Earnings Call: Q2 2018

Oct 31, 2017

Good afternoon. My name is Manabe. Thank you very much for your participation despite your busy schedule for our top management presentation of Daiichi Sankyo. At one p. M, we made announcement of the results of the second quarter FY twenty seventeen of its consolidated results. And based on the handouts today, I'd like to present the information. So this is the agenda today. I will cover the results of the second quarter FY twenty seventeen and revision of the consolidated result expectations for the fiscal year twenty fifteen and other main management update and shareholder returns. And after that, Doctor. Glenn Gormley, the Global Head of R and D, is going to give you the update of the R and D activities. After that, we will take questions from the floor. Let's start with the second quarter results of the FY twenty seventeen. This is the outline of the results. Consolidated revenue was JPY469.4 billion, up by 11,400,000,000.0 year on year or 2.5% increase. Cost of sales increased by JPY 9,800,000,000.0 year on year. SG and A expenses declined by JPY 1,700,000,000.0. R and D expenses will be explained later on, but it increased by 27,800,000,000.0 yen including special items. As a result, operating profit was 48,800,000,000.0 yen down by 24,500,000,000.0 yen year on year or 33.5% down. PBT was 51,200,000,000 down by 20,700,000,000.0 yen And profit attributable to owners of the company was 34,300,000,000.0 yen That was declined by 14,700,000,000.0 yen year on year or 30% decline. Actual ForEx exchange, yen 111.7 for $1 that was yen depreciation by 5.72 yen and 126.29 yen per euro, that was a yen depreciation of 8.7 yen And let me explain the factors of ups and downs year on year. Revenues increased by 11,400,000,000.0 yen year on year, and I will explain the breakdown as per the business units. First of all, Japanese businesses, Pharma, Vaccine, OTC, OMATIC, hypertension product reduced its revenue. However, anticoagulation product, Lexiana, made a good growth. Also Nexium and prior year, osteoporosis product with the additional indication of rheumatoid arthritis, those made increase of the sales. Daijisankyo Ezfa made increase of the revenue, mainly with the authorized generics such as Telmisartan, Omisartan, rosuvastatin. Daijisankyo Healthcare also increased the revenue. Japan as a whole made an increase of the revenue by 23,100,000,000 Let me talk about our overseas businesses. Those are the numbers excluding the impact by foreign exchanges. Daijisankyo Inc. In The U. S. Had the decline of the revenue of on Misaltan, Hypertension and Effient antiplatelet. Thus, we had a decline of the revenue by 30,400,000,000.0 yen Lutepold U. S. Had a growth of the iron deficiency anemia injector and generics injectables, thus, increase of the revenue by 7,900,000,000.0 yen Daijisanter Europe had a growth of Alexiana. However, due to the decline of Olmecaltan, it had a revenue decline by 1,200,000,000.0 yen And ASCA, Central South America and Asia had an increase of the revenue by 2,800,000,000.0 yen Incremental sales due to the ForEx was 9,200,000,000.0 yen as a whole. This slide shows reasons behind ups and downs of the operating profit. The revenue had incremental sales by JPY 11,400,000,000.0, including the JPY 9,200,000,000.0 increase by foreign exchange. Expenses excluding ForEx associated and special items are as follows: Cost of sales increased by 13,200,000,000.0 yen due to the cost ratio increase by the product mix change because of the OmeSouthan exclusivity losses SG and A increased by 900,000,000.0 yen and R and D expenses reduced by 4,600,000,000.0 yen The incremental cost increased by the foreign exchanges, factored by 8,300,000,000.0 yen including the cost of sales, 2,700,000,000.0 yen SG and A, 3,400,000,000.0 and R and D, 2,200,000,000.0 yen Special items had incremental cost of 18,100,000,000.0 yen as compared to the previous term, and details are explained in the next slide. Excluding the foreign exchange and the special items, we had virtually a decline of the profit by 7,300,000,000.0 yen These are the details of the special items. In the previous term, we put up 6,000,000,000 yen for restructuring cost for Europe, thus cost increased. This term, we had sales of the fixed asset. We had a decline of the cost by 6,100,000,000.0 yen But we put up 30,200,000,000.0 yen of the impairment losses of the intangible assets, thus 18,100,000,000.0 cost increase. Intangible assets impairment of 30,200,000,000.0 yen includes CL1080-one 108 return of the rights, which was at 27,800,000,000.0 Next, let me explain current profit. As already explained earlier, ForEx, other extraordinary factor impact adjusted operating profit decreased by JPY 24,500,000,000.0. In terms of financial income, expenses with improved ForEx gain and losses, financial expense is reduced by JPY 3,800,000,000.0. And as indicated in the chart on the right, tax rate remains about the same year on year. With profit before tax decrease, corporate tax came down by JPY 6,700,000,000.0. Further, incorporating noncontrolling interest, current profit attributed to the parent company is JPY 34,300,000,000.0, that is a decrease of JPY 14,700,000,000.0 year on year. This slide is showing major business unit revenue changes in Japanese yen. On Slide six, ForEx exclusive BU status was presented, but here, those are ForEx inclusive performance. Japan business is surely growing in revenue year on year, and Daiichi Sankyo Healthcare is performing well. Overseas, due to Oneside and Patent Cliff, U. S. Daichi Sankyo Inc. Posted lower revenues, but U. S. Lutefold business revenue greatly increased. Daishankyo Europe due to ForEx impact had a higher top line. So ASKA business encompassing Asia, South And Central America grew in top line. Next, revenue changes of major products in Japan. This fiscal year, as in the previous year, major products like Lixiana, Nexium, Pralia are performing well. On the other hand, many with the generic products' further market penetration, many long listed products are struggling year on year. Now let me explain our fiscal year twenty seventeen revision of consolidated forecast. Up to the second quarter of this fiscal year, excluding CL-one hundred and eight impairment loss, performance results are in line with our original forecast, and they are anticipated to remain so going forward. We are going to take all potential management efforts and try to expand top line and bottom line, reducing expenses. Yet we decided that it's difficult to offset all CL-one hundred eight impairment at present. Although at the level, we, therefore, decided to revise OP target to be 75,000,000,000 