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Everyone, my name is Hiroshi Nomura, and I am the President. Good morning. Thank you very much for taking time out of your busy schedule to participate in our financial results announcement for the second quarter. I would also like to take this opportunity to express my sincere gratitude for your continued interest in your company's management and your valuable feedback. Today, our stock price has been moving quite a bit since this morning. I think it had to do with the closing of accounts. But we will take this move seriously, analyze it carefully and utilize it in our future management. Now I would like to get right to the point. Page 3. The company's revenue was JPY 293.7 billion, an increase of JPY 32.2 billion compared to the same period of last year. As we have already announced, we have received an upfront payment of $270 million from Otsuka Pharmaceutical for joint development and commercialization, which has a significant impact. The cost of sales has increased slightly, but this is due to the fact that the sales of Sumitovant Group products have increased, and the realized portion of LATUDA's unrealized profit has increased because of the depreciation of the yen. As a result, gross profit increased by JPY 26.1 billion. On the other hand, SG&A expenses increased by JPY 30.9 billion. As you can see later in the segment information, SG&A expenses in Sumitovant increased due to the increase in the U.S., as you can see on the right. This is due to the fact that we have actually started sales activities in places like Myovant and Urovant, so these expenses have increased. In the same period of the previous fiscal year due to the impact of the COVID-19 pandemic, we were not able to spend as much on normal business activities but it returned to the original level to some extent. R&D expenses have decreased by JPY 3.5 billion, but this is because the development of napabucasin, alvocidib and relugolix has come to an end. Accordingly, as a whole, it is in the direction of decrease. As a result, core operating profit was JPY 47.9 billion, which is almost the same as the same period last year. In addition, there are no major changes in fair value of contingent consideration and other nonrecurring items, so operating profit was JPY 47.6 billion, which is also the same as the same period last year. Profit before taxes increased by JPY 5.6 billion, but this was due to a difference of about JPY 6 billion between the top and bottom in financial expenses and income as foreign exchange losses in the same period of the previous year were offset by foreign exchange gains in the current period. In addition, income tax expenses have increased because while profits have increased for our Japanese corporation, losses have increased in areas such as Sumitovant where tax effects cannot be obtained, thus only the tax has slightly increased. Finally, profit attributable to owners of the parent was JPY 36.5 billion, down about JPY 800 million year-on-year. Basically, we are not going to revise our forecast at this time. This is a revenue in Japan, and it is 51.1% of the forecast, which is almost in line with the progress. The NHI drug price revision recently had a negative impact of about JPY 3.5 billion, so I think we did very well in terms of volume. There has been an increase in the number of Equa/EquMet and Trulicity. Although Equa/EquMet is negative in terms of monetary amount, volume is increasing. LATUDA also increased. In addition, although the progress of Lonasen Tape has been a little slow, it has increased year-on-year, although there was a year-on-year decrease of about JPY 800 billion. In the North America segment, you can see the unit of billions of yen in the middle. LATUDA was JPY 101 billion, a year-on-year decrease of about JPY 3.6 billion. As you can see on the right, we are a little behind the forecast at 45.8%. As you can see the comments on the side of this page, there was an increase in distribution inventory last fiscal year -- in the last fiscal year, due to the impact of COVID-19, there was an increase of distribution stock due to 90-day prescriptions, and this had an impact on the adjustment. In terms of prescriptions, there have been no major changes, which is in line with our expectations. As for BROVANA, the patent has expired, so there was a decrease compared to the previous year. In the Sumitovant subsidiaries ORGOVYX is JPY 3.2 billion. MYFEMBREE is JPY 400 million and GEMTESA is JPY 2.1 billion. As a whole, it was as expected, although I have the impression that MYFEMBREE was a little smaller than expected. As for others, it is JPY 45.1 billion, a year-on-year increase of JPY 33.8 billion. This includes the upfront payment from Otsuka Pharmaceutical, the revenue recognition from Pfizer -- Pfizer's partnership and the revenue from Gedeon mixture. In the China segment, there was a year-on-year increase of JPY 5.8 billion. Also, compared to the forecast, it is about 61%. It has increased from the previous year, but if you look at the same period 2 years ago, it is about JPY 14 billion, so it is also increasing compared to that. This means that there is still a lot of -- this is just for your reference, showing the current insurance coverage for ORGOVYX, MYFEMBREE, and GEMTESA, and the light blue bar graphs show the cumulative number of patients. The GEMTESA shows the number of prescriptions. In terms of ORGOVYX, Medicare Part D coverage is at 81% and commercial coverage is at 60 -- 76% as of October. As for MYFEMBREE, it is 61%. Until September, we had roughly 600 patients, which is a little less than we expected. The product was launched in June, and after that, it was difficult for field reps to visit the market in person due the COVID-19 related issues. I think it was around September 23 when the in-person detailing actually resumed. In that sense, I think it was difficult to provide information on new products. I also heard that the gynecology was much more restrained in terms of consultations and other medical subjects and the COVID-19 pandemic. The first thing to do is to familiarize people with this new medicine in order for the doctors to get to know it better. There was also a process of having an experience and confirm the effectiveness of our free program. So in that sense, I feel that it is a little low as a start.
