Shionogi & Co Ltd

Ladies and gentlemen, time has come to start the meeting. I am Kyokawa, GM at the Public Relations of Shio Nukin Company. Thank you very much for attending the meeting out of your busy schedule. From now, I would like to start the first half of the fiscal 2023 financial result meeting. First, let me introduce the speakers today. First one, Representative, Director, President, and CEO, President, Mr. Tessie Logie. Tessie Logie, nice to see you. And John Keller, the Senior Executive Officer, Senior Vice President, R&D, Verizon Unit. And Mr. Toshinobu Iwasaki, Senior Executive Officer, Senior Vice President, Healthcare Business, Verizon Unit. Mr. Koji Hanasaki, Senior Executive Officer, Senior Vice President of Surprise Supervisory Unit in the Global Business Division. And Ryuchi Kiyama, Senior Executive Officer, Senior Vice President of Corporate Strategy Division. And Takeki Uehara-Lakobu. Research Media Vice President, Drug Development and Regulatory Science Division. And finally, Ms. Masako Kudo, the GM at the Accounting Department. Let me explain the procedure today. First of all, Toshilogi will explain the out view of the quote reclosing until the shareholder returns according to the agenda. And then John Keller will explain about the update. onwards gender update of the COVID-19 treatment drug. And then after that, we will have a Q&A session in the end. And you can use the simultaneous interpretation function today. If you were to use a simultaneous interpretation, please find the globe icon on the bottom of the screen to choose Japanese or English. whichever you like. So let me start, Mr. Teshiirogi, present, please. So as Kyokawa-san explained, for R&D, for COVID-19 treatment, 309-309 drug will be explained about Mr. Uehara. Then after that, this morning, The OSA and HIV will be explained by John Keller. It shouldn't be disclosed publicly, but I have a kind of back pain which is very severe. So I look very bitter in my face, but it is not showing the unpleasantness of your question because of physical pain. So, let me start off on page 4. I guess you understand the numbers. So, I just would like to explain the points only. So, 230.5 billion yen revenue and operating profit before taxes, 115.6 billion. So, last year was not good, but this year business is good. And, yeah, profit before taxes increased, The quarterly profit is 90.6 billion, and as I explained in our revision in April, there is a report on KPI EBITDA, which is our important KBA, and it is 114.2 billion yen. So last year, again, EBITDA was not good, but it is about three times higher than last year's level. Page five, please. So on the left is full year and the first year forecast, and the force is the achievement ratio for the first half is like 106% or 121%. So that's the kind of ideal first half result that we expected to attain. And for the fully exchange, it is cheaper yen. And for R&D, the cost has been pushed up for R&D, but the royalty and also the Staphylococcal cells overseas could be beneficial for lower end, so lower end is beneficial for those activities, and that is very positive for us. At page 6, just taking the points only, the fourth from the left, which is first result achievement, the revenue is 1.06%, and the cost is 88.5%. And you will see the 50% increase of the sales, but the cost is just a 2% increase only. That is the biggest cause of the big profit in the end. And the increased sales is brought about by... adhd transfer over to 85 million from takeda and the royalty income was very good and so those does not have a kind of a sort of a cost of manufacturing uh however uh the real gloss is coming from the uh So those Zofluza, which is our own development, our own manufacturing, and the cost situation is very good for them. And we have this cost ratio, which is low. And the royalty and also the out license and also the self-development items. are the focus of our business model, and those are the points we'd like to make an effort. For the first half, I should say that we were able to achieve what we wanted to achieve. In a way, it's a good pattern of the business model. For SG&A, which is the 95% ratio, and there is the left-hand side of 229, but this was increased to 230, a little bit increase, and the selling general decreased, but R&D increased. So for the second half, we'd like to be more positive for R&D activities into the second half. And also, there is a negative 81 others. And out of that, the 6.66 billion is retirement for 300 people, retirement allowance, which disclosed yesterday. As I understood, Aziz, for next year, 3 billion negative, I guess, will be next year's result. On the other hand, we embark on the new business and the mostly overseas staff capability will be increased. And so this is the strategic carrier employment, which is discussed. management meeting. And a third is a career recruit with a higher age people. So the headcount cost would not be very low. But for next year's portion only, I guess this headcount cost would be a little bit decreased. And the third from the bottom is a financial income and a cost. uh 42.5 for the full year and 17.5 for the first half and the dividend for a b company is very solid and which is overriding our expectation and for the second half it would be uh much better but currently 42 i don't think the it wouldn't be lower than the 42.5 and the right hand side the negative figure of But because the dividend last year was very big, and there is the consolation between, resettlement between the Gilead and the Weave, so that one portion of the dividend was given to us, and 22 billion was obtained last year. But for this year, we don't have that. The solid and this healthy dividend is obtained continuously. And on the page 7, which is explained about that, one is the decrease, that third one, which is the sales. Last year we sold the real estate, but this year no sales. And yesterday's BOD, the kind of reduction of those kind of three jerry seller shares, and, well, I guess about 30% of the reduction of those kind of cross-holding shares is debated. And it wouldn't be affecting the P&L. Unwinding of the cross-shareholding is now debated, but we'd like to promote those kind of financial policies that you have to be aware of. Coming to the page 8. The PLUGS ratio over first half and year-on-year ratio, you would see the Ping An in China, and Ping An, as you know, that is minus 6.4%. So existing business is okay, but originally... We hoped to push forward for COVID-19-related business, and that portion was not materialized as we anticipated. However, the progress ratio for the previous half and year-on-year, all positive figures, except opinion. For royalty, this is a positive 17.6% increase. So almost two-thirds means the positive blowout about the growth of the existing business. And anyway, the 14 billion are positive. That's a very strong royalty income. And on page 19, again, this is explained. I didn't mention that the second from the bottom, which is a federal call in US and EU is very good. And 6.5 in US and... billion in the EU, so exceeding 10 billion in a half year for the first time, and the second half would continue that, so a little less than 30 billion would be maintained. However, having said that, the kind of multi- Well, is it the right way that we are selling that much for this kind of infectious disease? So why is it growing as such? Well, we are increasing the country we are launching for the first time. In Italy, the amount is not very big. However, there is an existing market which is growing, and it was a new market we launched for the first time. So we'd like to aim at a little less than 30 billion.

