Takeda Pharmaceutical Co Ltd (TAK) 2008 Q2 法說會逐字稿

(Interpreted). Thank you very much for coming, despite your busy schedule today. Thank you. We would like to start the conference call of semi-annual financial results of fiscal year ending March 2008 of Takeda Pharmaceutical Company Limited.

I would like to introduce to you the participants, President Yasuchika Hasegawa and Mr. Yamaoka, the General Manager of Corporate Strategy Planning Department and Mr. Kiyoshi Kitazawa, General Manager of Strategic Product Planning Department and [Dr. Makaoni Miamoto], General Manager of Pharmaceutical Department and Mr. Takahara, General Manager of Finance and Accounting Department.

And my name is Ino, the Corporate Communications Manager. As you have the brochure in front of you, so please refer to them during the presentation. And we're also connected with overseas, so we would like to take the questions from overseas as well. Now, we have President Hasegawa to talk about the making his presentation.

(Interpreted). Good afternoon, ladies and gentlemen. Thank you very much for attending the conference call of semi-annual financial results and having so many of you here today.

I am sure you have many questions, so I would like to make the presentation simple. So I will start from the page six of the presentation. From pages one to five I think you know very well, and Mr. Takahara will mention details of the products. So I will start from page six.

This fiscal year -- this year May, when we made presentation of our financial results last year, we also gave you similar presentation. As the new 475, 322 and 390MR, how we can get the approval application as soon as possible that would be very crucial for our Company I remember. So, we said by the middle of next year we wanted to do the application.

However, June 19 -- October, TAK-475, as a result of clinical trials received 100mg high dosage in U.S. and 50mg in Japan, dosage in Japan, we had side effects in [ALP] increase and hepatic side effects. So we suspended the -- stopped the clinical trial.

And additional we began the consultation with FDA for low dosage clinical trial based on the requirement from FDA. So we have the side effects from high dosage and we had to give up the clinical trial. And the FDA application, we had to give up the application which was unexpected for us. So the strategy overall a re-examination is done at the moment.

Having said that, as soon as -- as long as we are in this market and also the demand for us is becoming more [shift], this sort of situation could happen to anyone any time. That's reality. Therefore, even if this unexpected thing happens, we need to be able to deal with this properly. In other words, we have to -- need to enhance pipelines or the back-up products needs to be in preparation. Those things should be done properly. It's ideal and this is something we should do. But we haven't been able to do this as well as we would like to. So that's the situation for surrounding 475.

Having said that, even if we try to do it for a magic wand, it's not easy to find easy magic wand. So what we can do in this situation is the pipeline enhancement, which I always feel there's three principles, or the three pillars. One is enhancing the in-house development which we do. It's not easy to promote the development quickly so, in order to do this, number two the second pillar, life cycle management, development, enhancement, promotion, those things.

And number three, third pillar, alliance including acquisitions. [Those two] who seem -- we need to have sense of crisis and to do this steadily and speedily. This would all depend on this. Especially in the later stages of development, everyone is trying to get their hands on them. In this situation it's very difficult to find them and prices are also increasing rapidly.

Fortunately for our case, as we can see here on the left-hand side, bottom left-hand side, from Lundbeck the mood disorder, or anxiety disorder achievement drug, one is the Phase II clinical trials and another is -- another one has entered into Phase II, which is in the middle development stage. So those drugs, whether they will come in quickly, is a challenge for us. Having said that, we would like to steadily try these efforts.

As for SYR-322 and TAK-390 early application approval, at the moment, fortunately, there are no issues of concern so as far as the plan is concerned for January, March next year. Also for other products in late stages of products, TAK-491, Hematide, which we made release and already in Phase III development in U.S. which will be done according to the plan, we will invest as much resource as possible.

Also life cycle management, one of the pillars of the management of, 475, in other words the lifestyle-related diseases has -- it used to form a triangle, but now it's the left to one of the three angles. So we have to think about what we have to do in the future for this. Having said that, DPP-4, or the new ARB and Actos, the combination of those is something we want to promote the development, so that line extension and life cycle management and life extension can be, sorry, examined.

As for the in-licensing alliance, Hematide which in-licensed last year, we began the Phase III, as I said before. And Lundbeck is -- as I explained before. And research tie up with XOMA in the U.S. for platform antibody drugs and also with LG Life Sciences we have begun joint research for obesity. And TPNA in U.S. this is Provigil, which is the sleeping sickness human medication, we implemented co-promotions from the third quarter. And TPNA, Rozerem the insomnia drug and also chronic idiopathic constipation, Amitiza co-promotion, we began from spring the co-promotion with TAP.

And [CPC], we have done the ambient generic impact. We haven't grown that much. When it comes, we didn't think it would become a large product, but we were -- we had thought it would grow a bit more but the relatively modest -- it couldn't reach our modest forecast either. So about what to do with this product, we have to think about what to do with the promotion for the new product. And we need to decide on the -- I think we're at the turning point of deciding what we should do.

