Thank you very much for joining D aiichi S ankyo's third ESG briefing out of a very busy schedule today. In our fifth midterm business plan for FY 2021 through FY 2025, we are clearly demonstrating that Daiichi Sankyo Group will further promote ESG management. In fulfilling our purpose to contribute to the enrichment of quality of life around the world, based on our recognition that it's important to address social issues and engage in a business at the same time, we have actively worked on sustainability initiatives and responded to requests from ESG rating agencies. We are trying to act with a high sense of ethics and social good common sense as a life science company. In order to respond to changing, diverse requests from society, we think it is necessary to further promote dialogue with stakeholders, including patients, their families, investors, and society.
Today, I am hoping to discuss ESG management of our group with you. I will explain the progress of ESG management we have promoted and reinforced towards the realization of our group's purpose and vision. Our group's purpose is to contribute to the enrichment of quality of life around the world. This is the common belief among our group employees, and this is the origin for us. To realize our 2030 vision of becoming an innovative global healthcare company contributing to the sustainable development of society and respond to various requests from society, we input a variety of capital such as human and intellectual capital. We are working to create value in the entire value chain by utilizing science and technology, our biggest strengths, and the source of our competitive advantage. We will continue to contribute to patients' treatments by providing pharmaceuticals responding to diverse medical needs such as ENHERTU.
Also, we will create social and economic value through reducing environmental footprint and promoting the success of a diverse range of people. Through co-creation of value with various stakeholders, we will aim to reinforce our competitiveness, contribute to sustainable development of society, and enhance our corporate value. We aim to enhance our social value our group can generate by leveraging our group's strengths, science and technology, to deliver innovative pharmaceuticals we create to patients. Through our strategic alliances with AstraZeneca and strategic collaboration with U.S. Merck, we will deliver five DXd ADCs, including ENHERTU, to more patients faster. Towards realizing our purpose, in order to create NextWave to establish the next pillars following the five DXd ADCs, we are transferring Daiichi Sankyo RD Novare functions to Daiichi Sankyo's R&D division to strengthen our R&D systems.
Furthermore, in order to expand the ADC production system and accelerate the development of new modalities, we will integrate Daiichi Sankyo Propharma and Daiichi Sankyo Chemical Pharma with Daiichi Sankyo. We will strengthen the stable supply system by consolidating production technologies and formulate and execute integrated strategies from development to commercialization and achieve agile decision-making. We will continue to create innovative pharmaceuticals and improve access to healthcare. On this page, I will explain the major progress of ESG management through materiality management. As for materiality on business, in FY 2023, we added as a new KPI the cumulative number of designations to the priority review system in Japan, U.S., Europe, and China. From FY 2021 up to the end of September 2023, we received a total of 24 designations to the priority review system.
Regarding materiality on business foundation, we set a new KPI target for our business partners based on the trend in society about measures against climate change. As for promoting compliance management, there is no change in the content, but we changed the wording of KPI. Our initiatives to achieve KPIs up to FY 2025 are mostly making progress according to our plan. Achievements in our initiatives on improving access to healthcare, promoting the success and development of a diverse range of people, and corporate governance will be explained by other speakers later. Along with the advancement of pharmaceutical research and development, there has been an increase in the number of drugs with hope for patients. On the other hand, it's urgently required to address physical and psychological issues patients face and economic and social issues faced by families and caregivers participating in society and taking care of the patients.
In the field of oncology, in particular, in order to sincerely address issues that patients face regarding peripheral symptoms and QOL, we recognize the importance of being close to the patient journey and each individual's life journey and contribute to the patient's well-being as much as possible. Our group is aiming to contribute to the development of a total care ecosystem, the total care platform, as part of the realization of healthcare as a service, HaaS, to provide optimal services tailored to patients. We will leverage our science and technology and the trust we have built and collaborate with other companies and groups in health and healthcare areas so that we can work to create innovative services and solutions which patients can use with a sense of security. That's all from me.
Okuzawa speaking. I will talk about the expansion of our human capital towards realizing our purpose.
During FY 2022 ESG briefing, we received a request to show you our human capital measures and their linkage with the enhancement of corporate value, in other words, the impact path. Considering such opinion, I will talk about our thinking behind human capital, the most important capital for our group, and expansion measures, including the status of internal discussions. Our purpose is to contribute to the enrichment of quality of life around the world. To realize this, we have a mission to create innovative pharmaceuticals addressing diverse medical needs. To realize our mission, it's essential to continuously strengthen science and technology and value chain. We believe that people hold the key. Therefore, our most important capital is human capital. As a source to create competitive advantage, we will invest and expand human capital continuously.
We are working to expand our human capital to be strengthened, including power of individual for continuously growing individual strengths, power in numbers for continuous supply of human resources to areas to be strengthened, and power of synergy that creates synergy among individuals and organizations. In the ongoing fifth midterm business plan, we have set a goal for FY 2025 to become a global pharma innovator with competitive advantage in oncology. In addition to the human capital expansion measures to enable a strategy to maximize the value of five DXd ADCs and deliver them to patients around the world. In addition to generate NextWave, which is the next pipeline, we will continuously strengthen our science and technology. To enhance human capital expansion measures, we are drawing the path for the linkage between HR measures as input and the desired state of human capital strategy as outcome.
We are discussing HR measures which will help realize our management strategies. As HR measures, we are assuming the expansion of talent necessary for the promotion of a midterm business plan, initiatives to enhance the power of individuals, promotion of culture, and building organizational structure and HR system to support global businesses. Using these HR measures as input and going through the output will lead to the outcome of human capital important for the realization of the management strategy as is shown in green. We believe that creating innovation, increasing employee engagement, and increasing productivity are the three important outcomes linked to the management strategy. Further examination will be necessary for the setting of appropriate KPIs in the path and quantitative analysis of the linkage of each element. We will utilize a quantitative analysis based on the path, run the PDCA cycle, and enhance the effectiveness of the measures.
