Takeda Pharmaceutical Co Ltd (TAK) 2022 Q2 法說會逐字稿

Thank you very much for your participation in this FY 2021 Second Quarter Earnings Conference Call.

I am (inaudible), the Global Head of IR.

I'd like to serve as a moderator today.

And well, first, I would like to explain about language settings.

In the lower right corner of the Zoom, there is a setting bottom group sign.

Click on it and select Japanese if you want to listen in Japanese and click English if you want to listen in English.

If you would like to listen original voice in English with Japanese without the interpretation, please (technical difficulty).

Before starting, I'd like to remind everyone that we will be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those discussed today.

The factors that could cause our actual results to differ materially are discussed in the most recent Form 20-F and in our other SEC filings.

Please also refer to the important notice on Page 2 of the presentation.

Well, from our side, as presenters and also the panel, we have President and CEO, Christophe Weber; and Andy Plump, President Research and Development; Costa Saroukos, Chief Financial Officer; and Masato Iwasaki, Japan General Affairs; and Ramona Sequeira, President of U.S. Business Unit and Global Portfolio Commercialization.

And Julie Kim, President Plasma-Derived Therapies Business Unit.

Now from Christophe, Andy and Costa, we will give you presentations.

And after that, we would like to take questions.

Now we'd like to start.

Thank you, Chris, and thank you, everyone, on the phone to join us today.

It's a great pleasure to be with you.

So, we'll take you through the progress we are making in the transformation of Takeda as we discussed our performance in the first half of our fiscal year.

So how are we progressing towards our vision?

And this is -- please go to Slide #4.

Our vision at Takeda is to discover and deliver life-transforming treatments, guided by our commitment to patients, our people and the planet.

And first, despite the pressure of the pandemic, our employees have come together with a very strong commitment to make a difference for patients.

So I feel really inspired and energized by the spirit and determination that the entire organization has shown during this pandemic.

Our journey in the transformation of our company has been producing a very strong result.

And I think our first half results are evidence of our progress.

Specifically, we have consistently delivered on the fundamentals.

Our underlying revenue growth for the first half has accelerated to plus 6.8% with a reported revenue growth at 12.8% compared to prior year.

This growth continued to be driven by Takeda's 14 global brands with underlying growth of this 14 global brands of 11.4% in the first half.

And more importantly, for the future, our diverse portfolio of 14 global brands now represent 42%, an impressive 42% of our total revenue.

I mean, when you look back what a transformation, considering that Takeda launched its first-ever global product back in 2014.

Before 2014, we didn't have a single global brand in our portfolio.

Today, we have 14, which represent 42% of our total global revenue.

And we are expecting an acceleration in the second half of the year and significant revenue growth for our global brand over the near to medium term, particularly as we expand into new markets.

So today, we remain on track to meet our full year 2021 guidance of mid-single-digit underlying revenue and underlying core operating profit growth, thanks to the continued performance of our 14 global brands.

And as we are confident in our financial performance with very strong cash flow generation, as we are confident in our strategy and our growth potential driven by our 14 global brands and broad pipeline, and this strategy -- this growth dynamic, we think is not reflected in our current share price.

We are initiating a share buyback of up to JPY 100 billion, also a reflection to our commitment to delivering value to our shareholders.

So what is Takeda growth strategy?

Well, we think it's a very clear growth strategy.

We have a razor-sharp focus on bringing life-transforming treatment to patients.

So we will drive the growth in our 14 global brands through new indication, label extension, our expansion to geographies previously answered.

It is very clear that this 14 global brands will continue to grow significantly in the coming years, at least until ENTYVIO face bio-similar competition in the U.S. We will also continue to invest in the approximately 40 clinical stage pipeline assets that all bring the potential to transform the life of patients.

Our strong pipeline and portfolio are not built around a single flagship product or compound, but instead are highly diversified and focused in area of high unmet patient need.

In fact, more than 1/3 of our Wave 1 pipeline has received breakthrough therapy designation, a true testament to our innovation and focus on targeting entirely new categories and modalities.

By any standard and even considering some setback, and I will come back to that, we are experiencing a remarkable year.

Our pipeline is beginning to deliver on our ambitious aspiration.

I'll go into a bit more detail later, but in this quarter alone, we received FDA approval for EXKIVITY in the U.S. and an enormous recommendation by an FDA Advisory Committee for Maribavir with a decision on FDA approval scheduled sometimes in the coming weeks.

At the same time, we will continue to evaluate opportunities for strategic partnership and collaboration that complement our therapeutic area of focus to expand patient access to the treatment they need and to help accelerate our pipeline strategy.

One example of that is the collaboration with Arrowhead Pharmaceuticals to develop TAK-999, a first-in-class RNA therapy designed to treat the underlying cause of alpha-1 antitrypsin associated liver disease, which is a very devastating condition for which currently, there is no approved therapy.

Another great example of this strategy is a recent collaboration and license agreement with JCR Pharmaceuticals to commercialize JR-141 for the treatment of Hunter syndrome.

JR-141 introduced a new way to treat Hunter syndrome and help maintain our improved cognitive function in patients living with this rare disease.

What is also very notable here is that this is the first time Takeda has entered an agreement with a Japanese company to commercialize a program outside of Japan.

I think it's indicative of how we are perceived now as a global partner of choice among Japanese company, too.

And you might have seen just this week, we announced the acquisition of GammaDelta Therapeutics to further strengthen our immuno-oncology and cell therapy pipeline with a novel platform leveraging GammaDelta T cells.

This was a build-to-buy collaboration, which we started in 2017, which brings to Takeda novel cell therapy approach to target solid tumor and hematologic malignancies.

So our plan is very clear and consistent.

Our strategy -- Our strategic vision is to focus on leveraging the strength of Takeda's 14 global brands, which will remain a growth driver over the coming years, providing us with the momentum to support the growth potential of our exciting pipeline.

Having said that, allow me to address our recent clinical development setback that you know already, but I want to come back on that.

It goes without saying that when one developed truly innovative R&D compounds, as an R&D organization, you do experience setbacks and challenges as at the same time, important progress are made.

This is what being on the leading edge of science is all about.

Andy will address that in greater detail shortly, but I can tell you that we recently announced that a safety signal has emerged in the Phase II studies of TAK-994, which is an investigational oral orexin agonist for the treatment of narcolepsy type 1. We will continue to analyze the data.

And I want to reinforce that we are committed to advancing our multi-asset orexin franchise, including the oral orexin agonist TAK-861, which is currently in Phase I development.

We also announced that the pevonedistat Phase III PANTHER study did not achieve statistical significance for the primary endpoint of event free survival compared to azacitidine.

But this is why I shared with you that the diversity in our clinical programs and approximately 40 clinical stage [enemies] give our pipeline strength and resilience -- strength and resilience.

We are excited about the potential to deliver dozens of new therapies to patients in the next decade.

And I think we should not lose sight of that.

So in our mind, these setbacks are not derailer of our strategy.

They are setbacks, but we have enough breadth in our pipeline to continue to look towards the future with serenity, with a sense of urgency also, to develop other molecules.

