Earnings Transcript for 4503.T - Q2 Fiscal Year 2024

Hiromitsu Ikeda: Thank you very much for your coming to this Astellas Q2 YTD FY24 Financial Results of Astellas. I'm Ikeda, CCIRO, Chief Communications and IR Officer, serving as a moderator for today. Today, we make a presentation first that is followed by Q&A. The presentation is based upon the presentation material posted on our website. For question and answer as well we are going to provide the simultaneous translation in English and Japanese. The accuracy of the translation is not guaranteed by Astellas. Please do understand about that. The language can be selected menu over zoom webinar screen. If you select the original, then you can hear original voices without going through without voice through the translation. Cautionary statement, this material or representation by representatives for the company and answers in a statement by them for the company in the Q&A session includes forward-looking statements based on assumptions and beliefs in light of the information currently available to management and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information of pharmaceuticals, including compounds under development. But this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness. Now let me introduce you the participants here today, the Representative Director, President and CEO, Naoki Okamura; our Chief Scientific Officer, Yoshitsugu Shitaka; Chief Medical Officer, Tadaaki Taniguchi; Chief Financial Officer, Atsushi Kitamura; Chief Commercial Officer, Claus Zieler. We have five representatives here from Astellas. Now, start the presentation, Okamura San.

Naoki Okamura: Hello everyone. I'm Naoki Okamura from Astellas Pharma Inc. Thank you very much for joining our FY2024 second quarter year-to-date financial results announcement meeting out of a very busy schedule today. This is a cautionary statement regarding forward-looking information. As this was explained by Ikeda earlier, I'm not going to read this page. Page three is the agenda for today. Starting from the next page, I will explain these topics in this order. On page four I will give you an overview of FY2024 second quarter year-to-date financial results. Revenue increased by 22% year-on-year. Sales of Strategic Brands, as a whole, expanded to over 150 billion yen in total, exceeding expectations with a significant growth of over 90 billion yen year-on-year. As for SG&A expenses, excluding US XTANDI co-promotion fees, ratio to revenue improved by 3.2 percentage points year-on-year through continued cost management with a focus on ROI. Core operating profits significantly increased year-on-year mainly driven by growth of XTANDI and Strategic Brands and continued cost management. Full year forecast of revenue and core operating profit was revised upward based on the robust second quarter year-to-date progress. As a result, we shifted from profit decline initial forecast to profit increase forecast. I'll explain the details of our revised forecast on page 10. On page five, I will explain FY2024 second quarter year-to-date financial results. Revenue reached 935.6 billion yen, up by 22% year-on-year. Core operating profit rose to 183.1 billion yen, up by 36.2% year-on-year. The bottom half of this page shows a full basis results. In the right bottom of the table, we included other expenses booked in the second quarter. We booked net foreign exchange losses of 12.2 billion yen associated with ForEx rate fluctuations. As a result, operating profit increased to 93.7 billion yen, up by 69.9% year-on-year. Profit increased to 73.5 billion yen, up by 105.3% year-on-year. On page six, I will explain FY2024 second quarter year-to-date results of XTANDI and Strategic Brands as well as a revised full year forecast. First, about XTANDI, global sales increased to 451.7 billion yen, up by 90.7 billion yen or 25% year-on-year. XTANDI progress continues to be strong globally driven primarily by the United States from the first quarter. In the United States, in addition to the growth of the overall market, the penetration of M0 CSPC indication and its ripple effects on other indications have continued to -- contributed to higher than expected sales growth. In ex-US regions, demand was as expected or exceeded expectations. We have updated our forecast based on the progress by now. In line with our initial guidance, we are anticipating three months negative impact from US IRA Medical -- Medicare Part D redesign in the fourth quarter in the United States. Initially we were anticipating the impact of $50 million to $70 million, but along with the revision of our forecast, we have updated the impact to $80 million to $100 million. Robust progress through the second quarter globally as a whole is expected to more than offset the negative impact from US IRA Medicare Part D redesign, so we have made an upward revision of our global four year forecast to 859.7 billion yen. Sales of Strategic Brands supporting our future growth namely PADCEV, IZERVAY, VEOZAH, VYLOY, and XOSPATA expanded to over 150 billion yen in total with a robust growth of additional 90 billion yen or more year-on-year. We have made an upward revision of a full year forecast by more than 40 billion yen in total reflecting strong momentum overall. As a result, we are expecting growth to about 340 billion yen in FY2024. PADCEV global sales increased to 75.4 billion yen, up by 42.7 billion yen, expanding substantially with a growth of 131%. IZERVAY sales expanded to 28.1 billion yen, substantially exceeding initial expectations. Reflecting the respective robust progress, we revised the full year forecast upward. I will explain the details on later slides. Global sales of VEOZAH reached 14.8 billion yen, making a steady growth. Since the first quarter, we have continued to implement initiatives with a focus on ROI. The number of launched countries has increased to 18. Regional expansion has also contributed to sales growth. Reflecting the solid demand trend globally as a whole, we have made an upward revision of our full year forecast. As for VYLOY in Japan or VYLOY globally, sales for about four months since its launch in Japan in June reached 1.2 billion yen. This progress exceeded our initial expectations. Faster than expected market penetration of CLDN18.2 testing has contributed greatly. Steady progress is being made towards regional expansion as well. VYLOY was approved in Europe in September and in the United States in October. It was launched in the United States last week. It will be launched from the third quarter onwards in the respective countries in Europe. In China, we are expecting approval in the fourth quarter. Reflecting the strong performance in Japan, we made an upward revision of a full year forecast. We are expecting further sales growth along with regional expansion from now on. XOSPATA performed well globally as a whole. Global sales increased to 34.8 billion yen, up by 32% year-on-year. Increase in FLT3 testing, especially in the United States, has contributed to demand increase, driving the overall sales. Reflecting the solid progress through the second quarter, we made an upward revision of our full year forecast. We're expecting continuous stable growth going forward as well. On page seven, I will explain a business update for PADCEV. Global sales of PADCEV grew more than two folds year-on-year, progressing well vis-a-vis our initial assumptions. The number of launch countries has increased to 39 out of which 11 countries have the approval of first line metastatic urothelial cancer indication. Based on the robust growth trend globally as a whole, we have revised our full year forecast upward. We are assuming different growth rates in different regions, but we are expecting continuous strong growth globally as a whole. Let me also explain the progress by region. First in the United States, first line indication based on EV-302 study has penetrated rapidly in the market since approval in December last year with new patient share approval approaching 55%. Due to already high penetration rate, we are expecting a more moderate growth going forward. We are not expecting growth to stop but rather we are anticipating a mild but stable growth. In Europe, prescription is rising in the second line settings and beyond where we are obtaining reimbursement. The additional first line indication approved in August has also contributed to sales growth. For the penetration of the first line indication, it is necessary to go through procedures to obtain reimbursement once again. So we are expecting full-fledged sales growth from FY2025 onwards. In Japan the additional first line indication was approved in September. We are expecting PADCEV to serve as a growth driver from the third quarter onwards. In China, the indication in the second line settings and beyond was approved in August. We are expecting future contribution to sales. Furthermore, the additional first line indication is expected in the first half of calendar year 2025. We can expect further acceleration of sales after approval. In the international markets, the additional first line indication was approved in multiple countries such as Korea and UAE contributing to sales growth. We are expecting further new launches and first line mUC approvals from the third quarter onwards. Lastly on this page let me also touch on future growth drivers. We are expecting substantial first