Olympus Corp Ord

Hello, I am Representative Executive Officer Takeuchi. I would like to start with a presentation for the consolidated financial results for the second quarter of high school year 2035. Thank you for participating. Before turning to the results presentation, I want to first address the recent reports regarding our previous Representative Executive Officer and CEO, Stephen Kaufman. As we have announced on October 28, 2024... Upon receiving an allegation that Mr. Kaufman had purchased illegal drugs, we immediately launched an investigation which determined that Mr. Kaufman likely engaged in behaviors that were inconsistent with a global code of conduct, our core values, and our corporate culture. The matter was swiftly passed to the authorities, and Olympus has been and will continue to cooperate fully with the investigations. As these investigations are ongoing we are limited in what we can say on the matter here today. We appreciate your understanding. We will promptly announce any events that should be disclosed in the future. Since Mr. Kaufman's resignation, I took on the role of interim CEO and will lead the company in the execution of a strategy and continued delivery of essential products and services to patients worldwide, fully embodying a purpose of making people's lives healthier, safer, and more fulfilling. Olympus is strongly opposed to the use of illegal drugs. We regularly provide training to management teams and employees to ensure that they are fully aware of the global code of conduct and company policies. We will further continue to strengthen this in the future. In addition, the management team remains resolutely focused on a long-term strategy and execution for sustainable growth. Going to the second quarter's consolidated financial results. First, our business continued to grow steadily in the second quarter following from the first quarter. Revenue increased by 10% year over year on a consolidated basis, accelerated by a tailwind of yen depreciation. Of particular note was the strong performance in North America, where we achieved 24% growth year-to-year, with double-digit growth in all three focus areas of GI, urology, and respiratory. Strong core customer demand, particularly in the U.S., drove overall growth, mitigating headwinds, particularly in China, including the continued impact of the anti-corruption campaign, volume-based procurement, and increasing local competition. Due to factors such as tight SG&A control, the adjusted operating margin reached approximately 18% for the six months and 20% for the three months, in line with our company's strategy. The ongoing remediation and quality transformation program, ELEVATE, is continuing to progress well to meet our commitments to the U.S. Food and Drug Administration, FDA. In the next slide, I will explain the progress to date and the outlook for the ELEVATE program. Our forecast for the fiscal year 2025 remain unchanged from the previous announcement. Although the business environment remains uncertain, we will continue to monitor the situation closely and respond appropriately and promptly, working towards achieving the initial forecast announced in May. Finally, I would like to inform you of two topics that will support our future growth. The first point is that we received clearance and approval for cloud-based AI endoscopy devices in the U.S. and Europe. I will talk about the details later in this presentation. Next, on November 1, 2024, the U.S. Centers for Medicare and Medicaid Services issued the calendar year 2025 Medicare Physicians' Fee Schedule Final Rules. The rule finalizes establishment of a new current procedural terminology, CPT code, and reimbursement rate specific to ITIN, which will go into effect in January 2025. The addition of a CPT code with appropriate reimbursement rates not only creates a systematic process for providers to bill and collect for the ITIN procedure, but makes it economically viable in the hospital outpatient ambulatory surgery center and physician's office sites of care, increasing access for patients seeking this minimally invasive therapeutic option for BPH. In fiscal year 2024, we launched a multi-year program focused on a quality transformation called Elevate. The program is an initiative to meet our regulatory commitments, acknowledging the FDA warning letters we received in 2022 and 2023, build for a future, and strengthen our cultural foundations led by a strong global and cross-functional team. Progress to date has been very good, with over 95% of our commitments to the FDA completed. Regarding the global complaint handling system, one of the key milestones, we completed the transition to the global system in October 24 in the U.S., Europe, and Japan. The transition in China and other markets in Asia is scheduled to be completed by the end of November. This will allow us to harmonize complaint handling processes globally and improve our ability to quickly detect and correct issues. In addition, we successfully completed third-party audits of remediation activities at Aizu, Hinode, and Hachioji facilities, and the feedback confirms successful implementation of corrective actions. By fiscal year 2026, we expect to complete our remaining commitments to the FDA and move on to the next phase of Elevate in further improving and standardizing key elements of a quality system. Accordingly, expenses related to Elevate will decrease, but some will transfer to SDNA-enhancing QARA organization capabilities from fiscal year 2027 onwards. Through EvoVate, we will not only comply with the regulatory requirements, but also continue embedding the principles of quality, patient focus, and customer centricity further into our DNA as we embody a culture of excellence and continuous improvement. This gives us a strong sense of purpose as a company and will become a source of competitive advantage. Next, I would like to highlight our three new cloud-based AI medical devices that recently received approval as CE marked medical devices in Europe under the Medical Device Regulation, EUMDR. They represent the first phase in an effort to commercialize the first intelligent endoscopy ecosystems. Additionally, in July 2024, Odin Medical Limited, an Olympus company, received FDA 511K clearance for the first cloud-based AI technology designed to assist gastroenterologists in detecting suspected colectal polyps during colostomy procedures. the CADDI, Computer Aided Detection Device. In August 2024, we received CE approval for three AI medical devices in Europe under the MDR program. CADI, which can be used to detect and characterize suspected colorectal polyps, CADU, which is intended to aid in analyzing dysplasia in patients with Barrett's esophagus during endoscopy procedures, and SMART-IBD, which is designed to aid clinicians in analyzing ulcerative colitis during colonoscopy procedures. All three products use AI algorithms that utilize innovative cloud technology, allowing data to be analyzed in real time via the cloud with the most up-to-date software. The 510K clearance for CATI and the CE approvals in Europe mark a significant milestone in our efforts to enhance clinical outcomes and operational efficiency in endoscopy and allow us to accelerate the launch of the platform with these CAD digital products. So we believe several ski achievements in fiscal 2025 are prepared as well for the commercial launch in fiscal year 2026 for the intelligent endoscopy ecosystem. Recent roadshows and product demonstrations with customers generated strong feedback on the vision and the architecture of our intelligent endoscopy ecosystems. We are piloting these cloud AI endoscopy systems in selected European hospitals. This co-creation approach enables real-world clinical evaluation, ensuring the systems meet the needs of healthcare providers and patients. Early customer feedback on initial offering has been very positive. We will begin commercializing the first AI solutions in the first quarter of fiscal year 2026 in the U.S. and selected countries of the EMEA region. Additional digital products of the intelligent endoscopy ecosystems will follow during fiscal year 2026 in selected countries of the EMEA region. With the anticipated growth in AI offerings, Olympus is uniquely positioned to shape the future of healthcare, improving outcomes and efficiency by leveraging data and a strong presence across all endoscopy suite components, capital equipment, consumables, infection prevention, and service. Our ambitious goal is to connect 40,000 of a globally installed base of GEI image processors by the end of this decade. I'll hand it over to Shifu Izumi, who will lead you through Adidas financials for the second quarter.

