Shionogi & Co Ltd

This is Kyokawa of the Corporate Communication Department of Shionogi. Thank you very much for gathering today. From now, we would like to begin the presentation of the third quarter of fiscal 2024 financial results from Shionogi and Company Limited. First of all, let me introduce the people who are here with us. First of all, Toshinobu Iwasaki, Senior Executive Officer, Healthcare Business Supervisory Unit. Next, Koji Hanasaki, Senior Executive Officer of Supply Supervisory Unit. Next is Kazuhiro Hatanaka, Senior Executive Officer, Corporate Supervisory Unit and Corporate Strategy Division. And next is Takeki Uehara, Corporate Officer of Drug Development and Regulatory Science Division. Uehara-san is joining from different venue online. And we have Masako Kudo from the Finance and Accounting Department.

Let me briefly explain the flow of today's meeting.

First of all, we would like to give you the overview of the Q3 FY2024 financial results and transformation of Chinese business and pipeline progress will be explained, and we will have Q&A session after that. We will have a simultaneous interpretation service for this meeting, so if you are going to use the translation, Please press the globe icon and select the language you wish to listen to. Now let us begin. Ms. Kudo, please. Yes, I would like to give you the overview of the Q3 FY2024 financial results. First, on page 4, this is the highlight of financial results. Sales revenue was 333.6 billion yen, down 3.2 billion yen from last year's 336.8 billion yen. However, excluding the one-time payment of 25 billion yen associated with the license transfer of an ADHD drug that was recorded in the first quarter of last year, revenue increased by 21.8 billion yen, due to the significant growth of royalty income and overseas business, as well as the stabilization of our domestic business. In addition, for the same reason, operating profit increased by 15.5 billion yen, excluding the one-time payment. Next, regarding the consolidated financial results, the results for the third quarter of fiscal year 2024 were revenue of 333.6 billion yen, operating profit of 129.2 billion yen, profit before tax of 155.9 billion yen, and profit attributable to owners of parent of 133.8 billion yen. Revenue and each profit item are almost as expected and we are making solid progress against the full year forecast. This is due to the strong growth of the HIV business and overseas business as well as the stabilization of the infectious disease business in Japan. Although there is the impact of the one-time payment recorded last year, revenue was down ¥3.2 billion year-on-year, and operating profit was down ¥9.5 billion year-on-year, which is an improvement from the second quarter settlement, and we are making solid progress toward increasing revenue and profit for the full year. In addition, profit attributable to owners of the parent It increased by 6.6 billion yen while on wide. Regarding foreign exchange, the yen weakened more than expected, resulting in exchange gains on each currency. Next, on page six, we have the consolidated statement of profit or loss. As I mentioned earlier, revenue started off at minus 25 billion yen due to the impact of the temporary factors that occurred last year. but due to the strong growth of the HIV business and overseas business, it ended up exceeding expectations. On the other hand, the cost of goods increased by 8.6 percent year-on-year, but this was due to a change in the product mix due to the growth of the overseas business, and the full-year forecast was roughly in line with expectations. Research and development expenses increased 9.4% year on year due to the continued aggressive investment in high priority development pipelines and the impact of foreign exchange rates due to the expansion of clinical trials globally. Although overall expense, including the selling general and administrative expenses and R&D expenses, The overall expense appears to be poor, but we are implementing cost management in line with sales revenue in order to achieve the full-year operating profit forecast. If sales revenue remains strong, we expect to use expenses in the fourth quarter in line with the full-year forecast. In addition, the large increase in other income and expenses year on year is due to the implementation of a special early retirement program in the second quarter of last year. Looking at the overall picture, I believe you can see that our business is progressing very smoothly. Next on page seven, we will discuss the revenue by segment. Regarding domestic prescription drug, Sales was down 38.1% year-on-year and down 23% year-on-year, excluding the one-time payment of 25 billion yen. In the second quarter, these figures were down 50.5% and 33.1%, respectively.

So you can see that the declines have improved.

