Takeda Pharmaceutical Co Ltd (TAK) 0 Q0 法說會逐字稿

(Interpreted).

Good morning, ladies and gentlemen.

Thank you very much for taking part in our presentation, very much in spite of your schedule.

From now on, I would like to explain -- I would like to talk about our meeting for the fiscal year 2009.

Firstly, I'd like to introduce the participants.

Mr.

Hasegawa, the President, also Mr.

Takahara, General Manager of Finance and Accounting Department, Mr.

Iwasaki, General Manager of Strategic Product Planning Department and Mr.

Ohkawa, the Chief Science Officer, Mr.

Inoue, General Manager of Corporate Strategy and Planning Department.

And also we have this time from overseas, Mr.

Alan MacKenzie, Executive Vice President, International Operations.

Following him, I would like to introduce to you, Dr.

Deborah Dunsire.

And myself, my name is Inoue.

I serve as General Manager of the Corporate Communications.

I would like to ask for your kind cooperation.

We have distributed the materials for (inaudible) the fiscal year 2008.

And so from now I would like to call upon Mr.

Hasegawa, President of Takeda Pharmaceuticals to give us the presentation about the policy of Takeda.

(Interpreted).

Good morning, everybody.

First of all, I would like to review FY '08 and the outlook for '09 just briefly before others.

Please move to the next slide.

Takeda will face patent expiries for its core products from this fiscal year.

We set our key policies for '09 in consideration of this as well as of course we may be requested by the FDA, a possible request to conduct additional studies for SYR-322 prior to the approval.

Firstly, we aim to maintain and expand sales in Japan, US, Europe and Asia in order to minimize the negative impact of patent expiries.

Secondly, we will enhance our R&D structure to achieve the steady launch of in-house products, allowing for self-sustained growth of the Company.

Thirdly, we will continue to establish an appropriate structure to support global business and continue to accelerate human resources development.

Let me explain each item in further detail.

First, I will talk about maintaining and expanding sales in Japan, US, Europe and Asia.

The growth rate in US market is slowing but it still makes up about half the global markets.

Although Takeda's sales and profit will be negatively affected by the patent expiry of Prevacid after November this year, we will try to maintain the sales of TPNA by realizing the quickest possible penetration of new products into the market and further growth of existing mainstay products.

Regarding Actos Family, we intend to maintain the market share through aggressive promotion.

At the same time we will make an effort to obtain marketing authorization for Actosplus met XR and to launch it as soon as possible and attempt to promote switch from Actos and Actosplus met to the FDC product with the aim of good compliance of (inaudible).

As for Kapidex we will try to accelerate the switch from Prevacid and other brand drugs with main claim of sustainable acid suppression effect in order to achieve the sales growth.

For Uloric we will concentrate on quick penetration of the product into the market by highlighting its superior efficacy and safety compared with other existing products and by invigorating the market with the first new gout drug in the past 40 years.

We will work to maintain our number one position in Japan, our home market.

To achieve this we aim to maintain market share for the Blopress Family, our core product in the ARB market through the rapid growth of Ecard, which is Blopress and diuretic fixed dose combination and which was launched in March this year.

Regarding Ramelteon, we will establish a solid position in the insomnia market as quickly as possible through the novelty of its MOA and its safety profile.

As for Vectibix, we will prepare for the launch as much as possible.

Regarding Velcade, we will pursue various major researches of indications so as to achieve [$1b] in US sales as quickly as possible.

And we will implement various measures including education programs for Millennium Oncology MRs and medical professionals aiming for further penetration of the front-line, the use of Velcade in multiple myeloma, the indication which we obtained in June 2008.

So through such activities we will try to achieve about 30% sales growth in the US.

And as part of our efforts to expand our geographical presence we started Takeda Farmaceutica Espana, as a wholly owned subsidiary of Takeda in Spain, that will serve the pharmaceutical market in Europe and started promotional activities last April for Blopress and Glustin and Actos product names in Japan.

And in the Republic of Ireland in January, Takeda UK also expanded its promotional activities for Actos in order to cover the entire country, which had proved to be very limited.

And also in Canada there was a larger pharmaceutical market for Takeda Canada.

A wholly owned subsidiary of Takeda has started operations and intended to file NDA submissions with Health Canada by the end of 2009.

Furthermore in Portugal as well, a wholly owned subsidiary of Takeda will start promotional activities progressing after summer.

And moving forward, we will look to expand market coverage in Europe by evaluating the possibilities to enter new countries such as Russia, Turkey, Benelux countries and those in Northern Europe, looking to transfer the marketing right of Actos from Eli Lilly to Takeda.

Furthermore we will consider opportunities to enter new countries in the Americas and Asia as well, in order to establish a well-balanced presence in the global market.

And our second key policy is to enhance our R&D structure to achieve the steady launch of in-house products.

Reflecting the discontinuations and delays of our development project (inaudible) and others last year, we will pursue measures to improve the probability of success in the clinical studies.

We will research the therapeutic areas of disease with the real unmet medical needs and prioritize investment of researches.

At the same time we will strategically shift from focusing on just raw R&D number and speed to overall project quality.

As we already made an announcement yesterday, we already press to get the top quality.

(inaudible) Mr.

Ohkawa, that I had had a communication with Mr.

Ohkawa.

We have to make a very clear cut policy.

If we just come up with a policy without the definition, without definite determinations perhaps we may invite that kind of confusions.

But everybody wanted to make his or her own interpretations and therefore that we have to clarify a very different policy.

And so from the quantity and speed we need to shift to quality.

So perhaps we will face difficulties ahead, yet perhaps we have to take time that we have to establish a very good policy.

That is why we decided to change our policy.

Of course so far we have had a certain policy, but reflecting the experiences that we found several poor policies.

We will strengthen translational medicine activities including biomarker research and further activity essentially in R&D to improve success in the clinical stage.