As for GEMTESA, prescriptions are growing steadily. However, on the other hand, if you look at this, you will see the insurance coverage may not have grown much. This is something that we have been talking about with payers, and we will put it on the formulary when the formulary is reviewed by the other side. I understand that it is not so different from the base of the formulary when Mirabegron was launched. This is a breakdown by segment. If you look at the increase decrease column at the bottom of the page, you can see that Japan was affected by the NHI price revision. We were unable to conduct sales activities in some areas due to COVID-19 during the same period of last year. In North America, there were some temporary gains, but expenses also increased, so there was a decrease of about JPY 600 million. Profit in China increased by JPY 3.3 billion because of the increase in revenue. Other regions had a negative impact at this time due to a temporary and intensive shipment in the same period last year. Regarding the alliance with Otsuka Pharmaceutical, when we reviewed our mid-term business plan 2022 in May, I think, we mentioned that we would reduce development risks and development cost share through the alliance. One of the first project is a partnership with Otsuka Pharmaceutical. I said around May that the contract would be signed immediately, but it took some time, and we were able to finalize it by the end of the second quarter. By doing so, we will be able to develop additional indications in parallel, which we would not be able to do independently. We believe that this will generate greater synergy than, for example, developing SEP-363856 independently. In that sense, I think this partnership will be very meaningful for us. Since we will collaborate on joint development, we will establish the Joint Development Committee and decide who will be in charge of what indications for each compound and how we will proceed. The most urgent issue is to decide what to do for the second indication or the third indication of SEP-363856. As for the status of research and development, the areas in red and new additions, indications for 2 compounds in Phase I in the U.S. that are the subject of the collaboration with Otsuka Pharmaceutical are yet to be determined. Since both companies will decide on the indications after consulting with each other, we have left them undecided. In Japan, we have the DSP-9632P, which is a newly -- which is new in Phase I. This can be found in the reference section of the document, so please take a look. As for the oncology area, TP-3654 in Japan is now in Phase I. EPI-589 in Phase II in Japan has started investigator-initiated study. SEP-4199 in Phase III in the U.S. shows that the pace of development has moved up. In China, we have submitted an application for lefamulin, which is a compound that we acquired from Sinovant, and it is listed in the application section. This is the description of -- you have seen in the table. RETHYMIC, which is the third item from the bottom, is for a kind of regenerative medicine that transplants to patients with pediatric congenital athymia in the U.S. As you can see here, for every 4 million babies born, 17 to 24 will have athymia. In the U.S., newborns are screened and patients with congenital athymia are quickly identified, so the process is to have these patients operated at Duke University. We are culturing thymus glands from pediatric heart surgeries and providing the tissue for transplantation. This is SEP-4199 Phase III Study overview. As you may remember, in Phase II, there was a high placebo effect and the results were not statistically significant, but the improvement trend was very good. So we decided to start Phase III study which is also part of the co-development program with Otsuka Pharmaceutical. In Phase III, we will do everything we can to prevent placebo effect from occurring. The following is reference information, which I hope you will take a look when you have time. This is all I have to say. I would like to use the rest of our time for Q&A. Thank you very much for your kind attention.
