Takeda Pharmaceutical Co Ltd (TAK) 2016 Q4 法說會逐字稿

Thank you very much. Thank you for taking the time to attend this session.

I'm very happy to present our 2015 annual results and also the outlook for the Company, not only in 2016 but also a little bit more long term this year for the next three years, and our long-term aspiration as well.

So I will also talk about what we have achieved, not only financially, but also how we are progressing in the transformation of the Company. I think it's important for you to understand also how we are developing our activities and our business.

As you know, we have developed a very clear strategic roadmap for the future, and this is really what we are in the process of executing. This is nothing new here. This is something which has been existing now for a bit more than one year.

We want to be a value-based company and we have made a lot of activities in the last two years on that. We want to be a company which is trusted by the society, which has a very strong reputation and we want to reinforce our reputation everywhere where we operate. And of course, we believe that if we have the patient centricity on top of that, we'll have a very successful business in the future.

So in everything we do, in all the decisions we make, we think about patient, trust, reputation, business in that order. We think that in the current environment, with some issues that the pharmaceutical industry is facing in many countries, this is very important for our future success and sustainability.

We want to be very patient-centric and we have designed an organization where we hope that our employees will have a lot of empowerment. We want to be a very agile organization in spite of our complexity and size. And we are focusing a lot on internal talent development so that we are grooming the next leader internally for the Company.

We also want every employee to deliver its best and to really have the opportunity to deliver its best in the future.

R&D is absolutely key in our strategy and we'll talk more and more about our R&D strategy. We made some very important decisions last year about therapy area focus that we will have, and that's of course something we'll have to deliver against it in the future.

And of course, business performance is very important. We want to grow again. We want to improve our profitability in the future, and we'll talk about that for 2015 and also for the outcome.

What is our long-term aspiration? Our long-term aspiration again is to be trusted by the society; is to have a very strong reputation; to be a value-based company. We want to be recognized as a very attractive company to work for. And of course, we want to have a steady pipeline, a continuous pipeline for the future, to continue to grow.

We have also a very specific long-term aspiration in the therapy areas that we have selected. We want to be the leading global GI company. We want to be a very significant player in the oncology field. We want to be a strong CNS player. These three areas will allow us to keep our leading position in Japan, and will allow us to continue to grow in US and in Europe. And of course, in emerging markets, we will continue to leverage our value brands, but also, we will launch our innovative product in emerging markets and we can discuss about that further a bit later.

In the next three years, when we look at our sales growth and underlying revenue, we believe that we can grow at a mid single-digit level. And our aim, in fact, is to have our profitability to grow 2 times faster than our sales, and that's really what we are aiming for, and that's something we have already delivered in 2015 but we want to continue to focus on that moving forward.

You can see here our underlying revenue in 2015, plus 3.4%; core earnings, plus 8.1%; underlying core EPS, plus 21.7%. Rudolf will detail this financial result and this management guidance just after me.

In 2016, we are seeing an acceleration of our growth, mid-single digit; and low to mid-teen growth for our core earnings and core EPS.

So that's really what is really driving us is to sustain our growth and to have a very competitive growth. This type of growth is above the market growth, the global and the pharmaceutical market growth, and I will explain how we will deliver this growth in the future.

But you know already, if you are following Takeda, and I see many faces who are following well Takeda, this growth is mainly driven by the innovative products that we have started to launch, like ENTYVIO, like NINLARO in the future, TAKECAB in Japan for example.

We have built a very strong leadership team, it's a very diverse team; we have eight nationalities in the leadership team. I am very happy to say that we have found our future CFO, it will be announced in the coming days, so you will see the announcement very soon in the coming days.

I want here to also recognize and to thank Rudolf for the role he has played as Acting CFO. Rudolf will continue to play a very significant role in Takeda, so I think we will reinforce a lot our finance team with Rudolf and the new CFO, and again we will announce it in the next few days.

But I want to insist on this team, which is very strong, and many of the faces here are relatively new in the Company, but this team is very operative at the moment. And this is one of the reasons we are able to deliver the type of result that we are announcing in 2015 because it is really a team on top of the business; understanding the sales drivers but also showing the right level of discipline on our cost.

And we are improving significantly the way we are managing our cost base; you will see that we have improved significantly our operating free cash flow and that's because of the discipline we are able to have with this team.

So let's look back at 2015. I will not dwell too much. We have made great progress in terms of the value of the Company and how we want to conduct our business. We have developed a program for providing better access to our medicine in emerging markets and our patented product will be the first beneficiary of this program; it's very important for us.

We are measuring our customer satisfaction in every country. We have developed a customer satisfaction index where we see how we rank by specialties and by country, so it's a very precious tool for us to measure our performance.

We have introduced many development programs and diversity programs in the Company. These programs will progressively again deliver the next generation of leaders for the Company.

You will have noticed, perhaps, that in the team that I mentioned earlier, many people came externally, including myself. We are really investing on our internal development program so that we have more internal promotion in the future.

Diversity is key for us. We believe that strong diversity generates strong creativity and innovation, and that's what we want to be as a company. So it's not only a Japanese program. Of course, we want to improve our diversity in Japan, but it is a global program that we are really focusing on.

Now we had great success and some setback in 2015 regarding R&D. Of course, NINLARO approval earlier than expected was a great success, and I will talk further about the launch of NINLARO.

ENTYVIO; we are continuing the rollout of ENTYVIO. I want to stress out here that ENTYVIO, when launched in emerging markets, is also very successful. So in every single country where we launch ENTYVIO, we have beat our forecast, and that's a testimony of our ability to launch.

BRINTELLIX; frankly we were hopeful to have the cognition indication label because the advisory committee was very supportive. We got the complete response later from the FDA; we are analyzing it. We will continue to work with the FDA to eventually get the recognition that we believe the product deserves.

On vaccines, in fact 2016 will be key, because in 2016 we should start the Phase III -- we should initiate the Phase III for our Dengue vaccines. We have continued to work on vaccines; vaccines is always a long development but we remain committed to the vaccines.

And of course you are aware of the collaboration we did with Professor Yamanaka of Kyoto University that's a T-CiRA collaboration. This is really moving ahead very well. We have already six principal investigators working on different programs [soon] 8 and [soon] 10. So this is really working very well, and we are very pleased with this collaboration with Professor Yamanaka.

So we are very pleased, we are very satisfied with the 2015 performance. We are delivering our guidance; plus 3.4% in revenue; core earnings plus 8%; core EPS plus 21%.

We have good control of our OpEx; I will talk about our growth drivers lately, but GI, oncology, CNS and emerging markets. Perhaps emerging markets is a bit lower than what we expected, but otherwise, we are very satisfied by our overall performance.

I want to say a few words about the deals that we have done in 2015. We decided to sell respiratory because frankly, we were not performing well in respiratory. And because we were not performing well, we were investing a lot of resource behind this product. We're sure that we can leverage better behind ENTYVIO or other products.

