Takeda Pharmaceutical Co Ltd (TAK) 2009 Q2 法說會逐字稿

(Audio starts in progress). I would like to start the fiscal year 2008 and the half year results meeting.

First I'd like to introduce to you who are here present from Takeda Pharmaceuticals. First I'd like you to meet Mr. Hasegawa, President, Mr. [Inoue] of Corporate Strategy Planning, Mr. Iwasaki, General Manager Strategy Product Planning department. On the left hand side Mr. Takahara of the Finance & the Accounting department. And right hand side Mr. Ohkawa of the Pharmaceutical Research and Mr. Miyamoto, the Pharmaceutical department.

And myself, I am Inoue from CC. I'd like to ask for your kind assistance. We have already distributed the materials for the result. Would you please refer to such materials while you are taking part in the conference. I'd like to start the meeting. I'd like to invite Mr. Hasegawa to speak about the policy of the management.

I believe that we have distributed the copies of the slide at your hand. So I'm going to give you an explanation based on those documents.

Please turn to next page. So those are the three products that we are planning for getting the marketing approval from US FDA. And I believe that we have already explained about this, but I would like once again explain about this.

SYR-322, this is the type 2 diabetes, the treatment drug. It has the PDUFA date of October 27. Right about two weeks ago there was a notice given from FDA. And they said that they won't be able to complete their review by that PDUFA date, so they would like to extend this target date. But what will be the revised PDUFA date, although we have asked them, they didn't -- wouldn't give us. So at the moment what we can tell you is that the PDUFA date hasn't been finalized yet.

And SYR-322 -- TAK-390MR, the FDA have said that they would like to complete the review of the PDUFA by January 31.

And TMX-67 we have received two rounds of approval letters. And we have submitted the final letter. And PDUFA date was set to January 18, 2009. But, as you may know, November 24 there will be a advisory committee to be held at this venue. This will be discussed, as you can see from the FDA's website. And depending on the results or the outcome of this advisory committee, we believe that we'll be able to get the approval by January 18. But this will be depending upon the outcome of this advisory committee.

And next page, this is something that I have been talking for a number of times. So I'm not going to talk about this much. But in this mid-term business plan what we are going to, and for emphasis is improvement of our R&D pipeline and geographic coverage and human resources enhancement.

Moving on to next page, this is a synergy -- the maximization of the synergy of the TPNA and TAP consolidation. And this is one of the major targets for our Company this year. But the TAP have integrated with TPNA and TGRD. And it has started the new organization from July this year.

But apart from some IT systems, it has already almost completed the building of the appropriate and efficient functional cooperation. And the synergy effect of TPNA and TAP integration we're expecting about JPY40b for next three years. And at the moment the corporate [motion fee] that took place between TPNA and TAP there's no occurrence of that anymore due to -- and also the reduction of the indirect expense have allowed us to say that we are smoothly conducting this integration.

And the increase in the presence of the (inaudible) of Takeda in the US and the enhancement of the product fulfillment and the marketing organization in primary care physicians -- the market, through these integrations, after Rozerem, Amitiza and Prevacid, we are going to make sure to maintain and maximize our sales there. And also in addition to that, the three products, SYR-322, TAK-390MR and TMX-67, we are going to put our efforts in getting the early approval of those products.

And talking about the Millennium, it will become the core entity of promoting the product strategy and development, global development strategy of Takeda Group. And we are currently proceeding to transfer those functions over to Millennium. And on oncology development projects, the two companies are cooperating to proceed with the transfer.

Almost half of the programs have completed its transfer. And remaining programs are supposed to be completed by end of this year. And not to mention that our management team members who are going to report to Dr. Dunsire, CEO, there are other core members in R&D and the sales and marketing people retained in Millennium. And with regards to the increase the number of resources in the sales and development program, we have been smoothly progressing with that.

And Velcade, April to September sales -- this is the indication for multiple myeloma, thanks to the obtainment of the first-line treatment in June, we have been able to see $190m. This is 42.9% growth from the previous year. We might see slightly lower growth for the full year trend, but probably will be able to obtain 40% of the growth rate.

And in addition too, the royalty income from the sales outside of the US of Velcade, I believe that this will be greatly contributing to our top line and bottom line.

Next page please. This is the result of our first half of 2008 and the forecast for the full year as you can see from this table. And for the details, Mr. Takahara, the General Manager of Finance and Accounting department, will talk about this later in detail. So I'm not going to talk about this.

Next page please.

At Takeda we are going to centering ourselves around R&D-oriented Company. So the biggest strategy of the Company is to have a further strengthening of our in-house development of our platform.

So in order to create the new products that will support our Company's growth after year 2011, we will be looking to what will be our strength and what is going to happen to the future market and competitive environment. We will define which areas that we are going to focus on. And under such environment, we will set out the research topic that we are going to put our research resources on. And we are going to be prepared for the contingency topic.

So this slide talks about the products that we are going to get the filing by FY 2010. And we have introduced many products in FY '07. And we purchased Millennium in FY '08. So compared with the previous years, our product pipelines have fulfilled.

The products that are under filing, SYR-322, SYR-322/Actos combination drug and TAK-390MR and TMX-67 and TAK-375 and Vectibix, of course we are going to make sure that we are going to get approval and try to launch them early. That's something that we are preparing ourselves.

And also, in addition to that, for those products, the compounds that are in the later stage of development like Hematide, the renal anemia treatment drug, and mood and anxiety disorder treatment Lu AA21004, and hypertension treatment drug TAK-491, and AMG706, for those products too we would like to swiftly progress with our trial and try to develop them.

And also we are going to conduct the strategic alliance and try to augment our pipelines. And we are going to proactively pursue the life cycle management.

Because we have ambitions with regard to be one of top three companies in oncology, we already acquired Millennium. So we already had a long-term vision in trying to acquire Millennium. And we persuaded Millennium to be included in our consolidation with already [realized] acquisitions.