line mUC sales contribution from ex-US regions on a full scale in FY2025. Furthermore, next potential growth driver is the anticipated additional indication of MIBC, muscle-invasive bladder cancer, with top line results expected in FY2025 and sales contribution expected after approval. On page eight, I will explain business update for IZERVAY in the United States. IZERVAY has continued to perform well since the first quarter. Sales in US dollars reached $184 million growing steadily by 26% quarter-on-quarter. Market share has risen from about 35% in the first quarter to about 40% in the second quarter. Also, new patients share is estimated at about 60% in the second quarter with a steady increase in the number of new patients. Given the fact that the competitor's product was launched about six months earlier, we think we are making great achievements. Over 143,000 vials have been shipped since launch. Adoption at new accounts is also making steady progress. As of the end of September, IZERVAY was available in over 1,300 retina accounts. Post marketing safety profile remains consistent with clinical trial results without new safety signals observed. We believe physicians’ high assessment of IZERVAY's safety profile is also contributing to its robust progress. In addition, from 30th September, new DTC campaign was launched across major channels including TV and social media. We are aiming to raise disease awareness of GA, geographic atrophy, and highlight the importance of early treatment with IZERVAY. Only one month has passed since the start of the campaign, but we are already receiving positive feedback from retina specialists and patients. As a future outlook, we are anticipating the overall market expansion due to DTC campaign from the third quarter onwards. Based on the progress exceeding expectations through the second quarter, we have raised our target market share at the end of FY2024 from the initial 40% to 50%. Based on the good performance so far and the latest outlook, we have revised our full year forecast substantially upward. Very good performance has continued since launch in September last year in the United States. We're expecting further growth. On page nine, I will explain SG&A and R&D expenses. Excluding US XTANDI co-promotion fees, SG&A expenses increased by 10.2% year-on-year. When ForEx impact was excluded, SG&A expenses increased by 3.8% year-on-year, as a main factor behind sales promotion costs increased for Strategic Brands and IZERVAY in particular by about 19 billion yen year-on-year. During the same period last year, IZERVAY was in a stage before full scale investments, so this is a factor to increase our costs. On the other hand, sales promotion costs related to mature products decreased by about 6 billion yen year-on-year. Also, due to the global organizational restructuring implemented in FY2023 including the reorganization Japan, commercial cost fell by about 5 billion yen year-on-year; as a result, SG&A ratio to revenue improved by 3.2 percentage points year-on-year through continued cost management with a focus on ROI and the expansion of Strategic Brands. The expenditure rose by 21.4% year-on-year and by 15.4% when ForEx impact was excluded. As main factors behind, we have made investments in order to make progress in clinical trials for primary focus, immuno-oncology and targeted protein degradation and enhanced in-house capabilities necessary for clinical development resulting in an increase by about 13 billion yen year-on-year. One-time co-development cost payment booked in the first quarter is another factor to increase our R&D expenditure. On page 10, I will explain FY2024 revised four year forecast. First, we revised our full year forecast ForEx assumptions to 149 yen against the US dollar and 160 yen against the Euro. From the third quarter onwards, we are assuming ForEx rates of 145 yen against the dollar and 155 yen against the Euro. We have made an upward revision of revenue forecast by 150 billion yen to expect 1.8 trillion yen. We have factored in an increase of about 30 billion yen due to ForEx impact, and an increase of about 120 billion yen for XTANDI and Strategic Brands. We are expecting 823 billion yen SG&A expenses as a whole. We have factored in about 15 billion yen due to ForEx impact, about 40 billion yen as US XTANDI co-promotion fees with an upward revision for XTANDI in the United States and increase in pharma fee to be paid to the government in accordance with sales amount in the United States, which rose due to good performance. We are forecasting early expenditure to reach 341 billion yen by factoring in an increase in development costs due to faster patient enrollment in the ongoing clinical studies for VYLOY and VEOZAH in addition to ForEx impact. As a result, through sales growth for Strategic Brands exceeding expectations and stringent cost management, we are expecting core operating profit to reach 300 billion yen, changing from profit decline initial forecast to profit increased forecast. We are forecasting 80 billion yen for full basis operating profits by factoring in other expenses booked up to the second quarter. We are also incorporating a certain amount in our forecast for other expenses in case of potential risks such as impairment loss. From here I will explain our initiatives for sustainable growth. Page 12 summarizes key updates on R&D since the last financial announcement. The details of the Strategic Brands and individual programs of the Focus Area Approach will be explained in the following slides. Slide 33 in the Appendix provides an overview of the partnership of AviadoBio, which is one of the primary focus in genetic regulation. Please refer to it if you are interested. RX+ plus made progress in two programs. DIGITIVA, our digital health solution for heart failure management, has been certified by the FDA as software as medical device. Preparations are currently underway for pilot cells in the United States. Regarding an implantable device from iota Biosciences, early feasibility study of a program targeting under active bladder was approved by the FDA for an IDE, investigational device exemption, which is the equivalent of an IND for pharmaceutical product. On page 13 I will explain the progress of key events expected in FY2024 for XTANDI and Strategic Brands. I have indicated in blue the progress that has been made since the previous financial results announcement. PADCEV was approved in China in August for the second line treatment of mUC based on the EV-203 study. In addition, an additional indication for first line treatment based on the EV-302 study was approved in Europe in August and in Japan in September. VYLOY was approved in Europe in September and in the US in October for the treatment of Gastric adenocarcinoma and GEJ or gastroesophageal junction adenocarcinoma. As announced during the press release of the day before yesterday, we have withdrawn the marketing authorization application submitted to the EMA based on the results of discussions with the CHMP in EMA. We remain confident in the clinical profile of IZERVAY as we continue to believe that the clinical meaningful effect of IZERVAY in the slowing progression of geographic atrophic lesions demonstrated in the clinical trials outweighs the risk. While geographic atrophy is a serious condition that can lead to irreversible visual impairment and blindness, there are currently no approved treatments outside the United States. We will continue to evaluate available options to bring IZERVAY to patients around the world, including in Europe. In Europe, in addition to the process of centralized marketing authorization based on a single submission through the EMA, there are also multiple application processes that involve individual procedures for each member country. We will consult with the authorities in each European country to confirm what applications process are possible and consider what we can do. As we haven't started the consultation with authorities yet, we are unable to provide any specific information regarding the future direction or timeline at this point. We'll provide an update once the situation becomes clearer, so please wait for further information. I would also like to touch on the risk of impairment losses on IZERVAY, which is of great interest to the investors. We have booked $1.1 billion in intangible assets outside the US for IZERVAY where we will evaluate the asset value and perform appropriate accounting procedures. In revaluing the asset we will need to consider factors such as the availability of the submission processes and our target countries in Europe, as well as the fact that sales are exceeding expectations in the US and the competitive environment is different from the assumptions made at the time of acquisition. In addition, the target region for this asset is outside the US and the possibility of submissions in countries in regions outside Europe that we are currently considering will also be reflecting the evaluation of the asset value. Today, I cannot give you any specific answer about whether or not there will be any impairment losses or if there is the scale of the loss, but since we have already factored in other expenses such as the risk of impairment losses into our full year focus, we believe that even if an impairment loss were to occur this fiscal year, we would be able to absorb a certain amount of it. Slide 