Sumitomo Pharma Co U/Adr

My name is Toru Kimura, the President and CEO of Sumitomo Pharma. Thank you all for joining us today. The presentation materials have been made public, and I will now provide an explanation of this quarter's financial results based on those materials. As outlined in the agenda, I will first go over the Q3 financial summary, followed by our FY2024 earnings forecast, and then discuss research and development. After that, we will open the floor for the Q&A session. First, here is an overview of our Q3 financial results. In addition to revenue growth, our cost reduction initiatives have been effective, enabling us to return to profitability in terms of core operating profit. This is one of the key highlights of this quarter. Revenue increased by 24.7% year-on-year, while both SG&A expenses and R&D expenses were significantly reduced. As a result, also supported by the impact of the weaker yen, we achieved profitability at the net income level as well. Although I will not go into the detail today, I understand that many of you are concerned about our borrowings. The repayment deadline for our bridge loan has already been extended to the end of March 2025, Additionally, we continue to discuss necessary refinancing measures with financial institutions as well as our parent company, Sumitomo Chemical. Next, here are the core-based financial figures for Q3. Revenue came in at 293.2 billion yen, representing an increase of 58.2 billion yen year-on-year. Looking at the rightmost column, you will see the May 14th forecast. which reflects our internal budget. At the end of Q3, our progress stood at 86.7% of this forecast. Gross profit reached 179.7 billion yen, an increase of 37.8 billion yen. As I mentioned earlier, SG&A expenses and R&D expenses were reduced by 52.2 billion yen and 32.6 billion yen respectively. As a result, we posted a core operating profit of 21.5 billion yen. Next, regarding non-recurring items, these include expenses related to our business restructuring efforts in Japan, as well as restructuring costs from the previous fiscal year in North America. Consequently, operating profit stood at 13.2 billion. As for financial income and expenses, due in part to Father Yen's depreciation, the figure was 10.8 billion yen. This resulted in a quarterly profit attributable to owners of the parent of 21.2 billion yen, making a significant improvement of 138.9 billion yen compared to the previous fiscal year. Based on these results, we intend to revise our full year earnings forecast, which I will explain later. Now moving to revenue by major products, This slide represents our North American revenue for our three key North American products, OrgoVix, MyFembri, and Jamtesa. OrgoVix generated 57.8 billion yen, MyFembri 10.1 billion yen, and Jamtesa 43.2 billion yen, all of which represent significant year-on-year increases. Comparing these figures to our initial budget, as seen in the rightmost column, Expressed in US dollar terms, Orgovix achieved 129% of the target, Gemtesa 119%, while MyFembry came in at 74%. Overall, the combined performance of these three products exceeded our budget by 17%. Additionally, revenue from other products including Aptium and Recymic totaled $190. 179.4 billion yen, marking an increase of 64 billion yen year-on-year. Compared to our budget, the progress rate currently stands at 90.3%, reflecting strong performance. One additional note regarding MyFembreed. This product was previously co-marketed with Pfizer. But following discussions, we transitioned to a fully in-house sales model as of the end of December last year. As a result, we recorded a lump sum recognition of 9.1 billion yen in deferred revenue, which is included in the 26.2 billion yen listed under exports and upfront payment at the bottom of the slide. Here we present the revenue by product for Japan and Asia. In Japan, ECWA and ECMED, particularly ECWA, saw a slight decline in sales, due to its loss of exclusivity in December. As for TWIMIG, it is slightly behind our initial budget expectations, but Latuda, Midokuruko, and other products are progressing steadily. On the other hand, Treeleaf's exclusivity period ended in June, leading to a significant decline in sales. Reflecting this, total revenue in Japan declined by 10.7 billion yen year-on-year, to 78.5 billion yen. However, compared to our initial budget, sales have remained relatively strong. Next, turning to Asia and China, Meropen continues to perform well, with total revenue reaching 35.3 billion yen, an increase of 4.8 billion yen year-on-year. Performance has also been strong compared to our budget. Here we present the operating results by segment. Across Japan, North America, and Asia, core segment profit has returned to positive territory, with a total profit of 55.2 billion yen. Even after deducting R&D expenses, cooperating profit remains positive at 21.5 billion yen. At the bottom of the slide, you can see the year-on-year changes. In Japan, Tree Leaf's loss of exclusivity had an impact, leading to a ¥2 billion decline in core segment profit. Meanwhile, North America performed strongly, with core segment profit increased by ¥88.4 billion compared to the previous year. With these results, we have decided to revise our earnings forecast. The expansion of sales for three key products, along with the effects of cost management, has led us to raise our co-operating profit forecast to 30 billion yen. As I have explained, sales in the US, particularly for Orgovix, have been strong. Additionally, the lump-sum recognition