Hello, everyone. I am Tatsuya Izumi, CFO. Let me explain our consolidated financial results and the business review for the second quarter of fiscal year 2025. Consolidated revenue increased by 10% year-on-year to ¥474 billion, with yen depreciation serving as a tailwind. Revenue growth was driven by North America, which achieved double-digit growth in all three focus areas led by EBIS-X1-G1 endoscopy system. Revenue reached a record high for Q2 and for the sixth month. Operating profit increased significantly year-on-year to 70.5 billion yen due to a decrease in losses related to barren medical technologies, which were recorded in the previous fiscal year, tied SG&A Control and Tailwind from FX. Adjusted operating profit increased by 28% year-on-year to 85.1 billion yen, with an adjusted operating margin improving 2.5 points to 17.9%. In addition, looking only on the quarterly basis, the adjusted operating margin was 20%, achieving the financial guidance set forth in our company strategy. Three financial results were largely supported by FX. However, even after adjusting for FX, revenue increased by 3% and adjusted operating profit increased by 4%. The four-year forecast remains unchanged. And from the previous announcement, although the business environment is by no means optimistic, we will continue to work toward achieving our initial forecasts. Again, our fourth-year forecasts remain unchanged. Although the business environment is by no means optimistic, we will continue to work towards achieving our initial forecasts. Next, let me take a look at overview of each segment. First is the endoscopic solution division. Revenue grew 10% year-on-year. Adjusted operating profit, excluding other income and expenses, significantly increased year-on-year to 71.5 billion yen, with an adjusted operating margin of 23.9%, an improvement from the same period of the last fiscal year. Next is each sub-segment in GI endoscopy. Cells in North America grew 44% led by strong cells of EBIS-X1 GI endoscopy system. On the other hand, cells declined in China due to the impact of the anti-corruption campaign and other factors. In surgical endoscopy, sales declined in China and increased in Europe. Growth was driven by solid performance of Bicela 83, surgical endoscopy system and others, combined with favorable FX effects. In medical service, we saw steady growth across all regions, especially in Europe and North America, due to stable revenue streams based on service contracts including maintenance services and increase in new accounts. Next, in the therapeutic solution division, revenue grew 10% year-on-year. Adjusted operating profit, excluding other income and expenses, significantly increased year-on-year to 32.7 billion yen, with an adjusted operating margin of 18.7%, an improvement just like ESG. Now looking at each sub-segment, all three focus areas, GI endotherapy, urology, and respiratory, grew primarily in North America and Europe. In GI endotherapy, cells increased in HPV or hepatopancreatobiliary-related products and others. In urology, the growth was led by solutive superpulsed laser system for urinary tract stone management and resection electrodes for BPH treatments. In respiratory, we saw strong performance in the EVAS scopes and therapeutic devices mainly used for EVAS TB and A. Next is the balance sheet as of the end of September. Total assets decreased by 167.6 billion yen from the end of the previous fiscal year due to the decrease of cash-in-cash equivalents and FX impact. Additionally, interest repaying debts decreased due to the repayment of debts. Balance as of the end of September 245.5 billion yen. The equity ratio rose to 51.4%, up two points from the end of previous fiscal year. Next is cash flow. At first glance, cash flow may appear to have decreased significantly because the impact of the transfer of evident was included in the same period of the previous fiscal year, but adjusted free cash flow excluding the external factors improved year-on-year. Cash flow from operating activities was plus 93.7 billion yen. It increased significantly or near due mainly to an increase in profit before tax and corporate income tax refund. Cash flow from investing activities was minus 30 billion yen due mainly to expenditures associated with acquisition of tangible assets. fixed assets and intangible assets. Free cash flow stood at ¥63.7 billion. Adjusted free cash flow was ¥39.3 billion, excluding extraordinary factors such as acquisitions, transfers and reorganization of businesses. Cash flow from financing activities was minus ¥156.7 billion due mainly to share buyback, the repayment of the long-term debts and dividend payouts. As a result, cash and cash equivalents stood at 245.9 billion yen as of the end of September 24. That concludes my presentation. Thank you for your attention.

