Takeda Pharmaceutical Company Limited

Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today. The factors that could cause our actual results to differ materially are discussed in the most recent Form 20F and in our other SEC findings. Please also refer to the important notice on page 2 of the presentation. Well, from our side, as the presenters and also the panel, We have President and CEO, Christopher Weber, and Andy Prample, President, Research and Development, Kost Sarukos, Chief Financial Officer, and Masato Iwasaki, Japan General Affairs, and Ramona Sequeira, President, U.S. Business Unit and Global Portfolio Commercialization, and Julie Kim, President, Plasma GIF, the SIP's Business Unit. And now from Christophe, Andy and Osta, we will give you presentations. And after that, we'd like to take questions. Now we'd like to start.

Thank you, Christ, and thank you everyone on the phone to join us today. It's a great pleasure to be with you. So we'll take you through the progress we are making in the transformation of of Takeda as we discussed our performance in the first half of our fiscal year. So how are we progressing towards our vision? And this is, please go to slide number four. Our vision at Takeda is to discover and deliver life transforming treatments, guided by our commitment to patients, our people, and the planet. And first, despite the pressure of the pandemic, Our employees have come together with a very strong commitment to make a difference for patients. So I feel really inspired and energized by the spirit and determination that the entire organization has shown during this pandemic. Our journey in the transformation of our company has been producing very strong results. And I think our first half results are evidence of our progress. Specifically, we have consistently delivered on the fundamentals. Our underlying revenue growth for the first half has accelerated to plus 6.8% with a reported revenue growth at 12.8% compared to prior year. This growth continues to be driven by Takeda's 14 global brands with underlying growth of these 14 global brands of 11.4% in the first half. And more importantly, for the future, our diverse portfolio of 14 global brands now represents 42%, an impressive 42% of our total revenue. I mean, when you look back, what a transformation considering that Akeda launched its first ever global product back in 2014. Before 2014, we didn't have a single global brand in our portfolio. Today we have 14, which represents 42% of our total global revenue. And we are expecting an acceleration in the second half of the year and significant revenue growth for our global brand over the near to medium term, particularly as we expand into new markets. So today we remain on track to meet our full year 2021 guidance of mid-single-digit underlying revenue and underlying cooperating profit growth thanks to the continued performance of our 14 global brands. And as we are confident in our financial performance with very strong cash flow generation, as we are confident in our strategy and our growth potential driven by our 14 global brands and broad pipeline, And this strategy, this growth dynamic, we think is not reflected in our current share price. We are initiating a share buyback of up to 100 billion yen. Also a reflection to our commitment to delivering value to our shareholders. So what is Takeda growth strategy? Well, we think it's a very clear growth strategy. We have a razor sharp focus on bringing life transforming treatment to patients. So we will drive the growth in our 14 global brands through new indication, label extension, our expansion to geographies previously answered. It is very clear that these 14 global brands will continue to grow significantly in the coming years, at least until Ontario faced by a similar competition in the US. We will also continue to invest in the approximately 40 clinical stage pipeline assets that all bring the potential to transform the life of patients. Our strong pipeline and portfolio are not built around a single flagship product or compound, but instead are highly diversified and focused in area of high unmet patient need. In fact, more than one third of our wave one pipeline has received breakthrough therapy designation a true testament to our innovation and focus on targeting entirely new categories and modalities. By this standard, and even considering some setback, and I will come back to that, we are experiencing a remarkable year. Our pipeline is beginning to deliver on our ambitious aspiration. I'll go into a bit more detail later, but in this quarter alone, we received FDA approval for XCVT in the US, and an anonymous recommendation by an FDA advisory committee for Marie Bavir, with a decision on an FDA approval schedule sometime in the coming weeks. At the same time, we will continue to evaluate opportunities for strategic partnership and collaboration that complement our therapeutic area of focus to expand patient access to the treatment they need and to help accelerate our pipeline strategy. One example of that is a collaboration with Arrowhead Pharmaceuticals to develop PAK999, a first-in-class RNA therapy designed to treat the underlying cause of alpha-1-antitrypsin-associated liver disease. It is a very devastating condition for which currently there is no approved therapy. Another great example of this strategy is a recent collaboration and license agreement with GCR Pharmaceuticals to commercialize GR141 for the treatment of Hunter syndrome. GR141 introduced a new way to treat Hunter syndrome and help maintain or improve cognitive function in patients living with this rare disease. What is also very notable here is that it is the first time Takeda has entered an agreement with a Japanese company to commercialize a program outside of Japan. I think it's indicative of how we are perceived now as a global partner of choice among Japanese companies too. And you might have seen, just this week, we announced the acquisition of Gamma Delta Therapeutics to further strengthen our immuno-oncology and cell therapy pipeline with a novel platform leveraging Gamma Delta T-cells. This was a built-to-buy collaboration which we started in 2017, which brings to Takeda a novel cell therapy approach to target solid tumor and hematologic malignancies. So our plan is very clear and consistent. Our strategic vision is to focus on leveraging the strength of Takeda's 14 global brands, which will remain a growth driver over the coming years. providing us with the momentum to support the growth potential of our exciting pipeline. Having said that, allow me to address our recent clinical development setback that you know already, but I want to come back on that. It goes without saying that when one develops truly innovative R&D compounds, as an R&D organization, you do experience setbacks and challenges. as at the same time important progress are made. This is what being on the leading edge of science is all about. Andy will address that in greater detail shortly, but I can tell you that we recently announced that a safety signal has emerged in a phase 2 study of TAC994, which is an investigational oral aroxin agonist for the treatment of sarcolysis type 1. We will continue to analyze the data, and I want to reinforce that we are committed to advancing our multi-asset orexin franchise, including the oral orexin agonistat 861, which is currently in phase 1 development. We also announced that the pevonodistat phase 3 PAN-TAS2D did not achieve statistical significance for the primary endpoint of event-free survival compared to azacitidine. But this is why I shared with you that the diversity in our clinical programs and approximately 40 clinical stage NMEs give our pipeline strength and resilience. Strength and resilience. We are excited about the potential to deliver dozens of new therapies