Shionogi & Co Ltd

TSE:4507

Earnings Call Transcript 2022-Q1

[Yoshimasa Kyokawa, Investor Relations]

Good afternoon. Kyokawa from the Public Relations of Shionogi Pharmaceuticals. Thank you very much for joining us today. From now, we would like to begin the presentation of the Final Results of the First Quarter of Fiscal 2022 of Shionogi & Company Limited.

First, let me introduce the people on the stage. John Keller, PhD, Senior Executive Officer, Senior Vice President of R&D Supervisory Unit; Toshinobu Iwasaki, PhD of Senior Executive Officer, Senior Vice President, Healthcare Business Supervisory Unit and Pharmaceutical Commercial division; next Ryuichi Kiyama, Senior Executive Officer, Senior Vice President, Corporate Strategy division and Corporate Planning department; Takeki Uehara, DVM, PhD Corporate Officer, Senior Vice President, Drug Development and Regulatory Science division; and Susumu Mitsumori, PhD, Vice President of Finance and Accounting Department. President Teshirogi is in the separate room, since this is the financial results of the first quarter. When necessary, we will call upon him. And the presentation will be made by Mr. Mitsumori and then after that Kiyama will follow-up on the explanation. After that, we will have Q&A session. We plan to conclude at 4 – sorry 3:45.

Today’s presentation is provided with simultaneous interpretation. Please click on the globe at the bottom of the Zoom screen and select either Japanese or English for the translation. Please refer to the instruction manual that has been provided to you beforehand.

Now, let us begin. Mitsumori-san, please.

[Susumu Mitsumori]

This is the overview of the first quarter of fiscal 2022 financial results. Kiyama is going to explain the activities in the following quarters.

This is the financial results. The full year and also the first year forecast is shown here as well. The actual for the first quarter is ¥71.8 billion and also operating profit ¥12.4 billion and also the revenue profit before tax and profit attributable to owners of parent increased year-on-year while continuing to invest in COVID-19 related projects.

But as you can see here, the revenue from COVID hasn’t been realized here. So, if you look at the progress rate, the numbers may look lower. So, let us explain the figures, excluding the forecast of COVID-19 related products. The exchange rate is shown here. The Japanese yen has been depreciating, the next slide. This is the financial results, excluding COVID-19 related products. So, COVID-19 ¥45 billion and also the cost of sales of COVID-19 has been excluded from this slide, as to the revenue ¥71.8 billion, but if you look at the progress rate, it increased to 53.2% and operating profit – core operating profit and also the income before tax exceeded – all exceeded 50% of the progress rate. The base business has been very steady.

Next, this is the statement of profit or loss. This includes COVID related products as to the sales. ADH family in Japan and cefiderocol in overseas, HIV royalty are doing well. And these will be explained in the next slide as to the cost of sale, ¥12.9 billion, gross sales ¥58.9 billion. As to the expenses, R&D, we have COVID-19 R&D expenses and SG&A, including SG&A, we have been controlling these expenses. It’s 50% progress rate. It’s on track. As to the operating profit, ¥12.4 billion.

And if you go down financial income and expenses ¥27.9 billion. And this is much higher than the previous year. The fourth quarter of the 2021 the dividend from ViiV have been received and also – and the one-time income from Gilead contributed to this figure. So, we see a big increase from the previous year. And income before tax and also the profit attributable to owners of parent may look lower than the last year. However, last year, we had the payment from the Osaka Tax Bureau. That’s why it seems lower than the previous year.

And this is revenue by segment. The prescription drug in Japan, it’s ¥19 billion. The progress rate is 53.5%. ADHD family, Vyvanse sales were very good and other products are doing well as well. If you compare that to the previous year, it was down ¥4.5 billion from the previous year, because of the Cymbalta situation. As to overseas subsidiaries and export, for the first quarter, the actual was ¥8.8 billion. China has been struggling but Shionogi, Inc. and Shionogi VB in the U.S. and the Europe, cefiderocol is doing very well. So in total in overseas, the achievement ratio is almost 50%. As to the royalty revenue, HIV franchise, ¥37.3 billion and that’s ¥8 billion up from the previous year. The actual sales of ViiV increased and also because of the exchange rate, we enjoyed a big increase from the previous year.