Another point that I want to mention today is that I'm very pleased to report that earlier this month, we received confirmation that we successfully addressed an FDA warning letter for our manufacturing site in Hikari.

The FDA has now issued a revised voluntary action indicated status to the Hikari manufacturing site with an agreement to maintain a dialogue regarding ongoing commitment.

So the closing of the warning letter and the site status change is a positive development in the ongoing effort to address the FDA observation site in the official action indicated is in exchange status in March 2020.

So I think it does speak to our strong track record of upholding quality standards and our close collaboration with the FDA throughout this process.

On the next slide, I just want to update you on our contribution against COVID-19.

Takeda is really keen and is really committed to play a key role in the head to fight the COVID-19 pandemic in Japan.

As you know, as a marketing operational holder for the Moderna COVID-19 vaccine in Japan, we have distributed 50 million dose in Japan and expect to begin importing and distributing an additional 50 million as early as the beginning of 2022.

We are also partnering with Novavax in Japan to develop and manufacture up to 250 million dose per year and commercialize COVID-19 vaccines candidate from our Hikari facility in Japan, where it will be manufactured.

So we aim to be in the distribution of these vaccines in the early part of 2022 under the government vaccines program, of course, pending a number of factors, including regulatory approval.

One thing I would like you to notice -- to note is that Novavax pricing in Japan will reflect the government subsidy we received to build the manufacturing capacity in Hikari.

So there is no doubt that we have a very important role to play to continue combating the COVID-19 pandemic and we are very committed to it, but it's also something that provides to us valuable insight that we are applying to all our vaccines development program.

On the next slide, I just want to zoom in on our pipeline wins for this quarter.

And Andy will provide you a much more greater detail right after.

But I can tell you that we are very excited by the promise of -- and potential of our pipeline as demonstrated with the approval of EXKIVITY in the U.S. and the unanimous recommendation by FDA Advisory Committee for Maribavir.

EXKIVITY is a very important new treatment for adult patients with locally advanced or metastatic non-small cell lung cancer with epidermal growth factor receptor Exon20 insertion mutation.

It is the first and only approved oral therapy specifically designed to target EGFR Exon20 insertion mutation for patients whose disease has progressed on or after platinum-based chemotherapy.

This disease has historically been underdiagnosed and patients have, until recently, very limited effective treatment option.

So the approval of EXKIVITY advanced the treatment landscape.

And for the first time, patients will have access to an effective oral therapy.

We are also very excited about the potential for Maribavir to transform the way cytomegalovirus CMV infection is treated.

If approved by the FDA, Maribavir will be the first and only treatment indicated for adult transplant recipients with refractory CMV infection and disease without or with resistance.

CMV is a very challenging infection in transplant patients with an estimated incidence rate greater than 25% in solid organ transplant and stem cell transplant recipients.

We are proud to advance science in this critical area of need.

So EXKIVITY and Maribavir are just two examples of how Takeda approach scientific development.

We focus on areas for patients who have serious need, and they are very limited or even yet to be discovered treatment options.

So we are very encouraged by this recent development and we are continuing to look forward to upcoming milestones in our innovative and diversified pipeline.

So we talk about our recent milestone.

Let me also talk about how we are building our long-term pipeline.

We have a very aggressive plan to continue building a pipeline that has the potential to transform lives and, in the process, transform our business.

Our R&D strategy, as you now I'm sure know, is to focus on a few disease area in order to have exclusive scientific know-how, to focus only on programs with a life-transforming potential for patients and also to be the preferred partner for research entities needing a pharmaceutical partner.

We have made big investments in areas that will transform patient treatments for many disease in 4 areas of oncology, rare genetic and hematologic disease, neuroscience and gastroenterology.

And this is areas where there is a lot of need for innovation and new treatment option.

So look at our oncology pipeline, for example.

We are advancing multiple first-in-class immunotherapy candidates that has the potential to be transformative for people with blood cancer and solid tumors.

We're also seeing great promise with our pipeline compounds in rare disease where there is often an incredibly small patient population, but with desperate need for effective treatment option.

In the U.S., approximately 50% of Takeda's pipeline is being developed in rare or orphan disease areas and address areas of very high unmet need.

I also want to mention that we also built a dedicated PDT R&D capability, as we focused on improving our existing product as well as researching new plasma therapies, as well as an R&D vaccines investment focused essentially on our dengue vaccines.

We are very committed to science, to our pipeline.

We think that the potential of this patent is very significant, and this is why we have increased our R&D investment to JPY 522 billion in fiscal year '21, which is representing a growth of 14.5% compared to last year.

And it is an effort to ensure that we are in a position to deliver the next generation of potentially transformative therapies.

So to conclude, and before Andy will give you more details on our R&D pipeline progression, our transformation continues to bring Takeda's future into focus.

In 2014, we set out on a journey to accelerate our globalization to reinvent Takeda into truly values-based, R&D-driven global company positioned for long-term business growth.

I think we have made very significant progress.

We have gained a leadership position in our core business areas, oncology, rare genetic and hematology, neuroscience, gastroenterology and plasma-derived therapy.

We have completed the largest foreign acquisition in Japanese history that gave us competitive scale that helped grow our margin and that allowed us to establish a portfolio of 14 global brands that are generating today steady organic growth.

Prior to 2014, Takeda did not have any single global brand.

So the success of this acquisition has provided us with the scale, momentum and resource to build a dynamic new future.

And with the near-term and robust growth of our 14 global brands as our foundation, our rebound pipeline and approximately 40 clinical stage assets, which will provide the potential for an unprecedented number of regulatory approval over the next several years.

So that brings us back to our vision to discover and deliver life-transforming treatments guided by our commitment to patients, our people and the planet.

And I think Takeda growth strategy is a reflection of that vision.

With that, I would like to provide Andy with an opportunity to focus on our R&D strategy and our pipeline progress.

Thank you.

Thank you very much, Christophe, and hello, everybody.

Fiscal year '21 continues to be an inflection year that we firmly believe will kick off a decade of innovation from our pipeline.

Our pipeline is diverse and dynamic.

And as anyone would expect in pursuit of novel life-changing or transformative medicines, one will experience headwinds and tailwinds from time to time.

I would like to provide some color and additional context on these recent events.

So first, let's start with the tailwinds or the positive events.

As you just heard from Christophe, EXKIVITY was approved in the United States.

This approval comes just 5 years after this molecule entered the clinic.

And importantly, EXKIVITY is the first of our Wave 1 new molecular entities to be approved, and it's certainly a moment worth celebrating.

As Christophe mentioned, we also had a unanimous FDA advisory panel recommending approval for our anti-CMV drug Maribavir, and we anticipate a final decision next month.

So let's talk a little bit about our R&D life cycle management efforts for our global and regional brands, which continued to progress and do well.

For ENTYVIO subcutaneous, we recently received written feedback from FDA, which provides much greater clarity on the regulatory package and data elements needed for resubmission.

We thus have more confidence for a potential approval now in fiscal year 2023.

We also received an additional 6 months of pediatric exclusivity for VYVANSE from FDA.

We now have market exclusivity in the United States until August of 2023.

In addition, we had approval for ALOFISEL in Japan as well as label expansions for CABOMETYX and Vocinti in Japan and China, respectively.