As for [MTC] we have grown but we [pegged] (inaudible) OTC became OTC managed. It's a new movement. OTC first policy is implemented, so that before giving the prescription drug, then, use the OTC and if that doesn't work use the prescription drug. So the contraction of contract market and DTC was halted. So the awareness has dropped. So as a result [on] the market itself has shrunk.

So with these impacts (inaudible) resulted temporarily from the market. The share increased from 2% to 8% range but the market itself has contracted and also the share hasn't grown much. So since then we've seen flat -- it's been flat. So in order to make a breakthrough to Amitiza we plan to start the DTCs soon. And also first half next year, [IBSE] approval that we expect, we hope this will trigger a further growth.

Next please. As you can see the -- as for the new drug technology, we have been making promotion. As for the antibiotic medicine with a traditional initiative, which is the -- as you can see in the top part of the box, Biowa Inc., the POTELLIGENT technology, we have made -- concluded the contract for non-exclusive use rights. This technology is an important method to increase efficacy of antibody. Kirin Pharma and Kyowa Hakko announced its merger recently. And by accelerating our alliance strategy we will catch up with antibody technology.

As for the nucleic acid drug, the Archemix Corp., which is a biopharmaceutical company, we agreed to do joint research to produce aptamer drugs. So low molecular compounds and antibiotic bodies, it has the maximum optimum. And also it can be offered to the patients relatively cheaply by synthesizing them chemically. So we will be following up with this. And also [RN NAI] and also regenerative medicine, we will outside the bio -- we will be watching the outside biotechnology companies. And also based on our research centers we'll be following through this.

And also in the lifestyle-related diseases such as diabetes it's relatively -- it's generally recognized it's unsuitable in injection form. But there our treatments become difficult because it becomes severe cases. And also the development became possible to become more convenient in injection form. So not just in the cancer field, but also for lifestyle- related diseases, with a treatment paradigm shift in mind, we will look into potentials for active leads so that we can tie up with companies with new technology companies.

And JPY2 trillion in sales for in-house ethical pharmaceutical drugs for 2015. I showed this graph in May. From the initial [traditions] 2015 sales is predicted by our calculation multiplying our success probability with us. And JPY200b is the mid-term plan target for the license fee globally for -- and includes JPY1.8trillion. And also the TAK due to the suspension of development and with the consultation with FDA we are observing this. But based on this the target line could fall below the target line. So we want to do what we can do now. This is all we can say to you at the moment. And also maybe I can talk about it Q&A session. Thank you very much.

Mr. Takahara is going to explain about the overview of our financial results.

My name is Takahara. So I would like to give you an explanation about Takeda's consolidated results for the first half of fiscal year 2007 and the focus for the full year resulting for the fiscal year 2007. And with regard to the Takeda achievements, we have been able to achieve a growth of [70%] growth in consolidated revenue and profit in the first half of fiscal 2007. Net sales grew for nine consecutive years, operating income grew for two consecutive years, ordinary income, nine consecutive years, net income also increased after one year of decline.

In the first half of fiscal 2007, the highest net sales and net income ever were recorded. Net income increased by JPY58.9b, or 37% from the same period last year. This significant increase was due to additional taxes of JPY57.1b paid in the same period of the previous year for tax correction under the transfer price taxation system. R&D expenses were at JPY107.3b, an increase of JPY11.1b, or 11.6%. The EPS reached JPY255.54, a rise of JPY74.27 or 41% from the same period of the previous fiscal year.

What led to the [data of] the first half of 2007 is the significant growth of the Actos, primarily in the United States. As shown in this graph, Actos sales amounted to JPY207.1b on a consolidated basis. This represents a growth of JPY46b or 28.6% from the same period last year. Especially in the U.S. sales of Actos Family increased significantly by [$274m], or 23.8%, from the same period last year, mainly due to expansion of the market share through effective promotion activities focusing on excellent profile of the product.

Sales of Actos Plus Met to [Ectat] and other new products in a paper published in EMA 2007 regarding safety of the competitors' similar products for the cardiovascular system. In yen terms, Actos Family sales increased by JPY37.3b or 28% supported by the weaker yen. And a strong sales growth was also achieved in Japan, Europe and Asia due to the effect of many clinical evidences that have been publicized since last year.

Foreign exchange was another factor that had a great impact on the operational results for the first half of fiscal 2007. Average exchange rates during the first half of fiscal 2007 were JPY119 to the dollar, JPY4 weaker than the same period last year, and JPY162 to a euro, JPY16 weaker. And as a result of that, in the net sales JPY14.9b, operating profit JPY4.3b, recurring profit JPY6.7b, net profit of JPY3.9b positive impact was made.

And next is the changes in the sales in each of our business segments. Sales by pharmaceutical segment increased by, as I have mentioned, in addition to the growth of Actos. As we can clearly see, the growth of Candesartan sales by JP12.3b in Japan and the overseas market. And the growth of Amitiza sales by TPNA by JPY9.2b also contributed to the increase of JPY65.5b, or 11.7%. And this increase was comprised of JPY8.6b, or 2.3% in Japan and JPY56.9b, or 18.7% in the overseas market.

