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

[Interpreted] It's time to start Nxera Pharma webinar for first half FY '26 financial results. Thank you very much for joining despite your very busy schedule. My name is Nomura, CFO of the company, serving as the MC. Today we have CEO Chris Cargill, COO and President at Nxera Pharma Japan, Toshihiro Maeda, CSO and President of Nxera Pharma UK, Patrik Foerch with us. We have simultaneous interpretation. Please click the icon of language and select either Japanese or English for interpretation. If you turn it off, you can hear the original voice of the speaker. As for today, we will have the explanation of the materials, and in the latter half, we will have the Q&A session. Presentation slides are available on the screen, but they are on the company's homepage as well. If you need them, please enter from Investor Relations, IR Library, and Presentations to access the materials. As for the Q&A, institutional investors, analysts, and media people, when the time comes, please ask questions by raising hands. The others, please submit the questions from Q&A button. During the webinar, you will be able to submit your questions, and we would like to respond as long as the time permits. Without further ado, we would like to move on to the presentations. First of all, Chris will talk about operational highlights. I will talk about the summary of the financial results. Maeda will speak about Japan, APAC, commercial, and Patrik will talk about U.K. R&D. Lastly, Chris will talk about the road ahead. Please turn to page 5 of the materials. Chris, over to you.

Thank you very much, Nomura-san. Just a quick disclaimer, please note that today's presentation does contain forward-looking statements, and the actual results may differ from them. The details are here on slide number 2. Welcome, and thank you for joining us for Nxera Pharma's results for the first half of financial year of 2026. I am Chris Cargill, President and Chief Executive Officer of Nxera Pharma. This is the story of a company that is moving rapidly from investment to delivery, and I am very pleased to take you through it. You will see growth of revenue, a return to profit, and a clear external validation of our science. The next slide brings the whole half together on one page, so please turn to it now. In the first half, we grew revenue, returned to profit, and saw our partnered science validated in the market. On financial performance, revenue grew 25% to JPY 18.9 billion. Operating profit moved from a loss of JPY 2.8 billion to a profit of JPY 1.9 billion. Core operating profit increased from JPY 364 million to JPY 6.5 billion. Both our commercial products business and our platform business turned profitable. In commercial products, PIVLAZ sales reached JPY 6.3 billion, up 9%, and QUVIVIQ sales reached JPY 3.6 billion, up 127%. On the platform side of our business, we achieved multiple revenue-generating milestones from Neurocrine, AbbVie, Centessa, and Lilly. We created the new company for a GPCR-targeted program with up to $275 million in potential milestones, plus royalties, and a significant minority equity ownership stake. Our orexin agonist science was validated in the market. Lilly's acquisition of Centessa, whose orexin portfolio was generated on our platform, valued that business at up to $7.8 billion. This is an external arm's length reference point for the value that our platform creates, and it highlights just how serious Lilly are in making brain health and broader neuroscience the next big category beyond obesity. Our muscarinic science is also advancing on its own terms. Our partner, Neurocrine, continues to progress direclidine, the differentiated M4 program, which is moving towards a phase III data readout in the second half of 2027. And we regard this as a distinct source of value within our partnered portfolio. Let me turn now to how this progress maps against the objectives that we set out at the start of the year. Please turn to the next slide. Against the five priorities we set for this year, we are on track or ahead on every objective. On net product sales, we've reached JPY 9.9 billion, which is 51% of our JPY 19.5 billion plus target for the year. On adding late-stage assets for Japan and Asia Pacific, we have multiple discussions ongoing. And on new high-value partnerships, we are in active term sheet discussions. On partner-sponsored trials, we achieved our goal with the start of a phase II study of NBI-570. And on cost and profitability measures, we set out to reduce total costs by 10% and to reach full-year profitability on an IFRS basis, and we achieved profitability in the first half following Q1. Now, to take you through the financials in detail, let me hand over to our Chief Financial Officer, Nomura-san.