to patients in the next decade. And I think we should not lose sight of that. So in our mind, these setbacks are not derailers of our strategy. They are setbacks, but we have enough breath in our pipeline to continue to look towards the future with serenity, with a sense of urgency also to develop other molecules. Another point that I want to mention today is that I'm very pleased to report that earlier this month, we received confirmation that we successfully addressed and FDA warning letter for manufacturing sites in Ikari. The FDA has now issued a revised voluntary action indicated status to the Ikari manufacturing site with an agreement to maintain a dialogue regarding ongoing commitment. So the closing of the warning letter on the site status change is a positive development in the ongoing effort to address the FDA observation in the official action indicated in March 2020. So I think it does speak to our strong track record of upholding quality standards and our close collaboration with the FDA throughout this process. On the next slide, I just want to update you on our contribution against COVID-19. Takeda is really keen and is really committed to play a key role in the head to fight the COVID-19 pandemic in Japan. As you know, as a marketing authorization holder for the Moderna COVID-19 vaccines in Japan, we have distributed 50 million doses in Japan and expect to begin importing and distributing an additional 50 million doses as early as the beginning of 2022. We are also partnering with Novavax in Japan to develop and manufacture up to 250 million dose per year and commercialize F-COVID-19 vaccines candidate from our Hikari facility in Japan where it will be manufactured. So we aim to begin the distribution of these vaccines in the early part of 2022 under the government vaccines program. Of course, pending the number of factors including regulatory approval. One thing I would like you to notice is that Novavax pricing in Japan will reflect the government subsidy we received to build the manufacturing capacity in Italy. So there is no doubt that we have a very important role to play to continue combating the COVID-19 pandemic. And, you know, we are very committed to it. But it's also something that provides us valuable insight as we are applying to all our vaccines development programs. On the next slide, I just want to zoom in on, you know, our pipeline wins for this quarter. And Andy will provide you much more greater detail right after. But I can tell you that we are very excited by the promise of and potential of our pipeline as demonstrated with the approval of XQVT in the U.S. and the unanimous recommendation by FDA Advisory Committee for Marie-Pavir. EXTIVITY is a very important new treatment for adult patients with locally advanced or metastatic non-small cell lung cancer with epidermal growth factor receptor exon 20 insertion mutation. It is the first and only approved oral therapy specifically designed to target EGFR exon 20 insertion mutation for patients with disease that's progressed on or after platinum-based chemotherapy. This disease has historically been under-diagnosed, and patients have, until recently, very limited effective treatment options. So the approval of Xtivity advanced the treatment landscape, and for the first time, patients will have access to effective oral therapy. We are also very excited about the potential for Maribavir to transform the way cytomegalovirus CMV infection is treated. If approved by the FDA, Marie-Bavir will be the first and only treatment indicated for adult transplant recipients with refractory CMV infection and disease without or with resistance. CMV is a very challenging infection in transplant patients with an estimated incidence rate greater than 25% in solid organ transplant and stem cell transplant recipients. We are proud to advance science in this critical area of need. So Eschiviti and Maritavir are just two examples of how Takeda approach scientific development. We focus on areas for patients who have serious need and they have very limited or even yet to be discovered treatment options. So we are very encouraged by these recent developments and we are continuing to look forward to upcoming milestones in our innovative and diversified pipeline. So we talk about our recent milestone, let me also talk about how we are building our long-term pipeline. We have a very aggressive plan to continue building a pipeline that has the potential to transform lives, and in the process, transform our business. Our R&D strategy, as you now I'm sure know, is to focus on a few disease areas in order to have exquisite scientific know-how. to focus only on programs with a life-transforming potential for patients, and also to be the preferred partner for research entities needing a pharmaceutical partner. We have made big investments in areas that will transform patient treatments for many diseases in four areas of oncology, rare genetic, and hematology disease, neuroscience, and gastroenterology. And these are areas where there is a lot of need for innovation and new treatment option. So look at our oncology pipeline, for example. We are advancing multiple first-in-class immunotherapy candidates that have the potential to be transformative for people with blood cancer and solid tumors. We are also seeing great promise with our pipeline compounds in rare disease, where there is often an incredibly small patient population, but with desperate need for effective treatment option. In the US, Approximately 50% of Takeda's pipeline is being developed in rare or often diseased areas and addressed areas of very high unmet need. I also want to mention that we also built a dedicated PDT R&D capability as we focused on improving our existing product, as well as researching new plasma therapies, as well as an R&D vaccine investment focused essentially on our daily vaccines. We are very committed to science, to our pipeline. We think that the potential of this pipeline is very significant, and this is why we have increased our R&D investments to 522 billion yen in fiscal year 21, which is representing a growth of 14.5% compared to last year. And this is an effort to ensure that we are in position to deliver the next generation of potentially transformative therapies. To conclude, and before Andy will give you more details on our R&D pipeline progression, our transformation continues to bring Takeda's future into focus. In 2014, we set out on a journey to accelerate our globalization, to reinvent Takeda into a truly values-based, R&D-driven global company positioned for long-term business growth. I think we have made very significant progress. We have gained a leadership position in our core business areas, oncology, radiology, pneumatology, neuroscience, gastroenterology, and plasma-derived therapy. We have completed the largest foreign acquisition in Japanese history that gave us competitive scale, that helped grow our margin, and that allowed us to establish a portfolio of 14 global brands that are generating today steady organic growth. Prior to 2014, Takeda did not have any single global branch. So the success of this acquisition has provided us with the scale, momentum and resources to build a dynamic new future. And with the near-term and robust growth of our 14 global brands as our foundation, our reborn pipeline and approximately 40 clinical stage assets which will provide the potential for an unprecedented number of regulatory approval over the next several years. So that brings us back to our vision to discover and deliver life-transforming treatments guided by our commitment to patients, our people, and the planet. And I think Paqueda's growth strategy is a reflection of that vision. With that, I would like to provide Andy with an opportunity to focus on our R&D strategy and our pipeline progress.

