Takeda Pharmaceutical Co Ltd (TAK) 2008 Q4 法說會逐字稿

(audio starts in progress). First of all, I would like Mr. Takeda to make the opening remarks.

It's been a long time since I last stood here. As I retired as the Chairman and since Mr. Hasegawa became the President, I've been absent to this meeting all the time. However, the recent announcement of Millennium acquisition and since that announcement was made some people seem to think that the acquisition price was too expensive according to my understanding, some whispers in the market. And I thought just I'd like to spend one, two minutes before this meeting to talk to you directly from this stage. That's the reason why I am here.

It goes without saying that the mission of a pharmaceutical company is to eliminate suffering of patients or alleviate suffering of the patients. In the modern medicine, one of the major diseases causing people to suffer is cancer. To overcome this sickness or to alleviate the suffering of people as much as possible is indeed a contribution to patients and also a contribution to society itself. I always believe in that.

Because of this, my firm conviction for some time now, maybe the last four five years, I've been asking that the next challenge for Takeda or next pillar for Takeda should be oncology. And Mr. Kitazawa is there, the Managing Director when I made that request to the people in the company. If that can be achieved then Takeda can make even greater contribution to the people in the world and also Japan can be recognized much more worldwide by contribution in oncology that will highlight the presence of Japan. And we will receive much more recognition and respect from the world.

And in order to achieve that vision we need to establish and strengthen platform technology and marketing know-how as much as possible in oncology and as soon as possible. That is the background of the recent acquisition. Mr. Hasegawa the President of Takeda made this deal. He has been very energetic in executing the ideas and this deal was closed successfully. And it may sound strange that I say this but he did a very good job.

Ladies and gentlemen, I hope that you understand our determination and I hope strongly that you support Takeda's management with trying to achieve our vision. And this is my sincere and strong request to all of you. I hope that you will continue to provide your support and advice to us. And that concludes my short statement. Thank you very much.

Then from Mr. Hasegawa, he's going to explain about the key management policies.

Last week we had this earnings report meeting and in that meeting I have explained about this. Probably you may have an overview or an idea about this report and I am sure that you have already created your opinion -- excuse me, the questions. So I would like to make it brief for my explanation part. And I'm going to spend about 15 minutes to give you the overview of this earnings report and then Takahara-san is going to explain about our numbers and Mr. Iwasaki, the Strategic Product Planning Department person is going to explain about the pipeline. So probably the Company side is going to spend about 30 or 40 minutes and the remaining 30 minutes is going to be spent for the Q&A session. So please turn to page one of the slide.

This is a diagram that I have shown you a number of times, so I would like to make just two points about this slide. So in the past we have our own definition about this in-house ethical drug sales. As mentioned on the right hand side of this slide, we call it in-house ethical drug but because that was 50-50 consolidated basis and it was not the subject of the consolidated basis company so that's the reason why we have made this term as in-house ethical drug sales. But because that TAP was incorporated so going forward what we are going to use the term here is the consolidated net sales of ethical products excluding sales as a distributor to wholesalers.

And we are going to use JPY2 trillion target for year 2015 and JPY1.4 trillion for the amount up to 2010. So there is no change to our target. So this new consolidated net sales of ethical drugs products, it would not include distributor sales to the wholesalers.

And another point that I would like to make here is that in order to achieve this world-class pharmaceutical company position our basic understanding is that we are going to achieve this through the organic growth. So should there be any platform technology that is short or the geographical coverage that we are not up to the state that we would like to or the presence of our franchise, if it takes from the -- time-wise and effect-wise, if we deem that it will be better for us to purchase those platforms and areas, then we are going to do that M&A. That's our basic understanding. And when we have done that kind of investment in the past, that's the basis of our understanding too.

And you may ask what we are going to do going forward but for the areas that we are not up to the ideal state, I believe that we have got one cycle of the M&As for the areas that we needed. But for the problem about the European coverage I would like to address that when we hear the question from you.

And next one, this slide is mid term business plan '06-'10, major initiatives. This is the result that we have made for the enhancement of pipeline from FY '07 and after. Those are the achievements that we have made that is mentioned on that slide. Especially for the oncology area that we deem as our next generation's important area, these are the things that we have done. The U.S. Amgen's acquisition -- excuse me, the in-licensing of the U.S. Amgen's 13 products. And also we have purchased Millennium and also from the Cell Genesys -- we have acquired GVAX from Cell Genesys and we have in-licensed that product too. And for the CNS as I have been explaining from last year for the meantime Phase III of the Lundbeck product that is the mood and anxiety disorder we have in-licensed these products too. So we are going to quickly launch these products in the market and also we will try to accelerate this process.

And for this pipeline activity -- excuse me, for the number Mr. Takahara is going to explain about this. So I'm going to skip this slide. And number four the result of FY '07 and our projection for FY '08, these two -- just take a look at those numbers. I am sure that you have thoroughly analyzed the results that we have announced last week. But this review is going to be explained and addressed by Mr. Takahara so I'm not going to mention about this.

And the next page is FY '08, the major management tasks. Those are the three major things that we are going to do. One is establishing a path for the growth in trilateral markets, two is strengthening in-house R&D activities and three, improvement of operating structure and acceleration of HR department. This is something that I would like to touch upon.

The first one is establishing a path for the growth in trilateral markets. The biggest challenge here is U.S. and Europe. In the U.S. -- the U.S. business restructuring we have seen a track for this. And on April 30 TAP split off, a deal was signed with the U.S. Abbott. So this deal was closed. And at the moment the new CEO of our new TPNA, Alan Mackenzie is going to stay as the main person. And he is conducting the integration process proactively at the moment. So far our target is that by July 1 -- the new TPNA fully integrating the TAP is going to be established from April 1. If possible we would like to follow this schedule but this is a very big organizational restructuring so it may take about an hour -- one month at least, excuse me.

And about the Millennium acquisition, this is something that I have announced yesterday today and we have made a press release about this. Delivery committed, if we were to include that it's over 90%. But while we are waiting for that and if we're going to wait for the closing of this deal, then the tender offer period was stopped once, but for the sales division it says that they are going to extend three days. So Friday last week, Monday or Tuesday this week, we have extended three days of our tender offer period. And we are sure that we are going to surpass 90% for the [TOB], so after that on May 14, shoot for merger. In this manner we are going to execute the Millennium acquisition.

And with regards to Japan, the global number one, to keep this position, I missed the order -- mixed up the order. So shall we go on to the next slide?

