Earnings Transcript for 4507.T - Q1 Fiscal Year 2023

Yoshimasa Kyokawa: [Foreign Language] [Interpreted] I’m Kyokawa of Shionogi [IR] Department and thank you very much for your participation out of your very busy schedule. So we would like to start the First Quarter closing meeting explanation for [2024] Shionogi Company. So I’d like to introduce the speakers today. So first of all Mr. John Keller, Senior Executive Officer, Senior Vice President, R&D Supervisory Unit; next Dr. Toshinobu Iwasaki, Senior Executive Officer, Senior Vice President, Healthcare Business Supervisory Unit and Pharmaceutical Commercial Department; and then Dr. Koji Hanasaki, Executive Officer, Senior Vice President, Supply Supervisory Unit and Global Business Division; next Noriyuki Kishida, Senior Executive Officer, Senior Vice President in Corporate Supervisory Unit and then Dr. Ryuichi Kiyama, Senior Executive Officer, Senior Vice President, Corporate Strategy Division; Dr. Takeki Uehara, Corporate Officer, Senior Vice President, Drug Development and Regulatory Science Division; and last Ms. Masako Kudou, Vice President, Finance & Accounting Department and Corporate Strategy Division. And first Ms. Kudou, will explain about the overview of the closing and Kiyama will explain the major activities and achievement for the first quarter and then after that, we take a question and answer time and we'd like to close to 7

Masako Kudou : So I am Kudou. I would like to explain the overview of the first quarter financial result. So on Page 4, this is the highlight of the financial result. So for the first quarter of this year ended in JPY 109.3 billion, operating profit of JPY 46.6 billion; profit before taxes JPY 55.7 billion, the quarterly profit of JPY 42.6 million. And EBITDA which was newly set as KPI in the STS2030 Revision of Medium-Term Business Plan, and also that amount was JPY 51.3 billion. In this slide, year-on-year increase rate is shown. And as you can see, both sales and the profit increases significantly in all the categories and both reached record high in the first quarter of the fiscal year. On Page 5, this is the consolidated financial result. So since we do not issue, disclose a forecast for the first quarter, this is a percentage of a progress against the first half forecast. And they all exceed 50% showing the favorable progress. Regarding the foreign exchange rate, the yen has depreciated more than expected resulting in a foreign exchange gain. Page 6, statement of P&L. Revenue first, as explained in the note, we received the upfront payment of about JPY 25 billion for the transfer OF ADHD drug's license, which was a significant increase over the previous year. But even -- I'll explain later, but even excluding this, all business, both domestic and overseas are progressing steadily. R&D expense increased 10.9% over the previous year due to the active promotion of the COVID-19 and other major developmental project as indicated in STS Phase 2 Medium Term Management Plan. Financial income and cost totaled JPY 9.1 billion, a significant decrease of JPY 18.8 billion from the previous year. This was due to the impact of the dividends from the ViiV Company which declined significantly in the first quarter as the company received one-one time large amount of the previous year due to the delay in the payment period and the large increase due to the lump sum payment received in connection with a settlement with Gilead. But excluding these one-time effect, our dividend is on schedule and we expect to see the increase in the [later] portion of a dividend receiving the full year compared to the previous year. And so the seemingly smaller percentage of increase from the operating income to income before income tax is due to these factors from ViiV that reduced the dividend. And next Page 7 shows the sales revenue by business segment. For domestic sales of the prescription drug for the period from April to June, totaled to JPY 45.9 million, a significant increase over the previous year. Although the sales of Intuniv has continued since this year, and the decrease was more than the offset by Xocova, a COVID to treatment drug and one-time payment for the transfer of the license of ADHD drug, as I explained earlier, which resulted in a large increase of 141.6% year-on-year. Overseas subsidiary and exports also increased year-on-year due to the growth of cefiderocol in Europe and the US. The Chinese businesses 23.4% of the first half forecast but it is as expected because normally the second quarter forecast is larger. Royalty income from the HIV franchises grew significantly due to both actual sales and the impact of foreign exchange rate. And on the Page 8, the – I’ve already explained about sales of level of the prescription drug in Japan. As I explained earlier, it is progressing nicely. The sales of the COVID-19 related products and the influence franchise will produce products amounted to JPY 7.1 billion, an increase of JPY 7 billion from the previous year and almost all of the increase was attributed to the sales of the Xocova. The current situation and the future prospect of Xocova will be explained later on Page 11. Next the Page 9, this is the first quarter summary. Again, all the business are strong and the top line grew substantially year-over-year. Even excluding the one-time ADHD related payment of about JPY 25 billion, we believe that our earning power is steadily increasing. In addition to these, basic business expected to remain strong. We believe that we will be able to achieve the first half forecast at this point given the steady penetration of Xocova in Japan. That concludes my explanation.

