Earnings Call: Q4 2019

Apr 25, 2019

I am Manabe. Thank you very much indeed for your participation in this financial results presentation of Badaiji Sanclo despite your busy schedule. We made an announcement of the consolidated financial results of FY 2018. And based on the handout, we'd like to make a presentation. These are the topics I'm going to cover: FY 2018 consolidated financial results and FY 2019 forecast followed by the business update. After that, newly appointed Global Head of R and D since April, Doctor. Koka is going to give us the update of the R and D. We will take questions from the floor. Let's start with the financial results of the twenty eighteen fiscal year. Consolidated revenue was 9 and 29,700,000,000.0 yen down by 3.2% or 30,500,000,000.0 yen down year on year. Cost of sales was 18,600,000,000.0 yen increase year on year. SG and A was down by 24,200,000,000.0 yen and R and D expenses was down by 32,300,000,000.0 yen As a result, operating profit was 83,700,000,000.0 yen up by 9.7% from last year or 7,400,000,000.0 yen year on year increase. Profit before tax was 85,800,000,000.0 yen up by 4,800,000,000.0 yen year on year and the profit attributable to owners of the company was 93,400,000,000.0 yen up by 55% or 33,100,000,000.0 yen year on year. Actual exchange rate was 110.91 yen for dollar, 0.05 depreciation from last year and €128.4 per euro. That was in appreciation by 1.3 yen from last year. In next four slides, it's going to give you the explanation of the factors behind ups and downs of the performance. Revenues declined by 30,500,000,000.0 yen from last year, and these are the breakdown as per our main business unit. For Japanese businesses, including pharmaceutical, vaccine and healthcare, in addition to the oral anticoagulant, Lixiana and CANALIA Type two diabetes drug, we had gains on sales of transferring long listed products as well as Daiichi Center SVAB product, including authorized generics. Thus, we had an increase of the revenue. However, we had expansion of the generics products. The anti hypertension product, Olmetec, had a significant reduction in sales. We also had a reduction in revenue of anti alzonexium and anti influenza Inavil and analgesic and anti inflammatory naloxone. As Zaiji Sankey Healthcare, they had a solid revenue mainly based on the skincare product. However, due to the accounting practice changes, revenue declined. For Japan business as a whole, we had a decline of the revenue by 20,700,000,000.0 yen Let me move on to the overseas businesses. Those numbers exclude currency fluctuations. Regarding the Daiichi Sankyo Inc, United States, they had a decline of the revenue by 38,850,000,000.00 yen due to the reduced revenue of the Effient antiplatelet products and Omisartan antihypertension and hypercholesterolemia and type two diabetes products, Welchol, where the generics entered in May 2018. Formal Leutbold or American Regent Inc. Today, they had a 12,300,000,000.0 yen increased revenue due to the growing index of our IDA products. Like to Central Europe, they had declined business due to Omeprazole. However, they had a growing business of Alexiana, thus 10,000,000,000 yen increase of the revenue. ASKA, in charge of Asia and Central South America, they had increased revenue by 9,600,000,000.0 yen mainly in China and Korea. Revenue declined due to currency fluctuations by as much as 3,200,000,000.0 yen in total. These are the operating profit ups and down factors. We had an increase of the operating profit by 7,400,000,000.0 yen and these are the specific details. As I said before, revenues declined by 30,500,000,000.0 yen including currency fluctuations impact by 3,200,000,000.0 yen And in terms of expenses, excluding the currency and special items impact, cost of sales increased by 2,800,000,000.0 due to the change in the product mix with the OMESATALTOON patent expiry and SG and A reduced by JPY 14,900,000,000.0 due to the cost reduction efforts in The U. S. Expenses declined due to currency fluctuations by JPY 1,800,000,000.0. And regarding special items, the expenses reduced by 22,000,000,000 yen year on year. Excluding the currency and special item factors, we had operating profit decline by 13,200,000,000.0 yen These are the special items breakdown. Last fiscal year, we had expenses reduced by JPY6.1 billion due to the sales of fixed assets with impairment losses of 108 intangible assets and expenses for U. S. Business reorganization due to which we had expenses increased by 33,600,000,000.0 yen This fiscal year, expenses reduced by 3,500,000,000.0 yen due to fixed asset sales. With impairment losses of intangible asset for 15,100,000,000.0 yen regarding ZELBORAF and Mobantik, expenses increased by 11,600,000,000.0 Expenses finally declined by 22,000,000,000 yen year on year. Let me talk about profit attributable to owners of the company. Operating profit increased by 7,400,000,000.0 yen including the currency and special item factors. With regard to financial income and expenses, last fiscal year, we had currency gains. But this fiscal year, we had currency losses due to yen appreciation. Thus expenses increased by 2,600,000,000.0 yen Corporate tax, along with the strategic collaboration with AstraZeneca for this 08/2001, future expected tangible income is increased. As a result, deferred tax asset can be added. Thus, the corporate tax and so forth has reduced by 28,800,000,000.0 yen As a result, our profit attributable owners of the company was 93,400,000,000.0 yen up by 33,100,000,000.0 yen year on year. In Slide eight and nine, we discuss about major business unit and Japanese businesses in currency. In Slide four, I explained the unit based situations excluding currency impact. However, in this page, we discussed the figures including currency impact. Let me talk about consolidated focus for FY 2019. Our target for FY 2019 is going to be revenue JPY $940,000,000,000 and operating profit JPY 100,000,000,000 yen Let me explain the comparison of the numbers to the fiscal 2018, excluding special items. Regarding revenue, it increased by 10,300,000,000.0 yen in total as out of upfront payment for DS-eight thousand 201, a 10,000,000,000 yen is booked for this fiscal year as deferred revenue. Cost of sales will be down by 19,500,000,000.0 yen as gains on sales of Atakatsuki plant will be booked for 90,000,000,000 yen And regarding SG and A, sales of Nihonbasi Building would help reduce expenses by 10,600,000,000.0 yen But we anticipate expenses increase for our Oncology business unit reorganization. Thus, SG and A would be up by 3,800,000,000.0 yen Regarding R and D expenses, we anticipate 21,300,000,000.0 yen increase due to the progress of the clinical trials of DS-eight thousand two hundred and one and other new ones. OPI expecting 100,000,000,000 yen up by 4.7% year on year. With regard to the impact by the strategic collaboration for the DS-eight thousand two hundred and one, nothing else but the deferred revenue portion of upfront payment is included in the fiscal year. As we have progressed with AstraZeneca discussion and be ready with the new development plans, we will let you know. Next, I'd like to discuss