yen for this fiscal year. From here, I'm going to give major management updates, edoxaban first. On this slide, including edoxaban, changes in direct oral anticoagulant DOAC global market are presented. The bar graph indicate DOAC market size. In other words, DOAC products total annual sales. The line graph is showing the ratio of DOAC prescription in total of waffling and the DOAC prescriptions combined, indicating the progress of switch from warfarin to DOAC. DOAC market size has been expanding for the past five years, growing to be around 1,700,000,000,000.0 yen for one year period ending June. So as indicated by the graph, along with the market size expansion, switch from waffling is surely progressing. However, DOAC prescription ratio is still below 40%. On this side, I would like to make the same point. Showing time series of DOAC market in Japan and Germany using N denomination. In both countries, the market is expanding, making DOAC annual market size about the same level, around JPY140 billion. However, there is a notable difference in switch rate to DOAC from waffling between the two countries. In Germany, DOAC ratio is already over 60%, while it stays a little more than 30% in Japan, making us think that we still have market potential in Japan. Here, I'd like to show you the ups and downs of the sales shares over the quarters in the Japanese market for edoxaban. We sell this product with the name Lexiana. Its share has expanded steadily, and in the second quarter, it reached 23.5%. It is approaching to the top two products. This slide shows the prescription shares of Lexiana for new patients, unlike the sales share in the previous slide. These are the monthly shares. We believe it is important indicators leading for future expansion of the sales, and it occupies the top position since March, and it expanded to 38.6% as of September. Not just new patients, but I would like I believe we can be one for the shares of all patients, not just new patients. This is the situation of Germany, the largest drug market in Europe as well as Korea. In both countries, we have made a steady expansion of the sales shares over the months since the launch. As of August, it was 9.2% in Germany and 18.5% in Korea. This is the update of The U. S. Pain businesses. We made a press release in August. With regard to CL-eight thousand eight, we have decided to return all the rights back to Charleston Laboratories. We made a press release in June about myrogabalin. In the Phase III trial for five low myelojeta patients in Europe and U. S, we couldn't achieve the primary endpoint. We have those changes of the circumstances in house. Also, we are seeing the social and the political situation changes around opioid in the state. Going forward, we will stay prudently observing the situation, and we will carefully deploy the pain businesses with the Movantik, Morpho Bond and Roxibond, the three products to respond needs of the pain patients. And this shows the commitment of the pain care at Daiichi Sankyo Inc. In The States, opioid abuse is creating a big issue. Daiichi Sankyo understands both the benefit of the use of the opioid in the health care field in The U. S. As well as the associated risks so that we declare the contribution to the pain care. And this is the situation of the three products in the Pain businesses in The States. As for the Movantik, we try to improve the awareness of the opioid induced constipation. Thus, we can expand the revenue. In terms of the Morpho Bond, and that is the extended release Morphin with the abuse deterrent property, and it was launched this month. Roxibond has the abuse deterrent properties approved by the FDA, and it is immediate release opioid, and we plan to launch it in 2018. Mulfabond or Roxibond employ the technology so that it is difficult to adult read the tablets for misuse and abuse. We will prevent misuse and abuse and respond to the needs of the patients who require opioid. Update of the Japanese business next. With UCB Japan, we are co promoting anti epilepsy agent, Vimepad. In August, we received approval of additional monotherapy indication. And in September, prescription period restriction is lifted. On the next page, let me show you expected expansion of patient types, thanks to this additional indication. This graph shows estimated number of epilepsy patients, breaking them down based upon whether they are being treated or by age or by symptoms and drug therapy effect. Before, BIMPAD was prescribed to only to nonresponders to existent agents, and BIMPAD was prescribed as part of combination therapy based on the indication with this new additional monotherapy indication, partial onset seizure patients who are estimated to be about four hundred thousand in number will have access to the agent. In September, we launched CANALIA combo tablets. It is a combination between MTPC discovered and developed Type two diabetes mellitus drug, CANALIA and CANAGU. It is the first DPP-four inhibitor and SGLT2 inhibitor fixed dose combination approved in Japan. DPP-four inhibitor is prescribed in combination with SGLT2 inhibitor in ten percent of the cases. CANELIA combination tablets address such combination needs with expected benefits like a reduced number of tablets to be taken and improved dosing compliance for patients and health care professionals. As was the case for Tunnelia, it is marketed by Daichi Sankyo and co promoted with MTPC jointly. On this page, I would like to report on in house development status. Myogabalin could not, as mentioned earlier, achieve the primary endpoint in Western countries. However, in Japan and Asia, the postherpetic neuralgia as well as diabetic peripheral neuropathic pain patients were evaluated for the efficacy, comparing the weekly average pain score with the control group as Phase III studies, and these attained the primary endpoint. Also, Ezexia women, CS-three thousand one hundred fifty antihypertensive efficacy was evaluated in Japan Phase III studies for its known inferiority of eprelinone in essential hypertensive patient population and achieved the primary endpoint. And NDA submissions for both are planned in the fourth quarter of this fiscal year. If things work out well, they will contribute to future Japan business expansion. Next, shareholder returns. In current midterm business plan, total return ratio of 100% or more, annual dividend amount of JPY 70 or more and the flexible acquisition of own shares are clearly stated as our shareholder return policies. Pursuant to the policies today, we announced our share acquisitions. The program will start tomorrow as of November 1 and complete by March 2338, with aggressive