Olympus Corporation (7733) Earnings Call Transcript & Summary

Hello, everyone. I am Yasuo Takeuchi, CEO of Olympus Corporation. I am very pleased to welcome you to our first Virtual Investor Day to update you on the progress we have made against our 2019 transformation ambition and to share our vision for the future of Olympus. We are excited to share our plans with you as we look to a new horizon. Joining me today is our Chief Operating Officer, Nacho Abia. As you can see from the agenda, we have a lot to cover. We will begin with a look at the goals we set for our transformation to become a global med tech leader and our achievements against these goals. We will then look at an overview of the current trends affecting the health care landscape, and Olympus is placed within that environment. We will conclude with an outline of our plans to position Olympus for continued success. There's a lot to discuss, so let's get started. As you know, in 2019, Olympus embarked on an ambitious transformation journey. In doing so, we set out to build a new foundation for long-term growth and margin expansion. We have made considerable progress in transforming our company. We are now focused on our medical business. And as our recent results show, we are making steady progress towards achieving the KPIs we outlined in our corporate strategy. But the industry arena of which we are now a part is also undergoing rapid change. Macro shifts and micro developments are combining to create a highly dynamic and more globalized health care industry than ever before. Those to recognize and embrace these changes will be well placed to lead and make a real difference for the patient and health care professionals. Of course, change is not new to Olympus. As an organization that is over 100 years old, we manifest a long history of successful adaptation and focused renewal. And once again, we stand on the cusp of our next evolution as we accelerate our journey to become a global metric leader of the future. By the conclusion of today's presentation. I hope that you will have a clear view of how Olympus will stay true to its purpose of making people's lives healthier, safer and more fulfilled long into the future. Before we look ahead, I'd first like to summarize the steps we have taken and what we have achieved since 2019 by briefly revisiting our actions, our performance and our outlook. At Olympus, a key element of our success is that we continuously challenge ourselves. When we review our aspiration to you in 2019, we set some tough targets: sustain 5% to 6% growth annually, deliver a consolidated corporate operating margin of over 20%, attain a leadership position in the areas where we can compete in a meaningful way. Achieving these goals enables us to deliver solutions that benefit all facets of the health care industry from patient and health care professionals who care for them to the payers and infrastructure that support the system. We set an ambitious time line to achieve over 20% operating margin by 2023 with understanding that this journey would be a process, not a moment. Achieving an operating margin over 20% in a short period of time will significantly change the awareness of colleagues and corporate culture and bring out the potential of Olympus as a whole by financial year 2023. Let me be clear, 2023 is not the end goal. It is a milestone on our continuing journey. For our journey to be successful, it requires a careful charter part, one that enables Olympus to realize its full potential through a world-class organizational, operational and cultural approach. Today, with 86% of our revenue derived from medical and 80% of the revenue generated outside of Japan, we are a global metric company and we serve solutions to 150 countries and regions across the world. It is important to recognize how our contributions to society go beyond our medical contributions. Olympus also recognizes that one of its important management activities is to consider sustainability and actively promote initiatives that incorporate ESG perspectives. Therefore, we have committed to this set of materialities and made sure all management initiatives are clearly engaged. While there remains much to do, we have made substantial progress in a relatively short time. One of the key initiatives was the portfolio management. We transferred the imaging business in January 2021 and some businesses in the United States and Japan. We acquired 5 medical companies since last year to grow our medical business. We have increased our attention on improving our operational model and capability. We established a globally integrated HL management system to utilize our talents globally and set up the global business service structure. The career support for the external opportunity initiative implemented in Japan has shifted our employees' mindset in a globally aligned way, especially in Japan. I am proud of our work in improving our corporate culture and making the best use of our organizational strength. I am confident that Olympus is steadily transforming into what we want to be, a leading global medtech company. We have implemented the variety of the measures since the first fiscal year of the corporate strategy, and we are enthusiastic to accomplish the goals set forth in that strategy. These are the financial KPIs we published in our corporate strategy. We have set the operating margin as the most important KPI and have set 3 supporting indicators. As I mentioned earlier, we have implemented a number of important initiatives in the short time period. As a result, despite COVID-19, we have been able to significantly improve our operating margin and are right on track to achieve over 20% in fiscal year 2023. The figures are on the adjusted basis, and we define the extraordinary items. The supporting financial indicators are also improving, along with operating margin. In particular, EPS is currently progressing ahead of the schedule, and we expect further improvement in the next fiscal year. On the other hand, free cash flow and ROIC are a little bit behind. We will continue to make efforts to improve them in order to maximize cash flow, which is the social corporate value. This is the update regarding the capital allocation policy. Taking advantage of a robust platform centered on the GI endoscopes in the medical business, I believe we can continue to generate a stable free cash flow. First of all, business investment is a top priority in the capital allocation. I believe our shareholders expect Olympus to make the business investments that can create unique added value and also increase shareholder value. In line with the corporate strategy, we will continue to promote business investment and M&A centered on the medical business, especially in our 3 focus areas. We pay dividends stably and aim to increase them gradually. After securing sufficient liquidity on hand for working capital and investment, we will consider flexible buyback of the treasury stock if there are surplus funds. To summarize, our focus and the result has brought us to where we are today, standing on a solid foundation that will enable us to extend our offerings to lead in areas where we can generate the most impact and to achieve our global ambition. Our contribution to improving the lives of the patients around the world is already significant with our solutions treating over 100 diseases and conditions. Our solutions support position treating and patients suffering from 4 out of the 5 most common cancers: lung, stomach, colon and prostate. However, we can and must do more. This snapshot provides a sovereign view of the aging population and the rise of the new cancer cases. As the age of the global population rises, so as the incidence of the chronic diseases. For example, the estimated number of the new cancer cases is expected to grow substantially from approximately 90 million cases in 2020 to over 30 million cases by 2040. The need for effective medical solution is growing rapidly. And we, as an industry, must act, at the same time, new technologies of a great promise in terms of raising the standard of care. Data and analytics have the potential to unlock enormous value by improving patient care and experience, reducing the care burden for professionals and driving costs down. Alongside these drivers is a definitive shift across the industry around expectations for patient care. There is an emerging need to create solutions and optimize procedures to enhance the care pathway. For health care professionals, this drives better performance, increase efficiency in resource allocation, lowers cost and has the potential to deliver new insights from the data accrued. For patients, the benefits are clear: more personalized care, faster service, lower cost and ultimately better outcomes. This is another area where challenges present us with exciting opportunities to extend our offerings, collaborate with partners and ultimately shape a better health care system. So what does that all mean? You may ask. These benefits for HCPs and patients mean simply that it is incumbent on leaders in our arena to look beyond optimizing device performance and think more expansively about how their capabilities can be better leveraged to enhance patient care. So where does that lead us? As we move forward from today, our strategy is to improve patient outcomes by elevating the standard of care in targeted disease stage. Significant opportunity exists to address unmet needs and elevate the standard of care in areas where Olympus has an existing right to win. Important unmet needs are common across targeted disease states, including the needs for the earlier patient engagement for better care along the patient pathway and for application of data-driven and advanced technological solutions. This opportunity landscape represents a significant shift in the direction towards a pathway and procedure focus while next-generation products will also play an important role. The initial implications of this strategy are clear. We will focus on areas where we can win, where Olympus can truly elevate the standard of care and ultimately improve patient outcomes. We will seek new opportunities to expand our participation at multiple stages of the patient pathway. Adopting a clear pathway-focused approach offers us the opportunity to take a leading role in shaping the future of health care. This will require enabling operational adjustment that allow us to meet our aims globally and at pace. I want to be clear. This is a unifying value creation strategy designed to accelerate our ability to deliver on the growth and profitability targets we have set, optimize the treatment journey for the patient and health care professionals as well as unite and inspire our global team around the impact we can have. I will now ask our Chief Operating Officer, Nacho Abia, to take you through the details of how we move forward from today. Nacho, over to you.

