Bread Financial Holdings Inc

NYSE:BFH

[Interpreted] So, I would like to now start the 2022 financial results. So this is Kyokawa from Shionogi Pharmaceutical. Thank you for attending today's session. And so, let me introduce the people here, the Chairman and CEO, Teshirogi Isao.

Thank you. This is Teshirogi. And Executive Officer, the General Manager of R&D and Investment Strategy, John Keller. And Executive Officer, General Manager of Healthcare Business and Pharmaceutical Product Business, Iwasaki Toshinobu. Senior Executive Officer and Senior Vice President, Corporate Strategy Division and Corporate Planning Department, Kiyama Ryuichi. And Executive Officer, General Manager of Pharmaceutical Development Division, Uehara Takeki. And the General Manager of Accounting and Finance, Kudo Masako.

So, from Tesshio, we'll explain the financial results first, and we have time for Q&A. We plan to finish at 12.15.

And today, we have simultaneous translation, so if you are going to listen to translation, please choose Japanese or English language from the globe icon at the bottom of your screen.

So, let's begin. Please, President Teshirogi. Thank you. This is Teshirogi. Thank you. So, I will explain the outline of the financial results. So, we have some numbers, and especially for fiscal year 2023, we have guidance, R&D, and the sales activities. I will talk about our thinking towards those. Today, we have the professional investors, so I would like to talk about those topics as well. And for R&D, we have John, and also Uehara here. And for sales, we have Iwasaki here. So, they will be able to answer your questions.

So, let's go to page four. I think you already know these numbers. So, revenue, and for all the profit categories exceeded record highs, and the revenue was JPY 426.7 billion, and that was up 27.3 percent, and the profit was JPY 220.3, and operating profit was JPY 149.0 billion, and net profit was JPY 185 billion.

And so, I personally think, since I assumed the president, that was 2008, and from 2001 to 2004, all the business was re-engineered, and around 2004, our sales dropped to about JPY 200 billion, and the wholesale sales, that includes JPY 427 billion, we were not able to renew the top-line. However, for profit, Presto and HIV loyalty were well combined, so we were able to renew the profit all the time.

However, the revenue has caught up to profit, and for 2023, the Japanese government bought the drugs as well as we had the revenue, about the same amount as those bought by the Japanese government. So, it's challenging, but I think we were able to meet the target, and so, we have these highlights now. And so, revenue has increased, and now we're in a position to aim for a company that will have increased revenue.

Now, let's go to page five, so the COVID drugs, and the operating, the R&D, and also the pharmaceutical things and the communication with all the authorities around the world, so that we started from JPY 120 billion of net profit, and usually, we get about JPY 140 billion of operating profit, but we were in a position not to understand the situation very well, so I told you last May that we would use this kind of assumptions, and at the September time of settlement, we knew that Xocova and the COVID vaccine trend were able to be understood, so in November, we revised the forecast, and at the third quarter, after the third quarter, we had the final estimate.

And you can see from on the left-hand side, you can see the revised forecast came out after the third quarter, so year-on-year, we have the numbers on the right-hand side, so what about the forecast on year-on-year, that's also important for us, the priority came out, and we were able to, can we able to perform as was performed, that's very important, that's why we have the year-on-year, so we got to 109%, and so we have achieved the estimate.

And then page six, you can look at the cost of sales and finance, income and cost, I explain about the expense, so as for the cost of sales, revenue was quite good, Xocova, that was JPY 104.7 billion yen, and so that's our own company product, and we had to prepare for the sales, so normally, the cost of sales for Xocova is quite high compared to other products, but the cost of sales could be contained, so JPY 62.6 is result, and 94% achievement, and year-on-year, so the revenue increased to 27%, but the cost of sales is 12%, so the gross profit is 30%, so the cost of sales is contained, and so we proceeded our business by containing the cost.

And if you go to SG&A, it's a little lower than the best estimate, but the R&D is over JPY 100 billion, so that's 30%, 40% year-on-year increase, so we are using JPY 100 billion of R&D, and still, we are getting the operating profit of JPY 149 billion, so we have achieved what we said, promised, so the JPY 100 billion of R&D expense is a Merck-Ma for our future. To support this kind of figure, we need JPY 450 billion and JPY 500 billion yen of revenue constantly, so that is the 2023, the numbers that we have to show you.

Now, if you go to the finance income and cost, it's JPY 71 billion, and it's an increase of JPY 55 billion, and JPY 16 for 2021, that was three times registration from the Biven, and their accounting had been delayed, and we were not able to get the dividend, and so the third quarter dividend was not here, and ViiV and Shionogi had a settlement for IP, and we got a one-time payment from Gilead, and JPY 50 billion for Shionogi, that was registered last year, and we got JPY 50 billion, so the ViiV got as much amount as well.

So, this was included in the well dividend, so this is a special arrangement, so that the in total, JPY 25 billion something, so plus minus JPY 3 billion, this is the type of, this is kind of the range of the well, that amount, this was already included in the last year, therefore, out of JPY 717, perhaps JPY 25 billion should have been included in 2022, that the, in fiscal year 2023, the forecast for the dividend, so that the finance income and the cost, that the well, about JPY 42 billion or something, So that this is the routine level of course, so this is a percentage we are supposed to receive on a routine basis.

