Takeda Pharmaceutical Co Ltd (TAK) 2014 Q1 法說會逐字稿

(Interpreted) Please note that this telephone conference contains certain forward-looking statements and other projected results which involve known and unknown risks, delays, uncertainties and other factors not under the Company's control, which may cause actual results, performance or achievements of the Company to be materially different from the results, performance or other expectations implied by these projections. Such factors include economic and market conditions, political events and investor sentiments, liquidity of secondary markets, level and volatility of interest rates, currency exchange rates, security valuation, competitive conditions and size, number and timing of transactions.

During the presentation from the Company, all the telephone lines are placed for listening mode only and the question and answer session will be held after the presentation. This conference call is being broadcasted through Internet online but only for listening mode.

Now we'll start the conference with the presentation.

(Interpreted) Thank you very much for joining the conference call of the first quarter FY 2013 financial results for Takeda Pharmaceuticals. My name is Christopher Hohman, Senior Vice President of the Corporate Communications Department.

Now, please let me introduce today's presenters and panel. Mr. Iwaaki Taniguchi, Senior Vice President of Corporate Finance and Controlling Department and Mr. Tsudoi Miyoshi, Senior Vice President, Head of CMSO Office. First, the Q1 results will be presented followed by the topics of R&D. After that we will have a Q&A session. Please refer to the presentation materials as you listen.

First, Taniguchi will start.

(Interpreted) I'm Iwaaki Taniguchi, Senior Vice President in charge of Corporate Finance and Controlling. I would like to report our consolidated financial results for the first quarter fiscal 2013. This is the consolidated summary for the first quarter FY 2013.

The net sales were up JPY12b or 3% from the same period last year to JPY410.3b.

Operating income went down JPY14.9b or 23.8% to JPY47.7b.

Net income went down JPY58.5b or 66.8% to JPY29.1b.

Excluding extraordinary income or loss such as intangible assets, goodwill, amortization and special factors such as tax refund from the transfer of price tax system agreed last year, net income was up JPY1.4b or 2.2% to JPY62.4b. Let me explain more in detail in the following slide.

The slide shows changes in net sales by business segment. For the domestic Ethical Drugs, contributions from new products such as Lotriga and Azilva could not offset the decline in existing products such as Actos and Blopress. Impact by the termination of distributorship agreement of some items also pushed down sales. As a result, sales went down JPY5.3b from the same period last year.

For Overseas, in spite of the Actos sales decline by generic erosion, sales contribution of JPY11.2b by URL Pharma and Multilab acquired last year and the yen depreciation positively impacted sales by about JPY40b. All together, overseas sales were up JPY16.7b from last year.

Next slide please. This slide shows changes in sales by product.

Global sales of Actos were down by JPY45.2b from last year but Velcade from Millennium and sales in emerging markets increased. The yen depreciation also helped to achieve an increase in other products by JPY32.8b. New products launched after 2009 also showed good progress marking a sales increase of JPY23.8b.

Next, I will explain sales by region.

In US, Canada, Actos sales significantly declined which was partly offset by Colcrys from URL Pharma and other products such as Velcade, Dexilant and Uloric to manage the decrease by 13.2% from last year. The sales of emerging markets which we consider as a growth driver increased by JPY16.9b or 34.6%.

In the next slide, I will explain more about emerging markets. Emerging markets include Latin America, Russia, CIS, Asia, Middle East, Oceania and Africa. The sales of the emerging markets increased 34.6% to JPY65.7b or about 18% of the total Ethical Drugs sales of JPY371.9b. Excluding the FX impact, sales of emerging market marked a steady progress, up 10.4% from the same period last year.

By region, Russia CIS increased about 40%, Asia about 35%. China in particular was up 47%.

Operating income from the emerging markets are not shown here, but operating margin was about 30% on the management accounting basis, an improvement of a few percentage points.

Next slide please. I will now explain changes in operating income.

Although the sales went up by JPY12b from last year, because of the decrease of highly profitable Actos, the gross profit was up only by JPY200m.

For SG&A, although there was cost reduction effect by streamlining overseas affiliates, due to the yen depreciation, the SG&A increased by JPY16.4b. As a result, operating income was down JPY14.9% or 23.8% to JPY47.7b.