And also starting in the early research stage, we will build a high quality portfolio based on strong [POC] and we will timely review the prioritization of our (inaudible) project with the input of both development and marketing divisions.

So this will be achieved by further emphasizing the importance of the Takeda product, target product profile over (inaudible) such as product concept.

So we will have a closed function or a closed border project.

But we will have a portfolio review continuously.

So we will have such organizations to make it possible to review the portfolio.

So Mr.

Ohkawa has been taking a central role and he is going to organize the meeting to review the portfolio continuously.

And by the fiscal year 2011, we will look to develop such products listed here.

We will prioritize among all the R&D projects including clinical stage projects and we will selectively invest sufficient resources in the high priority projects to develop them quickly without sacrificing quality.

Also we will find out the prioritized projects and of course we will enhance the quality and for the other [reasonable] projects we will consider the risk and also cost reductions.

At the same time we will consider the risk.

We will use clinical data to differentiate the products from their competitors and we will consider appropriate FDC strategies for during development to implement (inaudible).

And also at the same time we will pursue licensing opportunities.

And as we have already said the Protocol Review Committee was established.

So these activities will be carried out with this committee mainly.

And furthermore we intend to establish oncology as additional pillar or franchise in core therapeutic areas.

We will maximize the value of Velcade and protein homeostasis research and also we will try to take advantage of the leuprorelin prostate cancer area foundation so that we will be able to grow our revenue.

At the same time we intend to continuously launch new oncology drugs that are clearly differentiated from competitors by aggressively developing high priority-first/best-in-class clinical programs to market.

By ensuring greater success we will enhance the translational medicine capabilities and by improving the quality and size of pipelines.

And Millennium and the other entities of Takeda Group share the same vision and based on that they are sharing their expertise and knowledge with each other.

And to further this we also started scientist exchange program in April.

I believe that at this point it's the first anniversary of the Millennium becoming a member of the Takeda family.

It was just last year -- last week that I went to the United States and I was able to celebrate the one year anniversary of the Millennium becoming one of our Takeda companies.

We will further enhance that exchange and sharing informations between us and we will also respect their own ideas.

I think we have already started a very good relationship between Millennium and Takeda.

And to leverage the paradigm shift for our future in the drug discovery, we are enhancing the CMC research to utilize new platform technologies such as antibody, nucleic medicine and regenerative medicine.

Mr.

Iwasaki, the General Manager of Strategic Product Planning will explain about this further in detail.

And Takeda reorganized its corporate structure so as to further enhance our global business operations on April 1.

We recruited a Chief Scientific Officer and the EVP of International Operations on that date and the Chief Administrative Officer role to be established later this year.

So the CSO role is based in the US and is responsible for global research, CMC and intellectual property.

And the creation of the CSO will provide an opportunity to further enhance product development (inaudible) through the integration of research and development.

And the role of EVP International Operations is also based in Chicago in the US and is responsible for all the international, ex-Japan commercial operations in US, Europe and Asia, as well as global medical affairs and international marketing.

The creation of the EVP International Operations will enhance Takeda's globalization efforts and allow for more streamlined commercial decision-making.

And they are including Russia and Turkey, they are growing markets, and also in Asia, we will enhance the market -- also we will enhance the marketing capabilities and the presence.

We have been looking to seamlessly manage functions related to the global R&D and overseas marketing for some time, due to the benefits from a global governance perspective as well as a speedy and comprehensive decision-making process.

Now we will look forward to realizing these benefits now with the right people for these roles found.

Despite now we have just changed the organizations so that the independence of our official organization for decision-making such as the management meeting, Board of Directors meeting.

Of course we will still have such entities for decision-making, but we have the other positions such as CSO and CAO.

With those people we are now planning to realize that the organizations to make the decisions with these people newly positioned.

So by this we will be able to accelerate, speed up the decision-making and also any of the decisions, perhaps we are going to be able to reduce the number of decisions which needs to be carried out by the Board of Directors.

And here are the results for the fiscal year 2008 and forecast for fiscal year '09.

And here we have a comparison of sales, R&D expense, operating income, net income, ROE, EPS.

Net sales for fiscal year '09 will be less compared to the previous fiscal year by JPY38.3b or 2.5% due to negative exchange rates.

But of course we will be doing our best to further better our performance.

Mr.

Takahara would explain about this later more in detail.

In order to continuously our corporate value, Takeda makes strategic investments mainly in enhancing the R&D pipeline and improving the business infrastructure both in Japan and overseas.

And in terms of profit distribution, while continuing our efforts to steadily increase the dividend payout ratio, Takeda will continue to conduct share buybacks as appropriate for the purpose of improving capital efficiency.

And our dividend, of course we try to maintain stable [payout] distribution over the long term according to the consolidated financial results.

And so Takeda has set a goal of gradually achieving a consolidated payout ratio on the earnings before amortization of intangible assets associated with the Millennium acquisition of around 45% in fiscal year 2010.

And this year compared to the 2007 we will have that ratio of 38.3%, minus 1.8% compared to the previous year.

And also we already made a promise and also the dividend has been increased by JPY2.

That is the one that we already promised.

And also that we have set a payout ratio of 44.2% in fiscal year 2009, the increase of 5.8%.

So as for the dividends, we plan to pay JPY180 in this year and also the year ahead.

Thank you very much.

(Interpreted).

Next Hiroshi Takahara regarding financial results.

(Interpreted).

Good morning everyone, and thanks again for joining us.

It's my pleasure to present to you the summary of Takeda's consolidated results for fiscal year 2008 and forecast for FY '09.

Consolidated net sales is like this.

For the sales for FY 2008 increased by JPY163.5b, mainly due to the consolidation of TAP and Millennium as subsidiaries from May 2008 as well as an increase of sales of Ethical Drugs in Japan, despite a negative JPY79.1b foreign exchange effect.