Thank you, Yas. As Takeuchi-san just said, moving forward, we have absolute clarity to continue our purpose of making people's lives healthier, safer and more fulfilling. The steps we've taken under Transform Olympus and the divestment and new investment we've made in the recent past are supporting our move in a further developed direction. The first chapter was established in the endoscopic solution and therapeutic solutions division developing the governance and organizational structures needed to become a truly global medical technology company. Now I would like to take you through the next chapter and share with you the details of our focus and shape principles. First and foremost, our stated strategy is to improve patient outcomes by elevating the standard of care in targeted disease states. This strategy is based on our strengths today, inclusive of imaging, endoscopic screening, diagnostics and endoluminal therapeutics. But it also addresses the market shifts, such as the integration of digital solutions and our drive to mean unmet needs along the patient pathway. It is a strategy that requires us to focus in areas of the business where Olympus can make the greatest difference in lives of patients around the world. And it is a strategy that composes to work together, focusing human and financial resources across the organization on new innovations, care models and technologies that shape the future of health care. We must focus on our strengths in the areas we can have the greatest impact on patients' lives, and we will be more successful against our competition. As you can see in the slide, Olympus is a clear leader in the areas of gastroenterology, urology and respiratory. This is where we are having greatest impact today, but it is also where we have new growth opportunities. These are the areas where we will focus our investments and resources to achieve profitable and sustainable growth and make the biggest difference in the care pathway journey. As a result, we plan to maintain market leadership in GI endoscopy and outpace market growth in GI endotherapy, urology and respiratory. Let's talk about GI first. The prevalence of chronic GI diseases is increasing, and therefore, we'll continue to be significant amend needs in screening and treatment of GI diseases. Our disease a state of focus represents markets where Olympus is strong and will continue to grow. Both the stomach and colorectal cancer are in the top 4 out of 5 most common cause of cancer-related deaths. And our 2 divisions, ESD and TSD, collectively offer a portfolio of solutions across the continuum of care, enabling detection, diagnosis, staging and treatment. So we are uniquely positioned to reach more patients by delivering such a comprehensive offering, and through it, to continue increasing our value to health care systems and patients alike. Looking at the prevalence of colorectal cancer in particular, we see greater opportunity for Olympus to elevate the standard of care through solutions for screening, diagnosis and treatment. Encouraging news is that our solutions can make a difference to patients, and research tell us that many eligible and at-risk patients are not the screen for colorectal cancer. There is a significant opportunity to improve the patient care pathway to ensure that the right patients receive earlier screening, early diagnosis and earlier less-invasive treatment. This is a tangible example of where we can elevate the standard of care and deliver significant value. So we will drive future growth in gastroenterology and harness the opportunities ahead. In GI, we can segment our growth opportunity into 3 categories: innovation of new products, regional expansions and leveraging our domain knowledge to grow into areas adjacent to our existing expertise. Let's explore this approach with some specific examples on the following slides. The launch of EVIS X1, our more advanced endoscopy system has been enthusiastically received by customers and it is contributing to growth in the regions we already launched. The CAGR for the predecessor platform of EVIS X1 provides a good outlook of the kind of momentum we can expect for EVIS X1 as it is launched around the world. And EVIS X1 system launches in Europe, Asia Pacific and Japan have been quite successful. So we are very confident the new launches planned that will extend entry for this product into the U.S. and China will be very successful as well. We're bullish on these launches and have full confidence that our efforts will yield significant additional results over the next 5 years. Another growth driver we would like to highlight is infection prevention. As we all know, infection prevention is top of mind at every health care facility, large or small. And here, Olympus has a substantial opportunity to make a difference. We intend to compete for a portion of that market that greatly complements our product lines, and this is a state of focus. To accelerate our impact and offering, Olympus has established a dedicated unit to build our capabilities through a combination of organic and inorganic growth. This unit has 3 clear priorities: strength and effectiveness of core products and accessories, provide end-to-end portfolio and advisory and to develop innovations for money on automated cleaning. The next area we will focus on is urology, where Olympus is uniquely positioned with a comprehensive portfolio of products to treat some of the most common urological diseases. We have significant market opportunities in BPH, bladder cancer and kidney stone treatments. Benign prostatic hyperplasia or BPH impacts 50% of men between 51 and 60 years old and 90% in men older than 80. As just highlighted earlier, the aging population is a trend that is driving the industry, and this is a specific example of how that trend aligns with our focus. The second is a disease state of focus is bladder cancer, which unfortunately has very high recurring rates up to 74%. And third, the incidence of kidney stones is rising and is associated with high recurrence rates over 5 years. The good news is that Olympus has world-class treatment solutions to other each of these conditions, making the aggressive goals we have set possible. Let's talk specifically about BPH, where the prevalence is considerable. Our focus is to provide urologists with a complete suite of solutions to treat patients suffering from BPH so we can address the disease state all along the patient pathway. For example, for less severe cases of BPH, iTind is a temporary device that is easily implanted deliver rapid support and is completely removed at the end of our treatment period. For more severe cases, through a transurethral resection of the prostate or TURP procedure, our plasma plat solution has integrated third-generation bipolar technology. This network generation continues to set new standards across the board in terms of performance, treatment option, safety, cost and time efficiency. And finally, in addition to its main application area in stone management, the SOLTIVE platform allows physicians to address unique procedures and economic needs associated with prostate nucleation as our lease solution is used for this procedure as well. By focusing on the solutions, satisfied growing market needs, Olympus is well positioned to continue its growth in these areas and even extend leading positions that we have already created. To summarize, we'll be driving growth in urology by continuing to invest in core procedures and technology areas while expanding our reach globally. Our key focus area of BPH, bladder cancer and stone management will be driven by our visualization solutions plus other key technologies like iTind, plasma plus and the SOLTIVE system and also through our entry into the single-user heteroscopy market. And we'll also drive global market development to allow patients worldwide to benefit from the iTind procedure, while expanding our stone management portfolio beyond core markets, powered by a revolutionary market-leading SOLTIVE solution. Physicians and clinical evidence have shown that this is a game-changing technology, and we're very proud to bring it to the market. Let's move on to respiratory. Olympus will make a real impact on the global health care system by focusing as well on the respiratory segment where disease prevalence is growing and the unmet need is significant. Lung cancer is the most deadly cancer with over 3.4 million patients per year and high associated mortality rates. Early detection and diagnosis is critical and well aligned with our current and future product set. Second disease state of focus is chronic obstruction pulmonary disease, COPD, which is the third leading cause of death globally with 174 million patients suffering from this disease worldwide. With our bronchoscopy and endoscopic devices, we lead the respiratory endoscopy market, a market that is currently underpenetrated. This, together with our product pipeline, positions Olympus for continued growth and signals our opportunity to make a real difference in the life of patients and their families. While talking about elevating the standard of care, Olympus was an early and critical innovator in the lung cancer space with the introduction of the endobronchial ultrasound, transbronchial needle aspiration solution that supports lung cancer staging. Furthermore, the acquisition of Veran Medical Technology enabled Olympus to extend its important work in this space, bringing an integrated offering, bronchoscopes devices and the bronchial and transporting navigation technologies designed to for the lung cancer trade. However, the prevalence of lung cancer and the mortality rates remain high, and new solutions are still needed. The reason for this is that while lung cancer screening is recommended, many instances continue to go undiagnosed. And the standard of care for diagnosis is CT-guided needle biopsy, which has a high complication rate. So this is yet another example of an area where our leadership is needed. It is our obligation to continue to innovate in this area and uncover a more precise path to early detection and effective treatment. We continue with volitention in this space as we have in the past. One example of an important patient pathway improvement that Olympus has already broke to the respiratory market is in the combination of EBUS-TBNA plus peripheral bronchoscopy. This enabled diagnosis and staging to be done in one episode of care. This is the kind of patient care and procedure efficiency that we must strive for. Overall, our growth in respiratory will center on 3 core actions. First, it is incumbent upon us to leverage our innovations and clinical knowledge; to maintain leadership in core markets such as the U.S. where we will launch EVIS X1. We'll also have a full portfolio of single dues and traditional bronchoscopes as well as new EBUS technology that will address currently unmet needs. Second, we will expand our market presence with platforms such as the Veran spin thoracic navigation platform and the commercialization of the expiration valve system in other geographies such as China. And third, we will meet so far unmet clinical needs by growing our pipeline of technologies to improve diagnostics for suspicious peripheral lesions while applying our domain expertise to have the scenarios in lung cancer screening, certification and treatment. Let me talk now for a moment about our other therapeutic areas. When we look forward, a new horizon with higher focus in mind, it is critical to acknowledge the important investment we have already made in other areas where we can now realize tangible benefits. These 4 business areas, surgical endoscopy, surgical devices, ENT and gynecology, will continue providing a robust contribution to Olympus. And while we might not be the global leader in this entire spaces, our products have provided great value to our customers for many years, which is visible, for example, in our leadership in surgical solutions in Japan or our global leadership position in visualization in ENT. Therefore, we plan to protect and grow these areas, leveraging past investment, harnessing market shift towards minimal invasive procedures across the care pathway, and we will do it while focusing our efforts on operational and commercial efficiencies that best serve our margin goals while demonstrating our ability to launch products that are able to catalyze growth. Let me highlight some of those developments that will be catalyst for growth in these just mentioned therapeutic areas. These solutions, some already in the market and some upcoming, will help physicians avoid complications and can prevent recurrence of serious diseases. For example, our newer surgical endoscopy platform, together with recently acquired Quest Spectrum Technologies, will use advanced visualization techniques like fluorescence or molecular imaging to help avoid complications during surgery. Or in the surgical device space, we have just launched Power Cell in the United States with plans to launch this advanced bipolar energy portfolio in Europe and other regions in the next fiscal year. This marks a significant market penetration and growth driver opportunity for us by releasing a solution that meets high clinical performance standards. Okay. Let's move on now into the shape. The solutions we have discussed so far demonstrate our potential to realize further growth and have greater impact. But if we are aiming to continue elevating the standard of care as the core of our strategy, we will also need to determine what other innovations will be required. Themes that you have heard so far in this presentation, such as elevating the standard of care, procedure optimization and enhancing the care pathway, are synonymous with this category of shaping the future, shaping the new, shipping the way Olympus will continue impacting health care and patients like in the future. In looking to the future, we are applying 3 lenses as we pursue our shape principle: pathway enhancement, procedure optimization and next-generation product innovation. For pathway enhancement, the emphasis is on driving value through a comprehensive understanding and management with a care pathway of diseases and to offer more personalized care. For example, we will pursue integration of improved screening and diagnostics offering with decision-making tools at each stage across the care pathway. We'll put emphasis on driving value through data and analytics; solutions in high-fidelity complex procedures as hardware and software integration can enable care teams to reduce variation, avoid errors and optimize performance. And while considering next-generation product innovation, we will emphasize product differentiation to drive value creation. Here, our focus will be on devices that are designed to address unmet needs by improving upon cost, quality, ease of use and connectiveness. Our goal is to help bring new care delivery models, new technologies and new business models to the forefront to better serve the health care provider and ultimately the patient in fundamentally new ways. While talking about the shape of future, one unquestionable area of our next-generation product innovation will be in single use endoscopy. Our leadership in endoscopy allows us the ability to develop a portfolio of endoscopes that are right for the job. Present market research we conducted gave a view into the most important attributes an endoscope should have from reliability, on overall economics, workflow features and more. Olympus has and will continue to align our offering to these critical needs and best-in-class attributes to complement our reducible endoscope portfolio with solutions that can fit the need of every specific case. This is leading us to introduce more breadth and balanced portfolio offerings such as single-use endoscopy, which give our customers access to the best tools for each procedure, side of care and individual patient needs. We recognize the growth opportunity on market demand for single-use endoscopes, and we are launching a first line of single-use bronchoscopes now. I have near future plans for single use endoscopes in several specialty areas. Our customers tell us that there is an ample room for both single-use and reusable endoscopes and that they are excited to benefit from the new features and benefits we bring with each new product launch. But our shape principle doesn't end with endoscopes. It is just the beginning. Our digital industry concept is part of our vision beyond endoscopy. There is a solution that could extend the reach of endotherapies while improving the patient experience using artificial intelligence and other digital tools and technologies. Some specific examples of what it might include our cloud-based content management for cross procedural data access, the ability to link in the therapy simply with other disciplines such as pathology, an endoscopy workflow management platform or 3 dibodumab visualization. Some of those aspects of our shape principle through our digital solutions can be found in work already in progress. With our digital initiative, we are harnessing digital technology and automation, creating the opportunity to reduce the cognitive burden currently managed by clinicians and staff, allowing them to focus on serving their patients. This critical concept sit at the heart of our new digital governance led by the recently created digital unit. This unit will oversee and accelerate progress starting with 3 prioritized digital initiatives, all of which will make a meaningful contribution to our success. First, to develop the Olympus health cloud with infrastructure and capabilities in data collection, artificial intelligence and machine learning. Second, in the already mentioned endoscopic workflow management platform to sustain long-term competitiveness and increase value to our customers. And last but by no means least, to establish market leadership in CAD, computer-aided diagnosis, and clinical decision support. Here, we will define the future of CAD for Olympus. Finally, the last topic I would like to speak to you about is our new endoluminal therapies. By now, you will recognize our results to focus our portfolio and business that maximize the impact we can have. Endotherapy, which is also a key focus area of Olympus, is a portfolio of advanced, minimally-invasive devices and procedures focused on treating and the rise of GAC disease throat endoscopic access without the need for open or even laparoscopy surgery. This has several advantage by higher procedural success with lower morbidity rates, lower patient downtime and economical benefits for the health care system as the procedure is usually conducted in an inpatient less expensive setting. We at Olympus believes that additional endoluminal technologies will make easier to perform endoluminal procedures, which will extend to utilization, and therefore, they are the natural extension for our endotherapy product offerings. This will increase not only the variety of procedures that can be conducted endoluminally but also will benefit the ultimate patient outcomes of those procedures. We believe that further extension of endoluminal therapies, coupled with autonomous capabilities, will be widely adopted in the future as minimal-invasive therapies become the norm and provide the demand tools to simplify procedures, improve decision-making and enhance outcomes. Here, we will focus in the future on exploring the possibility of developing an innovative endoluminal ecosystem. In conclusion and to recap, we will focus our efforts in the areas where we can make a greater medical difference, namely GI, urology and respiratory, by thinking in terms of disease states instead of products and by elevating the standard of care in these therapeutic areas. And we will shape the future of endoscopy, leveraging our many decades of expertise in the area and introduce a balanced portfolio that contains single-use endoscopes while we'll also push into new frontiers, leveraging a suite of interconnected digital technologies and exploring exciting new terrains, such as the development of new and innovative tool for endoluminal surgical procedures. We are truly excited about the great potential this strategy holds that will allow us to focus and shape our leadership in medical technology to elevate the standard of care and enhance patient care pathways. And with that, back to you, Yasuo, to detail how we will enable our strategy.

