Now, it is time. From now, we would like to start Nxera Pharma's FY2025 full-year financial results briefing.

Thank you very much for joining despite your very busy schedule. I will be serving as the MC today, CFO Nomura.

Today, we have Mr. Chris Cargill, CEO; COO, President, Nxera Pharma Japan, Toshihiro Maeda; CSO, President, Nxera Pharma UK, Dr.

Patrik Foerch, attending the meeting. We have simultaneous interpretation as usual.

Please click the globe icon and select the language, Japanese or English, and you will be able to hear the interpreter's voice. If not, you will be able to hear the original voice of the speakers.

In the first half, I will be presenting, and there will be Q&A session in the second half of the session. We have the materials shared on the screen.

We are also uploading on the website. If you would like to have the materials, from Investors, IR Library, Presentation, and please access to the materials.

In the latter half of the session in Q&A, institutional investors, analysts, and media people, you will be able to ask questions by raising hand. The others will be able to submit questions from Q&A button.

You will be able to submit questions at any time, and we would like to respond to questions as long as the time permits. Without further ado, we would like to move on to the presentation.

I will talk about the financial results. After that, Chris will talk about the operating highlights.

Mr. Maeda will talk about the Japan commercial business update.

Patrik will provide update on UK R&D progress. Lastly, Chris will talk about FY2026 objectives and beyond.

Now, please turn to page 5 of the materials. This is page 5 of the materials.

Here, summary of FY2025 full-year financial results along with the past trend by revenue segment is indicated. The revenues, against the ¥28.8 billion last year, this was ¥29.6 billion, slight increase.

Milestone revenue decreased from ¥11.2 billion to 9. point—¥7.9 billion, and product sales grew from ¥14 billion to ¥17.8 billion.

I will talk about the details later on, but especially Piviwiq, product supply and royalty became the drivers of the product sales. The milestone is declining.

The blue is declining. In 2024, Neurocrine had a $35 million, close to ¥5 billion milestone revenue, but primarily low milestone in 2025.

In terms of profit, core OP was -¥400 million. IFRS basis was -¥8.4 billion on year-on-year basis.

SG&A was compressed by 4% to 5%, about ¥800 million. Clinical study development and investment in obesity, the expenditure in R&D increased by ¥2.7 billion.

There were impairment in part of the assets, primarily due to incur of ¥1.8 billion, one-off cost related to business rebuilding and structural reform. It is not included here, but operating profit was ¥20.05 billion deficit, and there was the cost related to the change of the terms of the corporate bond of ¥4.6 billion in IFRS basis.

In slide 6, this is by business domain, and core operating profit and accounting operating profits are shown as the breakdown. On the far left in blue is the platform business.

This is so-called bio venture-type business model. The red one to the right is a commercial business, so-called pharma-type business model.

Platform profit is largely dependent on milestone from partners. Self-control is, unfortunately, difficult.

On the other hand, commercial, by growing that, we are targeting for the stabilization of the revenue. This is the company policy.

As explained, in platform business, large-scale milestone was lacking. There is increase of R&D expenses.

As a result, the core operating profit turned deficit. Last November, as we announced individually, we are rebuilding business for turning profitable.

Commercial business is growing steadily on core basis. It became in black, ¥6.05 billion, targeting for stable growth next fiscal year.

As for the forecast, later on, Chris will cover this in FY2026 objectives. Please move on to slide 7.

As I mentioned about the R&D expenses, I would like to talk about the difference on year-on-year basis in detail. Last November, we showed this slide in R&D Day.

The trend has not changed significantly. The development products in the clinical stage, last year reached the peak of expenditure.

We announced in August last year, but there was significant increase in investment for obesity area, and there was exchange rate fluctuation compared to the assumption. This is very brief, but I would like to conclude the explanation on the financial results.

Next, Chris will talk about the business highlights. Chris, over to you.

Thank you, Nomura-san, and good afternoon. Now, let me start by saying FY2025's financial results, particularly the operating profit level, were unacceptable.

We have initiated changes to management, changes to research strategy, and implemented cost controls, and I expect the benefits from these changes to become apparent in the second half of this year, FY2026. Our strategy is clear: we aim to strike a balance between investing in research to create future value, while at the same time being as close as possible to break-even or profitable financial status.

Now, there are many factors in our industry that are 100% outside of our control, such as scientific or clinical outcomes, or partner-regulated strategies. However, how we allocate our capital is within our control, and we must do better.

