Takeda Pharmaceutical Co Ltd (TAK) 2009 Q1 法說會逐字稿

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

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

During the presentation from the Company all the telephone lines are placed for listening mode only. And the questions and answer session will be held after the presentation. This conference call is being broadcasted through the Internet on line, but only for listening mode.

Now we start the conference with the presentation.

Thank you very much for your participation to the conference call of the first quarter financial results for fiscal 2008 of Takeda Pharmaceutical Company Limited. My name is Hirofumi Inoue, General Manager of Corporate Communications Department of Takeda.

Let me introduce the schedule and the participants here, Mr. [Hirofumi Inoue], General Manager of Corporate Strategy and Planning Department; Mr. Iwasaki, General Manager of Strategy Project and Planning Department; and Mr. Takahara, our Manager of Finance and Accounting Department.

First, we will start with the presentation on financial overview of the first quarter followed by the R&D update. After that we will have a question and answer session and your questions will be welcome. We have enough time for Q&A.

Now, we start the presentation. Please prepare presentation materials and also the earnings reports in hand, Mr. Takahara and Mr. Iwasaki please?

Hello everyone. My name is Hiroshi Takahara, General Manager of the Finance and Account Department. It's my pleasure to present to you the summary of Takeda's consolidated results for the first quarter of fiscal 2008 and (inaudible).

As shown in this table, consolidated net sales for the first quarter of fiscal 2008 increased by 8.3%, from the same period of the previous year, mainly due to the consolidation of TAP and Millennium as subsidiaries from May 2008.

However, from the same period of the previous year operating income, ordinary income and net income in the current quarter decreased. This decrease was because in process R&D expenses of JPY166.2 billion associated with the consolidation of TAP and Millennium, a further expense during this quarter.

Earnings per share, EPS, decreased by 98.0% from the same period last year; however, earnings per share excluding ordinary income and other extraordinary factors arising from business acquisition and similar event, which the Company uses as one of its management industries, decreased by 3.9% to JPY127.25.

Next slide please. I would now like to discuss the division and the consolidation of TAP as a wholly owned subsidiary and acquisition of Millennium, both of which had a significant impact on the consolidated results. I'd like to address the accounting treatments applied to the transactions and the final financial impact on the consolidated results of the quarter.

Please be aware that the valuation of assets, purchasing price allocations and accounting treatment such as [metals] in periods of amortization of intangible assets for TAP and Millennium were determined and finalized based on appraisal by a third party consultant and audit by an independent auditor.

First let me begin with the value allocation of the TAP division. Please take a look at the next slide.

Please turn to the next slide. As a result of the division of TAP, Takeda acquired about 50% of the rights in Prevacid in TAP development pipeline, including TAK-390MR and other drugs, which is shown on the left hand side of this slide. Likewise, that gave us a 50% of the rights in the Lupron business, as shown on the right hand side of the slide, was transferred to Abbott.

The value of the newly acquired 50% share of the Prevacid business, that is $820 million, has been booked as intangible fixed assets and is to be amortized over a fixed period. The value of the acquired pipeline, that is $540 million, was fully expenses as in process R&D expenses in the first quarter of fiscal 2008. On the other hand, the gain from the transfer of the Lupron business, $709 million, was recorded as extraordinary income in this quarter.

The basic spirit of the transaction was that TAP be divided equally. Therefore, value adjustment will be made over five years following the date of the division to ensure the value of the portions assigned to Abbott is equal to the portion acquired by Takeda.

To be more specific, at the time of the division of TAP a temporary liability, which reflects a hypothetical value adjustment to enable equal division, was recorded on the balance sheet and certain contract payments will be made to Abbott over five years from fiscal 2008 to fiscal 2013, based on the future sales of products, including Prevacid and the progress of the product development.

After five years, in fiscal 2013, the difference between the temporary liabilities recorded on the balance sheet at this time and aggregate amount actually paid or received will be settled and any difference will be recorded as income or loss in FY2013. That concludes the outline of the accounting treatment of the TAP division.

Next I would like to discuss the accounting treatment of the Millennium acquisition. Firstly on the left hand side of the arrows on the slide represents the in-house estimates provided when announced our FY2007 result in May. And the figures on the right hand side of the arrows are the newly finalized numbers being provided this time.

