Takeda Pharmaceutical Co Ltd (TAK) 2011 Q4 法說會逐字稿

(Interpreted). Thank you very much for your waiting and I thank you very much for participating in this presentation of fiscal year 2010 financial results and the explanation of '11 to '13 MRP.

I am Ohtsuki from Corporate Communications. I would like to introduce the participants today, Mr. Hasegawa, President and CEO; Mr. Ohkawa, Director and Chief Scientific Officer; Mr. Frank Morich, Executive Vice President International Operations; Americas and Europe and Mr. Iwasaki Senior Vice President of Strategic Product Planning department; Mr. Hirate, Senior Vice President International Operations in Asia; Mr. Takahara, Senior Vice President Finance and Accounting Department; Mr. Inoue, Senior Vice President Corporate Strategy and Planning department; Ms. Deborah Dunsire, President and CEO of Millennium.

First of all, I would like to ask Mr. Hasegawa to give us a talk on '11 to '13 Mid-Range Plan.

(Interpreted). I would like to briefly introduce the 2011 to 2013 Mid-Range Plan and review the plan. Next slide please. Takeda Pharmaceutical Company Limited will implement fundamental strategies of innovation, culture and growth to restore financial performance in fiscal 2015 to fiscal 2010 levels and seek sustainable growth thereafter, as published when we shifted the MRP to '11 to '13.

We have three fundamental strategies of innovation, culture and growth, and this is reflected in this new, renewed MRP. Today I would like to explain the following three points.

First, we will challenge the creation of innovative drugs, which is the Company's mission, through intensive R&D investment in core therapeutic areas. We have to utilize the new research laboratories to the fullest extent. And we have to utilize the internal and external resources to the maximum so that we can improve the efficiency of research and development.

Second, we will shift the focus from a mature, blockbuster products portfolio to a line-up of a wide variety of new products because some of the blockbusters will experience expiration of the patent. It is difficult to have another blockbuster in the future, so we have to have a variety of new products sold effectively and efficiently.

Third, we will promote globalization by strengthening sales and marketing bases, particularly in newly entered markets and emerging countries, in addition to three core markets, Japan, the US and Europe. In this industry, the growth of pharmaceutical business -- more than 50% of the growth of pharmaceutical business is found in new-entered markets and emerging countries. So we have to catch up with growth in market size. We have to win the potentials and tap the potentials from these markets and countries.

Next slide please.

When Takeda announced the '10 to '12 MRP May 2010, I explained that the Company would position the years as a transition period to move forward from past successes and grow into a new Takeda, and to restore financial performance in fiscal '15 to fiscal 2010 levels, and seek sustainable growth of around 10% thereafter under a new management policy. This was the vision we had. '11 to '13 MRP is announced today and we haven't changed our goal at all. Takeda has maintained the same targets in the '11 to '13 MRPs announced today. The Company will continue to implement its fundamental strategies based on its management policy.

Now I would like to explain about the progress of efforts and results in fiscal 2010, the initial year of the previous MRPs. Regarding the financial performance Takeda had the financial targets that's shown here.

Now next I would like to talk about the progressive fundamental strategies. Under the theme of innovation, Takeda established the Shonan Research Center, a hub for global R&D, and actively promotes joint research, primarily in the CNS area. In addition, the Company introduced potential pipeline projects that are expected to contribute to future growth.

Under the theme of culture, the Company strived to promote open and candid communication to overcome organizational and national silos and advance cooperative culture. Under [the head] we have announced two foreign members in our Board of Directors so that we can globalize the management structures.

Under the theme of growth, the Company shifted from a portfolio of mature, blockbuster products to a diverse line-up of products, launched new products in Japan, and streamlined its sales and marketing structures, and expanded sales of new products such as Uloric and Dexilant in the US. And we have to restructure the sales forces. Uloric and Dexilant and Edarbi are new products which we would focus in our sales activities in the US. For Japan I will describe it later, but we have new products launched last year, and we have to try to promote penetration into the market.

I would like now to talk about the '11 to '13 Mid-Range Plan. And here is Takeda's financial forecast. The Company projects that its business performance will continue to deteriorate 'til 2013 due to effects of the entry of generic drugs for Actos. However, Takeda will try to minimize the decline of the business through sales promotion of existing drugs and penetration of new products. So 2013 will be the bottom of our business in the near future. And this year, as promised, we would roll out three-year MRPs, each year, and I can show you the figures for 2013.

Under its basic policy of return to stockholders, Takeda will maintain its dividend payment at the current level of JPY180 per share, which would cost JPY140b. And I believe that this is the amount we can earn in our cash flow. And we would continue this level of JPY180 per share 'til fiscal 2013.

Next I want to brief you on Takeda master focus on therapeutic areas where higher growth is expected due to the existence of unmet medical needs. The Company will challenge innovation with the creation of innovative drugs and transformation of current treatment paradigm and creating game-changer that contributes to the prevention and fundamental treatment of diseases.

Takeda will prioritize the investigation of RA and ulcerative colitis by allocating management resources to immunology and inflammatory diseases, in addition to existing core therapeutic areas such as metabolic diseases, diabetes and obesity, oncology and central nervous system diseases. The Company will also study the development of an oncology program for deepening the specialization.

And we'd like to also explore the possible application of the same compounds in different therapeutic areas together with Millennium. There's still a high bar for winning approval of obesity drugs. However obesity is not only a main cause of lifestyle-related diseases, but also is a therapeutic area where medical needs remain largely unmet due to the lack of drugs that achieve effective and sustainable weight loss benefits and have definite safety profiles. For these reasons Takeda will continue to focus on the obesity area to prevent diseases. But we have learned lessons from our past failures, so therefore we would like to take somewhat different approaches. If you are [interesting], Dr. Ohkawa will be able to answer to your questions in Q&A sessions later.

