Shionogi & Co., Ltd.

This is Kyokawa of the Corporate Communication Department of Shionogi. Thank you very much for gathering today.

From now, we would like to begin the presentation of the Third Quarter of Fiscal 2024 Financial Results from Shionogi & Co., Ltd.. First of all, let me introduce the people who are here with us.

First of all, Toshinobu Iwasaki, Senior Executive Officer, Healthcare Business Supervisory Unit. Next, Koji Hanasaki, Senior Executive Officers of Supply, Supervisory Unit.

And next is, Kazuhiro Hatanaka, Senior Executive Officer, Corporate Supervisory Unit and Corporate Strategy Division And next is, Takiki Uehara, Corporate Officer of Drug Development and Regulatory Science Division. [indiscernible] is joining from different venue online.

And, we have, Masako Kudou from the Finance and Accounting Department. Let me briefly explain the flow of today's meeting.

First of all, we would like to give you the overview of the Q3 FY ‘2024 financial results and transformation of Chinese business and pipeline progress will be explained, and we will have Q&A session after that. We will have a simultaneous interpretation service for this meeting.

So if you are going to use the translation, please press the globe icon and select language you wish to listen to. Now let us begin.

Q3 FY ‘2024 financial results. Ms.

Kudou, please.

Yes. I’d like to give through the overview of the Q3 FY 2024 financial results.

First on Page 4, this is the highlight of financial results. Sales revenue was JPY333.6 billion, down JPY3.2 billion from last year's JPY336.8 billion.

However, excluding the one-time payment of JPY25 billion associated with the license transfer of an ADHD drug that was recorded in the first quarter of last year, revenue increased by JPY21.8 billion, due to the significant growth of royalty income and overseas business as well as the stabilization of our domestic business. In addition, for the same reason, operating profit increased by JPY15.5 billion, excluding the one-time payment.

Next, regarding the consolidated financial results. The results for the third quarter of fiscal year 2024 were revenue of JPY333.6 billion, operating profit of JPY129.2 billion, profit before tax of JPY155.9 billion., and profit attributable to owners apparent of JPY133.8 billion.

Revenue and each profit item are almost as expected and we are making solid progress against the full year forecast. This is due to the strong growth of the HIV business and overseas business, as well as the stabilization of the infectious disease business in Japan.

Although, there is the impact of the one-time payment recorded last year, revenue was down JPY3.2 billion Y-on-Y and operating profit was down JPY9.5 billion year-on-year, which is an improvement from the second quarter settlement and we are making solid progress toward increasing revenue and profit for the full year. In addition, profit attributable to owners of the parent, it increased by JPY6.6 billion Y-on-Y.

Regarding foreign exchange, the yen weakened more than expected resulting in exchange gains on each currency. Next on Page 6, we have the consolidated statement of profit or loss.

As I mentioned earlier, revenue started off at minus JPY25 billion, due to the impact of the temporary factors that occurred last year, but due to the strong growth of the HIV business and overseas business, it ended up exceeding expectations. On the other hand, the cost of goods increased by 8.6% year-on-year, but this was due to a change in the product mix, due to the growth of the overseas business and full year forecast was roughly in-line with expectations.

Research and development expenses increased 9.4% year-on-year, due to the continued aggressive investment in high priority development pipelines and the impact of foreign exchange rates due to the expansion of clinical trials globally. Although, overall expense including the selling, general and administrative expenses in R&D expenses.

The overall expense appears to be poor, but we are implementing cost management in-line with sales revenue in order to achieve the full year operating profit forecast. If sales revenue remains strong, we expect to use expenses in the fourth quarter in line with the full year forecast.

In addition the large increase in other income and expenses year-on-year is due to the implementation of a special early retirement program in the second quarter of last year. Looking at the overall picture, I believe you can see that our business is progressing very smoothly.

Next of Page 7. We will discuss the revenue by segment.