So VIV's sales increases, the profit increases, of course, the dividends is going to increase as we'll. So for this year, so JSK and VIV, so that the, they have some forecast for that sales and cash position, then perhaps JPY 42 to JPY 43 billion would be the appropriate amount as a dividend, so what is the amount of dividend we are going to receive has been more or less established, so other than that, about profit, we already explained to you earlier.

And page seven, so that the, well, this is just a schematic chart of what I just explained so far, so therefore, we don't have any special topics, but R&D, on your left-hand side, you see that we have a large increase of R&D expenses, so in the future, that the JPY 100 billion, this is that the, well, one of the, well, the criteria for us to achieve, so whether we are going to sustain this level R&D, so this is the indication we can give you, that we try to, again, that the, well, sales to sustain this level R&D.

On page eight, and page 10, Domestic situation is going to be explained later, and overseas, we have had a very good business, even including Forex, Fortimax, so the JPY 2 billion, some things, this was already included in 2021, but we have seen this level of growth, so there was cefiderocol, and Fetroja, that Fetroja, that is a name in Europe, they have had a very, so this product has had a very good performance, and about the OTC, in four years in a row, we have achieved the highest ever sales.

Therefore, that the, well, operation in the industry has been the upgraded, so therefore, OTC products, so that the, we have a very, that the extensive good lineups, so we are going to promote this, and about the HIV, as I said earlier, on your right-hand side, so HIV franchise, minus JPY.5 billion, 3.3 percent minus decrease.

As I said earlier, is that the JPY 50 billion yen, this is at the lump sum payments of the Gileads, including this, this is a comparison against last year's royalty, so that the JPY 550 billion, a lump sum payment was received, but we just got

the minus of the JPY 5 billion, in other words, that the loyalty, actually, we have seen an increase of about JPY 45 billion, so this trend, including injectables, that too, that the well products, the treatments, John is going to tell you more in detail later.

So about HIV, in the near future, we are, that the forecast, the very strongest growth, and we can do that, and about the COVID-19, as I said earlier, so that the JPY 100 billion, and that the purchase, and also that the JPY 4.7 billion, in the general distribution sales.

On page 9, well, this was said already, explains that the COVID-related products, 100 billion yen, so this was included, so for that JPY 91.5 billion yen, which achieves, so this one, we will try to expand this, then, this level of COVID-19 products need to continue in 2023 and 2024.

On page 10, the domestic markets, so the flu families, the JPY 1.1 billion yen minus decreased, and in Chinubibanse, so we have seen that the well are at a certain level of growth, and they were already transferred to Takeda, as of April, about the ADHD franchise, has been augmented so far by us, so that the well, perhaps you may have a question, whether we have had a good sales at the well force, so ADHD is the area where we actually took part in for the first time.

But we are able to show the capability that we can earn this level of growth, but the flu, about three years ago, that the well, the stock in the distribution, well, were collected, and only the necessary portion was sold, so this kind of approach was taken after October, so with this scheme that we are able to sell JPY 4.2 billion, so that the well stock and distributions are manageable.

Now we have come to almost zero in the stock and distributions, so that when the flu actually becomes rampant in the future, in the very purest, that whenever that we see sales, then that we can boost our sales, so that the, and from the time of the SPGs, so that the well, we actually replace a new product after we collect all the products, and some products, they go to the, well, the hospitals, that we are not able to repackage, therefore that these are non-GMP products, that is why they need

to be disposed.

So however that the cost of goods is low, but it is not a very good idea for us to continue to dispose such products, that is why, so in the case of emergency, and in the case of the well infections, that we did this kind of disposal, so I think this is a very good approach, and it seems like Iwasaki-san is quite said that the, well, knowledgeable about this, said that the 20, 80 percent increase year-on-year, and after this year, for this, so we are very strong in this segment, so that we are going to try to grow this product.

And on page 11, in 2020, transformation strategy 2030 was created, and in those days, that the target for 2020 is described on the third from the right, such as JPY 426.7 billion, so that the, against this KPI, that our performance 2022, that the, well, the overseas sales has been increasing, but we have not yet achieved our target, but the other sales include Japan, overall has increased, that is why, this is, that the portion overseas is somewhat small.

So they will use 4.0, that is the, well, our target, other than this, we have achieved, so that the SDS 2030 in June revision is going to be disclosed, that is our planning, so towards this disclosure meeting, well, in 2022, I think we can say we have had a very good year.

So on page 12, so this is, that the description, what I just mentioned, so that the second item of the second drivers, the stage, I put six, so that the pipeline, so later, I'm going to, that explain to you one by one. On page 14, so that the, in addition to the 2023 SDS 2030 revision is going to be disclosed, but the same themes is going to be very important for us, so for the last three years, that we had a very difficult year, and we are able to create the COVID-19 products, so DERF-LUZA[ph] is also included in the respiratory infectious disease products, including Japan and global, so that the, how well we are going to establish the sales.

