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Edited Transcript of 4506.T earnings conference call or presentation 29-Jul-19 7:45am GMT

Q1 2020 Sumitomo Dainippon Pharma Co Ltd Earnings Call

Osaka Aug 29, 2019 (Thomson StreetEvents) -- Edited Transcript of Sumitomo Dainippon Pharma Co Ltd earnings conference call or presentation Monday, July 29, 2019 at 7:45:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Hisayoshi Kashima

Sumitomo Dainippon Pharma Co., Ltd. - Senior Director & Corporate Controller

* Kazuo Koshiya

Sumitomo Dainippon Pharma Co., Ltd. - Senior Executive Officer & Global Head of Oncology

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Conference Call Participants

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* Fumiyoshi Sakai

Crédit Suisse AG, Research Division - Research Analyst

* Hidemaru Yamaguchi

Citigroup Inc, Research Division - MD and Analyst

* Kazuaki Hashiguchi

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

* Seiji Wakao

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

* Shinichiro Muraoka

Morgan Stanley, Research Division - Research Analyst

* Yasuhiro Nakazawa

SMBC Nikko Securities Inc., Research Division - Senior Analyst

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Presentation

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Hisayoshi Kashima, Sumitomo Dainippon Pharma Co., Ltd. - Senior Director & Corporate Controller [1]

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[Interpreted] I'm Kashima, presenting the financial results for the first quarter fiscal year 2019 and the clinical development updates. Please look at Slide 3.

I would like to present the financial results for the first quarter based on IFRS core basis. Total revenue was JPY 117.5 billion, slightly up by JPY 1.6 billion year-on-year. Revenue grew in North America and China, but dropped in Japan.

Sales expenses declined mainly in North America, and R&D expenses decreased as well. As a result, core operating profit increased by JPY 3.9 billion year-on-year to JPY 22.3 billion.

Changes in fair value of contingent consideration was up by JPY 21 billion year-on-year, driven by favorable expenses due to the discontinuation of Phase III study of napabucasin for patients with pancreatic cancer. The operating profit as a result improved significantly from a year earlier to JPY 40.4 billion.

On the other hand, net profit attributable to owners of the parent fell sharply, driven partially by a foreign exchange loss due to a stronger yen and mainly by additional tax expenses of JPY 24.8 billion. This additional tax expenses were in relation to the liquidation of deferred tax assets of JPY 23.6 billion in the United States, following the discontinuation of a part of clinical studies of napabucasin.

Progress of the revenue against the forecast for the second quarter fiscal year 2019 is slightly fast and expenses are favorable, both of which have contributed to faster progresses incorporating profit and operating profit. On the other hand, net profit attributable to owners of the parent is slow in progress due to the foreign exchange loss and tax expenses. By reflecting these factors, financial forecast for the term was revised, which will be presented later.

Please go to Slide 4. This slide shows revenue of Japan segment. Revenue decreased by JPY 2.7 billion from the same period last year to JPY 32.6 billion. Trulicity continued its strong growth and other promoted products were flat in growth from a year earlier, while long-listed products, mainly AIMIX lost the revenue substantially.

The progress versus the second quarter forecast is 53.5%. LONASEN has achieved strong progress but is expected to be impacted by generics of LONASEN, tablet and powder, which were launched in June.

Revenue is also expected to be affected by NHI price revision. All in all, the progress of the revenue is expected to be in line with the forecast.

Please look at Slide 5. I will present the revenue in North America and China segment. The revenue in North America was 66 billion in yen basis, up by JPY 5.3 billion year-on-year. LATUDA sales reached JPY 49 billion, an increase by 11.7%. APTIOM showed consistent growth, and revenue was up by 14%. Overall performance in North America was in line with the expectation.

China segment had JPY 6.8 billion in revenue, up by JPY 1.4 billion. This was mainly driven by MEROPEN, whose progress was faster than the expectation. For your information, revenue outside of Japan, including export business, accounted for 64.2%.

Now on Slide 6, which is the financial results for the quarter by segment. Japan segment profit decreased by JPY 2.2 billion year-on-year to JPY 7.3 billion, driven significantly by the loss in revenue. North America segment booked favorable revenue and sales expenses. As a result, core segment profit rose by JPY 4.5 billion to JPY 29.5 billion. China segment also increased the revenue and booked core segment profit of JPY 3.8 billion, an increase of JPY 1.5 billion.