The total acquisition cost to be apportioned was approximately $8.866 billion, which is about the estimate we provided. The value of the Velcade and Integrilin, both of which already marketed, has been recorded as intangible assets and are subject to amortization over the respective fixed periods.

Our outside consultant's valuation appraisal on the value of those two products was finalized at $4,440 million, which is pretty close to our May estimate.

The $2.4 billion listed as deferred assets in the one shown as the Group gross up tax effect of the intangible assets at May presentation. With the accounting treatment now finalized it has been determined that the tax effect of intangible assets will not be grossed up but accounted under deferred tax liability. Therefore, for convenience it is shown here as deferred assets.

And please be noted that this does not mean that the value of Velcade has decreased. $887 million of deferred assets being finalized at this time, include Millennium's deferred tax asset of $800 million from utilization of NOL.

On the in process R&D expenses we estimated it would be $1.2 billion in May, but it decreased by $150 million, because the value [accruing] to the shared platform technology, which already marketed Velcade, was recognized as intangible fixed assets.

With regard to goodwill compared with our estimate of $2.3 billion at the May presentation it has increased by $786 million to $3.086 billion, due mainly to the decrease of in process R&D and deferred assets, despite approximately $900 million decrease arising from the deferred tax asset from Millennium's NOL, which had not been incorporated in to the May announcement.

The goodwill will be amortized over 20 years.

Out of other assets and liabilities $917 million is cash and marketable securities. Therefore, actual purchasing price is $7.949 billion.

Furthermore, as I have mentioned earlier, it was found out that NOL and other tax effect of approximate $900 million, which was not confirmed at May announcement, can be used. And this concludes the details of the purchase price allocation of Millennium.

Let's move onto the next slide. So, as a result of the aforementioned accounting treatment, impacts of the US business consolidation on the consolidated results of the first quarter are as shown in this slide. Amounts in the slide represent amortization of intangible fixed assets, tax effects and amortization of goodwill for the two months of May and June when TAP and Millennium were consolidated.

And please turn to the next slide.

This graph shows changes in sales revenues; consolidated net sales by pharmaceutical segment increased by $30.4 billion or 9.2% from the same period of the previous year. Despite increases in our sales of the core products, Actos and Takepron, sales in Japan decreased by $2.2 billion -- excuse me, YEN2.2 billion with the revision of NHI prices in April 2008 being our negative factor.

The strong yen was a negative factor for overseas sales. On the other hand, due to TAP and Millennium's consolidation from May, TAP's Lansoprazole and Millennium's multiple myeloma treatment, Velcade, contributed to our overseas top line by JPY32.5 billion or 17.3%. Sales of Velcade included in consolidated debt sales was JPY5.9 billion.

Please turn to the next page.

This shows consolidated sales of ethical drugs, excluding sales of products for which Takeda acts as a distributor to the wholesalers. We achieved JPY324.9 billion of sales, which is an increase by JPY30.2 billion or 10.2% as compared with sales of the same period of the previous year. In addition to increases of ours sales in the US, due to the division of TAP and acquisition of Millennium, sales in Europe and Asia have grown as well.

Please go to next page.

For TPNA, although the sales of Rozerem and Amitiza decreased, sales of the Actos family, this is the main product line of TPNA, increased. Overall sales of T -- by TPNA increased by $34 million or 4.2%; however, when we translate them into Japanese yen, due to the exchange rate of JPY13.9 billion, net sales by TPNA decreased by JPY9.7 billion or 9.8%.

Please take a look at the next slide.

Next I would like to explain the results for the four international strategic products. Pioglitazone sales decreased in Americas due to stronger yen against the US dollar and other currencies and global sales also decreased. Lansoprazole sales increased significantly by 13 -- excuse me, JPY31.5 billion or 7.2%, thanks to the inclusion of May and June sales from TAP, following its consolidation as a subsidiary.

Candesartan sales increased and Leuprorelin sales decreased from the same period of the previous year.

