Sumitomo Pharma Co U/Adr

My name is Toru Kimura, President and CEO of Sumitomo Pharma. Thank you for attending this briefing today. Today, as shown here, we will provide a summary of our 2024 financial results and our 2025 forecast, followed by Reboot 2027 and finally a Q&A session. Here are the financial results for FY2024. The results were almost in line with the revised forecast announced on April 28th. Revenue was 398.8 billion yen, an increase of 84.3 billion yen from the previous year. Growth in three key products mainly in the U.S. contributed to the increase. We have been working to reduce R&D expenses as part of our efforts to cut costs through drastic business restructuring and as part of our selection and concentration efforts. As a result, selling general and administrative expenses decreased by 68.7 billion yen to 167.7 billion, and R&D expenses decreased 42.4 billion from the previous year to 48.5 billion yen. In the fiscal year under review, 13.7 billion yen was recorded in others core basis, because we spun off part of our regenerative medicine cell therapy business and transferred some of our shares to Sumitomo Chemical. As a result, core operating profit was 43.2 billion yen, an increase of 176.1 billion yen compared to FY2023, which was a very difficult year. The ¥14.3 billion recorded as adjustments includes restructuring costs in North America or Japan and a small impairment loss on TWIMIG. As a result, operating profit was ¥28.8 billion, an increase of ¥383.7 billion from FY2023. As for financial income and costs, we recorded a loss of 11.2 billion yen due to foreign exchange losses, interest and others. As a result, net profit was 23.6 billion yen, and net profit attributable to owners of the parent increased by 338.6 billion yen compared to the previous year, far exceeding the figures announced at the Q3 results briefing on January 31st. Revenue from sales of major products is shown here. The numbers in the middle are yen-dominated figures. Revenues from Orgovix, MyFembri and Gemtesa increased 96.9%, 39% and 78.6% respectively over the previous fiscal year, due in part to the slight impact of foreign exchange rates. Business in North America was very strong. Finally, revenue totaled 251.8 billion yen, up 92.8 billion yen or 58.3% from the same period last year. A comparison between the forecast at the beginning of the period and the actual results is shown in the upper right corner. Orgovics and Jamtesa results exceeded initial forecasts. On the other hand, the results for MyFembry, while growing compared to FY2023, were a little less favorable than we had expected. With regard to MyFembry in January, we switched from co-marketing with Pfizer to solo marketing by the company. If there is any remaining in the future, deferred revenue will be recorded in a lump sum. This is included in export products one-time revenue at the bottom. In Japan, total revenue was 99.8 billion yen, down 14.8 billion yen from fiscal year 2023. As noted, the 12.9% decrease was due to the significant decline in sales of aqua and tree leaf, whose exclusivity period ended during the fiscal year. In Asia, Chinese meropen remained strong. Total revenue in Asia and China was 47.2 billion yen, up 6.3 billion or 15.5% from FY2023. I would like to explain about the joint venture of our Asian business and the transfer of the frontier business announced in March and April. We are in a very difficult situation and we desperately needed to invest in growth at this time in order to further maintain and grow our Asian and frontier businesses in the future. After internal discussions, we decided to concentrate on the US and Japan, which is the core markets for the new drugs. The decision was made to transfer the Chinese and Asian operations, which has a much different pipeline and product mix, to a joint venture with Marubeni Global Pharma Corporation, which is expected to invest more in growth. The frontier business was transferred to Sawai Group Holdings, which focuses on the digital healthcare business. We have not been able to explain to you the benefits of joint ventures, especially in Asia and China. So I'm showing you the benefits here. The entire business will be transferred in two separate transactions. First, 60% will be transferred in FY 2025 and the remaining 40% in FY 2028, receiving 45 billion yen and 27 billion yen at each timing. In the meantime, the joint venture's dividend payout ratio will be 100% in principle, and our share will be 40%. In addition, we will continue to supply products from our company, which will benefit us in the future. This is an image of the benefits of a joint venture. Here you see forecast for FY2025. If you see the middle of the table, revenue forecast is 355 billion yen, a decrease of 43.8 billion yen including the impact of foreign exchange, and a decrease of 30 billion yen excluding the impact of foreign exchange compared to FY2024. Since the China and Asia business will be transferred to the joint venture, its sales will no longer be recorded from August of this fiscal year. In North America, Aptium will soon face loss of exclusivity. and its sales will decrease significantly. The period of exclusivity for ECWA ECUMED will end in Japan as well. These are the main reasons for the decrease in revenue. SG&A expenses and R&D expenses will be reduced in the same manner as the fiscal year under review, or even more so where possible. However, most of the decrease in revenue is due to the impact of foreign exchange rates. The 44.5 billion yen recorded as other score basis is due to the 45 billion yen in income expected from the transfer of the AGM business. Core operating profit is expected to be 56 billion yen, an increase of 12.8 billion yen from the fiscal year under review. There will be no adjustment and operating profit is expected to be 54 billion yen. Financial costs are expected to be 14 billion yen, including foreign exchange losses due to the difference between the actual exchange rate of 152.62 yen for the fiscal year under review and the projected exchange rate of 145 yen to the dollar for FY 2025. As a result of the above, net profit attributable to owners of the parent is expected to be 40 billion yen, an increase of 16.4 billion yen. The forecast by segment is shown here. Since we will basically only be supplying drugs for our Asian operations from August onward, we anticipate a very large decrease in revenue and profits in Asia. In North America, Aptium will face loss of exclusivity. Although our strategy is to offset the loss with growth in three products, we do not expect to be able to completely absorb the foreign exchange loss. This shows a breakdown of the changes in forecasted cooperating profit. The actual amount for the