In FY2025, we did continue to invest in programs and products that will shape our future growth. I am proud to say that our Japanese operations are highly profitable on a standalone basis.

Our UK drug discovery operations require a sharper strategic focus and stricter capital allocation. In FY2025, we took necessary steps to correct this.

Please turn to slide 9. Sales of Pivlaz and Quviviq exceeded our goal of over ¥17 billion Japanese yen net product sales.

As I mentioned, I'm extremely proud of our teams in Japan for their continued commitment to expanding access for patients to these important products. After the year-end, we completed the in-license of vamorolone for Duchenne muscular dystrophy, or DMD, adding a late-stage, rare disease product with a strong strategic fit for our business in Japan and the high-growth APAC region.

In our drug discovery business, we were unsuccessful in completing a new high-value business development partnership deal in FY2025. However, we did successfully begin a new Phase II trial with our EP4 antagonist program, and the early clinical data from this program is very encouraging as we aim to fast-follow Ono's product with the same mechanism of action.

Following the acquisition of Idorsia's business in Japan late 2023, almost all planned PMI, or post-merger integration, investments across IT and business systems are now complete, which means we can look to operate much more efficiently going forward. Our goal of positive IFRS operating profit was missed due to the GPR52 option not being exercised last year in FY2025.

Please turn to slide 10. We do continue to advance rapidly both the drug discovery business and commercial side of the business.

Our UK drug discovery business progressed five programs in Phase I, five programs in Phase II, and two programs in Phase III trials across our key focus areas. Our commercial business in Japan experienced strong growth across two commercialized products, Pivlaz and Quviviq, and it is poised to advance two clinically de-risked, rare disease products as we expand the late-stage clinical pipeline.

I believe we're on track to continue strong growth trajectory through 2026 and beyond. Please turn to slide 11.

Pivlaz delivered ¥13.5 billion in sales, 7% year-on-year growth, and it's now firmly established as the standard of care in Japan. Quviviq delivered ¥4.3 billion net sales and is now showing strong momentum with our partner, Shionogi, in Japan as the two-week prescription limitation ended in December 2025.

We expect 30% annual revenue growth for Quviviq this year in FY2026. As I mentioned, our new late-stage product, vamorolone, is highly synergistic with our existing development and commercial infrastructure.

We expect, once launched, that the product will contribute meaningfully to our business. Please turn to slide 12.

As I mentioned earlier, despite the heavy R&D expenditure last year, we did build value by advancing our wholly owned, in-house drug discovery programs, as well as strong momentum from our core partners, Neurocrine and Centessa, as they advance our partnered programs. Now, in our partnered portfolio, Neurocrine maintains the world's most comprehensive portfolio of muscarinic agonists to treat neuropsychiatric disorders, and these were all developed using our NxWave drug discovery platform.

The most advanced program, the muscarinic M4 agonist, now called direclidine, is in Phase III trials for schizophrenia, and top-line clinical data is expected by the end of 2027. There are also several other muscarinic agonists advancing through Phase I and Phase II studies across multiple indications.

Centessa is advancing its lead asset, ORX750, towards a registrational program this year to treat narcolepsy type 1 and 2, as well as idiopathic hypersomnia, all huge areas of unmet medical need. In our wholly owned in-house portfolio, we have two Phase II-ready assets now: NXE-149, a GPR52 agonist for schizophrenia; and NXE-744, an EP4 agonist for IBD.

These are both undergoing competitive licensing processes, and our aim is for both of these programs to be partnered by the end of FY2026, if not sooner. NXE-732, our EP4 antagonist for advanced solid tumors, is progressing through Phase IIa trials with partner Cancer Research UK, and we expect data in 2027.

Our CSO, Dr. Patrik Foerch, will discuss these programs in further detail, including an outline of some of the strong indicative clinical data we have seen so far.

Please turn to slide 13. Now, we've recently refocused the UK drug discovery portfolio to prioritize areas with the greatest potential so that we can broaden our patient impact.

Now, this includes an innovative portfolio of next-generation small molecules for obesity, metabolic, and endocrine disorders, with very significant total addressable patient markets. We also work with global investment firms to create new biotech-focused companies to advance medicines through clinical development, and we disclosed plans for a new company yesterday via a press release, and we look forward to hopefully launching this company from stealth very soon.