Now let's move on to the domestic market. It says negative 50. The fluza rapiacta. Most of them are in the warehouse of the wholesalers, so we retrieve them. From the standpoint of SDGs, we don't want to continue this business practice of sending a lot of products and getting them returned. The doctors and the wholesalers may not be satisfied 100%, but we would like to go this way. And as to Zafuruza, the actual use and our sales are perfectly matched. So I think this is a very good practice in the area of influenza. Iosaki-san may have to receive a lot of complaints, but that's the way we want to go going forward. In addition to that, influenza and COVID-19, 44.4 billion, that's 50 negative from the previous year. So it's the increase of 50 billion. As to ADHD family, 10.1 billion was the last year of sales. For this year, 25 billion, So it's the increase of 15 billion, 50 billion increase for influenza. And also in addition to that, we have increase in ADHD. Page 11, including that increase overall as to the sales, All the categories are going well and increasing. I think we are having a very good start for the first half. Page 12. In addition to the sales activities, we've obtained CUPEX. This is the inhibitor of beta-ractam. With this product, we have enriched our product pipeline. And as to S309309, we've had a very good phase one and we are going into phase two. We've completed enrollment for Phase 2. We'll have observation period of 6 months and have 1 month observation period. We would like to have the result as soon as possible. Page 14, this is the forecast in response to the situation. We've had a lot of discussion at the board meeting, and this is the result of an intensive discussion. From the bottom, the Koba in Asia We are continuing to have a conversation with the authority. We are now after the emergency period, so all those countries are not in hurry, and they are thinking that it's okay to have a regular approach. That's why the review process is slower than our expectation. In the latter half, the sales of Korea and China, we are still forecasting sales. But rather than having too much expectation for this year, I think it's better to have a reset. And we will focus on the respiratory-related diseases in Japan and cefideocol in the U.S. and also royalties. I think those things would compensate the situation. So 450 billion is going to be our forecast for revenue. We maintain this forecast, and that will be the starting point. At the board meeting as well, we discussed that it might have been better to increase that figure However, this is the first year for 2030 revision, so we wanted to have a rather conservative figure and make sure that we exceed that figure. That's how we got approval at the board meeting. In addition to that, the cover in China, we are working with Zenda and Shanghai Therefore, SG&A was very big, but that had been reduced. It was halved, so the SNG had been reduced, and that would be transferred to That's the basic thinking. This is the forecast for the latter half. 5.5% up for the sales and the operating profit would be 0.7% up. And that's how we are going to achieve the record high figure for both of them. Page 16 is the breakdown. SG&A and other items may stand out. Negative 11.0 for S&G. And as to cost, it's also negative for China and Korea. If we are going to go to those markets, the cost of sales goes up. But that is not going to be the case. So, SDNA and also the cost will go down. Of course, we have to be prepared for the US and Europe and China. We have to prepare for those markets. So, we have to consider that. But still, it's minus 11 billion. This is going to be the forecast for the whole year. Page 17 is the breakdown of the forecast. As to Japan, After October, there was a very big Zoukoba expectation in China and Korea. And Japanese expectation was very, assumption was very small. But for this year, according to October trend, We don't think that antivirus products won't go to zero. Of course, because of the reduction of the spread of the infection, there may be some decrease. However, from October to December, we may have the 10th wave. And if the 10th wave comes, we are expecting to have this figure. So that's why it's 24 plus for domestic cases. Infectious diseases. And for overseas, Pyongyang and Korea and other Southeast Asia, the COVID will be negative. Royalty, positive. And Shioniji will be psychedelical, positive. So it's minus 13.5. That's going to be the starting point, and we are going to make sure that we can exceed those figures. Page 18, this is about domestic market. The 88.6 for COVID and influenza, this is almost the same as the first half. As to October, It's not only us, but COVID-19 has come down, but influenza is spreading very rapidly. By combining those two, we want to achieve 44 billion. That's all about the revenue and others. Today, we have Iwasaki and Hanasaki on this stage. So, if you have any questions, we are happy to answer those questions.

