Sumitomo Pharma Co., Ltd. (4506) Earnings Call Transcript & Summary

We'd like to begin. Thank you for joining the R&D meeting with Sumitomo Dainippon Pharma. Just for your information, this meeting is being broadcasted live and is telephonic. Today's presenters are Mr. Nomura, President and CEO of the company; Dr. Kimura, who will be presenting Psychiatry & Neurology area and Regenerative Medicine & Cell Therapy; Dr. Koshiya, who will be presenting Oncology area. And from the United States, we have Dr. Kenneth Koblan, Chief Scientific Officer in Sunovion Pharmaceuticals. I'm [ Higuchi ], a moderator. We will be using the slide deck we sent out via e-mail. This is the agenda. Mr. Nomura will present the overview at the introduction, followed by the presentation on Psychiatry & Neurology area and then Regenerative Medicine & Cell Therapy by Dr. Kimura, followed by the presentation on Oncology area by Dr. Koshiya, followed by the presentation on SEP-363856 by Dr. Koblan. We will have a Q&A session at the end of the meeting. We can take questions from those who are joining on the phone. Without further ado, I'd like to open the floor for Mr. Nomura.

I'm Nomura. Thank you very much for joining our R&D meeting today. I'd also like to extend my sincere gratitude to you all for showing your interest in and continuing the support for management of this company. First and foremost, in the wake of the outbreak of the new coronavirus, as a preventive measure, we decided to hold the meeting with live broadcast. Today, we have a presenter from the United States, Dr. Koblan, and he initially planned to join the meeting in person here in Japan. But given CDC's updated level 2 travel alert for Japan, Dr. Koblan is participating from the United States. With that, let me begin our presentation. During the course of my presentation, I'll touch upon delivering innovation to patients in CHANTO. CHANTO, as we described in our Mid-term Business Plan, is a concept in the group to enhance the capability to continuously foster and deliver innovation so that we can deliver the highest performance to hit the goal in fiscal year 2022 and even in fiscal year 2033 for a long run. This is our commitment in a slogan in our global organization. This is what is symbolized in the opening slide. This is the corporate mission: to broadly contribute to society through value creation based on innovative research and development activities for the betterment of health care and fuller lives of people worldwide. Today, I'll highlight what it means by creating value based on innovative research and development activities with the following slide. This slide illustrates the value creation process. We have sources of value creation that are 6 types of capital such as intellectual, social, financial, human and manufacturing capitals. They support our strength in -- including R&D activities. This creates a value by realizing innovative drug discovery. Our focuses in the discovery are Psychiatry & Neurology, Oncology, Regenerative Medicine & Cell Therapy, and Infectious Diseases areas. Through our business activities, our value will be provided to society by creating innovative pharmaceutical products and health care solutions in areas with high unmet medical needs and contributing to the development of science. This will lead us to contribute to improving quality of life for patients and their families and to achieving the sustainable development goals. This, as a result, contributes to enhance our corporate value. This is mid- to long-term corporate vision. We aspire to establish ourselves as a Global Specialized Player by 2033 in the areas of Psychiatry & Neurology, Oncology and Regenerative Medicine & Cell Therapy. We will also enhance best-in-class value-focused activities to support first-in-class 3 focus areas, where it is highly challenging to consistently deliver innovative medicines. Best-in-class area gives us higher possibility of success and the activity, which allows us to generate cash flow to finance R&D activities in the first-in-class areas. We aim to deliver pharmaceuticals and solutions by the combination of medicine, cell therapy and health care solution, which is supported by our Frontier business. This is our holistic view aiming to contribute to improved quality of life for patients and their families at the end of the day. Our Mid-term Business Plan 2022 has basic strategies, one of which is rebuilding business foundation. To do this, we are thriving to establish growth engine and build a flexible and efficient