On the other hand from the previous year, operating income, ordinary income and net income decreased due to one-off expenses including JPY159.9b of in-process R&D expenses in connection with the consolidation of TAP and Millennium.

Earnings per share excluding extraordinary income and loss and other extraordinary factors arising from business acquisitions and other events, which the Company uses as one of targets and management indices, increased by JPY78.3 to JPY470.30 compared to the previous year.

Despite the decrease of shareholders equity due to share buybacks, ROE decreased by 4.2 points to 10.9% because of the large net income decrease.

Before moving to the details, please let me mention the recent foreign exchange fluctuation which give a significant impact on results.

The recent FX had a negative impact on our results due to the stronger yen against other major currencies.

The primary drivers for the increase in sales in FY 2008 was the addition of sales was the addition of Prevacid to USA, a drug for peptic ulcer treatment and addition of Millennium's Velcade, a drug for multiple myeloma from May 2008.

The year's sales had previously decreased by 22% on a local currency basis, mainly due to the increased share of generics in the PPI market.

However, on a consolidated basis, the net sales increased significantly.

Until April 2008 the export sales of Prevacid from Takeda to TAP, which previously sold the products in the US, were included in the consolidated sales.

Following the consolidation of TAP in May 2008, the export portion are included in the consolidated net sales and are now recognized as TAP's Prevacid sales in the US.

Velcade also grew in the US market in sales.

Excluding the impact from the effect of consolidation of TAP and Millennium and FX, sales from the Pharmaceutical segment increased by JPY72.2b or 6% from the previous year.

As shown in the slide, sales on the ethical drug business in Japan, overseas and the consumer healthcare businesses all increased, confirming the strong fundamentals.

This graph shows the changes in sales by business segment.

Net sales of Ethical Drugs in Japan and overseas increased JPY19.3b and JPY154.5b respectively.

The total net sales increased by JPY173.9b or 14.4% from last year.

In Japan sales increased by JPY19.3b or 3.6% from last year, due to the stable growth of Enbrel, Actos and Takepron despite the unfavorable effect of the MHI drug price revision in April last year.

With respect to Blopress, one of our core products the sales volume increased by about 10% mainly due to the contribution of Ecard, a fixed dose combination tablet of Blopress and diuretic, newly released in March 2009.

As a result we achieved as much net sales of the previous year despite an MHI drug price reduction of 10% -- 10.1% in April 2008.

As I explained earlier due to the addition of Prevacid and the Velcade, sales outside Japan increased by JPY154.5b, or 22.7%, despite the unfavorable FX by the stronger yen against the US dollar.

Sales of the Consumer Healthcare increased by JPY2.5b or 4.1% thanks to [Alemin R], [Actos mini], [Actos-L] which are newly released in March 2009.

Now I'd like to provide details of the sales of TPNA.

TPNA sales increased by $1.962b or 63.0% to $5.074b, due to both TPNA taking over TAP's Prevacid and also increased sales of the Actos Family which increased by $212m from last year.

We were expecting about 7% increase in the sales of Actos family on a local currency base and it actually increased by 7.6%.

The sales of Kapidex, a drug for gastroesophageal reflux disease was $5m.

The promotion of Kapidex started in February 2009 in US.

The sales of Uloric, a drug for hyperuricemia in patients with gout were $2m in '08.

The promotion started in March 2009 in the US.

This slide shows Ethical Drug sales by geographical segments.

The figures exclude sales of products in which Takeda acts as a distributor to the wholesalers.

We achieved sales increase of JPY174.2b or 16.1% from the previous year.

In the US, following the consolidation of TAP and Millennium, total net sales increased by JPY153.5b despite the unfavorable FX.

Sales in Europe decreased mainly due to the generics entry to the market after expiration of the Lansoprazole patents in France and Switzerland as well as the unfavorable foreign exchange.

On the other hand Asia maintained the same level of last year and Japan increased from the previous year.

Royalty and service income increased mainly due to inclusion of the royalty income of Velcade integrated as a result of consolidation.

Now I'd like to explain the results of the four international strategic products on a consolidated basis.

Despite increase in the other areas, the global sales of the Pioglitazone declined due to the decrease in US sales.

However, this decrease was the result of the unfavorable FX impact.

The sales on a local currency basis increased by 7.6%.

With respect to Lansoprazole, despite the US sales which were previously decreased by 22% on a local currency basis, the consolidated sales increased significantly in the US due to the consolidation of TAP.

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

The gross profit was JPY1,248.8b which was an increase of JPY152.6b or 13.9% year-on-year due to the increase in sales of Ethical Drugs.

The gross profit ratio was 81.2% an improvement of 1.4 points.

R&D expenses increased by JPY177.3b and SG&A expenses increased by JPY92b.

The total expense increased by JPY269.3b because the in-process R&D expenses were recorded as one-off expense in FY '08.

The amortization costs of the intangible fixed assets and goodwill were also expensed in FY '08 in connection with consolidation of TAP and Millennium.

As a result operating income decreased by JPY116.7b.

As shown in the lower half of the slide, if we exclude this JPY242.2b of expenses, which is related to intangible assets including the one-off in-process R&D expenses in connection with the consolidation, the SG&A and R&D expenses would have increased by JPY9.7b and JPY17.4b respectively.

Assuming that, operating income would increase by JPY125.6b from last year.

The table shows sales and operating income of each geographical segment.

Net sales in Japan decreased because export sales from Takeda to TAP were no longer included from May 2008 due to the consolidation of TAP as a wholly owned subsidiary.

On the other hand the sales of North America increased by JPY213.8b due to inclusion of sales of TAP in the US as well as the effect of acquisition of Millennium.

Next is operating income.

Operating income of North America, increased by JPY61.7b.

This is mainly due to inclusion of sales of Prevacid by the consolidation of TAP.

