Astellas Pharma Inc. (4503) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Yasukawa as a President of Astellas Pharma. Thank you for taking time out of your busy schedule to participate in our first sustainability meeting today. The Slide 2 is the caution statement. As usual, I would like to skip the reading out. Page 3. First, I would like to explain about our vision. Today, there are some participants who are usually not participating in our meetings. There are many such participants. So first, I would like to talk about our vision, that is the upper concept in our corporate strategy, Japan OC -- excuse me, corporate strategic plan, or CSP. On the forefront of the health care change to turn innovative science into value for patients, that is our vision. We have evolved and developed each strategy goals while inheriting the basic strategies in CSP2018 will contribute to the sustainability of society by solving social issues through its business activities by creating innovative pharmaceutical products. In addition, the trust that Astellas earns from society through its business activities improve the sustainability of Astellas. So in CSP2021, on top of the strategic goals 1, 2, 3, we have set a new strategy goals for deepen our engagement and sustainability. In today's meeting, I will explain Astellas' initiatives to engage in sustainability, including the strategic goal 4 and organizational health goals, which I was unable to fully explain in the meeting in May last year. Slide 4. This is the agenda for today. So first of all, I would like to explain Astellas' activities to improve access to health, which we will refer to as improving ATH. Our efforts, as mentioned on Page 6, can be divided into 3 categories. The first is the innovative drug business. In other words, Astellas is working to solve social issues through its business of creating innovative new drugs and delivering them to patients. The second is enhancing the availability of Astellas' products, which is an initiative to improve access to Astellas products for those who cannot receive them through business. The third is to supporting third-party access to health, or ATH, activities. We are working to improve ATH by supporting third parties rather than by ourselves. In addition to these 3, we also provide support through foundations to which Astellas contributes. Through the Astellas' Global Health Foundation, we are working to improve ATH in regions where Astellas does not have any business. In also, Japan, we were the first major Japanese pharmaceutical company to abolish the scholarship donation for research support 2 years ago. This donation system has been existing since the time of the Showa era. But we abolished it. And through the Astellas' Foundation for Research on Metabolic Disorders, we are contributing in the form of research support for young researchers in academia and support for overseas study. In the following, I will use 3 slides to explain initiatives 1, 2, 3, which is shown in red. Astellas has specialized in the innovative drug business since its establishment. We believe that by creating innovative drugs and delivering new products that satisfy unmet medical needs to patients, we can contribute to improve ATH and to solve social issues. Let me explain some specific examples. The left-hand side of the slide shows a number of countries where our innovative launched drugs are sold and the estimated number of patients who have been administered them to date. For example, Prograf. This is a drug that suppresses the rejection caused by the immune system at the time of organ transplantation. Although it has been on the market for nearly 30 years, it is still largely used in the field of transplantation medicine around the world and has been administered to approximately 1.6 million patients to date. In the field of urology, such as the benign prostate hyperplasia and overactive bladder, we have created drugs that improve the shortcomings of conventional drugs and enhance their safety to contribute to the improvement of the QOL of many patients. Recently, we believe that we are saving the lives of many patients by creating anticancer drugs called XTANDI and XOSPATA. In addition, Astellas is currently actively engaged in the research and the development of cutting-edge modalities or technologies, including cellular medicine and gene therapy. These innovative treatment modalities have the potential to provide long-lasting effects and cure diseases with a single dose. This innovation can not only improve the QOL of patients, but also enable them to return to society and improve the workforce level. Therefore, the lives of their families and caregivers can also become better. So we believe that the value of these therapies to society as a whole is extremely high. Page 8 -- Slide 8. I would like to talk about enhancing availability of Astellas' products. We are strategically considering and implementing the measures from the drug development to post launch to improve access for patients who are unable to receive prescriptions for Astellas products for social or economic reasons. Specific programs and their execution timings are indicated by red rows. The leftmost are clinical trial programs. The most effective way to access treatment with Astellas products prior to approval is to participate in clinical trials. However, clinical trials are only open to patients who meet certain criteria. In order to improve access for patients who do not meet this criteria, we have various programs in place, including early access programs and post-trial access programs because clinical trials are conducted only in the limited countries, limited sites. For example, early access program provides Astellas investigational drugs to patients who do not participate in clinical trials but meet certain but limited criteria, and terminates the provision of drugs once the product is launched. Through this program, XOSPATA has reached more than 900 patients in 35 countries, suffering from relapsed or refractory FLT3 mutation-positive acute myeloid leukemia, or AML, who have failed with other treatment options. In addition, there is the international pharmacy program that allows the countries where such products are not yet approved can import and use the products that have been approved and launched in major countries. Through this program, PADCEV is now available for import in 50 countries, and we have actually delivered it to more than a couple of patients -- a couple of [ tens ] of patients. In addition, there is a patient access initiative, which allows patients who meet certain criteria in certain countries and regions to receive support when purchasing certain Astellas products. Third is the prostate cancer drugs XTANDI and XOSPATA and such become available in 37 countries and 17 countries, respectively. Next, I would like to talk about support for third-party ATH activities. The first is in the upper part of the slide, that is an initiative to provide Astellas' capabilities and technologies. Schistosomiasis is a parasitic infection that is common in developing countries, particularly in Africa and South America. The incidence of the disease is high among children, and if untreated, it can be fatal. Astellas is working with the concession of the pharmaceutical companies, research institutions and international nonprofit organizations to develop pediatric formulation of praziquantel tablets. Astellas provides its own formulation technology for the creation of pediatric formulation. The pediatric formulation is the development of smaller than the current tablets, and disintegrates easily in the oral cavity, so it can be taken with or without water, and it is also designed to reduce bitterness. Phase III clinical trials have been completed. And [ MILC ], a member of the consortium, is preparing an application for approval for expand the products to the African region. We also are working with external partners to identify new treatments for tuberculosis and malaria. In 2019, 1.4 million lives were lost worldwide to tuberculosis and there are 410,000 to malaria. Breakthrough drugs for both diseases are eagerly awaited. Astellas is providing its own library of tens