Takeda Pharmaceutical Co Ltd (TAK) 2007 Q2 法說會逐字稿

Good morning, everyone, and welcome to the conference call of the first half in fiscal 2006 of the Takeda Pharmaceutical Company Limited. The conference call today is based on presentation materials available at the Company's website. And we may suggest that you visit our website to see the presentation materials on the display, if you don't have yet the printed copies in your hand. The conference call is scheduled to start at 10.30am Japan Standard Time. During the presentation from the Company, all participant lines are placed on listen mode only. And the question and answer session will be held after the presentation.

Please note that this telephone conference contains certain forward-looking statements and other projected results which involve known and unknown risks, delays, uncertainties and other factors not under the Company's control. This may cause actual results, performance or achievements of the Company to be materially different from the results, performance or other expectations implied by these projections.

Such factors include economic and market conditions, political events, investor sentiment, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuations, competitive conditions and size, number and timing of transactions. Thank you.

[Interpreted]. [Inaudible] Takeda Pharmaceuticals and I hope you will be able to refer to the materials in your hand. And now we will be talking about all of the results and the achievements of the Company [inaudible] performance and what is going to be happening for this fiscal year.

And from this presentation, to all of the overseas investors, we will providing those presentations access over the Internet. And at the final end of the Q&A, if there is any questions, I would like to get all of your questions from the overseas investors as well over the Internet. And we will be going through an hour and a half of this presentation, until 12 o'clock for this particular session.

And now I would like to introduce all of the participants from this time. And we have our President, Hasegawa. And we have Mr. Kitazawa, the Managing Director and General Manager of the Strategic Product Planning. And we have Mr. Ogata, the General Manager of the Research Division. And we have Mr. Miyamoto from the Pharmaceutical Development Division. And on this side, we have Mr. Yamanaka. We also have Mr. Takahara, General Manager of the Finance and Accounting. And also my name is Yoshida, the General Manager of the Corporate Communications department.

And now we would like to go into the management policy presentation from Mr. Hasegawa.

[Interpreted]. Good morning, everyone. Thank you very much for [a lot of the] attendance for today. And the other day we had announced the mid-term result and we have been able to get a lot of detailed analysis from the analysts. And we have received a lot of comments and we appreciate all of those.

With regard to how we are going to be proceeding with today's presentation, with regard to the figures of the settlements, we will have it explained from Mr. Takahara of the Finance Accounting Division. And pipeline progress update is going to be presented from Mr. Kitazawa, the Managing Director and the General Manager of the Strategic Product Planning department. And from my side, I would like to be able to talk about the mid-term strategy and what kind of [engagements] we had, that was announced in May of this year.

And with regard to the first part, I won't say it's a waste of time but we just are going to be recapping the positioning of what we are going to be engaged in. And with regard to the '06 mid-term plan, this is we will be enriching the pipeline, how we are going to do it for the leap into the future and all of the leap is dependent upon the content of this. And we will be mentioning about the content of that later.

And now, with regard to this mid-term management plan, when this was announced -- I have mentioned this already. And as it's mentioned here, all of the figures is how it is mentioned. And where we have mentioned this mid-term management plan, on top of that we have mentioned that we would like to be able to get our sales of the in-house pharmaceuticals to JPY1.4 trillion. We would like to get it to JPY2 trillion, JPY2 trillion at 2016 and -- sorry, 2015. And for '06 plan, [JPY1.18] trillion was the forecast in the '06 plan but, at the moment, we will be in the -- we will in the beginning have the JPY1.2 trillion.

And so from this kind of a perspective, to 2010 we are getting very close to the JPY1.4 trillion that was targeted for FY 2010. But our actual ultimate target is how we will be able to realize that JPY2 trillion by 2015 and how we will be to enrich the pipeline during this fiscal year is what that result is dependent on.

Then also with regard to what was announced for the results, there has been the taxation penalty that we had to pay out. Due to that -- and therefore the net profit is a bit negative on an annual basis as well. But with regard to the dividend, it will be JPY120 on an annual basis and JPY60 on a half-year basis. We are planning on realizing that.

And 33% or more of the payout ratio is going to be realized then with regard to the share buybacks. We have been conducting that from May on but it was difficult to buy out all of the shares that we had anticipated. And regarding that, we hoped that we wanted to buy out in an expedited manner as we had anticipated. But the market situation that we had anticipated for the share buyback was not aligned. And we are not trying to not buy as much as possible. And therefore we would like to be able to conduct the share buybacks in the way that we would like to be able to achieve.

And going on to the execution of the mid-term management plan, it's a big trend that is described on this slide for this division. And we would hope that we would be able to grow towards a world-class pharmaceutical company with Japanese origin based on Takeda-ism. And the major pillar is going to be the enhancement of the pipeline and securing the human resources. And we hope that we will be able to strengthen the presence in which we are weak at the moment.

And I have been in this presidency over three years. And with regard to the management challenges or what the management should do or what the Company as an overall should do needs to be found. It's not difficult to find the core. If we are cool, and if we will be able to look at the Company in an objective way, we will be able to find where the weakness is and we will be able to find out where we need to be complemented. And unless we find it, I don't think there is a [complication] to be in the management seat.

But the issue is it's difficult to put that into action. And with regard to all of the reforms, if it is an in-house reform we will be able to maintain our pace in order to execute the in-house reforms. But if it is going to be a major alliance or an acquisition, there is another company involved in that. And because of that, we would have to be able to build a good human relationship and a trust relationship. Unless that process is done, it's difficult to make it happen. And in that sense the execution itself takes time. And that's why it [inaudible].

And as described at the bottom, although having said this, as a Japanese company I hope that we will be able to leverage the strength of a Japanese company. But we are not trying to push the Japanese way to the overseas. But at the moment, the strategy planning is done at TPC, the Japanese headquarter of Takeda, for the global strategies. And the local strategies depend upon the local areas. But while we are going through this strategy generation, what we think is that the European [inaudible] strategy is very bold and very speedy in the decision-making. And against that, even if we try to do that in the same way, it is very difficult to conduct that in the same way.

And of course, it's not that we cannot make any decisions but everybody needs to understand it. And we have to be able to create a structure in which it can be implemented in such a way. And in that sense, there is our culture and there's the mentality of the Japanese, so it is very difficult to do that.

However, on the flip side, what we truly feel on our side is that if we have a long-term intricate plan and if we execute it in a proper way, Japanese is good at doing that. The target is there, objective is there and we will be able to show the path towards that we will be able to [sustainably] achieve that. And I believe Japanese is very strong in that. So I hope that we will be able to fully leverage on that kind of objective, [inaudible] the Japanese.

