Takeda Pharmaceutical Co Ltd (TAK) 2010 Q4 法說會逐字稿

Good morning everybody.

Thank you very much for waiting.

Now we are starting the conference for announcement of financial results for fiscal year ending March 2010 and the mid-range plan FY2010 to FY2012.

Thank you very much for joining our conference this morning.

Let me introduce the members from Takeda.

The President of Takeda Pharmaceutical Company, Mr Hasegawa.

Mr Yamanaka, General Manager of Pharmaceutical Marketing Division.

Chief Scientific Officer Dr Ohkawa.

Alan MacKenzie, Executive Vice President International Operations.

Mr Inoue, General Manager of Corporate Strategy and Planning Department.

Mr Takahara, General Manager of Finance and Accounting Department.

General Manager of Strategic Product Planning Department, Mr Iwasaki.

President and CEO of Millennium, Dr Deborah Dunsire.

Let's start with the announcement of consolidated results summary for fiscal 2009 and forecast for consolidated results for fiscal 2010 from Takahara.

Thank you very much.

It's my pleasure to present to you the summary of Takeda's consolidated results for FY09 and forecast for FY2010.

This is FY09 consolidated results.

First about the sales.

Due to the negative effect of patent expiration of Prevacid in US and the negative impact of the depreciation of yen, consolidated net sales decreased by JPY72.4 billion or 4.7%.

On the other hand for the profits, the influence of R&D expenses JPY159.9 billion, which was M&A related costs incurred in the previous year, was not recorded this year.

Therefore operating income increased JPY113.7 billion or 37.1% to JPY470.2 billion.

With an increase in operating income and less tax offsetting the decrease in extraordinary income, the net income increased by JPY63.4 billion by 27.0% to JPY297.7 billion.

EPS excluding extraordinary income and other extraordinary factors decreased by JPY21.49 to JPY448.81.

ROE was 14.4%.

Next slide please.

This slide compares our consolidated results with forecast announced in February this year.

Net sales resulted in JPY14.0 billion below the forecast announced at the Q3 earnings report.

R&D expenses were JPY13.6 billion below forecast to bring the total expenses JPY25.0 billion below the announced forecast, which more than offset the reduced sales to achieve operating income JPY25.2 billion above the forecast.

Ordinary income and net income are also shown here.

Next slide please.

As you can see the foreign exchange had a negative impact on net sales operating income and net income.

About 90% of the JPY72.4 billion decrease in net sales was attributed to currency effects.

Next slide please.

Now looking at the changes in sales by business segment, the net sales of ethical drugs decreased by JPY66.4 billion or 4.8% year on year.

Sales in Japan were flat.

However, Takeda original products increased.

The overseas sales of Millennium's Velcade increased by JPY8.5 billion, but overseas sales of candesartan, pioglitazone and leuprorelin declined mainly due to the yen appreciation.

Furthermore, sales of lansoprazole decreased significantly due to the US patent expiration.

As a result the total overseas sales of ethical drugs decreased by JPY66.3 billion or 7.9%.

Sales in the Consumer Healthcare decreased by JPY6.1 billion or 9.5% due to the decreased sales of Nicorette in August.

Next slide please.

This slide shows the changes in ethical drugs by region, excluding products for which Takeda acts as a distributor to wholesalers.

The Takeda Group as a whole decreased by JPY59.4 billion or 4.7% year on year.

Excluding the FX impact sales increased in all areas of Americas, Europe and Asia achieving the Takeda Group net sales increase by JPY4.8 billion or 0.4%.

The sales of Americas excluding the FX impact increased by JPY1.5 billion or 0.3% with the increase of Velcade and Actos family and the contribution of Dexilant and Uloric covering the negative impact of Prevacid's decrease of $466 million.

In Europe, sales excluding the FX impact also increased by 3.5%, mainly due to the increased sales of Actos.

Next slide please.

I would like to explain the sales results for Takeda Group's main products.

Although sales of Velcade increased by JPY8.5 billion or 22.6%, sales of other four main products decreased on the yen basis mainly due to the stronger yen.

Excluding the impacts of FX, pioglitazone sales were up JPY26.2 billion, candesartan up by JPY0.9 billion but lansoprazole sales were down by JPY42.0 billion and leuprorelin also down by JPY0.9 billion.

Next slide please.

This slide shows the breakdown of the changes in operating income.

Due to the decrease in net sales and the slight decrease of the gross profit margin, resulting from the appreciation of yen, the gross profit decreased by JPY67.9 billion or 5.4%.

The impact of the stronger yen pushed down the SG&A expenses by JPY25.0 billion.

In-process R&D expense of JPY159.9 billion was recorded in the previous year but not this year, thus the R&D expense for this year was decreased by JPY156.7 billion.

As a result the operating income significantly increased by JPY113.7 billion year on year.

As stated at the right hand side, when extraordinary factors related to M&A are excluded the operating income decreases by JPY49.0 billion, mainly due to the decrease in gross profit.

Next slide please.

Let me explain the details of the changes in net income.

Non-operating income decreased by JPY25.1 billion, mainly due to a reduction in interest income because of lower rates and also due to lower extraordinary income.

The operating income increased by JPY113.7 billion; and income tax and other factors decreased by JPY46.1 billion, thus the net income increased by JPY63.4 billion to JPY297.7 billion.

With respect to the tax in the previous year, partly because of the higher tax rate associated with the Takeda Millennium merger, the consolidated effective tax rate was 40.5%.

This year this factor had no impact.

And the merger of the drug products in the drug substance manufacturers in Ireland had favourable tax effects to push down the consolidated effective tax rate to 27.8%.

Next slide please.

This is the cashflow situation.

As you can see, FY09 posted a net positive cashflow of JPY94.4 billion.

Next slide.

I will explain outlook for fiscal 2010.

The sales in Japan are expected to increase by launching of new drugs, but this would not be enough to cover a sales decline of Prevacid due to the patent expiration last November and the even stronger yen appreciation from the previous year, negative impact of about JPY18 billion.

Thus consolidated net sales are expected to decrease by JPY66.0 billion year on year.

Operating income, ordinary income and net income are expected to decrease from the previous year because of the lower gross margin due to the sales decrease and higher R&D expenses due to the start of the new research centre.

EPS excluding extraordinary income and other extraordinary factors such as possible business acquisitions in FY2010 will be JPY342.04, a decline of 23.8% year on year.

Please note that this outlook is based on the assumption that the entry of generic Actos in the US will start in August 2012.

That concludes my presentation.

For the dividend of '09 and dividend for 2010 in the presentation of Hasegawa he will explain policies on dividends.

Thank you very much.

Next, Mr Hasegawa, President of Takeda Pharmaceutical Company is going to explain about the mid-range plan between 2010 to 2012.

I would like to give an explanation of the mid-range plan between 2010 to 2012.

However, at the outset I would give the look-back on the mid-range plan of 2006 through 2010.

Takeda has been implementing the fiscal year 2006-2010 mid-range plan, so far striving to become a world class pharmaceutical company.

What you are seeing is the operational targets in fiscal year 2010 and the results in 2009.

As for the EPS, excluding extraordinary factors, the average annual growth was 7.8%; and with regards to the ROE, we achieved 14.4%.

The market share in the countries where the Company has its own sales channels is expected to reach 2.5%, which is about the same level as originally planned.

On the other hand, as for the targets of having an in-house ethical product sales of JPY1.4 trillion in 2010 and to have a pipeline towards the sales of in-house ethical products of JPY2 trillion by fiscal year 2015, these were the targets for the mid and long range targets.

However, even though we have still one year left until the final year of the plan it is now difficult to achieve these targets unless we implement M&A of a substantial size.

As for the returns to shareholders, we set a target to increase the dividend payout ratio to 45% in fiscal year 2010.

As you can see in the first page of financial statements -- I'm not sure you have that at your hands -- if not, then there are slides with regards to the dividend payment and I would like to mention that later on.

Well, with regards to the share buyback we did, bought back the shares worth of JPY622.2 billion by the end of fiscal year 2009.

In order to improve our capital efficiency and increase profit returns to shareholders, all shares bought back were already cancelled.