14, page 14, I will now explain the progress of the Focus Area Approach. The programs that are in the clinical trial stage and have been updated since the previous fiscal announcements are indicated in blue. Primary focus immuno-oncology ASP1570 initial data including Phase 1 data was presented as a poster at the ESMO in September. ASP3082 in targeted protein degradation was presented orally at ESMO as well on initial data from the Phase 1 trial. We introduced the details of the data at the briefing session held on September 27, so please see the materials from the link, if you are interested. ASP2016 in genetic regulation received rare pediatric disease designation and orphan drug designation from FDA in August 2024 and September 2024 respectively. ASP5502 in immune homeostasis in primary focus candidate achieved the first subject first treatment in Phase 1 trial since September. Please refer to Appendix slides 31 and 32 for an overview of each primary focus flagship program marked with a star mark. As I have explained so far, the overall business has been steadily progressing through the second quarter. I will now explain the midterm initiatives that are supporting this favorable progress as well as the latest outlook based on these initiatives and situations. On page 16 I will first explain the overview of mid-term initiatives. In the second quarter we were able to show good progress including significant growth of Strategic Brands, the acquisition of encouraging initial data from ASP3082 and an improvement in the SG&A ratio to revenue which led to an upward revision of the full year focus for revenue in core peak. In order to ensure a successful implementation of the ASP21, we have established three enterprise priorities that are closely linked to our performance targets and we have begun to work on this in a full-fledged manner from this fiscal year. As an overview of each, is shown on the right side of the slide. First, growth of Strategic Brands is essential for expanding future revenue and the growth strategy is an initiative to maximize their potential. Next, the Bold Ambition is an initiative to accelerate R&D for lifecycle management of Strategic Brands and the Focus Area Approach in order to improve pipeline. And sustainable margin transformation is an initiative to pursue cost optimization in order to achieve our target of co-operating margin of 30%. We have set KPIs for each initiative and are steadily implementing them as a priority issue while rigorously monitoring progress. Based on the results through the second quarter, we are seeing positive results from these initiatives. In the following slides I will explain the initiatives and the latest outlook for each of three enterprise priorities. On page 17, first, I will explain the initiatives to maximize the potential of Strategic Brands, which are extremely important to expanding future revenue. The total sales of our Strategic Brands through the second quarter have grown to over 150 billion yen, achieving growth that exceeds our initial forecast. At the beginning of the fiscal year, we expected sales to grow to 300 billion yen for the full year, but based on the strong progress and the latest forecast, we believe we can aim for 340 billion yen. In order to further accelerate growth, we are introducing a new operating model by brand level. We have already started introducing this in the US from July and it is already showing results in accelerating sales growth in the US market. By shifting from a hierarchical organization to a cross functional organization by product and the commercial organization senior management work with each product team, we are now able to promote faster decision making. We will continue to expand this model in regions outside the United States. In order to accelerate the growth of Strategic Brands, we are also focusing on lifecycle management, LCM initiatives. We are accelerating the progress of clinical trials for expanding indications and we expect this to contribute to an additional sales growth on top of the existing indications. We expect to receive top line results for VYLOY in pancreatic adenocarcinoma this fiscal year, PADCEV in MIBC in FY2025 and XOSPATA in treatment naive AML in FY2026. In addition, LCM initiatives that are expected to achieve milestones in FY2026 and beyond are shown on slide 30 of the appendix. Our Strategic Brands are making steady progress towards achieving about $500 billion in sales in FY2025 and we expect further growth from 2026 onwards. We will maximize their potential through our new operating model and are looking for two of their potential sales contributions of LCM. On page 18, I will explain our outlook for the Focus Area Approach. At the announcement of our FY2023 financial results in April, we announced that we plan to advance full flagship programs in each of our primary focus areas, namely ASP3082 for targeted protein degradation, ASP2138 for immuno-oncology, AT845 for genetic regulation and ASP7317 for blindness and regeneration to the POC judgment stage by the end of FY2025. In order to accelerate POC judgment, we are working to build an Azure organization structure and strengthen our in house capabilities in early development. The chart in the middle of the slide shows the expected timing of the POC judgment for each program. We expect to have the POC judgment timing in the fiscal half of the calendar -- the first half of the calendar year 2025 for ASP3082, in the first half of the fiscal year 2025 for ASP2138 and in the second half of fiscal year 2025 for AT845 and ASP7317. To date, the Focus Area Approach has been in a phase of divergence, as we have explored the potential of each platform. In the future, depending on the results of the POC judgment, the current primary focus will move to a phase of convergence phase and we will strive to improve the value of the pipeline by investing management resources preferentially in primary focus that have achieved clinical POC. The R&D portfolio will be constantly reviewed and prioritized based on the technical difficulty and value of the programs and will be turned over repeatedly. We expect that the programs created through the Focus Area Approach will progress and contribute sales in the 2030s bringing about sustainable growth. On page 19, I will explain sustainable margin transformation. As I have explained so far, our Strategic Brands have entered a growth phase that will contribute significantly to sales expansion. We can also see expansion from fiscal 2025 and onwards and we are becoming more confident that they will grow to a scale that will make up for the decline in sales due to the loss of exclusivity for extending. In R&D, we have entered the stage of POC judgment for the four flagship programs in our primary focus. Depending on future developments, we will invest management resources in priority areas to drive growth in the 2030. To support the growth and investment and ensure sustainable growth after the loss of exclusivity for XTANDI, it will be important to work on optimizing our cost structure. Since Kitamura took up his new position as CFO, we have been working to control costs in a disciplined manner, but at the point where we review our efforts and optimize the cost structure over the next four years, which is between 120 billion and 150 billion yen. I'm going to explain that with this slide. On the left side of the slide, we have divided the specific measures for cost optimization into four categories. The progress of these measures is being monitored strictly under the strength and management system to enhance the effectiveness of each measure. In addition, many of the measures have already completed at the planning phase and have moved to the implementation phase. For example, in clinical development operations will enhance our in house capabilities for early development while minimizing outsourcing. In addition, in order to further consolidate and streamline global operations, we are considering establishing a Global Capability Center with the aim of building a flexible resource provision system for the entire value chain and all functions that support it as needed. We are also working to improve manufacturing costs through manufacturing scale up and yield improvement through our review of manufacturing process. We will continue to implement these measures from FY2024 to FY2027. As a result, we aim to achieve cost optimization of 120 billion to 150 billion yen on a company-wide level by the end of fiscal 2027 as an expected annual effect of this and annual equivalent of 40 billion yen is expected to reach by the end of this fiscal year. The resources generated from here will be used for growth investment such as further sales promotion of Strategic Brands, lifecycle management initiatives and the stage development of prioritized primary focus products after POC. And we will continue our efforts to secure midterm profits by increasing profitability. Page 20, this slide summarizes the initiatives we'll focus on in the mid-term as explained so far. We'll commit to these initiatives which include maximizing the potential of Strategic Brands, focusing on prioritized primary focus products and increasing the pipeline value, as well as pursuing cost optimization to improve profitability and aim for further growth after extended loss of exclusivity. This concludes my presentation. Thank you for your attention.

