Takeda Pharmaceutical Co Ltd (TAK) 2016 Q3 法說會逐字稿

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

Such factors include economic and market conditions; political events; and (inaudible) [assessment]; liquidity of the country markets level; and the volatility of interest rates, currency exchange rates, security variations, competitive conditions and size, number and timing of transactions.

(Operator Instructions). This conference call is being broadcasted through Internet drive, but only for listening mode.

Now we start the conference. Ms. Higuchi, please go ahead.

(interpreted) Thank you very much for your participation in the conference call of the third quarter financial results for FY15. My name is Noriko Higuchi, the Head of Investor Relations. Thank you for your participation again.

We have the presenters and respondents to the questions from our Company, including Mr. Christophe Weber, President and CEO; Mr. Rudolf van Houten, Group Chief Financial Officer -- Acting Chief Financial Officer; and Dr. Azmi Nabulsi, Head of R&D Strategic and Professional Affairs.

First, Mr. Weber will make a brief update about the latest status and then, followed by the Q3 financial results presentation by Mr. van Houten, based on the prepared presentation materials. Then we will take questions. Now, please refer to the presentation materials at hand. Christophe, please.

Thank you very much. Good afternoon, everyone, and good morning for those who are in Europe or elsewhere. I will be very short. I will just say that the third quarter is confirming that we are on the way to delivery -- to delivering our commitment that we are confirming that this is a turnaround year in both sales growth and profit growth.

I will not detail more the situation. I prefer Rudolf van Houten to present our results, and then I will be very happy to have any questions at the end of the presentation. Thank you.

Thank you, Christophe. So, if you please turn to slide number 4, we'll start the financial presentation.

As Christophe said, Q3 was a good quarter for us. Our underlying revenue growth year to date is up 3.8%; core earnings is up 1.5%; and core EPS is up 17.3%.

Takeda's growth drivers, as we defined them last quarter, GI, oncology, and emerging markets, they represent roughly half of our revenues and they were up by a robust rate of 8.5%.

ENTYVIO continues to do very well, and it's on the way to deliver over $2 billion in peak sales.

Another milestone was the launch of NINLARO in the US in December of last year.

In Japan, Q3 was a quarter where new product growth offset generic decline, so that was a nice performance for our Japan entity.

Project Summit, I'm very happy to say that as of the end of Q3 we already exceeded our full-year savings target. And we still have more to go in the last quarter of the year.

And then, I'm also very happy to say that our operating free cash flow showed a very large improvement versus last year. We put a lot of effort in this area, but a lot more work remains to be done.

We are also reaffirming our management guidance for the full-year 2015.

If we now turn to slide number 6, we'll first go through the reported P&L as usual. Our reported revenue was JPY1,393 billion, which represents an increase of JPY53 billion or roughly 4% increase versus the same period the last year.

Revenue was driven by strong performances, primarily ENTYVIO, up JPY43 billion; AZIlVA, up about JPY12 billion; and VELCADE, which also continued to grow up about JPY12 billion.

This was partially offset by the continued decline of CANDESARTAN, which is known as BLOPRESS in Japan, it was down JPY35 billion; and COLCRYS, which was down JPY10 billion. Both of them are impacted by generic penetration.

On a geographic basis, our ethical revenues in overseas markets was JPY844 billion, which represents an increase of about 8.5%, which is really driven by a robust growth in the US.

Our ethical revenue in Japan was JPY428 billion, which was a decrease of 2% versus the prior year. And in Japan the contribution from sales increases of products such as AZILVA and LOTRIA could unfortunately not fully offset the decline of products such as BLOPRESS, which continues to suffer from generic penetration, as previously mentioned.

Consumer health revenue was JPY64 billion, which was an increase of almost 10%; a very nice performance, mainly increased due to sales of ALINAMIN vitamin tablets.

And then the revenue in our other business section was JPY57 billion, and that was a decrease of 14.5%, naturally the result of the divestment of the Mizusawa business back in April 2015.

Going down, the P&L gross profit increased by JPY37 billion, or about 3.9% which was in line with sales growth. The gross margin percent remained largely unchanged at around 71%.

Our operating profit was down by JPY32 billion, or 16% decline. There were a number of factors which were -- can be attributed to that.

