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

[Interpreted] Thank you very much for your attendance today. Since it's time, we would like to commence 2023 R&D Day of Sosei Group Corporation. Thank you very much for joining despite a very busy schedule. I will be the emcee for today. My name is Nomura, CFO of the company. Today, as you can see on the screen, we have the attendance of: Chris Cargill, CEO; Satoshi Tanaka, President of Idorsia Pharma, Japan and Korea; Matt Barnes, President of Heptares and Head of U.K. R&D. As usual, we have the simultaneous interpretation, please click the icon of the globe at the bottom of the screen and choose Japanese or English. If you select, off, you will hear the original voice of the speaker. As for today for the first half of the session, we would like to explain the progress of the business according to the materials. Followed by Q&A session in the second half of the session. As for the materials, we will be sharing on the screen, but we also uploaded on the website. If you would like to use them at hand, please go to the tab of Investors on the top right of the website, select presentations and webcasts and access to the materials. In the second half of the session in Q&A, institutional investors, analysts and media people, when the time comes, you will be able to ask questions verbally. [Operator Instructions] Now let us move on to the presentation. First of all, from Chris, mainly on R&D, and there will be an update on the overall business update; and Tanaka will speak about the progress of business in Japan and APAC and the progress of R&D from that; and lastly, I will briefly talk about the Q3 results. Now Chris, over to you.

Thank you very much. [Foreign Language] [Interpreted] Hello, everyone. My name is Chris Cargill, CEO of Sosei Group. Our mission is simple, cutting-edge science, precision designing new medicines, medicine by design and real human outcomes. We are building the next-generation pharma company for Japan. Next slide, please. We are the world leader in SBDD with a strong focus on GPCR targets. GPCRs are the most successful drug targets in modern medicine, but hundreds of GPCRs remain undrugged. We have the international expertise to hunt this opportunity. It is easy to forget but we were the first company to solve the GLP-1 structure. GLP-1 medicines for obesity are the fastest growing area of modern medicine. Next page, please. As I said, GLP-1 medicines for obesity are the fastest growing area in modern medicine. We have deep exposure to this area of health care. Pfizer is using our science to enable discovery of new GLP-1 medicines. Lilly is using our science to enable discovery of new medicines beyond the GLP-1 target. We have the next-generation programs in discovery that target broad incretin and upstream receptors from GLP-1, GIP and GCG. Next slide, please. Existing GLP-1 and GIP medicines for diabetes and obesity may soon create a USD 100 billion market. However, this is just the beginning. Emerging research suggests these medicines will also benefit heart, liver and kidney diseases. Our science in this area gives us exposure to this potentially huge indication expansion opportunity. Next slide, please. Together with our partners, we have additionally designed multiple medicines for neurology and immunology diseases. Together with our partners, this year, we have started 5 new clinical trials. We will not rest and expect further new clinical starts in 2024. Next slide, please, Slide 10. Following the acquisition of Idorsia Pharmaceuticals Japan and Korea, new Sosei Group Companies, PIVLAZ became our first commercially available major medicine. PIVLAZ is increasing -- protecting the lives of Japanese patients. PIVLAZ is seen to be an innovative treatment for cerebral vessel spasms with a more manageable safety profile. PIVLAZ is a very attractive new option for neurosurgeons. Please turn to Slide 11. Sleep disorders have a major impact on Japanese society. Sleep disorders can drive decreases in productivity from absence and sickness. Furthermore, average sleep of less than 6 hours per night can lead to higher risk of death. Our potential new medicine, daridorexant is a best-in-class solution to the problem of insomnia. We are very excited for daridorexant's potential launch in Q4 of 2024. Please turn to Slide 12. In summary, our mission is in progress. Cutting-edge science, precision designing new medicines achieving real human outcomes. We are building the next-generation pharma company for Japan -- from Japan. Thank you. Tanaka-san will now speak.