Operator: Thank you very much. That's all as our explanation. We now like to entertain questions from the audience. If you have a question, please press the raise hand button at the bottom of your zoom screen. If you're joining from your smartphone, if you tap details, raise hand button will be displayed, so please press it. The MC is going to name you one by one. If your name is called, please unmute yourself on your screen and please mention your name and affiliation and ask questions. So questions please. Thank you for waiting. The first Mr. Yamaguchi from Citigroup Securities, please.

Hidemaru Yamaguchi: Yamaguchi speaking from Citigroup Securities. Can you hear me?

Naoki Okamura: Yes.

Hidemaru Yamaguchi: Thank you very much. My first question. As you explained IZERVAY, this may be a question I think you can respond rather than questions you cannot respond. There would be a PDUFA date for label update, IZERVAY. Any update for sales in the United States, any impact there would be DTC and [Indiscernible]. What about the impact of labor update? Is that included or not? If that's the case, it's not -- can I understand that the impact is going to be positive? That's my first question.

Naoki Okamura: Kitamura, would you like to respond?

Atsushi Kitamura: Thank you for your question. Kitamura speaking. Regarding the label update impact, that was included in the initial plan, so that continues to be part of the plan. That's my response to your question.

Hidemaru Yamaguchi: Understood. And also this is my second question. In Europe you may not be able to talk about the progress, but in Europe there can be an individualized procedure to file in the respective countries in Europe. I'm not asking about specific countries, but in which country that procedure can be applied in ex-regions US regions, Europe is one of them. For example, in Japan, Asia, China, do you plan to have a development program in those countries and regions?

Naoki Okamura: First, I'd like to respond briefly, if there's anything missing, Taniguchi would like to add. Originally, in Europe, through CHMP -- for the region across Europe, before that procedure, each country had a fighting and that fighting in each country still remains. But it takes time and efforts to do this in each country. Clinical studies may also change, so usually through CHMP to get the approval for all Europe through EMA. After Brexit, UK is no longer part of Europe and Switzerland, which is not a member of EC, has its own filing system, so that is possible in each country. But instead of sending and submitting our documents to the respective countries, but based on the data package, we consult with the regulatory authorities and if they say they can review it or you'd like to file, that is going to be the process which will be in operation. So, a few countries first with the regulatory authorities, we will use our current data set to consult with them to see whether we can file a submission or not. That is going to be the first step. And outside of EMA, US and Switzerland, we are filing in those countries. Also in Japan we are consulting with PMDA. We started the consultation process in other Asian countries and South American countries. As much as possible, we would like to deliver IZERVAY to patients. We will continue to make efforts. Taniguchi, anything missing. Thank you very much.

Tadaaki Taniguchi: I don't need to add, but as Okamura explained, in Europe there's going to be a review by the individual countries which we are considering. Regarding other countries, US, UK fighting is being submitted. Canada, Japan, China and other countries, we are considering the possibility in those countries as well. And once we have the discussions with regulatory authorities in their respective country, we'd like to update you. Lastly, just briefly regarding VEOZAH, you had an upward revision. ViiV function test frequency is higher and in the Q1 earnings call we discussed the potential impact.

Hidemaru Yamaguchi: Any feedback from the sales field? Any feedback by now?

Unidentified Speaker: Thank you very much. For the time being, there is no signal to tell that it's going to be negative. What is going to be the potential impact? We are doing market research, but this is just a mere market research. The prescription trends in the field would be the best performance indicator if there's anything to add. Klaus.

Naoki Okamura: You've summarized it very well. Now the prescriptions are continuing the upward trend and anything else, we will have to wait for the market research to read out. Thank you.

Unidentified Speaker: Thank you very much. That's all from me. Thank you.

Operator: Thank you. Next question, JPMorgan Securities, Mr. Wakao please.

Seiji Wakao: JPMorgan, Wakao is my name. Thank you very much. My question is Wakao is my name. Thank you very much. My question is for IZERVAY. This is a question I should be asked because you cannot answer. But still with regards to the way of answering by Okamura San, I would like to have a deep understanding, so please tell me. In the case of impairment loss, while currently 60 billion is expected, so certain level can be absorbed. I think that's the way of expression or explanation. But the US sales status and with regards to EU, the filing will take place at each country and you're thinking about the development in the Japanese market, so current 60 billion I believe. I assume that still impairment loss could be within the scope of this 60 billion yen expected. Is it too optimistic? There might be just as nuance why the explanation will be still helpful for me.