[Interpreted] Thank you, Chris. Here, I will explain the summary of financial results in first half FY 2027 by segment and the historical trend. Please turn to page 8. As Chris mentioned, the revenue against JPY 15.1 billion last year, increased by 25% to JPY 18.9 billion. The milestone revenue grew from JPY 5 billion to JPY 8 billion, and product sales, in red, from JPY 7.5 billion to JPY 9.9 billion, respectively. These are the major drivers. We received milestone from our key partners, Neurocrine, Lilly, AbbVie, Centessa, and once again, since this was acquired, Lilly. With these four partners, saw progress in development, resulting in milestone payments. I will skip the numbers as they were mentioned earlier, but both products grew steadily. In terms of profit, core OP was JPY 65 billion, JPY 1.9 billion on IFRS basis. Although it slightly declined compared to Q1, where milestone was concentrated, the progress is in line with the full year forecast for both revenue and cost. On the next page, I would like to show the breakdown. Turning to page 9. As usual, it shows breakdown by business domain and consolidated P&L core and IFRS. The far left blue platform business is so-called bio venture type business model, as you know, and next to it in red is the commercial business, so-called pharma-type business model. The profit of the platform business is heavily dependent on milestone from partners. While it is difficult to control by the company, we aim to stabilize revenue, in red, by driving commercial business. We achieved steady progress on milestone during the first half of the year. The platform business secure profitability on a core basis. The commercial segment saw significant growth in both revenue and profit. Regarding costs, specifically SG&A and R&D expenses, which have been working to reduce since last year, spending is tracking in line with our full year forecast, standing at 49% and 50% of the projected amounts despite some minor fluctuations in specific areas. Thanks in part to these efforts, the commercial business in particular is shifting toward a higher profitability structure, with profit growing by 38% against sales growth of 11%. That concludes my brief explanation on first half financial results. Next, Maeda will cover Japan APAC commercial. Over to you.

[Interpreted] I will now provide an overview of our Japan and APAC operation. I am Maeda, COO. Thank you very much for today. I will explain the current status for our three main products. First is PIVLAZ. It is an endothelin A receptor antagonist for prevention of cerebral vasospasm after aneurysmal subarachnoid hemorrhage. It's our first in-house product to be launched. The graph on the left shows quarterly sales. As you can see, there's a seasonal pattern with higher sales in Q4. If you compare the same quarters across different years, you will notice that sales have grown year-over-year. In Q2 of 2026, total sales totaled JPY 3.4 billion, and cumulative sales for the first half reached JPY 6.3 billion, showing steady growth compared to the same period last year. As our market share exceeds 70%, it stands to reason that our future growth drivers will shift from securing new sites to optimizing dosing and expanding the patient segment receiving prescriptions. From this perspective, a key initiative is the practical guide to clazosentan administration, published by the [Academy] Society in March of this year. These guidelines systematically organize insights regarding the administration of PIVLAZ in real-world clinical practice. We believe they will lead to appropriate treatment for a greater number of