Thank you, Nacho. To be successful, as we focus and shape, we must continue to improve the capabilities of our organization. We must enable Olympus to fulfill its potential and compete more effectively on a global scale. As Olympus gains capability as a med tech company, it is clear that significant opportunity exist to address unmet needs and elevate the standard of care, both in areas where Olympus is strong today and areas where we are exploring solutions that lead to earlier patient engagement. Enhanced care and better use of new technologies will have notable potential for value. Continuous investment in these opportunities will be necessary if we are to pursue them effectively. And for this, we are more than ready. Business development structures and processes have been established across 7 locations worldwide. Key medical areas have been strengthened through a series of relevant deals and partnerships in the last year, and we are continuously exploring opportunities. And finally, this September, we announced the creation of a corporate venture capital fund, Olympus Innovation Ventures, seeded with an initial commitment of the USD 50 million over 5 years. This fund will allow us to form a relationship with early-stage companies in desirable areas and help nurture partnerships with relevant and compelling entrepreneurial teams and innovators. Our shifting focus to a care pathway approach will deliver significant benefits. But to get things right, we need to extend our clinical expertise in new ways. We have already taken steps to ramp up our medical and scientific FIS function, adding significant clinical expertise across the globe. We will also continue to expand our leading educational programs and training exercises to help health care professionals increase their technical expertise, achieve excellent clinical results and ensure patient safety. We have been hard at work identifying and bringing on respected experts and talented individuals who will be the artics of this shift and underscore our commitment to patient pathway orientation. We will support this with a clinical scientific and data-driven, decision-making framework. We must continue to be bold and committed in making changes that will enable our organization to thrive to execute better globally and at the pace. Therefore, we are putting structures in place to support more agile and empowered decision-making governed by global functions rather than by regions. We are establishing global end-to-end operations for manufacturing, procurement and supply chain management. We are building a strong global R&D network that is deeply connected to our other corporate functions. We will deepen our expertise in core areas and continue to streamline our quality assurance and regulatory FIS function. All of these actions will help us to increase productivity and improve cost efficiency in order to ground our business in the culture of excellence. Ultimately, we will operate more efficiently in a way that allows us to make future investments. To meet our aims and ensure the success of our enabled principle, this September, we announced plans to broaden our executive team by next April. We will add a sixth executive officer role to guide our end-to-end operations, including procurement, manufacturing and supply chain and will make the necessary reforms and vision for these functions. R&D will be handed over to a new executive officer who will head this function into the future. To conclude, let me once again recall the challenging target that Olympus has set. These include core financial indicators of continued growth and solid operating margin of over 20% with expectations towards maintaining revenue growth and improving profitability through cost leverage and balance sheet efficiency after fiscal year 2024. Our strategy builds on our core strength, addresses key value creation shift in the industry and provides focus for our efforts for better patient outcomes and an elevated standard of care. Our ultimate goal is to make people's lives healthier, safer and more fulfilling. With a care pathway focused approach that is driven by demand for better treatment, we will be broadening our participation in growing markets and capturing new value. The transformation we have announced to you today will help us best align our capabilities with our goals, focus on the areas where we generate the most value for patients, achieve solid growth and fully stand by our commitments. Thank you for your time.