And decision-making boldness and the speediness in decision making is always double -- there is always a double -- both sides to it on the negative side. And therefore the European companies, if they are going to be put in bold action in a speedy way, sometimes the -- one thing happens and trust is lost.

So when I am saying that everything is good about the European way and when I am saying that the Japanese way is always a good way, what we need to think is that we will have to be able to pursue the business model that was built by all of the individual companies. And we will have to grow based on that and that is the only way to do it.

And at Takeda Pharmaceuticals we will have the vision to realize the vision of the Group towards a world-class pharmaceutical company with Japanese origin based on Takeda-ism. And our basic strategy is to have an organic growth. But there might be a weakness in which it's difficult to catch up on a short-term basis, [as said].

And we are going to be implementing the strategy in buying time with money. For example, if there is going to be [LNX] technology that's needed for the research and the R&D new drug creation, if [that is not good], then we will be acquiring the R&D engine.

And also with regard to the regional presence, we will need to correct that in a short-term manner then those are the things that we would have to be putting into consideration. But strictly we will hope that we will be able to have an organic growth. And as a complementary basis, we will buying time with money. So those are some of the ideas that we have.

And going on to the pipeline enrichment for the research, we will have to be able to increase the productivity of the research that we have. And with regard to the research strategies, we would have to be able to efficiently manage the researchers. And with that recognition that we will have to be able to engage in the productivity and efficiency [to do it], and research management reform, and we would have to be able to build a management system that is very resilient.

And 2011 to 2015, we hope that we will be able to produce five items. And from 2015 on, we hope that we will be able to launch the new drugs, one new drug on an annual basis, and also that we will have to be able to improve the in-house research productivity. We will have to acquire the R&D [engine] requirement.

I hope we will be able to promote the alliances specifically. We won't go into the details but we had listed all of the teams and we had focused the teams. And we have prioritized and also we have been able to -- we -- against the average of the industry, the ratio of the validated against the non-validated was mismatched. And therefore, as I said, we hope that we have been able to modify it so that it is going to be closer to the industrial standard.

And also we hope that we will be able to acquire the [target] from an external source. And we hope that we will be able to acquire the LNX technology from an external source. So those are the areas that we would hope that we'll be able to do.

And also we would like to talk about the R&D engine. After the -- as it's mentioned in the middle, what is going to be -- hope that we will be able to create the -- we will be able to create -- we hope that we will be able to maximize the creation of the regional [inaudible]. And last year in March, after we had been able to buy out research companies in the United States, it has been difficult to find new source.

But with regard to the antibodies, not just us but all of the rest of the pharmaceutical companies have been mentioning about the antibodies. And there has been a lot of competition in the Japanese market. But from Kirin we have been able to get a human antibody. And also we have been able to go to some of the target implementations from XOMA and from Galaxy we have been able to gain some of the antibodies. And also we have been able to get the antibody creation alliance from XOMA. So we have been proceeding but this is not enough. So I hope that we will be able to go through further research and development of the antibody field.

And also with regard to the clinical models and also with regard to the R&D engine requirements, there have been some studies going on to see what kind of acquisitions we will be able to do. And with regard to the alliance with regard to business development, finally, last year in November, we have been able to create the business development division. And the acquisition function and the licensing function have been integrated. So thus, we will be able to pour in the good [team] resources and that kind of an organization has been created.

However, a global structure has not been created yet. But finally we have been able to create a Global One team as a global team. And through TPNA, the business development group has been created. And the -- our BD group, they are going to become the ears and eyes of TPNA. They are fulfilling that role.

And also, with regard to the European market, as we have announced this spring a European sales and marketing company. Without having this company, then if each company were to do their business development that is quite inefficient. So this established company is one we are currently focusing on. But it seems that we are very behind some of the current initial schedule. But recently we have been able to recruit the general manager of this sales and marketing company. We have signed a contract with him. So I believe that we will be able to have a formal announcement about this establishment of the company and he is on board.

So after [inaudible] comes into our Company, then we are going to create this team anew. So with that what we would like to create is a global one team structure. And also about this in-licensing alliance activity progress, as we have shown on this slide, in-licensing products and protocol development from the '04 April and also what happened are listed on here.

And for the joint research, the result of that is mentioned in the left half of this slide. This is quite natural but this is not a sufficient achievement. And every day we are just trying to discover new things and also we are doing the negotiations on an everyday basis.

And it is true that, with all the competitors looking for the same thing, the competition will become very fierce and the price will go up. So we are currently suffering from such a kind of dilemma. But having said, we need to overcome that, otherwise we won't be able to compete in this competition environment. So with the development centering around this department, we are going to proactively acquire the products or to take forward a major alliance, or sometimes we may go ahead and think about the merger and acquisition of the company. That would be our plan.

And the other one, the other pillar, is securing of human resources in our Company. And to nurture those people who will be able to do the global management, we are very behind in that. And after I became President, the internal global leadership program that takes a year to open this program, but it's already [unified] and the young executives have started this program.

And beside that, we are making a real global program together with Insead, so that our customized program is going to be launched. And all the other major pharmaceutical companies are doing this kind of a program but this is our first time doing such a thing. So we are going to launch this program next year.

And to develop the actual practical operations side, basic product strategy building, and doing that not only the division head, each head of the function from the domestic market, but TPA, Takeda Pharmaceutical North America's general manager. And instead of the top of the sales and marketing department people, the SG&D and the function head of the [TPGRD]. But to have them on board and have this operation committee is what we have created. And as necessary basis we have this meeting. And ultimately we are going to create it as a global strategy and have our decision making on that. Such a committee was created and this committee is actually working right now.

And furthermore, with regard to the alliance, there is an alliance committee, strategy committee. This is an alliance review committee and this is a virtual organization. But in this committee we will -- not only Japanese but global development and marketing people's opinion will be gathered together here to look for the alliance opportunities.

And furthermore, and thinking ahead in the future, the North American local company and also in this European sales and marketing department in the future TPC, Takeda Pharmaceutical Company, to recruit those people who will be able to work in TPC Japan. To find out those kind of people and we would like to send them over to Japan and have them learn about the Takeda-ism. And then, after that, we will send them back to the other regions of the Company. That's the kind of thing that we should be thinking. So that kind of initiative is just started but we would like to further deepen this kind of effort.

And lastly, about the improvement of the presence where we are weaker. As you can see from this pie chart, the global market -- according to IMS data, the global market is like that on the left-hand side. And by compare with that, our Company is imbalanced. Because our Company is originated from Japan, it is quite inevitable that our market is -- our sales are coming from -- one-third of the sales is coming from Japan and 50% from North America and Europe is 14% and BRICS companies are less than 1%. So it is quite trivial. So that kind of regional presence is currently what Takeda is having at the moment.