fiscal year under review was 43.2 billion yen. Core operating profit for the current fiscal year will no longer include the one-time recognition of deferred revenue from MyFembri and a gain of 26.8 billion yen from a change in equity interest in the regenerative medicine cell therapy business. In addition, the termination of the exclusivity period of ECWA ECOMET will reduce gross profit in Japan by 8.3 billion yen. In contrast, gross profit in North America will increase, but on the other hand, the exclusivity period for APTIUM will end. Subtracting these items will result in a positive figure. In Asia, the company will record a gain of 45 billion yen on the transfer but will lose sales after August. On the other hand, there are equity method profits and profits from the supply of products after the transfer of the business. Net amount related to the transfer will be 31.5 billion yen. As a result of the above, core operating profit forecast for FY 2025 is 56 billion yen. The revenue forecasts for our main products are shown here. Our focus is Orgovix, MyFembri and Gemtesa. In particular, revenues from Orgovix and Gemtesa are expected to increase by ¥19.9 billion and ¥17.1 billion respectively over the fiscal year under review. We expect these to continue to be our growth drivers. On the other hand, since my Fembri is to be sold solely by the company, although we do not expect an increase in revenue, we expect the profit from the product to improve so much that it to be profitable as a standalone item in the current fiscal year. This will be explained again later. We expect revenue of 248.2 billion yen for the North America as a whole. In the next fiscal year, we will receive 100 million sales milestone from Pfizer, which is also included in the 38.7 billion yen. The following is a brief explanation of each product. First, Orgovix achieved an 87% increase in sales in FY2024. compared to FY2023. The figures in the chart below are in dollar terms. In FY2025, we expect 24% increase over the previous fiscal year to $710 million. My family revenue was up 32% in FY2024 compared to FY2023, but revenue is expected to be almost flat in FY2025. The plan is to increase profitability and profit while covering the termination of the partnership through our own sales activities alone. Next, let me explain about Gemtesa. Gemtesa revenue was very strong in FY2024 with a 69% increase. We plan to continue to increase revenue by 26% to $572 million in the current fiscal year. On the other hand, the addition of new indications for OAB-BPH overactive bladder with prostatic hypertrophy was decided late last year, and a new differentiating factor from other competing products have emerged. We will continue our sales activities to make it the standard treatment of choice for both male and female patients. We have been paying attention to the generic version of Mirabetric, a competitor that came out in the middle of the last fiscal year. The red area shows the trend of Gemtesa, which is increasing without receiving impact. The number appears to have decreased slightly since this calendar year. This is due to the impact of our price negotiations with payers. We were bullish because of the new indications, but we received a proposal to lower the price, so once we started activities to have them removed from the formulary. We have already seen a large payer return to us, so we are optimistic that performance will return soon. Next, let me explain about research and development. The progress since the Q3 results in January this year is shown here. In the CNS area, or regenerative medicine cell therapy, we have made a major change in the form of a business for dopamine neural progenitor cells derived from other iPS cells, which will be now conducted in collaboration with Ruxera. However, the program itself is proceeding as usual. Data from a physician-initiated clinical trial at Kyoto University made headlines when it was published in Nature on April 17. We are already in the progress of conducting a Sakigake Comprehensive Evaluation Consultation with the PMDA and hope to obtain approval in FY 2025, preferably by the end of the year. In the area of oncology, as we have repeatedly explained, we are focusing on two products, Enzominev and Nubisertiv. Regarding Enzominev, we recently agreed on a study package with FDA in April for submission and have started a pivotal study. As for Nubisertiv, we will soon be presenting the latest data on the efficacy and safety on the single agent cohort at the European Hematology Congress, so please stay tuned. TwinMig was marketed in the form of a cautiously administered dose for patients with kidney problems, but data have emerged showing no effect on renal function. Here you see the criteria. The drug can now be administered to patients with CKD3B or 4, making this drug even more reliable. We expect to know the results of the interim analysis of the universal influenza vaccine by the end of this year. All human administration and immunization studies in clinical trials have been completed. Let me explain each product in a little more detail. I will explain about allogeneic iPS cell-derived dopaminergic neural progenitor cells for regenerative medicine and cell therapy. In the lower left corner, there are three rounds, egg-like objects in a row. This is a pet image of the brain. And the red area is where dopamine is made. Two large red dots appear, one on each side, as indicated by the arrows. which were not there before the surgery. It can be seen that the transplanted cells made dopamine well. There is a rating index called the Hong and Yang scale for patient symptoms. In this index, as noted in the upper right corner, a person living in bed or wheelchair without assistance is classified as 5, while a person with tremors or stiffness of limbs on only one side of the body is classified as 1. In Japan, people with Ho and Yang, 3 to 5 are eligible for designated intractable diseases. All 6 patients who underwent surgery were designated as intractable. After 12 and 24 months, half of the patients moved to index 2. I think you can see that this is very impactful for patients. Patients with three walks in small increments and shows sagging legs. In index 2, tremors in both limbs and muscle stiffness remain, but overall movement is normal. Indicators 3 and 2 have this difference. As for Enzomenev, as I mentioned earlier, approval trials have begun. We are considering consulting with PMDA in Q2, as well as accelerating patient enrollment for the Phase 2 part. For nubicertif, we are processing with a cohort of patients receiving nubicertif as a single agent or in combination with a JAK inhibitor. There is a European Hematology Conference coming up soon, and I heard that the