Next slide please.

Net income was about JPY58.5b from the same period last year to JPY29.1b. Last year we had tax refunds and interest on tax refunds which pushed up net income by JPY52.8b. This year we had no such special factors and by comparison, net income is significantly lower for this quarter. Excluding special factors and extraordinary income/loss, net income would be JPY62.4b or an increase of JPY1.4b. Please refer to the appendix for the breakdown of special factors.

Next slide please. This is the cash flow for the quarter.

Operating cash flow was minus JPY89.5b, of which income tax paid was minus JPY97.2b. Compared to the previous year when we had tax refunds, the tax payment increased by JPY126.5b which was a significantly negative factor.

There are two factors associated with this. One, according to the Actos APA or Advanced Price Agreement we paid about JPY85b in this quarter. That was in Japan. Second, we received JPY42b more tax refund previously last year as a part of transfer of price tax refund compared to this year.

Regarding the first factor, based on the Actos APA between US and Japan tax authorities, we received the same amount of refund from US in the second half of last year. So there is no impact on the cash flow if last year and this year are combined.

Next slide please. Let me explain the forecast for the year. The FX assumption for the Q2 and beyond is now changed so that we are more close to reality. JPY100 to $1 and JPY130 to EUR1.

Sales forecast for the year is now JPY1.68 trillion, up JPY90b from the May announcement of which JPY80b is from the positive change in FX assumption and JPY10b from expected sales upside in Overseas, including US Velcade, Prevacid and Adcetris in Europe.

While revised FX assumptions will push up sales forecast, COGS, SG&A and R&D expenses in overseas subsidiaries will also increase. Furthermore, goodwill, intangible asset amortization expenses denominated in the non-yen will increase significantly by the change in the FX assumption. As a result, operating income for the year will be the same as was announced at around JPY140b.

Excluding the special factors such as goodwill and intangible fixed asset amortization, operating income will be JPY295b, up JPY15b from the May announcement.

For the first half, operating income is expected to be up JPY10b or 14.3% from the May announcement to reach JPY80b because of possible shift in spending timing from the first half to the second half.

In order to have a competitive operating model as a global company we started Project Summit and we are driving this very strongly. This was already announced in May. We are now discussing specific initiatives by cost category. The project is advancing very smoothly. The whole Group is working as a team. By the second quarter earnings report we hope to be able to explain the whole picture of the project and specific measures.

Next slide please. Let me explain the Q1 result of sales and operating income against our forecast for the year.

As of the end of the first quarter, sales achieved 25.8% of the plan for the year, or 24.8% excluding the FX impact. Because of the change in the FX assumption, the sales forecast for the year was revised upward by JPY90b to JPY1.68 trillion. Q1 achieved 24.4% of the revised plan.

Operating income as of now achieved about 34%. However, let me just remind you that more expenses tend to be spent later in the year. Last year our overseas compensation system linked to the stock price was a factor to increase overall expenses. We have introduced the management system to follow expense trends in much more timely and detailed manner. We are working to reform the compensation system so that it is more linked with our business performance.

Next page please. Lastly, let me explain IFRS which we will voluntarily apply at the end of this fiscal year.

The slide shows the IFRS based actual Q1 performance for your information. It also shows forecast for the year announced in May and the revised numbers announced this time. The IFRS numbers are provisional, obtained by incorporating IFRS factors into the numbers from the J-GAAP. This is just for your reference please.

For the first quarter, operating income on the IFRS provisional basis was up JPY8.5b to JPY56.2b compared with J-GAAP numbers. For the year, operating income will be up JPY20b to JPY160b. For the more details of the Q1 figures, please refer to the appendix. Please note that the IFRS numbers shown here are provisional which may be different from final numbers audited by auditors.

Along with the transition to IFRS, as one of our profit indicators, we introduced the idea of core earnings. It is a profit based on IFRS GAAP operating profit which excludes temporary factors such as impacts from M&A.

Q1 core earnings marked JPY90.5b or 22.1% of net sales. For the FY 2013 we expect core earnings of JPY295b or 17.6% of net sales.

This is all from my presentation side.