Kohtani from Nomura Securities. My first question is about GEMTESA on Page 6. I think the progress of coverage is still a little slower than expected. I think there is an obvious differentiation between Vibegron and Mirabegron, such as the Vibegron has fewer side effects of hypertension, better sharpness since the label states that is effective in the second week and no restriction of concomitant use with CYP2D6 inhibitors. Nevertheless, it has only 30% coverage. The President, Mr. Nomura, said that it was compared with the progress at the time of the launch of Mirabegron, but the disease called OAB itself is not much recognized, so I think it is significantly different from the current situation. Certainly, I think there's a timing for it to be mentioned in the formulary. But even so, since progress has been slow, is there anything that was unexpected? For example, could you comment on what is inhibiting Mirabegron's gross to net being much lower than expected?
Thank you very much for your question.
We also wonder why it is so low when we put these 3 products side by side. So Jim Robinson, who is in charge of Urovant, who used to work for Mirabegron told me that there is no delay or obstacle, but that this is the current coverage as planned. So in his opinion, we should communicate well with payers and make changes according to the timing of payers' review of the formulary. This is how it is now, but I'm not too worried about this kind of coverage at this point in time because he has already said that the coverage will increase during the fiscal year.
The plan has changed and the coverage and the formulary are to be determined in January. Is there a possibility that the coverage ratio will increase drastically in the period from October to December or from January to March?
Thank you very much. I don't know if it will go up significantly, but my understanding is that it will be much higher than at present. I regret that I cannot give you a figure, but I understand that it will increase.
I understand. My second question is about the SEP-4199, which I have asked you about before. On July 7, 2020, the data of the results of the Phase II study already released and the change MADRS score after 6 weeks of placebo was 16.2%, whether it was 200 milligrams or 100 milligram placebo, was [16.2] points less. The amount of change in MADRS score after 6 weeks, which is written on the LATUDA label, is [15.4]. In short, placebo was as effective -- as effective LATUDA in the past. I think -- I see this as being the biggest problem with SEP-4199. When I asked you last time, you mentioned that the problem is professional patients who walk through clinical studies. The design of the Phase III study is disclosed on Slide 14. I would like to ask you to tell us how you are addressing this professional patient issue in this study?
As for your question, in conducting the clinical study of SEP-4199, it is very important to have patients who respond to the drug properly participate. In the diagram on Page 14, there's a proper box on the far right that says Screening/Washout. In particular, in the Screening, we have been analyzing the data to see what kind of trend is seen in professional patients who are not responding well or who have a placebo response, and we have found that there is a certain trend. By taking advantage of this, we are able to select patients who will respond well to the drug in the normal screening process, which is a process of determining which patients can enter the clinical study. I will refrain from getting into specifics about what we're actually focusing on, as that would be considered know-how.
As a supplementary question, does professional patient mean, in essence, a person who deliberately participates in various multiple clinical studies and does not seem to be taking much medication? Also, sequential parallel comparison design is being pushed quite a bit by Dr. Maurizio Fava, but the FDA is still skeptical. Can we assume that you don't think much about exclusion or excluding people who have a placebo response in that way?
As you mentioned, one way -- one way to think of it is to watch the patient for a while and exclude those who have had a placebo response. But in our case, we believe that we can exclude them by looking at the information of the patients. In the U.S., patients are paid for participating in clinical studies. So whether they take the mitigation or not, patients who are intending to participate in clinical studies are scored on their answers to various questions and responses to doctors, especially in case of mental illness. This is the reason why there are some clinical study subjects who do not reflect objective data.
So you don't think much about sequential parallel comparison design?
We are thinking about it in various ways, but in this clinical study, as written here, screening will be done based on prior information. Washout means to stop taking medication for a period of time to eliminate the effect of the various medication they have been taking.
I understand. Lastly, the clinical trial of Phase III study of SEP-363856, which was scheduled to be completed this year, has been postponed until next year or later due to COVID-19. Since the product will be launched between the '23, the long-term safety study will be completed at the end of 2022. Is there any change to this?