organization. To establish growth engine, we have identified 5 themes, but today, let me highlight 2 of them. Enhanced innovation base with new approach to drug discovery and deliver highest performance of clinical development in the course of my presentation. This is a list of main progress of developed products in fiscal year 2019. Let me walk you through. LONASEN transdermal patch was approved in Japan. NDA were submitted for 3 products: dasotraline for binge eating disorder indication in the United States, apomorphine in the United States and lurasidone in Japan. We initiated Phase I study for a compound, DSP-1181, which was created using AI platform in Exscientia. Dr. Kimura will touch upon this more in detail in his presentation. We are expecting some products launch in fiscal year 2020, lurasidone in Japan, dasotraline for binge eating disorder indication in the United State, and apomorphine in the United States. In fiscal year 2021, napabucasin in the United States and Imeglimin in Japan are expected to be launched. In FY 2022, napabucasin in Japan and in fiscal year 2023, SEP-856 for the indication of schizophrenia in the United States are expected to be launched. We have a pipeline to deliver innovative medicines year-after-year. vibegron and relugolix are new entries to our pipeline. NDA for vibegron was submitted at the end of last year in the United States. NDA submission is expected for relugolix for uterine fibroids in April and for prostate cancer in the first quarter in fiscal year 2020. This is the development pipeline. Revision since the announcement of January is the start of the development for the treatment of hematologic malignancies for TP-0184 in Oncology area. This is product launch target. Revision since the announcement of January is the launch target for age-related macular degeneration indication that is under consideration. This slide shows our research and development strategy in each area. Our basic policy is to concentrate investment in 3 focus areas: Psychiatry & Neurology, Oncology and Regenerative Medicine & Cell Therapy and to bring an open innovation, which is the collaboration between internal and external expertise and to allocate R&D investment by priority. Our approach to Psychiatry & Neurology is to target psychiatric disorders with poor treatment satisfaction and to aim at discovery of disease-modifying drugs in addition to drugs for treating peripheral symptoms of neurodegenerative diseases. Approach to Oncology is to promote research, focusing on tumor microenvironment or cell-cell interaction to enhance pipeline with diversity and innovation. Approach to Regenerative Medicine & Cell Therapy is to pursue advanced manufacturing expertise and cutting-edge science to become a global leader. Other areas, shown at the bottom of the page will not be deeply covered during the presentation. But just to give you an idea, in Infectious Diseases area, we will promote R&D in collaboration with academia to address AMR or antimicrobial resistance or develop adjuvanted vaccine aiming at contributing to global health. In Frontier business, we aim to build a technology platform through collaboration with external partners, mainly in CNS area. We will not repeat best-in-class focus on value approach. This slide shows our research and development base. Through the strategic alliance with Roivant, we have 5 new R&D bases shown on the top right. San Diego office shown at the bottom is a new R&D base for Regenerative Medicine & Cell Therapy. This is the new research and development system scheduled for April 1. We released the announcement today of the introduction of Chief Scientific Officer reporting to President and CEO. Dr. Kimura, member of Board of Directors and Senior Executive Officer, is appointed as new Chief Scientific Officer responsible for R&D activities in the group. Dr. Kimura has been the Head of Research for the company, but he will also supervise development activities in all areas as CSO going forward. The expense allocation policy for R&D will be discussed in the management committee. On my last note, Sumitomo Dainippon Pharma is committed to continuously foster and deliver innovation to patients and other customers. To do so, we will also transform our organization to adapt to changes in the world, especially technologies, and to continue a sustainable growth moving forward. With that, I'd like to pass it on to the next presenter.

Thank you. Next, Dr. Kimura presents our R&D activities in Psychiatry & Neurology area and Regenerative Medicine & Cell Therapy.