(Interpreted) Now Miyoshi would like to make a presentation.

(Interpreted) My name is Miyoshi, Head of CMSO Office. I would like to talk about the update related to R&D activities. And today, I'd like to cover recent stage-ups in the pipeline and MLN0002 Vedolizumab and data from Phase 3 trials of TAK-875 Fasiglifam and Lu AAA21004, Vortioxetine.

Before I introduce the latest stage-ups in the pipeline, I would like to explain about the withdrawal of our marketing authorization application in Europe for the anemia treatment, Peginesatide. In February, Takeda voluntarily recalled all lots of Peginesatide Omontys from the US market as a result of new post-marketing reports of the serious hypersensitivity reactions, including anaphylaxis.

While Takeda has been working actively to investigate the root cause of these hypersensitivity reactions, the investigations on the root cause analysis and the determination of a risk mitigation plan has got to be completed during the European MAA procedure timeframe. Therefore, Takeda withdrew the European MAA and will determine at a later date the appropriate direction for the product.

As for TAK-700, the mCRPC trial for post-chemo metastatic castration-resistant prostate cancer, the interim analysis by the independent data modeling committee indicated that the TAK-700 arm would likely not meet the primary endpoint of improved overall survival when compared to the controlled placebo arm. So, we decided to unblind the trial based on the recommendation of the committee. There were no safety concerns regarding TAK-700 and the decision to unblind the mCRPC trial is not expected to impact other ongoing Company-sponsored clinical trials with TAK-700.

Next, I will talk about the stage-ups since the last FY 2013 financial results announcement on May 9. As we just introduced you today in our announcement, in China we received [CFTA's] IDL, Import Direct License for Nesina, alogliptin, for the treatment of Type 2 diabetes. We believe that this will expand our options of available drugs to treat the Type 2 diabetes in Chinese market.

Although it's not shown in this slide, regarding alogliptin, the Committee for Medical Products for Human Use of the European Medicine Agency expressed a positive opinion in July. The final decision will be made by the European Commission and we hope to launch in Europe after getting the formal approval.

Next, in June, following on from the filing in Europe, we filed a biologics license application in the US for MLN0002, Vedolizumab, as a treatment for ulcerative colitis and Crohn's disease.

Also, for Rienso, we filed for an additional indication to EMA in June this year, which is iron deficiency anemia in patients with the history of unsatisfactory oral iron therapy, or, in whom oral iron cannot be used.

Regarding MLN9708, we started the Phase 3 trials in patients with newly diagnosed multiple myeloma in the US and Europe.

Also listed here is SGN-35, treatment of malignant lymphoma. We have started Phase 3 trials in Japan for front line mature T-cell lymphoma.

Next slide please. I'm going to talk in a little more detail about MLN0002 for which we submitted a biologics license application in the US in June. This product is a novel class of gut-selective monoclonal antibody targets, alpha 4 beta 7 integrin on leukocytes involved in ulcerative colitis and Crohn's disease. Findings from GEMINI I for ulcerative colitis showed that Vedolizumab met primary endpoints of improvement in clinical response at week six and clinical remission at week 52.

The sixth week clinical response in the Vedolizumab arm was 47.1% compared to 25.5% in the placebo arm. Remission rates at 52 weeks were 44.8% of patients receiving Vedolizumab every four weeks and 41.8% of Vedolizumab every eight weeks when compared to 15.9% of patients who received placebo.

In GEMINI II for Crohn's disease, Vedolizumab demonstrated statistically significant improvement in the primary endpoint of clinical remission at week six and week 52.

The clinical remission at week six was seen in 14.5% of Vedolizumab patients versus 6.8% of placebo. Remission at week 52 was seen in 36.4% and 39% of patients on Vedolizumab every four weeks and every eight weeks respectively versus 21.6% of patients receiving placebo.

Next I'd like to talk about TAK-875, Fasiglifam. This drug is a first in class GPR40 agonist for Type 2 diabetes and in clinical trials it has displayed its new mechanism of action over stimulating insulin secretion dependent on glucose level. Because it is a glucose independent, the risk of hyperglycemia is much lower than existing sulfonylurea drugs. And in Phase 2 clinical trials, the incidence of hypoglycemia for TAK-875 was 2%, but 19% for the sulfonylurea, glimepiride.