Well, I would like to explain about the background of why we started the next mid-range plan one year before -- than first planned, even though we have still one year left for the mid-range plan between 2006 to 2010.

That is because of the wide -- great changes of the external environment.

That is the main reason.

And for the changes in the external business environment, the overall pharmaceutical industry is running into a wall for the further technological innovation.

Therefore the R&D productivity significantly decreased.

On the other hand, R&D costs are rising steeply.

Also in other countries the examination for new drug approval became stricter and also that the healthcare reform is going on in the United States and their medical system is reviewed.

Also there is a stagnant economy and market in the developing countries where the rapid growth is enjoyed by the emerging countries.

So in the mid-range plan we were not able to achieve the original targets and there are many issues and challenges that have to be carried over to the new mid-range plan.

As I explained at the outset we were not able to establish the pipeline where the sustainable growth would be possible, regardless of the patent expirations of the core products.

And against the backdrop of the great changes in the pharmaceutical industry, we were not able to have an aggressive counter reaction to these changes of the environment.

We implemented various countermeasures.

However, we were not able to see any results and then since the last fiscal year it seems that so far we have been putting too much weight on the quantity and the speed.

So we decided that it would be necessary to emphasise more into the quality in the research and development, and that is a fact we tried to shift our focuses on.

Also that there were some challenges that we faced in the R&D that many products were either discontinued or became delayed.

So unless we address this problem we think that we don't have any future.

But on these challenges, Mr Ohkawa is going to explain later on so I am not going into detail.

We had an accurate analysis of the results achieved so far in this 2006-2010 mid-range plan and matters identified that need to be strengthened.

We decided to develop a new mid-range plan one year earlier than the original schedule.

And also, because of the great changes in the business environment, we thought that we would have to flexibly respond to the changes, so we shortened the duration of the mid-range plan from the five year to three years.

During this 2010-2012 MRP we are going to put forward a new vision.

And then until 2015 we would like to recover the performance to the level of 2010.

And we would like to also have a sustainable growth of about 10% in 2016 and thereafter towards 2020.

So we think that we have to have the transformations time where we're going to part with the past successes and to transform Takeda into a new one.

Also in 2013 the effect of the Actos generics entry will be emerging.

However, we think that this is going to be the bottom and then afterwards we think that we would be able to recover and go onto the path of the stable growth.

Now in the mid-range plan of 2010 to 2012 we would like to transform the Company, which can achieve the sustainable growth for long term; and for that we have three visions.

In order to meet the needs of the patients and in the medical community, centering around the core therapeutic area, we would like to make a research and development of the innovative products.

Also, we would like to have the Company culture where we will be able to support these innovative challenges.

And we also would like to target to the enhancement of the corporate value.

In order to do this we would like to put importance on the very important spread of the Takeda and to realise the management vision.

The strategies to realise new visions are shown here.

Then I would like to give a more detailed explanation for each.

What you are seeing are the late stage development projects.

And then from fiscal year 2010 to 2015, we would like to make sure that we will be able to secure the launches.

Then by implementing various measures we would like to enrich our pipeline.

More specifically, Dr Ohkawa I believe is going to give you a more detailed explanation so I would like to be brief on this.

But in the metabolic and CV in April 2010 application for marketing approval was filed with FDA for TAK-491, a successor product of the candesartan.

Since this drug statistically showed superiority for lowering blood pressure in head to head clinical trials comparing with competing products, we believe it will contribute to many patients with high blood pressure.

As for Hematide we plan to announce Phase 3 results around the middle of the current year and file a marketing approval application by the end of 2010.

Since this is the injectible product which can be administered once monthly, we will reduce the burden to patients.

We believe it is distinctly differentiated from other competing drugs, which will be explained more in detail by Ohkawa.

As for SYR-332 in the United States, additional clinical trials have been progressing steadily and we plan to submit the data based on the interim analysis in the fall of 2011.

We confirmed with FDA that durations of assessment of this data takes six months.

Our GPCR research resulted in creation of TAK-875.

It is a first-in-class diabetic drug with a new mechanism of insulin secretion stimulation product receiving great expectation from [KOL].

Oncology, we expect that TAK-700 can become a best in class drug as a prostate cancer drug following Lupron.

Good results from interim analysis of Phase 2 trials has already made us to make up a decision to proceed to Phase 3 trials.

CNS, we count on LuAA21004 as an anti-depressant drug having superior safety profile.

Well, this chart shows how we are going to reorganise the core therapeutic area and the details will be explained later on by Dr Ohkawa so I'm not going to go into the detailed explanation.

Another strategy in order to materialise the vision, in order to enrich the pipeline for the enhancement of the R&D productivity in the R&D processes, we would like to pursue the new proof of concept and competitiveness model so that we'll be able to have a very efficient development.

Also we would like to strengthen the global R&D and also we would like to pursue aggressive alliances and also establish the new research centre in Shonan, but this will be explained later on by Dr Ohkawa.

Now, next is about the growth.

By introducing the new products and also to maximise values, we would like to have a lot of enriched products, which are shown on the slide.

What is circled or squared in red has been already approved, and the projects and products that are in the green are the products that we have already filed for the registration.

We will strengthen the communication with regulatory authorities in order to address the various challenges and also we are carrying out various measures to promote the proof of concept and competitiveness model.

Through these measures we would like to have a sustainable growth and then to try to have a early launch of the products.

I would like to explain about the measures that are being carried out in each region.

In Japan, we are expecting a lot of new product launches.

So amongst the three regions during this MRP we think that Japan is the market where we will be able to expect the very stable and robust growth.

Based on the patient view we would like to carry out the various activities that are based on the viewpoint of the medical people.

And by utilising the very good productive sales system we would like to launch seven new products in three years, including the SYR-322 and the Vectibix.

We think that we will be able to have a good growth engine to materialise the growth, and by doing so we would like to maintain our number one position in Japan.

We think that we will be able to strengthen the existing franchise, and also we would like to go into the new areas of oncology and CNS areas so that we will be able to solidify our position as a leading company.

Next I want to talk about the situation in US.

TPNA will promote steady growth of existing Dexilant and Uloric.

Dexilant is the [type] Kapidex before and we would have a steady growth of existing Dexilant and Uloric.

Also we'll strive for quick market diffusion of Hematide and TAK-491 and SYR-322 and other new products.

Since it becomes probable that SYR-322, or Nesina, and the fixed dose combination of SYR-322 and Actos will be launched before the introduction of generic version of Actos and its [FDC] into the market, we will utilise the existing Actos franchise for fast penetration of SYR-322 single agent and SYR-322 and Actos FDC.

We will establish marketing and personnel organisation with high productivity and efficiency by shifting to that, which flexibly responds to the business environment and product mix.

We will talk about this later.

Millennium will aim further growth by differentiation of Velcade to overall survival benefit for multiple myeloma and intend to sustain growth by ensuring acquisition of approval for additional indication.

Then Europe and Asia.

In Europe we will ensure market introduction of these new products and achieve their rapid diffusion in the market by shifting the marketing and personnel organisation to what can respond to not only primary care needs but also specialist needs.

In Asia, their sales promotion system lead by TPAsia will be strengthened.

We will intensively distribute investments to India, South Korea and other new countries we plan to expand into and accelerate to establish a business system to ensure that this strong growth in Asia will contribute to our business performance.

In China, rapid growth will be realised by maximising the effect of the co-promotion of Actos with Pfizer in the early stage.

We tried to review the investment of trinities in China so that we can accelerate the rapid growth there.

Takeda Clinical Research Singapore increase the percentage of patients recruited in the Asian countries for global clinical trials.

In addition, it will closely work together with TPAsia and sell subsidiaries in five Asian countries, which conduct marketing activities in order to promote development activities in Asia, realise approval fitting to the market needs in Asia and accelerate the penetration of product into the respective markets.

These are the things we have to work on further so that we can make further improvement.

Since manufacturing and marketing approvals were acquired for SYR-322 in Japan, we will possibly pursue acceleration of the timing to obtain approvals in certain Asian countries.

Next slide please.

The world market mix is expected to change by 2013 as shown in this slide based upon IMS data.

The US will remain the largest market in the world.

However, it's market growth rate will become lower than the overall growth rate of the global market.

