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

[Interpreted] Good evening. Thank you very much for your participation in our earnings call despite the late timing of the day. I will be serving as a facilitator today. I am Nomura, Head of IR and Corporate Strategy, Sosei Group. Our participants today are Tamura, CEO; Christopher Cargill, CFO; Miles Congreve, Chief Scientific Officer; and Matt Barnes, the Head of Drug Discovery. We'll be covering the business situation of fiscal year 2021. And then in the last 30 minutes or so, we will take questions. And the presentation materials are available in our corporate website. So you can find from our IR presentation topic over home page, if you need it at hand. And simultaneous translation service is available. There is English selection or Japanese selection button, with a global sign at the bottom of the screen. You may choose either Japanese or English. And if you choose off, it is the speaker's original sound. And we are very sorry about for the Q&A sessions, we'd have to divide you into 2 groups. For institutional investors, analysts and the media, when it comes to the Q&A, please speak up unmuting your microphone assets. You can ask questions at any time during this session from the Q&A button at the bottom of the screen. And we will be responding to you as many as we can in the QA. And your registered name at the webinar will be attached to the questions, but it's not disclosed to the other participants. Now I would like to start. Please look at Page 5.

[Interpreted] Hello, I am Tamura, Chairman and the CEO. Since our founding, we keep our vision of becoming a group of biotech champion originating from Japan by solving the challenges of the drug discovery. Japan has a world-class track record of increasing average life expectancy while reducing national health care costs. On the other hand, due to the low drug price policy, the price of drug is the lowest among the developed countries. As a result, major foreign manufacturers are deliberately delaying the development of their products in Japan in order to avoid being dragged down by the drug prices in Japan. When I first entered the pharmaceutical industry more than 40 years ago, there was a problem of a so-called [ drug rag ], where drugs approved in Europe and the U.S., were not approved in Japan. After that, thanks to the efforts of the MHLW and the PMDA, the drug [ drug rag ] has since been considerably eliminated. However, we are now in an ironic situation. We have foreign manufacturers voluntarily delaying the development of their products in Japan. The industry and the government agencies are working on a solution, but I think it is difficult to expect a quick fix. Reducing health care costs in an aging society is a prerequisite for healthy social development. In order for biopharmaceutical companies to grow in this environment, it is necessary to develop new drugs, mainly small molecules at low cost and to have a strategy to meet the unmet medical needs that are truly needed. To that end, it is essential to capture untapped drug discovery targets. Next slide, please. About 400 GPCRs are set to be potential targets for drug discovery, of which about 25% or 100 have already been discovered. In 2018, sales of drugs targeting GPCRs was about JPY 20 trillion, which is a very large drug discovery target accounting for about 1/4 of the total sales of all drugs in the world. On the other hand, about 75% of them is still untapped and this is where we are focusing on our efforts. However, the question that naturally arises is why no drugs have been developed for 75% or about 300 types of GPCRs untapped, even though it is on such a great target. GPCRs have a very competitive structure that crosses cell membranes 7 times. When conducting normal drug discovery, it is necessary to artificially create such GPCRs in the laboratory by taking them out of the cell membranes without destroying their structure. However, such a complex structure inevitably collapses, which is why it is extremely difficult to develop drugs for the remaining 300 GPCRs or about 75%. Therefore, we have developed a new method to analyze the structure of GPCRs by using StaR technology, which stabilizes the fragile structure and to develop new drugs from it. That's our unique system and the source of competitiveness. And the reason why we have been able to conclude many licenses with major companies around the world. Next slide. Our StaR technology is our greatest strength. But our unique IT-based SBDD is also an excellent technology as shown in this side, which is proven by the results in the next slide. Of course, we have also introduced AI and machine learning to increase accuracy. Next slide, please. This is our drug discovery track record, and it shows the features I explained in the previous slide. We are the world leader in IT drug discovery for GPCRs. Currently, the main focus areas of disease are: the neurology, immunology and gastrointestinal. However, of course, we are facing competition. We are not resting on our laurels, but introducing innovative technologies and expanding our partnerships with various companies to maintain and develop our proposition. For more details, Miles Congreve and Matt Barnes will explain later. Next slide, please. I'd like to touch on the relationship between biotech ventures and major pharmaceutical companies. For the last 20 years or so, about 70% of drug discovery has been down by venture companies, where the remaining 30% by major pharma. Venture companies have been playing a leading role in the discovery of the drugs in other words. They originally discovered them. On the other hand, the percentage of drugs sold by major companies was about 20% in 2020. Roughly speaking, venture companies to discover as of the 70% of the drugs, but only about 20% of the drugs now are actually sold by them. And the remaining 50% are licensed to other major companies, from which they receive upfront payments, milestone payments and royalties. That is the business model and our business model is exactly this type of licensing business model. After discovering the drug and conducting the initial development, we license it out to major pharmaceutical companies to earn income. Next slide. Against this background, the license agreement is important for many venture companies. This slide shows the data from Evaluate Pharma, a well-known database in the pharmaceutical and the biotech industry, shown the list of top 15 pharmaceutical and biotech companies by the cumulative total license value from 2015 to the end of 2020. For example, the major companies are conducting those licensing -- AstraZeneca, Daiichi Sankyo, which are major pharmaceutical companies ranked at the top. And including these major companies, we are ranked 7th in the world, which is a very high position amongst approximately 2,100 analyzed. On the other hand, this amount is a sum of the upfront payment and milestone payments and does not include the royalty income, which is a certain percentage of sales. So it is not necessary the entire amount. So that has to be a point to be noted. And on the left-hand side, we show the -- after the 2015 March, the trend of the milestone payment. And for both the milestone outstanding amounts, it's been steady increasing. Now I'd like to talk about the potential of our existing partnerships since the acquisition of Heptares in 2015, we have been demonstrating results. And this quarter, we made another large partnership with Neurocrine. In total, we have $4.4 billion balance of potential development and proven milestones for our existing partnerships, which we may receive this year and in the next 10 years. Sales milestone totaled $4.5 billion, which we may receive after product launch. In addition, royalties are expected to provide a fixed percentage of revenue over time. Existing contracts has a maximum royalty rates in the mid-teen percent range. Total peak sales of a single product in a targeted disease are calculated to be $4.3 billion (sic) [ $43 billion ] annually. The total market for the target disease is $25 billion (sic) [ $250 billion ] per year. It is a big amount. And as market data details, it is found in the appendix. So please refer to them later on. Now Mr. Chris Cargill will now explain the consolidated financial results for the fiscal year ending December 31, 2021.