Thank you. Thank you very much, Christoph, and hello, everybody. This new year 21 continues to be an inflection year that we firmly believe will kick off a decade of innovation from our pipeline. Our pipeline is diverse and dynamic. As anyone would expect in pursuit of novel, life-changing, or transformative medicines, one will experience headwinds and tailwinds from time to time. I would like to provide some color and additional context on these recent events. So first, let's start with the tailwinds or the positive events. As you just heard from Christoph, Xtivity was approved in the United States. This approval comes just five years after this molecule entered the clinic. And importantly, Xtivity is the first of our wave one new molecular entities to be approved. And it's certainly a moment worth celebrating. As Christophe mentioned, we also had a unanimous FDA advisory panel recommending approval for our anti-CMV drug, Merigavir, and we anticipate a final decision next month. So let's talk a little bit about our R&D lifecycle management efforts for our global and regional brands, which continue to progress and do well. For Intivio subcutaneous, we recently received written feedback from FDA, which provides much greater clarity on the regulatory package and data elements needed for resubmission. We thus have more confidence for a potential approval now in fiscal year 2023. We also received an additional six months of pediatric exclusivity for Vyvanse from FDA. We now have market exclusivity in the United States until August of 2023. In addition, we had approval for Alopecia in Japan, as well as label expansions for Tabomedics and Vocinti in Japan and China, respectively. These R&D lifecycle management efforts are important to our future and will continue to drive revenues for Takeda in the short and medium term. We continue to invest in novel mechanisms and capabilities and aim to unlock innovation wherever it originates. Our strong emphasis on partnerships, continues to bolster our exciting pipeline with potential therapies that may provide step function improvements or cures for patients in the future. We just completed in-licensing, as Christoph went through, of JR141, a potential next-generation recombinant fusion protein that pairs iduronorate 2-sulfatase to an antibody to the human transferrin receptor, allowing shoveling through the blood-brain barrier. This innovative new treatment for Hunter's syndrome patients was recently granted prime designation by the EU and could potentially address both central neurologic symptoms as well as peripheral symptoms in Hunter's patients. We also continue to build on our platform technologies. And again, as Christoph mentioned, we announced this week the acquisition of Damodelta Therapeutics. This was a build-to-buy collaboration that we initiated in 2017. We really know this company well. We really like the technology and the progress that has been made. And just yesterday, we exercised our rights to purchase this company and add to our cell therapy ambition. And then finally, we announced three next-generation gene therapy collaborations that will provide tools to potentially help us address some of the issues with first-generation gene therapy constructs. And these partnerships include Selecta, Poseida, and Immunosoft. So, if we can please go to the next slide. Actually, before I start to mention the next slide, I'll also mention that, of course, we've had some headwinds that you're very aware of over the past quarter. These are events that stall or oppose some of our forward momentum. As Christoph mentioned, pevinitistat did not achieve statistical significance for the primary endpoint of event-free survival in the Phase III panther study for patients with high-risk myelodysplastic syndrome, and we expect to present information at an upcoming medical conference. And in addition, importantly, TAP994 had a safety signal. This was a liver safety signal, which we will discuss in much greater detail later in this call. So our pipeline, despite these events, despite these headwinds, is strong and is starting to deliver value. This is our pipeline. We have approximately 40 new molecular entities in development. And over the past quarter, we've added new molecules like TAC-105, a peptide used to treat conditions that result from nausea and vomiting. This is a peptide that was discovered in the Tejeda Laboratories. And also JR-141, where we continue to invest in cutting-edge technologies for rare diseases like Hunter syndrome, as I just went through. So if we can please go to the next slide, 10. I wanted to spend some time walking you through our reps and franchise. And I'd like to first reiterate why many experts and regulatory authorities remain excited and optimistic. Importantly, we have seen transformative efficacy in multiple patient populations, including type 1 narcoleptics, where we see responses in the maintenance of wakefulness tests of greater than 30 minutes above placebo response, a result pushing up against the upper limit of this 40-minute test. And just by reference, the standard of care today shows less than eight minutes above placebo. In addition, we've received positive feedback from health authorities securing prime designation in the EU and breakthrough designation in both US and China all over the past four months. These regulatory designations speak to the strength of the data and the excitement in the field of erection tube receptor agonists. But unfortunately, over the last few weeks, we've faced a significant setback, a liver safety signal PROTAC 994 in our eight-week 1501 Phase 2B study and our 1504 long-term extension trial. As a result of this safety signal, we discontinued the trial early to protect patient safety. Ending the studies will allow us to holistically assess the risk benefit prior to making a decision on possible next steps. of course, in conjunction with regulators. So let me just spend a moment explaining exactly what we saw. We saw a single patient in a long-term extension trial who had significantly raised liver enzymes. This was, in fact, a serious adverse event. Treatment was discontinued. The patient is being closely monitored and remains asymptomatic and clinically stable. The decision to stop the Phase II study, as well as its extension, was based on the degree of liver function test elevations in this patient, as well as the recent identification of additional patients who were discontinued from the trial for smaller increases in liver function tests. We are in close contact with clinical sites and principal investigators to ensure appropriate follow-up and to gather all necessary information to fully fully understand these cases. We are now working to analyze the data and further understand the mechanism underlying these liver findings. This full risk-benefit assessment will be made, and we are committed to publishing the results at a medical meeting in 2022. So, if we can go to the next slide, 11, please. I want to spend a minute talking about our leadership position in Erepsin and our future plans. And I'll underscore. This step back in no way deters our ambition to develop and deliver a transformative therapy for patients with type 1 narcolepsy and other hypersomnolence disorders. If anything, if anything, we are more determined than ever to achieve this goal. We have a number of differentiated molecules in our pipeline that are part of our Ericsson franchise, and we are now exploring the best paths for acceleration. So these include two molecules you have heard of before, as well as multiple additional molecules in preclinical stages. First, there's PAP861, a differentiated, longer-acting oral agonist compared to PAP994. It's currently in a Phase I single and multiple ascending dose study. This study will provide initial safety and PK data, as well as information on initial efficacy in both sleep-deprived healthy volunteers, and type 1 narcolepsy patients. This will provide us data in narcolepsy as well as its effects in people with normal orexin levels. Together, these results will inform our future development plans. And then there's PAP925, the IV formulation that provided us initial proof of concept of the mechanism for in type 1 narcolepsy, as well as type 2 narcolepsy and idiopathic hypersomnia, in excessive daytime sleepiness with obstructive sleep apnea, and is currently being explored in the post-anesthesia setting in patients with obstructive sleep apnea. Obstructive sleep apnea patients are at high risk for respiratory issues when recovering from anesthesia. We believe our short-acting IV infusion can help in this setting. important to note that we are additionally developing multiple molecules with differentiated profiles in our research labs. We have an army of scientists working on orexin and now have a deep understanding of the orexin 2 receptor agonist pathway and have gathered incredibly valuable clinical data. We know we have an efficacious mechanism with transformative potential equipped to With this knowledge, we will accelerate development of our current molecules, and our chemists will design new molecules for the future. We will be in a position to make a data-driven decision on next steps for these programs in 2022. This has and will continue to be a top priority for Takeda and our R&D organization. We are now working harder than ever and equipped with knowledge to build this franchise. We will continue our leadership in the erection agonist field and build on our foundation. We are dedicated, fully dedicated to bringing transformative erection agonist medicines to patients suffering from narcolepsy and other related sleep disorders. We want to thank all the patients and their physicians for participating in our clinical trials. So, we can go to the next slide, please. As you heard earlier from Christoph, and as you're aware, we received unanimous support at the October 7th FDA Advisory Committee panel for Meribavir, and we expect a decision in the next month. CMV is the most common viral infection after transplantation, and we have seen robust efficacy, in fact, greater than two-fold greater than standard of care, with a significantly better safety profile, ten-fold lower toxicity, specifically related to neutropenia and kidney injury, We are very excited about bringing this novel therapy to transplant patients. You can see some of the timelines on the left side of this slide, including the potential approval in the EU early next year. You also see timelines for our frontline trial and post-hematopoietic stem cell transplant, which is on track to read out in the first half of fiscal year 22, filing shortly thereafter. So, if we move to the next slide, please. Finally, I want to highlight gamma-delta therapeutics. This recently announced acquisition is scheduled to close in the first quarter of fiscal year 2022. Now, as you can see in this slide, we positioned gamma-delta in our overall oncology strategy and our pipeline. So, what is this? Gamma-delta T cells have shown potent anti-tumor activity that is not antigen-specific. So, we should anticipate the potential for advantages across a wide range of tumors, including solid tumors. This acquisition continues to build our rich pipeline of oncology therapies and help fulfill our self-therapy ambition. Could we move to the next slide, please? Before handing it over to Costa, let me just say that we have an exciting and dynamic pipeline, and it continues to advance. Beyond what we have mentioned earlier, we want to highlight one of our earlier stage programs. something that we'll be doing more and more of. We have seen exciting clinical proof of concept data with CAC573 in patients with relapsing and refractory multiple myeloma, and we will be sharing these data at a medical conference this calendar year. We remain highly optimistic on our prospects, and we believe we have the right R&D model that is focused on treatments with the potential for step function benefits or cures for patients. We continue to drive growth in our 14 global brands through new indications and global expansions. We will continue to invest and drive our innovative pipeline of now 40 new molecular entities that have the potential to transform the lives of patients. With that, I will hand it over to Kostas Saroukas.