Regarding the late-stage development compounds, talking about the expected launches in each area, the slide describes each one of the items. The Company established the Management and Operations Committee, a decision-making body, to deliberate on important managerial matters.

And we also have the Management and Operations Committee Three of R&D. And the current advisor, Dr. Tachi Yamada became the Chairman of the MOC3, who was installed in March. And, as is announced today, in June Dr. Yamada will also be installed as a Director of Takeda. Takeda will use his knowledge and capabilities to make promotion of the proof of concept development model, so that the Company can prioritize the pipeline projects appropriately and ensure approval of late-stage development compounds can be obtained.

Those are the pipelines to be launched later on. And if you have any questions, we'd like to make supplemental explanations later on.

This slide shows the high potential pipeline projects underway. And Takeda continues to recognize the improvement of R&D productivity as its highest priority task. Compared with industry standard, our R&D expense ratio to sales is high. It is about JPY300b annual investment into R&D. And of course you may say that the other industrial trend that we should make the contribution back to the shareholders, but for us we need to continue launching new products based upon our R&D activities. Otherwise we won't be able to expect our future.

But if we just stick to the in-house compounds it will not be so greatly successful either. Therefore, so to speak, open innovations or research alliances are also promoted. And about 10% of the budget has been utilized for alliance. And in the near future we would like to allocate around 25% of these expenses.

And in February, Shonan Research Center celebrated its opening. And with this we will start up the new system and drug discovery unit which takes charge of each therapeutic area with 100, 150 researchers. We will establish each unit for the core therapeutic areas. And the people, goods and the capital, or external resources, will be put into those units, and give full authority to these units so that they will be able to smoothly go forward with our R&D activities. And also we will make use of external resources if in-house resources doesn't work well, so that we will be able to make a complete results of R&D.

Talking about the culture, Takeda needs to foster human resources and a corporate culture, with a spirit of challenging innovation, in order to promote the innovation that I mentioned before. However it is difficult to realize it. Therefore the Company has been implementing many measures. Dr. Paul Chapman became the Director of the Research, and a new Executive Committee was formed. And all the key executives have discussions all the time and make decisions. And those decisions will penetrate in the whole organization promptly. We need to probably wait for some time so as to see the results, but I feel already that the improvement has been achieved.

Next I'd like to talk about growth. Takeda will shift from a portfolio of mature, large-scale products to a line-up of diverse products. And in sales and development, costs went up or sales force efficiency was concerned to drop down. Those are challenging factors. On the other hand, because of patent expiration of blockbusters, there is a patent risk that we will be facing with. But that risk will be minimized. And therefore, in that sense, I think the industry itself has been facing risk, the major, change in time of the innovations. Therefore we would like to pursue this model so that we will be able to achieve the sustainable growth and profitability.

And another point is that, in order for us to maintain sustainable growth in the medium and long term, we need to continue making investments in R&D. And for the future growth, we need to also in-license the pipeline compounds and the platform technologies.

As for the criteria for pursuing M&As, we need to acquire innovative products, pipeline projects in core therapeutic areas. We need to enhance global sales and marketing base, including emerging countries. And we screen all those candidates and continue challenging to achieve those activities. Although we couldn't [arrive them] in many numbers, but we will continue to pursue those opportunities in the future.

And we have done this already so far, but not only R&D, but also innovative finance for our M&A activities. We need to make operations slim and lean, so that we'll be able to make necessary investment into R&D and M&A activities.

Next I'd like to talk about sales strategy in major regions. In Japan Takeda aims to promptly boost Nesina's sales and diabetes franchise as a whole to JPY100b, by taking advantage of approval of long-term prescriptions of the drug. The Company also plans to strengthen new therapeutic areas such as oncology, CNS and immunology by launching new products.

We already launched in-licensed products in oncology, CNS. And also we have some to be developed furthermore. And after Enbrel, JAK-3 from Pfizer, it's (inaudible) and launched in Japan. So with these products, although this is a new area for us, we would like to explore this new area so that we will be able to establish our presence.

And the ethical drug sales in Japan, among the total sales we would have 45% of total domestic ethical sales coming from new products. And, at the same time, the Company will promote changes in the product line-up and secure the number one position in the domestic market.

TPNA in the United States started sales promotion of Edarbi from April 2011 in addition to Uloric and Dexilant. TPNA reduced the number of employees from 5,000 to 3,600 in 2010. Taking this opportunity, TPNA will improve the efficiency of sales promotion and penetrate these new products into the market.

Millennium will work harder to promote Velcade as the first line treatment for multiple myeloma and introduce subcutaneous injectible formulation with excellent safety profile into the market to boost the growth of Velcade. After the approval is obtained, we would further our efforts so that we can contribute -- it can contribute to the Millennium growth.

And I would like to talk about the Chinese market. I think it is an urgent and important issue for Takeda to increase their presence in mid-term and long-term perspectives because China has more than 50% of the market in Asia, and there is 20% growth of the market in China. So China is really a rapidly expanding market. We shouldn't be behind other competitors.

We feel that we are behind the competitors, but in order to catch up with the others, [Ms. Takira] at corporate office, who joined our Company last year, developed reconstruction [plans] for our activities in China. And we would make proactive investment of business resources under a new operational structure, and the Company will expand its current sales of around JPY3b to tenfold or more. I think it is feasible.

And according -- and we have to increase the number of medical representatives from 250 to 900 in fiscal 2015. So the national sales meeting in China was held in the middle of April which was the first in our history.

Concerning the emerging markets, since 2008 Takeda has newly entered into 13 areas and countries. From this fiscal year the Company will accelerate further globalization by properly advancing into new regions and increasing global commercial coverage up to 90% in 2012. And simultaneously we will expand business performance in newly-penetrated and fast-growing emerging countries. And I hope that this would help us globalize top line and bottom line.