patients. Next, I will explain QUVIVIQ, a medication for treating insomnia. It is a novel drug belonging to a class known as dual orexin receptor antagonist, or DORA. First, please look at the graph on the left, which shows the structural changes in the market itself. In the field of insomnia treatment, DORA is rapidly establishing its position, replacing traditional benzodiazepine. The DORA market share based on the number of tablets is projected to reach 40% by 2026. In terms of market size, the total DORA market has expanded to JPY 83 billion. We believe this structural shift is still underway and that there's significant room for growth. The graph on the right shows QUVIVIQ's position within this context. Revenue in 2024 was JPY 1.3 billion, while in 2025 it reached JPY 4.3 billion, a significant increase of 224% year-over-year. For the full year FY '26, we project revenue of JPY 5 billion-JPY 6 billion, representing 30% increase year-over-year. As of the first half, revenue stood at approximately JPY 3.6 billion, indicating steady progress. As of June 26, QUVIVIQ's market share within DORA class stands in the low 9% range. Although the market is still dominated by leading drug, lemborexant, the growth is driven by two concurrent tailwinds. The fact that this product as a latecomer is steadily gaining market share, and the fact that the class itself is expanding. We will continue to work with Shionogi to carefully communicate this drug's key features, such as minimal carryover to the following morning and improved daytime function, and expand the base of prescribing physicians. Next, please. Finally, let me explain vamorolone, a new product we launched in early 2026. The drug is indicated for the DMD. For many years, corticosteroids have been standard of care for treating this disease. However, adverse events such as growth suppression, decreased bone density, fractures, and cataracts have been main challenges, and it is not uncommon for patients to find it difficult to continue the treatment. Vamorolone is a drug that directly addresses the challenge of strong effects, but side effects that are too difficult to tolerate. Top-line results from the recent GUARDIAN trial demonstrated that compared to standard corticosteroids, vamorolone significantly improved safety while maintaining efficacy. I would like to highlight 3 specific features. First, regarding growth, normal growth was maintained with an average height difference of 12 centimeters at the 5-year mark. Second, regarding bone health, the vertebral fracture rate was 8% in the vamorolone group, compared to 42% in the deflazacort group. Third, regarding eye health, the incidence of cataracts was 5% in the vamorolone group, and there were zero cases of glaucoma. All three factors determine whether patients and their families can continue treatment over the long term. We believe that the reduced side effects, which enhance treatment adherence, represent the greatest value of this drug. The chart on the right shows the consensus sales forecast for vamorolone in other countries. According to Evaluate Pharma's forecast in December 2025, which combines data from Catalyst in North America and -santhera in Europe, the market is expected to grow to $670 million. We believe that this level of international recognition serves as an important reference point when considering the potential of this drug in Japan and the APAC region. Based on this clinical differentiation, we will steadily proceed with preparations for our regulatory submission. This concludes my presentation on our Japan and APAC operations. Nomura-san, over to you.