On the following pages, I will explain what we focused on in particular in FY 2023 among the measures described as input. First, I will explain HR measures to support global business expansion. In order to realize agile global decision-making, we are establishing a global management structure and building an organizational structure to strengthen global collaboration and promote the efficient operation since FY 2021 in stages. To make these global organizations function effectively, we have started a global common HR infrastructure as well. Before, HR systems were different from region to region, which was a hurdle to global collaboration in our group. Starting from FY 2024, we are planning to start evaluation systems focused on creating results and developing talent. From FY 2025, we will introduce globally common job grade system and a compensation system with competitiveness in the market.
We are hoping that the new evaluation systems through coaching will increase employees' capabilities and motivation, trigger their voluntary action to achieve goals, and enhance their performance. Already from FY 2023, we are implementing a globally common program for effective coaching and feedback to about 600 managers who hold the key to coaching. Through these measures, we will strengthen our global organizational structure and HR infrastructure so that we can provide value to patients around the world. On this page, I will explain the establishment of DS Academy to strengthen the development of global leaders for global organizations. From April 2024, DS Academy will be established as a platform to promote, develop, and grow. Managing Executive Officer and CFO, Koji Ogawa, has been appointed as the first principal to further develop global leaders.
For the purpose of developing candidates for Daiichi Sankyo division and unit heads, we are planning to implement Off-JT and OJT combined programs so that they can learn Daiichi Sankyo's DNA, advanced management skills, and Daiichi Sankyo's global leadership. As for DNA of Daiichi Sankyo, it's also important for all employees to attend the course to hand over for the future. We will create an environment so that all employees will be able to take that course. CFO Ogawa, since joining the company in 1984, has contributed to the development of Daiichi Sankyo on the forefront of global businesses. We believe he is a person who embodies DNA of Daiichi Sankyo. That's why he has been appointed as the first principal. We want him to be responsible for the launch of DS Academy.
We are hoping that DS Academy will become a framework to select the right talent globally and with transparency and develop leadership candidates stably. On this page, I will explain the fostering and penetration of our corporate culture, One DS Culture. Also, in FY 2023, we are promoting the penetration of One DS Culture globally. Specifically, we implemented training for culture ambassadors supporting leaders of each organization, produced videos for all employees, and worked on the penetration of our culture. We've also fostered a sense of unity in DS Group and implemented the Core Behavior Award to recognize employees who most embody the core behaviors. For the penetration of One DS Culture, we are using global survey to measure the current penetration. From FY 2022 survey results, we found that our employees' score was low for the item learning from failures in the develop and grow category.
We repeated intensive discussions among the top management, including myself, to discuss this and defined learning review to secure time to look back on success and failure experiences as a global commitment. We are working on this at the company-wide level. So far, I have explained initiatives for globalization, but on this page, I will explain initiatives to respond to changes in business environment. The number of global development projects is increasing. There is going to be a shift from existing main products with LOE in a few years' time to oncology business centering on ENHERTU. The promotional structure is changing accordingly. Due to these changes, transformation to a more productive, efficient organization is required. Under these circumstances, we are promoting initiatives to solicit and support changes and growth of employees, increase the liquidity of talent within a group, and provide new opportunities to take on a challenge.
We are identifying specialized talent to be strengthened, in particular, such as biopharmaceutical talent, global talent, and DX talent, and promoting their development by fostering a culture of learning and a culture of training. Regarding specialized talent, biopharmaceutical talent means specialized talent with knowledge about middle and high molecule modalities and skills to handle them. Global talent is defined as specialized talent with global skills such as English, cross-cultural communication, and international perspectives, as well as business experiences and specialty who can execute global business regardless of where to work. DX talent means specialized talent with business requirements in each value chain of Daiichi Sankyo Group who understand both digital and data with a transformational mindset according to our definition. In these areas to be reinforced, these personnel can voluntarily apply for jobs in technology unit and DX where they are reallocated with the instructions from the company.
We will review measures for improving the ma nufacturing workplace environment that leads to higher employee engagement. In parallel, we are also trying to optimize group companies as well. As was already announced, we are working on the transfer of Daiichi Sankyo Espha's shares, the transfer of Daiichi Sankyo RD Novare functions to Daiichi Sankyo's R&D division to strengthen R&D functions, and the integration of Daiichi Sankyo Propharma and Daiichi Sankyo Chemical Pharma with Daiichi Sankyo to strengthen manufacturing functions. I believe in the potential of each employee's skills and capabilities. While we optimize the structure, we would like to leverage the skills and experiences nurtured within Daiichi Sankyo Group and develop professional talent in new growth areas through reskilling. So far, I specifically explained human capital expansion measures.
For employees to increase their engagement and for measures to function effectively, the key is that each employee feels convinced about the company's direction and HR measures based on the direction. In FY 2023, as the President Caravan, I visited each location across Japan and engaged in dialogue with employees working there. I started this initiative in Japan where transformation is being executed and implemented a total of 31 President Caravans at all locations in Japan. I conveyed management policy, HR measures, and my expectations to the employees. During the Q&A session, I received many questions and exchanged opinions. From FY 2024 onwards, I'm planning to have dialogue with overseas employees working at locations in the world. I want them to deepen their understanding of the thinking of the management. I hope to continue the dialogue so that they can work with high engagement. This is my last page.