Thank you very much, Tamura-san. Please turn to Slide 13. And good afternoon, everyone. My name is Chris Cargill, Chief Financial Officer of Sosei Group Corporation. I am pleased to report another year of successful execution and strong financial performance. Throughout FY 2021, we continue to execute on a long list of goals. The most significant achievement by our team will be investment, development and successful license of the muscarinic programs to Neurocrine for USD 100 million upfront and USD 2.6 billion in future milestones. Recall, we only regained the muscarinic program from AbbVie 12 months earlier in January 2021. So the fast turnaround time to create significant value is something that we are very proud of. The Neurocrine transaction was the main driver behind our third consecutive year of profitable performance. And we were profitable despite increased investments in R&D as well as unplanned noncash impairment charges and a nonrecurring contingent consideration charge. International investors further supported us in FY 2021, helping us to raise an additional JPY 10 million via convertible bonds. We ended the year with approximately JPY 60 billion of cash, so we remain very well positioned to invest and expand corporate value from 2022. And the group will continue to pursue a balanced model and sustainable financial profile. Please turn to Slide 14. This slide shows the group's revenue and operating profit for the 12-month period ended 31 December 2021. As I mentioned on the previous slide, our transaction with Neurocrine drove exceptional growth in revenue and operating profit. On the left-hand side, you can see revenues increased 100% to JPY 17.7 billion from JPY 8.8 billion in the prior year. In addition to the Neurocrine transaction, good progress across our discovery and development collaborations also drove additional milestone revenue income from partners: GSK, Pfizer, Genentech and AbbVie. This diversity of partnerships is supporting increased revenue sources and sustainability for the company. On the right-hand side of the slide, you can see operating profit increased 370% to JPY 3.8 billion from JPY 0.9 billion in the year prior. This was a fantastic result given we also had a planned increase in R&D expenses as well as the unplanned noncash investment -- noncash impairment rather. Please turn to Slide 15. This slide shows the group's income statement for the 12-month period ended 31 December 2021. Our emphasis on collaborative drug discovery partnerships drove a balanced split of revenues, which you can see on the right-hand side of the slide. Multiple sources of revenue enabled us to modestly increase our R&D investment, and this incremental investment will create future long-term value for the company. As I already covered our strong revenue and operating profit performance on the previous slide, on this slide, I wanted to discuss the noncash costs and nonrecurring costs in the income statement. Item #1, noncash costs. A large proportion of this figure around JPY 3 billion relates to a collaboration partner's decision not to progress older licensed drug candidates. And to instead focus their development efforts on next-generation candidates with novel chemistry and longer patent protection. We, therefore, impaired the older programs to zero value. Item #2, net finance costs. A large proportion of this figure, JPY 2.9 billion relates to a nonrecurring contingent consideration provision to cover the USD 35 million liability to former Heptares shareholders arising from the Neurocrine transaction. The requirement to pay contingent considerations to former Heptares shareholders on new licensing deals has now expired. And therefore, we do not expect any significant provisions or charges for this in future years. Please turn to Slide 16. This slide details the introduction of a new financial indicator called core earnings, which is favored by investors and features in our financial results presentation here. Our income statement presentation is now in a similar format to other major TSE prime listed Japanese pharmaceutical companies. The format is based on IFRS figures. We have chosen to adopt core earnings as we recognize institutional investors are often interested in the level of core recurring earnings in the business. As you can see on this slide, we are extremely pleased this year that we were able to grow our core earnings by 206% to JPY 8.9 billion from JPY 2.9 billion in the prior year. Please turn to Slide 17. This slide highlights the group's balance sheet as of 31 December 2021. Positive operating cash flows and another successful capital raising in the company is well positioned to invest in enhancing corporate value. On the right-hand side chart, you can see we generated almost USD 64 million of positive operating cash flow, and this is a direct result of our collaborative drug discovery strategy with the costs and risks are shared with major partners. Together with the approximate USD 100 million of fresh capital raise, the company finished the year with cash at hand of JPY 60 billion. Please turn to Slide 18. This slide shows our guidance for financial year 2022. But before I discuss this guidance, a brief note on how we performed against our guidance last year. For R&D costs in FY 2021, we guided to a range of JPY 5 billion to JPY 5.75 billion on a cash basis, and our actual result was JPY 5.5 billion, on a cash basis, which was within the guided range. On an IFRS basis, the actual result was JPY 5.9 billion, as shown on this slide. For G&A costs, we guided to a range of JPY 1.8 billion to JPY 2.3 billion on a cash basis. Our actual result was JPY 2.5 billion, on a cash basis, slightly above the top end of the guided range and largely due to the impact of the strong Great British Pound. On an IFRS basis, the actual result was JPY 3.9 billion, as shown on this slide. Now moving to our FY 2022 guidance. Guidance for forecast R&D and G&A is on an IFRS accounting basis, and this is to align with our new financial disclosure policy going forward. Once again, in FY 2022, we plan to make modest increases in investment to push our in-house programs forward to support the addition of new major partners and to drive a step-up in our long-term corporate valuation prospects. We expect R&D expenses to be in the range of JPY 5.75 billion to JPY 6.75 billion on an IFRS basis. For reference, and as described earlier, our actual figure in FY 2021 was JPY 5.9 billion on an IFRS basis. The potential increased level of investment will be used to grow capacity and progress priority programs towards early clinical development as we seek to build the most value programs ahead of future partnering. We expect G&A expenses to be in the range of JPY 3.75 billion to JPY 4.25 billion on an IFRS basis. Our actual figure in FY 2021 was JPY 3.9 billion on an IFRS basis. This investment will be primarily used to maintain functional support teams and to continue enhancing our governance practices. Thank you. Moving to the operational highlights now. Please turn to Slide 20. This slide shows the excellent progress that we continue to make against the objectives that we set ourselves at the beginning of FY 2021. Executing against these core growth initiatives will secure a long-term value potential for the company. Miles, and Matt will speak through our strategy and progressing at several of these organic and strategic initiatives, and therefore, I will only briefly mention the 3 items where we fell short last year in FY 2021. Item #1, organic growth and our goal to execute 2 to 3 new high-value collaborations per year. Ordinarily, we aim to execute 2 to 3 major collaborations. However, in FY 2021, we chose to focus on executing one very big transaction, the license with Neurocrine. We will continue to target multiple transactions in a year going forward. However, when large transactions are achievable, we will focus on ensuring those types of partnerships are executed as a priority. Item #1 under strategic growth, seeking out revenue-generating opportunities, including M&A, we continue to work with professional advisers to analyze opportunities. We actively due diligence on opportunities in FY 2021 and raised additional capital in advance of an opportunity. However, we chose not to pursue specific transactions, as they did not make strategic sense, nor were they valued appropriately. This item will be a key area of focus for us in FY 2022. Item #4 under strategic growth, in-licensing late-stage assets for Japan. Again, we continue to work with professional advisers to analyze opportunities. We actively did diligence on opportunities in FY 2021 and raised additional capital and advancement opportunity. However, we chose not to pursue specific transactions, as they were not sufficiently derisked scientifically, nor from the perspective of being broadly tested in the clinic. This item will again be a key area of focus for us in FY 2022. Please turn to Slide 21. This slide shows a snapshot of our pipeline, which we expect to fuel significant upside potential over the longer term. There are a few programs that I would like to point out as the ones to watch over the next 12 to 24 months. On the top half of the slide, the program shaded in blue with green stars. These are our newly partnered muscarinic agonist programs with Neurocrine. Each of these programs has the potential to generate pipelines in a product, delivering transformative new treatments for patients living with schizophrenia, dementias and other neurological disorders. Further to these programs, we have a very diversified roster of partners, advancing programs across the spectrum from prediscovery through to clinical development. On the bottom section of the slide, the program shaded in orange with the orange stars. These are our prioritized in-house programs that we intend to take into early clinical development test hypotheses, build data before hopefully executing major license partnerships. The programs include a GPR52 agonist for neuropsychiatric disorders, a H4 antagonist for atopic dermatitis, an EP4 antagonist for immuno-oncology and finally, an EP4 agonist for IBD. Please turn to Slide 22. This slide shows a list of our major licensing and collaboration deals with the majority being new partnerships executed within the last 3 years. It is worth noting that each of these partners has chosen to work with us, specifically on GPCRs or the GPCR system. The partnerships validate our technology and credentials with many billions of potential economic value to us in the future upon successful progress. Please turn to Slide 23. As I mentioned earlier, we have prioritized our next wave of potentially high-value programs. And these are the 4 programs that we hope will support future Neurocrine style, large global licensing deals. The programs target a range of CNS inflammatory and immune-mediated disorders. We have committed enhanced levels of investment towards these 4 wholly owned programs over the next few years. Our aim is to build differentiated clinical data packages for each program that could support early signals of efficacy. The programs represent a balanced mix of normal first-in-class and best-in-class targets with all programs being potential treatments for patients with serious illnesses with high unmet medical needs. The target product profiles are largely designed to be convenient, once-daily oral small molecule treatments. We will host an R&D investor event in the second half of 2022. And at that time, we look forward to sharing more information on the specifics of these programs, including the translational medicine strategy and clinical development plans. I will now hand over to Chief Scientific Officer, Miles Congreve, to talk about future themes and organic growth initiatives, shaping our business. Thank you, and over to you, Miles.

