Takeda Pharmaceutical Co Ltd (TAK) 2009 Q3 法說會逐字稿

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

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

During the presentation from the Company, all the telephone lines are placed for listening-mode only and the question and answer session will be held after the presentation.

This conference call is being broadcasted through the Internet online, but only for listening-mode.

Now we start the conference with the presentation.

Thank you very much for your participation to the conference call over the third quarter financial result for fiscal year ending March 2009, [for] Takeda Pharmaceutical Company Limited.

My name is Hirofumi Inoue, Manager of Corporate Communication Department of Takeda.

Now, please let me introduce the schedule and the participants on Takeda.

Mr.

Hiroshi Takahara, General Manager of Finance and Accounting Department.

And Mr.

Masato Iwasaki, General Manager of the Strategic Product Planning Department.

So first, I would like to start with the presentation and financial overview of the third quarter, which is followed by the R&D update.

After that we will have our question and answer session, any of your questions will be welcomed.

We believe we have enough time for the session.

Now let us start the presentation.

Thank you very much.

This is Hiroshi Takahara.

Thank you very much for joining us.

It is my pleasure to present to you the summary of Takeda's consolidated results for the nine months from April through December 2008.

Page two please.

Consolidated net sales for the nine month period increased mainly due to the consolidation of TAP and the Millennium subsidiaries from May 2008, as well as an increased sales of ethical drugs and also consumer healthcare business in Japan, despite a negative FX impact of JPY55.2 billion.

On the other hand, operating income, ordinary income and net income decreased due to one-off expenses recorded by the consolidation of accounting of TAP and Millennium.

Earnings per share, excluding extraordinarily income and other extraordinarily factors arising from business acquisitions and other events which the Company uses as one of its target management indices, increased by JPY8.07 to JPY370.71, compared to the same period last year.

[EPS including] extraordinary factors marked JPY206.95 down by JPY182.89.

Please look at the next slide.

Before moving on to the details, let me explain the recent foreign exchange fluctuation which gave a significant impact on our operating results for the first three quarters of FY08, due to the financial crisis, average foreign exchange rates for the nine month period were JPY103 to the dollar, JPY150 to the euro, which represents appreciation of JPY14 and JPY12 respectively, which had a negative impact on our operating results as shown on the table.

Next slide please.

The primary drivers for the increase in sales for this period were the addition of Prevacid to US sales, a drug for peptic ulcer treatment.

And the addition of Millennium's Velcade drug for multiple myeloma from May 2008.

The left-hand side of the slide shows the contribution of TAP and Millennium to the consolidated net sales.

The right-hand side represents an increase in the US market for Velcade.

With respect to the sales of Prevacid, until this April, only the sales from Takeda to TAP and royalty income from TAP were included in the consolidated sales.

However, following the consolidation of TAP in May 2008, TAP sales in US have been included in net sales resulting in a significant increase in consolidated net sales.

And also the sales of Velcade in the US market have grown as expected.

Next slide please.

This graph shows changes in sales by business segment.

Net sales of ethical drugs increased by JPY132.4 billion or 13.9%, compared to the same period last year.

In Japan sales increased due to the stable growth of Enbrel, Actos and Takepron despite negative impact over the NHI drug price revision in April '08, sales of Blopress, one of our core products, decreased by JPY3.2 billion in Japan and -- which is because of an NHI drug price reduction of 10.1% in April 2008.

However the volumized sales increased by 9% as I explained earlier, due to the addition of Prevacid and Velcade.

Sales outside Japan increased, despite unfavorable foreign exchange impact by yen appreciation.

Sales of the consumer healthcare business increased, due to increase of Benza and Nicorette, although sales of Alinamin drinks and Alinamin EX tablets decreased.

Next slide please.

These are sales of TPNA which merged with TAP at the end of June 2008.

TPNA sales increased significantly due to both TPNA taking over TAP's Prevacid, and also because of increased sales of the Actos family by $83 million from the previous year.

