Nxera Pharma Co., Ltd. (4565) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the JPMorgan Healthcare Conference. I'm Seiji Wakao, Japan pharma analyst in JPMorgan. And it's my pleasure to introduce Chris Cargill, CFO with Sosei; and Miles Congreve, Chief Scientific Officer, will join for Q&A session. Welcome them to the conference. [Operator Instructions] With that, let me turn it over to Chris. Please go ahead. Chris?

Thank you very much, Wakao-san. I'm beginning on the cover page. And good morning, and welcome to the Sosei Heptares presentation at the 39th Annual JPMorgan Healthcare Conference. Despite the COVID environment, it's wonderful to be able to present virtually. I'd like to thank our friends again at JPMorgan for their continued support and for inviting us to present back again this year. This morning, I'm going to give you a brief overview of our drug discovery platform and core capabilities. In addition to updating on the excellent progress that we've been making against both our organic and strategic growth plans. Could I ask if those alone, please turn to Slide 3. Now quick introduction for those that are new to our company, Sosei Heptares is a leading drug discovery and early development specialist. We focus our efforts on applying our proprietary StaR technology and structure-based drug design platform to discover small molecule therapeutics that modulate G protein-coupled receptors or GPCRs. We are a publicly listed company headquartered in Tokyo. However, uniquely, we have our R&D Center of Excellence located in Cambridge, in the United Kingdom. This is where the bulk of our employees are based. Our vision is simply to become one of Japan's global biotechnology and drug discovery champions. Now we are very much a science-led organization. 75% of our staff have a science background and the vast majority of those are holding PhDs. And some other key items of note regarding our experience include: we are prolific researchers and drug counters in this area, having sold over 300 molecular structures to date from over 30 different GPCRs. We've published over 180 publications, including 7 prestigious nature papers. We've been granted over 500 global patents. We've worked with over 15 major global pharma and biotech partners and continue to do so today. And using our technology and platform, we've been able to create 24 preclinical candidates, 8 of which have entered human clinical studies. This is just in the past 10 years. And this productivity has generated over $700 million of partner revenues to our company. On the right-hand side of the slide, you'll see we have a very robust and diversified pipeline with over 40 active programs, both partnered and in-house. And evolved this pipeline in recent years to specifically focus on 3 therapeutic areas: neurology, immunology and GI. Please turn to Slide 4. Now StaR technology enables us to unlock the full potential of GPCRs. GPCRs are known or well-known targets, yet the opportunity for drugs that modulate GPCRs remain significantly untapped. Of the 400 GPCR targets believe active in human disease, around 100 have now been drugged, which leaves 75% potential opportunity for first-in-class novel targets for us to go after. Several GPCR targeted drugs have become blockbuster sort of change patients' lives, medicines such as Abilify and Seroquel. We believe there are many more medicines like these to be discovered in the decades to come. Sosei Heptares is in a very unique position to exploit this GPCR opportunity. Our StaR technology gives us a competitive advantage, enabling us to unlock the potential of GPCRs for an advanced understanding of their structures and molecular interactions. As I mentioned at the outset, we're prolific researchers and drug counters in this area. We've sold over 300 molecular structures from over 30 different receptors and 60 stabilized StaR proteins. It's that deep know-how that attracts big pharma and biotech partners to us, specifically those seeking to tackle difficult first-in-class novel GPCR targets that offer the potential to bring much needed new medicines to patients. Please turn to Slide 5. Now we are structured a little differently when compared to the average U.S.