Regarding domestic prescription drug sales was down 3 – 38.1% year-on-year and down 23% year-on-year excluding the one-time payment of JPY25 billion. In the second quarter, these figures were down 50.5% and 33.1% respectively, so you can see that the declines have improved.

In addition, regarding overseas subsidiaries and exports, revenue of Cefiderocol increased 39.6% in the United States and 25.6% in Europe year-on-year. This was due in part to the impact of foreign exchange rates, but sales volume has also been strong due to the expansion of sales countries in the sales expansion in countries where the drug is already on the market.

Sales of over the counter drugs increased by 20%, thanks to the expansion of not only our mainstay Rinderon, but also Mucodyne and [indiscernible] in response to the spread of various infectious disease. Regarding royalty income, the HIV franchise grew significantly in the third quarter due to the impact of both volume and exchange rates and is progressing, steadily compared to the full year forecast.

Regarding COVID-19 related products and influenza family of infectious diseases, sales of Xofluza and RAPIACTA expanded due to the influenza epidemic in December. Compared to the same period last year, sales decreased by 30.2% due to the end of public funding of COVID-19 treatment.

But you can see that sales of COVID-19 and influenza family have been stable even from the first quarter to the third quarter. In addition, in this quarter, the insomnia treatment drug, QUVIVIQ, was launched on December 19 and was recorded as new sales.

That is all from myself.

Next, Hatanaka, would like to introduce our third quarter results.

First, on Page 9. We will look at the HIV franchise.

The graph on the left side of the slide shows the quarterly transition of Shionogi's HIV royalty income. As you know, the HIV franchise has been growing very steadily in the mid to long-term.

But even looking at 2024 alone, you can see that it has grown significantly. It has also increased significantly by JPY12.3 billion compared to the third quarter of last year.

The reason for this steady growth in the HIV franchise is the expansion of the market share of new products including LA formulations. The graph on the right side of the slide shows ViiV’s sales of six products, including dilutive dolutegravir and cabotegravir in the third quarter compared to last year.

The red part shows the oral two-drug regimen including dolutegravir, which increased 12.7% year-on-year. The blue shows the LA formulation treatment, Cabenuva and preventing drug Apretude, which together increased 43.4% year-on-year.

HIV royalty has shown very strong growth and we expect it to continue to grow as we expect new treatment and preventive drugs to be launched for every four months and every six months, administrations. Next on Page 10.

Our overseas business has achieved steady growth, centered on Cefiderocol. The graph on the left shows quarterly sales trend of our overseas business, and you can see that the sales have been growing steadily since the launch of Cefiderocol.

Sales have also increased significantly by JPY1.4 billion compared to the third quarter of last year. Currently, the number of countries in which it is sold has increased to 25 and in order to further expand, we have submitted the application for approval in Australia and China.

Based on the continued growth of Cefiderocol, we will accelerate the global expansion of other development pipelines and aim for further growth in our overseas business. On Page 11, I would like to explain the status of our domestic acute respiratory infectious disease business.

The graph on the left shows the patient trend for COVID-19 and Influenza since April 2023. You can see that either COVID-19 or Influenza has been prevalent at any time over the past two years.

By having treatments for these two infectious diseases and gaining a high share in the respective treatment markets, our infectious disease business which was previously considered unstable has become a business model that can generate profits every quarter in a very stable manner. In the third quarter, sales of influenza family, including Xofluza have expanded, due to the spread of influenza in December.

Regarding COVID-19 the treatment rate has consistently maintained 12% to 14%, but there is still a gap against the treatment rate of Influenza. We know that the hospitalization rate is higher than that of Influenza.

So in preparation for the spread of COVID in the fourth quarter, we are engaged in various activities to deliver appropriate treatment to patients in need, such as awareness raising activities and sponsoring a COVID insurance to help reduce the out of pocket costs of antiviral medication. Page 12, this is a summary of results for the third quarter.

To reiterate, the top line has been steady mainly due to the revenue drivers of HIV business and overseas business. And excluding temporary factors, we have been able to achieve an increase in revenue compared to the previous year, and we believe that we are growing steadily.