amount of acquisition cost up to JPY 50,000,000,000. This is the end of my presentation. Next, R and D updates are presented by our R and D Head, Mr. Glenn Gormley. Glenn, please. Thank you, Madhavi san. My name is Glenn Gormley, and I'm the Global Head of Research and Development at Daiichi Sankyo. Today, I'd like to provide you with an update on our research and development activities, which we continue which continue to provide an important growth engine for the company. Here's the agenda for today. I would like to start by highlighting our efforts to continuously improve the focus and the efficiency of the R and D unit. I'll then provide an update on several oncology programs, including our two most advanced antibody drug conjugate projects, DS-eight 201 and U3-four thousand two two, followed by a description of two new collaborations we've recently announced. I will then update you on the progress of esaxerenone, our newest drug for hypertension. And I'll conclude with a brief update on several major milestone events that we're looking forward to and let you know about our plans for our next R and D Day in December. As our R and D pipeline has continued to expand, it's important that we stay focused on the most important projects that we believe have the potential to change the standard of care and provide significant benefits to patients. We also need to do this as efficiently as possible. To do this, we are using a three step process. The first step is to carefully prioritize our projects to ensure we identify those that can have the biggest impact for patients. The second step is to selectively increase our investment in oncology, especially in the antibody drug conjugate and AML franchises. This will require that we reduce our investment in our CVM and other areas, continuing only the most important projects. We will also need to decrease our operational costs to allow more of our resources to go directly to projects. The third step is to accelerate our clinical programs as much as possible using the focused investments. One consequence of this strategy is the need to outlicense projects that do not align with our priorities. A recent example of this is our decision to outlicense DS-five thousand and ten, a selective RET inhibitor. And I expect there will be other examples, including DS-six thousand and fifty one, the NTRK ROS1 inhibitor and DS-two thousand nine hundred sixty nine, a gyrase inhibitor for the treatment of Clostridium difficile infection. These are difficult decisions to make, but we must remain focused on our strategy to ensure that we can apply all the necessary resources to our top priorities. I would like to now provide you with an update on the two most important antibody drug conjugate projects. DS-eight 201, which uses a HERD2 antibody and U3-fourteen oh two, which uses the HERD3 antibody, putridamab. Both antibodies are combined with the same linker and payload, which creates a unique platform technology that we anticipate will provide a significant competitive advantage in the field of antibody drug conjugates. The Phase I study for DS-eight 201 consisted of two parts. Part I was the dose escalation phase and Part II was the dose expansion phase, which consisted of four groups of patients. At the twenty seventeen ASCO meeting in Chicago, we presented the results of Part one and the first three groups in Part two, which focused on patients with breast and gastric cancer. These are referred to as Part 2a, 2b and 2c on the right side of this slide. At the recent ESMO conference in Madrid, we presented for the first time the results of Part 2d, which looked at dose expansion in HER2 expressing solid tumors other than breast and gastric cancer. At the time of the analysis, Part 2d of the dose expansion study for DS-eight thousand two hundred and one consisted of 25 patients with a mean age of 60 and a median number of prior treatments of three, although there was a wide range from zero to 10. Eleven patients had colorectal cancer, six had non small cell lung cancer, four had salivary cancer and the remaining four patients consisted of Paget's disease, cholangiocarcinoma and esophageal cancer. For Part 2d, the overall objective response rate was 31.8, with the best response seen in patients with salivary cancer. The disease control rate was eighty one point eight percent, with slightly less efficacy observed in the patients with non small cell lung cancer. A note at the bottom of the table indicates that three of the twenty five patients did not have sufficient information be evaluated for response. This waterfall plot shows the maximum percent change from baseline for the patients in Part two d. The color of the bars indicates the degree of HER2 expression in the tumor by immunohistochemistry. With the blue bars indicating the highest level of expression, green bars indicating an intermediate level of expression, and orange bars indicating no detectable expression. The symbol above the bars indicates the patients who are continuing on treatment. As you see, tumor shrinkage was observed in most of the patients. And the two patients on the far left side of the chart with some increase in tumor size had no detectable HER2 expression in the tumor. Here's an example of one of the patients who responded well to treatment. This is a 59 year old male with colorectal cancer and significant liver metastasis, indicated by the red arrows on the left. He had a high expression of HER2 by immunohistochemistry and was treated with six point four milligrams per kilo of DS-eight thousand two hundred and one. On day one hundred seventy '5, after eight cycles of treatment, the image on the right indicates a substantial reduction in the size of the liver metastasis. He was judged to have a partial response to treatment, but clearly, it was a remarkable change. Next, I'd like to summarize the safety profile for this Phase I study. For this analysis, we've included all 168 treated patients from Part I and from Part II. In this table, we summarize all adverse events on treatment of any grade that occurred in more than twenty percent of patients. We observed that while many patients experienced Grade one adverse events, There were fewer Grade two or Grade three adverse events and a low incidence of Grade four events, shown in the yellow shaded column. There was no dose limiting toxicity observed in the study. Based on our analysis of Part 2d of this Phase I study, we can conclude that DS-eight thousand two hundred and one was well tolerated and the maximum tolerated dose was not reached during dose escalation. The overall response rate was about thirty two percent, and the disease control rate