-listed small-cap biotech. We are less late-stage development focused and much more research and drug discovery focused. We have capabilities to take assets through to early human studies up to an including Phase Ib patient studies. In western markets, this is very much our sweet spot, moving multiple early stage, innovative programs forward at low-cost and lower risks to our business. We view large-cap pharma biotech is better equipped to manage the sizable costs, risks and binary outcomes that are associated with late-stage development. And this is why we like to develop our programs through to certain value inflection points before executing high-value partnerships or feeding the programs into new co-owned investment vehicles. Sosei Heptares is perfectly positioned to provide the innovation around GPCR targeted programs that big pharma might require. And together, we can bring novel therapies to patients with high unmet medical need. So executing new partnerships and rapidly progressing existing partnerships is at the heart of what we do. Please turn to Slide 6. In line with this emphasis on partnering, we have a track record of bringing world-class leaders to our technology and our candidate programs. On this slide, we show numerous active collaboration programs and co-owned investments that we have. There are some new names that we added in 2020. On the left-hand side, AbbVie, GSK and Biohaven, our new partnerships, where we've struck a series of major global license and development agreements last year. On the right-hand side of the slide, you'll see Tempero Bio. This is a new co-owned investment vehicle we formed together with Joe Jimenez and Mark Fishman's [indiscernible] Bio. And as I mentioned, again, at the outset, over the last 10 years, these partnerships generated over $700 million of revenues to us in the form of upfront milestones, royalties and research funding. However, it's over the next 10 years where we think the real value for Sosei Heptares will be realized, with up to $7 billion of outstanding potential deal value to be created by the development progress across these active partnerships and JVs. Please turn to Slide 7. Now in addition, to organic growth around our GPCR drug discovery business, we also have an aggressive strategic growth plan. In the second half of 2020, we successfully raised $200 million to fast track our ambitions in this area. Specifically, we plan to deploy the funds on M&A, targeting revenue-generating companies or assets as well as some tactical in-licensing opportunities for our home market in Japan, and on top of this, we will continue to make investments that will future-proof and also expand our drug discovery platform. And I'll touch on this a little bit later when I discuss our strategic growth plan. Please turn to Slide 8. Moving on now to our organic growth plan and the progress that we've made against it, the organic growth strategy is focused on 4 areas: extending our technology and platform leadership, generating multiple high-quality novel drug candidates, advancing our discovery and development pipeline and, of course, executing new high-value partnerships. I'm pleased to say that despite the environment, we remain fully operational throughout 2020, made excellent progress against these organic growth objectives. Regarding the objective of technology leadership, our StaR tech and SBDD platform remains as relevant as ever. And in 2020, we achieved scientific breakthroughs in our co-owned investment vehicles with Medicxi, which are called Orexia and Inexia, and these are focused on developing orexin OX1 and OX2 positive modulators for narcolepsy. These achievements and breakthroughs triggered a new tranche of funding into those companies and progress remains solid. Regarding the objectives of generating multiple high-quality candidates and advancing the pipeline, where we created 4 new discovery programs across neurology, immunology and GI in 2020 and we have well over 10 in-house discovery programs ongoing. Further this, we advanced 3 programs to preclinical candidate stage last year, and they were our H4 antagonist, EP4 antagonist and GPR35 agonist programs. The latter was successfully out-licensed to GSK just before Christmas last year in a deal of around $500 million in terms of buybacks. So the progress in 2020 outperformed our stated target, which is for 2 new preclinical candidate nominations per year. So we're very happy with that. Lastly, regarding the objective to execute high-value partnerships, we had a standout year, attracting multiple new collaborations, as I highlighted earlier. So I mentioned our GPR35 agonist program found a new home with GSK. In addition to this, we enter new deals with AbbVie in the inflammation space and a deal with Biohaven for our CGRP antagonist program in the neurology space. Furthermore, we created a new co-owned investment vehicle called Tempero Bio together with Aditum, the fund founded by Joe Jimenez and Mark Fishman. Tempero Bio will develop our mGlu5 negative allosteric modulator for substance use disorders and aims to combine behavior modification through digital devices such as mobile apps, together with the pharmacotherapy to support patient treatment, improve adherence and ultimately create better patient