And of course that will be reflected on our market share in each geography. And TPNA and TAP, if we add them together, then totally we have a 2.7% market share in North American market. But our mid-term target, that is 3% in the -- 3% in each geographic market, probably we will be able to achieve that. The [short-term] progress is currently suffering, so we're still at 2.7% but [inaudible] is increasing drastically. So probably it is not difficult for us to actually achieve our 3% target for North American market.

On the other hand Japanese market, as you know, that ethical products is at 6%. And including [rated] company sales, we are targeting for 8%. But in case of the European market, if we take a look at that, the European market, we only have 1% market share. So we are far behind from 3% mark. And if we were just to achieve that in organic growth, that will be a very difficult thing to do.

So from that perspective, currently we are having two strategies. And those -- if we were to do a major alliance or to M&A another company, that is no guarantee for us to do that. So as a back-up contingency, we are going to create a sales and marketing company in Europe and put our strategic staff in there. And if it is necessary, we would create our presence in EEC companies. Or we might think of [purchasing a different] infrastructure by purchasing a company in Europe.

But ideally, if we could find an appropriate company which we would like to acquire, and if we could set up alliance with them, that would be the best scenario for us. But we need to pursue both organic growth as well as with M&A and alliance. But we don't know by when we will be able to do that but currently we are looking for the various [venues] to achieve this target. But in what way we are going to achieve this target is something that we need to -- we need some time to actually see it. That's my candid opinion.

And lastly, about Takeda-ism. It's maybe quite familiar to you already. So we are going to see our global business expanding going forward. But to build that organization, we need [inaudible] some people. We need to have a kind of a one principle. Otherwise, if we look -- see a very difficult situation, then we would be spread around and we cannot be one company. So Takeda-ism for us to expand our Company as the highest principle of the management, I believe that our employees have this Takeda-ism concept in their mind always. We would like to try that all the management side will have this Takeda-ism concept on their mind when they are doing the operation of the management.

Moving on to the overview of performance, Mr. Takahara is going to be mentioning it.

[Interpreted]. My name is Takahara and now I would like to talk about the first half consolidated result of FY '06. Then we will talk about the forecast of the annual result for FY '06.

And the '06 first half consolidated results overview is that if you can take a look at the red portions, the sales was JPY642.4b, which is JPY42.6b over last year or 7.1%. Operating profit was JPY236.2b, an increase over last year by JPY21b, 9.7%. And recurring profit was JPY299b, an increase of JPY39.6b, 15.3% increase. And the net profit for the first half was JPY159.1b, a decrease of JPY22.1b or 12.2%.

And with regard to the -- in addition to the JPY39.6b increase in the recurring profit, the extraordinary profit of JPY38.3b was assimilated in the first half. This led to a -- in the mid-term net profit before tax there has been a significant increase. However, regarding the transaction with TAP, a U.S. joint venture company in which we have 50% stake, as you know, at the end of June we went through a course of action [inaudible] on [Transfer Pricing] Taxation. And with regard to this additional tax penalty of JPY57.1b, which is included in the PL for this fiscal year, so the mid-term net profit decreased year-on-year.

And with regard to R&D expense, which was JPY96.2b, an increase of JPY13.9b or an increase by 16.9%.

And the next slide is going to be comparing the first half result against the recently announced forecast figures. And the sales result was JPY37.4b more. And the recurring profit was JPY54b more than the forecast. But on the flip side, the net profit was below the forecast by JPY15.9b, due to the impact from the additional tax penalty.

And there are a couple of factors for this. And the first factor was the Actos sales for TPNA was far more than what was forecasted. And the second factor was the currency. The currency level used for the forecast was JPY110 against the dollar and JPY130 against the euro. But the reality was [far] to the yen. And the -- and in this -- the average currency rate during the first half of the term was JPY115 against the dollar and JPY146 against the euro.

The third factor was the interest hike and because of that the financial income was more than what was anticipated. And because of these factors, the recurring profit was 22.1% more than what was anticipated. But it was not able to offset the additional tax penalty influence. So in the end the net profit was below the forecasted figure by JPY15.9b, or 9.1%.

Next for the highlights of the results. On the sales side the Takeda Food Products, beverage and food business, was disposed, incurring a negative impact of JPY18.2b. But this was absorbed by an increase in the prescription pharmaceutical sales centered on Actos sales in the U.S. of TPNA, which led to an increase of JPY42.6b.

And with regard to R&D expense, it increased JPY13.9b from last year, due to the progress in the development activities and promotion of introduction and alliance activities. And on top of that, the marketing expense related to new products increased in TPNA. But these were absorbed by an increase in gross profits due to sales growth. So the operating profit increased JPY21b.

Furthermore, an increase in the financial profit due to the interest hike and an increase in the equity [inaudible] profit led by TAP in the United States caused an increase in the recurring profits by JPY39.6b.

Also during the first half, there was an extraordinary profit of JPY38.3b. So the net profit before tax increased year-on-year by JPY45.3b. And so this has led to a JPY45.3b on profit before tax. However, the additional taxation penalty of JPY57.1b caused by the corrective actions taken for Transfer Pricing Taxation was included in this term's PL, so the net profit for the first half decreased by JPY22.1b.

And now I would like to go to into the breakdown of the sales by business side. Regarding the domestic prescription pharmaceuticals or the ethical drugs, [inaudible] price reduction occurred in April this year and the [inaudible] drugs for the peptic ulcer and diabetes were launched. But main products like Actos, Blopress and Takepron grew. This led to an increase of JPY13.5b from last year.

And the situation by product is as follows. Actos grew JPY5.1b year on year, Blopress JPY2.9b, Takepron JPY1.3b, Leuplin JPY0.9b increase over last year.

And for the overseas prescription pharmaceuticals there was a currency impact of JPY14b, which was an increase. And therefore there was a JPY47.5b increase from last year. And in the United states, Actos from TPNA [saw a] significant increase. And other than that, in Europe, Actos and other main products increased. So the total increase in the overseas market was 18.5%.

In the other business areas, this year in April, because of the beverage and food business disposal, which had a negative impact of JPY19.1b in the others section. And if we look [at the result] of these on all company basis, the sales increased by JPY42.6b.

And now I would like to explain about the sales breakdown or the increased [inaudible] situation for our U.S. sales subsidiary, TPNA. The sales of Actos, our main product, was influenced by the growth of the diabetes drug -- oral drugs marketed [inaudible] Medicare Part B. And also Actoplus Met, which was launched in November last year, contributed, ending up as a $312m increase at $1.259b. And also the Rozerem, which was launched in September last year, amounted to $32m. And also there was Amitiza that was newly launched in April. The sales of that was $13m. And these contributed to the increase in sales for TPNA.