In addition, regarding overseas subsidiaries and exports, revenue of Cefiderico increased 39.6% in the United States and 25.6% in Europe year on year. This was due in part to the impact of foreign exchange rates, but sales volume has also been strong due to the expansion of sales countries and the sales expansion in countries where the drug is already on the market. Sales of over-the-counter drugs increased by 20% thanks to the expansion of not only our mainstay, Rinderon, but also Mukodine and MediCom in response to the spread of various infectious disease. Regarding royalty income, the HIV franchise grew significantly in the third quarter due to the impact of both volume and exchange rates and is progressing steadily compared to the full-year forecast. Regarding COVID-19-related products and influenza family of infectious diseases, sales of Zofluza and Rapiacta expanded due to the influenza epidemic in December. Compared to the same period last year, sales decreased by 30%, 0.2% due to the end of public funding of COVID-19 treatment. But you can see that sales of COVID-19 and influenza family have been stable even from the first quarter to the third quarter. In addition, in this quarter, the insomnia treatment drug Qvivik was launched on December 19th and was recorded as new sales. That is all from myself. Next, Hatanaka would like to introduce our third quarter results. First, on page 9, we will look at the HIV franchise. The graph on the left side of the slide shows the quarterly transition of Shionogi's HIV royalty income. As you know, the HIV franchise has been growing very steadily in the mid to long term, but even looking at 2024 alone, you can see that it has grown significantly. It has also increased significantly by 12.3 billion yen compared to the third quarter of last year. The reason for this steady growth in the HIV franchise is the expansion of the market share of new products, including LA formulations. The graph on the right side of the slide shows VIVE's sales of six products, including dolutegravil and cabotegravil, in the third quarter compared to last year. The red part shows the oral two drug regimen, including dolutegravil, which increased 12.7% year-on-year. The blue shows the LA formulation treatment, Kabenuva, and preventing drug, Apertude, which together increased 43.4% year-on-year. HIV royalty has shown very strong growth, and we expect it to continue to grow as we expect new treatment and preventive drugs to be launched for every four months and every six months' administrations. Next, on page 10, our overseas business has achieved steady growth centered on Cefiderico. The graph on the left shows quarterly sales trend of our overseas business, and you can see that the sales have been growing steadily since the launch of Cefiderico. Sales have also increased significantly by 1.4 billion yen compared to the third quarter of last year. Currently, the number of countries in which it is sold has increased to 25. And in order to further expand, we have submitted the application for approval in Australia and China. Based on the continued growth of Cefiderico, we will accelerate the global expansion of other development pipelines and aim for further growth in our overseas business. On page 11, I would like to explain the status of our domestic acute respiratory infectious disease business. The graph on the left shows the patient trend for COVID-19 and influenza since April 2023. You can see that either COVID-19 or influenza has been prevalent at any time over the past two years. By having treatments for these two infectious diseases and gaining a high share in the respective treatment markets, our infectious disease business, which was previously considered unstable, has become a business model that can generate profits every quarter in a very stable manner. In the third quarter, sales of influenza family, including Zofluza, have expanded due to the spread of influenza in December. Regarding COVID-19, the treatment rate has consistently maintained 12 to 14 percent, but there is still a gap against the treatment rate of influenza. We know that the hospitalization rate is higher than that of influenza, so in preparation for the spread of COVID in the fourth quarter, we are engaged in various activities to deliver appropriate treatment to patients in need, such as awareness raising activities and sponsoring COVID insurance to help reduce the out-of-pocket costs of antiviral medication. Page 12. This is a summary of results for the third quarter. To reiterate, the top line has been steady, mainly due to the revenue drivers of HIV business and overseas business. And excluding temporary factors, we have been able to achieve an increase in revenue compared to the previous year. And we believe that we are growing steadily. In our domestic business, our COVID-19 and influenza treatments, Zocova and Zofluza, have both captured high market shares and contributed steadily to our profit. And we have also been able to launch Qvivik, which is a key treatment of QOL diseases. Going forward, we will continue to work to make our infectious disease business a stable pillar of our business by capturing a large market share in our domestic business while also promoting activities to make QOL diseases. to promote activities to make QOL diseases, which are less susceptible to the effects of epidemic, a new pillar of our business. Regarding costs, we will continue to implement detailed cost management in line with sales revenue while prioritizing and proactively promoting R&D. Overall, we believe that the third quarter went as expected, and we expect to achieve the four-year forecast. Next, Iwasaki will explain about the transformation of business in China. First, I would like to explain the dissolution of our joint venture with Pinyan Insurance. The partnership with China's Pinyan Group began with the establishment of joint venture in China in November 2020 with the aim of creating synergies by combining Pinyan Group's cutting-edge AI and other digital technologies with Shionogi's drug discovery know-how. After many sincere discussions following changes in the business environment surrounding both companies and the accompanying review of strategies, the two companies have come to the conclusion that while maintaining a good relationship going forward, the joint venture in China be resolved and Shionogi to become a wholly owned subsidiary. During the period, we worked as a JV, phase three trials for the two drugs, Cefiderico and Naludimidine, were completed in China. The NDA for Cefiderico was accepted, and we received an early use approval in the designated medical zone on Hainan Island. In addition, we obtained SAR approval for Ancitroville and Cefiderico in our territory in South Asia and have begun supplying them. Regarding AI drug discovery, I will introduce some of the ongoing projects on the next page. And we are currently working on multiple candidates targeting respiratory and CNS diseases and have verified their effectiveness in non-clinical trials. Going forward, Pyongyang Shionogi and Shionogi Healthcare, both in Shanghai and Hong Kong, will become wholly owned subsidiaries of Shionogi, and we will build a business structure in Asia centered around China. We will provide the further details at the time of our financial results presentation for the fiscal year ending March 2025.