abstracts will be published on May 14th. We'll be able to explain the content tomorrow or the day after. We are in the process of accelerating to determine the recommended clinical dose as soon as possible so that we can move to the next stage. Next, let me briefly explain about reboot. This is our immediate action plan to restart a strong Sumitomo Pharma. With the announcement of this plan, the current midterm management plan, called Midterm Management Plan 2027, which no longer fits the current situation, has been withdrawn. First, let's look back FY23 and FY24. As we have explained many times, our performance in FY2023 was very difficult, and we achieved a V-shaped recovery in FY24. In fact, in North America, we have already undertaken a very large and fundamental structural reform in FY23. In Japan and the US, we have been promoting organizational streamlining, selection and concentration, review of R&D investments, and governance reforms. The initiatives for FY 2023 and 24 are shown here. We have thoroughly cut costs and implemented a workforce reduction of 1,200 employees in Japan and the U.S. In addition, we are conducting cap management on R&D expenses and reduced those from 110 billion yen to 50 billion yen. At the same time, a gain of 250 billion yen was recorded from the sale of the entire stake in Roivant and the conversion of our agent operations into joint ventures. In addition, we promoted selection and concentration of programs in R&D too. In order to ensure that our financial situation does not hinder us from expanding our regenerative medicine and cell therapy business, we have established a new joint structure with Sumitomo Chemical as a member of the Sumitomo Chemical Group. As a result, from FY23 to FY24, we achieved a 140 billion yen reduction in SG&A expenses and a 60 billion yen reduction in R&D expenses compared to FY2022. With this reboot, Sumitomo Pharma is now restarted as the new Sumitomo Pharma. Despite the difficult situation, Sumitomo Pharma is determined to rebuild its foundation as an R&D-oriented pharma. We will rebuild our value creation cycles based on our own innovations and make a strong start. We would like to emphasize the value creation cycle as a key word within our company. Not only must we continuously bring innovative drugs to market through research and development, but we must also maximize their market value afterwards to contribute to better medical care and lead them to the stage of expanded sales and indications. The resulting product branding and expansion of the next set of management resources will allow for further new strategies or new research. We have named this cycle the value creation cycle. All company functions are responsible for one of these. We would strongly encourage each person or department to contribute to this cycle. As a result, we would like to rebuild the company as a global R&D-orienting company, which is our ideal abate in a limited area as a global specialized player. In this regard, research and development have not been very successful so far. However, the next two to three years will bring major milestones in regenerative medicine such as iPS, Parkinson's, and cancer that will feed us in the future. For the time being, the three key products plus Recymic will provide solid support for earnings while we nurture the next butts. In this context, if we apply this value creation cycle, CNS is still in the research and development stage, as we have suspended the development of a major late-stage product. As for cancer, we are finally starting to see cells, and the same is true for the regenerative medicine and cell therapy. We will strive to maximize them as soon as possible by putting them on the value creation cycle that we will be strengthening. In order to implement this, we have positioned FY 2025 as the year in which we will demonstrate our true value as an R&D-oriented pharma company as shown in the previous diagram. The results I have shown you here and have emphasized many times before will be concentrated in this fiscal year. and we hope to regain momentum through them. We currently believe that the success of this will allow us to draw up a more concrete strategy for future growth. Here are our financial targets. These figures do not factor in the fact that sales are currently very strong and that a major milestone in research and development will come this year. We will achieve revenue of 250 billion yen for the three key products. Core operating profit will not fall below 25 billion yen after FY2027. On the other hand, sales-related revenue account for the bulk of the current cash flow and operating profit. One of our goals for free cash flow is to quickly get the company into a position where it can generate a profit without sale-related revenues. In addition, we hope to quickly reduce interest-bearing debt to less than 200 billion yen and resume dividend payouts as soon as possible. For the time being, we believe that repayment of loan debt must be our priority. Here is another slide for financial targets. This image shows cash allocation. We intend to use cash flow from our core business and one-time cash flow effectively, mainly for R&D investment or repayment of interest bearing debt. In addition to the repayment of interest-bearing debt, the recent refinancing will become due in FY27 and the first resumption of the existing subordinated debt will also arrive. We also see shareholder return and strategic investment as issues to be addressed. On the other hand, to start up with a focus on R&D, aggressive investment in development will be necessary. But there is a possibility that we may not be able to fully finance the cost of such investment. We would like to place maximizing our profits through external partnership in our development programs at the center of our strategy. We do not sell our pipeline to outside parties through licensing, but we partner to maximize our value. The business strategy overlaps with what I have already explained. The overall picture is to first maximize the value of existing products. Thorough cost control will also continue in the future. We intend to strengthen our portfolio by selecting our in-house development pipeline and pursuing partnership opportunities. First, we will focus on two oncology products and regenerative medicine, followed by strategies in the CNS and neurology fields, which are our foundation. As we work towards the launch of the two oncology products, I would like to reiterate that we will give priority to the development of three products and look for a development partner as soon as possible to maximize their value. We are currently planning to file for Enzomeneb in FY2026 and launch it in FY27. For Nobicertib, we plan to file