In our business model, investment in human capital is a source of continuous corporate value enhancement and social value creation. By expanding human capital, we'd like to run the positive cycle of sustainable growth so that this will lead to the achievement of our midterm business plan and the future growth. T hat's all from me.
I'm Harad a from the sustainability promotion department. I would like to explain our patient-centered initiative, access to healthcare and environment. In order to realize our group's mission of contributing to the enrichment of quality of life around the world and to respond to the rapidly changing, it is extremely important to build a relationship of trust with our various stakeholders, including patients. One of the strategic pillars of our fifth midterm business plan is value co-creation with stakeholders, and we are promoting patient centricity throughout our value chain.
Patient centricity is an important value for the group. In order to further strengthen our global cross-functional initiatives, in April 2024, Ms. Ueno, Vice President and General Manager of the Medical Affairs Division of the Japan Business Unit, will assume the special responsibility for patient centricity. Ms. Ueno will be responsible for overseeing and promoting the group's patient centricity initiatives in an integrated manner. Patient centricity in our group means that all employees share the common desire to be a part of the power of patients to find hope in their treatments with compassion for patients and passion for innovation, which is our corporate slogan at the core of our corporate activities. We are promoting a variety of initiatives throughout the value chain to contribute to the patients.
For example, in the area of drug discovery and development, we have been conducting COMPASS activities since 2014 with the idea that the program is a compass for understanding the actual conditions and the needs of diseases and treatments and creating pharmaceuticals that respond to them through activities such as visits to medical sites and other exchanges between patients and medical personnel and employees. In addition, we are also focusing on the provision of safety information and other information that is easier for patients to understand and access. Today, I'd like to introduce four example activities in which we have taken the voices of patients seriously and actively reflected them in our business activities. This is an initiative to co-create a better medical environment through the development of PPI. In October 2023, a top-level meeting was held with two patient groups, Takeda Pharmaceutical Company and Chugai Pharmaceutical Company.
Our CEO, Manabe, attended the event and delivered a joint message. The PPI concept has evolved from the original concept of patient and citizens involvement in R&D to the current concept of incorporating the voices of patients not only in R&D but also in all stages of the patient journey to realize better healthcare together with patients. Case two is an example of proactive use of patient-reported outcome, PRO, which incorporates subjective evaluations of symptoms, QOL, and other aspects of the treatment response to treatment. For example, in the ENHERTU clinical trials, DESTINY- Breast 02, 03, and 04 trials, ENHERTU showed significant control and improvement of health conditions such as fatigue and pain during the treatment period, demonstrating consistent benefits in maintaining patients' quality of life.
Case three is the PFDD, patient-focused drug development activity, which has been promoted since FY 2022 to incorporate the true needs and opinions of patients into drug development. The PFDD program was initiated with hopes of accelerating drug development and bringing new medicines to patients as quickly as possible and creating a system in which patients can participate in drug development as members of Daiichi Sankyo's development team. The slide shows the PFDD framework, which is Daiichi Sankyo's original framework, as an initiative in Japan. We have a permanent clinical trial coordinator board, and we actively incorporate the voices of patients in a timely manner in the formulation of drug development concepts in the planning, execution, and submission of clinical trials for approval.
In addition, as a global patient centricity initiative, the oncology business unit's global oncology medical affairs is leading patient advocacy activities in collaboration with medical affairs teams in the U.S., Europe, and Canada. With the vision of providing better outcomes for patients by gaining the true insight and promoting value co-creation with patients, we are building strong partnerships with advocacy groups to conduct and support clinical and observational research and expand it across programs that reflect the needs and opinions of patients. Now, I'd like to explain our efforts to expand access to healthcare. In order to realize our purpose of contributing to the enrichment of quality of life around the world, we are working to expand access to healthcare not only in developed countries but also in developing countries.
To expand access to healthcare, we have established the Daiichi Sankyo Group Access to Medicine policy, which consists of three pillars: promoting research and development, improving access to medicine or availability, and capacity building of regional healthcare. Based on such access policy, we are implementing measures to address the needs of many more patients around the world. Now, let me explain the Daiichi Sankyo Group's current approach to expanding access to healthcare. The Daiichi Sankyo Group's current strengths lie in its product portfolio and R&D pipeline of advanced oncology drugs as represented by its ADCs. We will continue to focus on the advanced oncology drug business as an important business that supports the sustainability of Daiichi Sankyo's growth. At the same time, Daiichi Sankyo will work to strengthen its business and expand access to healthcare in countries and regions where future growth is expected through partnerships.
The business experience gained through alliance and collaboration in countries and regions where future growth is expected will be utilized by Daiichi Sankyo in its future efforts to expand access to medical care. On the other hand, in countries and regions where it is difficult to deliver the globe's medicines due to lack of medical infrastructure, Daiichi Sankyo will provide initiatives to strengthen medical infrastructure in partnership with NPOs, thereby contributing to the improvement of local medical care. Now, I would like to explain an example of expanding access to medical care in our business in developed countries. First, as you know, through our strategic alliance with AstraZeneca, we have been able to deliver our flagship product, ENHERTU, to more patients more quickly. Daiichi Sankyo operates in 29 countries and regions.
Through the alliance with AstraZeneca, the number of countries in which the product is available expanded, with the product now being delivered to patients in approximately 50 countries and regions. Daiichi Sankyo is also responsible for the production and supply of ENHERTU in the countries and regions where AstraZeneca markets the drug, thereby contributing to expanding access to healthcare. In Dato-DXd, Daiichi Sankyo is also involved in the same activities as with ENHERTU. With regards to the three products in the collaboration, patritumab deruxtecan, DS-7300, and DS-6000, we expect that more patients will be able to access these medicines sooner through the strategic collaboration with Merck in the United States. In terms of speed and scale, this is another initiative to expand access to healthcare that Daiichi Sankyo could not have achieved on its own, and we expect it to have a greater impact.
