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.

On page 19.

COVID patients, looking at the first half, they're blue and red, and the red is going down, but the hospitalization is increasing in red in 2024. So hospitalization has not decreased this year. So one of the greatest reasons is the treatment rate. The blue is 2023, and as a nation there was a subsidy, but compared to that, the red figure is much lower. So we have to increase this red figure, and by doing so, we can reduce the mortality and as well as the hospitalization. So including the investment, we want to do better. And on page 20, having said so, John and Uehara-san has also been looking at the QOL disease as well. But you might think that it is not selling well, but So you think that the hearing difficulty and so forth may be interesting, but this will not lead to real business, you might say that. But Kivivik is going to be added as the QOL disease. And also, as I will be speaking later, Rinalaron, this... is also that we are looking forward to. And so this will be, that is the QOL disease will be our second pillar. For 20 and 21, this is a data from Nexasa, and this seems to be a good figure on page 22 especially with regard to the European guideline of 2023 with regard to insomnia. we have been recommended in the guideline, and therefore this is very strong overseas. And also the market is really congested, but we would like to make this one of our franchise. And on page 23, I will not be able to go into details, but Nexara, Idosia, Mochida, and our company Shionogi We have had a very complicated sales channel, but for our patients, this area is where we cannot waste any effort, so we have decided to consolidate the sales scheme, and so Shionogi will take the responsibility with regard to our sales, and Zenararon will be added to this and so in the CNS area this will be our pillar and therefore this will be the first step towards the second pillar which is the QOL disease. Next, with regard to the shareholder return, In our board meetings, with regard to buying our treasury stock, we discuss this agenda item every time. So what is the scale, what is the timing, is what we speak upon. Of course, this is a growth investment, and we want to prioritize on the growth investment as much as possible, and that has also been endorsed by BOD. So taking that into consideration, we consider the timing and also the scale. and also the price. All that all considered, we are considering what to do with the share buybacks and cancellation. With regard to the dividend, last year it was 25 yen. This was the record-making in the past, and so 75-85 dividend increase. But this time, this will be split to three shares, so ¥87, ¥172 as of now is our plan. And so in the second half, we will consider the results, and we are always considering the level of a dividend, including the level of expectations. And this is what we discuss at all times at BOD. So as usual, in the second half, we want to be able to meet your expectation as much as possible. Now, my last part, page 27. So the analysts may think that this is quite complicated, but this time we have discussed with VIVE and we have revised this number. And you might think that this has not changed very much, but with regard to the HIV royalty at the bottom, So the absolute sales will be the core, and we don't want to be impacted by cliff. We want to continue to grow, and this is how we came about with these numbers. And so the revenue, most of the revenue is based upon the HIV royalty, and we have to consider the HIV royalty and what kind of investment. what kind of pipeline development should be made is always considered altogether. And so all that included, we are very confident that HIV royalty will grow in this manner. And Vive has said that they are comfortable with these numbers. And so with regard to the acute respiratory infection business and also vaccine being added, and also QOL disease all added. We would like to continue with our growth. And so from here, with regard to HIV business, John will be speaking about the development, and also Uehara-san will talk about the development, and Iwasaki-san will also.

With respect to the HIV business, and especially with respect to the long acting, both prevention and treatment, which has been pioneered by ourselves with Vive. As you know, there has been a great response from both patients and physicians finding the greater, not only convenience, but improved privacy and improved quality of life without thinking about HIV every day. We have achieved very strong, steady growth for the entire segment. We're now the combination of treatment and prep, mostly treatment, is achieving over 300 million pounds per quarter. And just very briefly, that means Cavanuva by itself is now well over a billion dollar annual year drug. Next slide, please. And as we look this growing further, as you know, we continue to improve and to streamline this pipeline for the convenience of patients. So we move from once per one month to once per two month, next phase to move to once per four month. and then beyond that every six months. Think now with the once per four month, since that's at the same time as viral testing, that means the patient only needs to think about their HIV three times per year. And so with that plan, Even with the current portfolio, by 2026, Veve expects an overall top line around 7 billion pounds and one third or more of that to be coming from the long actings. And then looking out to 2030 and beyond, for the entire treatment market in HIV, we expect will be more than one third long acting and prep substantially more than that, perhaps as much as 80%. Next slide, please. And so in order to achieve this, we need a continuing pipeline. And as we have outlined before, the next steps are the every four-month format, both for cabotegravir itself and for cabotegravir together with rapilverine. And so cabotegravir itself for prevention, cabotegravir or pilverine for treatment coming out in 2027, and then looking to every six months. Now, we can't achieve that with cabotegravir or pilverine. So we're now working on the compound we discovered internally, 598, then licensed to be, they call it 184, which is progressing well and may be an option both for every six months both prevention and treatment, and also for home injection for those patients who may find that format more convenient. That also needs an additional partner compound that can go out to every six months, which we are working on intensively internally. So we see this pipeline continuing to strengthen, continue to expand, and maintain that position we've established in long acting far into the future. Thank you.

