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Edited Transcript of 4506.T earnings conference call or presentation 1-Nov-19 4:00am GMT

Q2 2020 Sumitomo Dainippon Pharma Co Ltd Earnings Presentation and Definitive Agreement for Strategic Alliance with Roivant Sciences

Osaka Nov 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Sumitomo Dainippon Pharma Co Ltd earnings conference call or presentation Friday, November 1, 2019 at 4:00:00am GMT

TEXT version of Transcript


Corporate Participants


* Hiroshi Nomura

Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director


Conference Call Participants


* Fumiyoshi Sakai

Crédit Suisse AG, Research Division - Research Analyst

* Kazuaki Hashiguchi

Daiwa Securities Co. Ltd., Research Division - Research Analyst

* Motoya Kohtani

Nomura Securities Co. Ltd., Research Division - Senior Analyst

* Seiji Wakao

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst

* Shinichiro Muraoka

Morgan Stanley, Research Division - Research Analyst

* Stephen Marks

Jefferies LLC - Investment Banking Analyst

* Yasuhiro Nakazawa

SMBC Nikko Securities Inc., Research Division - Senior Analyst

* Myrtle Potter;CEO

* Vivek Ramaswamy

Roivant Sciences, Inc. - Founder, CEO and Director




Unidentified Company Representative, [1]


We'd like to begin. Thank you very much for taking your time listening to the financial briefing for Sumitomo Dainippon Pharma. Earlier, we announced the financial results for the second quarter fiscal year 2019 and signing over definitive agreement for a strategic alliance with Roivant Sciences.

Today, I'd like to give you the contents of the financial results and the strategic alliance.

Let me introduce participants from our side. Mr. Nomura, President and CEO; Mr. Nishinaka, Head of Global Business Development; Mr. Tamura, Executive Director of Corporate Regulatory Compliance and Quality Assurance Division and Drug Development Division; Mr. Koshiya, Head of Global Oncology Office and Oncology Clinical Development Unit; and Mr. Vivek Ramaswamy, Founder and CEO for Roivant Sciences.

First, Mr. Nomura will deliver his presentation, followed by a presentation by Mr. Vivek Ramaswamy.


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [2]


Thank you. I'd like to start by thanking you for coming to listen to the financial briefing of Sumitomo Dainippon Pharma and signing of a definitive agreement for a strategic alliance with Roivant. I'd also like to extend my gratitude for your continuous interest in our business and your kind understanding.

Today, Mr. Vivek Ramaswamy is also here for the presentation. We will open the floor for Q&A later, and we would appreciate your questions.

With that, I'd like to begin my presentation. This is the financial results for the second quarter fiscal year 2019. You might be familiar with those figures. So I will present them just briefly.

Revenue increased, mainly driven by the growth in North America and China, despite the revenue decrease in Japan. SG&A slightly decreased from last year when we booked expenses for LATUDA litigation and commercial investment for COPD franchise.

As a result, core operating profit, which shows our profitability, went up year-on-year. And the rest of the items were impacted by various events. Changes in fair value of contingent consideration increased significantly because there was a cost reversal due to the discontinuation of Phase III study for napabucasin pancreatic cancer, revised business plans for alvocidib and discontinuation of development for amcasertib.

As for alvocidib, we decided to reprioritize the indication and focus on MDS, considering the slow enrollment of patients with AML. We decided to discontinue the development of amcasertib for not being able to observe adequate efficacy.

As a result, changes in fair value as of the second quarter fiscal year 2019 were about JPY 42 billion. Other nonrecurring items were minus JPY 19.7 billion due to impairment losses from revised business plans for alvocidib and discontinuation of amcasertib development.

These events impacted operating profit, which was JPY 66.8 billion. Income tax expenses were significantly up to JPY 33.8 billion from JPY 9.7 billion from the same period last year, and a large portion came in relation to the discontinued study for napabucasin pancreatic cancer.

Deferred tax asset of JPY 23.3 billion was liquefied as we expected a significant loss of taxable income in the United States from napabucasin.

Despite of this impact, core operating profit ended positively and was favorable to the previous forecast. This is revenue of major products in Japan. As I mentioned earlier, revenue in Japan decreased. Promoted products such as Trulicity grew but long-listed products struggled due to generic penetration in the market.

LONASEN transdermal patch was launched in September before price revision and booked the revenue of JPY 100 million in a month. This is revenue of major products in North America and China. LATUDA booked $873 million, up by $60 million year-on-year. LATUDA and APTIOM were growth drivers in the United States. The total revenue was up by JPY 6.8 billion year-on-year.

In China, MEROPEN continued to grow. Its revenue was up by JPY 2.2 billion from a year earlier.

Despite the loss in revenue in Japan, North America and China grew. This showed segment information with the second quarter results of the current fiscal year and the year before. Please note the change shown at the bottom.

Revenues in Japan dropped as well as in other regions in relation to a small inventory buildup for MEROPEN. Revenues increased both in North America and in China. Expenses in North America decreased.

Next is financial forecast. Please take a look at the changes from the previous forecast. No major change from the previous forecast.

Revised forecast for revenue remains the same with the previous forecast at JPY 475 billion. And same for core operating profit at JPY 77 billion. Operating profit remains at JPY 88 billion and so does the bottom line at JPY 36 billion.

We expect some positive and negative impacts here and there going forward, but results are expected to be in line with this forecast.

We changed the forecast for cost of sales due to the product mix. Forecast was also revised upward for SG&A expenses by JPY 1 billion in relation to a strategic alliance with Roivant, which includes fees for advisers, lawyers, accountants and consultants.

All in all, revised forecast for core operating profit remains to be in line with the previous forecast. Revised forecast of changes in fair value of contingent consideration reflects the changes for the second quarter and revised forecast of other nonrecurring items reflects items such as costs for operational efficiency. Upward revision of changes in fair value was offset by downward revision of other nonrecurring items.

As a result, operating profit is expected to be JPY 88 billion. Income tax expense is revised downward and expected to be JPY 51 billion. This is related to return provisions after a tax inquiry in North America.

All in all, the bottom line is forecasted to be in line with the previous forecast.

This is segment information with the revised and previous forecasts. In China segment, yen-based revenue is expected to decline due to updated exchange rate assumption, despite a strong sales trend in the market.

In Japan segment, incremental revenue of REPLAGAL is expected. Incremental cost of sales is expected in Japan, but it is anticipated to be offset by a decline in North America and China.

Now I'd like to move on to our research and development activities. Revisions since the last announcement are highlighted in red. The only change is for Lurasidone, for which we submitted NDA in Japan for schizophrenia and bipolar depression. This shows clinical development status.

For Lurasidone, NDA was submitted in Japan in July, and launch target is fiscal year 2020.