Despite the rapidly worsening US economy and the slowdown in the overall growth of US prescriptions, including those for overall diabetic treatments, by continuing our efforts to educate on the importance of controlling HemoglobinA1c, and of improving insulin resistance, the sales of the Actos family increased by 3.9% on local currency basis.

Next slide please.

This slide shows the changes in ethical drugs sales by region, [this] excludes sales of products for which Takeda acts as a distributor to wholesalers.

We achieved sales increase of JPY133.2 billion or 15.7% from the same period last year.

In the US following the consolidation of TAP and Millennium sales, net sales increased by JPY122.8 billion despite the negative FX impact.

Sales in Europe decreased due to the negative FX impact, with Actos (inaudible) sales in Asia and Japan have continued growth.

Next slide please.

I'd like to explain sales of Takeda Group's four international strategic products on the consolidated basis.

Total sales of the four products increased significantly due to the consolidation of TAP.

Despite the increase in the Japanese, European and Asia markets, the global sales of Pioglitazone declined because of the decrease in the US market, due to the negative FX impact.

Sales of Candesartan decreased in Japan but on a quantity basis sales increased by approximately 9% year-on-year.

Total Lansoprazole sales were up thanks to an increase in US market.

This was due to the consolidation of TAP.

A decrease of sales in the European market is mainly due to FX impact in the exploration of the substance patent.

Next slide please.

I'd like to discuss details of the changes in operating income.

The gross profit was JPY981.5 billion, an increase of 13.9% year-on-year due the increase in sales of ethical drugs.

The growth profit margin was 81.6%, an improvement of 1.5 points.

SG&A expense increased by JPY285.5 billion due to in-process R&D expenses, amortization costs of intangible fixed assets and goodwill associated with consolidation of TAP and Millennium.

As a result, operating income decreased by JPY166.0 billion.

Excluding extraordinary expenses related to the consolidation of TAP and Millennium, operating income increased by JPY58.8 billion.

Next slide please.

The table shows operating income of each region.

Operating income of North America increased significantly.

This is because now 100% of gross profit margin of TAP is included in the operating income of North America due to the consolidation.

In the previous year 50% of the gross profit margin of TAP was recorded as equity in earnings of affiliates which is a non-operating item.

Furthermore, consolidation of Millennium in May last year contributed to the increase in the North America.

On the other hand, the category of elimination or corporate decreased notably compared to the same period last year.

R&D expenses subject to centralized management as a Group, are excluded from operating expenses of each region and included in this classification.

Please understand that the main reason of the decrease is in-process R&D expenses related to consolidation of TAP and Millennium.

Next slide please.

Now the details of changes in net income, ordinary income declined because in addition to the decrease of the operating income, non-operating income decreased by JPY85.6 billion due to a decrease in interest income resulting from a significant decrease in cash at hand, and lower interest rates in the US, as well as a decrease in equity in earnings of affiliates due to the consolidation of TAP.

While extraordinarily income increased due to the gain from the transfer of the Lupron business in the US, net income decreased as a result of significant decrease in ordinary income.

Next slide please.

Cash flow for the first three quarters of fiscal '08 resulted in the net outflow of JPY1,025.6 billion.

The primary cause was the JPY833.5 billion payment for the acquisition of Millennium which excludes the cash reserve of Millennium.

In addition there were other factors such as share buy-backs, dividend payments and tax payment.

As a result, cash and cash equivalent as of December 31, 2008 were JPY587.6 billion.

However, as is shown by the JPY181.8 billion net cash inflow from operating activities, the cash outflow was just a one-time event caused by special factors.

I have presented the consolidated results for the period from April 1 through December 31, 2008.

Let me summarize the effect of TAP and Millennium on the consolidated financial results.

Next slide please.

As shown in this slide in terms of operating income, business consolidation of TAP and Millennium gave negative impact of JPY74.8 billion and JPY150.0 billion respectively.

Effects of net income was again of JPY5.3 billion from TAP, a loss of JPY137.8 billion from Millennium.

Next slide please.