Also, because we were not performing well, we were facing impairment every year that we will not face, and that's why in fact this deal is EPS accretive as well. Every single deal here is EPS accretive for us.

CONTRAVE is the same, in a way the same. CONTRAVE we did try; we had a good launch, but we believe that we have better investment to make in our US business. We believe that for $1 investment we can get a better return and more success with ENTYVIO or the products we are promoting, compared to CONTRAVE, so we decided to sell it back to Orexigen, our partner there.

Then the Takeda Teva JV, here it's really instead of letting our long-listed product declining to a zero level, we decided to partner with Teva to have a 49% of future generic business. This is also EPS and cash flow accretive, but also it give us an opportunity to own half of this JV which, hopefully, will be very successful in the Japanese context.

This is a real win/win deal. Teva knows very well the generic business; we don't know the generic business so well. Teva does not know so well the Japanese environment; we know the Japanese environment very well. We know how the wholesaling, the distribution, work, so we believe it is a real win/win situation. Again, we were able to have the right level of negotiation in order to, with the declining asset, to still own 49% of the JV.

Looking at our growth drivers; GI, oncology, CNS and emerging markets represent about half of our total business, and overall they were growing at 9.5%. Oncology growth is a bit lower 1%, but that's because we are slowed down by the VELCADE royalties in Europe. If you extract VELCADE royalties, and VELCADE is sold by J&J and they are facing generics already in Europe, if you extract these VELCADE royalties our growth in oncology is 4% in 2015.

ENTYVIO, it's really a great success; all the indicators are on the green whether you look at the official guidelines, whether you look at our market share in the US. For example, currently if you look at our new prescription and switch market share we are at the level of 20% in the US, so it's a very strong dynamic, very successful. That's why we are slightly [pre-sizing] our guidance, if you like, so you remember that we said ENTYVIO will generate more than $2 billion sales, but so far, we didn't say when.

Now we are saying that by 2018, so four years after launch, ENTYVIO will pass $2 billion bar, if you like. It's a very positive, and it's positive not only in the US, but we are seeing very strong uptake in Europe and also in emerging market, and we are developing the product to launch it in Japan as soon as possible.

Geographic expansion is key for us for ENTYVIO. We are also generating a lot of data to support further ENTYVIO, and not only in the field of GI but also potentially in other field. You can see that we have a lot of investigator sponsored studies also ongoing, which shows, in a way, the scientific interest which is existing on this product. It's a great success and, in 2016, ENTYVIO will become the biggest Takeda product in the world.

NINLARO it's a bit too early to say, but we are very pleased so far with the signal that we are getting in the US market. We believe that this product has a unique feature in terms of efficacy, safety, and convenience. We believe that the long-term vision is that NINLARO will be one of the backbones of treatment of multiple myeloma. We are very hopeful that it will become also a multibillion product. We still need a few more weeks, a few more months, to be a bit more precise about the (inaudible), but it's clear the signals are very positive.

The market coverage in the US is very strong already; we have already more than 1,400 patient under treatment with NINLARO in the United States. We are in dialogue with EMEA on the EU approval; we've got orphan designation in Japan; and we have very significant Phase III development programs to generate data in all segment of the multiple myeloma market. It is one of the most comprehensive and significant development in the multiple myeloma disease.

It's so far so good, and we need to continue to drive NINLARO. I want to stress out that NINLARO will also be the fastest global launch for Takeda in the future.

In 2016, in fact 2016 is a continuation of 2015, no new strategy; it's really focusing on execution, continue to work on our values and how we conduct our business. We have a very clear corporate strategy; for example, a social responsibility strategy. Access to medicine is very important because we want NINLARO and ENTYVIO especially, but also the vaccines later, to have full access in emerging market. And we developed a program for that which I believe will be very innovative and we will start to [get] these programs in emerging markets in the future.

We are focusing our access to medicine agenda on the patented innovative products instead of focusing on the non-patented products where there is a lot of cheap generic available. Of course, we are also making sure that these products are available. We believe that the most challenging access issue is for innovative patented products in emerging markets, so we have developed a program for that.

We'll continue to focus on our patient centricity and customer satisfaction. We'll continue to focus on the talent development and investing in training for our employees. And we'll continue to focus on the diversity and inclusion agenda. We have specific targets in Japan for that, but we also have specific target actually outside of Japan as well.

We have decided to focus on a few therapy areas. This is a big decision because there will be a lot of change coming in the organization to align our capability and capacity based on that choice. We believe it is the right choice.

When we look at the pharmaceutical market, the stringency of the market for the innovation is very high. It's getting higher and higher. So unless we are able to bring truly innovative products to the US, to Europe, in the future as well to Japan, true innovation to the market, we believe that focus is a key.

In how many therapy areas can we be among the best in the world? Not 10 we believe, and that's why we selected GI, oncology and CNS especially as a therapy area where we want to excel and we want to be among the best. That's a very important choice for us in the future.

Our aim in succeeding is to move our Dengue vaccine into a Phase III. So a key milestone for us to initiate our Phase III programs on our Dengue vaccines in 2016. We'll come back to that. We have a full day in June about our R&D strategies. On June 9, we have focus on R&D and focus on oncology and, by then, we'll have a bit more information on NINLARO as well. So I hope it will be a very interesting day.

But that's where we are focusing oncology, GI, CNS. Specialty CV we mention it because we have a few very interesting projects, so we are focusing on these project there. And then vaccines is still around, especially Dengue vaccines and Norovirus vaccines, as you know already.

Now, of course, the challenge for us as an organization is that, in order to compete and to be among the world leader in especially oncology and GI, we need to master different technology; small molecules, biologics, monoclonal antibodies, cell therapies. So that's really where we want to be good at, in order to bring this best innovation in oncology and GI.

And that's, in a way, the challenge for Takeda. That's why also we focus on internal investment, as well as external. So you will see more research, R&D partnerships, more external collaboration in the future, because we will not only invest internally, but also invest externally in the future.

In terms of business, ENTYVIO and NINLARO will be, by far, the contribution to our growth in the future. Frankly, I don't think anything can stop ENTYVIO now. The dynamic and the attractiveness of the product and the support by the scientific community is very, very strong. So we will just continue to see a very strong momentum with ENTYVIO.

As I mentioned earlier, we are in the process of doing the fastest possible launch of NINLARO worldwide. We have already launched in the US; we launch in Europe soon; we are planning to get approval in 37 countries in 2016 and to be under review in 27 more. So by far, it will be the fastest rollout global launch for Takeda in its history.

In our mind, capital allocation fully aligned with our strategy. And this is perhaps something a bit new, but nothing really surprising. Cash return to shareholders is important. In 2016, we are maintaining our dividend of JPY180.

If you look at our capital allocation, for us, it's on one side the shareholder return; on the other side is pipeline. If we have the opportunity to reinforce our pipeline for the future, we will do so. And, of course, the third area is potential acquisitions to reinforce our growth drivers. So we are looking at GI, oncology, CNS.