I have already explained about this so let's go to this one about the Millennium. I have briefly touched upon that right now. But for Millennium it is going to be the core business unit of the Takeda Group, the oncology franchise. And Millennium has those areas that is important for oncology area but Takeda does not have so far. So for example the development, marketing and Millennium themselves have the production capabilities but the production of the (inaudible), the controlling capability of those (inaudible), Millennium has those capabilities especially for development area. They have been able to launch their products within 4.5 years, launching Velcade from Phase I to the launch of the product. They have this kind of a track record and also when we take a look at their current pipeline, they are on track. They are on schedule. So that's the track record they have. And also for the marketing purposes they have a very unique product. And among oncologists and hematologists, Millennium is highly appreciated for high quality sales force and high quality company.

By acquisition of Millennium the pipeline is much stronger for Takeda and also some products including Velcade in the market and also our pipeline is strengthened. And Velcade is expected to gain first line indication and I suppose June 20 is the date that FDA is announcing. And as we look at the data we can expect very positive feedback from FDA. So we are expecting that. Of course under the current environment you never know what is going to happen until you actually listen to the answer from FDA. But if it was, the sales will be further accelerating. While looking at first quarter of this year alone compared to the same period last year, 40% plus growth already. And compared to the first quarter 2007 -- fourth quarter 13% growth. Therefore that was achieved without line extension of the first line. So the guideline of our JPY32b to JPY34b, that could be exceeded. And if the first line approval is gained then we can expect further upside from the sales.

And in the research divisions and also San Diego, Cambridge, those research centers also have various compounds and Millennium will be taking care of those. And other than oncology for Millennium, those compounds will be developed by TGRD in the U.S. So we have clear roles and responsibility defined already for the operations. And of course Millennium's CEO, Deborah Dunsire, she is the CEO and MD and she will continue that position and she will report to me. So that reporting line is established. And we discussed with the management of Millennium and key scientists and key personnel. We have discussed and they have identified 100 out of 1,000 key researchers can be retained. That has been agreed already. Therefore as of now, intangible assets, human resources with high potential we have been able to retain them and we expect we can expect very good synergy.

Can you go back to the slide? Here one point synergy of Millennium and Takeda, that's the title of the slide. What I expect through this acquisition is not necessarily cost synergies. Maybe administrative overlap can be saved after streamlining. But synergy is in terms of R&D platform and the research platform and of course from there we can expect synergies. Sales and Marketing, R&D, marketing in those areas, we do not have track record in some of the areas. Therefore the synergies from those areas is the expectation from our side.

And in close cooperation with Millennium we will look at the projects in oncology and based on Takeda Group's strength we will identify our targets. And in oncology we will look at the optimal research portfolio aiming to create a foundation of research that is capable of producing several INDs annually from this fiscal year onwards.

In oncology the pipeline is not just Millennium but also we have various product introduction from Amgen the yellow part. And we can see the pipeline is much stronger and we have substantially increased just in a short period of time. Especially in oncology the risk is much higher than the other fields and we do not think this is sufficient yet. And I do not mention here in detail but in preclinical area, our own R&D has some very good candidates close to basic research and close to clinical. So we hope to accelerate R&D in those areas so that we can even strengthen our pipeline.

Next slide is Velcade. I briefly mentioned this so I won't go in detail here. The profile of this product and competitive environment when that is observed in the U.S. not so distant in future. I wouldn't say when. But in U.S. alone JPY10b top figures is possible.

Second is strengthening in house R&D activities to consistently launch profitable products from the in-house R&D pipeline is of course the most attractive prize for an R&D oriented company. And that is basic and that is most important for us. To achieve this and open new opportunities in the future, each researcher must try to do their best and Takeda will continue to increase productivity. And the research division of Takeda, Takeda San Diego, Takeda Cambridge and Millennium should have very healthy competition in collaboration to stimulate creativity and innovation.

Four, five years ago I had this vision and that is coming into reality now. Those divisions have different platforms and they have strengths in different fields. But still the platform technology should be mutually utilized and be interactive so that each progress should be accelerated. We think that is quite possible and for the acquired company we provide good and substantial autonomy. And we of course will have benchmarks or goals to achieve certain milestones to certain timelines. And of course in terms of number of resources and management where it should be most efficient to develop certain candidates and compounds in that way we can encourage healthy competition. And for some of the current studies lacking we can mutually exchange researchers so that each can learn from each other. That way we can accelerate R&D. That is our plan.

Another target, that is R&D to be accelerated beyond 2011 and onward. As you can see in this slide, we have a very strong pipeline in the later development stage. But as you have sometimes pointed out Prevacid is going to expire in the second half of 2009, and Actos and also Candesartan in U.S. because it was transferred to AstraZeneca in terms of marketing and that is 100%. Of course we are impacted in terms of exports impact but because of this transfer the impact is minimum. And also because of AstraZeneca's reasons, the potential of this product that is fully executed in U.S. and Europe. That has not been the case in U.S. And various possibilities to resolve that have been discussed between the two companies. But because of AstraZeneca's situation we can't really do that and that in a way minimizes the impact of patent expiration from Takeda's viewpoint.

So 2011, 2012, 2013 the sales may go down and that is the concern that you have expressed already. However, we as the management team of Takeda will not make that happen. We have a very strong determination that we will continue sustainable growth 2011 and 2012. And we are taking various actions and measures. I cannot make a commitment now at this moment but as you can see from this slide, we have a very strong pipeline and those that are in later stage. And progress has been good so far. Therefore we think we can overcome patent expiration impact.

And the third point is management structure to be strengthened. We want to become a world-class company with a strong presence and that was our choice. And at that time we think of Takeda's way of global management and the structure to support that. We've been always thinking about that. And this summarizes our global company structure. Of course organic growth and for what we are lacking we will open to corporate acquisitions if and when buying them is the most effective approach for supplementing and strengthening our products and basic technology to expand into new markets.

At the same time, when such investments are necessary we will carefully examine the cost benefits. We never change the standards of our investment selection. We think of various possibilities and dedicate all of our resources to execute based on the priorities we established. As the Chairman mentioned the Millennium acquisition and some people think it was too expensive, the premium too high according to some people. But I don't think so. I am a contrarian. If people say like that I'm going to show you by the result. So please look forward to the results.

And another plan is we have established efficient marketing and production infrastructures, with a force in Japan as a base. We will construct and improve our own efficient global infrastructure. And we will encourage all employees to learn best practice from one another on a global basis and share them together throughout the Company.

