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

Thank you very much for joining Astellas Pharma, Inc Sustainability Meeting 2025, out of your very busy schedule today. I'm delighted to serve as MC today. I'm Kato, Chief Communications and IR Officer. Thank you for your time. Today, after presentation, we will move on to a Q&A session. We will explain based on a presentation posted under Materials section on our website. Including Q&A., simultaneous translation is available in both Japanese and English. We cannot guarantee the accuracy of simultaneous translation. Thank you for your understanding. [Operator Instructions] This is a cautionary statement. This material or presentation by representatives for the company and their answers and statements in the Q&A session include forward-looking statements based on assumptions and beliefs in light of the information currently available to management and are subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations, promote unapproved uses in any fashion, or provide medical advice of any kind. Let me present the company representatives in this room: Naoki Okamura, President and CEO; Shingo Iino, Head of Sustainability; Katsuyoshi Sugita, EVP, Chief People Officer; Takashi Tanaka, Independent Outside Director, the Chair of the Nomination Committee and the Compensation Committee. We have four members here in person. We would like to start the presentation. Okamura-san, please.

Good morning everyone I'm Okamura from Astellas Pharma. Thank you for joining us today at the sustainability meeting despite of your busy schedules. This is a cautionary statement which is explained by Kato earlier, so I will skip reading it. In the past four meetings we have explained the progress of our initiatives to enhance sustainability the outcomes of these efforts and their relationship to enhancing corporate value. The fifth meeting will cover updates on the sustainability function the human resources function and corporate governance previously introduced including the social impact of our initiatives. Before proceeding to the main topic I will explain Astellas' vision our approach to sustainability and our past initiatives and their outcomes. Page 4. Astellas pursues its vision of on the forefront of healthcare change to turn innovative science into value for patients, striving to create innovative healthcare solutions. We clearly define this value in capital letters as the truly important outcomes for patients with dividing outcomes that matter to patients by the cost to the healthcare system of delivering those outcomes. We always consider the entire environment surrounding patients Delivering value to patients means not only achieving better outcomes for them but also contributing to cost management across the entire healthcare system. Page 5. Society strongly expects the healthcare sector to create innovative solutions in disease areas with high unmet medical needs. For us as a pharmaceutical company the starting point for sustainability is addressing societal challenges through our core business to realize our vision. For us, sustainability means creating this virtuous cycle, earning the trust of our stakeholders and further enhancing the sustainability of both society and Astellas. Of course we will also fulfill our corporate social responsibility by advancing initiatives addressing climate change and other environmental issues which are highly required by society. Page 6. Now let me -- let us review our initiatives for evolving sustainability. First in FY 2021 we updated our materiality matrix selecting 19 key issues and identifying nine material issues out of those. We aligned this with CSP2021 and established our sustainability direction in FY 2022 building a foundation to connect strategy with the front lines. Since FY 2023 we have introduced indicators to measure progress on sustainability initiatives being linked to our annual plans and executed and evaluated them company wide. Page 7. I will introduce you now notable specific initiatives and achievements. First the outcomes of activities promoted by the sustainability function. We have steadily advanced initiatives identified as top priorities in our Materiality Matrix such as enhancing access to health and reducing our environmental burden. Additionally since last year we have focused our efforts on the visualization of these activities. Sustainability activities are meaningful initiatives for both society and the company. To clearly demonstrate the connection between the resulting social impact and the creation of corporate value, we believe it is important to present quantitative information along with qualitative information. As one effective means to achieve this we are working on visualizing social impact. At the last Sustainable Meeting last year we presented the social impact generated by our cancer awareness activities in Malaysia converted into monetary value. Today based on our previous report we will broaden the scope and introduce our efforts to visualize social impact through converting the effects of our activities on society into monetary value. Next are the achievements by the human resources function. We work to ensure psychological safety for employees by frequently holding sessions where employees could ask top management anything and by conducting training for managers aimed at improving their management skills. Furthermore to continuously foster innovation we are focusing on developing next generation leaders. In the development program introduced at the last sustainability meeting 41 individuals selected globally participated this year tackling real business challenges. Additionally we simplified and consolidated our Astellas Way culture foundation introducing Organizational Values and Behaviors. This enhances each employee to act with a clear shared understanding strengthen collaboration and enhances our ability to create value for patients These initiatives based on the organizational health goals set in CSP2021 are steadily fostering a culture that promotes innovation. Sugita later will introduce recent concrete results and findings from the Global Engagement Survey later. The last one is corporate governance. In June 2025, we welcomed Andreas Busch and also Mark Enyedy as our first independent outside Directors with pharmaceutical industry backgrounds and foreign nationality. The Enterprise Priority Monitoring or EPM composed solely of independent outside Directors including these two discusses company wide priorities from an objective standpoint and provides feedback to the Board of Directors. This further strengthens the Boards oversight function and effectiveness. Personally I perceive several changes. Firstly, addition of members from the pharmaceutical industry has enabled more equal consultation and discussion. Additionally the format of board discussions has shifted from the traditionally Japanese formal style where speakers ask questions only after the chairperson designates them to a Western style approach where members speak without waiting to be called on. Including our long standing Japanese independent outside Directors, I feel the Boards overall discussions have deepened while better leveraging each members expertise. Today Mr. Tanaka an Independent Outside Director and EPM Chair will explain EPMs activities and the changes in the Board. Page 8. This shows the logic tree for enhancing enterprise value. This logic tree visualizes how Astellas financial and non financial initiatives contribute to enhancing corporate value. The content introduced today are those highlighted in colored boxes within the diagram. Among the initiatives for enhancing sustainability the yellow indicates sustainability function related efforts and will be introduced by Iino. The blue sections are HR function initiatives related to organizational health goals and will be introduced by Sugita. The green sections involve corporate governance initiatives and will be introduced by Mr Tanaka an independent outside Director. Through todays presentation we aim to convey how Astellas is working to enhance corporate value and the outcomes that these efforts are achieving. Page 9, shows today's agenda. Now Iino Head of Sustainability will begin his presentation.