As for alvocidib, as I explained earlier, development strategy was revised to prioritize Phase I/II study for MDS, which is highly MCL1 dependent. This is due to the slow enrollment of patients with AML.

As a result, launch target for the asset was pushed to a later date, which impacted fair value and generated impairment loss.

Phase I/II study was started for DSP-0509 combination therapy and Phase I study was started for myelofibrosis of TP-3654. Amcasertib program was discontinued and obeticholic acid program, or DSP-1747 in China, was also discontinued. We have been seeking for the course of direction in development in China and trying to obtain an approval without conducting Phase III study. But the newly published guideline for a treatment of NASH requires pharmaceutical companies to conduct thorough clinical studies.

On top of that, considering the fierce competition in the market, it seemed to be difficult to continue the development. So we decided to discontinue.

This slide shows the product launch target. Let me highlight revisions made from the last announcement. In Japan, LONASEN was launched in September. Expected launch of napabucasin in Japan is now in fiscal year 2022. The reason why the launch target in The United States is earlier in fiscal year 2021 is because we will focus on NDA submission for the United States market first rather than focusing on simultaneous submission for the U.S. and Japan market so that we can address inquiries and other processes efficiently.

In The United States, launch target for alvocidib MDS indication was pushed to fiscal year 2023.

That is all for financial results. Now I'd like to shift my focus on a definitive agreement for a strategic alliance with Roivant Sciences.

I will start by introducing our aims of the alliance, and please note the relations between key challenges we identified in the midterm business plan and potential reforms this alliance may bring.

The first key challenge is how to expand post-LATUDA assets. Through this strategic alliance, we obtain potential near-term blockbuster products that are relugolix and vibegron. This is important as LATUDA loses its exclusivity in the market in February 2023.

Next challenge is on expanding pipeline by continued creation of innovative new drugs. The strategic alliance gives us an access to multiple innovative clinical programs from 5 subsidiaries we acquire, including gene therapy. We also expect to improve R&D productivity and expand future pipeline by leveraging drug on platform.

Another challenge is (sic) [has] to do with regional strategy and how to reinforce profitability of North America and Japan business and also expand presence in China and Asia.

In the midterm business plan, we set forth a revenue target of JPY 200 billion for Japan business, but it seems to be challenging to achieve the goal during the period of midterm business plan 2022. So we are aiming to hit the target in fiscal year 2023 and onward.

Our effort will be driven by expanding pipeline in Japan with multiple early-stage assets we acquired through the strategic alliance.

In relation to our organization and culture, we are aiming to enhance organizational capabilities to address changes in external environment. Adaptation to changes and proactive actions are a must for sustainable business, and we have been trying to realize digital transformation to address this challenge.

With the alliance, we introduced a framework and talent to accelerate the digital transformation in the group. And we also cultivate a dynamic organizational culture through this strategic alliance.

This is how we address issues and what we expect from the alliance.

This is the overview of the strategic alliance and details of the definitive agreement. We acquired Roivant's ownership interest in 5 of its subsidiaries; obtained options to acquire Roivant's interest in 6 of its subsidiaries, which is exercisable until 2024; acquired Roivant's technology platform and talent, digital innovation and DrugOme and entered into client relationships with Roivant's independent technology subsidiaries.

We share technology platform and talent with Roivant in this partnership.

We also acquired over 10% of Roivant's shares.

How we do this is that Roivant will transfer its interest in 5 subsidiaries and talents in health care technology platforms to a new, fully owned company, which will be established for this strategic alliance. And Sumitomo Dainippon Pharma will acquire all shares of the new company and intangible assets.

Consideration for the acquisition is $3 billion, of which $2 billion is for shares of the new company, which has 5 subsidiaries, DrugOme and other platforms; and $1 billion is for shares of Roivant.

Our adviser, Citigroup Securities, provided us with a financial opinion for the purchase price of shares of the new company.

Closing is expected when all of the requirements are met, especially government approval and antitrust law clearance. It's hard to say exactly when, but we assume and expect that the closing will happen by the end of fiscal year 2019.

This slide shows a proposed post-acquisition company structure in North America. We currently have 3 American subsidiaries under Sumitomo Dainippon Pharma America. But separately from this organization, we will own and consolidate 5 subsidiaries under the newly established company. This is a simplified organizational structure, just to give you an idea.

The reason why we established a new company separately from the existing organization in The United States is to realize direct oversight by Sumitomo Dainippon Pharma. This will allow the entire organization to achieve efficient communication, which is particularly crucial when we start a new company. This is how we plan to launch this alliance.

This slide shows a management structure of the new company, and we have already identified the key persons.

First of all, Myrtle Potter will be the CEO of new company. And I'll share with you her background later in the presentation.

There will be 4 main functions in the new company: Vant Management, responsible for the governance of Vants; Scientific & Medical Development; Business & Commercial Development; and Digital Innovation.

Vant Management will be led by Myrtle Potter for governance of existing development programs at Vants, review and support of ongoing development plans, studies and so forth and portfolio and budget management within and across Vants.

Scientific & Medical Development will serve as internal experts to support scientific functions at Vants and explore enhanced scientific evaluation, development strategy through DrugOme. The team will be led by Sam Azoulay, who will be appointed as Chief Medical Officer.

Business & Commercial Development will assess new business opportunities or alliance partnerships, apply DrugOme to identify assets of interest and to craft commercial strategies and lead various alliance negotiations. The team will be led by Adele Gulfo.

Digital Innovation will be responsible for digital transformation of the group and led by Dan Rothman, who will be appointed as Chief Information Officer for the new company and Chief Digital Officer for Sumitomo Dainippon Pharma Group.

This is the management team of the new company. Myrtle Potter was a former President and Chief Operating Officer of Genentech and led the launch of numerous breakthrough products, including AVASTIN and XOLAIR. She also took Board roles at many renowned global companies. She has been very active in the pharmaceutical industry in the United States.

Sam Azoulay was a former Senior Vice President and Chief Medical Officer of Pfizer Essential Health and formally assumed a senior leadership role at Pfizer Japan.

Adele Gulfo, who will be appointed as Chief Business & Commercial Development Officer, was formerly President and General Manager of Pfizer's U.S. Primary Care business and led the commercialization of LIPITOR and was also responsible for CRESTOR at AstraZeneca.

Dan Rothman, who will assume positions as Chief Information Officer for the new company and Chief Digital Officer for the group, was a managing Director at Goldman Sachs, in which he was responsible for internal and external technology platform development.

These are 4 key persons in the new company, and all of them have accumulated experiences and are top talents, either in pharma or IT industries.

This is about DrugOme Technology, and I'd like to share with you the platform more in detail at this time.