outcomes. These 4 new partnerships in 2020 outperformed our stated target to execute 2 to 3 new high-value partnerships per year. Please turn to Slide 9. So we are a neurology, immunology and GI discovery specialist and we seek to work with world leaders in these therapeutic areas. In addition to the collaborations and JVs that I just mentioned on the previous slide, we've got broad multi-target deals that were struck in 2019 with Takeda and Genentech and our Pfizer technology collaboration, which was inked in 2015, continues to produce with 2 new programs entering clinical development last year and potentially more to come in 2021. As you can see from the table, on the right-hand side column, we expect significant value to be unlocked in the coming years as these collaborations progress deeper through discovery and development. Going forward, we harbor our ambitions to add to this list further by executing deals with as many major pharma and biotech players that we can, particularly those with significant franchises in our chosen therapeutic areas of neurology, immunology and GI. Please turn to Slide 10. Now one of the reasons that we are confident in our ability to execute 2 to 3 new major deals per year stems from our productivity. We believe, based on our internal analysis, there were around 2 to 3x more productive than the industry standard when it comes to the discovery of new drug candidates. Our deliberate focus on being a pure-play discovery outfit gives us the agility to better exploit modern tools and technologies that enable more efficient and productive drug discovery. As I mentioned in the opening, we have generated 24 preclinical candidates in the past decade, 8 of which have entered human clinical trials. We think this is a strong return for a small-cap biotech, but we're aiming to go further. Our goal over the medium-term is to deliver at least 4 new discovery programs to lead optimization stage every 2 years and on average, 2 new preclinical candidates every year. We will ship in these programs through to the appropriate value inflection points ahead of partnering or seeding into newly formed JVs. Please turn to Slide 11. Now here is a current snapshot of our very robust and diverse pipeline that we expect to fuel significant value creation over the medium term. There are a few programs that I would like to point out as the ones to watch over the next 12 to 18 months. Beginning with the top half of the slide, the programs shaded in blue. These are our partnered programs. On the left-hand side, you'll see our co-owned investment vehicles, Orexia and Inexia, partner with Medicxi. As I mentioned earlier, the companies are developing orexin positive modulators for narcolepsy and other neurological disorders, and these are progressing well. Next, in the middle section of the Pfizer programs. We currently have 2 programs with Pfizer that are advancing through Phase I at present, an oral GLP-1 agonist for type 2 diabetes and obesity and the CCR6 antagonist indicated for IBD. We are hopeful of seeing progression from these 2 assets over the course of 2021. Lastly, to the right-hand side of the slide is our AstraZeneca program, where we are advancing an A2A antagonist in prostate cancer, which is being trialed in multiple combinations, and we look forward to news in the next 12 to 18 months regarding progress of that program. Now moving on, I'd like to focus on the bottom half of the slide, and these are our proprietary in-house programs, and these are shaded in the orange color. Any of these programs has the potential to be partnered over the next 12 to 18 months, and we think the H4 antagonist and the Part 2 program, both indicated for atopic dermatitis, may represent attractive programs for pharma partners with expertise in immunology and inflammation. However, in addition to the new preclinical programs that we brought through last year, perhaps the most significant opportunity for us over the next 12 to 18 months could come from our muscarinic M4 and M1 agonist programs. These programs were recently regained from Allergan, following Allergan's acquisition by AbbVie. The programs, which I've highlighted with the orange stars on the slide were all precision designed using our StaR technology and SBDD platform and out-licensed to Allergan in 2016 for $125 million upfront and circa $3 billion in future buybacks. Now we've recently received these programs back at no material cost under the reversion in terms of the original agreement. As a portfolio, they represent multiple clinical stage programs with the potential to deliver transformative new treatments for patients with schizophrenia, dementia and other neurological disorders. And over the next few slides, I'll touch on what