Thank you, Andy, and hello, everyone. This is Kostas Saroukas speaking. I'm very pleased to report that our accelerations top-line growth has continued throughout the first half of fiscal year 2021, and we're confirming our full-year guidance of mid-single-digit underlying revenue growth and underlying core operating profit growth. During our first half, our underlying revenue growth was 6.8%, up from 3.8% in Q1. This acceleration was driven by our 14 global brands, which grew at 11.4%. And now, as Christophe mentioned, represents 42% of total company core revenue. In addition to our top-line growth, we remain focused on maintaining competitive margins and delivered an underlying cooperating profit margin of 29.1% in the first half. We also continue to generate strong cash flow with first half free cash flow of 315.6 billion yen, putting us well on track towards our full year target of 600 to 700 billion yen. And our net debt to adjusted EBITDA ratio has further reduced to 3.1 times. We have continued to accelerate our debt pay down. And in the first half, we paid off a total of 441 billion yen, or $4 billion, including all remaining debt maturing in fiscal year 2021, as well as prepayments of debt maturity in fiscal year 2022 and fiscal year 2025. We believe that the company is in a position of strength and that our growth prospects are not being reflected in our current share price. Therefore, we have announced the initiation of a share buyback. And this program is up to 100 billion yen to underscore our confidence in our business strategy and our commitment to shareholder returns. This buyback does not compromise any other aspect of our capital allocation strategy. And we remain committed to investing in our growth drivers, deleveraging towards our target of low twos net debt to adjusted EBITDA and maintaining our existing dividend policy of 180 yen per share annually. Let me walk you through a summary of the first half financial results in the next slide. Please turn to slide 17. So our first half, our H1 reported revenue was 1.79 trillion yen, up 12.8% versus the prior year, benefiting from 133 billion yen booked as revenue from the sale of our Japan diabetes portfolio in Q1. Core revenue, which had just out this one-time impact, was 1.66 trillion yen, with growth of 4.4%, and business momentum and favourable effects more than offset the impact of divestitures. Underlying revenue, which further adjusts for foreign exchange and divestitures, delivered strong growth of 6.8%. Reported operating profit was 346 billion yen, with significant growth of 60.5% versus prior year. This was mainly due to the gain on the sale of the diabetes portfolio in Japan, as well as lower purchase price accounting and integration costs. Core operating profit, which adjusts for the purchase accounting and non-recurring items, was 485.7 billion yen. This was a decline of 4.3% versus prior year, due to higher cost of goods, an increase in R&D investment, and the impact of divestitures. If we adjust for FX and divestitures, underlying cooperating profit increased by an impressive 6.4%. Our core and underlying cooperating profit margins are both above 29%, in spite of the increase in R&D investment. They are also reflecting the impact of a lower gross margin in Q2 due to product mix, and then this was largely driven by cost of goods dynamic with the plasma-derived therapies. Reported EPS was 117 yen, with growth of 111%, and core EPS was 214 yen. Underlying core EPS growth was 9.1%. Operating cash flow was an abundant 400 billion yen, up 2% versus the prior year, while our free cash flow was 315.6 billion yen, a reduction of 25.8%. Slide 18 gives more insight into our top-line growth dynamics. Reported revenue for the first half grew at 12.8% to 1.793 billion yen, including 133 billion yen, or 8.4 percentage points benefit from the sale of the Japan diabetes portfolio. Adjusting that out, core revenue grew at 4.4% to 1.66 trillion yen. This reflected 6.8 percentage points of underlying growth driven by business momentum and our 14 global brands, plus 3.9 percentage points from favorable FX, partially offset, by the 6.3 percentage point headwinds from the divestitures of non-core assets we completed over the past year. Our underlying revenue growth of 6.8% is supported by an innovative portfolio across five key business areas, as reflected on slide 19. You can see GI, which represents approximately a quarter of total core revenue, delivered 8% growth, spearheaded by Intivio growing at 18%. Rare diseases declined slightly by 2%, impacted by the continued decline of rare hematology, as expected, and the PDT immunology bounced back to 11% growth for the first half, with the quarterly phasing that negatively impacted Q1 balancing out in Q2. Oncology grew strongly at 8%, and neuroscience was up 9%, with Vyvanse and Tritellix both posting double-digit growth as market dynamics returned towards pre-COVID levels. For more details on each of these five key business areas, please refer to the slides in the appendix. Finally, the All Other column to the right side of the slide, these products grew at 10%. And this is reflecting the completed divestitures of several declining portfolios and also included distribution revenue for the Moderna COVID-19 vaccine in Japan. Slide 20, I want to emphasize that our plasma-derived therapy business continues to deliver on its commitments with strong underlying PDT immunology growth of 11.1% for the first half of the year. the business is more resilient than ever, with plasma donation volumes consistently surpassing pre-COVID-19 levels from as early as quarter one fiscal year 2021. This is a testament to our growth and transformation efforts across the BioLife network. You will notice that we revised our plasma donation growth projections to 15% to 25% for fiscal year 2021, which reflects the volume needed to meet our supplier commitments to patients and revenue growth targets, while simultaneously improving network efficiency and managing donor fees and cost of goods. There is an incredible upside in the area of our business with the core operating margin of the PDT business expecting to improve as revenue growth and transformation initiatives are fully implemented in the coming years. Turning to slide 21, this shows the revenue of our 14 global brands, which are driving Takeda's top-line growth. In total, these products generated 692.2 billion yen, or 6.2 billion US dollars in the first half of the year, meaning they are now representing 42% of our core revenue, versus prior year, our 14 global brands grew 11.4% on an underlying basis, or 96.3 billion yen on absolute terms. Now, if you were to annualize that, it means that these brands are generating close to 200 billion yen of incremental revenue year on year. On slide 22, I'd like to emphasize the momentum of these 14 global brands. As explained on the previous slide, our H1 underlying growth of the 14 global brands was 11.4%. This reflected a strong acceleration in Q2 versus Q1, and I'm pleased to report that these brands are driving growth in all regions, including in emerging markets. We believe the acceleration of the 14 global brand revenue will continue