in FY27, although there will be a slight delay. By adhering to this schedule, we will move forward with the realization of the early market launch shown on the right side. As for regenerative medicine and cell therapy, as I have repeatedly mentioned, we have only launched Recymic in the United States. We aim to obtain approval for IPS Parkinson's disease drugs as soon as possible this year and to start selling them in the next fiscal year. We will continue to develop the product in the US to become one of the world leaders in this field. We aim to make this a 100 billion yen business by the mid 2030s and 300 billion yen thereafter. This is a regional strategy of a value creation cycle. Until now, we have focused on Japan, the US, China, and Asia. Our business in China and Asia, which has not been in the form of a new drug market, will be transferred to a joint venture with Marubeni Corporation, and we will establish a business with a focus on the US and Japan. The Global Strategy Function, or R&D, will be promoted firmly on a global basis, while sales and marketing will be managed with an emphasis on localization. I will explain our R&D efforts in more detail, but since most of these overlap with the previous explanations, I will skip some points. First, milestones for the restructuring of the value creation cycle are concentrated in the next three years, especially in the current fiscal year. Our top priority is the commercialization of IPSL-derived products and the launch of two products which will be followed by other products. I hear a lot of different voices about the two cancer products. It is said that we have done many things before. We will continue to move forward with the strategy of right target, right plan, right action to maximize value as soon as possible with more concrete confirmation. The policy of right target, right plan, right action applies not only to cancer but also CNS. Until now, for example, when verified in a large comparative study, the results were not known until the unblinding. Rather, we will continue our R&D in areas other than oncology while firmly confirming efficacy signals even in small diseases. At the same time, the unification of the R&D and technology research divisions into a single entity was a major highlight of the December structural reform. We would like to pursue efficiency and results creation. We show you how to maximize the value of our portfolio in oncology, CNS, and regenerative medicine. This has already been mentioned, so I will skip it. As an R&D-oriented firm, we will do our best. Finally, we are considering three steps in the restart towards a strong Sumitomo Pharma. First of all, we have almost achieved our goal of getting out of the business crisis. Next, while reforming the company to ensure that the value creation cycle rotates strongly, we will work towards expanding our three key products along with R&D in oncology and regenerative medicine from now until FY27. After that, we would like to firmly establish our positioning as a global specialized player, which is what we are aiming for. We are considering restarting in these three phases. I have explained reboot 2027 today. As I have just mentioned, we will withdraw the current midterm management plan, and at the same time, we would like to continue the restructuring of the company in the direction I have explained today. On the other hand, sales in North America has been very strong. We have a major milestone ahead of us this year in FY 2025. Once these are clarified, we would like to prepare a more elaborate midterm business plan and present it to you. That is all I have to say. Thank you. Yamaguchi from Citi Group. I would like to briefly ask you a few questions. You told us about the mid-term management plan, the partnership in Enzominem and the prompt launch, which is likely to move the corporate value in the short term. Regarding the partnership, you have a sales team in the U.S. And of course, I don't think you're going to go into partnership for all products. But could you first tell us what you are aiming to achieve through this alliance in Japan and the U.S.? ? and how you plan to distribute profits as a result. Yes, naturally it depends on the partner, but we would like to share the upfront and R&D costs in the alliance. On the other hand, in terms of commercialization, as you have just mentioned, our target markets are Japan and the US, so we would like to sell our products there. We hope to have such partnership. Is the timing set already? I believe it was described in the slide as the current fiscal year. Our R&D expenditures are sufficient for our current activities, but as you know, our R&D investment will continue to grow. We would like to do R&D with partners in the next year and beyond. We are aiming for the end of this fiscal year or second half of this fiscal year. However, we need to consider the convenience of the other party, so we are considering the possibility of a slight extension. I understand. This time you spoke about the next three years. We have received the figures for the fiscal year ending March 31, 2026. But what will happen in the three years through the fiscal years ending March 31, 2027 and 2028? In particular, you said that the fundamentals are expected to be positive in the fiscal year ending March 26, but there will be temporary ups and downs. It is probably a little early to ask, but beyond that, will there be no one-time revenue and profit will grow mainly through the core business in the U.S.? Or are the ups and downs expected to continue? Thank you. We believe that the sale of the Asian business will be the last major one-time proceeds from the sale. So we intend to make a good profit from our own products in the fiscal year ending March 2027. Sales of the key products are performing very well compared to our initial forecast, which we hope would make up for it. Thank you. Finally, could you briefly tell me about the relationship between dividends and interest-bearing debt, which was mentioned on the same slide? Is one should hold when interest-bearing debt falls below 200 billion yen, or is that not necessarily the case? They are not linked. We want to reinstate dividends and reduce interest-bearing debt, both of which are independent of each other. First of all, we would like to strike a balance by discussing with our shareholders what priorities we should give to the banks from which we have borrowed money, as well as to other parties. Thank you. That's all. from JP Morgan. Thank you for your explanation. First of all, please tell me about the results for the three key products in Q4 and the forecast for this fiscal year. I believe there has been a positive impact of Medicare Part D from Q4. I would like to