The next largest markets will be Europe and then Japan.

It is expected that the Japanese and European markets will continue stable growth.

Although the percentages of China, Asia and other regions is still small, they're expected to grow rapidly.

From the viewpoint of market sizes and growth rates, we will establish comprehensively well balanced regional portfolios of sales and profits.

I would make additional comments on this.

We have been realising speedy territory expansion into new countries by establishing a team under the [IO] that established new marketing expansion around the world.

We expanded into 12 new countries during fiscal year 2008 and '09 and achieved coverage of 26 countries, including Japan.

As a result we improved coverage of the world market by 13% to 84%.

This has been explained repeatedly and through M&A we would explore the possibility to have solutions, but it has not been realised yet.

Therefore we don't wait for unknown factors to be realised.

Rather we would like to do whatever we could do now as much as possible.

And if there is any possibility that M&A can expand our businesses, we would take that opportunity.

This is the shift of our strategies and that's why we can have a rapid expansion into the markets.

In the startup phase of the countries where we have already had presence, we pursued diverse market and activities to establish the franchise base early and to achieve early reporting of profits.

We try to utilise diverse methods so that we can achieve early reporting of profits.

We will continue examining the possibility of expansion into South Korea, Russia, Australia and other countries and India and achieving 90% coverage all through countries of the world market by fiscal year 2012.

This allows us to cover almost all countries we are targeting at.

In India, we will not only consider establishing sales operations but seriously consider businesses opportunities for cost reduction and out-sourcing in the functions of production, research development and IP business process so as to enter the markets gradually by prioritisation.

Now, I would like to talk about the creation of active and vital profit culture.

During the past few years our employees have rapidly become diverse as a result of the Millennium acquisition, TAP consolidation, globalisation by the expansion of research sites and marketing territory, appointment of non-Japanese management and increased female employees, mid-career employments and non-Japanese employments in Japan.

However, we are not still in the real vision of the global company.

Together with diversity of the workforce we will accelerate development of globally competent employees.

The new training centre in Osaka constructed in February 2010 will be actively utilised for this human resource development.

Globally consistent personnel programs such as job rotation on a global scale, revision of the performance assessment system will be reviewed and implemented.

This is something which other multinational companies have been conducting, but we have to make further improvements so that we can catch up with other multinational competitors.

In order to do this we have to have the talent development through job rotation on a global scale, including the headquarters.

This is to be realised during this mid-range plan.

Also, especially (inaudible) Japan Takeda we will empower the organisation and vitalise corporate culture.

By these actions on corporate culture and challenge to innovation, which has just been explained, we will realise our sustainable growth.

Why I mentioned Japan Takeda is that Japan Takeda's diversification or introduction of global mindset and the issue more resource development who can make global management and business needs to be further enhanced.

We have 20,000 employees in Japan Takeda -- sorry we have 9000 in Japan and we have 6500 -- with these numbers of employees still, the global mindset should be further pursued so that we can really be a global company.

Next I would like to talk about the forecast for financial results.

The forecast for financial results up to fiscal year 2012 are shown here.

We will minimise the decline of net sales and profits by the delay of market introduction of Actos generics.

Next slide.

These forecasts for financial results are based on these assumptions as shown in this slide.

Market entry of Actos generics in the US is in the following situation.

Takeda has been disputing with generic drug manufacturers in patent infringement lawsuits and claiming that Actos generics can't be launched until June 2016, which is the expiration of its patents relating to combination of Actos with other diabetes drug.

We completed settlement agreements with seven generic manufacturers including Sandoz and Aurobindo regarding Actos and ACTOplus met.

As we are confident in and intend to enforce its patents and FDA decided that Teva needs to submit paragraph 4 like other generic companies, we used the assumption that Actos generics would be introduced into the US market in August 2012.

Please note, however, Teva would continue and some others may initiate their legal attempt, which would allow them to sell a single agent of Actos generics at any time after January 2011.

As always with any litigation, there still remains certain unpredictability and if these companies arise, we will take the measures to start lawsuits against them.

We have one in the New York Southern District Court and I think this is the better way to handle the issues, and we have been pursuing the road for settlement.

During the coming periods we expect a tough business performance situation and must implement cost structure reforms that will accompany some pains.

As part of such reforms we would reduce employees in fiscal year 2010, mainly in the US, approximately 10% of global employees.

TPNA already made an announcement and they would reduce approximately 30% of employees or 28% of employees and about 20% at TGRD US.

As the total cost reduction resulting from this personnel restructuring during these three years, we expect net savings of more than JPY50 billion excluding lump sum payments provided to retiring employees.

Regarding the healthcare system reform implemented in the US, negative impacts of costs related to so called doughnut hole of Medicare Part D, tax contributions, the rebate payments related to Medicaid were reflected into our forecast.

The positive impact of sales increase by the market expansion by decrease of the number of uninsured individuals was not included in our forecasts, because we expect it will begin to contribute to our performance after this mid-range plan.

This is based upon the timeline announced by the US Government.

In the area of R&D expenses we expect depreciation expenses related to a new laboratory of over JPY10 billion each year.

Including these expenses, we will maintain R&D expenses at a level of JPY300 billion.

In the base case scenario of organic growth, we assume that our financial results of fiscal year 2013 will be negatively affected by the market introduction of Actos generics for the full year and our financial results will decrease and hit the bottom.

However, we will implement innovation during fiscal year 2010 to 2012 as explained previously and also actively promote strategic investments.

By these activities we would recover the financial results of fiscal year 2015 back to the level of fiscal year 2010 at least and aim for a sustainable and approximately 10% growth into fiscal year 2020.

These are base case projections that include normal business development activities, but impact of potential M&A are not included.

So we have the budget including those normal businesses but M&A are not included.

How can we increase -- how can we expand?

This base case scenario depends all on us and all on our challenges.

We have to implement the development of vital culture of Takeda as early as possible, so that we can return to the growth track of the Company, and the management is well aware of the importance of this.

Including the BD costs on a cash basis, we have JPY50 billion BD costs added each year.

Of course we have not identified the opportunities for these business developments so the sales do not reflect this.

Concerning M&A, we continue to pursue the possibility of M&A.

Next slide.

As for cash at hand we will secure financial resources necessary for operating capital, making strategic investments and stable dividend payments.

We think that we will secure financial resources necessary for operating capital, about JPY350 million, and a cash building system has already been introduced.

Before we talked about JPY500 billion and the situation has changed and we tried to minimise these financial resources, so that we can utilise the remainder money for a more effective investment.

Cash at hand we expect is JPY880 billion and even if we paid the dividend, it would increase to over JPY1 trillion level.

By borrowing money if needed, we would like to conduct M&A possibilities which would contribute to the further growth.

To recover the financial results of fiscal year 2015 back to the level of fiscal year 2010 and to achieve a sustainable and approximately 10% growth after fiscal year 2015, we will actively and effectively make strategic investments through M&A, product acquisitions and others.

Although our earnings and profits will drop temporarily, we will expect that our performance will recover by fiscal year 2015.

Accordingly we set a basic policy to maintain payment of per share dividends during the 2010-2012 mid-range plan period, the same as the current level or JPY180 per year as planned for 2009, although the payout ratio will become higher during this period as shown here.

The dividend per share is shown here and in the asterisk, our earnings before amortisation of intangible assets associated with the acquisition of Millennium is slightly different from the figures in this presentation.

We decided to transform a new Takeda during this mid-range plan period while implementing the discussed reforms.

Takeda has succeeded continuously over the long years of history of the Company, which will celebrate the 230th anniversary in 2011.

It's the basic foundation of our business management and will remain our unchanged sense of values to be handed over to the organisations and people of the Group, as a symbol of the entire Group.

We will also not change our mission to strive towards better health for patients worldwide through leading innovation in medicine.

When implementing our entry to new geographies, we think it more important to maintain strict compliance on a global basis.

We will strive to further strengthen the trustful relationship with all stakeholders and to be recognised as a good corporate citizen through practising Takeda-ism and our mission.

We would like to have your continued support for our activities.

Thank you very much for your kind attention.

Let's move to Dr Ohkawa's presentation, Takeda's R&D strategy for the MRP 2010 to 2012.

Thank you very much.

