Investor Day 2025

Mar 25, 2025

Slides

Summary

Remediation focuses on stronger quality oversight, frontline culture and measurable manufacturing KPIs. R&D and IP capabilities support first-to-market launches into an estimated JPY 1.8tn residual small-molecule market through 2030.

Thank you very much for joining us today at Sawai Group Holdings IR Day 2025. I'd like to introduce the seven attendees here today. Mitsuo Sawai, Representative Director, Chairman and President. Shoji Yokota, Director, Senior Managing Executive Officer and Group Chief Research and Development Officer. Masatoshi Ohara, External Director. Naomi Todo, External Director, participating remotely today. Masayuki Mitsuka, External Director. Motohiko Kimura, Senior Managing Executive Officer, Representative Director and President of Sawai Pharmaceutical. Taku Nakaoka, Senior Executive Officer in charge of Group Finance Department. I'd like to hand it over to our President, Mr. Kimura. Thank you for the introduction. I am Kimura, President of Sawai Pharmaceutical. In the first session, I will explain the progress on recurrence prevention measures and board monitoring. Let me explain from the presentation slides. Page 5 is about background of the incident and administrative guidance. This shows the background of the incident along a timeline. It all started around 2010. At that time, a stability test to verify dissolution properties resulted in an out-of-specification, OOS, result. In 2013, another OOS result was found in a dissolution stability study. However, once again, the issue was not properly addressed. Due to insufficient communication, improper handling gradually became routine around 2017. The incident was discovered in May 2023 while changing the person in charge based on the job rotation system. The newly appointed person reported that inappropriate processing was being carried out. Following an internal investigation by a special committee on December 22, 2013, the Ministry of Health, Labour and Welfare, along with Osaka and Fukuoka prefectures, issued a business improvement order. Since then, to this day, the entire company has implemented measures to prevent recurrence. Next, on page 8 is a summary of our efforts to make improvements. Four major initiatives have been undertaken. The first is the corporate culture reform project, which is under my direct supervision. Second, we have reevaluated Teprenone and other existing products in terms of manufacturing and quality, and we are currently implementing the necessary measures. Third, as a result of the administrative action taken by the Osaka Prefectural Government, we reviewed and strengthened the structure of the reliability assurance division at our head office. The manufacturing division has been implementing the various initiatives described here at the Kyushu plant and the manufacturing division as a whole. The next page shows the measures we are taking to ensure that we strengthen our corporate governance. As you can see here, from the left, there is the board of directors of Sawai Group Holdings. In the middle is the board of directors of Sawai Pharmaceutical. Below that is the Group Compliance Committee, and on the far right is the monthly meeting to report to the president. First, at the monthly president's meeting, which is held on the far right, I, as president, and the chairman also attend. The three officers, the general marketing supervisor, quality assurance manager, and safety control management, give detailed reports on the previous month's activities. We have also invited the auditors to attend this meeting and have set up a system to ensure checks and balances. After the president's report meeting, I and the person in charge of quality also attend the board of directors meeting at Sawai Pharmaceutical and give a thorough report. Then there is the Group Compliance Committee. In the past, reports were given quarterly, but we now hold meetings every month, and thorough reports are given here, including GMP cases. At the same time, the committee includes an external lawyer who is an expert in GMP, and we receive advice on whether our judgments are correct. In order to ensure that there is a system of checks and balance between Sawai Pharmaceutical and the holdings, we have strengthened governance by having me or the person in charge of quality assurance regularly report to the board of directors of the holdings. We have been doing this, and the Iizuka factory has received a renewal of its manufacturing license in February. As for manufacturing and sales, we are in the final stage of receiving a manufacturing and sales license by the end of March. This concludes my brief explanation. I'd now like to open the floor to questions, but first, I'd like to start with the questions we've received in advance. There are three of them in total. The first question: After the inappropriate testing was discovered, at what point did you get informed about it, and what went through your mind at the time? What role did the external directors play in the subsequent process, including formulating measures to prevent recurrence, strengthening monitoring, working with the third-party committee, and pursuing the management's responsibility? Director Ohara will answer the question. Thank you. I am Ohara, and I have been serving as an external director. We have caused great concern to our shareholders and investors with this matter. In order to explain today, I have investigated the past background and facts. As President Kimura explained earlier, this matter was discovered in May. The initial report to the board of directors stated that