Thank you, Chris. So as Chris has said, our organic growth objectives were to execute 2 to 3 new high-value collaborations and co-investments every year and expand our expertise in GPCRs. So we're delighted to have found Neurocrine as a strategic partner at the end of 2021, and I'll describe this collaboration in a bit more detail in a moment. We've also continued to update and develop our drug discovery platform focused on GPCRs in 2021. So next slide, please. Our new collaboration with Neurocrine is focused on developing novel muscarinic receptor agonist for schizophrenia and other neuropsychiatric disorders. The collaboration gives Neurocrine the rights to our portfolio of potential best-in-class selective muscarinic receptor agonist for the treatment of major CNS disorders. As part of this Sosei Heptares has received $100 million upfront payment at the end of 2021. We will also receive ongoing R&D funding to help support Neurocrine team. The collaboration has the potential to deliver up to $1.5 billion in development and regulatory milestones and up to $1.1 billion in commercial milestones, plus tiered up to mid-teen percentage royalties on net sales. Sosei Heptares has negotiated the right to develop all muscarinic M1 agonists in Japan in all indications with Neurocrine receiving co-development and profit share options. The focus on the collaboration is initially on moving the most advanced asset, which is an M4 agonist, into a Phase II study in schizophrenia. However, the collaboration contains a portfolio of potential CNS drugs, including both dual M1/M4 agonists, and selected M1 agonists in preclinical development. And these assets will also be progressed over the coming years. We have established an excellent relationship with the Neurocrine scientists, and I'm confident that this collaboration will be very successful. Next slide, please. In more detail, our M4 agonist designed using our StaR drug discovery platform is HTL16878, which is now called NBI-1117568. This agent is competing with the Karuna xanomeline and trospium fixed-dose combination and also the Cereval M4 positive allosteric modulator or PAM. We believe the single agent that is a highly selective m4 receptor agonist directly acting as an agonist rather than a modulator, will get the best overall benefit to patients with the minimum side effect profile and the best -- and be best in class. Neurocrine shared this view. More specifically, NBI568 will avoid non-M4-receptor muscarinic side effects. It will mitigate peripheral M4 receptor on-target cardiovascular effects. And due to being a direct agonist with a different profile to a PAM, we believe an M4 agonist can be more effective in patients who like [indiscernible] time and therefore, giving broader benefits. Importantly, the data generated in the clinical studies carried out by Karuna and Cerevel reported last year gave us a great deal of confidence in the benefits to schizophrenia patients of the M4 mechanism, making this target 1 of the most exciting opportunities in neuroscience at the moment. Working in collaboration with Neurocrine gives us the very best chance of success with NBI-568 to achieve its best-in-class potential. Next slide, please. So turning to our drug discovery platform. As I mentioned, we have the objective to continually update and improve how we find GPCR clinical candidates, and we've made good progress again in 2021 in developing, improving our core technologies. In addition to the original stabilized receptor and structure-based drug design core technologies, we've made tremendous progress in 2021, applying our StaR agents with cryo-electron microscopy to facilitate resolution of protein lipid structures useful for drug design. As part of developing this new approach, we have established a protein-binded toolkit, which helps us to give new protein complexes that are useful for Cryo-EM, giving us structures much more quickly. We have also worked with DEL, DNA Encoded Library vendors, to use StaRs to allow DEL screening for GPCRs, a technique that simply cannot be applied to GPCRs without using our StaRs. This is making a big impact on our hit generation process for more challenging GPCRs that are largely intractable to classical screening approaches to find useful hits from medicinal chemistry. So overall, we continue to have the world-leading drug discovery platform for GPCRs. Turn to Slide 29, please. So in a bit more detail, we've combined these 3 new technologies with our StaR structure-based drug design approach to make our platform better and faster. Firstly, Cryo-EM. We have resolved structures of 12 different GPCRs by Cryo-EM in 2021 and 2020. We've installed our own instrument, and we have access to 2 high-power instruments in Cambridge. Professor Richard Henderson, one of our cofounders and Scientific Advisory Board members, won the Nobel Prize in 2017 for developing this technology. As an example, Family B receptors are implicated in a range of disease areas and are longstanding drug targets. Structure-based determination of these receptors has been historically challenging. We've determined multiple structures of Family B now by both X-ray crystallography and also cryo-EM to enable structure-based drug design. Secondly, our protein-binded toolkit. Most Cryo-EM structures require the introduction of additional protein domains, as the larger the protein particle, the better for this technology. In our GPCR work, these include domains fused to the StaR or introduced during expression or purification. Fusion partners, mini G proteins, nanobodies, antibody fragments have all been successfully now used. And we have a granted patent for our mini G protein technology, which is used to give agonist GPCR structures. In addition to structures, protein binders can also facilitate protein engineering, biophysics and pharmacology. And lastly, DEL screening. So DEL is an alternative strategy for hit identification in early drug discovery. Libraries of 15 billion to over 1 trillion compounds can be produced, giving a much higher chance of finding hits from our conventional screening approaches. And the technique is highly complementary to fragment-based drug discovery, frame-based screening, which we also employ. DEL allows access to an unprecedented level of diversity. Compound libraries have the potential to be engineered with unique features to facilitate the identification of hits, specifically to target GPCRs. In fact, we first reported DEL for our r PAR2 StaR in 2018. And today, 13 different StaR proteins have been subjected to DEL screens, giving a slightly hit against these tailwinds. So that concludes my section, and I'll pass on to Matt Barnes now to tell you about how strategic growth plans [indiscernible]