Thank you. I am Iino Head of Sustainability. Today under the title Visualization of Astellas Corporate Value, I will discuss our efforts to quantify nonfinancial value and the strategic insights gained from this work. Page 11. As Okamura explained earlier the sustainability function is advancing initiatives to visualize nonfinancial activities. At last years sustainability meeting we introduced the social impact generated by our cancer awareness activities in Malaysia part of our efforts to improve access to healthcare. This time we expanded our scope and converted the impact of Astellas corporate activities on society into monetary value. We believe that quantification would allow us to more clearly demonstrate the influence our nonfinancial value has on corporate value. First, I will explain how we perceive corporate value using the analogy of a single tree. The trunk and branches visible above ground represent current results meaning financial value such as sales and profits, which is verifiable through financial statements. These are the visible results of activities from the past to the present. On the other hand the roots spreading underground are invisible but represent the nonfinancial value that forms the foundation of this company. We believe these roots are the source that generates future corporate value over the mid to long term and serve as leading indicators for predicting growth. The significance of visualizing nonfinancial value lies in quantifying the certainty of these invisible roots not as a feeling but as objective numbers. By visualizing the nonfinancial value that forms the foundation for generating business outcomes like sales and profits this project aims to further enhance your expectations for Astellas sustainable growth. Page 12. Next I will introduce the calculation process, specifically how we visualized and quantified these values. This fiscal year, we did monitor evaluation of the social impact generated by Astellas materiality initiatives. Specifically we evaluated the following four areas. For product impact we calculated the medical value that Astellas product prescriptions provide to patients their families and healthcare institutions. Please note that this does not refer to the product sales figures themselves. Next, for human capital impact we evaluated the impact of employment fairness and appropriate wages and career advancement and opportunities on employees. For environmental impact we calculated the negative environmental impact such as greenhouse gas emissions and waste generated by business activities. For access to health impact, we evaluated the positive impact on society through initiatives to strengthen healthcare systems. This monetary valuation was performed based on international impact accounting frameworks such as IWA, IFVI, and VBA to ensure objectivity and transparency. Page 13. This shows the monetary value of the results for FY '23 and FY '24. The table on the left displays the figures for the four impact evaluation categories and their components, while the bar chart on the right illustrates these values. Notably the product impact is overwhelmingly significant. For FY '24 it reached $27.861 billion and increase about 17% year-on-year. This demonstrates that six products including PADCEV and XOSPATA deliver substantial medical value to society. Regarding human capital impact we view this as an indicator that serves as the source for continuously creating future innovative healthcare solutions. The value generated by career advancement and fair wages creates a positive impact of $5. 28 billion. On the other hand environmental impact was calculated at a negative $32.7 million. We recognize this as an ongoing challenge requiring our continued attention across all categories product stands out as having the largest of our impact followed by human capital environment and access to health. Page 14. Today, I will explain the important sustainability activities of environmental impact and access to health impact. First regarding environmental impact the far right of the left graph showing impact trends represents the latest FY '24 figure which was minus $32.7 million. The figure has improved annually since FY 2018 with FY '24 showing a reduction of about 19 percent compared to FY '18. Looking at individual metrics we confirm that further reduction potential exists for water consumption, waste and GHG emissions. Since the environmental impact is highly influenced by our activity levels we also referenced the revenue trends. We confirm that despite increased sales revenue or increased revenue, meaning high activity levels during the same period, the negative impact continued to decrease. We believe this demonstrates that Astellas' efforts to reduce environmental impact are yielding steady results. Page 15. Next is access to health or the improvement of access to healthcare. Here we calculate the cumulative impact of the four healthcare system strengthening programs currently in operation. The left graph shows the total impact across all 4 programs, while the right graph shows the impact per resident for each program. We found that even programs with a small total impact like program B can have a large impact per resident. Moving forward we believe we need to aim for expanding total impact by considering both the number of residents reached and the magnitude of impact per resident. Page 16. Here, I summarize the insights gained from this visualization initiative. Analysis confirmed that product impact is overwhelmingly significant. This reaffirms that our core business innovative drug discovery itself delivers the greatest societal impact. Therefore our efforts to deliver innovative solutions to patients through our core business are crucial, and we recognize this as a key source of our corporate value. One sustainability activities, especially the environment and access to health focused. For the environment impact, a strategic implication is that we must aim to reduce negative impacts exceeding the increase in sales revenue that in other words the expansion of our activities. Specifically we will concentrate efforts on areas with significant reduction potential such as water consumption, waste and GHG emissions, aiming to minimize negative impacts. For access to health, we must enhance our social impact making communities through program partners like NPOs, NGOs. Considering both the number of beneficiaries reached and the magnitude of impact have beneficially, we will strive to expand our total impact. Astellas intends to continue nurturing and strengthening these invisible roots of nonfinancial value aiming to connect them to significant future financial value. Next, we will move on to the explanation by Sugita from human resources. Thank you.