I would like to explain our R&D strategy for 2010 to 2012.

The mission of Takeda's R&D is to achieve better health for individuals and progress in medicine by using cutting edge science to develop superior pharmaceutical products that fulfil unmet needs.

For this mission between 2006 and 2010 in the previous MRP we enriched our pipeline, established a global organisation and enhanced our R&D capability.

We need to accelerate this process for the 2010 to 2012 new MRP we have planned.

According to this based on the past achievements we need to make further growth and we need to enrich and fortify our R&D pipeline as a global pharma.

The plan focuses on maximising the value of portfolio, mainly emphasising late stage clinical programs that support near term growth and clarify and promote therapeutic area strategy to fulfil unmet needs for leveraging Takeda's assets.

At the same time we aim to improve efficiency of the pipeline enrichment through R&D productivity transformation, and strengthen overall research capability towards innovation that advance progress of medicine.

That way we will continue to deliver innovative pharmaceutical products that meet the needs of patients.

Now let me first review the previous MRP and share with you the outline of R&D strategy in the new MRP.

First, let me review achievements of the past MRP.

In May 2006 we announced our MRP from 2006 to 2010.

Based on that plan, our R&D Department worked hard so that we had the capability to continuously launch one new product from in-house R&D every year, and we have worked hard to establish a global R&D structure.

As a result we have seven new products, and 25 life cycle items approved and also, including in-licensing items, 46 items newly entered into clinical.

We also strengthened our global structure.

That achievement includes multiple IND engines establishment; two established networks, Millennium and Takeda Bio Development Center, established to strengthen oncology; TGRD US and TAP integrated to make more efficient R&D process; and CSO was established so that we can strengthen global R&D organisation and coordination.

Toward R&D capability enhancement we installed a team system based on therapeutic areas.

We focus on translational medicine, established external networking.

In the next slide I'd like to give you an update of our pipeline.

As of May 2006 and the current pipelines are shown here.

In the metabolic and CV area, many in-house developed compounds achieved phase progresses and three compounds are obtained by in-licensed activity.

Alogliptin, a promising anti-diabetic agent, is already approved in Japan and Phase III ongoing in US and EU for CNS as of May 2006.

Only one item in pipeline, but thanks to in-house developed stage progress and in-license activities, Lundbeck enhanced our pipeline.

Rozerem, an insomnia treatment agent, it was approved in 2005 in the US and in Japan in April this was approved.

Next is oncology GI, GU and others.

In oncology area we achieved phase progress of in-house products.

And also we acquired Millennium and Amgen's in-licensed compounds to fortify our pipeline significantly.

Vectibix, an antibody agent, and [Mepact], an immuno enhancer, will enhance and other antibody agents are enhanced.

Regarding oncology pipeline, I will explain later.

For GI, GU and others existing programs advanced and three chemicals, three compounds, are launched as new chemical compounds.

Now, let me highlight some of the late phase pipeline drugs which will bring early revenue stream after launching for the short and mid term.

This was explained by the President for the new MRP period, and up through 2015 we expect these compounds to be launched.

Regarding the in-licensed items from Amgen, we do not disclose therefore they are not included here.

We will make a steady progress in the late phase compounds so that we can gain approval according to the schedule.

At the same time we maximise value of life cycle management programs, and by in-licensing we will further enhance late phase pipeline.

Of these, I would like to highlight five molecules -- TAK-491, Hematide, SYR-322, LUAA21004 and Vectibix, especially with differentiation with profile.

TAK-491 -- this can be our best-in-class anti-hypertensive agent.

It is developed as mono and in concomitant therapy.

As this slide shows, in mono-therapy compared to other ARBs, it has a stronger efficacy in reducing BP according to the clinical data.

In combination, also it has strong efficacy of BP reduction.

We expect that this plays a central role in hypertension treatment in the future.

Next is peginesatide.

That name is Hematide, and this is for CKD patients for anaemia treatment.

Compared to existing agents it has stable haemoglobin response and avoidance of PRCA is possible and less frequency in administration which can address the current erythropoietin issues.

US, EU and Japan Phase III studies are ongoing.

We expect launching by FY2012.

Next is the alogliptin or SYR-322.

This has been developed as a successor to Actos anti-diabetic agent.

Compared to existing products it can avoid hypoglycaemia and improve side effects profile.

In Japan it was approved in April 2010 and as a mono and also as combination it has been filed already.

In US, additional trials focusing on CV examine has been ongoing, and FDA has agreed that they will review based on interim data.

It will be launched by 2012 as mono and also as a combination therapy with Actos.

This is from Lundbeck, in-licensed LUAA21004.

This is against major depressive disorder.

It has multi-modal acting mechanism.

It can avoid sexual dysfunction and discontinuation symptoms and has lower drug-drug interaction.

It is superior in terms of combination therapy or concomitant therapy.

We try to clarify these differentiating points, and in terms of safety and efficacy we try to identify optimal dosing level as we progress in the Phase III studies.

Next is Vectibix.

In-licensed from Amgen this is an antibody medicine against colorectal cancer.

In Japan it was approved in April.

This will serve as the core oncology product in Japan for Takeda.

Compared to the existing anti-EGFR antibody this is a fully human antibody and infusion reaction is much less in frequency and EGFR tests are not really necessary.

This can be applied as first, second and third line treatment in combination with chemotherapy or as a mono-therapy, and much less frequency in administration.

So in terms of safety and convenience it has competitive advantage.

It can be a best-in-class agent.

Those are some of the main molecules.

Let me now explain our therapeutic area portfolio strategy for longer term growth.

This was also shown in Hasegawa's presentation.

We will focus on the areas where unmet needs are high and where we can make contribution in terms of prevention and cure -- oncology, CNS, and metabolic and CV, particularly obesity, diabetes and arteriosclerosis.

Those are the areas where we will be very active.

We will leverage Takeda's strengths.

By doing so we will develop and discover new drugs.

Let me talk to each therapeutic area specifically.

First metabolic and CV area.

This will continue to serve as a core area for Takeda.

Takeda in early-1960s already paid attention to the relationship between obesity and metabolic and CV, and we have developed various diabetic drugs and anti-hypertensive drugs.

Based on the GPCR research we have TAK-875, so we will focus on more potent and safer anti-diabetic agents.

Also based on our [build up average] we will focus on obesity and actual prevention targets.

We will also focus on arteriosclerosis as downstream target for treatment.

Regarding obesity, in addition to our research platform we have the peptide medicine pursued in Tsukuba and we will develop peptide based in all our small molecule drugs.

In diabetes, in Tsukuba we have iPS cell research.

We have findings from regenerative medicine and we will offer regenerative effects of beta cells of pancreas.

We will also look at the stronger HbA1c and weight loss and pancreatic data for preservation will be our focus.

In arteriosclerosis we will apply translational medicine, including biomarker and imaging so that we can utilise our fatty acid cascade.

Now next I would like to explain about the strategy in the field of oncology.

By capitalising on the networking that we established globally and also by utilising the strength of the Velcade locally we would like to pursue the R&D policies to have a highly differentiated drug that can prolong the cancer patient.

Also, we would like to utilise the basis that we established with the Velcade on a surface platform.

Also, by utilising the strength of the prostate cancer research that we have established with Leuprorelin and we would like to pursue further on new molecule entity discovery and also to contribute to the health up to 2015.

We also would like to consider about the in-licensing of the late phase products and then to enrich the portfolio.

Also in the clinical (inaudible) would be the areas where we would like to have a competitive edge and then they're doing the prioritisation so that we'll be able to have a high quality drug development.

Also that's a time we would like to utilise the experiences that we acquired in the development of the solid tumour (inaudible) PBDC.

Also we would like to pursue the translational medicines and also utilising the imaging technology, so that we will be able to strengthen the R&D and then to become the leadership in the oncology.

Now this is the pipeline of the oncology.

We would like to progress and enrich the inhouse pipeline, that we have acquired the Millennium as well as we have in-licensed the products from the Amgen so we have an enriched pipeline.

As you can see here, in the pipeline we have the various candidates with different mechanism actions, and that is one of the [characteristics].