Now, our GPCR know-how and our flexible chemistry approaches remain unmatched, and we plan to continue to deliver differentiated, best-in-class medicines to address these high unmet areas of need. I'm going to hand over now to Maeda-san to discuss the Japan and APAC clinical development and commercial businesses in more detail.

Thanks, Maeda-san.

Thank you. Then I would like to talk about Japan and APAC.

Please turn to the next page. The actual of our first commercially available product, Pivlaz, and its highlights as of 2025.

Since that launch, this was used and positioned as the standard of care in Japan for the prevention of cerebral spasm in patients with aSAH. As of the end of last year, it has grown sales to ¥13.5 billion.

This fiscal year 2026, we're expecting to see the stable growth of over 4% on patient base. From 34% in 2022, the share expanded to 74% in 2025, securing dominant position in the domestic market.

On the right-hand side, you see the 2025 highlights. Since the launch to December 2025, Pivlaz patients reached 25,470 patients.

In STROKE 2025, over 100 abstracts were presented. Looking at this year, summarizing the practical guide to administration of clazosentan, it is expected to be published in March.

We're expecting to have further promotion of use in the medical field. As you can see, Pivlaz has established clinical value, market penetration, and scientific evidence, and growing steadily as the mainstay product.

Next page, please. Let me now turn to the explanation of Quviviq.

Quviviq is the novel dual orexin receptor agonist, so-called DORA, and this is insomnia treatment drug, especially recently in Japan, rapidly establishing its position in the treatment paradigm for insomnia in Japan. On the left-hand side graph, you see Japan market size, and you can tell that the DORA overall is expanding.

The right graph shows the sales of Quviviq. From ¥1.3 billion in 2024, last year it reached ¥4.3 billion.

On year-on-year basis, it exceeded 224%, demonstrating powerful growth. This fiscal year, expecting to see further growth to ¥5 to ¥6, ¥7 billion.

Next slide, please. On this graph, you see the sales and profit structure of Quviviq and the cost reduction outlook in the future.

At this moment in time, the profit is basically royalty income, but in the future, independent, low-cost supply chain will be formulated, and we are targeting for profitability from product supply. Already established Nxera independent supply chain from the licensor last October.

Regulatory approval on second API source was obtained in October 2025. In the latter half of this year, second API is expected to contribute to profit.

Going forward, cost optimization of raw materials, drug product, and packaging sourcing optimization, through that, we are targeting for further improvement on the profit margin. Next slide, please.

From here and onward, I would like to introduce newly introduced DMD treatment drug, Agamree. DMD is a rare and life-threatening neuromuscular disorder characterized by progressive muscle dysfunction leading to ambulation loss, respiratory failure, heart issues, and premature death.

No efficacious therapy apart from corticosteroids. However, presently, there are many severe adverse events with existing steroid treatment.

Agamree is the first-in-class drug candidate to treat DMD that binds to the same receptors as corticosteroids, but modified the downstream activity to express a different characteristics. The company has the development rights for Japan, Korea, Australia, New Zealand, and DMD treatment is concentrated in limited number of centers.

There is approximately 70% sales synergy with Pivlaz, which is extremely strategic product for the company. Next slide, please.

On this slide, it shows the characteristic of Agamree. Compared to conventional corticosteroid, there is a higher likelihood of reducing adverse events significantly.

The VISION-DMD study showed durable efficacy and markedly improved the safety versus standard corticosteroid, specifically growth maintenance, lower fracture rate, lower incidence of cataracts. Important indicators for patients are improving.

Looking at the sales forecast in other countries, we're expecting to see robust growth in North America and Europe. Agamree is strategic product which has potential to become long-term pillar of the company.

Lastly, on the last slide, I would like to talk about the sales synergy between Pivlaz and Agamree. DMD treatment is concentrated in a limited number of centers, and there is approximately 70% commercial overlap with Pivlaz.

Therefore, the network we've already forged with university hospitals can be leveraged for deployment of Agamree. Through this sales synergy, speedy market penetration and efficient sales activity will be possible.

As an overall portfolio, we can expect to see high level of synergy effect. This concludes my commercial business explanation on Japan and APAC.

Now, I would like to turn over to Patrik to talk about the R&D update.

Okay. Thank you.

My name is Patrik Foerch. I'm the Chief Scientific Officer, and I'll now move over to our pipeline of innovative drugs developed through our NxWave drug discovery platform.