We had higher operating expenses that support new product launches, particularly ENTYVIO and CONTRAVE in the US, and TAKECAB and ZAFATEK in Japan. And then, also, the establishment of global functions, as we previously disclosed.

2014 also concluded a one-time gain on the disposal of assets of JPY25 billion, it was mainly the disposal of real estate; and then we had a net gain in 2014 as well of JPY26 billion on COLCRYS. Both of those events were one-off events and will not be repeated in 2015.

Net income and the EPS were both up approximately 43%, despite the lower operating income. The improvement in net income and EPS was related to the decrease in income tax expenses of JPY67 billion.

This decline in income tax expenses was largely the result of the net impact of a 2014 R&D tax credit revaluation loss, which we explained in our 2014 results. Then in 2015 we had the tax impact due to the capital redemption from a subsidiary, which had a positive impact.

So if we now turn to slide number 8, we will go through the underlying results starting with revenue. So slide number 8 shows the bridge from the reported revenue numbers which I just spoke about, and then the -- to the underlying revenue.

There are really two main adjustments as in the past, the first one is related to FX, which restates both years using constant exchange rates. The second adjustment relates to the acquisitions and divestments, and that really aims to place both years on a constant population basis.

So in 2014 we're removing primarily the divestment of several smaller businesses. Most notably the Mizusawa sale that I previously spoke about; and then, in 2015, we removed the impact of a small acquisition we did in Turkey earlier in Q1 of this year.

When adjusting for these items, our reported revenue of 4% actually stays largely unchanged and becomes 3.8% for the first nine months of the year.

So please now turn to the next slide; slide number 9, in fact. This slide shows the growth in revenue coming from our two growth drivers and, again, they're GI, oncology and emerging markets.

On a year-to-date basis our growth drivers increased by 8.5% versus the 3.8% underlying sales increase for the full business.

We continue to grow strongly in GI, which is really led by ENTYVIO. Emerging markets also continue to perform very well in a volatile environment that everybody knows about.

Oncology was impacted by lower VELCADE income outside of the US, but the US VELCADE is still performing very well, as is ADCETRIS. We anticipate that oncology will start growing with the recent launch of NINLARO.

So if we turn to the next slide, slide number 10, this shows the breakdown of our underlying revenue growth into the impact coming from our growth drivers versus the remaining base business.

Our growth drivers contributed JPY53.5 billion to our revenue growth. Apart from the growth drivers, however, CANDESARTAN continued to provide headwinds, dropping by JPY36 billion.

However, the impact during Q3 of the CANDESARTAN decline was considerably less than during the first two quarters of the year. That's because generics first came into the market during Q3 of 2014.

It's also interesting that -- to note that ENTYVIO sales for the quarter were now actually higher than BLOPRESS sales.

Something else I should point out is that aside from our growth drivers we also saw broad base growth in our portfolio of other products, such as AZILVA, LOTRIGA and BRINTELLIX. Growth in these products virtually completely offset the adverse impact from CANDESARTAN.

So if you turn to the next slide, slide number 11 for those on the phone. This gives a breakdown of our underlying sales growth by region, and as we have seen in previous quarter our largest regional growth driver continues to be the US, which was up almost 12% in the first nine months, really driven by ENTYVIO and BRINTELLIX.

Emerging markets also continued to grow well, albeit at a slightly lower rate in Q3, which is no surprise given the recent emerging market turmoil, but still continued to do quite well.

Ethical sales in Japan decreased by 1.7% year-to-date, and that's really because of the generic penetration. If you recall from our last earnings release in -- for the half-year, Japan was down by 3.4%. In fact, if you take Q3 alone for Japan, Japan sales grew by 1.5%. That's because of the decline of BLOPRESS, which was actually significantly reduced during the quarter versus the previous quarters.

Of course, the products, such as AZILVA and LOTRIGA continue to perform well in Japan.

The Japan other business continued robust growth, and that's really reflective of our consumer health business, I spoke about earlier.

So please turn to slide number 12, and this gives a breakdown of our global sales by region and also a little bit more detail on emerging markets.

Globally, sales were very well balanced with about one-third coming from Japan; another one-third coming from the US; and then the remaining one-third coming from the rest of the world.