As a data source for the platform, structured data sources such as pharmaceutical data, target molecule data, clinical trial registry, FDA data and insurance claims data are used.

Unstructured data sources such as FDA and securities filings, press releases and academic research are also used.

Data source are linked and integrated in the database and then used for analysis. There are analysis tools available for the standardized analysis, but bespoke analysis will always be available.

Computational research team dedicated to DrugOme conduct application development and minor analysis to cater needs from the business team. Expected outcomes include support for clinical development such as strategy formulation, expediting development time line, cost and study design management.

The platform is also expected to be useful and helpful in searching promising assets, not just in the context of a potential acquisition, but also for driving in-house development activities.

Improved decisions are expected through the application of the technology. Utilization of DrugOme will be aligned with the approach we put forward in the midterm business plan. We are aiming to establish the growth engine by enhancing innovation base with new approaches to drug discovery and delivering the highest performance of clinical development.

The intention of the utilization of Big Data and digital technologies in this approach is to support drug discovery and achieve efficiency and higher probability of success in clinical study.

Through the incorporation of DrugOme ecosystem and client relationship with Datavant, which, by the way, has a capability to link various data sources, we hope to become a data-driven pharmaceutical company.

We anticipate positive impact on our activities. For example, in research, our in silico drug discovery will be greatly benefited from the technology.

In development, optimization and improvement of clinical studies as well as building of evidence, combining in-house with real-world data will be achieved.

In business development, utilization of data will improve the efficiency of BD activities.

This is Digital Innovation Technology. The technology will be utilized to optimize business process and to address issues. The technology helps us best leverage data at hand. This platform is supported by digital innovators, a dedicated team of technologists with strong coding and data analytics skills. These innovators are embedded in business teams to identify operational issues and propose solutions through close collaboration with business team.

Once a proposed solution is validated, digital innovator plays a central role in developing applications necessary for the improvement. The solution will also be shared across departments to ensure overall efficiency as a group.

An example of digital solutions is digital patient recruitment center for achieving increased patient enrollment, as you can see at the bottom of the slide.

I wish to show a video of sort to give you a better idea on this solution. But in a nutshell, creation of web survey to prescreen patients and confirm visits significantly increased monthly enrollment rate, while significantly decreasing monthly screen failure rate.

Acquisition of Digital Innovation platform is also in line with the approach in the midterm business plan that is to realize digital innovation. The platform will drive digital transformation in the company as we can quickly solve operational issues by using digital technology. It will allow us to further focus on digital capability and company-wide efforts to identify more opportunities that leverage the store technology so that we deliver the best performance at the end.

As a result, we can realize new value creation in both drug discovery and in our frontier business.

This is also to show how we promote the technology. And as I have highlighted, Dan Rothman is expected to play a central role in deploying digital innovation throughout Sumitomo Dainippon Pharma Group as Chief Digital Officer.

We will also establish a dedicated office in the company to promote new technology and nurture DrugOme.

This shows the overview of Roivant subsidiaries that are included in the alliance. We announced 4 subsidiaries when we signed MOU. And today, we announced Spirovant Sciences as fifth Vant we acquired. The company focuses on gene therapy. The reason why we chose this company is because the company is the best fit for our approach we put forward in the mid-term business plan, which is the acquisition of a new treatment modality.

In addition to the acquisition of these 5 subsidiaries, we have options to acquire 6 subsidiaries. You can find more information of the subsidiaries on the press release we issued earlier.

This is the leadership of 5 subsidiaries. Lynn Seely is the President and CEO of Myovant; Keith Katkin is the President and CEO of Urovant; Rachelle Jacques is the CEO of Enzyvant; bill Symonds is the CEO of Altavant. And Joan Lau is the CEO of Spirovant.

As you can see, all of them have rich experience in pharmaceutical industry, and we are very excited to have them on board. I am confident that the probability of success in their clinical programs are quite high.

This is the list of the development pipeline of acquired subsidiaries. NDA submissions are being prepared and expected by the end of this fiscal year for relugolix, uterine fibroids indication; and for vibegron, overactive bladder indication.

We are expecting the approval for RVT-802. Phase IIa study is ongoing for treatment of pulmonary arterial hypertension.

Expected peak revenues from both relugolix and vibegron are large as we expect them to be potential blockbusters. Revenue size from RVT-802 is expected to be small.

Relugolix may not need further introduction, but let me just highlight expected differentiation points. We plan to launch the drug as a combination drug with hormones to maintain bone health and mitigate side effects such as hot flashes to enable long-term use. The drug is expected to offer once-a-day dosing with no titration required, which is simple and convenient for both patients and prescribers.

As for vibegron, some of expected differentiation points are high receptor selectivity and significantly lower risk of QT prolongation and early onset of efficacy, which can be observed in 2 weeks from the initiation of the administration.

This slide shows financial impact and funding. As I said, we are not sure when exactly the closing date would be so the financial impact in association with the alliance with Roivant is not being reflected on the latest financial statement at this time. But temporarily, costs related to acquisitions are incorporated into the forecast. We plan to update the financial impact as soon as we close the deal.

With respect to the impact on financial performance in fiscal year 2020 and onwards, there will be positive impact to revenue in fiscal year 2022, which is the final fiscal year of the midterm business plan 2022. But SG&A and R&D expenses are expected to be pushed up.

We plan to review the business goals of the term business plan 2022 but we plan to do so later in our time line as our highest priority at the moment is to ensure the success of relugolix and vibegron through the strategic alliance.

In regard to accounting, details such as purchase price allocation will be disclosed probably a year after the closing.

As a funding policy, we raised cash proceeds with cash on hand and bridge loans, followed by refinancing through hybrid finance instrument, bank borrowing, et cetera.

This slide summarizes the deal. Once again, we acquired 5 subsidiaries and obtained options to acquire 6 subsidiaries. DrugOme technology and digital innovation technology will be shared with Roivant in the alliance.

We entered into contract agreements with health care IT subsidiaries to gain an access to Datavant and Alyvant.

Sumitomo Dainippon Pharma will work with Roivant side-by-side as strong partners in this alliance to operate both of our businesses and to maximize both of our values going forward.

With that, I'd like to conclude my presentation, and I'll pass it on to Vivek.


Vivek Ramaswamy, Roivant Sciences, Inc. - Founder, CEO and Director [3]


(foreign language) I'd like to present a little bit of background to you on Roivant Sciences, and in particular, why this strategic alliance is of great value, not just in the ways that Nomura-san has described, but also of great value to Roivant as a company as well.

Next slide. So our business model at Roivant is to develop new medicines in a different way than the rest of the biopharmaceutical industry through our Vant model. And we believe that our business model will be validated when multiple products are launched successfully and reach patients. And so in our opinion, our business model is validated through the commercial success of this alliance with Dainippon Sumitomo Pharma.