know how the growth to net is improving, especially in light of the performance in Q4. I would say that the forecast for Orgobics for the current fiscal year is somewhat underwhelming. And I believe perhaps it has the potential to go a little higher. For Gemtesa, on the other hand, it is difficult to understand actual revenue from the prescription trend. I believe that the high earnings forecast probably had a lot to do with the improved growth to net. In light of these points, could you please tell us about your projections for the three key products? First, I'll give you a brief explanation, and then Mr. Nakagawa will elaborate. Regarding Orgovix, as you mentioned, the insurance system, a very perfect measure for us, will be implemented this year, which will reduce the burden on patients. There has been a significant change in the trend since January, and I think the difference can be read quantitatively. Mr. Nakagawa will comment on this later. For Gem Tessa, the current figure is mainly due to the improvement of growth to net. We are not particularly concerned about the lack of volume growth because Medicare coverage is now temporarily reduced. Mr. Nakagawa, do you have any additions? Yes, I'm in charge of North America operation. I cannot go into more detail at this stage than what Mr. Kimura has just explained. There will be no major changes to the pricing strategy for Orgovix in Q4 or before or in FY2025. Certain improvements resulting from changes in our IRAs are, of course, working in our favor starting in January 2025. While maintaining this, we would rather take advantage of the ease of use of this drug. The characteristics we have been advocating have led to more and more prescriptions and the number of new patients have been increasing very steadily. Basically, we calculated a strong sales forecast for FY 2025 based on such volume strength. On the other hand, the change in the IRA for GemTesa, which began in January of this year, is working in our favor in terms of price. In this regard, we are considering whether to focus on price being listed in the formulary, volume, or market share in order to achieve the best balance. We would like to refrain from disclosing detailed figures. Through such strategies, we hope to achieve the significant increase in sales in FY25 that I explained earlier. As we have informed you, the various effects of the executive order are naturally not taken into account at this point. We have determined that nothing can be considered from the information available at this time. Thank you very much. Could you tell us quantitatively how much the growth to net is improving? I am sorry, we have always refrained from giving such figures by quarter. We would like to keep that information within the company. Regarding Orgovix, if the growth to net is improving and the trend of the volume in Q1, which was quite strong, continues if your plan looks conservative. If there is anything wrong with that concept, could you please point it out? As for Gem Tessa, what is your volume forecast for this fiscal year? First of all, Orgovix was very strong, at least in Q4. We are also seeing some very good figures in April, although still at the preliminary level. I don't think the FY25 forecast is conservative, but I would like to review it at the appropriate stage based on the latest information. You asked about the volume of Gemdessa. As I mentioned earlier, we will be looking at the situation and making a strategic decision on whether we should pursue price or volume. Of course, we have included certain figures in our budget, but we would like to refrain from disclosing them. Rather than just increasing market share and volume, as I mentioned earlier, we would like to consider a variety of options including price. This is not a straightforward answer, but we hope you understand the situation. Thank you very much. The second is a similar theme. According to Mr. Kimura's explanation earlier, the 250 billion yen in the midterm management plan does not factor in the recent strong performance. So can you expect to exceed the 250 billion yen if the current situation continues? I will answer this as well. Yes, when we made the plan, we did not fully factor in the very strong January to March situation. We will make every effort both strategically and operationally to somehow surpass this. Thank you. Finally, in terms of changes in the external environment, I would like to ask you about the impact of U.S. tariffs. For example, if a 25% tax rate were applied to pharmaceuticals, what would be the expected impact? What will be the impact regarding yesterday's executive order by the president? In fact, I believe the three key products are much higher than their original prices. Is that understanding correct? I will answer your question. First of all, it is difficult to make a decision related to tariffs as the situation changes in many ways. Assuming the 25% condition you just mentioned, it could have an impact of about 1.5 billion yen as we are actually doing all kinds of things for our supply chain. that would not be a very significant impact. Therefore, we have not incorporated the impact of tariff in our forecast for FY 2025. As for the executive order, as you said, we are analyzing it, but it is very vague and abstract. We will keep a close eye on when and in what form this will be implemented and how it will affect our business. He seems to comment that prices are high in the U.S. and low in Japan and Europe. we will keep a close eye on the future trend. In terms of actual selling price, the price at which the drug is passed on to the patient in the US may be somewhat higher, but that is not something that the drug companies can control. I think this is a very difficult problem to solve. I understand it seems that within the next 30 days, each pharmaceutical company will receive some sort of notice. In response to this, are there any factors that your company can work on in the short term regarding price? We don't have specifically. In our business in the U.S., we determine the publicly listed wholesale price ourselves, which is called the work price. But then there are costs for middlemen and large rebates. Therefore, I would like to mention that prices are never changed by a single voice of a pharmaceutical company. I understand very well. Thank you very much. That's all. Muraoka from Morgan Stanley. In your earlier explanation about tariffs, you said that even if a 25% tariff were applied, it would only affect by about 1.5 billion yen. Does this mean that the three key products are mainly manufactured in the U.S. and some materials are imported from outside the U.S.? ? Well, this is very complicated and difficult to explain in a few words. We import raw