of thousands of compounds free of charge and is conducting joint research with its partners, TB Alliance and MMV, to discover new therapies. The bottom of the slide shows the initiative that we will strengthen in the future. Focusing on activities that are synergistic with Astellas' business as well as support for activities aimed at strengthening the health system and improving literacy. Here are 2 examples. The first is our support to the National Cancer Society Malaysia and the Asian Cancer Forum. We are supporting National Cancer Society in Malaysia and Asian Cancer Forum in their cancer contra-activities targeting over 1 -- over Malaysians that includes the development of cancer education database, a cancer prevention registry portal and community engagement sessions for cancer disease awareness. So the targets are the over 1 million Malaysians. The second is to support the City Cancer Challenge Foundation. This is for the city of Arequipa in Peru. This support includes activities to strengthen the infrastructure of the health care system for more than 2,500 cancer patients in the city and building the capacity of 450 cancer specialists also through providing education and mentorship programs, the improvement of parties' access to cancer treatment in Arequipa City supported. Now I would like to talk of climate change measures. Slide 11. Astellas recognizes that the impact of climate change on society and companies is significant and that it is an issue of common importance throughout the world. Regardless of its own greenhouse gas emissions and its volume, Astellas is aware of the need to address climate change as the company's responsibility to improve sustainability. In 2018, Astellas received approval from the SBT, or science-based targets, initiative for the greenhouse gas reduction target set in its environmental action plan and has been working to achieve these targets. In addition, in December 2020, we announced support for the TCFD recommendations, and we intend to promote more proactive and efficient information disclosure in the future. In CSP2021, we have positioned sustainability initiatives, including climate change as one of our key strategies. I would like to here explain 4 of our major initiatives to date. First, at the Kerry plant in Ireland, introduction of wind turbines, biomass bolus and the solar panels took place, resulting in nearly several greenhouse gas emissions in 2015. In April 2020, we switched all electricity consumed by our 3 research and manufacturing sites in Japan to Aqua Premium, which is provided by typical Energy Partner Inc. as hydropower-derived electricity that does not emit greenhouse gases. As a result, we reduced greenhouse gas emissions by approximately 29,700 tons in FY '20. Globally, we have introduced hybrid and electric vehicles with less environmental impact and sales vehicles. As of FY '20, 59% of all sales vehicles globally have been switched to such vehicles. As a unique initiative, Astellas became the first company in the world to adopt environmentally friendly biomass-based plastic for PTP sheets used as the primary package for pharmaceuticals in October 2011. Slide 12. Through initiatives such as those described on the previous pages, we have been able to reduce greenhouse gas emissions as planned toward the target set in the environmental action plan. In FY 2020, thanks to progress and initiatives to reduce the greenhouse gas emissions such as the use of electricity derived from renewable energy sources as well as external factors such as COVID-19 measures, we achieved a combined 39% reduction compared to fiscal year 2015. However, we are not satisfied with this achievement, and we are now reviewing our greenhouse gas reduction targets to the declare net 0 as our long-term goal for 2050. Specific reduction targets are still under consideration, and we plan to apply for SBT in the first quarter of FY 2022. We plan to disclose this information as soon as we obtain SBT approval. In the future, by further introducing electricity derived from renewable energy sources and increasing the ratio of hybrid and electric vehicles in our sales vehicles, we will strengthen our efforts to reduce greenhouse gas emissions. From Page 13 afterwards, I would like to talk about corporate governance. Now Slide 14. This explains our corporate governance system. In June 2018, we transitioned from a company with an Audit and a Supervisory Board to a company with an Audit Supervisory Committee. This delegates a substantial part of the Board of Directors' decision-making authority of the execution of business to executive directors to enable prompt decision-making and to further enhance the deliberation of matters such as business strategy and the Board of Directors. We then further strengthen the supervisory function of the Board of Directors. In addition, the corporate governance guidelines stipulate that the majority of the directors should be outside directors in order to ensure decision-making from a broader viewpoint and objective of our sight of the execution of business. Important matters related to corporate governance, such as the nomination and compensation of directors and corporate auditors are discussed by the entire Board of Directors, a majority of whom are outside directors before our final decision is made. As of February 2022, 7 of the 11 members of the Board of Directors, 4 of the 5 members of the Nomination Committee and Compensation Committee and 3 of the 4 members of the Audit and Supervisory Committee are outside directors and both Nomination Committee and the Compensation Committee head are chaired by outside directors. Now Page 15. This is about the board agendas and evaluation of effectiveness. We have identified 4 important management themes to be discussed by Board of Directors: corporate strategy, stakeholder engagement, risk management and corporate governance. This page is a partial example of Board of Director meeting issues in fiscal 2021. In particular, sustainability improvement was set as a new strategic goal, so discussed at the Board of Directors meeting in fiscal 2021. As shown in the lower half of the slide, we are continuously striving to improve the effectiveness of the Board of Directors by reflecting the result of the annual analysis and evaluation of Board effectiveness. In FY '20, it was determined that the overall effectiveness of the Board of Directors is sufficiently insured. Some of the reasons given for the evaluation include: free, open and constructive discussions and appropriate supervision of succession planning by trying to understand the expectations and opinions of various stakeholders and then reflecting them to discussions. We will continue to strive to improve the effectiveness of the Board of Directors. Now Slide 16. I will explain the compensation system for directors. We have introduced a compensation system and a composition that are closely linked to performance with an emphasis on increasing enterprise value and shareholder value over the medium to long term. In addition, we aim to have a fair and impartial compensation system based on job responsibilities and the results regardless of country or region, and we actively disclose information to enhance transparency. Even if a non-Japanese were to become President, we have no intention of changing our basic approach to setting compensation levels based on the nationality. The middle of the slide shows an example of the compensation composition ratio for the President and CEO, as an example. The basic compensation is 27%, 33% bonus as a short-term incentive and a 40% stock compensation as a medium- to long-term incentive with a higher ratio of performance-linked compensation. For mid- to long-term incentives, we introduced a performance-linked stock compensation system in 2015, and we use total shareholder return, TSR, which is highly linked to shareholder value as the valuation index. According to the 2020 data disclosed by Willis Towers Watson, long-term incentives is 27% of compensation for CEOs of Japanese companies with sales of JPY 1 trillion or more, while Astellas has set a high level of 40%. We have introduced an incentive scheme that aims to improve corporate