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

[Interpreted] Good Morning, everyone. Thank you for joining us today despite the early morning. From now on we will start the briefing session about the license agreement with new client which was announced on day before yesterday. So I am Hironoshin Nomura, manager of IR and Corporate Strategy department for Sosei Group. [Technical Difficulty] moderator for today, thank you very much. Regarding the details of the alliance, we posted an explanation [ booklet ] on our website a day before yesterday. So in order to answer as many questions as possible today, we will place the explanation with the video and the presentation material is posted on our Home page. And today, we have from our company CEO, Shinichi Tamura; CFO, Chris Cargill; and Chief Medical Office Tim Tasker, all participating and present at this time. Please check the explanation with the video and the presentation material posted on our Home page. I would like to proceed [Technical Difficulty] focusing on questions and answers. And explanation materials are uploaded to our website. So we will share it on the screen but if needed please access it from the Latest News on the top [Technical Difficulty] information at the top right of the home page. Today, simultaneous interpretation is provided, so please click the interpreted button on the bottom right of your screen and select the Japanese language. Chris Cargill and Tim Tasker will speak in english [Technical Difficulty] [Operator Instructions] So let's start. If we have any question please?

[Interpreted] So Miura, from the Jefferies Securities.

[Interpreted] This is Miura from Jefferies. Can you hear me?

[Interpreted] Yes, we can hear you. Good morning.

[Interpreted] Congratulations for your deal. I have 2 questions from my side. The first question is that your partner is the Neurocrine in the U.S. So what is the background to partnering with the Neurocrine? And do you have any potential other [ new ] biopharma? And why you decided to partnering with Neurocrine? So this is my first question.

[Interpreted] Understand. So let me answer to these questions. So this is a very attractive deal. So of course, we have thought about the various biopharma company and also well known companies have inquired us. And at the beginning, we have considered various. But those who evaluated our portfolios very highly and also have the past records and experiences. So as a best partner, we have selected Neurocrine as a partner.

[Interpreted] You mentioned this is a very attractive set. So when I confirm, this M1 and M4 programs and your -- the past experience partnering with Allergan, that's over the $6 billion. So after 2013, as one program, this is our largest deal size we have realized this time. So why do you think this program is valued highly and how much this will contribute for the improvement of the treatment modality for the Alzheimer's disease as well as schizophrenia.

[Interpreted] As for this, I will ask Chief Medical Office, Tim Tasker who is going to answer to these questions.

Thank you. [Foreign Language] So the partnership covers a range of programs. The most advanced one is 878, which is a first-in-class and selective and oral M4 agonist, which is expected to enter Phase II proof-of-concept next year for schizophrenia that also has potential in other neuropsychiatric disorders: psychosis in bipolar, Parkinson's disease and Alzheimer's dementia. The second key molecule is 537, a dual M1/M4 agonist, which is preclinical and the potential to enter Phase I in 2022 and more likely 2023, which affects both psychosis and cognition. And then there are M1 agonists, which are currently preclinical, which will enter Phase I in the first half of 2023. But these compounds are derisked. The targets they work on for M1 and M4 are established and clinically validated targets in schizophrenia, Alzheimer's and other dementias such as Lewy body dementia. And their selectivity allows for an improved safety profile without the need for combination therapy to minimize side effects and the direct agonist approach does not require cooperativity with acetylcholine compared with other compounds, which are positive allosteric modulators. So we think there's a portfolio of important compounds which has the potential to address multiple disease areas where there is significant unmet clinical need. And we're very excited about the opportunity to develop them with Neurocrine. That concludes my answer.

[Interpreted] Mr. Miura, thank you very much for your questions. So we would like to move on to the next questions. So Mr. Tsuziki from Mizuho Securities. Please unmute and ask questions.

[Interpreted] I am Tsuzuki from the Mizuho Securities. Can you hear me?

[Interpreted] Yes, we do.