And also with regard to the co-promotion revenue from Kos, it increased $16m from last year. And there has been a co-promotion that was started in July as a [triple] launch, and which was $9m, which also contributed to the increase. And as a result of this, TPNA sales overall was $1.259b, an increase of $383m or a 43.7% increase, year-on-year.

And on a yen basis, there is a positive increase for JPY7.4b due to TPNA, ending up in an increase over last year of JPY49.4b or 51.5%. And this has -- this was a major factor in order to contribute to the increase on this basis.

And also continuing on to the gross [inaudible] ratio trend by business ares. The breakdown of JPY642.4b in sales business is from the ethical drug is JPY561.9b, healthcare business JPY30b, and also for the others JPY50.5b. And due to the ethical drug increase, the ratio of the medication business has increased, the healthcare business as well, to the overall sales went up 3.7 points from last year, which amounts to 92.1% of the overall sales. And the gross margin for the Company went up 2.0 points, at 78.4%.

And this was caused by the increase in sales of the ethical drugs, which is high profit margin. And the beverage and food business disposal has impacted as well, because these have lower gross margin.

And next I would like to go into the global sales of our in-house prescription pharmaceuticals or the ethical drugs, including the [inaudible] drugs. Sales from in-house ethical drugs were JPY611.5b, an increase of JPY63.9b or 11.7% year on year.

And if we were to break this down by region, there was -- United States was JPY52.4b increase. And this included the currency gain of approximately JPY16b. And also, in Japan, the JPY7.6b or 4.1% in Japan and JPY1.9b in Europe, 2.4%, and JPY2.1b in Asia. So whatever the region it might be, there's an increase in all of the regions.

And next for these ethical -- in-house ethical drugs, our major products. For international strategic products, I'm going to explain about with regard to the sales. First is Lansoprazole, where overall our revenue is JPY196.8b. That is a JPY3.6b increase or a 1.9% increase. And a major [inaudible] is that U.S. revenue has increased by JPY7.1b, that is 5.1%, due to the yen depreciation against dollar. And with respect to European market, centering around the license fee and exports, JPY5.1b decrease has been seen. And in case of Japanese, we are seeing JPY1.2b increase of revenues.

Next is Leuprorelin. Global revenue is JPY91.4b and that is a JPY100m increase, 0.7% increase from previous year. And America TAP company sees a JPY700m decrease. But in Japan JPY900m increase and Europe and Asia shows JPY200m each increase.

Next is Actos. Global revenue is JPY161.4b, a JPY49.9b increase from previous year; that is 24.8%. And TPNA JPY41b; that is an increase of 44.5%. And in Japan JPY5.1b and Europe JPY3.2b increase. So each of those companies sees 40% growth.

And last is Candesartan. The global revenue is JPY100.9b and that is a JPY7.7b increase from previous year; that's 8.3%. In Japan JPY2.9b increase in revenue and overseas market we see a JPY4.8b increase in revenue. So the total of those four strategic products, global sales is JPY550.5b. That is a JPY61.8b increase from previous year; that is 12.6% increase.

And next is -- let me explain about the reasons why we are seeing the increase in operating profit. The revenue sees a JPY42.6b increase. But the high gross margin products, that is ethical drugs, has seen an increase in revenue. And also, by transferring the low gross margin division, that is beverage and food, that impacted the cost of sales by 2.5% decrease. And with that, we see the increase in gross profit of JPY45.1b and the gross margin profit is improved by 2.0 points to be 78.4%.

On the other hand, for R&D costs [inaudible] treatment drug TAK-745 and type 2 diabetes drug, SYR-322, have gone through progress in the U.S. for development activities. And to obtain exclusive development and sales rights in overseas markets for renal anemia and cancerous drug Hematide, we paid upfront money of JPY12.2b to Affimax. Due to this, R&D costs increased by JPY13.9b, 15.5% increase from previous year. SG&A has been increased in sales expenses for Rozerem, a sleeping pill launched last year by TPNA as a [cross mix] for type 2 diabetes and Amitiza for chronic idiopathic [cossiveness].

In total, SG&A increased by JPY10.2b increase from previous year. Increase in SG&A and marketing expense were absorbed by increase in gross profit. Thus, operating profit was JPY21.0b increase from previous year.

And for the equity and earnings of affiliates has seen an increase of JPY6.6b. And out of that, TAP's portion is JPY5.1b increase. And other non-operating profit centering around TAH holding company, our financial-related profits have increased by JPY11.4b to become a JPY12b increase. And for the equity and earnings of affiliated [added on], the non-operating profit as a whole sees an increase of JPY18.6b.

And this non-operating profit improvement added by the -- [has added to] the operating profit increase of JPY21b, recurring profit is JPY39.6b, 15.3% increase [to the] increase. And so the extraordinary profit increase was JPY5.7b and the -- prior to the adjustment to the taxes, the net profit is JPY45.3b increase. However, due to the transfer pricing taxes, we have paid the additional tax of JPY57.1b, so our net profit was down minus JPY22.1b.

And for the total assets, JPY2,951.2b, that has [gone down] by JPY91.1b from previous year. And net assets is JPY2,337.8b, JPY29.4b increase. And this is because, due to the changes in accounting standards, we have added a capital portion and a minority shareholder portion to become this net profit. And from the previous fiscal year end, the net asset was [JPY2,295b]. And from this amount we see the JPY7.8b decrease.

And in this first half, we have returned to shareholders during the very flexible share buyback. And our shareholders' equity ratio is 2.0% increase and becomes 79.2%. And cash and cash equivalents balance is JPY1,646.1b and from the previous fiscal year, JPY19.9b increase.

And next is the projection of the 2006 year term. The revenues from previous year, JPY87.8b, 7.2% increase to become JPY1,300b. And operating profit JPY22.2b increase to become JPY425b. And recurring profit increase by JPY54.6b to become JPY540b. And net profit is a minus of JPY3.2b to become JPY310b.

For the R&D costs, from the previous year we are seeing a JPY45.4b increase to become JPY215b. And for the revenues projection, the Takeda Food Products, beverage and food, business was transferred to the other company. And this impacted about JPY325b. And with that there is a decreased impact from the decrease of [inaudible] happened April this year. However, our mainstay products in the United States and domestic market growth have absorbed these minuses and we are expecting to see a JPY87.8b increase from the previous year.

And per-product basis in America, Actos, on a year basis we are saying that it will expand its sales by 20% also. And in domestic market, Actos will see 50% or so growth and progress and Takepron will see a 5% or so growth. It's what we are projecting here.

And for the assumptions for 2006 projection, our assumption of the ForEx rate is dollar is JPY115 and euro is JPY145. Therefore, in this fiscal year's annualized ForEx rate, dollar and euro, we expect that yen to be depreciated from previous years. So the total ForEx impact will be [JPY130b] increase.