Yoshimasa Kyokawa: Next, Kiyama, will explain the major activities and achievement in the first quarter.

Ryuichi Kiyama : On Page 12, that is the current status of Xocova in Japan in the progress of the development plan. Xocova was launched for their general distribution four months ago on March 31 and its use in Japan has been steadily progressing since it was moved to Category 5 infectious disease in May. In the post-marketing surveillance conducted during the latter half of the emergency approval period more than 70,000 patients have used this drug, and the result of the safety evaluation, no additional safety measures were deemed necessary in the deliberation of the Safety Committee. Also the post-marketing surveillance has been completed. We will continue to report the collected safety information on the regular basis. In addition, our general use result survey of 3000 patient is underway to collect secondary information on safety and efficacy and their actual condition of use. And we have just received the first interim report. As disclosed in our website to healthcare professionals, a variety of data that is in line with actual clinical condition that has been collected. And although it is only an interim report, the results are similar to those of the clinical trial in terms of efficacy and safety. The fact that more than 80% of the registered patient have no risk factors also reflects the current prescribing trend of Xocova and also the infection rate are on the rise, prescribing opportunities are expanding especially for patient with no risk factors. The right hand side shows the slide summarize the progress of Xocova development plan. The onset of prophylaxis prevention study and the pediatric study in Japan started the enrolling of the patient in June and the studies is currently on progress. We will continue to accelerate the global expansion of Xocova in consultation with regulatory authorities in each country. In Taiwan we have reported that we have filed the EUA application but EUA application is ended temporarily, so we’re continuing to actually regulate global expansion in consultation with the regulatory also at least in other countries. Next [indiscernible]. This is about the progress of our vaccine business, recombinant protein vaccine S-268019 is under deliberation to the Pharma Secondary Subcommittee. We are expediting our preparation so as to supply the vaccine as soon as it is approved. We are also working on lifecycle management for additional indications for adolescents and school children. And in addition, we are preparing to start clinical trials for the monovalent vaccine for XBB strains recommended by WHO and MHLW after S-68019 approval in Japan. On the right hand side, the universal vaccine is progressing very well, and we hope to start a clinical trial in 2024. On Page 13, we discuss progress in building a foundation for global expansion. In June, we acquired Qpex Biopharma, a US bio startup as a wholly owned subsidiary. It has a strong R&D capabilities of anti-microbials and a diverse network within the US government organizations and experts. We believe that this acquisition will generate a wide range of synergies in our infectious disease business, such as strengthening R&D of antimicrobial agents and external collaborations. We also acquired exclusive global development, manufacturing and marketing rights for Xeruborbactam, the β-lactam antibiotics. When used in combination with Xeruborbactam, β-lactam antimicrobial can exit a broad spectrum activity against drug resistance bacteria. Providing a new treatment option for drug resistance bacteria will lead to an environment in which β-lactam antibacterial agents can be prescribed with confidence. So we will continue the development. Next on Page 14, this shows the progress and milestones of major development projects. There are also investigator initiated trials. But here on this table on the company initiated clinical trials are shown. On the right hand side of the table in red, these are the most current results of each project. Our focus is the anti-obesity drug 0309309 and a painkiller Resiniferatoxin, we would like to have the presentation in the following slide on Page 15. First S-309309, and it is the new mechanism of action. The anti -- the obesity drug, which is the different around the now popular GLP receptor agonist, this uses a new MOA that inhibits MGAT2 monoacylglycerol transferase. We are increasing the speed of the development as the top priority and the table shows the overview of the Phase II trial underway in the US but also with the BMI 30 or over are randomized in a placebo controlled double blind study, once