we've regained, the opportunity and how we plan to move forward with a differentiated lead muscarinic program. Please turn to Slide 12. So we've regained a broad portfolio of muscarinic M4 and M1 agonist programs, which you can see on the table on the right-hand side of the slide. This is a much more advanced and enriched portfolio of muscarinic agonists compared to what we originally out-licensed to Allergan in 2016. Indeed, over the 4-year partnership we had with Allergan, Allergan put over $55 million of new R&D investment to advance these muscarinic programs, and we now will benefit from this. We regain a larger and stronger intellectual property portfolio, together with all preclinical and clinical data generated over the 4-year partnership. And this also includes a pipeline of next-generation selective muscarinic agonists, again, precision designed using our StaR technology and platform and all with novel and diverse chemistry. Please turn to Slide 13. So muscarinic M4 and M1 receptors are well-validated targets for both psychosis and cognition, and they've been worked on by pharmaceutical companies for over 25 years. More than 20 years ago, Eli Lilly successfully demonstrated the antipsychotic effects of an M4/M1 preferring agonist compound called xanomeline and achieved human proof-of-concept in 2 double-blind, placebo-controlled trials in schizophrenia and Alzheimer's disease patients. The relevant studies are shown in the clippings on the right-hand side of this slide. Now despite this clinical proof-of-concept achieved for the M4 and M1 targets, the development of xanomeline was ultimately terminated due to severe GI and cardiovascular side effects which will most likely caused by its very limited selectivity over peripheral muscarinic M2 and M3 receptors. After these studies were reported, there were compelling reasons to want to design much more selective orthosteric M4 and M1 agonist. But this remained very challenging due to the fact that the muscarinic subtypes are almost identical in the agonist binding site called the orthosteric site, which confounded these efforts. Now with over 20 million schizophrenia sufferers globally and over 50 million dementia sufferers worldwide, the need to develop new treatment options remains of paramount importance. We believe that the muscarinic M4 and/or M1 receptor agonists with higher selectivity over the peripheral M2 and M3 receptor subtypes have the potential to be truly transformative treatment for these disorders. Please turn to Slide 14. Now we will position our highly selective muscarinic M4 agonist codenamed HTL'878 as the lead program from this muscarinic portfolio, and it will be indicated for schizophrenia, which is an area of huge unmet medical need. Schizophrenia is a very large market, over 20 million patients worldwide. And despite the limited efficacy and significant side effects associated with the current approved therapies, these drugs regularly achieve peak sales over $1 billion. There's been almost no innovation since the 1950s with all current and generic treatments, essentially having the same mechanisms of action and limited efficacy. We know that the severe side effect profile of the currently approved drugs then as atypicals, continues to drive high relapse rates, disease progression and discontinuation of treatment. In a chronic disease like schizophrenia, very important that patients keep taking their medicines. And there's no use if they stop their treatment because they do not like the effects. Therefore, we see significant need for new treatment options, and we're very hopeful our M4 program can potentially become a transformative treatment for these patients. There is opportunity for a highly selective M4 agonist. And we believe HTL'878 is a potential first-in-class therapy with a novel mechanism of action and a potentially improved tolerability profile. Please turn to Slide 15. Now for those of you that are familiar with some of the other companies pursuing muscarinic therapies in this area, you might be wondering how we see ourselves positioned versus the competition. As you can see from the table here on the left-hand side, we see M4 selective agonist is providing the right profile to improve brain function in schizophrenia without the adverse side effects due to actions on other muscarinic receptors, such as M2 and M3. Our M4 selectivity provides a strong effect on mechanisms important in schizophrenia, but it does not adversely affect the GI or cardiovascular system, which are principally affected by M3 and M2 receptors, respectively. I mentioned previously, Lilly's development of the compound xanomeline was ultimately halted due to GI and cardiovascular effects through M2 and M3. Now our compound currently