Towards 2020 we have a long-term perspective financial goal. So for us we have already developed the platform of our technologies. Based upon such, we have technology centers we mention today. We have San Diego, Cambridge research centers. We already bought several companies. And in addition to this we acquired Millennium.

So we can make use of the protein homeostatis, this new platform technology from Millennium. By taking out a bunch of [results] we will be able to develop the new drugs and achieve new discoveries. And also perhaps that we can actually provide with each other better (inaudible) and resources among the research centers.

We are making good progress about this kind of research data sharing. This kind of synergy can be taken advantage of. And also in this way we'd like to accelerate technology and development of oncology area, and also development areas that the -- our Takeda research effort will be transferred to Millennium for development.

This is a scheme we have already devised. We would like to make good progress by using this scheme. And of course the oncology research requires several approaches and also the different perspectives.

So, as I told you earlier, that because of the Millennium consolidations, we would like to make use of the new approach from Millennium. So also in the development in the case of Velcade, that they started with one and also that they got approvals, that they took only a few years for this development.

And also here we have the person in charge of the pharmaceutical development. Therefore you can ask some questions if you are interested in. We have oncology research, R&D platform very much, because some areas of research has been lacking. But the Millennium can actually compensate this area where we have been lacking in our research and development. So we actually be taking advantage of the Millennium technology already.

And also the pipeline for the oncology in relation to Millennium, we already received some in-licensed work from Amgen, US. But on the contrary TAK-851 [the vacc] was suspended for the development.

So we would like to accelerate in the clinical pipelines as well as the strategic alliances. Some of the products are not listed here. But we still have a lot of projects in the pre-clinical areas that we would like to -- we need to understand the risk entailing of the development of the cancer.

And also we would like to have the new drugs which differentiates from existing drugs. And also we would like to generate some drugs which give us a [partnership]. So by doing so we would like to become one of the top three companies in oncology area in the worldwide.

Next please. In order for us to enhance the global bases of operations, we acquired several bio-venture companies already. In the United States we have two research facilities in the US and also one in EU. And furthermore in Singapore we have facility in Singapore, in Asia. So each major region we have already established the research centers.

And also they are using different approaches. Therefore we can ensure that the synergies among those different research centers. And also that we are going to enhance the presence in region, which is a mid-term challenge for us. We'd like to perhaps answer your questions later about this point.

And also in EU, as we already expected, we have a coverage of region -- has not yet been that they're making progress very well. Therefore I think we need to review that strategy -- our strategy.

And also in Asia. So far that we managed oversee our business in Asia. And also that we already established our facility in Europe to oversee the region. Therefore we are planning to establish the similar things, and have [border] functions to oversee the Asian business.

Also the Asia area has all the functions. It was already established at this moment for development (inaudible). Our top management will visit and as will sales and marketing. Our general management, that we -- we are planning to employ at our expense, personnel management. Therefore at the beginning of next year we are going to make a start in both locations.

So at the same time, by using the -- sharing the same office, we'd like to enhance communications and also have a better efficiency of the operations. And we can cut -- can actually cut the cost of the operation as well.

Plus we have to catch up on the returns to shareholders, also payout, from the long-term perspective. By the end of this fiscal year we'd like to achieve the 45% of payout ratio.

And also in the mid-term perspective, as I told you earlier, since we have had a series of acquisitions, because of this we have in-process R&D amortizations. It's excluding such extraordinary (inaudible) things that we'd like to actually achieve that payout ratio of 45% eventually. But at this moment we're going to attain the 41.7% payout ratio. At this moment we are planning to provide JPY176 as dividend.

And also, in addition to the payout ratios, we'd like to contribute to the shareholders in another way, that is a share buyback of the shares from the market. We have had -- we have already achieved -- implemented share buybacks up to 2008.

Excluding the share buybacks in progress at this moment, we have already completed some of the share buybacks. And the completed share buybacks are listed here. So the total at the -- well there are [JPY547.4b]. And also that the [9.7%] of our share is already bought back.

As for the cancellations, amortization of those shares, after we buy back those shares, at the end of the year we complete the buybacks, we have a policy to cancel all those shares we bought back. So for the time being we are going to continue the cancellation of the shares we bought back.

So that is from myself. Thank you very much for your kind attention.

Followed by Mr. Takahara to give you the outline of the financial results of the first half of 2008.

This is Takahara. It is my pleasure to present to you the summary of Takeda's consolidated results for the first half of fiscal 2008 and forecast for full year fiscal 2008.

So, as shown in this table, mainly due to consolidation of TAP and Millennium as subsidiaries from May 2008, as well as stable sales growth of ethical drugs and healthcare business in Japan, and despite a negative JPY28b foreign exchange effect, consolidated net sales for the first half of fiscal 2008 increased by JPY98.7b to JPY807.1b. So this means that we have achieved 10 consecutive fiscal period of growth in consolidated net sales.

On the other hand, in connection with the consolidation of TAP and Millennium, from the same period of the previous year, operating income, ordinary income and net income decreased due to one-off expenses recorded.

Earnings per share, excluding extraordinary income, loss, and other extraordinary factors arising from business acquisitions and similar events, which the Company uses as one of our target management indices, was about the same as last year. However when those factors are included, earnings per share was JPY87.33, a decrease of JPY168.21 compared to the same period of the previous year.

The primary drivers for the increase in sales in the first half of fiscal 2008 was the addition of TAP product Prevacid, a drug for peptic ulcer treatment, and the addition of sales of Millennium's Velcade, a drug for multiple myeloma in May to August. The left-hand side of the slide shows the contribution of TAP and Millennium to the consolidated net sales.

The right-hand side of the slide represents the increase of sales of Velcade in the US market. With respect to the sales of Prevacid, only the export sales from Takeda to TAP and royalty income from TAP were included in the consolidated sales until this April. However, following the consolidation of TAP in May, whole TAP sales in the US have been included in net sales, resulting in a significant increase in consolidated net sales.

And, as shown in the slide, sales of Velcade in the US market have grown as expected. Velcade received an additional indication from the US FDA in June for the first-line treatment of patients who have not yet received any prior medication, which will highly contribute to both Velcade sales as well as our financial results in the future.