Hello, everyone. I am Chief People Officer, Katsuyoshi Sugita. I am going to talk about the progress of our initiatives toward achieving organizational health goals, which are part of CSP2021. Page 18, please. This is a summary of our actions and results of OHG, organizational health goals. In CSP2021, we set up OHGs and have implemented a variety of initiatives to achieve them. Overall our employees productivity increased 1.6x from FY 2020 through FY 2024. We are expecting labor productivity to go up 2.1x based on the FY 2025 earnings forecast. We believe we have been able to promote initiatives which are directly linked to business outcomes. With various transformations our engagement score has risen in stages from 70 to 73 over five years. For organizational health goals 1 through 3, there has been a lot of progress and achievements. Let me share some of them. First for OHG1, we promoted a flatter organization and a full remote work policy ensured improved meeting efficiency and worked on the transformation to build an organization with high productivity. I will give you an actual example later. Transformation resulted in changes in employee behavior changes, some of these are paving the way for their own career. Innovations are accelerating in the field. As for OHG2, succession planning, we have promoted strongly by now is bearing fruit. We are promoting the appointment of a lot of new talents and enriching its diversity. Now that we have a larger talent pool of successor candidates under a fair annual assessment, we have been able to appoint optimal senior leaders to each position. Also in the next generation leadership program, we are achieving outstanding results. Program participants are taking on the challenge to being assigned to new roles and being promoted to assume higher responsibility. We are enhancing their level steadily. We are also focusing on human resource development with short term overseas assignments as well. Longer term overseas assignments of experts would cause a lot of burden on both the company and employees. But in the case of shorter term assignments, the hurdle to clear is lower up to such assignments. It's possible to accumulate global experiences through the actual work. We are also supporting younger talent in their career development internally as well. In Japan, transfer of employees with internal job postings is increasing substantially. We hope that more employees will be able to develop their careers internally going forward as well. Regarding OHG3, by changing the bonus calculation factor from divisional performance to company wide performance we put in place. The foundation of the organization pursuing outcome beyond divisions under one Astellas. Now we are also promoting the delegation of authority from functional unit heads to cross functional teams.We will incorporate the voice of our employees and create an environment so that we can achieve results more rapidly. In addition, in April 2025, based on business needs, we established organizational values and behaviors as a culture foundation. We have been able to steadily solidify our foundation so that we can excel as one Astellas. With all of these initiatives working in sync, we have been able to build a strong organization for sure. We believe this will lead to further leaps forward from FY 2026 onwards. Page 19, please. I will give you one example of the creation of innovation in the field. As Okamura also talked about organizational values and behaviors, this example I am going to share is exactly the innovation outcome through action based on this culture foundation. This year for ASP5834, a pan KRAS degrader program in a primary focus, targeted protein degradation, we achieved first subject dosing in Phase I trials in a record 27 days after IND, investigational new drug application clearance. We achieved this goal just in 1/3 our 3-month target, at a record fast speed. This case represents the achievement after R&D reorganization in the current fiscal year. So, I'd like to add that we are able to realize this through seamless collaboration across the organization. We think there are five keys to success behind this achievement. All of them are based on the culture foundation, organizational values and behaviors. First, we set clear roles with shared objectives and accountability. Next, we collaborated through seamless integration of each persons expertise as one Astellas with teams contributing to a holistic understanding of the assets risk benefit profile. Also the project team had early engagement with investigators to reflect their feedback from the clinical settings on protocol design. Fit for purpose peer review enabled us to resolve key issues before the protocol was written and avoid delays. Ensuring a sense of urgency led to this final outcome. Furthermore, this project team had the courage to set ambitious goals and promoted effective collaboration cross-functionally to pursue and achieve desired outcomes. This outcome focused approach was the biggest key to success. In this way, we are accelerating creation of innovation in the field. We hope this will bring about further achievements to our business. On page 20, let me explain research talent exchange Astellas is working on to activate the drug discovery ecosystem in Japan. In Japan, world-class scientific talent exists. On the other hand the drug discovery ecosystem is not functioning sufficiently as a mechanism to continuously create new drugs through mutual collaboration among companies, academia and start ups. So impact of Japan's drug discovery capability is set to be limited according to some. One reason behind is low talent mobility. Drug discovery cannot be completed anymore by a single company alone. A variety of capabilities such as basic research, applied research, development regulatory affairs and clinical must be combined first in order to enable the delivery of drugs to patients. That is the reason why talent mobility to enables persons with the required knowledge and experiences to thrive beyond organizations or sectors is important key to make the drug discovery ecosystem function. So in order to enhance the quality of the drug discovery ecosystem in Japan. Astellas is strategically promoting initiatives to increase talent mobility. We believe this will lead to new opportunities for Astellas researchers and the organization as well. To realize this we are leveraging the secondment program, side job system et cetra. Through these activities, we have actual case examples of collaboration between major universities in Japan and Astellas as well as the development of talent who thrive at universities and start ups, while staying employed at Astellas. Through these initiatives new value creation beyond Astellas is making progress. As a result, a mechanism is being built where innovations are returning back to Astellas as well. Drug discovery and advanced medical care is positioned as one of the 17 strategic priority areas for future investments set by the Japanese government. While receiving support from these changes in the external environment Astellas is aiming to exert active leadership in activating the drug discovery ecosystem. Next, page 21. I will explain the results of the Global Engagement Survey. The engagement score in FY 2025 reached 73, the highest in the past five years. The response rate increased to 87% up by 5 percentage points year-on-year, reflecting strong employee engagement and participation. Scores improved across all 43 comparable items versus the previous year with no declines observed. Substantial improvement was seen in scores on items such as white space resources and collaboration. This is thanks to the effect of initiatives to enhance productivity such as improved meeting efficiency we mentioned earlier. On the other hand, again, in FY 2025, items such as changed communication, paying for performance and promotion practices were identified as opportunities for improvement because of relatively lower scores. These scores improved from the previous fiscal year but these items were listed from before as issues to be addressed. So we will continue and reinforce our current initiatives. Over the past five years we have been able to maintain or improve engagement overall. Productivity as an organization has substantially been enhanced over the past five years. We believe this is the outcome of a transformation we have promoted based on organizational health goals. Page 22, is the last page in my section. In response to FY 2024 Engagement Survey results, Astellas launched a cross functional task force including corporate communications, digital IT and HR to deepen the analysis of survey results and strengthen our engagement initiatives. First, we conducted a pulse survey in June 2025 to enhance employee listening. Furthermore, top management visited locations around the world in person organized town hall meetings and small meetings and increased opportunities to communicate with our employees. Through in person dialogue sessions, we were able to gain deeper insights from feedback on the company's policy and organization. So we believe this was a very good initiative. We as a company are promoting the enhancement of productivity including a full remote work policy, but we also place importance on face-to-face communication as well. So, we will continue to maintain a good balance in running our organization. As we have been saying from before, management is the key. We gained similar insights based on the survey analysis findings by the task force. So we are working to enhance management capabilities as the most important initiative. Specifically we conducted interviews with managers who demonstrate outstanding leadership in certain items such as communication and shared other findings as best practices across the manager community. We also launched management capability enhancement training focusing on capability development in communication in particular. We are also holding monthly manager sessions to support managers as well. As I have explained by now, organizational health goals cannot be achieved overnight. There are still many things we have to work on towards further growth of Astellas according to our understanding. Astellas as a whole will continue to be united to work in order to promote talent strategy which is directly linked to our business outcome. That is all for my presentation on the progress of our initiatives to achieve organizational health goals. Next up is Mr. Takashi Tanaka. He is an outside Director and chairs the Nomination Committee and the Compensation Committee. Tanaka-san, please.