in development at Karuna Therapeutics called KarXT, attempts to address this by combining xanomaline with a muscarinic receptor inhibitor called Trospium. But this remains a nonselective approach and it does this imperfectly plus the inhibitor potentially brings its own problems. The other compound in development in this area is Cerevel's CVL-231, a positive allosteric modulator, which activated M4 and is selective over M2 and M3. However, clinical data on file from this compound shows moderate effects on heart rate, doses that are expected to be active in schizophrenia. Therefore, we see HTL'878, our lead M4 agonist, which has now completed Phase Ia studies as being the only orthosteric M4 agonist in development worldwide, acting directly on the M4 receptor and its highly potent and selective M4 over M2 and M3. We have fully funded the program for the next 12 months to advance this development in-house to its appropriate inflection point and ultimately, we see HTL'878 as being a highly attractive opportunity for prospective pharma biotech partners, CNS franchises in this area. So please watch this space over the next 12 to 18 months. Please turn to Slide 16. I'm shifting our focus now to the strategic growth plan, which was launched in July 2020, and I mentioned earlier in the presentation that we raised around $200 million last year to fast track our strategic corporate ambitions. Our strategic growth plan is focused around 4 growth areas of interest. One, seeking out revenue-generating acquisitions; two, investing or collaborating in novel technologies; three, taking early steps to expand beyond GPCRs into other target classes; and four, in-licensing late-stage assets for the Japan market. Now we're already executing a number of these objectives in the first 6 months. Regarding investing or collaborating with novel technologies, we recently entered into a strategic 2-year technology collaboration with Captor Therapeutics, a Poland-based targeted protein degradation company. Through this collaboration, we hope to achieve early validation that we can create GPCR degraded technology together. Secondly, and just last week -- this week, actually, we announced a collaboration with a Cambridge U.K.-based company called PharmEnable, which is an AI-driven drug discovery specialist. Through this collaboration, we aim to match our proprietary structural data with PharmEnable's AI capabilities to drive efficient novel drug discovery against the challenging peptidergic GPCR target associated with neurological disease. And in addition to these initiatives just mentioned, we are seeking to acquire revenue-generating companies or assets as well as targeted in-licensing activity of derisked late-stage rare disease drugs for the Japan market. And at this juncture, I'd like to point out that in our home market of Japan, where we are headquartered, we do retain a small tactical late-stage development team that can pursue these opportunities. These transactional initiatives are designed to boost our near-term revenues and thereby enhance our ability to sustainably invest behind our innovation pipeline for many years to come. Please turn to Slide 17. As we move into 2021, we will be focused on executing across 3 areas: one, ESG and our commitment to sustainable development goals. We see ourselves as one of the Japan-listed of biotechs that prides ourselves on ESG compliance, and we will continue this course in 2021 and beyond. Now a key pillar of our activities in this area last year was our commitment to leveraging our discovery network and partners to advance coronavirus research, and this will continue in early 2021. Our [ M protease ] inhibitor program established in 2020 as an ESG initiative, successfully identified potent broad spectrum antiviral small molecules for further development as oral treatments for the SARS-CoV-2 infection and related human coronaviruses. Secondly, we will continue to progress the organic growth plan. And as covered in today's presentation, the ultimate aim is to progress across all areas with a view to executing multiple new high-value partnerships in 2021. Lastly, executing on the strategic growth plan. In 2021, this will likely focus on acquisitions of revenue generated companies and assets and also targeted in-licensing of derisked late-stage rare disease assets for the Japan market. Please turn to Slide 18. So in summary, thank you for your time today. We are a world-leading drug discovery business focused on GPCRs. We look forward to executing our plan over the medium-term to achieve our vision becoming one of Japan's global biotechnology and drug discovery champions. Thank you. I'll now be joined by Dr. Miles Congreve, Chief Scientific Officer, for the Q&A session.