The reason we entered this alliance is that though our long-run vision is also to build a global biopharmaceutical company, we felt that in the near term, we had not built sufficient capabilities at Roivant to be able to support the commercial launches of our Vants. And as many products approach the FDA approval, we actually felt it was more appropriate to enter an alliance with a global biopharmaceutical company that has a track record of commercializing products. And it was through that and in part through a preexisting relationship that we ultimately entered this partnership.

In addition to the 5 Vants that Nomura-san described, there are also 6 additional Vants, known as the option Vants, on which Dainippon Sumitomo will have an option for the next approximately 4 years. And for us, too, that provides a clear path to commercialization for the products in development at those option Vants.

As it pertains to the technology side of Roivant. Our technology solutions, when shared, ultimately become more valuable. Because the more parts of the business that DrugOme or digital innovation are applied in, not just within Roivant as they were previously, but now across the entire Dainippon Sumitomo business as well as alliance, the technology solutions themselves become more valuable because of greater data that feed them.

Finally, for Roivant, we are planning to continue to grow our business, to take the capital injection that we receive, including through the equity investment, and be able to build and launch more new Vants in the future.

And overall, in that process, we gain a strategic shareholder with deep commercial pharma experience. We expect to learn much from Dainippon Sumitomo. And over the long run, after the initial success of this alliance, we see opportunities for expansion into future areas of collaboration as well.

So what I'll do now is I will say a few words about some of the products in the alliance, and then I will hand it back to Nomura-san after that, and I'll be here and available to take any of your questions thereafter.

On the next slide, you see the lead product from Myovant, which Nomura-san talked about, relugolix combination therapy, which is in development for 2 different women's health conditions: uterine fibroids and endometriosis. Both of which are estrogen-driven diseases, which means that by driving down estrogen levels as relugolix, a GnRH antagonist accomplishes, there's the potential to deliver relief of symptoms of each of those diseases. But the dilemma is that if you lower estrogen levels too much, then you may see other side effects, such as bone mineral density loss and which may actually pose risks to chronic use of the product in women.

Therefore, what we did with relugolix, which is a product that has a half-life to be able to be used once per day, was that Myovant developing this product, in combination with what is known as low-dose add-back therapy, adding back just enough of the hormone to be able to still preserve the efficacy, but while not lowering estrogen levels so much that you achieve bone mineral density loss.

In this paradigm, simplicity for the patient is key. And as a consequence, we are developing relugolix such that we hope and expect it to come to market as one pill once per day, such that it is a single fixed-dose combination, which we view as a meaningful differentiator from the competition, in the hands of AbbVie, which has a pill that is taken twice a day, and if used in conjunction with add-back therapy, would require a completely separate regimen for the add-back therapy itself. One of the several ways in which we see relugolix as differentiated.

We reported 2 positive Phase III results for relugolix: LIBERTY 1 and LIBERTY 2 in uterine fibroids. We expect Phase III results from our endometriosis Phase III program in the first half of 2020. And I will not talk about relugolix as a monotherapy for prostate cancer, where we see the revenue opportunity is significantly more modest than the larger opportunities in the women's health indications.

Next slide. I'll talk next about the lead product at Urovant, vibegron. This is a therapy in development now past Phase III for the treatment of overactive bladder. We view overactive bladder as a major unmet medical need and a major commercial opportunity in the United States.

Today, in the U.S. alone, there are over 18 million prescriptions for overactive bladder drugs. However, most of these prescriptions are for a class of drugs known as anticholinergics.

As many of you with medical or scientific backgrounds may know, in recent years, there have been significant studies demonstrating bad side effects for this class of drugs, including, but not limited, to a known risk and a known association with dementia as well as other CNS risks. Keep in mind that this is an elderly patient population.

As a consequence, the other drug, the only other drug that's on the market today that is not an anticholinergic in the U.S. is a beta 3 agonist called Mirabegron, marketed by Astellas, which also markets the anticholinergic, the lead 1 of the leading anticholinergics, and that beta 3 agonist has succeeded in the market, growing about 20% year-on-year, on track to be a blockbuster scale drug.

We believe vibegron has the potential to be a best-in-class beta 3 agonist due to multiple differentiating features that we're happy to describe later. And vibegron reported positive Phase III results earlier this year, statistically significant improvements relative to placebo, including at an early time point measured week 2. And there was also a positive control included in that, an active comparator, known as Tolterodine, which is one of the marketed anticholinergics.

Moving to the next slide. In addition to my Myovant and Urovant, we're also initially contributing 3 additional Vants to the alliance: Enzyvant, focused on rare diseases. The lead product at Enzyvant is RVT-802. This is a tissue-based regenerative therapy. It is -- it has been filed with FDA. The BLA for this product was filed. And it was filed for the treatment of pediatric congenital athymia, which is a disease where children are born without a thymus. And this is a uniformly fatal condition by the age of 3.

If approved, we believe this would become the first FDA-approved therapy with regenerative medicine advanced therapy designation, or RMAT designation. And in addition to RMAT, it has also been granted breakthrough therapy designation, orphan drug designation and rare pediatric disease designation by FDA.

And in addition to Enzyvant, we have an enzyme replacement therapy for another rare disease earlier in development.

At Altavant, we are developing a TPH inhibitor, an oral TPH inhibitor, which could represent a potentially disease-modifying mechanism of action for the treatment of pulmonary arterial hypertension, or PAH. As many of you know, this is a blockbuster market today but in a market in which very few would describe any of the drugs that are on the market today as disease modifying. We view this, if successful, as a potential blockbuster opportunity. This is currently in Phase II development.

And lastly, as Nomura-san mentioned, we unveiled, in conjunction with this announcement for the first time yesterday, Spirovant, a new Vant that had not been previously described publicly, which is developing a portfolio of gene therapies for cystic fibrosis. Cystic fibrosis is an inherited condition of the lung, you may be familiar with it. Vertex

Pharmaceuticals today, among others, market an oral chronic therapy for subsets of patients with cystic fibrosis. These are blockbuster drugs. We are developing here a potential onetime therapy to cover a much broader swath of cystic fibrosis patients. This is at an earlier stage of development. It is preclinical but because it is developed as a onetime therapy for this type of indication, we see potentially rapid paths for future development.

In summary, I will close up this discussion by saying, once again, that this alliance and its success is important not only to Dainippon Sumitomo, but it's also important to the success of Roivant and our business model over the long run. And if we are able to see and deliver successes commercially in this alliance, as we expect, we ultimately hope to find other ways to expand our collaboration with Dainippon Sumitomo in the future.