I would now like to further explain the details of the operating income. Supported by the sales growth, the gross profit increased by JPY23.6 billion from the same period of the previous year; SG&A expenses increased by JPY203.9 billion from the same period of the previous year. The steep rise was due to the one-off in process R&D expenses related to TAP and Millennium, which were fully recognized in this quarter, as I explained earlier.

As a result, operating income decreased by JPY180.3 billion from the same period of the previous year. For your reference, excluding extraordinary expenses, such as amortization of intangible assets, amortization of goodwill and one-off in process R&D expenses related to the division and consolidation of TAP and acquisition of Millennium, operating income of the quarter increased by JPY700 million.

Please take a look at the next slide.

In this slide I will provide details of the changes in net income. In addition to decrease in operating profit, equity in earnings of affiliates decreased by JPY12.8 billion from the same period last year, which was mainly due to TAP becoming a wholly owned subsidiary of Takeda.

The Company's ordinary income decreased by JPY196.8 billion. Subsequently, extraordinary income increased by JPY45 billion, mainly due to a gain from transfer of Lupron business in the US to Abbott in connection with the division of TAP. But this was not sufficient to trade off ordinary loss; consequently, net income decreased by JPY228.5 billion or 98.1%.

This concludes the summary of Takeda's consolidated result for the first quarter of fiscal 2008.

I would now like to discuss the outlook for the remainder of fiscal year 2008. Firstly, we prepared this slide to show you what the impacts of the TAP and Millennium transaction will be, and how our forecast of the year has changed from original announcement that we made in May.

Operating income will increase by $400 million. $10 million of -- is from TAP and $390 million is from Millennium. Net income after tax will improve by $400 million as well. $100 million is from TAP and $300 million is from Millennium. The gain from transfer of the Lupron business increased by $110 million, due to an increase in valuation of Lupron business. On the other hand this amount will be offset by decreasing tax effects on amortization of intangible fixed assets. Therefore, change to net profit will be same as operating profit of $400 million positive.

Please move on to the last slide.

Finally, I would like to explain the outlook for the consolidated results for the full fiscal year of 2008, reflecting the finalized accounting treatment of the division in consolidation of TAP as a subsidiary and the Millennium acquisition. I can now provide you with updated forecasts and consolidated results for fiscal 2008 as shown in this table.

All the forecast for operating income, ordinary income and net income are increased by $40 billion -- excuse me, YEN40 billion. The EPS forecast is increased to JPY244.34.

The forecast of our earnings per share, excluding extraordinary gains and losses and other extraordinary factors arising from business acquisitions, which the Company uses as one of its management indexes, is increased to JPY423.68.

The number of shares used to compute EPS this time does include the Company's shares repurchase took place May to June timeframe, which was not the case for May forecast.

This concludes my presentation on Takeda's first quarter operating results. Thank you very much for your time.

My name is Masato Iwasaki, General Manager of Strategic Product Planning Department. I will give you an update on our development pipeline and then some topics will be discussed.

First slide please.

This show our core therapeutic areas, we focus on enhancing R&D pipeline as it is also for growth and try the earliest possible launch of new products. In fact, in terms of the invested management resources in the four core therapeutic areas, this is achieved through the aggressive implementation of three strategic pillars of enhancement of in-house R&D; and maximization of product added value; and strengthening of in licensing and alliance activities.

Let me review the current status of each of these franchises. Franchise I is lifestyle related diseases, which is the most important therapeutic area for the Company now and in the future.

In regards to the DPP4 inhibitor SYR-322 for region NDA was submitted to FDA at the end of last year. We maintain close communications with the FDA with the aim of obtaining the earliest possible approval for market launching, by maximizing its position as the only Company capable of marketing both actors in the DPP4 inhibitor. Takeda intends to further enhance our global leadership position in the diabetes field.

Next slide please.

In the hypertension area, as part of our life cycle management strategy is to maximize overall product value. In June of this year Takeda submitted an NDA for a combination drug of blood pressure and diabetics in Europe. Furthermore, in Japan Phase III trial for a combination drug of blood pressure and calcium channel blocker is ongoing.

Next slide please.