We have the 75 share buyback. But separated from that, for dividend, it is to be increased constantly and for six months base, for example, last year's, the 75 yen dividend in the end of last year. And recording that, we consider that is a base in the minimum line. We've been continuing that for over 12 years. So, this 75 would be mid-dividend, and this is increased by 15 yen. And so, from this, as you know, in case our business is good, the year-end dividend, would be debated in B or D to see the possibility of further increase all the time. And so for this time again, I think a dividend is hoped to be higher than that. Sorry for a kind of a lengthy explanation for the business result and our idea for the full-year business. And next, Ms. Wehala will explain about... update on COVID-19 treatment, and update for 309, 309 drug. I will continue to explain. First of all, for Razocovar, the COVID treatment, which your paper describes as the result of the trial, the first one is a global phase 3 study in US, EU, Africa, India, Well, over 2,000 cases are registered. And so far, mostly in Asia, in Japan, the one Phase 3 study, which was approved emergently, is already over. And the second one is inclusive of high-risk patients. This trial, the registration is almost over. or the enrollment would be over. So by the end of December, the enrollment of the cases will be complete, and we are in the final stage. A big update is that, as I have already mentioned, that the efficacy for long COVID, the primary endpoint is the time until the resolution of the symptom. So that's the primary endpoint, however, for long COVID. There still is a metanase remaining, so the second key endpoint is set, and actually having the drug would minimize the risk of long COVID or not. And each country, we will implement a study, and we are in the final stage of agreeing with the FDA for that point. And I think the follow-up under the blind situation will continue. And then after that, the data will be explained whilst those extension time. And for the prevention study, global, many countries, is it possible to suppress the onset of a COVID-19 symptom in close contact, which again is over 2,000 enrollment. So the existing drug has never achieved a suppressing of onset effect. So that is very highly expected, and we'd like to continue preparing the environment that this round can be used in globally. And the enrollment is on the way, favorably, and together with the Phase 3 study on the top line, I hope that in this winter we'd like to complete the enrollment. And the third from the top is the pediatric trial. Mostly in Japan, we prepare the smaller tablet for the school children will take it. So I think a primary school student will start to get the disease until the adult, and there is no drug available or tablet available for pediatric. So we are in the clinical study to enable to deliver that drug. And the final one, there are many doctors expecting the efficacy of Zocova in the hospital. So using this Zocova as an add-on in the hospital, which will promote the early discharge of hospitalized patient out of the hospital, and this is conducted globally as well. On the next page, So the new data coming up so far is about the long COVID. I said it is verified in a global Phase 3 study. On the background, well, we have a Phase 3 study in Asia in three months, in six months. Well, the long COVID risk was reduced as more compared to the one which does not have a drug. So I think a long COVID suppressing risk is obvious. And as against the placebo, we confirmed a 25 reduction of long COVID. And there are many reports about the loss of concentration, thinking ability, and also the fatigue, forgetfulness, so forth. Those symptoms are in a long COVID patient. So the have reduced significantly, like by 68% and by 72% respectively. Those risks were minimized with our Zocoba, and that should be verified in upcoming trials. So far in Japan, it has been used in kind of normal clinical practice. And we'd like to collect the safety and efficacy information. And the kind of intermediate report is available. So far, the safety is confirmed in a clinical trial. and daily clinical practice, there is no new safety concerns identified. And for the effectiveness, efficacies, which is not compared with the placebo, but the efficacy is almost equivalent to the one which we obtain in clinical study. For example, the time necessary for recovery to the normal temperature hospitalization and just four out of 1,584 cases hospitalized, but there is no death case. It is to read the safety, but for efficacy, we were able to provide, I think, high-quality data. I'm hoping furthermore, Well, new data, which is about the taste and smell disorder. As you know, in COVID, the taste and smell will be lost. The COVID virus is not infecting the taste and smell cell, but there is the expansion of those symptoms underneath that cell level. So the function of taste and smell decreased. As much as soon as possible, it is necessary to prevent the expansion of the virus. And as you see in the graph, the interest level is showing the less smell disorders compared to the placebo on the bar graph. And the right-hand side, without any symptom, The first and the day one and day two, this is an acute stage, so to some extent it appears, but in the later stage, with this Zocoba treated patient, dramatically those taste and smell disorder decreases as against the placebo ones. So basically, without any treatment drug, the COVID will be cured naturally. But I have to say that for the virus shedding as early as possible, it is better to prevent such kinds of a disorder of smell. And I would like to focus on the other main activities and achievement in pipeline. Please look at page 66. You are seeing the list of the pipelines, and I can't explain all of them because of time interest. I just would like to focus the major ones only. For the infection disease, in addition to the COVID-19 treatment drug, the vaccine for COVID-19, which is the top one, it says 019 on top, is the vaccine. And also the XBD1.5 kind of mutant one, we have a vaccine. And also by acquiring other kind We have a new AMR treatment and also the collaboration to treat the Asperger's disease. Yeah, we are in good shape of promoting those ones. And for others, those are the major ones as well. Especially today, I will speak about 309309, which is an obesity drug. And for this one, phase one is already over and currently in phase two. And later I will show you with the data on the next slide, which is a situation of vaccine development. As you know, there was a gene recombinant vaccine for COVID is a priority of Shiorogi. And so far we've made an effort in that line. So those So far, we had kind of the superiority in terms of this multi-drug resistant bacteria. However, there is some additional data recommended to present. And so far in Vietnam, To prevent the infection onset, the third phase three study for the prevention effect is already over, and we will add the data from that and PMDA hope to see that data, and we're preparing the data for them. Having said that, for the vaccine for the existing strain, well, messenger RNA is already available, and now XPV1.5 strain, those kind of mutant strain vaccine is now being prepared. In this winter, XBB strain vaccine clinical trial will be done to approve that. And those two approvals obtained for S019 and XBB strain, both could go on the clinical trial. So we will be promoting the vaccine, two vaccines in parallel. I hope that the universal vaccine development is to be promoted because those virus changes over time, they are very mutant. And we would like to get the antigen where we can apply for many strain. It's animal experiment, but this neutralized antibody could be obtained from those animal experiment. So this vaccine is resistant and having the neutralizing property for any strain and we are repeating the experiment, not just the injection, but also a kind of nasal treatment, a nasal vaccine is now being developed.