was about eighty two percent. Most of the patients treated had tumor shrinkage and experienced an acceptable safety profile. The most important conclusion from these interim results is that further investigation of DS-eight 201 in HER2 positive expressing solid tumors beyond breast and gastric cancer is possible. DS-eight 201 is our highest priority project. And based on this, we are executing an aggressive development plan to fully explore the potential of this therapy. We have two Phase II pivotal studies ongoing: one in patients with breast cancer who have failed treatment with TDM-one and one in patients with gastric cancer who have failed treatment with Herceptin. These studies are tracking for a 2020 submission. We were very happy to hear that DS-eight thousand two hundred one received breakthrough therapy designation from the FDA in late August for the breast cancer indication. Breakthrough therapy designation is designed to expedite the development and review of medicines in order to ensure that patients have access to new treatments as soon as possible. We also have three studies planned to start in the second half of this year. One, in patients with HER2 positive breast or bladder cancer in combination with the BMS PD-one inhibitor nivolumab another in patients with breast cancer who have a low expression of HERG2 on their cancer and a third in patients with HERG2 positive non small cell lung cancer or colorectal cancer. And finally, we're planning to explore the treatment of patients with HER2 positive breast cancer at earlier times in their care. I expect that any submission for these indications would be beyond 2021. U3-fourteen oh two is also one of our highest priority projects. This antibody drug conjugate is based on our own HERD3 antibody, putridamab, developed at U3 Pharma and is combined with the same linker and payload used in DS-eight 201. We have a Phase I study ongoing in patients with HERG3 positive refractory or metastatic breast cancer, and we anticipate presenting the results in 2018. The Phase II study should start in the 2018 with top line results anticipated in the 2018. We also have plans for a Phase I study in patients with EGFR mutated non small cell lung cancer, and recruitment should begin later this year. Now I would like to highlight a new project that is about to enter the clinic with a unique mechanism of action. DS-twelve oh five is an inhibitor of the transmembrane protein known as Axl. Axl is a tyrosine kinase, and upregulation of Axl is associated with a poor prognosis in several cancers. It appears that upregulation of Axle is one of the bypass mechanisms that leads to EGFR resistance in EGFR mutated non small cell lung cancer. DS-twelve oh five is an orally available, potent and selective small molecule inhibitor of Axle tyrosine kinase. I'd like to share with you some interesting data presented at ESMO in September that we believe supports the start of a Phase I clinical trial later this year. This is an animal pharmacology study. A mouse xenograft model demonstrates that single agent treatment with DS-twelve oh five, shown in the blue lines, has no effect on tumor growth. The model also shows that osmertonib is effective in suppressing tumor growth, shown in the red line, but resistance develops after about forty days of treatment. When DS-twelve oh five is combined with osmertonib, shown in the pink lines, the combined treatment significantly delays the onset of resistance and tumor growth continues to be suppressed. Our goal is to replicate this effect in a clinical study that will start later this year. We continue to establish new collaborations to support our antibody drug conjugate and AML franchises. I would like to briefly describe two recently announced collaborations: one with Glycotope based in Germany and one with the MD Anderson Cancer Center based in Houston, Texas. We are committed to establish partnerships that will allow us to apply our antibody drug technology to new antibodies and new targets. A good example of this is our new partnership with Glycotope to combine their antibody, Pancomab GEX, with our linker and payload technology. PancomabGeX is a humanized monoclonal antibody that binds to the tumor specific epitope of mucin-one, which is highly expressed in ovarian, lung and breast cancers, enabling it to differentiate between tumor Mucin-one and nontumor Mucin-one epitopes. We've also established an important collaboration with the MD Anderson Cancer Center. MD Anderson is one of the largest integrated academic centers in The United States, specializing in the treatment of patients with leukemia. The goal of our collaboration is to accelerate the development of novel therapies for AML. This will be accomplished by conducting many preclinical Phase I and Phase II trials using our portfolio of compounds plus other compounds from outside Daiichi Sankyo. The collaboration will also allow us to explore the development of novel biomarkers in AML. Here's how the collaboration with MD Anderson will work. Daiichi Sankia will contribute several compounds, including quasartanib, our FLT3 inhibitor DS-three thousand and thirty two, our MDM2 inhibitor DS-three thousand two hundred and one, our EZH dual inhibitor and PLX-fifty one thousand one hundred and seven, our bromodomain inhibitor. MD Anderson will test these compounds in various combinations, including combinations with compounds from outside Daiichi Sankyo. If these combinations show potential in early clinical studies, the programs will transfer back to us for testing in appropriate pivotal registration trials. This approach takes advantage of the strengths of both of our organizations to greatly accelerate the development process. The real winners will be the patients who need new treatment options as quickly as possible. I hope you can see that we're making every effort to accelerate the development of our pipeline in a focused and efficient way. We're looking forward to the San Antonio Breast Cancer Symposium in December, where we plan to release more data on DS-eight thousand two hundred and one, including use in patients with low expression of HER2. We're also looking forward to the American Society of Hematology meeting, where we plan to release Phase I data on DS-three thousand two hundred and one, the EZH dual inhibitor in patients with non Hodgkin's lymphoma. I would like to briefly update you on an important project outside of oncology. This is esaxerenone, our mineralocorticoid receptor antagonist, being developed for the treatment of hypertension and diabetic nephropathy. It is well established that activation of the mineralocorticoid receptor by aldosterone or