daily overall S-309309’s efficacy and safety are verified. The primary endpoint is the change of body weight from the baseline to week 24. The secondary endpoint is in the percentage of patients who had a weight loss of 5%, 10%, 15% and 20% or more. And in this particular study, we built a POC and compare doses for the sake of the Phase III trial and then we will decide the best doses. So that purpose, we set three dosages and as soon as we get to the POC and to the optimal dosage, we would like to start a global Phase III study. Next we're on the right hand side and the next is Resiniferatoxin licensing from Grünenthal. It is an analgesic with a novel mechanism that acts on TRPV1 on sensory nerves projecting to the knee causing strong desensitization and pain separation by causing sensory nervous to retract on the knee. Currently, hyaluronic acid injections and [indiscernible] acetaminophen and opioids are the main drug therapies for patients with knee osteoarthritis in Japan, but the balance between the long term efficacy and safety as necessary. The clinical trial so far have shown that once per six months administration to the knee joint significantly reduces pain and improve the physical function as well as good safety and tolerability profiles. FDA has also designated it as a breakthrough therapy. These characteristics will make it a drug with a greater potential to become a new treatment option to meet the unmet needs of patients with knee osteoarthritis. Next Page 16, this is the HIV business progress by ViiV. GSK presented its financial results last week. This is an excerpt from that. The bar chart on the left shows the sales trend of the new products every quarter. The oral two-drug regimen, Dovato and Juluca and the LA formulations Cabenuva and Apretude, these four products are growing in terms of the sales and growing the entire HIV business. The line graph shows that the sales of these four products as a percentage of ViiV’s total sales of anti-HIV drugs and it is up to 51% now. In LA formulations which is very important for medium to long term growth, the treatment regimen Cabenuva increased sales by £50 million compared with the previous term in SOLAR study in comparison to big therapy of Gilead. 90% of the subjects preferred Cabenuva to the orally taken daily products. And in many clinics in United States, there are many patients who hope to start with a prescription of a Cabenuva. And there 70% or more of the patient prescribed with Cabenuva were switchers from the competitor’s drug. This will give us a sense of confidence for the future growth. On the prevention side, Apretude in the US, sales is trending positively and then the European CHMP and has the positive opinion for the approval. Next, the European Commission will make a decision on the approval but this positive opinion is an important step for the approval that ViiV is going to have the explanatory meeting on HIV in late September to talk about the update of the, maybe to the long term strategy of primarily LA formulations. Page 17, this is about the human capital management for 2030 vision. Since the ST 2030 was developed, our colleagues in group understood the importance of proactively acquiring new capabilities that are necessary for growth, and we have engaged in the reskilling and retraining actively. Last July, we set up the Human Capital Strategy office to execute initiatives to maximize human capital. We'll change the HR and grading system to allow diverse people to thrive and to speed up Shionogi’s growth. And we started to work from home and four day workweek systems for better work environment. And we also set up a joint venture for back office work with Accenture. We also develop the Early Retirement Program to speed up the review of the talent portfolio. Going forward, we will hire people with specialist skills from outside and the develop talents for globalization, more. And we will do engagement to transform our corporate culture by addressing our future challenges so that we can build talent portfolio for that further growth to ultimately employ 2030 vision. Lastly, the return to shareholders. As a part of the financial strategy for STS Phase 2, the company decided to conduct a buyback and a cancellation of its shares. The buyback is scheduled from August 1st to March 31st 2024 with an upper limit of 12.5 million shares and JPY 75 billion. Taking the share price which we think is undervalued and the performance trends into account, we plan to obtain the largest ever number of shares. We'll continue our efforts to strengthen shareholder returns and improve capital efficiency. My presentation will end here. Thank you very much.