Sales by Consumer Healthcare business increased by JPY0.5b, or 1.7%. Major factors for this increase were an increase in sales of Alinamin tablets, about JPY0.4b, and an increase in sales of Benza by JPY0.2b.

Now, I will explain the details of sales of ethical pharmaceutical products in Japan. Takeda's a top selling product in Japan is Biopress. The sales of this hypertension treatment drug increased strongly by JPY5.4b, or 8.5%. Leuplin sales increased by JPY1.1b, or 3.5%. Sales of Takepron increased by JPY3.2b, or 11.2%. This increase was supported by increased use of OD tablets. And approval were acquired last year for additional indication of non-erosive reflux disease and approval acquired in August 2007 for the dosage administration for the second rated infection of Helicobactor pylori.

In the diabetes field Actos sales are supported by steady implementation of evidence based promotional activities. Actos sales grew by JPY4.1b, or 25.6%. On the other hand, Basen sales declined by JPY1.2b mainly due to the impact of generic products. Sales of Enbrel, a drug for rheumatoid arthritis, increased by JPY3.4b, or 66.7%.

Now I would like to explain details of sales by TPNA, our subsidiary engaged in sales operation in the U.S. Actos is one of TPNAs core products. As explained earlier, Actos sales increased significantly by $274m, or 23.8% from the sales of the same period of the previous year. Amitiza was brought into market in April last year. Co-promotion with TAP commenced in March 2007. They focused on detailing inter-primary care and gastro intestinal doctors. Integrated sales and suspension of a competitor's product pushed up Amitiza's sales by $77m. Rozerem sales also increased by $24m from the same period last year supported by a co-promotion with TAP started in February 2007. The continuation of DTC execution was a contributor here.

And the revenues from the co-promotion activities decreased by $35m, mainly because our contract with [COS] ended in the end of December last year. As a result, net sales by TPNA as a whole increased by $341m, or 27.1% from the same period last year. In terms of Japanese currency, net sales by TPNA increased by JPY45.6b, or 31.4%, including JPY6.3b resulting from the positive impact of the weaker yen.

Next, I would like to discuss worldwide sales of our in-house ethical pharmaceutical products, including sales at our affiliated companies subject to the equity method. Global sales of in-house ethical pharmaceutical products totaled JPY674.7b, an increase of JPY63.2b, or 10.3%, over the same period last year.

Looking at this by geography, sales in The Americas increased JPY39.4b, or 11.49% -- 11.9% mainly supported by TPNA sales. Sales in Europe increased by JPY10.8b, or 13.3% [including] the positive effect in the currency translation. Sales in Japan increased by JPY10.3b and sales in Asia market increased by JPY2.8b.

Next, I would like to explain the results for the four international strategic products which accounts for a significant portion of our in-house ethical pharmaceutical product sales. As explained in the beginning of the presentation, global sales of Pioglitazone increased by JPY46.3b, or 28.7% due to the significant sales increase in TPNA in the U.S. and continuous strong sales in Europe, Asia and Japan.

That has outpaced Lansoprazole and now become the top seller in Takeda Group. Net sales of Lansoprazole decreased by JPY6.2b, or 3.1%. This decline is mainly due to the sales declines in TAP, a U.S. equity method company and in other companies in Europe because of the adverse influence of generic products in the [PPI] market.

Candesartan achieved strong sales both in Japan and in the international market. Net sales increased by JPY12.4b, or 12.3%. Sales growth of Leuprorelin remained low with an increase of JPY1.5b, or 1.6%, due to the contraction of the market and intensified competition. Total sales of the four products increased by JPY54.1b, or 9.8%, from the same period of the previous year.

In the next page I will explain the details of changes in operating income. The gross profit ratio improved by 1.9 points. This was mainly because sales increased in ethical drugs that have high gross profit margin, and the weaker yen. Gross profit increased by JPY64.9b, or 12.9%, from the same period of the previous year. SG&A increased by JPY25.1b, or 14.7%. This increase was primarily due to the expansion of sales expenses used by TPNA for Rozerem, Amitiza and other new products introduced into the market in and after 2005.

R&D expenses increased by JPY11.1b, or 11.6%, due to the progress of developmental activities. In addition, R&D expenditures in Takeda Cambridge Limited, which we acquired in March 2007, pushed up R&D expenses. As a result, operating income increased by JPY28.7b, or 12.1%. The operating profit ratio was 37.4%, a 0.6 point improvement from the same period last year.

Now, I would like to explain the key components of net income. Increase in earnings of affiliates decreased by JPY1.3b from the same period in the previous year. This decline includes JPY2.1b of equity in earnings of TAP in the U.S. Other non-operating income increased by JPY7.2b, mainly due to the increase in the financial income of JPY6.8b in Takeda America Holdings, our holding company in the U.S., and the Takeda Pharmaceutical.

As a result, ordinary income increased by JPY34.7b, or 11.6%. Extraordinary income of JPY29.2b was recorded for the first half of fiscal 2007, mainly in connection with sales of affiliated companies' shares. Nevertheless, compared with the same period last year, extraordinary income decreased by JPY9.1b. Net income increased by JPY58.9b, or 37%. This significant increase is because of additional taxes of JPY57.1b paid in the same period of the previous year for tax correction under transfer pricing taxation system.