Now I would like to talk about the update of the acute respiratory infection business from page 33. As you know, we have Zofluza, Rapiacta, Zocoba. and those RUS virus, lots of the acute respiratory disease treatment drug is being developed to increase the pipeline. But at the same time, as has mentioned, a diagnosis is very important to bring you with. So globally, the chance for the Diagnosis must be provided. So three pillar and also the diagnosis drug to develop this acute respiratory infection business and providing various solution to the people. In doing so, I just would like to give you some of the update of each of the product from next page onward. Enstrable Zocoba. So as you have the press release paper, so speaking about the backdrop, so this is just out of kind of a test. So we prepare this in haste to... make available at any time we asked. So this is a very latest result we have confidence with. And you would see the scoliosis PEP trial. So the family member, if the family member has infected, the not infected family living together, who code as the close contact people. And those close contact will get it orally to prevent being infected. That was confirmed. And with this, the phase three study, which is for another indication to be added as a pivotal study. And so far, FDA, EMA, for regulatory body, we consult with the filing the out-of-the-real-world data, the prevention of the aggravation into the severe disease. And in Darrow-Blight, we have not shown the efficacy enough. Of course, before the Omicron strain is prevalent, we did several trials, but ours are more closer to the real world. So most of the people is vaccinated, yet there is the anti-virus result has been shown as a data, but by the anti-virus effect, it will prevent, make a kind of a prophylaxis. And the data are all summarized to present to the regulatory body. And we'd like to discuss with them the filing from now for approval. Furthermore, in Japan, the small size of a tablet is prepared for pediatric patient. This month, tomorrow, registration will be complete. And when the result is obtained, we'd like to make an effort for earlier approval. So this is a good progress of a trial. And on the next page, I would like to explain. So as Mr. Toshirogi mentioned, this transmission suppression, you may be confused with the prophylaxis with this transmission suppression. When you have this it will not transmit the disease in the surrounding people. On the left-hand side, the phase three of Zofarouza, on the next day of having this drug, half of the patients get rid of the viral shedding. So what is the benefit for that? The families living together, we can prevent the infection to them, we can expect, anticipate scientifically. But what is the real world? Is it really happening, the case? So in the world, we try to confirm this effect of prevention. We have confidence that we were able to prevent the infection to the close contact of the family. So when Zofluda is taken by the family member, the transmission was reduced by 29%. Statistically, it was correct. So as a clinical trial, it was verified that was a progress this time. And so developing the antiviral drug in many ways, for example, the ROS virus, a new MOA. We conducted a phase two for the new mode of action for this RS virus. And we'd like to make the planning after the phase three, which we'll again explain to you in the next meeting. And next one, the vaccine for the COVID portfolio, which is slide page 37. And there are four pipelines project for the vaccine. As you know, the COVID-19 against the anti-gender Wuhan strain, it was approved successfully. But as you know, now the strain is going to the Omicron strain from the Wuhan strain. So the strain is mutated and this vaccine is to be reshaped every year. we have to do this quickly. So we have to be approved as a platform. So even the mutated strain, we need to get the kind of quality data and also if this satisfy that quality and also the immunogenicity, we don't need the phase three every time. Just the preclinical and the quality data is okay. And also for the S023, for the antigen of XBB 1.5. However, it was not achieving the primary endpoint. But now we have a new vaccine for JN.1 strain, and Phase 3 will be started within this year, and we are in the final process to start the Phase 3. What is the data so far? Why you need yet another Phase 3? In order to answer your question, I'd like to show you the result. On the left-hand side graph is the COVE-GOES boosting trial. So with the community, The twice, two times vaccination, we then give our own vaccine at the third time vaccination. So as you know, here, this shows the non-inferiority against the community. And in terms of a figure, it's a little above them. So the neutralizing effect is to be continued. That is a very interesting data we obtained. And this is a very good vaccination. And they say we will consider for the mutated strain. And we designed the same way against the community and the several priming and the third time and the fourth time priming and boosting. And then we give our vaccine. 0 to 3 vaccine boosted. And then the neutralizing agent at primary, we were not able to confirm non-inferiority. However, our recombinant vaccine will continue to show the efficacy. We have that data.