Operator: Thank you. So we'd like to move on to the question-and-answer. [Operator instructions] So Mr. Yamaguchi of Citi Security, please.

Hidemaru Yamaguchi: Yamaguchi speaking. Can you hear me? I have two questions. First of all Xocova, there is no disclosure and for the sales of this drug as one drug. But in terms of Q4 explanation, you mentioned about the prescription ratio. And regularly you are still selling, but in terms of prescription ratio and the share of the market. Well, seemingly, it seems that there is room for further growth. But currently, what do you think about the situation of Xocova in its growth in the market share?

Toshinobu Iwasaki: Iwasaki speaking, I will answer your question. For Xocova, the treatmental ratio from the external source out of the three drug, a little less than 20% out of the three treatment drug. This is the fixed time point observation and not very accurate one, but I guess reality is close to that range. And 60% of them is by Xocova and for a risk free patient mostly Xocova is prescribed. And for the future, there is a nice wave coming now for us from August, September. I guess that the nice wave will reach its peak in that timeframe. As a whole treatment ratio, I hope that it should be increased further more.

Hidemaru Yamaguchi : Just a follow up, so the treatment ratio is increasing, correct? Originally you forecasted as 10%. Now gradually it is increasing. And one more question for 309309 obesity drug. The clinical.com says that the Phase II completion will be April next year. In the interim analysis, will there be a disclosure of interim analysis? And after Phase III, I understand that Shionogi alone will proceed but the whole prescription with GLP-1 would be the possibility, a combination, I mean? Will there be any global development inclusive of such a kind of a combined treatment development?

Unidentified Company Representative : Thank you for the question. Uehara will answer your question.

Takeki Uehara: 303309 obesity drug are for the future study. The size of the clinical trial is not really big one. After the registration and six months, there will be primary endpoint of evaluation. We’ll keep the blind until the primary endpoint announcement. And after all the analysis is over in the end of the fourth quarter, I hope but it is not fixed yet. And so for the second phase trial is over, the global Phase III will be on the way but as you say the -- with the combined -- the combination, it is very likely that we have a combination drug. And the alliance partner candidate, the company, are coming to us for a possibility of a variety of the deal. I think the -- what kind of alliance strategy we'll take with them we'll like to discuss with the possible candidates.

Hidemaru Yamaguchi: So the alliance possibility, yeah, so there is the great opportunity for alliances with other company, correct?

Takeki Uehara: Yes, we should not depend on alliance that will delay the start of the Phase III. We'd like to shorten the timeline. But in parallel we'd like to consider the partner.

Hidemaru Yamaguchi: Thank you. That's all.

Operator: Thank you very much. Next Goldman Sachs, Mr. Ueda.

Eiji Ueda: Ueda from Goldman Sachs. On Xocova, in infectious diseases there is a plan and in the first half the progress it was not that much content with the plan. How progressed and how good where there is a progress? And for the prescription plan, is there any bottleneck of the prescription?

Toshinobu Iwasaki: Okay, Iwasaki on Healthcare, I’ll will handle that question. As for the progress, the number of patients is not dramatically increasing. So the sales, it may not be spectacular but the prescription rate is 60% out of three choices. So in terms of that, the milestone was reached. And going forward, now, it is in Category 5 and the broader spectrum of hospitals -- increasing number of hospitals may prescribe the drug, there is no restriction anymore, but still the medical institutions who accepted the patient with fevers are still the mainstay of the prescribers. And so, we would like to encourage local governments and medical associations and the academic societies and present it along COVID study results to appeal the necessity of with the medical treatment so that the prescription rate overall needs to be higher by doing these efforts.