[Interpreted] So I have several questions. The first question is regarding the same questions from Mr. Miura. So you have also have inquiry from the other large pharmaceutical and total sum might be larger, but you select the one which will make the more development of your own compound.

[Interpreted] So then let me answer to these questions. This is a general perspective, so milestone and also upfront and also reality and also their capability of development. So the general perspective, we found that Neurocrine will be the best partner for us. That's all.

[Interpreted] So in the other case in Allergan that the $55 million was used. But this time, you do not disclose, but would you please explain to me about this. So you are in charge of the Phase I and the [indiscernible] clinicals, so the activities you are going to receive some supplemental money from Neurocrine. Am I right?

[Interpreted] So this is going to be answered by the CFO, Mr. Chris Cargill.

Thank you, Tamura-san. Yes, that is correct. We will receive research funding. We cannot disclose the exact amount. However, I can confirm, it is more than enough to carry on multiple preclinical programs under the collaboration for a period of 2 to 3 years. Thank you. That concludes my answer.

[Interpreted] I have another question. So $100 million. So this is a large amount of the upfront payments. So well, about the client [indiscernible] the conditions, I think this one was already well priced. So what is the timing for you to go to [ applying ]? Do you have any idea?

[Interpreted] Yes, let me answer these questions. So that the -- yes, we'll be able to suffice the conditions, whether we will go to climb or not -- prime or not. We have some intentions. But the TSE is going to -- the review [indiscernible]. At this moment, we don't know. As long as we suffice -- even though we sufficed the TSE condition, that is not enough, therefore, we will see in what is going to happen.

[Interpreted] I understand. And one more question, please. For this time [indiscernible], well, I have some of the [indiscernible]. The [ first one,] the milestones were earlier, $66.5 million. However, this one of $1,500 million -- so $150 million. So M1, M4. M1/M4 module. So there are 3 programs in total. So for each, so perhaps the $500 million for each? So you are going to have the milestone for each. Is my understanding correct?

[Interpreted] So I think this question is going to be answered by Chris Cargill, our CFO.

Thank you, Tamura-san. Unfortunately, we don't provide a breakdown of the development and regulatory milestones. However, you are correct. They cover all of the clinical and the nonclinical programs. And as you will have noticed, they are more than double the size of what we had previously. We're very happy with this structure, as obviously, it has the potential to bring forward the timing of the achievement of milestones versus if they were or commercial post marketing. That concludes my answer.

[Interpreted] Thank you very much for your questions. Before going to the next question, I'd like to share that you can find out the translation button on bottom right. So when you choose the translation, you can use the translations. So that the -- would you please make sure what the language you're going to listen to by selecting your translation button. So let us go on to the next question. Citigroup Securities, Mr. Yamaguchi.

[Interpreted] My name is Yamaguchi from Citi. There are 2 questions. So my question may be rather similar to the question earlier asked. Within the total deal, you have established development milestone, initial is somewhat small compared to the earlier deal and the development milestone is bigger. And also the sales milestone is small. So compared to the latest deal, I don't know whether it is good the idea for us to compare against the previous deal or not. But do you have intention about the [ deal ] structures. And since you have more programs that in this case compared to the previous deals, therefore, what is the characteristics of this deal structure compared against the previous deal?

[Interpreted] Yes. I'm going to ask Chris to answer this question.

Thank you, Tamura-san. So look, it is inevitable that people will seek to compare and contrast this new deal versus the previous deal. However, I think it's very important to note that this is a different deal. And based on different candidates this time around, different programs, indications and market opportunities, which we know a great deal more about. For example, this time, the real focus of this deal is around the M4 program, which is initially looking at going into a Phase II next year indicated for schizophrenia. So the structure is different to last time. It's also important for shareholders to note that this time around, we retain the M1 agonist development program rights in their entirety for all indications in Japan, and we did not have that last time around. Also, to your point around commercial potential, you will notice that for us, commercial potential is not just in the form of commercial sales milestones but also royalty rate considerations. And we're really happy with the structure of high single-digit to mid-teen royalties on programs here. So that concludes my answer. Thank you.