Next slide. And this is prescription drug for Japan. As I mentioned, Intuniv and Vyvanse are doing very well, especially Intuniv, that’s 29.5% from the previous year. As to other products, they are progressing very well, achieving more than 50% of the progress rate. So, domestically, it’s business is going very well. And this is about the results up to the first quarter and future efforts. The revenue and also the profit, excluding COVID-19, if you look at those figures, it’s progressing well against the forecast and the previous year.

I am going to talk about the COVID-19 related projects in more detail later. But global Phase 3 has been started and also we are preparing for the application in China. In order to achieve the full year forecast, we are planning to achieve the full year forecast. That’s all from myself.

[Ryuichi Kiyama]

Next, I would like to explain about the main activities and achievements in Q1 FY 2022. My name is Kiyama.

As you can see, this is the timeline for the Ensitrelvir fumaric acid, which is a therapeutic drug for COVID-19. I would like to call this by the codename of S-217622. The emergency approval of Ensitrelvir was deliberated in the Pharmaceutical Affairs and food Sanitation Council held on July 20. And the deliberation will be continued. With regard to the continuation Phase 2/3 trials, there is Phase 3 part and Phase 2b/3 part and both recruitment have been completed. And we have concluded the registration of these numbers. The top line results will be obtained in the first half of 2022.

With the global provision after Japan approval in FDA and EMA, we are under discussion also in Asia especially China as we have released already, Ping An-Shionogi has initiated the submission of preparatory materials for an application. On the right hand side, the lifecycle management preparing for the trials to obtain further indications, we are making pre-preparations for the prevention of onset after contact with infected people in children under 12 years old. With regard to the global Phase 3 trials, the study has started with agreement with FDA. SCORPIO-HR is very close to the study that we conducted in Japan. It’s a study for patients of SARS-CoV-2 infected patients without hospitalization. And also we will have Phase 3 trials in hospitalized cough to infected patients and both of these studies will have a scale of 1,500 subjects. And also with regard to the supply, production has been expanding to supply more than 10 million people annually and also we have plans to manufacture in China and the United States for further supply expansion.

On Page 13, this is with regard to vaccine S-268019 schedule. Next page, this is an active control neutralizing antibody titer trial and superiority verification trial of VAXZEVRIA is being conducted. And details on the results will be disclosed in paper in the first half of 2022 and also safety and efficacy has been confirmed with the Phase 3 booster trials as well. So, we have all of the data necessary for the approval in Japan and a full package will be submitted in the first half of this year and also a study for pediatrics and adolescent and 4th vaccination study have been a started. We are making preparations so that many people can use them.

With regard to the domestic business, as has been explained the sales of Intuniv and Vyvanse has grown Y-o-Y. And also with regard to Intuniv, especially growth in the pediatric market is seen and also accelerated efforts to increase Intuniv’s share of adult ADHD market is ongoing. And also, we will work on the maximization of product value by using digital actions and also strengthening hospital medical representatives. With regard to overseas business in the Western business, we will increase the sales countries and also a subscription system will be used in order to grow the growth of sales of cefiderocol.

Also, sales in Europe and China is ongoing. In order to promote the overseas business together with the domestic developed product, we will be making great investments. In China, our efforts to provide 622, is being made and we have started preparations for the submission and also we are under discussion with various potential partners. Along with the maximization of 622, a good doctor is being used in order to grow the sales of the existing products as well as the development of new products.

Next is with regard to the actions for establishment of sustainable infectious disease business. With regard to infectious disease, the profit structure that is not influenced by the epidemic is what is necessary. And one of the approaches for this purpose is to use a subscription model for cefiderocol. And we have started cefiderocol subscription model in the UK. And we would like to expand the countries to incorporate or introduce cefiderocol, mainly in Europe. Also, government purchasing and stockpiling addition of xofluza to domestic stockpile has been conducted and we are under discussion regarding purchase volume and amount.