Hello everyone. I am Takashi Tanaka an outside Director. I will give you FY 2025 updates on Astellas corporate governance. In particular, I will explain the strengthening of the Board of Directors function and activities by the Enterprise Priority Monitoring Group, EPM in short, which we reported on its establishment in the previous sustainability meeting. On Page 24, the first topic is the Board of Directors structure. I will share three highlights related to the Board over the past one year based on three axes. The first axis is the culture of the Board. In FY 2025, we welcomed two independent outside Directors, two global leaders with deep insights on the pharmaceutical industry. With their participation, we are now having fully bilingual open and active dialogue more than ever before. The second axis is the evolution of ways of working. In order to enable effective and efficient discussions the Board incorporates new ways of working. Early pre read distribution is ensured to secure enough time for review. Concise presentations on the day of the meetings allow us to streamline routine topics. As a result we can dedicate about 80 percent of meeting time to strategic topics. And the third axis is to strengthen objective monitoring by fully operationalizing the EPM. EPM is a group which consists of independent outside Directors only and was established in November 2024. It sets and tracks KPIs for the three enterprise priorities. Through regular updates from accountable CXOs, EPM is beginning to drive meaningful impact. These three axes functioning organically positions the Board to deliver stronger governance and long term value. Next, Page 25. Regarding EPM our new initiative by independent outside directors, I will explain specific EPM activities and their focus today. EPM conducts structured periodic KPI reviews and targeted strategic discussions with CXOs. EPM insights contribute to the enhancement of Board oversight and decision quality. As a track record of its activity since the establishment in November 2024, EPM has organized 12 meetings in total by now. CXOs were invited 8 times for discussions. Also an external adviser was invited to discuss the theme of market trends and Astellas valuation perspectives. EPM is incorporating multi-angle perspectives. At present EPM is mainly discussing the three enterprise priorities. The first is to maximize revenue. This is led by our CCMAO, Chief Commercial and Medical Affairs Officer, Claus Zieler to monitor sales of our strategic brands and XTANDI and market trends. The second one is to accelerate the pipeline. This is led by our CRDO, Chief R&D Officer, Tadaaki Taniguchi to discuss R&D program milestones progress and risks on flagship projects initiatives to enhance R&D productivity. The third is operational efficiency This is led by our Chief Financial Officer Atsushi Kitamura. Next page please. On Page 26, I will explain a specific example of strengthening Board oversight in our third focus operational efficiency. We have a cost optimization target of JPY 150 billion by FY 2027. EPM is overseeing disciplined execution of sustainable margin transformation. To achieve this target, EPM is breaking down cost optimization initiatives and tracking the amount of investments and savings with clear accountability under a designated CXO. Through discussions with CFO, Kitamura. EPM defines path to achieve a 30 percent core operating profit margin for board discussions on free cash flow allocation strategies. In this way EPM is not just tracking KPIs, but is also reflecting this insights it has gained onto Board discussions and ensuring disciplined execution by the management team to enhance the oversight and executive function. That is all from me.