And by the way, in the latter half of the year the sensitivity of the revenue to the changes of JPY1 [inaudible], in dollar will be JPY1.6b and euro it will be around JPY0.4b. And the sensitivity to net profit for dollar JPY700m and euro will be JPY40m, is what we are presuming here.

And next is the projection for the next quarter. The progress in the development activities and in-licensing our activities pushed our R&D costs by JPY45.4b and TPNA's new drug-related expense increase would push up the SG&A total is what we are seeing here. But this we are going to absorb that by the increase of cost by gross profit increase in the ethical drug area. So we are going to expect the operating profit of JPY22.2b increase.

And in addition to this operating profit, there is an increase in interest received due to increase in interest rates. So we are projecting our recurring profit is being increased by JPY54.6b. However, this would not absorb the additional tax of JPY57.1b. So our net profit will be a minus of JPY3.2b decrease.

And as the initial projection, we have anticipated that the growth of ethical drug and also again depreciating ForEx. And the revenue has been upgraded, up revised by JPY70b. And the ForEx impact will be about JPY29b. And with this modification, gross margin profit will increase and that will absorb our increasing R&D costs. And operating profit is JPY35b and recurring profit is JPY54b, upwardly revised. But that would not absorb the impact of the additional cost of the net profit and that will be a minus of JPY10b.

And now I would like to have Mr. Kitazawa from the Strategic Product Planning department talk about the pipeline.

[Interpreted]. My name is Kitazawa. And from my side I will be talking about the current products of our pipeline and three related topics regarding those as well, at the end of my presentation.

As you know, with regard to our core therapeutic areas - lifestyle-related diseases, oncology and urology, CNS and finally gastroenterology. In the four areas, we are focusing on it, so we would like to be able to talk about those four and introduce them.

Then first, let's start with Franchise One. Lifestyle-related diseases is the most important area that is going to be supporting our Company now and also into the future. And we started during the first fiscal year Actos/TAK-536 combination drug, phase III started in the United States. And also Actos family, Actos/Metformin combination drug, a member of the Actos family, was approved in Europe.

A further Actos/SU combination drug was approved in the United States. And also towards the approval there was a positive opinion adopted in Europe as well. And also, going on into the cardiovasculars, this year TAK-491, which is the hypertension drug, phase II has started in Europe in the first quarter. And also with regard to TAK-583, phase II is going to be starting in Europe with regard to the development of the neurological [inaudible], also the diabetes and neurology disorders.

And also TAK-128, that was added. That will be received by the [inaudible]. In phase II we have not been able to confirm a good enough efficacy and therefore the development has been suspended or stopped. And also, at the moment, we are conducting a study for TAK-475. And for that, next week in the United States, HA convention will report a phase II that has already been conducted. It's going to be announced in Japan. However, because of the [AJ] areas, the previous data introduction before the epidemic circle is prohibited. And because of that, unfortunately, we will not be able to disclose any information any further than this.

And going on to the oncology and urology area, and this is the area that we are focusing on next to the Franchise One. From Affimax, as mentioned, we have been able to get Hematide, which is a drug for the anemia with pain and [in February]. And the development itself was introduced in Japan in February, followed by the global development of sales rights in June, and it is in phase II at the moment.

And, as you know, we are putting a lot of emphasis in the diabetics and cardiovascular areas. And as the disease proceeds, it tends to go into the renal diseases for the patients. And also, for the cancer patients as well, the chemotherapy and by cancer itself it will cause anemia. And this drug in the [CVS] area or to the oncology area under Franchise One, this product, this drug is going to be fitting into that kind of focus area. And by this global agreement, we will be able to conduct the development on a unilateral manner with regard to this drug. And therefore, in the future we will be able to conduct an ever more efficient development in the future, so that we will be able to get this into the market in an expedited manner.

And also we have been able to get the EMD72000 that was introduced, which is an anti [inaudible] receptor blocker which was gained from [GARAA] which started phase II in Japan.

Then also, from Bionumerics, we have been able to get the cancer -- the sytem drug Salicept. And for that, Bionumerics had done a phase III in Europe and unfortunately not enough efficacy was seen. And because of that, we had suspended or had terminated the development for that.

And going on to Franchise Three, this is the CNS area. As you know, last year in September, Rozerem was approved in the United States. But in Japan and also in Europe it's still going through an additional phase III. So we hope that we will be able to proceed with this, so that we will be able to get this into approval processes in Europe as well. And in the first half, in this area, there was no upgrade in the stages that were for Rozerem centered around Europe -- sorry, United States. I hope that we will be able to put in additional value into it.

And finally, with regard to the gastrointestinal area, in a major area, this is with regard to [Tachicron], we have been going through a couple of efficacy additions in the domestic market, one in the non-erosive gastro-esophageal reflux and the other one is the injection type. For those people who are very severely suffering from the disease of gastrointestinal, we are having this approval of injectional formulation.

And as of the [inaudible] a secondary [inaudible] application, we have applied for a new application for the drug. So those are the progress in the pipeline.

Today, when we are reading your analysts' report, it seems as if that our Company's pipeline is not good enough is what we often see in your reports. With the pipeline that we have explained, we do not regard that those are sufficient enough [or are basic quality]. In other words, our in-house development pipeline enhancement and acceleration of that. That's the ones in the phase I clinical tests or the pre-clinical testing drugs we would like to upgrade them to the next stage.

Or the second thing is to enhance our alliance. As the President has explained earlier, the business development and structure enhancement is what we are going to do. And so that globally to bring in the best fit is what are the activities that we are doing.

And a third one is so-called Life Cycle Management, in other words existing products or the to-be products. We -- to [inaudible] drugs, we may add the efficacy or indication is what we are currently trying to do.

And this is a recent topic. As you already know, in U.S. the Berkeley, California State from XOMA Limited, the monoclonal or antibody. With regard to the development and production and discovery, we have concluded the contract at the beginning of November. And with this, XOMA company is [inaudible] library and they are going to use their antibody optimization technology. And they are going to generate antibodies targeting to the several targets that Takeda has selected.

And with that, we would like to start the research of it and ultimately we will do the clinical testing and also we will be in charge of selling those antibodies coming out from this joint research. This antibody is a state of the art drug and XOMA is one pillar of that in this technology. So by utilizing those external technologies, we would like to enhance our antibody development and research area.

And the second one is XEN401, the analgesic treatment. With regard to that, the Canadian company called Xenon Pharmaceuticals, from this company this September we have in-licensed drugs from them. And with regard to this, that currently the territory is Japan and a few other Asian countries. But XEN401 it can be taken orally and, comparing to opioid and cox 2, this XEN has a totally different indication. And Xenon has a unique idea to come up with XEN401. So there are target areas, including their oncology area, there is a possibility that this XEN401 will be effective in other various areas too -- various areas as well. So we would like to develop our [status] here.