We would like to take questions from this point onwards. First, Mr. Takeuchi. As you have explained at the beginning, I would like to ask my question about your point. So I understand it's difficult to answer the things related to the investigation, but please answer while possible. If you look at the reports, Mr. Kaufman, in terms of the management of these type of crises, Maybe it was a bit lax. I think basically Mr. Kaufman's behavior and words were based on the lax management. So I don't know how, whether this media report was true or not. So basically, in terms of the expense or spending of Mr. Kaufman, in terms of control of the spending by Mr. Kaufman, have you conducted any review? Because it seems to be lax. So, Mr. Takeuchi, you are the interim CEO. So in terms of the nomination committee discussions, what will be the roadmap for the succession planning going forward? I would like to ask about that. Thank you very much for asking your question, and I would like to answer. Well, the investigation is ongoing, so there's nothing that I can say definitely. In terms of the expenses, in terms of our lax management of the company expenses, I think that was the point of your question. For this incident, more broadly, so not just trying to limit the timing, the former CEO himself privately utilizing the company asset under investigation. We have not found that type of allegation to be true. The internal audit is ongoing, but currently I think we can say that point. So in that sense, This has been a personal matter for him, and that's what we think as of now. In terms of the succession planning for the next CEO, the nominating committee and the board of directors will decide about this, so I cannot give you any formal comment. Currently, what I can say at this point, we are trying to the best candidate, taking a broader perspective. So that will be a basic policy. That is how we are approaching this matter. Understood. So a simple follow-up on my side. So the current midterm management plan, so it was announced in 2023. And at that timing, it was right after the wording letters has been issued. And after that, Mr. Izumi has joined the company as a CFO. And the board members have changed dramatically. And Takeuchi-san, you had explained at the beginning, the FDA issue is moving forward toward the solutions. And the CEO has changed. In terms of the midterm plan, is it going to continue on this track, or is it going to update that because of the change in the external environment, the change in your internal situation? Can you give us some guidance on that? Thank you for your question. So what I can say at this point is that the incident surrounding the previous CEO and reviewing the direction of the strategy of the company, we will not do so. We will basically go forward with what we have set forward as a strategy. But Putting that aside, whether we should review the strategy or not, this is something ongoing discussion. So depending on the change in the environment, if necessary, of course, we will review our strategy. So always... Maybe it's an exaggeration to say that we always have that in mind, but there is a possibility that the tragedy may be changed. But I repeat, this is not related at all with the former CEO. This is purely a management matter that we are taking into account. Understood. Thank you very much.