On the final slide I would like to show the effect of share buy-backs.

The chart on the left-hand side shows actual shares that we bought back in the recent fiscal years.

Cumulatively we acquired about 98.88 million shares on the market for about JPY622.2 billion, which represents about 11.12% of outstanding shares.

The box on the right is the effect to ROE and average EPS growth.

We will continue to buy back shares as appropriate in order to improve capital efficiency and further promote returns to shareholders.

Finally there are no changes in forecasts of consolidated results for the full year of fiscal 2008 announced in November last year.

(inaudible) the foreign exchange rates for the second half of fiscal '08 is JPY95 to the dollar, and JPY125 to the euro.

FX fluctuation of JPY1.00 to the US dollar would mean JPY3.1 billion impact on the net sales, JPY0.2 billion on to the operating income, a net income JPY0.1 billion impact.

And for the JPY1 fluctuation to the euro would mean JPY0.4 billion to net sales, JPY0.2 billion to operating income and JPY0.1 billion impact to the net income.

Thank you.

My name is Iwasaki, R&D from Strategy Product Learning Department.

I would like to talk about updates regarding the status of [pipelines] as well as the key points in the third quarter of fiscal 2008.

This is the first slide.

So these show the major therapeutic areas, it is shown here.

We have already chosen those four therapeutic areas.

We have been diverting our resources into those areas

I would like to talk about (inaudible) over each pipeline.

Please go onto the next slide.

First of all the Franchise I, lifestyle-related disease, so Franchise I one is making a great contribution to us now and in the future and is one of Takeda's most important therapeutic areas.

The DPP-4 inhibitor SYR-322, we received a notification from FDA.

FDA has notified us that the rescheduled date of completion with (inaudible) SYR-322 was set for June 26, 2009.

The outstanding product value of SYR-322 is not at all affected, but we will continued to promote a close communications with the FDA to make sure SYR-322 is promptly approved.

Well in '02, 2008 we applied for marketing approval for fixed dose combination of Actos with extended-release metformin in Europe.

With the Actos as a single agent, we obtained approval for the indication of a concomitant therapy with biguanides in Japan in December 2008.

In the future, we aim to maximize the diabetes franchise by actually retaining the approval for SYR-322 and exploring all the possibilities regarding the management of the [life cycle] of Actos and while making efforts to further strengthen our presence as a global leader in this franchise.

Please go on to the next slide.

So the -- regarding Blopress, our hypertensive treatment, we obtained manufacturing and marketing approval for the ECARD, a fixed dose combination Blopress with diuretic in Japan and China in 2009.

By obtaining the approval for ECARD, we can offer a new therapeutic option for patients with hypertensions and further increase the product value of Blopress.

And in December 2008, we start the Phase III clinical trials of ATL-962, a treatment for obesity, that was introduced by Alizyme.

And please go on to the next slide.

Next is oncology and urological diseases.

In late December 2008, our total global sales of Velcade, a treatment for multiple myeloma, exceeded $1 billion, we expect even greater success for Volcade with sales projected to reach $1 billion in the US market alone in the near future.

Please go on to the next slide.

And also in December 2008, we started Phase II clinical trials of CBP501 an anti-cancer drug, introduced by CanBas, for the treatment of patient with malignant pleural mesothelioma in the US.

We aim to become the global leader in the field of cancer treatment, a market with high future growth potential and are making ongoing efforts to [solidify, reinforce] research and development pipeline in this area.

Next slide.

Next one is the Franchise III, CNS, bone/joint diseases.

We have initiated Phase I clinical trials LuAA24530 ,which was introduced by Lundbeck in Japan.

In this area, we need to apply for [expedited] approval for LuAA21004 for treatment of mood and anxiety disorders in the US.

In consideration of the fact that the patient suffering from Alzheimer's disease, depression and schizophrenia and others, do not show high levels of [obsessive action] with currently available [indication] so we intended to make efforts to develop a market in-house model drug for such diseases.

Last one is the gastroenterological and other diseases.