I'm Kimura. Thank you for listening to the presentation in these areas. Today, by taking this opportunity, I'd like to put my highlight on research activities in these areas during the course of my presentation. This is our R&D strategy. The most important point here, as it is written on the top, is to achieve precision medicine through logical and rational drug discovery based on disease pathology. This is our strongest wish. As a direction to support this in psychiatric area, we focus on drug discovery and R&D for schizophrenia, depression, peripheral symptoms of neurological disorders and developmental disability. To treat neurodegenerative diseases, we focus on disease-modifying drugs to suppress the progress of diseases such as dementia, Parkinson's disease and rare disease. In the area of neurology, analysis of disease mechanism have been actively done on molecule level. And with the application of the learning, we believe to be able to develop disease-modifying drugs. In the area of psychiatry, analysis of animal behaviors have been the mainstream, but we try to deepen our research into genetic and neural circuit anomalies as they are becoming more available. Later, I'd like to explain some of the examples. This slide shows our established presence in psychiatric and neurological diseases area. Pie chart on the left shows the market size comparison of each company in Psychiatry & Neurology area. Sumitomo Dainippon Pharma is ranked sixth. Market size of our company itself is not very large, but our presence in this therapeutic area is strong. Bar chart on the right shows the number of new active ingredients in clinical pipeline of each company in the therapeutic area. We have a total of 11, which is comparable to that of major global pharma. These achievements are the result of our consistent focus on this therapeutic area. More and more pharmaceutical companies are deprioritizing Psychiatry & Neurology area, and the probability of success in this area is believed to be low. With this slide, I'd like to highlight why it's important to keep the focus on this area by sharing the assessment shown on the right of the page called DALY, disability-adjusted life year, that assesses the loss for the society. As you can see, the number of patients with Alzheimer's disease or depression is increasing at a very rapid pace, causing enormous and greater loss for the society than that from cancer. Other psychiatric and neurologic diseases such as schizophrenia, bipolar disorder or Parkinson's disease are also causing enormous loss for the society, and the size is as significant as the loss from cancer. We also face 2 major problems in therapeutic area, one of which is treatment resistance. There are approximately 30% of patients who are treatment-resistant. These patients remain hospitalized despite the effort of pharmacological therapy. In Japan, roughly 150,000 patients with schizophrenia are now being hospitalized, causing enormous loss for the society. Problem of peripheral symptoms of dementia is becoming very critical as well. The number of patients with symptoms are expected to exceed 7 million in Japan by 2025. By developing disease-modifying drugs, we can contribute to suppressing the progression of these diseases and, moreover, by addressing challenges of peripheral symptoms such as anxiety, restlessness, aggression, depression, delusion and hallucination. We can also support caregivers as well as patients. This is where we have unmet medical needs and where we are committed to inject our capability for drug discovery. This is a simplified illustration to give you an idea of heterogeneity in psychiatric and neurological diseases. On the left, you can see the illustrative image of psychiatric disease. Let's say, this is a schizophrenia. As I mentioned earlier, there are both drug-sensitive patients and drug-resistant or refractory patients in that population. Both types patients are diagnosed as schizophrenia, but the response to drugs varies depending on their background, such as the environment they are exposed, neural circuit or associated symptoms. Our aim is to develop a drug that works for patients with different background. On the right, you can see the illustrative image of neurological diseases, including Parkinson's disease and Alzheimer's disease caused by neurodegeneration that involves the loss of structure or function of neurons. Many patients with neurological diseases also suffer from peripheral symptoms such as hallucinations, delusions, depression, anxiety, frustration and sleep disorders. These challenges can be tackled with similar MOA to treat psychiatric diseases. As we showed, the Venn diagram in the middle of the page, by targeting both of psychiatric and neurological diseases, we can find the universe of these 2 areas, where peripheral symptoms of neurological disease can be found. As we have been doing the research in this area for a long time, we have our research foundation in biology, chemistry, computational science and clinical science. We have accumulated various findings. If you look at the biology side of -- on the left, we have various novel disease models that have been utilized. In recent years, we have developed genetic modification model and optogenetics, which