of deferred revenue for MyFembri has also contributed significantly to the upward revision for North America. On the cost side, expenses have decreased due to business restructuring in Japan. At the same time, we have been prioritizing and focusing our R&D investments, continuing to control our budget. Furthermore, as part of the integration of the regenerative and cell medicine business with Sumitomo Chemical from February onwards, this segment will no longer be consolidated, which will contribute to further reductions in expenses. Regarding other costs, We plan to transfer the regenerative and cell medicine business to Sumitomo Chemical by establishing RAKTHERA, which we expect to generate a gain of 12 billion yen. Meanwhile, we have already recorded 1.6 billion in Q3 from the transfer of our stake in Esprachmo to Sumitomo Chemical. As a result, here we present our revised earnings forecast for FY2024. The leftmost column represents our original budget based on our May 14 projections, while the middle column shows our revised forecast. We now expect revenue of 381 billion yen, gross profit of 233.5 billion yen, SG&A expenses of 167 billion yen, and R&D expenses of 48.5 billion yen. core operating profit is projected at 30 billion yen. As for non-recurring items, as I explained earlier, business restructuring costs are included in our forecast, and we now expect operating profit of 21 billion yen. This means that for the first time in a while, we anticipate achieving positive operating profit this fiscal year. In addition, Financial income and expenses have seen some minor adjustments due to foreign exchange fluctuations. Ultimately, we are forecasting net income attributable to owners of the parent at 16 billion yen. Given these circumstances, we have revised our sales forecast for key products as shown here. Orgovics continue to perform well, and we expect this trend to continue, leading to an upward revision of 20.6 billion yen. bringing the forecast to 78.5 billion yen. My family has faced some challenges, but we are forecasting 12.2 billion yen. Gemtesa has also been revised upward from our initial forecast to 62.8 billion yen. Aption has also been performing strongly this fiscal year, with a forecast of 36.6 billion yen. Initially, we had projected total sales of 198.7 billion yen for these products, but after revising our estimate upward by 36.7 billion yen, we now forecast 235.4 billion yen. Now, let me go into detail about each product. First, Orgovix. Our initial plan projected cumulative sales of 293 million dollars through Q3. However, actual sales have reached $379 million, a 129% increase over our forecast and a 76% increase year over year. The primary driver of this growth has been volume. In addition to reducing the financial burden on patients, our promotional strategies have been effective, leading to higher-than-expected demand across all segments. Looking at the revised forecast in the lower right-hand side, The key factor behind this adjustment is the significant impact of increased volume. Next, MyFembri. MyFembri's achievement rate stands at 74%, with current sales at $66 million. However, this still represents a 33% increase year over year. The reason behind this performance is that sales volume did not grow as much as we had expected. the expansion of the oral GnRH market and Mifembri's market share growth in endometriosis have fallen below our initial expectations, leading to these results. As shown below, the key difference between our original FY2024 forecast and the revised forecast is the impact of volume. Accordingly, we have lowered our sales forecast from $124 million to $80 million. Next, I would like to explain our transition to fully in-house commercialization of MyFembri, which I briefly mentioned earlier, including our intent and the expected impact. As of the end of December, we ended our commercialization agreement with Pfizer. From January onward, Sumitomo Pharma America has been handling the sales and marketing of MyFembri independently. Looking at the impact of earnings, We view this transition positively as fully in-house sales allow us to improve the product's profitability. Furthermore, having sole control over sales strategy enable us to respond more flexibly and dynamically, which we see as a major advantage. To illustrate this, I will briefly explain the diagram in the lower right. Until December, We shared gross profit with Pfizer after deducting the cost of goods sold from revenue. With this transition, the entire portion of the profit will now be retained by us. On the other hand, in terms of SG&A expenses, we previously shared some costs with Pfizer, rather than bearing the full burden ourselves. With this change, our share of costs will increase, but we aim to streamline our in-house sales operations to offset this increase. As you can see from the chart, we view this transition as a net positive. Meanwhile, Orgovix continued to perform very well, and we will remain our partnership with Pfizer to further expand its market presence. Now moving on to Gemtesa. The achievement rate for Gemtesa is at 119%, with sales increasing by nearly 20%. Compared to the same period last year, revenue is up 63%. Breaking this down, the primary driver has been pricing. Prices have remained higher than we anticipated, which has contributed positively to performance. Compared to the initial forecast, factors such as lower than anticipated product returns and reduced financial burdens related to the coverage gap have led to an increase in average selling