Unidentified Speaker: Thank you very much. When we acquired bio or purchased price allocation precondition was there. That is, the market should be outside of the United States. However, the Europe, roughly speaking, or Japan, those are the countries that we incorporate for the evaluation earlier phase that is considered as the foundation of the forecast. As you know, now Europe is separated not the centralized for the submission. And also in Japan, which we didn't have any plan, we started to see the avenue or the journey ways to go for the approval. So at the time of the assumption of PPA [Phonetic], some countries are not included. But now they are potential, as Taniguchi mentioned, so we've started the preparation already. Therefore, this 1.1 billion yen relationship rather than this perspective; further, we would like to think about various factors and situations to consider objectively the value of the south side of the United States and based upon that, we would like to calculate the impairment laws. And this 60 billion yen as a whole, that is not -- this all is not the impairment loss, but 1.1 billion intangible assets outside the United States and because of that we withdraw our submission in Europe. So it might be considered that this 1.1 billion is all for impairment loss. In order to avoid that misunderstanding, I made that expression.

Seiji Wakao: Understand. I stop here. And second, that's about the future next fiscal year and afterwards I have a question about extending PADCEV, IZERVAY, VEOZAH, you made explanation and they are quite steadily progressing. And my concern is XTANDI, this time you made an upward revision, so it is progressing in a steady manner. But IRA impact in the next fiscal year and afterwards, this fourth quarter it took to 10 billion or 8 billion to 100 billion and considering this is IRA impact would take place throughout the fiscal year, I understand about that. But IRA out of pocket is set as a $2,000 and also in terms of CRPC, that is on the progress of the market expansion and that is likely to impact into the next fiscal year as well. So all in all XTANDI in the next fiscal year, do you think it will grow further? I think you're going to scrutinize it further, but as of this moment, especially in the United States, how do you view about the XTANDI in the United States next fiscal year? Thank you very much.

Naoki Okamura: I don't want to say something irresponsible, so I don't want to go into details or the deep dive. But just like Wakao mentioned, basically the number for the patient is on the increase and M0 CRPC, of course the patients who receive the treatment earlier phase and also the duration of the administration will be longer in M0 CSPC. Well that leads to the ripple effect for other indications as well and the patient will pay less. Therefore, in terms of the affordability, those patients who receive their drugs without making any payment would now be shifted toward those who need to pay. So the balance of the patients will be different. So there are so many factors mixed up and in a net it's very difficult to tell. So 2025 and afterwards when we made the announcement of the FY24 as a whole for year, we'll give you the guidance for FY25, at that time you might say that this is just one quarter, but this calendar year 2024 first quarter situation will be more clearer. So based upon that I would like to explain that at that time. Claus San, do you have any additional comment on this?

Claus Zieler: Thank you, Naoki. I think we need to remember that the volume growth of this market of this class is still double digit and that's true not only in the United States, but essentially across the world in many, many countries. So we have a very strong volume momentum behind XTANDI and the class that XTANDI represents. So the question of the IRA impact and other pricing impacts that we will have to face is as Naoki has said, the question will be which of these factors is dominant; the pricing factor or the fact that patients stay longer on drugs or the volume growth of this market. And that's what we'll have to calculate and then give guidance on when we look at FY25.

Seiji Wakao: Very clear. One last question regarding the costs you're going to ensure good cost management and cash flow compared to [Indiscernible]. Regarding capital allocation, I have another question to you. This is going to be a future discussion point. But the profit level is going to be high. Then dividend increase and shareholder returns, there would be high expectations on that. But at the same time, you have 900 billion yen of loans or borrowings, you may give priority to the repayment of loans. Shareholder returns, how much is the room to use the money to make shareholder returns? There is a table showing the possibility of shareholder returns and increasing the dividend. What's the situation?

Naoki Okamura: Capital allocation approach from a long time ago remains the same with consistency. We'd like to use the money for the business growth investments. In terms of shareholder returns, the dividend in the longer term would be increased in a stable fashion. In the longer term, if there's still excess cash, we would buy share backs, buy our own shares flexibly in a different way. We'd like to return the money back to the shareholders in a different way. Based on the original plan, we developed other plans, but if there's going to be an excess cash above that level and based on the current situation, is it better to repay borrowings or is it better to invest in our businesses, we have the initial guidance 74 yen as a dividend payment, or is it better to increase the dividend, there would be a variety of options. We will have excess cash to begin with, what is the amount if we buy our own shares, is that going to be a size and scale which is meaningful enough, we have to consider and think about which option to take. As you said, if we have long term borrowings for too long to do our business because of the nature of a business, I think it's a bit risky. So at a certain pace, we have to repay the interest bearing debts. If we have excess cash, are we going to repay at an accelerated pace or are we going to use that for other purposes, that is going to be considered by Kitamura. Kitamura San, anything to add?

Atsushi Kitamura: Thank you for the question. In principle, I agree with what Okamura said. You may say what if, but we have to achieve good business results and based on our capital allocation, we have to make investments for growth. And we have to consider the balance of vis-a-vis debt borrowings and loans and average liabilities in five to seven years, we are going to pay -- that is going to be repaid. So first we have to increase our profitability for sure, that is the most important thing, so continuously we'd like to work on this. That's all from me.

Unidentified Speaker: Thank you very much. Having said so, our operating profit is increasing so I think it's improving than before, right. In principle the performance as far as we see the performance up to the second quarter and it's not just because of the what we did in the past two quarters but including what we have done so far. Compared to the initial forecast, we are progressing very well, I think we can say so.

Seiji Wakao: Thank you very much. That's all from me. Thank you very much.

Operator: Thank you. Next, Morgan Stanley MUFG Securities. Muraoka, please.

Shinichiro Muraoka: Good afternoon. Morgan Stanley, Muraoka is my name. Thank you. XTANDI, January of March, IRA negative impact, entire calculation range is expanded because of the increase of the cells. If there are some other factors involved, would you please explain that? That's the first question from me, thank you.

Unidentified Speaker: In my understanding just the denominator becomes bigger so this multi application leads to the bigger number. Claus San, is this answer right?

Claus Zieler: That's correct. This is just the mathematical calculation of the IRA Medicare Part D impact as it's been laid out in the legislation by the US government.