And last we can take is Case-J. With regard to the inter-clinical testing, in the International Society of Hypertension it was reported by Tokyo University [inaudible] and Joint Center have conducted this test actually. And the result of that was announced in this International Society of Hypertension. And Case-J trial is a comparison of -- compared to most-used anti-angiotension [inaudible] antagonists therapy in Japan, as hypertension therapeutic drug called Blopress, Candesartan and a [inaudible] agonist called Amlodipine.

This was the first large-scale clinical test carried out in Japan, using about 4,700 cases of Japanese hypertension patients. The test was carried out for more than three years. As a result of that, the major -- the relation item, CV event, the total occurrence rate and the success rate, from that perspective there are no differences between two drugs. However, calcium antagonists, it has efficacy at the very beginning of applying this drug and on the other hand drug Blopress we see a significant improvement in the treatment.

So we have this opinion that this is quite effective in offset and for this [inaudible]. And also, with mortality compared with Amlodipine, as it's said here that it reduces the rate of all mortality by 15%, especially for those patients which have a BMI of more than 27.5% obese patients. And compared with Amlodipine, their risk was reduced by 49%.

And lastly, to the new-onset diabetes, the Blopress compared with Amlodipine. New onset was reduced by 36%. And furthermore, as the obesity level goes up, it seems quite apparent that the Blopress suppresses the onset of diabetes significantly. From this trial test, the CV event, the new onset, we did not see any difference between two drugs. But for those effects in the treatment of the heart enlargement or the new onset of diabetes, we got this result that Blopress is far superior than Amlodipine.

So as we can see from here, that progress in the [inaudible] role where the metabolic syndrome is what we talked about, this progress is matching the good drugs for anti-hypertension drug. So that's all from [inaudible].

[Interpreted]. Thank you very much. And after this we would like to go into Q&A session. So, first of all, I would like to have a question from the people on the floor. And after a number of minutes we would like to have a question from the overseas investors. So, for those people in the hall, please raise your hand. And for those people who are on the conference call, if you wish to ask questions, please press asterisk and one. And if you would like to withdraw that question, please press asterisk and two.

[Interpreted]. Hi this is [Nomaraga Yishiada] from Nomura. And the first question is with regard to the region treatment presented by Mr. Hasegawa. You mentioned about the strengthening in U.S. and Europe and you are going to strengthen Europe first, is that correct?

[Interpreted]. Yes. As I mentioned in the pie chart, our presence is the weakest [and the main area] is Europe. And because of that, we would hope that we will be able to strengthen Europe. And with regard to the United States, as an infrastructure we already have it. So if we put in products, then we will be able to [sink] in infrastructure and that will not be so difficult.

And with regard to Europe, we will be able to separate that it's less, about JPY210b. And if we are to [buy it in] a major alliance, how much of the capital are you going to be infusing into that market?

[Interpreted]. And because there is a partner that is involved, we are not thinking of the amount of money that is going to be involved.

[Interpreted]. And in order to fill in this JPY250b, is it going to be phased approach or in a full-on one-time approach? And how much you will be able to fund it?

[Interpreted]. And with regard to this JPY250b, I think you have calculated backwards from 3%. But it's not that we are going to be taking that kind of an approach in the calculation of this. And because of that, we don't know how much amount this is going to be amounting to.

[Interpreted]. With regard to JPY1 trillion, you are going to be infusing this in order to strengthen the European business. Is that something that is too drastic a comment?

[Interpreted]. It all depends on the partner companies or who are going to be buying, no matter what kind of question you ask. We are considering it, but we cannot talk about the exact figures, whether it would be JPY1 trillion or JPY250b and etc. I'm sorry, I cannot mention any exact figures.

[Interpreted]. And with regard to the United States, you mentioned that the infrastructure is already there. And when you buy out TAP, is that priority wise? Is it high or low from a management perspective?

[Interpreted]. With regard to TAP synergies coming in effect and whether that is needed, and the reduction of that kind, it probably has been mentioned already, but whether there might be, we -- if we can integrate and go through the synergy activities, [it's best]. So we're not that we have given up that kind of a road. So if that kind of an opportunity exists, then we would like to talk about it in a proactive manner. And in that sense, when we had made an announcement back in May, we had talked about it that it's not optimistic but it's hopeful in that kind of a situation. That's not changed.

[Interpreted]. And the second question, with regard to the [inaudible] people, I would like to talk about this for 322. Phase II has taken two years. And how much of a reduction you will be able to get, that is something that is going to be receiving a lot of attention in the [inaudible] areas. Is it going to be taking two years or is it going to be coming out any earlier than two years? If possible, if you would be able to answer that, that would be appreciated.

[Interpreted]. As a general approach, phase III, especially in this area, Franchise, it would need at least six months dosage and 450, 500 cases. And in order to recruit the patients, no matter how short it's going to be, it will still take about six to nine months. And on top of that, it is going to take an additional six months, and we will have to organize and compile the data. So, simply put, in the best case it's still going to take two years.

However, like you mentioned, there's already a preceding drug that has been through the approval process already and the next one is close to approval. And because of that, we talked about that, there has been an increase in the R&D expense. But we would like to accelerate it in the maximum manner, so that we will be able to shorten that timeframe so that we will be able to go through the approval process. However, from the conventional manner, we never say -- we never anticipate an approval date in a forecasted manner. So the only thing that I can say is that we hope that we will be able to accelerate that time.

[Interpreted]. And one on 322, and a combination of 322 with [inaudible], I understand that you have started this testing from September. So the launching timing of 322, will that combination drug will be launched in the market with a similar timing with 322?

[Interpreted]. If possible, we would like to do that. However, in case of combination drug, there needs to be some kind of investigation on a drug and also the clinical testing. We need to provide the different data for combination drug. So timing wise we are not sure whether those two would be launched in the market in a similar timing. I don't know about that. We cannot comment on that.

But 322, the first approval time, we can think of the parallel usage. And so we believe that we will be able to do that.

[Interpreted]. And can I ask for the people at the very front, yes, that's right. That's the person.

[Interpreted]. My name is Yamaguchi from Citigroup. In domestic market sales I would like to ask a question. ARB market is growing and although [Canden] is interesting but we are seeing some kind of a slowdown. And the competitors, Astra and [Tanjio], those are the merged companies. So if you do the [technical difficulty].

[Interpreted]. I do not believe that -- that will not make the ARB differentiation.

[Interpreted]. So how are you going to enhance the sales force activities of Candesartan? Do you have any short-term strategy or initiative for that?

[Interpreted]. For the short-term initiative to enhance that sales force, the Case-J that I mentioned earlier --

[Interpreted]. That would not be a differentiating factor is what you're saying?