TAK-875 is currently in global Phase 3 trials.

In addition to trials in comparison to placebo and glimepiride shown in the slides, we are also conducting head-to-head trials and concomitant use trials with DPP4 inhibitor sitagliptin. In order to satisfy the US FDA's requirements we are also currently conducting a cardiovascular outcomes study. Projected timeline of approval in Japan is fiscal 2015 and in the US and Europe fiscal 2016.

In May this year we presented new Phase 3 study data at the Japanese Diabetes Society Annual Meeting, which I will introduce to you in the next slide.

This is a placebo controlled, double blind comparative study evaluating the safety and efficacy of TAK-875 oral dosing of 25 milligrams or 50 milligrams once daily in 192 Japanese patients with Type 2 diabetes over the course of 24 weeks. Regarding the primary endpoint of the change from baseline of HbA1c at week 24, as shown in the bottom left corner of the slide, TAK-875 25 milligram and 50 milligram had statistically significant reduction compared to placebo of 0.75 points and 1.01 points respectively. In addition, both these doses showed continued glucose lowering effects after 24 weeks.

The second endpoint of the proportion of subjects with hemoglobin A1c less than 6.9% at week 24 as shown in the bottom right corner of the slide was 54.8% for 50 milligram, 30.2% for 25 milligram of TAK-875 and 13.8% for placebo showing statistical significance for both TAK-875 doses.

Regarding safety, incidences of advanced events as well as hypoglycemia in TAK-875 and the placebo groups were similar. In this trial no weight gain was seen in the TAK-875 groups.

Next slide please. I will talk about Lu AA21004, Vortioxetine, in-licensed from Lundbeck of Denmark.

This is a novel multimodal anti-depressant of two pharmacological actions, serotonin reuptake inhibition and serotonin receptor activity moderation. In October 2012, we submitted a new drug application in the US for the treatment of major depressive disorder.

The right-hand figure shows the results from Phase 3 clinical trials represented at the American Psychiatric Association in May this year. Of these four trials, three met the primary efficacy endpoint in the changes from baseline of MADRS. The PDUFA date in the US is October, in the beginning of October, 2013.

Next slide please. This slide shows our timeline for pipeline approvals. Within this fiscal 2013, we are expecting approval of SGN-35 for Hodgkin lymphoma, influenza vaccine in Japan and Vortioxetine in the US and the alogliptin family, dexlansoprazole and lurasidone in Europe.

Next slide, please. As always, I'd like to finish by reminding you of Takeda's R&D value and mission. Moving forward in order to address unmet medical needs of patients, Takeda will remain committed to the discovery and delivery of innovative solutions through R&D investment. We will also strive to improve R&D productivity and pursue improved cost effectiveness.

Thank you very much.

(Interpreted) Now we would like to have a Q&A session. We would like to entertain your questions.

(Interpreted) We have a question and answer session now. (Operator Instructions). The first question is from Citigroup Securities Company Mr. Yamaguchi. Go ahead.

(Interpreted) Hello this is Yamaguchi from Citi. Can you hear me?

(Interpreted) Yes.

(Interpreted) Regarding the progress of the first quarter, it's a regular question, because of those expenses, operating income is relatively higher in terms of the progress and by region Japan, US and emerging markets there are some up's and down. If you noted any particular situation, can you comment?

(Interpreted) This is Taniguchi. Overall, regarding sales there is a positive upside but when you breakdown overseas, upside was significant. On the other hand, for Japan compared, to our expectations it was slightly lower than our original forecast.

(Interpreted) Thank you. And regarding Nesina and Azilva in Japan, in the case of Azilva it can be switching but Nesina it looks like it's not really achieving up to the expectation. You are not showing particular specific numbers. Do you think it's going to be able to recover or do you think that's going to be challenging?

(Interpreted) Well, let me first talk about Nesina. It is true when you just look at the past three months the progress is a bit slow against the plan, but prescription is on an increasing trend. And towards the end of the year and the second half, we expect good growth three years past since launching.

And efficacy is shown in the clinical data. And based on the evidence we are strengthening our marketing activities. And I think we are seeing some good results out of that.