[Interpreted] I have a second question. So I'd like to ask you the impact to the future business. So first of all, that the development support, so you are going to receive the research funding. So this is going to be included in your revenue, I guess? And also when it comes to development milestone, perhaps seen a step wise approach, Phase II, for example. Are you going to receive the research funding in a step wise manner or at the time of the submission and the appliable, are you going to receive research fund? So this is that the [indiscernible]. I'd like to have a [indiscernible] for me to add the forecast of your revenue.

[Interpreted] Yes. Let me answer this question. And so we have some that the -- our supplemental, the answer from Chris-san, but we have had a bad [indiscernible] -- so let me clarify your questions. So your question is about the milestone structure, right? So in a certain period, research fund is going to be sufficed and also in the long run. What milestone payment is going to be received at what stage? So is my understanding correct? Yes. Okay. Then in that case, I think the best person for you can answer this question is Chris. So Chris, would you please answer this question?

Yes, sure. Certainly, Tamura san. And I must caution that this deal is still subject to antitrust clearance and has not yet completed. And therefore, we have not been through the various accounting treatments. However, the way that the funding will likely be carried out is that there will be funding provided from research activities against the preclinical programs, and those will be treated as pass-through costs. There will also potentially be some small, modest amounts of FTE or research revenues that will be generated. However, as I stated at the outset, we will evaluate this in its entirety subject to completion of the transaction. And at that point in time, we'll be able to give better guidance. Thank you.

[Interpreted] We have had very bad audios. So now I actually gives additional explanations. Compared to against Allergan, this is the questions we have received so far. So I think you know this already, so that we try to make the -- well, that the amount as big as [indiscernible]. So we have a tendency to increase the sales milestones. For example, that -- well, a certain level of money is going to be given. So once we actually reach a certain level of our [indiscernible] revenue such as JPY 500 billion, that the [indiscernible] more realistic. So that the -- well, we need to be sure to what extent we are going to receive the sales milestones. So for example, even though we're sacrificing sales milestone, we can actually increase the development milestone like this way. We have had negotiations 6 months and just onetime payment. Therefore, royalty is going to be more important. So compared to against Allergan, I think royalty has been improved in this collaboration. Thank you very much. Yes, [indiscernible], thank you very much for your question. Sorry, microphone doesn't work properly, sorry. So let us go on to the next question.

[Interpreted] So Mr. Matsubara from Nomura Securities.

[Interpreted] This is Matsubara from Nomura Security. So I'd like to ask M1 agonist. The first question is the development in Japan, the M1 development is in Japan.

[Interpreted] Well, then we ask Chris to answer to these questions.

Thank you very much, Tamura san. Yes. So we have retained the rights to develop the M1 agonist in Japan for all indications. The indications have not been selected yet. This is something that we will do in collaboration with Neurocrine at the appropriate time under the research collaboration. Now this -- we saw this as a very important opportunity for us to add value. Obviously, last time around and throughout the course of the Allergan collaboration, a lot of the focus was on the M1 program. And the M1 program is targeted for its effects on cognition. And we have always thought that it could be useful in dementia, which is a major societal issue in Japan. And of course, Sosei Heptares as a Japanese company is obligated to contribute scientifically to this area. So we have developed a vast amount of preclinical, clinical and regulatory knowledge over the course of the previous partnership, and we want to bring that to bear in this collaboration with Neurocrine, and we thought that this was certainly an area where we could contribute. In terms of the structure of what we have agreed with Neurocrine for the Japan market, we have the rights in Japan. They, of course, have the rights everywhere ex Japan. We envisage development programs in each territory with progress and data being shared. And if in the future, this is successful, Neurocrine has retained 2 options to co-develop and/or co-commercialize the M1 assets together with us in Japan. And those trigger points one, before commencing Phase II studies and two, after receiving top line data from a first Phase II proof-of-concept study. That is how we have structured the pace for ourselves around the M1 agonist in Japan. Thank you. That concludes my response.