[Interpreted]. But Case-J, I would regard this as a positive thing. And on the next day from this was announced, as a sales division everyone is working on this and we are seeing some kind of a feedback from that.

[Interpreted]. So here the growth, Blopress is slowing down is what you're saying.

[Interpreted]. And because [the denominator] is increasing, we won't be able to expect the growth that we have been enjoying.

And in terms of the MRI number [inaudible] and Case-J, from their perspective, I believe that the competition will become very severe, but our Company has been accumulating the information of this MRI. And also the strategy of the Company that we have accumulated, we would like to put them onto this Case-J and we would like to try once again. So this may be another opportunity for us to grow.

[Interpreted]. 475, you say that you cannot disclose the data but as for the business development is what I would like for 475. So this is a combination of the statin, so this 475 is a kind of -- on top of this statin, is what I see as your business model. So including Lipitor as a combination drug with the other drugs, do you have intention of having a close alliance, especially in relation to the [inaudible] Lipitor?

[Interpreted]. So what you're saying is that -- you're asking here is that [inaudible] do we think of the alliance thinking of selling different -- same products by two companies.

[Interpreted]. That's my question.

[Interpreted]. At the moment we are not thinking of that in depth. As for TAK-475, not only limited to Lipitor but this can be used together with statin. And probably that will be a permanent promotion material that we can leverage on. So any statin can work together with our TAK-475. So we would like to see it as a potential and we would like to look into that going forward.

[Interpreted]. At the end?

[Interpreted]. [Matsui] from [inaudible]. I have several questions. First the [inaudible].

[Interpreted]. [Canada AVPA] $4.6 that was announced. And if it happens, then of course we will be able to use it together with that. So simplified, it's going to be $10 today. And therefore -- and it's going to come into [inaudible] with just these expenses. And I think it's difficult to use it in combination with that because it's a generic.

[Interpreted]. [Inaudible] this Avandia share needs to be taken like [Metronomin] and etc. is that -- that's what I think for that for you. And Actose, is that a threat or is that irrelevant?

[Interpreted]. [ADA] - was it ADA? - I think it was announced in May this year. And at the time, DBD4 data was announced. In that sense, Merck and Novartis, the [inaudible] market is where they are going to pursue and of course they would come in and try to grab that share.

[Interpreted]. However, with regard to the safety and efficacy profile, if you have to take a look at that, or if you have to take a look at the diabetics market, with a single drug?

[Interpreted]. There is no drug in which one drug will be able to meet all of the needs of the patients. And so, in that sense, it needs to be used along with something else or most of the parts. So in a clinical stage, there needs to be used in combination with another drug.

[Interpreted]. But aside from that, for now, what kind of strategy they're going to be taking, as has mentioned by the two companies with a [Gavanis] and Actose switch.

[Interpreted]. If they are going to do that in a proactive manner, then for that kind of a period, for us, I think that we would have to think of that as a threat. But whether that is going to be persistent, I'm not sure. So it depends on the two companies' strategy, but normally a new product, when a new product is launched, different products, while they are acquiring these different market positions, it's then that we will be able to expand the new area for that drug. That's the orthodox manner. So I think that is the way that it's going to be done. But I'm not sure if there might be a threat in this regard to our development. With regard to 322, Case-J's announcement was made and I thought it was in phase III, but actually because of the toxicity it's going into the pre-clinical now.

[Interpreted]. So with regard to 322, we don't have to worry about that?

[Interpreted]. I'm not worried about that at all. And another thing, with regard to 475 and the overseas market with Lipitor versus [Traffin] from FDA, with regard to a phase III, I think there was a longer testing that is going to be needed. And because of that, the launch market -- launch timing is going to be delayed by two years.

[Interpreted]. With regard to 475 and statin, if we are to combine 475 and statin, a long-term clinical trial or a major scale trial, is that going to be required by FDA?

[Interpreted]. As I mentioned, for the new drugs development it's not just a simple one-drug test, but we would have to think about -- it's not a combination drug, but if there's going to be two drugs used at the same time, we will have to go to the FDA's consultation on a step-by-step basis. And at that moment, as us, we don't think that kind of a long-term data is going to be necessary.

[Interpreted]. Next, please.

[Interpreted]. My name is [Takata] of Credit Suisse. I have two questions to ask. One is that -- but firstly, I'll make a comment about the mid-term plan once again, so I'm going to ask this question. After you have announced that plan, looking at the market your stock price has moved and you are doing your share buyback. So I am sure that the President is aware of the reaction from the market. And actually when you -- I understand that you have this venue to exchange opinion with your shareholders. So I would like to know what is the market's reaction to your management. Do you regard that the market is evaluating your mid-term plan fairly or not?

[Interpreted]. Well, I believe that the reaction from the market is not negative.

[Interpreted]. So, in other words, that you are meeting the expectation of the market. Can I understand it as such?

[Interpreted]. Well, as a brand, probably we are meeting their expectation. But what we are required -- what the management is requested to do is to come up with the actual results. So probably the market watches how we are going to actually execute what is written on this market is what they are monitoring, and to how quickly we will be able to execute that will be our -- my mission as well my management team's mission.

[Interpreted]. Understood. The other question is you said that for the shortage you are going to buy the time with money.

[Interpreted]. This is what I saw by looking at the [inaudible] transaction deal. This kind of deal that is happening in Europe and America, probably the money that they are paying is a one-digit difference. So probably they are paying more premium to buy the company.

[Interpreted]. I'm not asking you to pay a lot of money. But you refrained from paying money, in other words opportunity loss. That's the kind of things I'm concerned about your company. So what do you think about that?

[Interpreted]. Well, as I said earlier, first, the difference between our ideas is that as long as I am in this present position we would like to pursue for the organic growth. And if there is insufficient area, then we would think of M&A. But I'm not just pursuing for the scale of economy and we are not just saying that we would like to expand ourselves and then if we are having difficulty with growth speed compared with market trend, then I do not see that kind of thing to happen. So from that perspective, because we haven't paid money and that is the reason why we are losing the opportunity, I do not see the picture like that.

[Interpreted]. [Inaudible] Schering probably.

[Interpreted]. Yes, we have done a thorough investigation about Schering and we have done a thorough investigation about the other company too. So after this investigation, we deemed that we would not be a good partner to them. So that's the reason why we didn't raise our plans. So it is not a matter of money constraints. Of course we are Takeda, we are stringent but we are more than welcome to spend the money that is necessary. So I am not thinking that we are losing opportunity because we are not paying [inaudible].

[Interpreted]. Lastly, do you have any plan to change the payout of the TAP, dividend payout -- dividend policy, excuse me, dividend payout -- dividend policy.