Our management team is determined to make concerted efforts to implement the fundamental strategies of innovation, culture and growth to achieve sustainable growth from fiscal 2015. And we are sure that we can go back to the level of 2010 in the fiscal 2015.

I'm sorry to be rude, but I would like to have your candid opinions. This is an IR meeting and I am making this presentation, and Mr. Takahara will talk about the financial presentation and Dr. Ohkawa to give scientific presentations. Is it a good way to make a presentation, or is it better for me to be very brief in making some greetings and we have longer Q&A sessions, because you are important clients, and if you want to listen to me, I'm happy to talk. But some of you may say that no, we don't want to have a duplication. We would like to have more time for Q&A. So I would like to ask you to vote. With A, do you prefer A? So we'll continue. Okay. We will continue this formal presentation in the future as well. Yes, we would like to have this presentation in the future.

(Interpreted). I would like to invite Mr. Takahara, Corporate Officer and Senior Vice President of Finance and Accounting department, to give us a talk on fiscal year 2010 consolidated financial results and '11 to '13 MRP.

(Interpreted). I'm Takahara. I would like to present the consolidated financial results of fiscal 2010 and the financial forecast under the '11 to '13 MRPs.

First I would like to give you a summary of the consolidated financial results for fiscal 2010. Net sales decreased by JPY46.6m, or 3.2% from the previous fiscal year to JPY1,419.4b. This decrease included the negative impact of the yen's depreciation of JPY60.7b. Excluding this factor, net sales increased by JPY14.1b.

Operating income fell by JPY53.1b or 12.6% from the previous year to JPY367.1b. Although Takeda reduced SG&A expenses and R&D expenses, the Company was not able to absorb the decrease in gross profit of JPY79.1b, resulting from the decrease in net sales and in profit margin by 2.9 points. Ordinary income and net income also decreased as shown in the table.

Then I would like to explain the breakdown of sales by business segment. Sales of ethical drugs in Japan increased by JPY29.6m, or 5.4% from the previous fiscal year, mainly resulted from the contribution from eight new products and merchandises. In the meantime sales of ethical drugs in overseas market decreased by JPY79.9b from the previous fiscal year, due to the negative impact of the yen's appreciation of JPY60.1b, and a decline in sales of Lansoprazole in the United States. However, in addition to sales growth of Pioglitazone and Velcade, Takeda saw sales of Dexilant and Uloric, which marked second year since their launches, grow sharply.

Slides four to eight show sales of ethical drugs by region, the results of major product sales, the breakdown of increases and decreases in operating income and net income, and the summary of consolidated cash flow. Please have a look at these slides.

And next please look at slide nine. I would like to explain the consolidated financial results for fiscal 2010 by comparison with the fiscal -- financial forecasts. As shown in the right column of the table, net sales and income exceeded the latest forecasts announced on February 2011. The area shaded in grey shows the comparison of actual results with forecasts in the '10 to '12 Mid-Range Plan announced in May 2010.

Net sales exceeded the original forecast by JPY19.4b because the Company absorbed the negative impact of the yen's appreciation, JPY42b, due to the contribution of new products and an increase in sales of major products.

Regarding income, the Company absorbed the negative impact of currency exchange. Operating income and net income exceeded the original forecast by JPY37.1b and JPY27.9b respectively.

Going to the next slide, I would like to explain the financial forecasts under the '11 to '13 MRP announced today. First regarding the financial forecast for fiscal 2011. The forecast was formulated based on assumed foreign exchange rate of JPY85 to the US dollar and JPY120 to the euro. Compared to the actual rates of fiscal '10, the US dollar will appreciate by JPY1, but the euro will depreciate by JPY7 on the other hand. Thus the Company assumes the effect of the currency exchange is to be limited against fiscal 2010.

At the bottom, the sensitivity of the fluctuation of currency exchange is shown. Currently the rate is JPY81 for the US dollar and JPY116 to the euro. So if you want to make a correction please do so accordingly.

So in FY '11 Takeda forecast net sales will increase to JPY1,450b, up 2.2% from fiscal '10 due to the steady sales of Actos in the United States and the growth of new products in Japan and the US.

Regarding expenses, although R&D expenses will increase, the Company estimates that the total expenses will remain almost the same as the previous year due to the full-year effect of the restructuring carried out in the US in fiscal 2010.

As a result, operating income will grow to JPY390b, up 6.2% from fiscal 2010 due to the increase in gross profit, up 2.2%, resulting from increased sales.

Please look at the next slide. I would like to explain the change in fiscal -- financial forecast during the 2010 to '13 Mid-Range Plan. Takeda expects net sales to decrease until fiscal 2013 due to the negative effect of the launch of the generic versions of Actos in the United States in August 2012, despite the growth of new products. The Company also estimates income to decline until fiscal 2013. This is because, in addition to a decrease in net sales, the cost to sales ratio will rise by around 5% due to an increase in the proportion of in-licensed products and merchandises. And the Company will actively invest in R&D to enhance competitive pipelines.

Takeda will improve their profitability through further implementation of selection and concentration, including a hold down of selling, general and administrative expenses. For example, Takeda will concentrate resource in core therapeutic area for their aim to improve R&D productivity. We will also put investments into sales promotion in products and regions which emphasize profitability.

Please look at the next slide. Here are comparisons between numerical targets in the '10 to '12 MRP and those in the '11 to '13 Mid-Range Plan. As I have already explained, financial results, both net sales and income for fiscal '10, exceeded the forecasts. The Company also expects the financial results for fiscal 2011 to exceed the forecasts, both net sales and income in '10 to '12 MRP, because through the sales of Actos in the United States and the growth of new products will absorb the negative effects of foreign currency exchange.