As you can see, this slide also gives a breakdown of our emerging market sales. During Q3 we saw some slowdown in emerging markets. However, our key markets of China and Russia both continue to grow well; in fact, they were up at a double-digit rate.

Brazil showed some recovery during the third quarter versus the results that we posted in the first half.

However, there were other countries, such as Venezuela and Mexico, which saw some slowdown, while CIS countries also were a little bit more difficult.

So please turn now to slide number 13. Within oncology we had a very significant milestone at the end of last year with the approval and launch of NINLARO in the US for relapsed and refractory multiple myeloma. this is the first and only oral proteasome inhibitor in the market.

In addition to good efficacy, NINLARO also has a favorable safety profile, and the simple convenience of being one capsule, once a week. This profile allows patients to be treated for a longer period of time, and with a better quality of life.

Since NINLARO was launched in the US in December, the Q3 sales, of course, are still very small, because we've only had a couple of weeks' worth of sales in third quarter. However, we expect this to be one of the key products driving Takeda's growth over the mid-term.

We have also filed in Europe, and we're planning to bring this product to market rapidly in Japan, as well as in emerging markets.

Please turn to slide number 14. This slide shows our ENTYVIO performance. It's always a pleasure to present this slide, because it's a real success story for us, ENTYVIO.

As of December 2015, we have achieved a moving annual total of about JPY70 billion, which is really a fantastic performance considering that the product only came on to the market about 18 months prior. This positions the product very well to achieve our peak sales target of over $2 billion.

Maybe I'll just mention a couple interesting facts about ENTYVIO. We now have approvals in six continents, and in over 40 countries. Over 350,000 vials have been manufactured, and nearly 30,000 patients have been treated with ENTYVIO so far.

During Q3, ENTYVIO also became our fourth largest product, globally. Total sales of ENTYVIO in Q3 exceeded total sales of BLOPRESS.

In addition, during Q3 we purchased a biologics manufacturing facility in Minnesota, in the US. We will use this facility primarily to manufacture ENTYVIO. That gives us a second production source, and will ensure that we'll be able to meet future demand for the product.

Please turn to slide number 15. This slide shows the [patterns] of BRINTELLIX and ADCETRIS, and we've shown you this slide many times before. I'm pleased to say that the trend of strong growth continues for both of these products. These are two important new products for us that are really making meaningful difference in patients' lives.

For BRINTELLIX, the FDA is currently reviewing our application to add data regarding the effect of cognitive function to the product label, which could be important catalyst for this product.

ADCETRIS continues to generate great data, such as the five-year follow-up data in relapse or refractory Hodgkin lymphoma that was presented at ASH.

In addition, we have label update approved in Europe recently to include data on the treatment of adult patients who have responded to previous treatments of ADCETRIS, but later relapsed.

We anticipate that both of these products will continue to be steady contributors our revenue growth, going forward.

Please turn now to slide number 16. Over the last few months, we have been analyzing our external disclosure, with the aim to increase the level and transparency of the information that we provide. In particular, external analysts and investors have asked for more product-based disclosures.

Today, we'll take the first step to provide more detailed information by product, and by region. Going forward, we will continue to review our disclosure materials, with the aim to improve further.

The report you see in this slide, and also on the following slides, shows our main product sales by region, both on a reported, as well as an underlying, basis.

It's not the intention for us to go through each of these products and explain each variance for each of the regions and each of the products. It's really rather the intention to provide more information, so that investors can more informed decisions regarding our performance.

We will present this report on a quarterly basis. We're now analyzing whether to also add a future sales trend by product.

This product will report the top 10 products of the Company, in addition to four other products that are either large in terms of revenue, or have been of particular interest for investors in the past. In total, these products account for more than 60% of our year-to-date sales.

Please turn to slide number 18. We'll skip 17, because it's just a continuation of the same report.

Slide number 18 is a similar-type report; it's also a new report. People have asked for more information on emerging markets, and so here we want to show our three largest emerging markets: China, Russia, and Brazil; again, breaking out both the reported, as well as the underlying growth for each of these markets.

As with the product report, we'll present this report, going forward, on a quarterly basis.

These three markets, China, Brazil, and Russia, account for more than 50% of our emerging market sales today.