it occurred on May 11th. But at that stage, we were told that a more thorough investigation would be carried out, and a further report would be submitted. Subsequently, the board of directors met on May 22nd and June 27th, but there was no report on this investigation at the May 22nd meeting. The reason for this was that the quality assessment needed to be carried out first in order to determine whether or not the product should be recalled, and as this work was not completed until June 19th, it was not possible to report on it by May 22nd. From June onwards, the then director in charge reported on the background to the matter on June 27th, and a special committee was established. Since then, the board of directors has held discussions and reported on the matter at each meeting. In addition, and this may be related to measures to prevent a recurrence, we, including the external directors and outside auditors, visited the second Kyushu plant on February 26th this year to check the status of quality assurance and quality control. Also, as President Kimura explained earlier, the Group Compliance Committee, which is mentioned on page 9, holds a meeting every month, and as an external director, I have access to the minutes of these meetings. As for what measures we took, as I mentioned in the roundtable discussion included in the integrated report, I was aware of the issues from two perspectives. The first is how to build a system for investigating the cause and preventing a recurrence. The second is the delay in reporting to the administrative authorities and the possibility that this was due to a delay in sharing information with the board of directors. Those are the 2 points I identified as problems and pointed out. The special committee also made recommendations for investigating the cause and preventing a recurrence. I think that the company has done a good job of establishing a system to prevent a recurrence of the misconduct. As you are probably aware, the establishment of a system is not the end of the process. It is necessary to check whether it is actually being properly implemented. As I mentioned earlier, I have been reviewing the minutes of the compliance committee meetings and have visited the Kyushu plant, so we are making efforts to carefully monitor the implementation of the system. Also, as I mentioned earlier, and as was also mentioned in the report of the special committee, there was a point made about reforming the corporate culture. Recently, not just in our company, but also in the third-party committees of other companies, there has been a point made about corporate culture and the corporate climate. As external Director, we asked the company to reform its corporate culture in the following ways: To ensure open communications, that is, to communicate well with the people working on the front lines. Furthermore, it is also important to encourage a change in the attitudes of the people working in the factories. As detailed in this report, in order to achieve this, it is not just a matter of providing education and study opportunities, but also of holding town meetings and other events to facilitate the exchange of opinions and communication between the people working on the frontline and their superiors or management. I think that this is actually having a positive effect. Then, there is the issue of reviewing the reporting system to the board of directors. As the President explained earlier, there are regular reports, but in addition to this, when something unusual or unique occurs, it is necessary to immediately report it to the board of directors of the holding company. Currently, at the holdings board of directors meetings, we spend a lot of time carefully explaining the matters to be reported, and then we ask questions and offer opinions. But when there are special circumstances, it is necessary to share information with the board of directors in a timely manner. As for what we, as external Directors, should do, I think that this should be discussed at the board of directors meetings. Next, I would like to talk about how we dealt with the responsibilities of the officers. I am also the Chair of the Nomination and Compensation Committee, and we made the officers responsible for this action by reducing their pay. To be honest, I think there will be various opinions about whether we have fulfilled our role sufficiently. But as I have just said, we will continue to do our best as external Directors to ensure that something like this never happens again, and that we can respond quickly if it does. That is all for me. Thank you, Mr. Ohara. Let us move to the next question. What monitoring is being done by the board of directors? As for fostering culture in particular, what do you think needs to be done in the future based on the experience of Mr. Mitsuka, director, and how is it being monitored? Mr. Mitsuka, please. Thank you for introduction. First, I'd like to explain the monitoring by the board of directors, which is divided into two parts: monitoring at the so-called management level and the monitoring to understand what is happening on the frontline, which I think is particularly relevant to culture. First of all, in terms of what we are monitoring in light of the recent events, when we were drawing up the medium-term plan last year, we made a number of requests, not just for financial indicators, but also for non-financial indicators such as KPI for manufacturing and quality information management, and we asked the company to formulate these and for the legal department to formulate more detailed ones. Because these KPIs are related to