Next slide, please. At the end of last year, we renewed our R&D focus to prioritize the programs in areas with the greatest potential for patient impact.

We launched a new wave of oral small molecule programs targeting high-potential targets in obesity, metabolic, and endocrine disorders by leveraging our NxWave platform to deliver novel, differentiated small molecules. We have two Phase II-ready assets: NXE-149, our first-in-class schizophrenia candidate; and NXE-744, our EP4 agonist for IBD.

Both of them are undergoing competitive licensing processes, which we announced earlier in the year during J.P. Morgan conference.

NXE-732, our novel immunotherapy for advanced solid tumors, is in a Phase II clinical trial with our partner, Cancer Research UK. I will be providing more details on these programs over the next few slides.

Next slide, please. NXE-744 is a gut-restricted, selective EP4 agonist with dual mode of action.

It's combining a anti-inflammatory activity and is promoting mucosal healing in IBD. All Phase I study elements have completed dosing in the clinic, and in the SAD and in the MAD studies, there have been no concerning safety signals detected so far.

Importantly, no systemic exposures, but very high gut tissue levels were observed in healthy volunteers, and we are very pleased that, in preliminary analysis, this gut-restrictive profile was also confirmed in a cohort of UC patients. In addition, we are very excited about the interim analysis of our indomethacin study, showing a highly significant reduction of around 50% of indomethacin-induced permeability in our NXE-744 treatment group, and thereby confirming target engagement.

This asset is now Phase II-ready, and we are currently engaging in a competitive licensing process and are in discussions with a number of major pharma companies. Next slide, please.

NXE-149 is a first-in-class GPR52 agonist offering a novel mechanism that addresses the positive, negative, and cognitive domains in schizophrenia. NXE-149 has successfully completed Phase I studies and is fully enabled for Phase II.

Data from the Phase I showed predictable pharmacokinetics, and CSF sampling confirmed high levels of central penetration. NXE-149 clearly engaged brain circuitry relevant for the treatment of schizophrenia, and also demonstrated increased alertness, which is reflected in the better cognitive performance following 10 days of treatment with NXE-149.

This potential first-in-class asset is now fully Phase II-ready and is undergoing competitive licensing that we announced during the J.P. Morgan conference in January.

Please move to the next slide. NXE-732 is a potent and selective EP4 antagonist aimed at reversing immune suppression in solid tumors.

In a Phase I study, we're very encouraged to see two partial responses in microsatellite-stable CRC and in PD-L1-resistant RCC with a tumor shrinkage of over 30%. The data also showed a very good safety profile and strong target engagement supporting its potential as a best-in-class profile.

The Phase II expansion study is underway in combination with atezo and has been led by our partner, Cancer Research UK. Please move to the next slide.

As we announced earlier in the year, we are leveraging our NxWave to design the next generation of small molecules for obesity, metabolic, and endocrine disorders. As we communicated, we launched a broad new pipeline strategically focused on best-in-class therapies to achieve long-term weight maintenance through convenient oral small molecules.

We are targeting a number of receptors: GLP-1, GIP, amylin, plus multiple others, and are focused on safety, tolerability, and expanding access to a diverse patient population. Our metabolic disease portfolio underscores the versatility of our NxWave platform and our commitment to tackling major global health challenges.

Next slide, please. Moving on to our partnered portfolio, our long-standing collaboration with Neurocrine showcases Nxera's GPCR discovery power and industry-leading muscarinic pipeline.

Neurocrine's muscarinic portfolio now includes five clinical-stage programs spanning selective M4, M1, and dual M1/M4 orthosteric agonist, addressing cognitive and psychotic symptoms across a range of psychiatric disorders. Our most advanced candidate is a M4-selective, direclidine, which is currently in Phase III for schizophrenia and in Phase II for bipolar mania.

NBI-570, the dual M1/M4 agonist, also initiated a Phase II trial in schizophrenia in Q4 last year. This continued momentum underscores the quality of our assets and is a major validation for our platform.

Please move to the next slide. Centessa is advancing a portfolio of potential best-in-class orexin receptor agonist discovered through our NxWave.

The most advanced asset, ORX750, is in development for the treatment of narcolepsy type 1, type 2, and idiopathic hypersomnia. Initial Phase IIa data showed robust efficacy in addressing wakefulness needs of patients across all three indications, and this matches rival molecules from competitors.