And we'll find clever acquisitions in this space in order to reinforce further our growth drivers. Some acquisitions could be a combination of pipeline business but, basically, it will always aligned with the strategy that we have outlined and you just saw.

So again, before we go into details on the financials, this is the acceleration that we wanted to share with you. We are very happy by the fact that in 2015, we described 2015 as a turnaround year and this is what we are delivering in terms of growth. We are very satisfied about that.

We believe that we will see an acceleration in the future. And we have a very clear long-term aspiration of being a leading Company, not only in Japan but also in US, but also by therapy areas, so being the leading number one GI Company in the world, being in the top 10 oncology companies, strong CNS.

Not many companies, in fact, are really focusing on CNS. We believe CNS is a good therapy area to be in. And, of course, we'll continue to reinforce our emerging market presence in the key countries that we have identified.

June 9, this is an R&D strategy and oncology day, so please attend if you can. And before going to questions, we'll have a presentation by Rudolf on the finance. Thank you very much.

Good evening, everybody. It's really a great pleasure for me to be here today and I think I have the privilege today to present a set of results which I think are a very good set of results.

So if we turn to slide number 4, first and foremost, I'm very happy to say that we've achieved our management guidance for the second consecutive year. Underlying revenue was up 3.4%; underlying core earnings, up 8.1%; and underlying core EPS, up almost 22%.

We also achieved two great milestones during the year. ENTYVIO reached $1 billion in cumulative sales since launch, and then we also had the launch of NINLARO back in December, a few months ago.

I would also like to say that Project Summit is proceeding very well and we have exceeded our full-year savings target. Also, we had a fantastic year in terms of cash flow, and I'll talk a little bit more about those two items later on in the presentation.

As usual, we'll first take a look at the reported income statement. Reported revenue for the year was up 1.7% and that was an increase of almost JPY30 billion versus the prior year. Revenue was driven primarily by ENTYVIO, which performed very strongly and was up JPY58 billion versus the prior year.

But apart from ENTYVIO, we had fairly broad-based growth across a number of other products, including AZILVA, DEXILANT, BRINTELLIX and VELCADE and they all contributed nicely to our growth story.

There were also some negatives and the big negative that we have been reporting on for the last many quarters was CANDESARTAN, which is known as BLOPRESS in Japan, and that was down by JPY41 billion, and then COLCRYS was also down by JPY12 billion. Both of those were suffering from generic penetration.

Looking at gross profit, our gross profit increased by JPY15 billion for the year, which was an increase of 1.2%. We had a small decline in the gross margin and that was mainly related to foreign exchange rates and adverse product mix, and mainly for product mix, the decline of the Japan portfolio, which is a fairly high margin business.

Operating profit was up JPY260 billion versus the prior year. The reported operating profit was very much distorted by a number of one-off items and the biggest one, of course, was the ACTOS litigation expense that we accrued in 2014. We also had purchase accounting impacts related to COLCRYS. We had a large gain on the disposal of real estate. Those were all items effectively which we had in 2014.

We have discussed them many times over the past few quarters and, of course, also last year. So in the interests of time, I will not go into each of these. Just to say that, when we look at our underlying core earnings in a few slides, it's actually much more reflective of the true performance of the Company, so I'll just hold until we get to that slide.

And then going down to the bottom of the P&L, our net income and our EPS were also very significantly ahead of prior year; again, to a very large extent, impacted by so many of the negatives we had last year and we had a negative, of course, net profit last year. On the side of the slide here, just for your benefit, we've listed a lot of those items which impacted the business last year, so it's just to provide a little bit more transparency.

So then, how did we do versus our reported forecast? Our revenue was broadly in line with the forecast; we achieved 99% on the revenue line. If you look at the breakout of that; we grew a little bit faster on ENTYVIO than what we had expected, we declined a little bit faster in BLOPRESS than what we'd expected, but they broadly all offset and we achieved broadly the revenue forecast which we had put forth.

We look at operating profit, we were ahead of our guidance by 9%. One thing when we had the Q3 call, I signaled at that time that our R&D expenses were likely to be a little bit higher. As a matter of fact, it did end a little bit higher for the year, but that was offset by lower G&A expenses where we did very well, and that was also aided by the higher Project Summit savings. And also, our impairment expenses were a little bit lower than what we had included in our forecast. So those items more than offset those higher R&D expenses.

One other thing -- profit before tax, I'll talk about that first. We were about 5% above guidance and that was mainly driven by the higher operating profit. You can see that the operating profit was up 9% and the profit before tax was up only 5%, so why is that?

Again, in the Q3 investor call, I mentioned that we were considering a write-off of an intercompany balance with our Venezuela business. We've given this a lot of thought and, since Q3, the economic troubles in Venezuela have actually gotten quite a bit worse. So we've had a number of discussions, including with our auditors, and we decided to follow a conservative approach and deconsolidate the whole entity.

This is actually, when you look at a lot of multinational companies operating in Venezuela, you'll see that a lot of them have followed the same approach. So I think we're really in line with the way that other companies are tackling this issue.

If you look at between operating profit and profit before tax, we have a JPY5.5 billion loss associated with the deconsolidation of that entity. That's in the financial loss line on the P&L. The total net income impact of that Venezuela deconsolidation was actually about JPY6.6 billion.

Of course, the advantage of no longer having this in the future is that we no longer are exposed to risks there in the future. That's one of the advantages we have. And ultimately, if the entity recovers in the future, we'll have the discussion with the auditors and we can reconsolidate it again. But I think, for the time being, this is the most conservative treatment.

Then net profit and EPS were both about 18% above our guidance for the year. And that was really the result of the higher operating profit and then also a lower effective tax rate.

Now let's take a look at the underlying income statement and again, I think this is very much more reflective of the true performance of the business. Just to remind people, when we look at the underlying revenue, there's really one major impact between the reported revenue and the underlying revenue, and that's really FX. That's the biggest change that we adjust for.

You can see the bridge between the reported and the underlying revenue in the appendix; I think it's around page 33. But really FX is by far the largest impact.

If we look at underlying revenue, we were up by 3.4% for the year. As Christophe showed, our growth drivers performed very well last year; they were up by about 9.5%. This was more than sufficient to offset the decline of BLOPRESS and COLCRYS.

If we look at the underlying gross profit, we were up about 2.2%, which largely, again, followed the sales increase. Then gross margin, just like on a reported basis, we were down slightly versus last year, and again, that's mainly related to product mix and also related to FX. You would say, well, why FX? This is all adjusted for FX, but this is transactional FX not translational FX.

If we continue to move down, you can see total operating expenses. We put a little blue circle or square, whatever that thing is around it, and you can see that they were very well controlled for the year. Our operating expenses were up less than 1% for the full year.