Next up, page 15. I'll explain about the outline of a future Chinese business prospect. Due to the change of business environment, we shift towards the new drug business activity. But from now, we'd like to focus on a new drug business more. And we'd like to accelerate a new drug launch and a new drug discovery in Chinese market. As for the launch of Shionagi New Drug, we will work to further accelerate the development and launch preparation for two new drugs, which completed Phase 3. One is obtaining approval for the Cephidel call by the end of 2025, and for Naldemizin, which completed the Phase 3 study, will proceed to the goal of NDA in upcoming April. In addition, for AI drug discovery candidates, that has been identified and verified for efficacy. In preclinical trial, proof of concept verification has already begun for the candidate of IPF treatment under the physician-led trial, and verification efficacy in other clinical trials is in progress as well. Next, for development pipeline progress, Aiwe Hara will present. Slide page 17 shows the diversification of the portfolio for viral infection for acute respiratory infection business. As Mr. Hatanaka has mentioned, influenza COVID-19 has been focused and stable sales in Japan has been secured. So the Zofrosa, which is the very basis, is the antivirus drug, which is just once a daily oral administration. And there is the evidence of transmission suppression within the family accumulated now. And we'd like to maximize its value. And for COVID-19, we have Zocoba for global development. And in addition to that, next one, the new generation 3CL protease inhibitor, which is a 216 compound, I'll report it later, and also the RSV infection, which we released for media. This is a second example to get into the acute respiratory infection business, and we have a good phase 2 result for that. Next, please. Next one for the COVID-19. I'll explain about the global market. As you know, still the viral keep mutating, and in such a situation, as the left graph shows, the CDC's statistical, starting from September 24 to January 25, for three months, the estimated number of patients is 3.9 to 7 million patients. And about 1 million to 1.9 million are still going to the hospital and hospitalized. And some are very serious in the symptoms. And the available oral to drugs in US for them from January to September 24, recording about 4.3 billion, which is a big market share. So the threat is still existing. And as Shionogi, or now, the Enstrelvil, Sokova, and the new 3CL inhibitors are being developed, and I'd like to give you several updates on that. Slide 19. This is a scopiopep trial of Enstrelvil. So by having that, it can prevent the infection. So if If there is a close contact to the infected family member, it should be given. And as I said, it has achieved the primary endpoint. So from the start of dosing until day 10, the COVID-19 could be efficaciously suppressed. But not just onset, but also this will reduce the road of virus. all the endpoint is confirmed with a significant data difference. And in March, CROI in US, the abstract is adopted. And in the oral presentation, I will give as a way to in that academia in US. And now in Japan, for pediatric trial for n-strivel, update will be given. So for those, it is actually small in size tablet for children. And for each weight bracket, the children is able to get exposure to the same dose as adult. CD safety, probability, PK, that is the concentration of blood is confirmed. As expected, the good tolerability was shown. And for the exposure, so in the dose we set, the same degree of exposure were confirmed in children. And with the due process, we'll go for NDA in Japan. Next, please. So in addition to those trials, the global trial stage has been summarized. left is the scopial SR and HR, and as I said, the pediatric test, and also the prophylactic test. So on the basis of this, the N-Striple should be deployed globally, and in the United States, we have pre-application consultation, Europe and the U.S., and after that, in the light timing, it's called going for NDA, and I'd like to update at the time it comes. In Japan, we are preparing for expanded indication of pediatric use and the post-exposure prophylaxis, and we are discussing with PMDA for detail. In Asia, the other day in South Korea, we withdraw our application, and we add to the PEP study and to plan for reapplication in the future. And in Japan, Singapore, and also in Taiwan, we submitted a new application for approval, and we have a stockpiling contract with the Taiwanese government. So globally, Taiwan could be the third country that the government is procured. And for the Estrelavel, Zocoba, and the next-generation Protease inhibitor, 2, 2, 2, 1, 6 development. MOA is just like a struggle, but still there are unmet needs in the existing oral drug. So we minimize the drug interaction and the strong viral efficacy. And no contraindication for pregnant women and having such a drug. We are now having a very good drug. And if there's two in global, for oral, it's on the way. And furthermore, and also this is the phase three, still the threat of COVID-19 continues. So this is the pre-exposure prophylaxis indication is necessary. So this is different from the post-exposure. So this is not replacing the vaccine. With the vaccine, there are patients which have low immunogenicity, and the vaccine is not working well for those patients. So for those patients, pre-exposure of such a drug It's very efficacious. So we try to get the indication for pre-exposure prophylaxis. Once you take it, the serum level is very well maintained for a long time. And we received the grant from Boulder, which is 375 million grant. And we'd like to go for a phase one in the United States. And the next one is the third one, the RS virus infection. As you know, there is no oral drug to prevent RS virus for the infant and also over 60 senior people and also the high-risk patient. More than 3 million latent patients exist in the United States, a big market. So what we developed this time? is S337395, and I show the life cycle of the virus, and, well, the polymerase protein is to be prevented in a very early timing, and we have developed this to inhibit the protein, and this has been released. This is a phase 2 vaccine, trial and showed a very strong antiviral efficacy. And this could reduce more than 89 percent. And we'd like to set the dose as we see the result of . And the challenge study has been conducted in the United States. So we see the efficacy as we anticipated and would like to prepare for the later stage development. And the next, some of the remaining pipelines. And this is infectious pipelines. And the major update has been already talked about for vaccine. This is Gen 1. targeted vaccine, which is Phase 3 study preparation ongoing. And this will go for the Phase 3 study for NDA in Japan. And other updates, as I have just seen. And other QOL disease, which are the social impact. And the big update is that Dattel-Milast targeting for the fragile X syndrome in the United States phase 2, 3 studies ongoing and MOA of this Dattel-Milast is very much expected in the preclinical and so those specialist doctors also suggesting that it should be indicated for the Jordan syndrome which is a genetic disease characterized by the developmental delay and have I really hope that this could be used for United States for this syndrome as well. And phase two in the United States is begun and patient enrollment is on the way. And also S606-001 for Pompe disease, which is a rare disease, we are preparing for the phase two. And also It has been designated from FDA as a rare disease, rare pediatric disease drug. So that's being developed. That's all from myself.