With regard to JN1, the guideline says that the same modality has to be used for comparison. But this was not available, so we used a community. But with regard to JN1, We have created our own vaccine, so it will be a different phase three study design, which we will implement, and we will try to deliver a vaccine which is safe and which has a persistent effect. And also from UMA Pharma, the production will be transferred from UMN Pharma to Shionogi Pharma and led by Iwasaki. So we will be developing and selling the vaccine within Shionogi. And so this kind of a new system is being developed right now. Going back a little bit to page 37, this is the universal vaccine of SARS-CoV-2. So we don't want to redevelop each time. So scientifically speaking, to various mutation or variation, we have developed a... antigen, which works for various variations. So for sarbecovirus, the neutralization can be induced. And if we can create something broad as that, we are expecting that we will not have to develop the virus for each variation going forward. And this sarbecovirus is being prepared for phase one right now. Next, going to the next topic, that is with regard to Ziranolone. In the R&D day, we have discussed the result of Ziranolone, and this is the characteristic of Ziranolone, which is that the onset is very fast. So on the left-hand side is the Phase III validation study, and from the third day, we are able to see the effect. So people who are suffering from depression, when they come to the hospital, they are very satisfied if they can feel the onset right after the medication. There are various kinds of medication, but as far as I know, there is no other drug that can have a rapid onset as soon as three days after administration. This is a new kind of treatment regimen for depressive disorder. And so the rapid onset and also the convenience of use is the characteristic, as well as safety with regard to ziranolone. So this is a new kind of medication for depression. And right now we are going through examination of PMDA. And next, I would like to talk about the other milestone, the development milestones. As you know, with regard to the infectious disease pipeline, we have discussed this topic thoroughly in the first part of our presentation today. And next page is with regard to the QOL disease. with high social impact which will be our next pillar and as we have discussed we are progressing smoothly with regard to various items and if there's any questions from the floor with regard to any of these items please let us know so that is all from myself With regard to the domestic business, Iwasaki, myself, would like to make a presentation. Shionogi will grow with two players of infectious disease and QOL diseases. that this will be our topic with regard to our activity. So with regard to the infectious disease, we have been involved in this for many, many years. Influenza was the only area that we were involved in until two years ago. So we were dependent on influenza, but with COVID-19 and Zocoba emerging, about 6 billion monthly average. And for the first half of this year, although we did not have influenza, there was 25 billion of sales of infectious disease. So a very stable business model was built with having both Zofluza and Zocova. And with regard to resource as well, we can be more predictive. So we can tell what kind of investment should be made for infectious disease. And our total activity plan has become easier. Therefore, With regard to QOL disease too, I think we will be able to make more effort. With regard to the infectious disease, the test to treat, so 10% is a treatment rate, but we want to increase this to 20, 30%. And with regard to this topic, as Uehara-san said, prophylaxis, results have become available and so the there has been some rumors with regard to the negative effect or lack of cost efficiency but right now the medical affairs is working on the square and other data domestically so based upon these results we want to intensify the necessity of treatment and we want to implement test to treat based upon this so in the second half as well we want to stabilize our business in the infectious disease as well at the same time so at the same level as infectious disease we want to implement the QOL disease business as well So with regard to infectious disease, the flus, rapiacta, zocova, and Fetrogea, not only Fetrogea, but there's others as well. So with regard to infectious disease in the hospital in total, we want to intensify the strength of Shionogi. And then we have had vaccines for RS virus, S337395. So AMR and the infectious disease. will be tackled with a balanced MR activity. With regard to QOL disease, Qvivik, this is something that we can sell on our own. So the sales plan and the strategy is easier to plan. Therefore, we are able to forecast our revenue. And then we have Zuranolon and SDT001. and also from Grunenthal's resinofarotoxin. This is for pain. So with regard to CNS as well, we will be involved in such QOL disease. Not only the resources, but we will be using digital web as well so that the people and the human hybrid sales activity will be involved and also we have increased 100 people of sales people and also we will be consolidating our sales firm and also we will use outside consultancy so that we can engage in sales activity which suits our customers and physicians. And also, we will be starting a new company in order to do digital sales activity as well. So with human and digital, from both approaches, we will be focusing on our sales activity to grow further.

Thank you very much.

So now we would like to entertain questions. From the floor, if there is any question, we would like to entertain your questions first. And then after that, we will entertain questions on the web.

Those people online.

You can raise up your hand while we are entertaining questions from the floor. So if you have any questions, please push the hand button. And if you have asked your question, please... decline your hand. So first of all, let me entertain a question from the floor. Please self introduce yourselves, your name and your affiliate before you ask your question. So please raise up your hand if you have any questions. City Yamaguchi some please. This is Yamaguchi from Citi. Thank you very much. My first question is with regard to page 27, what you have revised. So there were some arrows in the past information too, and I think the message was the same as before. So are you saying that the vertical axis has become more quantified? What is new with regard to this revision? So could you elaborate on the revision?