product quality, many of them are not disclosed to the public, but they are shared within the company, and at yesterday's board meeting, the head of the reliability assurance division gave a presentation on the current situation in line with the KPIs. Let me try to explain a little so that it is easier to understand. For example, if we are talking about quality, I think the worst-case scenario would be a product recall. But before that happens, what kind of deviations are occurring in the field? Deviations are a slightly technical term, but there are class 1, 2, and 3 deviations, and I would like to know how many particularly serious incidents are occurring that are a little worrying. When such deviations occur, how much capacity is there for correcting or preventing them? In the past, there was a lot of work that needed to be corrected or prevented. Even though we knew we had to deal with it, there were many cases where we couldn't do it because we didn't have enough staff. But we are monitoring things like how long it takes, on average, to do something that used to take six months as a KPI. Regarding the question you asked about fostering culture, I think there are two things that need to be improved in terms of what is currently a problem in the field. One of these is the same as it was 10 years ago, pressure to increase production. What was it like 10 years ago? As I read the records and correspondence, the priority then was to produce as much as possible. The market was conservative, so it was considered justifiable to produce more, and the market was expanding at a tremendous rate. I think there was also a need to respond to that. However, even now, it is necessary to ensure quality while building new factories and responding to increased production. I think the pressure to increase production will continue. Then there is the second one, which is something that has been added recently, I have already talked about it a little, but there is pressure to reduce quality problems, quality irregularities, and other problems to zero. I think we need to resolve the issue of how to think about this and what an appropriate way of thinking is within our workplace culture. Regarding the pressure to increase production, as I mentioned a little while ago, we have set KPIs that show that as a company, we are committed to ensuring quality rather than just focusing on production volume and sales. One thing we do is to constantly check whether we are moving in the direction of improvement over the long term by incorporating these KPIs into the work of the general manager and the managers under him, then the section managers under the managers. Another issue is the problem of securing personnel. Regarding the issue of securing personnel, there may be an explanation from the frontline or from the executive side if there are any questions. What I personally think is particularly important is not just increasing the number of people, but rather how many people are available to provide guidance at the frontline. When questions arise from the frontline operators, how many people are available to answer them, and what level of expertise do they have? To put it simply, if there is a problem at the workplace and you think, "This is bad, but my boss seems really busy," then this kind of thing probably will not go away. I think it is important to create a system where you can easily consult with your boss. Finally, although this is something like zero trouble pressure, I think it is important to make sure that people understand that temporary problems can occur. It is about not letting these problems become major problems. The system for handling production system troubles was actually created on the premise that deviations could occur in the first place, and it is set out what to do in the event of a deviation occurring and what to do with capacity. I think that what we need to do is to check over the long term how to suppress the possibility of the recurring. In fact, the report from the Quality Assurance and Reliability Assurance division that I received yesterday also showed that deviations are still occurring. In the short term, there has been a slight increase. We understand that this indicates that the sensitivity is increasing, and we are currently focusing on whether this is also occurring in the long term and how accurately the deviations are being handled. We hope to confirm that these efforts will ultimately lead to a decrease in the number of items collected in about a year's time. Finally, regarding the zero quality problems, I am watching very carefully to see whether there is a barrier to information between the head office and the production sites, given that the large factories are scattered throughout the country, or whether information is being ultimately dumped on them. Even looking at cases from 10 years ago, there were cases where the site was actually having problems and had sent an email to the head office, but there was no reply. I think they were probably very busy. The other day, when Mr. Ohara went to the Iizuka factory, which was just explained, we also checked the details of the correspondence with the head office through the documents, such as the inspection project for the certification that is currently being carried out. At least from what the general manager told me, I could see that the head office was also taking a hands-on approach to solving the problems at the factory. I would like to confirm as a member of the board of directors whether this is the case for all factory managers and whether it is also the case at a slightly lower level. That is