[Interpreted]. Well, dividend payout for us, dividend policy of the TAP is consistent. So the net profit to be used to buy the dividend payout, it makes no change to that idea.

[Interpreted]. Thank you and going on to the next person?

[Interpreted]. [Inaudible]. In the past two years -- in the next two or three years, you are going to be development centric. And I believe the product number is not going to be small in the future. But in the future, what kind of method are you thinking in order to reduce the number of unsuccessful cases?

[Interpreted]. The other day I received a similar question. And R&D, as you all know, it's high-risk activity. And in the industry, on an average basis, after the clinical [time] started and are going through the approval and we are seeing the approval, it's about 10%, a little over 10%. And if we are to think about that, out of 10, nine at a certain stage or another, whether it be the efficacy or the safety, it's going to drop. So it is a very high-risk activity. I hope that you will be able to understand that.

But on the plus side, it is true that our in-house productivity, or the success ratio, has been revisited several times in the past. And as a result, in both the research and the development, there are some issues that need to be resolved. And also by collaboration -- having collaboration between research and development, there will be a smoother result of the challenge and we will be able to increase the success rate.

In pre-clinical, we hope that -- in order to deepen the pharmacokinetic activities, and by doing that, the clinical stage in which it's going to incur a lot of money, I hope that we will be able to reduce the number of the failed cases. So there is several projects within our Company that's launched. And based on those projects, we are going to be improving the productivity. Does that answer your question?

[Interpreted]. Yes.

[Interpreted]. And we would like to take a last question from the floor. And after that we would like to have questions from overseas investors. So let's take the last question from the floor.

[Interpreted]. My name is Cheung Wah from UBS Securities. I would like to confirm about your overseas strategy.

[Interpreted]. TAK-405 is in phase III and there are two phases.

[Interpreted]. And SYR-322, it seems that with this you are targeting a GP market. So this time, to expand your business to European market, and the expansion -- or the increase of the GP and MR market in the U.S., how I should think about that.

In case of TAK-475, probably you can enter MR by yourself and you would look for the collaboration with other companies. Or have you already considered collaboration and do the marketing, having that idea on mind? I would like to have your priority.

[Interpreted]. For the in-house ethical drugs, we were determined to sell by ourselves. In the case of U.S., they have [many senior] drugs. This will be completed by the end of the year. But the co-promotion with [inaudible], we have been doing this for three years and we have a good result and we have been able to accumulate our knowledge in this project. So when this 475 is launched and if there is luck or work a number of people, then we would think of increasing that. And with regard to the [inaudible] and knowledge, we already have them. It was our thing. So it seems as if there is a company that holds the cards but that aside.

And with regard to the European market, we are going to have a sales and marketing company in Europe. So we are going to have a similar concept. So we need to think of expanding our infrastructure greatly sometime, as we don't have manpowers for that. But if there is -- but that would be the timing when we have very big scale or new drug launches in the market that was developed by in-house.

But as I said, in Europe we are going to pursue two strategies. So that will all depend upon how we are going to realize that. But in any strategy that we take, when the 475 is launched then in a short period of time we would like to have a sales force that will be able to maximize the potential of sales.

[Interpreted]. If that's the case, then in the case of America, say GP stayed at 1000. If you were thinking of launching 475 with a GP of 1000, then in case of Europe from the cash flow basis, so what you're saying is that European market can be delayed a bit?

[Interpreted]. What do you mean by delayed? What delay?

[Interpreted]. In the European strategy. In the case of Europe, the product line up is important, so you need to invest in infrastructure. And because probably it will be difficult to buy the time. So are you thinking of a balance between Europe and America?

[Interpreted]. No, we are not thinking. We are thinking European market separately. So depending -- with the timing of the new drug launch, we would like to have a drug sales force that is appropriate to that scale. So are you okay?

[Interpreted]. Then here I would like to have a question from the overseas market from the conference call. So can I ask Ms. Sainto, the operator, to take over.

Thank you. Our first question comes from [Mr. Ravio] from [inaudible] Partners. Please go ahead.

Hi. This is related to TAK-242. That's this drug. My question is will there be any interim analysis for this drug, considering that you have not done phase II, it has moved straight into phase III? And when can we expect to have that?

And my second question is if you can confirm filing of TAK-475, any kind of estimate on that. Thank you.

[Interpreted]. With regard to your questions, for the first one, TAK-242, when the phase III is going to be starting and what kind of mid-term analysis is going to be done and how we will be able to assimilate in going to the filing of TAK-242, on a global manner and also in Japan we are going through the phase III at the moment.

And with regard to this particular drug, we have an external independent institute that is doing some of the researches. And once some of the data for the clinical has been assimilated, we are going to be conducting R&D evaluation. And as a result, by taking a look at the result that was provided by this external independent institute, there might be a situation in which they might deem it safe to start the development in the mid-term perspective. And this may happen both in a positive way and also in a negative way. And so, depending on what kind of [morbidity] result we will be able to get, how the effectiveness figures, we might be starting this in the mid term and we might go through the approvals and filing processes.

And we would also have to take a look at the side effects and efficacy compared with group. And depending upon that, when the filing or when the approval is going to take place, it's going to be dependent.

And as to the timing of when the filing is going to be conducted, and this is going to be the same answer for TAK-475 as well, we are not disclosing or we are not announcing as to when the filing is going to be taking place exactly.

Okay. Thank you.

[OPERATOR INSTRUCTIONS].

[Interpreted]. My name is [Mataga] from [inaudible] Securities. With regard to TAK-475, you said that you cannot disclose the details of this. But [HHA], if you access that, you will be able to get some kind of information about that. But by looking at that, although this is a very short period of time, using [inaudible], I think that there is a good result coming up from there. But on the other hand, for this other [inaudible] [repeated with the animal fat], it seems that they have [inaudible] by far. So -- but I think this is quite [weak] because you have just entered six months. But if you continue that for a year, you'll be able to come up with a significant result. So I would like to know whether you are receiving expected result.

[Interpreted]. So the drug's efficacy with humans, as we have said, it's a short period of time or we need to comprehensively evaluate a number of such cases to see the efficacy on people. So we are continuing our development by anticipating that we will be able to get the result that we would like to have.

[Interpreted]. The other question related to that, the new [inaudible] co-patent has expired. But is it possible to use that with 475? And I would like to know whether you are planning to go ahead with the clinical test for that?

[Interpreted]. As I have already explained earlier about statin -- part of your question is limited to Lipitor, but we are not limited to one drug. There's no need for us to do so. We are currently looking for various options that are available.

[Interpreted]. Thank you very much. Thank you. Then it's time. So we would like to close this meeting. Thank you very much for your participation today. We would like to ask for your continued support of our Company. Thank you very much.

Portions of this transcript that are noted “interpreted” were interpreted on the conference call by an Interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.