In our domestic business, our COVID-19 and Influenza treatments, Xocova and Xofluza have both captured high market shares and contributed steadily to our profit. And we have also been able to launch Quviviq, which is a key treatment of QOL diseases.

Going forward, we will continue to work to make our infectious disease business a stable pillar of our business by capturing a large market share in our domestic business, while also promoting activities to make QOL diseases to promote activities to make QOL diseases, which are less susceptible to the effects of epidemic, a new pillar of our business. Regarding costs, we will continue to implement detailed cost management in line with sales revenue, while prioritizing and proactively promoting R&D.

Overall, we believe that the third quarter went as expected, and we expect to achieve the full year forecast.

Next, Iwasaki will explain about the transformation of business in China.

First, I would like to explain the dissolution of our joint venture with the Ping An Insurance. The partnership with China's Ping An Group began with the establishment of joint venture in China in November 2020 with the aim of creating synergies by combining Ping An Group's cutting edge AI and other digital technologies with Shionogi's drug discovery know-how.

After many sincere discussions, following changes in the business environment surrounding both companies and the accompanying review of strategies, the two companies have come to the conclusion that while maintaining a good relationship going forward, the joint venture in China be resolved and Shionogi to become a wholly-owned subsidiary. During the period, we worked as a JV, a Phase 3 trials for the two drugs, Cefiderocol and Naldemedine, while, were completed in China.

The NDA for Cefiderocol was accepted, and we received an early use approval in the designated medical zone on Hainan Island. In addition, we obtained SAR approval for Ensitrelvir and Cefiderocol in our territory in South Asia and have begun supplying them.

Regarding AI drug discovery, I will introduce some of the ongoing projects on the next page and we are currently working on multiple candidates targeting respiratory and CNS diseases and have verified their effectiveness in non-clinical trials. Going forward, Ping An Shionogi and Shionogi Healthcare, both in Shanghai and Hong Kong will become wholly-owned subsidiaries of Shionogi and we will build a business structure in Asia centered around China.

We will provide the further details at the time of our financial results presentation for the fiscal year ending March 2025. Next Page 15, I'll explain about the outline of a future Chinese business prospect.

Due to the change of business empowerment, we shift towards the New Drug Business activity, but from now we'd like to focus on a new drug business more and we'd like to accelerate a new drug launch and a new drug discovery in Chinese market. As for the launch of Shionogi new drug, we'll work to further accelerate the development and the launch preparation for two new drug, which completed the Phase 3.

One is obtaining approval for the Cefiderocol by the end of 2025 and for Naldemedine, which completed Phase 3 study will proceed to the goal of NDA in upcoming April. In addition, for AI drug discovery candidates that has been identified and verified for efficacy in preclinical trial, proof of concept verification has already begun for the candidate of IPF treatment under the physician-led trial and with verification efficacy in other clinical trial is in progress as well.

Next, for development pipeline progress, Uehara will present.

Slide – Page 17 shows the diversification of the portfolio for viral infection for acute respiratory infection business. As Mr.

Hatanaka has mentioned, influenza COVID-19has been forecast and stable sales in Japan has been secured. So, the Xofluza, which is a very basis, is, the antivirus drug who -- was just once daily oral administration.

And in order well, there is the evidence of transmission suppression within the family accumulated now. And we'd like to maximize its value and for COVID-19, we have Xocova for global development.

And in addition to that, next one, the new generation 3CL protease inhibitor, which is a 216 compound, I'll report it later. And also the RSV infection which we released for media.

This is second example to get into the acute respiratory infection business and we have a good Phase 2 result for that. Next of [indiscernible].

Next one for the COVID-19. I'll explain about the global market.

As you know, still the viral keep for mutating and in such a situation, as left graph shows, the CDC's statistical starting from September ‘24 to January ‘25 for three months, the estimate of the number of patient is 3.9 million to 7 million patient and about 1 million to 1.9 million are still going to the hospital and hospitalized and some are very serious symptom. And the available oral two drugs in U.S., for them, from January to September ‘24, recording about 4.3 billion which is a big market share, so that the threat is still existing.