So from my side, I have a question on succession. And of course, who is going to be the new CEO? I'm sure that you cannot comment on that at this moment, especially Mr. Takeuchi is here. So looking back when there was a financial scandal, you were one of the executive officers. So the candidates for the CEO, as far as I know, have probably retired or left the company mostly. So right now, the people coming from the medical area and also people joining from outside consist of the current management team. My personal impression probably is that because of this past scandal, the person who would have been included in the succession plan, there is a shortage of that. So from now on, I don't know whether the person will come from inside or outside. I'm sure you cannot talk about it, but is that something that is possible? Because you only have a limited pool of talent, and if you are to make the succession plan, maybe it would be very difficult. So the nomination of the next CEO after this incident is drawing a lot of attention in the equity market. So I would like to know whether there are any concerns about the lack of the talent pool. Well, as a concern, of course, it's one of our challenges, I think. But historically speaking, the CEO candidates in the past, of course, they existed. And as of now, the current status of the company is very different. So it doesn't mean that somebody who was successful in the past can be the CEO. the candidates for the future CEO, we have to really look at this from the job-by-job perspective. So I think that's a little bit different from what you described. So with the development of the company and as a Japanese company becoming a global company in a true sense, and we are heading toward that direction, so the mission of the CEO is becoming more and more difficult. And that, I think, is something that we can say. It is not the case when we have an abundance of talents, not only for Olympus but also for other companies. The two candidates for the CEO position, I think you have to have a certain amount of experiences, and that is becoming more and more difficult, I think. I see. So just one follow-up question. It's not just Olympus, but it's difficult for all the companies. But with this incident, you have to choose the next CEO. And in terms of the time frame, Mr. Takeuchi, you are just serving as a temporary CEO. Or when do you think that you will announce the next CEO, if possible, if you can comment on that? Well, this happened all of a sudden, and so it is a very unusual situation, I think. So I am an interim CEO, so I'm an acting CEO. and the former CEO and we have not had the clear progress in terms of the succession plan. So it is not appropriate for us to choose the permanent next CEO. As of now, who is the best person to be the CEO at this moment? And I was nominated based on that kind of question. So what would happen in the near future, I cannot say. And as a company, we have not made any decisions on that point. Understood. Thank you very much.

So I would like to ask about the endoscopy business and ask about the top-line trend, bi-region. I would like to ask about that. For this fiscal year's guidance, you have not changed your outlook for this fiscal year. For instance, U.S. is good. China is weaker than expected. What is the bi-region color? Can I ask about that first? Hi, Sam. Thank you very much. So, Doliboski, Doliboski-san, would you please answer your question?

Yes. Thanks a lot, Hayashi-san, for your question. You already pointed to two of the most important elements, which is a very strong American-based business. and slightly weaker than expected Chinese business. We have in both Europe or EMEA and in Japan, low single digit growth at the moment. And we are expecting slightly higher single digit growth in APEC. where we are still suffering from the Korean doctor situation. And we also are dealing with a few quality-related issues in Australia. But we are optimistic that the American overachievement or strong growth rates, which are, as you've heard before, in the range of 24%, that they can compensate a Chinese business that we also expect to slowly recover. We just got the latest sales for also the first month of the second half year in, and they confirmed our optimism that we can recover in the second half of the year. I hope that gives you a bit of an overview.

Thank you. Towards the next fiscal year, So China, when do you think that the China market is going to recover? And you announced about the intelligent endoscopy system. So if this is commercialized, the developed countries that are going to install the system, this will stimulate the further demand for endoscopes? May I ask about that?