This, especially from FY25 and 30, so qualitative or quantitative, is it growing, reducing or flat? This is not very clear. Everybody says that. However, even the image, it's not good for us to present this, to live as is. So this is more like a qualitative rather than quantitative and telling that is it comfortable for us to see this much growth? If it is, they will publicize and they will consider their business plan. And converting their plan into the royalty income on the part of Shionogi, we make clear that we are going to grow. Thank you very much. So it's kind of a qualitative one. For HIV, the royalty quarter transition period, And Q2 is a lot of flat. In Q1, there is a special factor, and there is no special factor in Q2, correct? Yes, you are correct. Are we doing the small effort every year, January, March, and April to June? VIV has its own characteristic of kind of a periodic sales. And in terms of April to June sales in Shinogi, we just consider they are growing 13% to 14% growth quarterly. And I guess the drug ends with 019 in their number. There is such a kind of numbered drug. Was it included from before with the 917019, correct? Page 47. 917019. 917019, correct. on page 47.

This is something we haven't fully disclosed yet. This is our own pipeline. This is advancing. I've told you a bit about wanting combination drugs for future partnerships. We have not disclosed yet the mechanism, but this is coming forward from us.

So it is, you are saying this is the combination drug?

This is a potential combination partner for long-acting integrase.

Okay.

So after 598, we have oral drug. And we have a PK trial to sustain for six months. We have to wait for six months. Maybe in the beginning of next year, we will have a result for the six months for the Gilead or for Shionagi. Well, the PrEP can be done just one drug. But for the treatment, we need at least two drugs. So we need a partner drug which can sustain the efficacy for six months. They consider the neutralizing antibody, but low-molecule, solid partner drug is necessary. John considers that, and we consider that, and making such a compound by us. And if that compound now is developed to a relatively good shape, so we... Just fill it here with that number. Sorry, 309, 309. There is no special update. Would you please explain with kind of a partnering?

We are taking on board both our own results and also the emerging GLP-1 situation and really what remains unaddressed by GLP-1s. And I think you see there's fairly high rates of rapid discontinuation. and also limited tolerability. And you see many, many new generations of GLP-1s and combinations, but these basic problems remain. So we have a set of preclinical studies ongoing, first in rodents, now in monkeys. to examine the profiles that we believe would meet those needs using 309309. And in this fiscal year, we will have those results and be able to recommend the path forward for how 309309 should be used, including both either on our own or with partners in this GLP-1 environment.

So basically you're waiting for those results to come. Then you start talking with other people.

Exactly. As well as yourselves.

Thank you very much.

So Mr. Weta from Goldman Sachs, please. I am from Goldman Sachs Security. I have one question concerning a midterm forecast. So for 2030, it's growing. You have modified upwards, sort of. What is the background of change from a little reducing to the modified upward? LA, you have good data for carbotic level, and also the dual regimen, oral regimen, is doing good. And then not the treatment, but for the prophylaxis, well, I guess the competitor has good data like yours. So what is the background change which deepens your confidence of growth? And after 2030, the dual oral drug regimen Then after that, there should be some cliff after that. So inclusive of a possible cliff, what is your long-term vision? I guess John later will present more detailed data to answer your question. But once in four months, Cabanuba, I think the feasibility of Cabanuba four-month drug is very feasible now. Now the HIV patient has to consider the virus situation once in three months or once in four months. And so meeting that cycle, so once in four months, lipid lube will be doable for four months. So that is very good for treatment. But there are still unknowns, and we shouldn't underestimate the unknowns that the competitors Once in six months or once in four months, they have an integrase inhibitor plus one. They do not arrive at that stage of integrase plus one. So I guess until closer to 2030 regarding LA, I guess we are almost occupying the market, the battlefield, I have to say. For prophylaxis, a little cast bill has a good result, and this is six months SC subcutaneous. There is some kind of injection problem, but they have a good result, so maybe this is a competitive market. four months or six months, even though it can be extended to six months, to what extent it would be feasible and make profit for us? Like a country of the US and in Japan, we and the Gilead, the market is very huge. So we need to develop it very large. They say there would be a kind of some digit level expansion, but this, the market would be kind of growing so huge. So this could be the 50 versus 50 competition, but we will grow for sure. So in terms of LA market, I guess we are able to predict the future for sure. And then after the oral, the Julka or Dovato, inclusive of those four emulations, in the first half of 2030, as Ueda-san said, these will be retained. Then after that, what happens for the oral regimen, inclusive of our competitors? What could be the change for oral market? It's very hard to predict. I guess the debate, a half of a debate over peak sales will still remain. And then, to some extent, we still have better long-acting injection, prophylaxis could be the mainstay for a constant growth. and we discuss with our partner, and the royalty calculation is based on that.