other aldosterone independent pathways leads to the development of high blood pressure. This is the basis for the successful development of angiotensin receptor blockers like olmesartan. And in patients with Type two diabetes, activation of the mineralocorticoid receptor can cause damage to the kidney, leading to the progression of diabetic nephropathy. For the development of vsacserinone in the treatment of hypertension, we have now completed the Phase III pivotal study evaluating efficacy and safety compared to oplerenone. And as Menavysan has already mentioned, on September 25, we reported that the top line results indicate that the primary endpoint was achieved. And we expect the detailed study results will be disclosed at a future scientific meeting. Based on the top line results, we are planning for an NDA submission in Japan in the 2017. For the treatment of diabetic nephropathy, our Phase III study is now underway, and we'll update you as the study progresses. On the next two slides, we've summarized the major R and D milestone events for fiscal year twenty seventeen. New updates are shown in red, and those that are underlined have already been achieved. And in the interest of time, I will only highlight the new events that I've not already covered today. At the top of the page, you see that the top line results for the TGCT Phase III study with pexidartinib was delayed by one quarter, and the outcome was released earlier today. At the bottom of the page, you see that we've initiated the Phase I study with PLX 2853 in advanced refractory solid tumors and non Hodgkin's lymphoma. And at the top of this page, you see that we're planning for an NDA submission for miragabalin here in Japan in the fourth quarter of this year for the treatment of peripheral neuropathic pain. And finally, we'd like to let you know that we are planning to hold R and D Day on December 13 here at corporate headquarters. On that day, I will be joined by Doctor. Antoine Iver, the Global Head of Oncology R and D. We plan to give you an extensive update on our progress and plans to deliver the oncology portfolio. And we look forward to seeing you again on that important day. Thank you. My name is Ayamaguchi from Citi. First question is about U. S. Paying franchise. As you said, you're going to observe them carefully going forward. And including those in licensed product, as you said earlier, that will be a local franchise in The States. But including the in licensed product, do you have a plan to expand the business over there? Apparently, it is not going to be according to the word carefully. As I said today, CL-one 108 has been returned back And myrogabalin Phase II data was not positive. It was negative against our expectations. In the midterm business plan, we say that U. S. Paying franchise will be 100,000,000,000 yen in 2020. However, apparently, it is going to be difficult according to the current situation. And The U. S. Opioid situation is surrounded by very tough situations, including the political and medical care constraints. Of course, we'd like to make it going forward. However, including those three items, U. S. Members today to start discussions to reconstruct strategy. And we have internal discussions. And when the strategy is clear, we will let you know. The other question is about CS 3,150, this local development at the moment. And what is the positioning of this product in your company? Of course, comparator product is not commercially successful. However, that product is greater than the hypotensive franchise product, including ARB. But are you going to develop that to aim for large product for the Japanese market? And please tell us the positioning of the product managing today's development situation. We are going to enter into the market with indication for hypertension, and we do not expect big sales for that. However, after that, we will have the diabetic nephropathy. If that is approved, we have high expectations. For the time being, we will mainly push this forward for the Japanese market. We have no specific plans for the, overseas market. Thank you for the question. Daiwa Research Institute, my name is Hashiguchi. I have some questions regarding ADC franchise. Recently, the company announced two alliances, BMS and Glycotope. When we think about opportunities, it is likely that there are other potential opportunities. The timing is dependent on the potential partner to some extent. But from your perspective, what are the second highest priority ADC opportunities? Especially, what is the priority? So of course, our highest priority is to develop our in house, antibody drug conjugate portfolio. So I've highlighted DS-eight 201 and U3-fourteen oh two. Those are the highest priority. We also have several in house antibodies that can be combined with the same linker and the same payload and will represent an in house portfolio of ADCs. We also recognize that there are other antibodies owned, developed by other companies, Glycotope as an example. And we are carefully looking and discussing with companies. We can't discuss all of those conversations today to look for the most attractive ones. There are also combinations with ADC that will be very attractive and nivolumab is just the first of those that we've been able to announce. And then as we develop further into the years, we have ideas within our lab to develop different linkers, different payloads, other ways for us to maintain a very strong leadership position in antibody drug conjugates. Our goal is to be the global leader. My second question, that's about 8201 development plan. So slide up, Page 44. Is this really newly confirmed facts or just what you have already covered before? On the page lower down compared to Page 57, there is additional information on the page. And on the page, it sounds like it has just started. How reflective is your information on that page of current status? So our strategy to optimize 08/2001, our highest priority, has been evolving constantly as our scientists have been looking at ways to use it. As we indicated, the breast and the gastric cancer studies are the most important. They are the most advanced. But now you see on this slide, the first study combining it with a PD-one inhibitor, so a combination therapy. We also believe that our drug, because of its superior attributes, will be effective in patients with lower HER2 expression, where other antibody drug conjugates have not been able to demonstrate benefit in low expression. And so we're testing that now. And then you see we're going to expand into areas beyond breast and gastric cancer. And so all of this is going on in parallel. Some things are