the major business update. First update is on edoxaben. The product name in Japan is LUXIYANA. It achieved one sales share in Q3 in the Japanese market and increased the share to 33.2% as of Q4. Consequently, the revenue results in FY 2018 was JPY 64,900,000,000.0, which was an increase of JPY 19,600,000,000.0 year on year. The share will continue to increase in FY 'nineteen. We target the revenue to be 77,000,000,000 yen This slide shows the changes of the shares in volume, not only in Japan but also in other countries. In Europe, Belgium, Germany, Italy, Spain and U. K. Are showing steady growth. And in Asia, Korea and Taiwan are in good condition. Also, in Brazil, where the product was launched in August 2018, it has been going up steadily. Thus, the global revenue results in FY 2018 was JPY117.7 billion, which was an increase of JPY40.6 billion year on year. We will seek further expansion in FY 2019, in which our target will be JPY 149,000,000,000. As for edoxaban, we have been conducting many trials as part of its life cycle management. This is a list of study names related to edoxaban. By targeting patients with a variety of clinical backgrounds in the randomized controlled studies, We are expanding our scientific knowledge. Also, as for ILLUMINATE AF, we gave a presentation during the late breaking session at the European Heart Rhythm Association. We are making steady progress in accumulating the results. The objectives of these studies are also to collect the real world data, and the clinical trials are also conducted. With knowledge and experience we accumulated on edoxaban, we will let the patients with different clinical backgrounds to be able to use it, and we will aim to maximize the value of edoxaban. I'd like to proceed to the topic of Japan business. In Japan, we launched Tarlysue, which is a therapeutic drug for peripheral neuropathic pain in April. We are also launching MINNEBRO, which is a therapeutic drug for hypertension next month. Next, I'd like to explain about the slimming of our assets. The first topic is on the reduction of cross shareholding shares. In principle, our company does not own listed shares. As for the shares we currently own, we will sell them off gradually by considering an overall impact to the market. We sold 10 stocks for JPY 14,300,000,000.0 in FY 2018. As for the properties, we also sold our noncore assets for JPY11 billion in FY 2018. For transferred the long listed products for JPY 6,300,000,000.0 in profit. The gains on transferring the Takatsuki plant for JPY 19,000,000,000 and selling the Nihonbashi Building for JPY 10,600,000,000.0 will be booked in FY 2019. Finally, about the shareholder returns. Our shareholder returns policy from FY 2016 through FY 2022 clearly indicates that the annual ordinary dividends are 70 yen or more in addition to the flexible acquisition of our own shares, and the total return ratio will be more than 100%. In FY 2018, the ordinary dividends will be JPY70. The total return ratio will be 40.8% per single fiscal year, and the three year cumulative is 114.8%. Now Doctor. Koga will discuss the R and D update in the following presentation. This is Koga. I succeeded the position of the Head of R and D from Doctor. Glenn Gormley in April. I look forward to working with you. Today, I'm going to give you the update of the global R and D progress. These are the agenda of my talk today, results of FY 2018 to start with and then a progress of DS8201 and the SAKIGAK designation of DS-three 201 and DS-sixteen 47 Phase II 2s study results and new Phase III study of myrogabalin upcoming milestones and ASCO IR events. Let me start with the results of the fiscal year 2018. In this fiscal year, we've had many achievements for DS-eight 200 and '1. This slide talks with the Phase I studies and shows achievements for breast lung cancers and concomitant therapy with IO and collaborations. In Phase I, we made presentations of the data for several cancer types in ASCO and other main congresses. And we have completed enrollment of the subjects for the pivotal Phase II study, DESTY PRESID one for the subject with the prior treatment of TDM-one. We also studied the Phase III direct comparison study for second line TDM-one and Phase III studies for HER2 low expression. We studied studies with nivolumab, a concomitant therapy for IO, and we made a strategic partnership with AstraZeneca in the March as in this slide. And this is the results of the oncology projects. We made a presentation of the results of the breast cancer Phase I study for U3x1402, a second ADC for the first time in ASCO. And the data shows the ones close to the early stage of DS-eight thousand two hundred one. And we made an NDA for quiseltinib, a global oncology product in Japan, U. S. And Europe, and we made NDA for bexidaltinib in U. S. And Europe. In the Specialty Medicine area, we've obtained approval for the Japanese market for myrogabalin, where the clinical studies started for the first time after integration and for Eztexarenone, which has the last project number from the before the integration. And let me talk about DS-eight thousand two hundred one progress. This slide shows the studies and schedules for DS-eight thousand two hundred one today. As I said before, we have discussions with AstraZeneca with regard to the ongoing studies for DS-eight thousand two hundred one as well as the new ones to start. I can discuss about gastric cancer Phase II studies to be carried out in the Europe and United States to you, and let me explain that later on in details. Let me talk about abreastava DS-eight thousand two and one. The first indication to be is the Mr. Stedika Bristacaster third line, and let me talk about our preparation status for NDA. We shared already in the end of last month that we are going to accelerate a BLA in The United States to the first half FY twenty nineteen. And recently, we scheduled NDA in Japan in 2020. However, we will accelerate it to second half fiscal year twenty nineteen, and that may be accelerated further on. For Europe, the original schedule will stand. We plan in the first half FY twenty twenty. In The United States, it is designated as the breakthrough therapy. Therefore, estimated review period is six months after the acceptance of the filing. In Japan, review period will be twelve months Therefore, the launch could be sometime within the fiscal year 2020 at earliest. Let me talk about the standard treatment flow of breast and gastric cancer. In here, we want to show you for which lines we are conducting trials for DS-eight 201 and where, which lines we want to challenge going forward. This slide shows the treatment flow of the HER2 positive breast cancer. At the moment, we are carrying out DESTINY Breast one, two studies for the subject of metastatic breast cancer line. And we also carry out Destiny Breast O3 aiming at TEDM1 replacement for second line. Pink boxes represent first line metastatic breast cancer. In addition to that, we have discussions with AstraZeneca regarding cost of new adjuvant studies, just like the KATHERINE TDM-one. And when we have our clear plans for clinical trial, we will let you know. Slide thirty