Thank you, Chris. So I start Q&A session. [Operator Instructions] So I start with my questions at fireside. I'd like to ask the best question about the technology. So could you comment on the competitive landscape of GPCR drug discovery area and your position in this area? This is the first question.

Sorry to you, Miles, please.

Yes. So thank you. So I think today, there's actually very little competition for structure-based drug sign approaches to G protein-coupled receptors outside of our own efforts at Sosei Heptares. So previously, there were some companies that were competitive in the space. But really today, I think we have the dominant position. There are some structural biology and biophysics based companies that are very small offerings in Europe. But really, I think what we see is that when a big pharma partner has a GPCR target of very high interest to them, that generally speaking, they come to Heptares to assist in the research against those efforts. And that's borne out by our long-standing and recent track record in partnering in platform collaborations.

Okay. And also, how long do you think you will be able to maintain your [indiscernible] and your position in this area?

Well, we see continued high interest in our platform and in our structural biology capabilities. And obviously, over the last several years, Cryo-EM technologies have emerged as very exciting, new approaches to getting the structures of larger proteins and membrane proceeds but today, I think it's still the case that most of the time, the definition of ligands and the way that ligand interact in the binding site is often not great from Cryo-EM structures and the ability to get high-resolution x-ray structures and structures of multiple ligands is very important to allow structure based design, particularly for more challenging targets. So it may well be that Cryo-EM continues to develop over the next 3 to 5 years, and that situation may change. But today, there's still very high interest in actually having x-ray systems that allow structure-based design approaches. And of course, we are working on Cryo-EM technologies ourselves. And as Chris has said, we're also diversifying what we're doing by developing new platforms, looking to establish degradation approaches with Captor, using AI methods with PharmEnable, and we'll also be looking potentially other membrane protein systems in the future to leverage for discovery.

Okay. So I want to know so just capital in the PharmEnable. So could you comment some more detail and your strategy on these collaborations? So what changes can we expect to see this progress or success succeed?

So these collaborations are planned to be worked on for the next 2 years, and for the capital collaboration, this is entirely new research. It's very poorly understood how G protein-coupled receptors have degraded and how to intervene with that to potentially to knock down the protein levels of G protein-coupled receptors in disease. So I think we will try and build that technology with Captor around a single target to start with. I think success in that collaboration that we established that this is possible and therapeutically relevant. And we hope to then build our relationship with Captor to expand into further targets. So I think this is an exciting opportunity. The PharmEnable AI technology, which is largely around generation of new chemistry for very challenging targets, then again, this is around a single target where we have multiple x-ray structures and lots of data on compounds, but where the compounds are not really suitable in our hands, at least to generate CNS drugs. So success for that collaboration would be perhaps at the end of this year to have generated entirely new chemistry, which is of higher quality than is available for that target today.

Okay. Very interesting. Okay. So sure. And I'd like to know about the license out. So you have made good progress on the license out or [indiscernible] project product so at steady pace. So -- and I understand you try to license out 2 or 3 programs annually. So do you have sufficient resources we [ therefore ] compound scientists, bigger staff resourcing to achieve your target?

So with respect to our licensing deals, then we -- our model is to try and build to a value inflection in preclinical or early clinical development to a suitable point for a high-value partnership. And we tend to build relationships with companies that we will license assets to over 1 or 2 years before the licensing actually goes ahead. So this -- in last year, we built a very strong relationship with the immunology team at GSK in [indiscernible], which ultimately led to us licensing our GPR35 agonist program. And we hope to see progress with that compound moving into clinical studies over this year and next year. And with the Biohaven CGRP deal, this is a program that we've worked on for many years. And originally, the program was with Teva, and we've been in contact and working with Biohaven over the last year or more to reach to a position where we agree the licensing deal and for that compound to be progressed in their portfolio, and I think what will be a very creative way. So I think the -- in answer to your question, we like to build relationships with partner companies who we believe bring a lot to our programs. They bring expertise and capabilities for the future development that we wouldn't be able to do as a small company to move these assets forward.

Okay. I understand. So next about your M&A strategy. So your question on M&A, so please comment in more detail for your M&A strategy. So what kind of companies you are looking for? So you want a small pharma company? Or small CRO? Or drug discovery company or something? Please comment on this point.