[Interpreted] So next slide, please. As CEO Chris mentioned, insomnia is an important disease in Japan, roughly 15 million patients do exist as people say. At the moment, we are developing, and we have submitted and this is orexin receptor antagonist. And currently, 90% of the entire market is covered by this drug. And this orexin market in 2030 will account for 43%, and that is our forecast at the moment. Please move on to the next page. This daridorexant has the 2 large-scale clinical trials in Japan. 25 milligram, 50-milligram and placebo, we have double blinded study and the second one is to confirm the long-term study. These 2 trials have been conducted in Japan. And the total sleep hours or against awakening, the effect of the treatment have been confirmed by 25-milligram and 50-milligram and with the 25-milligram in 4 weeks' time, we have been able to find a good efficacy, if necessary, by administering 50-milligram additional efficacy can be provided. That is confirmed. In terms of safety, with the longitudinal study and also double-blind study over placebo, even after administering our drug, there is no significant difference with adverse events, and we have been able to confirm safety. Please move on to the next page. Earlier, cenerimod, at the end of October, we have submitted, and we have just submitted to PMDA. And the next one is a S1P1 receptor, and this is one of the protein of GPCR. Currently, cenerimod is the product and for autoimmune disease. And this is now sold with the indication of multiple sclerosis, and this S1P1 antagonist, is for inflammatory bowel disease, or for autoimmune diseases against various diseases, we are expecting to see efficacy. So Idorsia, Sosei is considering cenerimod by targeting various diseases to conduct the clinical trials. Please move on to the next page. As Chris CEO mentioned, the sales trend of PIVLAZ is very favorable. At this moment, compared to last year, in Q2 and also in Q3 compared with last year. This is already administered to quite a number of patients as the treatment drug, as you can tell by this graph. In Q4, just like last year, compared with the Q3, plus 40% or over is what we are expecting. So we should be able to achieve the target for 2023. Please move on to the next page. This Q4 -- as one of the factors for increase in Q4. In September, our drug is now listed to a stroke guideline and the recommendation be evidence at level, middle median. So amongst the approved drug, this has the highest level of recommendation to be listed in the guideline. Through that, already after September, PIVLAZ is now prescribed to more people. So in Q1 this year, we are expecting that we are able to obtain more prescriptions. Please move on to the next page. We are actually doing the development within the company, and we are doing the sales activities within the company, but with the characteristics of the drugs. To work with the external partners, they are providing the sales capabilities, and we are also considering for different approaches. So we are hoping to achieve efficacy -- efficiency in order to deliver our drugs to the patients. That concludes my presentation. So now over to Matt.