six and seven talks about HER2 low expression treatment flow. There is no definition as such as HER2 low expression SOC. Therefore, the Slide 36 shows the HER2 negative hormone positive flow and 37 shows HER2 negative and hormone negative treatment flow. And we carry out a destiny grade O4 studies for last line for those patients. And for HER2 low and hormone positive patients, we want to aim earlier line, and we have discussion with AstraZeneca. Once details are up, we will let you know. And Slide 38 shows the treatment flow for the gastric cancer patients. Third line studies are going on in Japan and in Asia, and we have discussion with AstraZeneca aiming for the second line. The gastric cancer studies have been conducted in only in Asian countries so far. However, we will start the Phase II studies for third line gastric cancer patients in the Western countries in second half. And let me give you the details from the next slide. The gastric cancers are prevalent in Asia. However, like in this graph shows, the number of the patients in The States and five countries in Europe is greater than that of Japan. Gastric cancer is an extremely refractory cancer. Its prognosis is even worse than that of breast cancer, and we know that it's also easy to acquire drug resistance. Maybe those factors have some influence that when we looked at the past study results of similar drugs, they demonstrated lower efficacy in the Westerners than in the Asians. So we concluded that in gastric cancer study, it's better to confirm the efficacy and the safety by region, and the study should be separated from those on the agents. This study of gastric cancer Phase II in The U. S. And Europe is scheduled to commence in Q2. I'd like to continue to the next topic of the Sakigake destination of DS-three thousand two hundred one. DS-three thousand two hundred and one is a compound that inhibits the histone methylase of EZH1 and EZH2 required from the maintenance of cancer stem cells. They are expected to eradicate the cancer stem cells and suppress the cancer relapse. The EZH1 and EZH2 inhibitor has a possibility of becoming first in class. Currently, the Phase I study is being conducted on non Hodgkin lymphoma, including a peripheral T cell lymphoma. The graph you see was presented during the American Society of Hematology, ASH, two years ago. As the graph shows, the efficacy was demonstrated with two PTCL patients at that time. Currently, there are approximately 10 PTCL patients enrolled in this study. This drug has received the Sakigake designation for the treatment of PTCL. DS-three thousand two hundred and one is our company's fourth product designated for SAKIGAKE. Now I'd like to switch the topic to DS-sixteen forty seven, which is a cancer virus and an oncolytic virus G47 delta. G47 delta is an innovative oncolytic virus discovered and developed by Professor Todo of the Institute of Medical Sciences of the University of Tokyo. In this modification, the herpes simplex virus type one, HSV-one, was controlled to grow exclusively in cancer cells by genetic recombination. Our company has developed treatment for various solid cancer, including glioblastoma in collaboration with Professor. Todo. The overview of the study is shown on the next slide. The interim analysis of the Phase II investigator initiated study was conducted in July, and the study was stopped early after the efficacy of the drug was confirmed. The result of the interim analysis was presented by Professor Todo during the AACR JCA joint conference. The result of the efficacy was that the primary endpoint marked ninety two point three percent as the one year survival rate. In the secondary endpoint, the PFS was eight point six months. As for the safety, the incidence of side effects that required prolonged hospitalization was twelve point five percent demonstrated a high safety. With these results, we are planning to file an application for approval in the 2019. This product has already received a SAKIGAKE destination from the Ministry of Health, Labor and Welfare in Japan. Next, I'd like to draw your attention to the overview of the new Phase III study on miragabalin. Miragabalin was successfully approved for the indication of peripheral neuropathic pain this year, and it was launched in April. Neuropathic pain consists of the peripheral and the central classifications. The current indication is only for peripheral. We have started the new Phase III study on the central neuropathic pain. If the indication can be expanded to the new category due to the results from this study, we will be able to deliver this drug to all the patients with neuropathic pain. Lastly, I'd like to discuss the upcoming milestones and the IR events. During ASCO held in Chicago in The United States in June, we will offer oral presentations on U. Fourteen oh two and DS-one thousand and one. We will offer a poster presentation on DS-ten 62. Previously during ASCO, we conducted an on-site conference call to explain the details of our presentations at ASCO. This year, we will provide an additional on-site conference call for the investors who are attending ASCO in Chicago. We will let you know as soon as these two events are confirmed. As for DSA-two zero one, we will file an application for approval for the third line metastatic breast cancer treatment in the 2019 in The United States and in the second half in Japan. The results from the ongoing Phase II registration study will be presented during the San Antonio Breast Cancer Symposium in December. Quizartinib and pexidartinib will be submitted to the Oncology Drug Advisory Committee for discussion on May 14. As for DS-sixteen forty seven, as I mentioned before, it will be filed for approval in the 2019 in Japan. The appendix pages include a list of milestones in FY 2019 and a table of pipelines. Please take a look at them later. That concludes my presentation. Now we would like to take questions from the floor. Doctor. Manabe, who made the presentation today, President and COO and Doctor. Koga, Global Head of R and D, will respond to your questions. As needed, Mr. Nakayama, Chairman and CEO and Mr. Sai, CFO, are going to respond to your questions. Yamaguchi from Citi. First question is about AstraZeneca deals. I have my clarifications. You said that you're going to share R and D expenses. According to what you said today, you haven't defined so much of the deals. Therefore, the numbers today are not including those factors. Is that right? So within the fiscal year, if you have a progress with the deals, perhaps half of those money might be booked in the middle. Is that right? Please look at the page 12. First of all, in this fiscal year 2018 nothing is booked. However, for the fiscal year 2019, yen 21,300,000,000.0 increase of the R and D expenses booked. A majority of that is for these 8,201 as you understand. For that part, we are yet to discuss with the partner. Therefore, the amount might increase possibly. However, all those things are to be discussed going forward, so I can share with you. However, this is on the increments. Therefore, through expenses will be much higher. Yes, majority of the increments are for