First, let me comment on your question about China and the recovery. I think we all, meaning the whole medtech industry, were expecting a recovery and a clarification of the anti-corruption campaign in the second half of the year. We also expected that the additional stimulus coming from some packages that the government were presenting and preparing for acquisition of major equipment would help in the second half of the year. You probably also have seen over the last weeks quite a lot of MedTech industry players announcing that the Chinese sales is not recovering yet as expected. We foresee a slow recovery, as I mentioned, in the second half of the year still. We've seen first signs in the last two months. In some provinces, the additional funds from government are starting to arrive in bids and in tenders. But a strong recovery is at the moment not visible. So we are projecting a slow for this year, flat or very small single digit growth compared to last year. But at the moment we are we are still behind last year in China. To your second question and comment about the intelligent endoscopy system. Yes, once we start to roll this out, it will help to stimulate additional sales of systems and scopes. But to a big extent, it is also market share protection project. You must imagine that our installed base will be upgraded with these additional features and it will allow us then to secure the installed base to then continue to expand our and the scope sails towards the installed base of video towers because every single scope that will be used will benefit from these additional AI support tools and this will also allow us to expand the technology around the not only clinical support but also report writing and workflow support which will then, according to the feedback we received from customers, will make the utilization of our video tower more easy and more successful for them so that we see this as a very strong tool to keep and protect our already very high market share in, as you know, the GI business. That will conclude my answer for now.

Thank you. That's all from me.

Thank you. On page five, QARA-FDA elevate this project. I have a question. So the expenses, when you look at the expenses, 26 March, you plan to achieve the commitment, and what would be the expenses for that? And 27, FY27 and onwards, the expenses would decline. So does that mean that the expenses will be about the same level before that? So this QARA and this GNA, Could you talk about the level of the expenses in FY 26 and 27, 25, 26 and 27? Thank you. So about Elevate, it is the quality program and question on the expenses. So I would ask Mr. Izumi, CFO, to answer. Yes, Izumi speaking. Let me explain. First of all, for this fiscal year, FY 25 Elevate cost is 32 billion is expected. For the second quarter, SGA 5.2 and 11 for others. So the total is 16.2 billion for Elevate. So the progress is on track. So FY25 total is 32 billion as we planned. That is our forecast. FY26 for the next fiscal year as of now, we cannot say definitively because next fiscal year the budget is being formulated, so it's difficult to say. And another thing is that about the elevate, as it was mentioned, it is not just to respond to the warning letters. It includes the change of culture in others. So the QARA, it has become the part of the QARA. So which part is elevated and which part is not elevated? Now it's very difficult to distinguish. And about the finance work, we struggle to come up with the numbers. So because of that situation, what would happen in next fiscal year is difficult to say. But FY26, from our perspective, to achieve our commitment, what we are trying to do and elevate is the top priority. So next fiscal year, this cost coming down probably is very difficult. So what I can say at this moment is that What is that? Okay, thank you. Follow-up question. So three year about the 70 billion yen is the number that you have shown to us. So your comment and also the elevate cost will come down, start to come down from 27 March. So that means that it's not going to drastically come down. but probably 32 billion or 20 billion or 15 billion. That would be the size that we should be expecting. Is that correct? I'm sure that not all the numbers are finalized, but in terms of direction. Yes, the size, it's difficult to mention the size, but 70 billion and to keep it under 70 billion might be difficult. So as I said, in order to maintain it below $70 billion, we are not going to reduce the level of the activities. So there is a risk that we could exceed $70 billion. I see. Thank you.