ahead and some things are in planning. Some have just started. So when you heard our description just a short time ago and now you hear it today, that's a great example of how fast we're moving to optimize this asset. And we will give you more update at the R and D Day so that you have a full picture of where we're going. Lastly, about own share acquisition. Originally, the company indicated total return ratio of 100% or more. By now, it progressed very, very rapidly given the target. The program was only moved up or concerning cash flow or cash position or forecast of cash flow. Can the program go beyond the stated targets? Please tell us what seems likely at present. So we have announced total return ratio of 100% or more. As you pointed out, we have been implementing the program with speed. However, at the end of five years, attaining defined target is the target so that we have moved very quickly. Therefore, it is while it's not final, it is potentially possible that we slow down toward the end of the five years' period. Therefore, we would like to buy our own shares back when our share price dips lower than assumption. There are just limited occasions when no insider information is around to buyback. So we would like to move cautiously. Thank you for the question. My name is Mochizuki from Monthly Mix. With regard to this result, you had increase of the revenue but a decline of the profit. How do you take it? That's question one. And second question is that for the Japanese pharmaceutical businesses, including AG, SVA business growth is contributing to your results. And what is your thinking about future AG businesses? We had an increase of the sales turnover, as I said. And expenses making progress according to the plans. Therefore, impairment losses are impacting operating profit directly. And we said JPY100 billion rationally, but it is lower by as much as the impairment losses amount. However, we've had revenue as planned and expenses growing as planned as well. Therefore, the variance is only by as much as the impairment losses. That is our understanding. Therefore, things are going according to the plans. As for the AG, ESBA has taken a licensed product from other companies. In terms of the contribution to the medical cares, out of the patients out there, quite a few still have the resistance to the use of the generics. And I want them to start using the eGi product. Therefore, ESA is making efforts for that for sales. And we've had a high level of the market shares because we had early entrance into the market. For the time being, eGi will be the main products of ESAFA. However, I would not expect the big AG product to continue going forward. Therefore, we need to revisit our strategy sometime. So you're going to strengthen the pipeline, including the AGs from other companies going forward, is that right? If there are possibilities, of course, would you think so? Another question. In terms of the paying businesses, actually, that is causing the impairment losses against your expectations. It is not going according to the plans. However, do you have businesses which would complement the problems here specifically? And we've made those midterm business plans and the results. And of course, there are things going well. There are things which are not. U. S. Businesses of the paying franchise not going well, but Japanese business is going very well. Edoxaban, Lexiana are growing more than our expectations. Leutopold in The U. S, including Ejecta Phar, showing very good growth, more than our expectations. Therefore, including all that, we'd like to try to cover the shortcomings of the Pain franchise in The U. S. And of course, we have internal discussions today as to how we can do about our Pain businesses with those free products. UBS, my name is Seki. I have three questions. So about the company lowered its OP guidance to 75,000,000,000 yen in the midterm business plan, there was a mention of 100,000,000,000 yen Correct me if I'm wrong, but in past guidance, there was a chart showing that OP would stay above JPY 100,000,000,000. This time, the message is that due to impairment losses, OP happened to go below JPY 100,000,000,000? Or is it possible to keep seeing OP figures below 100,000,000,000 yen As you pointed out, at times, we voiced our wish to maintain 100,000,000,000 yen figure as much as possible. This time, the performance was better than expected. And there are no expense issues either. The downside of OP is due to impairment losses. So when you look at your numbers, we couldn't quite attain JPY100 billion figure, but we are on track. And going forward, we would like to stay in line with our mid term business plan peers and make efforts to the end. Having said that, though, we are we have to take risks in our R and D activities so that there are always uncertainties. On the other hand, there are ways to offset, offsetting fluctuations. Well, we would like to be courageous when possible. I would like to ask a question to Mr. Gong Li next. So let me ask the question in English. I understand the definition of Hatsu positivity in non small cell lung cancer or colorectal cancer is not well established. So I'm wondering how you are going to define the positivity for the HAR2 in this patient population. And also, how percent of patients will be addressable by AT-two zero one in NSCC or CRC? Thank you. So we recognized several years ago that as we were moving rapidly into these very complex questions in oncology, we were going to need to focus on biomarker development. We recruited a world expert in biomarkers, who joined us from Novartis and has been very rapidly helping us establish those approaches. You're correct. There is some question about how much expression there is, but we believe we can detect it. We believe we'll be able to demonstrate, or separate patients based on that. We haven't disclosed all of that, but it's work in progress, but it will be the key to success. And it is important to recognize that, that biomarker strategy goes hand in hand with what we think will be the success in oncology throughout pharma, and we plan to be a leader there as well. Do you have a rough number for the how many patients would benefit from 8,201, like half or for the NSCLC? No, no, not at this time. We'll know once we get those clinical studies done. Hopefully, we can answer it with the data. Lastly, third question, it is a kind of tough question regarding a mass media report at the August. The company immediately issued a press release and denied it. As your company's management principle in implementing the principle, do you think that Adaichi Sankyo needs to stay independent company? We