The whole thing is indeed a little behind schedule. Although we are several months behind, we have not moved the approval schedule as of yet. We are aiming for FY '23.
I apologize for my long question, but is there any change in the ELEVATE 2 study of rodatristat ethyl, which is scheduled to be completed in early 2023? I'm personally looking forward to this.
With regard to rodatristat ethyl by Sumitovant, there has been a slight delay in patient enrollment, and we are currently working to speed up the enrollment process. Therefore, looking at the situation, we may have to revise the end schedule of the clinical study. At the moment, we have not yet sorted out what exactly we will do.
I am Oda from Morgan Stanley. I have a few questions for you. The first one is about revenue of LATUDA in North America. According to your explanation 3 months ago, there were a lot of shipments by the end of December last year, and there was an inventory adjustment, which was completed by May, and the number of prescriptions has been returning since June. But I think that revenue in the period from July to September also decreased year-on-year.
Roughly speaking, last year, pharmacies, et cetera, had quite a large inventory level due to the COVID-19 situation. This year, the inventory level has returned to normal. But the revenue of LATUDA were quite large last year. So as a result, compared to last year, it decreased. Is it correct? Also, your progress to the full year forecast is now a little lower. But if I understand it this way, I think there is a downside risk for the entire year. What are your thoughts on this?
Thank you very much for your question. As for inventory adjustments, as I mentioned 3 months ago, wholesalers' inventories have been adjusted to some extent. But there was still quite a bit of distribution inventory, and I think the effects of this continued until the second quarter. I think we used to get a lot of questions in relation to COVID-19.
Regarding whether or not there would be an impact on people losing their jobs and going from commercial to Medicaid. Indeed, if you look at the percentage of Medicaid in about February 2020 and the percentage of Medicaid in about March of this year, there is a slight increase. However, if you look at September, we can see that the situation has almost returned to normal, which means that there is not much impact on that side. We think that the adjustment of distribution inventory has been delayed a little, and it entered the second quarter. As for what will happen in the future, I think the level of stock maintained by wholesalers and pharmacies will also have an impact on future sales. Therefore, we are not optimistic that LATUDA's revenue will achieve all of the forecast amount, but we think there is some risk in that area. However, we have talked with the sales team in the U.S., and they are determined to do their best to bring us as close to our project as possible.
I understand very well. Another thing is that the sales of MYFEMBREE are still slow. At the presentation by Myovant, they said that rather than competing with the leading product of AbbVie they would rather expand this market together than compete with them by raising awareness of GnRH antagonist. How do you and Myovant plan to increase the awareness of this class and expand the market? Are there any prospects for rapid increase in sales for the second half, although sales in the first half were still weak?
Thank you very much for your question. This class, or rather, items with this mechanism of action is a situation that our product has entered where only products AbbVie was sold so far. In this sense, the conventional treatment policy of doctors is becoming more and more recognized, and the recognition of gonadotropin receptor antagonist is still increasing, so that people who used to use oral contraceptives can now use those drugs more and more. In this sense, the increase in the number of drugs with the same mechanism of action is a way to expand the market. And unless such a market expands first, there's a little point in competing with each other, I think that's why Myovant made such a comment. In its comment, we also said that the ACOG guidelines have been revised, so in that sense, it is positive for us that treatment with drugs with this mechanism of action is becoming recognized and advanced in gynecology. On the other hand, I think it is necessary for us to appeal for point of differentiation within the same mechanism of action. Therefore, as was mentioned in the briefing session, I think the first step is to use the free program or something like that and let doctors and patients experience it. so that they can confirm the efficacy of the drug and move on to the next step.
I think that this way of entering the market will enhance the awareness of MYFEMBREE. As for what will happen in the future, Myovant is a listed company, so I would like to refrain from making any comments.
I understand very well. The third and final point is that Pfizer has decided not to exercise its option rights. I believe this was originally a onetime payment of $50 million for exercising options. But was this $50 million included in your company's guidance at the beginning of the fiscal year? If you don't disclose this information, the upfront payment of JPY 30 billion for SEP-363856 was probably included in the guidance at the beginning of the fiscal year because your company was negotiating quite a bit and have some control over it, and because there is a high possibility that it will be realized.
