Ajinomoto Co., Inc. (2802) Earnings Call Transcript & Summary

Good morning, everyone. Thank you very much for taking your precious time to attend Ajinomoto Company's business briefing session. We thank you very much indeed. I am the emcee. My name is Kaji from the IR group. First of all, I would like to introduce the participants from Ajinomoto. We have the Member of the Board, Representative Executive Officer, President and CEO, Mr. Fujie; Member of the Board, Representative Executive Officer, Executive Vice President, Mr. Shiragami; Executive Officer, Senior Vice President, General Manager of Food Product Division, Mr. Masai; Executive Officer, Vice President and General Manager of AminoScience Division, Mr. Maeda; Executive Officer, In charge of Finance and Investor Relations, Mr. Nakano; and General Manager of Bio-Pharma Services Department, Mr. Otake. So 6 members altogether. Today's session, we expect to finish in about 2 hours. First of all, there will be a 1-hour presentation from the company, followed by a Q&A session. Please be advised that the materials to be used for today's meeting is made available on Ajinomoto's homepage IR section. Please take a look at it as adequate. Please be advised that this session will be recorded all the way to the Q&A session, which will later be posted on the company's IR site. So please be advised of that. So without further ado, we would like to begin the meeting immediately. Mr. Fujie, the floor is yours.

Good morning, ladies and gentlemen. My name is Fujie from Ajinomoto. Well, thank you very much for taking your precious time out of your busy schedule to attend this briefing. I was very much looking forward to today's briefing session. The 2022 business briefing is today's meeting, so the new executive structure that was started from April, and I will talk about the ASV management evolution, the current state and also the future plans going forward. Those are the topics that I would like to cover today. So we look forward to today's session. Now on the next page, these are today's message that I would like to convey during today's business briefing. I think this is self-explanatory because now that we have a new management structure, I would like to talk about the 4 points towards the evolution of ASV management. Effective April 1, we have implemented a 100-day plan. And as a result of that, we have speeded up our execution. And in the first quarter, we were able to achieve an increase year-on-year in both profits and revenue. So we were able to achieve this record results. And going forward, we will formulate the 2030 road map for medium-term index-based management so that we can continually and dramatically increase our corporate value. So in the last 100 days, the new management structure, we were able to steadily achieve a gear change, if you will. Then the second point towards our sustainable growth of business, we will address business model transformation, so I will talk about this as well. And also, the -- through the integration of food and AminoScience, which is one of the strengths of Ajinomoto Group, I will talk about how we have made -- achieved this integration and what are the plans for the future. And also the fourth point, I would like to talk about the next-generation growth driver. Actually, the Bio-Pharma services is positioned to be the growth driver and especially the technologies that we have cultivated with the CDMO business together with its customer base will be combined together with the proprietary manufacturing technologies as well as solutions capability so that we can contribute to boosting further growth. So those are the 4 points that I would like to cover today. And I, myself, will talk about these 3 points, as you see here. So this is the vision of Ajinomoto Group. We aim we -- what we aspire to be, the red point -- red section in the middle. We would like to contribute to greater awareness for people worldwide, unlocking the power of amino acids to resolve the food and health-related issues associated with dietary habits. In fact, we would like to reduce the environmental impact by 50%. And also, we would like to extend the healthy life expectancy of 1 billion people. The next page, from -- with the new management structure in place from April 1, there are things that we will like to carry over, carry forward from the former team, which is about purpose, passion and operational excellence. The first is the purpose, unlocking the power of amino acid to resolve the food and issues; secondly, the passion; and also operational excellence. So we would like to work on these 3 points in a steadfast and thorough fashion. Next page, please. And these are the things that we will like to further evolve in the future, which is about speed up and scale up. We will work on -- we have been working on both ends. Now towards speed up and scale up, from April 1, we have implemented the actual plan -- action plan for the 100 days starting from April 1. So on the left-hand side, there are things that directly connected to ASV outcomes, the 4 points there. And also, on the right-hand side, there are functional things that accelerate and support the pursuit of ASV, which are written in the right-hand circle and the time frame for realizing this plan. Actually, there are 3 major ideas. There are things that produce results within 100 days; secondly, creating road map in 100 days; and third, identifying issues in 100 days. So those are the approach to the time frame. So the summary of the 100-day plan is provided here. As you can see here, we believe we have successfully been able to achieve a gear change in a steadfast fashion aimed at speeding up our management. And as you can see, number one and two, purpose, passion and operational excellence and also speed up and scale up is something that we have addressed over the last 100 days. And the third point, the sustained growth of corporate value. There are 3 points under this. One is that steady promotion of organic growth. We are going to pursue steadfast promotion of organic growth and also, at the same time, strengthen efficient management. Secondly, the thorough visualization of -- through data and rearrangement of evolution of business portfolio and thereby, looking at the changes in consumers' behavior, we will rearrange and evolve our business portfolio. Number three, through innovation, in the 4 growth areas, driven by business model transformation, we will further achieve growth and improve the profitability so that we can drive the overall growth of the company. And number four, continued strengthening of sustainable management foundation and organizational structure and operations to continue providing value to the future. And number five, we will connect the impact of COVID-19 and the Ukraine situation and lead it to revamping the company. So that's a summary of the last 100 days. And through this 100-day plan, we'd like to evolve ASV management under these scenarios. This slide shows the scenario. Well, Purpose and x Passion and OE as well as Speed Up and Scale Up, those will be the basis to strengthen health care, food & wellness, ICT and green areas. Those are the core growth areas to drive growth. In addition, we'd like to propel our organic growth as well. In order to do that, business portfolio needs to be reconstructed further. And it is a trust by management cycle evolution as well as intangible assets strengthening, including marketing advancing, brand strategies and others as well as midterm index-based management and business division collaboration as well as intangible asset enhancements. Through these activities, we'd like to involve the stakeholders who share our purpose, including investors as well as Sustainability Advisory Board, those incorporate materiality perspective and that we value. And also, we set up Value Creation Advisory Board and incorporate their innovative perspectives as well. Next slide, please. This shows our first quarter results for fiscal 2022. Amid global environmental changes, by responding to this changing environment, we were able to take swift actions and this raised our ability to respond, then that's why we made a strong start, resulting in a revenue increase as well as profit increase. And since the adoption of IFRS in 2016, the record was the highest quarterly results. So this was a very good start for the year. However, going forward, we need to closely monitor the impact of Ukraine and lead to the level of -- or reach the level of fiscal remodelings. Next slide, please. This shows in order to continuously improve our corporate value, we need to strengthen our management capability. In order to do that, we adopt or introduce rolling forecast. We are going to roll -- introduce rolling forecast. In ASEAN and Brazil, monthly visualization involving rolling forecast is introduced -- has been introduced on a trial basis. But the point is that we need to make sure that we grasp the current state of affairs and then enhance our capability to foresee to detect early signs so that frontline workers, together with the management, can examine and implement necessary measures. These are the key points. In order to do so, visualization through data needs to evolve. And this shows the vision for 2030. This is how we perceive our future in 2030. Currently, business profit base, 2 stars comes from foods. And AminoScience comes from the rest -- constitute the rest of our business. But at least 3% to 5% needs to grow the food business. And AminoScience, based on the current trend, and also seeds that already planted, we can achieve double-digit growth -- continue achieving double-digit growth in AminoScience. So by 2030, both AminoScience as well as food products will become a 50-50 in terms of our united entity. So by unleashing the power of our amino acid, we can provide more solutions to solve food and health-related issues so that we can continue enhancing corporate value, and we will be such a unique entity by then. This is how we perceive our future, and we are making a business planning to achieve this. To be more specific, on March 1, we will announce the next detailed index-based plan in greater detail, and we are making preparations towards that announcement. Next slide, please. In order to raise corporate value, intangible assets need to be our focus because they are the source of corporate value. And we are to strengthen our intangible assets, including talent, technology, customer and organization. Those will be enriched further. Next slide, please. To encapsulate, under the new management system in order to -- or by evolving ASV management, we are to realize sustainable and exponential corporate value enhancement. To do so, we are to formulate midterm index-based management, which is the 2030 road map by changing gears and making a jump start, and we'd like to ensure that we will formulate the next 2030 road map. And we like to solicit your continued support. That concludes my session. Thank you very much.