need to think about maximum value or best for our shareholders and stakeholders. Thus, if it is a good proposition for our shareholders, it must be considered. Thank you. You for the question. Ebisawa from Nika Yakudlo. I have a question to, Doctor. Manabe. You said that you want to make Lexiana number one in Japan. And when would you like to achieve it to try to get share number one? And in Germany, your progress is 60%, whereas in Japan 30%. That means you still have a potential going forward. At the moment, Alexiana in the Japanese market made 39,000,000,000 yen sales. And if that is going to be 60% of the progress, that means we can expect a 70,000,000,000 or 80,000,000,000 yen level. What is the potential going forward? For the first question, we want to achieve the number one position as early as we can. And as I said today, the growth amongst new patients are the greatest. Therefore, we have the strategy to do so, and that is functioning well now. And we have an internal target of when to achieve the one. However, we do not disclose that. For instance, the time of the Tokyo Olympics Games, that will make a good target. But when we have more specifics, we can explain. In terms of the switchover from RAFARINE, it is not just Daiichi Sankyo's issue. It is the common issue across all DOAC. We need to raise awareness of the DOAC's superiority to RAFARINE. And for that purpose, we are accumulating real world data in many ways. And once we get more data as such, it will say it is much better than WAFARINE, and it will let people use in many ways. I do not expect the Japanese situation to be like Germany very soon, but we'd like to gain 10% plus for some time soon. And in terms of the therapy, CART company acquired by Gilead gained approval, and DS is going to make sales of that in Japan. But what is the situation of the development? When can you launch it? We have obtained the approval by The U. S. Already, and we are going to start clinical trials for Japan next year. And we do not share with you the ideas, including launches, but we can say we are starting the clinical trials right next year. Starting from the Phase I, yes, we need to because we do have to get the Japanese data. Once that is launched, where are you going to manufacture? At the time of the clinical trials and clinical research programs, it will be manufactured overseas. However, if things go successfully and we can make sales in Japan, we can bring the manufacturing sites to Japan, but we have no specifics. Thank you very much. REPRESENTATIVE:] So my name is Morocco from Morgan Stanley. About treasury share buybacks, at the completion of the program this time, the company ends up owning more than 10% plus on shares outstanding. What is your company's idea about share cancellation? That is controversial. Our CFO, Mr. Hirokawa, would answer to the question. The scale of buybacks stay at the same level as last year's. There are caps in both total amount and number of shares to be acquired. And the upper limit number of shares is 28,000,000, but usually, we find it unlikely to reach that share count. So the pricing should be below 1,800 or so, so that the estimated number of the shares to be acquired is about 20,000,000 shares or so, the average of past years. And then the ratio held by the company is about 10% at the level with, I think, cancellation of shares is still unnecessary. Should in other words, should there be any cancellation that these after the next round of buybacks? That's right. And another question is about A201 pivotal study design. So on Page sixty three and sixty four, I could be mistaken in my interpretation, but the primary endpoint is stated to be ORR. Is that aligned with the authorities by and large, making that ORR? So that's correct. So the overall response rate is the primary endpoint as we indicated on the slide. We are in constant discussion with the authorities to ensure that we have alignment. We can't really discuss the outcome of the discussions with the authorities, but we're confident that the development program that we have is exciting to the health authorities as well as to the investigators and the patients. And the plan that you see is the one we're going to execute. We think we'll be very successful with that. You. Thank you for the question. Hasegawa from Iyakutai Zaisha. You mentioned with myrogabalin, it is going to be difficult for 100,000,000,000 yen You said that. And do you have an idea to revise your midterm business plans for that? After we announced the midterm business plans, we found that there are things which are going according to the plans and those which are not in the different regions and products. We are seeing risks as well. And internally, we are consistently revisiting the risks or gaps that are identified. Specifically, the paying businesses in The U. S, we have a tough situation, so we have an ongoing discussion. When we think that it is necessary to announce as change of the midterm business plans will be put, but at the moment, we are under discussion. I have a question about Generics businesses. You postponed a listing of the results on the other day. I want to know why. SFA allocates a lot of resources for AG. Would that cause overcapacity situations? Is there a possibility like that? I do not think so. It is not the case in my understanding. Thank you. Tokyo Marine Asset Management, my name is Mizuno. Regarding U. S. Pain business. The company's pain business has become essentially opioid business in The United States. In the presentation, various difficult elements surrounding opioid business were discussed. Let me check with you. There was something I didn't quite understand in the presentation. At the moment, without any final decision, you might review your business from now on? You just continue to the business on a cruising pace? Or you are going to try to develop up your business with a strong resolve to do the business? So the environment surrounding opioid business is becoming harder and harder, as you must be aware. This time, we launched Multipond and OxyBond. They are abuse deterrent formulations. So we can make a contribution to the society, we think. At the moment, those non abuse deterrent formulations are easier to be abused so that the government is looking into the direction. But even with the increase of the demand, the abuse deterrent formulation can be manipulated. And over time, it might be abused. Therefore, at the moment, we think our initiatives are valuable, and we keep selling those two products. But looking at the situation, we might have to make different decisions. In other words, rather than pursuing commercial success, you