Now it's about AMR. As Tetsuroki mentioned, beta-lactam and inhibitor, this is the combination treatment, and Cupex was obtained by us. Specifically, there are two programs going on. Those are the programs that we want to share. The top one is about 228. This is about cefidercol in addition to 0.0-bactam. By having this combination for mid to long term, cefidercol can be used. As an AMR, this is a scenario which we have a very high expectation. We are going to have a clinical trial for this combination treatment. The second one is the combination with cefibutatin. This is an oral combination drug. This is a prodrug. Cefibutatin is an old drug of our company. By combining those two, we can maintain the effectiveness. This is an oral medicine. When patients are in hospitalized, IV is used for prevention of infection. But if we can have anti-AML drug, oral drug, the medical economy will improve as well. This will be a very convenient AMR antibiotics that we are developing. Already, Cubex has started phase 1 study. Going forward, we will have global phase 1 study. Next, this is about 309 anti-obesity drug. The market has been very active because of the introduction of GLP-1, but our product is not GLP-1. This is MGAT-2 inhibitor. This is to neutralize or inhibit the resynthesis of triglycerides at the intestinal epithelial cells. Because of this inhibitor, of course, we can observe the fat, observe the fat, but this is not to observe the fat. By having this process in the body, we can have negative feedback of the appetite, or energy can be metabolized faster. So those are the mechanism of action of this drug. In animal model, we could observe the reduction of the weight, and this can add benefit to GLP-1 products There are various issues around GLP-1, like very expensive drug, and also oral might be better, and safety is another issue. So we are developing drug which can solve all those problems. The tolerability was very good in Phase 1. This is the PK profile. from 1 to 300 on a dose-dependent manner, there was no major adverse event, and exposure increased proportionally. Based on this data, We've already started POC phase two study in the US. This is mid-size study with more than 300 subjects. We've already completed the recruitment process. And as soon as we get the result, we will be able to present the result, maybe at around April.

The new joint venture announced today that the company and Housman are together with us. And it is a new focused research area for us of obstructive sleep apnea, or OSA.

And OSA obviously disrupts sleep and has significant effects on nighttime sleep comfort, as well as the following day's wakefulness and memory. But the consequences are much more severe than that. The cascade of the impact of moderate or severe obstructive sleep apnea includes depression, stroke, heart failure. It really has a significant effect on overall lifespan as well as quality of life, reducing survival rate after eight years by about 60%. Next slide, please. The reason that obstructive sleep apnea has not been addressed by a drug to date, and no trials have been successful to date, are that it's a very complicated disease. There is upper airway obstruction, unstable breathing, upper airway dilator muscle, unstable sleep components, all arousal threshold, all of which have their own subcomponents. For example, obesity is known to be a risk factor for sleep apnea. but that only affects the airway obstruction part. The other components are separate. Therefore, these require combination therapies and also probably patient subgroup selection to choose the best combination. Next slide, please. We therefore have chosen to go with an expert company in this area, one of the very few, and certainly the leading, ApneMed, which has the knowledge of translational medicine and clinical experience to rapidly select combinations and test them in the clinic. They have the knowledge of how patients appear to select the key components in their disease, and they also have the ability to rapidly progress into clinical trials and demonstrate whether these combination mechanisms can truly be effective and in which population they can be effective. Of course, we bring to the collaboration our capabilities in small molecule drug discovery and development, which APNIMED doesn't have currently. So that as soon as we identify these mechanisms, Not only can we pursue combinations of existing drugs, but we can create better NCEs and progress those quickly into ever better therapies for this critical disease. Next slide, please. I'd now like to talk about the HIV business. Now, as we've talked several times in a presentation on the HIV business by Viv recently, they updated the overall medium to long-term strategy. increasing their projected growth for the period of 21 to 26 from originally mid single digit to six to 8%. Clearly this year is outstripping that substantially already. This is an average rate. They're also critically updated the long acting formulation progress, looking forward to a future where essentially long acting injectable therapeutics will capture about 30% or a bit more of the treatment market and projecting 80% or more of the prevention market because of the clear demonstration of superiority for the long-acting formulations. Now, we are, as I'll discuss further, now progressing every four-month formulations, moving from our current every two-month formulation, and then beyond that, the potential for an every six-month formulation. Again, these periods are both for PrEP prevention and for treatment. Now, The other piece we added in that presentation was that the IP timeline for our existing drugs, Dovado and Jaluka, for basically dolutegravir-based drugs, are longer than people may have expected, that those drugs extend to the very end of 29 for Dovado and into 2030 for Jaluka. Furthermore, the long-acting portfolio obviously extends not only to 2031, but likely substantially beyond that, based on formulation and other aspects of the long acting portfolios technology. Next slide, please. So for the next period, from now to 2021 to 2026, we are focusing on growing the existing portfolio. Cabinuva for long-acting treatment, Apertude for long-acting prevention, and Devato for the best-in-class oral. Now, with that portfolio, by 2026, it's projected that Veve sales will reach 7 billion pounds. And of that, over 2 billion pounds will be from the long-acting portfolio. So of Veve's portfolio, about one-third by 2026 will already be long-acting. Then looking beyond that for further growth, starting from 2026, the ultra-long acting, the every four-month, potentially every six-month, and also the potential for a self-injection at-home format, which is attractive to some patients. Next slide, please. So to talk about how to achieve that, CAB 400, as we've nicknamed it, which is the once per every four-months formulation of cabotegravir is progressing very well, showing about twice the half-life, either in intramuscular or subcutaneous dosing, versus the existing formulation of cabotegravir. That clearly allows every four months, potentially even every six-month dosing. Furthermore, the combinations and the single-agent prevention will both be launched before the dolutegravir patent press, well before. Prevention, PrEP, by 2026, treatment by 2027. For treatment, as you know, we need two drugs. Right now, we have two leading options for the partner drug. First is to continue with a modified version of recovery. The second is Veve's novel broadly neutralizing antibody N6LS, for which a phase 2b trial is ongoing. A decision will be made next year as to which of those two combinations will be the ones selected for pursuit for launch in 2027. Some more detail on CAB 400 itself will be presented at CROI 2024 in March. Next slide, please. So this slide gives you the overall timeline. Again, the critical items here, launching four-month prep in 2026, launching four-month treatment, every four-month treatment in 2027, and potentially launching every six-month treatment in the 28-2030 timeframe, probably toward the earlier side of that. Again, we're going to be looking at the relative profiles of Q4 and Q6. And once we have Q4, is there a big advantage with Q6? That remains for kind of commercial and patient need discussion. The other interesting item, not critical, is self-injection. Self-injection has been slowed a little bit from some of our former timelines because it has the complexity of needing a device as well for simple home injection. But it's also in that same... 2028 and beyond timeframe. So really, the critical launches in the nearer term are obviously the every four-month format, treatment and prevention. And so we're very excited about that. And with that, I believe we close the presentation.