Now we would like to move on to Q&A. If you have any questions, please press the Raise Hand button. And after you have asked your question, please put the hand down and when you are asked to ask the question, please state your affiliation and also your name. City Yamaguchi-san, please.

Hello.

Thank you. This is Yamaguchi from Citi. First of all, with regard to the infectious disease family influenza was spreading last year. But on the other hand, COVID did not spread so much last year. So the progress is about 60%. So until around February or maybe around January, I think influenza is spreading. What do you think about this in Q4? I don't know about Q4, but when we consider the Q4, do you think you will be able to achieve the number? This is Iwasaki speaking. Let me respond to your question. So as has been said, it is very difficult to forecast, but influenza will be declining in January and the B type in February. After influenza, according to the past pattern, COVID-19 can spread. So although it is not increasing drastically from the mid of February after the Chinese New Year's, Maybe Zocoba revenue will be increasing, and in total, it's about 20 billion will be able to be covered in the two months, I think. Thank you very much. So the Zoukouva's filing in the United States. I think you are in the progress of doing so. But do you know when you will be able to file in the United States? This is Uehara speaking. Yes. So at this moment, as we are speaking, we are preparing for filing. After the top line, maybe six or seven months is the period required for preparation. The total package for the development is still under discussion right now, so I cannot give you any specific date at this moment. Thank you. And also, with regard to purchasing your own equity, I don't think that this is happening unless you have M&A. But when M&A happens, you will be purchasing a treasury stock. Is that the case? So could you tell me the situation? This is Kudo Spacing. As has been said, there is no big update at the moment. But with regard to the business development, we are continuing to consider. So from the Treasury, stock purchasing and M&A, how we are going to acquire funding will be something that we need to provide a thorough thought to. So we are doing what is necessary at the moment. Thank you.