Eiji Ueda : Thank you very much. And the second part is about the cefiderocol. Compared with the last year and the compared with the plan, the growth is quite good. What is the background for this positive trend?

Unidentified Company Representative : And this, Hanasaki on Supply will take care of this question.

Koji Hanasaki: Cefiderocol the progress, especially in the United States, the new account is being opened and also other than hospital which used this drug decided to continue using this. This is another positive trend. So the users of the drug are assured with the efficacy and then come back to reuse it. So this is a how a growth comes. And in Europe, in Spain and last November, it was launched in Italy and Germany. The price negotiation is going well. And then that's why we are ahead of the plan. That's all. It was Hanasaki.

Eiji Ueda: Thank you, very much. Thank you. That's awesome.

Operator: Thank you. Next, Mr. Hashiguchi of Daiwa Securities please?

Kazuaki Hashiguchi: I'm Hashiguchi. Well Xocova situation in China, the development for obtaining the approval or is there any update? And is the probability of achieving the sales plan in China for -- by Xocova increased?

Koji Hanasaki: Yes, I -- Hanasaki will answer. Well, data has been already presented to Chinese DA but we are answering the question from Chinese authority. In May and June, the second wave arrived there and considering from the past situation, I think the level of the demand has increased just most after some time and in the coming winter there will be yet another wave coming in [indiscernible]. So I think Xocova is necessary and also the preventive measures. I think it is very highly respected in China that our Xocova will be used for preventive purpose.

Kazuaki Hashiguchi : And achieving the second half of the plan, you mentioned that it can be achieved but you have special retirement plan which is recorded for the budget of the second half. Is it included from initially or even if it is added you are able to achieve the business plan?

Unidentified Company Representative : Kudou will answer that question.

Masako Kudou: A special retirement program, it is not included in our forecast. However, in terms of the -- or its impact in terms of the amount, we are now studying how much impact it will present. For the first half the progress ratio achieved in the plan is on our schedule. So inclusive of that forecast we see the achievement of the business plan is quite likely.

Kazuaki Hashiguchi: Thank you.

Operator: Mr. Sakai from Credit Suisse.

Fumiyoshi Sakai : This is Sakai from Credit Suisse. On Xocova, on Page 11 on the right hand side, the situation in the US is described, long COVID trial, is it with SCORPIO? Please update us about the study of the long COVID, any update? Is there new data available now or do you see some trends?

Unidentified Company Representative : Okay, Uehara will handle that question.

Takeki Uehara: On long COVID, as you can see on this slide, deploy the follow-up three months and six months, mainly in Asia. This is the Phase II study, it’s a Phase III part. This data was published 12 months, one year follow up. The data is now available. In September at ESWI that is an European, the respiratory infectious disease academic society that is where we are going to publish. We are preparing with our late breaking papers. We think that we can deliver positive results. So please look forward to the press release and also the publication about that meeting. And in global studies, SCORPIO-HR study, now the SR study, its two, three studies, the evidence are the basis and the endpoint collection method was predetermined to look at the reduced the risk of the long COVID. And this is going to be checked and tested in many different countries. Now the subjects are being accumulated, this is the large study. So it takes some time, but more than half of the subjects who are accumulated and as soon as the result is available that will be shared.

Fumiyoshi Sakai : Okay, then in first in September. And the one more, a little concern, there was a news or event on Page 14, the development project progress at the top, Olorofim. In the United States the FP2 and SG that is the submitted and the complete response letter was issued from FDA in June. And then, as a result that data will be collected together with, in coordination with FDA. And it says this is global and how is Shionogi involved in it? And is there any impact on domestic development? Anything to update about this?