materials to the U.S., but we do not import products. We have also products that are manufactured in the United States. Yes. So in a nutshell, you can say that the ratio of U.S. manufacturing is quite high then. Yes, that is in a nutshell. Although the percentage of sales in the U.S. is very high, the impact of tariff on our company is very small. I see. By the way, what has been the Medicare to Medicaid ratio for Orgovix and especially Jamtessa? And what do you expect it to be this year? There may have been several references to this in the past, but could you tell me? I have explained the payer mix briefly so far. Roughly speaking, Medicare accounts for around two-thirds of the total for both Orgovix and Jamtessa. So is Medicaid ratio small? The Medicaid ratio is very small. Yes. I understand. Thank you very much. Let me confirm about slide 33. I have read and you are saying that the core operating profit will be more than 25 billion yen from FY2027 or is it FY2028? You got that right. It means that we will reach 25 billion yen in FY2027 and will not fall below at least the amount after that. In the sense that we will not repeat the very severe performance of the year before last, FY2023, we have indicated that we would like to set a standard of 25 billion yen to manage the financial performance. I understand. It's a statement that the dividend will resume at the appropriate time, an implication that the dividend will resume after FY2027, although it will be difficult to resume by FY2027. We do not intend to make such a strong statement. We have indicated that we would like to be patient in FY 2025, but that we would like to consider very seriously reinstating the dividend in FY 2026 and beyond, whether it is feasible or not. I understand. So the basic assumption for this is 250 billion yen for the three key products. I have asked several times before, but it appears that the milestone that is triggered when the second round of orgobics achieve 1 billion dollars is not included in this 25 billion yen. Although that figure is included in the FY28 and beyond, given the strong performance in January to March and April, is it possible that a second milestone will be added in FY2027? Thank you for your very perceptive point. The next major milestone is the promise to Pfizer of $1 billion in the calendar year. This is $325 million, which of course depends on the exchange rate, but in yen term, it is around 50 billion yen. We have not included it in our current plans, but we will work to make that happen as soon as possible. Looking at how well the last couple of months have been going, I don't think it is unrealistic to imagine that this can be accomplished quickly. As I said, we would like to plan based on a clear assessment of what the trend will be and incorporate those figures when we announce what we would call a midterm business plan. Thank you. One more question. So there may be upside in FY27, but in FY26, which is not mentioned here, there will be rebounds of various factors and profits will decrease slightly. Is that correct understanding? We would like to avoid that, but we are expecting a gain of 45 billion yen from the sale of our Asian business in the current fiscal year. And we think it will be difficult to make a profit of 45 billion from something else in the next fiscal year. So while profit will probably decrease a little, we will make every effort not to decrease them significantly. I understand. Thank you very much. That is all. I'm Steven Baker from Jefferies. Thank you very much. I would like to ask about the joint venture of the Asian business on page 8. In this pie chart, the overall value appears to be about 100 billion yen, of which the orange portion to be about 15 billion yen. How should this be interpreted? Does this mean that the company expects to generate about 15 million yen in profits from exporting to Asia over the next three years? This is just an image, so it is hard to explain quantitatively. We naturally place a margin on the supply of our products, and we expect to receive some income from this. Depending on sale, we believe profit will be generated. I don't think this appears to be 15 billion yen, but if it appears to be, I think I owe you an apology. So you are saying that it will not reach 15 billion yen? No, that's not what I meant. This is just an image. I understand. On page 6 of the supplementary financial data, the sales forecast for the Asia segment for this fiscal year is about 21.1 billion yen. I assume that the business will remain the same until first half, but please tell us what kind of sales we can expect from product supply in second half and beyond. I would like to know the contents of the 21.1 billion yen. I cannot give you any details because it would cause trouble for the customer if you knew the price of the product supply. The four-month forecast for April, May, June, and July includes the sales of products as they are under the current business structure. We hope you understand that from August onward, we disclose the projected amount of product supply. I understand. Thank you very much. That's all. Hashiguchi from Daiwa Securities, thank you. First of all, I think you mentioned that over the past year or so, you have been discussing what kind of company you would like to become in the future, given the number of people have decreased considerably and the number of pipelines have also decreased. On page 46, you show us what you are aiming for in FY2033 and beyond. Am I correct in understanding that what is written here has not changed much from what your company has always aimed for and that you are in a condition that you are able to continue to aim for that? Qualitatively, it is, as you just said, we would like to establish a firm positioning in certain areas and products, not only in Japan, but also overseas. For example, we have given up on our presence in China and Asia. In terms of cutting the development pipeline, the number of products that can demonstrate positioning may also be slightly reduced. However, qualitatively, we want to be a company that has a strong presence in the U.S. and Japan as an R&D-oriented pharma company. Thank you. Although the number of pipelines has been reduced as you build the value creation cycle, do you ultimately aim to become a pharmaceutical company with a certain depth of pipeline of projects from early to late stage as you once did? Yes, that's right. We aim to be a company that can do everything in-house from early to late stage. We believe that it will be difficult to run a number of late stage programs in-house, especially at this size. So we would like to use the two cancer products as a touchstone and combine them with a partnering strategy. We will do the initial