TPNA's CEO Alan Mackenzie, I know him for twenty years and we've worked together for twenty years now. In the beginning he was Vice President and Sales Training Director. I think that was his previous career. That's how he started his career. And he himself is aware of Takeda's management and also Abbott's style of tight management, he is much experienced in that. Therefore the new TPNA will have a very lean structure in terms of management. I look forward to that.

And then this is at the heart of being an R&D driven company, we consistently generate innovative products from our R&D pipeline that meet the needs of patients the world over. We want to answer to -- we want to provide the answer to the unmet needs. We have now the footprint and we would like to achieve our visions and goals. And this is our plan. By 2010 we want to be the top three worldwide. By that time I will be just looking forward to the results at the Takeda Company. I hope that will be achieved by that time.

So I strongly feel that the management in U.S. is top down led by CEO. You make board decisions in a speedy way and you do execution. And if you try to do it by Japanese organizations, I'd say I can make quick decisions and try to lead the company, and the Japanese company and the Japanese employees may be not really following that in a full way. So there is a limit to that. But in U.S. business, U.S. style is okay. But in Japan and if you want to lead the Japanese people you need to have a very good medium to long term business strategy and detailed plans. And this is how you follow and this is where we will reach when things work. And if we don't work there is this contingency plan and everybody agrees to try to do execution by team work. I think that's the best way to lead a Japanese company. That is my personal feeling and we would like to continue that as the background of the management of Takeda.

And also in U.S. company when a CEO changes the opinion statement changes quickly. But that should not happen because a pharmaceutical company requires consistency and continuity. And we respect that very much.

And next is the shareholder -- returns to shareholders. Based on our mid term and long term plan we will provide stable returns, stable distribution. We have announced based on this plan 45% is our dividend payout ratio by FY '2010. That remains unchanged. But because of the Millennium acquisition in process R&D and intangible assets there are some special factors in the -- that should not be reflected on the payout ratio. Rather we should do it on cash flow basis.

So for 2007 as was announced JPY168 will be the annual dividend. That is 40.1% of the profit. That is before amortization. And for 2008 JPY170, that is 41.9%. That's the plan.

And as for the stock buyback as was just announced, we have done buybacks and most of that we will have some odd stocks, but except some fractions we will cancel almost all of the currently held treasury stock, which is about 6.2% of the overall issues. And last week we also made an announcement starting from today 80m shares or JPY100b whichever reaches faster will be executed as a buyback.

Lastly from 2009 to 2010 guidance, as Takahara will be explaining later we still need to consolidate some of the numbers including amortization. We need to establish the final numbers with auditors. And this is basically a guidance. I hope you understand that point. So this is the guidance for FY 2009 and FY 2010.

That is all from my presentation. Thank you very much.

And next we would like to ask Mr. Takahara, General Manager of Finance and Accounting to give us the overview of the earnings report.

This is Takahara. I would like to take this opportunity to obtain about Takeda's consolidated results for fiscal year '07 and outlook for fiscal '08.

For the fiscal '07, on a consolidated basis as you can see from this table, Takeda achieved its 17th consecutive annual growth in net sales and net income has also its third consecutive annual growth. These figures being the highest net sales and net income ever recorded. R&D expense increased substantially from the previous year. As a result operating income decreased for the first time in 16 years and ordinary income decreased for the first time in three years. Net income increased by JPY19.6b or 5.9% from the previous year. This increase was because of additional taxes of JPY57.1b were paid in the previous year for tax collection under the transfer pricing taxation system.

And now I would like to discuss the changes in sales. Net sales of ethical drugs increased by JPY66.2b or 5.8% from the previous year. Sales in Japan increased by JPY14.7b and sales in overseas increased by JPY51.4b. Sales by the Consumer Healthcare business increased by JPY3.1b from the previous year supported by the new products of Actage SN tablets and Scorba EX series as well as sales increase of the other major products.

Next I would like to discuss ethical drugs on a consolidated basis excluding sales of products for which Takeda acts as a distributor to wholesalers. Sales increased JPY69.3b or 6.9% to JPY1,079.8b from the previous year. While growth was the greatest in the U.S. growth was achieved in all of the four markets of Japan, the U.S., Europe and Asia.

Now I would like to further explain details of the sales of -- by TPNA. Sales of the Actos family increased by 415 -- excuse me $418m or 17.7% from the previous year and also the sales of Amitiza increased by $122m. Consequently total sales by TPNA increased by $495m or 18.9% from the previous year. On a yen basis, TPNA sales increased by JPY49.9b or 16.1% despite a drop of JPY8.5b due to the appreciation of the yen.

Next I would like to explain the results for Takeda for international strategic products. In line with our newly revised definition of sales of in-house ethical pharmaceutical products, this table shows consolidated net sales excluding sales by equity method affiliates such as TAP. So this is the changes that we have made this year from the previous one. So assuming TAP's integration we have make it in line with consolidated sales. Both the Pioglitazone and Candesartan achieved strong sales growth both in Japan and in international markets. Sales of Lansoprazole and Leuprorelin decreased due to a sales decline to TAP and an effect of off patent Lansoprazole in Europe.

I would now like to provide further details of changes in operating income. The gross profit ratio improved by 1.2 points and gross profit increased by JPY70.7b or 6.9% from the previous year. R&D expenses increased by JPY82.5b or 42.7% from the previous year due to license agreements concluded with Amgen and Lundbeck. Selling, general and administrative expenses increased by JPY23.6b or 6.3% mainly due to increase in selling expenses in the three markets of Japan, the U.S. and Europe. As a result operating income decreased JPY34.4b (sic - see presentation) or 7.7% from the previous year.

In the next slide I would like to explain the changes in net income. Equity and earnings of affiliates decreased by JPY9.5b from the previous year mainly due to decline from TAP. Furthermore, other non operating income decreased by JPY3.7b from the previous year. As a result ordinary income decreased by JPY48.6b or 8.3%. Net income increased by JPY19.6b or 5.9% from the previous year. This increase was mainly because additional taxes of JPY57.1b were paid in the previous year for tax correction under the transfer price taxation system.

Next I would like to discuss our financial forecast for fiscal '08 in detail. The financial forecast for fiscal '08 took into account the following factors. One, the division and conversion of TAP joint venture into a wholly owned subsidiary and two, the acquisition of Millennium Pharmaceuticals through a tender offer. Before explaining consolidated financial forecast I would like to provide a general overview of the accounting procedures applied and effect on our profit subsidiaries. With regard to asset values, asset allocation and amortization method applied I am unable to provide you with the definitive figures since they will be determined after asset valuation by third party external specialists and audit by independent auditors. Accordingly, the figures that I provide you today are based on the best current in-house estimates for each.