In the meantime, despite the growth of new products, Takeda has revised downward their forecasts for net sales and operating income in fiscal '12 due to the revision of the assumed foreign exchange rate which generates a significant negative effect on financial performance.

In the '10 to '12 MRP Takeda recorded the government subsidy for the commercialization of the influenza vaccine business in operating income. But the Company had posted it in non-operating income in the '11 to '13 MRP because the accounting method is fixed. After excluding this factor, operating income for fiscal '12 exceeds that in '10 to '12 MRP.

And also in the slide, the COGS and expenses total is shown. But the expense will be reduced which assumes the COGS are up. Therefore about JPY30b will be compressed.

Please turn over to the next slide. For the financial recovery to the level of fiscal '10 in the fiscal 2015, and subsequent years having the sustained growth thereafter, Takeda's earnings structure will change, as shown in this slide. There are two parts. If you look at the upper chart, in the financial results of fiscal '10, two-thirds of net sales came from the existing four major products. Sales of new products only accounted for around 5%. The Company will strive to raise the percentage of new products to around 40% of net sales in fiscal 2015.

Next if we look at the lower chart, Takeda will strengthen its sales and marketing bases in both emerging countries and newly-penetrated markets where the high growth potential are expected. The Company estimates the contribution of these countries will rise sharply in fiscal '15. Net sales in emerging countries and the newly penetrated markets are projected to reach 850 and 1,800 respectively against the fiscal '10 base of 100. Please note that net sales of new products are projected based on the probability of success, and net sales in newly-penetrated market include all [the sales] in countries the Company has sales and marketing bases presently.

Please look at the next slide. In addition to changes in product mix and commercial advancement of globalization, Takeda will steadily implement the fundamental strategies in '11 to '13 MRP, as shown on this slide. The Company is determined to bring itself back to the path of sustainable growth from fiscal '13, the year in which the Company's financial performance is expected to hit the bottom, and the restored financial performance in fiscal '15 to the level marked in fiscal '10.

Thank you for your kind attention.

(Interpreted). Next I'd like to invite Dr. Ohkawa, Chief Scientific Officer to give us a presentation of R&D activities.

(Interpreted). Thank you for introduction and thank you all for allowing me to discuss our R&D activities.

Takeda is committed to focusing in targeted therapeutic areas, CNS, oncology, metabolic and the cardiovascular and immunology and inflammation. We have a strong concentration in the metabolic space with the global products and development compounds, looking at diabetes and obesity. Part of this is continuing to strive to be a leader in the global diabetes marketplace through both internal research and external research development opportunities, both using our grounded expertise and with an eye on the horizon to provide new treatment option even in the prevention space, for example, combination therapy with anti-diabetic agents and the TAK-491, (inaudible) the anti-hypertension agent.

Further our oncology pipeline is positioned for growth. As the critical therapeutic area, Takeda is focusing in our collaboration between Millennium and TPC research in order to make this a strong -- even stronger reality.

In the CNS space we are working to establish this as an enriched therapeutic area by developing internal assets, in-licensing compounds, and joining in with external organizations and resources. And we are looking to explore further opportunities in the immunology, inflammatory space by investigating synergies with our oncology development.

I would like to introduce the expected schedule of approval of late-stage development compounds as Mr. Hasegawa introduced. As you can see, there is a significant progress among numerous late-stage development compounds. I would like to spend a bit of time discussing our development pipeline.

First, regarding our in-house development pipelines, the US FDA approved TAK-491, Edarbi for the treatment of hypertension in February. And in Japan we submitted a new drug application to the Ministry of Health, Labor and Welfare for TAK-536 for the treatment of hypertension in March. Further, as you can see, in Asian countries we've filed NDAs of various development compounds to each regulatory authority.

Second, regarding the lifecycle management, we submitted NDA for the fixed-dose combination of TAK-491 and chlorthalidone in the US in February. As for Velcade as a treatment for multiple myeloma, FNDA for follicular lymphoma and subcutaneous formulation was submitted in February and March respectively.

Regarding the in-licensed pipelines, we entered into an agreement for the joint development and the commercialization of Lurasidone anti-psychotic agent in the EU in March. And the Phase III clinical trial of anti-cancer agent, AMG-479 was started in Japan.

Further, although it's not described in this slide, we signed a co-promotion agreement with Pfizer for Tofacitinib, a treatment for rheumatoid arthritis in Japan in February.

Now please allow me to brief you on our recent R&D topics. Takeda achieved the most critical milestones in the CNS area last year. And we're continuing to advance our pipeline as we focus on the development of products for the treatment of Alzheimer's disease. Takeda also places great emphasis on establishing critical partnerships and alliances to further advance and grow our CNS capabilities.

Regarding LuAA21004 for the treatment of major depressive disorders and generalized anxiety, based on positive outcomes of the clinical trials, we are looking to submit a new drug application for this compound in 2012.

And Lurasidone, in-licensed product, is in Phase III clinical trials in the EU market. And further we have launched Rozerem in Japan and in-licensed Reminyl for Japan market.

And Takeda in-licensed from Zinfandel Pharmaceuticals TOMM40 assay as a biomarker for the risk of Alzheimer's disease. The TOMM40 biomarker has been developed to identify individuals at high risk of developing Alzheimer's disease within the timeframe of five years. Takeda will use the assay to identify high-risk older adults who would be candidates for clinical trials with Pioglitazone to evaluate its utility. This is an exciting partnership in identifying treatment to help delay the progression or potentially prevent the onset of Alzheimer's disease in an effort to reduce the burden of this disease. Additionally, Takeda recently signed an agreement with Heptares Therapeutic.