Thank you very much.

We'd like to move on to the question and answer. And we'd like to accept the question from the floor. And then after that, we take a question from the web participants. And you were able to raise your hand by icon whilst listening to the floor Q&A. And also, if you finish the question, please put down the hands. So from the floor first, I will point out the person to make question. Please state your name and the organization.

Ueda-san, please.

I am from Goldman Sachs. First, I would like to hear about the in Japan. Prescription ratio and the trend of the share. Would you please explain for the ratio of prescription after October? Would you please update and also the share you have ID week and there are occasional presenting data in many chances. So if there is any change from in the clinical situation, please let us know. Iwasaki, in charge of domestic business, will answer your question. As the public subsidy is given, I think for the whole, 23% and half of the drug rates by Zocoba. But it is just one month. We are not able to see the impact by the public subsidy. However, it is not dropping at all. So there is IELESS, which is a think tank, has released data in August, which says that I guess the number will be reduced to 1 over 10, but not to that extreme. That is reduced to a half, I should say. There is no fixed observation point. I don't know what is the cause of the reduction, but as against our anticipation, it is not dropping. For the future, for example, pediatric prescription, still there is a local public money subsidy, and so this could be used there. And the influenza treatment, we have 92%. However, for COVID, we still have just 10%. So for the treatment track of infectious disease as a whole, inclusive of safety data, and we hope our prescriptive ratio should be enhanced. And we have to appeal the efficacy. And I think if it is used, the efficacy could be very well felt by the doctors. And if doctors understand that efficacy, they will prescribe more. So we'd like to accumulate the data. Yes, clinical study in Japan will be enhancing the prescription ratio. Also, the second point is the COVID-19 vaccine. Why? it was not approved this time and in vietnam you mentioned that the clinical trial is conducted and it was approved there would you please explain the background of that and for the mutant strain of xbb 1.5 of data disclosure approval and schedule would you please explain please I will answer first. So the existing string is not approved, but it's still ongoing. We have not glossed over the discussion, but our understanding is that the data for neutralizing antibody that we currently have is not enough for being approved. And also, the Phase 3 data, which is prevention sort of data, with that, we'd like to... They say that they would like to consider these data all together And we have already presented the data to them, which I don't think is betraying their anticipation. I hope that the regulatory authority would take those data into the serious consideration for the future. So the vaccine to cope with this strain is being manufactured. And in this winter, the phase three trial, we have a data to compare the efficacy of the neutralizing antibody. And when those data is approved, I guess this to be successful maybe uh autumn winter 2024 i hope our vaccine will be used uh generally that is our idea oh thank you that's all for me is there any other question hashiguchi-san