And for hypertension, Azilva and Blopress, between those two agents, and when you combine them together, it is within our expectation. It is true the pick-up of Azilva in terms of switch from Blopress is a bit behind.

(Interpreted) TAK-7 in your pipeline, I have a question on this. The basic idea here is regarding post-chemo patients. Thought it may be a bit difficult but pre-chemo therapy, if you have good data, then you will have the filing.

(Interpreted) This is Miyoshi speaking. Regarding TAK-700 post-chemo therapy, it is unblinded, but it does not mean that filing is difficult when you look at the data. Regarding PFS, progression free survival, we do have good data. And, plus, the pre-chemo data combined will be the basis for our consideration in the future.

(Interpreted) So regarding PFS post-chemo therapy, that strategy is still there? Is that OS?

(Interpreted) I can't really comment on that specifically, but we are analyzing the data in detail. Why OS, overall survival was not significant by age, by region, by ethnic groups and sex we will analyze furthermore. And together with pre-chemotherapy segmentation, our population, we want to further analyze our strategy.

(Interpreted) Thank you. Regarding the FX sensitivity you have made a revision for FX assumption, so what's the sensitivity level now?

(Interpreted) Are you talking about operating income level?

(Interpreted) Yes.

(Interpreted) In the dollar basis JPY1,800m and for the euro that's EUR200m on the new FX assumption.

(Interpreted) Yes that's right, so that's not a big change. Thank you.

(Interpreted) We would like to entertain the next question please.

(Interpreted) Next question is Urushihara, Mr. Urushihara from Nomura Securities.

(Interpreted) Hello, may I ask a question?

(Interpreted) Yes, please give us all the questions that you have.

(Interpreted) I have four questions. The first question is about TAK-875. In order to look at the TV event, you are trying to recruit 5,000 patients and since the study started, I think already one year has passed. But could you really show the results of the TV with an update of 5,000 subjects? That's my first question. May I continue?

(Interpreted) Yes.

(Interpreted) My second question is Contrave, the filing timing. In May's financial announcement, in our handout materials it was said it would be filed soon. But what is actually the timing? Could you tell that? That's my second question.

Third question is the China is -- in the case of GSK whether or not you have been receiving any investigations as much as you can disclose please.

And number four is about cost control. And here I have two questions. Actos sales have been down, but the growth emerging is still 72%. It's not worsened. So, have you been making the efforts to cut the costs?

And also, in page six of the slides, SG&A effects because they are affecting -- impacted they increased, but actually the JPY9b cost cut seems to be achieved. Is that really the right accurate interpretation?

(Interpreted) Miyoshi would like to answer to your question first.

(Interpreted) Regarding TAK-875 5,000 subjects, whether or not this number of subjects is enough. According to FDA guidelines, of course, we would like to meet the FDA guideline requirements, and statistically we reviewed and we believe that this 5,000 sample size is good enough. We don't expect any problem with this.

(Interpreted) And do you know actually what would be the rate of the events, the onset?

(Interpreted) No, we cannot disclose that at this moment of time.

Your second question was regarding Contrave, the filing timing. Orexigen, our alliance partner, announced in the beginning of this year it will be in the second half of this year. That is the timing of FDA filing and we announced that way. Our partner announced and we haven't changed the timing since then.

(Interpreted) Regarding China, from the Chinese authority to us, we didn't receive any notification of any investigation. Since last year we have set the global policy to prevent any -- the briberies. Therefore, we wouldn't accept or allow those to happen thoroughly.

And your number four question regarding the cost, 72% roughly is this time's figure, and actually, Actos sales went down. And it went down by 3% at one time and compared with the -- two years ago. And FX actually impacted positively by 1%. So, compared with the same term, the same quarter of the last fiscal, the -- we will be able to probably bridge from between 74.1% and 71.9%. And, of course, we have been making every effort to cut the costs. And part of them have been already producing the results.

(Interpreted) Will it be accelerated? I mean for every quarter to come do you think that the cost cut results will be accelerated to be manifesting?

(Interpreted) I am not sure. But the cost rate will be improving and that's one of the important themes of our Project Summit. Therefore, we'd like to continue to make such efforts.