performance over the long term. Starting in fiscal 2021, the scope of this stock compensation plan has been expanded to include all global vice president class and above. Prior to this, eligibility for this system was limited to directors and former executive officers in Japan. According to information from an external HR adviser, there are very few Japanese companies that offer stock-based compensation to executive leaders around the world on the same scale as our company. By providing the stock compensation, we can make executives around the world aware of the common goals of maximizing shareholder value. We are also conscious of communicating the message that we are treating them as executives. Next, from Page 17 and onwards, I'd like to explain our people and organizational development. Page 18. Since the establishment of Astellas, to realize our corporate vision, we have clarified the ideal image of both people and organization and have accelerated the efforts to transform all Astellas organizations to be more innovative for CSP2021. In this section, I'm going to explain the establishment of HR system corresponding to a global functional organization we have worked on, organizational health goals, or HG insured set to transform into more innovative organization with a full-scale focus in CSP2021 and the creation of an environment in which diverse talent can thrive. Page 19. We, Astellas, have expanded our business not only in Japan but also globally as well. Along with that, we have established our HR system to promote the allocation of the right people in the right place on a global scale. These HR system transformations have supported Astellas business and enhanced our competitiveness in acquiring talent in the market. Here, let me share 4 representative initiatives. First, harmonization of grade structure and job evaluation. Since the establishment of Astellas, grades have been evaluated by each region and each function, respectively. We have reevaluated the grades based on the common scale for the entire group, so that there is consistency in grades based on each position's responsibilities globally. Job evaluations by the new globally common methodology and processes have been completed for about 200 positions at all VPs and above levels worldwide. It's not so easy to completely harmonize and implement the HR system operation worldwide. But in line with the globalization of our business strategy and organization, we have been pursuing globalization also in our HR system. As you can see on the right, our succession planning initiative at Astellas has started since the merger in 2005. After the merger between Yamanouchi and Fujisawa, particularly, for executives, we needed to make transparent and appropriate HR and successor decisions not based on seniority system regardless from which company they came from. It was necessary to realize the allocation of the right people in the right place, which everybody can agree to. We have completed this work worldwide and realized information consistency, higher process efficiency and automation. We have also implemented talent review by global organization and function. So for all VP positions and above worldwide, we are using the discussion process to select the best person from the global talent of the successor. By now, we have completed talent review and succession planning for all VPs and above worldwide and identified about 500 successful candidates. About 3/4 of the new positions for VP and above have been appointed from the successor list. As for the harmonization of compensation structures and levels, we have aimed for a globally common compensation structure for all VPs and above, promoting level integration between regions. By now, we have introduced common stock compensation plans for all VPs and above. Through these initiatives, we are approaching the structure where employees in eligible positions can receive fair compensation regardless of the region. In addition, we have implemented a global job posting system. Various positions around the world can be posted. There have been many applications, and we have completed about 300 internal hiring in total so far. Through our initiatives to realize the right people in the right place, we can be closer to the allocation of talent for innovation and ensure talent continuity. In general, Japanese companies, individuals tend to assume the next position based on the company's decision. This general method does not fit Astellas. As the business and organization, itself have globalized, we believe it's desirable to have a style where each individual develops his or her own career plan with a sense of 50-50 consideration by both the company and the individual. So we are planning to further promote talent allocation based on job posting and open internal competition. For the operation and execution of these HR initiatives, we have globally integrated the employee database, which was different from region to region before. Through this HR system called HR Connect, we are implementing talent management, including succession planning. We hear that many companies are still implementing document-based succession planning and talent management, but we are operating a substantial portion of this process within a globally integrated system. So we think we are promoting quite innovative practices in this regard. Page 20. From here, I'd like to explain initiatives to transform into more innovative organization and accelerate CSP2021 realization. To strongly promote the execution of our strategy in CSP2021, we thought it's necessary to first identify the factors that impeded innovation. So to identify issues to be improved in the current organization, interviews were conducted globally to collect employees and leaders' actual voices. We analyzed the collected information and had rounds of top management discussions, identified issues as shown on the left in the middle figure on this page. In order to resolve these issues, we set organizational health goals 1 through 3, shown on the right as elements of CSP2021. These OHGs are commitments to foster organization that encourages desired behavior, and we aim to substantially enhance our execution capability at Astellas and aim for innovative organization to deliver sustainable growth. To resolve extensive fear of failure and unwillingness to take business risk to achieve innovation, conservative objective setting and reluctance to update and develop new systems and processes to meet new challenges. In order to resolve these 3 issues, we set organization health goal 1, brave ideas pursue ambitious outcomes, so that we can aggressively take on challenges for innovation and ambitious outcomes. To address unclear image of leadership to generate innovative ideas and lack of development plans to foster leadership, we have set organizational health goal 2, talent and leadership thrives. To put into place an environment where excellent people have ownership and demonstrate their leadership. As for the issues of evaluation system that promotes not company-wide optimization but departmental optimization and silo and lack of trust between divisions, we set organizational health goal 3, we excel as one Astellas. We are trying to collaborate our growth divisions to achieve shared goals for all Astellas. Page 21. We are implementing various interlocked initiatives to achieve organizational health goals 1 through 3. Let me explain some of our initiatives. First, cultural development with psychological safety. We are aiming to promote an organizational culture of challenge without fear of failure and establish an environment of psychological safety where intelligent failures are celebrated as learning opportunities. We have developed a psychological safety playbook, which is being used for manager trainings. We have also developed a related training program as well. We are developing such a program. Secondly, Astella's leadership expectations. This is to clarify the leadership required in Astellas and develop leaders to execute CSP2021. Specifically, we are working to develop leader and manager capabilities in alignment with leadership expectations and OHGs. In corporate leadership expectations