[Interpreted] Thank you very much. Then you have mentioned M1 agonist. So the focus area is now -- you have any problem with side effects and that's why you try to develop the other one? Or you're thinking for the backup for the current stations.

[Interpreted] So I would like to ask Tim to answer to these questions.

Thank you. The -- your question is why we have other indications. I think at this point, there's a better understanding of the potential of the programs and the candidates and how to develop them. And in addition, we have a different partner who has a different priority. Neurocrine are active in the schizophrenia area and have programs in that area and a great deal of expertise there. Allergan, we're more focused on dementia. So that's why we are pursuing as the first priority, schizophrenia, and there's an important opportunity there for this new class of therapy, the M4 agonist, highly effective, but better tolerated. But in addition, we still have the focus on M1 and dementia in both Alzheimer's disease and Lewy body dementia, and there is an opportunity there. And there's also the opportunity in the psychosis part of dementias in both of those conditions. It's just that the current programs, the M1 backup programs are less advanced than the M4 program. And that's why we're focusing first on schizophrenia. But we have a very strong interest in the potential in M1. And as Chris has already explained about the Japanese opportunity, there's a great deal of expertise in Japan in dementia and in particular, in Lewy body dementia, which is a significant problem in Japan. And we believe the M1 agonist has a strong potential in that area, as we've previously explained. All of this would need to be jointly decided with Neurocrine following the closing of the transaction. I hope that answers your question and concludes my answer.

[Interpreted] Mr. Matsubara, thank you for your question. then there are many other people who raise hands, but this is the half time has passed, so I would like to pick up some questions. About 50 questions on chat box. So I'd like to ask that if we can ask them to be asked. So the first question is the competitive environment. The Phase II M4 agonist development will be proceeded. So what is the competitive situation in the market. As we have explained in the second quarter, but is there any update? Or do you have any other things in mind? So this is the first question from the chat box.

[Interpreted] So then we'll ask Tim Tasker to answer to these questions.

Thank you. So the -- as your question identifies the M4 mechanism is a very competitive mechanism in schizophrenia. And there are 2 other compounds that act through the M4 mechanism, which have shown good signals of efficacy in the treatment of psychosis. And this gives us great confidence in the efficacy of 878. Those compounds have very different ways of stimulating the mechanism. And we believe 878 is the optimum and the best-in-class M4 agonist approach based on our understanding of the different actions, although clinical trials will be needed to confirm these differences. KarXT from Karuna is a combination mixture of a nonselective compound [indiscernible] with a nonselective peripheral muscarinic antagonist designed to improve the tolerability of xanomeline. This is better tolerated than xanomeline alone, but there are adverse effects due to the antagonist. And that antagonist is an older agent whose pharmacokinetics are very affected by food and not well matched to xanomeline. Cerevel's M4 agonist differs from 878 and this is an important difference as it is a PAM, or positive allosteric modulator. This acts by enhancing the action of acetylcholine at the M4 receptor both centrally in the brain and peripherally. In contrast, 878 is a highly selective partial orthosteric agonist, which acts directly on the M4 receptor without effects on M2 and M3. And it's also been designed to be concentrated in the brain. We believe this will result in less peripheral adverse effects than the Cerevel compound and better tolerability. 878 also does not depend upon natural acetylcholine to act in contrast to the Cerevel compound, and we believe that 878 may therefore be more effective at the M4 receptor in dementia than the Cerevel compound as a result, particularly when used in dementia-related psychosis. So in our view, 878 is the best-in-class approach in this highly competitive field, and we're very excited that we're going to be able to move it forward in this collaboration with Neurocrine. That concludes my answer.

[Interpreted] Thank you very much. Then I'd like to pick up 1 another tough question, let me read out the question. So your question, we have [indiscernible] is that -- is quite similar to the question raised by the other -- from the Nomura Securities. About toxicity of the M1 agonist if we are going to adapt -- there is a question whether you are going to announce this result. So do you still have this plan after partnering with Neurocrine as a result? So the -- which 318, our backups, which compound are you going to proceed with the development? If you have any review on this. So would you please answer?