The figure on the right illustrates the number of patients who will have access to the three collaboration products. We believe that the strategic collaboration with Merck in the U.S. will enable us to reach the same number of patients several years earlier and help treat more patients in peak years. Lastly, I would like to introduce our efforts in countries with weak medical infrastructures. In countries where we do not have the infrastructure to deliver medicines, presenting initiatives to strengthen the medical infrastructure in cooperation with NPOs and NGOs. Currently, we are increasing oncology projects. For example, in Nepal, we have been working with AMDA-MINDS on a project for early detection of breast and cervical cancers. The government is also participating in this initiative, and we expect the project to have sustainability even after our intervention is over. I will now discuss the environment.
The Daiichi Sankyo Group is preparing for the transition to a decarbonized society by shifting to business processes that do not emit greenhouse gases. In fiscal year 2022, we converted electricity supplied to major groups in Japan to electricity derived from renewable energy resources by utilizing non-fossil certificates. This has paved the way for the group's 2025 target of a 42% reduction from 2015 level and its 2030 target of 63% reduction from 2015 in line with SBT's 1.5-degree target. As we continue to grow toward our goal of becoming a JPY 2 trillion company by 2025, we recognize that we are well on our way to achieving our goal of a decarbonized society. Furthermore, in August 2023, the group declared its commitment to net zero and is currently developing a transition plan.
In response to our decarbonized society, we are accelerating our investment in renewable energy, starting with the installation of a large-scale solar power generation system at our Onahama plant in Fukushima Prefecture in 2020, followed by the solar power generation at our Pfaffenhofen plant in Germany in 2022 and our Shanghai plant in China in 2023. We realized emissions reduction of around 2,500 tons in total. In addition, by investing in a wind power generation facility in Pfaffenhofen, Germany, we are contributing to the development of renewable energy sources other than solar power generation. As the transition to a decarbonized society accelerates with the strengthening of regulations and initiatives in various countries and regions, we believe that unless we decarbonize our business processes and the entire value chain, the continuation of our business itself will be in jeopardy.
In this context, we are currently developing a transition plan to achieve net zero emissions by identifying risks and opportunities for our business activities in a decarbonized society, which we expect to announce in FY 2024. In addition to the so-called Scope 1 and Scope 2, the transition plan includes Scope 3, which is the greenhouse gas emissions from the value chain and supply chain. We believe, in particular for Scope 3, that the cooperation of our business partner in the value chain is indispensable, and we have started engagement with them from this fiscal year. We believe that by promoting decarbonization not only of our business processes but also of our value chain, we will be able to establish stable business activities in a decarbonized society. This is the final slide. In recent years, there has been an increased focus on natural capital, including biodiversity initiatives.
Our group is taking steps to promote biodiversity in each region, including the protection of rare plants at the Tatebayashi plant and reforestation of Atlantic Forest in Brazil. In addition, we have initiated risk assessments of our business processes and information disclosure initiatives for the Taskforce on Nature-related Financial Disclosures, TNFD. The group is committed to identify risks from various perspectives, including product life cycle risks, biological depletion, land use, and water resource risks, and minimizing these risks in order to enhance the sustainability of our business processes. Through these efforts, we hope to achieve nature positive through our business activities. With this, I conclude my explanation. Thank you.
I'm Kama, Outside Director, serving as the Chairman of the Board of Directors. Today's meeting is a very valuable and meaningful opportunity for me to speak directly with investors and many other market participants.
I'd like to take this opportunity to thank you all for your kind attention. I'd like to talk about our efforts to improve the effectiveness and function of the board of directors based on the discussion at the board of directors meeting and the nomination committee meetings. Let me first introduce myself. I joined Ishikawajima -Harima Heavy Industries in 1971, which is now called IHI Corporation, and after many years in the management of the finance division, in 2007, became President and Chief Executive Officer of IHI in 2007 and Chairman of the Board in 2012. I also served as an outside director of several companies and foundations. Currently, I am an outside director of the Japan Exchange Group and auditor of the Japan Red Cross Society.
I became an outside director of the company in 2019, and after serving as the chairman of the compensation committee and the nomination committee in June 2023, became the chairman of the board of directors of the company. First, I'd like to explain our corporate governance structure. The term of office for directors is set as one year, and four of the nine directors are outside directors. In addition, an outside director has assumed the position of chairman of the board of directors since June 2020. For the purpose of ensuring management transparency, the nomination committee and the compensation committee have been established as advisory bodies to the board of directors since 2020. Those committees are composed of four outside directors and one outside audit and supervisory board member who participates as an observer.
In this way, the company has established and operates a system that contributes to improving the effectiveness and functions of the board of directors. In addition, in order to promote management that emphasizes the enhancement of shareholder value over mid to long term, the company introduced a stock compensation system linked to the midterm business plan in FY 2021 and has incorporated non-financial indicators such as ESG indicators as well as financial indicators as KPIs. Each fiscal year, the company conducts an evaluation of its board of directors and works to improve the effectiveness and functions of the board of directors by implementing improvement measures to address issues identified in the evaluation. In addition, a third-party evaluation of the board of directors was conducted in fiscal 2021, and the next evaluation is scheduled for fiscal 2024.