This concludes the presentation from us. Now we would like to entertain questions from the audience. [Operator Instructions]

So let's start this. The first question, Nissay Asset Management, Yatsunami-san, please.

Nissay Asset Management, Yatsunami speaking. Thank you very much for such a detailed update and also achievements in your explanation. My question is about the organizational health goals, so that I can have a deep understanding, let me ask you a question. Within the goals, the flattening the organization. So at the disclose of the HR strategies, innovative HR achievement or the approach is what you've been working on. And as a result, the productivity, labor productivity improvement and also pipeline progress enhanced, so improvement of the progress in terms of the execution is described. But in order to -- from the perspective of the reforming or change in the organization, how do you evaluate the current situation? And thinking about the coming 5 years, plotting the organization, you achieve this, so you achieve a certain goal or you try to excel further? What are you trying to do? Would you please share with us your insights? And also at the same time, innovation, the organization, well, execution capability is something you would like to improve and that is exactly where you see the outcomes. But this deepening the innovation, expansion of innovation -- sorry, this is a quite vague question. But from the Sugita-san's perspective for the coming 5 years, where is the -- or what is the area that you would like to reinforce further or outcomes? Sorry, this is really vague question, abstract question, but it would be great if you could give us an opinion.

Thank you very much, Yatsunami-san. Before Sugita, myself would like to make a bit of the explanation. For this type of approach initiatives, I believe there are no completions. For example, what will be the layers, the number -- what about the number of the subordinates under one manager? Yes, we can come up with such indication or indicator, but there is never the completion. And also since last April, well, for the management of the pharmaceutical industry region, country and also the HR, finance, development, so the regional axis, functional axis and also product technologies and events axis. So those are the 3 axis. And when we had the Astellas established, the region and the geographic aspect is the highest axis, but that is now shifting toward the funtion. With that, what can happen? The organization's to be more layered and siloed. So the collaboration among the functions become difficult. So One Astellas becomes more and more difficult. So rather, we put up the Patient Access or better access at the very top. So thanks to that, we now are able to have the cross-functional organizations. They set up the challenges and objectives on their own and they execute what they need to. And if they find something needs to be changed, they modify it. So 5834, 27 days, that is a record high and shortest, but I think we can make it shorter further. That's what I've been saying to the team. So in this way, overall, we always have the next, and working on those one by one is leading to the organizational innovative culture. Innovation, as you know, if you do the same thing, nothing can be cleared as innovation. You have to do something different, something from the -- different from the others from the past. You learn and you accumulate and you think about the next. That is the culture we need to develop. Sorry, this is a long answer from me. If you look at the indicators, you think this is good, that is good, this is a completion, but that is not really the case. We have to continue to realize a better organization. I'd like to hand over to Sugita here so that he can share his views. Thank you very much.