This graph shows changes in sales and revenues by business segment. Net sales of ethical drugs increased by JPY98.9b, 15.8% compared to the same period last year. In Japan, sales increased by JPY8.7b, 3.3% from the same period of previous year due to stable growth of Actos, Takepron and Enbrel.

Sales of Blopress, one of our core products, decreased by JPY1b in Japan. However, despite an NHI drug price reduction of 10.1% this April, sales of Blopress increased by about 10% on volume basis thereby nearly negating the effect of the price reduction.

Net sales during July to September quarter increased year on year. And it is expected that sales for the full fiscal year will increase slightly over those of the previous year.

As I explained earlier, negative impact from yen appreciation was absorbed by addition of TAP's Prevacid and Millennium's Velcade. And sales outside Japan increased by JPY90.2b or 24.9%.

Sales of the healthcare business increased by JPY3.5b or 11.4% from the same period of previous year due to new products such as Nicorette patch, a patch that's a smoking cessation product launched this July, and Actos, excuse me, [Actaid SN] tablet which has been on sale since last November.

I would like to provide details of the sales of TPNA which merged with TAP at the end of June this year. TPNA had sales of $2,590m which is an increase by $990m or 61.9% from the same period of the previous year. The reason for this growth was due to both TPNA taking over TAP's Prevacid and due to increased sales of the Actos family which increased by $72m or 5% from the previous year.

Despite the rapidly worsening US economy and the decline in overall growth rate of US prescriptions, including dose for oral anti-diabetes treatments, by continuing our efforts to educate on the importance of controlling hemoglobin A1c and increases in plasma levels of insulin, the sales of Actos family increased by 5% on a local currency basis. However this was under our original forecast.

Please take a look at next slide. This slide introduces the changes in ethical drug sales by geographical segment. This figure excludes sales of products for which Takeda acts as a distributor to wholesalers. We achieved sales of JPY659.3b which is an increase of JPY97.2b or 17.3% from the same period of the previous year.

In the US, following the consolidation of TAP and Millennium sales, net sales increased by JPY78.6b, despite the unfavorable effect of stronger yen against the US dollar.

With Actos as a pillar, sales in Europe, Asia and Japan have also grown from the previous year.

These are Takeda Group's four international strategic products on a consolidated basis. Total sales of the four products increased significantly due to the consolidation of TAP. Despite increases in Japanese, European and Asian markets, the global sales of Pioglitazone declined due to the decrease in Americas market sales.

However this decrease in the Americas market was a result of the unfavorable effect of the stronger yen against the US dollar. And sales of Pioglitazone in US dollars increased by 5% year on year.

Sales of Candesartan decreased in Japan. But on a volume basis sales increased by approximately 10% year on year.

With respect to Lansoprazole the increase in sales in the Americas, where TAP was consolidated, was the driver of overall sales.

In Japan Lansoprazole sales grew as a result of its orally integrating tablet achieving greater market penetration, as well as being the first product on the market to receive approval for the additional indication of non-erosive reflux disease, and receiving approval as an additional dosage as the second stage helicobacter pylori eradication therapy. It is recognized as the number one drug for acid-related disease in Japan.

Decreasing sales of European market is mainly because some patent expiries in some of the countries.

The changes in operating income are as shown here. The gross profit was JPY656.4b which was an increase of JPY88.1b, or 16.5% year on year due to the increasing sales of ethical drugs. The gross profit margin was 81.3% which was an improvement of 1.1 points year on year.

Because in-process R&D expenses were fully expensed during the first half of fiscal 2008, and amortization costs of intangible fixed assets and goodwill expanded in connection with division of TAP and acquisition of Millennium, in first half SG&A increased by JPY267.9b. As a result operating income decreased by JPY179.9b.

Excluding one-time expenses such as amortization costs of intangible fixed assets and goodwill, and in-process R&D expenses related to the division of TAP and the acquisition of Millennium, operating income increased by JPY27.9b.

Please go over to next slide.

The details of the changes in net income are as shown on this table. In addition to the decreases in operating profit, non-operating income decreased by JPY52.8b, due to drop in interest income resulting from lower interest rates in the US, and a significant decrease in cash at hand due to acquisition of Millennium, as well as decrease of equity in earnings of affiliates due to consolidation of TAP. Thus ordinary income was JPY101b, a decrease of 69.7% year-on-year basis.

While extraordinary income increased by JPY46.1b due to the gain from transfer of the Lupron business in the US to Abbot, net income decreased as a result of the significant decrease in ordinary income to record a consolidated net income of [JPY71.8b], a decrease of 67.1%.

The cash flow for the first half of fiscal 2008 resulted in a net cash outflow of JPY847b. The primary cause was the JPY833.5b payment for the acquisition of Millennium, which excludes the cash reserve of [JPY1m]. And share buyback and dividend payment occurred. And as a result cash and cash equivalents as of September 30, 2008 were JPY766.2b.

However, as is shown by the JPY129.1b net cash inflow from operating activities, the cash outflow for the first half of fiscal 2008 was just a temporary phenomenon caused by special factors. We will continue to generate around JPY200b to JY300b of free cash flow from operating per fiscal year.

I have presented the consolidated results for the period from April 1, 2008 through September 30, 2008. Next I would like to discuss effects of consolidating TAP and Millennium to our books.

As shown in this slide, negative effects to the operating income from the division of TAP and acquisition of Millennium were JPY69.7m and JPY138.1b respectively. Effects to net income were a gain of JPY10.2b from TAP and loss of JPY130.4b from Millennium.

Next I would like to explain the forecast for fiscal 2008.

Although actual sales for the first half of fiscal 2008 exceeded the forecast that we announced in July, given the decline in growth rate of prescription for the diabetes drugs in the US and increasing mono-therapy usage of low-priced, high-dose metformin, we expect growth rate of Actos sales in the US will remain at around 7% versus our original forecast of a growth rate of more than 10%.