About SGA and also research and development expenses, as compared to the first half, in the last half, it's going to increase by 40%, according to your plan. So can you explain, you already explained why they are going to increase. As to SGA, because of the reason you just mentioned, I think we are going to see further increase for the next year, because for the Zocoba, Promotion in the overseas, you'll have phase three results, and then you will have to pay more for the preparation. Is this correct? Of course, that'd be okay if you have a big sales. As to R&D, the Koba phase three may be completed, and this may be reduced from the next year, if you can elaborate on this point. Thank you for your question. Hanazaki-san may add to my comment, or John may add to me, but as you mentioned SG&A, especially East River in Asia and the US, and also some part of Europe, we have to see when sales will come. It's not that SG&A will increase one or two years before the sales. So if the SG&A goes up, top line would go up as well. As to R&D expenses, of course, according to a forecast, sales is going to increase. And along with that, R&D will increase. And we want to do new things as well. As to the composition, Enstrelville part may go down. Scotch HR is a very large study, and prep is going to be big as well. So that part may decrease going forward. However, we will have 309, 309 phase three preparation. In addition to that, as John mentioned, supplement joint venture. That's going to be a very interesting structure. Sleep apnea, as you know, we don't have animal model for sleep apnea because there is no animal who have sleep apnea. Therefore, we'll have to think about the mechanism of action for human being. And as to combinations, we have to see starting from phase 2a to see if it's really effective for human being the strength of applement is that the setup of hospitals and setup of fda's they are very advanced they have a very good setup better than anyone else if the research goes well and if phase 2a and to b if we obtain compound for that phase we want to go to clinical as soon as possible five one four five one anti-obesity and also implement including those about 20 percent of the sales we want to spend for r d and we want to spend them very wisely 113 billion, John and Uehara are not satisfied because they want more for R&D because there are so many things that we want to try. The question is how we allocate the resources. As to SG&A, Hanasaki-san or Yosaki-san, if you have any comment for SG&A. Hanasaki speaking. As Tetsurogi mentioned, we will see SG&A while looking at the sales. A study is going on in the US, so we have to deal with the authority, and we have to check the events, and we will think about the sales force and also SG&A on a step-by-step basis. Thank you very much. One more thing. about COVID vaccination. For the approval, you explained the approval process of COVID-19 vaccination, but the issue has been the manufacturing capacity. If you can get the approval, how much can you produce? Is there any update on this point? Hanasaki-san is in charge of manufacturing and supply chain. Unizen, we've got subsidy from the government. And now, finally, it's going to operate XBB 1.5 if it goes well. We are going to manufacture the product there. That's what I want to think about. One batch is very big. It's about for 5 million to 10 million people. That's the capacity we will have to have. And for the next winter, I think we are going to be capable to do that. Hanasaki-san, do you have anything to add? Hanasaki from supply. As to the production of vaccination, now UMN in Akita Prefecture, we have 500mm tank for clinical trial material. But as Toshirogi mentioned, we have a new factory in Injen. We are going to do the refining and we are also improving all those steps. So now we can see what we are going to do for the next autumn and winter. We are prepared to do a scale up. We are preparing to do the scale up.

Any other question? Mr. Matsubara from Nomura Securities, please. Thank you very much for your explanation. I have two questions about the pipeline. First one is 309309. So you said that it is not working on the GLP-1, but there's some nausea, vomiting, so of course it's okay, and also no reduction of the muscle. You need the right understanding. If there is no such side effect, so I hope that the DPP-4 and other drug combination is better than the combined with the GLP-1, I guess. What do you think? Thank you for the question. I couldn't hear the first part of your question. The reduction of the muscle... wouldn't happen or the GLP-1 causes of nausea, vomiting. What about those side effects in case of 309-309? Well, so far we have not seen such a phenomenon or side effect. In animal toxicity study, we haven't seen such a side effect. So the muscle reduction so far, GI disorder coming from the MOA is not apparent and for the combination for the future. So what is the combination partner we are searching for now? And there are many data which is coming from the repeated experimentation. Suppose we combine with the GLP-1. In a way, are we adding on to the GLP-1 or switching from the GLP-1 or just presenting for the one who are not? tolerant to GLP-1. So there are many ways. And also, as you said, that EPP-4 could be one possibility, and combining with other MOA is theoretically possible. So suppressing the appetite naturally reduces the muscle. That's a very natural cause of a body reaction. But preventing that and maintaining the muscle volume, I guess this MOA must be explored to enable that. That should be developed and understood very well. So MDT2 inhibition and fibrosis is prevented, but is there any indication of expansion? For the obese, the people tend to be the fatty liver, nausea, so forth. And in our trial, in experimentally, we have the river parameter scanning, of course. So the weight loss, and because of MOA, which could add some kind of line extension possibility, we would consider. Let us see the second one. It's very hard to find the right patient for that drug. What is? Yeah, actually it's very hard for radar 70. We will add three cases and we understand some of them, but others are not. Yes, still we are in rolling. So on the page 26, this is the application submission, the third quarter, and the follow-up of the 52-week patient. So I guess you have to finalize the enrollment, otherwise it's very difficult. Yes, for this... Dystrophic epidermolysis bullosa, yes. Not yet. In a way, timeline is very hard. But the target patient number actually is not so many. We don't need many patients for this bullosa patient. So when we find the appropriate patient, we can go on promoting the trial.

My name is Mamiya Da. I have a question about infectious diseases in Japanese market. For the first half, the COVID went very well. For the latter half, It's 25 to 42 billion. It increased because of COVID-19 and influenza. If you can talk about the breakdown of this increase. For the second half, the Falluza, you said that you have expectation for the Falluza. If you can talk about, elaborate on the increase of this increase. I think recently COVID-19 is coming down. But you also mentioned that it's been used more than you had expected. As to the breakdown, we are not going to disclose. As we mentioned at the beginning of the year, the reason for that is that influenza is spreading a lot, but we are not sure if it's going to continue until the next year or if it's type B comes in. Our target is to spread the coverage of viruses. That's how we want to hedge the risk. for the virus. If it's only one virus, we will lose the sales. We are going to Phase 2 and also for the influenza A, B, and many other viruses. And that's how we want to maintain certain level of sales. For the last half, including COVID, It's true that overreacted to the subsidy, so we are expecting to see the increase. For influenza, if you look at October alone, it's going to be very strong. Lapiacta is going very well as well. But as to the breakdown, we don't have any intention to disclose that breakdown. I have another question. As to Asia and Zocoba, this time you said that you are going to be conservative. But my impression is that we don't have to be that pessimistic. According to your mid-term, for 2025 to 2030, you are planning to have sales. So I see that there'll be no impact on those mid-term. You're right. You're an analyst, so I'm sure that you understand the situation. For us, emergency approval in Japan The question is how overseas market understand the Japanese emergency approval. If they want to prioritize the regular approval in Japan and FDA, including that, if we can get those approvals, I think the things would move very rapidly. That's why we are not disclosing the information.

Sakai-san, please.

Sakai speaking.