That is the number one priority for us, including SEBI.CO, AMR products, so G7 Summit this year is going to be organized in Hiroshima, Japan. In this meeting, that the, perhaps, that the G7 statement is going to be created, including these products, the infectious products, and also Sawada, actually, met the Prime Minister, so we are planning to have the meeting with the Prime Minister, so that the subscription in G7 is going to be extended, that is our hope, even after the expansion, so COVID vaccines, products, sales, and the, it's still higher.

-So therefore, that the as-based business model, JPY 10 billion or JPY 20 billion, so if we can gain such that the, well, sales, well, I think we can create a very good position, but in addition to this, how well we are going to grow at the top-line is going to be another challenge, and we have had all our products, so product access, and also that the long COVID are followed. We are the only one company who have covered all those. We are very proud of this. Of course, we have to pay some expense in this case, but what is the action that we need to take in next stage? That is a gear change in 2030. That is one of the themes in 2030.

So, we need to put our money and people in order to support the next growth for Shionogi. That is the trend for 2023, and now going on to page 415, earnings forecast, so JPY 450 billion of revenue and operating profit of JPY 150 billion and profit before tax and net profit, as I mentioned, we have dividend, will be normalized, so about JPY 20 billion or more, so JPY 192 billion profit and JPY 155 billion of profit, so that seems like we have decreased profit, but it all depends on how much top line we can achieve and SDGs and R&D, how much we are going to spend on those, that will depend on all that. I think you understand that we'll.

Especially from we started, from JPY 150 billion last year, and so what would be the minimum line that we can promise to you if we don't have much revenue or if we have used more R&D than expected, what would be the minimum number? That would be the 150 of operating profit. We'd like to start from JPY 150 billion.

On page 16, some of the base for the revenue by segment in Japan, you can see it's JPY 179 billion. That is the JPY 100 billion of purchase by government, and so JPY 700 -- 79 billion, JPY 709 billion, and so we have JPY 179 billion to JPY 134, so it seems like we have decrease of 25 percent, but it is really to bring from JPY 70 billion to JPY 134 billion, and in Europe and US, Semidelco is the central product, but in Asia, including China and Korea, and Zocova and Israel, we have much registered for the second half.

So about JPY 420 billion. We will bring that up to JPY 450 billion, and most of that growth will come from Zocova and vaccines. I think you understand that, so in Japan and Southeast Asia, how do we do this business, yeah, in Japan and Southeast Asia, and royalty, right, 10 percent increase, so that is JPY 185 billion, but GSK and ViiV, they think, they also forecast 10 percent increase in revenue at present.

So we reflected those forecasts, but it all depends on the currency exchange, and ViiV, we'd like the ViiV, ViiV wants to really grow this area, maybe we'll change this, and page 17, so the royalty, it says JPY 14.8 billion, and we have JPY 16.5, the HIV, and crystal royalty, in 2022, it became zero, so there's a decrease, but HIV itself is JPY 16.5 billion, and so the most of the reason that we will have 450 billion relates to the vaccine, and for influenza, last year in Japan, we registered ViiV JPY 4.2 billion, and Roche, we're not so strong in US and Russia.

I don't know if you agree with us or not, but our sales side and the R&D side, we are doubtful about influenza, and there is a zoonologist infection, and so is this a real threat or not, it's difficult to understand, but CLIAZE, all the human and pig and bird, those influenza, it works against all those, and so NOIDAMIDAZE as well, we have two products, so we can cope with, we can prepare, we should prepare for the influenza, so there is some expectation towards influenza in this forecast, and for Xocova, John and Iwasaki will answer your question.

And now we have on page 18 Xocova, let me just mention two things on the right side, in US and EU, we have clinical trial, the protocol EU, UK have agreed, and it's going speedily, it's going smoothly, and in US and UK, we hope to get approval in US and UK, and also we have the prophylaxis trials, and also for pediatrics, how much do we need, and how much needs are there, we are not able to forecast that as cleanly as in Japan, but fast track is really a tailwind for us, and for China, in February and March, especially in China, they stopped the zero corona policy.

And probably China as a country thinks that since it's zero corona, there's not much needs to prepare for vaccines and for drugs, so they may have that kind of attitude, but they have two drugs, they approved two drugs speedily that were made in China, however, since that review process has been stopped, and we were not able to move, however, in May, the normal communication has restarted.

And maybe it's the COVID, the infection is increasing a little, February and March, about 80% of our employees, 80% to 90%, they have contracted COVID, and this is true for all China, so their antibody has increased, but antibody will decrease after four months or so, and so some people who had been contracted will re-contract, and so CDB 1.6, I think it's

increasing a little bit in China, that's what people are saying.

Last week or this week, the Mr. Ozaki, the head of Japan Medical Association said that last year was just one digit, but last week, it increased to 15% the positive rate, and in Japan, so we are seeing a little bit of increase of infections, and so probably in China and Korea, the situation is the same, and so the two countries have started their activities as normal, so in first half, we will try to get approval, and in the second half, we will have a full-fledged activity.

And for page 19 and 20, we have John and Uehara, so they will talk about it, we have this much data accumulated, so we are a special maker in infectious disease, and the biggest important materiality is the infection disease, so long COVID, and also other drugs have rebound topics, so we are trying to get that kind of data as well, as for vaccine, November last year, we had applied for the approval, and the review is going on smoothly.