Thank you for your question. Okamura mentioned all the things I wanted to say in his answer, but let me share my view. To begin with, the second question was about innovation. Today I talked about the 27 days from the acceptance of IND to first patient dosing. And to activate the drug discovery ecosystem, we have talent exchange as our initiatives. These measures must be promoted. We need a mechanism for talent exchange. This was not thought about by the HR. Research and development leaders thought about this idea and brought the idea to us. When they came to us first, they have an idea like this. According to the company's rules, can we proceed to consider this idea? That was the question. I said, yes, no problem. Please consider. That's all. Then R&D people discussed what kind of programs will function and succeed. If there is a certain program, research can be motivated to exchange with people outside and we can invite talent from outside. And researchers themselves came up with this kind of an idea. And then just a little bit, how to pay salaries and a secondment program and system, that was supported by HR. But for the rest, business people, for their innovations shared their ideas about what they would like to do and how to make it function. And that is reflected into innovation aspects. So regarding the layer, in your first question, as you can see on this page, various points are related to the layer. How many meeting participants? How much reduction in the meeting participants? 2 boxes below. If there are deeper layers, we have more participants in meetings. Various people say they are related and many of them join meetings, but we can do away with that, then we can enhance efficiency. And to the right, in OHG, as Okamura mentioned earlier, cross-functional team have been established. As a company, those at a higher hierarchy are great. No. Experts and cross-functional leaders are important. They have to play a role -- a main role in the businesses so that they can run the organization. And we have to reward them with compensation. And OHG is shown in the middle, flexible career development. Before, if the size of the organization is large or the size of the budget is big, the rate tended to be higher for people. But rather, cross-functionally, those who lead cross-functionally and those with high expertise to contribute to the company may not have any subordinate or they may not have any particular budget. But still, we want to give a higher grade and higher compensation to them. So hierarchical things are not so important anymore, but the ultimate impact and the impact on to the company and society should be high so that we can evaluate them highly. And regarding the layers, there is a mention of reduction from 10 to 6, but it can be very difficult to implement this. So we have come this far, so we have to make efforts not to increase these numbers. We have reorganization and budget formulation. We may reorganize our structure substantially at those timings. The number of layers is not increasing. We have a check item to see that there is no increase in the number of layers. It's now 6. So we have a system so that the number is not going to increase beyond 6. So this is what we'd like to do for the time being. In the future, we have IT advancement, and the scope each person can manage can be expanded. But for the time being, we worked hard to reduce the number of layers to 6. So we'd like to keep this for the time being. That's our reality.

Independent autonomous organization is now turning around within the organization. I understand that quite well.

Next, Tokio Marine Asset Management, Mizuno-san, please.

Mizuno speaking from Tokio Marine Asset Management. I have a couple of things. This might be quite detailed questions. But first of all, now in the Board members, you've invited the non-Japanese speakers with the experience in the pharmaceutical industry. And a couple of years ago, we talked about this with Okamura-san and I believe he mentioned it was difficult to realize that. But what's changed? What made it possible? That's one question. And now it's realized, but this fact is also reflected into or applied to other organizations within your company?

Ultimately, Tanaka-san will answer, but just like you mentioned, in the past, it was difficult. It might be difficult. The reason why I said that is that the pharmaceutical industry-related people and the Japanese serving as independent outside directors, if we ask them to serve for this position, there is the -- some interest that we have to consider with the former company this person worked for. So Japanese company with historic -- with a history, even they left as a management, but in various ways, they have the continuous relationship with the former companies. Therefore, amongst the Japanese populations, it was difficult to hire to get the outside directors, amongst Japanese, who have the experience in pharmaceutical industry. Then you would say, then why not non-Japanese? Well, this is the Board of Directors. So the language-wise and manner-wise and process-wise, they are getting more and more complicated. So that is insufficient. And also on the other hand, they have the knowledge and experience. Concerning those balance and trade-off, from this perspective, I said it was difficult. But now that we have these 2 non-Japanese outside directors, as has been explained or as I explained, once we did that, we learned, it is quite possible and we can do it. That is honest impression that I have. In the past, we worried if we do this, this and that would have happened, our non-Japanese outside directors might react in this way and that way. So it is better not to say that. But once we started it, we are managing it quite well. So Mr. Tanaka is exactly in the middle of such a new ways of the Board of Directors. So I would like to hear the comment from him.

Well, thank you. I would like to be frank here. Just like Okamura-san mentioned, for the Board of Directors, it was really challenging because there were several challenges that we had to deal with. And these 2 outside directors living in overseas, so we have to take into consideration the time difference, time zone difference and how we can secure the time of the meeting with them. Considering those challenges, we came up with more than 5 of such. But we just thought, why not give it a try? So we rather try to solve the issue one by one. And as a result, what happened? Well, we ended up with a great success. Just like Okamura-san mentioned in his presentation, 80% of the meeting time is now possible to be allocated to discuss about the strategic items, which is a great achievement. And looking back the past, here, there are several factors that we can share with you. First off, this BoD meetings, now the site of the material discussions, so that we can secure that, we shifted or changed some part of the discussion items. And this is a bit different talk, but we have EPM here, the basic KPI monitoring and strategic discussions are possible to be conducted. Therefore, this outside directors from different fields can have the shared and common understanding and insight. Third, needless to say, we welcome the 2 new directors. They have a pharmaceutical background. They have a lot of experiences, and there's a lot of diversity. We have now 2 additional missing pieces to fill the gap. In order to have good discussions on the Board, we use both Japanese and English, and we need simultaneous translation as well. So from the company, the management team, we are receiving a lot of support. And various challenges have been resolved in organizing our Board meetings. In the end, as a result, as Okamura-san said, we can do this. It was feasible. Until then, everybody made his or her effort. That's why it's now functioning very well with the success. Personally, in this sufficient way and in this meaningful fashion, including global directors, we have been able to have such good discussions on the Board. So these are the results we can be proud of. That's something I'd like to say. Sorry for my long answer, and that's all from me.