And also... So 598 integrase is very important for us. Our rivals are going to use something different as their backbone therapy, but I think that will be very difficult. So integrase plus one is what we need to develop. And so from last year, we have increased our gear in order to do this at John's Place. And so every six months is a possibility. So together with Vive, if they are going to adopt this, the main treatment regimen will be from us. And so that will be a very big advantage for us.

Yes, as you know, from today's standpoint, treatment is about 90% of the market. And while we certainly think Gilead's efforts, if successfully approved, will expand the market, treatment, you really require an integrase. And Gilead, they have preclinical and various early clinical efforts, but nothing visible at the moment. We certainly intend to keep driving the treatment market, as we mentioned by Viv's projections, about a third plus of the overall treatment market will be long acting by 2030, 2031, which is essentially equivalent to Viv's top line nowish. And that should be ours, basically the treatment part. And that's why we're confident in that at least sustaining. And even if generic orals appear, it would be exceptionally difficult for governments or payers to switch a patient back to an oral after they're on a long-acting injectable. So the speed at which share is being captured now is is really important. And I mean, we're already seeing that in terms of share capture, we're consistently growing by about two points, a little over two points year on year. Gilead's still growing 0.6 point about, and we're capturing, both capturing from other regiments, but we're taking more because of the strength of the long acting.

Thank you very much.

The second point is with regard to the domestic expectations. So excluding the infectious disease, I think you have had difficulties in some of your performance. But infectious disease has become a solid base, and also QOL has increased its items as well. So with regard to your company products, I think it will require some time to be more successful. So aside from HIV, in the 2030 vision, how do you position the importance of the domestic prescription drugs?

Yes.

What I am hesitating is, well, of course the Japanese market is very important. So, at Iwasaki-san's department, QOL disease is being focused, and as far as we see as of today, we need to intensify the QOL disease. And so, we are proactively working hard. That is, the growth investment framework is being used. and we are thinking of a large transition, including all that, the next year's business plan and also beyond that. Ultimately, I think domestic sales 50%, overseas sales 50%, That's our goal. So for the Japanese market or sales to grow too, we have to consider the cost and profit cost effect. And so in the near future, we would like to come up with a solid figure to introduce. Thank you very much. So from UBS Harada-san. UBS Harada is my name. With regard to R&D, so with regard to QOL disease, you have obesity and other chronic disease that you have some issues still. And so with regard to the QOL disease, what is your success probability? In order to make QOL disease as successful as infectious disease, what do you need to do? and external source and in non-clinical to clinical translational intensification is also necessary, I think. So again, so for you to become successful in QOL disease, what are you going to do? Thank you for the question. As you have indicated, as you are fully aware, With regard to sleep apnea, rather than animals, it's more effective to look into the human. And so with humans, we have to confirm the proof of concept. That is the kind of strategy that we need to use in certain kinds of disease. but proof of concept has to be made translational from animal to human using biomarkers, for example, with other disease. And so from the non-clinical stage, what kind of data is necessary to bridge to human is what we are concentrating on. And after that, when we move on to phase one, in the early stage we want to do before a large-scale phase two we want to come up with the biomarker we want to identify the biomarker and if that is possible I think the success rate will be higher so in POC's probability, we would like to discard the low POC probability ones, and we want to focus on the higher POC probability projects.

One thing you may see in sleep apnea is with the help of our expert partners, we were able to repurpose a compound we'd already taken to be ready for phase 3, 918, in a new combination. So again, to accelerate these profiles, we won't be able to do it every time, but sometimes repurposing existing compounds, others may accelerate our ability to move.

But it's not all that good.