A registrational program is expected to initiate in Q1 this year, positioning ORX750 as a potential best-in-class treatment for hypersomnolence disorders. I now hand back to Chris to outline the objectives for 2026 and beyond.

Wonderful. Thank you, Patrik.

Please turn to slide 30. Looking ahead to the next 12 months, these are our priority objectives.

We want to achieve net product sales of more than ¥19.5 billion across Pivlaz and Quviviq. We aim to secure at least one additional late-stage product for Japan and APAC as we continue to build out our highly profitable pharma business unit in Japan.

We want to execute or sign one or more high-value partnership deals from our portfolio of wholly owned, in-house programs. We want to initiate at least one new Phase II trial with a partner.

Of course, we want to reduce total costs in the business by over 10%, and we aim to achieve full-year profitability on an IFRS basis. Slide 31, please.

For the full-year 2026, achieving both core operating profit and operating profit is our aim. As you can see from the chart, top-line revenue growth, excluding any new business development deals, has been strong since FY2023, reflecting our commitment to building a highly profitable commercial pharma business in Japan and APAC.

If we can achieve multiple milestone payments from our existing partners and successfully out-license multiple Phase II-ready, wholly owned, in-house programs, then I expect to see a strong year of performance. We will continue to review our wholly owned, in-house portfolio dynamically and allocate capital more effectively.

Slide 32, please. Now, this slide provides a bit more detail about our 2026 guidance.

The drug discovery platform side of the business should be able to reach break-even on a core basis. We expect to see continued strong growth from our Japan and APAC commercial business.

With disciplined execution and continued cost rationalization, we believe profitability is achievable for FY2026. I'll just add one more point, and I said this at the beginning: we implemented changes to management, changes to pipeline, and cost reduction initiatives, and we expect the second half of 2026 is when these changes will start to wash through our financial statements.

Please turn to slide 33. The year is shaping up to be another strong year of execution as we work towards our 2030 vision.

As you can see on this slide, we are expecting several potential catalysts, both internal and partner-led, as multiple clinical trials reach key development milestones with partners. Slide 34, please.

The 2020—the 2030 vision, rather, remains intact, and it is to build a high-growth, highly profitable Japanese biopharma company. We're very happy with the addition of vamorolone to our late-stage portfolio.

It provides further growth potential towards reaching our goal of ¥50 billion of annual revenues and operating profit margins above 30% by the end of 2030. We're very excited about what's to come this year, and we believe we are well-positioned for success much beyond 2030.

Thank you for your time. Management team and I are very happy to take any questions now.

Thank you.

Hashiguchi from Daiwa Securities. The performance outlook, the forecast, I would like to know the basis for the forecast.

The lower limit does not include the new partnership. On the other hand, with respect to the milestone, there are some which may incur and which may not, and there are the ones with high probability and not.

For the lower limit, the uncertainty of a milestone, how are you factoring in? On the other hand, between the lower limit and the upper limit, it is ¥15 billion.

This ¥15 billion, with what kind of idea is this based on in order to set this figure?

Yes, thank you for the question. There were two questions.

Since this is related to the performance forecast, I would like to respond. If there is any additional remark, Chris will respond.

Page 32 is the breakdown of the lower amount, especially the top left, platform milestone part. How much uncertainty is involved?

I understood this was the question. The platform milestone, as Mr.

Hashiguchi mentioned, this is milestone in the first place. We still do not know.

It really depends on the progress, as we have been explaining. There are many pipelines in the late stage of the clinical stages, and also there's also public comments as well.

We have accumulated the figures as a result of that, and we have deducted some of the figures, and that will arrive at ¥14.3 billion, and a milestone is at ¥12.5 billion, and that is equivalent to the milestone. This is quite conservative, not everything, but even what is likely to occur is deducted.

This is the milestone part. Moving on to the second part of your question.

Your second question was ¥15 billion and the rationale for ¥15 billion. The rationale for ¥15 billion, this is BD.

There's no solid rationale from our perspective. This is our aspirational target.

Of course, if these two out-licenses go well, there is a possibility of exceeding ¥15 billion. Rather than having the rationale, the two assets we have, this is more of the expectation to our two assets.

Chris, do you have anything to add?

Thank you, Nomura-san. Hashiguchi-san, I think the easiest way to think about this is, lower end of the range is my minimum expected performance from the business, and the top end of the range is if there is absolutely 100% perfect execution across all elements of revenue generation.