Thank you. Thank you, Tanaka-san. Good evening, everyone. My name is Matt Barnes. I'm the President of Heptares and Head of R&D in the U.K., and I will present our recent progress from the U.K. R&D area. So please turn to the next slide. So in the next 2 slides, I would like to provide an update on our partnered programs. Firstly, I would like to update on one of our highly successful clinical stage partnerships with Neurocrine, around a suite of muscarinic agonist programs for schizophrenia and other neuropsychiatric disorders. This slide is taken from Neurocrine's Q3 financial results presentation held at the end of October and represents an up-to-date summary of this collaboration. As previously highlighted, Neurocrine initiated a placebo-controlled Phase II study in October 22 to investigate NBI-568 a selective M4 agonist as a potential new treatment for schizophrenia. They commented at their results presentation that the trial continues to evolve very well. In addition, in September this year, Neurocrine confirmed the initiation of a Phase I clinical study of NBI-570, which is a dual M1/M4 selective agonist that has the potential to treat neurological and neuropsychiatric conditions. This is the second compound to enter clinical development as part of this collaboration. Please note that Neurocrine anticipates advancing additional muscular compounds into clinical development over the coming months. Please turn to the next slide. So this slide summarizes recent highlights and progress with other partners. Most recently, we were encouraged to see Pfizer detail the entry of PF-522 into its Phase I clinical pipeline as part of its Q3 results. PF-522 is a new oral small molecule GLP-1 receptor agonist, which was discovered by Pfizer scientists as part of our multi-target research collaboration. We look forward to this asset advance alongside two other currently active clinical stage assets in Pfizer's pipeline. Further progress on clinical and preclinical programs is also highlighted here in the top part of the slide. As previously mentioned, MBI-570 as well as further clinical development with Tempero on mGluR5 negative allosteric modulator, or NAM, and the strong preclinical data on OX750, a small molecule OX2 agonist, which was presented by Centessa at the World Sleep Conference in October. We also continue to make strong progress with our discovery and technology collaborations. We recently announced the progression of a first-in-class discovery project with Genentech and the nomination of our first drug discovery targets from our target identification and validation collaborations with Verily. And actually, just this morning, we announced with Kallyope also. Plus, we also have the extension of our drug discovery collaboration in the AI space with PharmEnable. So in summary, we're making excellent progress with all of our partner programs covered on these first 2 slides. Please turn to the next slide. So in addition to our highly successful collaborations, we have a rich internal portfolio of programs with 3 wholly-owned clinical and preclinical assets plus more than 10 early-stage programs. In August this year, we were proud to confirm the initiation of a Phase I, Phase IIa clinical trial with 732, which is a selective EP4 antagonist for immunosuppression in advanced solid tumors, which is in collaboration with Cancer Research U.K. 732 was developed by leveraging our SBDD or structure-based drug design platform as a once-daily oral available small molecule. Cancer patients are now being dosed with this compound. No dose-limiting toxicity is reported to date, and there are 2 clinical sites currently open with a third site to open imminently. We are also making good progress with our oral GI-restricted EP4 agonist program for IBD or inflammatory bowel disease. All the preclinical work is on track, and the regulatory submission is planned for Q4 this year with an anticipated Phase I clinical start in the first half of 2024. Finally, in the middle of the slide, you will see that in July this year, we were excited to announce the initiation of a Phase I clinical trial with 149, which is a selective GPR52 agonist and a novel GPCR and presents opportunities in schizophrenia and psychosis. 149 was also developed using our SBDD platform as a once-daily oral available small molecule drug, which selectively targets this orphan GPR52 receptor in the brain. This Phase I clinical study is proceeding as planned with good progress through the dose escalation phase. Please turn to the next slide. So this slide provides some further context to our GPR52 agonist program, which we believe represents a novel approach to treating schizophrenia. GPR52 has a unique expression profile as it's co-expressed with dopamine D2 receptors in the striatum and dopamine D1 receptors in the prefrontal cortex. This leads us to a therapeutic hypothesis that GPR52 agonists may have broad efficacy to address not only the positive symptoms like psychosis and delusions and hallucinations but also the negative symptoms like social withdrawal and cognitive impairment, for example, attention and working memory, which are not currently addressed with current antipsychotic treatments. On the right-hand side of this slide, you can see some of the preclinical evidence that we've previously presented, which supports this hypothesis. Very briefly, a related GPR52 agonist compound, which is 178, clearly demonstrates the reversal of psychostimulant induced hyperlocomotion and cognitive impairment in rodent models, which are designed to reflect those positive and cognitive symptomologies, respectively, that I mentioned previously. We are extremely excited about progressing all of these internal programs further into the clinic as they offer opportunities across our key therapeutic areas of focus and will ultimately provide benefit to patients and provide Sosei Heptares with higher value creation. Please turn to the next slide. So next, I would like to provide a flavor of some of our future in-house programs to come from our pool of more than 10 programs in the pre-discovery and discovery areas. Firstly, we have an internal target, one on the right -- on the left-hand side for inflammatory bowel disease, which is currently proximal to preclinical development stage and is a once-daily oral small molecule with first-in-class potential. The concept of this project is based on mucosal healing by targeting gut epithelial cells and is aimed at promoting gastrointestinal barrier repair. Second is this internal target 2 or major depressive disorder, which is currently at the late stages of discovery. This is also a once daily oral small molecule with best-in-class potential and is aimed at the modulation of dopaminergic transmission in reward circuits. And then finally, on the right-hand side, you'll see an internal target 3, which is also designed as a once-daily oral small molecule with first-in-class potential. This is a really exciting program, which targets the modulation of broad incretin release and appetite suppression that Chris referred to earlier. These incretins include GLP-1, GIP and glucagon. And the drug target is upstream of clinical-stage GLP-1 small molecule agonists and represents a more physiological way of potentially treating metabolic disorders, such as type 2 diabetes and obesity. Please turn to the next slide. So in support of all of these in-house and partner programs I've mentioned in the previous slide, I also just wanted to highlight some areas in R&D where we are utilizing AI and machine learning approaches. We now use routinely AI and machine learning approaches across many areas of our SBDD platform and translational medicine disciplines, either internally or in collaboration with expert partners. This ranges from using AI machine learning algorithms to predict star enabling mutations, GPCR binding sites or modes, identifying and optimizing new chemical starting points and using an AI-led analysis of large patient data sets to identify biomarkers and patient stratification strategies. These AI approaches have broad impacts across many areas of R&D and can accelerate and improve areas of our SBDD platform, drug discovery and also enable us to design the right clinical studies as part of our translational medicine strategy. Please turn to the next slide. So this is my last slide. And as highlighted in our priority objectives for 2023, I would like to finally update you on our continued investment in our GPCR, SBDD platform and areas of future innovation. Firstly, I would like to update you on our investment in non-GPCR membrane drug targets that I have mentioned previously. We are utilizing our current know-how to explore other membrane protein target classes and have now initiated programs in both the ion channel and transporter space. We have chosen drug targets with strong biological validation, where we believe a structure-based drug design approach will offer a means of differentiation. This really allows us the opportunity to demonstrate the technical feasibility on non-GPCR membrane drug targets in our therapeutic areas of interest. Secondly, I would like to inform you that we have now completed the building works on our additional laboratory space as our R&D facility in Granta Park, Cambridge, U.K., where I'm calling from today. This laboratory expansion will allow us to establish a new phase display lab, which will be used to identify protein binders to support cryo-electron microscopy and our SBDD platform plus a new mass spec facility to drive the advancement of our biophysical characterization of GPCRs. So that concludes my section, highlighting our significant progress in the U.K., R&D area in 2023 so far. I'll now pass on to Nomura-san to provide explanation of our Q3 results. Thank you, Nomura-san.