[Interpreted] I appreciate the very detailed presentations, and the presentation was very powerful and also quite impressive. So I really look forward for the future of this company. Now from 2024 onwards, what will happen, in Mr. Takeuchi's presentation, beyond 2024, you mentioned that you want to strengthen the company even further. But looking at the financial goals, objectives, is this going to be the next midterm plan, which means that you cannot really share with us the details yet? We understand that. But in the for the next 3 years in terms of profitability, as Mr. Takeuchi mentioned, the challenging goal of 20% or more, I think you can achieve that within this midterm plan. But about the upcoming next 3 years? What kind of range do you think you should be or you must be aiming for? Do you have any idea about that, first of all?

[Interpreted] 20% target, the current target, as you may know, was set 2 years ago. And at that time, we also announced the management strategy. And as Olympus, I said we will become a global medical company. So this was a big direction that was announced, and we spoke about the 20% then. In order to opening this position, we had to achieve 20%. That came without saying, and that's how the company must be operated. So that's the thinking behind this announcement. And then based on that, I believe that most of the things that have to be done could be done, as I mentioned today in the presentation. Now what will happen going forward, 20% or over 20% should be achieved next year. To that end, we will do our best and beyond that period. In terms of the profitability, we are not really thinking about a specific numerical target. But as I have explained before, business should grow by several percentage. And this is something that is taken for granted, I think, in terms of direction. But also in line with that, we wish to increase the profitability as well. Again, at this point in time, we are not really thinking about setting a numerical target for that. Above 20%, this was the management strategy, and this was the KPI for the 3-year strategy. But achieving over 20% is the strategy of the company management right now. So the assumption is that we will retain -- maintain this for the time being. Thank you.

[Interpreted] Within the current sort of initiatives, CTO replacement and then 6 executives, I understand you're trying to reinforce the function. In September, you made announcement about a change to the executive team, and I understand that you want to achieve certain things with this. What are they? And what other challenges or issues behind this change?

[Interpreted] In September, we made this announcement about the change in the executive team. The purpose is not changing the member of the executive team organizational management at the vision level from the local level. We want to shift the business governance to the global level, and this is a transformation that is currently ongoing. Going forward, technology development, product development and also global operations. When I say operations, in this case, I'm talking about running the factories and production planning and PSI-related operational manufacturing capabilities. When you consider these things, new technology product that used to be acquired by Olympus, and we just continue to add a number of locations every time we bought those things, which means that we didn't have a standardized quality system or operations system across the board. In other words, of course, operation-wise, we are integrated, but all these different sites are running different systems. So this is what we have been doing so far. But going forward, we want to see end-to-end process, so all the way from the upstream source to connecting to the clients, customers. We want to manage all this at the global level. That's what we envision. And currently, CTO supervises a huge area. So technology deployment team and operation team, we have decided to separate the 2, and that was the purpose of the announcement that was made in September. So the executive membership has changed accordingly. So we want to achieve certain position, and there is also change of generation, and there is also an HR aspect to this. But still, from the executive who is more suited for this position, we have decided the executive offices as of April next year. That's all. Thank you. Thank you very much.

I have a question for Nacho Abia about the strategy. As far as I understand, you are -- you have a very strong position in the capital base for that. But in terms of the consumable side, competitor, like Boston Scientific had a strong position. If possible, could you explain what kind of opportunity, especially in consumable area for rod sector? Possible, could you explain the total addressable market for you in maybe 5, 7 years' time horizons? And also, if possible, at this moment, how much of the market you capture? And then in the long term, how much you could capture that market, especially focusing on consumables area. That's the first question.

Thank you very much for your question. As you say, Olympus is quite strong in capital equipment and specifically on the endoscopy platform, but we also hold a quite significant and strong positions in some therapeutic areas. That include medical devices or disposable devices. So I think that in the area of endotherapy, for example, which is very relevant, where we have very powerful competitors, as Boston Scientific, as you mentioned, I mean in -- we overall hold a significant market share worldwide. And in some regions of the world, we are market leader in some countries. We are market leaders as well. So I think that while this is a competitive market, we feel quite compelled that we can continue grow in that area and competing and gaining market share. As your specific question about that in the different areas where we participate, we have, as I mentioned before, already significant position. But just to illustrate, right? So in the area of respiratory in specifically for lung cancer, staging, I mean we very have a very clear dominant position in that area, and our market share is very large, including all the disposable devices associated. Or in urology, we are significantly increasing our position in lithotripsy and in laser pigment for EMEA and Oestrand. And again, we are positioning those areas very significant. So I think that our domination in the market are not coming from -- just from our endoscopy position, but there is a significant opportunity. And every one that have been mentioned in this presentation to capture additional market share and additional revenues. And altogether to contribute to our aspiration in the TSD, which is to continue growing more than what the specific markets are growing over the [indiscernible]. And this will be done thanks to the increase of the portfolio and increased market share in that we are present. Thank you very much.

I have one follow-up question. Sorry, for the similar question. But in my view, to compete with global peers, I think you need to acquire some technologies. Do you have any like M&A idea for maybe focusing on urology or if not, maybe TSD segment? Because to do the consumables business, I believe maybe like Boston Scientific, had a technology because they are doing like coronary case product. And then I believe they are transforming the technology to the DI consumers or not consumables, but I don't think you have such a technology. How would you fill that gap? And then to see the further growth in TSD already? That's my follow-up question.

Yes. Again, thank you for your question. And our growth in trapivisions has been pretty significant over the last year. And as I said before, we plan to continue. Our view on M&A that is an actual necessary complement our internal R&D development activities has been the current medical technology world is almost impossible for any company to pass on all necessary technologies. So M&A has become a very useful tool in order to introduce or include in our portfolio of those technologies that we are not owning at this point. So the way we look at M&A is the same way that we're looking over the last 2 years, whereas Mr. Takeuchi has explained earlier before, we have complemented our portfolio, for example, in neurology with the IT device for effective treatment of the BPH in earlier stage or with the acquisition of Veran Medical Technologies that will help us to navigate the lungs and provide even better access to potential lesions in the lung. So I think these are very good complements to our technology. And of course, we are going to continue looking at the market and identifying those opportunities. And when we find this opportunity that can help us complement our technologies, we will continue executing acquisitions as one of the very important part of our strategy. Thank you.