These R&D life cycle management efforts are important to our future and will continue to drive revenues for Takeda in the short and medium term.

We continue to invest in novel mechanisms and capabilities and aim to unlock innovation wherever it originates.

Our strong emphasis on partnerships continues to bolster our exciting pipeline with potential therapies that may provide step function improvements or cures for patients in the future.

We just completed in-licensing, as Christophe went through, of JR-141, a potential next-generation recombinant fusion protein that pairs iduronate-2-sulfatase to an antibody to the human transferrin receptor allowing shoveling through the blood-brain barrier.

This innovative new treatment for Hunter syndrome patients was recently granted prime designation by the EU and could potentially address both central neurologic symptoms as well as peripheral symptoms in Hunter's patients.

We also continue to build on our platform technologies.

And again, as Christophe mentioned, we announced this week the acquisition of GammaDelta Therapeutics.

This was a build-to-buy collaboration that we initiated in 2017.

We really know this company well.

We really like the technology and the progress that has been made.

And just yesterday, we exercised our rights to purchase this company and add to our cell therapy ambition.

And then finally, we announced 3 next-generation gene therapy collaborations that will provide tools to potentially help us address some of the issues with first-generation gene therapy constructs.

And these partnerships include Selecta, Poseida and Immusoft.

So if we can please go to the next slide.

Actually, before I start to mention the next slide, I'll also mention that, of course, we've had some headwinds that you're very aware of over the past quarter.

These are events that stall or oppose some of our forward momentum.

As Christophe mentioned, pevonedistat did not achieve statistical significance for the primary endpoint of event-free survival in the Phase III PANTHER study for patients with high-risk myelodysplastic syndrome and we expect to present information at an upcoming medical conference.

And in addition, importantly, TAK-994 had a safety signal.

This was a liver safety signal, which we will discuss in much greater detail later in this call.

So our pipeline, despite these events, despite these headwinds, is strong and is starting to deliver value.

This is our pipeline.

We have approximately 40 new molecular entities in development.

And over the past quarter, we've added new molecules like TAK-105, a peptide used to treat conditions that result from nausea and vomiting.

This is a peptide that was discovered in the Takeda laboratories.

And also JR-141, where we continue to invest in cutting-edge technologies for rare diseases like Hunter syndrome, as I just went through.

So if we can please go to the next Slide 10.

I wanted to spend some time walking you through our orexin franchise.

And I'd like to first reiterate why many experts and regulatory authorities remain excited and optimistic.

Importantly, we have seen transformative efficacy in multiple patient populations, including type 1 narcoleptics, where we see responses in the maintenance of wakefulness test of greater than 30 minutes above placebo response, a result pushing up against the upper limit of this 40-minute test.

And just by reference, the standard of care today shows less than 8 minutes above placebo.

In addition, we've received positive feedback from health authorities, securing prime designation in the EU and breakthrough designation in both U.S. and China all over the past 4 months.

These regulatory designations speak to the strength of the data and the excitement in the field of orexin-2 receptor agonists.

But unfortunately, over the last few weeks, we've faced a significant setback, a liver safety signal for TAK-994 in our 8-week 1501 Phase IIb study and our 1504 long-term extension trial.

As a result of this safety signal, we discontinued the trial early to protect patient safety.

Ending the studies will allow us to holistically assess the risk benefit prior to making a decision on possible next steps, of course, in conjunction with regulators.

So let me just spend a moment explaining exactly what we saw.

We saw a single patient in a long-term extension trial who had significantly raised liver enzymes.

This was, in fact, a serious adverse event.

Treatment was discontinued.

The patient is being closely monitored and remains asymptomatic and clinically stable.

The decision to stop the Phase II study as well as its extension was based on the degree of liver function test elevations in this patient as well as the recent identification of additional patients were discontinued from the trial for smaller increases in liver function tests.

We are in close contact with clinical sites and principal investigators to ensure appropriate follow-up and to gather all necessary information to fully understand these cases.

We are now working to analyze the data and further understand the mechanism underlying these liver findings.

This full risk-benefit assessment will be made, and we are committed to publishing the results at a medical meeting in 2022.

So we can go to the next Slide 11, please.

I want to spend a minute talking about our leadership position in Orexin and our future plans.

And I'll underscore, this setback in no way deters our ambition to develop and deliver a transformative therapy for patients with type 1 narcolepsy and other hypersomnolence disorders.

If anything, anything, we are more determined than ever to achieve this goal.

We have a number of differentiated molecules in our pipeline that are part of our orexin franchise.

And we are now exploring the best paths for acceleration.

So these include 2 molecules you have heard of before, as well as multiple additional molecules in preclinical stages.

First, there's TAK-861, a differentiated longer-acting oral agonist compared to TAK-994.

It's currently in a Phase I single and multiple ascending dose study.

This study will provide initial safety and PK data as well as information on initial efficacy in both sleep-deprived healthy volunteers and type 1 narcolepsy patients.

This will provide us data in narcolepsy as well as its effect in people with normal orexin levels.

Together, these results will inform our future development plans.

And then there's TAK-925, the IV formulation that provided us initial proof-of-concept of the mechanism in type 1 narcolepsy as well as type 2 narcolepsy and idiopathic hypersomnia in excessive daytime sleepiness with obstructive sleep apnea and is currently being explored in the post-anesthesia setting in patients with obstructive sleep apnea.

Obstructive sleep apnea patients are at high risk for respiratory issues when recovering from anesthesia.

We believe our short-acting IV infusion can help in this setting.

It's important to note that we are additionally developing multiple molecules with differentiated profiles in our research labs.

We have an army of scientists working on Orexin and now have a deep understanding of the orexin-2 receptor agonist pathway and have gathered incredibly valuable clinical data.

We know we have an efficacious mechanism with transformative potential.

Equipped with this knowledge, we will accelerate development of our current molecules and our chemists will design new molecules for the future.

We will be in a position to make a data-driven decision on next steps for these programs in 2022.

This has and will continue to be a top priority for Takeda and our R&D organization.

We are now working harder than ever and equipped with knowledge to build this franchise.

We will continue our leadership in the orexin agonist field and build on our foundation.

We are dedicated, fully dedicated, to bringing transformative orexin agonist medicines to patients suffering from narcolepsy and other related sleep disorders.

We want to thank all the patients and their physicians for participating in our clinical trials.

So we can go to the next slide, please.

As you heard earlier from Christophe and as you're aware, we received unanimous support at the October 7th FDA Advisory Committee panel for Maribavir, and we expect a decision in the next month.

CMV is the most common viral infection after transplantation, and we have seen robust efficacy.

In fact, greater than twofold greater than standard of care, with a significantly better safety profile, tenfold lower toxicity specifically related to neutropenia and kidney injury.

We are very excited about bringing this novel therapy to transplant patients.

You could see some of the time lines on the left side of this slide, including the potential approval in the EU early next year.

You'll also see time lines for our frontline trial and post-hematopoietic stem cell transplant, which is on track to read out in the first half of fiscal year '22 with filing shortly thereafter.

So if we can move to the next slide, please.

Finally, I want to highlight GammaDelta Therapeutics.