Fujie-san, thank you very much. Now we would like to move on to the presentation by Mr. Shiragami.

Hello. I am Shiragami, Executive Vice President. I would like to talk as Chief Innovation Officer. I'm responsible for business model transformation and the growth strategy towards 2030, so I would like to talk about this topic. These are the things that I would like to cover today. First of all, I would like to explain the overview of the BMX business model transformation in 2030 and also beyond that in 2050 in order for us to achieve continuous growth. The Ajinomoto Group has developed a 3-level growth strategy. The foundation is the steadfast growth of the core businesses. Through more selection and concentration, we would like to strengthen organic growth. The BMX that I would like to cover today is represented in the red box there. From -- Towards 2030, these are the areas that will drive our growth. We will leverage our strength, and we have identified 4 growth areas where we can make contribution and through the integration of food and AminoScience, we would like to drive the growth. Further, beyond 2030, we will continue to create next-generation businesses. So we would like to lay the stepping stones towards the future. So through this 3-level growth strategy, we will achieve corporate value expansion and achieve sustained growth of the total group. The next page. For business model transformation BMX, this is about transitioning from the existing business model centered on products to digital sustainability. Through these changes, we will further evolve the existing businesses at the same time towards the society that we aspire to realize. We would like to backcast from the outcomes, designing from what we would like to achieve our solutions, and therefore, make a business transformation to a market and consumer-centered solutions business. Of course, this is the strength of Ajinomoto, and we will work together with the human resources who have shared the same purpose. And through open innovation, we would like to work for the social value creation and also deleveraging our intangible assets and take advantage of this and realize BMX. Next page. And also in the 100-day plan towards 2030, we have identified 4 BMX areas where we can leverage Ajinomoto Group's strength. Beyond 2030, the earth environment, social system and the consumers, POF -- those are defined as picture of the future POF, and we have sorted out all the serious needs. And then from based on that, we have developed the values that we wanted to create and provide. So based on these outcomes, we have set health care, food & wellness, ICT and green as the 4 growth areas of the company. Health care and ICT, of course, will be covered later by -- as part of the amino acid business transformation, and this will be further accelerated because these are already delivering results. In the food business, data and personalization through this DX, we would like to further evolve the food business and growth strategy for sustainability. And also through the integration of food and AminoScience, food & wellness area and also the green areas, we would like to drive growth for the company. So for the core 6 businesses, as you can see on the left-hand side, based on the current structure, we are working on this -- in this vertical function. But on top of this, with the BMX for a transverse structure, we would like to -- based on the outcome and myself and the 2 business heads will work together, and so that we will have a dedicated person as well as for the business units so that we can achieve a transverse organization structure to promote midterm, short-term and long-term growth. This matrix organization is already implemented in DX promotion. So this is already a standard approach for the company. And also towards the creation of social value, we will drive open innovation and work together with various ecosystems together with start-ups in some various companies. And by stakeholder -- working together with stakeholder for co-creation, we would like to expand the growth of the company. From here, I would like to talk about the growth strategy for health care and ICT, especially focusing on the sustainable food business. So for health care and also ICT growth strategy, let me talk about this. As it was mentioned by Mr. Fujie's presentation, towards 2030, we have developed a growth strategy for 2030. And in the AminoScience business, we will aim to achieve a CAGR of over 10%, a 2-digit growth. In the AminoScience business, over the last 10 years, we have implemented business model transformation. We have captured the changes of society and made a selection to concentration to highly value-added businesses. And also overseeing the next 10 to 5 years, we have made R&D investment heavily in the growth areas. We made that transition. And in the health care and ICT, we have achieved a 17% growth as of 2011. We will continue heavy and prioritized investment in these growth areas so that we can maintain this high growth rate going forward. The next page. The last 10 years of growth was driven by the electronic materials business and health care business because we were able to offer high value-added services and service that has a high entry barrier. So we formulated this model. This model -- in this model, we foresee the innovation that will create a new market and conceive a business that could capture the value chain of the industries that will be created. So by foreseeing the winning pattern in this stage, we co-create together partners and build the building blocks of the company and move on to next stage. Then after that, when the value chain is socially implemented, we will scale up the business through the ecosystem and realize ASV. So by evolving these formats going forward, we would like to further accelerate the growth of the company and also apply the standard approach to the total BMX of the company. In the health care and ICT area, in addition to the growth of the existing business, after 2022 -- 2020, through BMX, the business contribution as newly, we believe we shall be able to achieve an incremental sales revenues of JPY 80 billion by 2025 and JPY 120 billion by 2030. And in terms of business profit, we achieve -- we expect to achieve incremental JPY 50 billion in business profit by 2030. The health care area BMX comprises CDMO business, cell culture media as well as cellular and genetic solutions as well as medical food business. Through this business, we would like to drive growth. Later, Mr. Otake, Head of the Bio-Pharma Service division, will talk about the oligonucleotide business as well as the CDMO business in more detail. In the ICT area, for the existing semiconductor packages, we will support high frequency and implement higher performance implementation. And also to expand the applications, we would like to enter the encapsulating material and magnetic material business and also participating in the IOWN consortium so that we can further accelerate the growth. The business development and technical development for ICT and health care areas, there has a time lag of 5 to 10 years. So therefore, we believe we have a well position to achieve growth by 2025. From here, I'd like to talk about the growth strategy for the green area. So one of the future pillars that we aspire to establish is the sustainable food business. So I would like to talk about this food -- sustainable food business in the future. In line with the growth of revenues and population of the world, the meat demand is also expected to heighten in the future. According to the Agriculture & Livestock Industries Corporation's projection, the food consumption by 2050 is expected to increase by 1.5x compared to the current level, which will also induce an increase in the meat protein market, which is estimated to be JPY 3.6 trillion by 2040. And according to A.T. Kearney's projection, 60% of the food meat market is expected to be replaced by alternative meat or cultivated meat. Here, it shows the change of consumer surveys results for sustainable food. In the world, there are people -- increasing number of people who are selecting sustainable food despite the higher prices, and this shows people's mindset and the behavior changes vis-a-vis the keyword of sustainability. So in light of these changes in market and also consumer's awareness, we, as a group, have took an earth perspective and in order to contribute to the food and health of people and also to solve the protein prices and the food supply issues through our business. Of course, food is a very important element in order for people to exert their individuality and diversity is expanding, especially from the viewpoint of alleviating the environmental burden, a more advanced solution is needed for food. So the food ingredient development, sustainable food system for lower environmental burden, sustainability-related initiatives will have to be rolled out under the understanding of the different food culture so that we can achieve affluent lifestyles that are delicious and healthy for everyone. So we will work together with innovators of the world and transcending the different categories of B2C ingredients and B2B and generate lifestyle solutions that can allow people to express their individuality through our environmental solutions. For our business strategy, because we already have a foundation in the United States, so we will use B2B as the central activity because U.S. is a market where alternative food demand is quite advanced. In the Americas, we will have already established a strengthened lineup for the plant-based solutions. Through the provision of seasonings and also for the ingredient textures, we have already established a business size of $10 million. So this will be the core, and we will add more resources in the future and work together with various companies and standardize the solution and thereby expand the business size as quickly as possible. The second strategy is the conversion between food and AminoScience and thereby established strengthened solutions. In the alternative food market, the plant-based protein is already an established market and also in the cultivated meat market where growth is expected in the future and also air protein, which is expected to be environment friendly. In this market, we have various solutions. So we have unique solutions that are only available with Ajinomoto. So by combining our technologies such as cultivated media, we shall be able to achieve deliciousness and enhanced health and nutrition value and, of course, develop a safe and social -- highly socially viable solutions that are offering better value for the product. In the green -- sustainable food business, we are developing ecosystem to various innovations. And in March of this year, we have made an investment in the company called SuperMeat. On top of the cultivated meat and technology and platform owned by SuperMeat and combining it with our own technology, we will be able to roll out the new delicious and very nutritious cultivated meat to the market. And also based on the different food culture of each region, we will roll out delicious and nutritious and healthy menus and products. So we have decided to establish a food -- sustainable food labs in each region. And of course, at the headquarters, we will establish sustainable food promotion department. The potential offered by food and science is so large. So by establishing a business model that is not just a one-off thing, we would like to achieve growth for the company. That was all for myself regarding the growth strategy through BMX, and I'll also talk about the details of the sustainable food business. Thank you very much for your attention.

Next presenter, we'd like to invite Masai-san as well as Maeda-san.