Please go to Slide 8 for a financial forecast for fiscal year 2019. Financial forecast for the second quarter and full year have been revised. Revenue forecast was revised upward by JPY 2 billion from the previous forecast to JPY 228.5 billion for the second quarter and also upward by JPY 15 billion to JPY 475 billion for full year. This is mainly driven by the launch of co-promotion and sales collaboration for the treatment of type 2 diabetes, Equa and EquMet, with Novartis Pharma. Following this new alliance, cost of sales and sales expenses are expected to increase.

Accordingly, core operating profit for the second quarter was revised upward by JPY 1 billion to JPY 39.5 billion, but full year forecast of core operating profit remains unchanged.

Operating profit was also revised upward to JPY 56 billion, up by JPY 21.5 billion for the second quarter into JPY 88 billion, an increase of JPY 19 billion for full year due to the updated reversal of costs for fair value of contingent consideration adjustment.

As for tax expenses, in addition to the liquidation in the first quarter, deferred tax assets are not expected to be recognized in this fiscal year, which resulted in the revision of net profit attributable to owners of parent to JPY 22 billion, a decline by JPY 3 billion for the second quarter, and to JPY 36 billion, down by JPY 13 billion for full year.

Next is financial forecast by segment on Page 9. In Japan, as I explained earlier, incremental revenue is expected from Equa and EquMet alliance. Therefore, the revenue forecast was revised upward by JPY 15.7 billion to JPY 135 billion in total, of which JPY 16 billion is expected from Equa and EquMet. This new alliance is also expected to increase the cost of sales and sales expenses. And as a result, core segment profit was revised upward by JPY 700 million to JPY 19.2 billion.

In North America, SG&A expenses forecast was revised upward by JPY 1.2 billion based on the progress in the first quarter. Therefore, core segment profit was revised downward by JPY 1.2 billion to JPY 122.8 billion.

In China, the revenue is expected to go up from the previous forecast by JPY 1.3 billion to JPY 28.3 billion, driven by the strong sales of MEROPEN. Core segment profit as a result is now expected to be JPY 12.6 billion, up by JPY 600 million. All in all, total revenue is forecasted to increase by JPY 15 billion to JPY 475 billion, and total core segment profit is expected to be in line with the previous forecast at JPY 163 billion. Core operating profit is expected to be in line with the previous forecast of JPY 77 billion, because R&D expenses forecast has not been updated.

Please look at Slide 11. I will explain development pipeline status. This is the list of development compounds and phases. Changes made since May is highlighted in red and will be presented in the following slide.

Please look at Slide 12. The following slides summarize change points since May. In psychiatry and neurology, LONASEN Tape was approved in June in Japan and is expected to be launched in the first half of fiscal year 2019.

In the United States, NDA for dasotraline binge-eating disorder was submitted in May. For SEP-363856, 2 Phase III studies were initiated for schizophrenia in the United States. This is a 6-week, double-blind, placebo-controlled studies evaluating 50-milligram and 75-milligram dose and 75-milligram and 100-milligram dose.

In oncology, interim analysis of napabucasin were conducted. In June, Sumitomo Dainippon Pharma received a recommendation from the independent Data and Safety Monitoring Board, or DSMB, to continue the clinical study for patients with colorectal cancer. Accordingly, the study is ongoing.

Whereas, in July, the DSMB recommended that the study for patients with pancreatic cancer be discontinued because it met the prespecified criteria for futility, and we decided to discontinue.

Now Slide 13. For alvocidib, new Phase II study was initiated in the United States for relapsed or refractory acute myeloid leukemia, following the treatment with venetoclax combination therapy. In other therapeutic areas, we obtained positive top line results in Japan from TIMES 3 study, a Phase III study of insulin combination therapy for patients with type 2 diabetes. I will present the results later with the following slide.

In regenerative medicine and cell therapy, for Allogeneic iPS cell-derived products to treat age-related macular degeneration, we made changes to the joint development structure with Healios K.K. in June this year. With the change, Sumitomo Dainippon Pharma will be primarily responsible for the clinical study, and both companies will be able to submit applications for manufacturing and marketing approval based on the study results.

In Frontier business, investment was made to Drawbridge Health in July to pursue a Frontier business utilizing the blood collection devices of the company. For your information, proposal to acquire Cynata Therapeutics, which was press released on July 19, is still under consideration.

Please go to Slide 14. This slide summarizes the results of Imeglimin TIMES 3 study. In this study, Imeglimin group met primary endpoint for efficacy. Imeglimin was generally well tolerated and adverse events were similar to previous studies. The results of TIMES 2 study, which is a long-term study including combination therapy with hypoglycemic agents, will be obtained around the end of 2019. We plan to submit NDA in fiscal year 2020 in Japan based on the results of TIMES 1, 2 and 3.