[Interpreted] So this is going to be answered by Tim once again.

Yes. Thank you. So there is some preclinical work, which is being evaluated and has -- it's close to its final stage. And when that data is available, we will jointly make a decision with Neurocrine, and this will be after the closing of the deal. That is, of course, referring to 18318. We are also talking in this plan about other compounds that are active against M1. And we've already described the plans we have for those to move those into Phase I. And they are equally superior molecules, which have been designed using the same approach as 18318. That concludes my answer.

[Interpreted] If we have more time later, then we're going to pick up these several questions from the chat and the Q&A field. So let us go back to the audience questions because I have seen several hands raised from [indiscernible], please unmute and start taking your question, please?

[Interpreted] This is [indiscernible]. So there are 2 questions. First, this time, the development in Japan is going to be conducted by yourself at the Sosei Heptares. And also when it come to the indications, you retain the right to all the indication for M1. So this is a very broad indications. M1 and M4 [indiscernible]. So do you -- there is -- so do you have any reason why you don't want to retain the right for the M1 and M4 [indiscernible]? And also about the Japan's stride as a whole. So you have actually as well emphasized that you just retain a right for M1 for all indications. But this time, from Sosei side, do you have a strong intention to retain those rights in your negotiation with the Neurocrine? That is my first question.

[Interpreted] Yes, about this, the CFO, Chris-san is going to answer this question.

Yes. So look, I think the question centers again around our retention of the M1 rights for Japan. The real reason behind this is, as I stated earlier, throughout the previous 5 years of work, a lot of the expertise and knowledge that we built up at Sosei Heptares was around the M1 programs. What was least advanced in the past was the M4 and the [indiscernible]. And as these 2 programs are likely to be active in neuropsychiatry and schizophrenia in particular, this is going to be the domain of our partner Neurocrine. And so the way that we have structured this collaboration is that it is now our job to deliver multiple high-quality preclinical M1 programs under the research collaboration. And then once we have done that, work with our partner, Neurocrine, to assess which, if any, of those programs is the best one to take forward. And as we have stated, our interest in Japan lies a lot from our heritage, the fact that we're a Japanese company, the fact that dementia, in particular, and associated illnesses are of a high social priority in Japan, and this is an area where we had already started doing significant work over the previous period. That concludes my answer.

[Interpreted] Additional question, please, about this point. When it comes to the Japan side, do the Neurocrine have a stronger intention to get such the right because in Takeda, that the -- well, they have already overstayed global -- the right, including Japan's territory. Therefore, did you have -- did you see that Neurocrine said that they wanted to get the right for the development in Japan?

[Interpreted] I think this question is going to be answered by Chris once again.

Yes. So we had a strong desire to retain the rights to M1 in Japan. And it doesn't mean, of course, that our partner, Neurocrine, is excluded because the way that we've structured the deal is that Neurocrine have the option to join us on the co-development front, and the co-commercialization front of the M1 assets in Japan. It's just that our resources and our knowledge and expertise in the M1 area is such that it's better for us to focus our efforts and retention there, while our partner, Neurocrine, a specialist in neuropsychiatry. It's better that they focus their efforts around the M4 and the M1/M4 going forward. That concludes my answer.

[Interpreted] Okay. So my second question is related with my first question. So then coming to the right in Japan, Japan territory. So the Neurocrine has some options. So Neurocrine may be able to join. Finally, for example, Phase II, at the stage of Phase II, perhaps for you Sosei, perhaps you are going to -- do you hand the development over to Neurocrine? Is my understanding correct?

[Interpreted] This is going to be answered by Chris once again.

Thank you, Tamura-san. Yes. So as I mentioned earlier in my answers, they have the option to opt in and codevelop. And they've got one option trigger, which is before commencing Phase II studies. And then they also have another opt-in trigger, which falls after top line Phase II proof-of-concept data readout on the programs in Japan. So 2 options for them to participate and share the costs and risks associated with development, but also, of course, share in the upside and profit share upon a successful path forward for these programs. That concludes my answer.