Takeki Uehara: Thank you for your question. As you understand in the United States, that was a result, the response, but it is about the interim analysis report. And then there was a strong request for the speeding expedition of the approval process and then there was the lasting class, very severe patient or with that target. So there is a high need for this and with the limited new data, we tried to submit a document with the limited data. However the FDA required additional data. And on that data, this is not the interim data, the first 200 cases, the entire data of these patients are available based upon which and we will discuss the possibility with the expedited approval with FDA. We're going to start that negotiation with the regulatory authority. Well, this package can we really apply? That is applicable within United States, and Japan and Asia and Europe, where we have licenses. The Phase III trial is underway in parallel, and as the arrow shows, in FY23 and FY24 Phase III will be conducted. And in Japan, the subjects will be accumulated and also in China, we try to accumulate the subjects and we are on track about that. So including Japan and Asia, and Phase III completion will be expedited accordingly.

Fumiyoshi Sakai : Thank you very much. So to clarify, in the US 200 subjects, the package, the data is already available, right?

Takeki Uehara: Yes.

Fumiyoshi Sakai : So it is that after the letter came?

Takeki Uehara: Yes, that's right after the letter was issued.

Fumiyoshi Sakai : Okay, I got it. Thank you very much.

Operator: Thank you. Next on JP Morgan, Wakao, please.

Seiji Wakao: I am Wakao from JP Morgan Security. Thank you for your explanation. I have a question about Xocova, first in Japan. JPY 7.1 billion result includes Xocova?

Toshinobu Iwasaki: Yes, that is the April/June result and most are -- can be considered as Xocova.

Seiji Wakao: I guess Xofluza is included. But would you please tell us the breakdown of this amount for Xocova because COVID is now the Category 5, so Xocova is now available in the market broadly. So in a way, you are selling out of accumulated inventory, out there was JPY 7.1 million, how much is inventory and how much is actually prescribed? That's the first question.

Unidentified Company Representative : Iwasaki answer the question.

Toshinobu Iwasaki : For the break down detail, I cannot tell you but as I said that mostly that by Xocova. Yes, the inventory situation, well, the infection itself is expanding so that we are not accumulating the inventory, they are all used in a way.

Seiji Wakao: Thank you and Chinese situation. Looking at the infectious situation in China, and also the approved oral drug, considering that even though it is approved, I guess I think JPY 40 billion, JPY 50 billion is anticipated. But it is I guess very difficult to achieve because during Chinese situation, this is a three month delay in a way in [recording] in China. So by the end of December, you can get approval and having this JPY 40 billion, JPY 50 billion sales. I want to know the probability of achieving that sales plan?

Unidentified Company Representative : Hanasaki will answer your question.

Koji Hanasaki: For the Chinese situation, yeah, we have presented this data to the authority and we are discussing with them in many ways. I have mentioned earlier already that the first and the second wave of infection situation in China is suggesting that yet another infection onset from winter. And I think this efficacy of Xocova will be very much wanted to deal with this. And so the second half, I think the progress for approval and increasing the sales will be on the way. Well, I guess they were some oral drug approved already. But in a way, I think those already approved with the oral drug will be used the first, in a way a bit pessimistic or kind of a conservative too much.

Seiji Wakao: So if your Xocova is approved, it is regarded as the existing COVID a drug in China so have equal status?

Koji Hanasaki: There is yes, Molnupiravir of Merck and one more drug already approved, but yeah, there are some Chinese oral drug also, but the Ensitrelvir of our company has kind of a viral exclusion that the effect is very high. So I think they will be a likelihood.

Seiji Wakao: Thank you.

Operator: Jeffries Securities, Stephen.

Stephen Barker : Thank you.

Operator: I’m sorry, it's hard to hear your voice.

Stephen Barker : Sorry about that. Now, do you hear me loud and clear?

Operator: Yes.

Stephen Barker : And on Xocova, in Japan, the number of patients right now under prospect? What do you think about the trend of the number of patients in Japan? And so the out-of-pocket payment, currently it is zero for patient but after September how much does patients have to pay? Is it going to affect the demand and also the price on the list? In April there will be the repricing, what will be the price on Xocova at that time?