I'll explain more in detail later on. Patient-derived iPS cells are also being used for our study. On top of that, advanced technologies have been applied for behavioral analysis. Efficacy prediction can also be done with computer technologies in this area. This analysis can be incorporated in the evaluation of the compound. Chemistry is also playing an important role in drug discovery. We have abundant experience in medicinal chemistry in Psychiatry & Neurology. Chemical compound does not always reach to the region of the brain just by administering the drug. So we need to ensure that the chemical compound reaches the target region of the brain through blood-brain barrier to demonstrate the efficacy. That's where we need the data. We have accumulated database and experienced throughout long time our R&D activities. With the application of in silico technology, chemical structure, physicochemical property and toxicity can be analyzed. With the combination of these technologies, we are advancing our drug discovery method. In the area of clinical science, we have abundant clinical experiences and rich clinical data. We'll continue to combine and utilize all of these technologies and expertise to improve the probability of success in this area moving forward. Organization is also needed to be activated in our research activities. Soliciting all the efforts from all researchers in the organization is key in doing so. It's been about 2.5 years since the introduction of this research project system. Under this system, we have what we call projects in each area of our research activities. The slide shows how it works. Passionate initiator becomes the leader of a project. Team grows as the project proceeds. And the leader continues to lead the team. There are some differences between preclinical projects and clinical projects, but the project leader gets to lead the team throughout the project. Those leaders are given the authority to manage the budget and evaluate the performance of the members. It helps to drive the progress of the project. Some of the leaders are in their 20s and they are young leaders, but continues to evaluate and lead their projects. In this system, we also collaborate with all other functions in the company to support the projects. Many different horizontal layers and vertical functions are engaged in our R&D activities. For example, there is a pharmacology research unit or a Alzheimer-related project working on tau and amyloid. Both of them may be working on the concept of accumulation under a common interest in abnormal accumulation in cells. This kind of theme needs to be studied with everyone in these teams, and that's where we can create Virtual One Team or V1T. Neuro-inflammation is becoming one of the interesting topics in the therapeutic area where glial neuro-inflammation is involved. This is a very important science. The study of the theme can be done with depression related project team. Some of these virtual teams have been created voluntarily in the process of teaching and learning from each other. Some colleagues in research division have a mission to -- summon people in the related activities and with common interest to form a Virtual One Team for cross-functional collaboration. As a result of all of these, we now have advanced technologies platform, and we are going to utilize it in a concerted manner moving forward. The number of clinical candidate nominations per financial year has been 2 on average. With the aggressive utilization of the technologies platform and Virtual One Team initiative, we are aiming to elevate the number of candidates for development to 11 in the next fiscal year so that we can improve the success rate in total. We also plan to elevate the -- quite a few number of compounds candidates in fiscal year 2021. It does not mean that all of them go into clinical trials, but we hope to incorporate the activation of organization into our research and development efforts. As a recent advancement, we have created a compound, DSP-1181, a serotonin 1A receptor full agonist. I'd like to share with you what we have achieved so far with the following slides. This discovery was reported in BBC News. As Mr. Nomura mentioned at the introduction, this is an innovative development, because after setting the research theme, it only took less than 12 months to capture the compound of DSP-1181, whereas it typically takes about 5 years. Why we are so fast was because we utilized AI and in silico technologies. By putting Centaur Chemist AI platform and in silico technology together, we were able to create this new compound in a very quick manner. A startup, Exscientia, is our partner in this development. Our robust internal resource in in silico technology will also continue to play an important role going forward. To understand the mechanism of the compound, analysis on animal behaviors to evaluate statistical group difference has been the mainstream in this therapeutic area. But we now have an approach that allows us to be more specific and accurate in the assessment of the mechanism. DSP-1181 is targeted to treat obsessive compulsive disorder or OCD. Pathology of OCD says that prefrontal cortex and striatum are activated in the brain of patients with OCD. We