And so why is this the case? John and the R&D people right now are working on this. And while the pharmacology is weak, we are good in synthesis. And with regard to infectious disease, the pharmacology in infectious disease is strong. But from animal to human, the bridging from animal to human, this pharmacology, the biological pharmacology is weak within Shionogi. So we need to accelerate on work intensifying this. young people will have to be positioned at a higher level so that we can reinforce the pharmacology capability. We have that kind of recognition and so the low molecules since the deaths and infectious disease, these are strong in Shonogi. We have a strong infrastructure and we have a lot of people. So what we need to do is to compensate on the pharmacology area. And so we are working very hard and urgently with regard to pharmacology intensification. Thank you very much. The second question that I have for you is this is kind of a reminder type of question, capital acquisition. So for strategic investment, I have a question with regard to what kind of strategic investment you have in mind. So 400 or 500 billion, I think, was the kind of scale that you were thinking of in the past. But I might think that you are not seeking for scale, but as for priority, the global development of infectious disease, or are you going to intensify the pipeline for the QOL disease? Of course, there is a partner that you have to consider about, but also you need to consider the timing as well. But could you respond to this question? Yes. Thank you. With regard to the scale, 400, 500 billion, based upon our present cash balance is possible. And also, personally, I think that or what I'm confident is that, as Ueda-san and Yamaguchi-san said, the HIV royalty flow beyond 2030 will be quite successful. And so with regard to the cash flow, I think we will be very strong. including all that, how much we can invest for growth is very important. And I am quite confident with the scale of investment that we can make for growth. And in that, domestically in Japan, Still, we need to have a strong business so that we will not be impacted so much by the epidemic. And so we need the product as well as people, and also R&D, low molecules. Although we are strong in this, In the domestic Japan, the medicinal chemists are decreasing. It's about two-thirds compared to before, and the pharmacological researchers who can do a wet experiment is low in numbers. So we need to intensify that. So in U.S. and Europe, the late-stage pipeline can be quite high, but we're working on rare disease, fragile X, and so forth mainly. And the reason why Cephylluracol was so successful is because hospital severe infectious disease, we were able to concentrate our resource in the area which we are successful in handling. So we want to be able to leverage the resource and maximize the resource that we have. And by doing so, I think we will be able to be more successful. So in total, As I said, so 400, 500 billion is one kind of scale that we have in mind so that we can run the projects, two or three projects simultaneously. Thank you.

Before going over to the online, one more person.

Kana-san, please.

Thank you for pointing out. I congratulate your wonderful result. You are discussing with the FDA, and the PEP trial was successful. And I guess there should be some positive impact I guess it's very hard for you to comment on this, but if possible, would you please explain about that? Thank you for the question. As you know, Pfizer, Merck, there are two oral compounds by them. And a similar trial has been conducted, but I heard that primarily the point is not satisfied. So this is the first drug that was successful for phase three in this area. And there has not been the safety concern, especially. And this is a very encouraging data I'm confident with. But having said that, as I have touched upon a little bit, in the world to prevent the severe disease, to prevent the hospitalization, and how to prevent the death ratio. So emergency use authorization. So if this definition is to be satisfied, if you don't meet that definition, this is not considered to be called as a drug. It's a wrong misunderstanding. So the antiviral result and the to prevent the onset of the disease, these clinical efficacy must be well evaluated. And so this is a kind of a book making a result, and I will present this data to the experts so that it will be utilized worldwide. Thank you. Now, I guess we'd like to close taking a question from the floor, but we'd like to take up a question from online participants, web participants. So first, Mr. Hashiguchi from Daiwa Security, from the forum, please.

I have a question.

Revenue and profit growth. is based upon your current product. Do you think it can be achieved by your current currently marketing product only? And if you just continue with the current products only, there should be a little gap. And how much source from outside will be added to guarantee this much sales? Yeah, because it's not clearly determined yet As we have said before, for example, Zocoba and Stravo, with the FDA and with EMA, we still continue discussion. And inclusive of a PEP study this time, we will continue discussion with those authorities. And in 2025, there is the overseas infectious disease sales. How much it will contribute to 2025 revenue. It's a big theme. And we have 460 billion as our goal. But how to add up from that base? It's very hard to account for the whole plan to achieve 550 billion. We just say we are targeting to attain. However, We need some kinds of the other source to fill that gap. And we always continue that. So this is just a growth image that we want to grow like this. But in 2025, in April, we will disclose the breakdown for 2025. We have sort of a balance well considered to constitute this bar graph. So thank you. For Zocoba, the uploop in the FDA and overseas, how is the development situation? Do you have any additional comment explaining the uploop situation? Well, the top line is out of view. The last study was revealed. Since then, we have some time. And what is the factor to allow for the approval? What do you await in order for drug to be approved by FDA and other authority overseas? Thank you for the question. This could be the repetition, sorry, but the point they are asking us is that it is a It is a drug used broadly in Japan to prevent the severe cases. And how much real-world evidence we have worldwide, there is one paper we contributed. But from the perspective of presenting to the regulatory body, this should not be exactly the same data used in the paper, academic paper. And doing so, there is a new result from the phase three coming up. So to go for the approval with the data, the current data, we are not enough. We are not enough. So we have a PEP data and exposure prevention data available. So we will be going for filing with all those data well summarized to attain the approval from them. Thank you very much. That's all. Next, Mr. Wakao of JT Morgan, please. I am Waka from JD Morgan.

Thank you.