The important caveat is, as I know we operate in the biotech industry, there's lots of risks, but equally a lot of our large-sized milestone income comes from partners, and that is not within our control. This is our best-guess estimates for my minimum expected performance both internally and across our partnered portfolio.

However, we need to have an aspirational goal, because if we are successful in marketing programs that are in our pipeline and executing new business development deals, as historically we have demonstrated we are very good at doing, then perfect execution leads us much closer towards the top end of that range. That would be my additional response to your question.

Thank you.

Thank you. I have one additional question.

The structural reform effect is expected to incur in the second half of the year. Also, compared to the full-year expense of this year, there will be less expense in the next fiscal year?

Am I correct to understand this way? Or that effect or benefit, there is a possibility for reinvestment, it is not possible to decrease in the next fiscal year?

Am I correct to assume this way?

Thank you for the question. Your question is related to the expense this year and the next year, I would like to ask Chris to respond.

Chris, can you respond?

Yes, certainly. As I mentioned during the presentation, our goal is to reduce costs across our business, across our core businesses.

Our business today is very heavy on costs throughout research and development, which is expected. We also have costs across G&A, which is another area that we will be focused on reducing expenses, and technology is helping us in being able to drive down cost in that part of the business.

I think the business has made great progress in reducing sales and marketing expenditure, particularly last year, we are becoming much more efficient in our commercial organization. Of course, if we can reduce costs by as much as I expect that we will, that should have the benefit of increasing our chances of achieving profitability.

We always have opportunities to reinvest capital, and we will continue to do so if we believe that there are high-value programs or high-value other opportunities that we can invest in that will create value for the future, particularly things that will contribute to our 2030 vision. That would be how I would respond to that question.

Thank you.

I am Matsubara from Nomura Securities. Can you hear me okay?

Yes. Thank you for your presentation.

My first question is about EP4 agonist. It's for IBD.

There are different mode of actions being available, TYK2, IL-23 as oral compounds. They may come, and EP4, how would you differentiate that from others?

Then what are the discussions taking place with your potential licensing partners?

Thank you very much. This is about R&D.

Patrik, would you be able to answer this question? Patrik?

Yes, happy to take that question. You're right, there are multiple assets on the market or in clinical trials for IBD.

Where we see a clear differentiation for EP4 agonist is that we're having, as you pointed out, a dual mode of action: the anti-inflammatory as well as a barrier repair function. Most of the treatments in IBD for the moment are anti-inflammatory with a clear efficacy ceiling.

When we see how to position EP4, I think there are two separate TPPs. You could see EP4 agonist as a monotherapy in mild-to-moderate cases, but there is also a clear opportunity to use our EP4 agonist small molecules as a add-on to biologics to break through the resistance barrier and efficacy barrier that most of the treatments have at the moment.

As an add-on to classic biologics, which are approved. A last comment to the process, as we started off this partnering discussion during JPM, we got very good tractions.

We have quite a few discussions with some of the major players. The mechanism certainly resonates, and what is very clear, the target engagement showing functional response in the indomethacin challenge study is very well received.

The overall package that we have from our Phase I studies, again, is clearly recognized that this is a very consolidated package understanding the mechanism as well as positioning this program to move forward into a Phase II trial.

Thank you. I have a additional comment.

Existing ones are for anti-inflammatory, suppressing the immunity. Ours is completely different.

It promotes the recovery. Patrik mentioned add-on, it's very different from the existing one.

We can differentiate ours from others. That's all from me.

Thank you very much.

Thank you. It has a different mode of action.

You are expecting the milestone or upfront, and this compound may actually exceed the expected value going forward?

Yes, I'd like to give you a brief answer to that question. Realistically speaking, yes, there is a possibility.

At J.P. Morgan, as has been explained, several companies have shown interest.

These big companies, more than five companies, are in discussion with us. When it comes to actual deals, to what extent they are serious, this is something that we would have to pursue going forward, but then we have quite high expectation.

Thank you very much. My second question is about obesity and your development strategy.

Oral GLP-1 and GIP drugs are being available, and for subcu, inhbe, which maintains the muscle mass while reducing the body weight. These are new ones.

Then you are spending a lot of money for R&D right now, but going forward for obesity, what would you be doing to overcome your competitors?

Thank you very much for your question. This is about R&D.