That concludes the presentation. Thank you. We will take questions.

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Questions and Answers

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Unidentified Company Representative, [1]

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[Interpreted] First question is from Mr. Hashiguchi, Daiwa Securities.

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Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [2]

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[Interpreted] I have a couple of them, one of which is a part of napabucasin's mid- to long-term strategy. Will there be any changes to the plan following the recommendation from DSMB to discontinue Phase III study for pancreatic cancer? I believe the company has forecasted substantial revenue from napabucasin in mid-term business plan. Are you planning to take some measures to hit the profit target? And if you are, could you tell us what it will be?

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Unidentified Company Representative, [3]

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[Interpreted] As you pointed out, napabucasin is expected to generate revenue in the last year of 5-year mid-term plan. Revenue will not be generated from pancreatic cancer market, but in the next couple of years until that point of time, we will capture opportunities to deliver the target revenue through the development of our pipeline as well as mergers and acquisitions and in licensing. Therefore, we are not planning to revise mid-term business plan at the moment.

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Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [4]

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[Interpreted] You mean to say that the company plans to take some measures to realize the forecasted top line but not to cut expenses. Is it correct?

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Unidentified Company Representative, [5]

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[Interpreted] It does not mean that the company would not take measures to cut expenses. We will plan and take actions so that we achieve mid-term business plan target.

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Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [6]

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[Interpreted] Understood. My second question is about SEP-363856. You mentioned that 2 6-week Phase III studies were initiated. When do you expect the studies to complete?

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Unidentified Company Representative, [7]

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[Interpreted] Updated launch target remains to be fiscal year 2023, which does not seem to be early enough, considering the fact that Phase III studies are only for 6 weeks.

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Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [8]

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[Interpreted] Is there a possibility for an early launch before fiscal year 2023?

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Unidentified Company Representative, [9]

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[Interpreted] I'm [Kozaki], and I'd like to answer your question. The asset was granted Breakthrough Therapy Designation, which will give us the benefit of accelerated revenue to expedite the launch time line. That said, we need to consolidate data of results from long-term study as well as these pivotal studies before submitting NDA. These preparations are required before fiscal year 2023.

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Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [10]

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[Interpreted] Understood. My last question is around SB623. Could you tell us when you plan to finalize the development plan? And how the company discloses the plan?

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Unidentified Company Representative, [11]

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[Interpreted] [Kozaki], once again, will address your question.

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Unidentified Company Representative, [12]

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[Interpreted] Development plan is currently being evaluated. We have obtained detailed data of secondary endpoint, and data analysis are underway. SanBio and Sumitomo Dainippon Pharma will discuss to determine the future course of development. Data analysis have been taking and will take more time than we initially expected. We initially estimated that the announcement of an updated development plan can be made around summer, but we are expecting some delay.

We are under discussion on how to disclose the updated plan, and we'll let you know when we know how.

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Kazuaki Hashiguchi, Daiwa Securities Co. Ltd., Research Division - Research Analyst [13]

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[Interpreted] I'd like to know how much more delay we should expect? Could it be a delay to the next fiscal year and onward?

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Unidentified Company Representative, [14]

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[Interpreted] It is up to the discussion with SanBio, but our current target to disclose the development plan is by the end of the fiscal year. We will promptly make a disclosure for the update, be it a press release or a content of a financial briefing.

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Unidentified Company Representative, [15]

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[Interpreted] Next question is from Mr. Muraoka, Morgan Stanley.

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Shinichiro Muraoka, Morgan Stanley, Research Division - Research Analyst [16]

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[Interpreted] My question is around LATUDA, whose performance looks stronger. I believe this is driven by effective strategies. But could you elaborate on how the product performed well? And whether the trend would continue in the second quarter and onward as well? I'd also like to know LATUDA business in relation to a number of drug pricing bills in the United States being introduced in an effort to eliminate the donut hole. I have a feeling that the bill could work positively for drugs in a certain price range, including LATUDA. Is this interpretation reasonable?

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Unidentified Company Representative, [17]

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[Interpreted] Kashima, will address your question on LATUDA's performance in the first quarter.

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Hisayoshi Kashima, Sumitomo Dainippon Pharma Co., Ltd. - Senior Director & Corporate Controller [18]

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[Interpreted] Revenue grew by 12% year-on-year driven by growth in share and particularly in price. Some positive impacts were settlement of rebates from the past transactions, decline in reservation for returned products and recovered inventory at key group pharmacies.