all from me. Thank you. The last question. To prevent not only this misconduct, but also future misconduct, do you have a system in place that separates authority and ensures mutual monitoring and checking? I will ask Mr. Ohara to answer this question. Thank you for the question. First of all, I would like to say that I have been an external director of our company since before this problem occurred, and the board of directors have always been very strict in its judgments regarding quality issues and legal compliance. But unfortunately, this problem still occurred. When I thought about the causes of this, including the investigation report from the special committee, I realized that this was a problem of mutual checks and supervision. In short, the system of having one person make all the decisions, or what you might call collusion, needed to be changed. At present, we have created a system in which the director in charge of quality and the person in charge of overall production and sales are separate, and they, including the President, mutually supervise and check each other. As was explained on page 9 of the PowerPoint presentation earlier today, we have been able to do this. As Director Masayuki Mitsuka explained earlier, at yesterday's board meeting, deviations were reported with a keen eye for detail. I see that mutual checks and balances are actually functioning rather than being left to the judgment of a single person. In addition, we have ensured that the Group Compliance Committee is monitored from the outside by having an outside lawyer who is very knowledgeable about the pharmaceutical affairs law join the committee. As I mentioned earlier, in order to break away from the aspects of our corporate culture and culture that were not good in order to cut off the bad aspects, including the responsible officers, we are giving employees thorough and sufficient educational opportunities to raise their awareness of what responsibility means, what legal compliance is, and how they should respond to GMP, and we are also building a governance system that allows information to be shared. At the moment, from what I have seen during my inspections, I think that they are doing this properly. The next issue is accountability, and we are working to establish a system that will allow us to explain our actions to third parties in an objective and transparent manner with the President, the Director in charge of quality, and the General Marketing Supervisor all being aware of their responsibility to provide accountability to third parties. That's all. Thank you very much. Regarding the points in the second question, the third overall question was: Given that the high turnover rate has emerged as a management challenge, how is the board of directors monitoring the situation and proposing improvements? What tangible progress has been made toward resolving the issue? We were planning to have Mr. Mitsuka answer this question. Please answer this one first. Regarding the points you raised, I have been at this company for two years now, and when I first started visiting various sites, I was often told that the staff turnover is very fast, and I thought that was a lot of work. If you go to a production site, you'll see that it's exactly the kind of physical labor you'd expect. Since I had received the question in advance, I received the data up to December of this year. As of December, the annualized resignation rate for the company as a whole was 3.94%, and for the manufacturing division, 4.21%. I used to work for a brand manufacturer, and I had the impression that the turnover rate at brand manufacturer was around 2%-3%. So I thought that our company's rate was high. But actually, when you look at all manufacturing industries in Japan as a whole, it seems to be around 10%. In other words, when you compare it to the average for all manufacturing industries, our company is not particularly a tough or difficult company to work for. Also, in comparison with brand manufacturers, 70% of our staff are manufacturing staff. There are many part-time and other employees working in the manufacturing division, so I don't think that the figure of 4.2% for the manufacturing division and 3.9% for the company as a whole mean that it is particularly tough or hard, but rather that it is about an average. However, when we think about increasing production and operating new factories in the future, the rate of employee turnover will become a bottleneck. There is also no doubt that it will become a bottleneck for human resource development, so I think it is important to think about how to improve this. The second point is the data comparing the previous year. Fortunately, it has improved from the previous year, and in FY 2023, the turnover rate was 4.86% on an annual basis, but it has improved by about 1 point to 3.94% in the most recent year. The manufacturing division has also improved in the same way, and as a member of the board of directors, I have confirmed that the most recent trend is in the direction of improvement. So, in order to reduce the rate of employee turnover, we looked at the reasons for resignations, and in the manufacturing division in particular, there were many cases where the reason given was that the employee was changing jobs and also suffering from poor health. I am not quite sure what they mean by poor health, but there were quite a few cases, and I think that it is not just that they are busy, but that there is also a considerable amount of workplace stress. Because there are so many different products, the production lines are switched over to the next item once every 2 