[Interpreted] Thank you, Patrik. Can you move on to R&D?

Yes. Thank you. My name is Patrik Foerch. I'm the CSO of Nxera. Can you move to the next slide, please? The first half of 2026 was a period of strong execution across the portfolio. We achieved multiple milestones spanning discovery, clinical development, partnering, and regulatory process. In discovery, our collaboration with AbbVie and Lilly generated further milestones, reinforcing the value of the NxWave platform. In the clinic, Neurocrine initiated a phase II development for NBI-570 schizophrenia, triggering a JPY 22.5 million milestone. We also continued to build value across the orexin portfolio, receiving milestones linked to the progression of orexin 142 and 489. Beyond this part of the pipeline, we advanced our broader strategic portfolio through the licensing and approvals in Japan and selected Asia Pacific regions. More importantly, these milestones underline the exceptional commercial potential within our portfolio. Particularly our neuroscience portfolio is very compelling. With Neurocrine, we now have the world's broadest muscarinic franchise covering M1, M4, and dual muscarinic agonist. Direclidine is the most advanced and the first selective M4 agonist currently in phase III trials, together with a wider muscarinic pipeline across schizophrenia and Alzheimer's disease. We believe direclidine's competitive position has become even stronger following MapLight's recent phase II readouts for their M1, M4 program that only achieved a modest placebo-adjusted benefit dosed once daily. For orexin, the acquisition of Centessa by Eli Lilly provides a powerful validation of the quality and the strategic importance of the 3 orexin agonists discovered through the collaboration with Nxera. We're very excited that Lilly indicated progressing all 3 orexin programs and that they are benefiting from Lilly's global capability. That substantially increases the potential of the orexin molecules across sleep, neurological, and wider neuropsychiatric disorders. The key message for the first half is not only that we delivered a strong series of milestones, but that the underlying clinical pipeline is becoming increasingly valuable, increasingly validated, and increasingly capable of generating significant future return for shareholders as well as value for patients. Can we please move to the next slide? Along these partnered assets, our internal portfolio includes three differentiated clinical stage programs in schizophrenia, IBD, and immuno-oncology, each with a clear upcoming value creation opportunity in the second half of 2026. The first program is NXE-149, our GPR52 agonist for schizophrenia, and that represents a generally novel approach to the disease by addressing positive symptoms, improving negative symptoms and cognition, areas where current therapies remain inadequate. NXE-149 has completed phase I development with a strong data package and is fully phase II-ready. We are in advanced discussion with several parties to partner that program. The second program is NXE-744, a gut-restricted EP4 agonist for IBD. The program has delivered strong phase I-B data by proving pharmacological activity in human indomethacin challenge model, and therefore showing that it's promoting mucosal healing. As the exposure has got restricted, we see minimal systemic exposure and an excellent safety profile. As this mechanism is applicable as a monotherapy as well as an add-on to biologics, we do see great interest in the program and have selected a number of major players in the I&I space for advanced negotiation. The third program is NXE-732, an EP4 antagonist for immuno-oncology. The ongoing phase II A study is sponsored and operationally delivered by CRUK, allowing Nxera to generate an important clinical proof of concept in a capital-efficient manner. Importantly, Ono's EP4 antagonist data for 4578 recently produced positive randomized phase II results in first-line HER2-negative gastric cancer. These Ono data provide strong independent clinical validation that inhibition of EP4 can enhance antitumor activity in combination with checkpoint inhibition. This meaningfully increases our confidence in the therapeutic relevance of the EP4 mechanism as we approach our own phase II A interim readout. Hence, we are very excited about this recent data and looking forward to our interim phase II A results in the second half of this year. If we can move to the next slide, please. This slide captures one of the most important elements of our R&D strategy, building a differentiated high-value franchise in obesity, metabolic, and endocrine disease. The market opportunity is substantial with the next generation of medicine moving beyond maximum weight loss, especially combining strong efficacy with better tolerability, improving body composition, durable comorbidity benefits, and allowing broad access and long-term adherence. This is where Nxera is particularly well-positioned. Our NxWave platform allows us to design oral small molecule against highly valuable but technically challenging GPCR targets. Our lead metabolic programs cover several of the most strategically important mechanisms in the sector: GLP-1 agonism, amylin agonism, and the GIP receptor, alongside different sets of endocrine opportunities. The commercial and scientific validation for this mechanism continues to strengthen. Lilly's oral small molecule GLP-1 orforglipron demonstrated that an oral non-peptidetic can achieve meaningful efficacy without the administrative restrictions of peptides. Importantly, our GLP-1 chemistry is structurally distinct from the described small molecule scaffolds that we know are primarily based on danuglipron and orforglipron. Similarly, for our amylin program, we have generated multiple proprietary series. We achieved a 10,000-fold improvement in potency in just three months. Most importantly, our chemistry is completely distinct from any chemistry described, and we are on track for IND studies next year. Execution is critical, Nxera has the platform, the chemistry, and the portfolio breadth to become a meaningful next-generation player into metabolic and endocrine disease. We remain on track for 4 IND-enabling studies in 2027 and subsequent clinical start in 2028. In summary, our R&D portfolio has made substantial progress in the last six months. Strong delivery of milestone in the first half, progression of the muscarinic portfolio with Neurocrine. The orexin portfolio attracted a multibillion-dollar strategic investment. We have 2 phase II-ready assets at advanced partnering stage, and our discovery pipeline is progressing to deliver multiple IND-enabling studies in 2027. With this, I'm handing over to Chris.