Thank you, Miles. Good evening, everyone. My name is Matt Barnes. So I'm Head of Drug Discovery. So next slide, please. Yes. So I'd like to continue highlighting our achievements in FY 2021 with respect to strategic growth. We've made exceptional progress by investing or collaborating in novel technologies in the areas of new target identification with companies, such as InveniAI and Verily; new molecule identification with companies, such as PharmEnable and Twist; and we continue to expand our interest in other target classes beyond GPCRs with companies, such as Metrion. Next slide, please. So before highlighting some examples in more detail, I would like to remind you of what we believe are the 3 biggest current challenges in drug discovery and development. So choosing the right targets on the left-hand side, discovering a new therapeutic agent in the middle and conducting the right patient studies on the right-hand side. We've initially focused on choosing the right targets and discovering new therapeutic agents as key opportunities for strategic collaboration, and we've aimed to identify and leverage technology to support this approach. Next slide, please. So how do we -- how do these strategic collaborations complement our existing in-house approach to drug discovery and development. Well, to demonstrate this, we have to expand our view of our prediscovery and discovery area into target identification and validation, structure and hit identification. Our recent collaborations with Verily and InveniAI are designed to support the identification and validation of new GPCR targets in the areas of immunology, which is a core therapeutic area for Sosei Heptares. Also, in addition to our existing core technologies, including the Stabilized Receptor or Star platform, Cryo-EM and DEL screening and general structure-based drug design, we've established collaborations across a broad range of companies with unique platforms to further complement and enhance our ability to discover new therapeutic agents. These range from companies that can insist that can assist in identifying antibodies and peptides, such as Twist and PeptiDream, to those that can help provide new types of small molecules such as Captor and PharmEnable. These collaborations will support our position as world leaders in GPCR drug discovery and beyond. Next slide, please. So let's look at some of the strategic collaboration partners in more detail. So we've established 3 new key partnerships in AI drug discovery over the last 12 months. So firstly, on the left-hand side, in January 2022, we signed a deal with Verily to identify new GPCR drug targets and then subsequently generate novel drug candidates for immune-mediated diseases. The research collaboration combines Verily's immune profile capabilities, and Sosei Heptares' StaR platform and SBDD, to identify GPCRs expressed in immune cells, enhance our understanding of their functional relevance and prosecute as potential drug targets in immune-mediated diseases. I will mention this briefly again in the next slide. But before that, secondly, in July 2021, we entered into a multi-target collaboration with InveniAI. This discovery collaboration combines InveniAI's AI-powered platform for target discovery, that's new target discovery with Sosei Heptares' GPCR SBDD platform and early development capabilities. So this is also identifying new therapeutic product concepts for immune diseases and generate novel compounds that could improve responses to existing immunotherapies. Finally, in January 2021, we signed a further deal with PharmEnable that relates to a technology collaboration to leverage PharmEnable's proprietary, AI-enabled and medicinal chemistry technologies. This allows us try to do novel drug discovery against a challenging peptidergic GPCR targets associated with neurological disease. Next slide, please. So as I mentioned in the previous slide, one of our most recent and exciting deals and collaborations is with Verily. So as many of you may know, Verily is a subsidiary of Alphabet, which is the parent company of Google. And this arm of Alphabet is focused on life sciences and health care and develops tools and devices to collect, organize and activate health data. One such example of this is its immune profile or platform, which utilizes large data sets and combines cytometry, genetics, transcriptomics, epigenomics and various analytics to uncover previously inaccessible signals in the immune system. So by combining various immune profiles with our GPCR knowledge base and StaR platform, we will identify GPCRs expressed in immune cells and enhance our understanding of their function and functional relevance and ultimately prosecute them as potential drug targets in immunological diseases. So next slide, please. So finally, this last slide shows some further recent examples of strategic collaboration partners. This time, with a focus on broadening our approach to discovering new therapeutic agents. So starting on the left-hand side. So in December 2020, we entered into a strategic technology collaboration with Captor Therapeutics. The aim of this collaboration is to initially identify novel small molecules that target a GPCR for degradation as potential therapeutic agents for gastrointestinal disorders. And this continues with the support of high-resolution structural information around the GPCR-E3 ligase complex to enhance our drug discovery efforts. This approach is commonly known as PROTAC, which has recently emerged as a very exciting new era in chemical biology and drug discovery. Next, in February 2021, we announced a collaboration to explore structure-based drug discovery approaches to ion channels. So this is beyond GPCRs with a company called Metreon Biosciences, who specialize in ion channel and so they are our CRO specializing in ion channel and drug discovery. The collaboration aims to demonstrate the potential of structure-based drug design to address disease-associated ion channels with an initial focus on identifying novel, highly specific drug leads for further development against a single ion channel associated with neurological disease. Lastly, in December 2021, we entered into an antibody discovery agreement with Twist Bioscience to discover and develop novel therapeutic antibodies against GPCR targets. So the aim of this collaboration is to combine Twist's synthetic antibody libraries and bioinformatics expertise with our StaR platform to discover therapeutic antibodies against GPCRs nominated by Sosei Heptares. Also, it's worth highlighting that we already have some track record in this area of generating therapeutic antibodies. For example, with companies like Kymab, we're pleased to note that in this particular agreement, Sosei Heptares will have exclusive full global rights to develop and commercialize any antibody leads identified and directed to the targeted interest. So that concludes my section, highlighting our significant achievements in FY 2021 with respect to strategic growth. So I'll now pass over to Tamura-san, who will highlight our objectives for FY 2022. Thank you.