So this is a question related to Mr. Kauffman. So it's not reported that he has been arrested. I think basically in some cases he can be under house arrest. Is it the case that he has been arrested? Actually, the charge is already confirmed. Well, for this matter, because investigation is ongoing, we cannot answer to your question at this point. So is it the case that he would not be charged Well, I do not think that this is a matter that we should be answering your question. We are not in the position to reply to your question. Related to this, so your response to the FDA, Mr. Kaufman is a non-Japanese, and he has been, I have had the image that he has been a person to directly communicate with the FDA. So he has left. Is there any change in communication with the FDA? It is true that up to now, our former CEO, with the device top person with the FDA, in some cases, as necessary, directly had a contact with them. That's true. But the company and FDA communications, between the company and the FDA and the company, if you look at in totality, so the team... We have a team, and they are from the quality team. So they are taking communication. So, Mr. Skolnick. So I think Mr. Kaufman just took communication with the FDA in some important points or when it was necessary. And this is a personal opinion. So I will ask Mr. Skolnick what he thinks. So after our CEO has left, I don't think the relationship with the FDA will be undermined. I do not think so. And if necessary, I, myself, as a top of the organization, as long as I am in this position, I will directly communicate with the top person for the device. And, of course, I understand that it's necessary. Understood. That's all from me. So maybe I should ask Mr. Sikornik to respond to your question.

I'm sure you got my message and his question. Do you make some comment for that?

Yes, thank you very much for your question. And Mr. Takeuchi, thank you for the opportunity to speak. Of course, as you've mentioned, the relationship with the FDA is managed more than one person. And while Mr. Kaufman was in front of the FDA, so was I and so are many other people in the organization at very different levels. We maintain both of that relationship. through very open, very honest communication with the agency. But most importantly, the relationship with the FDA depends on our actions, what we're able to accomplish, our ability to meet commitments, our ability to change our quality system, and ultimately will depend on the follow-up inspections and our ability to demonstrate to the agency that the changes that we're making are effective. And this is what we're focused on. We're continuing with our Elevate program. We're continuing with changing our quality system. We're continuing with improving how we're responding to complaints, how we conduct our management reviews, how we do our CAPAs, and overall, how we manage the overall company from a quality standpoint. quality system standpoint of view. And this is what we're focused on. And this is something that I believe if we continue on this track will help us tremendously with demonstrating to the agency that we're very serious about patient safety. We're very serious about improving our quality and ultimately demonstrating our compliance. Again, thank you very much for your question. Thank you.

From Q1 to Q2, the business performance trend, I have a question on that. So this quarter, I think that the gross margin has been improving. Is this due to the effects? Or when you look at the segments, we do not see that much change of the direction. So could you talk about the background of that? Also, based upon your forecast, I think you are basically on track, the sales and the cost of goods percentage and SGA. Could you talk about the trend of those items? Yes, Ueda-san, thank you very much. So I would ask Mr. Izumi, CFO, to respond. Yes, Izumi speaking. Let me explain. First of all, about the cost of goods sold, yes, there was an impact of the forex. On the consolidated basis, the unrealized depreciation of the inventory for the two months of the turnover of the inventory, so in comparison to the previous term, August, September, yen strengthened. So because of this, the previous term, August, September, yen was weaker. So because of that, due to the FX impact, there was quite a big unrealized FX impact that improved or made the COGS better. And what was your second part of your question? Compared to the plan or the forecast at this percentage of the COGS and the SG&A, what have been the progress? The internal plans is not something that we announce, so the specifics cannot be really discussed, but compared to our plan, basically we are on track. Thank you. Follow-up question. For this fiscal year, to achieve your plans, what are the risks that you are considering? Earlier, you said that it's not too optimistic, but compared to Q1, is it more difficult? Or as a management team, which KPIs are the ones that you are more committed to, if you can comment on that? Yes, I would like to answer to that question. Well, mostly, as you said, up to Q2, well, in comparison to internal plan, that is not only that one perspective, but I think basically the progress has been what we expected. And expenses and cost control, Concerning that point, compared with the previous year, I think we are containing cost better. We are controlling the cost better than the previous year. And looking into the future, we talked about the endoscope. Frank commented, as he commented, U.S. strength is likely to continue. And other markets, in Q1, especially China, suffered, there were difficulties, but the or the medical, or rather medical expenses in China to kind of support and stimulate is something that the Chinese government is trying to do. And also, toward the end of the year, there is a demand. And in the second half of the year, there is, we expect that the recovery will happen. So about the cost control, we will continue to control this well. And so unless there is an extraordinary or special items, I think that the current guidance that we are showing is quite reasonable and appropriate. Understood. Thank you. That's all the questions that I have.