Although we expect that sales increase in Japan and Europe and from Millennium will more than compensate for the lower growth rate, we forecast a JPY10b negative impact coming from the stronger yen to the euro and sterling pound. Accordingly our current forecast for fiscal 2008 consolidated net sales is JPY10b less than our original forecast.

Taking all these factors in, our current forecast for fiscal 2008 is net sales of JPY1,560b, operating income of JPY270b, ordinary income of JPY290b and net income of JPY195b. We assume exchange rates for the second half of fiscal 2008 to be JPY95 to US$1, and JPY125 to EUR1. Sensitivity of JPY1 difference for US dollar is JPY3.2b to net sales and JPY600m to net income. And in case of the euro, JPY400m to net sales and JPY100m to net income.

That concludes the discussion of forecast. So let us move on to the last two slides.

This first slide shows effects of the TAP and Millennium business consolidation in terms of Japanese yen. There have been no changing these figures on a dollar basis to those provided in our annual forecast announced in July. We have summarized here the effects of consolidating TAP and Millennium based on our current annual assumption of foreign exchange rate for your reference.

On this final slide we showed a set of share buy-backs that President Hasegawa mentioned early on ROE and average growth rates for EPS. We will continue to flexibly buy back shares as appropriate in order to improve capital efficiency and further promote returns to shareholders.

This concludes my presentation. Thank you very much.

Now I'd like to invite Mr. Iwasaki, General Manager, Strategic Product Planning Department. He's going to talk about that the status of R&D.

My name is Iwasaki from the Strategic Product Planning Department.

So I'd like to introduce to you the update and topics about pipelines in 2008, that's the other half. This is a slide you already find in a list that we have been making various efforts to enrich in R&D pipelines so the growth and to accomplish the launch of new products into the market. And the effects in these efforts we have been addressing three major [tacks], namely enhancing in-house R&D, maximizing added-value in products and promoting and licensing alliance activities. To at that end we are concentrating our management resources into those four areas.

So now I'd like to explain the update regarding the pipelines in each of these areas. So first, the franchise that is lifestyle disease. And this is the most important franchise and will continue to be so into the future.

Regarding the DPP-4 inhibitor SYR-322 in sector this year, we submitted an application in Japan for the manufacture and marketing approval for this drug in monotherapy. In the US we also completed the following process for marketing approval with combination drug with Actos.

As for Actos in Japan, this year in September we also submitted an application for the manufacture and the marketing of its orally disintegrating tablets as well as application in October for combination drug of Actos with metformin. So we will strive to ensure the various approvals for SYR-322, while at the same time actively implementing various management strategies for Actos. By doing so we'll continue to enforcing our position as a global leader in the diabetic strategic area.

Please go onto next. So with regard to the hypertension drugs that can (inaudible) that is focused in Japan, that the data from the product trial programs was presented at the Congress of the European Association for the Study of Diabetes held in Rome this year, in September. The [product] trial assessed a treatment with the consultants on the incidence and the progress of diabetics (inaudible).

This program is a first large-scale study program to assess the effective treatment with angiotensin II receptor blocker on diabetics (inaudible). And we have [overturned] the informative findings to this date showing a trend in favorable treatment with the [candesartan] [32] new brands introducing the incidence of diabetics [efficacy] into one diabetes patient, as well as in increasing the chance of regression type 2 diabetic patients.

So diabetic patients are said to be at a higher risk of developing hypertension as complications. So we believe that the benefit of using candesartan in the treatment of patient with such a (inaudible).

Next, I'd like to move on to the franchise II, oncology and urological diseases. This year in June that we obtained approval in the US for Velcade as a first-line treatment for patients with multiple myeloma. And also in September approvals also obtained in Europe for the same indications.

Takeda is not directly involved in development and marketing in Europe. However, we are expecting that the approval will greatly serve to further improvement of the value of this drug on a global basis.

And the pipeline of oncology drugs including those undergoing clinical studies has been greatly enhanced, as is shown here. We have a number of preclinical candidates, projects that are close to entering preclinical trials. And we will strive to further enhance our pipeline, seeking to establish operations as a leader in this area.

And please go to the next. Next as for the Franchise III, the area of central nervous system and bone and joint diseases. Here we are aiming for the earliest possible launch in the US of the Lu AA21004 which we are seeking license from Lundbeck for the treatment of mood and anxiety disease. In addition to that we will also focus on Alzheimer's disease and schizophrenia for which unmet medical needs are expected to be high in the future. We will work on these drugs utilizing our in-house research capability basis.

As there gastroenterological areas, as was already introduced by Mr. Hasegawa, our President, that the PDUFA date for TAK-390MR was postponed to January 31. However, we are confident that the high product value of this drug remains unchanged. In fact, as a proof for that, new clinical trial data for the drug was recently published in the US. And also our clinical trial data for SYR-322 was presented at the Congress of the European Association for the Study of Diabetics held in September.

Now I'd like to introduce the clinical trial data for peptic ulcer treatment drug TAK-390MR which was reported at the conference of the American Gastroenterological Association held in Orlando last month.

The clinical trial program was composed of two parts. The clinical trials were conducted on 4,092 patients with reflux oesophagitis. The patients were divided into three groups that were administered TAK-390MR 60mg, 90mg or lansoprazole. [Then the severity] of reflux oesophagitis. At the start of drug administration and the healing date after eight weeks administration were composed -- compared among the three groups.

The result confirmed that the healing rate of the groups given TAK-390MR 60mg and 90mg were higher than the healing rate of the lansoprazole 30mg groups, regardless of the severity level of reflux oesophagitis. Among other things, it is confirmed that the moderately severe and severe cases the healing rate of the group given TAK-390MR 60mg and 90mg were even higher compared with the healing rate with the group given lansoprazole 30mg.

Last thing I'd like to touch upon the clinical trial data regarding Alogliptin. The name is SYR-322 in combination therapy with insulin which was reported at the conference of the European Association for the Study of Diabetics held in Rome this year in September.