Next, I will explain outlook for the consolidated results for the full year of fiscal 2007. Net sales are expected to grow by JPY94.8b, or 7.3%, to JPY1.4 trillion due to the continued growth of the ethical drugs, mainly in international strategic products. It is expected that consolidated sales of Actos continue to grow by about 20%, supported by strong sales in all regions.

In the U.S., in dollar basis, around 20% growth is expected. And Candesartan sales also expected to grow by about 10% on a consolidated basis. R&D expenses will increase by JPY36.7b to JPY230b as originally forecasted. However, this increase in R&D expenses will be absorbed by revenue growth.

We project operating income will increase by JPY26.5b to JPY485b, ordinary income will increase by JPY20b to JPY605b, net income will increase by JPY59.2b to JPY395b. The sales and net income forecast originally announced at the beginning of the year were revised up by JPY10b and JPY15b respectively, considering the growth of Actos in the U.S. and improvement in the gross profit margin.

In forecasting full-year result for fiscal 2007, our assumption for foreign exchange rates are JPY110 to a dollar and JPY160 to a euro. JPY1 fluctuation in these exchange rates will have impact of JPY1.9b on top line for dollar and JPY0.4b for euro, and impact of [JPY7.8b] on bottom line for dollar, and no material impact for euro.

And finally, I would like to explain returns to the shareholders. It is the Company's policy to increase the dividend payout ratio gradually to 45% by 2010. In accordance with this policy, Takeda will pay a interim dividend of JPY84 per share for the first half of fiscal 2007.

Regarding the full-year dividend, Takeda tries to pay JPY168 per share, an increase of JPY40 from previous year and an increase of JPY8 from the original forecast. As a result, the dividend payout ratio is expected to improve by 2.9 points to 36.1%.

Takeda also has implemented share buybacks effectively since the last fiscal year. During the first half of fiscal 2007, Takeda bought back shares worth JPY128.6b. The aggregated value of shares bought back since last year amounted to JPY342b.

As a result of internal growth of profit combined with this share buyback program, earnings per share for the first half of fiscal 2007 reached JPY465.58, a 20.6% increase from the same period last year. It is expected that growth exceeding 7% targeted in our 2007-2010 Medium-Term Management Plan can be achieved.

This concludes my presentation. Thank you.

Next, we have a presentation by Mr. Kiyoshi Kitazawa, General Manager of Strategic Product Planning Division about the pipeline progress and current situation in the first half of 2007 fiscal year.

My name is Kitazawa. As it says here, the fiscal 2007 first half pipeline progress and situation. The R&D pipeline expansion and also new products early launch, which is the [source of] product, we want to strengthen in-house R&D and maximization of value-added products and in-licensing analyze activities promotion.

Based on those three pillars, we will focus the investment of management resources in the four diseases which are the important fields. We have -- on page 19 we have the pipeline. So please refer to those pages.

Field I, lifestyle-related diseases. This field is the most important field which supports our present and the future of our Company. In the field of diabetes in June, in Japan, we have made an application for additional indications for Actos and insulin formulations concurrent therapy. And also SYR-472 in the west, which is the DPP4 inhibitor we began Phase II [which is] a follow up. So for us, 322 we want to add value to 322. We hope this will be the product for this.

Next is the hypertensive field. In July this year, TAK-492 restarted Phase III clinical trials in Europe and U.S. Compared with ARB, which is in the market at the moment, including [our progress] 491 has strong anti-hypertension action and insulin resistance improvement action and also expects to decrease protein urea.

Also in August TAK-536, we began the Phase II clinical trials in Japan. Yesterday we announced about TAK-442, which also began Phase II clinical trial. This drug has [exaggerated] Factor Xa. It selectively inhibits the factor. Global -- including global mega companies developments have been done. The target field on the market and also the profile that will be made quite clear in the future, we want to grasp all those so we can enhance the potentiality.

Here we have TAK-475. It was released on October 29 and also, as President commented earlier, I would make additional explanation about this drug. First of all, in the U.S. and Europe we were accelerating development for application by the end of this year. However, in the middle of this year, in May the Phase III clinical trials were done. Most of them were double-blind tests and we are in a stage that the results will come out.

The safety and efficacy analysis began. Consequently, for each protocol it wasn't made clear. But if we look at the total result, the high dosage group, 100mg per day patient group, we saw liver function rise. Also of this, two patients showed severe abnormal values. As for these two patients, after halting the administration they recovered quickly.

As a result, those abnormal values were found that at that stage. As you already know, starting instructions before the administration the liver function should be checked and also for each [statin], for example ,the liver function should be checked after 12 weeks of administration. Those restrictions are tight.

By giving these restrictions we thought we could get the approval. We made this decision internally. For the time being, however, we should -- we decided we should do prior discussion with FDA, which is our target for the time being. As a result, it wasn't unexpected but they asked us to gather additional clinical data. So a clinical study, a focus on safety was necessary. That was the comment from FDA.