[Interpreted] This question about TSD noncore area. I would like to receive some comments about that, and that's my question. Page 6 -- well, there are 60 pages of presentation. And TSD, only 1 page, 36, Page 36 are dedicated to that because it's noncore. And the content is basically the same as before as far as I can see. But for Olympus, maybe SSD, something like SSD, it will be sold in the future. That kind of option you're not really pursuing. You are maintaining this for the time being. What is the reason behind this?

[Interpreted] Yes. I would like to take this question. As Nacho mentioned in his presentation, this is outside of the 3 divisions of businesses. But in some specific geographical areas, we do have a leading position and even in the other market. Over many years, we have been focusing our energy on these businesses or divisions. So the business is, for example, deeply rooted in each of these geographical areas and markets. Direction of the new business is focus. Focus is one big point of this. So rather than just delivering devices and the capital equipment, we want to approach this as a care pathway. That is the main focus, so how do we allocate the corporate resources. From that perspective, we have to basically focus on certain things and losing the focus from the others. So basically, the assumption is we'll continue this business, and there are 4 areas that are indicated here, and we will try to run the business effectively or efficiently. That is the main point.

[Interpreted] So spin-off like for SSD, you cannot really do that right now because depending on the product, the product is already diluted in the market, and it is really difficult to separate that out. Is that the reason?

[Interpreted] Well, degree of difficulty of separation due to deeprootedness, Yes, that's one reason, and another reason is because they share the same technology. In other words, technology-wise, it's very difficult to separate these things. And we have not really thought about separating them, so we have not really had a deep discussion about this either.

[Interpreted] I understand. Now I have a follow-up question. Page 13, transform Olympus progress. That's what I'm looking at right now. Profitability target is more or less on track. I understand that. But for the balance sheet -- I'm sorry, for the cash flow, free cash flow post adjustment, you have the target. And currently, the progress is slow. You are underachieving the target. Can you explain why this is happening? When you have new GI products in the future, do you think 20% or higher free cash flow growth, which is your target, becomes more likely to be achieved? Or maybe looking at the turnover days for your inventory compared to the capital-based medical device companies, my impression is that your inventory levels may be twice as high. So maybe that explains the low free cash flow margin. That is my assessment. But do you have any additional plan for reform? Can you please talk about this?

[Interpreted] Thank you, Korkan-san. This is Takeda, CFO, and I would like to take this question. So we're talking about next year, and I cannot really say anything specific at this point in time. In the past, as we have mentioned, balance sheet inventory and CapEx, with regard to these aspects, how can we run this better? How can we make the improvement? So I think we have to take a closer look at this. In the past, we were focused on operating margin. we had to dramatically increase it, and we have to focus on that and the balance sheet items. Of course, 2 years ago, we indicated these numbers as a reference. KPIs. And as of today, there is still some more room for improvement. So next year and beyond and even into the further future, we would like to continue the improvement. That's what we are thinking of right now.

[Interpreted] regarding TSD, I have a question for clarification. The revenue or CAGR growth, 8% has been the target so far. Whereas this time, no such mention in the presentation. So for the next 3 years or so, do you think what has been mentioned could be sustained or not? That's a pot of clarification that I'd like to seek.

[Interpreted] Basically, we're not thinking of making any changes. So I think you do understand correctly.

[Interpreted] I see. Now based on that, as for the focal areas in the area of GST, the GI endotherapy and respiratory and urology. The market growth is 5% to 7%. And based on what you said, you are going to aim for a higher than market growth. So CAGR, 8%. I think for those 3 areas, they are on track, whereas for surgical energy device, which was not part of the focal areas. Within TSD, they account for 1/4 of the revenue of GST, if I remember correctly. So I was wondering what type of revenue growth you are assuming for surgical energy devices?

Okay. Let me -- no, I'm going to ask Nacho to first answer that. Nacho, please.

Yes, yes. Thank you very much, and thank you very much for your question. The -- as explained in the presentation, while our focus areas moving forward are going to be the one described in this in this slide, there is already a significant investment that has been done in other areas, and we plan to harvest those. One of those areas is clearly surgical devices or energy devices, as we call it internally. So the -- as has been explained in the presentation, we are currently in the process of launching in the United States the power sale solution, which is an advanced bipolar solution that has been very much weighted by our customers in different markets, and we plan to launch the platform in other markets starting next fiscal year. I think that Power Seal definitely was mainly a need in our portfolio for a number of years. That complement very well our ultrasonic energy portfolio and that we believe can help increase significantly our market share in the area. So this will provide additional growth in the surgical devices as well. So generally speaking, I think that while the core areas will drive the main growth and urology, respiratory, we are seeing and in the therapy, we are seeing a significant growth above the market in the last years. We also believe that noncore areas, like in this case, devices, due to past investments, will also help drive some growth. So I think we'll be -- even -- you are right that this represents 25% of the TSD portfolio, but we are not abandoning that area, and we are just focusing and making sure that they deliver as planned. So I think in the combination of both it, where we will be able to obtain the 8% growth that we are targeting. Thank You.

[Interpreted] So I have a follow-up question on this area. The focal core areas, GI, respiratory and uro. I think M&A investments will be made so that the revenue growth will be larger than the market growth. Whereas for energy device area, I don't -- my thinking is that maybe there are no M&As planned. So market to grow by high single digit or you need to win market share from others in order to achieve the high single-digit growth? What would your response be to that question?

Your assumption is very correct, and it's true that there is not many M&A opportunities in the surgical device space or in the energy space specifically. But our growth will clearly come from capturing market share. Our position in the market is not too strong today. Well, there are 2 dominant players. And we believe that with the combination of our ultrasound energy solutions and this advanced by power solution, there is an opportunity for us to capture some market share. I do believe as well that the 2 market leaders will continue to being market leaders, but it doesn't mean that we cannot erode some of the market share. And so that increasing market share, we can grow our business.

[Interpreted] Page 8, growing into global med tech company. And you have stated that Olympus already is a med tech company. Head office and R&D globalization, how do you intend to pursue and promote this?

[Interpreted] I am not quite certain about how to respond to your question. I'm thinking. It's not that we have a head office per se. We consider it as global function. Head office, of course, is the parent company, the company that invests into things. So this is Olympus Corporation, of course. But people in Olympus Corporation do not necessarily serve the headquarter functions, so we understand this as meaning headquarter function if that is the intent of your question. In that case, in the last 2 years, ratio of a senior manager in headquarter function has changed dramatically. Approximately half have been diversified and globalized. In terms of R&D globalization. I'm just trying to figure out what that means. It is a very difficult question for me to answer. But from this April onward, as I mentioned earlier, engineering and R&D function based on the product that they're in charge of, they have their own organization. However, going forward of course, we will try to suit ourselves to the products, too, but the management itself will become truly global starting from April. That's what we will attempt.

[Interpreted] Shinjuku and Hachioji will not be controlling everything globally. So we use appropriate personnel in appropriate places, so people in different regions are in control themselves. Is that correct?

[Interpreted] Right, global headquarter location, they don't necessarily link or match R&D global function. Most of that reside within Hachioji. That is true. And there are various functions located in Shinjuku. But for the global position, the compliance manager is actually in Germany. And for legal, the person is in the United States. So the personnels are not necessarily attached to that particular location or nationality.

[Interpreted] As you pursue globalization, especially for product development, is it better to do -- continue to do this in Hachioji? Or is it better to do less in Hachioji and that would in turn reduce the -- lower the R&D cost, I would suspect? So positioning of Hachioji will shrink into the future? Is that a scenario that we should be seeing?

[Interpreted] Manufacturing location will not be simply lifted from location A to B, at least for the products that are very unique to us. That is not something that would happen that easily. Accumulation of technology and accumulation of the open is happening in that particular location, and this is being done by those people who are there in that location. Therefore, accumulation aggregation of technology creates products. So just because the cost is lower, we don't necessarily shift the location from location A to B. CTO Taguchi will try to give you a more detailed answer.