Next, I'd like to talk about the topics of the pipeline. A recent success in our cardiovascular therapeutic area was the FDA approval of Edarbi for the treatment of hypertension in adults in February. In keeping with Takeda's commitment to clinical research and development, the NDA submission was supported by seven clinical trials involving more than 5,900 patients with hypertension. Edarbi was shown to be statistically superior to the highest approved doses of commonly prescribed olmesartan medoxomil and valsartan in lowering both clinic and 24 hour mean blood pressure measurements.

Moreover, adverse reactions reported by patients taking Edarbi in clinical trials was similar to those reported by those taking a placebo.

We are excited to be able to bring this important new treatment option to market and we are pleased to build up on our Group expertise in the cardiovascular therapeutic area with the approval of Edarbi in the US. Especially with regard to the FDA approval of the fixed dose combination of Edarbi and chlorthalidone expected late this fiscal year.

Next, let me show you the oncology pipeline. First, is AMG749 which was discovered by and in-licensed from Amgen. It has recently entered into Phase III. AMG479 is a first-in-class human monoclonal antibody against insulin-like growth factor 1 receptor or IGF-1R and now is being developed by Takeda Bio in Japan.

Binding of IGF1 to its receptor, it stimulates cell survival and proliferation pathways. AMG479 binds to IGF-1R and thus shows anti-tumor activities.

The Phase III study is being conducted by Amgen globally and based on the positive results of Phase II study abroad, Takeda Bio has initiated the Japanese portion of the Gamma study and will lead the molecule development in Japan. We expect that AMG479 will provide a novel mechanism of action to the metastatic pancreatic cancer whose treatment options is extremely limited.

The final product introduction is an inflammatory disease pipeline. It is not an R&D pipeline, but let me show you Tofacitinib for the treatment of rheumatoid arthritis for which Takeda and Pfizer signed a co-promotion agreement in Japan in February 2011. This drug is a novel, oral Janus kinase inhibitor that is being investigated as targeted immunomodulator in RA and other indications.

Unlike current therapies for RA, it has a novel MOA and reduces RA inflammation by inhibiting JAK kinase which is related to autoimmune diseases such as RA. It is also being studied in psoriasis, Crohn's disease and ulcerative colitis in other countries.

The market introduction of biologics has led to a dramatic improvement in the treatment of rheumatoid arthritis. However, all currently available biologics are administered through injections. Tofacitnib is orally administered, and therefore if it can demonstrate robust efficacy, the drug if approved has the potential to fulfill significant unmet medical needs. Through this agreement, we will further enhance our franchise in RA which has been strengthened by Enbrel as well as contributing to the treatment of RA through Tofacitinib and Enbrel.

Finally, I would like to highlight Shonan Research Center located between the cities of Fujisawa and Kamakura. This new research center is positioned as a core part of Takeda's global research structure. This new research center also functions as a cutting edge center which will lead high quality research focusing in Takeda's core TAs. To achieve this, effective April 2011, Takeda's research organizations where re-aligned in an effort to focus on these TAs.

Drug discovery units were also put into place, which were empowered with responsibility and authority of each TA. DDU consists of four units, each of which is composed of researchers as well as staff to design clear strategy and support each project. The advantages of DDU are to increase efficiency and agility in research activity, empower DDU leaders for budget and resource management, accelerate stage decision making, maximize portfolio through internal and external opportunities and another advantage is to integrate oncology DDU with Millennium Group.

And DDU leader is [John Warren] the leader -- CEO of Millennium. We believe this structure will enable more flexible research activities in each therapeutic area than in the past. Also as we look to drive open innovation, we will have external resources that will support our efforts.

First, we would use the incubation laboratory to facilitate scientific exchanges and foster an environment of collaboration in an effort to drive with the most critical research and information. Takeda will then enhance research collaboration with outside research institutes as we look to enrich our clinical programs.

That's all from me. Thank you very much for your kind attention.

(Interpreted). We have a Q&A session now. (Operator Instructions).

(Interpreted). Now we would like to start the Q&A session until 6 o'clock. The audience in the room and also the audience over the phone are encouraged to ask questions. If you have any questions please raise your hand if you are in the audience in this room and please identify yourself with your organization name and individual name.

(Interpreted). I am Yamaguchi from Citigroup. Thank you for today. My first question is about your MRP, the future prospect of MRP. You make a commitment for three years and you rotate the plan. So this year you announced for this and this fiscal will be the bottom and then you are saying that you will make a recovery afterwards.

But as a result of a reasonable calculation if you can announce this. After one year, how much will be the recovery that you will be able to make? Because depending on the timing of Actos I think there is a possibility that you may also experience a drop in your sales.

(Interpreted). You are looking at me right. We don't have such numbers that we can announce today. But what I can say is that as Mr. Takahara explained to you, in fiscal '15, 40% of the total sales will be from new products. And the key driving are Uloric, Edarbi and Dexilant and the 536 that we filed the submission. And -- so those will be the major products as well as Hematide whose sales is expected to be larger and SYR-332. Nesina, the last year sales was JPY1.7b, but it will be almost JPY100b in fiscal '15 and Edarbi 491 combinations that will also be around JPY100b sales too. So these are the examples I think I can give you today.

(Interpreted). I have the second question. You were talking about Edarbi and Edarbi in the US is the question of mine to Ohkawa-san, Dr. Ohkawa. I understand Edarbi is a good product but we have generics and we have already the other competitors. So have you ever established a message so that you can increase the market share of Edarbi? This is a question to Morich.

Sorry for having to answer in English, but I think Dr. Ohkawa showed the key data we have very nicely established clear superiority to the patented -- still patented leading competitors in the market. I think it's fair to say that what our R&D organization achieved there after a ten-month review from the FDA is probably one of the best labeling, if not the best labelings that you can get for an anti-hypertensive.