DS-eight thousand 201. And second question, as to the 10,000,000,000 yen recognition for this fiscal year, you had paid in over 140,000,000,000 yen About half of them, yen 74,000,000,000 has been received, and then that will be prorated over the period over seven years, I believe, and that part is booked. Is that correct? I think your understanding is slightly different. Let me explain once again. Upfront payment was 1,350,000,000 or 150,000,000,000 yen approximately. For that part, over the exclusivity period in The United States, although we do not discuss about our patents as yet, however, for that period, we are going to book as deferred revenue, 150,000,000,000, but it will be about 10,000,000,000 yen for a year. That will be the impact. For fiscal year twenty eighteen financial results, On PL, since the deal was made on the March 29, therefore, was almost no impact on the PL for this year, only 100,000,000,000 positive impact on the revenue. But if you look at the balance sheet, both assets and liabilities area, we had a positive impact of 150,000,000,000 yen each. For cash flow, nothing for 2018 fiscal year. And for the FY 2019, for the cash flow, half the money will be received for as much as 75,000,000,000 yen We have received it for this year. The remainder of the half will be paid in the next year. For PL, 10,000,000,000 prorated amount will be recognized as revenue. So 10,000,000,000 yen booked every year after that, Correct. Lastly, as for the BREAST-one data to be presented in San Antonio, filing will be coming earlier than that. That means top line results will be available earlier than that. In terms of the sequence of announcement, would you be giving us the indication that top line is positive for instance before the presentation in San Antonio? Is that the sequence of the information release for itself? So in terms of the novelty of the information, the contents of the presentation in San Antonio will be including a new information and whether or not we're going to openly discuss about it prior to that is another story. So we have not decided whether we should announce the top line results before San Antonio presentation. However, you're going to file before that, right? Without a good result you cannot. Right. That is correct. I'm Hachi Wuchi from Daiwa Securities. I have a few questions. In your forecast of this year, the sales by American region is almost flat. It had a double digit growth last year. What are the factors that make you assume that the growth will stop? Sorry, what page are you on? Sorry. Is it about this year? Yes. I'm looking at Page four of the supplementary document. Yes. As for the revenue, Injectafer is still in good condition. Since the shipping volume of competing products decreased at one time, It is showing the growth. Although the competing products have already come back to the market, it is still moving along quite well. According to my understanding, I'm not aware of any particular negative trends in this case. Understood. Also in the development plan of ATO-one, I saw a lot of lines that indicate under discussion. Can you tell me what it means? Is it the case where you have already stated or started the detailed consideration of exactly what and where you are going to do? And the studies that can be started in one or two years will be the ones you mentioned today? Considering the eternity, I assume that things will change depending on the situations. But in a bit longer perspective at this point in time, what you want to do in the future are pretty much what you presented today. Is that what you mean? Can you tell me what you mean by under discussion? As you know, we will have a joint development with AstraZeneca. After entering into an agreement in March, we have set up a variety of meeting structures. Of course, there are a high level executive committee, a development committee or a supply chain. There are many factors involved and there are things such as how we can utilize their capabilities, what they want to accelerate and what we want to accelerate, etcetera. There are certain things we coincide with each other, and there are, of course, certain things we don't coincide with each other. Although being said, we are currently working closely to establish our priorities in that situation. As for the expression of under discussion, we want to do everything by ourselves by all means. But of course, we can't do everything by ourselves and things got delayed. But with this initiative, maybe we could move up things faster. That's easy to imagine. In order for two companies to work together, we need to have a run up phase to establish a good relationship, first of all. Once that is done, I believe we could create an opportunity to demonstrate something concrete one after another after being under discussion. I don't think I understood very well. In any case, what you have in your perspective during the run up phase would include those purple boxes in your presentation today. Am I correct? Yes, that's what I meant. Understood. Here's my last question. As for the DESTINY breast studies, can you tell me the results from the interim analysis of the two and the three studies? And in these studies, are the study designs structured in a way that they allow an early termination by achieving the efficacy? I don't remember clearly about this, but I don't believe they are structured in that way. At the same time, the current situation is that, for lack of a better term, we have been whipping them so that the studies will not be delayed. We are working hard on them. UNIDENTIFIED REPRESENTATIVE:] Other questions? Monthly mix, Mochizuki. As for FY 2018 results, the Almedic revenue reduction is quite hitting hard. Your results, would you please give us a comment, Doctor. Manabe, automatic revenue decline. Well, we are operating in this sort of era, patent exclusivity going off, meaning we have a replacement of the products. For that part, we would have to accept. And what we can do is to provide a new product to innovate SoC. In terms of the forecast for FY 2019, OP 100,000,000,000 yen target is right there, and we are approaching the achievement of the mid term business plan target finally. And as organizations, what is your target again, please? Well, our oncology products are not yet there to contribute our results, but we have a base business prior to that, ex Doxiban, that is one and Indectofar as well. And in Japan, we have a base businesses, and we want to maintain number one market share positions going forward. And of course, including our licensed in product, we would like to keep our positions in the Japanese market, and please expect on that. So you're expecting of the Japanese market quite highly going forward, is that right? Although the situation is tough, therefore, we wouldn't expect a very aggressive growth here. However, the majority of the revenue is coming from the Japanese market. Therefore, we want to sustain this business. Lastly, in terms of the asset streamlining, you have a long list of product transfer and non core areas being streamlined. And of course, Oncology will be growing as a core business And what is your thinking