With regard to the improving drug access globally, we have concluded a partnership agreement with GARDP and CHAI. The three parties will play our roles and also including LMIC countries, we would like to introduce cefiderocol to many countries as possible. And also, we would like to acquire capabilities to deliver products globally, including LMIC and also we will be providing and supplying to the global from our company.

Next, with regard to actions in acute infectious disease, execution of license agreement for new antifungal agent olorofim has started and we have signed agreement with our partner with regard to olorofim. Existing therapies of aspergillosis have severe limitations, including toxicity, resistance and drug and drug interactions. Olorofim is an oral preparation with new mechanism of action and also the efficacy has been proven and an ongoing global Phase 3 trial is in process and we are looking forward to the synergies with information provision activities regarding cefiderocol.

Next, with regard to HIV franchise, ViiV, we have reached rolling 12 months £1 billion sales milestones for Davato and also the Cabenuva sales doubled versus Q1 2022. Also upgrade to the long-acting formulation has gone through an additional analysis and 89% more preventive effects than daily pills, even 1 year after administration has confirmed and also safety for pregnant women have been confirmed and this was announced in AIDS 2022.

Now, this is Q&A session. We have a moderator for Q&A session.

[Operator]

[Operator Instructions] The first question from Citi, Yamaguchi-san. Go ahead.

[Hidemaru Yamaguchi, Citi]

This is Yamaguchi from Citigroup. I have a question about your financial results, oral drugs the review cycle has been delayed. And we understand that it doesn’t have any impact for the full year revenue. But for the first half, you showed the forecast. So according to your schedule, you may have to lower the forecast for the first half. Is that your assumption?

[Susumu Mitsumori]

Mitsumori speaking. As of now, I think your question is based on the reporting about 622. In the first half, we haven’t given up the – to get approval. So you are not thinking of revising our plan yet. So, that will be depend on the review process. That’s correct. And the second question is about 622. About the result of the Phase 2 and Phase 3, it sounded like you are going to get the results in the first half. So, are you going to get it by the end of August or September that was my impression, according to your presentation? So, have you delayed the top line or when are we going to – are you going to get the top line?

[Takeki Uehara]

Thank you for your question. Uehara speaking. As you mentioned, as to Phase 3, we are now preparing for the Database Lock. The registration has been completed, but the cleanup of the data and also the virus test and other tests have to be completed before completing the Data Lock. We have obtained a lot of data, a lot of patients so it’s taken time. Specific date hasn’t been decided yet, but as you rightly mentioned, it will be between August to September. We will get the top line data between August and September. That’s our plan.

[Hidemaru Yamaguchi, Citi]

Thank you very much. The last question is about this subcommittee announcement. Externally, we have got a lot of information. I don’t intend to ask question about the detail or the content, but I think you are going to try at another subcommittee. Is there any possibility that you are going to do that? Again, I know that it’s not you who is to decide how this is going to be done?

[Takeki Uehara]

As you mentioned, that’s not something we can decide. This time it was a EUA, this is a new procedure that the government has introduced and they decided that we need to have a subcommittee meeting this time if we wait for the result of Phase 3 and if we are to apply for that after that. The question is could it be EUA again? And now, we are having discussion on this matter. The question is how quickly we can send this drug to the patients. So that’s what we are discussing now. Thank you very much.

[Operator]

Next person is from Goldman, we have Ueda-san.

[Eiji Ueda, Goldman Sachs]

From Goldman Sachs, my name is Ueda. I would like to ask about 622. With regard to 622 positioning is the question, could you tell me your idea with regard to the positioning of 622, the efficacy and safety and also the drug-drug interaction profile has been cleared? Also, lung COVID study is being conducted by Pfizer. And so how do you want 622 to be used going forward? What is your thoughts with regard to the positioning of 622 going forward? In addition to that, what would be the successor of 622? Do you consider that any drug to follow a 622 will need to be developed?