Shinichiro Muraoka: Thank you very much. Next is about XTANDI. Once again I might haven't studied this yet much but the [Indiscernible] by Novartis is doing quite well. So pre tax and CRP also incorporates that product as well. So looking at FY25 and 2026, considering the competition of the XTANDI, is it going to be the bigger competitor for you or it is not necessary to consider about that regimen as the competitor?

Unidentified Speaker: I don't know who will be the right person to answer this. Claus, could you answer about this?

Claus Zieler: Yeah, I can try. I mean essentially the competitive landscape with new launches into this market, they're coming into very, very late stage populations. As you know with EMBARK we have been able to position XTANDI in the very, very earliest stage and we're the only compound that has that data set. So our position with XTANDI's position in this class is absolutely unique and doctors are recognizing that and we're seeing the good response to the EMBARK data. So the question really is what is the competitive landscape in the early stages of the disease and there our competitors are well known to you, it's Johnson & Johnson with Erleada and its Bayer with Nubeqa.

Shinichiro Muraoka: Thank you very much. And the last question is about the capital allocation. Probably migration is a bit with a different angle, so acquiring a new drug from outside for the primary focus. Next year four POC judgments will be available and if all of these four make a success then you don't need to acquire something big from outside, Is it okay to consider it away or it's not like that? Whenever if you come up with something new as a candidate, then even from the beginning of the next fiscal year, you are going to acquire such a candidate. Would you please sort out the situation for you?

Unidentified Speaker: Thank you for the question concerning only about the BD then primary focus flagship situation, well, of course good is good, but it's that so we make a judgment depending on the situation of that. But what is great about the primary focus is when a flagship makes success, they are following a project waiting after that success. So for example immuno-oncology or the targeted protein degradation, we have the next programs just before the clinical phase. So what I want to say here is that if such great things happen, of course I would be really happy, but making success with these four flagships would lead to the late development phase, but at the same time the following programs would follow, so it's going to lead to the really big cash needs. Even in that situation, would we need to do a BD or not? Well, the individual liberty of this is good or bad. That is a different decision making phase, or I rather don't want to say about this, but if a flagship clinical POC is not really good, that means from this 2030 and afterwards, in other words, XTANDI business is attenuated and that is covered by the Strategic Brands and the following growth will be covered by this primary focus products. So if you don't see any success for that, then at that time probably we need to do BD so that we can buy more time. That is likely that what I think. But whatever cases, my answer is that BD that is not something you can plan beforehand. This is quite a difficult area. So we would say that this is an ideal opportunity for us, but that that is not always waiting for us. So I don't know if this is right way to say, but this is like the sushi on the conveyor. You want to something, you want to eat something, but you have to wait until that dish would come, even if you would like to want to have it. So how our flagship would show the POC that really matters, so it's quite complicated and it's a complex situation, so we have to make a decision case by case.

Shinichiro Muraoka: Thank you very much.

Operator: Next, Goldman Sachs Securities, Mr. Ueda, please.

Akinori Ueda: Ueda from Goldman Sachs Securities speaking. This is my first question regarding IZERVAY. In the United States, the share is increasing steadily. During the presentation you talked about the assessment of safety in the selection compared to [Indiscernible] , there may be a criteria any other points in the clinical settings. IZERVAY is performing very well. What are the factors behind anything to add?

Unidentified Speaker: From the clinical perspective, Taniguchi may want to say something. So first Taniguchi is going to respond and then with regards to commercial aspect Claus is asked to add. Taniguchi please.

Tadaaki Taniguchi: Regarding IZERVAY, as was mentioned safety aspect from the physicians, we are hearing their feedback. Compared to the other company's product, safety seems to be more favorable and higher. That is the impression of many doctors. And GA associated with AMD may result in blindness in this disease. This is a very serious disease. But through treatment, receiving treatment, we would like to avoid adverse events as much as possible such as visual impairment. That is the wish of the doctors. That is leading to the market share of IZERVAY. As for the efficacy, as far as I have heard, compared to the competitor, there is not much difference according to the feedback we have received in many cases. So the efficacy and safety balance is being considered. That is why we are getting this market share at the current level. Claus, anything to add?

Claus Zieler: Yeah, I would like to give a perspective. Thank you, Tadaaki. As Tadaaki said, this is a serious disease. We're estimating 1.5 million patients in the US alone that have not had any option for this disease until the launch in FY23 of two products. So what you're seeing is two things. Number one, patients who have not had an option for a long, long time are coming to the doctors to be treated. So, that's the one wave that is pushing the development of this market. And the other thing is then that doctors are favoring our product. As Naoki said in his presentation, we're estimating 60% of new patients to be placed on IZERVAY at this point. So that gives us a very good feeling that, a, the product is doing what it's supposed to do and, b, that the safety profile is being recognized in the marketplace. Now let me just remind you it's been only one year since we launched IZERVAY, so this is a fantastic result both in terms of the market growth as such as well as the market share, the new patient share that we've been able to achieve.

Akinori Ueda: Thank you very much. I have the second question regarding the introduction of AVB-101. Regarding the indication, it's a franchise you didn't have in the existing business before. And regarding the gene therapy in the existing pipeline, there was delay in development. But in your in licensing, what is the point you kept on your mind in licensing this compound?

Naoki Okamura: Thank you for your question. First I'd like to briefly explain and then Taniguchi and Claus, Yoshitsugu can respond. First you target disease developed in very famous people who confess that they have this disease. It's a topic people are talking about and basically it's progressive. There's no treatment for this. This is a transformative treatment required in this field. When we have gene therapies for the future, we are hoping to expand. This can be a technology platform we can use to expand into various diseases into the future. But the target disease for the time being is monogenic. There is a single gene deletion or missing which is the cause of the disease. Roughly speaking, neuromuscular disease or CNS diseases, I think I can classify as such. We acquired the option for this project. The latter CNS disease which is monogenic and that is going to be the category it's going to belong to. Generally speaking, gene therapies in very serious diseases or without treatment options, mostly if you look at the prevalence there's a certain number of patients already but every year how much of them develop the disease; the number is going to be very small in most cases. So when the gene therapy product becomes available, while the treatment is spread amongst the patients been long waiting for the treatment and when the drugs are utilized amongst them, the performance after that is greatly reduced, so the [Indiscernible] is going to be quite spiky. And the disease that we gained the option right this time, well, because there is no option of the treatment, the prevalence is higher, there are many patients and considering the demographics, the development or the incidence rate would follow. So it's not exactly the spiky but the sustainable business is possible to be expected. So that's the trigger of this deal this time. Whichever cases, well, at this moment of time we acquire the company or we acquire the asset, it's not something like that. We would refer to the data from ongoing clinical trials and with that we can make the decision if we go for or not. And once the data becomes available, if the data is really good, then every other companies would like to jump on that, so the price goes up and it will be more competitive. But for us, when we execute the option with what conditions that asset is possible to be acquired, that is pre decided. So even the price goes up, the already defined condition is applied for our acquisition. So this is the structure of the deal. So we reduce the risk and once a good readout becomes available then we don't need to pay excessive amounts. This is not the deal that I myself did that, so as a person who got involved in the BD, I think this is a really good approach. That's all.