in peer and upward feedback frameworks and implement Ignite. Ignite is a remote training for all people managers around the world to instill and practice leadership as defined by leadership expectations. Over 2,500 employees have participated for over 20,000 hours in total by now. Thirdly, shared objectives. This is to set cross-divisional and ambitious goals towards CSP2021. To set these common goals, we identified pain points which impede cross-divisional collaboration under functional management. To further promote -- further improve company-wide performance and promote collaboration among divisions, we have developed a system to set shared objectives among divisions, which will be introduced from next fiscal year's objective setting. There was optimization in each functional division, but there were issues from the company-wide optimization perspective. So in order to change your gear speedily in accordance with the priority of the company's business strategy, so that many employees would be cautious of the company-wide performance, we have decided to introduce a system of setting shared objectives among divisions and change how to make bonus payments from FY 2022 so that behavior change will occur accordingly. On Page 22, I would like to explain our measures to disseminate and penetrate CSP2021 among our employees. We have been promoting their understanding of CSP2021 by management directly communicating with employees globally in Q&A sessions. And for me, over the past 10 months, I have spent about 190 hours in total to continue my dialogue with the employees. Dialogue with CEO. We have organized about 30 remote or on-site sessions of 30 participants or less online or sales offices across Japan in person. Small group meetings can serve as an opportunity to express their view and ask questions directly. By now, about 600 employees in total have participated and about 400 questions have been asked. Top management, including Corporate Executive Vice President, Okamura, and division heads in the global headquarters are having dialogue with employees in larger scale events called Ask-Me-Anything sessions. Employees can join these Q&A sessions on a voluntary basis. The agenda is set, participation is on a voluntary basis, and employees can ask questions. So far, about 6,800 employees have joined and about 730 questions have been asked. OHG leadership conversations or events, focusing on interaction between top management and division heads in the global headquarters. About 1,500 employees in total have joined and about 110 questions have been asked and answered. By taking time to have dialogue with employees and continuing to communicate the management's ideas and thoughts in the background, employees can feel convinced, synthesized with the company's strategy and link this to execution. We received questions and comments from our employees and consider action where necessary. The entire management are united to just work on what we are supposed to do. We will continue these initiatives according to our plan. Next, Page 23. Let me explain creating an environment in which diverse talent can thrive, and our progress so far. We, Astellas, believe that diversity can increase the organization's creativity. By promoting organizational diversity, we are trying to increase our creativity for innovation. Business transition is shown on the left and development of diversity is shown on the right. First, on business transition. Looking at the composition ratio of revenue by region, when Astellas was established in 2005, Japan accounted for 60% of the revenue. But in the 15 years after that, the globalization of our business and portfolio has made progress. Globally, the revenue structure became better balanced based on demographics and economic indicators. Also, regarding the composition ratio of Astellas employees, the foreign nationality ratio was about 40% before, but it's now exceeding 60%. We are also making progress in globalization of our talent. With the globalization of our business, we have increased employee nationality and various other diversity for creating innovation. We are allocating appropriate talent as division heads regardless of their attributes such as nationality. Over the past 3 years, the foreign nationality ratio among division heads has increased, and the majority of division heads have foreign nationality by now. We are running the organization from the perspective optimal as a company doing business globally. In principle, English is used as an official language in many of the internal documents. Many meetings are conducted in English, including executive committee, our highest decision-making body for execution. We think the number of companies doing their business operation with this level of global thinking is still small in Japan. And we are one of the leading companies as such. The percentage of female managers has increased from 29% in 2013 to 41% in 2020 globally and from 6% to 12% in Japan. The mid-career hiring rate has also increased from 20% to 54% in 3 years. Not only employees hired as new graduates, but also talent with a variety of background are playing an active role at the company. We are hiring about 100 new graduates every year. We're always searching for ways to acquire this talent to the maximum. Next, I'd like to talk about our new materiality matrix from Page 24. We developed our first materiality matrix in 2014. In 2017, we made a review and 5 years have passed since. In the past 5 years, we have identified key issues considering changes in trends in sustainability issues, consistency with CSP2021 and issues that must be addressed as the pharmaceutical industry. We prioritized 19 key issues shown on the slide based on the analysis of stakeholder interest, scale of social issues, affinity with Astellas' capabilities and results of interviews with top management from the perspective of material and to both society and Astellas. We believe that all the 19 key issues are material to both society and Astellas, but we identified 9 most important issues out of the 19 key issues shown in red as materiality. Shown on the upper right are social issues of significance, which Astellas would be able to resolve. By working on the 9 material issues, Astellas would be -- would like to aim to transform into cutting-edge value-driven life science innovator, win the trust as an industry leader and strengthen our management foundation. In addition, we will also address important issues of high social interest such as climate change and energy, including our consideration of net 0 declaration. Last but not the least, let me explain items we perceive we are expected by the stock market. Page 27. This page shows items we perceive to be expected further from us through a dialogue with the stock market. As for sustainability initiatives, we will specify KPIs for those that are appropriate to be formulated. We will disclose our initiatives to improve sustainability more proactively than now through our corporate website, integrated reports and Astellas meetings. We will aim to improve the ratio of female managers by succession planning, mentoring and dialogue with management. We recognize the importance of board diversity. The selection is made by considering experiences, skills, et cetera, comprehensively, and we will continue to emphasize diversity in our selection process. As for dialogue with outside board members, we will deliver messages through integrated reports and corporate website and consider opportunities for direct dialogue at Astellas meetings. I already covered our net 0 declaration. Today, I talked about our initiatives to enhance the sustainability of society as Astellas' corporate value. Astellas contributes to social sustainability by solving social issues through our business activities to create innovative drugs. To create innovative pharmaceuticals, we will strengthen our initiatives for innovative transformation of all the Astellas organizations. We are hoping to organize the sustainability meeting like this one today on a periodic basis for the future so that we can leverage our dialogue with you for future initiatives. That's all for me. Thank you for your attention.