And SG&A, you are right that because of FX impact, JPY25.3b minus was there. So, as SG&A itself, we tried to cut the cost and now we see the part of those -- the efforts.

(Interpreted) Thank you very much.

(Interpreted) Next question please.

(Interpreted) From Barclays Securities, Mr. Seki.

(Interpreted) Hello. Do you hear me?

(Interpreted) Yes.

(Interpreted) I have also four questions. First question. In Mr. Taniguchi's presentation, emerging markets sales is growing very well and it's a growth driver for you. Page five, excluding FX impact, 10.4% is the growth. Although it's a double digit it's a bit weak regarding the previous year that was 14%. And the other global company's announcement showing weaker result in emerging market. So if the trend is changing in emerging markets, that's the first question.

And regarding the stock price linked incentive plan, JPY5,000 and above at the end of May or March and then it came down, so what's the situation there?

Regarding TAK-700 Orteronel, Orteronel you are showing P values only. But, regarding OS and PFS comparing the active and placebo what's the difference.

And also, regarding page 25 Orteronel US approval expectation is FY 2014. You haven't changed. Is that still all right? And in Boston there was a change in leadership. And after that no confusion in the organization and no problem regarding the talent we can show. I have a long question list and help you to answer to those.

(Interpreted) Regarding emerging market trend, this -- these emerging markets are very important growth drivers. Because of macro economy, there could be some transient impact, but over the five years for the long-term horizon, the growth rate that we promised can be achieved in the emerging markets.

It is true, excluding FX 10.4% was the growth. And throughout, the year if you look at the growth for the year, we think there is some room for growth furthermore. It's not that the momentum in the emerging market in the mid and long-term is undermined.

(Interpreted) What may be a tender impact was the significant factor?

(Interpreted) No, I don't think so. Not for this quarter.

(Interpreted) Thank you.

(Interpreted) And regarding stock price linked incentive plan, as you mentioned the accounting is based on the March end stock price level. Based on that we have the calculation. Then every quarter we have the numbers from each month. And end of June the stock price is down compared to March end. Therefore, there is a decline compared to the March end.

(Interpreted) Do you disclose numbers?

(Interpreted) No we don't disclose. But for the quarter as a whole, for this long-term, incentive plan, costs for these three months is plus/minus zero.

(Interpreted) Thank you.

(Interpreted) This is Miyoshi speaking. So TAK-700 data disclosure, overall survival details, as of now, today we do -- we cannot disclose that data. And in future, at Takeda meetings we will disclose the numbers and the data.

And the second question was -- what was that?

(Interpreted) Regarding the timing of filing.

(Interpreted) We are discussing strategy for filing and as of now we have made no changes. But, going forward, when the strategy is decided in the second quarter, opportunity we will show you the plan.

Of course including the former CEO Dr. Dunsire, during times of organizational change it is inevitable that some people will make the personal decision to leave and initially, this can be somewhat disruptive. However, it also provides opportunities for others to lead and contribute in new and different ways.

Overall, we are engaging our employees with fairness, transparency and communication and appropriate compensation so we can contribute to maintain, attract and develop the best people possible for this important field of oncology.

(Interpreted) Thank you very much. The next question please.

(Interpreted) The next question is from Sakai of Credit Suisse Securities. Sakai San please.

(Interpreted) Thank you. I have two questions. First is MLN0002 for ulcerative colitis and Crohn's disease is the indication, and I believe that the remission rate is very high. Have you disclosed data on remission rate somewhere? That's my first question. And also in the US the filing really made in June but PDUFA is it fixed? That's my first question.

Second question is TAK-700. Actually, the same happened in the other companies that the FDA, even without recognizing the OS improvement, would it be really approved? Including post-chemo there seems to be potentials in your view. But could you specify what is your ideas regarding this situation? And this is interim analysis, therefore, the patients on placebo and TAK-700 I think that data is at the time points that the cross-over hasn't been performed yet. Is that the right understanding?