This recently announced acquisition is scheduled to close in the first quarter of fiscal year 2022.

And as you can see in this slide, we position GammaDelta in our overall oncology strategy and our pipeline.

So what is this?

Gamma-delta T cells have shown potent antitumor activity that is not antigen specific.

So we should anticipate the potential for advantages across a wide range of tumors, including solid tumors.

This acquisition continues to build our rich pipeline of oncology therapies and help fulfill our cell therapy ambition.

So as we move to the next slide, please.

Before handing it over to Costa, let me just say that we have an exciting and dynamic pipeline, and it continues to advance.

Beyond what we have mentioned earlier, we want to highlight one of our earlier stage programs, something that we'll be doing more and more of.

We have seen exciting clinical proof-of-concept data with TAK-573 in patients with relapsing and refractory multiple myeloma, and we will be sharing these data at a medical conference this calendar year.

We remain highly optimistic on our prospects, and we believe we have the right R&D model that is focused on treatments with the potential for step function benefits or cures for patients.

We continue to drive growth in our 14 global brands through new indications and global expansions.

We will continue to invest and drive our innovative pipeline of now 40 new molecular entities that have the potential to transform the lives of patients.

With that, I will hand it over to Costa Saroukos.

Thank you, Andy, and hello, everyone.

This is Costa Saroukos speaking.

I'm very pleased to report that our acceleration of top line growth has continued throughout the first half of fiscal year 2021.

And we're confirming our full year guidance of mid-single-digit underlying revenue growth and underlying core operating profit growth.

Our first half -- during our first half, our underlying revenue growth was 6.8%, up from 3.8% in Q1.

This acceleration was driven by our 14 global brands, which grew at 11.4% and now, as Christophe mentioned, represents 42% of total company core revenue.

In addition to our top line growth, we remain focused on maintaining competitive margins and delivered an underlying core operating profit margin of 29.1% in the first half.

We also continue to generate strong cash flow with first half free cash flow of JPY 315.6 billion, putting us well on track towards our full year target of JPY 600 billion to JPY 700 billion.

And our net debt to adjusted EBITDA ratio has further reduced to 3.1x.

We have continued to accelerate our debt pay down.

And in the first half, we paid off a total of JPY 441 billion or USD 4 billion, including all remaining debt maturing in fiscal year 2021 as well as prepayment of debt maturing in fiscal year 2022 and fiscal year 2025.

We believe that the company is in a position of strength and that our growth prospects are not being reflected in our current share price.

Therefore, we have announced the initiation of a share buyback and this program is up to JPY 100 billion.

To underscore our confidence in our business strategy and our commitment to shareholder returns, this buyback does not compromise any other aspect of our capital allocation strategy, and we remain committed to investing in our growth drivers, deleveraging towards our target of low 2s net debt to adjusted EBITDA and maintaining our existing dividend policy of JPY 180 per share annually.

Let me walk you through a summary of the first half financial results in the next slide.

Please turn to Slide 17.

So our first half of H1 reported revenue was JPY 1.79 trillion, up 12.8% versus the prior year, benefiting from JPY 133 billion booked as revenue from the sale of our Japan diabetes portfolio in Q1.

Core revenue, which had just out this onetime impact, was JPY 1.66 trillion with a growth of 4.4% as business momentum and favorable FX more than offset the impact of divestitures.

Underlying revenue, which further adjusts for foreign exchange and divestitures, delivered strong growth of 6.8%.

Reported operating profit was JPY 346 billion with significant growth of 60.5% versus prior year.

This was mainly due to the gain on the sale of the diabetes portfolio in Japan as well as lower purchase price accounting and integration costs.

Core operating profit, which adjust for the purchase accounting and nonrecurring items, was JPY 485.7 billion.

This was a decline of 4.3% versus prior year due to higher cost of goods and increase in R&D investment and the impact of divestitures.

If we adjust for FX and divestitures, underlying core operating profit increased by an impressive 6.4%.

Our core and underlying core operating profit margins are both above 29% in spite of the increase in R&D investment.

They are also reflecting the impact of a lower gross margin in Q2 due to product mix, and then this was largely driven by cost of goods dynamic with the plasma-derived therapies.

Reported EPS was JPY 117 with growth of 111% and core EPS was JPY 214.

Underlying core EPS growth was 9.1%.

Operating cash flow was an abundant JPY 400 billion, up 2% versus the prior year, while our free cash flow was JPY 315.6 billion, a reduction of 25.8%.

Slide 18 gives more insight into our top line growth dynamics.

Reported revenue for the first half grew at 12.8% and to JPY 1.79 trillion, including JPY 133 billion or 8.4 percentage points benefit from the sale of the Japan diabetes portfolio.

Adjusting that out, core revenue grew at 4.4% to JPY 1.66 trillion.

This reflected 6.8 percentage points of underlying growth driven by business momentum and our 14 global brands plus 3.9 percentage points from favorable FX, partially offset by the 6.3 percentage point headwinds from the divestitures of non-core assets we completed over the past year.

Our underlying revenue growth of 6.8% is supported by an innovative portfolio across 5 key business areas as reflected on Slide 19.

You can see GI, which represents approximately 1/4 of total core revenue, delivered 8% growth spear-headed by ENTYVIO growing at 18%.

Rare Diseases declined slightly by 2%, impacted by the continued decline of rare hematology as expected.

And the PDT immunology bounced back to 11% growth for the first half, with the quarterly phasing that negatively impacted Q1 balancing out in Q2.

Oncology grew strongly at 8%, and Neuroscience was up 9% with VYVANSE and TRINTELLIX both posting double-digit growth as market dynamics return towards pre-COVID levels.

For more details on each of these 5 key business areas, please refer to the slides in the appendix.

Finally, the All Other column to the right side of the slide, these products grew at 10%.

And this is reflecting the completed divestitures of several declining portfolios and also included distribution revenue for the Moderna COVID-19 vaccine in Japan.

Slide 20, I want to emphasize that our Plasma-derived Therapy business continues to deliver on its commitments with strong underlying PDT immunology growth of 11.1% for the first half of the year.

The business is more resilient than ever with plasma donation volumes consistently surpassing pre-COVID-19 levels from as early as quarter 1 fiscal year 2021.

This is a testament to our growth and transformation efforts across the BioLife network.

You will notice that we revised our plasma donation growth projections to 15% to 25% for fiscal year 2021, which reflects the volume needed to meet our supply commitments to patients and revenue growth targets while simultaneously improving network efficiency and managing donor fees and cost of goods.

There is an incredible upside in the area of our business with the core operating margin of the PDT business expecting to improve as revenue growth and transformation initiatives are fully implemented in the coming years.

Turning to Slide 21.

This shows the revenue of our 14 global brands, which are driving Takeda's top line growth.

In total, these products generated JPY 692.2 billion or USD 6.2 billion in the first half of the year, meaning they are now representing 42% of our core revenue.

Versus prior year, our 14 global brands grew 11.4% on an underlying basis or JPY 96.3 billion on absolute terms.

Now if you were to annualize that, it means that these brands are generating close to JPY 200 billion of incremental revenue year-on-year.

On Slide 22, I'd like to emphasize the momentum of these 14 global brands.