into the second half of the fiscal year, and our outlook for the full year underlying growth is for around 14% to 16%. we should see the proportion of total revenue contribution expanding to approximately 45%. As we look beyond fiscal year 2021, we expect momentum of the 14 global brands to continue. As we expand market penetration in launch countries, as we increase disease awareness and continue global rollout of products, including in Japan, in China and other emerging markets. Moving to slide 23, which shows the fact of impacting the 4.3% decline of our H1 cooperating profit versus prior year. Now, starting to the left-hand side of the chart, you can see the first dark red bar indicating a strong profit improvement from our underlying business. This was primarily driven by the 14 global brands, although it does reflect some year-on-year cost of good headwinds in PDT due to the donor fee dynamic. This underlying business momentum was partially offset by a significant step up in R&D investment, which we have called out in the red bar next to it. Next to that is a larger decline, which indicates the profit loss as a result of the divestitures. This is having a significant impact on growth rate this fiscal year as a result of multiple non-core asset divestitures that were closed in fiscal year 2020 or early 2021. While a major headwind in fiscal year 2021, this impact should be much smaller in fiscal year 2022, and our cooperating profit growth rates should also be more closely correlated to our underlying profit performance. As a result of these various pushes and pulls, as well as moderate FX benefits, our core Operating profit for the first half landed at 485.7 billion yen, putting us at a well-positioned track to deliver our full-year guidance of 930 billion yen. Moving to slide 24, which shows the bridge from reported to core operating profit. You can see that reported operating profit was 346 billion yen. From this, we adjust out the non-cash items related to purchase accounting and one-time items not related to the core operations of the business. In H1, the main adjustment items were 204.1 billion yen of intangible asset amortization, partially offset by one-time gains on the sale of the Japan diabetes portfolio of 131.4 billion yen. Moving now to cash flow, slide 25 shows the evolution of our cash balance over the first half of the year. Operating cash flow was an abundant 400 billion yen. This includes cash from the sale of the Japan diabetes portfolio offset by cash out for a litigation settlement and some phasing in working capital. Free cash flow after CapEx was 315.6 billion yen, comfortably covering the half-year dividend payment and our interest costs. Furthermore, we made significant debt prepayments in the first half of the year, totaling 441.1 billion yen, or approximately 4 billion US dollars. This included all remaining fiscal year 2021 maturities and prepayments of fiscal year 2022 and fiscal year 2025 debt. In spite of this substantial debt prepayment, we still ended September with healthy levels of liquidity at approximately $10 billion. Slide 26 shows the net debt balance over the first half of the year. We continue to make steady progress with deleveraging, and as of September 30th, our net debt to adjust the EBITDA ratio had come down to 3.1 times. Slide 27 is the latest snapshot of our debt maturity ladder. As shown on the previous slide, we paid off approximately 4 billion US dollars of debt in the first half of fiscal year 2021, including all remaining debt due this year, as well as prepayments for fiscal year 22 and fiscal year 25 maturities. Furthermore, in October, we issued 250 billion yen of 10-year yen-denominated bonds at 0.4% fixed interest. This issuance will be neutral to leverage, and the proceeds will primarily be used to refinance the remaining $1.7 billion of JVIC loan maturing in 2025, shown as called in this slide. we intend to put most of the remaining proceeds towards additional prepayment of debt, in particular fiscal year 2022 or fiscal year 2023 maturities. Our weighted average interest rate is approximately 2%, and once the JVIC loan prepayment is complete, approximately 95% of our debt will be at fixed interest rates. As a result of our accelerated debt paydown and recent refinancing, we have a well-positioned maturity profile, which averages 200 billion yen per annum over the next five years, with expectations for continued strong cash flow generation, we'll feel very comfortable in our ability to service this debt while maintaining the dividend and also making the right investments in the business. Moving now to slide 28, where we are confirming our full year fiscal year 2021 guidance of mid single digit growth for underlying revenue, underlying core operating profit and underlying core EPS. We are also maintaining our previously communicated forecast for reported revenue, reported operating profit, core operating profit and core EPS. With regards to the reported net profit and reported EPS, we are updating our forecast to reflect a tax provision related to a tax assessment of the break fee Shire received from AbbVie in 2014. As a consequence of this, our full-year reported EPS forecast is now 117 yen. As a reminder, our full-year forecast is based on an assumption of 108 yen to the dollar, and therefore we do see some potential upside for EPS in the region of 10 to 15 yen if current FX rates continue for the full year. On slide 29, we have included our updated capital allocation policy. In parallel with the shared buyback announced today, we have revised the language on shareholder returns to state our intention to maintain our well-established dividend policy of 180 yen per share annually, alongside shared buybacks when appropriate. The addition of shared buybacks does not have any impact on our other priorities of investing in growth drivers such as R&D, new product launches and investment in our plasma derived therapy business and continuation of our deleveraging journey towards low two times net debt to adjusted EBITDA by March 2024. Finally, on slide 30, I'd like to close by once again emphasising our focus on top line, on margins and cash flow. Underlying revenue growth in H1 was 6.8%, putting us well on track towards our full year guidance of mid-single digit growth. We believe the growth momentum we build through this year will put us in a strong position going forward as we continue to maximise our 14 global brands, launch new products from our wave one pipeline and continue to roll out COVID-19 vaccines. On margins and profitability, we are on track towards our full year forecast with cooperating profit of 485.7 billion yen and core and underlying cooperating profit margins of 29%. Despite the ramp up in R&D investment, we continue to target margins in the low to mid 30s over the medium term. Finally, on cash flow, we remain on course towards the full year free cash flow target of 600 to 700 billion yen, and continue to focus on debt pay down towards a low two times net debt to adjust an EBITDA ratio target, while also investing in growth drivers and returning cash to shareholders. Thank you for your attention, and we will now open it up for Q&A.