[Interpreted] Let me continue this presentation. Next slide, please. As I said in the beginning, I explained the collaboration business model for license agreement. Of course, license terms would be better if development is advanced. Of course, along with that, you have higher risks for R&D and possibly the risk of failure, high-risk, high-return principle. As a company grows, you need to revisit risk balance. By taking maximum risk, you try to do everything to approval, then you will have a big return. Some risk-taking U.S. bio ventures may do that. On the other hand, if you try to minimize risk, then you can have [indiscernible], that profit would be small. On the other hand, last year, you -- by having a good alliance management you can secure stream -- a steady stream of milestone payments. Already, we have large scale partnerships in our company. And rather than to have many lower value stage goals, we want to focus on pure development assets in clinical stage for high value. And that is in line with our strategies. As Matt and Miles mentioned, platform's productivity should be improved, explore attractive candidates, and we try to have a very attractive candidate. Before that, we will have more R&D expenses for 2022. This year will be the year to charge energy for near-term lead growth. Of course, we will explore possibly big deals. Next slide. Based on my idea, I have shown our objectives for 2022 organic growth, strategic growth, SDG, ESG. First, organic growth. Using internal drug discovery engine, we will start new preclinical programs. At least 1 preclinical candidate per year and at least 2 high value collaborations like the collaboration with Neurocrine and we want to have at least 1 per year. I explained the reason why in the previous slide. Next is strategic growth [ in 2020,] in 2021, we have the fund raising and I explained to you that we will seek opportunities to enhance our corporate value. And we also see collaboration to add value to drug discovery engine. And also we are thinking of in-licensing for late stage to be developed for the Japanese market. [indiscernible] priority is SDG ESG on the economic value, but we need to enhance social value and that will support sustainable growth and we can enhance value for investors. Let we mentioned some points. For environment, we try to reduce CO2 emission. The CO2 from research institute is declining. For social contribution, we have engaged R&D for oral COVID therapeutics and we have received from [indiscernible] [ Wellcome ] foundations in the world, and we provide the supply at low cost to developing countries. For diversity, we have very high level of female manager ratio and non-Japanese employees ratio. We have 21 nationals and the 47 percentage for female in the company. SDG ESG is an important topic. It's not just company activities but it is related to the conscience of the humankind and behavior. We need to commit at personal level. It's just you're talking about it, you need to commit at a personal level. This shows the management team that was part -- of shareholders' meeting and for the directors' meeting [indiscernible]. We have much younger generation and they will lead the company for a long time. And I will stay as Chairman and I will support the new leadership in the company. That's all. Thank you very much.