The last -- in January 2009, we obtained marketing approval for TAK-390MR, product name KAPIDEX in the US.

In the future, we will maximize sales of this product and success of Lansoprazole and we will take action soon to enable immediate market penetration.

In November 2008, the FDA Arthritis Advisory Committee announced that it has recommended that the marketing approval be given to TMX-67 for treatment of hyperuricemia with gout.

[In this case], the end of the R&D examinations was delayed because we didn't still have their view about the facilities in which the trial was conducted.

About the clinical trial data for this drug, I'd like to extensively introduce that later.

And also in January 2009, we initiated Phase II clinical trials of MLN0002 for treatment of inflammatory bowel disease in Europe and US and also take you through the details of this drug later.

Next slide please.

Now let me tell you about the efficacy of TMX-67, a treatment for hyperuricemia with gout, also known as febuxostat.

Based on the result of clinical trials in the four randomized controlled studies of febuxostat, 67% to 76% of the patients who were given this drug in a dose of 80 milligram once a day achieved a primary end point and their serum uric acid levels were reduced to below 6.7 milligram per dL.

The rate of achievement of uric acid levels below 6.7 milligram per dL was higher in the 80 milligram at the [maturation groups[ than in the allopurinol administration groups and there was a statistically significant difference between the two groups.

In the comparison between the 40 milligrams febuxostat administration group and allopurinol administration groups, the statistical non (inaudible) of febuxostat was demonstrated.

In an additional study on gout patient with [inflammacy] (inaudible) achievement of uric acid levels below 6.0 milligram per dL was statistically and significantly higher in the 40 milligrams febuxostat administration group as well as in the 80 milligrams administration group than in the allopurinol group.

Well I'll finish up by telling you a bit more about MLNL0002, the drug for treating inflammatory bowel disease.

Phase III clinical trials of this drug were initiated.

This MLNL0002 is an a4B7 integrin antagonist, a humanized monoclonal antibody developed by Millennium.

This drug controls the inflammations in the intestinal duct by blocking the binding between a4B7 integrin and the cell adhesion molecules that exist mainly in the intestinal mucosa.

In the late -- in the Phase II clinical trials conducted on 400 patients with ulcerative colitis and Crohn's disease, dilated (inaudible) healings [in the late admission] there was symptoms including diarrhea, frequently observed in patients with inflammatory bowel disease were significantly higher in the treatment group than in the placebo group.

In the trials, the safety profile vessels evaluated a number of people suffering from the inflammatory bowel disease each year increasing and the related drug market expanding rapidly because the current standard of therapy, which is largely dependent on immunosuppressant causes higher frequencies of adverse reactions in the form of infection and cancer.

So development of a safer therapeutic agent has been anxiously awaited because the immunosuppressant effect on MLN0002 as characterized by [the drug selective] targetings.

The drug has the potential to meet such needs without compromising systemic immune functions.

That's all from myself of that update.

So following the presentation, we'd like to entertain your questions.

You can raise your question either in English or in Japanese.

We'd like to entertain your questions.

We have a question and answer session now.

(Operator Instructions).

After the announcement, start your question with your name and company.

(Operator Instructions).

Mr.

Yamaguchi from Nikko Citi please.

Hello.

Do you hear me okay?

Now about KAPIDEX, this is for the next year, but you would like to accelerate lifecycle management process.

Now the target, how much would you like to sell percentage to Prevacid and what's the investment that you are going to put into?

Regarding this agent, this is dual release agent and there is high expectation among patients.

but how much we will be able to sell, well at the moment we cannot comment on that.

When it is in the market and when the promotion starts, then we would have a feeling of the initial sales.

So at an appropriate timing, we should be able to tell you.

And also for the marketing costs we would like to spend, we cannot comment on that.

Thank you very much.

Regarding Actos, 33.9% increase in the US market, it was mentioned before, and in terms of prescription, the growth is flat.