Please turn to slide number 20. This slide shows our underlying core income statement. Revenues, as we've discussed, were up 3.8%, really due to robust increases in our growth drivers: GI, oncology, and emerging markets.

In addition, declines in BLOPRESS were largely offset by growth in other products, such as BRINTELLIX, AZILVA, and LOTRIGA.

Our gross profit was up JPY25.7 billion, which is an increase of 2.6%, which largely follows the sales increase. The gross margin was slightly down, from 72% to 71.2%, mainly due to product mix in our Japan business.

Sales and marketing expenses were up to support the new product launches, including NINLARO, which was recently launched in the US. G&A expenses were up about 2%, due to the introduction of new functions; while R&D expenses were up about 3%.

The net of other income and other expenses had a positive impact, unlike in 2014, when we had higher expenses related to the termination of a pipeline asset. This resulted in a 1.5% increase in underlying core earnings.

Our underlying EPS was up by 17.3%, mainly due to a lower effective tax rate, resulting from the tax impact due to a capital redemption from a subsidiary.

Please turn to slide number 21. When we give our full-year management guidance, we always say that we expect our underlying core earnings growth to exceed our revenue growth. Now, when you look at the year-to-date results for the first nine months, this is not yet the case: the revenue increasing 3.8% per quarter; earnings up 1.5%.

I'd like to explain why we feel that, for the full year, our core earnings growth will still be higher than our revenue growth.

On this slide, you can see the quarterly SG&A and R&D expenses for the four quarters in 2014, as well as the first three quarters in 2015. You will note that in Q4 2014 there was a large increase in both SG&A and R&D expenses for the quarter. During 2015 Q4, we do not anticipate such large increases in expenses, particularly in R&D expenses.

Since we anticipate having lower operating expenses versus last year, this will increase our core earnings growth for the full year.

You may wonder why we expect R&D expenses to be lower in the fourth quarter, because since there was a big spike in R&D expenses last year during Q4, and there are a number of reasons for that.

The first reason is that our R&D budget for this year is much smaller than last year and so Q4 spending, naturally, since we're tracking roughly in line with our budget spend, would be smaller than last year.

In addition, we had a number of product terminations in Q4 2014. When we have a product termination we require, under IFRS, immediate recognition of all future expenses related to that project. We do not expect to have such terminations this year so, again, that would be a favorable variance versus last year.

We also had a ramp-up for new study starts in Q4 2014, which we do not have this year.

All in all, again, we expect our underlying core earnings to grow faster than our underlying revenue, as a result of the lower operating expenses during the fourth quarter.

Let's turn to slide number 22; that shows our progress on Project Summit. We previously made the commitment to reduce expenses by JPY120 billion over the five-year period. We remain fully committed to this goal.

During 2013 and 2014, we made total cumulative savings of about JPY62 billion, which is roughly half of the commitment. Such savings came from the consolidation of production facilities, commercial site closures, and the establishment of shared service centers.

Our savings target for the period 2015 to 2017 are targeted to be about JPY20 billion per year.

When you look at the cumulative savings this year up until Q3, up until the end of Q3, they were already higher than our full-year JPY20 billion target for the year. Savings during Q3 alone approached JPY10 billion, meaning that we now have already exceeded our full-year target.

During the quarter, we saw savings accelerate in all areas, most profoundly in production and supply; in R&D; and in G&A. Procurement savings did particularly well during the quarter, accounting for almost JPY7 billion of the total JPY10 billion of increases in Summit savings for the quarter.

Again, we remain fully committed to this project, and it's proceeding very well.

Please now turn to slide number 24, which gives an overview of our operating free cash flow. You can see that -- well, cash flow for us this year, I've mentioned that before, is really a big area of focus, and that's really starting to pay off.

During the first nine months of this year, our operating free cash flow, which is defined as our operating cash flow less CapEx and less the acquisition of intangible assets, that improved by JPY46 billion versus the same period last year. So, it almost doubled versus the same period last year.

Most of that improvement came from better working capital management. That improvement really came across all levers of working capital, including in receivables, inventory, and accounts payable.

However, despite the improvement, we still have a lot more work to do. Cash flow will continue to be a big focus area for us, going forward.

Please turn to slide number 25. This slide shows our debt maturity profile. We have about JPY100 billion coming due in now the fourth quarter of 2015, and additional JPY180 billion coming due next year.