[Interpreted] [Operator Instructions] I'd like to go to the first question. Please wait for a moment. There seems to be some technical problem. We have a difficulty to unmute the participant. Therefore, we would like to provide answers to the questions that came in the chatbox and also the pre-ask questions. Sorry for this technical trouble. So the first question is one of the most frequently asked questions prior to this call, that's about the share price. The recent share price is quite low. So in order to improve that, what is your measure. And for instance, a share buyback or dividend, could be also a solution? And also in the past, there was a target share price, so how do you see the gap between the target price and the current stock price?

[Interpreted] Thank you. I'd like to answer to this question. You may know from Nikkei and [indiscernible] that we need to consider the individual case and also macroeconomics. And it is true that our stock price has been low, causing some difficulties to you. And yesterday, there was a Nikkei article saying the Mothers market disrupted. And in 3 months, there was a decline of prices, 40%. And also -- It also says that we have an impression that the managers in charge of the market are not really experts. And it is very clear in the stock market in Japan, the analysts would be able to produce even higher return -- and that's about IPO. And there are many people who consider that putting short order is more profitable rather than buying long. But individually, in our case, we are confident that we should be able to increase our corporate value over time. And concerning the possibility of a share buyback, of course, if it's more possible, we'd like to do that. And we have the fund, but there is a regulation. We needed to have a cumulative profits recorded. But on a cumulative basis, we are still running deficits, therefore, we cannot do that. So please give us time. And shifting to the client listing, that's another way. The JPY 10 billion per annum that's achieved so we meet the requirement. But how much we'll be able to do that? We have been discussing with the TSE. So we will try. But again, about 2 weeks ago, there was a Nikkei article saying that from the Section 1, there are some companies decided to move from that because there is a high entrance barrier. There are many restrictions. And once you enter into the prime, those restrictions will be implied -- imposed. Therefore, the overseas investors may not be so interested in that because they don't trust the Japanese market. So they are leaving from their Japanese stocks and that's what the article said. And I have long experience of managing the company and understand those are macroscopic economics, and we had some headwinds. And when we have headwinds, it's better to focus on individual strength. And luckily, we do have the financial capabilities to conduct the investment to continue our growth. So we'd like to focus on that.

[Interpreted] Another question from the chat. We received the question, M1 agonist. So this is a target for impairment this time around. But that means for some compound that the toxicity study result -- you were investigating toxicity study as much as possible, can you explain the progress? That's the second question.

[Interpreted] Chris Cargill will answer this question, please.

Thank you for your question. Yes, we did take the view that we needed to impair the M1 against, and that is for the reason that those programs are now partnered with Neurocrine and it is up to Neurocrine, now that they are the owners of those programs, to choose what they want to progress. And as I said in the presentation earlier, our partner has elected to move forward with new programs, next-generation compounds, those that have novel chemistry and a longer patent life. It's not our place to discuss toxicity results of a program that we no longer own. However, I think we've been very clear that it is Neurocrine's intention. If they do move forward with M1 agonist that they will be using next-generation compounds. Thank you. That concludes my response.

[Interpreted] Thank you very much. the system is back. So we want to enter the questions from analysts. [Operator Instructions] Naoya Miura -- Jefferies Securities [Operator Instructions]

[Interpreted] Naoya Miura from Jefferies. Do you hear me?

[Interpreted] Yes.

[Interpreted] I have 3 questions. First, you mentioned a shift to the prime market sales revenue. You are -- Okay, you have the criteria passing [ JPY 2.06 trillion ], that is income before tax. You have to have [ JPY 2.5 billion ], so you're below that, either revenue or profit income. So is okay according to the prime market eligibility. Am I right?

[Interpreted] Let me answer one by one. You're right. So as revenue and the income before tax -- for the revenue, we -- okay, we passed the criteria, and we are talking with TSE, but there are various criteria including implementation criteria, we don't know how much restrictions [indiscernible] we are going to face. We don't know that. We will negotiate. But as a company, how is this helpful for the growth of the company. Of course, drug price may stabilize. But aside from that, we need to have a careful assessment. CFO, Chris, can have additional comments. Chris, you can go ahead.

Thank you, Tamura-san. Yes, I mean it is clear that we have met the metric on 1 basis. And that enables us, as Tamura-san has said, to have an open dialogue with the TSE regarding a potential move. Now, as Tamura-san has said, that move needs to be considered with respect to what is best for our ability to invest in our programs and to create value for the company because if there are too many restrictions placed upon the company as to how we can operate on a go-forward basis, there will be -- it may be difficult for us to invest in the sort of growth opportunities that we would like to. So we are, as has been said, having a very open conversation with TSE, and we will see how that all plays out over the coming months. Thank you. That concludes my response.

[Interpreted] My second question, in one compound impairment, you explained in your presentation and as a [indiscernible] I felt that Neurocrine is developing new-generation program. Is that right? So that means not only impairment but you need to do something as compensation to Neurocrine as financial compensation. And regarding the M1, you maintained the right to develop in Japan. And for this new-generation program, you -- Sosei is going to lead?

[Interpreted] Thank you. Chris will answer to this question.

Thank you for your question. The answer is, no, we do not owe any compensation or payment to Neurocrine. We simply impaired a number of older M1 compounds that we held on our balance sheet because we know that it is not the intention of our partner to progress them. So no, there is no payments owed to Neurocrine.

[Interpreted] And the second question, that was said. And the third one, simple. Let me answer. Sosei have the right in Japan. Yes, your understanding is right.

Lastly, collaboration with Pfizer's GLP-1 compound. At the Pfizer's earnings call, in the pipeline, there was no update, but it was mentioned in the meeting, Pfizer is developing twice daily GLP-1 compound. And once daily compound -- that data collaboration with you and going forward in Phase II, they may develop in 1 study that was kind of news. And what is your view on this and GLP-1 compound regarding that [indiscernible] also oral once daily small molecule compound. So what is the differentiation point that you then have, possibly properties of compound or sales scheme. Do you have any information on this?