In the journal, it has been said that the Zoukowa administration to the pregnant woman is a little bit problematic. So the share of a treatment in the first quarter is until 23%, but you need to increase that, and the ratio of Zocoba must be enhanced. And a formal approval is upcoming next year. So how Zocoba is used by the doctors? for example the administration to the pregnant woman was mentioned but how did you or are responding to such a phenomena would you explain Yes, another, I want to talk about myself. Iwasaki will speak about the sales and also Wehala is in charge of the safety management. What kind of measures are taking for safety management? So Iwasaki-san first, please. Before the launch, we knew that that should be the point of concern to be alert. And yes, we have a kind of insert which is lent by the patient. And so this is a contraindication point. And as I see the flow of the patient, before the diagnosis, From the doctor or medical, they ask, are you pregnant or not? Which is the point. And also the consent form. There is the sentence saying the pregnancy. And the contraindication for pregnancy is already communicated. That's the first gate. After the prescription, go to the pharmacy. And here is the pharmacy. The pharmacist would do. explain about that. So our MRs are having the material to deliver the message with a drug to the hospital and to the pharmacy. When the safety data is updated, the information is updated for those safety issues as well. For safety management, as much as possible, we are calling for the attention and for alertness so that the drug administration for pregnancy wouldn't happen. However, still, there are cases. that pregnant woman had taken our drug. For those patients, there is a follow-up medical consultation service available as a hotline sort of window. So animal explanation There are many cases of teratogenicity caused, but we are making the utmost concern for giving a lot. And should it happen, we'd like to follow up such patient as much as possible so the drug could be used most safely. Well, we consider this is a very important issue. So first thing in the morning, we say that how many cases it was given and what kind of information are given to the center and each patient is what week of the treatment schedule they are. And those informations are all summarized, and we always report to the Ministry. And yes, we were evaluated very highly for effort of safety management that you are making that much effort. Well, yes, in a way, there are drugs where the contraindication information is not properly given. And so learning from that lesson, well, we think it's very critically that we should be criticized if there is any kind of instability or one patient who accidentally had taken the drug despite the pregnancy. Thank you very much. One more. The very basic question, 309, 309 obesity drug out of the big GLP-1 market. I am not an expert on this, but looking at the page 42, I still remember the curse by the Orilstat. I know this is a different MOA. However, the pathway drug is working seems to be very similar. How do you differentiate from that drug and what kind of effect you can expect from this? Well, it is to suppress. There is no action of suppressing the fact of absorption causing diarrhea. No such effect. So the fact would wouldn't go through the GI tract. The MOA looks similar, but very different from all recent. In the animal experimentation, the weight loss is observed in the animal, but to what extent in human, it would express better. Yeah, it depends on the result. We'd like to have a result data and go for the discussion out of that.

The fatty acid is already incorporated into the intestinal epithelium, rather than being blocked from being brought into the intestinal epithelium. So it's not excreted through the GI tract. It's a change in metabolism inside the cell once absorbed.

Thank you very much. Akane-san.

My name is Akane.

Page 29 and page 30. About 309. Of course, GLP-1 has causing social issues, and I see that it's going to increase. And looking at page 30, even for Lehman, it's clear that it's going down. But on the other hand, There are three anti-obesity drugs approved in the US, but they are not going well. In the case of Pilbic, there was carcinogenesis, but the market itself is very big. However, it's very vulnerable to adverse events, and the hurdle of approval, the difference with the placebo needs to be 5% or 35%. And this time, you talked about the combination with GLP-1. The market may be very big, but the hurdle of approval may be very high. So is your strategy using combination from the beginning or you just mentioned GLP-1 because it's been very active in the market? What's the strategy of your research and development or maybe sales? As to anti-obesity drug, there are many unknowns. That's our understanding. As we mentioned before, single mechanism by blocking one thing, can we maintain the effectiveness with a single mechanism? We don't have any data at all. For example, hypertensive conditions have a lot of reasons, so only one mechanism won't work. Therefore, it's a good idea to combine various mechanisms to control a very important condition of obesity. So that's why we want to look at various mechanisms. Also, as John mentioned, if GLP-1 can reduce the weight by 25%, for example, right now, if you stop taking the drug, it will go up again. The question is how we can maintain lower body weight. That's where doctors' interests lie. high safety and affordability and lower body weight needs to be maintained for a long time. And one candidate can be a drug. In this context, if there are many GLP-1 in the market, requirements in terms of the regulation may change. For us, single drug or combination with other drugs. The question is how we can maximize a drug. That's what we are thinking. So far, many companies are coming to us for partnership, but for now, we want to do it alone until Phase 2. But based on the result of Phase 2, and if the result is very good, then we will think about what kind of strategy we are going to develop. That's the current situation. 309 is effective for rebound, is that right? We don't know yet. The question for any drug is how we can maintain the lower body weight. Recently, as to GLP-1, after reducing the body weight, it won't go up by 100%. Maybe they can maintain 30% of the reduction according to some papers, but it's not been endorsed yet. There are many unknowns, and we have to study further. Okay, thank you very much.

Wada-san. Wada-san, please.