This is over as a presentation. So we would like to now accept your questions. The questions can be accepted only by a telephone line. No questions are available for live streaming system. [Operator Instructions]

[Operator Instructions] So from the Japanese line, Daiwa Securities, Mr. Hashiguchi, please start.

Hashiguchi from Daiwa Securities. That's about Page 19. Talent management process, global integration. So for the drug discovery research and when you gain the competitive edge, well, and also the location of the research institute. From these perspectives, how can we think about this approach? For management, that is not impacted by the location and the same is applied for the product management. In that case, I think this approach will be quite valuable. But when it comes to drug discovery, the lab location, that might be sometimes a restriction to move around, depending on the region, the easiness of hiring people will be different. So if you have the 1 simple consistent system, then there might be the situation that you pay too much at a certain area. In that perspective, depending on the positions, allocation optimization are necessary to be considered. So the talented scientists who can bring the innovation, how you can keep hiring them to improve your development? So with that perspective, I would like to hear your opinions about things written in Page 19.

Thank you very much for your question. As you know, recently, around Boston, California, depending on the types of the biologies that we are aiming at, we sometimes acquire the research institute or start the research institute by ourselves. Regarding the researchers as well, if this and that is possible to be done, then the grade will be this and that, so we would like to have a consistent system for this as well. But still there are some things that can be done only by this person or this particular person's knowledge or the human relationship in the world or field of academia. If there's something unique, we are going to prepare new position to pay that is worse paying for that function. For the [ wet ], as for now, special positioning grades are now considered to be introduced. Sakurai is going to make a bit of the supplemental comment here. Thank you for the question.

I'm Sakurai, I'm in charge of the administration, establishment of system responding to a globalized functional organization. It's not something we are going to harmonize everything. Of course, the functionally reasonable global harmonization is what we have in our mind. Especially for research, innovation -- for innovation generation the motivation improvement of the researchers that is going to be quite important. The motivation improvement for the researchers, we have the internal venture unit. And within a project, certain size of the HR resource and budget management are left up so that the milestone can be achieved. And also in order to hire the potential people. In the case of Japan, other than the new graduates hiring, we are introducing the system to selectively hire the talented people. Regarding the research engagement, the globally common engagement survey is conducted for the quantitative measurement so that it can be reflected into the necessary countermeasures to be introduced.

Citigroup Securities and Mr. Yamaguchi, please.

Yamaguchi from Citigroup, can you hear me?

Yes, we can hear you.

I have 2 questions. First, this is about an individual topic. Regarding the access in Malaysia and Peru, you mentioned such cases. The world is abroad. Malaysia and Peru were mentioned in particular, relatively speaking, what's any particular reason why, relatively speaking, or it was mentioned just by chance?

Regarding the third-party programs, there was a bidding process. We explained our objectives. And from those who support our objective, we solicited their proposals, we selected through several schemes. In the selection process, Ino is going to explain.