100mg and 50mg, we took the data as a package. So the efficacy and safety evaluation we thought was sufficient. But high dosages are too much risk and they couldn't recommend it for approval. That was as a result of the feedback, 50mg in the clinical data was needed for the safety. That was their feedback.

And based on this, the globally developed -- development of EMEA in Europe and also in the Phase II stage in Japan, PMPA which are in plan, we are making the first contract.

As we said in the news release, the input from the regulatory bodies and [get the need] and finally we need to come to whether to -- to decide whether to go ahead or not to go ahead with this. This is the current situation. As a result -- as soon as we decide on the policy we will announce this to you. At this moment in time, the policy hasn't -- we haven't decided on the policy, to be frank.

Oncology field, from October as you know Affymax, the hematide that's in-license from Affymax, CKD-related anemia, we began the Phase III clinical trial for anemia patients with CKD-related anemia with the Company. And for bone and joint disease included CNS disease field the rheumatoid arthritis treatment, TAK-783, we began Phase II clinical trial in Europe and U.S. I will explain the details of the drug later on.

Also with Lundbeck in Denmark we in=licensed three drugs here. As the President said earlier, we signed a contract to form joint business with Lundbeck for Japan and U.S. I will explain about this in more detail as well.

Lastly, the gastroenterological field, Field four. As for this field, in June this year, Sucampo in U.S. produced and developed with TPNA we are selling Amitiza. For the irritable bowel syndrome with constipation, we submitted application for additional efficacy.

As for Takepron the secondary eradication of Helicobactor pylori, we received additional approval for dosage admissions. And with TAP, which is a Joint Venture with Abbott, [Premise] its successor product TAK-390 MR is under development and is in the final stages of development at the moment. Next year, as soon as possible, TAP is planning on submitting application.

TAK-783, that I explained earlier, has shifted to Phase II clinical trial. This drug , based on the findings to date, the Th1 lymphocytes autoimmune reaction is corrected, which is thought to be the etiology of RA and also it is expected to halt the progression of RA. And is oral drug, compared with existing immunosuppressant, it has wider safety allowance. So the methotrexate, which is the Gold Standard at the moment, it is hoped that this becomes first-line therapy to replace methotrexate.

And the so-called, the anti-depressant, which is in-house from Lundbeck, [CNS] field is one of the pivotal fields. We want this to be a pivotal field for our Company. With these two drugs, in-license drugs, we want to enhance this field.

As I explained earlier, 004 Lundbeck is doing -- has ended Phase II clinical trial. Detailed analysis is in progress. But according to the preliminary report, initial report shows efficacy. And 530, we will start the Phase II clinical trial jointly with the company on a global basis. So with Lundbeck we are doing development in parallel for these two products and find out what the properties are to be able to offer.

Thank you very much.

Nomura (inaudible) from Nomura Securities.

SYR-322, at present there are no concern issues. There's no concerns. This is as a result that all the consultation with FDA that you have no concerned issues at the moment, like with TAK-475.

Yes, that's right. 475, we focused on safety issues and we asked for FDA input. For this 322, safety and efficacy, there are no issues of concern.

In this case, the kidney problems, these things have been examined. And the FDA says there's no problem. I think you know, but the efficacy and safety evaluation, it's done in the screening level by the FDA. So from the present data, at least the application can be received, accepted.

Okay, thank you very much.

My name is (inaudible) from [Deutsche] Securities. There are two questions I would like to ask.

The first one is directed to the President. Many things are happening here, but this is a very critical timing and you have JPY2 trillion in cash. So President, say that the shareholders and investors, half of them, say that you cannot buy that kind of very high purchasing. But do you have any courage to purchase anything by saying that JPY1 trillion or JPY2 trillion under your responsibility, even that would cover the combined company or commodities or things?

This is a hypothesis. It's very difficult for me to answer this question. But what I always say is that, the first thing is that we don't have JPY2 trillion. We have JPY1.7 trillion. That's the current cash at hand at the moment.

So thinking about the various cases and operating cash, we want to have a rich operating cash. So that's the reason why we have this amount, [so] JPY500b. So we would like to hold JPY1 trillion for all the opportunities for M&A. And for this money, part of that amount we are trying to buy back our shares or to return to our shareholders. That's our basic policy. Probably this answers your questions.

I hope you would use that cash early.

And one question to Kitazawa-san. When I spoke with the President the other day, the President has [luck]. After three or four years since his inauguration, he [start] the product in Phase III like TAK-475. So I just wonder whether Kitazawa-san has the luck or not. Or do we need to have some system in place to do this pre-discussion, pre-negotiation with the FDA.

So I wonder whether you could improve your system so that you will be more successful in coming up with the development.

Well, there are various factors involved here I guess. But as far as I know, the success rate of our Company, when compared with other competitors, we do not believe that our success rate is inferior. As you may already know, in the domestic and overseas market, the major pharmaceutical companies there, they -- although they go into the final stage of the clinical testing, the efficacy and safety and maybe for the safety reasons, they see the delay in the development, or sometimes they [do] drop from the pipelines. We often see this kind of cases. From this perspective, I do not see that Takeda Pharmaceutical Company's R&D process is inferior from others.