development in-house. There are some programs that we have not been able to introduce to the outside world and are now forcing us to stop. We have a number of very promising non-clinical programs at the late stage lined up. We are maintaining that and hope to bring it back as soon as possible. Thank you very much. Second, I would like to confirm the definition of core operating profit of 25 billion Japanese yen for FY2027. You mentioned excluding one-time factors. What are they and what do they include? I don't think it's something like the 45 billion yen gain from the transfer of the Asian business this quarter, for example. Are the sales milestones coming in from Pfizer not a one-time factor? For example, I would appreciate it if you could sort out to some extent which of the pipelines that are in the late stage are temporary factors and which are not. Yes. To give an example from this quarter, the lump sum recognition of deferred revenue for my family is a one-time factor, and the sales of the business is also a one-time factor. Sales milestones are also a temporary factor. I hope you understand that excluding one-time factors here means, for example, the gains from Orgovix, Chemtesa, and my family. I understand very well. Thank you very much. Finally, I would like to ask you about the data in the paper published in Nature this time regarding the iPS cell derived products for Parkinson's disease. I believe Nature also published the results of a clinical trial of a very similar concept of embryonic stem cell derived product. I don't think it is fair to compare them, since the number of cases is still quite small in both cases. However, the numbers looked better in terms of efficacy and safety, and the other side is already conducting tests on frozen cells. In that sense, I felt that that might have a slight advantage in terms of development progress. What do you think of the company's competitiveness against the product with such similar concepts that other groups are developing? It is very similar sized clinical trial as you mentioned. This is being implemented by an American venture called Blue Rock. And at the first glance, the effect looks good. But in reality, the demographics of the enrolled patients are different. The Kyoto University trial is targeting patients who are considered by expert to be less likely to respond. For example, I am now showing you imaging data that indicates whether dopamine is being produced in the brain. The Kyoto University trial has such very solid data, but the trial of the other part has not yielded very good data. I don't think it is easy to decide between the two, but if you look at the details, I believe the Kyoto University trial has better results in terms of safety. In any case, it is not that one is better than the other, since enrolled patients are very few. We are currently running clinical trials in North America for both live and frozen cells. We would like to look at that and make a firm decision on which is more advantageous. It is true that frozen cells are easier to distribute, but our stance is that it is necessary to carefully assess whether it is advantageous or not. Do you mean that there is a possibility that frozen cells are not necessarily advantageous in a commercial sense? Yes, that's right. I would like to say out loud that I would only say this with the word not necessarily. Frozen cells have a lower rate of viable cells and the thawing required for actual use is not as easy. If someone unfamiliar with the process does this, it can cause problems. Therefore, I think it is necessary to conduct a thorough verification including actual clinical use in the future. Thank you very much. That's all. Sakai from UBS. Regarding the balance sheet, at the end of March, you had about 260 billion yen in long-term debt and 46 billion yen in short-term debt remaining. In Mr. Kimura's explanation of financial targets, he said that this figure is just an image. In other words, you will reduce roughly 100 billion yen by FY2027. It says that it will be reduced to less than 200 billion yen. although I'm not sure how much less. Now, there was talk of a lump sum or a gain on the sale. Will the 100 billion yen be repaid in the normal cash flow? In addition, the redemption of subordinated debt is expected in FY2027. Is this 200 billion yen figure after redemption of subordinated debt? Thank you for your question. I will explain first and Mr. Sakai would like to add a few more details. First, you are correct that there is a 100 billion yen difference between the 200 billion yen and the current 300 billion yen. Our goal is to reduce the 100 billion yen over the next three years. However, this by no means means that we will do that only with non-temporary income. Every cash in will be utilized for it. One thing that can be explained, the current situation is the gain from the sale of the China and Asia businesses that will be recorded this fiscal year. Many of those items would also be used to repay loans. Mr. Sakai, do you have anything to add? Regarding funding sources, as Mr. Kimura just explained, the income from the sale of businesses that have been sold or those that have not yet technically been sold but will be sold in the future will also be used as a source of funds. As I mentioned earlier in relation to the R&D theme, we believe that the cash returned by the partnership could also be a source of funds. 200 billion yen or less means total interest-bearing debt of 200 billion yen or less. So it is not intended here what to return including subordinated debt. We want to reduce interest-bearing debt to less than 200 billion yen. We additionally assume that at that level, the debt-to-equity ratio will also be below 1. I understand. Does that mean that that will be one of the benchmarks for resumption of dividend in the foreseeable future? If we say that it is a benchmark, analysts will write the timing of the resumption of dividends based on it. So I would like to refrain from saying that. Naturally, the amount of debt would be one indicator for considering the timing of resumption of dividends. But we would also consider other factors such as how stable the business situation is. I hope you understand that this is by no means the only indicator. I understand. Since Mr. Kimura is an expert, I dare to ask this next question. After various failures with anti-cancer drugs in the past, you are now in a situation where two drugs are about to move forward. Has anything changed significantly in your company's R&D, especially in drug discovery during this process? After all, I think that the development of anti-cancer drugs is still a process that requires very detailed exploration. Is there some kind of learning effect that is visible and