am not seeing that in the scientific data coming out right now post discovery of the AML/MDS cases (either in Sickle cell or CALD). Unless they are hiding something or outright fabricating I am putting this as low probability event. It is a really bad idea to hide data or other information in this field from FDA. Just look at Astrazeneca and their COVID vaccine approval status in the US.

 

(b) The other possibility is that due to corporate changes people leave. This happens when there is a change of guard at highest level (see Amazon and Merck for recent departures after succession of new CEO) or in the case of bluebird a split. My current bet is that since the gene therapy part of bluebird is getting a new CEO, egos are hurt and/or there was friction between certain individuals. Clearly CMO was passed on for the role of CEO in gene therapy part of bluebird post split. Its not too hard to imagine that under these circumstances along with all the negative events on their gene therapy, people will leave. It could also be that the chief medical officer is taking the fall for recent events.

 

© There is one scenario I can think of where it may be bad for bluebird. If infact bluebird revealed certain information to press first before they let FDA know about it and CMO thinks that this move has definitely irritated the FDA and will make them delay a decision on Lenti based therapy for Sickle and Thalassemia. I think the probability is again low in this case because bluebird was already being closely watched by FDA on their manufacturing troubles before they fixed it. It would be utterly foolish of them to not have taken FDA and/or other regulators/medical practitioners into confidence before releasing some of what we heard in the press. Plus, FDA has to keep in mind patient's well being. By acting in just pure vendetta and not based on scientific evidence, they could hurt patients.

 

Of-course I could be wrong here but right now my mental model is not raising red flags on ©.

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