Unidentified Company Representative : Iwasaki will answer to that question.

Toshinobu Iwasaki: Now we have the point based study observation of the number of patients so we don't know the exact number of cases. However from available data, currently 70,000 or 100,000 patients are being affected by COVID, that is our estimate. The current ninth surge is of peak in mid-August or it may continue until October. The peak will be happening in that timeframe. And given the current trend of increase compared with the Asian surging, the peak height will be 80% this time. And as for the payment, out-of-pocket payment, we cannot make any difference about, it depends on the government decision. Two months ago you may, at the Academic Society of infectious diseases and there was a request issued by them to defer or delay the start of the out-of-pocket payment. Now, the treatment ratio is 10% or 20%, which is low. And then there will be another round of surge coming in the winter. And if there is no subsidy, and if everything has to be paid out-of-pocket, that treatment ratio will become lower even further. So because of that the Academic Society requested a continuance of the public fund for the treatment. So these factors and our PMS long COVID data, this will be used in order to encourage the -- for the sake of the public health, a continuation of the public subsidy for the treatment. This is something that we have to do. But we cannot make a change just by one single company. And it depends on the decision by the government and we’d like to work together with the Academic Society. And this, the price revision or there is no talk about that over now. I am not able to answer that question.

Stephen Barker : Thank you very much and about the vaccination as we speak, there is a deliberation underway under the second subcommittee and if the result is positive, then the official approval. And when do you expect to have the official approval? And then I think that you are already talking with the government, is there any possibility that the government is going to purchase it? And what is your idea about the potential things of the vaccine?

Toshinobu Iwasaki: Hello, I am Iwasaki. Well and the subcommittee is being held and it is irregular, usually in advance, the items to be discussed will be published one week before but it was just before the meeting it was announced. And when it comes to COVID related things there should be additional special review and so when is the approval going to be given, it's hard to tell, but they will not be so distant in the future. And about the purchase by the government, whether they are going to do it or not, there is no clear announcement. So, the volume of the purchase and the price for the purchase, that discussion will start in full scale once the approval is given. And if it is purchased by the government, well then a company, well are working for the preparation of the distribution, so once we get to the approval, there will be the negotiation of the price. And then if the distribution system is clarified, and as soon as those decisions are made, we are able to provide the products to the market.

Stephen Barker : Okay, thank you very much. That's all from me. Thank you

Operator: Next from Mizuho Securities, Mr. Tsuzuki, please.

Shinya Tsuzuki : I am Tsuzuki from Mizuho Securities, can you hear me?

Operator: Yes.

Shinya Tsuzuki : Thank you I have two questions, one for the treatment drug and one for the vaccine. Or in recovery report in April, June and after July now, I think the number of patients is about three times, is it correct understanding? And currently, now, the effect of the immune incorporation, because well, even though the vaccination is done, it wouldn't show the vaccination effect of some immunology are kind of incubating. So, is it the correct understanding? I don't know about this situation.

Takeki Uehara: I, Uehara will answer. As you see here, correct, gradually number of infections are increasing as compared to April/ June, the dry situation is in a way increased one. We have a 60% of market share, especially the risk free patient to viral exclusion is very effective for those patients and that push up our share. So, in a way the number of patients are increased and also the number of the hospitals which prescribe our drug is increasing. So, gradually our sales is on the rise. And for the vaccine situation, yes. And the vaccine and also the acquired immunology by the neutralizing body, well basically for the people who are once infected, again will be infected. And so XBB is kind of the vaccine for a different type with a strain which is promoted. And so I think the pandemic will increase for the future too. So this mix sounds a bit too strong, but the second quarter results in the first half, I guess, Xocova sales will contribute very much.