And whether I have a luck or not, well, looking from the third party this is something that the third party needs to determine that. And one more thing about the improvement internally to the Company, we always do that, not only in R&D area. But we try our best to improve ourselves all the time. And we put our efforts in doing so. Thank you very much.

Just one additional question.

Whether you have luck or not, this is not important. As the manager of the company you do the best possible and wait for the results. But as I said before, the back up strategy, I think we haven't been doing that well. 475, for example, if we had good enough back up system, then we would not have been able to -- we didn't need to get the reaction from the market of [stop high stop low]. The 322, [as you can see], or 492, we had one year delay and research ordered from Lundbeck in-license. Those back up should be done properly and we will hedge the risks. So in this sense, the risk mitigation, we will be able to do a lot in the future.

Citigroup. My name is Yamaguchi. Rozerem, I have a first question to Rozerem.

In Te States, you had the -- it's below the conservative sales? Are you going to revise it in Te States? The sales, are you going to look at -- you're not going to sell that many in the U.S. or re-examine the strategy in the U.S.

We're doing the best as possible. I don't know what the definition of that is. But those are in-house products (inaudible). It's going to insomnia market. For the first time also [EPC driven] market was first time. So we had the risk in mind when we entered the market. But the market response wasn't as good as we had expected.

Unfortunately, the market reaction was doctors and patients (inaudible). It didn't have the enough potential to change their recognition. So we couldn't dissipate the recognition that was relatively weak. I guess this backdrop to PPC is advanced payment, so it's in the red. But continuing this we want to see whether it's good to continue or not. And last time here, and also return on investment, how we can maximize [those], and we want to re-examine this marketing strategy in this respect.

But you're doing well and the shares is relatively stable. In my sense, I think you could be getting, grabbing more shares from the competitors. What about getting the shares in the future for Actos? I think you can do this. It's possible if you look at the product profile.

The competitor's product, I don't know which competitor's product you have in mind. The direct competitive products, FDA's Advisory Committee was held July 30, and clear panelists' voting was held. And right now, there's a labeling change, the FDA are examining this right now. It's been three months since then, but the labeling, the final decision hasn't come up yet.

There are articles in Wall Street Journal, or the senators' questions from Senate. There are many movements, but we don't know exactly what is happening. Already, oral reactive anti-diabetic market, the oral market, Actos has more than 13% and Evandia, I think, is about 5.6% the latest share. And already there are many issues.

So in the several weeks or several months, there are many conversions. Conversions since then are hardly any conversions. So the [people with the] remaining share, the [trend setters] or the sitters (inaudible) safety, FDA's attitude should be clarified on Evandia. I think there are many -- some people are thinking this way. And in this process gradually Evandia's share has been going down against this backdrop.

In this situation, what we're doing if labeling change -- if they change the labeling, there's -- (inaudible) action plan is already in preparation so that immediately, we can do the implementation. We are in preparation for that. But there's nothing we can do anything more than that right now.

And in the balance for the first half JPY60b, and full year JPY20b R&D and exchange impact, there are many issues. But in the second half, there is still not -- it's relatively weak. What do you think about this?

In the second half forecast, not as good as the first half. The reason is, year on year compared with the year on year, exchange negative impact, exchange rate. As I explained it before, JPY110 to the dollar is our forecast. And in the first half this exchange rate impact JPY3.9b profit and JPY14.9b in sales. JPY13.5b for sales and JPY7b in the sales -- in profit, if you look at the -- based on the JPY110 to the dollar.

And the second thing is R&D expense year on year. The second half will increase a lot, greatly. R&D and development costs continue to increase by 30% and in-licensing cost second half last year was very small. So this second half I think we forecast to be a lot bigger. So in total, this second half R&D we will increase by JPY25b to JPY26b.

And thirdly, TH's financial revenue will drop a little bit. As you know, the interest rate in the U.S. has gone down, so we are expecting a JPY3b impact from that. And hopefully tax equity [range] -- equity method we expect to drop by 80b -- 8b so, compared with previously, a 9b drop. In the second half last year [Edigards] litigation resolution expense, we had JPY5.5b. We won't have this again. We won't have this this second year. So in the second half -- so that's why the figures forecast 2b.

And then -- the biggest wild card is Actos itself and most of you (inaudible) description, I think you have been watching this, it's been flat recently or slightly dropped. As I said earlier, May, end of May [The England] General Medicine this article was published and sales increased quickly -- sharply. And most of that pipeline still went to inventory -- distribution inventory. So in the second half this [stock] is, okay, a lot of de-stocking. From the movement of prescriptions right now this forecast slowed in the second half from your point of view, maybe you look at it conservatively, the figures is updated? Thank you.

My name is Naomi Takagi from JPMorgan Securities. I have two questions. For the first one, it's about 475, TAK-475. I have one confirmation. The information about back up products a number of times. For the TAK-475 the early back up -- early -- back up products in early stages, are there many of that which we cannot see at the moment?

Well, at the moment the Phase II or Phase I the back up products they go to take some (inaudible) products in the recent future and we don't have any of that kind of. If that's the case then yes we will determine that no-go for the TAK-475 then, scientifically (inaudible) that will be very difficult..