Wonderful progress. Thank you, Patrik. Let me now take you through the road ahead at Nxera. Can you please turn to the next slide? We are moving from an investment phase to a delivery phase, and I want to show you how all of the pieces fit together. We run our business as four value engines, and each one is now substantial and independently valuable. Each engine, as you can see, fuels, de-risks, funds, and accelerates the other engines. Let me show you how they compound. Here are the 4 engines on one page. Please turn to the next slide. Sorry, we might need to go back one slide if that's okay, guys. Of the 4 value engines, products, platforms, pipeline, and partners, and as I said, each is substantial and independently valuable. Products is a profitable and growing commercial platform in Japan. We're targeting JPY 40 billion-JPY 50 billion in net product sales and an operating profit margin above 30% by 2030. Our NexAQ and NxWave platforms pair artificial intelligence and quantum-level simulation with a proprietary GPCR data set. This engine is targeting 5 AI-led discovery projects by 2028. As Patrik just mentioned, pipeline is our emerging metabolic and rare disease biotech, and we're targeting 4 clinical stage programs for the U.S. market by 2028. Our partnerships represents more than $4.5 billion of partner-funded milestones and royalties, and we have a goal of executing a new partnership above $1 billion in total deal value later on this year. Let me take each engine in turn, starting with products. Now we can go to the next slide, please. Our commercial products engine has more than doubled its sales since 2023, and it is profitable, and it is cash generative. Since we acquired this business from Idorsia Pharmaceuticals Japan in July 2023, we've scaled revenue 2.6 times, and we've removed 20% of the cost base. PIVLAZ is the market leader with 74% share in the prevention of cerebral vasospasm. QUVIVIQ is growing in triple digits with Shionogi as commercial partner, and our forthcoming Taiwan launch is secured for the second half of 2026. Vamorolone is moving forward in clinical development. Note, the product is now broadly approved for Duchenne muscular dystrophy across the U.S., Europe, U.K., and China. We see substantial peak sales opportunity across all three products with PIVLAZ at JPY 15 billion-JPY 16 billion, QUVIVIQ at JPY 15 billion-JPY 20 billion, and vamorolone at JPY 10 billion-JPY 20 billion. Every well-chosen medicine that we add from here lands on this lean, highly focused commercial infrastructure. Now we plan to extend vamorolone into further rare disease areas as well. Please turn to the next slide. We plan to take vamorolone beyond Duchenne muscular dystrophy, or DMD, into at least three further rare diseases. We are evaluating vamorolone in Fukuyama congenital muscular dystrophy, FCMD, a disease found almost only in Japan. We're also evaluating it in pediatric nephrotic syndrome and in juvenile dermatomyositis. In each of these, the current standard therapy relies heavily on glucocorticoids, where a more tolerable steroid such as vamorolone could make a real difference to patients. This keeps us highly focused on serving more rare disease patient populations, particularly in our home market of Japan. Let me turn to our platforms and the new company that we recently created to drive them. Next slide, please. On the 1st of July 2026, we created a dedicated company for our NexAQ platform. Our starting 5, all experienced drug hunters, have now initiated the first AI-led research project. It's led by an experienced team spanning computational sciences, data science and engineering, AI and machine learning research, platform engineering, and computational engineering. These are people who have built and applied AI drug discovery techniques at leading organizations. Let me explain what makes this platform different. Please turn to the next slide. The NexAQ platform pairs fine-tuned AI models, large scale virtual screening, and quantum-level simulation with more than 15 years of our proprietary GPCR data sets. This data set includes 493 experimentally determined GPCR structures, 59 receptors, more than 400 small molecule entities, and over 30,000 mutation data points across more than 100 projects. This proprietary data asset compounds because every program feeds it with experimental outcomes flowing back in through the loop, so our predictions keep improving and sharpen the decisions on what to progress, what to make, what to test, and what to stop. All training data is private. None of it is available via public databases. This platform is cloud-based. It's built exclusively on AWS infrastructure, giving