days. In addition, it is necessary to log all the data from the factory, which is called LIMS. And when something is measured, it is loaded into the computer each time so that it can be recorded. I also looked at the factory for a while, and there was a lot of backtracking. And for the factory workers who are not used to it, I think the stress of trying to eliminate such problems is probably even greater than the physical labor. So from the perspective of so-called health management, I think one of the issues is how to reduce the stress of the manufacturing division. In order to make this business sustainable and healthy, and to have the people in the manufacturing division work in good health, happily and energetically, I think this is a really pressing issue. Or a really important management issue, even if it sounds a little relaxed. So while paying attention to such details, I would like to continue to look at these figures. I would like to ask Mr. Yokota to explain how our R&D capabilities enable first-to-market and exclusive launches. I would like to provide an explanation of the R&D capabilities that have enabled us to achieve the first-to-market advantage and exclusive launches. Please turn the page. This slide presents a summary. We have provided this summary in response to requests from our investors. As you know, the twice-yearly NDA approvals are critical moments for the generic drug industry. It is therefore a feature of the industry that peer trends are closely scrutinized. Even the slightest leak of our strategy could play into the hands of our peers. So please understand that I will not be discussing specific projects in detail in today's talk. So for today's explanation, I will describe our R&D process, case studies of actual product launches, and a very simple overview of upcoming development trends. Please turn the page. This shows the R&D process at Sawai Pharmaceutical. I believe the process is similar to that of most manufacturers of generics. We first establish our patent strategy and move from there on to product development. Please look at the middle of the left-hand side. Data management carried out in accordance with reliability standards is crucial for all research projects. When filing for approval and obtaining approval, our data is reviewed by the authorities. It is vital, therefore, that we obtain data that is based on stringent reliability standards and submit our application using similarly reliable data. Another core activity is bioequivalence testing. Quality and reliability are crucial for the investigational drugs used in these tests. We have established our own good manufacturing practice, GMP, which we use to supply investigational drugs that are highly reliable, highly safe and highly stable. It is these which we use in our bioequivalence testing. Please turn the page. Next, I would like to talk a little about intellectual property, IP rights. One of the strengths of our product development function is our IP strategy. I would like now to give a high-level overview of the concept of IP rights. This slide shows different kinds of IP. I am sure you are all well aware that patents protect the original inventor by providing preferential rights to market a product for a 20-year period. One feature unique to pharmaceuticals is the extremely long development period. Patents can therefore be extended for up to five years in order to recover expenses incurred over the development period. As development periods can be longer or shorter than expected, we carry out our development while paying attention to whether the innovator uses the patent extension. Please turn the page. I will now drill down in a bit more detail. Pharmaceutical patents consist of substance patents, which relate to the new substances that act as the API, and secondary patents. Secondary patents include use patents, process patents, formulation patents, and crystal form patents. Our generic drugs cannot be launched until the substance patents expire. However, it is possible to plan and launch generic drugs immediately after the substance patents expire by using patent workarounds to get around use patents and other secondary patents on the right-hand side, or by having such patents invalidated. In other words, by investigating various patents, including substance patents, and identifying possibilities for invalidation or workarounds, and asserting patent invalidity, it is possible to develop and launch new products in a short timeframe. This is the mission of our R&D division and is what drives our round-the-clock research activity. One area where we are especially cautious is in requesting patent invalidation trials. These requests are public, so any invalidation trials would make our strategy immediately visible to other companies. If this happens, peers may decide to get involved, and if you will forgive the expression, we could end up with many companies riding our coattails. This would cause the case to drag on longer than we had planned and prevent us from being first to market. Such requests, therefore, while allowed by the patent system, can work against our interests. It is a tough environment, but we intend to continue using patent invalidation trials where helpful. Crystal form patents are a type of secondary patent related to substance patents. Generics are permitted to use a different crystal form than that used by the innovator. One major aspect of our patent and IP strategy is to find a different crystal form when developing an API, which helps accelerate product development. The rapid development of generic drugs ultimately helps supply low-cost and