Tadaaki Taniguchi: Let me make some additional comment from BD's perspective, a deal perspective. Okamura gave you a very detailed explanation, so here I would like to make the medical perspective comment. Why did we make this contract of the license with them? This disease, this is the dementia -- frontotemporal dementia. So this is what is called as early onset dementia. This is really devastating form with the age of 40s to 60s diseases developed and within 3 to 13 years the patient dies, so this is really devastating disease. And also at the same time, unmet medical news is really high. On top of that for this disease, the GRN that is identified as the cortisol gene, so the target gene is quite clear. And when the disease has such a clear target gene then a gene therapy has a high potential for the method of the treatment. For those population there is no existing treatment and there we can bring new therapy. In that sense this program is extremely wonderful. That is one thing from me. Point two from me is that we have a V8 [Phonetic] based genetic therapy is on the development phase ongoing and we have experience of gene therapy for mainly rare diseases and there we established experience. So together with AviadoBio, as always possible, we would like to support the development in appropriate manner and we might be able to go forward after getting this option right. This frontotemporal dementia is the target for this product and the population of the patient is likely to be bigger than what we targeted in the past. Gene therapy only for the rare disease is economically difficult as a business. So, as a coming strategies of Astellas for gene therapy, we also would like to target to a bigger population of the disease. So this AviadoBio collaboration is really fitting the aspect that we are looking at. And just like Okamura mentioned a little while ago for disruption contract, the ultimate the final decision is after facing the result, so this contract itself. Well, we can make our judgment after we see the data, so it is relatively safe. We can have a good understanding about the data and also with -- we can also view about the regulatory perspective including FDA as well to make a final judgment if we execute the option right or not. So in that perspective we believe this is really good contract.

Akinori Ueda: Understood. Thank you very much for explaining the details. That's all from me.

Operator: Thank you very much. Next Nomura Securities, Matsubara please.

Hiroyuki Matsubara: Matsubara from Nomura Securities. Can you hear me?

Unidentified Speaker: Yes, we can hear you.

Hiroyuki Matsubara: Thank you for explaining. I have a question about IZERVAY, regarding label update and DTC activities or campaign. Prescription is going to go up but looking at the GATA2 disease, after two years, there was not much difference in the visual acuity. Is that going to affect the prescription into the future? What's your view?

Unidentified Speaker: Thank you very much. First, clinically speaking, how to interpret GATA2 data will be explained by Taniguchi and then how this is going to be perceived in the market that is going to be additionally explained by Claus later. Taniguchi San please.

Tadaaki Taniguchi: GATA2 results, we are talking about the best corrected visual acuity secondary endpoint. That is the secondary endpoint being assessed. BCVA is being used in the assessment and limitation. There are assessment challenges. GA lesions in the retina -- in which area in the retina the GA lesion could occur, depending on that how patients are able to see would be very different. There is a difference. You may know ophthalmology very well, but from the centralis fovea, it's going to be closer to the centralis fovea or is that going to be far away from the centralis fovea in terms of the lesion, depending on that, how patients are able to see, it would be very different. Missing part in the visual field, depending on the patient, that location is different. So by measuring BCVA, what is the clinical meaningfulness or significance or how appropriate it is to measure the efficacy, that's a challenge. Regardless of the location in the retina, the progression of the lesion can be slowed. We think that's very important. So, irreversible retinal cell death could progress then BCVA will decrease and there can be a variety of retinal visual impairment. We hope that those patients will be treated earlier.

Claus Zieler: Yes. Thank you. So Tadaaki explained the link very nicely between the functional endpoints and the lesions that we see growing in this disease. I think your second question was on the DTC, if I understood correctly. Is that correct?

Hiroyuki Matsubara: Yes. Yes.

Claus Zieler: Yeah. So let me explain how we see this market developing. As I said in an earlier answer, this is a disease where there's been no option at all for many, many years. So what you first see is patients who have been waiting for an option to come back to the doctor for treatment. But not everyone in the patient population knows that there is a new option available, so we have to make that known and that is where the direct-to-consumer is playing. So we're really trying to essentially already anticipate that the current penetration rate will have to be enhanced by informing more patients of new treatment options available. There's one other way that we can -- that we're thinking about increasing the market as such and that is if you think of the way patients go for their checkup in ophthalmology in the United States, you have the retina specialists, the retina specialists are the ones who are doing the injection for a disease like geographic atrophy, but there're also many, many, many ophthalmologists who don't have that specialization. So we are -- in addition to DTC, we're also thinking about how can we potentially reach these generalist ophthalmologists and help them diagnose and understand the disease and then refer to a retina specialist to treatments. So these are both mechanisms that we are exploring to make sure that the treatment that IZERVAY and the hope that IZERVAY provides really reaches every appropriate patient in the marketplace. And for that we have to communicate, we have to communicate directly to the consumer and that's the DTC campaign, or we have to communicate -- and/or we have to communicate to the generalist ophthalmology to diagnose and then refer the appropriate patients. I hope that helps explain how the dynamic of the market we see it changing over time and we're now only at the very, very beginning where the patients who are interested and who know and who are always asking for new options are now coming back to the retina specialist for consultation and for treatment, but that dynamic will change over time very much.

Hiroyuki Matsubara: Thank you very much. The second question is about the cost IZERVAY DTC, I understand it quite wells. VEOZAH DTC is also what you are going to do, what is the cost or expenses perspective? Would you please make a comment?

Naoki Okamura: Thank you. Generally speaking, the several channel mix is considered. So if we consider that it's effective, we'll continue, we'll expand it further. But if we cannot get the impact, positive impact that we expected, then we would stop. So the measures will be turned over depending on the situation. More specifically, what are we concerned about, if you have any additional comment about that, would you make it Claus San?

Claus Zieler: Yeah. So Naoki is absolutely right and we are looking very, very carefully at channel mix and we're looking very, very carefully at the ROI of the DTC campaigns, and there're data points we can use to measure the impact of the DTC campaign. It usually comes with a little bit of a timing delay. So in IZERVAY, we'll probably need some time before we can make that assessment, but VEOZAH, it's now already very clear that our DTC campaigns are correctly sized and are yielding the results that we anticipate.