Shinya Tsuzuki : Thank you very much. One more question is about the vaccine. I think this immunology establishment will have an effect and you are promoting the monovalent vaccine for the omicron XBB strain response. And also you mentioned about the increase of manufacturing capability. So what is the current situation of a manufacturing enhancement?

Takeki Uehara: XBB, the specificity is very different, so I don't have XBB human result. So I can’t just say, for sure broadly but 019 the vaccine for Wuhan strain, the immunology is well induced and kind of sustained efficacy is proven. So this kind of gene recombinant vaccine will be really useful so that there's some other variant of vaccine for omicron expedition, this strain is very much effective and we will be preparing for human study, and we'd like to get the data as soon as possible. Or the production, Hanasaki will explain.

Koji Hanasaki : So 019 production, well, in Akita plant we will make the first lot for it. For the mass production, there is a Unigen plant in Gifu, which will be utilized for mass production at the from the Akita scale to a Unigen scale, there is a scale enhancement trial. There are improvement of their cell culture and other bioprocesses improvement going on. And for the scale of production enhancement, we'd like to discuss with the contractor company. So depending on the variety of the scale, we are able to manufacture and the amount of it are adaptive to that scale change.

Shinya Tsuzuki : Thank you very much.

Operator: From Sanford Bernstein, Mr. Sogi.

Luca Sogi: Thank you. From Bernstein, Sogi. Vaccination and also the back office JV with Accenture, I have two questions, first on vaccinations. Two questions, first, the vaccination doesn’t deal with the omicron variants. And then after the approval of this vaccination, is this product going to be used, how much? And how much of the sales do you expect and how likely is it going to be used after the approval? And so far the JV with Accenture, could you elaborate on that because this may have a cost impact? How big will the cost impact to be? And what is the timeline of having this JV?

Unidentified Company Representative : On vaccinations Iwasaki will handle that question.

Toshinobu Iwasaki : The omicron variant, now, this is not just specifically developed for the Omicron variant, that's true, but however, in clinical trial, the neutralizing antibody was confirmed and so, the mortality and onset can be -- are not directly observed. However, looking at the change of the neutralizing antibody, there are certain roles to be played by this and as for messenger RNA, having the additional immunity and also the fatigue. There are certain people who do not like to have the vaccinations like 100,000 or 200,000 people don't like it, the vaccinations and this vaccine is for the Wuhan strain. However, after mRNA and RNA vaccinations there will be some additional immunity to be provided. So using this kind of data and also looking at the safety, the messenger RNA vaccine if people don't like that idea or this can be a use candidate for them. And as for the sales, but we expect as I said, it depends on the talk with the government. So it is nothing we can say for now. Okay, on JV, Kishida on Corporate is going to explain about the details.

Noriyuki Kishida : The contents, the details of this JV is that the Shionogi business partner was a subsidiary until up May this year. And HR Accounting and General Affairs is back office work was done by them for the Shionogi Group. A need to long term perspective, sending human resources to that subsidiary turned out to be difficult and investing in human resources in terms of our strategy, it will not be easy to do that and given the good training and the human resources development in that organization was difficult. So now we join our hands with the Accenture. Those who are seconded right now or who are being transferred to the subsidiary or those who are directly hired by the business subsidiaries, or for their element, and for their future career development, to look at all these things overall, and also looking to the cost management, in order to achieve both of them, we decided to have a JV. This is how we came up with this idea. And the specific the efficiency, we haven't disclosed that to the public. With Accenture, we are planning to have a long term contract more than 10 years. And over the next 10 years, for example, we would like to have a negotiation about what kind of efficiency we will pursue. And from that perspective, we would like to set up the negotiations and contracts. So the commissions will be controlled in this the longer term appointment. That’s all. Thank you very much.

Yoshimasa Kyokawa : Thank you. Well, the time is running out. There is no one raising hand so it's already the time. I’d like to close the meeting for the explaining the closing result for the first quarter of 2023. Thank you very much for your kind participation out of your busy schedule. Thank you.