The clinical trials were conducted on 389 patients, almost 400 patients, with respect to diabetics who met the full conditions shown on the slide. And our patients were divided into three groups, each receiving Alogliptin 12.5mg, 25mg, or placebo. Then changes from the baseline in HbA1c after 26 weeks of combination study with insulin were compared among those three groups.

The results show that compared with placebo groups, the HbA1c volumes of the groups given Alogliptin 12.5mg and 25mg significantly declined on average from the slides. Furthermore in a group given Alogliptin, the combined use of insulin did not have such a great influence on weight gain with, of course, hypoglycemia, as is often observed in the concomitant use of insulin. So we'll continue to work in close contact with the FDA for all the approval of these drug.

Thank you very much for your kind attention.

(Operator Instructions).

My name's Yamaguchi from Nikko Citi. So this is the color that you have given a number of times in the US. There is US support so that your new drugs approval is delayed, so you need to do the existing drugs, like Actos.

And in case of Actos you have lowered your target slightly. But it looks as if your performance recently is a very difficult situation. But do you have any marketing strategy or the ideas in order to recover that? Maybe 7% or 8% will be a bit difficult to achieve from looking this from external. So I guess I'd like to have your comments about what's your idea about to recover this situation.

So Actos in the United States, as I have mentioned earlier, for the first half it was 5%. But from May last year in the New England Journal of Medicine, Dr. Steven Nissen's (inaudible) comment about the impact of it was released in that magazine. And after that, our Actos pipeline order stock expanded. So we are comparing against that situation.

So when we take a look at our sales in a full year terms, probably going to see 7% to 8%. But as you have mentioned, the American market itself is maybe 1% or 2% growth. So it's a very low growth there. So under such situation, already for those patients who got the prescription at the doctor's, maybe those who are not [before] from the pharmaceuticals. So maybe next year and after the situation may be even worse. So we need to take that into account. But we are in the stage where we are going to put together the next fiscal year's plan. So I cannot give you a specific number as to what we are assuming to happen for next fiscal year.

And this is just an impression, but GVAX R-851, this is the newly introduced product. But that will disappear from the pipeline soon after.

I'm not sure what is the [hedge weight] of your company, but our impression is that the new product that you have put into your pipeline will see some failure. So I just wonder what is happening to your control of your pipelines and what are you going to do with the quality of them? So I just wonder what is your thought about the risk management.

So it is as if that you are looking into our Company, so we have a similar discussion internal to our Company. But one thing that I can say here is that once each product has each business as a situation, so one is to enhance the oncology area, and GVAX R851 and EMD72000. But any of them didn't do well. But in case of GVAX, so oncology as a [hormone] therapy, this is the most advanced one. But no-one has succeeded in that.

So thinking about that situation at that stage of Phase 3, we looked at the lower probability of our success. And then upfront we believe that we have hedged our risk. However, having said that, we were hoping that to be a successful case. But unfortunately this success rate that we assumed with the lower numbers didn't prove to be well, but [failed] finally.

So in order to improve or enhance this success or probability, especially for oncology, we would like to leverage Millennium's expertise going forward. And with regards to license and deal making, we would transfer everything over to Millennium, so we need to cooperate with Millennium. That's the method we are thinking of.

May I give some additional explanations? So in what way we are going to increase our ratio -- [run rate] ratio and success ratios. So far in relation to the in-house expertise, we have enhanced the relationship with the external bodies. With this view that the global signs are [fierce], we are going to enhance this function. The level of science they have captured is quite high in relation to that. We have a collaboration and communication with external that designed it. Actually they have a very good relationship with external [scientists]. Therefore sometimes we have some circumstances, but the variation only by our expertise. We will incorporate the opinions coming from external bodies.

My name is Matzore. I have several questions. First up, the (inaudible). Could you please elaborate illustration of this project?

As of today, this is under evaluation, examination. So we need to ask the FDA about the situation.

But anyway, I think that you already received that kind of approval. The data -- the one you already passed.

Yes, I believe that we will be able to get approval as soon as possible.

Do you have any other comments?

No, this is the best we can say at this moment. As of today that the -- it is too early for us to say anything different. I think we need to wait for some time.

And also the three drugs that you mentioned, SYR [N09] and one more drug, TMX-67, if you can get the approval, what will be the length until approval to the launch? So of course once you get approval you need to prepare the package insert. Perhaps you will be able to make a launch. Is this the situation for those two drugs?

Well that's speaking of the times and the length, of course, we need to consider our preparation level. As soon as we can get the approval we'd like to make them launch in early stage.

So production, the marketing, so do you have all ready prepared?

Yes, we have had a very good preparation for marketing and the production. But it depends upon the timing of the approvals. If we have to have a communication about the labelings of those products, we will spend some time. Same as for TMX, plus 40mg, 80mg, we have already applied both. Therefore I don't know whether we can get approval for both. Perhaps that we may have some comments about one of those.

But labeling, then we will have to have a communication with FDA about labelings. But that the labeling issue is actual [result]. We are ready to make them launch because we have inventory in the production. And also we have a preparation for marketing.

One more question. For the last years you didn't talk about this, [that is 242]. Basically do you already [withdraw] this?

No. In the global situations that we are now conducting those retrials. But for the last two years we're submitting that this product didn't appear in 2010 pipeline. At this moment we can't say differently when we're going to get approval. But what I can say this is under the progress.

This is Urushihara from Nomura Securities. I have three questions. The first one is about the SYR-322 domestic filing. According to the newspaper article, you file it without having the third phase of clinical testing. I just wonder whether you didn't have this third phase clinical testing?

Well, the PMDA, we have had prior discussion with them. And with the current package it is possible to file for the approval. So that's the evaluation we were given. So that's the reason why we filed it.

At the time when you got the approval domestically, I suppose that you need to do the very large scale Phase 4 clinical testing? And probably you need to do safety checking in a large scale. Do did you have that kind of conditions?

Well, this is in the process of the evaluation review. So at the time, at this point in time, I cannot make a comment on that.