I suppose the original goal was 7% to 8% growth on dollar basis, but maybe our inventory adjustment was a factor here, but maybe the target would be rather difficult to achieve.

What is your prospect, this is (inaudible)?

As you just pointed out, last year for the full quarter, there was an adjustment of inventory and considering that, 7% is outlook

That means, well -- so 3.9% is the progress that you just expected?

That's right.

And for R&D expenses for the fourth quarter, you had spent JPY90 billion.

Would you be able to use that project wide?

Do you think you would be able to use this in the last quarter?

This is Takahara speaking.

After the third quarter, JPY377 billion increase of 121% for this year, Millennium and tax are included and in-process R&D is posted, so excluding in-process R&D, then that would mean about 25.8% growth for the year and for the current quarter, the difference is JPY92.4 billion.

The fourth quarter '07 was, as you know, (inaudible) licensing cost was posted and JPY150 billion was posted at that time.

So I suppose the -- things are moving as we expected.

But for in-licensing there are various negotiations that we still need to have, so we cannot say anything definite at this point.

So including licensing in, [it means] JPY92.4 billion?

Including candidates that we have the JPY92.4 billion, we are going to use that.

Okay.

And ECARD Blopress in the Japanese market, it's not quite [selling], but are you going to press that or are you going to press Blopress itself in the proper (inaudible) well in Japan?

This is Inoue speaking.

You're asking the next year's is that right, or it could be for this fiscal year?

Together with ECARD for this fiscal year, we, in terms of volume, it is 10% growth and we hope that we will continue this way including ECARD, and in terms of sales, a slight increase maybe for that in terms of value.

That it is our outlook.

Thank you.

Thank you very much.

Hello, my name is (inaudible).

Can you hear me?

Yes, we can hear you quite well.

So I have two questions.

So KAPIDEX concerning about KAPIDEX, perhaps within this year, fiscal year, KAPIDEX will be launched I guess.

And also next fiscal year, that the [Prevacid] is going to expire in its -- the patents.

So Prevacid and KAPIDEX, if these are combined compared to the Prevacid this fiscal year, combination Prevacid and KAPIDEX.

So do you have any assumption to what extent you can have these sales of these two combined drugs compared to the Prevacid for this fiscal year?

So the launch timing of the KAPIDEX, so of course we are now doing our best to launch and within a month we will be able to have it launched.

And as for the expected sales, at this moment we cannot make any different comment about the sales size of these drugs, as I told you.

Of course, we are doing the best to have it launched.

Of course, at the start up of the [perhaps this kind of drugs], I'd like to tell you about the sales, the expectations.

Prevacid and plus KAPIDEX, do you think you can get the -- almost the same size of sales, so comparable to the data of the Prevacid, are you saying that the Prevacid is going to be offset, going to be (inaudible) by the KAPIDEX entirely?

No, I don't think so.

So let me read my question.

So to what extent you can think that you can actually get the sales from KAPIDEX?

We have several scenarios available at this moment, but as of today, perhaps I can't make any comment.

Perhaps at the start of the sales, perhaps we can have some expectations.

First ,we have to do, is to launch this product within a month and we will see and wait to what extent this product is going to sell.

Okay, that's all from us sir.

Thank you very much.

Next is (inaudible) from Deutsche Securities.

This is (inaudible) from Deutsche Securities.

Just for clarification, so Mr.

Takahara, after three quarters things are moving as you expected in terms of operating income, so 88% and the [sales] are 77%.

So three quarters are moving as you have planned or expected?

This is Takahara speaking.

Almost as we had planned, yes.

Well in January, because of yen appreciation, that might be giving a bit more negative impact.

And we have announced risk factors already and there is no major change in terms of risk factors.

So there is no change in the outlook for the year but yen is appreciating.

So as was suggested by Mr.

Yamaguchi, maybe you have some -- you can afford to absorb some more costs?

Well I'm not talking about R&D costs; we have too much.

We have an [natural]funded JPY70 billion that was announced already in spite of the yen appreciation.

Yes, I think that is going to be the level we would spend for R&D.