For Zocoba, your acute respiratory disease prevention, which is page 19. What I want to know in second half, You have a quantitative target for the second half. What exactly do you have to do? In the second half, in this infectious disease, 47 billion is the total of the whole respiratory area. The treatment ratio of the disease is the stay as the 2023 and also the ratio of the disease out of lake should be the same as the 2023 level, because the first half of last year was very good. But in order to attain that level of the sales, you need some other factors to guarantee that. And also, in order to increase the treatment ratio for the second half, what could be a more specific or concrete strategy to increase the treatment ratio? Okay, I, Iwasaki, will answer. The target, we have a target for the hospital, target for the clinic. And for the clinic, there is no risk factor. So I guess we take nearly 80% of the share. So increasing the treatment ratio is what we have to focus. In order to increase the treatment ratio, there are two ways. The first one is education to the general citizen, general public. So increase the diagnosis ratio. So diagnostic trial and also the OTC diagnosis drug will be provided. and the access to the diagnosis will be better. For example, we use the SNS in summer to use mass media for education of a disease, encouraging people to go to the hospital to get tests. For the hospital route, we need evidence. the data for the long COVID is now being summarized. And so, thanks to the evidence, we'd like to increase the value of Zocoba and increase the share to share should be 40% to 60%. Laguerre Julio is still the top earner. But in Japanese evidence, ours are better, and also the antiviral effect is even better than the Laguerre Julio, we think. We have to show that in real data and increase the treatment ratio in hospital, increase the share in hospital. So those are the two approaches.

So in order to increase the treatment rate and also at the same time the infection disease has to be the same as before and also with regard to disease awareness activity we have various ideas and we are in progress for implementing this and before the winter season I think we will be able to show you some results. And the second question is with regard to HIV royalty. In the second quarter, as Yamaguchi-san asked, I'd like to ask you further with regard to this question. In the first quarter meeting, you said that the result will be along the first half result. But in the second quarter, you are forecasting... something greater. So has there been any changes throughout this period? And also, in the second half, you say that the plan is rather conservative. So you might think that second half will be the same as the trend of the second quarter. Is my understanding correct? With regard to the royalty, in our forecast, we don't want to be too proactive, so it's quite conservative, and also vive. And we have to make adjustments. So we are forecasting quite conservative. So I think what you have said is correct. So the second quarter result. was based upon a conservative plan, but actually it was within your forecast target. So at that time, we did not know about the foreign exchange rate, and although we did hedge quite a bit, I think actually the foreign exchange was quite stable, so that was an advantage for us. And the next question, with regard to the PEP trial, I'd like to understand how we can utilize this result. So which kind of patient, shall I say, or What is the label that you are targeting? So for prophylaxis, if the family has been infected, is it within 24 hours or something like that? What is the label that you're targeting? And also, what is the marketability that you have in mind? In the United States, it seems like the patient number is large, but I'm skeptical about the insurance coverage, and I do not foresee whether the patients will actually use this for PEP objective. Thank you for the question. With regard to labeling, This is based upon the negotiation with the authority, so it is not something that we can decide on our own. But the phase three study design will be the basis, basically, and so the labeling will be decided clinically based upon that. so after the onset and after you have contacted the infection the patient you have to take the administration so it will be within 72 hours if you have come to contact within 72 hours you will be taking this drug i think will be the actual way of using this but in the clinical arena Are we going to limit to the family members or not is questionable. With regard to Zofluza, there is the prophylaxis effect and it's not limited to family members actually. So if it's like an elderly's home, if there are several people living together in order to extinguish or avoid a pandemic. Any people that you are sharing the room or sharing the building or if in a hospitalization as well, if you're sharing a room, maybe you can use it in that kind of environment. So there is no such labeling of this kind of indication for COVID. Therefore, actually, as to how we will use this drug is not decided. It will be based upon the affordability, I think, when we launch this in US and Europe. This is the only drug of the kind. Therefore, maybe a stockpiling, the governmental stockpiling may happen. There are several ideas that we have in mind, but there is nothing specific that I can tell you today. Okay, thank you very much. That's all from myself.

Sorry, if I could just add two more things. One is, as Uehara said earlier, at this point in discussions with FDA and EMA, this forms an additional and important part of the overall data. So between SR, HR, real-world evidence, and now the PEP study, It shouldn't be viewed necessarily in isolation in terms of the approval or the resulting indication. But as he mentioned, there's definitely indications in use that's important that can lead directly from this study. I'll just make a quick comment that with respect to the U.S., Coverage for preventive care is quite good. Vaccines are 100% covered. Other forms of prevention, including forms of antiviral prep, are generally fully covered by commercial insurance. Sometimes there is a government gap, as there is with HIV, although when the government gets concerned, and we're seeing that in HIV now, that does accelerate also. But commercial coverage is quite good.

Thank you very much.

Thank you very much.

So Tsuzuki-san from Mizuho, please.

This is Tsuzuki from Mizuho.