So OHG action is taken by the Board itself to show results by taking on a challenge. That's my understanding. And in the field of R&D, sales DX is making progress and you use AI as well. Listening to the presentations, this is applicable to the Board and the OHG measures to reduce the number of layers. By leveraging AI, many things are going smoothly. Or by applying AI into the future, you can expect further achievements. What do you think?

Of course, we are using AI now as well as digital tools. However, the outcome we are seeing so far is as follows. We use AI a lot for parts of drug discovery. We have been able to do something great in combination with robotics. And for customer engagement, we're using AI to come up with great results. So it's on an individual basis. Before, as Sugita explained, we reduced the number of layers in the organization to shift to cross-functional teams by the delegation authority. We are changing our ways of working by human beings, and we have a lot of outcomes on results. Based on that, if you can do this, then we will democratize data, use AI to work further. It's easier to do so now. Before it was a closed organization. Even if we use AI, we can do something just within the organization. But now cross-functionally, we can use AI and digital, then we can achieve greater results. That's my expectation. This is a pressure to my employees. Although I don't know whether they are listening to this or not, the substantial innovation acceleration will occur. And also, we can expand the impact on society as a result. That's my view.

We'd like to move to the other question, Citigroup Securities and Mr. Yamaguchi, please.

Yamaguchi from Citigroup Securities. I have 2 simple questions. First, product impact and access to medicine, you showed specific numbers today. If possible, looking at the indicators for the impact, there is a higher impact compared to sales and revenues for some products. And in access to medicine, there are a variety of things under that category. What kind of products would have a higher impact? And what kind of product would not have a higher impact? That's my first question.

Thank you very much. It's better that Iino is going to explain about this.

Thank you very much. The characteristics of products this time, 6 products, well, individual product result is not disclosed, but looking at all those 6 products, the therapeutic area wise, there are only 2. One is oncology and the other is urology. According to the currently available data, urological disease, the impact is likely to be more easier to be confirmed. That is because of the number of the patient is larger. And also the products are launched on the market. And if time is going to be passed a little more, the situation is going to be changed. That's what we've been discussing within our team. So if the number of the patient is larger, then the sales also becomes the bigger or the number of the patients is larger, so before the sales increase, the impact is likely to be visible further.

And what about the survival?

Well, this time, the quality is utilized as a base for the calculation. And your first question, comparison with the sales, well, the sales or the revenue and the impact, the direct comparison is what's been often discussed with the impact accounting field. So we cannot do the direct comparison. However, impact tends to show the bigger trend, and that is the situation. So it will be appreciated if you could understand in that way.

What about access to health?

Access to health? That is going to be more complicated. Depending on the disease, depending on the country, depending on the region, the impact is going to be greatly different or completely different. So far as Astellas especially, the countries where the health care system is fragile or health literacy is lower, we prioritize those countries and regions to provide support. And with having such criteria, RFP, request for proposal, are placed by NGO/NPO as the request for the support. And each one of them is a wonderful proposal. So it's very difficult to select one out of those. But we have a certain criteria within our company so that we can select some. And as a result of the impact analysis, what kind of programs are appropriate to be selected? We were able to get certain tips for that process. This response might be a bit not -- off from your actual intention of the question, but that is the current situation. Various factors engage each other, so it's very difficult to respond within this limited time.

The next question is the organizational health and sustainable margin transformation, SMT. Those are likely possible to be collapsed each other -- collide each other. But you are doing it quite well. If you can make it well, they are not colliding each other. Because if you try to do that, it doesn't work. That is something happening in my organization.

I think we are looking towards the same direction, meaning that the organization becomes healthier. That means -- well, as you know, we have missions, the value of the patients in capital letters. That is something we would like to deliver. We put our best effort for that. If we want to do that, those hindering the that should be reduced one by one, even if it is things, even people. And looking at SG&A, those making -- creating such a value and delivering such value so that they can function better, that are supporting people. But at the same time, there are some breaking such activities, putting a break for such activities, saying that there is no precedent of that in the past and so on and so. So just like layers, we have this cross-functional teams, after discussion, we have good proposals. But before execution of them, each member within each organization have to report to their boss, their boss of their boss. And when the outcome comes down to the very bottom of the team members, the good proposal is deviated from the original intention. So within the team, it's going to be completely separated, and that's why they have to do real work. So it is better to eliminate the layers, and with having autonomous cross-function team, we can enhance organizational health and something excessive can be reduced. And rather, we can have a more percentage of activities that bear the culture. So overall, SMT works well and the organizational health improves as well.

Sugita would like to add.

Please. I'd be brief. Please show Page 18. Regarding the question we have just received, Okamura already explained the details. But on top, if you look at the top portion of this page, labor productivity per head, core operating profit per head and engagement right next to it is shown here. There is a reason for this kind of slide. As Yamaguchi-san asked the question, engagement and organizational health items are listed here, and productivity. Generally speaking, it's difficult to achieve both in parallel. But what we wanted to do this time is as follows. We want to enhance productivity and efficiency, but we would also like to enhance innovation and employee engagement to create a positive cycle. We aimed for a positive cycle and did a lot of things. We may not be perfect, but we are working on many things. As you can see here, engagement, innovation are making progress, and productivity is being enhanced as well at the same time. So in this direction, we'd like to contribute to our business and employee innovation, and engagement would also be enhanced. That's what we'd like to promote. That's all for me.