Just to put that in perspective, as you all recall we've launched a number of products over the last 18 months. ENTYVIO launch is in there, which was in June of 2014; TAKECAB; NINLARO, which has recently launched. So we had, of course, higher sales and marketing expenses to support those launches. Yet, despite that fact, we were still able to keep our OpEx limited to 0.9% for the year. Again, as Christophe mentioned, we're really starting to focus a lot on cost discipline in the Company.

Then if we go to underlying core earnings, we were up 8.1%. Again, if you look at the reconciliation between the reported operating profit and our underlying core earnings, really two main things that play, and it's in appendix 34. But the main difference is really amortization and impairment that's included in our reported operating profit but is excluded in our underlying core earnings. Then the other item, which is much less significant, is restructuring expenses, mainly related to our Summit project.

If we keep going down, the underlying EPS was up almost 22%. Again, that's driven by the higher core earnings and that's combined with a lower effective tax rate. So I think overall, a very nice performance for the year.

Now on the next slide, how did that compare to our management guidance. As you will recall, and we have reaffirmed that guidance I think every quarter last year, our underlying revenue guidance was low single digit and we achieved 3.4%, which is right in the low single-digit range.

Our underlying core earnings was higher than underlying revenue growth. We were up 8%, which is more than twice as high, of course, as our sales growth. Then the underlying core EPS, our guidance was higher than our underlying core earnings, and we were almost three times higher than our core earnings. So again, I think a very nice result for the year.

Christophe has showed you this slide so I'm not really going to get into it. We've added CNS as a growth driver this quarter. That's really to align our growth drivers with our therapeutic area focus. Our therapeutic area focus was GI, oncology and CNS, so we've added CNS to our growth drivers as well. The biggest product in there is BRINTELLIX, which has been growing more than 60% year over year.

The next slide really is a graphical representation; it shows our growth drivers. They were up about 9.5%, and they account for roughly 50% of our total business. So on a total sales basis, they were up roughly half of that 9.5%, which is 4.7%. Then that was offset by mainly CANDESARTAN, which is BLOPRESS, and COLCRYS. Then we had growth among a number of other products as well, trying to offset that impact.

If we turn to slide number 13; this slide gives a breakdown of underlying sales growth by region. As we've reported in previous quarters, the US really was the largest regional growth driver for us, and that was up 12%. That was really because of ENTYVIO and BRINTELLIX both performing very well.

Emerging markets also continue to go, albeit at a slightly slower rate, and that's really reflecting some of the economic uncertainty in some of our main regions, in Russia and Brazil and, of course, the general slowdown as well in China.

Japan, sales decreased by 3.3% for the year and that's really because of the large BLOPRESS decline. And then Japan other increased quite well, and that includes mainly our consumer healthcare business, which had a fantastic year, mainly on the back of sales of vitamin-based ALINAMIN tablets.

The following slide shows our global sales and you can see our global sales remain fairly balanced with roughly one-third coming from Japan, another third coming from the US, and then the remainder coming from the rest of the world, including Europe and emerging markets.

And then on the right-hand side you see the little breakout for emerging markets. As I said on a previous slide, we're definitely seeing a slowdown in emerging market sales, which were up 4.8% for the full year. And this is below our long-term aspiration of high single-digit growth rates in emerging markets. However, we remain fully committed to emerging markets; I think every six out of seven people in the world live in emerging markets, and we still are very much committed to the future growth potential in these regions.

Let's take a look at Project Summit on slide number 16. As everybody knows, our five-year commitment for Project Summit was JPY120 billion. Our target in 2015 was JPY20 billion and we ended up achieving almost 50% more, JPY30 billion. And really, the higher savings were the result of our procurement organization, and our procurement organization is really getting a lot of traction and doing extremely well.

Our savings target for 2016 is also JPY20 billion and I think already, right now, we have very good line of sight where those savings will come from. So we're very confident that we will deliver those savings in 2016.

And then we have a remaining target of JPY20 billion in 2017, and again, I think we're starting to get fairly good line of sight of where those savings will come from. And, again, we're fairly confident that that last JPY20 billion will also be delivered. So I think, at the end of the day, I think we should over-deliver slightly on our five-year Project Summit commitment.

Let's take a look at cash flow. Cash flow was a real success for us during 2015, and operating cash flow, and we've excluded here the large ACTOS settlement payment, because that's obviously not part of regular operating cash flow, but for the rest it's straight from our audited cash flow statement.

We ended at close to JPY230 billion of positive cash flow after CapEx, and that compared to about JPY74 billion the previous year. So that means that our operating cash flow in 2015 was quite a little bit more than three time more than what we had in 2014.

The majority of the improvement versus last year was related to better working capital management. And, again, when we had the Q1 investor call, at that time I mentioned that working capital was going to be a big focus area for us during this year, and that's really paid off for us.

If you look at 2014, working capital was an outflow of JPY54 billion, and in 2015, working capital was an inflow of JPY23 billion. So there was a net positive of JPY78 billion versus the performance last year. And then also the remaining improvements were the result of lower cash taxes and less spend on CapEx, mainly intangible assets.

When you at the slide, I'm also very happy to say that our operating free cash flow was more than sufficient to cover our dividend for the past year. And I think also, when you look back, this is probably the first time in a number of years where we've generated operating free cash flow in excess of our dividends, and we were quite a bit in excess of the dividends. So overall, very good year for us from a cash perspective.

So then turning to the next slide; this slide shows our debt maturity profile. And if you maybe concentrate the on the orange or yellow lines on here, during 2015 we repaid JPY100 billion of debt that came due. Unfortunately, because we had the big ACTOS settlement, we also then entered into new bank loans of JPY150 billion. And you can see the maturities there in 2022 and 2025, JPY75 billion in each year.

And then what's not on this slide is that just in the last month, in April of this year, we also entered into an additional syndicated loan in the amount of JPY200 billion, and again, maturities ranging from seven to 10 years. So JPY100 billion of that JPY200 billion new loan will be a seven-year maturity, and the other JPY100 billion will be a 10-year maturity.

And that's really to refinance the debt coming due in 2016; you can see have almost JPY180 billion of debt coming due in 2016. So that gives us actually quite a nice debt structure with very low interest rates and quite long maturities for us.

I want to spend a few minutes on disclosures, and I think some people have been frustrated with the amount of information that Takeda has disclosed. And so in Q3, we started a project to really review our disclosures with the aim towards increasing the level and transparency of information that we provide.

So in Q3, we started disclosing information on a product level, specifically for our largest products, which account for more than 50% of our total sales. And we've also added to that, and that's in the data book, our expected range of growth for those products for 2016. So for each of those products, you can see that we've given a forecast of where we expect those products -- how we expect them to develop during the year.

We'll also give quite a bit more transparency about the assumptions that are included in our reported forecast, and I'll talk about that a little bit later on. And we will also disclose our CapEx forecast for the year 2016, so that people can then make their own cash flow projections for us for the year.