Ladies and gentlemen, this is Masai speaking, the General Manager of Food Products division, and I'll be the first speaker. Maeda-san, who is well versed in food is heading the AminoScience and myself, who is well versed in AminoScience, is now taking responsibility of looking after the food products, and we'd like to mutually grow the businesses. This is a repetition of the previous slide, so I'm going to skip. Today, I'd like to focus on the B2B aspect of our business. We are a unique food company in a sense that 32% of our -- or more than 30% of JPY 1 trillion sales is generated by B2B business. In 2021, B2B accounted for 32% of our total sales, and the breakdown is shown on the right-hand side. AminoScience as well as food are 60 to 40. Globally speaking, we have a direct sales network to sell our products to the world's leading food companies as well as pharmaceutical companies and cosmetics companies and semiconductor-related companies. And approximately 400 companies have purchased over JPY 100 million. Among them, 50 companies have purchased over JPY 1 billion from us. Next slide, please. And what products we are selling. I'm sure you're well familiar with this. But starting with AminoScience, we provide electronics and amino acid-related materials, Bio-Pharma service-related products. Under food products, solution and ingredients products as well as flavors as well as sweetener products are provided. Next slide, please. This shows B2B or BP -- as well as BP margin ratio. We are strong because we sell materials and ingredients, and that is why we are able to grow the portion of B2B. Amid rising material and fuel prices since the Ukrainian crisis, the B2B is performing well because we provide key materials and ingredients. Next slide, please. This shows how we are generating synergies, especially focusing on the intangible assets. At the bottom half indicates, talent as well as customer and technology assets will be integrated globally in order to provide values to customers. And then in AminoScience, electronics, high-speed development as well as the collaboration with pharmaceutical companies as well as in food science -- food products, value chain will be our partner to work with and also co-create values with start-up companies and others. Next slide, please. This shows the technological aspects as to how we can contribute to the food by fusing or integrating these 2 entities. On the right-hand side, the deliciousness technology -- on the left-hand side, excuse me. Amino acid alone can be -- can represent the deliciousness business technology. Speaking of the senses, there is taste as well as smell and texture. And starting with the sense of smell -- excuse me, taste. This is well known for Umami seasonings, Kokumi and low salt as well as high-intensity sweeteners. Those are contributing to the deliciousness technologies. As for the olfactory-related products, we haven't touted our related products. However, amino acid technology is mostly reflected in various products. By applying pressure on protein, then there is the reaction called [indiscernible] reaction and pertaining -- utilizing this, direct flavors are generated. So incorporating amino acid technologies, we are contributing to the tastiness or deliciousness of foods. And regarding texture, in order to improve texture or softening meat, we have technologies to achieve this. By clarifying those technologies, we'd like to emphasize this in our marketing aspects as well. One -- the other aspect is nutrition. By applying our knowledge accumulated with animal nutrition, going forward, alternative meat is going to be a strong focus. Plant-based protein, plant protein lack certain amino acids. And by supplying those deficiencies through a process called fortification, we can contribute technology-wise. Next slide, please. Starting from here, we'd like to touch -- switch to Maeda-san. The floor is yours.

Thank you very much, Masai-san. So this is Maeda speaking. Let me provide you some certain ideas and applications to introduce as a topic of the integration of food products and AminoScience. Currently in multiple businesses, we grasped wants and needs of customers to provide products and services. In food service, we provide not only seasonings in foods but also provide recipes in how to cook. In AminoScience, we provide supplements in aminoVITAL as you are all aware, but we also utilize our technology such as AminoIndex to determine the risk of developing certain risks or certain diseases. However, traditionally, each business unit has been working in silo exploring the best approach to each customer separately. Next slide, please. Going forward, with the society becoming -- facing larger issues on social issues, this is just 1 example. For example, dementia is one case. And this will have a very big burden, not only for the patient itself and also for the people taking care the family members, for example, and that will have also an economic burden on them. So in order to reduce the risk of dementia, it is not very difficult. Adequate and right level of exercise is considered to be effective and also well-balanced, nutritious intake, including protein is going to be very effective. So it's not about solving a problem by taking a relatively expensive supplement. It's not going to prevent that. So we believe if we can transcend the boundaries of business, and there is a good potential that we can support and provide solutions to these people who are concerned about dementia. So this offers a great opportunity. So supporting economic dietary menus and providing adequate initiatives and providing support for exercise and providing risk assessment once a year through AminoIndex. And as needed, we can also provide supplements if need be. So this is just 1 example. So in this way, for certain issues and for some certain problems, how to provide our resources and utilize our intangible assets so that we can provide value to society, so that's 1 output for that we should study as the integration of food and amino acids. So the next page, please. So this has already started, which is about the integration of food, amino acid and delivering results already. So this is something that we have not introduced this to you in any significant manner, but this is a business relating to our medical food business. For certain diseases, if there are any abnormalities for metabolization and also for digestion and absorption, for these people, they cannot maintain their health. So for those people, they prescribe and give guidance. And so this stands in the middle between food and medical products. So our company has been providing the raw material amino acids for these needs. But in 2017, we acquired a company Cambrooke in the United States. And thereafter, we made a foray into the U.S. in a full-scale manner. The next page, the medical food business has a very big total size of about JPY 2 trillion on a global scale. And going forward, this is expected to achieve a stable growth of 5% to 6% per annum. So why this will grow? Because the whole society is aging, lifestyle diseases are increasing and also because of the development of medical treatments. More advanced medical food will become available. So therefore, we believe this market will continue to enjoy stable growth to become a very important element of our business in the future. Overall, JPY 2 trillion is a very large medical food market, but it doesn't mean that we are going to address everything. We have a clear focus in our business activities. Cambrooke -- Ajinomoto Cambrooke is focusing on the amino acid-related metabolic disorders, epileptic fits and hyponutrition and protein allergy. So as you can see here, the diseases are directly related to proteins or based on the amino acid, which is the source of protein. So those are the causes of the diseases. So just by removing certain types of amino acids or making different combinations will be needed. So Ajinomoto Group is well versed in the functions of amino acids, so that's the reason why we are able to provide good quality products and assure good outcomes because medical food is, of course, positioned as one of the food. But usually, life sustenance is given priority. So the existing products are not really tasty. But in the case of Ajinomoto, we can take advantage of our deliciousness technology so that we can improve the taste of the product itself. So we are achieving both deliciousness as well as high functions. That's the reason why we are receiving great reviews from customers. So in those areas where we made an entry, we are actually outpacing the competitors and achieving high growth in our market share. Actually, after the acquisition of Cambrooke, we have also acquired a new company based in Ireland called Nualtra in 2020. So most of these 2 M&A cases as good news. They believe that they were purchased by the best owner. So in a very short period of time, we strengthened our unity and worked together as a group company and delivering results to the society. Next page, please. This is the last page for myself, medical food business. This is an area where we can exert our strength both in terms of functions as well as deliciousness, and we are focusing clearly on these opportunities. Therefore, the business size is still very limited at this stage. However, we have confidence that this is an area where we can leverage our deliciousness as well as our technology. And also, we have a very strong access to the channel and patients through our group companies such as Cambrooke. So we believe this is an area that can enjoy continuous strong growth in the future. And that's the reason why I wanted to introduce this company to you. Just briefly, that's all for myself and that is it. I would like to give back the microphone to Masai-san to summarize this part.