Now I would like to talk about accounting procedures related to the division of TAP. As a result of the division of TAP, Takeda acquired Prevacid and a pipeline for TAK-390MR and other drugs in the left side of this slide. And this is almost 50% of the total TAP. And Lupron business as shown in the right side of the slide is assigned to Abbott which we owned previously. The value of the Prevacid business is included in the intangible fixed asset at the gross value before tax and amortized over a given period during which its value continues. The value of the pipeline acquired will be expensed fully as in process R&D expenses in fiscal '08. The gain from the assignment of the Lupron business will be recorded as extraordinary income in FY '08.

The division of TAP is an equal value division. Therefore value adjustment is necessary to make the value of the portion assigned to Abbott equal to the portion acquired by Takeda. This adjustment will be made over the next five years. Specifically at the time of the TAP division temporary liabilities were recorded on the balance sheet and a fixed amount determined dependent on the sales of Prevacid and other products and the progress of product developments will be paid to Abbott over five years from fiscal 2008 to fiscal 2012. Because this payment is already accounted for only on the balance sheet, it will have no impact on the profit and loss statement. In fiscal 2013 a final adjustment will be made for the variance between the theoretical adjustment value at present and agreed amount actually paid. That's all for the outline of the accounting treatment relating to the TAP division.

In the next slide I would like to explain accounting treatment of the acquisition of Millennium as a wholly owned consolidated subsidiary. This slide shows how the acquisition value of $8.8b will be allocated if Takeda succeeds in acquiring all issued shares of Millennium. The total value of Velcade and [Integral] which are already on the market is $6.8b before tax. This will be recorded as intangible fixed assets and amortized over a period determined for each product. The value of pipeline is $1.2b and it will be expensed fully as in process R&D expenses in fiscal 2008. The value of this pipeline includes the value of Velcade's first line indication for which an application has been submitted to FDA.

The net value of assets, including cash and deposits and liabilities held by Millennium as of the tender offer date, in other words $0.9b, will be recorded on Takeda's balance sheet. It will have no impact on the profit and loss statement of Takeda. As a result of these transactions, goodwill of $2.3b will arise, which will be amortized over 20 years. That's all for the outline of the accounting treatment of the acquisition of Millennium as a wholly-owned consolidated subsidiary.

Next I will explain the impact of the inclusion of TAP and Millennium as consolidated subsidiaries on the operational result of fiscal '08, including amortization of intangible fixed assets and in process R&D expenses. These figures represent impact over 11 months from closing date of TAP's division, that's April 30 and the dealing date of the tender offer that is based on May 9 and the end of FY'08. It is expected that $0.3b of amortization of intangible fixed assets will arise from TAP division and $0.7b from the Millennium acquisition. Tax effects that will arise from amortization of intangible fixed assets. An amount equivalent to the tax corresponding to the amortization expense will be deducted as tax and other adjustments. Amortization of goodwill relating to Millennium totals $0.1b. Amortization of intangible fixed assets and goodwill will be included in the selling, general and administrative expenses account. It is expected that in process R&D expenses of $0.5b will arise from TAP division and $1.2b from the Millennium acquisition. In addition, gains of $0.6b resulting from the assignment of Lupron and other businesses will be recorded as extraordinary income in TAP.

Next I would like to discuss the overall impact of these transactions including other factors, in addition to non-cash items. In estimating the impact the assumed exchange rates were $1 to JPY100. It is expected that net sales will increase by $180b in total -- excuse me, JPY180b in total as a result of these transactions. In regards to TAP consolidated sales will increase JPY130b mainly due to the inclusion of Prevacid local U.S. sales. The Millennium acquisition will increase the sales by JPY50b mainly due to the inclusion of Velcade sales in the U.S.

In process R&D expenses and amortization of intangible fixed assets will have a negative impact of approximately JPY200b on operating income, almost all of which results from the Millennium acquisition. Ordinary income will be reduced by approximately JPY250b due to discontinuance of recording of equity earnings of TAP and an expected decrease in asset investment income because cash at hand decreased as a result of the Millennium acquisition. Consolidated net income will be reduced by JPY170b, although net income of TAP will increase JPY10b due to the gain from assignment of Lupron and other business. Net income at Millennium will decrease JPY180b.

As the value of TAP has been divided equally, the effect on operating performance is neutral and dependent, to some degree, on our realization of strategic synergies. Consequently the effect of the TAP division will be accretive for net income from fiscal '08 and accretive for operating income and ordinary income from fiscal '09. The Millennium acquisition is anticipated to be accretive to income from 2011 or 2012.

Looking towards the outlook for the consolidated result for fiscal 2008. In forecasting FY'08, the assumed foreign exchange rates were $1 to JPY100 and EUR1 to JPY155. Due to the impact of the restructuring of TAP into a wholly-owned subsidiary and acquisition of Millennium as a wholly-owned subsidiary, consolidated net sales are expected to increase by JPY195.2b or 14.2%, or JPY1.570 trillion. Operating income ordinary income and net income are expected to decrease significantly in order of 40% to 60%.

EPS expected to decrease by 54.1%. However EPS, excluding effect of extraordinary profit, loss and other special factors which has been selected for our management guide -- indicator, is expected to increase by 6.7%.

That's all from me. Thank you very much.

Next Mr. Masato Iwasaki, General Manager of Strategic Product Planning.

My name is Masato Iwasaki, General Manager of Strategic Product Planning. Let me introduce the current stages of our development pipeline. We are focused on R&D pipeline which is our source of growth, trying to ensure the earliest possible launch of new products into the market. And Takeda continues to invest management resources in the four core therapeutic areas that you can see here. This is achieved through three strategic pillars, enhancement of in-house R&D, maximization of product added value, and strengthening of in-licensing and alliance activities. Now let me explain current status of each franchise.

Franchise I is lifestyle related diseases which will continue to be the most important therapeutic area for our Company to the future. In the diabetic area end of last year we submitted an NDA of the DPP-4 inhibitor, SYR-322 to the FDA, U.S. Takeda have both a thiazolidenon -- thiazolidone derivate Actos and a DPP-4 inhibitor on the market which will enhance our global leader position in the diabetic franchise. And this is a particularly important area for us to achieve sustainable growth in the U.S.