[Foreign Language] [Interpreted] Thank you, Matt, for your explanation. And lastly, this is R&D related day, but I would like to provide supplementary explanation just by using 1 slide. Please take a look at Page 29. This page, please start from the right-hand side to go back to the left-hand side. So what we disclosed today is the result based on IFRS standard, and that is written on the orange line at the far right. On the top is a consolidated P&L and part of this is IFRS. Consolidated revenue is roughly JPY 5.5 billion. Operating loss is roughly JPY 8 billion. Unlike the other earnings results, by acquiring IPJ/IPK on July 20, there is a quite significant non-cash accounting based loss and the non-recurring costs related to acquisition. That is slightly to the left from the far right orange, and those are written in non-cash costs and non-recurring cost, especially what is related to M&A are in green from A to C. The total amount is roughly JPY 2.2 billion. So it's very brief, but let me go through one by one. First of all, A, is while we eliminate the existing inventory of PIVLAZ, this is a JPY 680 million for this quarter within about the 2.4 months from M&A to the end of Q3, this is related to revenue. And until roughly April next year, until the inventories eliminated at the time of the acquisition, this will continue. So in terms of accounting, this is reflecting the immediate amount. But as cash, this is already included as the acquisition amount and already paid. So in P&L, it's not something that we are always paying cash. So this is now categorized as a non-recurring cost. But if we look at the quarterly basis, this may be regarded as something that is close to non-cash cost. Now moving on to B. This is the amount that incurs related to amortization of intangible accounts. And this is roughly JPY 220 million in the third quarter. And I cannot talk about the detail, but this will continue while PIVLAZ and Daridorexant will sell. But after 2005, we are expecting that this will be roughly JPY 1.8 billion per annum. So on a quarterly basis, this will be the accounting expense, but it's not something that we are paying cash as necessary. And lastly, C, and this is the fee that is paid related to M&A of IPG and IPK. This is the actual cash, but this is just a one-off in Q3. These are the impacts related to the M&A. And just like we announced as the core operating profit, any kind of expense that doesn't have any cash out or the core operating profit, excluding the one-off expense is shown in the blue line in the middle of the slide, called the consolidated P&L, core operating profit. Consolidated revenue remains the same as IFRS standard roughly JPY 5.5 billion, but the operating loss will be compressed to JPY 3.9 billion. Going further to the left, the blue core operating profit basis distributed by business, and if you can take a look at Sosei Group and IPJ/IPK on the top, in light blue at the left, these are divided, but for 9 months from January to September is the figure from Sosei Group. But IPJ and IPK cover 10.4 months from September. So the period covered is different. Sosei Group includes the R&D at U.K.. As Matt and Chris explained, 2 clinical studies have commenced and making a steady investment in order to have the large-scale license deal. On the other hand, IPJ and IPK basically, so -- and also do the submission related to PIVLAZ and daridorexant, but they have been able to secure the profit of JPY 600 million on the core basis. Just for your reference, related to the submission of daridorexant, milestone revenue of JPY 1.5 billion is not included. So this will be included in the full year results to be announced in February next year. So this is the supplementary explanation for today's. So now I would like to move on to Q&A session.