Okay. Once again, I would like to just introduce 1 last page please. Through the collaboration of amino acids and food, what are we doing in each area? Actually, if you look at the bottom right, Japan, Southeast Asia and Latin America, in these areas, the deliciousness technology is well deeply rooted and making contributions to people's daily activities. Using our food platform, we are going to strengthen the AminoScience business in the future. When it comes to North America and Western markets such as Europe, the AminoScience business has been the centerpiece. Already the frozen food business is already there established. And of course, we are working on various fronts in European markets. So we will utilize the AminoScience platform so that we can strengthen the food offerings in the future. And for the bottom left, East Asia. In this area, the deliciousness technologies were proven to be functional here. And -- but of course, we have various production sites as well as sales sites in East Asia. So for each market, through the collaboration between food and amino acids, we would like to roll out new businesses and expect for high expansion there. That's all for myself, Masai-san and Maeda for the integration of food and AminoScience business.

Thank you very much, Masai-san and Maeda-san. Next, Otake-san, please.

This is Otake speaking. I'm the General Manager of Bio-Pharma Service department. Next slide, please. This is the agenda for today's presentation. First, I will give you an overview of our Bio-Pharma Service business, followed by an introduction of our oligonucleotide contract manufacturing service, which is the main focus of today's talk. And finally, I will introduce other initiatives for new value creation. Next slide, please. Let me begin with an overview of the Bio-Pharma Service business. This shows a mission and vision of Ajinomoto Bio-Pharma Service. Our mission has that we help to improve the health of humankind. Our vision is to be a leading and trusted and innovative partner to all our stakeholders. The value of our business is to continue to create ASV through our unique business by maximizing the group's tangible and intangible assets. The word unique or proprietary holds a key to differentiate ourselves from other companies. Next slide, please. This map shows our Bio-Pharma Service global sites. In Japan, there are 4 locations, including the headquarters. Starting with Kawasaki plant, is an R&D center for creating new technological values. Tokai plant is the main manufacturing base for oligonucleotide using AJIPHASE. And GeneDesign in Osaka, which is a CDMO specializing in oligonucleotide. In Europe, in Belgium, we have Ajinomoto OmniChem, which is the largest base for Ajinomoto Bio-Pharma Service. Although its main business is small molecule contract manufacturing, but it is enhancing its uniqueness as a manufacturing base for flow chemistry and more recently, AJIPHASE. In India, we have Ajinomoto Bio-Pharma Service India as a wholly-owned subsidiary of Ajinomoto OmniChem. This company mainly deals with small molecule contract manufacturing. In addition, Ajinomoto Althea is located in the U.S., San Diego and is capable of providing aseptic liquid formulation as well as manufacturing large molecule API. Next slide, please. The middle bar indicates the evolution of our CDMO business. With the acquisition of OmniChem in 1989, we entered the CDMO business with 2 bases, 1 in the Tokai and the other in Belgium. After a period of stagnation, with the support of management, we established a manufacturing base in India in 2011 and entered biologics in 2013 with the acquisition of Althea in the U.S. In 2016, we acquired GeneDesign to strengthen our nucleotide drug structure. This way, now we can handle various modalities encompassing small to medium to large molecules. And also, we are capable of aseptic liquid formulation. Until 2020, each company has grown its business under separate and individual strategies. But in 2020, we united as 1 brand of Ajinomoto Bio-Pharma Service, creating synergies between each site. And we are also optimizing the production capability as well. Based on or -- utilizing these tangible assets as well as intangible assets such as technology going forward, we'd like to strengthen and add value to our businesses in order to accelerate growth. Next slide, please. From now on, I'd like to introduce oligonucleotide contract manufacturing service, which is significantly growing lately. Next slide, please. In 2016, we acquired GeneDesign as part of Ajinomoto Bio-Pharma Service. Starting from there, our business plan is to triple our business by fiscal 2030. To do so or for that, oligonucleotide contract manufacturing service will be the main driver of growth, which is based on AJIPHASE. We entered the business in 2012. And with the acquisition of GeneDesign in 2016, we strengthened our capability. And more recently, we acquired multiple pipelines based on AJIPHASE significantly growing. Originally, AJIPHASE was originally developed as a peptide synthesis technology. But we realized that it could be diverted to oligonucleotide production technology, so we decided to develop the business. Going forward, we will optimize the global structure. And by 2017, we'd like to grow our capabilities 6x by 2016 compared to 2011 and also improve the current technological skills and then cultivate new customers as 1 united entity to accelerate future further growth. And then by 2030, we'd like to grow the sales of business to more than 20x the 2016 level to be the next growth driver for the entire Ajinomoto