Elimination or corporate decreased notably because the in-process R&D expenses of JPY159.9b was recorded.

Let me explain now the details of net income.

Ordinary income decreased by JPY209.2b because in addition to the decrease of the operating income, non-operating income due to a decrease in the interest rate income, resulting from a significant decrease in cash at hand and lower interest rates as well as a decrease in equity in earnings of affiliates due to the consolidation of TAP which was accounted for by the equity method last year.

While extraordinary income increased due to the gain from the transfer of Lupron business in the US as well as JPY23.4b of the effect of tax reduction on dividend income from foreign subsidiaries due to a change of tax laws in Japan this year, net income decreased by JPY121.1b as a result of significant decrease in ordinary income.

Excluding the effect of extraordinary income and loss and other special factors, net income increase by JPY48.2b compared to the previous year.

Next is cash flow.

Cash flow for the fiscal 2008 resulted in a net cash outflow of JPY855.2b.

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

In addition there were other factors such as share buybacks, dividend payment and tax payment.

As a result, cash and cash equivalents as of March 31, 2009 were JPY758.1b.

However, as is shown by the JPY326.3b, of net cash inflow from operating activities, the cash outflow for the fiscal '08 was just a temporary phenomena caused by special factors.

I have presented the consolidated results for the fiscal '08.

Now I would like to introduce the effects on the consolidated results of the accounting treatment for the consolidation of TAP and Millennium.

As shown in this slide, effects of business consolidation of TAP and Millennium, were JPY80.1b and JPY162.1b respectively, negative impact on operating income.

Effects to net income again were a gain JPY0.8b from TAP and loss of JPY145.6b from Millennium, by which the total impact was a loss of JPY144.8b.

The footnote shows JPY169.3b.

That is the tax on net income of extraordinary gain and loss and other special factors compared with the previous year, which is a total of JPY24.5b due to the previous year's extraordinary gains and the aforementioned impact of JPY144.8b.

On this slide we show the effects of share buybacks.

In FY '08 we acquired treasury stocks for JPY280.1b.

Cumulatively we acquired 98.884m treasury stocks on the market for JPY622.2b, or 11.12% of our outstanding shares.

The box on the right is the share buyback's effect to ROE and average growth rate of EPS.

This is the final slide, forecast for FY '09.

With respect to sales, decrease by expiration of the Prevacid patents in the US in November 2009, will be covered by contribution of the new drugs in the US, Kapidex and Uloric and increase of Velcade and Actos in addition to growth of Blopress including Ecard, Actos and Enbrel in Japan.

Yet consolidated net sales are expected to decrease from the previous year because we use stronger yen exchange for the forecast.

JPY95 to the dollar and JPY120 to the euro, which would mean a negative FX impact of JPY57b.

Operating income and ordinary income are also -- are expected to increase from the previous year because amortization of intangible assets including in-process R&D expenses were decreased from JPY242.2b in '08 to JPY81b of FY '09, in connection with consolidation of TAP and Millennium.

Income before taxes is expected to remain almost the same as the previous year because although ordinary income will increase in '09, we will not have a large extraordinary income as last year which was JPY71.3b in '08.

Net income is expected to increase from the previous year as consolidated effective tax rate of '09 will decrease by about 10 points to 30% compared to FY '08.

However, comparing FY '08 actual and the '09 forecast without extraordinary factors in connection with consolidation of TAP and Millennium, operating income, ordinary income and net income of FY '09 are expected to decrease due to the aforementioned foreign exchange negative impact of JPY57b on net sales and an increase of our R&D expenses by accelerated development of mainly late stage development products.

Earnings per share of '09 excluding extraordinary income and loss and other special factors arising from business acquisitions and similar events will decrease by 9.8% to JPY424.39.

In the outline of 2006-2010 mid term management plan, the target of average growth rate per year for EPS in 2010 is more than 7%.

This EPS excludes extraordinary income and loss, acquisition and other such special factors.

Target of ROE in FY 2010 is to maintain the FY 2005 level of 14.4.

Forecast of '09 of average growth rate for EPS is 6.3% and ROE is 13.5%.

(Interpreted).

Now I would like to invite Mr.

Masato Iwasaki, General Manager, Strategic Product Planning Department to talk about R&D update.

(Interpreted).

My name is Masato Iwasaki.

Please allow me to introduce the current status of our development pipeline and R&D after the third quarter of 2008.

First I'd like to explain the current situation of SYR-322.

As we made announcement already in March Takeda was informed that FDA will apply the newly issued December 2008 guidance for industry, diabetes mellitus evaluating cardiovascular risk in new anti-diabetic therapies to treat Type 2 diabetes when reviewing the alogliptin NDA.

Additionally the FDA does not believe that the amount of existing alogliptin clinical data is sufficient to meet certain statistical requirements in the new guidance.

The agency is open to discussions regarding the design of additional CV studies, with alogliptin.

S

o the PDUFA date, June 26 is to remain the same.

So such discussion with FDA are still ongoing.

So we'll continue to communicate closely with them to get their marketing approval as soon as possible.

So now you can see here the recent progress of the development pipeline since the third quarter last year.

In addition to the implementation of lifecycle management for Blopress, Actos and Takepron, we have started Phase I clinical studies for four new compounds.

And in the next slide, I'd like to explain briefly about TMX-67 which received marketing approval from FDA and also TAK-701 and TAK-901 which entered the clinical phase recently.

For those products in the later Q&A if necessary, Dr.

Alan MacKenzie and Dr.

Dunsire are going to explain to you more in detail.

And first Uloric, as mentioned by Hasegawa, President, that in March this year we launched this product in the United States, and rise in prescription it has been doing very well.

The number of patients suffering from gout and hyperuricemia is more than 5m in the US.

This drug demonstrated higher efficacy compared to Allopurinol in clinical studies.