So if that's possible -- if that's the case then would you like to seek further potentiality, or what's your sense?

Well, the background to that is that several of the items that in earlier phase may have a drug being in similar circumstances. And as a result of that we slightly may in a timing to restructure our development cycle. And as I've been mentioning, go or no-go, our final decisions have not been made yet. As a Company, unfortunately, we didn't have the stringent back up our system in place. So that's the reason why we did not have any back up products for this TAK-475 but -- at the moment. [Scrollin C35] inhibitor, I believe -- I still believe that there is a potential there.

Another point about the pipeline, the TAK-242, you didn't mention anything about that, so can I ask you for an update for this product, the enrolment applications or from there what will be the timing which you would acquire for that application?

For the TAK-242 in earlier days the second and third combined clinical tests will be conducted. I believe that we have explained as such in the past. And as result of that the first stage -- the first step data was comprised and we have analyzed them in detail and as a result of that for this drug the second and -- not like second and third clinical tests combined, but really we would like to start this -- we have started this as a third clinical testing. So at this point in time we have already started the third clinical testing phase for this drug. Unfortunately, we do not disclose what will be the timing in which we file for this application -- we file for this drug. So we cannot disclose that to you.

Credit Suisse, Sakai, Mr. Sakai. I would like to ask questions about developments. TAK-475, I want to make sure. AXE increase, 100mg, is seen in patient groups for 100mg, or it's also seen in low-dosage groups? And also CK and [TOT], surrounding liver [adjusting] is also in existence, I want to check that?

As you know, it's a clinical trial for many patients and the liver value, where they get the abnormal value or not, it's not a decision made for each patient but in comparison to the control group.

So as a result, the control group some patients showed abnormal [bodies] and 50mg compared with the control group there was no significant difference. And actually, 100mg compared with the control group, we saw a slight liver increase in the value. [Default AXE] the other increases or abnormal values, as the two cases I mentioned earlier, we saw some movement in other parameters.

So for these clear cases with ALP, it's increased a three times, five times fold for the standard?

Yes, that's right. Thank you.

And in (inaudible) this summer colon -- you didn't get good results on colon cancer. There are no updates on this issue. What is happening right now?

But this drug we really -- it's not the main primary company. The lung cancer patients' clinical trial -- Phase II clinical trial is underway. The results of this will come out at the beginning -- in the first half of next year. So we would like to look at these results so that we can with (inaudible) we want to come up with the next strategy.

Lastly, Mr. Takahara, you want to do a share buyback in a (inaudible) way as needed. I think you should (inaudible) the (inaudible) it's exceeded the share value so share value is low. So what sort of standard are you thinking of share buybacks? Can you explain that once again?

As for the share buyback, when we drew this, it's not something we can do any time we want; there are many restrictions. We have to take these things into account within a share buyback so that's all I've been saying. In -- the shareholders it's -- this is the principle if you can do it on the basis of share (inaudible) and then if you become (inaudible) you do it the next day or like (inaudible) some pharmaceutical company you need to do preparation beforehand and do the share buyback. So I think that's a problem. But if you look at the share values I think they're still cheap, nevertheless.

I don't know how you say in Japanese, but I'm not allowed to translate it in English, but my quick answer is, read my lips. Okay. Thank you.

(Inaudible) from [Schroder] Securities. I'm sorry I'm repeating about this question a number of times. I would like to ask about the TAK-475, whether this function is (inaudible) or is it an add-on to the statin? Can I understand which was the cases that you have done this time?

Well, for the high-dosage administration group, one of the add-ons for both our groups we have seen the number to go up compared with the control group.

Thank you very much. And for the new package is 50mg, 100mg combined together, I understand that's how you filed for? But just to extract the 50mg portion and then file for that and attaching the 50 data to that, isn't it possible to do that kind of [outlays] for the filing?

Well, we do it that we can do that and under such assumptions we have discussed with FDA. However, FDA's idea -- FDA's opinion is that the focus on the 50mg again to make sure that the safety is ensured there.

So as you already know, not only efficacy but the safety within the U.S. and the EU mean you need to have [thousands of] clinical data to be supported. And we need to submit them with the [fixed] one-year data for the safety. And from that perspective the 50mg package alone is insufficient. That's the FDA's comment that we received.

Therefore, with additional testing how much actually -- how much cost do we need to spend for this, including the investment of the resources? And on the other hand the [data] that has an expiration meant that we have in the U.S. market and also the later stage development of our products our priority is what kind of clarity that we are we going to put.

Taking them all into account, we need to come up with a decision of the development policy of this product -- this drug, excuse me. So as I have mentioned a number of times, we do not have sufficient information to have the final decision so we need to have more time.

So, before you acquire the Phase III document -- actually we'll analyze the cost of return, would you [come a bit] of a decision as no-go( Is it a possibility?

Well, it's very difficult for me to answer that right now and also I'm not sure which market are you addressing to, whether Japan, U.S. or EU? So say that is it -- say that it is difficult to do this in America and we might determine that we can do that with the EU or Japan market. So at this point in time, I really understand you are very interested in this drug prospect, but it's not as if we are hiding anything. But at this point in time we haven't come up with any final conclusion. We cannot make any other comment on that.