As explained on the previous slide, our H1 underlying growth of the 14 global brands was 11.4%.

This reflected a strong acceleration in Q2 versus Q1, and I'm pleased to report that these brands are driving growth in all regions, including in emerging markets.

We believe the acceleration of the 14 global brand revenue will continue into the second half of the fiscal year.

And our outlook for the full year underlying growth is for around 14% to 16%.

We should see the proportion of total revenue contribution expanding to approximately 45%.

As we look beyond fiscal year 2021, we expect momentum of the 14 global brands to continue as we expand market penetration in launched countries, as we increase disease awareness and continue global rollout of products, including in Japan, in China and other emerging markets.

Moving to Slide 23, which shows the factors impacting the 4.3% decline of our H1 core operating profit versus prior year.

Now starting to the left-hand side of the chart, you can see the first dark gray bar indicating a strong profit improvement from our underlying business.

This was primarily driven by the 14 global brands, although it does reflect some year-on-year cost of good headwinds in PDT due to the donor fee dynamics.

This underlying business momentum was partially offset by a significant step-up in R&D investment, which we have called out in the red bar next to it.

Next to that is a larger decline, which indicates the profit loss as a result of the divestitures.

This is having a significant impact on growth rate this fiscal year as a result of multiple non-core asset divestitures that were closed in fiscal year 2020 or early 2021.

While a major headwind in fiscal year 2021, this impact should be much smaller in fiscal year 2022 and our core operating profit growth rates should also be more closely correlated to our underlying profit performance.

As a result of these various pushes and pulls, as well as moderate FX benefit, our core operating profit for the first half landed at JPY 485.7 billion, putting us at a well position track to deliver our full year guidance of JPY 930 billion.

Moving to Slide 24, which shows the bridge from reported to core operating profit.

You can see that reported operating profit was JPY 346 billion.

From this, we adjust out the noncash items related to purchase accounting and onetime items not related to the core operations of the business.

In H1, the main adjustment items were JPY 204.1 billion of intangible asset amortization, partially offset by onetime gains from the sale of the Japan diabetes portfolio of JPY 131.4 billion.

Moving now to cash flow.

Slide 25 shows the evolution of our cash balance over the first half of the year.

Operating cash flow was an abundant JPY 400 billion.

This includes cash from the sale of the Japan diabetes portfolio, offset by cash out for a litigation settlement and some phasing in working capital.

Free cash flow after CapEx was JPY 315.6 billion, comfortably covering the half year dividend payment and our interest costs.

Furthermore, we made significant debt prepayments in the first half of the year, totaling JPY 441.1 billion or approximately USD 4 billion.

This included all remaining fiscal year 2021 maturities and prepayments of fiscal year 2022 and fiscal year 2025 debt.

In spite of this substantial debt prepayment, we still ended September with healthy levels of liquidity at approximately USD 10 billion.

Slide 26 shows the net debt balance over the first half of the year.

We continue to make steady progress with deleveraging.

And as of September 30, our net debt to adjusted EBITDA ratio had come down to 3.1x.

Slide 27 is the latest snapshot of our debt maturity ladder.

As shown on the previous slide, we paid off approximately USD 4 billion of debt in the first half of fiscal year 2021 including all remaining debt due this year as well as prepayments for fiscal year '22 and fiscal year '25 maturities.

Furthermore, in October, we issued JPY 250 billion of 10-year yen denominated bonds at 0.4% fixed interest.

This issuance will be neutral to leverage and the proceeds will primarily be used to refinance the remaining $1.7 billion of JBIC loan maturing in 2025, shown as called in this slide.

We intend to put most of the remaining proceeds towards additional prepayment of debt, in particular, fiscal year 2022 or fiscal year '23 maturities.

Our weighted average interest rate is approximately 2%.

And once the JBIC loan prepayment is complete, approximately 95% of our debt will be at fixed interest rates.

As a result of our accelerated debt paydown and recent refinancing, we have a well-positioned maturity profile, which averages JPY 200 billion per annum over the next 5 years.

With expectations for continued strong cash flow generation, we'll feel very comfortable in our ability to service this debt while maintaining the dividend and also making the right investments in the business.

Moving now to Slide 28, where we are confirming our full year fiscal year 2021 guidance of mid-single-digit growth for underlying revenue, underlying core operating profit, and underlying core EPS.

We are also maintaining our previously communicated forecast for reported revenue, reported operating profit, core operating profit and core EPS.

With regard to the reported net profit and reported EPS, we are updating our forecast to reflect a tax provision related to a tax assessment of the break fee Shire received from AbbVie in 2014.

As a consequence of this, our full year reported EPS forecast is now JPY 117.

As a reminder, our full year forecast is based on an assumption of JPY 108 to the dollar.

And therefore, we do see some potential upside to core EPS in the region of JPY 10 to JPY 15 if current FX rates continue for the full year.

On Slide 29, we have included our updated capital allocation policy.

In parallel with the share buyback announced today, we have revised the language on shareholder returns to state our intention to maintain our well-established dividend policy of JPY 180 per share annually, alongside share buybacks when appropriate.

The addition of share buybacks does not have any impact on our other priorities of investing in growth drivers such as R&D, new product launches and investment in our Plasma-derived Therapy business and continuation of our deleveraging journey towards low 2x net debt to adjusted EBITDA by March 2024.

Finally, on Slide 30, I'd like to close by once again emphasizing our focus on top line, on margins and cash flow.

Underlying revenue growth in H1 was 6.8%, putting us well on track towards our full year guidance of mid-single-digit growth.

We believe the growth momentum we built through this year will put us in a strong position going forward as we continue to maximize our 14 global brands, launch new products from our Wave 1 pipeline, and continue to roll out COVID-19 vaccines.

On margins and profitability, we are on track towards our full year forecast with cooperating profit of JPY 485.7 billion and core and underlying core operating profit margins of 29%.

Despite the ramp-up in R&D investment, we continue to target margins in the low to mid-30s over the medium term.

Finally, on cash flow, we remain on course towards the full year free cash flow target of JPY 600 billion to JPY 700 billion and continue to focus on debt pay down towards our low 2x net debt to adjusted EBITDA ratio target, while also investing in growth drivers and returning cash to shareholders.

Thank you for your attention, and we will now open it up for Q&A.

(Operator Instructions) First from Citi sir Yamaguchi-san, please.

This is Yamaguchi-san from Citi.

I have 2 questions.

The first question regarding the trigger of a share buyback.

Clearly, the recent stock price and the setback of 994 sounds like triggering these events.

But Costa, you -- other companies have been relatively conservative in the past, how to do this sort of activities.

So is this event period trigger this event or is it the right time for your company to change the dividend policy or shareholder policy?

And if you change it, if you -- are you going to continue to do so in the future as well?

That's the first question.

The second question regarding 994.

Andy-san, you comment on 994 in detail, which is pretty nice.

But can you give me how long -- how many years this franchise as far as launching is concerned, got delayed, if you're shifting resources from 994 to 861, how many years?

And also, given the 994 had a liver tox risk, how you can see the risk at this moment is yet to be clear for 861.

I understand the molecule is different, but can you give me some other reason why you are so confident about the clearness of liver tox on 861?