Next one, Ms. Aweira of Goldman Sachs, please. A video from Goldman Sachs Securities, the first for a franchise of HIV trend. The royalty progress in the fourth quarter is a bit reducing. Still, it is smoothly progressing, but against the plan of a company, how is it doing? And if there is any difference, what could be the difference point? Okay, Kudo will answer your question. For the third quarter, there has been a little reduction, as you understood. And this is in September, it dropped a little bit. For this October, November, we recovered for that. the fourth quarter, or the full year forecast in a way, I guess the actual will exceed the plan or the budget. So I guess in the end it will exceed the plan. So exceed, you mentioned, what could be the Is it because of the continuous injectable formulation? What's the reason for that excess? Basically, as you say, this is a new drug in a way. So because of that, it is growing. The second point is acute respiratory disease area. You mentioned that from the stability to the growth you mentioned. It is growing phase now. But still now, from outside, it looks very volatile. But in Shionogi internally, what is a level of a basis, a profitable level? In other way of saying, when we look at this business from next year, what level of top line the sales could be? anticipated, and for the growth, in what timing are we able to see the evidence of the growth for sure? Iwasaki, answering the question. Well, in Japan, 100 billion for both products in Japan, that could be, I think, is the target in Japan. For influenza, The ratio of treatment has been elevated and also the share of our drug has increased. So the focus from now is a development for pediatric indication. So pediatric indication would like to grow. For the COVID-19, still enlightenment education level is necessary and the treatment ratio is still low. So 20 to 25% of a treatment ratio. It should be secured, and if we get the 70% market share, I think we are able to secure the 100 million. When you say growth, so RS virus or the next generation drug, we have to wait until those new drug will launch or come up. Yes, in Japan, yes, but first in overseas and struggle development and the 216 and then RS virus, that's a sequence of the growth procession. Thank you very much. That's all.

Thank you very much. Next, UBS, Sakai-san, please. This is Sakai from UBS. I have two questions. The first question is with regard to the royalty from VIV and also the special dividend that you receive. I don't think GSK has announced its financial results yet, but is there a possibility of receiving this special dividend? I don't think this is included in your plan, but what is the situation of this? Yes, Kudo will be responding to this question. This slide that I'm showing right now, 65% seems to be low right now at the moment. But the VIVA dividend compared to the previous year, it's increasing. However, the cash position of the opponent is providing impact. And with regard to the fourth quarter, as you have indicated, special dividend is expected. So as forecasted, I think we will be able to end with the forecasted number. Not the royalty line, but this will be in the others. No, it is included in below the operating profit. And what is the forecast throughout the year? So we will, I think, it will be 41 billion as forecasted. And in the fourth quarter, increase will be included in this full year forecast, yes. And with regard to the Chinese business, Chinese business, I think It was a bottleneck for your company. There were, I think, challenges that you had to face, and this time you dissolved the JV with Pinyan. In the previous discussion, you said that dissolution was due to the situation of Pinyan, but was there any impact from the Chinese government is the question that I have for you. Iwasaki-san? The details will be explained in the May presentation, you said. But on page 15, you seem to give us quite a bit of a detail. And is there any additional remarks that you can make with regard to China? With regard to China, Sefi Deroko and now Demedyne, how they will develop going forward, I think, is the key. And with regard to Pinyan Shionogi, in ASEAN and Korea and Taiwan, these were the territories covered, and we need to review the governance of this territory, and I would like to cover those items in the May session. And also, with regard to pinyon situation, there are things that are difficult to understand, but one is drug development using digitalization was our expectation, but this was not the case. And also to focus on the main business is the movement in China, and Pinyan is an insurance company, so they wanted to focus on insurance business. You said that good doctor will be used in order to develop your business. in the past, but this was suspended, I understand. And also, OTC was going to be transferred to China, but also this has returned back to the original position. Is that the case? Yes. With regard to Good Doctor, Honestly speaking, we did not achieve what we had expected. And with regard to OTC, Pinyan Shionagi was included, but we are developing our OTC business originally in China. So OTC business will be continued in China going forward by us. Thank you.