One more thing about the 422 formulation, is it only the oral intake only?

For our formulation, no.

Other than oral, what kind of product are you thinking of?

(Inaudible) injectables. But at the moment we are just focusing on the oral intake.

I have a question about TAP. In some media already President Hasegawa says nothing to comment was published our (inaudible) will update and 475, the majority of TAP -- you can get the majority of TAP, what (inaudible) affect the future decision?

I'm not sure which IR meeting you're talking about, but the TAP meeting in the last seven, eight years, with partner companies we've made many discussions and all -- we have not come to agreements. So based on this experience, whether it's 475 or expansion TPNA, it should be considered separately from TAP. That's my basic understanding, so it's nothing to do with that question. So that's my answer.

And also TAP future, what will happen to the future? As I said before and also yesterday and as we said in the media, there's nothing to report at this point in time. It's a simple answer and it may not meet your expectation but that's my frank answer.

I've got one more question. The 36% payout ratio this year and, based on the current situation, it's JPY168. It's conservative and if you look at increase in the dividend the dividend allowance you will be -- revise this at the end of the forecast at the end of the year.

36% will be the priority that we will take.

Thanks very much.

My name is (Inaudible) from [GFK] Securities. The [PPP] inhibitors, there are two questions that I have. The first one is SYR-322. According to the clinical trials after 30mg SYR-322 add-on type and 30mg to [increase the] 45, I'm sure that you are doing the comparison testing for those. And I understand that this testing will be concluded at (inaudible). Can I just have (inaudible) when you are filing for FDA?

Well, my -- our understanding is that at the moment we are running many types of testing but at least the third clinical -- third Phase III clinical testing for the filing, the initial filing, are concluded. And currently we are comprising the data package including the safety and efficacy. That's our understanding.

Thank you very much. And the second question is that about the other product compounds, the TAK-475, you mentioned that you would like to add future value to the SYR-322. So what other feature would that be? Are you expecting to see the decrease in weight or what are the things 472 -- excuse me (inaudible) 472?

As you have mentioned, the impact to the weight is something that elder people are interested in. And after (inaudible) [JPP4] we do not have that kind of mechanism. So nearly all such evidence is coming up. But as you have mentioned, not only increase the weight, but whether is it possible to decrease the weight and also, in addition to that, is there any other added value that we can put on? We are currently thinking of that and trying to get data for it. But specifically, the specific area in which that we are focusing we are focusing at the moment is something that we can disclose you in a later time. So I just mention and can say that, we are not just concentrating on the decreasing of the weight.

UBS, my name's [Shima]. The 1 trillion strategy fund how do you use priority for TAK-475 included, how does priority change and on -- in the west you want an expansion policy with a partner or, if you're going to do it in-house, the timeline? How are you going to decide whether it's go or no-go, or what sort of products will be you [put on the fences]?

However you expand, as I've explained, one is your presence expansion in Europe and also the development, especially in the later stage products is acquired all in-licensing. And another thing, the development technology companies acquiring them, only oncology or CNS fields, a biotech company as (inaudible) acquired them where we are not very -- where Takeda doesn't have an expertise. That's where the investment will be made.

I have made comments on this repeatedly before. How we prioritize those three. This is like a living creature, so with an opportunistic approach, where we have the opportunity that will take priority where we make decisions. That will be the -- that will be how we will do consequently.

And as for the question on Europe, organic expansion and also the expansion by acquisition, we will pursue those two as we have been saying before. And also M&A, there's a lot of approach and screening and discussions have been held behind the scenes but, these days, it hasn't actually come to be realized. The business doesn't wait.

So what we can control, which is organic growth, we will steadily follow this through. And also if another opportunity becomes highly possible that can be realized, then we will think about how to resolve this issue. And this is the direction we are actually taking right now.

In the west the -- if you look at the drug price, even if you have a blockbuster product, if you don't have good line-up -- a large number of line-up, the contribution is difficult. This has -- the generics -- you have to sell those things as well, otherwise, you won't be -- you won't get merit in ED.

The specific target in the European companies, as you said, the cash [card] products are owned by many companies, that's true. However, if it's a generic, or whether it's in a generic business or not, it's a difficult decision to make. But with that aside, if we acquire those companies amortization, PL, bottom line impact and also organic growth and advance investment the impact on the bottom line which is -- we have to compare them.

It is true that cash flow, where the company with cash flow, cash cow, if you can acquire those companies that's the best thing. But for us, the [high price] synergy or coverage -- presence coverage, then the issue of cash [growth] is not -- it doesn't take priority. That's how we look at it.

Any additional questions that you would like to have addressed? Okay then, thank you very much for participating, despite your busy schedule. With this, I would like to conclude Takeda's Fiscal 2007 -- Fiscal Year 2007 financial result reporting. Thank you very much.

Speaker statements on this transcript were Interpreted on the conference call by an Interpreter present on the live call. The Interpreter was provided by the Company sponsoring this Event.