As far as the (inaudible) consolidation, of course we don't know what is going to happen but if (inaudible) and you have the (inaudible) and (inaudible) those agents may be impacted by that consolidation.

You are not worried about any of those deals?

This is Hirofumi Inoue speaking.

[YS] and our relation to that company remains unchanged, so [overall] business will continue as it is, that's right.

Lastly, Prevacid in US.

In the past four or five quarters, 10% to 20% decrease was marked but for this quarter, decline is now a single digit.

Can you explain the reason, why this change?

Regarding that point, in December there was a price hike so that might be affecting the increase in sales.

So PBI in the US is still rather challenging?

Yes that is right.

Thank you very much.

(technical difficulty) for the question.

There must be something wrong.

My name is [Okie].

I have two questions.

First actually about Millennium.

But in the interim reports that the -- (inaudible) stand alone.

What is the contribution level to Takeda Pharmaceuticals by percentage?

Are they voluminous?

I couldn't see it quite clearly?

At the third quarter, Velcade has been increasing therefore the profit contribution from Millennium must be considerable in size, but did you get that -- did you already capture that figure?

I see on page 13, there has been some negative effect but I think you must have some positive effect as well but I couldn't see it?

Yes, my name is Takahara.

As for Millennium, the loss and profit concerning about Millennium we have yet disclosed.

The [manageable] loss and the gains.

In (inaudible) and in R&D it has been a long time ever since they began (inaudible).

Do you have your plan in progress?

Yes, now we are working for the plans.

So there has been a long [delay] after you made an announcement (inaudible).

Yes.

And in KAPIDEX I have another question to (inaudible).

Would you please clarify your -- the personal comments about KAPIDEX?

When you have a negotiation about the KAPIDEX price, but do you think you need to have a lower price for the KAPIDEX compared to the Prevacid?

Otherwise you can't actually place Prevacid by KAPIDEX?

Well this has something to do with our strategy for price itself, so at this moment we can tell you the exact price we are targeting at.

But of course we would like to have a competitive price.

We would like to be flexible in setting up the strategic price for the product.

Right, I understand.

And my last question.

Perhaps this may be needless to say, but Actos, the consolidation fee will be returned, but do you have some divisions in the latter half you are going to get with the payment?

In the latter half?

Yes.

Your legal fee yes.

So the index [shows] any income in the third quarter but at this level this portion will be added.

Right?

Legal consolidation fee.

My name is Takahara.

Yes, this is actually only a gain outside of operations.

Thank you very much.

This is (inaudible) from (inaudible).

I have just one question.

In the US, Obama administration, there could be some intervention to the prescription policies.

And what is your outlook?

This is Inoue speaking.

President Obama, as of now, is not saying that universal coverage, but of course, he would like to decrease the number of people who are not covered by insurance.

He would like to at least cover all the children and generic to be promoted; that is also -- he said in medical part [2D] and the Government would like to negotiate on pricing.

There are three pillars, but whether they will be translated into policies right away and start implementation, I don't think so.

But for the long-term there will be more people covered by insurance so volume will go up; that is positive news.

But generic and pricing negotiations, that could have a negative impact.

So it is hard to say whether it is favorable or non-favorable.

But for the long-term the pressure on pricing and also because of the economic downturn, we don't know how long it will last, but the clinic visits may be decreasing, so the environment is rather difficult for us that is for sure I think.

Thank you very much.

Thank you.

About KAPIDEX.

I would like to ask some questions about the KAPIDEX label.

So you have chosen (inaudible) but also there is the disease.

Are you going to get the [death] level as well -- indication as well?

I know if you think your labels are very limited it may be difficult for you to replace the Prevacid by KAPIDEX if you think that the KAPIDEX instigation is too limited?

The line extension indication extensions for (inaudible) at this moment we have no plans for (inaudible) visits at all as indications.

(Inaudible), any infections are very limited in number.

And also about replacement and the -- I don't know whether PPI is very, very useful for all the patients especially the symptoms at night.