So this filing, is it just, I think, monotherapy of -- or what happened to the combination with 322? The base combination with the base in, have you filed that?

Well from the -- that's related to a development strategy. So I cannot give you any comment on that.

Thank you very much. And my second question is about MediPal and Alfresa, integration of those two. Your domestic business, is there any changes to happen to your Company, due to change of [a prior balance], from your company to MediPal, the rebate or [a sense] profit may go out? Or by having a single distribution channel, does it make your Company to sell more and would it be the following [link] for you? I just want to hear your comment on this.

The power balance itself, it is true that from volume-wise 60% or more of our products were [either from MediPal] and [first] into combined together and allowed by antitrust laws then it is true that 60% of products will be dealt with those people. But I don't believe that the power balance would alter between our company and them.

And also this [kind of allowances] on the topic, as you may already know, the Ministry of Health and Welfare and regulators, there are some issues that they need to overcome. But they are proactively pursuing that and another manufacturer for us to be able to support that, like allowances and discounts, to make them transparent early and to make sure that it's not going to happen later. So we are making sure that it's going to happen. So I do not believe that that will impact.

And on the other hand, what we are expecting here is that if they become that much of a size then in the past the buying power, by having a larger size of buying power, the stronger part they become. But to see the resolution of that balance of in the newspaper article, the [first advisor] is a minus, but there is a slight reduction is what I heard. But through this kind of consolidation I believe that that kind of situation to be resolved.

And the last question, the oncology development procedure has changed, because there is something that is already there with Millennium which is not there with Takeda. So I just want to know your idea about that.

I don't know whether we're [aligning] something or not. We have the chemical compounds, that we don't have any experience to develop the compound in the late stage. Because of consolidations, that we are taking advantage of Millennium strength. For example, that we have been transferring several products to Millennium for development.

So when we take a look at their plan for development, the methods they are using, the data generated should go back to the basic share of the research for new chance development. Or they can devise the new clinical trial programs and also they have a communication, close communication with external expertise about the data. So, in short, they have very specific ways of development of oncology products. In this regard we have a lot of points that we are learning from Millennium. And also that the Millennium has a very good strength about the development strategy.

Yes, may I add something? So that about the time required for the project, so the lifestyle disease and oncology, we have a different idea as to how soon we can develop, that in our case we conduct the clinical studies in a (inaudible) manner. We can pick up the candidate from the preclinical stage. Of course this is a very good way for us to develop the lifestyle disease studies.

But in the case of oncology, the clinical data that's not -- cannot be extrapolated into the clinical stage very well. Therefore that we need to make the project turn to the clinical stage as soon as possible. In this case we have [a good idea] what the product should be taken, so Millennium has very good experiences about its selection of the candidates. So we will -- that such [normal] from Millennium. So we are going to [mix] the projects onto the clinical stage. And so it's possible. I think it is a very good way for us to develop the oncology product.

My name is Sakai from Credit Suisse. I have two questions. First one, SYR-322 the phase 3 skipped when you filed for domestic approval. I just want to confirm that the clinical testing in Europe you did, right?

And in that process, according to the Expertise magazine or the article in Brazil or Hawaii website, the Japanese patients or people with Japanese DNA, you have put them into the clinical subjects. And that's the reason why you got some approval without going through phase 2. I just wonder whether this is the know-how that you can leverage in the future as well.

So we make the patient enrolment of -- we didn't do that you think the Japanese DNA or Japanese descendent people in enrolment of the patients in Europe. So what I can say to you is that SYR-322 compound is very good, and PK is good, so PK and PD, both aspects there is much significant difference. That's the biggest advantage.

So on the other DPP-4, most of them are requested to conduct a phase 3 in domestic market. But the differentiation in there, or is there anything that you can evaluate, is that what I can say. So this is area that ethnic factor works pretty well. So that's what we're very much concerned about, both PK data and PD data both came up with very clear data. So please consider as such.

One more question. I'd like to ask a question about the cash flows that are on page 22 of your slides. There is a table here that (inaudible) because of Millennium you have external factors that you can earn about JPY300b to JPY400b as cash flow. So this is the financial activities. Actually that the dividends, that the payment is about JPY250b to JPY300b perhaps.

Then what I want to ask you is the possibility whether you're going to accumulate the cash, because the earlier that you had your reserve of about JPY1 trillion as strategic plans, I think because of Millennium acquisition that the level of the cash has been decreasing still. What is your level you think you are -- you think as a cash flow?

And also if you have any surplus in the reserves are you going to use these kind of reserves, the extra money, for the -- that the dividend or the investment? So we want to know what is the strategy how you are going to make use of this cash.

As from today that the -- our policy of the cash flow is like this. It's all that we try to get about JPY1 trillion or -- and also JPY500b in -- on the operations. Because of the (inaudible) acquisitions, perhaps we don't expect any large-scale M&A at this moment. Therefore the strategic plans and that they compare to our -- the ideas that before, we don't have any clear-cut ideas. But by the JPY500b operatings, the money, I think we will continue to accumulate this level.

Then what is the surplus of our JPY500b, whether we are going to return this money to shareholders or not. So, as you know, because that we are facing that the problem of the finance systems, some companies actually have [a choice] about how to get enough cash. This is a situation we are facing. Therefore thanks we have a kind of idea, we have a discussion among ourselves to increase our reserve over the operating money more than JPY500b. So this is the best that we can actually disclose to you as of today.

And also can we go back to page 16 that the cash flow in the table, the JPY75.3b as a benefit the profit you got. What is the reason behind this?

So where are you looking at on page 16?

At the operating activities. Here, that the loss and the profit with the business transfer, I think this is substantial values.

This is Lupron. This is the profit we got from the sales of Lupron investment. And trying to make this, the table, we have utilized a kind of techniques. Yes, because of adjustment [to the tax] here that we deducted the value which is not affecting any cash flow.

But therefore this is the price regards from that the Lupron business. But you didn't exchange any cash at all?