Apart from these items, we've also taken a look at our core earnings definition, and we've decided to simplify it and make it a little bit more transparent, and just user-friendly, for external stakeholders. Maybe I'll just take you through some of the changes, and I've prepared a simple bridge, which shows our reported earnings, then shows the reclassifications that we would make to get to core earnings. And that's shown on this slide, slide number 22.

The first change that we make is that, previously, we had amortization and impairment expenses broken down under several different lines in our P&L. We had it included, of course, in the amortization and impairment line, but we also had amortization and impairment expenses included in our R&D expenses. So we've agreed with our auditors that, going forward, we will report all amortization and impairment just in that one line item so people can easily see what the total amount is for the year rather than trying to figure out by carving it out of different line items.

The impact on this is about, you can see here in the first column with the little 1 next to it, it's an impact of about JPY6.6 billion on R&D expenses. And then the opposite impact on amortization and impairment. Really no impact on operating profit; it's just a reclassification on the P&L, but no impact at all on the operating profit.

The second adjustment that we'll make is we will start adjusting for non-recurring items, but only items that are greater than a threshold of JPY1 billion. We want to avoid having a lot of small adjustments all over the place, and we just want to say we only focus on large items.

Again, I think, it increases the credibility and transparency of the adjustments that we (technical difficulty) related to the deconsolidation of the Venezuela business. So under the new definition, we would not make any other adjustments. We only make an adjustment for this deconsolidation of our Venezuela business.

And then the third item is that we will then draw a line of core earnings between R&D and amortization and impairment. And for us, that really reflects the core development of the business. It's our sales, it's our gross profit, and it's all our operating expenses including R&D. So in the future, that will then be the core earnings that we have for our business.

Then, of course, we go from reported core earnings to underlying core earnings, and for that we will make two adjustments. One is for FX, as we've done in the past, and the other one is for divestitures. If you look in 2015, we would only have an FX adjustment, and then in the last column you can see what the core earnings would be.

Now, I want to point out that we're not changing the definition to try to flatter our core earnings, to make the core earnings higher. That's absolutely not the problem. What we want to do is we want to make sure that our core earnings are more transparent for everybody. And effectively, you all can calculate it yourselves because you all can draw that line between R&D and amortization and impairment and see very easily what our core earnings are.

As a matter of fact, I said we're not trying to flatter our results. As a matter of fact, if we do this, our results actually would be lower. So our core earnings, you can see here, would be JPY303 billion; under the old definition they were JPY307 billion, so we actually lose some core earnings. But again, for us, the objective is to make it more simple and to make it more transparent for everybody.

And then in the next couple of pages, I'm not going read all of this because then I'm going to bore you to tears, but I had the narrative which explains how our core earnings are calculated. We did a lot of benchmarking versus other companies, Japanese companies and foreign companies, to make sure that we are showing our core earnings on the same basis as our peers. So again, it makes it easier for you all to compare our results versus that of other pharmaceutical companies.

So then I want to go to our management guidance for 2016 and Christophe has already shown our guidance for 2016. We are upgrading our underlying revenue growth from the low single digits that we had before to mid-single digits. We are updating our underlying core earnings growth from the 8% or so that we reported in 2015 and we expect that to be in the low to mid-teens, so it's the low double digits for 2016. And then, we're also expecting our underlying core EPS to be around that same level in the low to mid teen growth. So again, the low double-digit growth for the year.

Before I get to the reported forecast, I want to spend just a couple of minutes on the Teva deal that we did because, before I want to go through the reported forecast, it's important that people understand the deal, what the financial implications are, because they will have implications for us in 2016 and beyond.

With this deal, we transferred about 30 molecules, which is about 87 different products, to the Teva JV. And that includes BLOPRESS which I mentioned a lot today, which is a product which is declining, of course, very fast. If you look at that little graft on the left-hand side, you can see that the sales of these products that we transferred have been declining very rapidly. You can see that, in 2015, the sales were less than half of what they were only two years before.

And although it's, of course, difficult for me to say with precision what would have happened in the future to these sales, I think if you extrapolate the trend, you'll see that the contribution in 2016 and 2017 and 2018 would have been very, very small at the end of the day. So the contribution of these products would have gone close to zero, or would have gone at least very, very low.

So what did we do? Rather than waiting for these products to disappear, we proactively transferred them into this new Teva joint venture. Why did we do this, and what did we get in return for this? In return for transferring these declining products we received a 49% stake in this joint venture.

In return for transferring these declining products we now have Teva as our partner, and Teva, as you know very well, is probably the largest and most successful generics player in the world. And Teva is also currently, I think, in the top three generics companies in Japan, after this transfer. And Japan, of course, is probably the fastest-growing major generics market in the world. So we now have this 49% stake in a venture which will, in the future, start to grow quite significantly.

Another benefit for us of transferring these products is that we are no longer burdened with having these long-listed products which are declining and we can really focus now, the future, on our innovative and growing products.

So I think if you look at the midterm, I think this is a positive deal for us. Again, the contribution of these products, had they remained with us, would have been very small. Now in exchange, we have this 49% stake in a growing business and that business will generate cash flow for us, in terms of dividends. And that business will also generate a profit for us in the sense of we have equity profit -- 49% of the profit of this business we will show as equity income in our financials.

Of course, as time goes by, that equity income that we have from this business will more than offset the contribution that we would have had from these products, which were declining very fast. So again, I think it's important for people to understand this and if there's questions after, we'll be more than happy to address them.

So then, what is our forecast for 2016? This is the reported forecast. If you look to revenue line, revenue were expected to go down by 4.8%. So why are revenues expected to go down by 4.8%? Two real impacts in there. Number one is FX. We're using FX rates, dollar/yen rates of JPY110; the average rate for last year was JPY121. Similarly, with the euro, we're using weaker euro rates and, of course, that has an impact. And you'll see a little bit later that the impact of that is a little bit more than JPY90 billion at the revenue line.

The second impact that we have is that we are losing the Teva sales that I just went through, and we also, as you know, divested our respiratory business, which was also a declining business. And so, of course, those two impacts will also have an impact on the top line.

And then we're going to show a growth, on an underlying basis, of our growth drivers, such as ENTYVIO and NINLARO, TAKECAB, BRINTELLIX, etc. So that will offset part of the decline, but in the first year it will not offset all of the decline.

R&D expenses, you see them going down. In actuality, they're not going down; they're going down here because of FX. Again, a lot of our R&D expenses are in dollars and then, when we translate them into yen at a stronger yen/dollar rate, of course, it shows like as if they're going down. But they're really going up slightly on an underlying basis.

Operating profit were expected to increase by 3%. And in an effort, again, to increase the transparency of our forecast, we've listed a lot of the assumptions on the right-hand side of this slide. So let me just go through some of the assumptions.

R&D, we covered it, it's going down because of FX. We have also included a placeholder for amortization and impairments of JPY140 billion. So what's the breakout of the JPY140 billion? JPY110 billion of that is amortization and JPY30 billion of that is impairment.