Next is in the hypertension area, another important area for lifestyle-related diseases and disease CV, cardiovascular. In this area we have the follow up compound to Blopress, TAK-491 entered into Phase III clinical studies in U.S. and Europe July last year. TAK-491 is a strong anti hypertensive action than existing ARVs and will be positioned as the most suitable ARV for the diabetics. And in U.S., by building on the existing franchise established by Actos, TAK-491 will help Takeda to expand franchise into broader lifestyle related area. And in Europe TAK-491 is expected to become the successor to Blopress. It is tough to penetrate the anti hypertensive market with only a single agent. Therefore in addition to a single agent product, we are pursuing the possibility of various fixed-dose various combination drugs for simultaneous launching.

Next is Takeda's Franchise II, oncology and urology. In line with our life cycle management strategy to maximize product value, in March this year our six month formal (inaudible) received marketing authorization in France. As President Hasegawa mentioned, we are of course further trying to enhance Takeda's [core] strength in lifestyle related disease. And we are now aggressively working to position Takeda as a leading company in the oncology area where the growth potential is much expected.

This is our pipeline. When Velcade and other innovative compounds from Millennium Pharmaceuticals are added to this list, Takeda's oncology pipeline will be further enhanced. And some compounds are in the later stage of development. Vectibix and AMG706, which are licensed in from Amgen, and they are both in advanced development stages. And for GVAX, the prostrate cancer vaccine licensed in from Cell Genesys, will be explained later in detail.

Next is Franchise III, CNS and bone joint diseases. At February of this year Takeda submitted NDA to the Japanese regulator for the in-house product Ramelteon as a treatment for insomnia. Ramelteon is already marketed in the U.S. by Takeda's wholly-owned subsidiary TPNA under the brand name Rozerem. In Europe an application was already submitted for Ramelteon in March 2007.

In September 2007 Takeda entered into an alliance with Lundbeck of Denmark for the co-development and co-commercialization of compounds for mood and anxiety disorders in U.S. and Japan. And one of the in licensed compounds Lu AA21004 entered Phase III trial for depression in December 2007. The clinical protocol consists of several studies, with the total number of subjects exceeding 2000. Lu AA21004 has a novel structure and mechanism of action compared to other anti-depressants currently available on the market. And it is anticipated to be highly efficacious while maintaining an outstanding safety profile.

Next is Franchise IV. This is gastroenterological and other diseases. December 2007, the joint venture company TAP submitted an NDA to the U.S. FDA for Takeda's in house compound TAK-390MR. Takeda also initiated a Phase II trial in Japan. Once marketing approval is obtained for this compound, the Company will be able to further strengthen the GI franchise established in U.S. by TAP.

Let me explain the three compounds newly added to our oncology pipeline Vectibix, AMG706 and GVAX cancer vaccine.

Vectibix was in licensed from Amgen as an endothelial growth factor receptor, or EGFR inhibitor. This is a recombinant human monoclonal antibody. In comparison to its predecessor, the chimeric antibody Erbitux -- and there are other compounds and developments -- and compared to those compounds, Vectibix is the first approved human antibody in U.S. to target EGFR and has a superior safety profile. A Phase III study in metastatic colon cancer was conducted and it compared concomitant administration of Vectibix with the best supported care to the best supported care alone. The results showed a 46% improvement in progression free survival with Vectibix.

Next is AMG706. This is an anti-angiogenic agent that targets the VEGFR 1-3 and was in-licensed from Amgen for the global market. This agent is highly selective and can be administered orally. Three anti-angiogenic agents have been approved already for colon cancer and other cancers. And their efficacy has been shown against numerous other cancer types. AMG706 itself inhibits VEGFR 1-3. Also it demonstrates an outstanding inhibitory effect for PDGFR, platelet derived growth factor receptor. And once daily regimen can be efficacious, in Phase II trials no severe adverse drug reactions were observed. And its efficacy was confirmed as a monotherapy for thyroid cancer and gastrointestinal stromal cancer. And currently Phase III trials targeting lung cancer are ongoing.

Last one is GVAX. This was in licensed from Cell Genesys as a tumor cell derived cancer vaccine. Targeted for a wide variety of cancer antigens, it activates the immune system of patients, thereby exhibiting its anti-cancer effect. GVAX is, referring to technology, this is a vaccine for prostrate cancer. It is comprised of two prostrate tumor cell lines that have been modified to secrete GM-CSF, or granulocyte macrophage colony stimulating factor, an immune stimulatory hormone that plays a key role in stimulating the body's immune response and then irradiated for safety. GVAX for prostrate cancer is being developed as a non patient-specific, off-the-shelf pharmaceutical product.

Currently Phase III studies are ongoing. And the first trial VITAL-1 completed enrollment of 626 patients in 2007. By the second half of 2009 final analysis should be obtained from this study. The second one is VITAL-2. And it is anticipated to complete enrollment of 600 patients in the first half of 2009. And interim analysis is to be performed. Thank you very much.

We will now begin question and answer session. (OPERATOR INSTRUCTIONS).

My name is Urushihara from Nomura Securities. I have one question, SYR-322 application status. With the interaction with FDA, do you hear anything from FDA as the problem to get approval from FDA for this SYR-322? Can you hear me?

So as I have been explaining, December last year we have applied for the application, as you have mentioned. We just started interaction over FDA. But so far we do not hear any problems from FDA. So just this approval process is smoothly done at the moment, I guess. That's my understanding.

About CAG-390MR. And clinical studies use placebo as comparator. So I wonder how you differentiate this compound from others? What are your marketing strategies against the competitors in the market? Can you show us about your plan?

As you pointed out for the clinical development and the comparator, most of the comparators are inactive placebo controlled. But in addition to that we have a comparative study against Prevacid, that is also done. Maybe you have read abstracts, and I guess Prevacid's efficacy is superior in several aspects. So that can be appealing to the market as a differentiating point.

My name is Kenji Masuzoe from Deutsche Securities. I have three questions. The first one is about the sales. When we take a look at FY07 you are short of the target you have set for FY07. So can you give me the details, detailed information of which area has contributed this shortage in achieving this target?

So when we made our interim report I mentioned JPY1,400b. So it's JPY25b short of the target. The detail is JPY10b for Japan and JPY15b in U.S. That is the number that we didn't reach for the target. And is there any special reasons for that? That was your question, and for the domestic market there was impact on revision to NHI, and probably that's one of the reasons. And for the overseas market, somewhat of the foreign exchange fluctuation contributed this. When we announced interim report of JPY110 for a dollar but as a result we ended up with JPY109. So JPY2b to JPY3b foreign exchange fluctuation contributed to this shortage of target.