And as Shionogi or now the [indiscernible] Xocova and the new 3CL inhibitors are being developed. And I'd like to give you several update on that.

Slide 19. And this is SCORPIO-PEP trail of Ensitrelvir.

So, by having that, we can prevent the infection. So if there is a close contact to the infected family member, it should be given.

And, as I said, it has been -- it has achieved the primary endpoint. So, after -- from the start of dosing until day 10, the COVID-19 could be efficaciously Xofluza (ph).

But not just onset, but also, this will reduce the road of virus and it all the endpoint is confirmed with a significant data difference. And in, March, CROI, in U.S., the adobe structure is adopted, and, in oral presentation, I will give as a rate of Late-breaker, in that academia in U.S.

And now in Japan, for pediatric trial for in Ensitrelvir update will be given. So for those, it is actually small in size tablet for children.

And for each way to block it, the children is able to get exposure to the same dose as adult, CD safety, probability, PK, that is the concentration blood is confirmed. As expected, the good durability was shown and for the exposure, so in the dose we set the same degree of exposure will confirm in children and with the due process, we'll go for NDA in Japan.

Next please. So in addition to those trial as global trial stage summarized, like the SCORPIO-SR and HR and as I said, the pediatric test and also the prophylactic test.

So on the basis of this, the answerable should be deployed globally. And in the United States and also EU, we have a pre application consultation, Europe and the U.S.

And after that, in light timing, it's going for NDA and I'd like to update what the timing comes. In Japan, we are preparing for expanded indication of pediatric use and the post exposure prophylaxis and we are discussing with PMDA for detail.

In Asia, the other day in South Korea, we withdraw our application, and we add to the PEP study and to plan for reapplication in the future. And in, Japan, Singapore, and also in Taiwan, we submitted a new application for approval, and we have a stockpiling contract with the Taiwanese government.

So globally, Taiwan could be the third country that the government is procured. And for the, Ensitrelvir, Xocova, and the next generation, protease inhibitor, S-892216 development.

MOA (ph) is just like, in struggle, but still there are unmet needs in the existing oral drug. So we minimize the drug interaction and the strong antiviral (ph) efficacy and no contraindication for pregnant women and having such a drug, we are now having a very good drug.

And if there's two in global, for oral, is on the way. And furthermore and also, this is the Phase 3, still the threat of COVID-19 continues.

So this is the, the pre-exposure prophylaxis indication is necessary. So this is different from the post-exposure.

So this is not replacing the vaccine. With the vaccine, there are patient which has a low immunogenicity and the vaccine is not working well for those patient.

So for those patient, the pre-exposure of such drug is very efficacious. So we try to get the indication for pre-exposure prophylaxis.

Once you take it, the serum level is very well maintained for a long-time. And we received the [indiscernible] from BARDA, which is a 375 million grant.

And we'd like to go for a Phase 1 in the United States. And the next one is the third one, the RS virus infection.

As you know, there is no oral drug to prevent this virus. And for the infant and also over 60 senior people and also the high risk patient, more than 3 million latent the patient exist in the United States big market.

So what we develop this time is S-337395 and I show the life cycle of the virus. And, well, the polymers protein is to be prevented in a very [indiscernible] timing, and we have developed this to evade the L-protein and this has been released.

This is a Phase 2 trial and showed a very, strong antivirus, antiviral efficacy. And, this could reduce the -- more than 89%.

And we'd like to set the dose as we see the result of our Phase 3. And the challenge study has been conducted in the United States.

So we see the efficacy as we anticipated and we'd like to prepare for the later stage development. And the next, some of the remaining pipelines.

And this is infectious pipelines and the major update has been already talked about for vaccine. This is gen-1, targeted vaccine, which is a Phase 3, study preparation ongoing.

And this will go for the Phase 3 study for NDA in Japan. And other updates as I have just seen.