I am Wada from SMBC. I have a question about 31931 again. There are two points. In Phase 1, the PK could be seen dose-dependently, but at what point did you determine the dose for Phase 2? Is there any sort of a mark point where you can set the dose? So this is a subcutaneous trial so far, but we set the dose necessary to exhibit the efficacy in the animal experimentation. And the phase one profile, it is within the profile. That means in the kind of sort of within the margin of the safety, we set the clinical dose. And one more point for MOA and the positioning type of a question. As far as I understand, this is to suppress the upper stream of GLP-1, and by blocking the upper stream, it is... I guess, showing the efficacy by that MOA. So that means, as effect, it would kind of overlap with a GLP-1 drug. So how did you differentiate in non-clinical study? In the R&D meeting, you mentioned that the mouse data of sort of a concomitant use with GLP-1, but the dose of GLP-1 was not mentioned. And what exactly was that drug GLP-1 drug? And so in mouse, the dose, efficacy dose of GLP-1 is determined, and there is an add-on effect by your point, correct? It's a very sharp question, thank you. As you understand, the feedback of MOA, GLP-1 signal is coming in, and that's wonderful MOA. But as far as I see the non-clinical, The agonistic effect of GLP-1 would affect as a key to reduce the weight. The answer is no. GLP-1 signal is just one part, and actual absorption, suppression, and also the energy metabolism change there are many complex signal intertwined to cause the weight loss. In non-clinical model, actually we repeat the test still nowadays, but the weight lost by GLP-1 could further be reduced by our drug, and we'd like to bring that sort of data in later stage. Thank you very much. So that's all for the question from the floor. We'd like to ask the web participants.

Yamaguchi-sama from Citi. Citi Yamaguchi speaking. Do you hear me? I have two questions about 309. This may be a detailed question. in 2023 one january to march used to be the top line but now january to september so it's been shifted or the top line hasn't been changed as you mentioned one month follow-up if that's included this may be more realistic that's why it's april to june enrollment has been completed so after 24 weeks we will have a last patient out and then 30 days follow up and based on that we are now saying april to june okay thank you very much and about phase one volunteers, healthy volunteers, for those healthy volunteers, their appetite has been depressed. Is there any signs of indication, I mean, the effectiveness? In Phase 1, The purpose was to look at the blood concentration, so we recruited healthy volunteers, obese healthy volunteers, and we weighed their body weight daily. However, as it's phase one, They are in the hospital, and they have regular diet, and many of them actually had decreased body weight, so it's very difficult to see the effectiveness. However, we are now looking at very interesting signs of the movement of the markers, so I think it's not that it's not effective at all. What about the appetite? No, we don't have any information about appetite. And the second question is about phase three. You said that you may have some partnership for phase two. For the global market, are you going to have any partner for phase three? Do you have any plan? I think it's going to depend on the result, but you don't have any... You're right. If we are going to go Phase 2b or if you are going to have Phase 3, we don't know yet, but in any case, it's going to cost a lot of money. So, we have to see the result of Phase 2 first, and then we will make a plan. Okay. One another question is about OSA, joint venture. This company already has two trials which are ongoing, and they are going to be excluded, as you mentioned. And including that fact, is there any possibility that you are going to have the sales in the future?

to the structure of the JV, you're right, those programs are independent. And the mechanisms selected for the JV and the types of compounds are different than the lead compounds progressed at APNEMED. Obviously, we're a very close relationship with the company going forward as a result of the JV. But structurally, those are separate programs. And again, we chose programs together for the JV that we very much felt that our combined strengths would be best for.

After the Phase 2 result, whether or not if we are going to go into the market, we are still open.

As of now, the question is how we see 109. We are not in agreement 100%. That's why it's out of the scope. But if we have a very good result, then Apremend may consider us because we are going to be the best partner. So when that happens, we are going to have another consideration. But as of now, that's the situation. And the aim is that going to the clinical as soon as possible. Out of those four approaches, the upper respiratory is the main target of many companies. But you are going to take the new approach. You are going to take any decided approach.

several of these at once in combination, different combination therapies. And we will likely select different patient groups based on their sleep patterns as to which of these aspects will be dominant. So it's both components. So I think we have combinations that include three of these four mechanisms in different ways, different components in different approaches. You'll see more later, but the anticipation is to start this program with actually two programs in the development pipeline and four to six in the discovery pipeline. So it's quite a deep pipeline when we disclose that.

Thank you. That's all.

Thank you.

Well, we'd like to take the last question. Next, Kano-san from JP Morgan, please. Our Kano from JP Morgan. Time is very limited. I just have one question. 309, 309 question. Well, the weight loss by monotherapy of 309. So what is the figure that you are looking at as anticipated result? Looking at the data of an animal, I think that the weight loss percentage has been different from the two datas. So more than GLP-1 in October data, the weight loss percentage seems to be lower. But hearing the explanation so far, I see that the expectation of weight loss could be equivalent to GLP-1. Can we anticipate that? So for GLP-GIP combination, 25% is the ideal weight loss that we have to target at. We have a doubt. So 8 to 10% by the oral drug could be one target for weight loss. Combining some of the mechanism, and finally, the weight is lost in some ways, how to maintain that lost weight by those patients, that's one thing. And just a 3% to 5% level of the weight loss is not promising. So 8% to 10% weight loss could be by all kinds of middle dose or higher dose. Well, I guess if we can attain that weight loss percentage, we have a future. So, what about the oral and the injection? Of course, the injection drug makes the big weight loss, but comparing the oral GLA-1 and yours, would the equivalent be less? So oral GLP-1 is very difficult to read out considering their side effect. So the tolerable weight loss and maintaining that by GLP-1 is 8 to 10% as well. That means that the equivalent level weight loss, because our drug is very safe. We don't have a concern on that sense. I don't know whether it is comparing the Apple versus Apple, but very difficult to answer accurately. Thank you very much. Thank you very much. So with this, we'd like to close the second quarter analyst meeting 2023 of Shionori. Thank you very much for your kind attention. Thank you.