Maybe I'll start.

Thank you, Yamaguchi-san, for your question.

Let me break it down in the key drivers for this announcing the share buyback.

Firstly, we thought that this is an opportunity to buy back shares at a considerable discount.

We think our share price is significantly undervalued.

In fact, even if we compare it with the recent sell-side analyst average, it's our current trading of our share is 30% discounted.

So from that standpoint, we truly believe it's an opportunity to buy back shares in the company and deliver also value to our shareholders.

The second point I want to highlight here is we're doing this off the base of a position of strength.

You saw in our first half of the year results, the acceleration of our revenue from 3.8% growth to the first half at 6.8%, driven by our 14 global brands, which will continue to grow.

And on top of that, we're seeing an abundant cash flow, strong cash flow position.

Again, we think that this is an opportunity to do the leverage and utilize our cash flow, our strength of our cash flow to do some share buybacks because we don't see it derailing on our net debt to adjusted EBITDA target of low 2x by fiscal year 2023.

And finally, the key message we want to send is also that this share buyback underscores our confidence in our business, in our strategy.

We have, as Christophe and Andy mentioned, we have approximately 40 new molecular entities in our pipeline.

We have many potential proof-of-concept readouts in the next 12 months.

So we're very confident in our deliverable of our top line revenue.

The pipeline will deliver.

There some will succeed, some will not, but we're very confident that we have many shots at goals.

And that's why we felt that this is the right time, given the discount on our share price.

And just to reinforce the message, this is not a onetime.

We have updated our capital allocation policy to be able to decide on doing share buybacks when appropriate.

So we'll continue to monitor this situation as we go.

So thank you very much for your question.

And, Yamaguchi-san, you had two questions.

One was time lines for TAK-861, and the second was around the potential for liver toxicity for TAK-861 essentially if I can paraphrase.

So on the first, we can't give an answer right now in terms of what an expected launch time line would be for TAK-861, it's too early.

What we can say is that TAK-994 went into the clinic in November of 2019, and we were anticipating with reasonable confidence on approval in the end of 2024.

So approximately 5 years.

We know that TAK-861 and went to the clinic about 18 months after TAK-994.

TAK-994 time line took a hit during COVID, to be honest.

But at this point, we have to step back in terms of our time lines.

We have to understand what the regulatory requirements are going to be now that we have a liver safety signal in terms of durations of our Phase III study in terms of number of patients.

So we'll have more information as we advance.

In terms of our confidence in TAK-861 regarding a potential liver signal, let me say that we've worked very rapidly to preclinically understand this unexpected finding.

And we have a deep understanding now of what we think is driving the liver toxicity with TAK-994.

And so we have essays that we can use preclinically to compare the various molecules, including TAK-861.

We're still in the process of doing a lot of this work.

We have reasons to be optimistic for TAK-861, It is a different molecule -- It has a very different pharmacology than TAK-994 and has a different PK profile.

We feel very comfortable with respect to patient safety, in terms of advancing this molecule.

And over the coming months, we'll have more information to share.

Moving on to the next question.

Hashiguchi-san from Daiwa Securities.

Yes.

This is Hashiguchi, Daiwa Securities.

I have a question about Orexin program.

TAK-994 LFT elevation, what is the cause of this elevation?

And is it something that is common across the whole orexin franchise or is it really specific only to TAK-994?

And also, you saw the safety signal in TAK-994 and the clinical study design for TAK-861 and TAK-925 dosage administration inclusion criteria, have you changed any of these things for the other assets in the same franchise?

So Hashiguchi-san, thank you very much.

Your first question is the mechanism of action of the liver toxicity.

So we -- as I mentioned just previously, we're developing a growing understanding.

We think we have a -- we think we understand what is causing that toxicity for competitive reasons.

We won't share that information.

And we're using that information to better understand the profile of TAK-861 and to rapidly advance our next generation of compounds, but we think we have a beat on this.

You also asked whether this is a class effect or whether this is a molecule effect.

It's very hard to say definitively, but we have strong reason to believe that this is not a class effect, that this is a molecule-specific effect, and there's a long history of small molecule drug discovery and drug development that points to these idiosyncratic molecule-specific toxicities.

You then asked whether we've taken these learnings and altered the study design of our TAK-861 and TAK-925 trials, and the answer is no.

We have adequate safety measures and surveillance measures in both of those studies.

We have a very extensive patient experience base with TAK-925.

It's a very different molecule, IV administrated, very short acting.

We don't believe that TAK-925 carries this risk based on our clinical experience and what we know of the pharmacology PK and clinical profile to date.

TAK-861, as I mentioned, we have reasons to be optimistic that it won't share the same safety liability, but that's something that we're going to have to more fully understand.

I think a key question though, will be in the next steps, as we start to proceed to longer trials with larger patients, what kind of monitoring we will want to put in place to be safe and what kind of monitoring in patient numbers, durations of therapy, regulatory agencies will want to say.

That's not a conversation that we've yet had.

From Goldman Securities, Mr. Ueda please.

We have 2 questions.

First one is pipeline strategy.

So recently, the company licensed many early stage products.

But concerning the current pipeline status after negative development at TAK-994, do you think Takeda earnings to license in the late stage products?

Or do you still focus on the license for the early stage ones?

You have note as TAK-994 is one of the most promising product in the Wave 1 pipeline product.

And the second question is about the policy for dividends.

Considering that negative development for TAK-994, more cash will be needed for the enhancement of the pipeline.

So therefore, we try to confirm the current status for the dividend.

The company guidance, we know that the company guidance includes JPY 180 of the dividend as the shareholder and return policy.

But could you confirm that whether that is in a long term commitment?

Or that is just a plan for this fiscal year?

Thank you, Ueda-san.

I'll take the first question and Andy can add on.

I would like to first point out that we have many assets in our pipeline, which are very promising.

They were perhaps not as visible to you as TAK-994 because TAK-994 was quite advanced, and we highlighted it a lot, but we have a lot of assets in our pipeline with a very high potential.

For example, in oncology, TAK-573, TAK-981, for example.

So that's the first point to mention is that a lot of assets have a lot of potentials, but have not have been fully visible yet.

And I'm looking forward to the future milestone when you will start to see the value in our pipeline.

The second point I want to stress out is that we only have a growth question mark once ENTYVIO will face biosimilar.

And the date when ENTYVIO face biosimilar, the worst case is 2026 in the United States.

Not before.

And that's the worst case.

So when -- we can discuss what could be the possible date.

But as you know, we have a multiple family of patents expiring, many of them in 2032.

So there is uncertainty, but when biosimilar will enter.

But the reality is that our 14 global brands led by ENTYVIO within these 14 global brands will drive our growth until really ENTYVIO is facing biosimilars.

And so it's really in the later part of the decade that we need to have the pipeline really starting to deliver to continue to grow.

And we believe that we have a lot of ammunition in our pipeline.

Having said that, we continue to do in-licensing, partnering.

We are looking at all stages, frankly, but we know that late stage 1, there are not many; 2, they are often overvalued.

So we tend to prefer early or mid-stage.

And that's where you see that we have done a lot of partnerships.