price. We had originally forecast sales of $380 million for Gemtesa, but given these pricing benefits, we have now revised our projection upward to $413 million. Here we present data on Gemtesa, specifically regarding the impact of generic versions of Mirabegron, a competing product, which became available starting in April. I believe you are all aware of this development. This chart shows how total prescription volume and new prescription volume have been affected since the launch of these generics. The red section represents Gentessa, and as you can see, there has been no significant change in prescription trend following the introduction of Mirabel-Grön generics. Here we present the core-based earnings forecast for FY2024. If you look at the comparison between the previous and revised forecasts, shown at the bottom of the slide, you can see that the core segment profit has improved by 8.6 billion yen in Japan, 21.3 billion yen in North America, and 5.6 billion yen in Asia, for a total improvement of 35.5 billion yen. please refer to the top of the slide for a regional breakdown. Another recent announcement we made is that we have entered into a co-promotion agreement of Janssen Pharma in Japan for the long-acting injectable antipsychotic medication Zeplion and Zeplion TRI. By securing an injectable treatment options for schizophrenia, we aim to expand the breadth of our information provision and enhance the presence in the psychiatric field Adding an LAI formulation to our pipeline, which already includes Latuda in tablet form and lonacin tape, is expected to generate significant synergies. Next, I will provide an update on research and development. In terms of new progress, as indicated in red on the slide, we have initiated a Phase 1 and Phase 2 trial in the U.S. for DSP3077, allogeneic iPS cell-derived retinal sheet for the treatment of retinitis pigmentosa. Here are some key topics. In the field of regenerative and cell medicine, including psychiatric disorders, we previously announced during our Q2 earnings presentation that we were revising our domestic regulatory strategy for Parkinson's disease regenerative therapy. We have now established a new timeline, and have resumed activities with the goal of submitting for approval in FY 2025. In addition, we understand that the results of the physician-led clinical trial will soon be announced by Kyoto University. Meanwhile, as mentioned earlier, we initiated a new clinical trial in the U.S. in November. For oncology, both Enzominib and Novisertib continue to show promising data. At the American Society of Hematology conference in December, Enzomenev received very high praise and interest in Nubicertif is also growing. Another key update is that in December, Gemtesa received additional approval in the U.S. for the treatment of overactive bladder in patients with benign prostate hyperplasia undergoing drug therapy. Here we present an illustration of the new clinical trial we have initiated for DSP 3077. Retinitis pigmentosa is a progressive eye disease in which the photoreceptor cells responsible for detecting light, as shown in red on the diagram, gradually degenerate and disappear, leading to vision loss. The diagram illustrates how light enters from below and is detected in the red marked area at the top, representing the retinal structure. For patients with this condition, We are conducting a Phase I-II clinical trial at Mass Eye and Ear, an ophthalmology affiliate of Harvard University, to evaluate the transplantation of an iPS cell-derived retinal sheet, which we believe could help restore light perception. Next, we summarize the key findings from the Phase I-II trial of Enzomenev, DSP5336. Both efficacy and safety data continues to be positive. Regarding efficacy, the drug has demonstrated a high response rate, with complete remission or partial hematologic recovery observed in 30% of patients with MLL rearrangement and 47% of patients with an NPM1 mutation, indicating strong clinical potential. One of the Enzomini's key advantage is its safety profile. While some patients have exhibited QT prolongation, the incidence rate remains very low. Another potential challenge for this class of drugs is differentiation syndrome, which has been observed in approximately 10% of patients. However, no cases have led to severe outcomes such as death or treatment discontinuation. given its strong efficacy and favorable safety profile, and domenib is being evaluated as a potential best-in-class treatment. Next, moving on to nubicertib. So far, 22% of patients have experienced a reduction in spleen size of 25% or more, while 44% have shown an improvement of at least 50% in their total symptom score, indicating very promising results. As shown on the right, patients who experienced symptom improvement began to show positive changes around the fourth week, and these improvements have been sustained over time. That concludes my explanation. I would now like to move on to the Q&A session. Thank you. Wakao from Jake B. Morgan. I would like to ask about the outlook for your three key products. I believe they have been performing very well, and I'm keen to understand how things will develop from here. So I would like to get some insights. In particular, I would like to hear about Orgobics and Jamtessa, what assumptions you're working with, and what the current situation looks like. With the start of Medicare Party changes in Q4, I assume you have factored in improvements to gross to net and positive effects. How is that playing out? Also, just looking at recent