In terms of feasibility, I think it is a little difficult to see because I think the exercise of these options is controlled by the other side rather than by your company. In past cases, did your company incorporate these things into the guidance?
Thank you very much. Pfizer's option price of $50 million are not included in our earnings forecast, this totally depends on Pfizer as to whether or not they are going to strategically invest in Europe and other regions as well. So this is completely unpredictable. That's why we have not factored it in. However, for example, the lump sum payment with Otsuka Pharmaceutical is a matter that we have been able to discuss directly with them. We thought we were able to include this in our forecast, so we did. Contractual options are at the discretion of the party, and we have no control over them, so we do not include them in our forecast. We have been asked what we did with the $50 million, but since the option price with Pfizer still exist, we were not allowed to say anything about it. So I said that I could not make any comments on that. It has become clear. The option with Pfizer is no longer available, so I think we are at the stage of disclosure.
Wakao from JPMorgan. I would like to begin by asking you to tell us about your partnership with Otsuka Holdings. I believe that your partnering with them because you can improve the total value of your products by doing so, and from what I have seen in the media, I understand that this partnership is positive for your company.
On the other hand, if I were to create a model based on -- only on the information I have now, for example, for SEP-363856, based on your track record, I would have expected you to be able to launch it in the U.S. and earn all the profits. With this alliance, I think the profit will be split in half. In that case, the value you contributed to your company will simply decrease even though I believe that the partnership was a positive thing for your company.
Therefore, I think that there are various factors that are important when looking at the value of this alliance, such as increasing short-term costs, a faster time frame, an increase in the number of indications compared to your company doing it alone, or an increase in the probability of success. Is it possible for you to tell us some additional information other than simply having your profits?
Thank you very much. I think this is included in your question, but I can see it clearly when I look at the LATUDA case, there were many twists and turns in the development of LATUDA before we decided to develop it ourselves.
And we were thinking about licensing it or not, and we decided to develop it ourselves by establishing a base in the U.S. In the end, the LOE period is determined, so if a single company does it, for example, it can only be done sequentially. We worked on schizophrenia and then on bipolar depression. However, as you know, with schizophrenia alone, it has been approved as a drug and can help us but as a business, it is quite difficult. So it's necessary to work on the second indication as soon as possible. However, if it is a single company, we can only to do it in a sequential manner, which is difficult. Therefore, if we did for bipolar depression earlier, we might have been able to raise the top line of JPY 200 billion. Therefore, if we are to work on SEP-363856 alone, we would have to work on schizophrenia in the same sequential manner and on indications. And in the meantime, even if exploration date of the substance patent came or was slightly extended, and we would not have much time to spare. However, if the 2 companies can work together and overlap the second and the third indications to some extent, the potential of SEP-363856 were even greater than it would be with a single company. I think this is the mechanism, of course, since both companies will be working together, the cost of the project will be split into half, which decreases the cost compared to the case where each company worked independently. Therefore, in terms of time and cost and the probability of success, we are struggling with the placebo effect in neuropsychiatric area introduced earlier. We have accumulated a lot of experience. Otsuka Pharmaceutical also has a lot of experience in this area, having successfully developed Abilify. Therefore, I think another advantage of this joint development is the probability of success in clinical studies will be very high. I believe that there will be synergies in sales activities by working together with Otsuka Pharmaceutical. This does not mean that Sumitomo Dainippon Pharma will suffer any disadvantages by splitting the profits and losses, but there will be synergies by working together. Therefore, Sumitomo Dainippon Pharma has decided to work together even if 2 companies have to split the profits and losses, because Sumitomo Dainippon Pharma believes that 2 companies will be able to maximize the potential of SEP-363856 and other pipelines.
Thank you. I understand very well. Looking at the media. As for SEP-363856, the substance patent is for 2031, so the exclusivity period is not that long from what you have just said. I understand the speed is important, so it is better to speed up the process and to be able to apply the technology in a variety of ways so you will increase the potential by expanding the indication. Is it safe to assume that the area of profit gain will be larger than the case where you were to do it on your own? Also, I got the impression from your explanation that SG&A and R&D expenses will not reduce -- will not be reduced that much as a result of this alliance. I think this plan was included in the revised midterm business plan 2022, when it was explained to us. At that time, we were told that R&D expenses would decrease in the future, while SG&A expenses will be kept low. Is it correct to say that this partnership will not change your thinking, much from what you told us in the explanation of the revised midterm business plan?