And TPNA's Actos, in June we have seen significant growth in -- a slight [increase] in our sales area. But the sum of storage of the stock was over the ideal state, ideal line. So for the latter half of this year we have recovered -- or gone back this top level to the ordinary level.

Now second question about the combination drug SYR-322 and Actos, and can I understand that this is in smoothly progress and you're going to file for this, this year?

This is in progress, definitely.

And (inaudible) mentioned about the factory, what's been planned? So is it as far as you can see?

Actos in (inaudible) once daily, is it possible. Yes, we think so. The inspection, we pass inspection finally and therefore our products will be soon approved. In one, two months you will see the approval or faster than that. Well, shorter than one or two months would be difficult but within that range. Thank you very much.

(OPERATOR INSTRUCTIONS).

Hidemaru Yamaguchi from Citigroup. For the Millennium and TAP goodwill amortization for March '09 versus the procedurally arrangements that's going to change. And how about the impact? You follow Japanese style accounting, there's no impact to that?

After this April we have changed to apply the Japanese accounting rule there. And specifically speaking the changes made to the goodwill portion are in an earlier slide for the Millennium, JPY10m impact for the Millennium for annual terms. So Japanese accounting standard, that's the difference between Japanese accounting standard and U.S. accounting standard. For Japanese accounting standard, we need to amortize that for -- in 20 years. Otherwise they take it into account when we expense that.

And with regard to Millennium, there are some people who are experts about Millennium deal, but there are some people who do not know about this. So if after you have completed this acquisition 100% then can you set out a Millennium day to explain about the content of the Millennium to the investors? I just wonder whether you have any plan of having that kind of a meeting or briefing to us?

Thank you very much for your valuable opinion. We will like to take it back and consider about that. And we have received that kind of request from overseas, so we will like to take considering about it.

And the last one about the fundamental things, Actos is seeing a slowing down Pioglitazone portion and 322 DPP-4 is increasing. So that's the U.S. state. Of course SYR-322, if that is launching there can be -- that a shift can be made for that. But is there any initiative to increase Pioglitazone going forward?

So when we take a look at it on a quarterly basis, FY'07 first half and second -- first quarter and second quarter we have seen 25% equally and that's 15% in third quarter and fourth quarter it's 8.3% or so. So that's that transition that we have been seeing. And of course for the first and second quarter, as Takahara mentioned earlier, the pipeline has expanded quickly, so that was not in line with the increase in the prescription that we have seen. In other words, that in third quarter, fourth quarter, intentionally we have made adjustment to the start. And ultimately, because there was a short and at the end of March we have intentionally reduced JPY100m or so. So then when we take a look at increase in prescription, that increase is not there so much.

So is there any initiative to recover that?

There is no magic to do so. But one thing we can do, I'm not sure whether you can do this or not, but April 1, we have increased our price by 5% or so. And the other one is [periscope], the (inaudible). So as an orally-administered a drug we have applied for the clinical testing and that's the [periscope] one. And we -- if we can add into the labelling then there might be some changes that we might see. So including that kind of factors, if possible we would like to achieve double digit growth for FY08. And that's how the local people are planning to do.

I want to ask about R&D expenses for the next FY. For March 2010 what is going to be the range? Do you think it is going to exceed JPY300b for mid term and long term? And you have various areas and oncology focus? I think it is going to expand. What is your opinion regarding that?

We are based on the assumption that we can succeed in acquisition of Millennium and that is the basis for calculation, but one-time events in process R&D and amortization. If you exclude that, then 20% of sales should be the proportion of R&D expenses. But maybe small fluctuation year-by-year. But it will not exceed, it won't go up to 25%, so 20%, around 20% is our guideline so far.

My name is Sakai from Credit Suisse. I have one question with regards to Actos. So what do you think about the Pioglitazone one, the (inaudible) one as mentioned in Germany? So I just wonder what is your thought about that?

As you mentioned regarding Pioglitazone for female, there could be some risk reported to us about bone fracture. This time this case of male was reported and yet the detail is not yet available. And our data does not suggest any impact on male cases. So we have some objection to that and we have reported that to the regulatory.

To the FDA?

EMEA.

Thank you. And for this FY, you have the guidance, slide 13, TAP JPY130b and Millennium JPY50b. And that is the upside for the sales. But for TAP JPY130b, what is included?

And also the Millennium sales, what is included in the sales, Velcade, JNJ portion is excluded, net sales will be included as Millennium contribution?

So first of all, that TAP JPY130b increasing sale factor. So in accordance with this ideal that we are seeing this time, what's the impact it's made to the sales is the measurement here. It's JPY130b number, going to be replaced with TAP's sales there. So the local sales and export from Japan, the difference between that is JPY130b. But this just covers the 11 months.

And also for the Millennium JPY50b, that's our sales, Velcade sales price and royalty on licensing. That is the royalty income that Millennium received of JNJ and others. So those are included in this JPY50b increase that we are anticipating.

Then if that's the case then this year the Prevacid sales in U.S., what is your assumption there as a net sales in U.S.

So Prevacid sales amount FY'07 1,200 -- 225.2m and FY'08 we are anticipating 10% of -- around 15% decrease from '07.

(OPERATOR INSTRUCTIONS).

So I'm UBS. Millennium and TAP acquisition related goodwill, what is the discount rate there? The IPRD basis in case of Phase III, how much was -- or how much of that is incorporated?

So when you say discount rate, what is the discount rate that we are anticipating? Is that what you're referring to?

Yes, for the TAP.

So when we take it into account of the decreasing U.S. interest rate we are anticipating discount rate will be 8% or so.

What about Millennium's one?

For Millennium, this is just our estimation yet, but we are currently estimating it to be around 10% or so.

And the second question, the President mentioned that you are going to address to the say European coverage. So I just wonder, what's your view about your European business?

So when we -- as I had explained in interim report in new Europe, it's possible we wanted to purchase medium-sized company. So that we will be able to overcome this coverage problem. I mentioned about that in interim report. However due to the various reasons we have not been able to do so. Of course it is not effect we are not getting it up, but we are looking into the possibilities going forward too. But because we do not see any potential deal at the moment, so we are going back to this organic growth. But having said that, it is not as if that we are going to build up business in all the geography from the scratch. But we are looking for the acquisition possibilities, should there be any good deals available in the region.

And a third question is about the Medicare payers situation. It looks as if this is very strict and TPNA and Millennium inclusive. What will be the impact to Takeda? How do you account that? And going forward, when the payers' situation becomes severe, then what will be the negative impact to the lifestyle related disease of it?