Now the questions. Please click the raise hand button. And if you are on the Japanese channel, please ask a question in Japanese. And if you are on the English channel, please speak in English. And if you are just listening to the original languages, then you may be able to speak in either languages. And please ask up to two questions per person. Thank you. Can you hear me?

Yes, we can hear you. Yes. So this is Yamaguchi from Citi. I have two questions. The first question is regarding a trigger over share buyback. Clearly, the recent stock buys and the setback on 994 sounds like a trigger in this event. But, Konstantin, as a company, you have been relatively conservative in the past how to how to do this sort of activities. So is this event purely trigger this event or is it the right time for your company to change their dividend policy or shareholder policy? And if you change it, are you going to continue to do so in the future as well? That's the first question. The second question regarding 994, Anderson, you comment on 994 in detail, which is pretty nice, but can you give me how long, how many years this franchise, as far as launching this course, I got today, if you're shifting resources from 994 to 861, how many years? And also, given the 994 had a lever talk risk, how you can see the risk at this moment is yet to be clear.

for H61 even I understand the model is different but can you give me some other reason why you are so confident about the clearness of liver talks on the H61 thank you maybe I'll start thank you Yamaguchi-san for your question let me break it down in the key drivers for this announcing the shared buyback firstly we thought that this is an opportunity to buy back shares at a considerable discount. We think our share price is significantly undervalued. In fact, even if we compare it with the recent sell-side analyst average, our current trading of our share is 30% discounted. So from that standpoint, we truly believe it's an opportunity to buy back shares in the company and deliver also value to our shareholders. The second point I want to highlight here is we're doing this off the base of a position of strength. You saw in our first half of the year results, the acceleration of our revenue from 3.8% growth to the first half at 6.8%, driven by our 14 global brands, which will continue to grow. And on top of that, we're seeing an abundant cash flow, a strong cash flow position. Again, we think that this is an opportunity to leverage and utilise our cash flow, our strength of our cash flow to do some share buybacks because we don't see it derailing on our net debt to adjusted EBITDA targets of low two times like this for year 2023. And finally, the key message we want to send is also that this share buyback underscores our confidence in our business, in our strategies. We have, as Christoph and Andy mentioned, we have approximately 40 new molecular entities in our pipeline. We have many potential proof of concept readouts in the next 12 months. So we're very confident in our deliverable of our top line revenue. The pipeline will deliver. Some will succeed, some will not. But we're very confident that we have many shots at goals. And that's why we felt that this is the right time, given the discount on our share price. And just to reinforce the message, this is not a one-time. We have updated our capital allocation policy to be able to decide on doing shared buybacks when appropriate. So we'll continue to monitor this situation as we go. So thank you very much for your question.

And Yamaguchi... Yamaguchi-san, you had two questions. One was timelines for TAC-861, and the second was around the potential for liver toxicity for 861, essentially, if I can paraphrase. So on the first, you know, I can't give an answer right now in terms of what an expected launch timeline would be for TAC-861. It's too early. What we can say is that TAC-994 went into the clinic in November of 2019, and we were anticipating with you know, reasonable confidence approval in the end of 2024. So approximately five years. We know that TAC 861 went into the clinic about 18 months after TAC 994. TAC 994 timelines took a hit during COVID, to be honest. But, you know, at this point, we have to step back in terms of our timelines. We have to understand what the regulatory requirements are going to be now that we have a a liver safety signal in terms of durations of our phase three study and in terms of number of patients. So we'll have more information as we advance. In terms of our confidence in TAC861 regarding a potential liver signal, let me say that we've worked very rapidly to preclinically understand this unexpected finding. And we have a deep understanding now of what we think is driving the liver toxicity with TAC994. to compare the various molecules, including TAC861. We're still in the process of doing a lot of this work. We have reasons to be optimistic for TAC861. It is a different molecule. It has a very different pharmacology than TAC994 and has a different PK profile. We feel very comfortable with respect to patient safety in terms of advancing this molecule. And, you know, over the coming months, we'll have more information to share.

Moving on to the next question, Hachiguchi-san from Daiwa Security. Yes, this is Hachiguchi, Daiwa Security. Thank you. I have a question about the Oryxin program. 994 LFT elevation, what is the cause of this elevation? And is it something that is common across the whole Oroxene franchise? Or is it really specific only to 994? And also, you saw the safety signal in 994. And clinical study design for 861 and 925, dosage administration, inclusion criteria, have you changed any of these things? for the other assets in the same franchise.

So, , thank you very much. Your first question is the mechanism of action of the liver toxicity. So, we, as I mentioned just previously, we're developing a growing understanding. We think we have a, we think we understand what is causing that toxicity, you know, for competitive reasons. We won't share that information, and we're using that information to better understand the profile of TAC861 and to rapidly advance our next generation of compounds. But we think we have a beat on this. We also ask whether this is a class effect or whether this is a molecule effect. It's very hard to say definitively, but we have strong reason to believe that this is not a class effect, that this is a molecule-specific effect. And there's a long history of small molecule drug discovery and drug development that points to these idiosyncratic molecule-specific toxicities. You then asked whether we've taken these learnings and altered the study design of our TAC861 and TAC925 trials, and the answer is no. You know, we have adequate safety measures and surveillance measures in both of those studies. We have a very extensive patient experience base with TAC925. It's a very different molecule. IV-administrated, very short-acting We don't believe that Pac-925 carries this risk based on our clinical experience and what we know of the pharmacology PK and clinical profile to date. Pac-861, as I mentioned, we have reasons to be optimistic that it won't share this same safety liability, but that's something that we're going to have to more fully understand. I think a key question, though, will be in the next steps as we start to proceed to longer trials with larger patients, you know, what kind of monitoring we will want to put in place to be safe and what kind of monitoring and patient numbers, durations of therapy, regulatory agencies will want to say. That's not a conversation that we've yet had.

Thank you. Mr. Weta, please.

Hello, can you hear me? Yes, we can hear you. Thank you.

Thank you for taking my questions. We have two questions. First one is a pipeline strategy. So the, you know, recently the company licensing, you know, many early stage products, but considering the current pipeline status after the negative development at task 994, Do you think Takeru needs to license in the late-stage products, or do you still focus on the license for the early-stage ones? We would like to know the current stance, as TAC994 is one of the most promising products in the Wave 1 pipeline product. And the second question is about the policy for dividends. Considering the negative development for Task 994, more cash will be needed for the enhancement of the pipeline. Therefore, we would like to confirm the current status for the dividend. We know that the company's guidance includes 180 yen of the dividend. as a shareholder and return policy, but could you confirm whether that is a long-term commitment or that is just a plan for this fiscal year? Thank you.

Thank you, Ederson. I'll take the first question and then Andy can add on. I would like to first point out that we have many assets in our pipeline which are very promising. They were perhaps not as visible to you as TAC994 because 994 was quite advanced and we highlighted it a lot. But we have a lot of assets in our pipeline with very high potential. Take, for example, in oncology, TAC573, TAC981, for example. So that's the first point to mention is that, a lot of assets have a lot of potentials, but they're not been fully visible yet. And I'm looking forward to the future milestone when you will start to see the value in our pipeline. The second point I want to stress out is that, we only have a growth question mark once Antivio will face biosimilar. And the date when Antivio will face biosimilar, the worst case, the worst case is 2026 in the United States, not before. And that's the worst case. So when, you know, we can discuss what could be the possible date, but as you know, We have multiple family of patents, expiring many of them in 2032. So, you know, there is uncertainty about when biosimilar will enter. But the reality is that our 14 global brands led by Anzibio within this 14 global brands will drive our growth, you know, until really Anzibio is testing biosimilars. And so it's really in the later part of the decade that we need to have the pipeline really starting to deliver to continue to grow. And we believe that we have a lot of ammunition in our pipeline. Having said that, we continue to do in-licensing, partnering. We are looking at all stage, frankly, but we know that late stage, one, there are not many. Two, they are often overvalued. So we tend to prefer early or mid-stage. And that's where you see that we have done a lot of partnership. But take a product like CAC 999 that we partner with ARAID. That's the product that could be launched at the beginning of this second part of the decade, 25, 26. And it's a very promising product. So I think that's what we are really trying to do is to continue to build this pipeline which will deliver this value progressively.

And did you want to add anything?