prescription trends, perhaps due to the year-end and the new year holiday impact, it seems that both drugs have weakened somewhat since January. How do you evaluate this? This is Tsutomu Nakagawa. I'll take this question. First, regarding Orgovix, we expect a very strong demand growth to continue. As you pointed out, insurance system changes took effect in January. and we view this as another positive factor for us. So we expect strong results in Q4 as well. On the other hand, with Gemtesa, we anticipate that the demand growth pattern seen through December will shift slightly starting in January. This is the result of our negotiations with various payers under Medicare Part D. That said, while we do expect demand growth to slow somewhat, we see the pricing impact working positively in our favor. As a result, we believe we can still achieve our sales targets and maintain the overall trend we have seen so far through Q4. I hope this answers your question. Just as a follow-up question, so if I understand it correctly, Orgovix will continue its growth trajectory without much change. But looking at your forecast, Q4 sales are projected at $132 million, whereas Q3 was $147 million, meaning quarter on quarter, it appears to decline. Based on your explanation, it seems like the figure should actually be growing a bit more. Could you clarify that point? And also, regarding the Medicare Part D coverage changes for Gemtesa, should I understand this as simply meaning that while coverage is reduced, growth to net improves, so the net impact is positive. Is my understanding correct? If you do the math, as you pointed out, it might look like Orgovic's Q4 sales are slightly lower than in Q3, but the thing is, month to month and quarter to quarter, there is always a certain degree of fluctuation. In particular, December tends to see a surge in demand ahead of the holiday season. which was a factor in Q3 performing exceptionally well. Then looking at January, February, and March, there is a fact of what you might call a reset in insurance coverage. So these factors come into play as well. Rather than seeing a perfectly smooth upward trajectory every single month, there are some fluctuations along the way. But in terms of the broader trend, we believe it is indeed on the upward trajectory. And we think that's the right way to interpret the situation. And regarding the question on Gemtesa, could you please repeat the question again? Yes, I would like to clarify the meaning here because I didn't fully understand. So could you please explain? When you say that changes in coverage will lead to a decrease in volume, does that mean that the number of payers covering Gemtesa is decreasing and that's why volume will decline? On the other hand, since growth to net is improving, does that mean that in net terms, revenue will actually increase? Is that the correct understanding? What exactly do you mean when you say that a change in coverage will lead to a decline in volume? Yes, that understanding is generally correct. Okay, so when we look at recent prescription trends and see that Gemtesa appears to be somewhat weaker, Is that being affected by this? Yes, that understanding is correct. So it's not that it's losing out to generic versions of mirror background or anything like that, right? That's correct. We don't believe that's the case. We see this as moving in line with our expectations. Okay, and by the way, how much has gross-to-net improved since January? That information is not disclosed. My second question is about endominoid. As Dr. Kimura mentioned, I also believe this has the potential to be best in class. Since DLT hasn't been observed yet, I was wondering if there was a possibility of increasing the dose. But in the end, I understand that you're proceeding to the phase 2 part with a 300 mg dose. Why did you not increase the dose? I'm not sure whether this decision was made at phase 1 or later, but I would like to know when we can expect the next update. Also, how far do you think you can go with this development on your own? Do you see the potential to take it all the way to the first line setting? This is Yumi Sato. Regarding the recommended dosage, we have decided on 300mg. as reported in our latest update. The 300 milligram data is included in today's presentation materials and has also been presented at scientific conferences. We did consider testing a higher dose, but after evaluating the data, we determined that 300 milligram was sufficient in terms of efficacy. And that is why we settled on this dose. We plan to begin dosing in the phase 2 portion within this fiscal year. As for whether we can advance this to the first line setting, no decision has been made at this time. So question, given your current capabilities, do you think you can handle this yourself? From an R&D budget perspective and the current state of your development team, I imagine that moving into the first line setting would be much more challenging than later line indications. Do you have the capability to do this? I do believe we have the capability to take this forward, but including NuviCertiv, we want to continue assessing the data carefully and consider how best to approach our development strategy. So I'm assuming licensing out is also something you're considering. The data looks quite strong. But if you were to licensing out, what kind of timing would you be looking at? Well, rather than saying we are actively looking to licensing out, I would say that if both drugs continue to develop well, We will also need to consider how