I think I said that expenses will remain the same until the end of midterm business plan in 2020, but will be reduced after 2023. Therefore, the development cost will decrease after 2023. SG&A expenses will remain unchanged, or rather, SG&A expenses will remain unchanged and R&D expenses will be reduced from 2023 onward as the 3 products of Myovant and Urovant will be taken off and will not require much additional cost.
I understand very well. Thank you very much. Also, will the area of the profit have gained by the partnership increase?
As a matter of course, when we talk to the Board of Directors, we must ensure that the alliance is beneficial to us. As you mentioned, we simply cannot enter into an agreement that would be negative for us, and the Board of Directors will not approve it. Therefore, as a result of various simulations and calculations, we decided that the alliance with Otsuka Pharmaceutical would be economically beneficial for us, and the Board of Directors has approved it.
I understand. Lastly, I believe that Gedeon Richter's royalties have been recorded by Myovant from this time, and it was mentioned in the explanation that product has been launched in 7 countries in Europe. Could you please comment on the situation in Europe, if possible? That's all.
I'm sorry, I do not have much knowledge about the markets covered by Gedeon Richter, so I'm sorry that I cannot answer your current question.
Sakai from Credit Suisse. You mentioned the coverage of GEMTESA is low, but that Medicare coverage will increase from next January. On the other hand, this is a benefit that is not anticholinergic, such as the absence of dry mouth or constipation. I thought that you had high expectations for this product, is that correct? Is it reasonable to understand that inflammation activities are a little segment in the middle of COVID-19?
I think it was difficult to provide information in person in the COVID-19 situation. However, Urovant's sales reps are in charge of neurology and long-term care facilities where there are elderly patients, while Sunovion's sales reps, including about 90 people, a couple of primary care physicians. These sales reps will cover urology, long-term care and primary care positions. As for the sales of GEMTESA, we think there's no particular delay at this point. That's how I understand it, at least.
I understand. Another product related to Myovant is ORGOVYX. While Lupron is not supplied sufficiently, the benefits of switching to in-hospital prescription for oral drugs are not beneficial from the perspective of medical institutions or doctors. I had heard that the bottleneck was hard to attack that area. Could you tell us what you are doing about that, and how the situation is changing?
Thank you very much. Leuprolide and injectable drugs can only be handled by medical institutions, so they will be expensed by medical institutions. The economics of delivery price and insurance reimbursement price or something like that will be an important point. We understand this point very well. In the same way that Leuprolide is prescribed in the hospital, ORGOVYX is basically prescribed in the hospital and is delivered to medical institutions on an individual basis under a contract that is economically comparable. We are steadily working on such contracts.
You mean, in contracts with individual medical institutions?
That is right. It's called a clinic.
I understand. One more thing. In the President's earlier comment, it was said that the earnings forecast for this fiscal year has been left unchanged for the time being. Nevertheless, even if we assume that the midterm business plan for FY 2022 will remain unchanged, the environment will change considerably in the next 2 years, including the LATUDA, Cliff and post-COVID-19. In particular, there are new issues that need to be addressed, and if you say that these issues are incorporated in the midterm business plan 2022, that may be the end of it. But it is a review of the midterm business plan 2022. If you have any thoughts on what the major management issues are, or if you have any ideas on what you're thinking about doing? I would love to hear that.
Thank you. In Japan, I think COVID-19 has improved a lot, but in the world and in some other countries, it is still not so good. In addition, the business environment has changed before and after COVID-19. For example, even when it comes to visits to doctors, we don't expect the traditional way of doing things to return to normal. So as in Japan and the U.S., there will be a more hybrid approach with in-person information delivery, online interviews and online lectures. In short, I think that we need to change the way we provide international doctors and medical institutions in accordance with how they respond to COVID-19.. Therefore, we would like to proceed with the provision of such information after getting a good feel for the situation in the field. This is not a one-size-fit-all approach, and I think we have to think about what's the best approach for each medical institution is individually.