high-quality generics to patients, thereby reducing medical costs. Please turn the page. We will now look at patent research in a little more detail. Our activity involves a careful patent search, followed by the formulation of a meticulous and bold strategy, and then branding. While the careful patent search is a process also performed by our peers, in our case, we work very closely with IP lawyers, shown in the bottom bullet point. It is through these in-depth discussions with these lawyers that we can apply our strategy to new products. This may be what differentiates our processes from our peers. Another characteristic of our IP strategy is our experience with overseas applications. We have experience with Paragraph Four certification, meaning that we are able to survey innovator patent trends globally by looking beyond domestic patents to those filed overseas. Surveying global patent trends gives us a more objective view of the positioning of products that we should develop, which is a kind of knowledge that helps us secure first-to-market advantage. I cannot discuss the detail here, but this is what we mean by a meticulous and bold strategy. It is precisely because we are dealing with patents that our activity carries litigation risk. We are trying to strike a balance between these risks and securing the first-to-market advantage, and it is this desire to be meticulous and bold that has taken us this far. We have not just thrown together our patent and IP strategy at random. The third item on the slide looks at the products that we have released into the world as a result of our IP strategy. These are the jewels of our IP strategy, and we work hard to protect them with patents. We also aim to increase recognition of the technologies we have developed through branding activity. Please turn the page. I will go through this section briefly as there is some overlap with the previous section. This will show how IP grows during development. The early stage of development starts with patent research for new drugs. When a product is selected, we pull together information related to API procurement and formulation processes. After this, we draw up measures to tackle third-party patents. Post-approval risk mitigation involves lawsuits against patent infringement. Please turn the page. This ends the discussion of our IP strategy. Next, I will provide a simple overview of our proprietary technology. The first, SAWAI HARMOTEC, is as you know, a proprietary technology brand that aims to make medicines easier to swallow or take. It comprises five technologies. Core granule manufacturing technology, aimed at increasing effectiveness and manufacturing efficiency. Orally disintegrating tablet technology to make medicine easier to swallow and take. Film coating technology that makes the pill surface smoother and easier to swallow. Printing technology, which aims to include a greater amount of information on the products themselves. Information is already presented on drug packaging, but it is harder to present textual information directly on the pill surface. Finally, formulation evaluation technology. We have historically based development on research about human senses. However, there is considerable difference between individual patients in how they subjectively experience the taking of medicine. We therefore developed this technology to provide a quantitative means of expressing how patients feel. Please turn the page. This is a table of products developed through the deployment of the five technologies. At present, we have developed 17 products that use the SAWAI HARMOTEC family of technologies. For some technologies, we are still considering which products to use them in, but hope to deploy those that are not currently being used in future developments. The top row, Malcor, has already received positive appraisals, having been given the Asahi Kasei Young Scientist Award from the Academy of Pharmaceutical Science and Technology, Japan. We intend to deploy these technologies in products quickly and so allow patients to enjoy their benefits. Next page. Another technology category is QualityHug®. As you know, hug is an English term that conveys the idea of offering an embrace and a sense of safety and security. Security and safety are the first priority for generic drugs. We have been working hard to build a new category of technology for providing safety and security. QualityHug® also received the Good Design Award last fiscal year. Please turn the page. The QualityHug® brand only has three new technologies. Our intention for Kazaria® is to apply slight roughness to the surface as a way to present easy-to-see information on the pill. The other two technologies were developed as a means of evaluating nitrosamine, which is currently a hot topic. NOXANA® is a technology for predicting nitrosamine risk. SUPRENA® is a drug screening technology for determining which additives can restrain nitrosamine generation. SUPRENA® was recently given the Asahi Kasei Pharmaceutical Technology Award by the Academy of Pharmaceutical Science and Technology, Japan in fiscal 2025. We are very pleased that our formulation and analysis technology is receiving recognition. We aim to use these technologies, and the bottom two in particular, in new products to help reduce nitrosamine. Please turn the page. This shows a selection of Sawai products that were first to market. The right-hand side shows the kind of measures taken that helped us to achieve first-to-market status. We divide the measures into patent strategies, formulation technology strategies, and quality strategies. The table shows