So this is about the selection of the next CEOs. I would like to ask the question to Mr. Takeuchi. So I think your company is kind of an extraordinary company. TSD is more focused on the U.S., and ESD is focused on the Japan endoscopy market. So in terms of the people who can understand TSD, Both businesses, I think it's very difficult to find that externally. So understanding the U.S., even if you bring a top management of the U.S. and European medical devices, but in terms of I think it's very difficult for them to understand the ways these R&D is conducted in Japan. So I think it's appropriate to have a Japanese top leader right now. So if that is the case, in terms of the direction to aim to become a global medtech, that will be delayed or derailed. If you have any argument against me, please, I would like to hear that. Koutai-san, thank you very much for your valuable opinion. With what you have said, whether you are right or trying to point out some debate what you have said, to be honest, I have no response to make from my side. Because, of course, this is a thing that we have to think comprehensively. And I said that strategies always have to be reviewed. So one of the most important strategies going forward would be where we focus on what type of capabilities in terms of from the perspective of the management, what type of capabilities are required. I think we have to take a broader perspective. So in terms of the, we would like to get the feedback from the board, from the independent directors, and through that we would like to choose the best candidate Well, for instance, for the time being, the only way we – I think your intention was that the only way right now is to select someone internally, but it's not the case. I think basically we're not just saying that it should only be internal candidates. Well, my follow-up is that I have been researching your company, but in terms of your BHP, maybe you should highlight that because I think this is the second good business after endoscopy. So when men go over 60 years, so BHP, well, a lot of people suffer from BHP, and basically there's a limit in terms of how you can treat with drugs. Okay. So Tuis, I think you have the top share in the Golden Slater. You have the Trim Laser. So you have this very unique laser technology. So basically, you have technology that needs support for the people who go to the hospital. But maybe ED will be some of the side effects. So wisdom of the Boston Scientific, this is outpatient. So there was a stent-like device that is used for the outpatient treatment. So this ITIN, your ITIN, I think you have been able to get the ICPT code. So the 2023, the Medicare has got a CPT code, but that was kind of an experiment. But if it's a CPT code, this means that anybody can utilize this, and reimbursement will be more easy to do. So I think this will be a full-fledged release. I think your competitors are 3 million or so. Are they peak sales? Maybe. It's basically peak sales, 10 billion. The TSC business wasn't highlighted that much, so if you can give us a comment. Maybe investors will be more interested in the TSC business. Can you comment about that? Thank you very much. For the urology business, so BHP, not only BHP, but overall, I think this will be the second largest business area for us. And as I have said, the IT and ASPT code, I think this is very good news for us. So going to your questions. Yes. Mr. Kuramoto, who is leading the TSD division, I will let him answer your question. Kota-san, thank you very much. Thank you very much for taking interest in a BHP treatment. As you have pointed out, ITIN has been given the ICPT code from January next year. It means that in the U.S. we will be able to accelerate, we are going to accelerate the sales of our business. As you have said, peak 10 billion sales. Well, specific numbers we have not announced yet. So iTIND is a very easy to use and convenient device. Treatment is easy. And so I have witnessed this procedure. But the implanting iTIND is very short. And no anesthetist is necessary. And the follow-up after the treatment is easy compared to other devices. It's very convenient and easy to use. However, that said, in terms of the size of the BHPH is limited, but for people who are taking drugs for treatment, towards those type of people, if this item can be used for the treatment of those people and by increasing the number of cases and expand the sales. And that is one of the marketing strategies that we are considering. Thank you. So competitors, your competitors. So the urolift is not going to increase because there's a kind of a history against urology. That's what their competitors are saying. Do you think that it's difficult to grow in the urology area? Well, I have talked with the doctors. And there's low invasive treatment when they start that. There are some level of complications. There are some follow-ups that are necessary. So that happens. But as I have said, this is a very comfortable device. So in that sense... We are expecting for this device, and there is a certain limit because the drug treatment, patients undergoing drug treatment, we want to target those patients in terms of our sales activity. Okay, thank you. Understood. Understood.

next generation endoscope technology was introduced. So EVIS-X1, about the next model, EVIS-X1, there was the information meeting. So there will be a large-scale information meeting for the next generation, and when would that be held, or what is your target to have such meeting? Thank you, Saito-san, for your question. Thank you. So I would ask Frank to respond to that question. Frank, please.