Yes. Wakao-san, look, we are actually very open to looking at companies that are both kind of product or asset based, but also those that are discovery based. Our primary goal with the acquisition strategy is to actually enhance the group's revenues so that we can get to a kind of a point where we can more sustainably invest in innovation going forward. We also see there as being some benefits from having more revenues in the group, from the way some of the exchanges are structured in Japan. And you may be familiar that Tokyo Stock Exchange and regulators are actually planning a restructure of exchanges in years ahead, segmenting them into prime, standard and growth. We want to put ourselves in the best position to be on the best grouping amongst those exchanges in years to come.

Okay. Understand. So next about [indiscernible] programs. So first about -- so why did AbbVie done these programs? So would you give me your thoughts on this point?

Yes, sure. I mean the program was originally out-licensed to Allergan. And as a result of AbbVie's acquisition of Allergan, it's very common for big pharma companies to reorganize their pipelines post deal. AbbVie is a company that's predominantly focused on disease modification in CNS, not symptomatic treatment. Our muscarinic portfolio are symptomatic treatments, they're not disease modifying. And therefore, the fit with AbbVie's portfolio going forward wasn't there under the terms of our original agreement with Allergan. If those programs are not chosen to be advanced, then they revert to us. Like I said, they were originally our babies. We generated them with our technology, our platform. We're very happy to have them back. We understand them very well, and we're really hopeful that we can move these forward and create really novel therapies for patients in areas of high unmet medical need.

Okay. Great. So you showed us your plan about these programs to hold licensing out on these programs. So in terms of schedule in data [indiscernible] timing or something?

Miles will chip in, I'll go first. But I mean, certainly, we're very confident that the assets that we're getting back and the programs that we're getting back, they're quality programs. So we don't think that we're going to have to spend years and years developing them. We think that they'll be of interest to people over the next 12 to 18 months. In the meantime, as Miles [ is into managing ], we have a very broad team of scientists and quite a large BD team who are very active. Our strategy is to do 2 to 3 new deals a year to do that, we need to have the relevant people power, which we do have. But yes, look, we're certainly very confident that we'll be able to find a new partner for these going forward.

Thanks, Chris. And I think it's worth saying that, as I said before, with respect to, for example, the relationship we built with Biohaven for CGRP, our objective would be to find a partner that brings expertise to the clinical study of agents for schizophrenia and/or dementia. So a partner with their own franchise, their own clinical experts and a track record is really just as important as the financials for the program to give a solid foundation to move the program forward into the future.

Okay. So I'm interested in HTL'878. So does this program has the potential to expand as a [ pyschotic ] drug disorder, for example, major depression disorder or bipolar disorder something or something? So and I wanted to avoid [indiscernible], so probably this is [indiscernible] information. So is this compound [indiscernible] or long-acting [ injection ]?

That's a good question. So the obviously, the M4 mechanism is a new mechanism in schizophrenia. So it's not as well understood as those compounds that have been reformulated for depot. It may be that, that's possible in the future, but a much more clinical experience would be required to understand the PK/PD requirements to deliver that. I think the really exciting thing about the mechanism and to a certain extent, demonstrated by Karuna's data is that it seems to work. It does modulate dopamine, but in a way that doesn't give the other side effect issues that the typical and atypical antipsychotics do and make them very poorly tolerated. So the key thing will be a new mechanism with a better tolerability profile, which would allow patients to stay on drug and therefore, not need to have a depot to ensure that they get exposure of their treatment because the treatment will be well tolerated and not have the undesirable side effects that really hamper the treatment of patients.

Okay. Thank you. So I wouldn't ask one more question, but that's the time [indiscernible] has come. So we'd like to close this Q&A session. So thank you very much for your time, Chris and Miles. I appreciate your presentation and Q&A. Thank you.

Thank you, Wakao-san. Thank you.

Thank you.