are fulfilling corporate social responsibilities. Is that the idea? If my memory serves me correctly, naloxone was developed by Sankyo. So on the other hand, like the product, could you potentially develop a franchise that can resolve opioid issues? Opioid switching is taking place in Japan, and our products are recommended in palliative care congress, and we are proud that we are making significant contribution to the society. It's well controlled in Japan, so it's not abuse. Because of that, we can make contribution. However, U. S. Market is different. So of course, abuse deterrent formulations are necessary, but even prescriptions are hard to control and situation is tough. And if there is any additional comment from Mr. Gong Li, I pass it to you. So as you know, the toughest environment with opioids is in The United States. And there's a significant concern by the FDA and many others that there's too much abuse going on with the existing formulations. I was at a meeting two months ago with the Commissioner of the FDA, Scott Gottlieb, and he met with heads of R and D and CEOs of companies. And his strong message was that they want to encourage companies to produce abuse deterrent formulations. That they see that as one of the pivotal arms for getting the crisis under control. And Doctor. Gottlieb was very clear that companies that are willing to invest in abuse deterrent approaches would be well received. It isn't the full solution, as Manabe san said, you can still potentially abuse, but it decreases it a lot. What is really under pressure are the non abuse deterrent immediate release opioids. And that is not what we're focusing on in The U. S. Specifically. Our strategy is to stay with abuse deterrent where the FDA wants to work with us. Thank you. If I may, I would like to add one thing. As stated in The United States, there are strong wind against opioid. However, real patients' needs are there at the same time. The government, as Mr. Gong Li commented, there are expectations of our contributions we can make. So we launched these two products in the marketplace and see what kind of contributions are possible. However, considering difficult environment overall, we want to make cautious decisions. Sakai from Credit Suisse. I have two questions. One is about sales force in Japan. It has been a while since merger of your company that you still maintain a certain number of the MRs since then. But according to the report these days, I wonder if you could ensure to get the returns worth that number of MRs. And especially next year, integrated community care system is going to be introduced. That means role of the general MRs will be big, and it will be a good opportunity for you to raise the presence of the SMR. Next June was successful for Japan, and you can try to take the opportunity. And I think you need it. Of course, I don't know if that model can sustain in the Japanese market. We do not have a pricing system going forward, And we have a 2HQ discussion, too. But what do you think about it? At the moment, we have 2,200 medical reps at Daiichi Sankyo. As you know, we have so many product families to sell. Therefore, MRs are required of high quality. Number of the details per person is number one. We are proud of that. We have a very good assessment from outside as well. We have a good cycle at the moment. We enjoy a good evaluation of MRs from outside. We say that we continue to have 2200mls in this midterm business period to manage the Japanese businesses. However, the promotion method will change, as we said. And at the moment, we are studying up the medical affairs department. Going forward, we would like to strike the balance between the two to make it successful. And for the Community Care initiatives, we are going to allocate the people who have the role of the area promotion. There are some unclear situation in some areas, but at the moment, we will we are confident that we have a good capacity, and we will observe the changes going forward. This may be a question or maybe a comment. And you said that you are going to have the R and D on the December 13, and half of the R and D spending is allocated for oncology programs, and you have a policy to increase that. But we are puzzled from outside because nowadays, development model of the new pharmaceutical products are changing today. And we had a similar discussion elsewhere today, but it is going to be extremely important to ensure the payback of the R and D spending earlier. And that is the case for Japanese and Western companies. And on D Day, I would like to know how much efforts you want to make for oncology, how much you will need, what is the return program? It's not just launch day of DSAD01 in 2020. I want you to give us the strategic positioning of that. Of course, if this is a project update, we have the information today. So today, on the slide that you see on the screen, I highlighted the overall shift in strategy that will lead to an increased focus in oncology. It will require that we decrease our investment in some of the other areas and it also focuses on decreasing operating expenses to improve our efficiency. We have, within R and D, been working very hard to develop a long term strategy, exactly the question that you're asking. And it's our goal, on R and D Day on December 13 to outline how we plan to execute this shift in resources, how we will convert the strategy into an operational plan. And Doctor. Antoine Ver will cover part of that. I'll cover part of that. I think it will go a long way to answering your question. I hope he'll be there on the thirteenth. Yes. I'll be there. Okay. I can yeah. Looking forward to it. Thank you. Daiwa SB Investment. My name is Cho. Regarding buybacks, according to earlier explanations, the company was partly motivated to buy own shares back because you consider the price is too low. However, did you analyze why your share price is discounted? Without eliminating the root cause, technical buybacks do not provide fundamental solution. If your analysis revealed potential discount factors, I am interested. Well, we wish we could provide such a quick analysis, but it's kind of tough to do. External assessment are rather divided as well. As for products, for example, if A201 is highly appreciated, the evaluation tends to be high. But if it has not been factored in yet, the evaluation is very low. That is the source of difference. We just have to proceed on our current projects. And with transparency, we need to keep communicating the results. That's the best scenario. We continue to do that. Is that okay? Thank you for your time. This conclude today's session. Thank you for your