So at this point you may ask, why are you putting in a forecast for impairment and what is that for? Honestly speaking, if we knew what assets would be impaired today we would have already booked them in our results today, so we don't know exactly what's in there.

What we do know is that if you look over the last years, in 2015 and 2014 and 2013 and 2012, if you look at our industry, all of our competitors, every year they do have some impairment. So rather than giving you a forecast today with no impairment in it, and then maybe coming back six months or nine months from now and saying, I'm sorry but we forgot impairment and now we have to take the forecast down, we wanted to be a little bit proactive and already put in a placeholder of JPY30 billion so that you can rest assured that we have thought about this when we were constructing our forecast.

We have also included in our forecast JPY100 billion gain on the transfer of the Teva business -- of the long-listed Japan products to Teva. And that's included in other income, so in operating profit, again, on the P&L.

We have also included a JPY25 billion placeholder for efficiency initiatives. I would like to just say a couple of words about this. These are separate from Project Summit, so this is not related to Project Summit. Project Summit is going very well and we expect that that will continue and, after the five-year period when we reach our goal, that project will then disappear.

However, of course, a Company such as ours is always looking to improve our efficiency, whether that's transformation of R&D, whether that's optimization of supply chain, whether it's implementing global ERP system, whether it's optimizing our G&A expenses, we're always looking at ways to become more efficient, especially to meet our long-term core earnings growth aspirations.

So again, this is a little bit like the impairment placeholder. We put in here a JPY25 billion placeholder. It's still very early going; I don't have a plan for you today and say, this is what it is, this is what we're spending it on, this is savings, etc., because it's still very early. But we do know that we're probably going to use at least a big portion of that JPY25 billion. So again, rather than coming back later and saying, oh, we didn't put it in, we're taking our forecast down, we've been a little bit proactive and we have included it in our forecast.

What else? And then net profit for the year is expected to grow by a little bit less than 10%, and EPS, of course, also growing by a little bit less than 10%.

So for the first time, as I mentioned before, we give you also a CapEx budget or forecast for us and it's JPY175 billion; a little bit higher than what we've had in the past. And that really includes things like construction of our new headquarters; it includes things like a placeholder for external R&D collaborations; it includes costs related to our supply chain and our manufacturing facilities around the world, and we anticipate it will be somewhere around the JPY175 billion. So again, if you all want to do a cash flow forecast for us, you can have that amount to include in that forecast.

So given a lot of the noise that we have in the 2015 results, we had the Teva, we had respiratory, we had CONTRAVE, we have FX, I know it's very difficult for you all, also for us, to follow what the financials really are. So we've added this slide in there also to try to give you what the new baseline is for 2016.

So what we've done is we've restated 2015 to say, well, what if 2015, we didn't have the long-listed products, that we had already divested the respiratory business, that FX was already showing a strong yen. So we have included this slide, again, to be a little bit more transparent so that people can really understand the results.

At the top of the slide, you'll see we start with the reported revenue which, if you look in the previous page, you saw that was our reported revenue for 2015.

Then we're taking off the FX effect; that would be a negative JPY91 billion. We're taking off the long-listed products that we transferred to Teva, which again, was the 2015 number; we would have expected that number to be much lower in 2016, but this was the 2015 number which is negative JPY82 billion. We take off the sales for the respiratory business, which is about a negative JPY20 billion. And then there's a small amount for CONTRAVE.

So you can see our 2015 revenues, excluding all those divestments, would have been JPY1,611 billion and that then forms the baseline for our growth forecast for next year. So if you apply mid single-digit growth to that, I think if you apply roughly 6% or 7% growth to that, you'll get to the reported revenue number which we're showing in our guidance for 2016. So again, we want to make it very transparent for you so you can see what is the baseline that we're using for our forecast.

And we effectively did the same for operating profit. We're starting at our reported operating profit in 2015 and then we're showing you all the adjustments that we would make to get to core earnings. And that would then be the baseline on which we would grow the low double digits for next year. So again, just want to increase the transparency a little bit.

Then finally, just a few words about our capital allocation policy. Of course, as an innovative R&D-focused Company, we will continue to invest in our R&D pipeline and platform technologies. Of course, that is key to our long-term success. In addition, if interesting M&A opportunities arrive, particularly in our focus areas, we will think very hard about pursuing those opportunities.

And finally, of course, we will focus on total shareholder returns, which is a combination of dividends, share buybacks and capital gain. I don't want people to get very excited about the words share buyback here. In the future that may be an option, but it's not for us something that we plan to do in 2016.

So in summary, we will allocate capital on the basis of generating attractive total shareholder returns, specifically compared to our industry peers. And as we deliver on our long-term aspirations, as Christophe has showed you, we intend to maintain our dividend at JPY180 per share; however, bearing in mind, of course, that this is the absence of some large strategic acquisition or some other major transformational opportunities which would create more shareholder value for us. So just a few words on our capital allocation policy.

So that covers it for me today. It's been a pleasure being here. Thank you.

(Operator Instructions).

(interpreted) Please limit questions to two per person and please mention two questions upfront. Please raise your hand if you have a question.

(interpreted) Yamaguchi, Citigroup. My first question is regarding the outlook for FY16. You have various adjustments in the numbers, JPY135 billion, and JPY100 billion from Teva transfer is included, so essentially this is JPY35 billion and the biggest impact is Teva, that profit goes out of the organization. For short term, that has a big impact, is this understanding correct? This is for clarification.

The second question is, as I listen to the update, M&A was mentioned a bit more frequently than before. Including ACTOS litigation you had to deal with a past incident but now you are looking forward. In the US M&A is a [boom], it seems like. Have you been looking for good candidate for M&A, or are you very enthusiastic this year? I have a feeling maybe your mindset regarding M&A has changed, or has there been any changes regarding the perception of M&A? Thank you.

Thank you for the question. I will comment on the Teva joint venture. When we negotiated with Teva, we made sure that the deal is EPS accretive for us every year, even at the beginning. So it's not only about the midterm profit that we will get, but the term of the deals are such that we were able to manage the value swap without ever having a dip in the first years. So there is some -- that's how we negotiated, so it's EPS accretive and cash flow accretive every year.

That's very important for us, otherwise, we will not have done the deal if it will have created a huge loss during the first three years. And then, after that, only potentially we will recover because we will not have exchanged now value for potential value in the future. So it's a very balanced deal that we did and we were pleased with that. They were pleased as well, because they needed someone like Takeda to be successful in Japan as well, so it's a truly win/win situation.

Regarding M&A, we are not more excited now than before, but the difference is that now we are very clear on our strategy. We know in which therapy area we could potentially find a partner, if we find the right partner, but as you know, it's hard. You need to first find the potential right target and then make sure that you don't overpay because, when the market is very excited, it's usually a bad sign for a buyers. It's too expensive, potentially.