Next, Mr. Hashiguchi of Daiwa Securities. Hashiguchi, Futaiba Securities. First question. Well, the 89216, long-acting injectable development, how frequent it should be to be efficacious in your development plan? And how to differentiate the use of this vaccine? What is your expectation of this drug use and vaccine use? Thank you for the question. We have answers. From the US, from the powder, there was a proposal for this. And so one injection to be efficacious for three months. That's what they are expecting us to do. And the animal experiment, that exposure is naturally verified. But how high the serum level could be maintained, we have to confirm in humans from now. The differentiation of the use is in replacement. It's not working as a replacement of the vaccine for all the people. But the patient where vaccine is not working well, those patients could be targeted in a way, replacing the vaccine. And even though the vaccinated patient, having our drug will guarantee the more protection. Thank you. And for the my second question, you mentioned a share is expanding in your presentation. Is it possible to have a specific and concrete figures of the share percentage? And in November 2022 slide, I am just looking back that now. At that time, the sales and the prescription should be nearly equal. And I really hope that the stockpile could be well exhausted that you mentioned at that time. And in December prevalence was very strong. So for this, the prescription amount and the sales amount, there is a gap, should I consider, in such a way. And the number of patients in January is dropping so sharply, so the stockpile situation is controlled enough, well enough, as you mentioned, in 2022? Iwasaki answers, well, there are many databases, so I don't know the exact share, but maybe around 35%, I guess we are securing that much. And the sales and the prescription situation, you asked? Well, in the end of the year, to be honest, there were more placement of the orders than the number of patients. Well, in a way, some hospitals excessively placed the order with us. In a way, the disease is now a little bit under control, and how surplus can we have? in a stock situation. In the end of February, how much will be returned from the wholesaler? Well, I guess the calculation could be made only after that. In 2022, in the financial meeting, you mentioned that I am looking at the transcription of that meeting. You mentioned that we'd like to reject the return as much as possible. It's supported to some extent, but return cannot be permitted. So from the hospital to the wholesaler, and if the disease comes back, it will be again returned to the hospital to be used in the market. Yes, thank you.

Next from Tsuzuki-san from Mizuho.

Suzuki from Mizuho Securities is speaking.

First of all, with regard to RSS, you have met the primary endpoint, you said. So the challenge is, the next challenge is Phase 2A and the trial, the next trial that you are planning, what is the schedule for this is the first question. And it seems that there is no launching products, so launched products. Therefore, it is difficult to anticipate the scale of the market. Therefore, if you could give us some information with regard to that. With regard to the schedule, this is Phase 2A trial that we are speaking of. So in the actual clinical, it is after Phase 2B, we will move on to Phase 3. That will be our schedule. And with regard to the size of the patient number, Iwasaki-san? Right now, we have not achieved POC, and the vaccine is coming out. Therefore, we have to consider the market size going forward. I see. Thank you very much. And also, with regard to the chronic pain, could you give us a comment with regard to this chronic pain project? Right now, we are going through some preparation. So as things are prepared, we will give you the results. And also in FY25, I think the revenue for 550 billion is the number. But is there any number that is lacking? And what is the breakdown of the gap? Yes. This is Kudo speaking. Let me respond to that question. With regard to this year's revenue forecast, 460 billion, and HIV is constantly increasing, and also Zoukouva's global development overseas is beginning, and domestically, the infectious disease business will be stabilized and is being stabilized and I think we'll be picking up and from the latter half of 25, which is for depression, will be launched. I think for next year, we would like to increase compared to this year, and there is several tens of billions of yen that we can add. So with regard to the gap against 550 billion M&A and also licensing in will be within our scope in order to filling the gap. And so with regard to the 550 billion forecast that we have, this will not be changed. I see. Thank you very much. Thank you.