which strategies were applied to which products. This does not mean that we only apply SAWAI HARMOTECH® to these products. Rather, we use common technologies under the SAWAI HARMOTECH® label to pursue efficient formulation development, while at the same time looking for product-specific opportunities for patent circumvention and proprietary technology development, and in this way, achieve first-to-market development. By way of example, repaglinide uses SARAMEL® technology, although it is not an OD, orally disintegrating tablet. levetiracetam granular tablets use through-coat technology for making it easier to swallow. This is the last slide, which presents our outlook for products expected to come off patent by 2030. Generic product development generally takes around seven years. Since we are now in 2025, this means our development roadmap is more or less fixed for 2025 through 2030. Probably one of the more pressing questions for our investors is how trends will look thereafter. This page is a visual representation of how much of the small molecule market we think will remain through 2030. Our estimate puts the residual market at JPY 1.8 trillion on a drug price basis. We estimate the market at JPY 1 trillion for 2025 fiscal through fiscal 2027, and JPY 0.8 trillion for 2028 onwards. This suggests a definite market will remain through 2030. According to certain research, sales of small molecule drugs will falter around half of that for large molecule biopharmaceuticals in 2030. Even so, this indicates a residual market. We believe the market will not contract significantly, and that we will be able to capture that market with our technology and IP strategy. That is the end of the presentation. Thank you. We received four questions in advance related to this section of the presentation, and I'll ask Mr. Yokota to reply to these. The first question is this: which do you believe is the more important management resource, data and accumulated expertise, or the employment of high quality staff and human capital? Thank you for the question. We do not see it as a question of which is the more vital resource between data and experience on the one hand, and quality talent on the other. In my view, both are vital. Looking at data first, as I mentioned earlier, patent filing is one form of data accumulation. Since we launched our patent strategy, we have filed around 220 patents, as you can see for yourself. In particular, we stepped up our patent strategy from around 2015, resulting in a sharp increase in filings. In terms of HR, we believe a company is its people. Without people, we cannot file patents, nor can we develop new products. From this perspective, attracting quality staff is vital. Moreover, I believe that if our employees are growing, it creates a synergistic cycle in which growth of individual employees accompanies corporate growth, and this process is also crucial. That is all. Thank you. The next question: could you tell us about your R&D staff, their characteristics and career backgrounds? I assume the question is about the composition of our R&D department staff role. Our R&D function focuses on formulation, but our R&D activities are also multifaceted. In addition to formulation development, it is critical that our staff can carry out analysis related to API procurement, are knowledgeable about API synthesis, especially regarding impurities, and also have knowledge about biosafety and pharmacokinetics in the realm of bioequivalence. As mentioned earlier, knowledge of intellectual property is also necessary. We therefore need talent in a wide range of fields. Therefore, rather than simply hiring people from pharmaceutical science faculties or people who have researched formulation, we are always looking at hiring people with experience or research backgrounds outside of pharmaceutical sciences, who can help improve our overall capabilities. That is all. Thank you. The next question. Please tell us about what strategies you use to stay ahead of rivals in attracting top talent. That is a very difficult question. However, as head of the R&D function, I believe that highlighting what makes us stand out as an R&D business is one way to keep an edge in recruitment. From that perspective, the SAWAI HARMOTEC and QualityHug® branding strategies discussed above are probably having some beneficial impact. During recruitment interviews, candidates often bring up the SAWAI HARMOTEC and QualityHug® names, or they ask detailed questions about the technologies. Such branding not only raises awareness of the brand name, but also has a role in attracting talent. That is all. Thank you. The last question. Could you tell us about what differentiates your R&D abilities from peers, especially in relation to patent circumvention, and how you find workarounds for formulation and use patents? In terms of what differentiates our R&D capacities from peers, I believe we covered this in some detail in the presentation. However, to recap, our IP strategy differs slightly from peers, as does our technology-oriented R&D policy. One feature that sets our R&D strategy apart is that we aim to develop new proprietary technologies and launch high value-added products before patent expiry. That is all. Thank you. Finally, I would like to take questions regarding the presentation overall. We have received 4 questions before the start of this event, but one was already answered by Mr. Mitsuka. That leaves 3 questions. Here is the first one. The biggest issue from a governance perspective is the succession plan for Chairman Mitsuo Sawai. Could you please clarify the timeframe for how you intend