There are some people who have complained about the night symptoms.

Therefore in this regard they all (inaudible).

I think that the statistics will be highly evaluated, we believe so.

So as you see, perhaps that the price, and also as was explained by Inoue, that the (inaudible) extension in the market in the US by the Obama administration.

We may have some [discounting] to increase the sales, but as was already mentioned, that we should have a flexibility about setting up the price, so that we could have a flexible price so we could increase the sales to some extent.

Alright, thank you.

Second, the Velcade, and the first one was obtained in June.

Certainly we have seen a very good result, by 40% or something.

So do you think you have actually grown that share in the market or the market itself has been increasing?

In multiple myelomas [it sells].

The market of the disease has been expanding and it's (inaudible) because we have got the past line indications, therefore they especially have appreciated this drug very much.

Therefore perhaps sales and share is also increasing I guess.

Have you already captured any of the profile of the share of this drug?

For example, at the beginning of last year, what was the share?

And as of today what is the share of this drug?

Have you already captured the comparative share profile in the market?

Well the (inaudible) that the -- I will give you the answer because I can't give you the answer right now because we don't have any material at this moment.

And about the costs?

From the second quarter, I think your costs have been decreasing and Millennium TAP, the contributions are included I guess.

And the next fiscal year -- to the next fiscal year, the cost ratio, do you think that you are going to have improvement of the cost ratio towards the next fiscal year?

Takahara speaking.

Well regards SG&A, [it's already a] gross profit, indeed the other way around it's a gross profit.

Yes, well we have several strategies to reduce the cost ratios.

But we have more the subsidiaries outside of Japan, therefore the products -- the fluctuations may have more impact on the gross profit.

As a result, whether we could maintain this level of the gross profit would depend upon the fluctuations of the ForEx.

Thank you very much.

This is [Yoda] speaking from Barclays Capital Securities.

Actos was mentioned several times.

TPNA October, December down our base numbers.

Probably it's about 1% growth.

The market may be slowing down and is that impacting the sales?

This is Iwasaki speaking.

When you say market slowdown, the market as a whole slowing down?

Yes that's what I meant.

Well, for all our diabetics, the market itself is not really growing and one of the reasons may be related to the Obama administration, but economic downturn is one factor.

As far as we know, even people get prescriptions, they do not really actually get drugs.

And the patients themselves are not really aware of symptoms and therefore are not treated.

That seems to be an underlying reality.

So, factors is impacted by that kind of environment, yes I would think so.

That is our conservative assessment.

And for the XR, what is your outlook?

For the XR it is being reviewed so we cannot comment on the current status.

Of course we will write approval as soon as possible but as of now, we cannot comment.

We do not have any new information available.

Thank you very much.

One more question.

From Millennium, JPY17.1 billion in dedicated royalty.

And what is the growth for that?

Can you disclose numbers?

xxx

Just a moment please.

For the Velcade royalty, it is included in others, but we cannot disclose breakdown.

But for the growth it's about -- it's over 50%.

Thank you very much.

My name is [Dagadar].

My five questions.

Earlier you talked about the guidelines for the hypertensions.

That hypertension guideline was released newly for 2009.

So what is the impact for this -- what is the impact of this to the [LB] or the market because at this moment the -- well, perhaps there has been a limitation about the increase, such as 10%.

But do you think you are going to gain due to the sales increase for the next fiscal year?

Are you talking about the treatment guideline in domestic Japan?

Yes.

As you just said, yes [LB08] such (inaudible) actions, while data is widely accepted these two must be-- are used at first for the hypertension, so the (inaudible) card, five other treatments are available from other pharmaceutical companies.

And therefore promotion will be highly activated.

As a result, there will be -- a market will be increasing.

That's our expectations.

And there are some people who have had very high hypertension, so with a metabolic syndrome.

So this LB08 should be used for such patients because there were tests; perhaps the market will be further expanding.