And the other QOL disease, which are the social impact and the big update is that Zatolmilast targeting for the fragile X syndrome in United States, Phase 2/3 studies ongoing and MOA of this Zatolmilast is very much expected in the preclinical and so those specialist doctors also suggesting that it should be indicated for the Jordan syndrome, which is a genetic disease characterized by the developmental delay, and I really hope that this could be used for United States for this syndrome as well. And the Phase 2 in the United States is begun, and the patient enrollment is on the way.

And also, the S-606001 for Pompe disease, which is a rare disease. We are preparing for the Phase 2.

And also, it has been designated from FDA as a rare disease, rare pediatric disease drug. So that is being developed.

That's all from myself.

Now we would like to move on to Q&A. [Operator Instructions] Citi, Yamaguchi-san, please.

Hello? Thank you.

This is Yamaguchi from Citi. First of all, with regard to the infectious disease family influenza was spreading last year.

But on the other hand, COVID did not spread so much, last year. So the progress is about 60%.

So, until around February or maybe around January, I think, influenza is spreading. What do you think about this?

In Q4, I don't know about Q4, but when we consider the Q4, do you think you will be able to achieve the number?

This is Iwasaki speaking. Let me respond to your question.

So as has been said, it is very difficult to forecast. But influenza will be declining in January and the B-type in February.

After influenza, according to the past pattern, COVID-19 can spread. So although, it is not increasing drastically from the mid of February after the Chinese New Years, maybe, Xocova revenue will be increasing.

And in total, it's about JPY20 billion will be able to be covered in the two months, I think.

Thank you very much. And, so the Xocova is filing in the United States, I think you are in their progress of doing so, but do you know when you will be able to file in the United States?

This is Uehara speaking. Yes.

So at this moment, as we are speaking, we are preparing for filing. After the top line, maybe six or seven months is the period required for preparation.

The total package for the development is still under discussion right now. So I cannot give you any specific date at this moment.

Thank you. And also, with regard, to purchasing your own equity, I don't think that this is happening unless you have M&A.

But, when M&A happens, you will be purchasing a treasury stock. Is that the case?

So could you tell me the situation?

This is Kudou, speaking. As has been said, there is no big update at the moment.

But, with regard to the business development, we are considering -- we are continuing to consider. So, the – and from the treasury, stock purchasing and M&A, How we are going to acquire funding will be something that we need to provide a thorough thought to.

So we are doing what is necessary at the moment. Thank you.

Next one, Ms. Ueda of Goldman Sachs, please.

Eiji Ueda from Goldman Sachs Securities. The first for a franchise of HIV trend, the royalty plus in the fourth quarter is a bit reducing.

Still, it is smoothly progressing. But I guess the plan of a company, how is it doing?

And is it -- if there is any difference, what could be the difference point?

Okay. Kudou, will answer your question.

For the third quarter, there has been a little reduction as you understood. And this is in September, it dropped a little bit, for this October, November, we recovered for that.

The fourth quarter or the full year forecast in a way, I guess, the actual will exceed the plan or the budget. So I guess, in the end, it will exceed the plan.

So exceed, you've mentioned, what could be the growing? Is it because of the continuous injectable formulation of or what's the reason for that excess?

Basically, as you say, this is a new drug in a way. So because of that, it is growing.

The second point is acute respiratory disease area. You mentioned that from the stability to the growth you mentioned, it is growing phase now.

But still now from outside, it looks very volatile. But in Shionogi internally, what is a level of basis profitable level?

In other way of saying, if we look at this business of next year, what level of top line the sales could be anticipated? And for the growth, in what timing are we able to see the evidence of the growth for sure?

Iwasaki answering the question.

Well, in Japan, 100 billion for both product in Japan, that could be, I think is a target in Japan. For influenza, the ratio of treatment has been elevated and also the share of our drug has increased.

So the focus from now is a development of pediatric indication. So pediatric indication, we'd like to grow.

For the COVID-19, still enlightenment education level is necessary and the treatment ratio is still low. So 20% to 25% of a treatment ratio, it should be secured.