[Interpreted] Miles Congreve will answer to this question.

Yes. Thanks for the question. So yes, we are very pleased to hear the statements made at the Pfizer earnings call on the GLP-1 agonist program. I think this is the first time that our molecule has been described as once daily, and it clarifies that it's a once-daily drug over danuglipron, which is the most advanced compound, which is twice daily. And it was mentioned that there may be advantages for a once-daily drug over twice daily. And so I think overall, we're optimistic that Pfizer will progress the once-daily compound over which we have risen our collaboration into Phase II based on these statements. In terms of the differentiation versus the [ GLP-1 ] compound is difficult to say at this point, we haven't site of all of the detailed information that Pfizer has generated in the clinical studies for our once-daily compound and to compare that with results from the [indiscernible] compound, but we stated that the molecule is an excellent drug, and that there's an opportunity for [indiscernible] as well as danuglipron in further trials. So I think we're very pleased by these statements that were made on that call. That concludes my answer.

[Interpreted] Thank you, Miura-san. We'd like to move on to next. Next is Matsubara-san, Nomura Securities.

[Interpreted] This is Matsubara, Nomura Securities. Can you hear me?

[Interpreted] Yes, we can.

[Interpreted] I have 2 questions. Page 23. Your in-house development. You listed 4 products and you see efficacy in preclinical and you believe that it is promising. Or you already have some negotiations or discussions with the potential partners, licensing partners, which is the case.

[Interpreted] Miles would like to answer.

So as Chris has said, these programs are prioritized for our us to move into early development or sales and build value in the project. We are excited by the preclinical data in each case against the clinical target molecule and product profile. We believe these are very interesting areas of biology that fit very nicely with our core strategy. We do, of course, always have ongoing business development discussions and interest in our programs. [indiscernible] our intention to license these programs preclinically at this time. So that concludes my answer.

[Interpreted] And Matt, do you have any additional comments, if you have any, please.

Thank you, Tamura-san. So yes, I agree with Miles. So these -- the reason we've prioritized these 4 programs is they are a very nice blend of validated and novel targets. They are a nice blend of across our core therapeutic areas. We're very excited, I think, about this, and that's the reason why we want to invest in these and take them forward ourselves internally. But I think as Miles just said, we also -- we are very experienced in the business development area. We know that sometimes these deals can take a long time. We know it's about relationships. So we are kind of open to talking about the programs. But when we do talk to potential partners, we make this point very clear that we our intention at the moment is to take them forward into the clinical trials. Thank you.

[Interpreted] A follow-up question. Clinical studies, are there any planned or estimated timing of starting clinical studies for those products?

[Interpreted] Matt, could you answer?

Yes. So I think Chris mentioned earlier on in the call, I think there'll be an R&D Investor Day at some point later this year, and I think we'll reveal more of our translational medicine and early clinical development plans at that. But at the moment, I think what we can say is that over these 4 programs will be advancing over 2022 and 2023. Thank you.

[Interpreted] Understood. My second question is about the muscarinic agonist milestones. For each pipeline, I understand that the milestones are set. And you mentioned that the development is dependent on new client. So probably M4 is prioritized and the dual is deprioritized. Then is there any possibilities that you may receive this amount of the milestone?

[Interpreted] Chris, could you answer?

Yes, sure. Thank you for the question. And may I apologize for earlier. My Internet cutoff clearly. One of the hazards of working from home these days. So yes, the way that the transaction was structured is that we receive milestones on progress, not only against the M4 program, sorry, but also against nonclinical programs, so the dual M1/M4 and the M1 agonists. Now our expectation, as we said at the time, was that in M4 Phase II trial is very possible this year, and we are working hard with our partner, Neurocrine, to make sure that happens. If it does, we expect to receive a milestone. With regard to the nonclinical programs, realistically, they are most likely to progress in the 2023 and beyond time line. And if they do progress, we are also entitled to receive milestones. That concludes my answer.

[Interpreted] Thank you very much, Matsubara-san. Next question, Yamazaki-san from Ichiyoshi Economic ] Research Institute.

[Interpreted] Yamazaki, from Ichiyoshi. Do you hear me?

[Interpreted] Yes.

[Interpreted] Regarding collaboration plan for this year, I have one question. You have been saying it was suggested that for this year, clinical trial in the POC obtained their license out. That was the policy that was mentioned in the presentation. Does that mean that you have your internal program that is not accounted for that? So that means for this year, license for compound would not be expected. And also in the [indiscernible], it says upfront money is expected. Is that coming from drug discovery? Can you answer to this question?

[Interpreted] Let me answer to this first. More collaborations, so it doesn't mean that we don't do collaboration until we reach clinical stage, no. So we want to have another Neurocrine-type deal that means we need more preparation time. Please note that we want to have collaboration, whatever that is, we do have some of those assets, but collaboration with Pfizer was very early. So there were [indiscernible] items, and there was full target [indiscernible] is for platform. If conditions are good, we'll do that. If good times reached and if the target is hot, maybe it's not in the clinical stage, but we may have a deal possibly. We may have those deals before the asset reaches clinical stage. We have possible partners. We have many, and we should have good alliance management so that we can have good milestone as the next stage. That's also an important part of our job. Probably, Chris, you want to add comments. Go ahead.

Sure. Thank you, Tamura-san. Yes, in the [indiscernible], where we refer to the receipt of upfront this year, we are probably more specifically referring to a platform or drug discovery collaboration-style deal or potentially the expansion of an existing collaboration that we have with 1 of our partners. As you will know, we are very diverse in the types of deals that we can do. We have said today that around the 4 prioritized programs, we want to build much more value in those programs before we do a license deal. But that doesn't mean, as Tamura-san has said, that we can't receive upfront from different styles of deals. And as I mentioned, a platform-style collaboration, like what we've done with Pfizer, like what we've done in drug discovery with Takeda and AbbVie, for example, in the past. We can do transactions like that again in the future as well. That concludes my response.