So that's actually something that I would like to share from you for the answer. Of course the bad situation and then maybe January 2006, was it? After the legal submission, it was about 8% or so FY07 it was only the 3% growth itself. So that is due to the repercussion for FY08 and we know what is going to happen for the Medicare payers. So I'm not sure what is going to -- what are the changes that we're going to see. Because it will be dependent upon the outcome of the Presidential election. So I cannot give you the definite comment about that. But for the increase in growth, probably somewhere around 5% or nearer around that point.

So obviously sales are about 50%. It looks as if the U.S. sales portion is on increasing trend. So I just wonder what is your opinion about having the American people on to the Board of Directors?

So whether to have the non-Japanese people to become a member of the Board of Directors? We have been looking into that possibility into the past too and also we are going to continue that going forward too. So some time in the future we may see that kind of situation happen. And of course because we are a pharmaceutical company we are looking into the global market to (inaudible) kind of thing we may have to think about going forward as one of the means to do the governance of our Company.

[Tamara] from Schroders. Regarding Millennium Pharmaceuticals I have a question. As Mr. Hasegawa mentioned roles and responsibilities, in U.S. and San Diego R&D in oncology, will we go through venue or are you thinking about global?

In principle in R&D and the marketing in U.S. effectively operation will be done by Millennium and for the strategy for global R&D Millennium will have initiative in principle. And based on that Japan and Europe will have harmonization and execute each local market. And for marketing that is a basic framework we're thinking of. Thank you very much.

100 key researchers, you can retain them. Any timeframe for the period you can retain them?

We have not specified the period but in order to maintain the growth for Millennium, at least one year or two years we would like to retain key researches, and that is what we are asking to the local managers and management people. And that is how we explain to the high performers locally, we have retention programs and researchers have agreed and we are asking them, encouraging them to remain in the Company as long as possible.

Regarding TAP, I have question. Prevacid U.S. sales rights, you are going to amortize that for a certain period. Is that based on the patent expiration? And based on that calculation most of that will be for this year and a small portion for the next year, and then that's it. Is that correct understanding?

For this intangible asset portion, the patent related portion in other branded portion how we have divided. For the patent related ones the remaining 19 months until the expiration of patent is the period we are going to amortize for. And for the brand portion, the three years after the expiration of patent, we have considering about three years after the patent expiry.

How much synergy were incorporated?

Well, synergy, JPY40b for three years, that's what I have been saying, and that's the synergy will continue afterwards. That's how we think.

Thank you very much.

Suzuki from Capital. You mentioned Millennium retention and any particular contract regarding [CE]? The same for the [CE] of the period?

At least one year. As long as possible, so the same as what I mentioned before.

Thank you very much.

Mitsubishi UFJ Securities. My name is Nakazawa. I have two questions. First question is fourth quarter of '07 the sales declined, especially in Japan, in various products. Outlines were not achieved in some major products, 2% or 3%. In the third quarter Takeda conference you gave us confidence in the contract exchange with the supplier/distributor, and because of that third quarter sales declined. Maybe that impact continues in the fourth quarter. If that's the case, when do you think the situation will improve?

Yes. That element was there in the third and the fourth quarter, JPY5b to JPY6b is the impact, but this is a one-time event. Therefore, on '08 it's not going to impact us.

For '08, for Japan ethical, how much is the growth expectation?

'07 Japan, you seem to have a big concern but I am not that much concerned. Because of distribution structure change, and we tried to change that, then we decided not to, some are in the distribution route in transition, and that is back to the market that I just explained. And in the past few years, Japanese sales have been great, and last year we have a new responsible person. We look at the market situation carefully, and we try to avoid to go too aggressive. We cannot stretch our resources all the time for too long. If that continues, there are some false starting. So we reviewed and we prepared ourselves to have a fresh start for '08. Therefore, the sales estimate is sort of reviewed and, of course, NIH price has changed, and this happens once every two years so we incorporate that pattern already. So there are various talks and adjustments and, based on those discussions and plans, this is where we are so I'm not concerned.

The market will grow 2% to 3%, do you think that would be your level?

No. We expect 5% growth.

Thank you very much. Another point is Millennium portion, year 2011, year 2012 is the starting point to see the good improvement up -- improvement impact on to the -- of the accounting difference. So I just wonder what will be the impact to top line. At that time, probably JPY80b or so of our intangible asset is there so can I understand that's the level that you have in mind?

So maybe smaller than that number. So, excuse me, about that area, I am just allowed to give you the, well, timeframe, so I can't give you the specific numbers in terms of the impact.

My name is Mita from Morgan Stanley. I have detailed questions. First one is about TAP's sales uplift, TAK 399 -- TAK 390, whether that is included in that upside to the sales from the TAP.

The TAK 390MR, we have planned to launch this product to the market this fiscal year so although only very small in portion but that is incorporated into our plan.

And TAP and Millennium acquisition, the tax effect may come up is what you have mentioned but what is the tax rate that you are considering with regard to this, the change in tax rate going forward?

To the Takeda Group as a whole, is it? For FY'08, just limited to this fiscal year, the intangible assets amortization, the tax effect of accounting, if you adjust (inaudible) this intangible asset, and we are going to use this technique to adjust that to the period, but for the FY'08 portion, that is something that cannot be considered as expense. So FY'08, the tax rate will be very high.

And for the intangible asset amortization burden, for FY'09 and beyond, as I have mentioned earlier, as an intangible asset, it would just remain with the area just applicable for the tax effect. So FY'09 afterwards, it would normalize.

So, probably, the number is actually a 37% to 38%, is it? And TAK-491 and Hematide, that is now stage III, and Lundbeck's mood and anxiety disorder treatment drug, when are you thinking of launching those products?

So about when we are thinking of launching those products, of course, year 2015 there is a line that we are targeting for. So we try to launch them early so that those products will be contributed to achieving that target that we have set for the year 2015.

Muraoka from Morgan Stanley. 390MR, as I read the abstract [PK] assured you there are two steps that can be efficacious. After a certain period after dosing it works, and another timing of second step efficacious point. That can be a marketing appeal. Clinically, what does that mean?

The local marketing people think that is going to be a strong edge, to see it's operation period is going to be prolonged, according to their engine, and that is the limit of what I know. The next day, the (inaudible) is much less, well that kind of specific clinical evidence is not mentioned yet.