So we need to be very careful at paying the right price, but we know in which therapy area we want to complement our pipeline. That's, of course, very important for us because that's where we are looking

And we also know that organically we are growing well; driven by ENTYVIO, driven by NINLARO, emerging market, we are growing well organically in the next three, five years. But we need to reinforce our pipeline for after the five years, if you like. So that will be also the driving force for what is driving our M&A.

(interpreted) Seki, UBS. I have two questions about R&D. NINLARO, what is the future outlook for NINLARO? So my question is about the future outlook for NINLARO. For multiple myeloma treatment, immunology is being studied and a proteasome inhibitor plus immune therapy. This kind of combination is not really done at all. Your therapy may become mainstream in the future, so what would you say the positioning of NINLARO would be in the future?

My second question is about TRINTELLIX, the cognition label. What is the next step for the cognition label? Pseudo-specificity is a term that FDA has used, and for major depression efficacy on cognition, do you think FDA will accept this? And what about head-to-head comparisons against CYMBALTA, do you think that it will be necessary to do a head-to-head comparison?

Great questions. The first one for immune therapy and multiple myeloma; it's clear that immuno-oncology forms a substantial basis of the future of oncology. Today, there's no evidence that any approach that's been taken in immuno-oncology is effective in multiple myeloma. It's not to say that there won't be exception in the future.

Personally, I'm not sure that checkpoint inhibition, like you see with PD1 inhibition, will be the path forward. I think that there are emerging therapies that are coming downstream like adoptive T-cell transfer approaches, and bi-specific agents, but those are very far away. I also suspect that the safety profiles of those agents will be quite different than the safety profile of a medicine like NINLARO.

The answer to your question is that today, I don't see competition for the market that NINLARO will be effective in; those patients will benefit from NINLARO in the near future. In the more distant future, I suspect that the mechanisms in immuno-oncology will be targeting highly refractory patients.

The second question on TRINTELLIX, so BRINTELLIX globally now renamed TRINTELLIX in the United States, prior to the advisory committee meeting we had been discussing with many of you in one-on-one settings that we felt that the likelihood that the FDA would accept this claim was actually less than 50%.

With that said, we went to the advisory committee meeting very well prepared to defend the data that we had established in three independent studies to show that TRINTELLIX had independent effects on cognition, independent from its effect on depression. This had never been shown before with antidepressant, as you know; to be fair, no-one had really looked as carefully as we had. We had an advisory committee meeting in March and we received an 8 to 2 positive vote acknowledging the benefits of a [claim].

The FDA then went ahead and submitted a complete response letter, which is very unusual for the FDA not to agree with the advisers. We were, of course, very disappointed, but it wasn't entirely surprising in the sense that this is an entirely new area, it's an entirely new indication. I think the FDA, to be fair, struggled a bit with understanding how to think of this. And further, the FDA looked at this as precedent setting and they weren't quite ready to make that jump.

With that said, we're not giving up; we still think that we have a medicine -- we don't think, we know that we have a medicine that's effective in enhancing cognition in patients who have major depressive disorder. We are in an active dialogue with the FDA to figure out how we can push this into the label.

(interpreted) Hashiguchi, Daiwa Securities. My first question is regarding efficiency [incentive] cost; you have JPY25 billion in your plan, and that's the same level as FY15. As of now, you don't have any specific plans using this budget, according to what you said. So far, you have continued business transformation, and you think you passed the peak; therefore, in terms of amount do you think it's going to be smaller, compared to the past, or for FY16 and beyond do you think you will continue JPY20 billion or more? Transformation for efficiency used to have many other activities to implement, so what's the idea here? That's my first question.

The second question is, you announced that TAK-385 is going to go into Phase III. This is a successor to [Dupeline]; that's how it was developed so far, that's my understanding. But regarding Japan, you going to go into Phase III with EM indication. Regarding prostate cancer in EU and US, you also with have Phase II results from EU and US. What's the strategy of this compound, going forward? Regarding [uterine fibrosis] that's the only Phase III indication target, so what is your thinking now? Thank you.

I'll take your first question and [Andrew] will answer the second one. We still have a few efficiency programs to do. I think it's not -- we are still in the middle of the transformation of the Company. And one of the reason for that is that the globalization of the Company has started not a long time ago. So if you look at our manufacturing network, for example, we still have a lot of efficiency to do. We have a program called program Agile, who looking at efficiency of our supply chain; we have the right strategy network.

Same in R&D. In R&D, we have some efficiency to have, but it's more -- it's not so much, actually, totally on cost savings here; it's more about being able to deliver the pipeline in the therapy area we mention. So you can expect still a level of investment at this level for a while. We don't have a precise idea, but we still have to do this type of investment in order to position better the Company in the long term. Eventually, eventually, it will stop.

On the other hand, if you want to be a consistently competitive Company, in fact you should always invest in this type of improvement programs. The question is, at which level, and how much do you invest?

When we review these programs, we do look at the return on invested capital. So when there is some saving -- there is not always some savings, but in most cases we know we need to improve the profitability of the Company. So we are very much focusing on improving our profitability long term, so these programs are part of it. And we are financially discipline as well on these programs, so looking at the best return on invested capital possibly.

On the second question, for TAK-385, which is relugolix, which is a gonadotropin receptor hormone and antagonist, it's a medicine that clearly is efficacious. It's a medicine that has applications in prostate cancer, as you've mentioned, and also in women's health, specifically a uterine fibroid condition.

As you've heard, women's health is no longer within our strategy. And then of course, oncology's clearly within our strategy, but we're very careful at looking at the competitiveness of new therapies before making the very large investment to go into Phase III.

So when we put all this together, what we've concluded is that there is an opportunity in Japan that's clear, both on the prostate cancer side and also on the women's health side. We don't think that the opportunity in prostate cancer is as competitive, for a variety of reasons, outside of Japan.

So given all of this, we're in the process of looking a creative partnership that would allow the molecule to be developed globally for both indications, but would also allow us to retain rights to the molecule in Japan.

(spoken in Japanese)

Tim Race, Deutsche Bank.

Two questions, basically on the guidance. When I look at the underlying core earnings guidance, there's round about JPY100 billion of negatives to the revenue line from the Teva respiratory and CONTRAVE add backs or takeaways. But then, when I look at the core earnings level, those divestments have about [JPY93.5 billion] negative to take away for the underlying core earnings. So does this mean that we've got almost a 90% operating margin on those products?

And the second question, related to that, is, when I look at the reported guidance, the operating profit of JPY135 billion, and the profit before tax of JPY132.5 billion, shouldn't we have some profit from the joint venture coming in between those two items? And why is there not very much of a big item there? Thank you.

Regarding your first question, you can see that the core earnings impact is very high, compared to the revenue impact, so you're correct on your first assumption.

And then regarding the second item, we do have equity income coming in between operating profit and profit before tax. Initially, that's because the JV's just starting off. It's still a relatively small amount. I cannot tell you the exact amount, of course, because this is related to Teva's business, but I can give you a range that it's somewhere in -- or less than JPY10 billion in the first year.

Okay. Thank you.