However, there are many programs that are still in the early stage so we would like to identify the optimum product so that we'll be able to have a (inaudible) of the high quality products and also at the same time we would like to further the in-licensing so that we'll be able to enrich the pipeline in a late phase product.

On this pipeline I would like to talk about the TAK-700 and MLN9708, which is expected highly as the successor of Leuprorelin and Velcade.

Now the TAK-700, this is the Oral 17,20 lyase inhibitor.

And as a prostate cancer treatment succeeding Leuplin, in the United States we have acquired a very good interim analysis result in the Phase II trial, so we decided to go into the Phase III trial.

This is the administration of 300 milligrams BID or more, and then with the domestic castration resistant prostate cancer patients we have a very good response rate and we have very good clinical study data.

We would like to further proceed with the development of it as the fast follower in this field, so that we'll be able to narrow the gap with the other competitors' products.

Velcade will lose the patent in 2017, so we are in the development of MLN9708 which is the second generation Proteasome blocker which will serve as the successor to the Velcade.

At the present moment we are carrying out the Phase I trial and we have acquired a very stable [PK] and also we had very good data of tumour shrinkage with those.

It has a higher frequency and more safety than the Velcade so we think that it will become the first Proteasome inhibitor.

Also one of the very important technologies in the cancer drug, we are embarking on the antibody research.

This shows the pipeline of the antibody medicine research and development.

Centring around the licensing the product from the Amgen.

As you can see we have at the present eight antibody medicine in our pipeline, including the already approved Vectibix.

Most of them are the in-licensing products, however at Takeda San Francisco we would like to utilise our own phage display technology so that we'll be able to have a good target discovery, and also to the team work with the Japanese institute we would like to (inaudible) to the ING so that we'll be able to strengthen the pipeline.

We also would like to do the in-licensing aggressively from the bio-ventures so that we would be able to establish the very robust spaces in the antibody medicines, including the oncology area by pursuing the clinical study and development, capitalising on our experiences and knowledge of the Takeda Bio Development Center and Millennium.

Now I'd like to talk about the CNS growth strategy.

In this area Cercine, Rozerem, and Hirtonin and (inaudible) have been good results.

We have a very strong basis of the drug discovery which has been established for (inaudible).

And then also in addition to that, GPCR research and also the knockout (inaudible) in Takeda, as well as the iPS research in Tsukuba, where our strength lies.

Also that we would like to participate in the J-ADNI, which is the consortium of the biomarker for research of Alzheimer's.

Together with Lundbeck and Janssen Pharma we would like to pursue the research and development in the CNS.

Also, we would like to utilise the (inaudible) and also we would like to focus on the Alzheimer's disease as well as schizophrenia.

However, it will be necessary to further strengthen and enrich the pipeline to become the global pharma.

Looking at the external environment, the criteria for the approval by the authorities becomes [tricky] and also that there are more increased influences from that period by those insurance companies.

Also, in addition to that, we will lose some parts - or an incapacity because of the generics we will enter into the market.

So that means that we are facing a very challenging situation in the launch of that new project.

So in order to enrich the pipeline we need to reflect the market needs and then to pursue the R&D of a high quality so that we'll be able to make good differentiation.

Also, it will be necessary to have a very cost efficient R&D so we would like to implement four measures, which I'd like to explain one by one.

First are the cost effective R&D process and POC&C model.

POC&C is the aggregations of proof of concept and competitiveness, as was explained by President Hasegawa.

So in the clinical study we would like to conform the concept of the compound but also we would like to make a thorough confirmation and verification of the competitive differentiation so we'll be able to improve on the productivity.

One of those measures would be to have a strengthening of the cross functional collaborations between R&D, [CMT] and marketing.

In other words that we would like to carry out the R&D based on the POC&C model and also through the Portfolio Review Committee we would like to have strict evaluations of the in-licensing candidates and also the pipeline, so that we will be able to do the prioritisations and make decisions to (inaudible).

Also, we would like to carry out the optimum clinical study and then to carry out the translational medicine so that we'll be able to identify at the early stage which will be the most (inaudible) research and development team.

So we would like to allocate the resources to the most high prioritised products.

Also, we would like to start the long-term study as well as the manufacturing of the - investigate products after acquiring the POC&C.

So we would like to introduce the so-called backloaded model.

Also, we would like to carry out the life cycle strategy which we will map to the market needs.

Also in the regions we would like to have the optimised allocations of the resources so that we'll be able to strengthen the targeting of the drug discoveries which will be based on the understanding of the pathology.

As an endorsement, as I mentioned earlier, we would like to try to run the clinical study according to the appropriate first-in-class, best-in-class (inaudible) compounds.

Also we would like to strengthen the important functions sectors to clinical science and also the safety information so that we're able to effectively internalise the outsourcing and we would like to become a [cleaner] global operation [function].

Also we would like to have a competitive edge so that we'll be able to launch very high quality compound so that we we'll be able to have a higher possibility of success in the late stages, so that we'll be able to utilise the R&D because (inaudible).

Also, as I mentioned, that we would like to strengthen the cross functional collaboration.

This shows the R&D facilities and that we can see that all these R&D facilities are located in the Bio clusters of of Japan, US, Europe and Asia.

Under this system, last fiscal year we have (inaudible) and established (inaudible) and through this we are strengthened the collaborations in the R&D function.

Also, we collaborated with the marketing functions that are simply now in the United States.

(inaudible) we would like to utilise that as well the PRC, which by the way it is the pipelines and in-licensing candidates.

Now I would like to explain about the new research centre in Shonan, which is going to be established in 2010.

Well, in this new research centre, by utilising the scientific knowledge and the state-of-the-art technology we would like to fill in the unmet needs so that we'll be able to give the best treatment for the (inaudible).

We are going to do so by quality focused research.

Also we would like to position this new Shonan research institute as a state-of-the-art global research institute.

We would have a lot of staff members and researchers which have the innovative mind.

More specifically, by integrating the Tsukuba and Osaka laboratories we would like to further promote the collaborations among the various therapeutic areas, so chemical and pharmacology functions are located down the hall next to each other so that they will be able to have very good communication.

Also we have this space, a multiple space which we call [Nomad], so that the visitors will be able to have free discussions and argument, and through these activities we think that we'll be able to have a synergy effect.

We also would like to further have the active experience of the personnel with the overseas research institutes so that we think that this new research institute will become a fully fledged global research (inaudible).

Also I'd like to talk about how we would like to do the productivity improvement and the promotion of the better alliances.

Through active alliances we will make sure our maximum is being utilised outside resources and also we would like to pursue on the improvement of the productivity.

Also we would like further promote the collaborative research by utilising actively the world-class expertise in the [region] and also to expand the academia network so that we'll be able to establish a win-win relationship with the top experts in the global research arena.

Also we would like to strengthen our in-licensing activities, so even if there's a conflict with the inhouse compound, we would like to still try to do the in-licensing (inaudible) high quality compound.

Also we would like to try to reduce the risk in the late stage clinical study.

Also we would like to further proceed with the collaborative development.

Now I would like to talk about the innovation, and this is one example of how we are planning to enhance the capability for the drug discovery.

This is the slide that talks about the GPCR research.

The G protein coupled receptor, or GPCR, at the present moment has accounted for about 40% of the drug target that is in existence in the market.

However, the deorphanization is still the very important research theme.

In this research arena we have carried out the various functional analyses of the orphan receptor.

This research started in Tsukuba in 1994 and recently the GPR40 or the metastin were identified as a promising target which can be linked to the new compound.

This has been already in the development stage.

Also the Takeda Cambridge was established in order to strengthen this function.

At Takeda Cambridge we are utilising our strength for the transgenic mice and phenotyping in order to untap the further targets.

In this GPTR research we think that we will be able to obtain the competitive edge and superiority that CNS and in that therapeutic area.

As an example, I'd like to talk about the new anti-diabetes drug, TAK-875.

This TAK-875 is targeting the GPR40 which is in existence in the pancreatic beta cell, which has been identified from this open receptor research.

This has a different [MOA] than the other anti-diabetic drug.

Also, it has been already confirmed it has a very important glucose lowering efficacy and also the MOA is different.

So it is possible to expect a the diabetic effect from the already existing background.

Also there is a risk of hypoglycaemia.