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Shinichiro Muraoka, Morgan Stanley, Research Division - Research Analyst [19]

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[Interpreted] The settlement of rebates from the past transaction sometimes affects positively for other companies as well. But how much was the contribution to the business from the settlement of rebates in percentage?

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Unidentified Company Representative, [20]

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[Interpreted] Over 50%, I believe.

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Shinichiro Muraoka, Morgan Stanley, Research Division - Research Analyst [21]

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[Interpreted] That means that this trend should not be expected to continue in the second quarter and onward?

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Unidentified Company Representative, [22]

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[Interpreted] That’s correct.

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Shinichiro Muraoka, Morgan Stanley, Research Division - Research Analyst [23]

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[Interpreted] And then what is your take on the drug pricing bill to eliminate the donut hole in the United States?

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Unidentified Company Representative, [24]

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[Interpreted] We do not have information with regard to the impact from the bill on LATUDA, and we do not expect a major impact. Pharmaceutical companies are required to contribute to eliminate the donut hole, and Sunovion's contribution is estimated to be $5 million to $6 million in fiscal year 2019. That is for your information.

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Shinichiro Muraoka, Morgan Stanley, Research Division - Research Analyst [25]

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[Interpreted] Understood. I appreciate if you could give us an update on this matter during the second quarter presentation or afterwards, if there is any update. That's all for me.

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Unidentified Company Representative, [26]

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[Interpreted] Next question is from Mr. Yamaguchi, Citi.

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Hidemaru Yamaguchi, Citigroup Inc, Research Division - MD and Analyst [27]

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[Interpreted] The source of the information is not Sumitomo Dainippon Pharma, but an article, I believe, reported that the company is expected to present the updated mid-term business plan during the financial results presentation for the first quarter if the clinical study for pancratic cancer is terminated. Was it what you planned and announced?

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Unidentified Company Representative, [28]

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[Interpreted] No, it was not what we announced. We did not say that we plan to revisit mid-term business plan.

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Hidemaru Yamaguchi, Citigroup Inc, Research Division - MD and Analyst [29]

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[Interpreted] Understood. Just to clarify, you are saying that the company will take available measures to realize the revenue target in mid- to long run, instead of simply reflecting the potential loss and revising the business plan.

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Unidentified Company Representative, [30]

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[Interpreted] Yes, that is our current policy.

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Hidemaru Yamaguchi, Citigroup Inc, Research Division - MD and Analyst [31]

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[Interpreted] My second question is about proposal to Cynata Therapeutics, which was first announced by Cynata, followed by Sumitomo Dainippon Pharma's press release. Could it be possible for you right now to give us more information as to why you want to acquire Cynata? I know you made the proposal because you want the company, but I was also curious to know why.

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Unidentified Company Representative, [32]

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[Interpreted] This is not the perfect timing to elaborate on a proposal, but we value their excellent technology as well as their achievement in the development and the clinical studies of iPS cell-derived products as the world's pioneer in the field.

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Hidemaru Yamaguchi, Citigroup Inc, Research Division - MD and Analyst [33]

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[Interpreted] My last question is around Equa and EquMet. I understand that the sales forecast of acquiring EquMet is JPY 16 billion. This is a marketing alliance whose profitability tends to be low, but I'd like to clarify that the sales forecast is JPY 16 billion with a profit of just JPY 700 million?

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Unidentified Company Representative, [34]

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[Interpreted] That was not what we intended to present, and our focus of the profit is a little bit higher than JPY 700 million. As we presented in the financial forecast by segment, core segment profit in Japan is estimated to increase by JPY 700 million, which is a combination of incremental revenue from the alliance and additional sales expenses, including incremental headcount of field reps from the previous forecast of SG&A expenses. JPY 50 billion of previous SG&A forecast was based on the plan to reduce the headcount, but we will need more reps for the promotion of acquiring EquMet. Thus, we are forecasting incremental headcount. JPY 700 million is a result of the incremental revenue from an additional headcount for Equa and EquMet.

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Unidentified Company Representative, [35]

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[Interpreted] Next is Mr. Wakao, Mitsubishi UFJ Morgan Stanley.