And of course, we cannot talk about the stage of review, but they have their committee schedules, and our product 019, when will that be included, then it will go to for approval, so that is the process, and at that time, then we will know the rough time of approval, but I think the review is going on very vigorously, and for '21, in US and EU, we have certain revenues.

However, I talk with John often, about the stewardship, especially in Southern Europe, how are they, how much are they abiding by the stewardship, because, you know, the cefiderocol should not be selling continuously, we have to think about the

next antibody drugs, but we are now in a good phase to use it, so the pull type incentive is very important for us.

And now page 22, the HIV, we talked about HIV last time. So the 591, 598, page 3, and also the once in every three months, how well we are going to extend at the interval, Gilead, MERS, and once weekly, all the medications, how they are going

to proceed, so including this, we wanted to have a collaboration with the V. So, on page 23, it said the, well, short-term and mid- and long-term, and then also about the 24 and 25, so the Biogen's, Chris Viebacher, so about Alzheimer's, Zuranolone, so these are the most expected products, he said, and also Zuranolone.

So the phase-3 in Japan is going to get started very soon, and up until the phase-2 results, that the, well, perhaps we'll be able to gain a very good result from phase-3 as well, this is my personal expectation, so it is quite hopeful for me to expand this in Japan, so that is Ziniferatoxin, Olorofim, and phase-3 is now ongoing, so as early as possible, I would like to go to the NDA for submission and approval.

On your left, Stanzo-Cova, that the, well, safe alcohol, and so on, and also that the, well, that the sleeping applications, so we work together with Idolusia, so that the, this is that the, well, insomnia products, and depression, insomnia, that we will expand into this area still further, and on page 24, so as phase-1, so that the second row from the top, so 337395, RSV infection, 892216, so COVID-19, so that the, this is protease inhibitors, our aim is that, so that the, the no DDR and pregnant effect, that is our targets, and also about the AMR profile.

It's different from Xocova and 3CL, so that AMR profile is quite different, at this moment, we don't have a very big challenge about the AMR, but the, well, the women, that they happen to see this, that the AMR at any moment, therefore, there are three points, that the no DDI, no effect of pregnancy, and also that the profile, AMR profile is different. These are the three points we wanted to aim, and of course, from the, that the bottoms, this is the painkiller, 151128. I'm expecting this very much, personally.

So the product itself is very, very good, but what is difficult is how we are going to get the approval, what is a good level of the, well, the price, so that it is very difficult, but the product itself is good, and also Olorofim -- Olorofim, Xenonine, ferratoxin, then, so phase three ongoing, and also that the 309, 309, phase two has already started, data sensitive, so that phase two has already started as well, so 101, that the solid tumor, to what extent, well, it's up to Uehara-san, to what extent we are going to disclose.

This is a very interesting product, we'd like to expand this, so at the, well, based upon those, so these are the earnings forecast, on page 26, SG&A is JPY 135 billion, and the first half, JPY 35.4, therefore we have a large expense in the latter half, so in the latter half of the year, so where we are going to sell Xocova is related with this expense, so that the JPY 130 billion, this is the largest ever, SG&A, that we have never used before, so that at this moment, that the, we wanted to maintain, we maintained JPY 100 billion level of the phase one, phase three, so the pipelines to support Shionogi in the future.

So already, ready, therefore we wanted to maintain that JPY 100 billion level for R&D, so how we are going to manage DOTA PL, and needs to be communicated with you, on page 27, so this is that the, well, the detail, well, as was mentioned earlier, this is a repetition of what I mentioned, so overseas, that is going to grow very sharply and extensively, for pink EV, safe local, is going to be the mainstay, Xocova is going to stay as a main product in Asia.

And the COVID-19 is a focus area, so on page 28, so only one point that, or two points that I'd like to mention, about COVID-19 and the flu, so that the JPY 57 billion that is throughout the year, and the JPY 36 billion in the first half, so the, well, we received a question about the, from the media, about Xocova, so that the, well, well, we have the, we don't have a very clear-cut situation about the expense, so we have a lot of, the big expectations in the JPY 57 billion yen in the first half,

so including to edit the, well, all our medications, that the, perhaps that the, only we have eight to nine percent, so how we are going to increase this to 20 to 25 percent.

So if we can reach this level, that the, well, we can gain more, therefore, that the point is, how well we are going to increase the prescription, about the lap sum payments, at JPY 25 billion, for that the, so including antibiotic, we are not able to reach JPY 25 billion, however, the growth has, growth has been out of the sustain, but the, for this year, this is very low, but JPY 25 billion. So at least for this year, so domestically, is that the, no ADHD, so there's no sales, but we can avoid this kind of situation.

Lastly, our shareholders, they returned on page 30, so, well, we had a board meeting yesterday, and we decided to put this on the agenda item for this, the financial settlement meeting, so JPY 15 increase, and also the JPY 5 increase in the

mid-year, therefore, throughout the years, that JPY 135 was achieved, including JPY 20, so that the, plus JPY 20, is the highest ever increase in dividend in our history of 150 year's.