The result of the third-party evaluation in fiscal 2021 showed that the board of directors, the nomination committee, and the compensation committee, which are advisory bodies to the board, are functioning appropriately and that the effectiveness of the board of directors as a whole is ensured and functioning at a high level. In the self-evaluation for fiscal 2022, the company also confirmed that the effectiveness of the board of directors as a whole has been ensured in the same manner. Based on the evaluation of the board of directors in fiscal 2022, the company is working to three priority measures in fiscal 2023. For enhancement of discussions on key matters for further strengthening the oversight functions of the board, such as long-term strategy and globalization, the company is deepening discussions on long-term strategies, initiatives for globalization, materiality, and risk management.
For enhancement in terms of operation for further strengthening of the decision-making functions and oversight functions of the board, the company has been operating the board of directors meeting by optimizing items to be discussed and reported based on the revised criteria for discussion at the board of directors meeting. In addition, opportunities for discussion by directors and audit supervisory board members have been provided outside of the board of directors meeting. With regards to further consideration for optimizing the board composition, we are continuing discussions on the optimal composition of the board of directors for the company based on the direction of the company's management, which will be explained later. The nomination committee is composed solely of outside directors to ensure objectivity and fairness.
The Nomination Committee met 11 times in FY 2022 to discuss the selection of the Chairman and CEO, President and COO, succession planning for CEO and President, composition of the Board of Directors, selection of candidates for directors and audit and supervisory board members, contents of the Board of Directors' scheme matrix disclosure, selection of CXOs, unit heads, heads of global corporate functions, and executive officers for the global management structure, and vice president. In FY 2023, the Board of Directors has met 8 times by January, and discussions are underway to optimize the composition of the Board of Directors. In addition, since October 2020, the nomination and compensation committees have been meeting jointly to confirm CEO and COO goals and received interim reports.
The selection of CEO had been deliberated in the nomination committee, but in September 2021, the regulation was amended to include dismissal and reappointment of the CEO and COO as deliberation matters. We believe that this process, which ensures objectivity and transparency, is strengthening governance. In March this year, we plan to discuss CEO performance evaluation and CEO performance evaluation. Among the many items to be discussed, the selection of Mr. Okuzawa as president and CEO in FY 2022 when I was the chair of the committee was a major decision. We have been discussing succession planning for several years, and now that we are entering a phase of full-fledged globalization, we have begun discussing in earnest. We organized and discussed the skills and experience required of the president over the next several years.
Mr. Okuzawa has the skills and experience we are looking for in a president, including several years of global business experience and ability to embody core behavior, which is the foundation of our company's culture. He is highly esteemed by everyone. By such reason, he was selected to be a candidate for CEO and president. Deliberations were made by also looking at 360-degree feedbacks for candidates' organization survey, so we believe that the nomination committee has adequately fulfilled its monitoring function. We will continue to consider future candidates for the board of directors this year and will deepen our discussions toward the realization of the succession plan. This slide shows the skills matrix and diversities of internal and external directors and audit and supervisory board members. The company's board of directors is composed of members based on the direction of the company's management.
We have identified nine skills that we consider particularly important in light of the functions that the Board of Directors will fulfill in order to realize the 2030 vision, company's purpose, mission, mid- to long-term management direction, and business strategy. The diversity and balance of these skills are taken into consideration in selecting members of the Board of Directors from among candidates based on the diversity that will lead to the strengthening of the decision-making and supervisory functions. We also recognize the issue of majority of outside directors as stipulated in the corporate governance code and other regulations. We also recognize that the diversity of the Board of Directors, including gender and internationality, will strengthen the decision-making and supervisory functions of the Board of Directors, and we are further examining how to optimize the composition of the Board of Directors.
In closing, as Chairman of the Board of Directors, I'd like to express my commitment to further invigorate the board of directors by increasing the weight of discussion and deliberation at board meetings and sharing awareness of issues among outside directors. The board of directors will fulfill a highly effective supervisory function, and together with CEO Manabe and CEO Okuzawa, will support the company's growth toward globalization and the realization of purpose. Thank you very much for your attention.
N ow, Q&A session.
Thank you for your explanation. I'm Koguchi from Sumitomo Mitsui Trust Asset Management. I have questions to three of you. First, to Mr. Kama. In the integrated report regarding the governance for the future, you mentioned that outside directors tend to lean toward defensive governance, but you want to place a strong emphasis on offensive governance that supports the executive team.
Specifically, how are you going to change the governance? Pharmaceutical business requires a lot of expertise, so if the executive team wants to be offensive, outside directors may sometimes need to apply a brake. This can be difficult for outside directors. What do you think? That's my first question. Thank you for explaining the succession planning in detail. I understand for CEO and COO, but if the selection of people below them, like CXOs and executive officers, is also the job of the nomination committee, how are nomination committee members checking those people? These are my two questions to Mr. Kama.
Thank you for your question. I separate offensive and defensive governance. In general, outside officers, including outside directors and outside auditors, tend to lean toward defensive governance. They play a role to apply a brake more often given the supervisory function, in my view.
That alone would not lead to the company's growth, corporate value enhancement, and market cap increase. We believe that outside directors and outside officers are also given a role to provide backup support. In a pharma company regarded as a complicated and difficult business, can we apply a brake or support the executive team sufficiently? Of course, it's not easy for us to catch up with the pharmaceutical specialized knowledge and expertise. Based on the company's 2030 vision, purpose, and mission as a basis, as to what the executive team wants to do, as was explained today, we apply a brake where necessary but support the executive team actively so that the vision can be realized. I believe that's the role we should play. I think other outside officers also have the same view with us thinking we are discussing in the board of directors.