As I indicated during our first-half earnings announcement, we are planning to raise about JPY350 billion in new debt, in yen-denominated debt, within the next several months. Maturities for that will probably be in the range of seven to 10 years. This will allow us to refinance the debt that's coming due within the next 12 to 24 months.

I'd also like to give an update on ACTOS. We anticipate making the ACTOS payment, that JPY2.4 billion payment and now in March of this year, so next month, using balance sheet cash.

So, let's turn to slide number 27 and I would like to spend some time on slide number 27 and 28, because it is our forecast for the full year.

So for the full year we are upgrading our reported operating profit forecast from JPY105 billion to JPY120 billion. We are leaving our net profit and our EPS forecasts unchanged.

So, where does that JPY15 billion come from, the increase, in our operating profit forecast? It really comes from three main areas. As you know, we launched NINLARO in December of this year, which was several months earlier than we had initially expected when we made our forecast. That will give us an upside for the year.

In addition, as I just mentioned, our Project Summit savings are running ahead of the full year and we have also reflected this in our latest forecast.

Then finally, during the first quarter of this year we initiated a project to contain our G&A expenses versus our original forecast and this will also deliver in incremental operating profit improvement.

So, while we're on this page, I would just like to say a few words about our R&D forecast. We've kept that forecast unchanged. Since R&D is impacted by FX and other items, we may have a small overspend in R&D, but that would be offset by an underspend in SG&A. So really, no material impact on our total operating profit forecast for the full year.

So if you turn to the next page, I would like to spend some time explaining the rationale for our forecast and also the rationale why we are maintaining our net profit forecast, although we are increasing our operating profit forecast.

So, I'm now on slide number 28. There are two things I would like to address in this slide, which are important, I think. The first, as you can all see, our year-to-date operating income and net income are already higher than our full-year forecast, so I would like to explain the reason why that is.

Secondly, since we are increasing our operating forecast by JPY14 -- JPY15 billion, as shown on the previous page, why are we not also increasing our net income forecast by the same amount? Again, I would like to explain this topic as well.

So let me address the first issue first: why is our full-year income forecast lower than our actual year-to-date Q3 results? Everybody can do the very simple math and see that in that case we expect to generate a loss in the fourth quarter.

Now, I don't want to alarm anybody. This loss is not unexpected. It's included in our budget and it's fully in line with our historical result patterns. So if you look at 2014, exclude the ACTOS impact, we had a loss. If you look at 2013, 2012, 2011, etc., you can see that generally the fourth quarter is a weak -- is weaker than the other quarters. There are a number of reasons for this, particularly for this year.

In Q4 this year we're expecting sales to be below the year-to-date average run rate, and particularly this is coming from Japan. It's a result of the expected destocking in anticipation of the NHI price revision in April. This is just, largely, just a phasing issue between the months of March and April, but it will still affect this fiscal year for us.

Second, as I have already signaled during the half-year results presentation, there has been a general weakening of emerging market currencies over this past year, and this will impact our results also, as to be expected.

Thirdly, as I've shown on slide number 21, we generally have had higher operating expenses in the second half of the year, particularly the fourth quarter, when compared to the first few quarters of the year. Again, this is fully in line with our expectations and it's also fully in line with our internal budget. It's also then fully in line with our historical patterns.

Then finally, as a result of our internal planning process, which we go through quite a robust, long-term planning process where we look at the long-term potential for all of our products, and on the basis of that process, we then tend to look for indicators of impairment. Since that process falls towards the end of our year, we would then tend to book most of our impairment losses during the fourth quarter.

Again, I don't want to alarm anybody. This is just in line with our expectations. It's in line with our internal budget. We do not anticipate that impairment losses will be substantially different from our initial forecast. It's just that from a phasing perspective they tend to fall, the majority, in the fourth quarter.

So I hope that this explains why our fourth quarter results tend to be somewhat lower than our first three quarters. Again, it's fully in line with historical patterns and in line with our internal budgets.

So the second item I need to explain is why the JPY15 billion improvement in our operating profit, as shown on the previous slide, does not carry through down to net income. There are really two items that explain this.