to accelerate and expand their development further. In that case, bringing in a partner could be one possible approach. However, I believe we still need more data before making that decision. For now, we intend to continue developing in-house. Okay. Lastly, I had asked earlier about when we can expect an update. When will the next update be? Can we expect anything this year? This is regarding Ndominib. I believe we will have an update once we enter Phase 2. I don't think it will be too far off. As for data updates, we will consider the best timing based on upcoming conferences and other opportunities. So just to confirm, the data that will be presented at conferences will be an update on the Phase 1 portion. Am I correct? Yes, I believe the Phase 1 summary data will be one of the key milestones. Thank you. Muraoka from Morgan Stanley. I would like to get a clear picture of the outlook beyond the next fiscal year. Given that your full-year guidance this time is showing profitability even without asset sales? Should we assume that next fiscal year we'll see further profit growth without relying on asset sales? And looking even further ahead, will you be able to expand in FY2026? I imagine that from that point onward, the deferred revenue from FISA that was discussed earlier will start to decline. So how should we interpret the outlook based on your company's current snapshot? And while it may be too soon to ask this, are you considering resuming dividend payments? First, regarding the last point on dividend resumption, while our business performance has been strong, as you know, our financial situation remains quite challenging, so we need to carefully consider the timing. Another point I would like to mention is that The FY2024 earnings revision includes a lump sum recognition of 7.8 billion yen in deferred revenue from MyFembry. If you don't account for that, it would be an overestimation of the actual performance. All three of our key products are growing steadily. However, we should also consider that Optium has undergone sales force restructuring and is now essentially selling without promotional efforts. Furthermore, it will lose exclusivity in June this year. In Japan, following ECUA, ECUMED will also lose exclusivity, which is another negative factor. While the fundamental earnings capability of the business is increasing, there is a possibility that future earnings may not fully reflect the strong momentum that the current numbers suggest. That said, we believe we have taken solid steps towards recovery. I completely understand that it may be difficult to give a precise answer, but just to confirm, looking at next fiscal year and then another year ahead into FY2026, do you expect cooperating profit to continue rising from this year's 30 billion yen, even if we subtract the 7.8 billion from my family's deferred revenue? or should we expect some volatility along the way? First, a correction. Aptium's LOE is actually in May, not June. As for core operating profit, we still expect to achieve our previously stated goal of maintaining net profitability next fiscal year. However, since my family's deferred revenue will no longer be gradually recognized, there will be an impact from that. So rather than expecting a perfectly smooth upward trend, I think it's more realistic to assume some fluctuations along the way while generally moving in a positive direction. In terms of quantitative details, we will provide more specifics once we have a clear picture after this fiscal year's financial results become available. Also, there was quite a bit of discussion earlier about GemTESA. Looking at page 17 of your presentation, While TRX is increasing, new prescription volume seems to have slowed down recently. Based on the earlier discussion, I assume this is because of coverage changes, but since growth to net is improving, the expectation is that even if this trend continues, the price recovery will offset it, and the net impact will be positive. Is that the correct understanding? Sorry, this is a bit of an oversimplified way of putting it. I believe you are referring to the trends in November and December. If you look at the past two fiscal years, you'll see that October, November, and December tends to be seasonally weak periods. So from that perspective, we are not particularly concerned about this trend. That said, as I mentioned earlier, we do expect volume to decrease starting in January. However, at the same time, the improvements in gross to net will help support revenue. So overall, we remain confident in the upward trend for sales moving forward. This is Stephen Baker from Jefferies Securities. Looking at page 6 regarding revenue related to Pfizer at the end of December last year, it was $88 million, and this term, it's $147 million. Is the difference entirely due to deferred revenue from MyFembry? Yes, that's correct. The $59 million difference comes from the lump sum recognition of the deferred revenue from MyFembry. Regarding MyFembry, how much deferred revenue was recognized each year and how much will that decline moving forward? The deferred revenue was approximately $30 million per year. But starting next fiscal year, that will no longer be recognized. Thank you. Hashiguchi from Daiwa Securities. As you continue your discussions on your mid- to long-term business plan, what are the key discussion points? And how do you plan to present the information to us going forward? Also regarding the refinancing of the bridge loan, I understand that the discussions are ongoing, but what are the