Furthermore, because patients with mild to moderate renal and hepatic impairment can take this medicine without any dosage adjustments, therefore we expect sales to increase into the future.

TAK-701, that we're licensing from Galaxy Biotech.

This is a humanized monoclonal HGF antibody.

This compound inhibits hepatocyte growth factor which has been implicated in cancer cell growth and cervical tumor motastisis and angiogenesis.

In technical studies it was demonstrated the TAK-701 binds the hepatocyte growth factor ligand, and inhibits binding with receptor tyrosine kinase.

Then lastly the Aurora B kinase -- or TAK-901, this product, well, in the clinical studies has been shown to bind and potentially inhibit Aurora B kinase that are postulated to play a central role in controlling the proper progression of cells during the cell division.

The Aurora kinase genes are over-expressed and amplified in a variety of cancers.

So this [deviation] of the Aurora kinase and their essential roles in cell division makes them attractive targets for therapeutic intervention for human cancer.

Next I'd like to touch upon our current status pipeline for development.

The whole Takeda, we have three items under NDA and seven compounds in Phase III.

So we have a lot of (inaudible).

We have a lot of the pipelines with many early stage projects in franchise to the oncology area.

And although in the Q&A, Mr.

Ohkawa, CSO is going to tell you more in detail, the translational medicine, I'd like to touch upon this research.

TM research is designed to bridge non-clinical and the clinical studies smoothly.

And it aims to utilize knowledge from the latest basic research directly into the clinical development.

At Takeda, we are improving decision making for [candid] compounds by using human biomarkers that has been established based on the results from non-clinical experiments.

So at the same time we are able to reduce the (inaudible) area.

And we have already established a translational medicine unit.

We try to enhance these activities in many different strategic areas.

We will develop the different biomarkers in different therapeutic areas.

And so in addition to this TMU establishment, within the team of each therapeutic area we have established the TMU special teams.

And by leveraging Millennium's knowledge and technology in oncology area and technology assembled by TMU so we are aiming to further enhance TM research capabilities throughout the Takeda Group.

Next CMC, the research enhancement.

We have already made an announcement of our first (inaudible).

We already established a CMC research center.

For the drug discovery, we are aggressively taking initiatives for the drug discovery based on the new platform technology.

But in particular, antibodies therapeutics have already established an important position in oncology area and are expected to grow further.

Nucleic acid medicine is also promising market as it will enable us to generate therapeutics.

(Inaudible) it has been difficult to access by the small molecular and antibody therapeutics.

So we have been improving the platform technologies through the various technology introductions and joint research programs such as collaboration between Seattle Genetics and Millennium in antibody therapeutics.

And furthermore we will proceed CMC research to maximize these activities especially in the nucleic medicine.

DDS, the establishment of technology is essential.

So the CMC research center, with the collaboration of the research divisions and Mr.

Ohkawa, will pursue the activities.

Next I'd like to just briefly touch upon our initiatives for the regenerative medicine.

In regards to the IPS cell related projects, this IPS cell project is already financed by special consortia.

Takeda expects to take part in the accelerated application of IPS cell-based therapies projects led by [Dr.

Yamanaka].

And also, in addition to that, we have also decided to take part in a new [emergency] -- energy and industry technology development organization NEDO project, IPS cell project.

In addition to those, the antibody medicines and the nucleic medicines, the next generation medicines that we are focusing on is the regenerative medicines.

So [neurone cells] and also -- while focusing on antibody therapeutics, nucleic acid therapeutics and next generation regenerative medicine, we will also continue to apply our strength.

Thank you very much.

We have a Q&A session now.

(Operator Instructions).

(Interpreted).

Now we would like to entertain questions.

Please mention your (inaudible) and your name.

We have overseas participants.

If there are questions, please ask questions.

(Interpreted).

Hall from KBC Securities.

First alogliptin, of course you want to get approval as soon as possible.

How is the negotiation with FDA going?

Please give us an update regarding alogliptin.

And if there are additional trials required, maybe that may require two years.

That means launching will be 2011.

What is your outlook for that?

And the cost of additional trial is reflected in -- I don't think it is reflected in your outlook.

Please comment on this.

And also Actos patent six month extension, did you give it up or do you still hope that there is a still a possibility?

(Interpreted).

Regarding that, let me answer to the plan question.

As for the negotiation with FDA, it is considered as an outcome study.

Whether it is requested or not, we have a plan to conduct this outcome study so we have been discussing this already.

And whether additional study will be required or not, well the meeting continues still.

And there are no changes so far.

June 26 we expect a meeting.

And regarding the preferred date itself, on June 26 that is the preferred date and there is no change on that plan.

And of course we aim at early approval, as soon as possible.

We want to have the approval as soon as possible.

Therefore we would like to complete studies as soon as possible.

So you may wonder when the studies will be completed.

As for that, we are trying to decide details.

As of now we cannot tell you when the studies will be completed.

And regarding R&D expenses, as was mentioned by Mr.

Takahara that that possible additional cost is included in our outlook and forecast.

Regarding Actos patent, exclusive period for Actos including combos there are various patents involved.

We are currently doing our best, but Actos itself that patent extension would be rather challenging.

That is our view currently.

(Interpreted).

My name is [Yamaguchi] from (inaudible).

First I would like to ask the question about the shift from quantity to quality.

So far you were pressing for quantity, so far.

So the current pipeline is a result of earlier approach.

Then you are going to shift to quality from now on.

That perhaps you need to restructure the pipeline, perhaps.

So it seems you have had a gradual approach for the restructuring of the current pipeline.

But in this quarter do you think you are going to restructure the pipeline drastically?

Or what kind of the impact do you think you would have on the current pipeline if you change your policy.

(Interpreted).

Let me answer your questions.

Yes, so far, of course, we are pursuing the quantity to some extent with the probability of success.