I'm in charge of sustainability. My name is Ino, thank you for your question. There are certain criterias in stages to select. As Yasukawa mentioned, we wanted to support certain areas. We developed a criteria. And we had a request for proposal related NGOs and NPOs received such information as we sent. We Astellas aiming for certain disease area as a business. And also, NGOs NPLs, we have been associating with and before, we, checked their information and proposal. The best ones who can address social issues were selected. This time, we selected 2. As you can see here, these are oncology related. NGOs and NPOs supporting oncology. As for Malaysia, there are various [ SN ] groups and various lounges are being used in that country. Access to health knowledge is scarce among the general population to detect cancer as soon as possible. There are challenges in that country as we heard, that's why it was selected us for Peru. In South America, working on oncology, there is an organization called [indiscernible] working on oncology. Among their activities, something -- this was a country where a domestic body can also work together. That's why we decided to choose them to support.

So for the future, there may be a budgetary issue, but you would solicit proposals -- request for proposals or to choose what meets your criteria rather than based on your strategy, you would find something to fit your strategy to support, correct?

Yes. That was how we selected in FY 2021. And our employees globally would look at these examples, and they would be stimulated in their own region or in their own country, they may want to resolve issues in their country and region, there would be more ideas from our employees. I'm hoping for that increase into the future.

The second question, the way of asking the question might not be really good, but that is about the Page 29. The skills of the directors. There are many ways to look at this, but especially, in your company, the science perspective evaluation. That is going to be always important as a start, I believe, especially to evaluate the assets from outside and bring it in your company. That process is going to be important. So in that perspective, the medical or scientific knowledge, especially genetic therapy or cellular therapy, I just wonder how many out of this list can appropriately evaluate such kind of modalities? So the latest science is needed to convert into the corporate value. But for that foundation, you need to think about the skills of those who evaluate such technologies. How you would manage that? Because you cannot just simply take what the specialist take. So it's difficult to ask a question. So I believe you are doing a certain sort of the judgment on this regards, what kind of approach you are taking?

Yes, it is quite difficult. So it cannot be solved just with -- overnight, the Western venture company doesn't have to be venture companies, scale company or large companies. The old boys in this industry are going to be serve as the director in other companies. So there are many such cases going on. And if such people with a science background, then they can get involved in the judgment of the level of the technologies that we are thinking about. And in Japan, the external directors that is considered, we actually do not have many such kind of candidates in the Japanese market. Therefore, historically speaking, yes, we have 1 medical profession -- professional within our directors member, but so far, therefore, in the case of us, there is no such person within a member of the external director. So that is currently left up into the specialist in the research. When it comes to the price or the management of the expenses, from that perspective, we will receive the opinions from directors. So the research is now left up to development of people. If the market in Japan changed and if they're recruiting external directors from overseas might be possible, then situation might be changed.

In that perspective, ideally speaking, you have multiple people here and there with scientific background, and you can consult with them depending on the necessity. So if there's a market or because we're a global company, so if there's opportunity, would you like to do something like that?

Well, if there is the appropriate person we identified, that is also something we would like to consider. Board of Directors would make a decision, and for the execution side, if they give us the instruction, I think that will be different from the supposed to exit -- executed functions. So I think it's depending on the situation.

Today, some people cannot access the teleconference system, so we received their questions by e-mail, so I'd like to read. Hugo from [indiscernible] Trust and Banking. This is the first ESG meeting by Astellas. I was able to understand your initiatives very well. I think it's meaningful to continue holding these meetings. So I hope you will organize a meeting like this in the next fiscal year. And based on this, I'd like to ask you questions. Regarding talent, people and organization, I understand your initiatives clearly. The corporate culture with fear of failure and allowing us to take business risk to achieve innovation is being improved. What's -- how do you analyze the reasons why you have such a long organizational culture? And how are you going to examine the effectiveness of the initiatives? This is the question received.

I'd like to briefly explain the historical background. Since the establishment of Astellas, every year in March, we have divisional objectives we discuss for each division, we have set the system. In principle, initial proposal is from the bottom up from each division. From management, there are orders, and it's going to be refined. But basically, it's a bottom-up process. After a year, the goals set for that year, what was achieved and what was not achieved would be evaluated. Then it would determine the bonus payments and also the promotion for each person. If you do this, if you continue this process, if you say something very challenging and if you cannot achieve, you may wonder what to do if you can achieve something like that. You may not be highly evaluated. It may affect your promotion. There can be such a silent pressure, there was such a strong tendency after we continued this process in various rounds. China [indiscernible] setting can be given the motivation if that's achieved, we can give a lot of score -- a higher score -- we think that's more appropriate. That's how we started the initiative. Therefore, we have just started. Where we will see visible effects, it's too early to say. Sakurai would like to make additional comments.

Yes. Thank you very much for the question. Yes. What was the history behind to set these goals? That was explained by Yasukawa right now. Going forward, the goal is being set would be used to look at the progress. We will follow up on the progress. Setting KPIs and turning into an indicator, that was one of the options we could take. But then unintended incentive may come into force. So we would like to consider carefully here. Having said so, global engagement survey since 3 years ago, has been conducted 3 years ago or 4 years ago, we started this survey. Once every 2 years, we have been conducting this survey. But starting from this fiscal year, we are doing this in February, and we are analyzing the results right now. And the organizational health goal progress is included in the questions in the survey to follow-up on the progress at an appropriate timing. In addition, as Yasukawa explained earlier, management going to the field to communicate with employees, we have substantially higher number of such opportunities. Communication directly with the employees is happening and employees making the comments and asking questions by listening to their voice. We're making steady progress in the organizational health goal. We can feel about the progress on such occasions. So these are great opportunities for us. So we think this is going to be a very important process, we'd like to continue to proceed with.