I wish I could help (inaudible) the story but as for the metabolic syndrome, so the -- for a long time, there has been talks and a promotion by specialists, yet -- but the -- I don't know whether metabolic syndrome has a direct connection with the increase of the prescription in the market or not.

But the whole LB08 I think it should be used as the basic therapy.

I think this is the most impactful item within the guidelines for us.

And my second question.

And the -- perhaps in the middle of December last year in the US, the FDA issued the new guidelines for diabetes?

And SYR-322, what is the impact of this guideline to SYR-322?

Well perhaps that the data for the senior people and also the data for the nephrosisy, the renal disease disorders, such data should be prepared, such the article or the sentences are included in the guidelines.

But the SYR-322 regulatory data, have you already got such data available?

Well let me qualify.

Perhaps I will give you more detail on the status.

As for the diabetic treatments, there are two guidelines available for diabetic treatments.

And in February 2008, the guidance draft for the development of diabetics drugs was released.

In this set of guidelines that the -- it was meant to be diabetics drugs.

Well the 1,300 to 1,500 cases must be required for one year trials and also that the 300 to 500 cases for 18 months are required.

These are the recommendations.

And also in December, the new guidelines for diabetics, concerning with -- that the cardiovascular effect of the patients of diabetics were introduced.

So for these two guidance, well that the 322 [end of the year] was that the -- December in 2007.

So these two guidance were available after our applications, therefore that -- we didn't consider any of those two guidances for the end of the year for 322 after that.

But we have 120 day update for safety information of the NDAs.

Within this update, a new FDA -- the draft guidance a long-term study case, well we already submitted that the long-term clinical trial data required by this that the 120 updates -- FDA updates.

And also combination therapy was applied in December of last year, 322 Actos.

And as for these clinical trials, 322 Actos combinations efficacy and safety data, but this data FDA will evaluate this combined data and also 322, the single drugs.

So we will be evaluated.

So we have already generated much data based upon such massive data; the efficacy and safety of this drug, so we will be evaluated.

About the -- perhaps -- we can't talk about any assumption about the approval which will be given by FDA but we believe we have already generated much data.

Therefore our data will be subject to the good evaluations.

That is our understanding.

Thank you very much.

(Operator Instructions).

This is Shimura from UBS Securities.

I have two questions.

First is Velcade.

It could be about the past quarters but the first line and second line prescriptions, what are the percentages, if you know that?

Sorry we do not have that information.

Okay.

My second question, maybe it's difficult for you to answer, but last week in US at the congressional discussions, [to do with this] package was announced, April '08 to January 2011.

They -- those who lose the order in that period can be covered by Medicaid.

For your Company it could be a positive effect, maybe [Part D] that is a very likely scenario.

So for Takeda's next year's outlook -- the market may be confusing, but as of now, maybe things are rather favorable for you.

Do you agree?

This is Inoue speaking.

It would be misleading if I say that's a positive factor.

As I said before, the patients increase and pricing, and the balance between the two is important, so I cannot comment on that question.

Thank you very much.

For the Velcade first and second -- this is Iwasaki speaking.

Just a comment on that.

In terms of cases, the number of patients, we do not have the numbers, but first line and second and third line, that will be 50/50.

So the patients will fall into that category.

So first line 50%, second and third line 50%, that is right.

And for the Medicaid, of course as you mentioned, the pricing and demand balancing is a tricky question but as a previous successor is coming into the market, maybe you would like to give us what your feeling is now?

Can you comment on that?

Well I understand the intention of the question.

If probably you are wondering about the expansion of the patients, due to changes in the insurance, maybe the pricing pressure will come after that.

I think theoretically speaking, you are right, but still we don't know how much growth we can anticipate.

I see.

Thank you very much.

Thank you very much for your questions.

With that, I would like to conclude the third quarter -- the financial results conference call.

Thank you very much for your time in spite of a bad schedule today.

Well I'd like to close this meeting so with the hope that you -- we'd like to [wish you] further opportunity.

Thank you very much.

Thank you for attending the conference.

We will now finish the conference call.

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.