So we try to develop and launch new product, one per year.

So we have had the target.

But we didn't say that we disregarded the quality.

Of course we are seeking for the competitiveness.

But how we can actually shift the pre-treatment paradigm, so far that is our policy in research and development.

And recently because of the regulatory requirements and the clinical outcome, for example lifecycle management -- sorry, the [life] of the disease, we have to clear the higher hurdle.

And as for CNS and oncology, as you are aware, we didn't have any therapeutics, but we tried to approach new areas.

So like this way in the therapeutics areas we need to find something new.

Otherwise we won't be able to launch products very smoothly.

Even though we launch some products, the products will not be useful.

So we try to focus on these unmet needs.

That is why we have to have a feedback of the needs from the market, research and the development.

I think we need to be very (inaudible) such feedback as well as (inaudible) in the stage and also the investigator have some that he needs for the technical studies.

So the pharmaceutical research division created value, then this value needs to be realized and development.

So we have to have very close cooperation between these two sections.

So we try to focus on those areas, to utilize, to realize those developments.

So in some cases we need to change our priorities.

So let me give some additional comment.

So as Company whole, so far we are thinking about the established positions to supervise the R&D, but we didn't have very good person to serve this position.

But as I already mentioned in my presentation, Mr.

Ohkawa, he serves as the CSO, Chief Science Officer.

So in the past the research and development, the communications was not very clear in some cases.

But only a single person can actually supervise both the divisions.

Therefore we will have efficient R&D activities.

(Interpreted).

And as for Kapidex, I have a question.

So it seems Kapidex has been very steady, but when I take a look at the prescriptions, the Kapidex sales has moved down very much.

But within this year you tried to reach $200m.

But switching, have you seen a very good switching?

So if switching is very well, what is the good point?

And what is the negative point if you haven't seen that very good switching?

So we only began promotion in February and we have limited prescription data so far.

The trajectory of the new prescriptions are consistent with our forecast.

So we believe we're off to a good start and on track.

The source of the prescriptions is as much coming from other products as it is from Prevacid, which is representing some slight upside, at least in the short run, coming on the Prevacid side.

So we are meeting our launch trajectory for Kapidex, and getting a little bit less on switching, but more from other brands.

So that is a positive actually.

We continue to believe that this brand will go out the year, right after Prevacid expires from its patent exclusivity, with enough foundation to meet the long term view of this compound.

And it's as important that we source products from, actually from Nexium is probably the most important target, because this is the differentiated part of the market.

We're going for the top of the market.

We're not trying to compete with the middle of the market in generics.

So our strategy is go and present this product as unique and differentiated against the top of the market which is Nexium.

So that strategy perpetuates long after Lansoprazole's patent expiry and I believe we're off to a very good start with this product.

So the basic strategy, rather than choice of switch from Prevacid itself inside your Company, rather than taking market share from other top brand, is that your basic strategy currently?

It's a two-pronged strategy.

Clearly there is the switching from Prevacid's importance, especially when it comes from the perspective of the managed care companies because they are controlling the access of the drugs.

So we are able to offer some special contract terms for the Prevacid business to move those discounts over to Kapidex.

So that is very important and I don't want to minimize that.

At the same time that will only be valuable until Prevacid is no longer on the market, and that's November 2009 as a patent-protected product.

So we must be very balanced in our approach to be sure we are also positioning Kapidex as a very important novel product, with strong durability, that matches up against the top of the market which is the other, primarily Nexium prescribed patient.

Thanks a lot.

(Interpreted).

Urushihara from Nomura Securities.

I have two questions.

The first is related to Mr.

Yamaguchi's question, SYR-322, what happened in that compound can happen in TAK-491 or in other compounds.

Maybe FDA's guidelines changes and Phase IV to be conducted earlier than the current level.

And have you -- what is your feeling regarding this (inaudible) talk with FDA.

Regarding TAK-491 there's no move like that.

Other than 491 you do not have any of that kind of move?

(Interpreted).

That is right.

FDA's change is only in the diabetic area so far.

In the case of hypertension area, last year guideline was released and outcome studies are not really required if the lower BP level can be expected.

I understand that is an ongoing discussion.

That is just a draft level and not an official one.

So for the hypertension area, the aspect looks different.

For CNS there is no guideline changes.

No, we are not aware of any changes.

(Interpreted).

My second question, Mr.

Hasegawa mentioned that the shift to quality from quantity, for the short term you may have faced some challenges.

Do you see any possibility of incorporating external elements, M&A?

(Interpreted).

As I have always said, there are several criterias for us for M&A by Takeda.

Basically enhance organic growth, but if we identify gaps and if there are most efficient possibilities from outside, then we will consider it as one of our options.

(Interpreted).

Yesterday I did not check that, but regarding domestic business you, I think, suggested M&A in Japan.

Is that right?

(Interpreted).

No, that is not right.

I do not suggest anything of that sort.

We are not interested in that for the time being.

But in future maybe when NHI pricing changes, and if when there are changes in the environment maybe, for a long term perspective, you may see some consolidation in the industry because the stronger will be surviving.

So maybe M&A cannot be unavoidable.

That's my suggestion.

(Interpreted).

So before you start to be very active regarding M&A, maybe you do not do share buybacks for the time being in a very active manner?

(Interpreted).

Our basic understanding is the same, operating cash to be at JPY500b although you may think that is relatively rich.

And of the JPY1 trillion we used up JPY900b for the recent M&A and we will use excess over JPY1.5 trillion will be used for the shareholders return.

And we have JPY20b in excess.

Whether that is used for the share buyback, regarding that, as of now we want to see how things are going to move for the time being.

It doesn't mean that we definitely don't do share buybacks.

We just want to see how things are going.

(Interpreted).

What do you mean by you want to see how things are going?

(Interpreted).