[Operator Instructions] [Interpreted] I had some glitch and I cannot unmute for you. So my staffs are trying to be able to mute you. So thank you very much for sending your question on the Q&A. So let me start with that one. First question. This is for President Tanaka. PIVLAZ South Korea submission, how is the progress now? So President Tanaka, please.

[Interpreted] Yes, when we announced our results in August, I said a few months, in a few months, expect meeting was in the summer vacation in August, but that was extended. So it was delayed. In expect meeting, it was held and by mid-December, we think we can be approved. Thank you. I hope this answers your question.

[Interpreted] Sorry, we started from the equipment trouble, but now I'm able to unmute. So I would like to call on Hashiguchi-san from Daiwa Securities. [Operator Instructions]

[Interpreted] Hashiguchi from Daiwa Securities. My question is related to PIVLAZ. Third quarter revenue in Q2, compared with Q2, it's declining by about 10%. And if you showed the number of patients on Page 10, but it's on a cumulative basis. The difference from the previous quarter, I believe, is the new patients during this quarter, but it seems like the number of patients -- the pace of increase of patients is now declining. What are the reasons behind this? And what are the factors you're expecting to see the increase in Q4?

[Interpreted] Thank you. This is the question to Mr. Tanaka.

[Interpreted] As you know about this disease, in the third quarter, during summer, it's during summer. So the number of patients is slightly declining. That is a fact. In Q1, as you know, it was after October. So it's quite cold, and especially in Northern region, the number of patients increased quite significantly. And that is exactly the same trend as last year. So there is an increase in the number of prescriptions. Another one is, as I mentioned, in this area at an early stage, our drug is that we -- is now listed in the guideline for stroke. So the need for this drug is now acknowledged by the physicians of this field. So we are confident that the number of prescriptions would increase even further.

[Interpreted] So next from Pathology Associates Dion-san. Can you unmute yourself and ask your question.

Pathology Associates, Dion. And I just ask a couple of brief questions. Firstly, I noticed that aprocitentan was returned to Idorsia from Janssen Biotech recently. And I was wondering, how do you view the resistant hypertension market in Japan and whether you had an opportunity or will have an opportunity to discuss this, the Asia rights with Idorsia? And then secondly, I was just wondering if the recent GLP-1 deal with Pfizer, if the contractual arrangement is fairly similar to the previous lotiglipron agreement, and whether there is any chance of repartnering lotiglipron? And then finally, if I can just ask regarding your cost of debt, if you can make any comments regarding your cost of debt and in general, in your cost of capital, if there is any at the moment, post to Mizuho loan?

[Interpreted] Thank you very much. So if Chris, could you answer first, and Pfizer will be Matt and Mizuho loan in cost, I will answer. So Chris, could you start off?