Also it is possible to expect that it has got a less risk of the pancreatic damage compared to the [SU].

Now I would like to explain about our research vision towards the drug discovery innovation.

Well, the antibody or nucleic acid medicine and the vaccine, those are research that will be accelerated that we'll be able to further have a more effective drug discovery.

Also, a long-term activated, well, we would like to develop the prophylactic medicine as an example of the additional education requirement for the Basen, for the impaired glucose tolerance.

Also we would like to carry out the personalised medicine research, which will be most mapping to the individual patients.

Also, we would like to have a pathway to the regenerative medicine, which is also a focus of attention at the present moment.

So as was explained, by 2012 we would like to maximise the portfolio value based on the late stage clinical development program.

Also, we would like to capitalise the strength of Takeda so that we will be able to satisfy unmet needs, specifically in the area of the metabolic (inaudible) oncology and CND.

Also we would like to improve the productivity in R&D, and also we would like to strengthen our drug discovery innovation so that we will be able to provide a very innovative drug which will meet the needs of the patient.

Thank you very much.

We will have a Q&A session now.

(Operator Instructions).

First of all, I would like to entertain questions from the floor here.

Will you please raise your hand and will you please identify yourself when asking questions.

Yes please?

Excuse me, sorry, but there are many people who have questions, so each person up to two questions.

We would answer many questions but I would like to limit the number of questions from each person.

The person in the first row please.

Yamaguchi from Citi.

I have two questions.

First is Alogliptin, the US sales, is a concern for short term.

In the US the new product is not selling very well.

And what is the friction rate from Actos to Alogliptins?

And what is the situation of the franchise and how do you protect the franchise in this mid range plan?

This is the first question.

And the enhancement of your relationship with the authorities -- what is the specificities you will engage to enhance the relationship with the authorities?

Would you please give us some more specific information on that?

Alan MacKenzie will answer these questions later, but first of all, the switching from Actos to Alogliptin will be because discussed first.

As I mentioned in my talk, Actos generic introduction will be delayed, which would help Alogliptin [monotherapy], or the Actos fixed-dose combination can be launched earlier than the generics.

The full impact is expected to come after this mid-range, after fiscal year 2013.

And for fiscal year 2012 would be our target.

After 2013, there are many factors involved, so this is an objective, so the goal not the planned figures.

And will you please follow up my comment, Alan.

Thank you, Yasu.

So, if you look at the oral diabetes, anti-diabetes market in the United States, and you watch the launch of Onglyza, their uptake has been quite slow, and I'm sure that they are disappointed in it.

The factors behind that, very much - and it's true for all new products now in the United States - is perception of benefit versus unknown safety risk.

So even though products may have very good safety profile, they still have to demonstrate some additional benefit to make physicians want to move into another drug in the same class, so that's one issue.

The other big issue is formulary position, and will the insurance companies and the government programs pay for the new drugs when they come on.

And generally speaking - and it's been true for Onglyza - it's very difficult early on in the life to get your position on the formulary to get your product paid for.

So we think about uptake and peak year sales a little differently than we used to because it is essential to get on formularies and key government programs, especially Part B Medicare, so that you can get uptake.

So how do we think about Alogliptin?

Alogliptin, we will - as Hasegawa-san mentioned - will have the advantage of coming on the market overlapping some period when Actos is on the market.

But big benefit of that is in your formulary position, your ability -- because you are contracted in one drug in diabetes, and you're bringing out another important drug in diabetes, the ability to kind of shift some of your contracting strategy is very important.

And this is done very often in a class -- in the same class.

So we will seek to move our contracting position, because we have a very strong position with Actos on the market, offering rebates and discounts.

We will then be able to move Alogliptin in, we think, in a very good way, because we have that position.

So that's one major issue.

The other issue is safety.

And one of the maybe mixed blessings about Alogliptin having been delayed to the market is we are gathering an enormous amount of safety database.

And in fact, when Alogliptin launches, it will have the most significant randomised placebo-controlled blinded studies safety data to bring to the market.

And so we expect that we will be able to come out, hopefully, with a very -- as quickly as we can, a strong formulary position, and a very good safety message based off of the extensive clinical data, more than any other drug studied.

And we didn't study it more because we had any problems, we had to study it more because we had such few cardiovascular events in the initial clinical trials, and the new guidelines require a certain amount of events so that hazard ratios can be established.

So we are studying this compound in very large patient populations, and we will generate a very strong safety database.

I think that will be the platform.

These DPP4s are not going to differentiate from each other on efficacy.

Generally speaking, these are -- the efficacy is going to be viewed as relatively close to each other from compound to compound.

So, easy to use for the physician in terms of formulary, good strong belief of safety is going to be important, and we think Alogliptin will have a good position in that regard.

It certainly will be disadvantaged to be later order of entry than to other products, so we have to be realistic about that.

But that's the position.

I sorry you had another question to follow up which I don't remember exactly.

It's okay?

Let me explain additionally, in terms of a relationship with the regulatory, that was a part of your question, FDA, (inaudible), and how we think about that and what guidelines they issue.

With those regulatories, that is a big factor for us.

For FDA, one of our main markets is very important for us.

[Chicago] is not a new basis for R&D and that's one of the reasons, regulatories and each function by region has been in the past, but the headquarters needs to be concentrated in terms of function so that we can assess the global regulatory trend.

Therefore we have the headquarters function that way.

And also the advisory board is established because in-house information alone is not enough.

Though who are experienced with the FDA, who have knowledge about FDA, are attending in the advisory meeting so that we can sort anticipate what kind of guidelines to be established in the future.

Masuzoe from Deutsche Securities.

A similar question to the President, which I keep all the time.

In your presentation, maybe you can answer regarding medical device and bio-markers.

It's a kind of different business [style] from medicine, maybe when you look at 2015 or 2020, and inorganic growth you mentioned M&A, so maybe you were not so enthusiastic regarding some areas, including bio-similar, so you think there is a possibility you go into that kind of sort of new areas?

I would not say we don't have any possibility, but regarding the current situation, priority is relatively low, that remains unchanged.

Having said that, I did not mention in my presentation, but regarding vaccines, including pandemic vaccines, the hope to be engaged fully not only in Japan, we will target Asian markets as we try to have global approach.

Another question -- you mentioned Japan Takeda versus global, and (inaudible).

Well, I don't really like [need] that much.

Well I still think they're different, and maybe young researchers are very different from our generation.

And regarding the young researchers, if the [President] is too strong, maybe the young researchers may not quite follow you, what do you think about that?

Well, the [President] changed in the other pharmaceutical company, and thank you very much for your healthy criticism of me being in the [President].

Regarding recruiting, I'm not directly in charge, but generally speaking what people say that newcomers to an organisation, they are obedient, they do what they are told to do.

On the other hand, from my generation, a boomer, had these ambitious, aggressive attitudes, which are sort of scarce among the younger generation, that's what people are saying.

And as the management of a company, we need to consider culture transformation.

We can sort of fit into the younger generation, and that will help, especially [RTPC's] vigorous culture transformation.

Later Ohkawa can comment on this, and we, Takeda, would like to energise our organisation.

We are taking various measures regarding recruiting and hiring.

We hire not only from Japan, but this is stand by many companies, we go to Boston Job Fair, and we go Singapore where we actively hiring non-Japanese at the CNS head British would be placed.

So with those actions we can stimulate the culture and each other, and the way we Japanese do is when things are sort of at stalemate, then you give more authority or delegation to younger people, and also you build up bottom approach.

And we are trying to do that.

As the management, you need to control costs.

And in the past people said you do experiments in the [hidden] manner, and that way you can have very creative approach.

Well, that is true it's very important to provide certain level of freedom.

Our generation used to do that, but as the President said, the younger generation, they just say what they are supposed to do to.

But including some mid-career employees, we have new people and they want projects that is exciting where they feel passionate.

So we help that will be the driver for our growth, and we are establishing a scheme to encourage that.

And we will have [owner] our system for various projects, leaving some responsibility to younger people so that we can have new challenges.

On that point, in (inaudible) they are building the new research institute, and then maybe one way is that we would like to do the experiment in the open lab, and also there is various communication faces.