Group. Because this touches upon or joining to customer information, we must refrain from disclosing further details. But based on the current pipeline, development stage and risks and other factors, we think this is a very realistic goal, and this is our minimum target. Here, I'd like to explain the characteristics of nucleic acid-based drugs whose active ingredients are oligonucleotides. Nucleic acid-based drugs combine the advantages of both mainstream small molecule drugs and large molecule drugs in terms of both ease of synthesis and drug efficiency -- drug efficacy, excuse me. So following antibody drugs, this is drawing attention as a new modality. In the bottom half shows the recent pipeline. Oligonucleotide drugs have been approved one after another, and the ones in the development pipeline are also significantly increasing. Next slide, please. With the market growth, the oligonucleotide contract manufacturing CDMO is expanding or is expected to grow significantly as well. Currently, Nitto Avecia, U.S. Agilent as well as German BioSpring are the main competitors. Nitto Avecia is the top player in this market with the top share, but we believe that the Ajinomoto's oligonucleotide CDMO business is already in the #2 group in terms of scale together with Agilent and others. To grow further, we need to differentiate us from other companies as well. Next, I will introduce oligonucleotide synthesis method. Oligo-nucleic acids are produced by a method called solid-phase synthesis except for ours. Solid-phase synthesis is characterized by the fact that the reaction can be performed efficiently, reducing the production time. That means the production time is very quick. On the other hand, it requires very expensive -- extensive dedicated equipment and has limited scalability. Therefore, the products and volume per batch is limited to a few kilograms. Other companies have adopted a strategy of spending CapEx to install several lines of large solid-phase synthesizers in order to meet robust demand and achieve scale expansion. On the other hand, AJIPHASE does not require specialized equipment and can use general-purpose reactors normally used for small molecule production. This means that the equipment used for small molecule production can be converted or diverted to value-added oligonucleotide production without large investment. Although AJIPHASE is the world's only practical math synthesis technology. The production time is longer than out of the solid-phase method, making unsuitable for smart -- lot production of wide variety. In other words, in terms of business model as an example, solid-phase manufacturers need 100 projects worth JPY 500 million to achieve JPY 50 billion in sales. While AJIPHASE requires 5 large-scale projects worth JPY 10 billion. That's the perception of our -- difference in terms of business model. The Tokai plant is currently shifting to a value-added business model, whereby it will stop acquiring new small molecule contracts, which have been its mainstay business, and we'll divert the access capacity to AJIPHASE. So this is a switch to a value-added business model. And we are able to differentiate ourselves through mass-scale production based on AJIPHASE, leading to our significant business growth. Next slide, please. This table summarizes the characteristics of solid-phase synthesis and AJIPHASE. You may think that it would be better to develop only AJIPHASE alone because it can differentiate us from other companies. However, as shown in the lower left graph, which indicate the cost by scale, on a small scale, solid-phase synthesis is overwhelmingly superior in terms of speed and cost. But solid-phase has its limit as to scalability and cost reduction. Meanwhile, AJIPHASE, like small molecules, allows reactions to be carried out in large batch or a large reactor, making it possible to manufacture oligonucleotides on a scale exceeding 100-kilogram in a single batch using a 10,000-liter vessel or container. This means that the advantages are generated as the scale increases. Since any item starts on a small scale, we thought that the solid-phase synthesis is necessary to make a solid market entry. This is why we acquired GeneDesign in 2016 to gain access to solid-phase synthesis. Next slide, please. So that means Ajinomoto is the world's only oligonucleotide CDMO that possesses both a solid-phase and liquid-phase synthesis. And we are ready to optimally serve customer needs varying from micrograms to over 100 kilograms. As the last topic, I'd like to introduce other CDMO business initiatives that are unique to our group. Today, I have focused on AJIPHASE so far, which is our legal nucleotide contract manufacturing business. But we are also developing the ones or businesses that follow AJIPHASE. We will create new business centered around protein contract business, CORYNEX, TALAMAX and ADC-related AJICAP, and trying to make sure that these will follow as a second and third AJIPHASE. Furthermore, by establishing mRNA technology based on RNA fermentation technology and gene therapy, we will achieve significant business growth towards 2030 by creating new businesses. Next slide, please. Finally, we will further accelerate our growth by fully utilizing those tangible and intangible assets we have accumulated as a group, especially by strengthening businesses that can differentiate us from our competitors, such as AJIPHASE. Next slide, please. We recently launched a website that introduces Ajinomoto Bio-Pharma Service technology in an easy-to-understand manner. Please have a look. And that concludes my presentation.