Yes, sure. I also think it would be worth getting Tanaka-san's comments on the PAH market in Japan to help address the first question. As part of your first question, Dion, will we have an opportunity to talk to Idorsia about the rights for aprocitentan for Japan and APAC. The answer is yes, we would have an opportunity. We have a very strong business relationship with them. But right now, it's probably not one of our priority activities, to be honest. However, should we decide that we wanted to. We have a very open and very cordial, friendly dialogue with Idorsia, of course. So we would be able to talk to them about that. To your second question around Pfizer, the molecule that we disclosed Friday or Monday actually, I think it was, it was over the weekend. That actually comes from the original technology collaboration that we have with Pfizer. So it's not a new transaction. It's simply that Pfizer, as part of that original 2015 technology collaboration that we had with them, the new molecule that they have identified and advanced into Phase I was as a result of the technology collaboration that we had with them. So the way that it works, we do not get a new milestone immediately. But the terms of the financials are exactly as they were for the last program, lotiglipron. So we won't be or a milestone until this current program would surpass where lotoglipron was at. But once it gets to that region, then all of the milestones that have not been attained as yet are identical as they were before for lotoglipron. The question around what can be done with lotoglipron, that's not a question for us, unfortunately. It is Pfizer's molecule. As I've said previously, it's not our decision. But we're very excited that they have chosen to advance another molecule that was discovered utilizing our structural insights. So that's a good thing. I might just let -- before you maybe add Matt and Hiro, I'll let Tanaka-san talk about the PAH market in Japan because obviously, he has a lot of experience in this area.

[Foreign Language] [Interpreted] Thank you, Chris. So aprocitentan, I think it's -- we have already submitted to [indiscernible] and then we expect to receive the NDA approval annually next year. This study showed a very significant effects and understand plant, which was described on top of liquid medication in this [indiscernible] So therefore, we are pretty much convinced that this was really beneficial for potential. Especially in Japan of the 50% of the total patient with arterial hypertension is not medicinal. So therefore, there are lots of the protection market also in Japan.

[Interpreted] Matt, do you have any comments on Pfizer?

Not really anything much to add, I think, from what Chris said. Chris answered it really, really well, actually, Dion. Thanks for the question, Dion. So yes. So really, this is, as Chris mentioned, this new GLP-1 molecule, it really comes from that overarching multi-target collaboration we had with Pfizer that started in 2015. So it's just part of that overall kind of collaboration umbrella, which has been hugely productive, right? So we've had a number of clinical starts, 3 of them actually are now still active in the clinical stage, so GLP-1, CCR6 and MC4 antagonist. So this has been an extremely productive collaboration. And Chris nicely touched on, I think, what the expectations are with respect to the milestones and the value as part of that. So nothing more to add. Hopefully, that was clear, Dion, for you.

[Interpreted] So lastly, let me talk about the cost of debt. We do not disclose this, per se. So it's difficult to talk about it. But when we announced the M&A in the past, JPY 40 billion was borrowed for in the long term, 7 years from Mizuho. Mizuho understands our business well. And this is a hugely attractive loan. If this enters the 0.5% to 1% range on a global basis, it's still attractive, but 0.5% to 1% will not be that attractive, but that still will be a good term. We're still at that level. So if you could take that into account and guess. Thank you very much. Moving on to Nomura Securities, Matsubara san, please. Please unmute yourself and ask your questions.

I'm Matsubara from Nomura Securities. Can you hear me?

Yes, I can hear you.

On Page 21 about muscarinic, I would like to hear, if I take a look at the competitor in the clinical study in '97, it seems like they have moved on to stop the trial, and M1 and M4 action is selective, and I understand that there is a difference. But can you talk about the safety of your drug once again?

[Interpreted] So some, in the past study, there was safety concern, and you would like to know the advantage of our drug. So I would like to now ask Matt to respond to the question.

Thank you for the question. Yes. So Nomura-san, can you just clarify what the comparison is, which drug?

Yes, Matt, I think they're talking about the original trial in '97 that was published about xanomeline.

Okay. Sorry. I'm sorry. Okay. I understand. So yes. So I think as you are probably aware, so Karuna is developing a combination of xanomeline with a -- which is a non-selective muscarinic agonist, which has some, as you highlight, some adverse event profile. They have chosen to try to address that by co-dosing with a peripheral antagonist against some of the muscarinic. So in effect, they're trying to create or build in selectivity through this combination of using an antagonist as well. So the muscarinic suite of assets that we've provided to Neurocrine, of course, you don't have to do that because we've used our platform to generate highly selective molecules. So ours is a 568 is a highly selective M4 agonist. So the safety profile is different and differentiated because of that selectivity that we've managed to build in very well from using a very clear and rational structure-based drug design approach. And so that's the key difference between the two. I think that the selectivity of the molecules allows you to generate assets that have a very different safety profile. Hopefully, that answers the question. Thank you.