And if we get the 70% market share, I think we are able to secure the share, I think we are able to secure the 100 billion. When you say growth, so RS virus or the next generation drug, those we have to wait until those new drug will launch or come up.

Yes, in Japan, yes. But first, in overseas and struggle development in the 216 and then RS virus that's a sequence of the gross procession.

Thank you very much. That's all.

Thank you very much. Next, UBS, Sakai-san, please.

This is Sakai from UBS. I have two questions.

The first question is, with regard to the royalty from VIIV, and also the special dividend that you receive. I don't think GSK has announced its financial results yet.

But is there a possibility of receiving this special dividend? I don't think this is included in your plan, but what is the situation of this?

Yes. Kudo will be responding to this question.

This slide that I’m showing right now is 65% seems to be low right now at the moment, but VIIV dividend compared to the previous year it’s increasing. However, the cash position of the opponent is providing impact.

And with regard to the fourth quarter, as you have indicated, special dividend is expected. So as forecasted, I think we will be able to end with the forecasted number, not the royalty line but this will be in the others.

No, it is included in below the operating profit. And, what is the forecast throughout the year?

So, we will I think, it will be a 41 billion as forecasted. And, in the fourth quarter, increase will be included in this full year forecast.

Yes. And with regard to the Chinese business, Chinese, business, I think was a bottleneck for your company.

There were, I think, challenges that you had to face. And this time, you dissolve the JV with Ping An.

The previous -- in the previous discussion, you said that the dissolution was due to the situation of Ping An, but was there any impact from the Chinese government is the question that I have for you.

Iwasaki-san?

The details will be explained in the May presentation you said, but on Page 15, you seem to give us quite a bit of detail. And is there any additional remarks that you can make?

With regard to China, Cefiderocol and Naldemedine, how they will develop going forward. I think is the key and with regard to Ping An Shionogi, in Asia and Korea and Taiwan, these where the territories covered and we needed to review the governance of this territory, and I would like to cover those items in the May session.

And also, with regard to Ping An situation, there are things that are difficult to understand. But when is drug development using digitalization was our expectation, but this was not the case.

And also to focus on the main business is the movement in China and Ping An is an insurance company, so they wanted to focus on insurance business. You said that good doctor will be used in order to develop your business in the past, but this was suspended, I understand.

And also OTC was going to be transferred to China, but also this has returned back to the original position, is that the case.

Yes. With regard to good doctor, honestly speaking we did not achieve what we had expected and with regard to OTC Ping An Shionogi was included, but we are developing our OTC business originally in China.

So OTC business will be continued in China going forward by us. Thank you.

Next, Mrs. Hashiguchi of Daiwa Securities.

Hashiguchi of Daiwa Securities. First question.

Well, the 892216 long acting injectable development, how frequent it should be other being disturbed (ph) to be efficacious in your developmental plan? And, how to differentiate the use of this with vaccine?

What is your expectation of this drug use and the vaccine use?

Thank you for the question. Uehara, answers.

From U.S., from the BARDA, there was a proposal for this. And so, one injection to be efficacious for three months, that's what they are expecting us.

And the animal experiment, that exposure is naturally, verified. But how high the serum level could be maintained, we have to confirm in human form now.

The differentiation of the use is in replacement. It's not working as a replacement of the vaccine for older people.

But the patient where vaccine is not working well, those patient could be targeted in a way replacing the vaccine. And even though the vaccinated patient to further having our drug, will give guarantee, the more protection.

Thank you.

And for Xofluza, my second question, you mentioned a share is expanding in your presentation. Is it possible to have a specific and concrete figures of the share percentage?

And in November 2022 slide, I am just looking back that now. At that time, the sales and the prescription should be near equal and really hope that the stockpile could be well exhausted that you mentioned at the timing.

And in December, prevalence was very strong. So for this, the prescription amount and the sales amount, there is, yeah, should I consider in such a way?

And the number of patient in January is dropping so sharply. So the stockpile situation is controlled enough, well enough, as you mentioned, in 2022.