[Interpreted] Thank you very much for your questions. So I would like to go on to the next question. From [indiscernible].

[Interpreted] I'm [indiscernible] Securities. Can you hear me okay now?

[Interpreted] Yes, we can hear you, but we have some hearings. Would you please adjust your setting for your PC because we still have difficulty in hearing.

[Interpreted] Can you hear me okay now? Better?

I [Interpreted] Yes, I can hear you better. Yes, I can hear it clearly. Thank you.

[Interpreted] My name is [indiscernible] Securities. I'd like to raise some confirmation first. So the -- when I take a look at the presentation material, Page 7, so that the -- well, you have to go through -- you have to have a [indiscernible] against the American that the -- well out of the antitrust [indiscernible]. So you're going to receive $100 million in this case. But is my understanding correct that although you have some -- you have still some conditions to clear, the Antitrust Improvements Act that are you going to receive the $100 million as a payment. Is might understanding correct?

[Interpreted] Yes. So this question is going to be answered by our CFO.

Sure. Thank you very much. So yes, the transaction, similar to last time actually, [indiscernible], is subject to a very standard process called Hart-Scott-Rodino antitrust clearance. We do not envisage there being any issues with the transaction clearing. However, there is a period of time that this transaction will be assessed by the FTC. And once cleared, the transaction will complete. And we will be entitled to receive the upfront compensation, as mentioned, which is USD 100 million. That concludes my answer. Thank you.

[Interpreted] Can we think that it can be regarded to be a revenue for this phase -- fiscal year?

[Interpreted] So since this is a simple question. So there is no problem for us to anticipate it's going to be a revenue for this fiscal year.

[Interpreted] Then since this is a good opportunity, I would like to ask you that this time, that you have -- my concern is about the patent. So the contract period. So it is about from the 10 years or later from the commercialized. And I don't think it will have any problem with the patent. When the patents expire, then you will not lose the right to get the license. So 10 years from the commercializations or even expire from the patent, but for 10 years, you have a right to get the payment, right? So I'd just like to confirm.

[Interpreted] So I'd like to ask Chris to answer to these questions.

Yes. Look, we're not expecting any issues regarding the longevity of the patents. And as long as the patents are in place, we are entitled to receive royalty income. That concludes my answer.

[Interpreted] I understand. Thank you very much. Related to this, I have another question. In the past, the development has been reserved or was stopped. And then the reason for you to select the annual client or how to see then compare with the experience with Allergan. So I'd like to know how much the portion they do have, what new client have.

[Interpreted] So let me answer to this question then. As you have mentioned, to partner with the big company then they are dealing in many compounds. So sometimes there is a risk that -- so they take up money and then they don't proceed with co-development. But the Neurocrine is expertised in the neuropsychiatric areas, so they have enough asset and also the capability of development, and they do have a passion to do it. So how much they have committed to the resources, so that is the reason why we selected Neurocrine to be our partner. That answer the question?

[Interpreted] Mr. [indiscernible], thank you for your questions. So I would like to move on to the next questions. So Mr. Arai from Bank of America.

[Interpreted] I am Arai from BofA Securities. So I have one question. So the partnership this time and also [indiscernible] translated [indiscernible]. So what is the balance when you decided to do the partnership with Neurocrine so that you achieved that good revenue? And the next fiscal year -- so the [indiscernible] is not easy to have the operating income and to keep achieving the operating incomes. So what kind of the effort or idea you have for this partnership deal or make it like $100 million and then try to reserve it for the next fiscal year to achieve this operating income next year as well? Do you have any kind of the structure you have thought about?

[Interpreted] Well, let me answer to this question then. The deal is deal. So prime is not considered to work on the deal. So the prime is what the [indiscernible]. So we don't know. So even if we have the profit, but we will normally explain that we're going to have the continuous profit, but [indiscernible] would decide if it is or not. So without knowing the situation, and we will not change or manipulate the deal for that.