utilize the technology called optogenetics to assess the mechanism. This is the illustrative description of description of optogenetics. On the right, you can see a cartooned anatomical brain structure of a mouse. Mouth is on the left part of this cartoon and torso is on the right-hand side of this cartoon. We used virus factor to transduce an optical receptor gene called channelrhodopsin coming from Chlamydomonas with a technique that is similar to that of gene therapy. What will happen? Nothing happens at this point, but as soon as optical fiber is applied to striatum, hyperactivation occurs that triggers a symptom of OCD. I'll show you a short video with the following slide. This is a video of a mouse we took from the top of the cage. This is an identical single mouse. Under inactivated condition, the mouse showed normal exploration behavior, trying to understand the size of the space, as you can see on the top left. When we applied optical fiber, you can see what happens in the video at the bottom, says activated. The mouse seems to stay in put, but the mouse is actually grooming repeatedly. The mouse couldn't stop it, showing a OCD-like behavior. Patients with OCD cannot stop washing their hands, because they are obsessed. And the mouse is showing a similar behavior in this condition. But when we administered DSP-1181, as you can see at the top right, the mouse showed normal exploration behavior. With the study, we observed suppression of hyperactivation of striatum to suppress grooming or OCD-like behavior in DSP-1181-treated mice. These data are expected to accelerate our clinical studies to evaluate the compound going forward. It is true that the research and development require a significant investment, but we create value from the activities. We have experiences and know-hows achieved from long-term history of CNS research. As I explained during my presentation, we aim to aggressively incorporate and utilize advanced technologies. On top of that, we remain flexible in and challenge the way we manage the organization, combination of all the support or the strength in research and development. This will also enable us to realize innovative drug discovery to fulfill unmet medical needs. Just on a brief note against the backdrop of the current virus outbreak, let me touch upon our activities in Infectious Diseases area with the slide. Sumitomo Dainipon Pharma developed MEROPEN, a carbapenem antibiotic used in more than 100 countries around the world. We have know-how in the antibiotic development to contribute to treat antimicrobial resistance or AMR. A joint project with Kitasato Institute is underway. With TLR7 agonist, we have a strong patent base, which is being used to develop adjuvanted vaccines and vaccine for universal influenza and malaria. Projects are going -- are ongoing with public funds from AMED and GHIT. With that, I'd like to shift my focus on to the next area. This is Regenerative Medicine & Cell Therapy area. This slide shows our basic strategy in the area. In the context of the area, our focus is being shifted from the central nervous system, including ophthalmology, to peripheral tissues where the risk of rejection of transplanted cells and the number of required cells for transplant would be smaller. In the context of modality, first and foremost, we focus on the manufacturing of iPS cells and mesenchymal stem cells so that we can apply them to sphere and organs. New regulatory rule has been implemented in Japan, which gives us a new type of approval called conditional approval. We'd like to tap into the system to quickly apply our modality to clinical settings before shifting our focus on to the United States, where the size of patient population is bigger. To support these 3 basic strategies, we will leverage open innovation that is the collaboration with academia, biotech companies, companies of other industries and governmental institutions. This is the list of our business plan. Our products are all iPS cell-derived modalities or products, except the one at the top. I'll touch upon RVT-802 listed on the top, targeting pediatric congenital athymia, later in my presentation. We have partnering institutions for all of these projects. I'll explain them more in detail later. We obtained RVT-802, I just mentioned, through the strategic alliance with Roivant. Under the alliance, Enzyvant and Spirovant focusing on regenerative therapy became members of our group. RVT-802 is from Enzyvant, and I'll explain it with the following slide. This is a program with Duke University. BLA was submitted in the United States in April last year, but we received a complete response letter in December of last year. But the letter doesn't question the clinical efficacy of the product, but says that we need to address CMC-related matters, such as manufacturing method and in quality control. We are currently under preparation to respond to the letter for resubmission by the end of the year. Here are some characteristics of the product. Target indication is congenital athymia. Patients with congenital athymia cannot develop immune system, because T-cells in their body are immature. The condition is fatal when it is not treated, usually by the age of 2, due to infection. What we do is to