There is the efficacy message and Dr. Ohkawa already mentioned we have a confirmed safety profile from the FDA which is outstanding. And on top of that, probably by the end of the year, we will have a very unique combination between an ARB and a widely undervalued diuretic which is probably the best long-acting diuretic available in the world. That gives us a unique opportunity to bring out the message of a best in class and the combination of two best in class. And this is the strategy that we will be vigorously pursuing in the US.

I have another question. Since you joined the Company, I think it's like three years has passed, and Takeda's long-term goal is to become a top three in oncology in the long future. Are you guys on track do you think?

I think that as you said this is an aspirational goal and a vision for the future. And we've seen strong growth in Velcade. We've seen the launch of Vectibix in Japan which has been extraordinary. Within a period, a short period of months, the [PMD] organization has become leading in market share. It has the best label of Vectibix in the world in fact. So that will be a strong growth asset.

We're seeing development in the pipeline that gives us great enthusiasm that some of the molecules that are now moving into Phase II will yield results in both hematologic and solid tumors. We've started the Phase III trials with TAK-700, which we anticipate will be a very strong global performer in prostate cancer. So all told -- we've also licensed in actually SGN-35 for the ex-US markets from Seattle Genetics, and we're anticipating that submission in the middle of this year, or middle of the calendar year. So there's a lot of forward movement and momentum in the pipeline.

Having said that, it will take time for those products to mature. So I'd say we're on a good track but we do have a ways to go.

Can I just add, don't forget Lupron, which is also part of our anti-cancer franchise, which is still going strong, particularly in Europe.

(Interpreted). The person in the first line please

(Interpreted). Masuzoe from Deutsche Securities. On the oncology field, my question is related to oncology field -- Astellas, Takeda, Daiichi Sankyo, Eisai all are concentrated on oncology. Pfizer, Merck they are also working on oncology in the field of oncology. Academia are also active in oncology field. Why don't you start the Team Japan oncology R&D team with Japanese academia and Japanese other pharmaceutical companies? This might be more effective and efficient and it would be good for the cancer patients and the children cancer patients. Is it possible that you can have a Japan team for oncology research?

(Interpreted). In the field of business everything is possible. It is an interesting topic. And as Masuzoe-san stated, our ultimate customers are patients. And when we think of the patients, of course this kind of alliance is the most ideal to achieve our goals. This might be the most efficient and effective way. So it might be possible to start this kind of initiative.

(Interpreted). Next I think that you have identified areas regarding the M&As and looking at your free cash flow, JPY180 dividend will be paid. Then right now about JPY1 trillion cash is on hand. Are you going to use more from this cash or even making some borrows? Would you consider to conduct further M&As or you'd like to keep probably JPY500b on your hand and use the other half for M&As? What is your idea?

(Interpreted). It depends on the target but according to Mr. Takahara, JPY1 trillion financing can be done quickly. Therefore I think that could be in the range of our target.

(Interpreted). So I expect your good announcement early in the future. Thank you.

(Interpreted). Any other questions? Yes, please, the person in the front row.

(Interpreted). I have two questions. Sakai from Credit Suisse. The nuclear power plant accident and FDA's response is my question. I looked at the website of FDA but it is very vague and their work isn't -- about the foods than pharmaceutical products. Do you think FDA would have further restrictions on the Japanese pharmaceutical products or are they going to introduce new rules? Are there any moves like this?

We cannot see anything what is happening in the US. In the case of Takeda you have greater exposure in the US. So if you have any knowledge please share it with us.

(Interpreted). There are some countries and some areas, one of them is the EU and China. And we have already announced our strategies and measures at [JP&A] and we have also negotiated with the Ministry of Health, Labor and Welfare. If it is requested we would do the radiation examinations and we would put the label that it is not radiated.

Concerning the FDA, Morich will comment it later but we haven't seen any movement at the FDA at this moment. According to Mr. John Roos, Ambassador to Japan, he stated approximately two weeks ago in the current discussion that there is no such move at the site of FDA. Are there any comments from Morich?

For the patients in general, are they concerned about any Japanese product? We surveyed 100 doctors in Europe and the US and the professionals seems to be okay. But I'm just wondering any negative public opinion is [some how] ongoing in the United States right now.

We have not heard anything from our field force or anything that there are concerns out in the market. I think the general perception from where I spend most of my time is that this issue has -- because of other things that have happened has significantly calmed down.

(Interpreted). Another question is the Actos litigation issues in Japan. You are trying to introduce new products and whether or not such a case works better or worse for you, I wonder. Now with SU combination I think it's approved under metformin. Am I correct that it's reported to be ineffective? Therefore generics approval is somewhat not fully balanced. And you are claiming that for one year. Could you give us your comments on this issue?

(Interpreted). Generally speaking, as we do such activities in the US we negotiated with all the [generic] companies in the US and we settled. But in Japan the patents definitely have the full coverage and really the authority are not necessarily positioned to protect the innovation. Therefore when each case arises, then I think we have to handle on each individual basis. That is my comment and maybe Mr. Iwasaki has some follow up comment.

(Interpreted). In the case of Japan, some prior or preliminary consultation is the system to prevent any confusions in the market. And currently we are engaged in these preliminary consultations with the generic manufacturers. Regarding (inaudible) one judgment was given to admit the patent of the one with Alpha-GI. But this does not apply for all the cases. Therefore this is one case and that is how I would like to see you the situation. So therefore we have this preliminary discussion, it's underway now.

And you mentioned some specific topics of our discussions but regarding those discussion contents, because it affects to the progress or process of our negotiation, therefore I cannot disclose you the details. But please understand that we are now having a discussion with them.

But I think that the MHLW may be able to make [good the amount]. I am sure that this (inaudible) is, concomitant use is covered by our patent. We are confident. But rather than go into more specifics in this discussions today, in order to prevent confusion we are now having discussions with the counterparts.

(Interpreted). Okay, thank you.

(Interpreted). Yes, the person sitting at the back please.