And also that the chemicals and biology researchers will be able to have a space to exchange the opinions, which probably stimulated various innovative ideas.

I mentioned about the free exchange, but in a certain framework, of course, the way of thinking would be the same.

However, by having an exchange of opinions and discussions as well as argument, I think a very new ideas would come up.

And then the reason that I - we established the [IND] engine, but Japan is because of that.

And also that would -- it might be possible to bring in some new ideas, innovative ideas, into Japan and incubate, and by doing so, we think we will be able to some birth of new ideas, innovative ones.

Also we are hoping to -- for you to come up with an exciting idea.

Now Onozuka from JP Morgan Securities.

I have two questions about the restructuring and the buy-back of the shares.

In terms of the restructuring, I would like to ask questions about the timing.

I think the same question was asked just six months ago, at the time of the -- the generic is in the market of the (inaudible).

Maybe restructuring can be considered to then, but why now?

Was it a very drastic drop of the earnings, and that is why you carry out the restructuring now?

Why now is the question?

And that was the question about the restructuring.

Also about the size, or the order of the restructuring.

Why 10%?

Was that because during the [MRP] that you wanted to have about JPY300 billion of the operating profit, and that is why it's a 10%?

Or why are you considering that the various things then you arrive at the order or 10%, what is the reason behind of 10%?

Well, restructuring will be explain by Alan later on after me, but we do still have some kind of Japanese-based company management, but according to my thinking, I think it will be necessary to see each market situation delivered a market situation, so we do sometimes take -- become -- restructuring if it is amounting to that market situation.

Of course the certain compensation structure will be taken at the same time, but we thought that [what] would be the best way.

And then so the restructuring was the answer.

And Alan will follow up later on.

And the second question is about the buy-back of the shares.

Yes, about the buy-back of the shares, did you do that with the ad-hoc type of thinking, or because you wanted to emphasise (inaudible) business development and you'd like to acquire the cash, like JPY50 billion was earmarked.

And then there's a way that if there was some idle capital then you will be able to buy back cash.

That was the thinking behind.

In terms of the BD, about JPY10 billion to JPY20 billion other than such (inaudible) payment.

We have another deal making reserve, but then other than that, they have about [JPY150] billion cash flow for the cash flow.

And so for the buy-back of shares, considering all the situations that the Company is in, we thought that the -- it is better to utilise for the strategic investment if you have some access to cash, so that we'll be able to have a hedge for the future uncertainties.

So we are not planning any further buy-back of the shares.

And maybe there might be some event where it will be necessary, but we would like to utilise the excess amount for the strategic event.

So Mr Hasegawa answered the timing question.

In terms of the mechanics and the go-forward timing of it, so as announced, the -- it's a US-focused restructuring, 28% of the commercial company, TPNA, will be restructured, and of the development company, TGRD US-based, about 20%.

Those decisions, as they become clear on an employee basis, should be relatively final within about two months' time, and expected to be fully implemented before this calendar year is complete.

So it will be implemented relatively quickly.

We're trying to minimise disruption, and kind of re-platform the Company around the existing assets as we see over the mid-range plan, which is what we were asked to do, was to look at a resourcing that addresses the mid-range plan, and the products that we see coming in there.

We've made some modifications in modelling on the commercial side.

We used a very typical American model was you'd have these very large sales forces, and you would mirror them, one on top of another.

And you would have the ability to, in mirrored sales forces, have many different representatives calling on the same doctor.

We are now moving more toward a flexible resource model, because, in fact, the promotion responsiveness of sales representatives in the US and Europe as well changes as the payer community takes more and more control.

So you have to apply your promotional resources, your sales resources in the places where it's most sensitive.

So it isn't necessarily a one-size-fits-all that you can just put on top of each other like we generally used to think about it, most multinational's are the same way.

So this will be a more flexible resource model, looked at where are the high responsive areas, and then implementing that on a more localised level rather than just a general sort of country-wide mirrored sales forces perspective.

So these are the bottom-up figures, not the top-down decision in the number of restructured (inaudible).

That's correct.

Thank you very much for your question.

The person in the left end of the row.

[Hadishima] from [USB Securities].

Alogliptin and Actos are fixed-dose combination.

You withdrew the submission and then when you -- do they come when you resubmit for the approval of Alogliptin, or the generics will be available in December 2012?

Then the other DPP4 may develop fixed-dose combination.

Is there any possibility for that?

For Actos fixed-dose combination, there is a six month review period, and if we can confirm the safety, we can get the simultaneous position of the approval.

Second part of the question: are there other DPP4 manufacturers that could combine in with pioglitazone or with other TZDs?

The answer is yes, but it has to go outside of our patent coverage area.

So those would have to be outside of the current assumptions of our patents, and may require separate agreements.

Do you have the generic companies where you are settled, and they don't have DPP4, so they want to have fixed combination with Actos and other non-DPP4 fixed-dose combinations, but for DPP4, [FDC], other than the manufacturers launch is not going to launch the FDC.

Yes, so they would have to do clinical trials.

I mean, any DPP4 manufacturer who wants to combine with a TZD like pioglitazone where the compound patent is expired, or where use patterns have been settled, then they would have to do full-blown clinical trials, with their agent, and show safety and efficacy to ultimately gain approval.

When can they start clinical trials?

What is the timing of their starting clinical trials?

Basically speaking, it is related to the patent expiration, so patent life.

While they are protected by patents, they cannot conduct any clinical trials.

As far as we know, DPP4 competitive manufacturers are not -- or we don't know that they are developing fixed-dose combination with Actos and other DPP4s.

We don't know for sure, but we understand that it is likely, actually.

Through the settlement was six generic companies, Actos generic -- Actos and generic combination will be available in December 2012.

Then the other fixed-dose combination may be on clinical trials for development at the time of the (inaudible) 2012.

The study itself can be made, but when will they come into the market is a different story or different discussions.

They can conduct clinical trials, we have to confirm it, and we would confirm it later, but the study can be conducted.

In other words, we don't have an accurate information, but we cannot negate the possibility.

Thank you, the person in the first row.

Saito from Schroders.

I wanted to ask Dr Ohkawa, in [MRPs], the [oral] diabetic is a major theme of the research activities, and in the near future it would be the [perfect centre].

Oral diabetics, what would be -- when we think of the future market of oral anti-diabetics, [TAK-H75], there are -- they may act on livers and intestines and pancreas, we would have the products which would work on different organs.

Then what would be the market?

We have -- if they don't use [45] medicines together and they are -- the uptake route would be a different song, what products would be shrinking, and where is the position for TAK-H75?

What we are thinking is the following: you're talking about the fixed-dose combinations.

Haemoglobin A1c reduction cannot be achieved as ideally opted for, so the combination is a possibility.

When we think of the fixed-dose combination, a potent haemoglobin A1c reduction is needed.

The conventional [SUs or PPods], they are not perfect in terms of body weight, so we need to have some compound which doesn't have adverse side effects.

And beta cell -- wearing -- or sometimes beta cells are lost.

Then regeneration should be considered, or we have to protect beta cells.

Sometimes pharmacological therapy further deteriorates the function of the beta cells, so we have to protect the function of beta cells, and that's something we are aiming at.

Beta cell regeneration would be a future direction, and that's how we are going -- we are conducting those studies.

And if there would be some products available for regenerating beta cells, it would be the future antibiotic - anti-diabetic drugs.

So in order to normalise haemoglobin A1c, we need to have several medications to be combined and in that sense, we have to have that safety, and we have to avoid hypoglycaemia.

And if we can have those features and profiles which maintain some position in the market -- yes, we need to conduct further research - basic research - and for SUs we have to know how SU deteriorates beta cell functions.

We have accumulated our data, basic research, and through the scientific analysis of this, we would like to select the most favourable mechanisms of action.

Today you highlighted five molecules.

They are considered most promising from your pipeline, or timing-wise you can introduce them.

So they are in late-phase pipeline, and therefore we chose among them.

Of course as a company we have some high expectation in those compounds.

And also depending on stages, the molecules we cannot really disclose, so phase [212], some are very promising, but we will give an update at an appropriate time later.

Thank you very much for your question, we have more time.

Yes, go ahead.