First, due to the very poor economic situation in Venezuela, and as people may have known and been reading in the press, because of the low oil prices, they know Venezuela is in a crisis situation.

We are now in discussions with auditors about a possible write-down in our exposure to this business. This is a new item and it's an item that was not previously included in our forecast. We have now included that in our forecast today. That offsets approximately half of the JPY15 billion in operating income improvement that I showed you on a previous slide.

Second item, which is a new item which we've included in our forecast, is FX losses stemming from the devaluation of emerging market currencies. So that's also been included in our full-year forecast.

Although we have a very comprehensive hedging program, there are just simply certain currencies that are not possible to be hedged, because a well-developed hedging market simply does not exist. So this accounts for the other half of the JPY15 billion in our operating income improvement offset.

Finally, there's one additional item I'd like to mention on this slide and that's as a result of the recent tax reform announced in Japan. We have included in our forecast a revision of our deferred tax asset balance, which is a negative on the tax line for the full year.

So we have included that in our forecast, but this is broadly offset by the positive impact from the previously-mentioned capital redemption. So there is really no large material impact in our net income after tax. However, I did want to point out to people that this is an item which is included in our forecast.

So, then turning to slide number 29. This is our management guidance. As we've said before, at this point we remain fully committed to our annual management guidance, as you see on this page.

Then finally, turning to slide number 30, I'm pleased to announce the date of our IR event later this year. We will hold the event on June 9 in Tokyo, and we'll focus on our updated R&D strategy and our oncology business unit, including NINLARO. We'll provide more details about this IR event in the near future.

So that concludes the presentation for today.

(interpreted) Now we would like to entertain questions. For those who are in the Japanese channel, you can ask in Japanese. If you are on the English channel, you can ask questions in English. Please limit the number of questions to two per person. Thank you.

(Operator Instructions). Mr. Yamaguchi, Citigroup.

(interpreted) I have two questions. First question is for clarification; JPY15 billion in operating profit. Regarding that increase, I have several. You have mentioned the reasons, but sales do not change in your guidance, so Summit and other projects will contribute, so cost for the year will be lower. That's the reason for the increase in operating profit, so regarding revenue for the year, it's going to be in line with your expectation? That's the first question.

Thank you for the question. You are correct that we did not update our revenue forecast. I did mention that we had some upside, as a result of NINLARO.

But when you look at the total impact on revenues, it's really less than one-half of 1% of total revenues. So for us to be able to forecast at that level of precision is just not possible, so that's why, since it's more of a rounding issue, we have kept the revenue forecast unchanged. So that is correct.

(interpreted) Thank you very much. May I go on to the second question?

(interpreted) Yes, go ahead.

(interpreted) Regarding NINLARO, it's a bit premature to mention sales projections, but when you look at prescriptions in the US, the number of patients is not big in this field, about 800,000 prescriptions. That's what I understand.

What's the uptake so far regarding the promotion activities and the client feedback in the field in the US? It can be qualitative comments, if you could share that with us, could you, please? Thank you.

Yamaguchi-san, thank you for your question. It's Christophe Weber here.

Look, the early feedback on NINLARO is very positive. We believe that we have slightly more than 500 patients already under the treatment by NINLARO. The managed care and the reimbursement process is also going well and the feedback from the [key parameters] and from the prescribers is very positive.

So, too early to say, but there is all the signals so far are green and so we'll see how it continues on this trend. Thank you.

(interpreted) Thank you very much.

(interpreted) Thank you very much. We'd like to move on to the next question.

[Nikkei, Mr.Ito].

(interpreted) Mr. Ito, Nikkei Newspapers. I have two questions. The first one is about the margin market. Based on the yen the revenue in Russia and Brazil was significantly reduced. This is only because of the FX impact or is there any sluggishness in the sales in that region? That's the first point I'd like to confirm.

Christophe Weber again; thank you for your question. It's mainly the currency exchange impact. In many countries in emerging market we don't necessarily see a slowdown of the markets. In some countries there is a restructuring of the market with, for example, low price generic having more attractiveness when it's an out of pocket market. But it's emerging trend, so we'll see how it is evolving. This evolution here in term of reported is mainly the exchange rate factor.

I want also to stress out that our policy our Takeda is not to increase price significantly when we are facing this type of exchange rate fluctuation, because we want our product to still be affordable to the patients.