So for the time being we will not -- we are not considering share buybacks soon.

Thank you very much.

My name is Masuzoe from Deutsche Securities.

I have a question regarding Kapidex.

What is the dynamic share?

Do you have any specific figures about the dynamic share of Kapidex?

If you could give us such a figure I would be very obliged.

For example, if you have switched from Prevacid and switched from other products, so if you have a figure for the shares I would like to know the actual figures.

I'm not sure I know the term dynamic share exactly.

Could you clarify the question please?

Please clarify the question.

Yes.

Because you know we know some share of the [IMAs] for example, [NRS or TRS].

But how much switch from Nexium to Kapidex, so including first time share for the dynamic share?

Yes, the sourcing, source of product.

So you don't ever have perfect data for this.

You need primary market research to actually try to get at this.

It's only been a few months so we have limited view of that.

My sense of it is that we are not losing as much Prevacid market share as we are gaining in Kapidex share.

So it suggests to me that the source of prescriptions for Kapidex is coming a bit more from other products than what we may have originally projected.

Again the numbers are small, it's early and we don't have good primary research so we can only infer it.

We would have expected a little bit more of the trade-off very early on, with Prevacid coming down while Kapidex is going up.

In fact Kapidex is going up exactly as we had planned, but we're seeing a little bit less of the share loss of Prevacid.

So to me that suggests we're getting -- the dynamic share is coming as much from other potential products -- patients who maybe potentially would have gone to other products are coming to Kapidex.

Thank you.

(Interpreted).

And furthermore the authorized generics, perhaps the TPNA, are going to launch the authorized generics for Actos?

Do you have such ideas to launch authorized generics on your own?

Sorry.

Maybe I only caught the end of your question, but I think I have it.

So we will launch authorized generics via a partner at the time of patent expiry.

I have to double check to be sure -- is that public yet?

It's not public.

Okay.

So we -- better to be safe than sorry.

So we will, shortly I think, announce a collaboration with another company so that we are well positioned, in a very competent fashion to launch an authorized generic and so that we can continue to hold on to value, especially in the early part of the generic life.

As you know, there is not an insignificant amount of value that can be held through an authorized generic.

So, in fact, this is a well-formed strategy and we will announce very shortly the collaboration that we have with a major generic company to do so.

(Interpreted).

So our Chairman Kunio, he retired.

So you have only President Hasegawa.

(Interpreted).

So our Chairman is still with us but he's going to retire after June so he is taking part in Board of Directors meeting.

After he retires but we will continue our policy as we have done so far.

So even though the Chairman is gone, perhaps -- but his idea may be different from my own characteristics and way of working.

So perhaps -- of course he has been very supportive to me.

So I think I have been supported by him very much.

So I'd like to actually catch up.

(Interpreted).

So what is the [insufficiency] that you actually found out?

(Interpreted).

Well, that's my own -- that's the personal affair.

So I don't have to disclose what was the [insufficiency] on my own in public.

(Interpreted).

Onozuka from JP Morgan Securities.

I have two questions.

First is regarding North America business.

PPI franchise itself with Kapidex (inaudible) still 20% decrease is forecasted for this year if Actos patent expiration would happen.

And European companies or Western companies they are doing some profitability plans and some kind of adjustments to be announced.

Do you think in the latter part of this year you will have that kind of adjustment plan or you're not thinking of that plan of that sort?

Is your question regarding do we announce restructuring?

No there are no plans to announce any restructuring.

The base business, as Mr.

Takahara described, will be very strong in 2009.

We have new brands that we are in the midst of launching.

Important brands.

We've finished restructuring the Company actually when we merged TAP with the holding on a Takeda subsidiary.

So we did a lot of optimization at that time actually.

This is not a slumbering company.

This is a company that has just been very much recently redesigned and optimized for the near term.

And we are actively working closely with R&D, as new products are coming through, and preparing.

So there is no near-term plans for any restructuring.

(Interpreted).

Regarding your European business, Mr.

Hasegawa mentioned that regarding European distribution M&A may be a possibility that has been mentioned before.

And regarding the short term, you seem to be focusing on in-house growth.

But is there a possibility, are you more inclined to in house development and organic growth?

(Interpreted).

Let me first mention a comment on that.

Maybe Mr.

Mackenzie can comment additionally.

Regarding European markets and regarding improvement of our coverage, as I have always mentioned, we have pursued M&A to improve the situation.

We had various contacts with various companies and we did not reach specific agreements.

And therefore we thought, pursuing M&A in Europe if we cannot anticipate very good success, then we will go back to the basics and try to be focusing on in house development.

And that is what we are doing now.

Thank you very much.

(Operator Instructions).

(Interpreted).

My name is Sakai from Credit Suisse.

I have two questions.

First in the industry paper in April, Takeda, that they changed the rebate system, it was reported.

So I want to know whether this is true or not.

And also the last year, the last fiscal year, that the price (inaudible) reductions, you received some damage because of the [intentional] price reductions.

And also you may have an impact.

And also in the NHI price system, the new NHI price system may be established.

So as President Hasegawa mentioned this may be realized.

So in June perhaps I think the policy needs to be clarified about the new organizational structure of the NHI price.

So can you comment about this?

(Interpreted).

For the domestic market of course I rely on the marketing general managers.

Therefore of course, that's his own decision and discretion about rebates.

So I do not know exactly what is happening about the rebate.

And about NHI price and a new system for NHI price, possibly there is such new structure.

We have proposed new ideas about the structure.

So we still look for -- seek for the (inaudible) to establish the new NHI price structure.

That's what I can say at this moment.

Thank you.

(Interpreted).

Thank you.

Additional question, Kapidex coupon strategy.

Because Obama administration said they are enhancing Medicare and the Medicare rebate expansion, so I want to know what is the situation with the coupon strategy?

It seems that very extensive coupon has been available.