us compute at an unprecedented scale to be structure-based and prediction-led, to materially accelerate the timeline to a development candidate, and to scale our pipeline through automation and agentic orchestration. The result is going to be a step change in speed and cost. Please turn to the next slide. The NexAQ platform compresses the time and the cost of early drug discovery dramatically. Traditionally, reaching a development candidate takes 4 to 5 years and maybe JPY 10 million to JPY 15 million of investment. With NexAQ, we are targeting 1 to 1.5 years and less than JPY 5 million of investment per program. That is around 70% compression of front-end time and a more than 50% cost reduction. Speed to development candidate is going to be our core measure, and we are scaling to 5 AI-led research programs by 2028. Because every program continues to feed the data set, each one makes the next program faster. Our third engine is the pipeline that our platforms are building. Please turn to the next slide. We believe the next generation of obesity therapies will compete on far more than just weight loss. We are designing for greater efficacy and for better quality of weight loss that preserves lean muscle mass. We are designing for access and adherence with oral small molecules and convenient dosing, and we are designing for greater tolerability. Gastrointestinal side effects remain a major issue for current GLP-1 therapies. They drive high discontinuation rates, and they limit the maximum dose that can be reached in real world clinical practice. So, a gentler, better tolerated profile is central to adherence and compliance. The goal is healthy weight reduction that protects muscle and organs, and weight reduction that lasts. Here is how that pipeline builds over time. Please turn to the next slide. We are clearly aiming our next generation metabolic and rare disease pipeline at the U.S. market. Our 2026 discovery pipeline spans GLP-1, GIP receptors, and amylin mechanisms alongside targets for rare endocrine diseases. These discovery assets are designed to become clinical programs over the coming years, and our target is clinical programs for the U.S. markets in chronic weight management, muscle preservation in weight loss, and rare endocrine diseases. Our fourth engine turns all of this science into funded development and cash, and that is our partnerships. Please turn to the next slide. We hold more than JPY 4.5 billion of headline economics plus tiered royalties through partners, and the quality of these partners is being validated regularly in real transactions. As we mentioned earlier, Lilly's acquisition of our orexin partner, Centessa, valued that business at up to JPY 7.8 billion. An external arm's length reference point that supports the value of the partnered orexin pipeline in which we continue to hold economics. We await further publications in 2026 regarding the future of orexin science beyond sleep weight disorders and towards brain health and broader CNS such as cognition, fatigue, and mood disorders. We believe this is the next big category beyond obesity. Our muscarinic partnership with Neurocrine is progressing towards a phase III data readout for direclidine, the M4 program, in the second half of 2027. We regard this as one of the largest sources of potential value within this partnership and within our partnered portfolio. The partnered economics turn our science into funded development and cash, and we expect new partners again in the second half of 2026. Let me bring the 4 engines back together and what comes next for each. Please turn to the next slide. Each of these 4 engines has a clear next milestone, and together they all continue to compound. In commercial products, we expect new in-licensed products for Japan in the second half of 2026, as well as filing for the approval of vamorolone in Japan. In platforms, we expect the data readout from our first AI-led research program in the second half of 2026. In our pipeline, we expect a new global out license transaction in the second half of 2026. Our first metabolic disease program, we're aiming to enter the clinic in 2028. With our partnerships, we expect further clarity on Lilly's plans for the orexin portfolio in the second half of 2026, and we look forward to Neurocrine's M4 phase III readout for direclidine in the second half of 2027. With that concludes the main presentation. I'm going to go back to open the floor to questions. Please turn to the next slide. We'd be glad to take your questions now, and I'm joined by my colleagues from finance, commercial, and research development. Over to you, Nomura-san, to manage. Thank you.