(interpreted) Now we'd like to go back to the venue to take the questions from the floor.

I am Yamamoto. I have one question about the Teva joint venture. Mr. Weber, at the beginning you mentioned in the strategic roadmap, [Takeda-ism] was forecast; Takeda-ism is to gain the credibility and the reputation. And Teva Japan, a core operation, should be in Taiyo Pharmaceuticals, the old company, and this company have made a lot of quality programs which resulted in the recalls of the product.

And quality is not coming from the technology; I think it is coming from the culture in the operation. So even if they change the management, they are not able to solve that problem so easily. So Takeda, going forward, needs to be responsible for the quality issues which are held by old Taiyo Pharmaceuticals, which is very risky. And I believe Takeda-ism will die because of this. That's my concern; how do you respond to this?

It has been a big debate that we had when we looked at this project because we were aware of the quality issue that Taiyo had in the past. We have a new Global Quality Officer called Gerard Greco who is very experienced. By the way, he used to be at Teva as Head of Quality. And there has been full due diligence and review and agreement of quality improvement that has to happen before we could consummate and before we could do this agreement.

So we have full confidence that Teva is fully committed to improve the quality standards that are existing in the Japanese market. And I can tell you that I have confidence that Teva knows how to do that. It's not by chance that Teva today supplies 25% of the volume of the United States market. They know how to produce product with good quality; they just bought the wrong company in Japan, if I can say that. But they are fully committed to improve that quality and that was really an agreement that we had beforehand, before we could do that.

(interpreted) But as I mentioned before, even after the change of the management, the quality is based on the culture in the operations, so you cannot change so easily. So there is a possibility that you need to bring the product from outside of Japan and do you still think that this business should be okay in the future?

We believe that there has been great improvement made. Not all the products will be manufactured in Japan in the future; there will be some products imported to Japan, to the JV. And we believe that, after the due diligence we made, we believe that the quality will improve sufficiently.

And Masato, you can input.

(interpreted) I don't really believe what you mentioned is right. Teva, for the past three or four years, have made significant investment and changed the personnel significantly, as you have observed a couple of recalls before.

And in light of the Teva standards, they have taken proactive actions to make the recall of those products because they may have some potential recalls in the future. I think those people have been already replaced and [Mr. Matsumura] came on board as a new President, and quality responsible person also assigned with the right quality and credentials. Thank you.

(interpreted) This is not related to business performance, but regarding drug prices in the US market, I have a question. NINLARO has very high prices as it was launched and, going forwards, regarding pricing in the US market, what are the actions or measures that Takeda is considering? There is no specific questions from the parliament, but the [HDA's] technology assessment will be coming, how prepared are you at Takeda? That's first question.

Regarding the EM markets, I have my second question. It's tough than consensus, especially as global companies in the emerging markets, they're really, really very challenging. AstraZeneca respiratory business transferred; that maybe one of the actions, but is that enough? You have acquired [Nycomed] and you have some negative legacy from that and in 2016, what is your take on this? What are actions? Thank you.

Thank you for your question. For the pricing environment in the US and the overall development of [HT] in the world, this is very much on top of our mind. And one of the, I think, most challenging decisions we made last year and what also was a good decision I think we made, is the pricing of NINLARO. We thought very hard about how to price NINLARO and we decided to price it, in our mind, very responsibly; we price it at the level of VELCADE, which was launched a long time ago.

That was the expectation from the oncologists and the market and which means that NINLARO today is, in fact, the cheapest of the latest product launch by far; sometimes 30%, 40% cheaper on a per-treatment basis compared to the newest product. And we did it on purpose because we didn't want price to be a barrier for the acceptance of NINLARO. So we are very mindful about that. We think we made the right decision and the coverage we are seeing is appropriate.

In the US, we are also increasing our programs of help, not only in oncology, but we announced recently that we are upgrading our programs to support patients who have difficulties to finance their drug and their treatment. So we are very sensitive to that. I think we will see some change in the US environment in the future. There's been already some change. The challenge for coverage is much higher.

Regarding emerging markets, we believe that we can compete in emerging markets. We believe that the emerging markets will continue to grow in the future. We'll always face ups and downs. So the way I see emerging markets is a growing line, but it's a line like that, if you like. So it's growing but with ups and downs. I think we are in a down now; we'll be ups again.

I think we need to be very mindful about how we promote our products, compliance programs, are a huge focus for us; [it] is always a challenge. But we are investing a lot in this area in terms of compliance monitoring, having the right tone, developing the right culture.

In order also to be less challenged by local companies, we are focusing on launching our innovative products, our patented products. It's not because the product is patented that it's unaffordable. You can launch a patented product in an affordable way. And, of course, because it's patented, you will have no generics, because patent is recognized more and more by emerging markets. So I think this is where we have a strategy to grow in emerging markets, not only because of our value brand and branded generics, but also because of the launch of innovative products.

And we can see, for example, ADCETRIS. We launched ADCETRIS, which is a very niche product in Brazil, very successful. The volume has been like five, six times more than what we expected because we launched it appropriately. That's why our access to medicine strategy for patented products is very important for our growth in the future in emerging markets.

(interpreted) [Misna, Tokio Marine Asset Management]. During the CEO presentation guidance, you talked about specialty CV as one of the focus areas. Specifically, what does this mean? What kind of products and what kind of timeline do you have in mind? And do you want to grow it as big as the GI franchise? Is that your hope? What are your thoughts on this?

I'll take that question. Thank you very much. The first part of the answer is, you should come on June 9, to the R&D day; we'll be discussing all these pieces. But I can give you a little bit of a sneak preview. When we made the decision over the course of last year, through multiple iterative discussions and deep thought, to predominantly move away from cardiovascular and metabolism, it was a very significant decision with real implications for Takeda. And there are many reasons that we made that decision which we can talk about on June 9.

We also realized that we had an asset in particular in Phase II which was our TAK-272 program, and then some opportunities in research that we weren't quite ready to walk away from. So we kept that as a strategic focus for us, but it is incredibly focused at this point. And I can say pretty likely it's not going to become like GI. I think the key question for us is, what happens to TAK-272 in the ongoing Phase IIb study here in Japan?

And then, as we will discuss on June 9, the second key question is how we want to manage these early research assets; if we want to continue to work on them internally, or if we want to create a strategic partnership around those. But the answer for your question is that it's very, very focused and it's not anywhere near what we'll put into GI, oncology, or CNS.

(interpreted) Well, I guess you could wait for another month. But you work together with University of Kyoto, is the Kyoto University collaboration also part of this?

That's right. We have a research-based collaboration in cardiovascular and metabolism with Kyoto University. We're in the process of working with the faculty there to transition those projects into GI, and to really put them square into our line of focus.

(interpreted) Thank you very much.

With this, we'd like to conclude today's IR session. Please fill in the survey at your hand before you leave. Thank you very much, again, for your participation despite your busy schedule.

Thank you for your 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.