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.