[Interpreted] Mr. Arai, thank you very much for the question. So then I would like to move on to the next question. [indiscernible] from Morgan Stanley Securities.

[Interpreted] And this is [indiscernible] from Morgan Stanley. Mr. Tamura, nice to meet you again. So I have a similar question. The economical or financial deal, how this deal has been decided? So my question is, for example, other candidate partnership structure like a royalty more than 30% or not or upfront maybe the $5 million or so. So are there any other attractive offer from the other company and why you didn't go for that, and you selected Neurocrine as your partner?

[Interpreted] Let me answer to these questions. And if it's not enough, then Chris may add. But the important is Phase I and then preclinical. So upfront, I think this is at the most. So $30 million or $50 million. Of course, it is better, but I think this is not realistic in that perspective, same with the royalty. So the 30% said, well, if it is already approved or Phase III stage, then -- but this is still the Phase I completion period. So I think that a mid double digit, I think it's enough and sufficient. As I have mentioned, this is not only the financials, but also the higher potential of the success. So that's the upper end number. But without any success, so the general judgment perspective, we have decided that Neurocrine to be a partner.

[Interpreted] So in your perspective, then there are many other candidates, but the financial -- the offer are similar to each other, but you selected the one which have more commitment on this program. That is the reason of your selections?

[Interpreted] Well, due to a nondisclosure, but it is not that competitive. So I try to find the partner to be very passionate and also full committed partner. That's all from my side.

[Interpreted] Mr. Mark, thank you very much. So as we come closer to the ending time, so from my side. So I'd like to pick one question from the question-answer box. To ask a question to you. And then the question I will not come on this. During the webinar, please post it to the question and answer box. Then during the period of time, if -- the time is limited, but then we will try to find any way to answer to your questions. So since that would not be shown later, so please write and post it to the question-and-answer box. [indiscernible] we have just received. I would like to pick up one question. So this time, the [indiscernible] deal was established. So this is the great progress for us. And within this, so to say that the policy for business development, do we see any changes about your policy or the Sosei business? So would you please answer this question?

[Interpreted] Sure. Let me answer this question. Yes. This is a very great deal for us. As mentioned earlier, many times already in the short run, so that the upfront payment is used for the rich -- enriching the R&D and pipeline. So then we receive milestone payments in the midterm. So we are going to have a very favorable financial terms. Eventually, as I have already said, if everything goes very well, -- so the [indiscernible], so in this case, the royalty was only a half because it's just the one single deal. If everything goes well, so that the royalty could have been better, much better from Novartis, so we can stabilize the financial times. Therefore, when we think about the risk benefit the balance, at this moment, we are in the preclinical stage and we will go up to Phase I, Phase Ia, that is the maximum we can do. But if we try to add aim that the more value-added area, so we may think about the change of business model to this end. In order for us to do that, I think this deal is very attractive for us. This -- the collaboration is working for us.

[Interpreted] So it is almost time for us to close. So I'd like to close this explanation meeting. Thank you very much for raising the so many questions. Within this period, we are not able to answer all of those questions. We are sorry, but we are going to provide the answer to the questions later. And also this the well -- meeting, this video is going to be uploaded to our home page. Therefore, you can refer to this the video if you have further questions. So lastly, Mr. Tamura, the CEO, is going to say a few words of the closing.

[Interpreted] So I'd like to be very brief. Thank you very much for joining the online webinar on our expansion meeting. And this the collaborations and it reflects that our business model has been working very well. So that on continuous basis, we'll be able to generate that the cycle -- the neuropsychiatry area products. [indiscernible] technology such as the GPCR, we are going to enrich our pipeline. And also, we are going to have a chance to purchase [indiscernible] company. And we'd like to strike the balance -- a good balance between risk and benefit. And we would like to be the world leading bio venture from Japan. This is our proceed on the [ planning ]. So I would like to seek for that. I'd like to ask for your kind cooperation and support us still in the future. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]