Shionogi & Co Ltd

Ladies and gentlemen, time to start today's meeting.

I am Kyokawa, the head of Public Relations Department at Shio Nuki & Company. Thank you very much for taking time to join us today. We will now begin the CEO Nogi and Company Limited's second quarter financial results briefing for fiscal year 2024. First of all, let me introduce the speakers for today. This is Isao Teshiyogi, Chairman, President, and CEO. And next, Mr. John Keller, Senior Vice President, R&D Supervisory Unit. Very nice to see you. Next, Mr. Toshinobu Iwasaki, Senior Vice President, Healthcare Business Unit. I am Iwasaki. Very nice to see you. And then next, Mr. Goji Hanazaki, Senior Vice President, Supply Supervisory Unit, Global Business Division. Very nice to see you. Next, Mr. Takeki Uehara, Senior Vice President, Drug Development and Regulatory Science Division. Nice to see you. Lastly, Ms. Masako Kuro, Vice President, Finance and Accounting Department. Today, we'll begin with the overview of the financial result, followed by the presentation of initiatives for achieving 2030 vision given by Mr. Teshioki, Mr. John Keller, Mr. Uehara, and Mr. Iwasaki in this order. We will then take questions from the floor. The event will end at 16.30. Simultaneous interpretation is available for today. If you use the simultaneous interpretation, please select either Japanese or English from the globe icon at the bottom of the screen. So let's get started. President Shioge, you have a floor, please. Well, at 1,500, we open the floor, and the result of a PEP test will be given. So very nice to see you. Well, the figures, I guess, is well understood by you. So let me go to the page four. So, well, the point of our company is that the core of 100 billion purchased by the government and also the one-time payment of the EGV. So how to measure our performance? Well, excluding one-time payment, I have to say that the company is growing and revenue is growing. And in the middle of that term, we have to look at the control of the cost. And we should achieve what we want to achieve. And we have to land as planned. It is the thing that we always be mindful. So from the revenue and to the profit, Our goal is achieved by anyway, so that excluding the 25 one-time payment, so we have increase of the revenue and 3 billion increase of the profit anyway, so that was kind of a reasonably good achievement. Having said that, what is the year-on-year? We are responsible for this, and as you see on the right, a 7.2% reduction in revenue and a 12.2% reduction for the operating profit, and so the profit attributable to owners of the profit is 8%. minus 8.2%. So reduced revenue, reduced profit. However, for the full year, we keep the growth, the highest revenue, highest profit for the consecutive three years. And for that achievement, I guess our result is a good, reasonable achievement. On page six, next. Considering the product mix, the Koba, Zoku, Lusa, In Japan, the cost level is very low. And because of that, it seems that the cost of sales is a little higher. However, having said that the R&D cost, inclusive of the 10 billion yen increase of a cost, we were able to attend the profit lunch. And the others of 6.9 means that the retirement Our retirement of 6.6 billion has been gone this year. So originally, this year and the next year, we have three pillars, HIV, royalty, overseas growth, and also the infectious disease domestically. So those are the three pillars. On the basis of that, we will develop our business. For Japan, the COVID, the flu, starting from April to June, More than that, July, September, well, the infection rate was staying low. And what is the Zocoba situation? Well, we were fall short of 5 billion. However, looking at overseas, You see there's more than 30% of the revenue growth for U.S. and for Europe as well, more than 30%. And also the fifth from the bottom, which is the OTC, and the 15% growth over last year. And we started OTC. separated out from our division to the second Ogi Health, different company, and the sales at that time was less than 7 billion, but nowadays it kept growing, the maximum revenue, maximum profit updated, and this year also the OTC is doing good, and royalty income. The 26.6% increase for HIV franchise and 120 billion could be obtained in a half year. So considering the foreign exchange of a cheap yen, I guess John will explain later, but we are very strong in this business area and that growth will continue for the future. Going to the page eight, the prescription in Japan, the inference family of the 29.2 and well against the 80 billion target. the investors may consider we will achieve the kind of 30 to 40 billion, that we are a little less than that. And first, I have no flu, almost no flu. But considering the Zocoba, this is a little over the 85% of the target. And the flu has subsided the area, but still, I guess Zocoba is doing good. And on the next page, page 9, on the left-hand side, there is a royalty quarterly income. And the right-hand side, if you look at the right-hand side, you see the long-acting formulations doing good, the thick and the pale blue, and the Cabanuba. And as you see, the is two times This is not very conspicuous, but I have to say all the franchises are doing good. And Vive is trying to increase the dual or double regimen, starting from oral regimen. And better for a patient to just have two ingredients than three ingredients. In terms of side effect, it's safer, especially in Europe. The price for the two regiments is affordable than the three regiments. And I guess all this strategy is working out. And this trend, I believe, will continue. Going to the page 10, as I said earlier, it's fidelical. In U.S. and in Europe, they exceed more than 30 percent growth. And this month, October, still it keeps good shape. And in China, I have not talked earlier, but in Pyongyang, inclusive of Pyongyang, there are many issues that we have to tackle with. And I guess the safety record is a core to increase in China. And based on the trial in China, NDA will be... And this is a value driver because in Europe and the U.S., there is a real world evidence which is assessed very high. So I guess the 30 to 40 billion in a year, you may not consider this, but I think we are able to attain that level. And in Japan, flu, COVID-19 here, especially I focus on COVID-19. The sales situation will be discussed later. But as you see, in August and September, see the difference of the blue bar and red bar. The flu has subsided earlier than we anticipated. That is because of the 5 billion we fall short of. But as of April, the 30% payment by the payer was implemented. So the treatment ratio is less than 10%. But now we have almost 13.5%. And the driver for the growth is Zocoba, 70%. The market share of Zocoba is 70%. So without a market, we can't sell the product, of course, because we can sell because there is a market, because there is a treatment. So on page 12, this is the summary of the first half. One point. is the trial of the fluza trial. It was very good. In Japan, this examination is covered by the insurance. So the patient go to the hospital, and this kind of a transmission suppression test in Japan is not very valuable, but this is very valuable in U.S. and Europe, and we cooperate with Roche. and to get that indication to increase that in the U.S. That was a big trial.