Next, Morgan Stanley, MUFJ Securities, Muraoka-san, please.

Muraoka from Morgan Stanley. I have a question about EPM. I have asked -- I'd like to ask a question to Tanaka-san. An external adviser was invited by EPM once. According to the slide, the market trends and Astellas valuation were the topic, according to the slide. So I'm sure that you are paying a lot of attention to stock price. So I was very pleased to see that. I have a question to you. At EPM, this is the first time to invite an external adviser, and you selected this market expert. What's the background behind? What kind of people would be invited to hear your views -- hear their views going forward?

Tanaka-san, please.

Thank you for the question. We invited an external adviser because we wanted to know the market and also the perspective of an external adviser. We had a major objective to share that among the directors. That's why we invited an external adviser. What is going to happen for the future? The stock price is trending higher these days, and EPM has a target. And the deadline is the end of this fiscal year, the end of CSP2021. That's our tentative goal for deadline. We are discussing the next CSP. Accordingly, how we are going to think about this will be discussed from now on. So once the right timing comes, we hope you can ask the same question again so that we can respond. So as of now, the next invitation has not been decided yet.

We do have certain concerns, you would like to address further?

Not really. The next CSP is the main agenda item. So after that, we are going to discuss those issues you have just mentioned.

Still, the stock price has risen this much, maybe because of the effectiveness of the EPM. I have another question to you. On Page 18, I think, regarding the reward system. The bonus calculation factor has been changed from divisional performance to company-wide performance. It's not about Astellas, but pharmaceutical companies usually face LOE. And then the company-wide performance will decline because of the patent expiry. Any company will face that. Bonus calculation based on company-wide performance. R&D people may identify great things, but the bonus might be reduced. In our industry, that can be a dissatisfaction element as a trend or tendency. Are you approaching this timing so to make ends needs or to be aligning everyone in the right direction? What's your approach here?

Before Sugita, let me make a brief comment. So let me explain what happened in the past. This is about the compensation, especially the yearly rewards, so recognition of individual contribution. And in the past, there is the function of division-wise, and also after that, the company-wide evaluation or recognition. So we had those 3 layers. Those in lower grades, the individual aspect is higher in terms of the percentage. On top of that, the division and also company as a whole are added. And if you are in higher in layers, rather than the individual, the division or company-wide evaluation portion are bigger. That's the past. What does this mean, however? Well, individual important. However, rather than individual, the division is more important. So you tend to have such a culture. So we removed such components, so we have the individual and the company-wide. So that layer lower, then individual percentage is higher. And if you are up to -- you are up in the layers, then of course, there's a percentage of the individual, but the company-wide or division-wide, function-wise portion will be bigger. Of course, LOE is one thing we need to think about. But basically, we have the target for this year. How you can achieve it or not is evaluated. So the sales is reduced, so your evaluation is reduced. It's not that simple. So the reduction of the sales is predicted. However, to what extent you can stop that? That is possibly evaluated. So the performance up and downs are not directly related -- reflected into the evaluation. Just like you mentioned, the sales worked this hard and we came up with this performance, but R&D didn't work well. So company-wide performance becomes this and that. Of course, that would happen. But we want to realize One Astellas. Nobody says something like that. We face something good, something bad, but everyone cheer-ups and support each other. Japan is good, U.S. business is good, or sales division is good or R&D function is good. So there are ups and downs and there are differences. However, as One Astellas, so that we can realize that, what would be the appropriate compensation method or approach? That has been the thinking.

I think we don't have -- I don't have much to say here, but the explanation was exactly right. So the target is not absolute like year-on-year this and that. It's not something. We have the target or objectives for a while, and if you achieve it or not, is needed to be considered. That's why LOE is also managed when we set up with such organizational goals. So there will be no problem. And division performance or company-wide performance reflected into the bonus? The way of thinking differs depending on the organizations. Whatever you do, there are always the benefits and disadvantages. So what do we want to do? What do we want to promote this time? It's not division-wise, but the company as a whole. Cross-function -- cross-functional collaboration is good for the company, it's good for myself or each individual. That is the mechanism we would like to establish. So each individual need to think about the company-wide performance, total performance, horizontal function performance. If you think to that extent, then benefit will come on to you as well. It's not something that everything is okay if you think about only your own function. So again, whatever method you would introduce, there are always goods and bads. But throughout the company-wide organizations, let's go towards that as One Astellas. That's what we wanted to realize. I hope you feel that. So what is easy for me is, instead of me, Okamura can explain everything for this perspective, which means that we have a common understanding and we can do it as One Astellas. I understand our management is also one Astellas.

Thank you for the question. I believe some are still waiting for the questions, but this is the time to close. So with this, we would like to close the Sustainability Meeting 2025. Thank you very much for your participation out of your busy schedule. Thank you very much. Thank you, everyone. [Statements in English on this transcript were spoken by an interpreter present on the live call.]