shared within the company? You mentioned earlier that you have changed the structure. Does that mean that research and development are now integrated? It is very difficult to answer in what way, to put it crudely. In the past, we have run as fast as we could to get a big hit. Now, as written, we are thoroughly considering the results of individual subjects or individual trials in detail and thinking scientifically with experts without wishful interpretation. In particular, Enzomenef, one of the two cancer products, is fortunately or unfortunately a target with which several companies are competing. It is by no means the wrong target. In looking at the data objectively, there is data from industry people and clinical doctors, and of course there are websites where multiple agents are compared under clinical physician, and such information can be taken into account. Regarding new research, we are working with GSK on one of the current combination studies. The evaluation is being conducted not only by our own eyes, but also the eyes of experts from other companies. The changes of individual subjects are also naturally checked. There is no way to explain it other than that we are doing it in such a pragmatic way. I can tell you that replacing the leadership of cancer development has had a very significant impact on the culture and other aspects of the company. I apologize that all of this information is qualitative. I understand. I have the impression that it has tightened up because you are doing it on a tight budget. I hope you will be able to achieve results. One last question. Is the Medicare percentage for my family zero? I have heard that Medicare patients do not use myfembri very often. Mr. Nakagawa, do you have anything to add? I think you are right. Medicare is for patients 65 years of age and older, and patients with endometriosis and uterine fibroids, which are the indications for myfembri, are much younger. So while it is not zero, you can assume that the percentage is close to zero. Thank you. Wakao from JP Morgan for the second time. I would like to ask questions. Please tell us about your development products. First, Enzominib and Nuvicertib are included in the list of drugs with which you have external partnership. By partnership in Nuvicertib, do you mean the partnership with GSK? Or do you mean that you will sign a contract with GSK as the development progresses? First of all, one of the two combination studies we are running with the research is with Momelotinib, which we are doing with GSK. We are working with GSK on this. Naturally, GSK will see the data very quickly, but there will be no obligation about future development policies and partnership strategies. Naturally, partnering with GSK is one possibility but it is not limited to GSK. I understand. Thank you very much. Another question is about IPS. I was under the impression that it was proven to be safe after all. On the other hand, it seems difficult to say that it is highly effective because of the small number of cases compared to existing drugs. I would like to ask what kind of IPS positioning you are aiming for. Also, what is the current status of this in Japan? I believe that you will now apply for approval with conditions and time limits. Have there been no prior consultation with the MHLW and PMDA? Let me confirm this point. I will answer your second question first. Strictly saying, a Sakigake comprehensive evaluation consultation is currently underway. You can find out what a Sakigake comprehensive evaluation consultation is, but this is a sort of pre-screening process. After that is done, the application is submitted, and if all goes well, it will be approved. The sakigake designation system has a time clock for six months, so if you can get your application approved sooner than usual. On the other hand, we will communicate with them in advance through a sakigake comprehensive evaluation consultation. Although this is not a review, a procedural step similar to a review will proceed. Regarding the position of regenerative medicine for Parkinson's disease, all existing drugs or therapies for Parkinson's disease lose their effectiveness as the patient dopamine nerves degenerate or drop out. All of them are. Ultimately, the patient suffers from a very difficult situation. Cell transplantation is, in principle, the process of transplanting another dopaminergic nerve when it is dying or has died. As the patient's symptoms are alleviated, the medication becomes more effective again. The description in the Nature article is also very technical and difficult to follow. The patient's symptoms improve significantly when the drug is not present, and at the same time the patient's symptoms improve again when the drug is added. does not cure everything but it varies from patient to patient but this is a new drug a new drug this is a new treatment option offering total totally different in nature once administered the effect lasts for years the trial has been following patients for two years and the drug has been effective for patients for the entire two years Thank you very much. I thought that I understood the concept itself, but I was under the impression that it would not end up replacing it because its effectiveness was not necessarily high, and I understood it very well. After all, has the publication in Nature this time advanced the steps towards applying for the Sakigake comprehensive evaluation? I think it was a tailwind in the sense that many people became interested in it after it was published in Nature, while expectations were very high, including from patients. However, the review itself does not review Nature papers. Nature's data is data we have known for more than a year, and I believe a rigorous review will proceed based on it. Yes, thank you. I honestly wasn't sure if there are any changes in the consultation since the data itself seems to be the same all the time. Steadily, you are advancing various discussions regardless of nature, I believe. Yes, that's right. However, because the approval was conditional and time limited, the Japanese PMDA was highly criticized by foreign regulatory authorities and professional journals, particularly Nature. So Nature was the spearhead of the criticism. I imagine that it must have been psychologically very significant for the authorities to have that nature journal look at the results of the other japanese trial besides ours and say something like although the number of cases is insufficient it shows one scientific suggestion i understand thank you very much that is all This concludes the presentation of Sumitomo Pharma's FY2024 Financial Results and Reboot 2027, Reboot for a Strong Sumitomo Pharma. Thank you very much for your participation today.