Also, although it is not related to COVID-19, our major challenge in the future will be to further evolve the digital technology that we have acquired through alliance with Roivant and to firmly incorporate new value creation processes that utilize data in our daily operations. That's what I'm aware of.
Yamaguchi from Citigroup. I would like to ask you a few questions about your contract with Otsuka Pharmaceutical. First of all, the development milestone is $620 million. Of course, it is difficult for you to disclose the timing, but as you have been asked many times, I feel that they are very aware of the disadvantages of cutting your benefits into half. I would appreciate it if you could tell me how long do you plan to keep the development milestone?
We appreciate your question, but it is not possible for us to explain the details of each contract individually. There will probably be no such timing this year. Normally, in this kind of contract, milestones are received at the time of submission to the authorities or approval, so I think it will be better if you understand it that way.
I see. Another question. As you have been introduced about synergies, and I am very sorry to put it this way, Otsuka Pharmaceutical does not necessarily have the image of a global company that develops quickly. So there is a view that working with you may not necessarily speed up the process. In order to eliminate this problem, I think it is necessary to accelerate the selection period for expanding the indication of development. In this context, you have been looking at the relatively long time frame for the launch of SEP-4199. But do you think there is a possibility that this alliance with Otsuka Pharmaceutical will accelerate that time frame?
As for the future development plan of SEP-4199, we will be discussing it with Otsuka Pharmaceutical again in the future. The reason why the development of SEP-4199 seems to be taking a long time now is because of the previous phase and also because we want to concentrate on SEP-363856, so we are now drawing a time line with the plan to do Phase III one by one. The key point from now on will be how much risk we can take in that area and bring it forward in parallel will overlap it. So if we do that, the approval period will be brought forward.
Another point for the top line of the first Phase III of SEP-856. It is still not clear when we should be looking at now. Should we assume it will be the period from January to March next year?
The clinical study of SEP-856 has been delayed slightly, but only by a few months, and we expect to see the results in the first half of the next fiscal year.
So that would be fourth quarter?
That's right, fourth quarter, summer, fall, winter.
You said fiscal year, not year, so it's between April and September.
The fiscal year, that's right.
Hashiguchi, Daiwa Securities. On Page 10, in your explanation of the contract with Otsuka Pharmaceutical, you mentioned that the implementation of clinical studies is divided by indication, and that you are currently discussing how to divide the work. The cost is to be shared equally. So what we see and what comes out in the accounting is 50-50 for all the indications. But what is actually being worked on under the water is to be shared, is that correct?
We are currently working on SEP-363856 for schizophrenia, so the second indication will be done by Otsuka Pharmaceutical, for example. However, the cost is half for schizophrenia and also half for the second indication. It is difficult for both companies to work together on the same -- same second indication, so we divided the responsibility for each indication. The cost is to be split into half.
In the same idea, what do you think about the possibility of dividing the profits and expenses for accounting purposes also for sales activities?
According to your previous explanation, there is a time lag between the expiration of the LATUDA patent and the launch of SEP-363856. Normally, I think that the sales organization would shrink significantly when the LATUDA patent expires. But since SEP-363856 is coming soon, it will be difficult to close the entire sales organization even if we were to shrink. This would inevitably cost your company a lot of money during that period.
At this time, in the alliance with Otsuka Pharmaceutical, I think you can decide to have Otsuka Pharmaceutical do most of the sales activity at the time -- at the launch stage of the SEP-363856 and share the cost for the accounting purposes. I thought that would make it possible for your company to greatly reduce cost during the intervening period, but what are you and Otsuka Pharmaceutical discussing now?
Thank you very much. I received the very big suggestion. The connection between our LATUDA sales reps and the SEP-363856 sales reps is a very important issue to be considered. I think there is a way of thinking as Mr. Hashiguchi mentioned. As he mentioned, we would like to make the transition in a way that has as little impact on the bottom line as possible.
At this point, however, we do not have a concrete plan for how we will do this. It is still under consideration.