[Interpreted] And in the interest of time, we would like to now take the final question. [Operator Instructions] So if you have any questions, before closing please put your questions in the Q&A box, then we'll be able to answer to your question. Next is Tsuzuki-san of Mizuho Securities, please.

[Interpreted] Tsuzuki, Mizuho Securities. Can you hear me?

[Interpreted] Yes, we can.

[Interpreted] I also have financial results related questions regarding [indiscernible] What is your estimate or forecast for this coming year? Is it on the same level as the last year. And the muscarinic program R&D costs, partially I think it's borne by Neurocrine. Therefore, in that sense, keeping the same level, meaning that you will be having more R&D costs. Is that right understanding?

[Interpreted] Chris, could you answer?

Sure. Thank you. The answer to your first question is as presented here on this slide. Last year, we spent JPY 5.9 billion on R&D. And this year, we are forecasting to spend somewhere between JPY 5.75 billion and JPY 6.75 billion. It is more likely going to increase for the reasons we have discussed today. We have some fantastic wholly-owned programs that we want to move towards clinical development that will likely result in slightly higher R&D expenses, but the range that we have set is here on this slide. For G&A, again, last year, JPY 3.9 billion was the result. And again, we're not expecting it to increase markedly, JPY 3.75 billion to JPY 4.25 billion is the range that we have set. To answer your second question around muscarinic, yes, now that these programs are out-licensed to Neurocrine, any activities that we conduct to progress those programs under the license and research agreement will be paid for by Neurocrine. So there is no direct cost to us. The only time where there would be a direct cost to us would be in the future if we choose to move forward the M1 agonist in Japan where we have retained the Japanese rights. But certainly over the next 12 to 24 months, any activities that we conduct on the muscarinic programs will be fully paid for by Neurocrine under the terms of the agreement. Thank you. That concludes my response.

[Interpreted] And overall, I would like to ask about your concept. If it is a Japanese biotech beta company, simply they may target at early partnership. But now you are saying is that you'd like to go to the later stage, and then making it a sort of a mature program, then you'd like to license out. That is the impression that I have having heard your discussion today. Is this impression correct?

[Interpreted] Let me answer to your question. Yes, you are right. In our presentations, we mentioned that we'd like to add high values. Otherwise, we cannot be successful in big deals. And actually, there is no big biotechs originated from Japan yet. And overall, globally, stock prices are sluggish. And we'd like to raise the fund and would like to prepare ourselves. For instance, GPCRs, there is a company called Arena in San Diego, and it was acquired by Pfizer, [ JPY 50 billion -- JPY 60 billion ] last year. And they were doing something similar to us. They did a Phase I or Phase II and building a very strong pipeline, then they could create high value. And in our case, we are listed in Japan. So we cannot do exactly what the American companies do, and we already had few experiences several years ago. But we would like to secure our income source. And in that sense, we'd like to progress our discussion in our deals. And of course, development takes time. If we let to early, then we may not be able to add enough high values. Therefore, we need to hit the balance in between. And while we are preparing, we'd like to take a strategy from the managerial point to increase our adding values and that's to be done under my leadership. But I think probably it's better to have, Chris, to comment on this, please.

Thank you very much, Tamura-san. Yes, I mean, that is correct. We have made great strides over the last 3 years to add a significant number of new global partners across a diverse range of programs. And what that means for our business now is that we have lots of different potential sources of revenue and value going into the future. And we have now got ourselves to a point where we can make incremental investment, take a little bit more risk in order to build significant value. And to the question around going to the later stage, I just want to be clear, right now, with those 4 wholly-owned programs we've discussed today, it is our intention to not go any further than a Phase Ib or Phase IIa trial. We think that you can generate significant value with the right studies that generate the right data at that point. And as I've said, because of the great progress that we've made in the last 3 years to diversify our business, we're now in a position where we can make these little incremental steps in making more R&D investment on a year-by-year basis. That's what this is all about. And we think that this is absolutely the right strategy for the company going forward. And that concludes my response. Thank you.

[Interpreted] It's clear. Just last question. Overall COVID-19 therapeutics is drawing much attention in the market. Your overall COVID-19 therapeutics progress so far and your outlook for provinces coming years?

[Interpreted] Miles, can you answer to this question?

Yes. So, as you know, we have our program now funded by Wellcome. We, of course, have seen the rapid progress from Pfizer and Shionogi against the MPro target. And that changes the environment for our program. I think in discussions with Wellcome, we think the focus of future work should be to very much have a low-dose best-in-class compound, one in particular, that doesn't require co-dosing [indiscernible] and doesn't have drug-drug interactions because many of the vulnerable patients that most need Mpro inhibitor may be on co-medications because of other underlying health concerns. So I think we have changed our priorities, rather than a first-generation molecule that we've progressed quickly into the clinic, we're now working with Wellcome under their guidance. We are looking for a best-in-class low-dose once-daily, very high-quality drugs. So this will take a bit more time, but we've anticipated that we will have candidate drugs towards the end of this year and then can start to move things forward towards clinical development after that. Certainly, this position for the program is very consistent with other discussions that we've had with companies interested in antiviral agents. And what's now required is a superior molecule than the Pfizer molecule, that is a high dose. That concludes my answer.

[Interpreted] Thank you very much, Mr. Tsuzuki. My line was down. So I'm using [indiscernible] I apologize for this confusion. We close question -- Q&A session. We had some technical issues. I apologize for that, and thank you for your support. We are able to close very smoothly. For your questions that you submit in the chat, we will later go back to -- I mean, through our website, we will provide answers. Thank you very much. With this, we close today's meeting. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]