[Susumu Mitsumori]

Thank you for the question. With regard to 622 positioning, the Phase 2, Phase 3 study is conducted for the mild and moderate patients without any risks. We want 622 to be used broadly for such patients. There are two orals already. However, there is the DDI risk and also there can be risks in the kidney and liver. Therefore, we want to provide various options to our customers and I think this is the part of our idea. And with regard to successor, [indiscernible], the virus rebound that is positivity after the treatment is not seen with our present 622. This is the characteristic of 622. So, 622 can be used broadly and also stably compared to our existing orals and also the antivirus effect is high and therefore additional lifecycle management has been indicated here. If there is any contact with an infected person in the family, prevention of the onset is the additional indication that we are considering and also children under 12 years old as well as patients who are hospitalized we want to prevent more exacerbation and death. For these purposes, we are offered that 622 should be used with regard to the indication. So, in addition to the present indication that we are considering, after that, we want to broaden the indication so that it can be used for a broader patients. And also, with from – with regard to the backup program from the perspective of research, I would like to give you some explanation. There are many, many researchers in our company considering various opportunities. There are also issues identified for 622. So in order to recover these issues, new drugs are being researched and developed as of today.

[Eiji Ueda, Goldman Sachs]

Thank you very much. With regard to this backup program, is there any scheduling that you can share with us with regard to its clinical studies?

[Ryuichi Kiyama]

This is Kiyama speaking. I was Head of R&D until June. With regard to the backup program, we have started this from an early phase and virtual activity can be 100 folds or 1,000 folds. So, the activity is very extremely high compared to 622. However, the development of drugs will have to go through PD and also safety as well. So, we are considering a number of compounds in order to assess them. If there are no problems, we would like to start clinical study by the end of this year. However, we do not know what will happen. Therefore, we cannot give you any promising statement.

[Eiji Ueda, Goldman Sachs]

Thank you very much.

[Ryuichi Kiyama]

Thank you.

[Eiji Ueda, Goldman Sachs]

Second question about 622 for EUA, virus becomes variant, how do you think the authority is thinking about the change if the viruses, the development has been very difficult because of the characteristic of this virus, for example, before key open, depending on the situation of the type of the virus, are you going to revise your plan? When you think about the future development, I’d like to know what the discussions are like between your company and the authority?

[Susumu Mitsumori]

Thank you for your question. As you mentioned, the virus keeps changing in the human side a change as well because of series of vaccinations. So under the current situation, clinically how we should evaluate the efficacy is the question. HAL test of the global, this is for high-risk patients without hospitalization has just started. We are going to start this study, but the question is what’s the definition of the high-risk patients and how we can properly assess the appropriate endpoint? We are going to try to amend the protocol as we go. And the movement of the global is one thing. And the other thing is that we are going to – we have started Phase 2 and Phase 3 in a seamless manner and in 2A and 3B – 3A we have obtained data. And we are almost close to Data Lock. Together with expert doctors, we will discuss how we can finalize the endpoint to get the good results for the Phase 3 we will continue to have discussion with the authority about this issue.

[Eiji Ueda, Goldman Sachs]

Thank you very much. That’s all.

[Operator]

Next person from Nomura, Kohtani-san, please.

[Motoya Kohtani, Nomura Securities]

This is Nomura Securities. My name is Kohtani. I have two questions. The first question is with regard to 622. So, in the two councils, if the members are the same, after the law has changed, the discussion will be the same. And so Phase 2 study is necessary and for twice they have rejected the application. Therefore, I would like to ask you about the probability of success in this material, I do not know – I do not have the material from the Dr. Yoshinaga and the graph with regard to the depletion of the virus, I think your endpoint, that’s 144 hours, the Kaplan-Meier curve is separate. So, it is significantly different compared to the placebo, but the question is with regard to repeatability reproducibility, So, Phase 2B is Omicron. So, respiration and fever are included in the symptoms and this time it’s Omicron again. So, in the Phase 3 study too, I think reproducibility, it can be expected, is it true or not? And if you fail on the primary endpoint, what kind of secondary endpoint will you seek for?