Thank you for having me, and I will be glad to answer any questions that you may have.


Questions and Answers


Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [1]


Hashiguchi from Daiwa Securities. I have a couple of questions. The first question is about the financial impact from the strategic Alliance with Roivant.

You mentioned, and it's on Page 30, that Sumitomo Dainippon Pharma is expecting positive impact to revenue while the deal pushes up SG&A and R&D expenses. But what impact do you expect on P&L? There are maybe various scenarios to assess the impact. But what is the main and most likely scenario for you to assess the impact on P&L?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [2]


Certain expenses are expected to be pushed up because we will allocate R&D expenses for the new company and commercial expenses for relugolix and vibegron. But LATUDA will not lose its exclusivity in the U.S. market during the current midterm business plan period. So we believe that we can manage the impact on P&L.

At the same time, internal discussions are still ongoing around how we achieve synergy among subsidiaries such as Myovant, Urovant and Sunovion.

In the context of sales reps, we will hire reps for new therapeutic areas of Myovant and Urovant. And with that, we will have designated sales reps in each therapeutic area. Same can be said for medical affairs, but we can leverage supporting functions for commercial activities or distribution networks that are available in Sunovion. And this, I think, is the opportunity for us to achieve synergy in the new structure, and we will continue to assess the impact on P&L by also looking at this aspect.


Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [3]


It may be difficult to precisely estimate revenue size because it depends on drug uptake in the market, but expenses will be budgeted and allocated according to the company's plan. So would it be possible to share with us your latest estimate on cost for the foreseeable future?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [4]


It's still premature to share it at the moment. As I just mentioned, we are still in the process of assessing the opportunity for synergy and updating our forecast in the midterm business plan. We will update our P&L forecast accordingly.


Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [5]


My second question is on relugolix. The result from Phase III fixed-dosing study looks very good. Some of drugs with similar mechanism of action require titration, which seems to be a challenge for users. So my question is, what made relugolix so successful in fixed-dosing study? Is it attributed to the drug's favorable profile? Or is it attributable to the excellency in Roivant platform in identifying the optimal dose administration?

Manufacturers of marketed drugs and future compounds with similar MOA have been trying to develop better dose and administration. And some of them could succeed in doing so and offer same benefit as relugolix in the future. What is your take on this?


Vivek Ramaswamy, Roivant Sciences, Inc. - Founder, CEO and Director [6]


Yes. So thank you for the question. While I would like to -- while I would have been happy to claim credit for Roivant's development strategy here, actually, this is entirely a product of the features of relugolix itself as a molecule. So there's 2 features I would point to. First is the half-life. The half-life is long enough to support once daily dosing.

Crucially, the hormone add-back therapy is also once daily. This is lucky for us because if the drug is twice a day, then it completely changes the regimen for physicians and for patients. For patients, this means that you have to take 2 of 1 pill, twice morning and night, one of a separate pill and both the physician and the patient need to think of them as 2 different medicines being titrated to achieve a side effect mitigation. Instead, what we have developed because of that long half-life is a co-formulated one pill once a day. So that's inherently a feature of relugolix.

The second feature of relugolix is its potency. It is very potent in being able to drive estrogen levels all the way effectively down to 0 but 0 is a stable base. And the good thing about a stable base is that then you can very precisely add back just the level of hormone that you need to be below the level where you have symptoms of uterine fibroids and endometriosis, but above the level where you would experience bone mineral density loss.

By contrast, some of the competition, in our opinion, may be less potent and may have to use dosing strategies that have to dose into the range rather than being able to drive estradiol levels down to 0. So this was part of the initial rationale for the inherent advantages of relugolix that was then reflected in the Phase III strategy, and the team at Myovant has now delivered the successful Phase III results in uterine fibroids.


Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [7]


My last question is around by vibegron. The same class drug is already available in Japan, and Japanese pharma companies told me that they are currently focusing on patients who are new to the treatment, but not those who are already receiving treatments. Therefore, the revenue only grows gradually. Given that situation, how do you commercialize your drug in the United States?

Is your commercial plan different from those in Japan? Generic version of Mirabegron, a competitor, could enter the market in 3 to 4 years. But do you believe that vibegron can stay competitive in such a market landscape?


Vivek Ramaswamy, Roivant Sciences, Inc. - Founder, CEO and Director [8]


So I think it's -- so to be clear, we have the U.S. and European rights to vibegron. So the opportunity in the alliance here is not the Japanese opportunity for vibegron. It is the U.S. and European opportunity. So I wanted to clarify that the product is not in our hands, launching in Japan, but the major commercial opportunity is actually in the U.S.

Now to your question about competition and new patients versus existing patients. One of the things that -- this is one where we did do something unique in our development strategy relative to Merck and relative to the Japanese partner that was developing it in Japan, where rather than developing the product at 2 doses, 50 and 100 milligrams as it was tested in Phase II, and by the way, as is the case for the Astellas product, the beta 3 agonist with 2 different doses requiring starting at one and then titrating to the other, for example, we developed vibegron with a single 75-milligram dose, which is why patients could then start on that what we hoped to be efficacious dose right away.

Given that this was the theory of the development strategy, we also designed a trial that measured very early on what's the benefit, which is also unique to our knowledge. At least to my knowledge, there was not a study for the competition, which actually looked as early as Week 2.

In overactive bladder, it is our belief that early experience of efficacy is very meaningful for the patient experience. As a consequence of going then with that single dose, 75 milligrams rather than 50 milligrams, we thought it made sense to then include that special early time point, Week 2 as well. We were very pleased to then see statistical significance, not just at the primary endpoint of Week 12. But in fact, at every time point along the way, including as early as Week 2.

Collectively, we feel that this, in addition to the QTC profile, in addition to the DDI in addition profile -- DDI's drug-drug interaction profile, and in addition to other parts of the overall product profile, this is why we feel that, A, vibegron has the potential to be the best-in-class beta 3 agonist; and B, that the beta 3 agonist class could grow even more in the future as anticholinergics continued to fall out of favor.

In the overactive bladder market, even though there are multiple generic options, branded options still continue to sell very well. This is, in part, because patients switch often. So this goes to you -- one of your questions about starting versus switching. Patients switch drugs anyway reasonably often.

And finally, the company today in the U.S. that markets the beta 3 also markets one of the leading anticholinergics. And so -- that's Vesicare. And so as a consequence, we believe that the market knowledge about the true benefits of the beta 3 class may have been, in part, not fully realized because the only company marketing a beta 3 also stood to effectively lose market share for its other product in the process. So those are some of the reasons that we wanted to share.


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [9]


Just to mention the impact from generics, potential impact had been already factored in our valuation.


Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [10]


Wakao from Mitsubishi Morgan Stanley. My first question is this. The strategic alliance with Roivant is expected to replace some of expected revenue loss from the discontinuation of napabucasin pancreatic cancer program and LATUDA's LOE.

Then is it safe to assume that V shaped growth is given by this alliance with Roivant? The company earmarked JPY 300 billion to JPY 600 billion for M&A in the midterm business plan. So do you plan to pursue other M&A opportunities going forward?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [11]


The scenario we applied for the midterm business plan was that the development of napabucasin for both pancreatic and colorectal cancer treatment will make it to the finish line. And we laid out our plan for M&A to capture opportunities in this area to realize the growth in fiscal year 2023 and onward, which is after the current midterm business plan period.

It was not meant to just offset immediate financial impact from LATUDA's LOE. Since the announcement of the plan, napabucasin pancreatic cancer program was discontinued, which is expected to cut about half of the forecasted revenue by the time LATUDA loses its exclusivity. This is where we are right now. Against this background, relugolix and vibegron will be important assets as we expect them to offset majority of the forecasted loss, if not all. Revenue may go down for a short period of time. But it is my belief that it will come back up again.


Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [12]


Understood. Each subsidiary that owns relugolix or vibegron will remain to be a listed company. And Sumitomo will not acquire 100% of its share. What was the rationale behind this decision? And is there a possibility that Sumitomo will own 100% of their shares in the future?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [13]


We didn't start our discussion with Roivant in a bid to acquire Roivant subsidiaries but to realize and leverage the strategic alliance with Roivant. And that was how we reached to an agreement to acquire some of their shares.

Our intention has never been to acquire 100% shares of Roivant subsidiaries, but it was agreed in the context of the strategic alliance with Roivant. To answer your question about the possibility, I'd like to refrain from making comments on that because subsidiaries you mentioned are listed companies.


Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [14]


My next question is around technology platform. Sumitomo paid a significant amount of cost [deviation] for the platform. When do you expect to see and enjoy the impact from the utilization of the technology? I ask this question because it is my assumption that Sumitomo has done some assessments during valuation process. Is there a [matrix] that the company will use to evaluate the success of technology application?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [15]


It's a very good question. We evaluate the value of the technology platform by assessing the impact it can bring to address our challenges. One of the challenge in R&D is -- are not being able to develop post-LATUDA assets and that was why we put forward our policy of CHANTO in the midterm business plan, the ability to deliver highest performance.

We have been focusing on in silico drug discovery in research area and utilizing accumulated data from the past clinical studies like LATUDA study to formulate protocol in development area. For us to be more efficient and effective in what we do in those areas, we plan to apply technology platform, which allows us to utilize a large volume of data to come up with the best solution in a time-efficient manner.

So our index to evaluate the value of the platform and impact the application would be whether we improve the probability of success in R&D and whether we become cost efficient and effective in development. What is more important is to make sure that Sumitomo Dainippon Pharma can make the best use of the platform of DrugOme and digital innovation. It's not easy to pinpoint exactly when we will see positive outcomes because it will take a while. I'd like to ask you to closely follow our upcoming activities in R&D to see the success.


Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [16]


One last question about relugolix. I understand the differentiated points against competitors. But I'm curious because relugolix from AbbVie is not selling well at the moment. It is my impression that they are struggling with market expansion. What is your take on this? Do you think that sluggish sale of the competitor is attributed to the drug and not to the market? Are you confident that you can do differently when you launch the drug?


Vivek Ramaswamy, Roivant Sciences, Inc. - Founder, CEO and Director [17]


Should I take that question? Yes. So to be clear, AbbVie's initial launch was with a monotherapy, very different paradigm than the combination therapy. And when using the monotherapy, you have the choice between either a low-dose option that doesn't drive estrogen levels down enough or a high-dose option that too crudely drives down estrogen levels but without add-back therapy currently on the market.

So to be clear, even when I described before, the competition with add-back therapy, the hormone add-back being used twice a day for the drug and once a day for the add-back, even that is about the future. And even in that future state, that's how we see AbbVie as not being so competitive.

But the current launch was not even with that. It was just the monotherapy in the first place, and that does not represent a meaningful difference from Lupron, the current injectable standard of care, which is also effectively a product that today is used on a very short-term basis. And so we believe that this is the reason why -- part of the -- an important part of the reason why the product has not been a big product as monotherapy. But it was also our reason for in Phase III not developing relugolix as monotherapy for women's health at all.

We could have made the choice to develop it as monotherapy. We had seen the results in Phase II. We made a conscious decision precisely because we did not believe that is what the market needed. And did not believe that stood a chance of being a meaningful product at all. But the product is totally different if we're able to use the add-back therapy, put it in the same pill such that from the patient experience that pill delivers exactly what's necessary, both from the standpoint of efficacy as well as controlling for side effects.

We feel that it may be a blessing that AbbVie has already launched the product for 2 reasons. One is, there hasn't been that many much innovation or new products launching in this market. So it may just raise market awareness of this new class of oral GnRH antagonists. But also, we feel that even though they launched first our view, other companies may disagree, but our view is you get one chance to launch well. And if that brand has already a tarnished image with respect to not really meeting the patient need, launching with an add-back version later may be difficult since the initial launch was already formed the brand impression. And even that subsequent launch would involve separate pills once a day for the add-back, twice a day for the drug, which also reinforces that same message that the second launch is really just about adding a separate pill to the regimen rather than being about a new 1 pill once-a-day regimen.

So these are our reasons for remaining confident in relugolix because I think this was always our thesis that combination therapy is required to unlock the true market potential of chronic therapy that could avoid the need for surgery. And I did not mention that in my remarks earlier, but these diseases are significant enough that women seek out surgery, right? They get hysterectomies. And certainly, in the United States, where we have greater familiarity, that's a big deal to be able to go for a surgery. And the ability to have a chronic therapy that could represent an alternative medical course of therapy we think would represent a major improvement in standard of care but only if presented to the patient in the right form.


Yasuhiro Nakazawa, SMBC Nikko Securities Inc., Research Division - Senior Analyst [18]


Nakazawa from SMBC Nikko Securities. I asked the same question on September 6 about the technology platform and its value. Could you give us a sense of estimated value? It is stated on the press release that the consideration for shares of the new company is JPY 220 billion, and I appreciate your disclosure.

Given the market cap of Myovant and Urovant, consideration per company is estimated to be around JPY 20 billion to JPY 25 billion or JPY 30 billion with premium each. That means to say that the cost to acquire 5 subsidiaries would be totaled around JPY 150 billion. And assuming that my calculation is proper, the remaining consideration is translated as the value of the technology platform, which is as high as JPY 70 billion. Is my assumption reasonable?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [19]


Thank you for your question. I'd like to refrain from giving you specific breakdown at the moment. Of course, we see the value of the technology platform, and that is why we acquired the platform. As presented, accounting process is still ongoing and details such as purchasing price allocation will be disclosed after closing. I'd like to stick to this time line to disclose price allocation. And I appreciate your understanding.