on that? Plus do you have plans to reduce the number of people for streamlining the core area as a science? If that is the question, Doctor. Kogar will support later on that. But of course, oncology, that is the focus plus the rare disease immunology areas, those will be the nononcology focused areas to be. And as I said before, we have a 2025 Vision, and oncology product for that is quite good, and we need to keep seeding for oncology businesses going forward. And the core of the businesses will be mainly coming from innovative products. And of course, we do have businesses in Japan and we need to provide products that satisfy a variety of the needs in this market as well. So back again to the reduction of those assets. You talked about Nihonba Sea Building sales. And do you have any plans for the personnel reduction? In terms of the noncore asset sales, we do have a strategy, and we have continued along with that strategy. And the Nihonbasi Building sales is one of those efforts. And as a result, well, I think about downsizing. We have no plans at the moment for such a thing. So for the time being, you're going to maintain what you have today, correct? REPRESENTATIVE:] I'm an editor of the Journal of Pharmaceutical Business. My name is Idaka. Thank you for your presentation today. As for 08/2001, you entered into a global partnership with AstraZeneca. Once again, I'd like to know the points that made you decide to choose AstraZeneca as a partner. After all, why AstraZeneca? Furthermore, I also would like to know if you received any other inquiries from the companies other than AstraZeneca. That's the first question I have. Yes. As for A201, we have mentioned since long time ago that we have been conducting a broad search for a new partner. In fact, a few major companies raised their hands. Among all those companies, what was important to us was that in this project, we wanted the company to regard highly of the compound or rather that we wanted the company to have a fair assessment on the compound. In addition to that, if we work together, we will be able to deliver the drug to the patients much faster. Judging from these two aspects, we concluded that AstraZeneca was the best for us. Thank you. In the future, when it is launched in Japan, The U. S. And Europe, I believe Daiichi Sankyo will be in charge of Japan. But AstraZeneca also has a Japanese subsidiary in Japan. Are you going to have any changes to the areas of sales? Are there anything you and the Japanese subsidiary of AstraZeneca are considering so far? So far, we have no changes. As it was planned initially, the structure is that Daiichi Sankyo will have an exclusive sales in Japan and will pay the royalty. Okay. I have one more question. Currently, A201 has been making a very good progress, and it is at last making a final approach to the launch of the product. But meanwhile, you had a large scale personnel reshuffle of your officers in April. Doctor. Koga, who gave a presentation today, has assumed a top position of R and D. There was also a lot of changes to the officers in The U. S. For example, the head of the U. S. Corporate Division was fulfilled by a former Vice President, Mr. Ogawa, who had moved to The U. S. What it means is that since this is such an important time for the company that you wanted to have a new lineup of the management. Is that correct? Can you explain the idea behind this large revision of the management personnel at this point in time? Yes. As for the personnel reshuffle, we have been asked to have generational changes since long time ago. For Doctor. Glenn Gormley, we have had a discussion of letting a younger person take over his position sometime in the future, and we decided that now would be an appropriate time for such replacement. So Mr. Ogawa and Mr. Fukuoka have gone to The United States this time. There have been some organizational changes within DSI. While oncology will be our mainstream in the future, The U. S, Japan and Europe, especially The U. S. And Japan, will get engaged with a lot of work together in the future. So the idea behind this was that the Japanese management will be part of it, and the coordination between Japan and The U. S. Will be even tighter than before. This will be my last question. It's about the sale of your noncore business. You mentioned the buildings today, but are you going to continue this in the future? Also, sometimes in March, a certain information journal published a news article on your plan to sell the health care division. Are you considering the sales of Daiichi Sankyo Health Care and ESFA, which engage in businesses directly, sometime in the future? I have been saying that we will sell our noncore assets and will focus on core businesses. And we have been taking some measures every time. But in the future, although nothing has been decided yet, what we discussed initially was to strengthen our core. If the core becomes stronger, we will reorganize the noncore just like the relationships between the right side and the wrong side so that we will be able to focus on the core even more. The more we become focused, the more things there will be for us to consider in the future. However, we have not decided anything as to what you mentioned. Thank you. Goldman Sachs Securities, Ueda. I have two questions. One is about clarification of the numbers. FY 'eighteen, R and D expenses were lower than the plans. Why is that? And for FY 'nineteen plans, you have the up front payments and those gains on transfer. And in reality, your profitability level might be smaller because of that. And the last year, you had midterm plans updates, and you mentioned that you would perhaps have operating profit around 80,000,000,000 yen up until 2020, although you have a focus on oncology in the meantime. But since the update of midterm plans, any changes since then? So in terms of results of 2018 fiscal year, R and D expenses ended up lower than the past years because in the previous year, we had a 108 impairment losses booked. Because of that, we had an impact on the positive side for profitability for this year. For fiscal 2019, like on the page 12, yen 21,000,000,000 higher number planned than the fiscal year 2018. As I said before, majority of those will be the increments for DS8201. However, that will be dependent on the plans for R and D with AstraZeneca. Therefore, I can't really say if it will be up or down. And of course, we are going to share the efforts, mainly it will be positive for profitability. However, we have other projects like DS-fourteen oh two. We can divert those investment into other projects as well. So we need to see the situation in totality in order to judge the R and D expenses finally for the fiscal year 2019, but this is what we can share as of today. So FY 'eighteen, the number is lower than the plans. And what is the factors behind it? And for FY 'nineteen, R and D expenses and others too, For instance, we have upfront payments, gains on transfer, sales so forth. I think including all those factors, the real OP will be 60,000,000,000 or so. However, in the midterm plans, you said that you're going to sustain 80,000,000,000 yen operating