[Susumu Mitsumori]

Thank you for the question. In the Phase 3 study endpoint, as you have indicated Yoshinaga-sensei looked at the cancellation of the symptoms and we are rejecting that or denying that. So, when the symptoms go away completely, there are patients with the history of symptoms. So, excluding the history, all of the symptoms to be extinguished, we have had a result that 3-day reduction is achieved. It is a 2B study. So, the number of the subjects are little more than 100. So, statistical significant difference could not be shown in the study. We did not have that power in the study. However, the Kaplan-Meier curve has been separated clearly. So, in the Phase 3, the same endpoint will be used and we are expecting that the same efficacy can be seen. However, because the virus is changing and so far, it’s Omicron, but the – after January in Japan in Phase 2B study result, Phase 2B to Phase 3, this transfer is in the spring and it will go into the summertime and in this timeline in Japan and Vietnam and Korea, we are conducting the studies in different countries. And therefore there is the variability that we will be seeing and we are believing in the efficacy of our drug. However, if you asked me the probability of success, I cannot give you any numbers. In addition, in Korea and Vietnam I – is this other symptoms different in these two countries? No. In all of the countries the respiratory symptoms is the major symptoms. That’s the Omicron variant symptoms that we see mainly. And so the characteristic of the symptoms are very similar amounts, different countries.

[Motoya Kohtani, Nomura Securities]

I see. And about HIV cabotegravir is finally increasing now. This is the first muscular injection and there is [indiscernible] period and also there is an issue of the insurance. So this is once in 2 months, it was approved in February. So, is this increasing because of that or John Keller last time said that the doctor is very cautious because of COVID-19, so switch is not increasing. So what is happening to switch market? And lastly GSK has pressed and said that doctors in Los Angeles are waiting long, but why are they waiting long? Is that because there is a labor shortage? So, those are the questions I’d like to ask.

[John Keller]

Thank you very much. This is John Keller who will answer the question. So with respect to cabotegravir begin with, I have not been very pleased to finally the growth [Technical Difficulty] the opportunity for these in 2 months. That’s really now begun to be understood [Technical Difficulty]. The construction of the COVID related depression on the switch market is slowly releasing, it’s still slower than we expected. But I think it’s now in about the 25% range where it was in the 35% depression range. And we are optimistic that it maybe back to normal by the end of the year, although that’s hard to fully predict. With respect to – there were some other issues alluded to logistical items such as getting the J code in place for reimbursement. So that also is in place has been for a few months now for cabenuva and is actually quickly happening for Apretude as well. And that’s very important to get simplify the procedures. With respect to the weights in the clinics in LA, for example, I mean, some of that is enthusiasm. But some of it is also that physicians need to establish the processes for administering this. And I will note that the clinics that administer cabenuva treatment and the clinics that administer Apretude prevention prep are not 100% overlapping. So, it’s only about 60% or so overlap. So, there are lot of clinics that have the procedures in place for cabenuva. But many of the clinics for Apretude are just newly setting this up and so really don’t have the experience and processes in place yet. Thank you. That’s all.

[Motoya Kohtani, Nomura Securities]

So, I just wanted to confirm one thing. Thanks. So what you are saying is that the switch market recovery is a little bit slower than you might have expected, but the sales of cabenuva is doing better. So therefore, that means that I guess there is just more interest to finally the pent-up demand is really starting to show? So that’s it’s a positive.

[John Keller]

That’s exactly right.

[Motoya Kohtani, Nomura Securities]

Okay, thank you. Thank you very much.

[John Keller]

Thank you.

[Operator]

The next person from Daiwa Securities, Hashiguchi-san, please.

[Kazuaki Hashiguchi, Daiwa Securities]

This is a Hashiguchi speaking. The first question that I have for you is with regard to the oral treatment of COVID-19 in each region, what are the emphasis that are placed for the treatment selection and also that treatment system depending on the region and also from the philosophies or ideas that the healthcare providers have in each region? I think there are different markets, which is suitable for 622 and which are not. If that is the case, I would like to know between Pfizer’s drug and Merck’s drug, the share in each country are quite different. The Japanese doctors said in the BlueKai meeting many things and I could understand the image that the Japanese doctors have, but in Korea, Vietnam and China and Europe and United States, what are the philosophies behind the selection of the treatment drug?