Moving on to franchise II, oncology and urological diseases, thanks to the acquisition of Millennium and the in-license deal with Amgen, our oncology pipeline has gained an extra layer of depth.

In June Velcade received an additional indication for the first line treatment of multiple myeloma in the US, while in Japan a submission was made for marketing approval of our colorectal cancer drug Vectibix. Furthermore, Lupron six month depot was approved for Austria in May and for Germany in July.

Next slide please.

In addition to our current strengths in lifestyle related diseases, Takeda will continue to enhance its position in the growing oncology market to realize our goal of becoming a leading global company in the oncology field.

Next slide please.

Now looking franchise III, CNS and bone/joint diseases. In July this year our osteoporosis drug Benet 17.5 mg tablet received an additional indication for Paget's disease of bone. With this additional indication, we can contribute to treatment of patients suffering from this [awful] disease. Also, we can differentiate the product from the competitors, thereby enhancing its product value.

Next slide, franchise IV, gastroenterological and other diseases. As you can see, our pipeline in this therapeutic area has been enhanced by the acquisition of Millennium and the merger of TAP into TPNA and TGRD. In regards to the peptic ulcer drug TAK-390MR for which an NDA was submitted to FDA at the end of last year. We maintain close communications with FDA with the aim of obtaining the earliest possible approval for market launching.

Next slide please.

Now I would like to introduce Takeda's initiatives on drug discovery platforms. In May Alnylam and Takeda formed a non-exclusive strategic platform alliance and reached a joint research agreement based on RNAi Therapeutics, which is one of the foremost nucleic acid technologies.

Through the strategic agreement Takeda has gained access to Alnylam's key platform technologies and know-how. We expect that our product portfolio will be enhanced by the addition of RNAi Therapeutics to our current strength in small molecules and antibodies therapeutics being developed now.

Next slide please.

Lastly let me talk Velcade, which received approval for first line treatment of multiple myeloma in US in June of this year. Velcade demonstrates its anti-tumor affect by inhibiting proteasomes, which are enzyme complexes that break down the majority of proteins inside cells in a regulated manner. By disrupting proteins homeostasis Velcade induces a [proctitis] and inhibits tumor growth.

The recent approval for the first line treatment of multiple myeloma was based on the results of the Vista trial in which standard Melphalan and Prednisolone therapy was compared to the three drug therapy of Melphalan, Prednisolone and Velcade. The therapy with Velcade showed a survival benefit for patients.

With this additional first line indication we expect further growth in the sales of Velcade and we look forward to further accelerating its development for additional indications, so as to maximize its full market potential.

Thank you very much.

So now we would like to accept questions from you. So, we would like to take questions from both participants in Japan as well as from overseas.

We have a question and answer session now. (OPERATOR INSTRUCTIONS). Now the first questioner is Mr. Yamaguchi, Nikko Citigroup. Please go ahead sir.

My name is Yamaguchi from Nikko Citigroup. Can I ask a question now?

Please go ahead.

The first question is about the Velcade. So, after you got it as a first line treatment it's been -- it has got the first line approval, but the actual sales [in the field], and what would be the response that you are getting from the doctors or physicians? If you have any recent information I would like to get a hold of that. That's the first question I have.

This is Iwasaki. Let me answer to that question. The first line indication acquired by Velcade and the physicians' feedback has been very, very positive. A very strong support has been expressed. And -- however, in terms of number of prescriptions we have not the statistics yet.

This is Inoue from R&D. Let me add some comments. You are asking for our outlook I suppose. Millennium sales is included. Everything included JPY50 billion, the same as we announced in May. Our current outlook is probably the numbers will exceed that amount, because there is a momentum.

Thank you. My second question, and probably this is a frequently asked question. [This is actually] related too, you are having close communication with the FDA and my first question in relation to that is maybe you are asked to have a large scale additional study? How is that status?

And the FDA may be changing guideline for the diabetic's criteria, not just HbA1c. There will be some additional revisions. What are the impacts from this?

This is Iwasaki. Regarding renal disorder or renal data, in the consultation with FDA PKPD study, we had a discussion. There was no request from FDA for the additional renal study. And regarding the new guideline, I think this is related to cardiovascular area, but currently the guideline is on draft level. [FDA] is already -- NDA is already submitted to FDA. Therefore it will not apply to 322.