Next. From Morgan Stanley, please. From Morgan Stanley, thank you. For a Ping An business, the capital alliances continue, so the 2% position is not changed. I know that, but still, in a way, business relation is dissolvable. So, I guess that the 2% portion could be purchased. But is it? Isn't it? It's not very highly prioritized, Sushi Onagi's idea. As of now, We still want to continue the good relationship, we think, and in a way, we don't consider that kind of the purchase of our shares. You still keep possessing the shares, right? Yes. Thank you. And for RSV395, Maybe my understanding may not be correct, but the clinical data shows 89% virus reduction for the active drug. But what about the placebo? Because it's a placebo arm, the virus is not reduced. Is that right understanding? For placebo, when the virus is challenged, the virus is increasing. And the timing, when the virus is increased, the dosing is given, and how that could suppress the increase of virus. We calculated the area of growth of virus growth, and in a way, the active drug has reduced 89% reduction in placebo? Yes. So in phase 2B and phase 3 is planned. And the next trial is not the challenge study, but an actual infected patient, right? Yes, the patient who are infected. And SV, does it have any kind of seasonality Yeah, in real practice, targeting for the actual patient, we will do the study. Yes, in the earlier timing, the influenza RSV is becoming prevalent and having some seasonality, but the continuing longer period for infection because there is no treatment drug. They do not have a kind of a test or examination for RSV very positively, but when we have this kind of a drug with a diagnostic drug, we will be providing to the market results. So just like influenza and COVID-19, sometimes in a way that the RSV infection subsided and we have to wait for another one year. Is that the nature of the study? Yes, it's naturally the case. 216, long-acting drug. has some aspect of vaccine, the character of vaccine. It's a kind of a hypothesis, but in United States, the policy is now going toward discouraging the vaccine kinds of Well, it's very hard for me to say yes or no, but we consider the various possibilities and the kind of scenario. So in place of the vaccine, this drug could be utilized for the inclusive of a general public. and those immunocompromised public. I guess it is used mostly for high-risk patients. So increase the immunogenicity with a vaccine supplemented by the drug like us is a basic public health policy, I guess.

Next, JP Morgan. Wakao-san, please. Yes, this is Wakul from JP Morgan. The first question that I have for you is, in the United States, Zocowa filings, situation was not very clear. So what kind of meeting are you holding right now? What kind of meeting have you had in the past? What is your plan? Could you elaborate on the situation of filing in the United States? I could not understand the changes from the previous meeting, and I'd like to know more about what the situation will be going forward. So more specifically in the United States, for the treatment indication, SR and HR study and also the real world evidence are being collected. And on top of that, PEP study results, when they are all included, what kind of indication can you file for and what will be the package in the filing package? is what we are discussing right now. In case of PEP, I think we have met the primary endpoint. So with regard to the others, how are we going to proceed is what we are discussing right now. So with regard to pre-NDA meeting, have you had that kind of meeting? Yes. We are in the process. of requesting for a meeting. With regard to HIV royalty, it seems to be doing very well. And I can understand that the situation is very good. But from this point, I think the prescription is growing. And with that, I think the sales will be growing along with that. The exchange rate, I think, will be a following win for you, I suppose. I think yen depreciation was experienced in the past, and so I think what you have hedged for this year will be beneficial to the next year, I think. So do you think that the exchange rate situation will be a positive situation for you going forward? So with regard to Q3, compared to the previous year in the increase, the volume and the exchange rate impact is half and half. I think the impact between the two is half and half. And this year and next year, the foreign exchange is being booked. And therefore, I think there will be an impact of the foreign exchange rate. Thank you. and also the KPI achievement of the mid-term plan, the MM and also licensing in and MA are being considered, you said. And there is the new pipeline products and the royalty that you are expecting. So I think you are lacking by 50 billion to 100 billion. Maybe this is too much to say, but if you want to fill in the gap, maybe you might be licensing in some products. But I think M&A has a higher probability. So in order to achieve the KPI, are you focusing on the M&A? Is this interpretation correct? And to contribute to the next year's performance, I think at an early timing, I do think that you will be taking some actions. This is Kudo speaking. As you have indicated, there are gaps that you have said, and we are aware of that. So positively and proactively, we are considering various M&A opportunities, but there is no information that I can share with you today. So when there is anything more certain or with higher probability at that timing, we would like to share such information with you. And Hatanaka speaking, as Kudo has said, in daily operation, of course, we want to launch new products. But globally speaking, there are challenges. So M and A opportunities are being investigated in our daily operation. So today, I cannot share with you anything specific. But the objective of 550 would be kept, and not only by M&A, but we would like to find other ways so that we will be able to achieve 550 billion. When a situation allows us to share with you any information, we would like to do so. So I hope that you would be patient with us. and wait until then. Thank you very much. OK? Thank you. That's all.

Well, I have to say that time has come to close the meeting. And with this, I would like to close the financial meeting for the fourth quarter. Thank you very much for your participation out of your very busy schedule. Thank you.