(Interpreted). [Mrs. Mikocho, Kaizo] Asset Management. In the emerging market, you want to increase the sales in emerging markets. And how much contribution to the operating income -- do you think that you can enjoy the operating income from the first year, or do we have to take care of as (inaudible).

(inaudible) Asia, Russia, South America, there are wider areas as emerging markets. And China is one of the big components and we will have mid-term investment of JPY20b to JPY30b in China. And even in Asia, in the Asian region, in the profit we are enjoying we are trying to come up -- we are trying to find the resources for investment in China. We would make an advanced or proactive investment and we will spend 36 months so three years and we would increase the sales force of 200 to 900. We will have 900 MR or 1,000 including the mid management there. And as a return we are sure that we would increase our sales and so the breakeven point is in the short near future.

(Interpreted). If I make a supplement, in the handout you say that you will launch a global strategic product. And is this a special line-up for -- dedicated to Chinese market or you may bring out some from Japan to those areas?

(Interpreted). Globally both in oncology and in non-oncology areas, not only in China, but so far we have focused on Japan and to the US. But we would like to make a shift to emerging markets including China. And we have been accelerating such a shift. For new chemical entities including new emerging markets we would like to make a global development and we would like to bring those developed products into those markets.

But still we have some existing legacy compounds and in order to make a catch-up we need to make some clinical trials as well. So we will make the maximum use of what we have as an asset for us.

(Interpreted). Second question, the obesity drug. Mr. Hasegawa said that we can ask questions during Q&A. And what would be the future activities? For CNS and oncology you would do further R&D to find a new breakthrough or you are trying to utilize what you have? So what is the level of commitment for obesity drugs?

(Interpreted). I will answer this question. We would -- definitely would like to launch a product for obesity. Of course not only the efficacy but safety is important and for obesity drug we have to have complete safety. So pre-clinical and clinical studies are to be conducted especially concerning the cardiovascular side effects and adverse effects are to be studied before commercializing the product. And also we have some targets which may not be sensitive to the CNS adverse events. There are interesting targets available including GPCR and also peripheral obesity is another target we can work on.

(Interpreted). Next in the front row please.

(Interpreted). I am Urushihara from Nomura Securities. I have two questions. One is the oncology R&D. How do you make it more efficient? For instance, you talked about the productivity enhancement of R&D activities and in oncology area if we try to do so, maybe you may target the major cancers or the other ones, or you'd like to have first line, or second line. If you target the third line, it's a commodity market and therefore you may easily get approval but you may not be able to expect high profitability. So how are you going to strengthen your oncology business? If you have any unique strategy for oncology I'd like you to give us explanations.

(Interpreted). I'd like to ask Dr. Deborah to answer to your question, but before that if I may, Dr. Ohkawa told you earlier that the DDU drug discovery unit of 100, 150 scientists were established in four areas. And regarding oncology area, the leader used to be Japanese, but from this April, from Millennium, Dr. John Warren, the Research Institute head becomes the head of the DDU. And not only Takeda Japan, but not only Millennium but including San Francisco or San Diego's R&D is all included. He is going to become a responsible head for R&D activities and that way we'd like to make our operations more efficient. Therefore probably he will spend half of this total time in Japan.

Thank you. It's a great question and it's an exciting one.

Right now we're focused in the discovery area on leveraging the technologies that exist within the entire Takeda family of companies and being able to leverage the structure-based drug design at San Diego to assist with the entire novel drug discovery, in protein homeostatis at Millennium and leveraging the skills in Japan. So that's -- we're looking at ways to enhance the productivity of drug discovery.

But even more so in drug development, we're accelerating strategies in translational medicine where we're seeking to choose patients that will respond best to the right drug. So we're using a lot of genomic analysis and patient blood typing to be sure that the clinical trial can be in a patient population where the drugs are going to have the highest impact thus reducing the numbers of patients required for the study and increasing the chance of a positive outcome and a significantly positive outcome which can then accelerate approval and accelerate the pricing freedom. So that's really the thrust that we've taken to try and accelerate the drug development -- to increase productivity and drug development.

I think the days are past where we can take a product, try it out in a all-comers patient population because the benefit is too small. We've got to know which patients are going to respond and the background and heritage of Millennium being founded as it was as a genomics company -- maybe it was a decade too early when it was founded -- but now some of that knowledge is coming to fruition to really drive the productivity in the oncology drug development. That's at least one strategy. I don't want to take up too much time, because I'm sure there are other questions. But we could talk forever about that.

(Interpreted). But this is a general comment. This is not specific to your Company. This is what other companies are doing. Are there any special ways to make oncology as the cutting edge at Takeda which is the leading pharmaceutical company in Japan?

I think the first basis is the quality of the science. All companies will try for that. So the quality of the people that you have and the quality of the science. Also for us trying to expand a new field, like protein homeostasis, which is today where the field of kinase research was probably seven or ten years ago. That is yielding a large number of targets that have not been mined before. So that's a way to claim an edge and by playing where other competitors are not playing.

In the same areas, we also know that tumors are driven by a lot of different mutations, so they do need combinations of agents. So we've built technology in-house to test in a preclinical setting combinations against different mutation patterns so that that can be translated out into the clinic faster. We're also setting up collaborations with a small number of centers which can give us the genomic testing so that instead of doing a Phase I trial in all comers who've failed other therapies we'll actually genomically screen candidates coming into Phase I trials and then offer them the right products from the menu of the Takeda pipeline and either single therapy or combination therapy depending on their mutation.

So we're really to actualize that personalized medicine and be able through the technology resource in house and the collaborations we have externally with academia, together with very strong basic science to be able to make that leapfrog forward.

(Interpreted). My second question is your profit distribution to shareholders, it was JPY180 dividend payment. But in fiscal '07 or '08, you conducted a share buyback. In this rolling MRP, do you have any idea to conduct the share buyback?