profit up until 2020. What is the reason behind it? So as to the plans, which page are you referring to? For instance in the appendix R and D expenses 95% or 94.5% are against the plan. Let me respond to your questions. For this term, one of the reason is COF projects where we shift it people. And we streamlined our expenses as much as we could. We did so. And we had enrollment delays, and we needed to catch up for some of the projects because of those reasons. This is what we have done, but we are trying to support those areas today. Then FY 2019, yes, for the mid term plans, we had our image shown, but it is different, right? For instance, this year we had a big impact by the revision of the drug crisis again and we had about 48,000,000,000 yen Excluding special items and others, in real terms, the tough situations will continue. Second question, that is about returning back to the shareholders. Since the your education for the midterm plans, you have a collaboration for 80 two-one, aggressive activity for the asset streamlining. And still, you have more than 100% of the total return ratio to continue. And you have very good items coming out for Oncology now. And you may like to prioritize those ideas. You may like to focus more on the investment on the businesses. That's one idea. And those gains from the streamlining of the assets could be utilized for the shareholder returns. That's another thing, but could you explain? Are you thinking of that? So let me explain and perhaps CEO and COO may add some more later on. We are committed as of today up until 2022 to provide 100% of the total return ratio that is our promise. As in the slide here, in last year FY 'twenty eight up until that year, we've achieved 114 total return ratio. And going forward up until 2022, we would like to keep up our policy of total return ratio to be 100% or more for that period. And in terms of the investment on the businesses, we have a capacity of about 500,000,000,000 yen as I said before. And we will stay positive and aggressive in investing depending on the profitability levels going forward. We would not hesitate investing more on oncology businesses. Mr. Tsai explained our basic policy and factors we have is such that one is the agreement with AstraZeneca about development plans, how it will come out and then we will scrutinize the plans and then we have to think ahead again. And probably sometime in the first half this upcoming fiscal year, we will be able to look into that. This is Muraoka from Morgan Stanley Securities about the under discussion projects of 08/2021 from Page 35 to Page 38, which you discussed as the projects you want to do. Especially in the first half of it, you have six or seven purple boxes. That's too many. If possible, can you tell me which one of them will be your top priorities? Of course, developing a drug to become the first line drug is our ultimate goal, if it is a good drug. We believe that AT-two zero one has that potential. However, to reach that goal, we need to do it as if we are climbing up the stairs. For that reason, I listed a few things such as the third line or a concomitant use. Of course, what we really want to do would be something like cathetering, for example. Our goal is to bring it to the very top stage in any case where the physicians and the patients can use the therapeutic drug immediately. Please understand that we are climbing up the stairs for that purpose. Then the post neoadjuvant is where you are aiming to reach in the end, but that is not something you can jump at right away. I'm sure you can't do it right away. No, we can't do it right away. That's the way it is. Understood. As for the sales plan of your domestic main products this year, can you explain their implications? It's about memory and Inovir. If I remember correctly, Memory will have its generics in December. Think but it says plus 3%. Does that mean that the launch of the generics will be postponed a little bit? And Inovir was struggling last year, but it's growing this year. Is it because you think you can expect another competitive advantage of it? Can you explain? First, we don't expect much of the generics impact on memory. That's one thing. And about Inovir, it suffered from a lot of impact from Zofluza, but influenza actually ended up quite early this year, which might have helped with the recovery. We took that into account to come up with these figures. So that was rather not about the competitive environment, but it was influenza and Zofluza. That is something very hard to explain because we have some promotion matter recently. After all, we believe that if the positive aspects of our drug are recognized, we believe that we can achieve these figures Understood. Lastly, during the ASCO presentations, U3 was presented orally and 100 six-two was presented by poster. Did you have any implications in this arrangement or not? No. They were simply chosen by the Secretary of Bureau of ASCO. We didn't decide which one was more important than the others or which one should be selected. With the data set we submitted, ASCO decided that this deserves to be oral. And they decided that DS-sixteen oh two should be a poster presentation. They gave us their instructions. This whole thing could be reversed next year. So it is correct to assume that you want to draw people's attention to U3? Well, I want to draw everyone's attention to all of them. In some cases, the poster presentations can be unexpectedly better than oral ones. I better stop there. Thank you very much. You. Arai from Ameri Lynch Securities have questions about DS-eight thousand two hundred and one, HER2 positive treatment flow and a number of the patients' indications. Thank you very much for giving us the input. And in terms of the number of the patients with the metastatic breast cancers, how did it go in the past? And what is the upcoming expectations of the number of those people? Because Herceptin, Kadcyla will be utilized for Juvent. And what is the changes of the metastatic breast cancer treatment over the years? Could you give us the explanation? I'm not the best person to explain that. However, at least Herceptin and TDM-one treatments may not satisfy the needs completely. That is clear. At the same time, HER2 low expression patients, for instance, the diagnostics method is used today. However, diagnostics range isn't really defined clearly. Therefore, many patients have struggles at the moment. Because of that, ADX-two zero one get attention by people. Sorry, my answer is rather qualitative. I need to learn more about it. And in the CATHERINE studies, you work on the post neoadjuvant and Herceptin, Kadcyla are used. And are there any unmet needs area where the 8201 can enter and satisfy? What is the area for the unmet needs for that? So speaking of the profile of the products, the target is HER2. That's all the same. However, the quality of the payload is very different. And as was shown before, ATCO-one has a very stable profile in the blood stream and it is very safe. And in the solid tumor, it shows the bystander efficacy, meaning between the cells it can move on demonstrating efficacy. And we do have the head