produce this therapy from human thymus tissue that has been removed during unrelated pediatric cardiac surgeries to transplant the tissue in patient's leg. You can see the patient survival on the therapy at the bottom of the chart. For patients surviving 12-month post-treatment, there was a 93% probability of surviving 10 years post-treatment, which is a great result. This is a rare disease, but this treatment is literally a life-saving therapy for patients. Now I'll share with you what Sumitomo Dainippon Pharma has been doing in this area. The first one is renal regeneration project using nephron progenitor cells. This is to transplant renal anlagen with bladder collected from genetically engineered pigs into human. This is an early-stage project. Next one is on the projects in CNS area targeting Parkinson's disease. There are about 1.5 million patients in the United States and 163,000 in Japan. What we try to achieve is to create dopamine precursor cells from iPS cells for human transplant. Investigator-initiated clinical study is ongoing in Kyoto University. Transplant of iPS cells were completed in 3 patients out of planned 7 patients and the transplants were reported to be successful. We released the press release on the project earlier and plan to proceed with commercialization based on the results of the trial. Next project is for eye disease related to CNS area. Through the lens, retina captures the light to project an image for our brain to recognize. You can see the cross-section of the retina in the middle. Regeneration of retinal pigment, epithelium or RPE causes age-related macular degeneration. Regeneration of photoreceptor cells causes retinitis pigmentosa. What we are doing is to produce RPE and photoreceptor cells for human transplant. These are major eye diseases. Clinical research conducted by RIKEN's Professor Takahashi drew a lot of global attention, because it was the first -- world first application to human at the time. Our approach is slightly different from what professor applied, and we use RPE cell suspension to realize the therapy for AMD. We have been working with Healios in the project, but we revised our framework for joint development in June so that we can lead the project. In leading the project, we have identified new areas of interest we wish to qualify, and that is the reason why we plan to revise the launch target of this project. On this slide, you can see the section of transplanted cells produced in our facility. Photoreceptor cells are missing in patients with retinitis pigmentosa. So what we will do is to transplant the cells. Kobe Eye Center has applied for clinical research, and if we are successful, we will be able to transplant the cells in human by the end of the year. This slide shows the treatment of spinal cord injury using precursor nerve cells derived from iPS cells. Clinical trial is ongoing at Keio University, and we plan to transplant the cells in human by the end of the year. As I presented all of our projects in this therapeutic area is materialized through the open innovation or collaboration with startups, companies of other industries, universities and medical institutions. It drives the efficiency of the projects, which will become our know-how. Stable manufacturing of cells is key for cell transplant. Manufacturing high quality of cells is also crucial. The slide shows each step of the manufacture of regenerative medicine products. Ensuring the operation of each one of these process is very important in manufacturing. Quality control is incorporated in every step of the process. For us to be compliant with each quality control, we built a stable and high-quality production system. This is about the improvement of work environment and securing stability in manufacturing process. We developed automatic machines through our collaboration with companies of other industries, and this is supporting our stable manufacturing system. This infrastructure is available in our manufacturing plant called SMaRT so that we can be agile in the production of cells for clinical application for readiness. In this midterm strategy, I just touched upon ongoing projects during my presentation. Going forward, we plan to incorporate technologies such as gene therapy, organ regeneration and genome editing to further grow this therapeutic area. That concludes my presentation.

Now we'll invite Dr. Koshiya for presentation in Oncology area.

I'm Koshiya, Global Head of Oncology. Today, I will be presenting R&D activities in Oncology area, one of our focus areas, our research and development activities. In our pipeline, napabucasin and alvocidib are a compound in the late development stage, and we are actively accelerating our R&D efforts on them. Together with these 2 assets, we are also focusing on other promising assets to enhance our pipeline to support the growth of the company. We have multiple occasions in the past to talk about napabucasin and alvocidib. So by taking this valuable opportunity, I'd like to highlight some of other assets in the early to mid-development stages today. We're aiming to build diversified and innovative drug development pipeline through research focused on tumor microenvironment or cell-cell interaction. Tumor cells do not proliferate