No, nothing yet, Christophe. I'll take the dividend question. Thank you, Yoad, for your question. You know, we are very comfortable with maintaining the dividend policy of 180 yen per share annually. And there's numerous reasons why. First one is that we see that the R&D strategy is paying out. We've invested. We've already increased the R&D spend. We highlighted that in Q1, and you see that our full target has increased by about 15%. So we already uplifted the resources behind R&D to deliver the pipeline that we have. Secondly, you've seen in one of the slides on 27 how cash flow positions is abundant, and we've continued to prepay significantly our maturities. So if you look at that maturity ladder, we've already done significant amount of prepayments, already this year, $4 billion. So when you compare the yearly maturity obligations, we are looking at around 200 billion yen of debt on an average per annum. to pay down the debt. Our cash flow is anywhere between the six to 700 plus on every year. And that's driven by our performance, our top line revenue growth as well. So the headline tells it all, says it all. We're well positioned, our maturity profiles, which facilitates comfortable payment of dividends over time. So I don't see any reason for us to have to change the dividend policy whatsoever. We're in a strong cash flow position, we're in a strong performance on operations and the business, and we've already started to increase our investment in R&D to fulfill the pipeline needs. Thank you, Anderson, for your question.

Thank you. Thank you for your detailed answer. Thank you so much.

For the next question, we'd like to ask Stacey Koo from Palin. Stacey, please go ahead.

Hi, Stacey Koo from Palin. Thanks for taking our questions. I have two. First question is for Julie. Argenix has recently communicated that their SCRN pricing will be premium to IVIG. So what are your thoughts for a read-through to the Plasma Drives franchise? And then my second question is around regulatory timelines. Given that we have some new product approvals pending, can you give us a sense of what is happening with any upcoming FDA inspections and your thoughts on the timing of regulatory decisions? Should we be building in some slippage for products like Merpavir or Eohylia? Any comments around that would be appreciated. Thanks.

Hi, Stacey. Thanks for the question. In regards to the pricing that Argenix has shared, we don't comment on competitive pricing strategy. But what I will say is that the initial indication is a relatively small one, as you know, Myosinus gravis. So we will be watching closely to see if the pricing has any impact on the uptake of the product in Myosinus gravis. So far, as you've also seen, the data that they've released out of their Phase 2 seems reasonable in myasthenia sclervis. So, again, we will be monitoring closely.

Casey, I can take on your question around the timelines for regulatory approvals. And indirectly, you're asking about our site inspection strategy. So, you know, firstly, We have a very strong record with respect to site inspections, both for GCP, GMP, and GLP activities. And we are routinely undergoing site inspections, not just as part of filings, but as part of our normal course of action. Specifically with respect to Meridivir, as you know, we had the positive adcom last month, and we have a PDUFA date coming up in towards the end of November, and we have high confidence in the approval from Rivivir, and based on the site inspections that we've had, we have high confidence that that product won't suffer any delays at all until launch. Eohylia is in a very different situation. The issue with Eohylia is not around site inspections. It's around the regulatory review process. As you know, we missed our Kuduva date in April, and we've been in a back-and-forth dialogue with FDA responding to information requests. At this point, we still don't have an update to provide in terms of potential timelines for that program.

Thank you very much. Next question. Steve Baca. This is Steve Baca from Jefferies.

Yes, hi, it's Stephen here. Thanks for taking my question. I have two. The first one, again for Jewelry, regarding your plasma forecast, collection targets, and the second one, So I'll ask that one first. In your guidance on page 20, you were saying that you expect growth of 15 to 25% for the full fiscal year. That is a reduction, I think, from your previous guidance, which was for 30% growth. So I'm wondering if you could give us a bit more detail about that change in view. And then the second question is about, perhaps it's for Andy, it's about your collaboration with JCR for his cargo, for Hunter Syndrome. What does that mean for the future of your existing product, Ella Praise, and also for Tax609, which is an intrathecal version of Ella Praise, I believe. Thanks very much.

Thanks, Steve. In regards to your question around the plasma donation levels, so yes, you're correct. At the beginning of the year, we did guide that we would have growth of approximately 30% to support what we were targeting for revenue growth and commitments that we've made from a patient standpoint with IT supply. So through the year, given our performance in plasma collections thus far, plus the efficiencies that we've gained across Our entire network from biolife, our plasma donation infrastructure, and through to manufacturing, we're able to reduce the amount of plasma we need to collect this year in order to meet those commitments. And given the ongoing challenges that you've seen, particularly in the US with the pandemic, the cost of plasma collections is higher than we would like at the moment. And so it is prudent for us to pull back on the collection so that we are targeting the commitment to patients and the overall revenue targets that we have made, which we are still on track to deliver for the year. I will note a little bit of a plug. We do have an investor event scheduled for November 17th, where we'll be going into much more detail in regards to our performance in the PTC business.

Okay, just to clarify, so this is a deliberate decision you've made to reduce the level of your collections, but you are responding to the environment where you've had to pay more than you expected for collections. Is that the right way to think about it?

Correct. It is a deliberate decision that we have made. Yes.

Understood. Thank you.

Steve, maybe I can jump in next on LPRACE and the JCR agreement, and I'll ask Andy to comment on 609 as well. So, you know, I think this is an area, hunters, where there is, you know, really a dearth of treatments on the market. We're actually very excited to have one product that is on the market that has an amazing impact on children, on their somatic symptoms, and to have two in development, 609, as well as the new one that we have with JCR. And I think, you know, as we think about all of these products, Part of the risk is in the development, right? So we'll push these through development, doing everything we can, and then look at, you know, what that means from a co-positioning standpoint as we get closer to commercialization of the JCR molecule. No clear direction on that yet that we're ready to disclose or give, other than, you know, there's room for more treatments and there's a, you know, high, high unmet need in this population. We're very excited about the JCR molecule and the opportunity to treat both cognitive as well as somatic symptoms. Andy, did you want to comment on 609?

Thanks, Ramona. Just very briefly, Stephen, you know, 609 is an intrinsically administered IDS replacement therapy that would need to be administered in conjunction with a peripherally acting enzyme like alloprase. So it's a very niche product. And, you know, as we presented previously, our peak sales forecasts are very small. for tax 6 to 9 because of that reason. We're still in dialogue with agencies right now. We'll have a better sense for the path forward, you know, over the next six to nine months.

Thanks very much.

This is Wakao from JP Morgan.

I hope you can hear me.

My first question about the TAC-994, the cathetic function safety signal, was it by low dose, medium dose, or high dose? So if you're going to use the trial once again, is it from Phase 2 or Phase 3? If you're going to continue development, if that decision is made,

From which stage will it restart, stage 2 or stage 3? And my second question, 450 billion to 500 billion was the test at the end of the fiscal year, but you are going to buy back the 100 billion, and what are your operating capitals? Thank you.