to head studies going on at the moment. And those profiles will be if the profile is well demonstrated in the clinical setting, I think there is a good chance for that. We need to check on that. And usually, we expect longer clinical studies like four, five years that is needed for that. However, do you have any development of the primary endpoint that may accelerate the studies? To my knowledge, no. Because of that, we need to go step by step going up the stairs. For the patients who had been treated with the Herceptin and TDM-one, though have the recurrence once again, we have a good efficacy of that with that and we can learn a lot about lot from that. And ASCO also conference is three hours long. That is unusual. But do you have any other updates other than U3 and ten sixty two? Depends sometimes we are in preparation for that. And in R and D, they are discussing how far we should talk up in that conference. That means we have so much we want to share with you, but we are having discussions with Antoine at the moment. Thank you. I'm Onishi from Toyo Keizai. I have two questions. On Page 12, where it says SG and A, it says the cost increase for the establishment of the oncology business structure. Specifically, since it says the Nihonbashi Building will be approximately JPY 10,000,000,000. If I calculate the balance, will the cost for this oncology business construction increase considerably? Since you say it's cost increase, so I assume it will increase. Is it going to increase as high as JPY 10,000,000,000 or even more? Also, can you explain the content of it more in detail? This is not going to stop here. But in the future, when you have many things to offer, including DS-eight thousand 201, this will be something like step one. You will need to increase your headcounts. For example, does this content imply that you will have more and more cost increases in the future? That's my first question. Then I'd like to start first. When it comes to the establishment of the oncology business structure, I believe The U. S. Is the largest. In addition to that, we have a global structure such as global marketing, global medical affairs, which are hiring people, and they will continue to do so in the future. Especially in The U. S, they need to actually develop the sales structure and must start the training as soon as possible. So these are costs for the oncology sales structure in The U. S. And Europe. As you mentioned, this is where a lot of investment that will be made here. That is the first step. Considering that this business will expand in the future, this will not stop here. In some cases, you need to increase the cost even more in the future. Is that a right way of interpreting it? We haven't been able to estimate or plan to that extent, but the main part of the structure will be established by them. I can't tell you the specific number of MRs, but we won't need a structure like when we were selling edoxaban. The headcount will be smaller. I don't have any impression that this will be a double of the amount in the increase. My second question is about the ratio of SG and A. I also hear that people are suspicious about the SG and A in the financial statement. I have a feeling that Daiichi Sankyo's SG and A didn't decrease that much. Do you also recognize this to be still too much? About the cost reduction, we have been working on it as a corporate project on a daily basis. However, we believe that this figure is something we still need to continue to challenge, but we don't regard this as an abnormal figure. Since there are many special factors associated with it, I don't see it too much for the direct spending. Sakai from Credit Suisse. Let me ask again about 08/2001. AstraZeneca conference call said that HER2 high expression plus HER2 low expression will be the targets out of the breast cancer patients, but they are going to expand for other types as well, including mutations. Of course, they are envisioning a concomitant therapy with Tagrisso and Infinity. And Mr. Nakayama said that we want to solidify the plans in the first half. And how much of the package are you going to solidify then? For instance, the translational research included for HER2 low expression patients with AstraZeneca, Are you thinking that much for the first half this year? Because AstraZeneca is the giant in the oncology. And if you have concomitant therapy studies, you may be dominated by them, and that could be a risk. How do you hedge against that? I don't know if they say you're too high. But as for 08/2001, in the respect of the translational research, we do have a very high level and we do understand that way in discussions with AstraZeneca. And we have areas where we have a very well matching interest with AstraZeneca or sometimes we have a high interest, they have low interest or the other way around. And then depending on how our interests are like how we are engaged may be different. And we do have freedom in a way, and I wouldn't have to worry about being dominated by the other. And in a way, the benefit of the development jointly is that rather than working on our own, we could achieve higher sales target at earlier timing with earlier approval. And as AstraZeneca was saying, of course, as you said, AstraZeneca is very strong in oncology and that can be beneficial for us to raise our organization as well. My answer may not be responding to your question, but this is what I can say. The risk of the partnership is both parties insisted themselves too much causing their fights over the territories. But in this case, it is a full fledged partnering, but we always have a policy to take the better one to maximize the deliverable, and we have a total agreement on that point. One question regarding the impact on PL. When you agree something with AstraZeneca that will be an event triggering the milestone payment to you. And then how are you going to disclose such payment or impact on PL with us? Both companies released the information impact on PL be disclosed to us at the same time because in this term we only have 10,000,000,000 yen in. Going forward, the agreement in discussion would not necessarily lead to the impact on PL straightforwardly. We have a total development plans and we will make progress along with that. And we will have the development milestone triggered when we have achievements. And we talked about total plans and that will be indication to you. The rest is at what timing, when, what achievement is coming up. Of course these will be as per the total plans for development both together and then we will go along with that. Ai Nomura from Nikkei VP. I have two questions. You won the top share with Lixiana in Japan. It is doing well not only in Japan but also worldwide. I'd like to know your understanding of the factors that are contributing to the growth of shares in Lixiana in Japan and overseas. Recently, I believe you have enhanced the evidence and you are undergoing with different studies. Can you tell me if there are any points that are specifically important among the evidence you have obtained so far? First, in the product profile, it's once daily. We also have robust data for