by itself, but they proliferate by attacking surrounding immune cells to create an environment suitable for their survival. This is what is known as tumor microenvironment. As we understand more about the crucial role played by the tumor microenvironment, we come to the realization that this is a very important target for the drug discovery in the area. That is why we focus on immuno-oncology and cancer metabolism as a part of our efforts and focus on tumor environment. At the same time, we also focus on oncogenic signaling, specialized by Tolero Pharmaceuticals, one of our U.S. subsidiaries. This holistic approach is supporting our building of diversified and innovative development pipeline. This is the latest development pipeline. As I mentioned earlier, we employed diversified approach to focus on immuno-oncology, cancer metabolism and oncogenic signaling. Our pipeline has become a rich pipeline. The first asset I'd like to introduce to you is DSP-7888, WT1 peptide vaccine and immuno-oncology. This is a cocktail vaccine containing peptide inducing WT1-specific CTL or killer T-cells and peptide-inducing helper T-cells. WT1 is one of cancer antigens and a potent target of drug discovery. DSP-7888 is one of the front-runner WT1 peptide vaccines in the world. Please look at the diagram on the left to see the mechanism of DSP-7888. With the administration of the drug, peptides are presented on antigen-presenting cell. This induces CTLs and T-cells with the enhancement of the activity of CTL by helper T-cell. Then clonally expanded WT1-specific CTLs attack WT1-expressing cancer cells. There have been a couple of pilot study for the asset. And I'll show you one of the results with the chart on the right. This is the result of the study for Myelodysplastic syndrome. Gray line shows the overall survival or OS of all patients treated with DSP-7888. Blue line shows OS of patients with positive immune response, whereas red line shows OS of patients with negative immune response. As you can see, DSP-7888 extended OS of patients with positive immune response. This is a result from a separate study and administered WT2725, WT1 peptide vaccine and the prototype of DSP-7888 to patients with glioblastoma or GBM. It was a study with a smaller sample size, but as you can see from the chart, tumor volume shrunk gradually to achieve complete response or CR. A global Phase II trial of DSP-7888, our next-generation drug after WT2725, is ongoing in patients with GBM. Restoration of the entire 219 patients has been completed and follow-up of OS is ongoing. Results of the study will be available next year, and we are very much looking forward to the study results. Another point I'd like to highlight is the study of DSP-7888 in combination with an immune checkpoint inhibitor. As you can see on the right, anti-PD-1 antibody eliminates exhaustion of tumor-infiltrated CTL. It plays a role of releasing the brake of the engine. And DSP-7888 attacks cancer cell by activating immunity. The combination of these 2 achieves synergic effect to attack cancer cell by releasing the brake and accelerating the engine. Based on the study, we progressed to Phase II study in patients with platinum-resistant ovarian cancer. Next asset I'd like to introduce today is dubermatinib. It's a multikinase inhibitor that mainly targets AXL kinase. Dubermatinib is a promising agent for virus indications. There are other inhibitors that target AXL kinase, but our asset is a unique inhibitor, because it was discovered by phenotypic screening targeting epithelial-to-mesenchymal transition or EMT. EMT is a very important mechanism, because it is involved in tumor proliferation, metastasis and therapeutic resistance. Dubermatinib is expected to demonstrate a good efficacy to attack virus cancer cells. The slide is very busy, but just to pick up a few, you can see the result of the study in combination with PD-1, PD-L1 on the left and co-administration effect of TK inhibitor on the right, together with other preclinical study results. With this data, we initiated a Phase I basket study to explore indications. We plan to identify potential indications based on the study results by the end of next fiscal year to move on to the late development stage. The next compound is DSP-0509, TLR7 agonist. It shows antitumor activity through cytokine induction and CTL activation in dendritic cells. TLR7 agonist has a promising mechanism in cancer therapy, but the development of the compound has not been very successful due to the risk of side effects from cytokine release. Local administration is the only formulation approved as of now, whereas DSP-0509 makes intravenous administration possible, enabling rapid elimination from the body after the administration. This ensures both safety and efficacy. DSP-0509 not only activates CTL directly, but also induces immune memory T-cells. As you can see the chart on the right top, combination with anti-PD-1 antibody accelerates further induction of immune memory T-cells, which is expected to achieve long-lasting antitumor immunity. This is why we plan to develop the compound in combination with checkpoint inhibitor. Next is TP-3654, PIM kinase inhibitor. PIM kinase is our main effector molecules in JAK/STAT signaling pathway