Thank you very much. My last question Group assets, and you -- the price, if you know the numbers, I would like to know that?

This is Inoue speaking. Regarding Group assets, and user price, first quarter $469 million; compared to the previous year, a decrease of $91 million, a decrease of 15.5%.

Thank you. That's all.

Thank you very much. The next -- (technical difficulty).

Now, when we take a look at page 13 and also the page -- the table on page six, the difference between those can be calculated as amortization of the Group. Is that so?

The Group have some intangible assets amortization. This portion of amortization is about -- it is $272 million or so annually, but the intangible asset amortization and the goodwill amortization of JPY1 million aside for this year and the next fiscal year, how much would that incur is something that I would like to ask? That's the first question.

So, this is Takahara. So, about the goodwill amortization, the amortization period is 20 years. And if you could refer to page seven of the slide, it mentions that $26 million is the goodwill amortization amount. But this is the value for the two months' worth.

And if you could go to slide number 15, then similarly the goodwill amortization full year affect amount is mentioned here on the table there too. For the Millennium the goodwill amortization $140 million is put there as a revised number. So, I believe that you can refer to this, $140 million.

So, when you say, you mentioned page 15 --.

No, it's page 14.

So, the effect from the business combination on FY 2008 is this the slide heading that you're referring to? So, this revised estimate, the Millennium's goodwill amortization of minus of $140 million, is that the three months of the quarter and a few days on June, is that so?

This is Takahara. If you could go to page seven, it mentions the Millennium's amortization of JPY386 million -- JPY387 million -- excuse me JPY308 million. And because -- JPY3086 million, so this is [linear] amortization. So, if you divided that by 12, then you can get that. Excuse me divide by 20.

So, it will be JPY152 million or so full year?

Yes, I think that will be okay.

And the second question is -- maybe this is in relation to Yamaguchi's question, but SYR-322 does the Committee opening, did you receive an invitation, a letter from them?

No, we -- there is no discussion like that.

When I look at FDA's homepage at the end of November Advisory Committee for endocrine related area is discussed. Maybe if SYR could be included in this discussion? Or without Advisory Committee, do you think the review will be made for SYR?

That is what we think. There will be no Advisory Committee discussion.

For Velcade you are not developing oral formulations right?

We are developing oral formulation, however there are some difficulties.

In terms of absorption?

Yes, that is right.

Thank you very much. That's all the questions I have.

Thank you very much.

Thank you very much. The next question is from Mr. Masuzoe. Please go ahead sir.

My name is Masuzoe from Deutsche Securities. So, the previous question SYR-322 of Alogliptin, 50%, is it okay for the end of October, or so in December the NDA and then usually you can get the next one for the end of October?

So, that's our plan at the moment.

So, regardless of whether you're going to have advisory or not, but -- so can I expect that this is going to happen for the end of October?

That is something that we are aiming for.

And this combination with Actos, I thought that it is going to happen in -- sometime around summer, but what is happening there? May be submission and what's the status?

This is Iwasaki speaking. Regarding the timing, of course, we want it as early as possible and we can't say beyond that. But there are no problems and the development has been ongoing without any problems.

I have two questions about number Actos US sales in dollar basis, compared to last -- same period last year it remains an increase of 5% according to IMS statistics. The number of prescription sometimes negative numbers and June sales, according to IMS is flat. Therefore, it seems it is suffering regarding the 5% increase on dollar basis, maybe inventory adjustment? And if that's reason, why did -- the increase is small or maybe I thought the plan was 10% increase or are you suffering from -- against the plan. Can you explain that?

This is Inoue. As you pointed out in US all round diabetics market is very, very challenging. First Actos' performance from April to June, you asked whether there is an inventory adjustment. That is not the reason. That is not a factor.

And our outlook for the year is, as of May we thought 10% increase would be the growth compared to the previous year. Although things are rather difficult, we want to achieve this growth. That is -- that remains the same.

And for domestic sales, you have the number only for the first quarter, but broad base for this quarter flat (inaudible). I thought your expectation was flat. And compared to that the first quarter numbers seems also challenging. What is your feedback on this?