safety. Just recently, a certain person told me that since this is a kind of a drug that requires continuous dosage, it increases the risk dramatically if one forgets to take it. So a once a daily intake is very beneficial. A person who actually takes it told me that. This, we believe, is the best part of the product profile that has been well accepted by the patients. We pursue the same benefit in Japan and overseas. In addition to this, we are accumulating the data, including the real world data in the LCM. If we can identify how much efficacy it has in the real world clinical practice on what patient it is effective and how safe it is, we will accumulate more of those data to publish. If it's once daily, I think rivaroxaban is the same. But have you been able to obtain any new advantage over rivaroxaban or have you not? I think it has been compared against many others, including the safety profile. I have one more question regarding CAR T. You are currently conducting Phase II. Can you please tell me approximately when you started the study? Yes. I believe the administration started last year, if I remember correctly. And our CAR T is I don't know to what extent I can disclose the technical information. In any case, it has an advantage that the manufacturing period is very short, and our policy is to set up the manufacturing facilities in Japan as quickly as possible. However, CAR T has a lot of complicated issues such as drug pricing. Despite that, the clinical study has been ongoing as scheduled right now. And is it correct to assume that as soon as the Phase II study of CAR T is completed, you will go ahead and file for the application for approval? Yes. Do you know approximately when that will be if the data has been nearly confirmed? The current situation is very complicated, but hopefully we can file it sometime this year. But I'd like to refrain from giving you any clear answer about this. Other questions? Ebisawa from Nikan Yakutou. I have three questions in the General Shareholders Meeting in June. Mr. Nakayama will be stepping down from the position of the CEO. And what is the meaning of that? And until when would Mr. Nakayama keep the representative positions of the company demonstrating the leadership for the business? Well, growing the successors is one of the top most important jobs in the company and we've been talking with the people outside of the company. And we've decided so because this is going to be the good timing. And of course, this is the matter of the General Shareholders' Meeting. Therefore, I cannot say much about it. However, if I get reelected, of course, I would like to support the business. So the representative role would be taken away in June. Is that right? Well, nothing is decided. Well, it is yet to be decided and that will be disclosed sometime later at the time of the General Shareholders' Meeting. Right after the meeting, there will be the Board of Directors meeting where the decisions will be made. And next question is about MSL. You have 14 MSLs at the moment. Do you have a plan to increase the number of them? And how many of them will it be if that is the case? And what is the changes in the business environment which may want you to do so? Which part of the presentation are you looking at? MSL? Well, we are working on the oncology. Therefore, the medical affairs force will be strengthened. That's what we want to do. How many more? We do not disclose the number. Of course, we need to think about the balance between ML in number. We will think about that along with that. However, what is the scale of the missile force you're talking about? We do have a variety of discussions. Once we are ready, we would let you know. And third question is about Inavil. This year we had hot topics about direct resistance, but with regard to the direct resistance to Inavil, what is the characteristics of that? There is no direct resistance against Inavil reported. I'm Mizuno from Tokyo Marine Asset Management. I'm sorry to be so inquisitive about AT01. If an accelerated application has become available, I believe it means that you have resolved to resolve the issue of manufacturing capacity. In your discussion with AstraZeneca about what you are going to do next, have you reached the conclusion that the manufacturing capacity will not be your bottleneck? I'm sure you have discussed about the expansion of the facilities. Since you are getting a lot of money, do you ever consider things like accelerating the expansion? I'd like to speak from the technical and regulatory aspects. The manufacturing factors would include the materials such as antibodies, linkers and payloads. These materials are expanding continuously. However, according to the regulation, if any of the facilities was not listed in the initial application, we will need to explain and justify its comparability. And what method do we have to make an accelerated application and approval? Or are we going to implement it after we get the data that makes it available? We have been working on these strategies quite a bit. And the reason why we could accelerate it not only in The United States but also in Japan was because our strategy has become solid. Of course, we invest internally and we try to increase our options for external CMOs. And we will coordinate with AstraZeneca about the application date and the approval timing in our preparation, I think. Just want to confirm that if the first application for the approval in The United States is approved, all the CMC related matters will be applicable to the future indications. What FDA does recently is that they skip that part. And for an expanded indications, as long as the clinical data are good, it is very likely that the FDA review will be much faster. Or is it correct to say that that's what it is to be expected? Yes, that's a correct understanding. Even if it is in Europe or in The U. S, if you are adding a manufacturing facility, in that case, naturally, there might be a preliminary review, and you need to get an approval every time. Also, there was a part in your presentation that I couldn't follow about gastric cancer in The U. S. And Europe. Is the purpose of those studies to be able to file for application? Or is that because you need to conduct Phase II and Phase III anyways? It is to be able to file for application. I'm sorry, but I have one more question. Edoxaban in Europe is doing really well. But if oncology is growing so much internally in your company, it could be possibly a kind of fragmented business. Is it correct to assume that this will not be your noncore business? Or is it still possible to be noncore business in a certain case? Well, now in Europe, edoxaban has been making up entirely for the reduction in olmesartan quite well. Of course, we will aim to expand the oncology area. Edoxaban is an extremely important drug as a base. Until we lose the exclusivity, we'd like to deliver it to the patients as much as we can. Thank you. Are there any other questions? We have a little more time for questions. It seems that there are no further questions. That concludes today's financial results presentation. Thank you very much for your