In total, this is the performance forecast for 2024. We have three pillars, HIV royalty in U.S. and Europe sales. They are growing smoothly, and this will continue towards the second half. Domestically speaking, at the bottom, Qubibic, and also the influenza family and COVID. 13.4% is the treatment rate, and we are not satisfied with this. From the MHLW statistics, last year, the mortality number was 15-fold compared to influenza. So people might think that COVID has ended, but the hospitalization is increasing, The number of deaths is increasing, so 13% of treatment rate is not sufficient. So we have to increase this to 15% or 17%, and 70% to 75% or 80% of market share is what we intend to do. And so I don't know what will happen in the second half, but I think in the second half, I think we will be able to meet the plan. With regard to the cost, of course, we want to use the cost. But, of course, the schedule and priority has to be reviewed. And so more than 10 billion increase compared to the previous year is the cost. And especially domestically, with regard to SGAE, we want to do Zlokova, Zofluza, and Kivivik. And so we would like to also be aggressive with regard to these projects. And in total, this is page 15. In the second half, what we have exceeded will continue towards the second half, and we will be able to achieve the plan in the second half. So from the sales to various profits, we will be revising upward, and we want to make the record, and also we want to make the record compared to the previous year's revenue, $4,600 billion operating profit, $1,650 profit before tax, $2,060. And PL is written here. So what has changed? On the right-hand side, if you look at the second half, The sales has increased, and R&D and also the general expense have been adjusted, and the cost will be increased by 2.8. But I think we will be able to meet these figures, including the carryovers. And this is by segment. In Japan, the second half of Flusa, Zhukova, and Kyuubibik are included. I think we will be able to achieve this negative figure. We would like to keep it in this negative figure. And in the U.S. and also in EU as well, we are going very smoothly, and all that included with royalty income, it will be 240 throughout the year. And in Japan, as I have said, what we have not been able to achieve in the first half has been revised in the full year, but with regard to the second half, it will be on track, and QVVIC too. This has been considered, and I think we will be able to meet this plan. That is the background behind these figures.