Next, about succession planning. How are we involved in the selection of people below the level of directors in addition to CEO and COO? As for the selection of CXOs and unit heads in the global management structure, the executive team explained the details at the nomination committee where we engage in sufficient discussions. If they have experience as an executive officer, there are also discussions with executive officers within the nomination committee. Through such forums, we can have a sufficient understanding of their thinking, ability to take action, and character as a person. When it comes to non-Japanese people, how much do we understand them? There may be some insufficiency, but for the rest, those recommended by CEO, COO, and executive team, we make a correction where necessary and make the selection in the end.
Well understood. Thank you. Next, I have questions to Mr. Okuzawa.
On page 14 of the presentation, last year, you recognized an issue about learning from failures. You reflected this onto the management strategy, which I appreciate a lot. Specifically, define learning review as a global commitment and roll out a global campaign is rather difficult to understand. It's fine to talk about successful experiences, but it can be difficult for organizations to look back on failures. Could you please elaborate on this, like what you are doing or what you'd like to do specifically, if any?
Thank you very much. We decided to start this practice of self-first. Executive management committee members focus on this particular theme and engage in discussions every year. The other day, we organized such an event. We confirmed the current status of the survey, and all of us confirmed together that learning from failures as an item with room for improvement is an ongoing challenge.
Then, how each person can speak out so that his or her failure can be leveraged as knowledge for the organization. Each person is speaking up about his or her experience on such forums. Someone said, "Learning from failures is not a good wording. We should call it learning from experiences," and then people will find it easier to talk about it. This is a simple but important point. In my case, in the past, in the global settings, I had better experiences and tough jobs. Specifically, you did certain initiatives, but it didn't work. Then what's the learning from there? That is exactly what you gain from failures. Making one story and talking about it is what we are putting to practice. Similarly, leaders are talking about their story, which is uploaded onto a global portal so that everybody can view. We are creating such an environment as well.
These are concrete examples.
Understood. Thank you. If there is any example resulting in the fostering of culture, please share that with us in the next briefing. Thank you very much.
Thank you.
Lastly, to Miss Harada appearing on the stage for the first time today. Regarding patient-centricity on page 19 and 20, great value chains are depicted. Based on this way of thinking, if you're working to improve access to healthcare, not only our evaluation but also other external assessment will be higher. The value chain ends with sales information provision, but if possible, please also consider the patent expiry as well. Or you may be considering it too, although it's not mentioned here. Can I have your comment on this?
This time, oncology and cancer in industrialized countries, but in developing nations, you may have a sales network but without the right products such as products with patent expiry. In that case, you could bring products from other companies. You could consider leveraging your sales network. I'd like to hear your view. That's all from me.
Koguchi-san, thank you for your question. As I explained earlier, our initiatives on access to healthcare are in the field of oncology, our area of strength. As to how we can leverage our strengths to deliver our products to low- and mid-income countries, I talked about improving access to healthcare through alliances and collaboration and approach with AstraZeneca and U.S. Merck today. On the other hand, you mentioned that the products with patent expiry, from the perspective of access to healthcare, can also be a possibility as we can utilize our strengths and assets.
But in reality, we have not reached that level of discussion yet. Based on such a perspective, how we can deliver our strengths and assets to improve access to healthcare in low and mid-income countries. We'd like to discuss this, including the senior management.
Thank you very much. That's all from me.
If you have questions, please raise your hand. A person in the front row, please.
I'm Sakai from UBS Securities. I'm not an ESG expert, so I may be off the mark. I have two or rather three questions. First, to CEO Dr. Manabe. About the KPI creating innovative pharmaceuticals in FY 2023, the results are shown, but do you have internal targets? That's my first question. Then, why designations to the priority review system? Why not breakthrough therapy designation? I don't know, but in the future, your company may enter the field of rare diseas es.
How do you think about it and set this KPI creating innovative pharmaceuticals?
We want to create innovative pharmaceuticals continuously. What KPIs will be good for us? We had lots of discussions. The KPIs we selected are very tough. As we have ADCs such as ENHERTU, we have been able to create innovative drugs continuously for now. We had some concern about whether we can do this for the future, but Daiichi Sankyo wants to create innovative pharmaceuticals continuously. This was a bit challenging, but we set this as a KPI. Numerical targets are also very difficult to set. Looking at a certain period of time, if we can tell how much we can contribute, we may be able to increase for the future. But for the time being, it's tough and challenging, but we selected this item.
Regarding FY 2023 results, you are satisfied with a certain level. Is my understanding correct?
Yes, we are satisfied for the time being. And also, in the form of other KPIs, external parties are evaluating us in terms of the creation of innovative pharmaceuticals. Thank you.
Next, I have questions on the presentation by COO Okuzawa-san. Sorry for basic questions again, but human capital is talked about often these days. From outside, it's not so clear to us. As internal numbers, as a benchmark, what are you using as the numerator and the denominator when you measure the productivity and make investment in human capital? What kind of formula do you use to evaluate? Anything you can share with us, please? Simply, personal costs and labor costs are understandable from the outside to a certain degree, but what is the numerator? This may be an area difficult to show in numbers, perhaps. Do you have something like compone nts?
As for diversity, developing female managers and salary gap due to gender gap, how do you perceive this internally? These are two questions from me.
Thank you very much. Regarding your first question, there is no uniform formula across the company. So in each value chain and in the respective business plan, what kind of resources need to be input in a particular year? With that, what is it trying to realize? We have lots of discussions in business planning. These days, human rather than money as a major resource input is drawing a lot of attention. How much in what area, people of what kind of quality it wants to allocate? Global HR Head Matsumoto, sitting next to me, is also joining in-depth discussions with each unit.