(Interpreted) First regarding MLN0002 data, as I told you earlier -- which data are you talking about GEMINI 1? In GEMINI 1 the -- at week six the remission improvement, at week 52 excuse me, Vedolizumab there are every four weeks and every eight weeks regime, every four weeks 44.8% and every eight weeks 48.1% and placebo of 15.9%. And at DGW we made announcement.

And next was about TAK-700?

(Interpreted) Yes. OS, you couldn't show the good results.

(Interpreted) Yes, we didn't show the significant difference in terms of OS it was the interim analysis. And we unblinded it the trial this time. So from now on TAK-700 will be provided to the patients, and with the existing data how can we make filing.

And on the other hand not only with this data but pre-chemo data shall be also reviewed so that we will be able to come up with the good strategy. So, we may need some time to decide how to do. It's only after a short time since it's announced or disclosed.

(Interpreted) Regarding 0002 filing timing, it says here in June but PDUFA, has it been fixed?

(Interpreted) PDUFA hasn't been fixed yet.

(Interpreted) So, no notification from FDA?

(Interpreted) No, not yet. But the approval is expected to be in FY 2014. We haven't changed that timing.

(Interpreted) Thank you.

(Interpreted) Next question please.

(Interpreted) From Morgan Stanley MUFG Securities, Mr. Muraoka.

(Interpreted) Hello this is Muraoka speaking. I have three questions. Regarding the revision, upward revision and I want to ask about the background of that. The yen depreciation and in your case operating profit in the data is a negative factor but for non-GAAP based income expectation is higher. Is that you have changed from conservative to neutral or there are several positive factors in the three months and you start seeing some upside. Can you clarify on that? That's the first question.

TAK-700 in Japan FY 2015 is the submission timing according to the table, and Japan has a different clinical study from global. I think it was a different study and so strategy in Japan.

[Vortioxetine] is my next question. You did not mention today but sexual function, in terms of sexual function, it is considered better compared to the other agent, so can you clarify that?

(Interpreted) Regarding the first question, let me clarify. Regarding the revision upwards this is based on J-GAAP. And regarding the sales, FX impact, well on sales side, our consolidation is in Japan, therefore, the sales will be positively impacted. That is about JPY80b by product, and upside sales of JPY10b, therefore, all together JPY90b for the year.

For the operating profit, however expenses, tend to be shifted in the second half and in operating income, the yen depreciation worked negatively in our Company. But, with cost reduction efforts we hope to maintain as before. So that's for the Japan side at JPY140b.

And for the first half, the sales is going to be increased compared to our original expectation and, also, expenses to be shifted in the second half especially, in R&D. So, for the first half, the operating income will be up by JPY10b. That is J-GAAP base.

On IFRS base, it's really amortization of goodwill and that is in the dollar basis as on the dollar denominated. And in IFRS goodwill will come in to the operating income and FX impact will be positive. So for the IFRS there is an upside of JPY150m to [JPY150m]. That's the difference from the J-GAAP numbers. Is this clear now?

(Interpreted) I understand that, but actually, the cost in the second half is going to be heavy and I think that might mean that you have some upside furthermore, but it's too early to say that?

(Interpreted) Well as of now regarding the operating income in ordinary income and net income level, we -- I'll just show you what we think it's going to be now.

(Interpreted) Okay, regarding the second and third question, this is Miyoshi. Regarding TAK-700 for Japan pre-chemo and post-chemo we are conducting the same study. Therefore, together, we need to consider our strategy going forward, so it's the same as in US.

And [Vortioxetine] and sexual dysfunction aspect was the question and whether that can be reflected in the labeling. What we are going to discuss -- we need to discuss this with FDA. As of now, we can't answer clearly whether it's going to be reflected in the label or not.

And advisory board we are going to have that. Well we will have discussion -- we've had discussion with FDA and in March there was an interim review meeting and FDA were saying that they not planning advisory meeting.

(Interpreted) Thank you very much.

(Interpreted) There aren't any more questions so therefore with this we'd like to conclude the question and answer session. And with this we'd like to finish the conference call today. Thank you very much for joining us in this conference call. We would like to ask for your continued support to us. Thank you very much.

(Interpreted) Thank you for your time and that concludes today's conference call. You may now disconnect your lines.

Portions of this transcript that are noted "interpreted" were interpreted on the conference call by an Interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.