One more question that's about the environment. The countermeasures for the climate change is your focus? And what's the reason for that? What about the other environmental issues, for example, biodiversity, water, chemical, substances, how they are positioned?

The lab and also the plant, the genetic modified biology materials are about to be handled. The rest of the microorganisms, they are going to be used more and more. So they are not going to go out of the field of the lab or the plant emitting those taboo, so we have already introduced the countermeasure for that. So it's not something we are going to introduce new measures so that we can prevent all conceivable issues, we are going to continue to work on the countermeasures. That's our current position. And organic compounds, those are treated in an appropriate way to be emitted outside or the specialized with companies are utilized for the treatment. So that's been a long-standing practice for us. It's not something we are treating light. We have introduced the sufficient measures for that. Because of that, that is not included as worse in this immateriality metrics, please do understand it in that way.

[Operator Instructions] BNY Mellon Investment Bank Japan, Mr. Oiyama, please.

Japan Investment Management Oiyama speaking. I have 3 questions about the environmental measures. First, sustainability making documents are mentioning this already Scope 1, 2, 3 information has been disclosed and you have the approval from SBT, you have a high level of activities in sustainability and there's a high assessment. In around 2030, a goal for 2030 are net 0 in 2050, setting the goals in the medium term and the longer term. What is going to be the timing of disclosure of such goals? What's the cost status of your consideration right now as far as you can share today?

Thank you for your question. The timing of disclosure, already, is in line with the CFD. We are doing the analysis already and the timing of disclosure is now under consideration. Next month, in March, by the end of next month, the analysis results will be posted on our website according to our plan. That's the first thing I can mention. And what was your other questions, sorry.

Secondly, biodiversity, I'm interested in your biodiversity initiatives. Biodiversity in general to conserve the species, the extent the endangered species handled. And you're incorporating these into your indicators or to minimize the environmental burden and also to conserve the biodiversity. I think that's your philosophy. Having said so, when we say by diversity, direct conservation of the space is important. But if possible, you may have your specific ideas. And you don't have any particular indicators for the biodiversity in terms of the species conservation. What's the background?

As we answered to the previous questions, something which does not exist in the environment, the microorganisms or viruses, which are not dominant. If that's released into the environment, it's going to be different from the natural environment. Creating such an environment is going to be unacceptable. So that's my focus. And also, that's the area the company should focus on, pay attention to into the future as well. As for biodiversity indicators, yes, you're right. It's our own indicator to set the goals. You might have read the website regarding the biodiversity indicator, climate change measures and also the environmental contamination measures and also circular environment areas, what kind of initiatives were made to make progress to come up with an indicator regarding biodiversity if you do something in particular. It's not going to improve just based on that, according to understanding. Various factors, among the 3 classifications must be addressed. That's how we are discussing right now.

Next, diversity. The -- looking at the action plan for female managers and you have the targets and the percentage of the female managers around the 20%, so from -- that is the target that you set. And in this plan, the percentage of the female management is 11% currently. And also, as you mentioned globally your ratio of the female manager is higher, but in Japan, it's relatively lower. So the current target, making it as a raised rate to 20% or 30% by the year for 2030, is that going to be your ultimate target for the percentage of the female managers?

Regarding the questions, there is a bit of the breaking up of your voice. Therefore, can we confirm your question? Or is it better to speak slower? Well, toward the end, your voice was broken up. So would you please come closer to the microphone or telephone. Sorry about this inconvenience.

So based upon your role of utilization of the female level force, I believe you can have the target that is 20% of the female manager ratio. And toward the 2030, you said that target is at 30%. And also you disclosed the current ratio of the female manager is 11% as of March of 2021. So this female percentage 20% and 30% toward 2030. That is your target for the diversity with regards to the female manager ratio?

Sakurai is going to answer your question.

Your understanding is quite right. Group-wise, 12% is the ratio of female managers. This previous target was achieved 1 year earlier. So 20% in FY '25 and 30% for FY '30. For these targets, well, actually, we are going to introduce necessary measures to achieve these targets. Having said that, this target setting for female managers, the discussion that we always have is that the -- introducing the female managers is not the purpose of increasing this percentage. Rather, we would like to see that the female managers are working quite actively and lively. That's what we want to realize. And based upon that, we are thinking and disclosing this target percentage. So that's our basic policy -- or philosophy. So we are really aiming at the females that are actively and lively working in the company continuously. We would like to continue our effort for that.

If it's possible, I actually have 2 more questions, but can I?

First, sorry, Mr. Yama, sorry. Others are waiting to ask questions. If possible, could you send your questions to IR so that we can respond later?

Next, JPMorgan Securities, Mr. Wakao, please.

Wakao from JPMorgan Securities. First, innovation was explained. And also on the -- you talked about the research organization. You have internal bioventures. I think that's very important. So I'd like to ask those questions on the 2 points. First, you talked about the research organization structure. There is no financial incentives for them. But today, you gave us a presentation for employees and researchers. What would be an incentive for them to take a challenge? It was not clear to me to promote innovation and internal bioventures, I wonder whether they would be successful? For employees and researchers, what would be the incentives for them? Could you explain, please? And also on Page 22, CSP 2021, you have communication with the employees on this point. Regarding CSP 2021, it could be management or employees. What are their questions about CSP 2021? And after communication, they felt convinced, did they accept the responses from the management and felt convinced?