Patrik, would you be able to take this question?

Yes, happy to take that question. You're absolutely right, this is a very competitive field.

We're very much aware about that. However, when you look, these targets, all GPCR targets, which is right in our wheelhouse, where we are best-placed to come up with very selective, high-quality molecules.

With the exception of GLP-1, most of these targets are very much driven by, as you said, subcu or generally peptide molecules. When you look at the cost of goods and convenience of administration, the next wave of this target is clearly small molecules, where we are very well-placed to follow the data coming out of the front-runner molecules and then follow up with a very clearly defined TPP for a best-in-class small molecules, especially as we see that the whole metabolic area, the whole indication field expanding very, very rapidly.

We're working, and you might have seen the announcement of our Metabolic Advisory Council, to have very clearly defined TPPs for our metabolic pipeline, that we can position our selective and highly efficacious small molecules exactly at the right position in the market.

Nomura-san, I might just add a comment to that, and thank you very much, Patrik, for your answer. Our approach to this area is not solely about obesity.

We are thinking much longer-term. Many of the top pharmaceutical companies have GLP-1s, and as Patrik said, they are either subcutaneous injectable peptides.

They are going to need small molecules to follow on to those franchises, and they're going to need GIP antagonists, amylin agonists, etc., as part of their portfolio of combination therapies that will go with their GLP-1s. It's not just about obesity.

This is about chronic weight management for the long term and longevity. The way that we see the market shaping out over the next 10 to 20 years, we want to see really strong health outcomes for patients the world over, and the market will eventually shift towards once-daily oral small molecule approaches to treat not just obesity, but the range of comorbidities that come with that, and then longer-term chronic weight management, which will produce health outcomes across the board.

It's not just an obesity play in competition with current obesity companies. It's about thinking about longevity for human beings and health outcomes over a much longer time horizon.

That's why we are planning to offer a portfolio for pharmaceutical partners to look at where we've got oral small molecule approaches to all of the necessary targets to deliver on those goals.

Thank you.

Thank you very much.

Yamakita from Jefferies. Can you hear me?

Thank you. I have two questions.

The first question is on cost. The SG&A cost, in platform, you see slight increase in SG&A, and this is for the promotion of out-licensing.

I would like to know the details and the overall cost. Suppose it is difficult to achieve a profitability, how much buffer do you have?

Is it a level you cannot go further for the reduction? Can you give us the sense?

Yes, I would like to respond to the question. Starting from SG&A increase, as you said, this year, we need to be more active on BD activities, and IT investment for the purpose of efficiency, we need to continue this year as well.

In commercial business, we had some SG&A cost, but in platform, there was a transfer internally, it is a slightly shifting. That's the technical part.

Combining that together, there is a slight increase. On the other hand, if we cannot achieve profit, then do we have room for further cost down?

The answer is both yes and no. Of course, we are continuing such efforts.

When we face such circumstance, we need to consider additional measures. This cost reduction from the second half of this year, Chris mentioned that we will be addressing more seriously.

Our outsourcing company, if we need to stop that, there will be further time buffer to that. In that context, we will be making such efforts, in that context, it is yes.

Can we do this flexibly? Unfortunately, we will be too late if we start that in the second half of the year.

If possible, in the first half of the year, we would like to accurately grasp the business situation and BD. We would like to make sure that we can close the big deal, we are now focusing on that now.

Thank you, Nomura. I might just add two comments.

We are an extremely cost-conscious operation now. We will always be looking to take costs out of our business and become more efficient.

For example, over the last three years, we've been making enormous gains from implementing new IT systems and business systems that we will be able to extract significant efficiencies from going forward. As Nomura said, I expect those efficiencies to come to bear in the second half of 2026.

We will be able to operate significantly more efficiently going forward. That is something I'm very, very excited about.

Of course, you can't take too much cost out of the business. If you get to a point where you remove too much, the business will stop functioning.

It's a balance, and we always need to be able to invest for the future so that we can achieve our 2030 vision, which is to have ¥50 billion of sales and 30% or more operating profit margins. I just want to give all of the analysts and investors out there the comfort that both Nomura-san and I are continuously—and the broader management team as well, but in particular, it is very clear across my management team that we are always looking to reduce costs wherever any costs can be taken out of the business and technology can be used to be more efficient.

Thank you.

Thank you, that's clear. Coming to my second question, it's about licensing out.