For the broad base domestic sales for '08 and our outlook is flat, as the previous year and our stance remains the same.

For the first quarter the NHI price revision that was a big factor and you may look, the sales is not going very well. But in terms of volumes, there is a 10% growth from the last year. And for the year we would like to maintain the same level as last year.

Thank you very much.

Thank you very much. (OPERATOR INSTRUCTIONS).

Hello, my name is Mizuno of Daiwa talking. I have a question about Amitiza, so additional indication [also] was made I suppose. But currently the sales is decreasing at the moment. So, I just wonder what is happening at the moment with it.

This is Inoue speaking. With regards to Amitiza, as you have pointed out in the first quarter it is doing not well, but when we compare it against the previous year on a quarter on quarter basis, the -- our competitor [Serno], it has stopped selling. So due to that, temporarily, [Amitoze] -- Amitiza's demand picked up quite significantly.

So, that's the reason why for this first quarter, when we compare ourselves to the previous year's same quarter, it has seen a decrease. But due to this additional indication, when we translate this into a full year, we believe that we will be on track with the initial plan.

And another question I have about TMX-67, I just want to know the current status of it?

On July 18 we had submitted additional data and, at the moment, the deliberation is underway.

Thank you very much.

Thank you very much.

Thank you very much. The next question is from Mr. Sakai, Credit Suisse (inaudible).

My name is Sakai from Credit Suisse. I have two confirmation; one is about Amitiza; I believe that in the same period last year there was -- a recall was made. But this year, the IBS -- a new drug for -- Amitiza, I believe this was circulated starting from May this year. But in IMS basis the new prescription is not going up.

Is that due to the migration of MRN with that? The promotion activity was a slowdown? Or is it because the market situation has changed?

So, I would just like you know the specific explanation about why this is not doing well as we have expected?

This is Inoue speaking. As you pointed out, the number of prescriptions is not really picking up. That trend is -- can be observed, but June prescription number is increasing.

I did not explain well enough before; specifically, because of our relationship with the partners, we can't disclose the numbers, but because of the additional indication against last year, good growth can be expected. It's just the timing of the prescription number to go up is a bit delayed but we think we can achieve the annual goal.

Weekly 10,000 is the number for the prescription according to the current situation, is that correct? I'm talking about new prescription NRx.

We do not have the data with us now. We let you know later. I hope you understand?

But if I may add some comment, the first indication is constipation and the first line indication is IBS related to constipation and it would take some time and this will really pick up. And IBS education and market development is required. And this is the only drug with this indication profile. So, it may take some time.

So, in terms of promotion and MRN, you do not have any problems?

That is right.

But Actos, JPY771 million is the sales for the first quarter. ACTOplus Met and ACTOplus Met XR is not here yet. So, can you give us a breakdown ACTOplus Met sales and XR situation?

ACTOplus Met first; of JPY771 million, JPY81 million increase, an increase of JPY20 million, 30%, more than 30% increase from the previous year.

What about XR? The situation remains unchanged?

This is Iwasaki speaking. For XR, in May this year we asked FDA to review us again. And if review goes smooth, by November this year we will be able to get approval. Thank you, [then].

Acto switch with -- through this (inaudible) after XR -- switch or conversion -- is that the correct understanding?

That is right.

Thank you.

Thank you very much.

(Technical difficulty).

So currently, after getting the FDA's approval, how the prescription trend has been changing and how it has been changing and including the Millennium, how you're going to expanding this? That's the area that I would like to hear from your -- from you about explanation of this. That's the first question.

This is Iwasaki speaking. With respect to the number of prescriptions, we cannot have data yet. But the expert's feedback and the feedback from the market has been very, very positive and we would like to achieve rapid growth, and for that we will be promoting.

So within this year 30% or 40% growth can be achieved? Or your expectation is less than that?

Yes, of course we achieve that level of growth.

Thank you very much. And the second question, maybe this was asked already -- in Japan and outside Japan, there are many generics and this is a hot topic in the market. What is your strategy of generics in Japan and outside Japan?