But Kapidex, when I think about Kapidex, the switch, to what extent, how long are you going to continue this coupon strategy?

Furthermore as rebate expansions, does this have any impact on TPNA?

Have you ever calculated what is the impact on to the TPNA by this really extensive coupon?

So we very precisely calculate the impact of all the discount programs and couponing programs.

For Kapidex launch it's very important that we get high trial.

This is a very important time in the beginning of the life of a new drug.

In acid reflux, how the patient responds and the feedback that that brings back to the prescribing physician is so important early on.

We want to make sure there are no barriers to trial, to an actual trial of the drug and we have high confidence, actually, the trial will yield very positive feedback to the prescribing physicians.

So we have thought about the different ways that we can be sure.

Especially early on, when you don't yet have formulary acceptance, it always takes some time.

But we want to accelerate, before we even get to this full formulary acceptance, the patient trial.

So samples is one approach.

But now in the United States samples are not good for every situation.

There are certain hospitals and clinics that don't permit sampling.

So we've also introduced couponing, as you mentioned, and the couponing essentially allows the doctor to write the prescription and give the patient a coupon that they can take to the local pharmacy and get complimentary products.

So they can have that initial trial.

This is very much of an early launch strategy, the couponing side, because over time, once you have your formularies being built and you have a much easier process for prescriptions going through very smoothly with the proper reimbursement, then it becomes less important.

So I don't anticipate that we will see this level of couponing for a protracted period of time.

But yes it's a very important part of the launch.

And yes we have carefully calculated it.

And we carefully calculated the importance of both rebates, the discounts and the coupons.

And so far it's working because we're seeing nice prescription uptake which -- and the coupon, the difference between a sample and a coupon is if a doctor gives a sample from the office, you actually don't yet see prescription.

When you get a coupon, you actually have to go to the pharmacy with a prescription.

So you'll see, in the IMS data you'll see a prescription.

So we are seeing a very nice uptake on prescriptions.

Part of that is coming from coupons.

Is that one of reasons that you're seeing the switch from Nexium?

Excuse me.

I do think it's a factor.

I do think it's a compelling offering for a patient who comes in, either a patient who's been on a generic product perhaps and needs -- feels like the doctor would like to give them a stronger medicine, or for patients who are renewing their prescriptions and, yes, the doctor is always looking for a better alternative for them.

So I think when you have an important new drug like Kapidex with a novel mechanism, with its dual release technology, and patients who are looking always looking for more power in the PPI market -- you know the strongest product always is viewed as important and the top of this market is so critically important.

Generics work great for a good portion of the market, but there's always patients who will need a stronger drug.

So the couponing, again, at that time, I think, is very important.

And I think it does play a factor in choice of products at that time.

Could you also comment about rebate, Medicaid and Medicare rebate situation?

Yes.

So we don't have Medicare coverage yet for Kapidex.

New product, it takes --

Overall TPNA.

Overall?

So our -- it's product category specific.

So PPIs have had historically very high Medicaid and Medicare rebates and that's a function of the size of the market and the high number of players in the market.

It appears to be, I would say, year-over-year relatively consistent.

We don't see really extreme price degradation in the Medicare, Medicaid market in the PPIs, but it was very deep to begin with.

The price of entry for -- in the government programs was quite high.

So I think it's consistent.

Kapidex, just because it's early, we haven't finished the process yet.

And the other main business, in diabetes the rebates are actually relatively stable year-over-year.

There's no big change.

And if anything the situation between -- in the [TZP] market, whereas it used to be viewed as more head to head competitive, now Actos is viewed as having a safety advantage.

And so you don't have to continually, as much as in the past, play this strong increasing rebate.

It's stabilized very nicely actually.

(Interpreted).

Regarding Velcade I have a question.

On the first line use, how much is used in the first line?

And Vista data I think it was -- and relative positioning, has it changed in the Vista study?

I'd like to address your question about how much Velcade is used in the first line setting.

And we're getting a good distribution of Velcade across all lines of therapy.

The great thing about it is, even if it is used in first line therapy, if the patient relapses it can be used again.

So we haven't seen a decline in the second and third line share of Velcade, while we have seen a significant uptake in the front line after the approval in June -- late June of '08.

So I'd say the distribution of utilization is about 50/50 between the front line and the later lines of therapy now.

With respect to the Vista trial, as we continue to follow the data of the Velcade containing initial arm VMP versus MP -- and those MP patients got Velcade when they relapsed, so actually it's testing early Velcade versus late -- the survival advantage for Velcade persists.

And we are now out to past three years and going on to four years and we see a very strong continuation of the advantage of Velcade going forward.

So we really are seeing Velcade assume the role of the backbone of therapy.

As you are aware, front line therapy is always combination therapy and we're seeing Velcade being used in multiple different combination therapies in the front line setting.

This Vista trial going to support [itself] to compete to Reglumade.

So far it has been -- as you are aware Velcade is approved in the front line setting and Reglumade is not.

Ultimately both drugs are actually being used together.

And I think that's why the combination utilization in the front line is tremendously important.

It means that both drugs can grow in combination.

It doesn't have to be one versus the other.

I think Velcade has become a very trusted standard.

It's also very economically valuable to payers, including Medicare, since it's roughly half to 60% of the price of Reglumade.

And that certainly has been an advantage to Velcade as we've gone through 2008 and into the early months of 2009.

Thank you.

(Interpreted).

Any other questions?

As it seems we don't have any more questions, with that we'd like to close the meeting, 2009 March meeting.

Thank you very much for your time out of a tight schedule.

I'd like to appreciate your contribution.

Thank you.

Thank you for taking your time and that concludes today's conference call.

You may now disconnect your lines.

Portions of this transcript that are noted "interpreted" were interpreted on the conference call by an Interpreter present on the live call.

The interpreter was provided by the Company sponsoring this Event.