Thank you for the question and also for handing it over to me. The next generation of our GI endoscopy center, so the successor of X1, is still under development. And as you probably know, we have also launched X1 in some countries, Japan and Europe already about four years ago. But we are still very fresh with that product in some other places due to the regulatory hurdles we had to overcome. So I think we are targeting a launch in about three to four years. So therefore, we are fully focusing on the current X1 upgrading activities because we feel that we have a huge potential of installed bases that are still not benefiting from the beautiful capabilities that X1 is offering. and therefore upgrading the processor, but also then upgrading all installed base units with our X1 generation endoscopes is going to still give us a lot of potential and a lot of work to do over the next years until the next generation will be launched.

Thank you very much. Just one simple follow-up question, if I may. So the endoscope procedure, depending on the part of the body, there could be some fatal incidents. For the next endoscope, in addition to the better diagnosis, would it be more secure and safe to So compared with the current model, is it possible to develop such a model in the future?

I guess I should take that question as well. Very fortunately, the number of fatal incidents connected to flexible endoscopy is extremely small. And typically, they are a very unfortunate combination of special anatomical medical conditions of the patient and maybe also disease. unfortunate procedural events. So the direct connection between scope design, so endoscope design and technology and fatal incidents is extremely small. And I think we rather continue to invest a lot of time in training and education and obviously try to make scopes safer. But as I mentioned, that is low incidence already today, fortunately.

Thank you very much. So the incident, yes, it is low. But when I talk with the investors, there are some investors who are concerned about that. And when I hear about the death or fatal incident, that would probably reduce the number of the people who go through the endoscopy procedure. So that's why I asked this question. Thank you very much. That's all the questions that I had.

So this is about the financial matters. I have two questions about financial matters. So the performance is good. Your cash has accumulated. But under the current management situation, taking that into account, I have two questions. One is about M&A. M&A, because if this matter has become more stabilized, are you going to accelerate M&A activities? And I think basically you have made the comments about accelerating M&A activities. Has your attitude not changed? Because the CEO has not decided yet. Even that kind of a situation, are you still going aggressive about M&A? and followed up by capital allocation. So from last fiscal year, you have been proactively conducting share buybacks and enhancing shareholder return. That's very good. But in terms of the quantitative policies, the guidelines is not present. So it's very difficult to predict. The predictability is very low. So I think the TSE has some guidelines. I think, basically, I personally think they should disclose some guidelines in conducting share buybacks. So in terms of the capital allocation policies for M&A, there has been various confusion in the management. Has anything changed in terms of the timeline? When can you release the capital allocation or shareholder return policies? Watanabe-san, thank you very much for your question. Mr. Izumi, the CFO, will respond. Allow me to answer your question. First of all, in terms of our stance on M&A, on being proactive in M&A, as you can see in this slide about capital allocation policy, the first priority would be to invest in the growth driver and invest in our profitable business and flexible share buybacks. But although our CEO has left, we should not put a brake on our M&A activity. That is the total will of the management. So we will not slow down our M&A activities based on this incident. Another point I want to make is that in terms of the quantitative guideline is lacking for shareholder return, yes, I think that's difficult from our point of view. So capital allocation should be upheld and then invest in a growth driver. And the second priority will be dividend and then share buybacks. I think being flexible is very important because... you know, the shareholder return ratio, a certain pretentious point, showing that type of guideline, I think that's understandable. But that means that including flexible M&A The management that matches the situation of the times will actually tie our hands. So we are not considering showing any guidelines. But based on your feedback, we will continue to deliberate the possibility of whether we should have those type of guidelines. And, of course, we'd like to have a conversation with the investors about that. But at this point, we have no intention to have the policy. So in terms of the leverage on your balance sheet, so we net that EBITDA, whatever indicators that you can use, it's very, you have room, but what is your comfortable level of the balance sheet, but in terms of your leverage level, for instance? Well, in terms of the balance sheet, I think our credit rating is one indicator. So S&P, triple B plus, that is an absolute level that we want to maintain. So in terms of the quantitative indicator, net debt EBITDA multiple at the most 1.5 times. In terms of the working capital at hand, the one month worth, that's the minimum level. So that will be the quantitative target. So if you look at our current balance sheet, I think it is true that we have room for using our balance sheet for investment. Understood. Thank you very much.