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Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [36]

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[Interpreted] My first question is about napabucasin. Could you enlighten me as to why the interim analysis results were positive for colorectal cancer to continue the study and not for pancreatic cancer? I have had the impression that the Phase II study for pancreatic cancer was more favorable than the study for colorectal cancer. And are you planning a conference readout of the study, which is to be discontinued for futility? Or are you considering to present the sub-analysis results in the context of positive Stat3 expression.

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Kazuo Koshiya, Sumitomo Dainippon Pharma Co., Ltd. - Senior Executive Officer & Global Head of Oncology [37]

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[Interpreted] I'm Koshiya, and let me answer your questions. As you said, the results of the interim analysis were not exactly what we initially expect it to be. The analysis of the data from the study for pancreatic cancer has not been completed yet at the moment. So we do not know why it met the prespecified criteria for futility. We will carry out detailed analysis, including some analysis to find out why.

I believe that the data will be presented at the conference or else when it is appropriate. But given 303C Phase III study, which is ongoing, we are not pressed to prepare a readout of the discontinued 111P study.

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Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [38]

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[Interpreted] Understood. I'd also like to know if there will be any change to the company's direction in oncology.

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Unidentified Company Representative, [39]

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[Interpreted] at the moment, I do not expect the company to go after oncology assets to cover the gap and enhance oncology pipeline when you exercise mergers and acquisitions in the future. Instead, as we presented in mid-term business plan, I assume that the company would pursue assets in psychiatry and neurology.

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Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [40]

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[Interpreted] Is it a safe assumption?

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Unidentified Company Representative, [41]

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[Interpreted] It is not always the case because we do not have any intention to defocus on oncology. We will pursue in-licensing as long as there are assets with high potential in any scenario. Of course, we will remain our focus on other focus areas that are psychiatry and neurology and regenerative medicine and cell therapy.

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Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [42]

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[Interpreted] My next question is around SB623. I know that the future course of direction and development plan will be finalized and disclosed, but what about data? Do you plan to disclose it as well? And if you do, when do you plan to do so? Will it be together with the revised development plan or at a conference?

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Unidentified Company Representative, [43]

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[Interpreted] [Kozaki] will answer.

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Unidentified Company Representative, [44]

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[Interpreted] It is not certain yet how the results of the data analysis become available and plan for disclosure should be finalized after discussion with SanBio. Therefore, we are not able to answer your question at this very moment.

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Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [45]

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[Interpreted] Understood. That is to say, I believe that any scenario would be possible for both of the development plan and data disclosure?

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Unidentified Company Representative, [46]

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[Interpreted] That is up to the discussion with SanBio.

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Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [47]

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[Interpreted] Understood. My last question is about the JPY 1.2 billion upward revision of the SG&A forecast in North America. Could you give us the breakdown?

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Unidentified Company Representative, [48]

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[Interpreted] Nothing outstanding, but it's an accumulation of small items. Upward revision was made based on the progress in the first quarter, and we will continue to watch the progress and revise the forecast accordingly.

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Seiji Wakao, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Senior Analyst [49]

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[Interpreted] Does this JPY 1.2 billion increase include the additional DTC investment for LATUDA?

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Unidentified Company Representative, [50]

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[Interpreted] No, the investment for LATUDA is in line with the previous fiscal year and the previous forecast.

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Unidentified Company Representative, [51]

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[Interpreted] Next question is from Mr. Sakai, Crédit Suisse.

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Fumiyoshi Sakai, Crédit Suisse AG, Research Division - Research Analyst [52]

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[Interpreted] My first question is about Imeglimin. TIMES 2 study is currently ongoing, and the positive results for TIMES 1 was press released. When do you expect to obtain the results from TIMES 2 study, which I believe is a study of insulin combination therapy.

In relation to this, what would be the company's policy in diabetes therapy? As you launch, Equa and EquMet alliance, we can assume that the company is aiming to refocus on the area in Japan, but there is no asset except in agreement. Are you aiming to sharpen your focus in the area, mainly in Japan, by enhancing the pipeline through in-licensing? Also, what will be the impact from changes in fair value of contingent consideration on Imeglimin's business? How does the payment structure work in the business? Do you pay more when the project becomes successful towards the expected NDA submission in fiscal year 2020?

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Unidentified Company Representative, [53]

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[Interpreted] Fair value of contingent consideration, which is to be paid to former shareholders, does not apply to Imeglimin's business. We only have upfront payment for in-licensing and license fee.

With regard to clinical studies, particularly 3 Phase III studies, we have already announced the results of the study of monotherapy, and we have just presented the study results of insulin combination therapy. And we are expecting to obtain the results from the study that includes combination therapy with hypoglycemic agents. We plan to submit NDA in the next fiscal year based on these results.