From Morgan Stanley Securities -- Morgan Stanley MUSJ.

My name is [Mita].

Actos patent issue is my first question.

Regarding the settlement with several companies, you have newly settled with (inaudible), so that means only (inaudible), not settled yet regarding the settlement.

I'm sure you have prepared much for this, but as the Company, is this within your expectation or (inaudible) further development, you received recommendation for settlement.

And so what's the background?

(Inaudible) and Actos combo, America is doing a phase III, and also 2011 I think they want to file.

Would that be a litigation possibility?

So the first part of the question regarding the seven parties that are now settled.

So they were paragraph [four filers], they were three first filers, they were settled first, and then other four followed, with [Oribindo] being the most recent.

So the only remaining litigant is [Teva].

It's not quite the same as the others, though, because Teva had initially desired to come into the market using what's called the little eight strategy, which is a approach into the market where you say you're not going to violate any patents, so you don't file any paragraph fours.

But ultimately, there was a ruling by FDA that no, you must, in fact, come by paragraph four filing.

So they are the remaining party.

To the best of my knowledge, at least through the last couple of days, they have not yet filed paragraph four, they were still party to the law suit in the southern district of New York.

There's a trial which was scheduled in early June which the judge has now postponed for some period of time to understand what the parties are going to do.

Whether or not there is some settlement approach, or whether or not there'll be a paragraph four filing, and some litigation that will follow.

All of that is just not known right now.

So that's the full, I think, case of what we know today.

Regarding Actos, the combination are being developed in phase III, and things are moving.

Whether that would lead to a litigation, regarding that question I am not quite knowledgeable so any other member can answer.

Maybe we can get back to you later.

And regarding the recommendation of settlement, whether that was a surprise or not?

Well we are -- have the patent for the combination that expires 2016, we were confident about that, but we have no guarantee that we can win in litigation.

And the judge issue this recommendation, we carefully discussed this, and we thought it is more appropriate that we listen to the judge's recommendation in terms of risk hedge.

That is why we have settled this matter with those companies.

Thank you very much.

Is it okay that I start my second question regarding the US health care reform?

Is incorporated in the MRP, what would be the impact -- magnitude of impact for this year, next year and two years ahead?

And various impacts could be different, but (inaudible) Actos, what would be the impact and the position?

Whether they are less impacted?

--can you answer to that question, the level of impact?

And regarding back to Actos, I don't know whether we can answer to that individually.

Regarding the impact of health care reform, (inaudible) is only --

I meant Velcade, sorry, it was my mistake.

Well for the FY2009, Medicaid rebate strengthened, and that impact for January/March is already the consolidated.

That is about $15 million.

And for FY10, and the impact would be for the full year, and public health care service, this is for the low income people, hospital, and the reduction would be first among those institutions, the Velcade and the [one sort] at TPNA, 1.7% impact in the [amount] of about $90 million.

And after that for FY11 the (inaudible) patients payment of 50% are paid by the pharmaceutical companies and the various (inaudible) in FY2011.

And therefore 3.5% to 4% would be the impact in 2011 and beyond.

So for the next [sales] that would be the level of impact.

As the President said, the patient would be expanded that would start in FY2014, but up to 2013 we cannot incorporate that in our estimate.

And the goals for FY2015, people say that the facility [2 million] more covered, but we are not incorporating that in our plan.

Thank you very much for the questions, and since because of the time constraints, one last question.

The person who raised hand early, maybe that person in the front.

Then briefly I would like to pose the questions.

I'm from the Nomura Securities.

Well I think you mentioned that you're going to do the productions of the [EE] compound in India, like for example are you going to produce SYR-322 and then [still] try to provide at locals?

Well I also heard that you were planning to do the outsourcing in India, and with the Actos in 2012 or early after, are you not going to do the (inaudible) in your company, or are you trying to outsourcing in the Indian facilities in order to continue the business?

About the utilisations of the India, as Hasegawa mentioned that the R&D and manufacturing and IT are where they would like to capitalise the capability in India.

In terms of manufacturing, well the quality is very important in the compounds in pharmaceutical products we are creating.

So we would like to consider about the API purchasing, and then to do the phase in with early production.

However we not planning to have the production of the Actos, and also that the capability of the [CRO] is increasing, and as you know the IT can be provided by the country in at a low cost.

So I'm sure that that will become a very important (inaudible) for the manufacturing of the compounds, not yet.

So the Actos business is to be continued?

Like in the (inaudible) of 2012 or December, the Actos generics or the Actos plus generics will come in.

What are you going to do with your business, are you going to continue on the business of Actos?

Yes.

--have an authorised generic strategy, and to advance that, it's not yet -- the partner is not yet determined, or the actual manufacturing is not yet determined, but it is our plan to have an authorised generic strategy, post the patent expiry.

Thank you very much for the questions.

It's Sakai from Credit Suisse about the Millennium by Takeda.

It's been two years after the acquisition of Millennium by Takeda.

And thank you very much for introducing the oncology pipeline, but the -- about Mr Hasegawa, do you think you were able to see some value from the Millennium products that you have registered?

And also that there are many projects that are in the phase I, even though the pipeline has become enriched.

So do you have any strategies to accelerate that?

And also I think you have to narrow down the candidates?

So what is the strategy of the oncology that you said that you would like to (inaudible) by 2020?

What is your strategy?

Maybe afterwards Dr Dunsire will be able to follow me up.

So that whether the acquisition of the Millennium was worthwhile the invested capital.

Well we have been doing the assessment of the corporate value in-house and so far we think that we were able to see the good value that is equivalent to the investment.

And also as I mentioned that we were able to acquire the many intangible assets.

But excluding the intangible assets at the present moment, I think investment was worthwhile.

Thank you for the question.

I do agree with you that pipeline is early, and so our strategy right now is to grow the revenue through accelerating Velcade, bringing in new indications, and then look what's in the pipeline for areas where we can accelerate highly differentiated products to bring them to market early.

The next phase III, as Dr Ohkawa pointed out, will be TAK-700, which is the [1720] lyase inhibitor in prostate cancer.

So we're looking for strategies to both accelerate that and close the gap to the front runner, abiraterone, which is somewhat ahead in development.

In the early pipeline, we're being very rigorous about setting go/no-go criteria, and really requiring that the product demonstrate an ability to be commercially successful and reimbursed around the globe.

So in early trials we're trying to select the winners, and really setting very high hurdles, so we do anticipate over time that the -- we will thin out that early pipeline to really be able to focus our resource behind highly differentiated products.

We also have an external growth strategy where we are looking at expanding the portfolio with somewhat later stage molecules, and you saw us last year bring in Mepact through the acquisition of IDM Pharma.

It's a small product, but was approved in Europe and is launched already.

You also saw us partner with Seattle Genetics on SGN-35, highly differentiated antibody drug conjugate for Hodgkin's disease, which has pretty extraordinary phase II data.

And we look at the possibility of a pivotal phase II approval in relapsed Hodgkin's lymphoma, coming in 2012.

So those are the types of actions we're taking to fill that gap in the late stage pipeline, while we very rigorously set high hurdles for the early stage pipeline.

Also I would like to make some addition.

Not only the oncology, but we are very much putting priority on the quality.

So from the speed and from the quantity we also would like to have a very good quality, whether it has a competitive edge or not, or whether it really is the compound that will be very much needed at the frontline of the clinical setting is how we would like to evaluate.

So as for the clinical project, we are going to the prioritisations by the pipeline review committee, and the pipeline review committee is strictly doing the prioritisations.

And not only the R&D, but from the aspect of the marketing for the from the strategy -- launching strategy, we are evaluating it.

And if we think that we will be able to move the compound into the later stage, then we will allocate some resources.

So if -- each project is either all or nothing, so I think on the -- rather than number, but the quality is more important than the number.

Thank you for the questions.

Thank you very much for your questions.

We have received lots of questions, and there are questions which we cannot fully answer your questions.

We would like to discuss with the product strategy and will you please enquire us later so that we can give you the final answer to you.

Thank you very much for your participation and cooperation today, and I would like to have your kind support in the future as well.

Thank you.

Statements in English on this transcript were spoken by an interpreter present on the live call.

The interpreter was provided by the Company sponsoring this Event.