Iwasaki answers, well, there are many database. So I don't know the exact share, but maybe around 35%, I guess we are securing that much.

And the sales and the prescription situation, you asked? Well, in the end of the year, to be honest, there were more placement of the orders than the number of patient.

Well, in a way, some hospitals excessively placed the order with us.

But so how -- in a way the disease is now a little bit under control and how surplus can we have in a stock situation. In the end of the February, how much will be returned, from the wholesaler?

Well, I guess, the calculation could be made only after that.

In 2022, in the financial submission, you mentioned that I'm looking at the transcription of that May meeting. You mentioned that we'd like to reject the return as much as possible?

Well, it's supported to some extent, but return cannot be permitted. Yeah.

So from the hospital to the wholesaler and defend the disease come back, it will be, again, later to the hospital to be used in the market.

Yes. Thank you.

Next from, Tsuzuki-san from, Mizuho.

Tsuzuki from, Mizuho Securities is speaking. First of all, with regard to RSS, you have met, the primary endpoint, you said.

So the challenge is -- the next challenge is Phase 2a and the trial -- the next trial that you are planning. What is the schedule for this is the first question.

And it seems that there is no launching products, so launched products. Therefore, it is difficult to anticipate the scale of the market.

Therefore, if you could give us some information with regard to that.

With regard to the schedule, this is Phase 2a trial that we are speaking of. So in the actual clinical, it is Phase 2.

After Phase 2b, we will move on to Phase 3. That will be our schedule.

And with regard to the size of the patient number, Iwasaki-san?

Right now, we have not achieved POC, and the vaccine is coming out. Therefore, we have to consider the market size going forward.

I see. Thank you very much.

And also, with regard to the chronic pain, Could you give us a comment with regard to this chronic pain project?

Right now, we are going through some preparation. So as things are prepared, we will give you the results.

And also in FY '25, I think the revenue hunt for 550 billion is a number. But is there any number that is lacking and what is the breakdown of the gap?

Yes. This is Kudo speaking.

Let me respond to that question. With regard to this year's revenue forecast, JPY460 billion and HIV is constantly increasing and also Xocova’s global development overseas is beginning and domestically the infectious disease business will be stabilized -- and is being stabilized and Quviviq, I think will be picking up and from the latter half of ’25 [indiscernible] Jordan, which is for depression will be launched.

I think for next year, we would like to increase compared to this year and there is a several tens of billions of yen that we can and – so, with regard the gap against 550 billion M&A and also licensing in will be – within our scope in order to filling the gap. And so with regard to the 550 billion forecast that we have this will not be changed.

I see. Thank you very much.

Thank you. Next, from Morgan Stanley, Muraoka please.

I’m Muraoka from Morgan Stanley. Thank you.

For wrapping on business, so the capital alliances continued, so the 2% position is not changed. I know that, but still, in our business relation is dissolved.

So I guess that the 2% of portion could be purchased. But, is it -- isn't it's not very highly prioritized, Teshirogi’s idea?

As of now, we still want to continue the good relationship, we think. And in a way, we don't consider that kind of, the purchase of our shares.

You still keep, possessing the shares, right?

Yes. Thank you.

And for RSV 395, maybe my understanding may not be correct but the clinical data shows for 89% virus reduction for the active drug. But what about the placebo?

Because it's a placebo, the other virus is not reduced. Is that right understanding?

For placebo, when the virus is challenged, the virus is increasing and the timing, when the virus is increased, the dosing is given and how that could surplus in increase of virus. We calculated the area of growth of virus growth.

And in a way, the active drug has reduced 80%, 90%. 89% reduction in placebo?

Yes. So in Phase 2b and the Phase 3 is planned.

And the next trial is not the challenge study, but actual infected patient, right? Yes.

The patient who are infected.

And, for RSV, do you have a -- does it have any kind of a seasonality?

Yeah. In a real practice, targeting for the actual patient, we will do the study.