These days, the Japanese companies are struggling on out-licensing and partnership, and that is probably because of the uncertainty in the US drug price, especially for the large assets, the global pharmas are scrutinizing quite seriously. There will be more requirement for additional data compared to the past.

It's my understanding correct? You mentioned that the discussion is ongoing in J.P.

Morgan, but with the current data available, do you think you can close the deal? If additional data is required, what will be required?

Do you already know what is necessary? What is the environmental change in out-licensing, and I would like to know how you would like to react to that.

On BD, Chris, I would like to ask Chris to respond. Chris, are you able to respond to the question?

Of course. Yes, thank you.

I'll make a very bold statement. I think we have one of the best business development teams of any company that's listed in the biotech or biopharma space in Japan.

If you look at our track record over the last 10 years, the number of partnerships that we have been able to execute with top 20 global biotech and biopharmas, I honestly don't think that there are any companies in our peer set that can match what we can achieve. We have a fantastic team.

We have a business development group that is split across two territories: we have key members in Japan, we have key members in the UK, and we have extremely strong business relationships with the biggest and best pharmaceutical and biotech companies in the world. I think we have a fantastic opportunity to do business development this year.

Of course, whether or not we can convince another partner to do a deal is another question, but from our capability standpoint, I think we've got a fantastic opportunity. Now, to your point around other Japanese companies potentially struggling with business development, that's a very broad statement.

I don't necessarily believe that is true. For the very large companies, they are operating in a very difficult environment right now, particularly those that have US businesses.

There's a lot of uncertainty from the regulatory perspective, and there's also a lot of uncertainty around pricing and how that will ultimately shake out. The best thing about our business, though, is when it comes to business development, we're pretty much Japan-only focused on the way in.

We are in-licensing products for the Japanese market from small-to-mid-sized biotech and pharma companies that are not as concerned or susceptible to some of these global regulatory or pricing pressures. As you will see, at the start of this year, we were able to in-license vamorolone.

That was a competitive process. We did that process from start to finish in eight weeks.

When we choose to execute, we can execute very quickly and very effectively, and that has always been a strength of our team. From the UK drug discovery side of our business, where we are out-licensing programs, we're typically giving global rights away, or certainly we are giving rights to global ex-Japan, which ultimately hands the project or the program over to the partner, and they have full control at that point.

I don't think that we're really going to see any problems. I think we're really well-positioned, both on the way in for products that we're trying to bring into Japan, and on the way out where we're trying to license programs, particularly for the US market for a US biotech or US pharma company to control.

That concludes my response. Thank you, Nomura-san.

Looking forward to the update. Thank you.

Thank you very much. I think we are running out of time, I would like to conclude this Q&A session for direct questions.

We have a lot of questions in the Q&A box, but I think there are two questions that are similar about the Japan business, which I'd like to take up, and it's about vamorolone. Vamorolone, one thing is that PMDA skipping the Phase III, do you have any feedback from PMDA regarding skipping Phase III for vamorolone?

Another one is that, assuming that you are to conduct a bridge study while you have cost pressure, can you invest enough resources for the bridging study? Maeda-san would like to answer this question.

Maeda-san, please?

Yes, thank you very much for that. The first question is about the feedback from PMDA.

We are in the process of planning to have a consultation with PMDA, and probably in the second quarter, we will have more visibility regarding that point. If possible, as you have pointed out, we would like to have this consultation as soon as possible.

Given the past track record, unless it's a really, really special case, without having any Japanese data, you can't really file. From the past experience, it could be difficult, but given the recent attitude of PMDA for pediatric and rare disease development, they have been quite flexible.

We'd like to have thorough discussions with PMDA so that we can skip Phase III trial. Another one is about bridging trial.

If we are to conduct a bridging study, it's not going to be a large-scale trial. That's what we assume.

Therefore, as you can see, the Japan and APAC budget, within this budget framework, we'll be able to afford such a bridging trial. That's all from me.

Thank you.

Thank you very much. In response to your question, there are many questions in the Q&A box, and we're sorry we have not been able to respond to you.

For the ones we weren't able to respond as usual, we would like to respond through our official web blog. It may take some time, but I hope to ask for your understanding.

We would like to upload this video to our website. Now, unfortunately, the time has come.

Thank you very much for joining this session. With this, we would like to conclude FY2025 full-year financial results briefing.

Thank you very much for your participation.

Thank you.