But take a product like TAK-999 that we partner with Arrowhead, that's a product that could be launched at the beginning of this second part of the decade, '25, '26, and it's a very promising product.

So I think that's what we are really trying to do is to continue to build this pipeline, which will deliver this value progressively.

Andy, did you want to add anything?

Nothing to add, Christophe.

Costa, you want to take?

Yes, I'll take the dividend question.

Thank you.

Ueda-san, for your question.

We are very comfortable with maintaining the dividend policy of JPY 180 per share annually.

And there's numerous reasons why.

First one is that we see that the R&D strategy is paying out.

We've invested.

We've already increased the R&D spend.

We highlighted that in Q1, and you see that our full target has increased by about 15%.

So we already uplifted the resources behind R&D to deliver the pipeline that we have.

Secondly, you've seen in one of the slides on 27, our cash flow position is abundant, and we've continued to prepay significantly our maturities.

So if you look at that maturity ladder, we've already done significant amount of prepayments already this year, USD 4 billion.

So when you compare the yearly maturity obligations, we are looking at around JPY 200 billion of debt on an average per annum to pay down the debt.

Our cash flow.

Our cash flow is anywhere between the JPY 600 billion to JPY 700 billion plus on every year, and that's driven by our performance, our top line revenue growth as well.

So the headline tells it all, says it all.

We're well positioned, our maturity profile, which facilitates comfortable payment of dividends over time.

So this -- I don't see any reason for us to have to change the dividend policy whatsoever.

We're in a strong cash flow position, we're in a strong performance on operations in the business, and we've already started to increase our investment of -- in R&D to fulfill the pipeline needs.

Thank you, Ueda-san, for your question.

For the next question, we would like to ask Stacy Ku from Cowen.

Stacy here from Cowen.

I have 2. First question is for Julie.

Argenx has recently communicated that their FcRn pricing will be premium to IVIG.

So what are your thoughts for read through to the plasma derived franchise?

And then my second question is around regulatory timelines.

Given that we have some new product approvals pending, can you give us a sense of what is happening with any upcoming FDA inspections and your thoughts on the timing of regulatory decisions?

Should we be building in some slippage for products like Maribavir or Eohilia?

Any comments around that would be appreciated.

Stacy, thanks for the question.

In regards to the pricing that argenx has shared, we don't comment on competitive pricing strategy.

But what I will say is that the initial indication is a relatively small one.

As you know, Myasthenia Gravis.

So we will be watching closely to see if the pricing has any impact on the uptake of the product in Myasthenia Gravis.

So far, as you've also seen, the data that they've released out of their Phase II seems reasonable in Myasthenia Gravis.

So again, we will be monitoring closely.

I can actually take on your question around the time lines for regulatory approvals.

And indirectly, you're asking about our site inspection strategy.

So firstly, we have a very strong record with respect to site inspections, both for GCP and -- for GCP, GMP and GLP activities.

And we are routinely undergoing site inspections, not just as part of filings, but as part of our normal course of action.

Specifically, with respect to Maribavir, as you know, we had the positive AdCom last month, and we have a PDUFA date coming up in -- towards the end of November, and we have high confidence in approvals from Maribavir.

And based on the site inspections that we've had, we have high confidence that, that product won't suffer any delays at all until launch.

Eohilia is in a very different situation.

The issue with Eohilia is not around site inspections, it's around the regulatory review process.

As you know, we missed our PDUFA date in April and we've been in a back and forth dialogue with FDA responding to information requests.

At this point, we still don't have an update to provide in terms of potential time lines for that program.

Next question, Steve Barker.

Mr. Steve Barker from Jefferies.

It's Stephen here.

I have 2. The first one, again, for Julie, regarding your plasma forecast, collection targets.

And the second -- so I'll ask that one first.

In your guidance on Page 20, you were saying that you expect growth of 15% to 25% for the full fiscal year.

That is a reduction, I think, from your previous guidance, which was for 30% growth.

So I'm wondering if you can give us a bit more detail about that change in view?

And then the second question is about -- perhaps it's for Andy.

It's about the -- your collaboration with JCR for Hunter syndrome.

What does that mean for the future of your existing product, elaprase and also for TAK-609, which is an intrathecal version of elaprase, I believe.

Thanks, Steve.

In regards to your question around the plasma donation levels.

So yes, you're correct.

At the beginning of the year, we did guide that we would have growth of approximately 30% to support what we were targeting for revenue growth and commitments that we've made from a patient standpoint with IG supply.

So through the year, given our performance in plasma collections thus far, plus the efficiencies that we gained across our entire network from BioLife, our plasma donation infrastructure, through to manufacturing, we're able to reduce the amount of plasma we need to collect this year in order to meet those commitments.

And given the ongoing challenges that you've seen, particularly in the U.S. with the pandemic, the cost of plasma collections is higher than we would like at the moment.

And so it is prudent for us to pull back on the collection so that we are targeting the commitments to patients and the overall revenue targets that we have made, which we are still on track to deliver for the year.

I will note a little bit of a plug, we do have an investor event scheduled for November 17, where we'll be going into much more detail in regards to our performance in the PDT business.

Okay.

Just to clarify, so this is a deliberate decision you've made to reduce the level of your collections, but you are responding to the environment where you've had to pay more than you expected for collections.

Is that the right way to think about it?

Correct.

It is a deliberate decision that we have made.

Yes.

Steve, maybe I can jump in next on ELAPRASE and the JCR agreement, and I'll ask Andy to comment on TAK-609 as well.

So I think this is an area, Hunters, where there is really a dearth of treatments on the market.

We're actually very excited to have one product that is on the market that has an amazing impact on children on their somatic symptoms and to have 2 in development, TAK-609 as well as the new, now one that we have with JCR.

And I think as we think about all of these, part of the risk is in the development, right?

So we'll push these through development, doing everything we can and then look at what that means from a co-positioning standpoint as we get closer to commercialization of the JCR molecule, but no clear direction on that yet that we're ready to disclose or give, other than there's room for more treatments, and there's a high, high unmet need in this population.

We're very excited about the JCR molecule and the opportunity to treat both cognitive as well as somatic symptoms.

Andy, did you want to comment on TAK-609?

Thanks, Ramona.

Just very briefly, Stephen, TAK-609 is an intrathecally administered IDS replacement therapy that would need to be administered in conjunction with a peripherally acting enzyme like ELAPRASE.

So it's a very niche product.

And as we presented previously, our peak sales forecasts are very small for TAK-609 because of that reason.

We're still in dialogue with agencies right now.

We'll have a better sense for the path forward over the next 6 to 9 months.

This is Wakao from JPMorgan.

I hope you can hear me.

My first question, about TAK-994.

The hepatic function safety signal, was it for low dose, medium dose or high dose?

So if you're going to do the trial once again, is it from Phase II or Phase III?

If you're going to continue development, if that decision is made, from which stage will it restart, Phase II or Phase III?

And my second question, JPY 450 billion to JPY 500 billion was the cash at the end of the fiscal year, but you are going to do a buyback of JPY 100 billion.

And what is the operating capital?

Thank you.

So Wakao-san the 2 questions you had for TAK-994.