So this is Inoue speaking. So, as you may already know, for domestic market the generic market, the generics share, this is under investigation for the NHI, so revision for its '08 indices, the September figure and this is 6.4%. And as you may know, the Ministry for Welfare, the 30% in 2000 in terms of our unit, this is just the target that the Ministry has come up with.

However, for our Company, as I have been saying, there is no change as to our thoughts in this regard. So, with the increase in awareness of our generics, of course, this generic market will go up. But as a drug manufacturing company, through the high quality activities, and also the very affluent efficacy and safety information, we -- by providing this information to the physicians, I think we -- in addition to coming up with better drugs for our patients, we will put our efforts as a pharmaceutical company. There is no change to our behavior.

And also, globally -- speaking from a global perspective, other companies may be looking into this generic market. But under such situation, as Takeda, at the moment we are not thinking of getting into the generic market, although we are considering about it, but we are not thinking about it.

Now, in case of US GP the market is negative growth and PB, including the product marketing has becoming very difficult. So, probably there must be some option available. But thinking about the time span there, probably it will be difficult to come up with a new drug. But with this strategy can I understand that this study is one of your options for Takeda?

Well, the European [multi] and Japanese companies are, therefore, thinking of taking up that option. However, for Takeda, especially in the US, to go into generic market is something that we are not thinking at the moment.

Thank you very much.

Thank you.

Thank you. The next --

(Technical difficulty).

There are two questions. One is about TPNA's TAP combination or consolidation. I believe that this is progressing quite smoothly at the moment. But for Millennium's sales or the development side, the integration of sales in the development side, what is your plan for integration? Or are you thinking of having Millennium as an independent body?

In respect to the Velcade distribution, how TPNA will be in engaged in that process is something that I'm interested to hear from you.

My name is Inoue. Fortunately for Millennium, as we have planned, it is progressing quite smoothly and when we announced the acquisition of Millennium -- this following [Group] is the explanation we have already given to you. But the Millennium, we would like to think it as the core to our oncology business.

And also, it's a strong R&D capability and marketing capabilities to the American markets and physicians, we are thinking of leveraging that. And currently we are coming up with an organization structure together with Millennium. But at the moment it is doing quite smoothly.

And with regard to the relationship with TPNA; the Velcade, that is selling quite well at the moment due to its nature, with a few number of sales rep to visit the specific specialized physicians. So, that's the current course that we're thinking of and we're not thinking of engaging the TPNA there.

And the other one is that your company, Takeda is in negotiation with a [trained] pharma. This article was put onto the Indian newspaper, that's what we hear and this is just -- might be a rumor. But our Indian analyst wanted me to confirm with Takeda, so that's the reason why I'm asking this question.

So, you earlier mentioned about your idea about the generic market, but are you thinking of acquisition in India as well? Can I understand that is one of your options?

Inoue speaking. And with regard to the story that you have just introduced me with, that's something we're not -- we didn't know of. We are not sure why this topic came up.

But our idea towards India, this might be related to the earlier comment I made. But India will become a very important market going forward. That's my -- our understanding too.

In relation to the growth going forward and in relation to the market size, we totally understand that this is a quite important market and we have been investigating about this market from different perspectives. It is not simply to go into Indian markets and sell our products there by ourselves.

But thinking about Indian market nature, in doing our business there might be many things that we can leverage on. So, we are currently thinking there are different -- there are various aspects of this and we haven't come to the conclusion yet. But we are putting importance to this market too.

Thank you very much.

My name is Muraoka from Morgan Stanley. I have one additional question about SYR-322. I'm sorry that I'm asking this number of questions. But according the announcement on September 11 there might be a metabolic Advisory Committee.

But you mentioned that there's no request at the moment, but we don't have an Advisory Committee to go to the (inaudible) information. Do you have any odd feeling towards that or do you not have any odd feelings towards that, without going through this Advisory Committee?

We do not have any odd feelings for that.

Did you say anything?

Well, we do not feel any odd feeling for it.

Thank you very much.

Thank you very much. The next question is from Mr. Miyoshi, Merrill Lynch. Please ask your question, sir.

This is Miyoshi from Merrill Lynch. First, maybe I could not locate the Velcade sales during this quarter. How much was it?