With regard to the positioning of diabetes area, as you pointed out, R&D is not active in the area, but commercial activity has been invested as it is one of the focused areas in the field in Japan. We already have a portfolio of promoted products with METGLUCO, Trulicity and SUREPOST, and we will add Equa and EquMet in the portfolio to become the #1 company in the diabetes area.

As you know, we are aiming to achieve JPY 200 billion revenue target in Japan during the next mid-term business plan period. And the business in this therapeutic area is expected to be a driver to achieve that goal. We plan to pursue appropriate opportunities to in-license assets moving forward.

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Fumiyoshi Sakai, Crédit Suisse AG, Research Division - Research Analyst [54]

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[Interpreted] Understood. One more question, which is about LATUDA in Japan. What is the current status of development? Why I am asking this is that there was a meeting of the Japanese Society of Psychiatry and Neurology in June, where so many data were presented to discuss the treatment of bipolar disorder with antipsychotics in Japan. This kind of conference presentation look, to me, very valuable for LATUDA. Could you share with us your take on it?

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Unidentified Company Representative, [55]

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[Interpreted] As for the development status, we are aiming for NDA submission for schizophrenia and bipolar depression in the first half of this fiscal year, with a launch target in fiscal year 2020. Okay. The conference presentation was titled [WFSBP], if I remember correctly.

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Fumiyoshi Sakai, Crédit Suisse AG, Research Division - Research Analyst [56]

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[Interpreted] Was it a meeting of a Japanese Society of Psychiatry?

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Unidentified Company Representative, [57]

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[Interpreted] Yes, it was.

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Fumiyoshi Sakai, Crédit Suisse AG, Research Division - Research Analyst [58]

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[Interpreted] That is why we can discuss this again in the future opportunity if you don't have the information right now.

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Unidentified Company Representative, [59]

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[Interpreted] Next question is from, once again, Mr. Yamaguchi.

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Hidemaru Yamaguchi, Citigroup Inc, Research Division - MD and Analyst [60]

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[Interpreted] I'd like to know more about LONASEN transdermal patch formulation. This is a good timing to launch a new formulation to account for generics of LONASEN, which were launched in Japan. Help me to review your forecast because I was wondering if you have disclosed your estimate on the uptake of the product. Transdermal patch formulation is very unique in psychiatry, and compliance could be low if we consider a risk of the patch being removed by patients from the skin.

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Unidentified Company Representative, [61]

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[Interpreted] Are you looking for sales forecast?

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Hidemaru Yamaguchi, Citigroup Inc, Research Division - MD and Analyst [62]

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[Interpreted] Yes, if there is any.

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Unidentified Company Representative, [63]

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[Interpreted] Estimated sales is around JPY 10 billion to JPY 50 billion, which is medium in size for the company. This is the projected range of peak sales.

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Hidemaru Yamaguchi, Citigroup Inc, Research Division - MD and Analyst [64]

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[Interpreted] Is it higher than the sales from the existing formulations of LONASEN ?

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Unidentified Company Representative, [65]

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[Interpreted] That is what we are aiming to achieve.

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Unidentified Company Representative, [66]

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[Interpreted] Next question is from Mr. Nakazawa, SMBC Nikko Securities.

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Yasuhiro Nakazawa, SMBC Nikko Securities Inc., Research Division - Senior Analyst [67]

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[Interpreted] I have one around SEP-856. Thank you very much for sharing the design of the study. Daily dose is 50 milligram and 75 milligram for one study, and is it 75 milligram and 100 milligram for the second study?

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Unidentified Company Representative, [68]

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[Interpreted] You can find the daily dose on Page 12, and it is 75 milligram and 100 milligram for the second one.

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Yasuhiro Nakazawa, SMBC Nikko Securities Inc., Research Division - Senior Analyst [69]

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[Interpreted] If I remember correctly, pivotal studies for LATUDA or Abilify had more dose investments. Are 2 regimens sufficient for a pivotal study and for the company to submit NDA for 856 for schizophrenia?

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Unidentified Company Representative, [70]

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[Interpreted] Yes, we believe it is. We have consulted with FDA on this matter. Phase II study was also recognized as a pivotal study. So as long as we are successful in at least 1 of these 2 Phase III studies, we are good to submit NDA.

Thank you. We'd like to conclude Q&A, and that is the end of the conference call.

[Portions of this transcript that are marked Interpreted were spoken by an interpreter present on the live call.]