(Interpreted). We don't exclude that possibility. But as management, looking at our future prospects and the pipeline situations, I think rather than making a return to shareholders, I think it will be better for us to solve the problems, by conducting acquisitions upon necessity. That is I think more likely to respond to the expectations given to the Company. Therefore I think that is a possibility.

(Interpreted). Thank you. The person sitting in the middle, please.

(Interpreted). Sorry, I will ask a very detailed question. I have two questions. The first is Edarbi. Is it high potency or there are different [TDs] because responders or non-responders, it is different from other conventional ARBs. What is the difference, high potency or different (background noise).

(Interpreted). I have two questions. First of all, the activity to the receptor is very high and usually it is decoupled. But it combines longer so it has a higher efficacy. And African Americans are not responding to ARBs, conventional ARBs, however the Edarbi works well with the African Americans. So we can differentiate Edarbi from the competitors in its efficacy. There are no pharmacological actions different from the competitors. ARBs is ARBs however, the potency is different and also the targets are different. In terms of the target population it's different.

(Interpreted). The second is TAK-875. In the mid MRP we have a plan for launch in Japan but not in the Western countries. Is it because of the lack of confidence?

(Interpreted). No, no. In Western countries, [CV] outcome studies should be considered and one study is now ongoing as the Type-2 diabetes drugs. It would take time to conduct our clinical studies. So the global studies takes longer than the study only in Japan.

(Interpreted). So you are conducting a clinical trial then in Western countries. Is this simultaneous or is the Western countries behind Japan.

(Interpreted). It's simultaneous. However the launch period will be different because clinical trial designs are different in Japan and in Western countries, because of the different patient background.

Just not to be misunderstood, I can say here on behalf of the Americas and the European part of the organization, we think this is one of our best products in the pipeline. What Dr. Ohkawa just said it is absolutely right. It's not that we don't want it. We would love to have it in 2014 and '15. Unfortunately we have a somewhat different situation. I'm talking about 875.

(Interpreted). Thank you. The one in the front row please.

(Interpreted). I am Onozuka from JP Morgan Securities. I want to ask one question. You have been talking about the acceleration of your penetration into emerging markets. And according to this expansion of the original version, so a paradigm shift. How are you going to make a change in your personnel situations in Japan, EU and the emerging countries and markets? How many each in those regions or countries and what will be the situation in 2013, if you can disclose please?

(Interpreted). Well, maybe you can categorize them into advanced countries and non-advanced countries.

As of today, we have 18,500 people, and about half are located in Japan. I'm talking about the consolidated basis. And the other half are working overseas. And on that in the US we have 3,500 and Millennium 1,200 or so and San Diego and San Francisco in total 200 or so. So that's the US. And in Europe, in total we used to have 2,000 but now it's about 1,800. And the rest are in Asia if we count the Asian countries as emerging market.

And we plan to increase the number in China predominantly so current 200 to 250 will be increased to 1,000 in three years. And in Mexico and Brazil, we put a flag. And in Brazil however, we need to take more time, one year and a half to register our organization and the start-up of our operations. So therefore in 2013, I don't think that will be a big number in Brazil. And in Mexico, products are already approved and therefore the level will be several hundred. And other emerging countries Russia and India, we have just started our company and in Russia, we haven't established a company yet. Therefore as of 2013, I think in those countries those numbers will be negligible.

So those are the situations anticipated in emerging countries. In Asia, China, South Korea or India, those countries that we focus on are the areas that we will also increase the number of personnel.

Given the numbers of Japanese employees, the President said it's about half and actually about 40% of the total are working in Japan.

(Interpreted). And in the US the number will not be changed right? In the US, in the near future?

You're talking about the headcount and future prospects in the United States? Yes, it's fairly stable. Millennium are stable or a little bit increase, minor increase. So stable.

(Interpreted). Thank you very much. And we would like to take the sales system into consideration. The way we conducted sales for 15 years, we tried to provide accurate information to the medical doctors and we had a long history. But in the Western countries, the MRs or sales reps or medical representatives are not provided information. Rather they use other medias including the websites and information is provided through medias other than medical reps. So the mature -- the more matured the market is, the importance of human factor is reduced. But in the emerging economies and countries, the situation is similar to the Japanese situation for 10, 15 years. So medical representatives should provide information to the medical doctors, otherwise the medical doctors do not have the information on the drug. So there are some areas, where we have to focus on headcount increase and other areas where the headcount should be decreased.

(Interpreted). Any other questions?

I am Muraoka from Morgan Stanley. I have one question. Alogliptin sales in the US, I'm talking about the future. Linagliptin BI was approved the other day and Linagliptin, if it achieves a big success, I think the (inaudible) what will be the strategy you will take, or if Linagliptin doesn't succeed then what would be your strategy? Could you just give us a rough image of your strategy in the US?

Of course we're well aware of the situation with BI and we will deal with it. And the best way to deal with it is when and if -- when we launch Alogliptin we will be the only PP4 inhibitor that has a cardiovascular outcome study, which is a major advantage. From what we know and believe, we have no efficacy disadvantage. We have -- we're right up there at the top of efficacy and we have this significant safety advantage that other competitors will not have. So we'll have a unique combination. So I think we will, yes, we will have to play a catch up game, but we're not playing it with a bad hand -- with a bad hand of cards, so we have good arguments. And we believe in the success of the compound.

(Interpreted). Just for your reference, the Actos FDC will be approved. That is the unique combination he mentioned. Thank you.

(Interpreted) Any other questions? Thank you. I believe that you have already exhausted your questions and this concludes today's meeting. As mentioned before, the questionnaire should be filled in and be posted in the collection box at the exit of this room. Thank you very much once again for your participation tonight.

Thank you for taking 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.