to address the issue? Mr. Ohara. Succession is not just a topic that is taken up in the corporate governance code. Rather, we believe it is a crucial issue for ensuring sustained growth in corporate value. The Nomination and Compensation Committee have been discussing the issue consistently since 2022. Although we have not confirmed all the details, we are considering the issue over three timeframes. The first is an emergency plan, which is who will succeed the Chairman in the event of a sudden change of situation. The second is the ordinary contingency plan. That is, who will be appointed to succeed the Chairman and for how long, once the current Chairman reaches the end of his term. Finally, from a longer-term perspective, we are looking at how to grow and train the next generation of senior management. In terms of the emergency plan, I cannot name specific people, but we have a plan in place should something happen. For our contingency plan, our advisory committee is considering what length of term for CEO and other management positions is best suited to raising corporate value based on information obtained from specialist advisors and current practice among peers. At the same time, we are looking at what kind of CEO and executives would be best suited to our company. We are, first of all, considering someone who understands our philosophy of aiming to improve everyone's lives. We will also look at candidates' experience together with a 360-degree evaluation of the workplace. The committee has already identified certain candidates and is looking at their backgrounds. Some possibilities have been lined up already, as mentioned above, and we are looking very seriously at preparing candidates through further HR training. That is all. Thank you. I'll move on to the next question. Director Naomi Todo commented that promoting female Directors and executive officers from within the company is a key issue. I would like to hear about what led you to that conclusion. I would also like to know what kind of discussions are being held at the board of Directors in order to raise diversity among the leadership, including female management. The answer will be given by Director Naomi Todo, who is joining us remotely. I'm Naomi Todo. Thank you for the question. I will give my personal thoughts on the issue. Ever since I was appointed, I have said it is my goal and dream to sit on the board together with a female Director appointed from inside the company. As an expression of that goal, shortly after I was appointed, I held roundtable discussions with Chairman Mitsuo Sawai and several female employees, and also shared the details of these discussions with the rest of the company. Unfortunately, however, I have not been able to achieve my goal of having a female Director appointed internally. It may be out of place for me to say this, since this applies to me also, but even appointing female Directors from outside the company does not equate to the advancement of women in the workplace. Frankly, female Directors must be promoted from inside the company if the appointment is to be meaningful. However, there are not many female managers in Sawai, nor many female employees who aspire to become managers. I have said for a long time that promoting female participation is best achieved in a corporate context where every employee has an active role, not just women. I have expressed this idea in every meeting with female employees and at meetings of the board of directors, and I believe it has gained currency. Put simply, I believe it is impossible to become a company in which all employees can play an active role without the active participation of women as representative of other minority demographics, especially in managerial positions. In other words, thinking about creating an environment where women can flourish links to a corporate attitude that looks to build a more comfortable working environment for all employees. I believe our company is currently addressing this issue based on the ideas I have outlined here, and I also believe we are seeing steady results. Thank you. The last question is about share buyback policy for next fiscal year and beyond. Won't additional buybacks be necessary if you are to meet your 2030 ROE target of at least 13%? Further, if they are necessary, what balance sheet indicators will you be referencing, and what time frame are you looking at? Mr. Nakaoka will answer the question. In late June last year, we announced our decision to carry out buybacks. We finished buying back all the shares we planned to by late February this year. I understand your question to be about what we will do next. At present, we do not have a definite plan about whether we will buy back more shares, and if so, when. Of course, we are very aware that buybacks are beneficial from various perspectives, including dividends, shareholder returns, and ROE improvement. However, it is also true that the leaders of some of Japan's largest companies have expressed differing opinions on whether buying treasury shares is an appropriate one-size-fits-all solution. Take, for example, Mr. Miyauchi of ORIX. He said corporations should improve ROE through investment and generating solid returns. I completely agree. In that context, we will be treating share buybacks as one available means to be deployed based on a comprehensive analysis of multiple indicators, share price trends, and shareholder returns in general. That is all. Thank you. That is the end of the questions submitted in advance. With that, I would like to close the Sawai Group Holdings IR Day 2025. Thank you for joining us today.