So, so either in the, well, first, a lot of helps, that the, if we increase the dividend, that is at the starting point, so in 11 terms in a row, we have increased the dividends, so that the, so next year, that the, well, we will, this year, we will start from 150 yen, so if our financial settlement is stable, that the, of course, that the, we are going to have a consultation with the board of meeting about the dividend in the latter half, and so, well, at the dividend, we all, well, I think about the dividends, so in line with our performance, we'll make a decision. That is very brief, that is about the explanation about the financial settlement and the result for the fiscal year 2022.

Thank you very much. So, I would like to go on to the Q&A. So, from the floor, that the, I would like to entertain a question

from the floor. First, after that, we'd like to ask the remote participant to raise any questions.

[Operator instructions] So, Kotani-san, I'd like to receive the question from the floor first.

This is Kohtani from the Nomura Securities. I have a few questions first. So, on what page, past page 17, that top-line, well, it says in the domestic prescriptions of 145 point billions, so most of them are covered, but before that, I'd like to understand the

conceptual idea about the vaccines. Well, I think that the government is going to purchase the same amount of the COVID-19 as the amount of the flu, because you don't have any omicron species. Therefore, much of the vaccines covered by Pfizer, but the government, they have some perspectives. So, therefore, the 10 percent could be diverted to the vaccine in Japan,

but when I take a look at these figures, perhaps that the amount is quite small. So, do you have any reason why the figures are so small?

For example, the Ministry of Finance has so much inventory, therefore, they say they don't have to purchase any further, or because they are waiting for that approval, that is why they have a kind of a divider that will, the conservative ideas about the stock-pilings, well, this is our issues, not by the government. So, because we do not have enough capacity

of production to that level, that is the first reason.

Okay, your capacity of production is somewhat limited, so the expansions that the culture, you are still struggling with this

expansion culture?

Yes, I can disclose this. I don't see any point of you hiding this. So, at the government, as Koten-san mentioned, well, they are very positive. So, at this moment, at Shionogi, so Shionogi is still a newcomer for vaccine, therefore, that there is a confidence that we can give to the government for delivery, so that we cannot make over promise about the vaccine. If we cannot deliver enough amount of vaccines, this is going to be detrimental.

That is why that we have communication with the government in trying to find out the exact figure, how much we can supply. So, therefore, if we try to create a capability to suffice the amount needed, but we are not able to come to this stage yet.

So, you think that this will take time for at least this year?

Well, the capacity for production will increase.

That means the factory must have added, well, factory must be added. So, maybe there should be additional approval for the factory, and how much time that will take.

The capability is quite good. We have to take data, we have to take stability, and also get site qualification. Maybe it's fall 2024, we can produce the amount that we were told to. At present, we would like to have that kind of capacity by then.

Okay, second question, the demand for COVID-19 drug in China. So, at 3,578 sites, it's being prescribed that as of March. Currently, what is the figure on May 8?

It might be some difference from what you've had before. I think the prescription rate is quite low, I personally think. Maybe it's a more difficult disease than influenza, but maybe people have a light view of this situation.

That is surprising. So, can you tell me the situation?

Iwasaki will make additional comment, but I agree with what you're saying.

So, the category five, since it's been category five, how do we catch the patient situation?

On TV, this kind of news is going on. And when the test becomes, you have to own payment, they're asking, will people get the test? From the normal situation, if you get test, and if you're positive, you will get the antiviral drugs. So, I think about 80% of fluza, enavil, tamiflu, generic, including at this stage, it's just a single digit percent. So, the doctors are talking about acetaminophen, they have a dialogue with patients on that.

So, with that kind of pattern, they think we were able to deal with the situation, but they can say, well, we have new drugs. That is a big hurdle, maybe. So, research, approval, and a lot of paperwork, and we hear those hurdles. When we hear from doctors who use this drug, they say it's cumbersome, but it's not that cumbersome. As a concept, COVID, antiviral drugs, that kind of concept making is not, they haven't really made that concept. That's what we hear. So, we need to improve that.

Yes, as Toshiro-san mentioned already, well, so the 3,500 facilities, so this has been growing, so finally, well, so perhaps we will have about 40,000 facilities or not, that we have covered those already. So, in the general distributions that, well, we don't have to have a checklist, therefore, the cumbersomeness has been decreased. Therefore, prescription ratio has been increasing, yet about 10 percent, including three products.So, each product prescription should increase, and also that we have a communication with academia, in addition to science data, and clinical usage needs to be explored.

What is a good efficacy in the clinical stage needs to be well recognized?

So, once you use that, well, perhaps a fever and also a sore throat can be resolved in a day. So, this is efficacy they have already well achieved. So, therefore, the five symptoms, and there was only one day decrease. Well, this is about that you are thinking, it's about a misunderstanding, and we need to avoid this, about unless the flu is COVID-19, for the long COVID, there is a risk that the doctors do not understand the districts very well yet. That is why that the FMEDS, there is announcements, and we are still in the preliminary stage, but including such data, early diagnosis and treatment is quite essential. So, we wanted to expedite this idea.