[Interpreted] Yes. This is Taguchi, CTO. Your question is about globalization of R&D and how we view this. As Takeuchi-san mentioned, in each region, they have products or technologies that they're responsible for, and they are growing those products and technologies. That is what's happening. Whether it's development of technology or products, I would say 70% happens in Japan, but the remaining 30% is already being developed outside of Japan. And we will have a new CTO and CMSO starting from next April. Up until now, we decided the product by region. And it doesn't differ that much, but anyway, the function should be viewed more globally, more broadly, and that will be happening under the new structure. As was explained before, we have a care pathway concept and the new strategy. Olympus will be developing products for the portfolio, and those products will continue to change. So the 70%-30% ratio may also change over time. It's actually quite likely that it will change. That's all for me. Thank you.

[Interpreted] My question is on Slide 10 about the initiatives for transformation. The operational model of transformation and global business service is being promoted to reduce the cost and to improve on the margin, I understand. But since FY 2020, in margin improvement, the revenue increase and business portfolio transformation in addition to those, the cost reduction and others, how much did it contribute in improving on the operating profit margin? And can we expect these efforts to continue for the next several years?

[Interpreted] Thank you for your question. In November 2019, when we started the corporate strategy, we have transformed Olympus initiative to transform the company itself. And in a broad sense, the operational efficiency improvement was covered in that. In addition, we changed the company system, the Board of Directors System and others. At least in terms of the operational transformation, it was part of the Transform Olympus we identified specific issues to address, set the target for efficiency, for example. And on a monthly basis, and that cadence, we have been following, monitoring the progress. And the current value of that, I'd like to ask Stefan Kaufmann to explain.

This is Stefan Kaufmann speaking, and thank you so much for your question. As Mr. Takeuchi just mentioned, when we announced Transform Olympus in 2019, we expressed 2 goals with Transform Olympus. One was to improve the financial performance of the company and the other one was to improve the organizational health, and the letter included also to globalize the organization in terms of operating model, but also globalizing management. And the GBS project basically serves both purposes. It helps to improve the financial performance, but it's also a catalyzator and facilitator of a more global operating model we can align throughout our regions and the headquarters. We started about 2 years ago with the journey, and we set ourselves for GBS quite ambitious targets. So within 2 years, we wanted to establish a global infrastructure, which serves 5 regions and which covers 5 core functions of our company, namely finance, HR, supply chain, procurement and sales administration. And the progress we have made so far is very encouraging despite some a headwind we faced, mainly because of COVID. So we have the captive center in Americas up and running. In EMEA, we are thinking at the moment about scope extension, and we are also gaining first experiences with automization and RPA. And in Dalian, we have already our BPO partner up and running serving Japan and parts of Asia and finance functions, and our captive center in Dalian will assume first services for Japan in the area of HR in the next weeks to come. What is obvious is that the establishment of a global business service structure requires at the beginning investment. So there's a payback period. And from next year, we do expect that we can benefit from run rate savings, annual run rate savings. And those run rate savings will increase, obviously, year-by-year, the more we extend the scope of GBS. And my last statement with respect to GBS. For us, this is the beginning of the journey. When you compare the maturity level of GBS, we are now endeavoring. This is compared to other global companies still at the beginning stage, so we see huge potential over the years to come to expand scope and responsibility of GBS throughout the entire company.

[Interpreted] I have a follow-up question. The initiatives that you just mentioned. If there are any areas that you have yet to start on addressing, are there any areas that you haven't started yet?

No, there are no areas where we have started yet. But when you look at the potential of Transform Olympus, I think we have reached now halfway, and there's more potential to come in the next 2 years.

Reuse and the single use. How do you view these 2 things? In your presentation, you said that the you have already done the bronchoscopy and then you will do the urethra and the others. But Boston is doing something. You have more than 200 support systems for reuse and you are very strong with us. You also do going forward. But anyway, maybe this is a double side it's sold, trying to do single use. So how do you continue to strategize for both single and reuse?

Thank you for your question. Nacho, can you please respond to this question?

Yes, yes. Pleasure. So well, thank you for your question. And I think it's obviously a very pertinent question. Our strategy for endoscopy, it's quite simple and easy to understand. So we've been the leader of the endoscopy world for many, many day, cuts. And we plan to continue being that leader. And the way we plan to achieve that is with a very simple strategy, which is to offer the physicians and the clinicians to write endoscope for every case, every patient, every setting and every need. And this can be reusable or can be single use. This is our fundamental strategy, and this is where we are making our portfolio decisions and our investment decisions. We closely observe the need of physicians. We work with physicians every day, and we clearly understand what is the need in their healthcare facilities, and then we provide the tools that they need. So the -- we are very much aware about the developments of Boston Scientific and Ambu and also about the number of procedures that they are capturing. And still, those number of procedures is quite minimal compared to the overall number of endoscopy procedures, could be ERCP procedures or any of the kind of procedures that compared to the overall number, the cases where single use is being utilized is more. At the same time, as I said in the presentation, we are aware that there is a significant business opportunity, and we don't want to miss that. So we will continue working with our customers in order to make sure that we can provide, as I say, the best solution. But our main goal here is to focus on the patient need and in the physician need. And based on that, we will develop, we will continue developing and providing to the market the products that is needed, being reusable or being single use. Thank you very much.

[Interpreted] Yes, very clear. A follow-up question. When I go to your website, it says that 20% to 40% growth was single, as mentioned. This is a big range. But what is the growth for your particular company for single use?

Nacho, over to you. Nacho. Can you respond?

Yes. We don't disclose such a figure, but among other things because at this point, we are only in the bronchoscopy area. We have been mentioning over the past earning calls, answering questions about our portfolio. And over the course of next year, we will launch products in other areas like colonoscopy. But at this point, we just launched a few months ago the bronchoscope. The reason why we started with bronchoscope is because bronchoscopy is the area where it's being developed and it's been more developed at this point, and this is one of the largest revenue at this point on single use, and this is why we have started there. Obviously, I mean we are growing significantly, but the starting point was very low. So I think those numbers are really irrelevant in the comparison because we have literally 7 months or 8 months of product in the market. But as I said before, we are paying strong attention to the development of the market. We don't want to miss any opportunity. And at the right time, when the need will be there and the market will be there, we will be launching our single-use portfolio. Thank you very much.

[Interpreted] Well, either way, we have been doing reuse for a very long time, and it's been greatly supported, appreciated. Single-use product is very new in terms of scope. Although the need was there for a very long time, but the solution was absent. And the single-use has become more popular recently. So we believe that the growth will be very fast in the near future.

[Interpreted] Single use, would it take over the reuse market completely?

[Interpreted] I don't think that would be possible. Single-use solution is limited in range. Therefore, we use in single use. Will be used depending on the situation of the patient and depending on the actual clinical practice setting. So the doctor will choose one or the other. That's what will happen in the future, which means that we are the only company that can provide both. And as you have mentioned, we have hepatobiliary and urethra and duodenum and the bronchoscopy. So these are the only limited areas that we have, but we will continue to provide both single and reuse.

[Interpreted] I'm looking at Slide 20, where you say that you are going to be a leading med tech company that go beyond the devices. That's the aspirational image that you are projecting, which is truly impressive. Now maybe I missed your point. But what's shown here, I think it's closer to a customized or tailored medicine. It looks like your business model itself is going to be transformed. Am I looking at this correctly? And can you elaborate on that vision? What kind of changes should we expect in terms of business model? And I wonder if there are other players which are leading in this field. In diagnostics or pharmaceutical industries, I think tailored medicine is rather easy to imagine. But for endoscopy, I wonder what the tailored medicine would look like.

Thank you for your question. The corporate strategy that we announced 2 years ago, the leading global company technology is the aspiration that was being projected, and the specifics of that had not been explained so far. And the leading global med tech company that we have in mind was presented today, our image, our understanding. The reuse endoscopy, very strong, and the values that we can provide through that has been the core of our business deployment. But going forward into the future care pathway, the patients would be the center, and that will be the major thrust. Of course, we have been looking at the care pathway and partially providing various solutions, but that was on a limited scale. Going forward, we're going to focus more on care pathway starting from the diagnosis treatment to the care, take all that into view is the business that we are projecting now. Nacho, anything to add?