In the timeframe of a particular business year or a midterm business plan, each unit checks whether the outcome was commensurate with the resource allocated. This is a very important commitment for unit head. This is what we are doing for now. Next, about gender gap. Unfortunately, we think gender gap still exists in our company, but when we think about global expansion, we are very much encouraged to see female employees thriving remarkably, even as of now, at overseas locations. For example, I served as the President of ASCA Company for three years to lead the Asia, South, and Central American business. At any location, I saw many female managers in meetings like business updates. There were female presidents as well. Due to various reasons, we no longer have a female president, but when I was leading ASCA Business, there were.
Within Daiichi Sankyo Global, gender gap is being filled a lot. The challenge is Japan. This is positioned as an important issue for corporate strategy. With Fukuoka in charge of corporate strategy attending today and global HR head Matsumoto, we are working on this as an important issue for the senior management.
Understood. Thank you very much.
Please raise your hand if you have questions. A person in the last row, please.
I'm Ikawa from Fidelity Investments, Japan. Thank you for your explanation. This may be a question to CEO Dr. Manabe. On page seven, you touched on promoting compliance management and corporate culture. Recently, we begin to see scandals involving Japanese companies. Corporate culture with openness or whistleblowing system is functioning? Could you comment on your initiatives in this area?
Yes. First, about whistleblowing system. Employees can become whistleblowers at each unit, including each region.
We are monitoring the number of reports by whistleblowers. It's difficult to interpret. No report may mean no whistleblowing, or it may mean that it's difficult to escalate a report. Including this issue, we are considering and implementing improvements with regards to compliance via scandals involving various companies that reported recently. We are different at our factories, research laboratories, and clinical development because of very stringent restrictions by GxP. Including SOPs in each field, I think training has been sufficiently implemented. Under these tough regulations, mistakes we make must be recognized by making a report. So we are considering this, including psychological safety. The importance of compliance cannot be overemphasized. Including the senior management, we are doing this whenever there is an opportunity. Through annual activities with particular focus on compliance, we are strengthening our efforts even more these days. Thank yo u for your understanding.
Hyogo from Mitsubishi UFJ Trust and Banking. Thank you for your meticulous explanation today. I have a question to Mr. Kama. From your perspective, in your capacity, capital efficiency conscious management is sufficiently done? I appreciate your comment on this. The company decided to transfer Daiichi Sankyo Espha stocks. Looking at the entire company, there are profitability issues. It should not be done in terms of capital efficiency. What kind of discussions took place at the board? Also, about the spending of R&D expenditure, there are deals with U.S. Merck and others. In relation with periodic profit and loss, R&D expenditure is efficiently used. Do you think that way? How are you monitoring the situation? I appreciate your comment. This is my first question.
Firstly, I think your question is about how the board of directors relates to management with capital efficiency in mind.
Well, in the case of our company, the discussion is always centered on the growth or investment in growth and how to return profits to shareholders. Outside directors often make comments from such aspects, and we are discussing these issues with them. On the other hand, individual capital investments, M&As, and so on, they are hurdle rates based on the company's cost of capital or work. I think that the board of directors is constantly checking to see whether the company has sufficiently cleared those hurdles. And also, with regards to the reorganization of Espha, which is so-called selection and concentration, we are also looking at and discussing the situation in which cash could still be earned, but in view of competitive situation and the future, it is better to take the company out than to keep it inside. I believe there has been sufficient discussion on these issues.
So that is my answer to your first question. And also, with regards to whether the efficiency of research and development expenses and their results are sufficiently discussed. Well, for that, I think that there are some areas where there is not enough discussion. But we are now using the operating margin as a percentage of sales revenue or operating profit as targets. So in that, we target 40% profit margin before R&D deduction. So I think there's some discussion whether those targets are being met from a macro perspective. On the other hand, we also discuss how to allocate R&D investment for future growth or shareholder returns and other investments, etc. Well, that is discussed on case-by-case basis. In the year after the next, we will formulate and implement the sixth midterm business plan. We are aware that discussion on cash allocation will become even more important than before.
Thank you very much. I think the second question is for Ms. Harada. And I understand that you have promoted sustainability in a variety of ways, and that is what you are doing as a company-wide initiative. But could you tell us about the degree of penetration of sustainability among employees from the bottom-up or enrollment perspective? What is your assessment?
Yes, I'd like to answer the question. In terms of the degree of penetration of sustainability among employees, for the first time this year, our department has organized Global Sustainability Week. So this was the first initiative using the metaverse, and it was held for all employees globally. We think that a number of participants may have a bearing on the degree of penetration. However, the current results show that the majority of the participants are in Japan.
Honestly speaking, there are still some issues to be addressed in the U.S. The Sustainability Promotion Department has been working on this issue. For that, since 2021, we have been providing information on our internal portal, holding various briefings, and implementing various other measures. Although our efforts were not yet sufficient on a global scale, starting with this year and from the next fiscal year onward, we will continue to promote the concept of sustainability in a more global manner.
I hope you will update us on the progress of the initiatives. Lastly, I'd like to end with a question for Mr. Okuzawa and Mr. Manabe. I'd like to ask you about reforms in the area of corporate culture or other reforms to improve the corporate cu lture.
I understand that the investment in human capital is very important, but has there been any change in the corporate culture with regards to this? Do you feel that there has been any change in motivation of young people, particularly in creating opportunities for young people in their 20s to grow? So I'd like to hear your final comment on this. So because I have been looking at the world of my sites called Open Work, I think that the growth opportunity for people in their 20s seems to be a little weak. So I'd like to know what the actual situation is in this area, including HR system.