It is also important to highlight that the value will be brought not simply by the platform alone, but also by how we leverage it. The platform needs to be fully utilized by functions such as scientific and medical development team or business development team and supported by the computational research team and digital innovators. Application of the technology across the organization is critical. And we need to nurture the platform to maximize the value going forward. That's why we think it's premature to talk about it further in numerical figures.


Yasuhiro Nakazawa, SMBC Nikko Securities Inc., Research Division - Senior Analyst [20]


Understood. As you mentioned in the presentation, you will acquire the platform and talents. Do you plan to utilize the capability and apply the technology to clinical studies and commercial activities for SEP-856?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [21]


Clinical studies of SEP-856 for schizophrenia indication was already initiated. In the market, the medical care cost of schizophrenia are being covered by Medicaid in the United States. So the drug price of SEP-856 is not expected to be so high.

Going forward, we will need to identify the second indication of 856 as we did so for LATUDA. Data from PET study is available, but we also expect to utilize the platform to address that. Contribution to the study protocol of the second indication is also anticipated.


Yasuhiro Nakazawa, SMBC Nikko Securities Inc., Research Division - Senior Analyst [22]


My last question is about vibegron on Page 35. Changes of the average daily UUI episode is shown on the left graph. How many times was the base line? Was it around 10?


Vivek Ramaswamy, Roivant Sciences, Inc. - Founder, CEO and Director [23]


Without having the data in front of me, I don't want to misquote a number.


Motoya Kohtani, Nomura Securities Co. Ltd., Research Division - Senior Analyst [24]


Kohtani from Nomura Securities. So a question for Vivek. These are 2 drugs, relugolix and vibegron, obviously that Merck and Takeda assessed on their own and then, of course, were -- chose to license it out, I think, and part of the reason probably why is that while there is differentiation, and I think you've explained it very well, it seems to me that these are 2 drugs that would require a little bit of muscle to try to get it out, to try to build up a base. Do you think that, that's an accurate assessment?


Vivek Ramaswamy, Roivant Sciences, Inc. - Founder, CEO and Director [25]


So I would say with all due respect, not quite because actually, it would be -- hearing that -- would be actually feasible to do with relatively lean sales forces. We, at Roivant and Myovant and Urovant have views, but I think Dainippon Sumitomo should speak to you about their perspectives on what it will take to launch the products, but we actually do not believe it would take large-scale primary care audiences to market either of these products.

If I may say a word about the prior partners, you can study their respective public statements about their corporate strategy. And this goes to Roivant's business model of focusing on areas where medical need is very high, but where the strategic focus of other companies by therapeutic areas is very low.

At the time that Takeda licensed relugolix to us, their stated -- publicly stated strategy, as you may be aware, was to focus on neurology, oncology and GI disease. They had historically had a partnership in the U.S. called TAP with AbbVie to market Lupron. AbbVie, you will note is the competitor for Myovant. And that is publicly known to run into difficulties in a partnership between those companies anyway.

In Merck's case, you will note that they had major success of KEYTRUDA in immuno-oncology around the time that vibegron was in development, and it is also publicly known that oncology has become the core foundation of that company, even though urology represents an interesting unmet medical -- area of unmet medical need, this did not appear to be within the core focus of the company that had developed KEYTRUDA and other IO or immuno-oncology agents.

And the final point, which is a factual point as well, is that as of the end of Phase II meeting that Merck had with FDA, it wasn't so much a heavy lift in commercialization as it was a heavy shift -- a heavy lift in development. So their end of Phase II meeting had called for 2 different Phase III studies at 2 different doses, 50 milligrams and 100 milligrams, I think, in part, through leveraging some of the Roivant platform that Nomura-san described and open constructive dialogue with FDA and Merck and a deeper analysis of all of the available data, we aligned on a strategy not to do 2 different Phase III studies at 2 different doses of 50 and 100 milligrams, but to do one Phase III study at 1 dose. So that made the development effort much more streamlined.

And furthermore, as I described earlier, starting with the single dose rather than starting with low-dose titration upwards, we think, improves the eventual commercial profile as well.

So I think that Dainippon Sumitomo, Myovant and Urovant can comment on the specific commercial plans at a later date, but at a high level, I do not think about those commercial launches as a large primary care style launches but rather much more closer to a specialist-focused launch apparatus that we believe could be quite lean. And potentially even involve some overlap between the OB-GYNs and urologists that comprise the respective audiences for Myovant and Urovant, although that is subject to further analysis and review.


Motoya Kohtani, Nomura Securities Co. Ltd., Research Division - Senior Analyst [26]


Just one last point on relugolix. Can you -- obviously, you're talking about multiple -- sorry, uterine myoma and the other ones, endometriosis. The uterine myoma is more sort of associated, I guess, with surgery -- surgical removal. Obviously, this has had some difficulties very recently. And obviously, some of the operations have changed. But I don't know, how do you -- how the segment be differentiated among drugs and surgery? What are the available population?

And endometriosis is an area that has some pretty intriguing innovation coming up through the pipeline. I don't know how you see the space, but if you could sort of describe your view of the endometriosis space.


Vivek Ramaswamy, Roivant Sciences, Inc. - Founder, CEO and Director [27]


Both are markets actually that are characterized by surgery as the backstop option for these women. So that applies to both uterine fibroids as it's referred to in the U.S. or for endometriosis. And the fact that women have to opt for surgery in order to relieve the symptoms of bleeding and pain, I think, reflect how bad it is for those women. And so you'll see numbers quoted like 19 million for uterine fibroids prevalence, 8 million for endometriosis prevalence.

Well, the reality is the portion experiencing meaningful symptoms is more like 5 million in uterine fibroids and about 5 million, 6 million for endometriosis. But for that population, we see the future paradigm change as really being one that moves away from a market for surgery as the backstop to instead a chronic medical therapy as well. And so we actually do see an opportunity. And it is certainly our hope and expectation at the time we began developing this that this would become that new standard of care to become chronic medical care rather than a market that's usually driven by a backstop, short-term bridge to surgery today.