Hiroyuki Matsubara: Thank you. That's all from me.

Operator: Thank you very much. Next Mitsubishi UFJ Trust and Bank, Hyogo San please.

Shinichiro Hyogo: Mitsubishi UFJ Trust and Bank, Hyogo is my name. Thank you very much for giving me this opportunity. Thank you for your presentation. One question from me. Page 19, sustainable margin transformation is my question. Thank you very much for making this kind of presentation material this time. My question is that what is considered as a challenge to share this slide with us and what exactly do you want to do? That's the core of my question. So this core operating version, that's what you have been quite particular about for the operational excellence. You're always aiming for the profit margin increases and looking at these items, many of them are quite orthodox, if I use this term, which means that there is nothing new much, there is nothing added on. But you share this slide with us that's because you have a strong commitment on these numbers or you also would like to communicate this to internally as well, saying that you haven't done everything well so you would like to improve that part. So what's the significance of this slide? What are you thinking? That's my question.

Unidentified Speaker: Thank you very much. Kitamura is going to directly respond to you.

Atsushi Kitamura: Thank you very much. First of all about the challenges, when this the fiscal year started or, in other words, at the end of the time of the last fiscal year financial announcement for the review of CSP2021 that three targets are reviewed in terms of the progress and their cost management or margin improvement or the cost management, those were not well done. In the first three years, we haven't done in a sufficient manner. That's what we feel. And also on the other hand, in order -- well for the improvement of productivity, yes, we've been doing each manner but that is controlled in the company as a whole manner for their cost management especially. Well, this kind of initiatives have been started about one a year and we also worked for the establishment of the mechanism for that. Just like Okamura mentioned, looking at our growth strategies, we have the -- we see the growth room for the Strategic Brands including SEM [Phonetic] as well. And if POC is judged and established and coming towards the later phase of the development, there is a higher demand of R&D cost. So we have to review our calculation, if that is the right calculation or not, that is revisited and that result is reflected into this slide. And also on top of that there's still room of the growth so we can spend all the asset or the budget into it. It's not like that. We also have to have a view about the profitability. We do the investment for the growth field at the time, we need to see the profitability. That's our commitment for the management of control. It is said that if the margin increases, then what kind of capital allocation we could think about; of course, at the same time we need to think about the return of the borrowings. If it has the capability of gaining the revenue and profit, then capacity of the borrowings will be increased as well. So thinking about the long-term sustainable growth for us, this is quite a necessary approach, so we would do this. We can do this that's why we share this with you this time.

Shinichiro Hyogo: Thank you very much. Then before you were doing this already individually, but including the top down management, you have not been able to do this because of the gross investment, it was kind of mixed up. But with a certain mechanism you can now manage very well. Is my understanding correct?

Unidentified Speaker: Yes, you're right.

Shinichiro Hyogo: Understood. Including the companies you acquired, you're going to ensure that management, that type of management.

Unidentified Speaker: Yes, of course.

Shinichiro Hyogo: Understood. Then I don't know in fiscal years, but you will give us an update on what kind of benefits you are achieving. I'd like you to show into the future and among employees. Is this ensured among your employees. What's your impression? An initiative like this, even because of the top down approach, the bottom part may not catch up, it may take time for this to penetrate. At many companies over time changes may not be being expressed as benefits because of an orthodox item, it may take time, that's my view. What about the penetration of this among your employees? This is my last question.

Unidentified Speaker: It is penetrating among our employees. We talked about the growth strategy board ambition and sustainable margin transformation. I talked about the three -- these are the three enterprise priorities we are working on. And a top down approach is one thing but in a bottom up approach, how much we can do. We are accumulating the initiatives and there are a variety of ideas. In that sense, this is enterprise-wide initiatives. It's not just being talked about by the top management, but I'm sure this is penetrating in our organization.

Shinichiro Hyogo: Thank you very much. That's all from me. I am counting on you with high expectations to you.

Unidentified Speaker: Next, today, from 5pm there's going to be another earnings call by another company, so in four or five minutes we'd like to close.

Operator: Sanford C. Bernstein, Ms. Sogi, we can entertain just one question from you.

Miki Sogi: Thank you very much. Sustainable margin transformation is a topic I'd like to ask you. Regarding the development, enhancing in-house capabilities, specifically, what kind of initiatives are you working on? Would you share?

Naoki Okamura: Thank you for your question. I will explain the overall situation. For details, Taniguchi can add. Up until now, in the conduct of the clinical studies, we almost depended on CROs completely. By using CROs, there are benefits as well. For example, a three arm Phase 3 study with 1,000 patients in each arm, we cannot do this alone, so we have to approach a variety of study sites to join us in our study. We have to spend a long time. We have to monitor the patient enrollment process; a third party with a broad network can do this. That was meaningful enough, but from some time ago and if you look at the future portfolio to come, that kind of a clinical study will not exist at all into the future. If there's a middleman in between the investigators joining the studies and we may not be able to communicate directly, but rather we can go there directly to talk with investigators that's more valuable. That's very evident. So we used to pay money outside to CRO for outsourcing, but rather we can do the operation of clinical studies. Once again, that's being restored. We did this in the 20th century, but we changed it to a CRO approach. But because of the progress of a pipeline and conducting the clinical studies is a core capability as a pharmaceutical company, so depending on third party in this regard is not so good, so we are trying to do this internally. If there's anything to add, Taniguchi San please.

Tadaaki Taniguchi: Okamura already explained. But if you just depend on outsourcing, it's costly. And in terms of capabilities, what's happening at study sites and what are the issues, how we can address the situation quickly, we have to think about it. It may not be the best option in all cases. So there were such big issues, so CROs, we will continue collaboration with them where necessary, but internally, global clinical studies can be done. We'd like to have such a structure. At the same time, cost management there can be done by us. By establishing such a structure, we can reduce outsourcing costs, but also in the study, we can enhance efficiency within the study. More recently, digitization or the use of AI can be done to enhance efficiency and quality. Various companies are working on this challenge, so such capabilities can be developed internally. In addition to cost reduction, quality can be higher at a faster sense of speed in the conduct of clinical studies at relatively lower cost. We would like to make efforts to that end.

Miki Sogi: Thank you very much.

Operator: Thank you so much. I am sure you are waiting for the comments and the questions but because of time, with this, we would like to close today’s announcement. Thank you very much for your participation.