[John Keller]

This is John Keller again. You are absolutely correct that the perception is quite different and I will come to that. But it’s important to mention first, that, as you know, worldwide, the pandemic itself has evolved. And it has now evolved to this rapidly spreading Omicron with relatively light symptoms, in which neither Merck nor Pfizer have really generated positive data. We are the only ones working in that environment to generate – generating data. So, the key element with respect to perception, as you know, in the U.S., Paxlovide is now being very rapidly adopted. And although it was approved for high risk, it’s clear it’s being used beyond high risk. Now, the increasing visibility of the rebound issue, how this impacts it remains to be seen. But the ranking between Paxlovide and Vaxzevria was established early, based on hospitalization results in the earlier Delta phase of the pandemic. But that difference has extended into the Omicron phase. And now, it’s widely prescribed, again, pending the impression on rebound. With respect to Europe, Europe is quite slow to treat, for example, with influenza with antiviral drugs. And that sort of reluctance has extended into the relative low use and quite low use of the oral antivirals. And with respect to 622, really, the positioning was based on our data, again, is focused, will be focused on this current Omicron phase of the pandemic. So, I think that will be the key element coming into there. But still, Europe, overall, the utilization rates will be relatively slow, based on the cultural aspects of it. Of course, if the pandemic becomes more severe, and there is more concern in that and of course, shift things. And then again, based on BlueKai discussion, Susumu would you like to talk about Japanese context.

[Ryuichi Kiyama]

Basically Japan and U.S., and Europe are the same, the risk patients in the Delta phase is the data that has been used for the EUA, and therefore, the usage is limited to high-risk patients. However, in case of our drug, as has been said, we can apply our drug to patients who have not high risk factors. So, as the segment we have a broader target compared to the existing drugs that are available now.

[Kazuaki Hashiguchi, Daiwa Securities]

Korea.

[Ryuichi Kiyama]

In Korea, the current phase of the pandemic continues to be felt very acutely. And I think there was a strong desire throughout Korean society to have an oral antiviral to be used. For China, it remains to be same, because of course, the China policy to this point has been zero COVID. So, the utilization of an oral antiviral in the context of a zero-COVID policy, as opposed to if China would shifts toward the rest of the world sort of with COVID policy that will result in very different utilization problems. Nevertheless, there is considerable interest in having oral antivirals available when needed in either context. Thank you.

[Kazuaki Hashiguchi, Daiwa Securities]

About 268 and 84 the superiority study against Vaxzevria. Have you achieved the primary endpoint about this study? Before, you talked about the application between June and July, you said that to the media, but now it’s already August, what is the situation of the preparation or the plan for the application? Have there been any change to the application plans?

[Ryuichi Kiyama]

Thank you for your question. About the superiority study against AstraZeneca vaccination, we are planning to have a paper, publish a paper because we have been – what this applies, so we are now in the process of publishing that data. The result won’t betray you, will not disappoint you. That’s all we can say now. And based on the result about the application schedule, non-clinical and clinical data package coming out and we are preparing the data submission. But we will have to consider various aspects, including manufacturing. We are trying very hard so that we can provide this product as soon as possible.

[Kazuaki Hashiguchi, Daiwa Securities]

Thank you very much. That’s all.

[Yoshimasa Kyokawa, Investor Relations]

The next question is Sakai san from Credit Suisse.

[Fumiyoshi Sakai, Credit Suisse]

This is Sakai speaking. I have two questions. With regard to the joint BlueKai meeting, I think one indication that was made was that actually, the patients when they are tested positive and until when 62 is administered, the lead time or the window period is 72 hours. And during this period, the peak of the virus will be attained during this 72 hours. To this, there was no response from SHIONOGI. But if such question is provided to SHIONOGI, how would you have answered to this question? So, in the actual clinical practice 72 hours is the necessary time that is required. And I think that this was one of the questions that were raised by one of the physicians at the BlueKai meeting.