[Interpreted] If I may add, with respect to the safety, we are already in Phase I study. So of course, we are looking at safety in that trial that's known. And another one is that at the beginning of 2021, when there was reversion of muscarinic, there were comment that there were no issues at the Phase I, and that is included within the website. So please refer to that as well.

[Interpreted] Yes, that's very clear. And the second question is about metabolic disease on Page 25. Eli Lilly worked on drug, which would act on 3 factors, which is related to GLP-1, GIP, and GCG. And you are partnering with Eli Lilly with the diabetes and others? And what is the positioning? And how can we compare with the other drugs? Can you speak about that as well?

[Interpreted] I believe this is, again, a question to Matt. And if necessary, Chris may comment. I think we understand your question.

Yes. I think so too. So I think that, of course, if you are monitoring this landscape right now in the metabolic disease area, as Chris mentioned, this is really exploding at the moment. Lilly, I think, have a strong presence in this area through the development of various peptides in this space, and they are continuing to develop and generate clinical data that supports the efficacy of peptides with different pharmacological profiles across those different incretin receptors. So really, we started this collaboration with Lilly at the end of last year. And this is really to try to start to generate a next-generation suite of assets that are small molecules. Now we can't disclose what the targets of interest are for Lilly in that collaboration. That's confidential information but it is a multi-target deal. It is based around small molecules in the metabolic space. And so that's really where we're working with Lilly very closely to do that. And that collaboration is going really, really well. It's at an early stage. As you can imagine, trying to develop small molecule equivalents of peptides is not easy. People are trying to do this with GLP-1, of course. And Lilly, I think, have the foresight to be able to be now thinking about what that next generation of small molecule versions of these peptide drugs is like. So yes. So hopefully, that answers the question. Chris, I don't know if you want to add anything.

No, there's not much to add except to say that it's a very good example of a partnership whereby I think we can say this. There are 2 very clear leaders in this space in the world. One is [ Vyznova ] in Europe and the other is Lilly. Lilly just overnight, received an FDA approval for their drug tirzepatide in obesity, Zepbound, is the brand name. This is a perfect synergistic partnership. We're working with arguably the best company in the world in this space. They bring a lot of capability and deep knowledge, and they have chosen to work with us because this is a collaboration that requires insights into GPCRs and we're the best company to provide that in their opinion. So it's just a very good example of a collaboration that we hope will be very successful for the company over the long term.

[Interpreted] Mr. Matsubara, thank you very much. So moving on to the next question. Mizuho Securities, Tsuzuki-san, please unmute yourself.

[Interpreted] From Mizuho, Tsuzuki is my name. So two on this morning and one on R&D. So 2 points this morning, very simply, so from '25 onward, JPY 18 billion, depreciation 2024, I think it was JPY 240 million. So JPY 1.2 billion will be the 2024 depreciation? Is that the question the case? And second, you mentioned multiple collaboration. As mentioned in the third quarter financial results, too. So is the possibility there rising? So those 2 questions first.

[Interpreted] So first of all, depreciation. Let me answer that question. Yes, it's roughly yes. So the current level, it's 2.4 months. And so you need to calculate, but that will be similar next year. And from 2025, JPY 1.8 billion, as mentioned here. This final conclusion with the audit firm will be shown on the full year financial results. So this number may change slightly, but second question about the possibility -- probability of the collaboration -- new collaboration. Chris-san, can you answer?

Yes, sure. I mean, I think it's those that have followed, so say, for some years will understand that we always, every year, attempt to execute a major collaboration, but people also respect that executing these collaborations takes a long period of time. It involves transaction negotiation. It involves scientific diligence. So right now, we are in multiple conversations. And of course, we absolutely hope to execute at least one major collaboration by the end of the year. But as I say every year, we can never guarantee that, that can happen. But if you look at our track record over the past few years, we do have a bit of a tendency to come late in the year and execute these things in the fourth quarter where we can. But it certainly continues to be our aim. Thank you.