So we'll pass on the two questions you had for TAC994. The first was around the dose at which we saw the toxicity, and the second was around what would be our plans regarding restarting clinical development. So on the first question, we haven't disclosed dose yet. It's still a blinded data set, but there are some of us who have been unblinded, obviously, to ensure patient safety. but we'll provide more information next year regarding the full safety data set and dose-response relationship. With respect to your question regarding trial restart, right now there's a serious patient safety issue. We paused those trials. We stopped those trials. We are not dosing patients. Before we have any possibility of restarting a trial, if there is a possibility, we need to really look at the full data set. So there are no plans in place right now.

Maybe I can take the next. Thank you, Andy, and for the question. The shared buyback, the way we're funding that is from our operating cash flow. So you're seeing a stronger operating cash flow. We think we're going to be comfortably delivering our free cash flow and operating cash flow targets. But on top of that, we're unlocking even more working capital as well. So we have the opportunity to fund this from our strong, abundant operating cash flow, and therefore we don't see an impact to our deleveraging targets as well. Thank you for your question.

Thank you. Thank you for taking my question.

Sorry, we'd like to move on to the next. Craigie Swiss, Sakai-san, please.

Can you hear me? Yes. Okay. Thank you.

Sorry. I was on mute. So two questions. One question for Kosta-san. This shareholder program, are you not sending wrong message to investment community because 100 billion Japanese yen with 30 million share buybacks, You're saying you're buying the share below 3,000 Japanese yen, below today's closing price. So what is the justification of this size of the share buyback? So that's my first question. And the second question is, tonight we have the U.S. people here, so I would like to ask the pricing situation in the U.S. Obviously, the U.S. is preparing for a post-pandemic, I guess, living condition, whatever they are. Now, with the budget coming soon, what's the Biden administration's pricing policy going for? We're getting very patchy information for the last 12 months. Can you tell me anything concrete with the pricing pressure? that we should be aware of. That's the question.

Thank you.

Thank you very much, Takesan. I can address this. So thank you very much, Takesan. I'll just repeat what I said before. I think the message is really the fact that we think our share price is well undervalued. And now is an opportunity to acquire the discount. And at the same time, we're in a position of strength. We're showing strong cash flow, strong underlying revenue growth. And again, the window is six months, but we will look at buying from next week. And I think for me, it's really a key message from the leadership team is that we're confident in our strategy, we're confident in our deleveraging, and it's a signal that we'll continue to look at enhancing shareholder return as indicated in our updated language of our capital allocation policy. So I agree if it was a one-time, perhaps, But the signal here has been updating also from our capital allocation policy. So we'll continue to revisit this on an ongoing basis. Thank you very much.

Thank you. And maybe I can take the question on US pricing. So, you know, very high level today. It appears the administration is getting closer to some sort of package. I think what's up in the air still is the size of the package, and that means the size of the pay-fors from pharma as well. So it's difficult to say concretely because we don't know concretely at this point exactly what's going to happen. I will say that we're pleased that the administration has expressed support for lowering patient out-of-pocket costs. The unpredictability in the U.S. of patient out-of-pocket has been a challenge for patients and a challenge for us making our medicines available to patients. And so we do expect there'll be some pay-fors from pharma within that. We've provided a number of solutions to the administration that we're hoping they're looking at carefully, and we believe they are. But the final decision has yet to be shared. And certainly, we're looking at all options, assessing the impact, and as soon as we have any more information, we'll definitely be passing that on to you. But we do very much support the administration's goal of, you know, making our medicines accessible to more patients and reducing out-of-pocket costs and increasing predictability and affordability of medicines in the U.S. Thank you.

Thank you very much.

Because of the limitation of time, the next question will be the last. Morgan Stanley, Muraoka-san. Hello, this is Muraoka, Morgan Stanley. I hope you can hear me. Yes, we can hear you. Thank you. My first question is about cost ratio. In the second quarter, the cost of goods, the cost ratio, more than three-point deterioration I understand this is due to plasma collection, but 15 to 25%, so you are slowing down the plasma collection. What does it do to the four-year performance target? Do you think you would miss the target of 930 billion because of the lower gross margin? And for the next fiscal year, once the collection cost normalizes, do you think that it can contribute to the improvement of the gross margin for the whole company? That's my first question. And the second question is about Novavax vaccine. I didn't really understand that the pricing in Japan will be lower than 2,000 yen or higher than 2,000 yen? I wasn't quite sure about that, so can you please clarify this for me? And also, so this was filed in the UK, and therefore, you would have no problem filing in Japan. Is that the question? Understanding. And also, the production capacity, 100 million. There is excess capacity, according to your agreement with the Japanese government. Do you think it's likely that you would export the excess production to outside of Japan? That's all. Thank you.

First question, and then for the Novavax question.

Sure. Thank you. Thank you, Marioka-san. If I understood your question, it was around the gross margin on the core results. So you're right. The gross margin is we had some headwinds in the first half of the year, and that's predominantly driven by two reasons. The first one is FX impact. So the cost of goods has been impacted from FX because we have a lot of the manufacturing costs in euros. So that had a headwind. The second one was the donor fees. As we've highlighted for plasma-derived therapies, there was an uptick on donor fees. But now that we're no longer addressing that from that standpoint, we expect in the second half of the year to improve the overall gross margin. And in particular, another reason for improving the gross margin is that we also see the acceleration of our 14 global brands. And our 14 global brands have a higher overall gross margin than the overall company total gross margin. So we think we're in a comfortable position. We're very confident that we're going to deliver the $930,000. cooperating profit target for the full year. In fact, even in the first half year, the run rates are at 52% to the full year 930 cooperating profit. So we believe we're in a comfortable position to deliver our guidance. So thank you. And I'll hand it over to who was next. Masato-san.

Thank you. This is Iwasaki. Thank you for your question. So pricing and also timing of filing approval as well as what is the impact of the filing in Europe. I think those were the questions. As far as the pricing is concerned, it has not been fixed yet. The Japanese government will be the biggest buyer from our perspective. So we consult MHLW as we decide on the pricing. Timing of filing as well as approval. We have not really shared this with you specifically, but supply of product will be early 2022. That is the plan. Again, Novavax and MHLW, we need to collaborate with them very closely to make sure that there is no delay in manufacturing, so we're getting ready for that right now. I hope that answers your question. Well, what is the difference between the manufacturing capacity, 150 versus the 250 million? Yes, 250 million doses can be manufactured with the capacity, and we don't know what's going to happen in the future, but we are discussing with Novavax, and excess production, if we produce more than we supply to the Japanese government, we are checking if it's possible for us to export to outside of Japan. That's one of the potential options that we're considering. Thank you.

Thank you, Masato. I will add one element, but not in the translation, is that remember that the government of Japan help us to finance the investment for the manufacturing capacity. That's what we wanted to express is that they help us with the financing of the manufacturing capacity. And that's why we wanted to say that, you know, logically, they will have a preferential price linked to that investment that the government made at the time.

Thank you very much.

With that, I would like to close this webinar for today. Thank you so much for your participation despite your busy schedule. We ask for your continued support. Thank you.

Thank you.