[Ryuichi Kiyama]

Thank you for the question. So, with regard to the time after the onset, in case of America – and Pfizer’s drug, that’s within five days – to be administered within five days after the onset, that is the condition of the study. In case of our drug within five days to be administered was the condition of the study. And if I was to give you some data, amongst that, within 72 hours were half of the patients. And from 72 hours to five days, administration was another 50%. So, the faster they were people who were administered early, and those who were administered later. And as for the characteristic of the patients, when the patient has fever or feel something wrong, on the first day, in most cases, the patients will stay home and not go to the hospital on the first day. And then afterwards, they go to the hospital, they go to the fever clinic and then tested and the next day the PCR test results will come out. And then they decide whether they want to participate in the clinical study. And after that the drug is administered. So, because you are tested positive right away, the environment does not allow the person to have the administration right away. Overseas, there is system of test and treat. If you are tested positive, you can be administered the drug. So, if such an environment comes available to Japan, I think more patients will be able to be administered earlier, the characteristic of our drug looking at the data of Phase 2b so far, regardless of 72 hours, within five days, we have been able to confirm the efficacy in the study design or within five days is the design that will be applied in Phase 3 2 study as well. Thank you very much.

[Fumiyoshi Sakai, Credit Suisse]

Another question is about numbers. On Page 4 or Page 5, the revenue you have numbers with or without COVID-19, there was a difference of ¥45 billion and the profit was negative ¥39 billion. I think this is just an assumption. So, I am not going to blame these figures. But other numbers do not change on this slide. And if ¥45 billion is delayed, what kind of impact so this shows – the impact it would have if the ¥45 billion is delayed? Is this right?

[Susumu Mitsumori]

Mitsumori speaking. About those figures on the slide, ¥45 billion, and the costs related that have been excluded, so other numbers won’t change. As to R&D about COVID-19 remains the same.

[Fumiyoshi Sakai, Credit Suisse]

Okay. Thank you very much.

[Yoshimasa Kyokawa, Investor Relations]

The next person JPMorgan Securities, Wakao san, please.

[Seiji Wakao, JPMorgan]

Wakao is my name from JPMorgan. With regard to 622, could you tell me the scheduling for the next examination? The top line will be available in August or September you said and the re-examination period when will that be?

[Ryuichi Kiyama]

In the joint BlueKai, the report will be submitted in November. So, I guess the next meeting will be held after that. So, let me know about the next re-examination timing. Thank you for the question. Right now, we are consulting how we shall proceed with a discussion going forward. This is a new system. Therefore, with regard to the framework of EUA whether we will continue to use this framework of EUA or not is also being discussed right now. So, from our side, we cannot give you any information as to what to be conducted when.

[Seiji Wakao, JPMorgan]

So, if that is the case, if Phase 3 part will be examined in the framework of EUA. Do you think that the deliberation will be made at an early stage, but if it is a normal NDA, it will be after the report being submitted in November and MHLW will be doing the examination afterwards. So, it will be extended further on. So, there may be two kinds of scenarios.

[Ryuichi Kiyama]

Yes, that is correct.

[Seiji Wakao, JPMorgan]

About China, Korea and Vietnam, regarding China, when are you going to apply for approval? And as to Korea and Vietnam, according to my understanding, once you get an approval in Japan, it will be approved both in Korea and Vietnam, if you can clarify this process, please.

[Ryuichi Kiyama]

Preparation, enrolling, submission has already began in China. So, discussions are ongoing with the authorities as to how they wish to proceed. With respect to Korea, again, we are in discussion with the authorities and there is some possibility to proceed without waiting for Japan. So, with Vietnam, it’s not yet fully clear. Probably, again, we will engage in as much as we can, in a thorough discussion with the authorities in parallel.

[Seiji Wakao, JPMorgan]

Thank you very much. About China, when are you going to have the plan for the next step?

[John Keller]

We are informed by the government. We are providing all the information the government is requesting and assisting their deliberations, but we await their feedback.

[Seiji Wakao, JPMorgan]

Thank you very much.

[Yoshimasa Kyokawa, Investor Relations]

The next question will be our last question Mitsubishi UFJ Morgan Stanley, Kumagai San, please.