SYR, the new data coming out, Actos and [hemoglobin A1C], the lowering target level maybe 1.5 point lower in that regard to you, is -- can you give us some kind of target numbers?

Well, this is concomitant administration, therefore, better efficacy than mono, that is our expectation. And concomitant, yes, with Actos we have done several studies, and 1.5 point lowering of glucose level. And that level of efficacy is considered internally, but as of now [AGA], not all the data can be disclosed yet. We are thinking of combination development, and in that development processes, of course, the concomitant use with Actos we have various data. And comprehensively, efficaciousness and safety comprehensive [data] for the concomitant usage, please wait, maybe in September, EASD meeting, we hope so in September.

And about marketing strategy in Japan, maybe I misunderstood this. The Blopress sales for this year, how much is this it going to be, your marketing position, how it's going to be? If the growth is more then ARB1 would be undermined? Is there a risk like that? You said too much of stretching you mentioned, and how should I interpret that?

Well, when I said stretching out, it's not that particularly what I meant. Blopress number one position should be maintained, and that is a firm recollection of the commitment of the Japanese sales team, but ARB, As a whole, is reduced in price by 10% in terms of NIH. So, of course, all the pharmaceutical companies try to overcome that and try to show good numbers there. Everybody's having a hard time. Diovan is charging up [less off], and this year, in terms of sales, we will be able to maintain number one position. Diovan is of course stretching up but we try to maintain our number one position.

My name's Miyoshi from Merrill Lynch. With regards to Millennium, I have some questions. For intangible assets, $6.8b was the evaluation that you came up with? And earlier, for Mr. Hasegawa, with regard to Velcade, sometime in new feature it will go up to $1b, that's what you said. So even thinking about that, $6.8b, well, we have discussed about until when this ex-patent will be remained, but, based on that, I think this amount is very expensive, or very high. Say that before the patent expiration, how much sales that you are anticipating to get from Velcade? This $6.8b, it is very difficult to justify this number so I just want to hear your advice on this.

Well, I cannot give you any advice on that, because we think that that's a number that is justifiable and also Velcade year 2007/2010 is the patent expiry in the U.S., and in the previous meeting I mentioned year 2017 and some of this, that is not the case, and some analyst says that according to the [FX book] that expiration is year 2017. And we have confirmed, double confirmed, about that, and Velcade, that patent expiration is 2017 in U.S. and 2019 in Europe. So we have confirmed that.

And how much sales that we are going to generate until that expiration date, that is -- the God is the only one who knows about that. It's very difficult for us to do that. When we launched the Prevacid that peak of sales was at $375m but it was the sales tenfold from there. So what it can be sold to, how much in 10 years, that's very difficult to mention about that number in this kind of a meeting. That's up to the analysts to come up with that number. If the management, and specifically you mentioned what is the anticipated sales, that's something outrageous for the management to do.

Then I would like to ask a different question. The Millennium's anticipated operating profit, on page 12 and page 13, calculated from the also numbers there, the $3b -- excuse me, $30m for 11 month, is that correct?

Well, according to slide 11, 12, and 13, when you analyze the TAP number there, I think that's the number you will come up with.

Then the Millennium's SEC filing document, when I take a look at that, then according the data that Millennium provided to Takeda, $53m is the operating profit numbers. I think that is the number that is already disclosed probably. And $30m for the 11 month, even say that that goes up to $35m so, but from the initial year there is a gap of $20m. Do we have to see in that light or are you looking this in a conservative manner of not?

Well, that's after tax net income impact. So if we are translate that into before tax then probably the number you have just mentioned will be the number that will come up with.

Where? In Millennium's standalone profit, $30m?

Yes.

So the number that I showed you, is that according to the analysis that you have used numbers in page 12 and 13, the $30m is the net profit basis. If you translate that into before tax then the number you may also mention is the one that come here? Well, $2,000m, page says [1,970] so I believe that operating profit is $30m. Is that number wrong?

Well, my logic is like this, on page 12, Millennium, the intangible asset and goodwill, in process R&D, when you add them together, then 1,750, that's a negative impact. But, on the other hand, when you take a look at page 13, the Millennium's net profit is JPY180b negative, so there is a difference of JPY50b on a net profit basis. So, other than these, there is export interest factor to take into account here. So when you take a look at that, then on $30m on a standalone basis and a before tax basis, that will be $50m or so.

The Millennium numbers, there is no change to assumption from the time they have submitted their document to SEC, is that correct?

That's correct.

Mizuno from Daiwa Securities. SYR-322, is that incorporated into the guidance?

A part of that is incorporated.

And SG&A, TPNA traditionally SG&A assumption, including marketing, ignoring TAP portion, so traditional SG&A of TPNA, is (inaudible) and Amitiza expenses. And SYR-322, when you consider those expenses, is that going to increase or is it going to be flat?

Well, I don't quite remember but [Rodem] DTC is decreased and that portion is declined, but for that portion, Amitiza DTC is done on a trial basis, and the valuation is being conducted and we need to see that, if that is can be ignored and DTC will be eliminated. But 390, or pre-launch of the other compounds, when you think of the expenses with the expenses going up or down, no, I don't really know in detail. If you need that information, then I can provide later.

Millennium and TAP compensation, Millennium -- Abbott's stock option, Abbott's share of stock option was increased, and what is going to be the long-term incentive?

For the long-term incentive, we are thinking, we are considering, a buyout for the Millennium stock option, and that will be shifted and substituted by Takeda's incentives.

Thank you.

My name's [Aki] from [Callion Securities]. I have one question with regards to the acquisition of Millennium. Net operating loss carry forward of Millennium, I believe that there is a $1.5b or so, so how are you calculating that portion?

So about that point, under U.S. taxation system there is a rule called change of ownership. If the ownership change for more than 50% then a debt note cannot be used. And currently we are investigating about it, and we need to have a very thorough investigation about that, and we are doing that investigation in a very proactive manner.

By the way, if we can use this NOL then how we are going to do the accounting treatment, we are currently confirming that with accountants. And if we can use this NOL then the tax reduction effect will be deducted from the total goodwill amount. Say that we can use this NOL then probably a 40b to 50b improvement, positive effect can be enjoyed. But at the moment we haven't taken that into account in our guidance.

Now we, just I have one more comment, these numbers are not definite numbers yet, and you're probably wondering when can we have the final numbers. The first quarter financial report will be announced end of July. By that time, we will have final numbers related to all those deals. That's a promise we do, I myself and him next to me.

Thank you very much for your attention. We would like to close today's report meeting. Thank you very much for your participation. 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.