[Interpreted] I think your explanation is quite clear. But I would like to add that this direction, it's an evolution of our current or existing strategy for a number of years. The main difference is that we will likely with more focus and more intention to really execute on the entire or the largest part of the care pathway for individual patients and not on the one device. But let me illustrate with a couple of examples that might help to understand a little bit more what we meant by optimize the care pathway. I think that we do believe that the health care expectations and the society expectations for medical device companies is not just to deliver one device or one technology solution that can fix one specific problem, that there is an expectation that medical device companies can really make certain improvements in specific diseases and treatment with the overall view of the quadruple aim. I mean improve the clinical outcome, improve patient satisfaction, improve the cost of the procuring, improve as well the physician experience using the device, right? So there is such an expectation. And in order to comply with that expectation, it's important that we look at the largest portion of the care pathway. And so as I say, a couple of examples of this would be, for example, if you take, I mean, obviously, colorectal cancer has been one that Olympus has been participating for very long. In the early diagnosis, that have led to early treatment, and that has avoided a number of complications in the future for that patient. That would be one example that we have been doing. Most recently in respiratory area, we are contributing heavily to the lung cancer staging and sampling, trying to combine procedures in one in order to make the numbers of episodes of care less than before and again helping the whole experience and the whole cost of the care pathway is better or in neurology as we were explaining in the presentation, right? So we want to offer the physician a treatment for every stage of the different patient and a different situation. That's what we mean by optimizing the care pathway, right? So we don't want to just offer one solution for one specific episode, but we want to complement our solutions really taking care and considering a wider view on how can we benefit the entire healthcare system and obviously the patient experience. I hope this clarify a little bit our positioning in this optimizing the care pathway. Thank you very much.

[Interpreted] Yes. On that sense, what you're saying is that care pathway, the areas in which you will be providing services and products within the whole realm of care pathway is going to expand. So I wonder if maybe that in itself is a difference in business model. I understand that you have already been doing this to a certain extent. So it's not really about a business model change, but the business application area is going to expand. Would that be -- would it be fair to put it that way?

Mostly, yes. I think that our intention is to help optimize the care pathway. Obviously, we cannot control in many cases of the entire company. But clearly, our intention as defined in this strategy is to occupy a larger space in the care pathway providing benefit. Now regarding the business model, I think at this point, we are not disclosing or discussing this topic here. But obviously, this penetration of the care pathway, an improvement solution, might led to discussions with the health care providers that might lead to a specific business model, which are more convenient for their systems. And we are open and also considering some of these business models as well. Thank you.

[Interpreted] Now in terms of business model, this is Takeuchi speaking. Here, we're talking about the future direction. That's how it is positioned today. So it's not that we have a clear business model that has been thoroughly studied. But simply put, from individual sales of devices, shift from that to solution provision so that we can provide services all the way to remove the pain points of the patients and the health care providers. So I think the business model is going to change essentially in that sense.

So the reason why there are so many questions, I believe, in the TSD business is because we, analysts and investors, have a hard time understanding sort of the growth trajectory for TSD. So it would help to talk about specific growth drivers in the TSD businesses. So the question is for Nacho. I did ask this question actually earlier through a translator. It didn't quite work. So I'm going to try this again. So if you could talk about what's happening to iTind. Well, Olympus acquired Medi-Tate for $240 million to gain rights to iTind. Boston Scientific paid $300 million for Rezum and Teleflex paid $725 million for UroLift. So obviously, there is a lot of interest in this area in urology. Now we've done the randomized clinical trial. We've seen the results. The results are basically on par with Rezum and UroLift with less dysurea and hematuria. And unlike Urolift stent, it's not left in a bot. So I would think that the iTind is presumably competitive with other devices. I think it was granted de novo approved, I think, in the urine obstruction in BPH in 2020. So where are you with insurance and Medicare coverage for iTind? And Olympus already has a considerable presence in the urology space, thanks to tourists and the original scope. So if UroLift already has sales of $200 million and you guys have seen considerable sales business, shouldn't we expect iTind to reach at least $100 million in 3 years? That's my question.

Thank you. Takeuchi-san, may I take this one?

Yes, please. It's all yours.

Yes. Well, thank you, thanks for this very specific question. And I know that in the earnings calls and in many occasions, analysts keep asking about the growth drivers in TSD. So allow me to answer that question, and then I will go to iTind specifically, right? So I think that the current growth drivers in TSD are coming from endotherapy devices where we continuously grow more than the market and gaining market share through the addition continuously of our portfolio, new products to the portfolio that complement and make the portfolio wider and our commercial activities. So that's number one. In urology, besides DPH tourist treatment for being very successful a market leader for many years, we are growing very significantly already with lithotripsy and,, with a solid solution, which is providing a very, very significant growth already in the present and -- or in the respiratory area, where it's growing more than double digit for the last years, thanks to our continued solution in lung cancer staging and sampling. So I think these are the main drivers today. Now when we talk about iTind, needless to say, we have a lot of expectation on iTind. We do believe that our solution based on the fact that this is absolutely noninvasive and it doesn't leave any implant behind after the treatment is definitely a very solid alternative for treat BPH in early stages cases. So we are very confident that iTind will deliver results. Now the current situation is that we are working on -- to obtain better reinsurance. I mean we have a code that has been assigned already, but it's a limited code that provide limited reimbursement. And we need to keep working on providing clinical data, and we need to keep working with providers, including obviously the CMS to obtain a better reimbursement on that. We are doing that. We are working very heavy on that. We are working with clinical trials as well and clinical studies to prove the efficiency of the device. And we have all the hubs and the expectations on iTind to really reach to the levels that other very successful devices like Relief or I would say Relief at this point more than Rezum, but that we know very well what is the revenue that they are generating. And this is our target, right? This is our goal. Can we achieve it in 3 years or in 5 years? I don't know, and I cannot tell you right now. But definitely, we know how big is that market. We know how big is the opportunity, and we believe that we have the right technology. So our experts in healthcare economics and reimbursement and clinical studies and are working in order to prepare all that. And once we have all the calls, I mean, to go to the market in a strong commercial way to achieve that commercial milestones. I hope I can -- I have answered your question on the iTind and TSD growth in general.

That was actually a very direct as that was really helpful. So just as a follow-up, although it's not really a follow-up, unfortunately, I have to apologize, but I just can't tell because it's a very precious opportunity. Can Stefan talk about GBS in a little bit more detail? Because it's among the most important achievements for the last few years, but there's just really not much details that are already discussed. So you obviously started OBSE in Wroclaw. I think that's what's announced in Poland. In 2019, February, at the time, I think. Well, Poland is the most advanced in the GBS, so it really helps to show where GBS is headed. At the time of the funding, you had, I think, 100 employees in sales support, finance, supply chain. I think there are plus 200 employees and expansion into human resources. That is all that is known about this, the very first operation in GBS. So where are you now with OBSE? How many employees? What sort of -- what are they exactly doing? And what are the functions? What does scope expansion exactly mean for OBSE because in this context and because this will tell us where Asia and Americas site? Lastly, you said something about global services being halfway there. I just find it hard to believe because it's only Europe so far. Asia and the U.S. has just started. So I don't know where exactly you -- I would think that it's still probably like 25% of the way in the rollout of GBS. Just any comments on GBS, it would be very helpful.