Thank you very much. So this is Okuzawa. Let me speak first. I spoke a little about this in my presentation today, but this is the first year of my president term.
So I visited all business sites in Japan, and I was able to engage in two-way communication with almost 9,000 employees of Daiichi Sankyo Japan. And the feeling I had there, well, there was positive feedback, but there were some challenges as well. The positive thing is that employees have a very high expectation for the company's growth. And this was strongly felt at all workplaces and functions. All employees are fulfilling their respective roles with a very bright outlook for the future of Daiichi Sankyo. This was an extremely positive impression. But in this context, if there's a sense of challenge for the future, I would like to mention that in Japan, we need to increase the mobility of human resources within the company.
As I mentioned earlier today, we have identified the key areas for strengthening our growth strategy and necessary talents, such as global human resources, DX human resources, and Baltic human resources. We are working on to fill these roles that should be strengthened, both based on the company dictating personal change and application from the employees themselves. We'd like to challenge to proactively fill in the jobs that need to be enhanced as a new company. Naturally, there's a high possibility that they have to enter uncharted territories. We are not just asking them to take this job or go to that place. We will provide the best possible support measures, including education and training, both on the job and off the job, when transferring people. That's the current policy in Japan.
But given such policy, some would have felt whether they will be qualified for the job and what skills he/she needs to acquire. So I felt a sense of unease or confusion as a first impression. But on the other hand, there were many young employees who threw themselves at me with their sparkling eyes, saying that they would like to work in such a strengthened area. I have the impression that the younger generation see this as a very dynamic career development opportunity for them to create their own careers within the growing Daiichi Sankyo.
I'd like to add something. I spent a long time in the research. So I'd like to talk about my recent impressions of the most important part of Daiichi Sankyo's strengths, which is the culture of science and technology and the R&D organization.
Originally, Daiichi Sankyo's strengths in science and technology were that in the laboratory, when discussing science, there are no supervisors or subordinates. We have a culture of being very passionate about innovation. I always had a feeling that this would be a strength of us. Now, out of such culture, ENHERTU was born. ADCs were emerged, which gave us a lot of confidence. I think the culture is going in the right direction. Also, thanks to this, very talented people are joining us. So I think the culture is going in a very good direction toward the future of innovation.
Thank you very much. I'm happy to hear that. I look forward to the next year and beyond. You explained in your slide that the company would examine the relationship between HR strategy and corporate value.
So if there's anything that you can disclose to us once you have verified that, we would like you to introduce it to us, not only just presenting the HR strategy. If you could share with us the detail of the interrelationship between each and the corporate value. For example, you change certain items, and then the result of engagement survey improved this much, etc. We think that this will help outsiders to better visualize the current activities. Overall, compared with the first meeting, the content has been more informative. I'm very much looking forward to seeing what will happen next year. So I would like to thank you for your continued efforts of communication. Thank you very much.
So next question, Mr. Muraoka from Morgan Stanley MUFG Securities. Please.
Yes, hello. My name is Muraoka from Morgan Stanley. Pleased to meet you.
I have a question for Mr. Kama. It is about capital efficiency again and also in relation to the share price. I often ask management this question at quarterly results briefings. Last year, when the share price was falling considerably, I asked them why they didn't buy back their own shares. The answer was that the window of opportunity was very narrow. I have received such an answer once. That says, if you look at this most recent third quarter, there was JPY 600 billion of income from Merck. I don't think there were any particularly important materials against the share price. So why couldn't? I have wondered about this in my mind. What kind of discussions were held on this in the board of directors meeting, including the idea of capital efficiency, the share price?
How were you convinced that you would not do it now? Can you tell us as much as you can?
I believe that the board of directors discussed the total return ratio, which combines dividends and share buybacks from time to time. Well, this time, the executive side chose to increase the dividend rather than repurchase shares. The board of directors agreed to this. When it comes to the total return ratio, we are always having good discussions. However, as you have just mentioned, it is also true that the window is narrow. We'll have to find a way to deal with this situation in the future. In addition, based on the various announcements made this time, as Mr. Muraoka mentioned, we are very much aware of the opinions of the analysts.
So I believe that the direction of our discussions is to keep the acquisition of Treasury shares in mind.
Okay, thank you very much. One more thing. I would like to ask Mr. Kama for this as well. I think Mr. Hyogo was asking earlier about the efficiency of returns from R&D. Well, I've been looking at the cost other than R&D, the SG&A. Well, I think the situation is getting better, but I have always had my doubts about the SG&A. I thought there was a continuous increase that could not be explained by enhanced AstraZeneca payment alone or by stock-linked compensation alone. I was wondering if the board of directors had any questions in this area, such as whether so much is needed. How much discussion has there been on financial and cost discipline in the board of directors? Was this ever a program? What was it like?
Well, I don't think we discussed the SG&A amounts or ratio per se so much in the meeting. As I mentioned earlier, in the end, it is the core operating profit and other figures that are the targets of the mid-term business plan. So we need to think about how we can realize those targets and how to achieve them. So we would discuss the amount and ratio of R&D, SG&A to achieve these targets. But I don't think there's much discussion about the detailed analysis of SG&A ratio and what it means. Of course, there's an analysis of the cost of personnel and various costs that make up SG&A. But I don't think there's a lot of discussion about the effectiveness of SG&A or what it should be like.
Okay, I understand. Thank you very much. That's all.
Now that the scheduled time has come to an end, the ESG briefing for Daiichi Sankyo for FY 2023 will come to an end. Thank you very much for your time today. We will also end the online distribution here. Again, thank you very much for taking time out of your busy schedule today to attend and listen to this presentation. Thank you.