Thank you very much, Otake-san. Now we'll begin the Q&A session. [Operator Instructions] The first question came in. This is from Saji-san from Mizuho Securities.

I have 2 questions. One is about the Bio-Pharma Service. On Page 10, there's about $4.5 billion of oligonucleotide drug market, which is about more than JPY 600 billion market according to current currency rate. So if you say you were able to acquire market share comparable to Agilent, so then looking into the future, do you think you are also projecting a similar growth level towards 2030? Is that your projection? And let's say you have a market share of 20% or so, are you expecting higher expansion, further expansion of your market share? So can you just share with us your assumptions for the market projection -- growth projection in the future? What are the assumptions that you have utilized? I just wanted to confirm the medium-term potential of this business? That's my first question. May I continue?

Please continue.

Okay. The second question is about Shiragami-san's presentation, which is about the texture and your strength of Ajinomoto. So this is a question relating to your strength, including the texture of food on Page 7. I think this was mentioned by maybe Maeda-san and Masai-san's presentation, Page 7, about the deliciousness technology. You have provided us a lot of details behind this technology. So -- but texture and flavor technology, I do -- you said that there's a strong need, although you haven't introduced so much details in the past. So the question is, in the market, [indiscernible] included, entailments maybe, I think there are 4 companies that recently reorganization is taking place, the consolidation is taking place. So they are expanding their size, the scale of the business. So as it was mentioned by Mr. Fujie in the beginning, the B2B users, let's say, you have 50 companies that have a size of JPY 1 billion. So for those major users, flavor, the aroma, do they -- are there a heightened demand from them, including raw materials, for example? So your approach to aroma, your flavor, what is your current position? Of course, in the past, I believe you were interested in M&A activities in these fronts. But at this point of time for, you to brush up the deliciousness technology, other than texture, what's the importance of aroma, the flavor? And can you just comment on those points?

Thank you very much for the question. This is Otake speaking to answer the Bio-Pharma section. On Page 10, this is a nucleic acid-based -- excuse me, oligonucleotide drug CDMO. And my topic today was oligonucleotide. However, apart from that, I'm sure you are aware that mRNA is a hot topic because of the pandemic. And also vector is also another type of nucleic acid, and our target is oligonucleotide. And this oligonucleotide alone, we wanted to extract this information alone in order to highlight the market growth. So we encapsulated all aspects of nucleic acid. But speaking of oligonucleotide alone, the market size is around JPY 50 billion to JPY 60 billion. And in 2030, about 1/3 will be oligonucleotide. So JPY 150 billion in absolute terms. That is the size we expect in 2030. And speaking of oligonucleotide contract manufacturing, our growth will be on par with the entire market growth. I hope that answers your question.

So that means that speaking of JPY 50 billion market size, you said that about JPY 10 billion is yourself. And once that market tops JPY 150 billion, so your revenue will top JPY 30 billion. Am I right in thinking that?

Well, to be more specific, well, we cannot actually disclose such specific data for the oligonucleotide contract manufacturing, but that's about the right impression or perception.