So, finally, this is a very difficult question, I think, that the corona variant, XBB-1.6, something like that, are emerging. So, the scientific rationale and scientific explanations should be needed.

So, there is any scientific scenario that we can avoid the 10th wave? So, I'd like to raise this question to the professional of the infection disease. So, we have already handled the wave 9s, but is there any possibility that we may bump into wave 10?

I don't know if John has the same opinion, but I don't think that will be the case.

At the certain point observation, how accurate, how can you, how many new patient will be there? Can you really accurately catch that?

In U.S. and Europe, there are a lot of infections through the epidemiological studies. We are quite interested, and we're looking at influenza 100-year history. And in winter, when the temperature is low and humidity is low, the influenza is virulent. But in COVID-19, the first wave was in summer, and you have the ups and downs every six months. So, the ninth wave, what we call, probably the peak might come in summer, or maybe it will be in fall to winter, the peak comes.

Maybe, will it be the same as in the past?

That we have to really look at. So, the variant, maybe including variant, I don't think there is any case that it will not happen, including variant.

Yeah, Ueda-san, please?

My name is Ueda from Goldman Sachs Security [indiscernible]. I'd like to raise a question about the influenza. So, there is a guideline in Japan that the flu does, that our recommendation was upgraded. What is the efficacy of these products in your planning, so that they will share, and also that the infections? So, what is your perspective?

So far, I3T, so that the, well, this product is rather hard to be used, but in the current guidelines, of course, the over 16 years old, but the, well, about the, perhaps that the FedEx accounts for some 20 percent, we can explore the efficacy in this area.

So, we have already had good cases of the promotion of the product in this, well, young age, and also once daily, that the 40 percent share is a target we wanted to achieve.

The second question, in the new pharmaceutical drugs, the RS3, the 337391, what kind of concept drug is this? For this disease, there's now vaccines, and also antiviral drugs. So, in the clinical positioning of this drug, can you talk about it?

Vaccination or the coverage will really, of course, reach 100 percent. And the severity of this disease continues, and the efficacy of this drug to potentially have a very rapid viral reduction, a very significant viral reduction compared to other mechanisms, we still believe can bring some strong benefit. So, we still feel this is a very important contribution to the treatment of RSV.

Hashiguchi-san, please?

From the security, my name is Hashiguchi. I'm at Xocova, including Xocova. And the antiviral prescription, how you are going to increase the prescription, as you mentioned earlier, so you have some initiatives. I think you are going to raise the prescriptions. But within these plannings, do you think it's okay for you to either continue the current pace, or in some situations, perhaps, do you expect any trigger to increase the prescription rather sharply? So, if you have this kind of ideas, when this drug is going to be developed? So, did you have any idea?

So, for me, for example, that the well, prophylaxis of the severity. If you have evidence to reduce the well, that the severity, and also that there is a data disclosed for the long COVID, that is very promising. So, if you have a very good evidence, perhaps you may have a chance to increase the prescription rather sharply. This may serve as a trigger. So, this is my own idea.

So, do you have any ideas how you are going to increase the prescription?

So, this is one of the difficult questions, I understand. Well, in reality, the prescription 20 percent is a target. So, that the, well, the patient has been increasing in numbers.

So, during this course, how many more people, more patients are going to increase?

So, the initiatives are for the long COVID data, and also PMS. So, we have about 40,000 cases. In terms of safety, there is no problem. So, there is another idea that is scientific evidence, in addition to the scientific evidence, as I mentioned earlier, emergency approval. So, the checklist, and also the well, about agreements from the patients, this is quite cumbersome. Therefore, I think it is very essential for us to receive the approval in a normal stage.

And also, this is rather expensive. So, that is why the people are somewhat reluctant to purchase. So, that the perhaps, well, rather than the four product package, we try to have one single package in order. So, as of now, long-term COVID data, and also the normal approval should be gained to reduce cumbersomeness. And also, we need to start the single packaging.

So, that the, about the approval in the normal situation, when, do you have any idea when you are going to receive the normal approval?

Uehara-san, would you please answer this?

So, the, as a premise for the emergency approval, within a year, so that we are going to submit for the normal, that the approval, that is at the condition added. So, that the, in November, or timing, or earlier, perhaps hat the, we are going to submit for that the normal data approval. As of now, actual data are now, that the, well, provided. And also, to add the approval, inspections in a facility might be needed. So, there are several, that the, well, perhaps that the process we need to go through. So, we are having this.

Another thing about SG&A explanation, you said there's much difference between first half and second half. You didn't say this clearly, but overseas, Xocova, in order to sell Xocova, you assume that you will put much of the cost, the selling cost. And when you say you are going to spend cost, what kind of activities will incur cost? You have partner companies. So, what kind of a role, division of role are you thinking of? Thank you.

Yes, I think we have indicated that in China, in the sales, we have to sell to all the, all over the countries. So, we have partnered with Genda, and also, how much, also we partnered with Shanghai. And so, in China, we need to have a partner, and we have to pay distribution fee and promotion fee. How much of that fee, do you have an idea of how much fee we are paying? Then you will know that this, our cost is appropriate. So, rather than you paying the cost, you are paying the partners.

Any other questions? Mamihara-san, please?