[Interpreted] And next is on R&D. This time, this metabolic first-in-class drug was shown for the first time. Eli Lilly, [indiscernible] is it something like that, the Eli Lilly, [indiscernible] And this time, with fiber GLP-1 agonist, Phase I started. Lotiglipron, you had a suspension once and this is a resumption. So I think this can be applied to other partners, too. So I want to ask you, this Pfizer deal stopped once, but now the new one is coming, you showed us that this time. So for other partners, could the similar things happen? I'm sorry for a long question, but -- so if you could answer yes or no for my question, I'd appreciate it.

[Interpreted] So Matt, could you answer that question? And Chris, if you need it, also.

Yes. Thank you. Thank you for the question. Yes. So you're right. So this is the first time we've highlighted this. So we don't normally disclose target names before we nominate them for preclinical candidate. So I just really in this slide I wanted to give you a taste of some of the exciting projects we have earlier in the portfolio. Of course, this is an internal -- these are all internal programs. So this one, #3 here listed is not part of the Lilly collaboration, it's outside of that. So of course, anything that's included in the Lilly collaboration, we would not have freedom to operate in-house. So this is outside of the Lilly collaboration. So hopefully, that's clear. On the GLP-1, so just to be -- it's important to clarify that the Pfizer agreement didn't stop. I mean, we have a very active collaboration with them. As I mentioned before, there are a number of clinical candidates that still are existing as part of that collaboration. I think that, Chris, you might have to help me with the other parties. I didn't quite understand the question there.

Yes. Look, I think the easiest way to answer this question is to simply say, the best way to think about the new Pfizer molecule is that it was just a backup program, right? And most of our partners and including ourselves, when we pick a target to work on and we advance molecules, we typically have a lead program, but we also typically have backup programs that may have slight differences in chemistry approach. Any one of our partners at any time may choose to discontinue a lead program and go for a backup program. That can happen. Very common in the industry. I think if you look at our partnership with Neurocrine, for example, as Matt said, there's lots of activity there. And there has been, for a number of years, people that remember Heptares. The first 2 compounds that were advanced for M1 are not likely to be the compounds that are going to be advanced going forward if our partner chooses to take them forward. So there is always multiple molecules that could be advanced. And yes, it's ultimately if they're partnered programs, that's up to our partner to choose, which ones to advance. And on an internal basis, for our in-house programs. We always have a rigorous debate at the time that we nominate a preclinical candidate as to which one that lead candidate should be. But we typically also have backups as well.

Yes, as you say, Chris, it's not unusual by any means to have this kind of approach. And sometimes, it's -- people have backup programs to mitigate maybe risks of the front running molecule, but also you can maybe explore a broader range of indications if the backup molecule has a slightly different profile. So it's not unusual. It's actually quite smart and clever and opportunistic to have multiple shots on goal like that.

Yes. Thank you for the question.

And thank you, Chris.

Thank you.

[Interpreted] And so with compounded -- so we do SBDD and target-based drug discovery. So if there is a promising molecule, there may be coincidence from various reasons, but structure-based molecule is made. So the design ability is high. I wouldn't say easy, but -- and so like you mentioned, having a backup is not rare. So that is the key to technology. Thank you very much. So the structural design and analysis, I understand that it's important. Thank you very much. So I still see many raised hands functions, but we were scheduled for 5:00 today. So we would like to conclude the Q&A session here today. But in the Q&A box, we have submission of many questions. Later on, we will look at them, all of them, and we will return the comments through blogs and other means. If you have any questions, just include a word in the Q&A so that we will be able to respond to your questions. So once again, for those of you who are still raising hands, I'm sorry to say, but even if you are not a media analyst, if you can drop down your questions and submit your questions through a Q&A box, we will come back to you. Later on, we will be uploading the video for today's session. But for those of you who have participated on real time, thank you very much for your attendance. With this, we would like to conclude R&D Day 2023. Thank you very much for your attendance. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]