And let me deal with the second question. This is Masai speaking. Historically, flavor manufacturers worldwide were important amino acid customers. And they purchased amino acids to manufacture flavors by themselves. Especially in the U.S. U.S. is a big market for aromas or flavors. So the customers tend to purchase -- flavor manufacturer -- tend to purchase from flavor manufacturers. So Ajinomoto is not producing themself flavors by ourselves. But we have established an internal technology to produce the flavor to add to our own products. That is the reaction flavor that is being introduced to B2C products. Did I answer your question?

Yes. So currently, B2B customers, the main users of your company. How relevant are these aroma for those customers? Or is flavor?

Yes. Well, flavor matters to customers, I believe. However, I might repeat myself here, but we are not selling flavors directly to those customers. But amino acid-based flavors are used to produce our own products.

I see. Considering the global trend, the end users are deciding whether they directly purchase, source those materials from the suppliers or from Ajinomoto, but there may be natural-based flavors. Well, the end users may be toiletry manufacturers or other cosmetic companies and aroma or flavors are in great needs. But considering what you have said, you are adding those levers on top of your taste and other products. Is that right?

So that doesn't -- so that means that flavor is not so important. But we call it a deliciousness technology, which needs to satisfy all aspects of taste and smell and texture. Speaking of that, well, smell is only 1 aspect of it, but the smell alone is not independently acting.

Mr. Saji, thank you very much for the question. Now we would like to move on to the next question. This is from Miura-san from Citigroup Securities.

This is Miura san from Citigroup Securities. Actually, the presentation was very positive, although that content was quite difficult for me but it was a very fruitful meeting so far. Now I have a question. The first question is for Mr. Fujie. So you have this fist and you've been [indiscernible] and talked about scale up and speed up on repeated occasions, but when it comes to scale up and speed up in concrete terms, what are you actually aiming to achieve? So can you give us some more concrete strategy examples? So in view of your strategy? If you can give us some concrete example, that will be quite informative for me. And also the other question is about the Bio-Pharma business. This time around, you had very progressive disclosure this time around. So that was quite splendid especially on Slide #9. Regarding the oligonucleotide drugs approval and the certification tests, all these data have been disclosed for the first time this time. So 5 to 16 -- the number of approved drugs, increasing from 5 to 16. To be more specific, in which country, for example, in which region or in which area do they represent or maybe just a category will be fine. So if you just elaborate what kind of drugs in which area have been approved? And also regarding the clinical trials for nucleic acid-based drugs from [ 300 to 700 ] is doubled. So how many of them are at Phase III. Can you just elaborate on those details if that can be done, that would be appreciated?

So Mirua-san, thank you very much for the question. First of all, regarding the speed up initiative, actually, the -- we are trying to expand -- accelerate the speed of execution. So at the executive committee meeting, of course, we have -- we conduct extensive discussion, but we are speeding up the decision-making. So this gear change is already implemented, and I think we are successful in this effort. And so far for the executive committee meeting, the management meeting, the employees of Ajinomoto directors and only the Ajinomoto people consisted of this meeting -- comprised this meeting. But in addition to them, the value creation Advisory Committee was added, so we can incorporate the viewpoints of investors and all the opinions for [ Takeshi Yoshida ] who is very strong at business transformation activities. And in order for us to expand the corporate value, from that viewpoint that we have incorporated [indiscernible] san from Value Create in our team and also, to some extent, brand and corporate brand, product brand, how to evolve these brands. From that perspective, we have also invited [ Nikki ] San from Interbrand to take part in our executive meetings so that not only internal opinions, but also outsiders' perspective can also be incorporated in a discussion relating to the management of the company, and we decide and make decisions and accelerate the speed of our execution. So in that regard, on Page 16, we have given some reference information as to the things that we delivered results in the 100 days. So the major items are listed up here for the management structure and organization structure and operations. In these areas, we believe we were able to deliver firm results. So especially, we are committed to accelerating the speed. And from the top management, we are taking the lead and showing the example. And also, for the scale-up portion, especially today, the Executive Vice President, Mr. Shiragami informed you and talked about business model transformation and the fourth growth area were identified by him. So we are focusing on these 4 areas. And currently, the specific plans and actions for business model transformation in the 4 areas are now being discussed and studied. So we are now trying to develop the standard model to achieve this. So through these initiatives, we would like to expand the scale. And at the same time, the existing business' organic growth will also be addressed in a proper fashion. So in addition to the organic growth of the core business. On top of that, we want to achieve business model transformation, especially in the 4 growth areas, we will inject resources in terms of human resources and monitor resources so that we can properly propel these activities. Thank you very much.

And let me deal with the second question. On the nucleic acid drug. Speaking of what countries have approved recent nucleic acid-based drugs in the U.S. as well as Europe as well as in Japan, those are the major countries where products are being launched. The number of products in the pipeline is also increasing. At this point in time, I don't have the specific data to answer that question. But in Phase III as well as Phase II the increased number of Phase II and III, and there will be more to be launched. I hope that answers your question.

So I have additional questions. I like your instruction Otake san. So these nucleic-based drug, there were 5 in 2016, but the number has risen to 16 in 2022. So it's on a cumulative basis? Yes. Until 2016, there have been 5 being approved. And then after that, from 2016 to 2022, the number has increased by one. I understand -- excuse me, has increased by 11. So what category or therapeutic area are we talking about for these approved drugs? Could you instruct me on these nucleic-based drugs?

Yes. Well, there is a wide-ranging therapeutic areas on a trial basis, but the ones approved are the genetic diseases or hereditary diseases. The advantage of this nucleic acid-based drug is the ones that cannot be targeted by the small molecule such as muscular dystrophies. And that is where our progress is made, especially on the clinical trial front. So speaking of hereditary diseases, I'm very nervous at this health care, but there are multiple hereditary diseases and what specific therapeutic areas can be addressed. In particular, muscular dystrophy is a clear example and also familial high cholesterol.

I understand. And those are already launched?

Yes.