Can you hear me? Yes, we can hear you. Thank you. So Qubibic is what I would like to ask about. So with regard to Qubibic, you have a competitor, but in your case, you have quite a sales forecast. And so how do you consider the strategy for making Qubibic successful? We do have a strong competitor, yes, of course. But according to the European guideline, we were the only drug that has been recommended. And also, the function during daytime is good. That's our characteristics. So we would like to target the GPs mainly. And also, the StreamEye. the digitalization will be used in order to promote this, so the cover rate of the target doctors will be further enhanced. And also with regard to the wholesaler strategy as well, so large-scale wholesalers and Oroko wholesalers will be used

in order to increase the coverage.

So 21,000 is our target, so we would like to increase the coverage. Not Oleksikin only, but benzo and non-benzo are also used. There's GE, but we want to stress the safety aspect and also the carryover effect as well. And so switch from drugs of different mechanism is another target that we have in mind.

1100 billion is the market size, so 3 billion.

We have our own – we can have our own strategy for – from GP to hospitals. So I think we will be able to achieve this target. So what is your peak target? Can you share with me your peak target number? Top is 40 billion, so maybe 20 billion, I think, will be our target. I think Tashirogi-san is nodding, so maybe 20 billion would be our target initially. That's my mission. Okay, thank you. And with regard to the development, 151, 128, their chronic pain, I think... Your flash report is due, so can you comment on this chronic disease? I think there's a great focus from overseas as well with regard to chronic disease, so 151128.

Currently, we are analyzing the data, and when the future strategy is determined, I'll report on that. So if you determine that, do you have any presentation meeting to explain about this? Well, R&D presentation meeting, all these kinds of the investors report meeting, and this will be held. Thank you very much. Thank you very much. So, Sogi-san, from the first time, please. Can you hear me? Yes? That's good. Thank you. I have two questions. First for Zocoba. I want to know your idea for actually the COVID. Well, the infection of COVID cases and also TREMEC that you have, and we look at the market share also. So Q1 to Q2, actual number of cases you have doubled your prescription. And treatment ratio is 1.3 times, and the market share is 1.1 times. So in Q1 and Q2, I guess the revenue should be like three times. But actually, looking at that, it's more than five times. Maybe we are overlooking some element. Would you please tell me what is overlooked? There are many ways of interpreting those data. In a way, that epidemic is not able to predict, and the Q1 was below the prediction. In a way, it looks that we are stretching very much, but considering the number of patients stayed the same as last year, and the 20% treatment ratio and the market share is as shown, I guess the number is reasonable. It's not our own analysis, but also the interpretation of the figure itself. And so there is a gap of prediction figures, I mean, interpretation difference. I understood. For vaccine, for the Omicron strain, The primary endpoint of the vaccine is not the meth for this strain. And you are going to start another trial for those mutated strain. In terms of the commercialization of the vaccine, when will be actually the kind of marketing date or when this will be launched into the market actually? Thank you. I, Hanasaki, will answer your question. On page 42, there is a pipeline schedule listed, and JN1 to 4. The phase 3 will start this year, and the filing for 25. And then after that, to gain the approval, we will have kind of a consultation with those authorities. Of course, this is. For the kind of Wuhan strain, the vaccine is already approved. Then the approval is following that original strain. Then the review timing will be shorter. Is it possible the review period could be shorter than the original strain case? Yes, it is. But yet we have to present a lot of data. They can't review in just three months, so they will review the data precisely, and the review of a platform may take time. reasonable time is necessary. So realistically, so I guess 2023 is the year that revenue will be shown. Well, in terms of revenue, well, it wouldn't be in time for 2026. Thank you. Okay, so let's take up the last question. Matsubara-san from Nomura Securities, please. Matsubara from Nomura Securities. Can you hear me? Thank you. One question for Zura Neuron. Looking at the efficacy of Zura Neuron, it's good, and also the sales for overseas should be good. But for the – I guess it's very hard to find out the post-delivery patient. Post-delivery depletion patient is hard to pick up in Japan, and what is your strategy for after the launch of the market? I saw it was not well explained, but this page 40, the graph here, is for MDD, so it's not limited to the PPD or postpartum depletion. Well, there is a drug which has a blue bar for PPD first, then MDD. But our strategy is inclusive of postpartum depletion. We over-indication of MDD, inclusive of post-delivery or postpartum depletion. Of course, we'd like to specifically deal with that, but we are targeting a larger segment, not just postpartum depletion. Thank you. So initial startup will be as planned. Is that correct understanding? Yes. Thank you very much. Thank you very much. So with this, we'd like to close the FY2024 Q2 investors meeting. Thank you very much for your participation out of your busy schedule.