main issues being negotiated and what kind of adjustments need to be made? Additionally, I recall that around last spring, you mentioned a mid to long-term management strategy being built, something akin to a medium-term business plan. I don't quite remember the exact wording you used at the time. I believe you had mentioned to announce something within this fiscal year. How is that progressing and when can we expect to see something presented to us? I will first address the midterm plan and then Mr. Sakai will provide an update on the refinancing situation. First, we already have a plan in place and which we have been discussing with our banks. However, the next step is to clarify the direction the company will take moving forward. Also, as you are aware, since December, we have undergone a significant workforce reduction, particularly in Japan. In light of this, we are currently working on structuring our talent and personnel policies within the company. Rather than preparing a large-scale medium-term management plan, we are instead focusing on formulating and sharing our internal vision first. How will we communicate this externally is something we are actively discussing right now. As for the timing, we are aiming for this spring. And Mr. Sakai, please provide an update on the refinancing situation. Yes, this is Motoyuki Sakai. At present, we are in discussion with our primary banks as well as Sumitomo Chemical regarding refinancing. However, as these negotiations are still ongoing, it is difficult to provide specifics at this stage. As I have mentioned before, Each financial institution has its own unique circumstances. Naturally, with a number of participating banks involved, we are currently working on adjusting the terms and conditions of the refinancing agreement. I would appreciate your understanding on this point. Earlier, Dr. Kimura mentioned the timing of the plan. as being around spring, does that mean it will be shared internally around spring or will it also be shared externally during that time frame? That is exactly what we are currently discussing. For now, we are working toward an initial target of the end of March this fiscal year. From there, we are discussing on how best to present it externally. I apologize for not having a more concrete answer at this point. Yamaguchi from Citi Group. Regarding Orgovix, Gemtesa, and Mifembri, your three key products currently sold in the U.S., are they manufactured in the U.S.? My understanding is that they are produced overseas and then imported into the U.S., but could you confirm whether they are made in the U.S. or not? and including whether they are subject to import duties. Within our supply chain, some production does take place in the U.S., but a significant portion is manufactured overseas outside the U.S. We are aware of the recent discussions regarding tariff on pharmaceuticals, and we are currently assessing the potential quantitative impact. At this stage, that is about all the information we can provide. Sakai from UBS. Dr. Kimura, since you come from an R&D background, I'm sure you're well aware of this issue, but I wanted to ask your development pipeline. Looking at your portfolio of development programs, considering the number of projects, the therapeutic areas, and your annual R&D budget, which currently stands at 48.5 billion yen, Do you believe that this budget is sufficient to sustain the pipeline? And from an outsider's perspective, it seems quite challenging. Realistically, you would have to start making tough choices, potentially even dropping promising candidates. If so, at what point do you see those decisions being made? Or do you believe that With this 50 billion yen level of R&D spending, you can manage the pipeline as it stands. I would appreciate your insights on this. This is indeed a difficult issue. The reason we currently have so many projects in the pipeline is that most of them are still in the early stages. That's why we are able to handle this number of programs at the moment. However, As these projects progress to phase 2b or phase 3, even if we obtain strong data across the board, we will inevitably have to make strategic choices and concentrate our resources. At that point, partnering with other companies or outlicensing some assets will become viable options. Ultimately, once we start seeing even partial clinical proof of concept, potential partners will also begin to recognize the value of the programs. I believe that will be the key decision-making point. Since most of our pipeline is at a similar stage, I don't expect significant discrepancies in timing when we assess those programs. As you pointed out, the reality is that with 50 billion yen in annual R&D spending, we simply do not have the capacity to develop all these programs in-house. I see, so in other words, you expect R&D spending to remain at current levels for now, and you will manage development accordingly. Yes, that's right. For the next two to three years, we plan to maintain R&D spending at this level. Beyond that, as our U.S. business grows and our company becomes more streamlined and financially stronger, there may come a time when we can allocate more resources to R&D. But for the next two to three years, we expect this situation to continue, and we are prepared to operate within our current R&D budget. Thank you. If there are no further questions, we will now conclude the Q&A session. That brings us to the end of the Sumitomo Farmer's Q3 FY2024 Financial Results Briefing. Thank you very much for your participation today.