No.

I understand. Thank you.

(Operator Instructions).

My name is Onozuka from JP Morgan Securities. I have two questions with regards to Actos in the US. The first one is about the revision to the guidelines. At the end of October, [AD] and therefore the Diabetes Association, the guideline of the drugs was made, I believe. [Is that right?] So the Actos revenue, is this related to the guideline changes? Or if that is not related to the guideline changes, then how did fact that you are positioned as tier 2 to impact your revenues?

So, about the diabetes guideline, that's the outcome study by [launch].

No, I'm not talking about development side, but the type 2 diabetes treatment guidelines. And this was revised first time for last two years and there was a big changes to flow chart. And there is a tier 1 and tier 2 and Actos was a position in tier 2.

Well the guideline itself, I do not see that that is impacting the Actos prescription. Rather, as President mentioned earlier, the overall prescription itself, due to various reasons, it is not growing much. So that will be the more greater impact to our Actos.

And second question is related to this one, the prior one. But for Actos, April and October you have increased the price two times, and a total of 10% or so. And although our treatment drug, you mentioned that if they are in a very difficult situation recently. So the 10% increase in price, I just wonder whether that is the level that can be accepted by the patients? Or this might be a difficult price increase that you can do going forward. But this price increase, is it possible to do that?

So the price increase itself of this level, and it is possible to do that under a current situation. But, as you know, probably Mr. Barack Obama, if he won the presidential election, then the government may come in to do the negotiation directly. So that kind of changes might be expected.

But if that is going to be realized, then it might be difficult to increase the price. But under that extension of the current situation, that increase might be possible. But that's pricing. This is negotiation with a managed care, so even if we increase 30% the net price increase is only 3% or so. So the, in reality, the price increase is not that far as what we have increased on the surface.

Thank you very much.

My name is [Miko] from Daiwa Securities. Perhaps this year so you have received that postpone to update the response, but you might be an [expert] to receive that the postponements. But in general, in communication with FDA, do you think this kind of postponement will likely to occur more often? What do you think you are going to be by situation in six months after?

I think this kind of situation would continue. But there are several reasons for this. For one thing, well, FDA is of course the agency for food and drugs. These programs through the safety program is rampant in the United States as well as in Japan. Therefore they are quite peculiar about this point.

And also perhaps that I made a mistake yesterday about this point. Actually, because of the public servant pay caps, and it has been implemented for the last 17 years. So because of this, many of the public servants are de-motivated. Therefore that does -- they can actually --- they can employ new people. But once that the staff can have good knowledge and capability, they leave FDA. Therefore turnover ratio of staff is quite high. The about [1,000] [a year] perhaps will be now vacated.

So therefore, in other words, FDA is lacking resources always because of the pay cap. And I don't think these kind of pay caps will be revised very quickly in the US. Furthermore, [as the] petition groups or the Congress that are felt by the pressure of FDA about safety, therefore they have to spend more time for the safety evaluation. Therefore this the delay [variation] cannot be resolved very quickly.

About this point, in 2015, you have already said you are going to target the JPY2 trillion that the -- in this regard, perhaps you are going to increase the pipelines?

I wish I could, of course, the pipelines. In 2005, that's when we tried to make mid-term plans and for the next 10 years. Of course we tried to get perspectives about 2016 so that the, in other words, to make the next medium plans, I think we need to know whether we are going to achieve JPY2 trillion in sales or not in close manner.

So, in some cases, we need to revise the target value. So this is a situation we are facing because of the [arid] market. I think that we need to -- we may need to revise. So I think we need to look back our actual -- the capabilities.

Thank you.

My name is Shimura from UBS Securities. One question is with regards to oncology area, the vaccine-related areas, can I understand that you are not going to pursue that? Or I just wonder whether you still are going to be engaged in this?

For the oncology vaccine, that is something for the future. But we are putting our efforts into the antibodies. And there are several reasons to that.

The first one is that vaccine, in using the patient's immunology, we are going to do the treatment. So thinking about it, if there is the antibody then it might be better to administer antibody for the sake of efficacy. And in respect to this immunology, our treatment is the [high] (inaudible) people [BMI] are using the concomitant therapy.

So, using this kind of adjuvant and using the vaccine, we might be able to -- we are not in a stage to be able to up with an effective vaccine. So we are going to watch closely. But for the research-wise, we are going to put our efforts in the antibody area.

And about the US, for the next one or two years ahead you are going to revise the strategies? I mean that your branded products has been decreasing in sales and profit. And also because of the -- that the slowdown economic situation that you will receive the first share from Medicare, therefore that the extensive -- the service, such as oncology, may face such (inaudible).

So the -- your core areas, lifestyle disease and oncology, these are the areas which will be affected by the slowdown in economy in the US. So these two are very important areas for you to sustain. But what is sales prospective for those two areas?

Yes, we are very concerned. But these problems you mention, they're problems everybody's facing. Therefore I don't know whether we can look for another area in which we have new clout at all.

So, in this regard, perhaps that the -- we are very much -- we're still with a very good situation in the US in the past. Therefore that the problem we are facing may be unknown that we will foresee in the future. Therefore that will have a better balance of the [election] coverage. So even though the US, the market, the growth may slow down, but we can suffice that this -- that the effect by either company, other regions, such as [BRIC].

So this kind of situation what would be required, I think we need to prepare such a situation as soon as possible to correspond to a response with the fluctuation in different regions.

About region coverage, I have one question about the domestic market in the future. For example, AstraZeneca, GSK, what are the main products that you are going to get up -- they are going to get approvals? The -- although perhaps that you're the number one company in Japan, but you receive more pressure from the foreign companies. So therefore the gain of the market will be different in the future.

So, in this regard, that if the situation changes, what are -- do you have any plans on how you are going to -- or that the -- or launch a strategy? I don't quite understand you [mentioned] that the game has changed.