Regarding your first point, no financial incentives. I think that's an overstatement. Venture units, if you serve as the head of a venture unit, they would receive a very high grade. For such a grade or grade closer to that, they can serve as the head of the venture unit. Only those people can -- it's not really the case where only those people can volunteer to serve as the head if they want to be the head or even young people can apply for this. They can jump grades to serve as the head. For people who are selected such heads at a younger age, there is going to be additional compensation for them. So I think that's serving as an incentive for them. As for researchers, they would like to be open to work on their areas of interest, and they want the scope of their discretion to be expanding. That's one motivation behind. In the past, typical pharmacology or chemistry or metabolism research institutes before by function vertically. And then our team members were formed and we had project members. And it was not -- there was no delegation of authority to the team members. And if you bring the decision to the team, the boss may say something to the team members. The decision-making process was slow, and it was not a sufficient delegation of authority to the team members. Because of this phenomenon, functional, classical, vertical, siloed organization, something we decided to leave, those who aim for certain biology form their teams on a voluntary basis. As much as possible, they make a decision within themselves to proceed with the project quickly. If there is an achievement or a track record that is going to be reflected onto the compensation. Compared to the previous system, there are higher incentive for them. As to your second question, as for myself, I go to sales and marketing and PDEC and also DDR. So there are different questions being asked from different sections. Organizational health goals are the topics of interest to our employees. What do they mean? And for each activity for each goal, they would like to know more. And how the businesses are going to change, they would like to know? I often receive such questions.

Last question, not explained, but there is an explanation within the annual report for the sustainability. R&D system, especially the life ethics, how do you handle that? You are trying to do the innovation? Or something new? And actually, that is your strength, an important point for you. And with that perspective, the genetic medicine and also the stem cells, I think those are what you are trying to be -- trying to work hard -- and so based upon that, you also would include cell therapy and also genetic medicine. And that is where that life science -- life ethics related. So how do you handle that? How you're trying to deal with that?

Well, we acquired Ocata and we started the cell therapy. At that time, the cells from the fetus are to be utilized as a source. We declared that. And it's not IPS, but such kind of cells are to be used as a material. So how we can procure the fetal cells as the materials? And such discussions have been started in our company. And recently, on top of that, we are going to do some modification of the genes and the genetic therapy has been what we are working on. So the defects and how abnormality is modified, those are what we are trying to do. So genetic therapy if we acquire the genes, what should we do at the time of the differentiation of the genes. With that perspective, we have a committee. So at each experimental timing, we do some evaluation. We're approaching the end of this meeting, so the next question is going to be the last question.

Crédit Suisse Securities, Mr. Sakai, please.

Sakai from Crédit Suisse. Just 1 question. Page 25, there is a table on materiality. In 2017, this was developed, as you mentioned. I don't want to venture, but ESG and sustainability strategies by pharma companies in the end would link to the creation of innovative drugs is going to be a key. Do you agree to this? That's my first question. And also by achieving this materiality, what is going to be the impact? In terms of the ESG investments, I'm not an expert in ESG, I may be wrong. But in the end, I think it's going to be reflected on your stock price. So this was developed -- if this was developed in 2017, now in 2022, I'm sure you have your score cards in the meantime, internally. So unless you show that as KPIs, there can be a risk for ESG. From a layperson's perspective, Sakurai-san talked about keep your disclosure, you mentioned the company is a bit careful about the disclosure. What is your disclosure plan for the future?

I'd like to respond. In 2017, as Yasukawa explained, in 2017, the materiality metrics on our website was developed since. By today, from investors, we had dialogues with investors as well. They often told us that it's too general. What is important for Astellas was not clear to them, that's the comment we received from multiple investors. This time, we wanted to address the comments. As you can see on the slide, on Page 25, this has been updated newly. It's reduced to half. It was too general, but we narrowed down the important items to focus on important items as the pharmaceutical companies, innovative drugs must be delivered. That's the most important contribution to society, as you said. So these are the most important issues for us. What's special about Astellas Pharma is the transformative treatment but we being afford to transformative treatment. I would like to reduce the burden for health care professionals through gene therapy and cell therapies from multiple dosings. We'd like to cure and improve the patient's diseases. We are making progress. We are moving in that direction. And that is one of the most important initiatives or issues. On top of that, innovative solutions and drugs would be delivered, what's important here that the talent and organizational culture for realizing innovation within OHT in organization health, psychological safety would be ensured to create innovative drugs. We are creating such a talent organizational culture. So by dealing with this sustained materiality matrix, we can create next innovative drugs as we specified.

As Sakurai-san said, it's going to be reflected onto the share price in the end ESA, I can agree. What's in red in the materiality matrix to continue to create innovative drugs is included. Whatever the circumstances are, we have to maintain the healthy supply chain system so that we can prevent out of stock or shortage of a product, something which should not happen would be well managed. So in a positive sense, and also in terms of the conservative fashion, it's going to be linked to the stock price in the end. As for KPIs, as you can tell, qualitative or quantitative things which can be measured and others, it cannot be measured. I always tell the teams, what cannot be measured easily may exist. Selecting 1 or 2 KPIs, which do not represent such cases, just meeting them to be satisfied may lead to side effects, and you may go into a wrong direction. So if it's going to be difficult to set, we shouldn't set such KPIs, but rather, we should look at the situation more broadly. That's how I tell the teams. So this is linked to the earlier comment by Sakurai, if we can measure, we'd like to disclose KPIs to you.

Thank you so much as at time. So with this, we would like to close today's meeting. Once again, thank you very much for your participation.