[Naomi Kumagai, Mitsubishi UFJ Morgan Stanley]

Kumagai speaking from Mitsubishi UFJ Morgan Stanley.

[Yoshimasa Kyokawa, Investor Relations]

Yes, we can hear you.

[Naomi Kumagai, Mitsubishi UFJ Morgan Stanley]

I want to ask a question with regard to 378, with regard to the Phase 3 study, the clinical study says ended on September of 2024. And so what is the objective of the application? And also, what is the difference with the existing drug? And also, what is the MoA?

[Ryuichi Kiyama]

Thank you very much for the question. I think the study that you are talking about right now, this is Phase 3 study that is ongoing in the United States. So, with regard – in addition to this study, we have additional study, that will be conducted, and we are making preparation for that. And in that study, data will be acquired, and various – so that it can be used for various countries. So, we are conducting additional studies so that the product could be used in various countries.

[Naomi Kumagai, Mitsubishi UFJ Morgan Stanley]

With regard to MoA, and also the difference with existing drug?

[John Keller]

With respect to the existing first line drugs and this being a distinct mechanism, dihydroorotate synthase, we believe this will have a different profile, and indeed be effective and more effective against these infections, which increasingly, are showing non-responsiveness to the existing drugs such as a cell class.

[Naomi Kumagai, Mitsubishi UFJ Morgan Stanley]

Thank you.

[Yoshimasa Kyokawa, Investor Relations]

We can accept one more question. Muraoka san from Morgan Stanley.

[Unidentified Analyst]

Hello, Muraoka, speaking. Can you hear me? Got a question 62 in China, there are many uncertainties in China. Are they waiting for the approval in Japan? And you mentioned that the process in Korea may be accelerated? So, is it a separate process in China from Japan? That’s my question. And the other question is Chinese government, is it – I don’t know if it’s local government or the central government? But how – do they have any plan to have an storage of the products – stockpile?

[John Keller]

Alright. Really, in the discussions about the registration. China, as you may know, has a number of classifications for drugs and the speed of review, which have a range of criteria, which include medical need and a range of other factors. And depending on which one the Chinese government chooses here, can determine whether it proceeds in advance of the Japanese approval, or whether there is a waiting for the Japanese approval. Both are possible at this point. And again, we are in intensive discussions with the Chinese government to try and define with Chinese authorities, forgive me to try to define the appropriate path for the health of Chinese society.

[Unidentified Analyst]

Thank you. One last question. If you achieve your target for this year, I think you can produce a lot of profit. So, how are you going to allocate the profit? Are you planning M&A or other investment or are you going to do buyback and other return to shareholders or maybe both? Do you have any plan or priorities on how you are going to use the profit?

[John Keller]

Okay. John here and ask Kiyama san to speak about broader use of funds. But with respect to the M&A part or licensing aspect, of course, we are always looking and it is perhaps unfortunately for some an advantageous moment in the market. There is certainly a number of – quite a number of innovative companies reaching crossroads in terms of funding availability of IPO window. So, there are some interesting possibilities that weren’t necessarily there before. With that said, there is also tremendous competition with both Pfizer and Merck, essentially declaring to the public and Sanofi too that they are on aggressive M&A campaigns with no budgetary limitations. So, we have recognized the nature of that branch of the competition, but the financing and funding markets have been tougher for innovative companies and may open some opportunities for us. And we certainly are interested in adding to our portfolio particularly with good science and innovative discovery through development platforms.

[Ryuichi Kiyama]

Kiyama speaking. I won’t be able to give you good answer. But in order to achieve 2030, we are going to have a strategic investment. So, we will keep looking for opportunities about shareholders returns. Our policy is to share the benefit of the growth together with the shareholders. So, about shareholders return, our policy will remain the same.

[Unidentified Analyst]

Thank you very much.

[Yoshimasa Kyokawa, Investor Relations]

Thank you very much. Thank you for all the questions. With that, we would like to close the financial results announcement for the first quarter of fiscal 2022. Thank you very much for joining us today. Thank you.