The first was around the dose at which we saw the toxicity and the second was around what would be our plans regarding starting clinical development.

So on the first question, we haven't disclosed those yet, it's still a blinded data set.

There are some of us who have been unblinded, obviously, to ensure patient safety, but we'll provide more information next year regarding the full safety data set and dose response relationship.

With respect to your question regarding trial restart.

Right now, there's a serious patient safety issue.

We've paused those trials.

We stopped those trials.

We are not dosing patients.

Before we have any possibility of restarting a trial, if there is a possibility, we need to really look at the full data set.

So there are no plans in place right now.

Maybe I can take the -- Thank you, Andy, I'll -- Wakao-san for the question.

The share buyback is back -- the way we're funding that is from our operating cash flow.

So you're seeing a stronger operating cash flow.

We think we're going to be comfortably delivering our free cash flow and operating cash flow targets.

But on top of that, we will -- we're unlocking even more working capital as well.

So we have the opportunity to fund these from our strong abundant operating cash flow, and therefore, we don't see an impact to our deleveraging targets as well.

Thank you for your question.

Credit Suisse, Sakai-san, please.

So 2 questions.

One question for Costa-san.

This shareholder program, are you not sending wrong message, the investment community because JPY 100 billion with 30 million share buyback.

You're saying almost you're buying the share below JPY 3,000, today's closing price.

So what is justification of this size of the share buyback?

So that's my first question.

And the second question is, it's nice to have the U.S. people here.

So I would like to ask the pricing situation in the U.S. Obviously, U.S. is preparing for post pandemic, I guess, living condition, whatever they are.

Now with the budget coming soon, what the Biden administration's pricing foresee going forward?

We're getting very patchy information for last 12 months.

So can we -- or can you tell me anything concrete with the pricing pressure that we should be aware?

So that's 2 questions.

Thank you very much, Sakai-san.

I can address this.

So thank you very much, Sakai-san.

I'll just repeat what I said before.

I think the message is really the fact that we think our share price is well undervalued and now is an opportunity to acquire the shares at a discount.

And at the same time, we're in a position where we're in a position of strength.

We're showing strong cash flow, strong underlying revenue growth.

And again, the window is 6 months, but we will look at (inaudible) to just buying from next week.

And I think for me, it's really a key message from the leadership team is that we're confident in our strategy.

We're confident in our deleveraging and it's a signal that we will continue to look at enhancing shareholder return, as indicated in our updated language of our capital allocation policy.

So I agree, if it was a onetime, perhaps.

But the signal here has been updating also from our capital allocation policy.

So we'll continue to revisit this on an ongoing basis.

Thank you very much.

Thank you.

And maybe I can take the question on U.S. pricing.

So very high level today, it appears the administration is getting closer to some sort of package.

I think what's up in the air still is the size of the package, and that means the size of the pay force from pharma as well.

So it's difficult to say concretely because we don't know concretely at this point exactly what's going to happen.

I will say that we're pleased that the administration has expressed support for lowering patient out-of-pocket costs.

The unpredictability in the U.S. of patient out-of-pocket has been a challenge for patients and a challenge for us making our medicines available to patients.

And so we do expect there will be some pay force from pharma within that.

We've provided a number of solutions to the administration that we're hoping they're looking at carefully, and we believe they are.

But the final decision has yet to be shared.

And certainly, we're looking at all options, assessing the impact.

And as soon as we have any more information, we'll definitely be passing that on to you.

but we do very much support the administration's goal of making our medicines accessible to more patients and reducing out-of-pocket costs and increasing predictability and affordability of medicines in the U.S. Thank you.

Morgan Stanley, Muraoka-san.

This is Muraoka, Morgan Stanley.

I hope you can hear me.

My first question is about cost ratio.

In the second quarter, the cost of goods cost ratio, more than 3-point deterioration.

I understand this is due to plasma collection, but 15% to 25%, so you are slowing down the plasma collection.

What does it do to the full year performance target?

Do you think you would miss the target of JPY 930 billion because of the lower gross margin?

And for the next fiscal year, once the collection cost normalizes, do you think it can contribute to the improvement of the gross margin for the whole company?

That's my first question.

And the second question is about Novavax vaccine.

I didn't fully understand, but the pricing in Japan will be lower than JPY 2,000 or higher than JPY 2,000?

I wasn't quite sure about that.

So can you please clarify this for me?

And also, so this was filed in the U.K. and therefore, you would have no problem filing in Japan.

Is that a correct understanding?

And also the production capacity, 100 million.

There is excess capacity according to the -- your agreement with the Japanese government.

Do you think it's likely that you would export the excess production to outside of Japan?

Constantine for your first question and then Masato for the Novavax question.

Sure.

Thank you.

Thank you, Muraoka-san.

If I understood your question, it was around the gross margin on the core results.

So you're right, the gross margin has -- we had some headwinds in the first half of the year.

And that's predominantly driven by two reasons.

The first one is FX impact.

So the cost of goods has been impacted from FX because we have a lot of the manufacturing costs in euros.

So that had a headwind.

The second one was the donor fees, as we've highlighted for plasma-derived therapies, there was an uptick on donor fees.

But now that we're no longer addressing that from that standpoint, we expect in the second half of the year to improve the overall gross margin.

And in particular, another reason for improving the gross margin is that we also see the acceleration of our 14 global brands.

And our 14 global brands have a higher overall gross margin than the overall company total gross margin.

So we think we're in a comfortable position.

We're very confident that we're going to deliver the JPY 930 billion core operating profit target for the full year.

In fact, even in the first half year, the run rates are at 52% to the full year JPY 930 billion core operating profit.

So we believe we're in a comfortable position to deliver our guidance.

So thank you, and I'll hand it over to -- who is next?

Masato-san.

This is Iwasaki.

Thank you for your question.

So pricing and also timing of filing approval, as well as what is the impact of a filing in Europe?

I think those were the questions.

As far as the pricing is concerned, it has not been fixed yet.

The Japanese government will be the biggest buyer from our perspective.

So we consult MHLW as we decide on the pricing.

Timing of filing, as well as approval, we have not really shared this with you specifically, but supply of product will be early 2022.

That is the plan.

Again, Novavax and MHLW, we need to collaborate with them very closely to make sure that there is no delay in manufacturing.

So we're getting ready for that right now.

I hope that answers your question.

Well, what is the difference between the manufacturing capacity, 150 million versus the 250 million?

Yes, 250 million doses can be manufactured with the capacity, and we don't know what's going to happen in the future, but we are discussing with Novavax.

And excess production, if we produce more than we supply to the Japanese government, we are checking if it's possible for us to export to outside of Japan.

That's one of the potential options that we're considering.

Thank you.

Thank you, Masato.

I will add one element [that it] was said, but not in the translation, is that remember that the government of Japan help us to finance the investment for the manufacturing capacity.

That's what we wanted to express is that they help us with the financing of the manufacturing capacity.

And that's why we wanted to say that, logically, they will have a preferential price linked to that investment that the government made at the time.

With that, I would like to close to the webinar for today.

Thank you so much for your participation despite your busy schedule.

We ask for your continued support.

Thank you.

Thank you.

Thanks, everyone.

Thank you.