Mamegano, so the BOB, the security. So, about R&D, I'd like to raise one question. So, 309, so there is some delay for those products, pipeline products. When I think about R&D amount, so that JPY 100 billion for this year, this is a range of expectations. And for the future, so after the next fiscal year, is that the JPY 100 billion level R&D could be continued or not? So, this is a question, first question I wanted to ask.

So, yes, I'd like to cover the macros, and also that the warehouse is going to cover in detail. But JPY 100 billion yen is one of the criteria for us to continue. For the next few years to come, we would want to continue this level. So, JPY 450 and JPY 500 billion sales needs to be continued to us, for us to support this level of the R&D in the next phase. Well, this level of R&D is necessary.

So, in the very, very details that the overseas clinical well, studies that the weekend is very good. So, therefore, in the latter half of clinical settings, clinical development, if the end is weeks, we can actually have a good, better position. That is why JPY 100 billion is a kind of criteria.

For the COVID drug two products, well, this one is not as prominent, but 309, 309, the obesity drug, we have the top priority for this. And as I mentioned, the good safety and good profile, the in-blood profile is there. So, we have started already in Japan, and it's phase-2, but we need to get conclusive results. So, we have a lot of cases than normal, and there are maybe a lot of patients, but we need to recruit. It's not that there is delay, because of the cost problems. And for the resiniferatoxin, partner companies are conducting the clinical trials. So, we will update the newest information.

May I ask another question for Xocova in the U.S and Europe? What is the situation going on for the scope?

Scope HR. With FDR, we have confirmed the study design. And so, we are recruiting the cases smoothly in U.S, Africa, and in Europe and Asian countries. We have many patients coming in. And in this trial, I said, in Asia, we've already conducted phase-2 and phase-3, and we are collecting the long COVID data. So, in global level, we are conducting this and getting the same kind of evidence, and we're currently analyzing. Thank you.

Another point, that is about the end point for this study, so domestically. So, in the midway through, you changed that end point. But the scope of HR, so perhaps there is some that you can disclose. So, if you can disclose that, would you please? About the end points, yes, as mentioned earlier. So, we already welcomed the agreement with FDA. So, there are the time after manifestations or onsets. So, within five days, that is the original programs.

But in Asia, when I take a look at the data, within three days after onsets, so that we need to have an assessment within three days, because of the clinical setting, as well as the virus science, that is appropriate. That is why primarily, we are going to set on three days. So, in Asia, based upon the evidence in Asia, well, of course, that the study design change has already been come to the agreement with the authority. So, in the early stage, and then we changed the protocol, there should be no problem. That is a very, that is a change in the very early stage. Therefore, this change was accepted from many different authorities.

I think we have a lot of people raising hands on web. So, let's move on to the people from web.

From Citi securities, Yamaguchi-san.

Yes, this is Yamaguchi. Can you hear me? For Zocova in China, I have some things that I want to confirm. Now, in the forecast, you're saying about JPY 46 billion in increase. So, in the future, you get approval, and the revenue will increase, and you will sell in China. The business model, you're going to sell locally. How much of profit will you get there? Is it JVB method? So, I want to confirm the revenue.

I can talk as much as I can disclose. As I said, we, the assumption is energetically to increase and to proliferate this. So, we have to pay the partner companies, and the cost, and the sales, the price. There are several different models. I'm not going to disclose that, but if it was this price, this would be the cost. That's what we will think, and how much operating profit we will get. It's not as high as in Japan, but we have a target total PL operating profit, and we can probably get that. Thank you.

One more confirmation. It's about the Shionogi that they finance the sales, the Shionogi sales. So, this is the sales to the government in China, am I correct? Sorry. So, this is that the sales in China, so that the China sales is included, is booked in the PIN on Shionogi, am I right?

Yes, that is correct. So, that is the principle.

So, and also equity method is adjusted at the very end, and therefore the sales is reflected into this?

Right, that is correct. Thank you.

So, Murakasa from Morgan Stanley, please?

Thank you. This is Muraoka from Morgan Stanley. To continue with the China, so the sales is about JPY 46 billion and SG&A about JPY 28 billion, so that's a lot there. So, the JPY 28 billion, the SG&A seems to be too big. Am I missing something? Can you explain, please?

As Yamaguchi-san, we explained to Yamaguchi-san where we want this much of operating profit, and in China we'd like to realize that operating profit in China. So, other SG&A is, so some kind of, we will spend it in some ways other than the Zokova sales in China.

So, you mean the China approval, if it's delayed, then the SG&A will also decrease, is that right?

Yes, that's right. Thank you so much.

One more. So, but the scope always says they suspend it, so the GSK believes that the, so the, there is no such, that the, well, well, the trace, and also that the phase three, well, we decided not to continue phase three, and also 918 for license, so these two are different with each other. So, we wanted to continue those two schemes. Do you think you are going to receive a very attractive offer?

So, the Johnson has been working for this very seriously. So, including safety, we have had very good data. Therefore, we wanted to license this product out. So, as was said earlier, JPY 100 billion for R&D, if we use this, of course, we have a lot we wanted to do. So, perhaps phase three, one or two phase three in US, and also the EU, so these are quite costly. So, therefore, we cannot say that we decided to cancel this.