We do increase price sometimes, but we are very careful about that, to make sure that our products remain affordable.

(interpreted) One more question. Earlier you mentioned about some loss to be incurred in Venezuela, so what is the target of that re-evaluation loss in Venezuela, in terms of the business in there?

So we haven't finalized all the discussions with our auditors, but if I venture a guess it would be somewhere between the JPY5 billion to JPY10 billion.

(interpreted) Well, I'd like to understand the scope of the assets, what is the actual assets to be impacted by that reevaluation loss?

So again, the main -- at this point, our view is that we have an intercompany receivable between Mexico and Venezuela for the supply of products. That receivable is denominated in US dollars. And because there is a large differential between the coded government -- official government exchange rate, which is I think VEF6.3, local currency, to $1, and the non-official exchange rates, which could be as high as VEF800 to $1, we would take a write-down in that intercompany receivable.

I would also add that we are not worried about our exposure in Venezuela, because for many quarter now and many years we have been very careful about our exposure in the country. So we have to potentially take this impairment here today, but we don't have a huge exposure in the country.

Credit Suisse Securities, Mr. Sakai.

(interpreted) This is Sakai; I have two questions. BRINTELLIX [has gone] -- or local time today I suppose, in the briefing paper what should we pay attention to in this briefing document? That's first point regarding Advisory Committee.

Also, this cognition function that's going to be added to the label in the package inside, that means in expanded indication in broad definition of indication, is that an extension of labelling, is that what it is?

Sakai-san, thank you very much for your question. It's Christophe Weber here. The -- well, don't go too fast on assuming that we will get an indication with the combination dimension. It's a significant scientific debate and regulatory debate, which is going on, as we speak actually because it's today -- or starting soon today.

So we'll see the outcome in the -- it's quite difficult to predict what will be the outcome. What we know is that there is an interest by the FDA to have this debate, otherwise we wouldn't have this meeting today.

The meeting will be in two parts. One, it will be a fundamental discussion about how to recognize effect in the field of depression and how shall we do that? Then, in the afternoon, it will be a more specific debate on BRINTELLIX and the data that we are providing.

It is very difficult to predict exactly what will be the outcome and the advice that the Advisory Committee will give to the FDA, and whether it will translate into an indication, clinical features or nothing.

Of course, this has significant potential positive consequences on BRINTELLIX, not negative, but potentially only positive, depending on the outcome, but we will see. It's very difficult to predict.

(interpreted) I have one more addition to ask. That means in your policy, you think, as the first step, addition to the label is important for you; is that the right understanding?

Well, depending on the outcome. Associated to that, there is the ability to promote or not. So I think that will -- of course, the label is important, because it will define what we can say about the feature of this product in the future, that's so -- but details matter, so that's why we need to see really the outcome of the Advisory Committee.

At the present time, I want to stress out that our forecasts do not assume yet that we have the ability to promote our combination features in United States. So again, we will see what the outcome of the Advisory Committee.

(interpreted) So when you say outcome, that means outcome from Advisory Committee, you are waiting for the recommendation; you're not talking about outcome of studies?

No, no, I'm talking, sorry, about the conclusion of the Advisory Committee. So the Advisory Committee will conclude and will give an advice to the FDA as how to recognize this combination data.

So it will be -- and usually, often the FDA follow the advice of the Advisory Committee; not always, by the way. So we need to wait for the advice of the Advisory Committee and then wait to see how the FDA manage this advice.

(interpreted) Understood. Thank you.

Mr. Hashiguchi, [Life] Securities.

(interpreted) Daiwa Securities; I have two questions. The first one is although it was not stated today, but at the very end of this presentation, there's the slide about the joint venture with Teva; long-listed products to be transferred to joint venture. I believe Takeda, going forward, continues to manufacture those products.

But what is the price set to be sought to the joint venture? The gross margin, how are you going to split gross margin between Takeda and the joint venture?

In conjunction with this joint venture or transfer, I believe you are going to get the profit share. What is the level of the profit you can get?

Relative to the reduce -- expected reduce in long-listed product sales? Are you going to have the positive net result, or in the future, inclusive of a generic profit, which will be generated from Teva Pharmaceuticals basically through this joint venture, you think that you can get the profit positive (inaudible)?