And if possible, May and June sales reflected in your numbers and April and June, I want to see continuous trend of Millennium. So, if you have the sales for May and June, and April, May and June?

This is Takahara speaking, please sir refer to on page seven of the slides, it mentions from May 19 to end of June the sales of Velcade is mentioned there. It says JPY5.9 billion, that is mentioned on this slide.

So, you -- so can I divide that with JPY104?

Yes, please do so.

And for the April to June timeframe, do you have any sales number for this three months?

Please wait for a while. This is Takahara. So, we do not have any figure for April to June timeframe.

So, the Velcade's quarter base continuous trend cannot be grasped, is that so? So, you don't have those numbers?

This is Inoue. At the moment we do not have that number. So, if we got hold of that number I'd like to let you know later.

Thank you very much.

Then on slide 11 there is a breakdown of the increase and decrease of the operating profit. So, excluding TAP and Millennium the operating profit increased by JPY700 million and probably that number is shown in there. So, that is excluding JPY181 billion of the consolidated -- of the consolidation of the companies.

But the TAP integration and Millennium integration for -- respective of those, what would be the contribution to the operating profit? How much was there for this first quarter? If you have the number I would like to know.

In other words, so, what I want to know here is that according to the conventional or the traditional Takeda a performance what happened to there and then, how much of contribution is coming from TAP and Millennium, and then end up with how much number. That's something that I would like to hear.

This is Takahara. So, as we have pointed out JPY700 million increase in the operating profit is the goodwill amortization. A portion is excluded from this merger of TAP and Millennium and we end up with a JPY700 million increase from the previous y-o-y -- excuse me, quarter on quarter basis.

And the -- on operating profit TAP and Millennium's breakdown, so if TAP's a subsidiary, it's JPY61.3 billion in minus and Millennium's acquisition is JPY119.7 billion in minus.

Can you repeat that?

In total, for this quarter, it is JPY181 billion. And when we divide this into TAP and Millennium, the TAP portion is minus JPY61.3 billion and the Millennium is JPY119.7 billion -- minus; so, in total minus to the operating profit of JPY181 billion.

So, the combination of those two companies is the -- is it -- are you just confined to this?

The companies' consolidation accounting only.

No, that's not what I want to hear. I just want to know how much contribution is made from the two companies on actual basis.

I know what you're trying to get at here. But in total the in profit basis for when we compare the actual figures, that is minus of JPY162.4 billion. In other words, minus JPY181 billion and minus JPY162.4 billion. This difference between those amount is the contribution from the actual, so JPY181 billion.

Okay, I got it and Takahara san I have another question. The Millennium acquisition price, the asset allocation there was a revision made there.

The Velcade's value is not decreased. So, this was what you have mentioned. But to me it looks as if that the Velcade's value has decreased. I'm sorry to ask this but can you repeat once again about this portion?

Then let me explain about that, once again. So, the total amount of Velcade and Integrilin are JPY440 billion and there is no change to that.

But the tax effect when we initially came up in May there was an appropriate thing made and at that time we thought that that was correct. But according to the accountant, based on the current US GAAP there was a point -- a suggestion from the accountant that there needs to be the adjustment. So, that's the reason why there is a change to that number there.

Then, as a result of that, you have transferred that amount to the goodwill. Is that correct?

That's correct. However, for this increase and decrease of the goodwill portion, as you can see from this table, it's a $700 million or so increases there. So, that would be $786 million dollars. And it is JPY2.4 billion -- as a whole did not go to the goodwill. Not all of them went to goodwill.

I see. Thank you very much.

Thank you.

Thank you very much.

If there are no other questions we would like to close. Any further questions?

(Technical difficulty) -- from Morgan Stanley asked a similar question. Just to make sure regarding this article from India and we would like to have your comment. There's no negotiation of acquisition?

That is true, there's no basis for this.

Thank you very much.

Thank you very much.

(Technical difficulty). Go ahead.

I have asked questions, I have no more questions.

I see, thank you.

Thank you very much.

Thank you very much. This concludes today's conference call for the first quarter 2008. Thank you very much for your participation.

Thank you.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.