And then in terms of the clinical trials, that has increased to 700 in phase -- well, there is 1/3 is Phase III. No, there isn't such only a few hundred -- excuse me, a few dozen of them. So speaking of absolute value or absolute terms, there's only a few dozen or 20 to 30, which are in Phase III?

Yes. That's right.

And what is the number of clinical trials being applied? Under review, for launch?

I don't have the specific answer to that question. But going forward, we believe that more and more will be approved one after another.

So is the number of products being applied for review or approval, is it greater than 20?

No, it is lower than 20 or 30.

This is Fujie speaking. In terms of the number of drugs being approved, an indication -- indicated as therapeutic area. So let me expand on this. As Otake-san indicated, apart from the ones that indicated by Otake-san, hepatitis B prevention and also acute [ polypealing ] disease. There are multiple diseases, hereditary ones that have indication that these drugs are -- can be indicated for.

The next question. This is from Fujiwara-san, Nomura Securities.

I have 2 questions as well. One is about for the green food, the sustainable food. From before, plant-based food is an area where can you apply amino acid and you talked about the business potential. You've been addressing this for like several years back. And now this time around, you are showing a touching focus on this possibility sustainable food. So the market itself, I think, is growing to a sizable level. So I think the areas where you can support and provide solutions is expanding. So can you just once again elaborate on the business expansion potential for sustainable food? My second question is about relating to CDMO. In your explanation, you talked about the solid phase and also the other synthesis technology. And will that become a de facto substandard in the future? But on the other hand, maybe this -- other companies are also hanging in there for the solid-phase synthesis technology. So you are in the second group and also -- you are in the second level, but the other companies are in the first leading group level. But maybe seismic change may happen in the future, some phase change may happen? Or are there any risks that, that kind of change will never happen. So can you share your viewpoint on that? That's my 2 questions.

All right. So I would like to answer the first question. This is Shiragami here. And Fujiwara-san, thank you very much for the question in the first place. As for the sustainable food among them, the plant-based protein, as it was mentioned by Fujiwara-san. The market itself, as you rightly pointed out, is expanding. That's our recognition as well. And we, too, for this market, currently, the centerpiece of growth is happening in the United States. So U.S. is the driver. So in the United States, as I mentioned during my presentation, amino acids and various other unique solutions that are only available for Ajinomoto, including texture materials as well as seasoning. We are providing all the solution materials. And there, as a result of that, the market size has grown to $10 million already. And of course, without doing anything in addition, I think the market will continue to expand. But furthermore, the [indiscernible] based are not really [ aquatic ] plant-based solutions are provided. Things that are similar to meat that is becoming trendy and becoming a fashion. But we, in addition to the solutions and the deliciousness, we would like to offer nutritious value as well as health value so that we can provide solutions that are requested for a plant-based products so that -- because we believe we can exert our strength in that way even further. So mainly in the United States in this area, we plan to provide those solutions and try to expand our market share as much as possible. And through these solutions, we would like to monopolize the market in certain areas so that we can capture this market as much as possible. So we will work together with other players in ecosystem so that we can expand our initiatives. And other than that, in each region, the plant-based products, the perception and the approach are quite different because there are many different ethical approaches to these food. So depending on the situation and circumstances in each region and market, maybe rather than Japan, Southeast Asia is showing higher amount of awareness to these alternative food, like bio meat is now making a very good success in Singapore, for example. So the demand level will have to be taken into consideration. Based on that, we would like to decide the proper target for the plant-based food in the future. That's our thoughts. Did I answer your question?

Yes. So for plant-based, actually, globally, you are -- there are many companies that are active on a global scale. So are you approaching these companies? What kind of actions are you taking to approach these companies, global players?

Yes, major global players have entered the space through M&A activities, for example. So those are what we are seeing already. So we would like to put our strength at the core, and we -- rather than doing everything ourselves, we would like to align with companies and tie up with them and collaborate with them -- those players who are strong in this field so that we can grow together. That's our strategy.

Regarding the Bio-Pharma Service, I'd like to answer the question. Solid phase versus the liquid phase, whether that will be the standard for companies to achieve both. When I speak with our customers, a solid phase alone is unlikely to source stably therefore, liquid phase such as AJIPHASE is required, that is the feedback we get from our customers, including companies, competitors including pharmaceutical companies, liquid synthesis -- liquid phase synthesis is on the rise. Well, AJIPHASE is only commercialized liquid-phase methods, but we need to maintain our differentiation as well as the competitive edge. In order to do that, we need to improve our own technology. So we have this -- we need to closely monitor the global trend. And speaking of the risks, as Fujiwara san mentioned earlier, Nitto Avecia and others who are liquid phase companies made a significant CapEx to achieve 1 tonne or 2-tonne in terms of production output. That's their level of investment. As their competitor, we see it, as A threat but there is a limit as to what these solid phase can do in terms of the scalability, that is why AJIPHASE, which is capable of mass production will be in greater need as well. That is what we believe.

We'd like to take a question. Next question from Takagi-san, SMBC Nikko Securities.

This is Takagi speaking. I'd like to ask this question Shiragami san. On Page 12, BMX growth driver. Sales target as well as business profit targets are stipulated here. In Business profit 2020 forecast versus 2022 forecast -- '25 forecast, so there is a difference of JPY 30 billion. And this is the accumulation of business profit. Could you be more specific about this? JPY 10 billion comes from CDMO, but what is the breakdown of this business profit? Explaining the discrepancy between the 2 forecasts. That is my first question. And second, this question is for Otake-san. Initially, you disclosed CDMO centered nucleic-based drugs, to what extent the business profit will grow? You mentioned this earlier in the previous briefing session. And in terms of sales growth, from '21 to '23, that's where sales will be accumulated. And sales will be further accelerated in '24 and '25. That was the perception. And could you please update us on this picture? Is it accelerating ahead of the pace? Or is it in line with the plan? And are we expecting a further acceleration in '24 and '25? And what is the perspective for profitability, especially centered around AJIPHASE and TALAMAX and AJICAP. You always mention these 2 in your presentation. But how commercializable are they? What potential do they have? Could you please edify me on these 2 prospects?