(interpreted) So first question should be answered first.

Thank you very much for your questions. So we are transfer some LLP's product to the joint venture. At the same time, we have 49% of this joint venture, so any profit in the future generated by the joint venture will be split 51% to Teva, 49% to Takeda. That's the overall scheme.

The way we structured the joint venture, we made sure that this move is EPS and cash flow accretive in 2016 and beyond. So that's how we have balanced the economic of the deal if you like. So we made sure that we don't transfer too much, for example, profit as we didn't want to have an EPS dilution in 2016.

So it's complicated. I don't want to give you all the details about the economic of the joint venture, but what is important is that we -- it's EPS accretive for us in 2016 and beyond, and it's cash flow as well.

So long term in the future, of course, these LLP products are declining significantly and they will continue to decline. We'll continue to own 49% of the joint venture, which, at the same time, this will develop a generic business in the Japanese market. So that's how the overall deal is structured.

So what we will do in May when we will express our guidance for 2016 is that we will pay special attention to the EPS guidance, because there will be -- the joint venture will impact our net profit and our EPS. We will give you some guidance on that, so that you can bridge from the core earning to the EPS if you like. Did I answer your question?

(interpreted) Yes, understood very well.

The second question is about the NINLARO, the future development direction about this product. Recently, in multiple myeloma, there are series of antibody products delivered positive data, one after another. So combination development are already ongoing in the competitors, together with the proteasome inhibitors. So in Takeda, do you have any directions to combine with the antibody drugs for your proteasome inhibitor?

We know that there are so many new agents that have been registered last year that everybody will look at what is the most effective combination, possibly by disease stage and by treatment.

We will be part of this research, if you like, which is what is the best sequence of combination, looking at efficacy as well as cost effectiveness, as well as toxicity and long-term sustainability of the treatment. This is where we believe that NINLARO has a key advantage of being effective, but with a low toxicity and a very easy way of administration.

We believe that it could become the backbone -- one of the backbone of treatment of multiple myeloma over time, because it could provide to the patient strong efficacy with good quality of life. But we know that NINLARO will be combined with other products in many cases.

We do have a Phase III maintenance therapy, [immunotherapy]. But otherwise in other Phase III, NINLARO has always been combined, mainly to Revlimid so far. But there will be a change of combination.

I think it's quite difficult, at the moment, to predict which combination will end up being used, because there are so many possible combinations. We -- talking with [key parameters], we know that they are all looking at exploring that. We will support this exploration, in order to optimize the treatment of multiple myeloma.

(interpreted) Thank you very much.

It's approaching the time to close so next question should be the last question. Please go ahead.

(Operator Instructions). [Mr. Izola], Asahi Newspaper.

(interpreted) Today, you announced consumer healthcare and it's now a subsidiary. What's the intention behind this? Takeda/Teva has joined business now and the resulting consumer healthcare, maybe you are going to lower your capital ratio from 100% to much lower level. Is that the plan (inaudible)?

Thank you for the question. The intent here is to really reinforce our consumer healthcare business in Japan. Today, it's a very strong business unit, but we know that in the future we'd like to add more brands. We know it's also different business than our pharmaceutical business, so we will give them more autonomy to build up themselves.

But, also, it will potentially open to opportunities to grow further our activities in the consumer business. It's a long-term strategy here that we are having in mind.

(interpreted) Thank you very much.

(interpreted) Are there any other questions?

(interpreted) I have one more question. Maybe it's not directly related to earnings, but in December (inaudible), there was discussion regarding recalculation of prices based on market size and there are various issues. What do you think are most important topics in the discussion of two years ago of (inaudible), Central Insurance Council? Thank you.

Well to me, the most important is that the Japanese Government and the policies remain committed to rewarding innovation. That's the key and I think that's very important.

At the moment, there is a very strong generic development and we understand that and we support that. That's also why we are doing the joint venture, because we believe that that will create a financing resource for the healthcare system, but also to reward innovation. That's the most important part.

(interpreted) Thank you.

(interpreted) Thank you for your question.

With this, we'd like to conclude with today's conference call. Thank you very much for your participation, despite your busy schedule.

Thank you for your taking time. That concludes today's conference call. You may now disconnect your lines.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.