Yes, I'm happy to do so. And thanks a lot for picking up the 50% again because I'm afraid I expressed myself misleading. So I thought the question was related where do we stand in general with our Transform Olympus initiatives, and GBS just one of many Transform Olympus initiatives. And my 50% answer or halfway answer was related to this, that when we look at the P&L impact of all our Transform Olympus initiatives, we are about halfway. So there's more to expect in the 1 or 2 years to come. So that was the answer to the original question. Coming back to GBS. At the moment, we employ in Wroclaw, more than 300 employees. The areas they cover are finance, sales support, supply chain, HR and procurement but more indirect procurement than direct procurement because in Europe, we don't have so much direct procurement functions related. And when we talk about potential of -- when we look specifically at Wroclaw, when we look at the areas of potential, one is in the area of automization and RPI. So that's an area where we are gaining first experiences to automate our transactional task, which we have in that area. When we talk about scope extension, you might know that advanced companies in GBS built up their end-to-end processes partially in the GBS environment. While we are, at the moment, only looking at transactional tasks. So that's one area where we see further potential in the future. The other area where we see further potential is that you can utilize the GBS also as a center of competence, as a global center of competence. So we have certain areas, for example, in CRA and MSA in other areas, where we could utilize also GBS structure to deliver services to these functions. That's in early stage because our premises at the moment is to get the basics right and to concentrate on the transactional task we have delegated to the GBS and to deliver a good performance and accomplish all our KPIs. When we look 2 or 3 years ahead, I think basically the sky is the limit. I think there are many areas where you can utilize the GBS for the benefit of the entire company for. Being a little bit more precise where we stand in Asia. We are working in Dalian on the one side with a BPO provider. This BPO provider is delivering already services for finance Japan, for finance Korea and for 1 or 2 other countries situated in Asia, and the current status is very encouraging. So the KPIs are met, and we are meeting also the cost targets related to this. In Dalian, we are ramping up the captive. We are just in the process of mass recruiting. At the moment, we just had a town hall meeting with the new colleagues. We employ about 100 people. And over the next couple of weeks and months, we will now continue, after the knowledge transfer has happened, to transfer task in the area of procurement, in the area of HR, in the area of finance to our captive center. And that's basically where we stand. And I believe the -- by the end of next year, the first chapter of our GBS journey will have been closed and then we are ready to embark to the next chapter and see how we can even make more use of GBS than we do currently.

That was very helpful. Is there -- I hope the -- I don't know whether Olympus has in mind to actually talk do a presentation specifically on GBS and these sort of services because I think these are all details that we really don't know, and it would be very helpful for investors to know.

[Interpreted] Similar question. In TS, I understand there are some products where you need to really deploy new market areas. For example, iTind is an innovative device. So I think sales and marketing strategy that are different from conventional ones would be important to actually deploy or open up the market. What do you think would be the focal areas? In order to develop the market, what do you think is the biggest challenge? If possible, can you share with us some of the specific examples other than the insurance remuneration? For example, are there any measures they can do to promote the adoption in certain therapeutic areas?

I give the floor to Nacho on this question again.

Yes. Thank you very much for the question again. And there's no doubt that in the current world, innovation and new solutions needs to be proven and needs to be -- the value that they provide to the health care system has to be very clear before it can be adopted. And that's a combination of a number of things, right? So it's a combination of, first of all, we have to prove the clinical the clinical value. And specifically, in iTind, we are working heavily with several clinical studies in order to prove that to the relevant authorities and the clinicians. You have to convince the insurers, the payers that at the end of the day, there is economic benefit using the device. And again, this is something that requires a significant effort and discussion and a lot of data. And then finally, when it's a novel procedure like this one in iTind, obviously, you need to educate physicians so in how to do the procedure. These are the 3 areas that specifically we are working very hard in the case of iTind, but not only iTind, in other products. As I said before, right? So the good thing is that we have a lot of existing, very relevant, big-sized growth drivers exist in TSD. And iTind, obviously, today, it still doesn't provide large revenue, but this is definitely going to be one of our engines for growth in the future. So I think we have a very healthy combination of a number of products and solutions, which are offering the growth today right now in the TSD area and above the market that has been discussed. But also, we have a number of products and technologies that will continue helping driving this growth in the years to come. But obviously, a novelty in the health market, which is very in terms of adopting new innovations. It will require a little bit of time and will require the efforts that I just mentioned. I hope I have answered your question.

[Interpreted] I have a follow-up question. Over a long term, the opportunity for improving the operating margin. As you just said, sales and marketing strategy, I think, is going to change as well. So 2 years ago, when you talked about the opportunity for open margin improvement, when you say 100 is total regarding the products; the COGS in R&D, 40%; and sales and marketing portion, the commercial part, 35%; and the remainder is 35%. And you said that open margin improvement efforts would be conducted accordingly. Now going forward, in order to achieve 20% or over opening margin, where would that come from? Would that mean product portion getting larger or commercial portion getting larger? What will be the breakdown?

[Interpreted] Maybe I can take that question. We don't have an update on such detailed analysis, so I cannot give you a specific answer to your question. But in terms of the basic thinking, I think it hasn't changed much, as I said earlier, cost of goods portion, sales portion, commercial and back office, the corporate function portion. Now direction-wise, it was 2 years ago that we announced it. So it just started the GBS, which was mentioned earlier, and the corporate expenses. One of the characteristics of our operation is that on a regional basis, we have many corporate functions. But through GBS and others, we are trying to outsource many of the functions. That will be accelerated. So as a trend, the streamlining of the corporate expenses is going to be promoted. But for quality assurance and other areas that need to be strengthened as a med tech company, I think, would become even more important going forward as a corporate function. Now what area where over time, the portion is going to go down is the product cost. That's where the -- managing the cost is going to be important. As a manufacturer, we have to always continue with the cost reduction efforts. Of course, we cannot expect a big decline, big reduction in a single year, but that is the overall direction of the management. So that's a very general answer, but I hope that helps.

[Interpreted] Just one question. Earlier, there was a discussion. You have more product to cover, the care pathway, and maybe you will do more solution-based selling. How practical or realistic is this? And what are the obstacles in terms of competitors and also sales force resources? How do you see the obstacles to achieve this? And also, which are the areas that are easier for you to tackle?

Thank you for your question. Care pathway, the basic concept is shape based on focus, which means that we should focus on areas where we already have competencies, technological challenges in terms of delivering services. Of course, there are some challenges, many challenges. But comprehensive strengthening of the care pathway, I think, will afford us a very high likelihood of success, and I want to give the floor to Nacho for this question.

Thank you. Again, thank you for the question, and thank you for the observation. I don't think that -- as I said before in a previous question, this concept of optimizing the care pathway is something that -- for example, in colorectal cancer, Olympus has been very active for a number of years. I think that if we think in terms of obstacles for that, I believe that the main obstacle is the one related about how do we look at our technology development, right? So -- and I think it's important that when we look about the new product we want to develop, the lenses that we use are not technological differentiation only, and with the lenses we have to use is that patient need. So we need to have a very deep understanding of very specific diseases. We cannot pretend that we can optimize the care pathway in many different diseases because the mission will be almost impossible. This is one -- this is why we have to focus. This is what we have to decide where we can make difference, and this is where colorectal cancer, lung cancer, ERCP, BPH treatment, I mean we are focused on very specific diseases, and we have to have a deep understanding as we have in the core areas of what are the needs of the physician and then devote all our technology in order to identify solutions that can help in care pathway. I think this is the biggest obstacle, and I think it requires significant mindset. You asked about competition. I think we don't talk about the competitors' margin in this strategic discussions. But obviously, I think there are companies that -- there are many medical device companies that are just focusing on the individual device and the individual treatment, and there are others which are also trying to pivot to the optimizing the care pathway. In our view, the trends that were explained by Takeuchi-san at the beginning of the presentation are showing the need for medical device companies to focus in this optimization of the care pathway because that's where the society and the health care providers are demanding from us. So we will focus more in this area than even what we have done it in the past. Thank you very much.

With that, we would like to conclude the question-and-answer session. I will now hand over to Mr. Takeuchi for any additional or closing remarks.

[Interpreted] Thank you. I thank you, everyone, for spending the last 2 hours with us. We have over 100 years of history started with optical technology, and we have been engaged in various businesses. And today as we shared with you, we are aspiring to become the global med tech company, technology-based solutions to customers' challenges and issues. That's our strength, has been the solutions. And we are going to cover the care pathway, patients' care pathway moving forward to become the global med tech leader. That is how Olympus is to become a global med tech leader by covering, addressing a larger portion of the care pathway. We don't have specific defined yet as we speak today, so we might not have been able to answer your specific questions, but it was the direction -- overall direction that we wanted to share with you tonight. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]