[Interpreted] Thank you, Chris. As Chris mentioned, we would like to move on to Q&A session. As usual, institutional investors, analysts, and media people, please use the raise hand function. Since we already have the hands, we would like to take the question. Hashiguchi-san from Daiwa Securities, please unmute yourself and ask questions. Yes, Hashiguchi from Daiwa Securities. Thank you.

[Interpreted] The first question is the license out negotiation of your products. From January, you started negotiations and a few months passed. Two products were the main targets. At this point in time, what is the progress of the out-license program, and will you be able to complete during this year? Thank you for the question. This is about out-licensing. Chris would like to respond to the question.

Yes, thank you very much, Nomura-san, and thank you, Hashiguchi, for the question. I think you will understand from our previous experiences that partnership negotiations can take some time, but that usually, we open the year at the J.P. Morgan Healthcare Conference, where we have many strong and good conversations with potential partners and then we move forward through the rest of the year with a goal, usually, towards executing these partnerships by the end of the 12-monthly cycle. We are continuing to have discussions on both programs right now. I'm very confident. Our goal for this year is to, I mentioned it on our previous slides, execute at least one new major out-license across some of our clinical projects. We're on track to do that. We are now moving into the second half of the year. Discussions with partners are becoming much more serious, much more focused. You can expect to hear from us in the second half of the year regarding a new potential transaction. Thank you very much for your question.

[Interpreted] Thank you. I have another question. The forecast for sales of PIVLAZ and QUVIVIQ, you have not made any revision. At this point in time, how likely will you be able to reach the target? Especially the progress of QUVIVIQ seems very high. On a full-year basis, is it possible to see go upside? Thank you.

[Interpreted] Let me respond briefly to this question. Both of them are in line. That is our view from the company as of now. PIVLAZ and QUVIVIQ, they have different significance. PIVLAZ, we are distributing ourselves, and we can have the revenue. This is in line and in line, but as Hashiguchi-san, you pointed out, with respect to QUVIVIQ, as you know, we are not selling directly. Amongst our revenue, product supply is accounting for quite significant amounts. Shionogi, if they increase the inventory for the future, then there will be increase of revenue and if they reduce inventory, that will not be the case, so the actual demand, that is not synchronized. These figures are from these range. Personally, I do agree that this may not fit within the range, but it is not controllable by the company, so this is still within the range at the moment. Did I respond to your question?

[Interpreted] Yes, thank you. You responded to my question. Thank you.

[Interpreted] We will now take the next question. Nomura Securities, Matsubara-san, please unmute yourself and ask a question.

[Interpreted] Thank you. Can you hear me?

[Interpreted] Yes.

[Interpreted] Thank you for the explanation. I also have two items for the out-license. At least one out-license this year, I understand. Phase II study has already completed the preparation, but has not started yet. The out-license, if you cannot do the out-license, this phase II study will not start. Am I right?

[Interpreted] Chris, if you could answer that question, please.

Yes. Thank you for the question, Matsubara-san. That's correct. If we don't out-license the EP4 agonist or the GPR52 agonist, it is not our intention to conduct global phase II studies ourselves. These programs have been taken to their logical point of inflection for our company, and it is best that both of them are moved or advanced by partners. If you think about what we are discussing here, EP4 IBD, very, very large global indication. That is much better suited to a large company that has an IBD franchise to take that program forward through phase II and phase III. Similarly, GPR52, this is a mechanism of action that is indicated for schizophrenia or psychosis in Alzheimer's disease patients. Again, it's a very, very large indication. We need the support and the expertise of a large partner to move that forward through phase II and phase III. So, hopefully that answers your question.

[Interpreted] Yes. Understood. Thank you very much. For this IBD, there are some oral disease competitors, too. If you cannot have the good partner, it will be an opportunity loss. Rather than that, but that cost is more important, is a higher priority for you. Am I right?

[Interpreted] Chris, if you could answer that question, too.

Yeah. Thank you for the question. Look, generally speaking, our preference is to out-license to a large partner that is fully funded to do all of the clinical development required to make the medicine a success. As you know from our history as a company, there are other ways that we can move programs forward without necessarily doing a licensing deal as well. Now, our current focus and our current priority is to find a licensing partner. However, if we were unable to find a licensing partner, we could create a spin co, and we could bring venture capital investors in to fund the trial, and we could, in return, earn significant minority equity stake in that spin co, and the venture capital funds could move the project forward cost effectively. That would be another way that we could realize value from these projects. I just want to make it very clear that Nxera will not be spending 100% of the development costs on these projects. Priority number 1 is a licensing transaction with a major pharmaceutical company. If we were not able to do that, priority number 2 would be a spin co with top-tier venture capital providers to move the asset forward in that fashion. Hopefully, that answers your question, Matsubara-san. Thank you.