Well, in a very positive basis, but in other words, we have more other priorities. That is why we decided not to continue this, including 7708018. So, we need to prioritize, so that the, we haven't had some experiences that we need to, our council give up something due to that the limited budget. So, we decided to prioritize several projects. I understand. Thank you.

Komagai-san? Komagai-san?

Mitsubishi, Morgan Stanley, this is Komagai. So, one question is about Xocova, the Korean approval. I thought you were going to get the approval a little earlier. Why is it taking so much time?

Well, it's same as in China. The emergency state declaration was eased, and the review by the authority was also lax. And in May, in Korea and China, they have started to move. So, maybe in those countries, there is more COVID. But anyway, that authority has started, and they were so slow in March and April. So, we think for the next wave, they are reviewing, we are asking them to review now for the next wave, but they don't really move that way. And if there is again, the wave or the infections, then it will affect the review. HIV, the royalty, 10% increase, you're forecasting.

Is that Dovad and Kandevova? And APRITUDE, it's only a limited contribution. Is that right?

So, Dovado and Kandevova, besides they have already reached, are expected to be the primary growth drivers. But APRITUDE is doing very well and is ahead of our plans. So, it will contribute. Of course, it's proportional. I mean, right now, for this year, I mean, for last year, it was in the scale of about 50. So, the next year, it will be bigger and bigger. But in this year, the big contribution, yes, will be Dovado and Kandevova.

We still have some time. So, I would like to go back to the floor.

Haruta-san, please?

My name is Haruta from Credit Suisse. I'd like to raise a very similar question to China. So, they are in the process of the submission preparation. What is going to be happening in China? You already submitted once. That is a release. And then, the process for reviews must have started. So, therefore, after approval, you are going to start sales. So, what is the process in China? We don't quite understand. So, are you going to expect the submission in the first half? Could you please tell me your forecast?

This is a rather difficult situation. We don't have a very good understanding either about the Chinese process. The partner for us, Gender Shanghai, including this partner, we have a kind of understanding after submission. So, approval is given within a week or something. Therefore, that the agreement of submission is almost equal to the approval. Therefore, submission.

What is the timing of submission?

Submission is quite crucial. Therefore, this is a very big difference from other countries. In South Korea, for example, after submission review starts. So, even before that, well, we have some discussions. Then, once the approval, they come to the stage that they are going to give us approval. Well, because within the first half, we will be able to receive the approval. That is our assumptions. About long COVID, please. The definition, the medical definition is not yet defined.

So, some people say that as a characteristic of the COVID virus within the body, there must be some place where the virus, I think they use the word reservoir. And I think that Xocova has the most, is most efficient or efficacy to discharge this virus from the body. So, if you can really get data from the clinical study, then it will be the virus drug, like the virus drug, it will really be proliferated. Yes, currently, including basic things, we had, I will explain what we're doing.

Yes, as you pointed out, the overseas doctors, the antivirus effect of Xocova is a point of interest. And as you commented, the doctors are saying this is the most efficacious drug. And some site overseas, we haven't started the clinical trial yet, but that these test designing is now at the ultimate final stage. So, for people who have gotten COVID, they have had the treatment, but they're not well. And if you look at these patients, if you look at the blood or the discharge things, the virus is confirmed. So, for those patients, if they take this Xocova, maybe they will, their symptoms will become better. That's what we're trying to do with the clinical study.

I think it's important to think about two aspects on long COVID. One is preventing the establishment long COVID beginning. And whatever the mechanism is, whether it's a viral reservoir afterward or some ongoing immunological process, you want to drop the virus as quickly as possible from the initial invention. And we do believe Xocova is the best way to do that. You then have the additional problem of patients who didn't get treated, were treated with another drug, wasn't so effective, and they may have remaining Xocova as per that possibility. And then as we're talking about future studies, treating with Xocova to knock down even those remaining viral reservoirs long after the initial invention.

So, last question.

This is Agai. So, one thing. So, I want to ask about this year's results. If you look at page 17, is this analysis, right? Royalty. So, 179. So, if you reduct the royalty, it's going to be a deficit. And last year, it was JPY 25.7 billion of deficit. So, how do you look at the royalty? This year, it will be a lot of, you'll be in red, because Xocova, the part of that sales is going to move to China. Or are you just being conservative? Or maybe, of course, there are a lot of costs. But this red, the deficit, the increase of deficit, how should we look at it?

Well, for one thing, the Xocova, the Japan sales will be half, and also the overseas sales will be half, and the cost ratio will be higher in overseas. So, the profitability is not as high as in Japan. And as for SG&A, it is JPY 230 billion. We have never used that much of amount. But in Korea and China, we have to sell Xocova.

And in Japan, what kind of measures are we going to take to increase the sales?

We have some plans to realize that.

How much money are we going to spend?

So, SG&A, we have a conservative view. So, as I said, we have to start from JPY 150 billion, and so we can land at the revenue that we promised.

So, thank you very much.

So, with this, I would like to, I would like to well conclude Shionogi's financial result meeting. Thank you very much.