For example, the wholesale plan so far, that the -- because you have had a sudden slide ratio, is that because the costs that the -- is getting up? Therefore the wholesale might be revised. And of course, in several franchise areas, that the other areas, other than long-term products, perhaps you may see a different situation about this communication about the price [that's the new situation]?

As long as we're operating in the industry like this, of course we need to develop and launch the new products, otherwise we can't expect any sustainable growth. So this is true in this regard.

And the domestic market in Japan, perhaps the problems that they -- well it's not very clear in the domestic market compared to the other countries. But we have the -- we already propose a kind of revision of the (inaudible) with the industry associations. And the -- perhaps that we will not have any that are discount. And as for the long-term [listed] products, of course that the government are going to decide a price for [generics].

And, also, in competition against generics, if we are forced to reduce the price then we need to make a decision. Each company will make a decision whether they are going to reduce the price or they are going to fight back such acts. So therefore that perhaps the source of the profits will [die back] from the long-term listed product to the products with which we still have the patent.

And also other, you asked about wholesale price and also (inaudible), such ratios, if you compare the domestic companies and the foreign companies. So I don't think it's a good idea to give something definite as an answer at this moment.

The foreign companies, I don't -- as long as they know that the foreign companies may give us bigger [analysis], therefore that this will not change drastically, even though the new product survived. So, in short, I think we need to maintain share or increase the shares by developing new products. So if we can capture, develop and launch new products, that will be perhaps the -- we will -- we may lose [track]. So we may be caught up with foreign companies.

Therefore, that we already -- that filed the several products in Japan. And also we receive the licensed product from [Amgen]. And also we tried to get the license and marketing that the license in Japan so that we have actually adapted the -- actually compensated the area where we are a little weak so far.

(Operator Instructions).

(Inaudible) from Barclays Capital Insurance. About whether SYR-322 PDUFA file was rescheduled. So this may be a question I have repeat -- repeatedly asking this question, but did you feel the benefit of having advisory committee for this?

At this point in time, we haven't heard about that.

Thank you very much. And a second question is about Amitiza. On a US-dollar basis sales, the expansion of the indication, I just would like to know the tendency for that. So is that in the line which Takeda is thinking on and have you done a DTC?

So DTC, we have conducted that on a trial basis. But the trial evaluation criteria that we have used, that is the growth of sales net meeting the investment, because we couldn't achieve that, so we stopped doing that. So we are not doing DTC for it.

And Amitiza sells itself. So comparing against what we have sold, according to annual plan, we assume that will go up further. But unfortunately the addition of indication, even with that, we haven't been able to grow that to an extent that which we have expected.

So what's the major reason why that number is under what you have expected?

Well if we knew that we may have done something about it. But this is not our in-house product and we need to deal with original manufacturer about this. So I cannot give for you the further comment on this.

Thank you very much.

My name is Mita from Morgan Stanley Securities. I have two questions. One of them is pipeline. So next year, [expected] year, you have some expectations to file something. So would you please disclose any products? Hematide and the TAK-491, and also that the Lu [backs], that the anxiety and mood disorder products, are these included in your application for file, filing, next year?

About the ones we are going to file we do not disclose. Therefore that we cannot say.

Did you see any progress about the phase 3? I think that you are doing that phase 3 in a steady manner. I think it has been two years.

For all those drugs, that's yes, we are making steady progress in phase 3 for those drugs. But we can't disclose when we are going to file, when we are going to submissions.

And Hematide, the [DSA] drugs? Perhaps do you want to have safety programs? So that I guess you have revised the protocol in the trials. Is this the right understanding?

Because the FDA devise the guidelines, in accordance with that we also revised our plan.

Thank you. One more question is Velcade. As outlined, an indication was approved in the US in June. Did you see that the good [factor on this] the approval or not?

And one of -- and about the co-promotion with Johnson & Johnson, you already started a co-promotion at the beginning of 2007. Do you continue to have the co-promotion with Johnson & Johnson, because I have heard the news that you may revise the strategy?

We have already -- the Johnson & Johnson co-promotion plan was already terminated.

When was it?

Back in July or June.

All right, thank you. So you are -- now you are on your own, so (inaudible) is only on its own?

Yes. As for the pipelines, the -- it is very difficult for us to quantify the fact of the pipeline indication approval. But I think that we begin to see the very good result from this, the indication approval because this drug has received so much reputation from our experts. And because of the [vast] indications they are going to make use of this a lot more. Therefore perhaps in case of sales, perhaps in a rapid manner. I think that the sales would increase in line with the evaluations.

About the dosing period, I think this has a got a long dosing period, I guess. So that the toxicity, neuro-toxicity might be rather enormous, therefore I don't think you can extend the period. Well, the side effects, that we don't receive any negative news, other than what was already reported about the toxicity about this drug.

(My name is [Sada] from JP Asset Morgan. So with regards to TAK-491, when you can -- the trial that you compare with olmesartan you just -- which took place at the very beginning, I believe that has been already completed. But did you get the top-line data for that already? And if you already obtained that, then I just wonder what is your feeling or the comments on it?

So we are not in a stage to be able to report that to you.

Thank you.

So if the good data is there and if -- once the data is compiled together, and I would like to set up the date in which that we will be able to report that to you.

Thank you. And 390MR, the domestic filing for it, according to the [JAPIC] website, the trial which you announce as a phase 2, that is regarded as 2/3 phase. So I believe that that is a bridging trial. So if that's the case, then you will complete that trial next year so the domestic filing will take place next year. Can I understand as such?

So I am repeating myself a number of times, but with regard to the approval and filings, we -- I would like to refrain from commenting about that.

So at least, this is the bridging trial? Is that correct?

Well, on that matter as well, I cannot comment on that. Thank you very much for understanding. Thank you.

Any other questions? It seems we don't have any other questions. Therefore with this we would like to conclude the conference on the first half results meeting in the fiscal year 2008.

Once again, I'd like to extend already our thanks and gratitude to all of the participants who have come and take part in the conference in spite of a tight schedule. Thank you very much.

Thank you for your taking time. And that concludes today's conference call. You may now disconnect your lines.

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.