Fumiyoshi Sakai, Crédit Suisse AG, Research Division - Research Analyst [28]


Sakai from Crédit Suisse. Two simple questions. One is about the exclusivity or data protection of relugolix and vibegron in the United States and profit-sharing scheme. Is there a profit-sharing scheme? That is my first question. And my second question is about the fact that Myovant and Urovant remain to be listed companies, meaning that there are shareholders who want to know the strategy for the company to grow. But I only see relugolix and vibegron in the pipeline to drive the growth of Myovant and Urovant, respectively. So I wonder if the scheme would actually work moving forward. Could I ask your take on this?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [29]


Vivek-san, could you follow-up on the question about exclusivity? Relugolix has substance patent until 2029 and other patents until 2033 to 2036. Vibegron has substance and other patents until 2034. To your second question, I understand your concern, but Myovant and Urovant have other assets in the development pipelines. So we ensure to proceed with the program as planned. That's all I can say at the moment. And as I said, I'd like to refrain from making comments on what would happen to these companies in the distant future.


Fumiyoshi Sakai, Crédit Suisse AG, Research Division - Research Analyst [30]


So what about the profit-sharing scheme?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [31]


What do you mean by profit-sharing scheme? Sharing with who?


Fumiyoshi Sakai, Crédit Suisse AG, Research Division - Research Analyst [32]


I was wondering if Sumitomo will pay royalty to Myovant and Urovant.


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [33]


We pay royalty to Takeda and Merck because they are originators of each drug. But I don't understand why you think that Sumitomo has the obligation to pay royalty to Myovant and Urovant.


Fumiyoshi Sakai, Crédit Suisse AG, Research Division - Research Analyst [34]


Then will 100% of profit be absorbed in Sumitomo Dainippon Pharma?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [35]


It's not going to be 100%. As you can find the detail on the press release, the ownership ratios of Myovant and Urovant shares are 50% plus and 75%, respectively. So that's the baseline scheme. And Sumitomo will allocate dividend to minority shareholders. That is what the structure says without question. These companies are listed companies and have shareholders and shareholders have expectations on company's growth and dividend. So we make sure to fulfill that expectation.


Stephen Marks, Jefferies LLC - Investment Banking Analyst [36]


Steve Marks from Jefferies Securities. I have 2 questions. One is around the management of the new company. New leadership team, including Myrtle Potter, is currently holding a position in Roivant. Will they stay in the position in Roivant even after assuming a position in the new company?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [37]


Myrtle, Sam and Adele will take each position in the new company and in the new company only. Dan may be engaged in the digital platform in Roivant immediately after the start of the new organization just for a short period of time. But his main responsibility will sit in the new organization.


Stephen Marks, Jefferies LLC - Investment Banking Analyst [38]


Isn't it going to be a conflict of interest, I wonder?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [39]


In what context do you expect a conflict of interest between Sumitomo and Roivant?


Stephen Marks, Jefferies LLC - Investment Banking Analyst [40]


Sumitomo as in the newly established company?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [41]


I assume that there may be a conflict of interest if they work for both Sumitomo and Roivant. But what I said was that it's only Dan who may take a wall in the digital platform in Roivant just for a short period of time after the start of the new organization, and all the other leaders will be dedicated to each role in the new company.


Stephen Marks, Jefferies LLC - Investment Banking Analyst [42]


Understood. My second question is about funding policy on Page 30. You mentioned that the company plans to refinance through hybrid finance instrument to raise equity-like capital. I just wanted to confirm that there is no risk that you issue new shares.


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [43]


At the moment, we have no plan to issue new shares. But of course, there are various possibilities, depending upon the timing of the funding. So we'd like to make a decision depending on the external environment. At this point of time, I cannot negate the possibility of issuance of new shares.


Stephen Marks, Jefferies LLC - Investment Banking Analyst [44]


Are you going to borrow money in yen?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [45]


Yes. The currency will be yen. That's our plan.


Shinichiro Muraoka, Morgan Stanley, Research Division - Research Analyst [46]


Muraoka from Morgan Stanley. It's rather a specific question. The name of the fifth Vant you disclosed on the latest presentation deck is Spirovant, which was not listed on the slide you presented earlier in September. Instead, I found Respivant on the last presentation slide. Is Respivant Spirovant? Is this the same company?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [47]


No, it is not. Respivant focuses on respiratory diseases and it's not Spirovant. As presented earlier, we disclosed the name of fifth Vant, Spirovant, for the first time today for this strategic alliance. It hasn't been disclosed until today.


Shinichiro Muraoka, Morgan Stanley, Research Division - Research Analyst [48]


Understood. And I assume that you chose this Vant in a bid to gain an access to gene therapy. But if that is the case, Axovant could be the candidate as well because they are also focusing on and quite active in gene therapy. Why didn't you choose Axovant as the fifth Vant, given the fact that Axovant focuses on gene therapy in neurology, which seems to be the best fit for Sumitomo Dainippon Pharma?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [49]


It's a good point. Axovant is engaged in gene therapy to treat Parkinson's disease. And it is true that we are very interested in the business in Axovant, but it was a matter of choice, and we chose Spirovant over Axovant. Spirovant targeting cystic fibrosis.


Shinichiro Muraoka, Morgan Stanley, Research Division - Research Analyst [50]


Understood. And you also explained about the breakdown of the consideration, JPY 2 billion for the acquisition of 5 subsidiaries and JPY 1 billion for over 10% share of Roivant. Am I correct?


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [51]


JPY 2 billion is for shares of the new company and others such as intangible assets, and JPY 1 billion is for Roivant's share.


Shinichiro Muraoka, Morgan Stanley, Research Division - Research Analyst [52]


Then paying $1 billion for over 10% of Roivant share means that you assessed Roivant's worth to be $10 billion. And what I don't quite understand is that late-stage assets such as relugolix and vibegron will be owned by the new company, worth JPY 2 billion according to your assessment. And all these stated assets will be owned by other Vants that remain environment organization, which according to your assessment, is worth $10 billion.


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [53]


Your question is very reasonable. As I mentioned, we received a fairness opinion as an assessment of the conservation of $2 billion, but there will be no fairness opinion for the consideration of $1 billion. So we are working with different party to receive an objective evaluation in writing. And a report is being formulated. We looked at this from many perspectives, including one you just highlighted. And as a result, our valuation was found to be reasonable.

Thank you very much for your questions. We had all of the questions from the floor. So we'd like to end Q&A.

Before closing the session, is Ms. Myrtle Potter here? I'd like to introduce the CEO in the new company because this is the great opportunity. She has been attending this conference today. Let us have a few more minutes.


Myrtle Potter;CEO, [54]


So thank you very much. I'm very pleased to be here and very enthusiastic about being a part of the DSP family. My colleagues and I have thought about the opportunity for quite some time. We've had the opportunity to work closely with Nomura-san and his team, and it is with a lot of impatience that we are looking forward to getting started and bringing our products to market. So thank you very much.


Hiroshi Nomura, Sumitomo Dainippon Pharma Co., Ltd. - CEO, President & Representative Director [55]


That concludes our presentation. Thank you.