Yes. In the area timing than influenza RSV is becoming prevalent and having some seasonality.

But, they're continuing a longer period for infection because there is no treatment drug. They do not have kind of a test or examination for RSV very positively.

But when we have this kind of a drug with a diagnostic drug, we will be providing to the market. So as just like influenza and the COVID-19, sometimes, in a way that they that -- the virus will infection subsided, and we have to wait for another one year.

Is that the nature of the study?

Yes. It's, naturally the case.

216, long acting drug, has some aspect of vaccine, the character of vaccine. It's a kind of a hypothesis, but in United States, the policy is now going toward, discouraging the vaccine, kinds of, flavorless.

Well, it's very hard for me to say yes or no, but yeah, we consider the various possibilities and this kind of scenario. So in place of the vaccine, this drug could be utilized for the, inclusive of a general public and immunocompromised public.

I guess it is used mostly for high risk of patient. So increase the immunogenicity with a vaccine supplemented by that drug like us is a basic public health policy, I guess, like all.

Next, JPMorgan, Wakao-san, please.

Yes. This is Wakao from JPMorgan.

The first question that I have for you is, in the United States, Xocova filings situation was not very clear. So what kind of meeting are you holding right now?

What kind of meeting have you had in the past? What is your plan?

Could you elaborate on the situation of filing in the United States?

I could not understand the changes from the previous meeting and I'd like to know more about what the situation will be going forward. So more specifically, in the United States, for the treatment indication SR and HR study and also the real world evidence are being collected.

And, on top of that, PEP study results, when they are all included, what kind of indication can you file for, and what will be the package in the filing package is what we are discussing right now. In case of PEP, I think we have meet, we have met the primary end point.

So, with regard to the others, how are we going to proceed is what we are discussing right now.

So with regard to pre-NDA meeting, have you had that kind of meeting?

Yes. We are in a process of requesting for a meeting.

With regard to HIV royalty, it seems to be doing very well, and I can understand that the situation is very good. But from this point, I think the prescription is growing.

And with that, I think the sales will be growing along with that. But the, the exchange rate, I think, will be a, following win for you, I suppose.

I think yen depreciation was experienced, in the past.

And so I think what you have hedged for this year, will be beneficial to the next year, I think. So, do you think that the exchange rate situation will be a positive situation for you going forward?

So with regard to Q3, compared to the previous year in the increase, the volume and the exchange rate impact is half and half. I think the impact between the two is half and half.

And, this year and the next year, the foreign exchange is being booked. And, therefore, I think there'll be an impact of the foreign exchange rate.

Thank you. And also, the KPI achievement of the midterm plan, the MM and also licensing in and MA are being considered, you said.

And there is the new pipeline products and the royalty that you're expecting. So I think you are lacking by JPY50 billion to JPY100 billion?

Maybe this is too much to say. But if you want to fill in the gap, maybe you might be licensing in some products, but I think M&A has a higher probability.

So in order to achieve the KPI, are you focusing on the M&A? Is this interpretation correct?

And to contribute to the next year's performance, I think at an early, timing, do you think that you will be taking some actions?

This is Kudo speaking. As you have indicated, there are gaps that you have said, and we are aware of that.

So positively and proactively, we are considering various M&A opportunities, but there is no information that I can share with you today. So when there is anything more, certain or with higher probability, at that timing, we would like to share such information with you.

And Hatanaka speaking, as Kudou has said, in daily operation, of course, we want to launch new products, but globally speaking, there are challenges. So M&A opportunities are being investigated in our daily operation.

So today, I cannot share with you anything specific, but the objective of JPY550 billion would be kept and not only by M&A, but we would like to find other ways so that we will be able to achieve JPY550 billion. When situation allows us to share with you any information, we would like to do so.

So I hope that you would be patient with us and wait until then. Thank you very much.

Okay. Thank you.

That's all.

Well, I have to say the time has come to close the meeting. And with this, we'd like to close the financial meeting for the fourth quarter.

Thank you very much for your participation out of your very busy schedule. Thank you.