and play an important role in cell proliferation, oncogenesis and fibrosis. The figure on the right bottom shows that TP-3654 monotherapy and in combination with ruxolitinib. They are effective in animal model of myelofibrosis, showing reduction in fibrosis in the spleen and bone marrow. A Phase I study in myelofibrosis patients is ongoing. Next is TP-0184. This compound is expected to be used in the treatment of various cancer types due to its antitumor activity through inhibition of ALK2, ALK5 and other members of the TGF-ß superfamily. TGF-ß superfamily is a cytokine that is involved in a variety of physiological and pathological processes, including cancer, as shown in the figure on the left. Activation of the ALK5 pathway is associated in enhanced phosphorylation of downstream, which alters erythroid differentiation. A Phase I study in solid cancer and a Phase I study in hematologic cancer is ongoing. The last compound I'd like to highlight is TP-1454. A Phase I study is scheduled to start shortly. TP-1454 has a new mechanism of influencing the glucose metabolism of tumor cells. Pyruvate kinase M2 or PKM2 is a key enzyme and dimeric form of PKM2 is predominant in tumor cells and creates anaerobic conditions preferred by tumor cells. What is T -- what TP-1454 does is to promote formation of PKM2 tetramer, which is highly active form from its dimeric form to lead a change of anaerobic conditions into aerobic conditions. In activation of immune cells, which prefer anaerobic condition -- or aerobic condition rather, enhances immunity results in demonstrating the efficacy. One of our challenges in our R&D activities is to the advancement of this rich pipeline in an efficient manner. Oncology area is a very competitive area, so the development of compounds needs to be done very quickly. Standard therapies or competitive landscape continue to change rapidly in this area. So we need to be ahead of these changes. Without agility, we would lose the market opportunities or return on investment for clinical studies even if we succeed in obtaining approval. That said, we can conduct R&D with high probability of success, much faster and more compact than before, because we can utilize cutting-edge technology, regulatory affairs systems and development methodology unique to the Oncology area. Let me introduce our effort to further enhance our pipeline with this slide. This is how we are bringing in new -- outside new innovations. It was press released yesterday, but we decided to realize venture capital investment specialized in oncology. Investment has been made into MPM Oncology Innovations Fund, a venture fund that makes investments mainly in drug discovery seeds or start-ups from Dana-Farber Cancer Institute. MPM Oncology Innovations Fund and Dana-Farber Cancer Institute are both located in Austin. As you can see on the right, we started an alliance in research with Harvard University, Columbia University and Wistar Institute to bring in their innovations as well. We hope these activities contribute to our R&D in Oncology area. This is my last slide. As for napabucasin, results from Phase III study for colorectal cancer are expected to become available in the summer. We plan to proceed to submission and launch if we are successful. I'd also like to point out that our pipeline has been enhanced, thanks to the effort from internal discovery and external innovation. We aim to continue to grow the pipeline with highly efficient R&D to realize all the establishment of oncology franchise. That concludes my presentation.

Our last presentation is from Dr. Kenneth Koblan on SEP-363856.

It's my pleasure to update you on our development pipeline with respect to SEP-363856. Next slide. As Kimura-san shared, there are major neuropsychiatric challenges with significant unmet needs that still exist. On the left-hand side of the slide, you can see the effect on schizophrenia, which affects approximately 23 million people worldwide, approximately 2.4 million living in the U.S. There are limited treatment options which exist, and the currently available products have a single mechanism of action, which they act through at either the dopamine or dopamine 1 or 2 receptors and serotonin 5-HT2A. So there exists many significant opportunities with respect to unmet needs around cognitive impairment and negative symptomatology in schizophrenia. As Kimura-san also shared with you, there is unmet needs with respect to neurodegenerative disorders such as Parkinson's disease or psychosis and other common neurodegenerative disorders failed to actually have hallucinations and delusions, which actually lead to a strong predictor of nursing home placement and mortality. SEP-363856 has the potential to treat both the positive and negative symptoms in schizophrenia, including cognitive impairment as well as the hallucinations and delusions commonly experienced in patients with Parkinson's disease. Next slide. Sunovion's discovery platform has enabled multiple CNS compounds, which are in the different stages of development. The most advanced is SEP-363856. Sunovion utilized a collaboration with PsychoGenics and an in vivo phenotyping screening platform, which relies heavily on bioinformatic machine learning to identify known drug signatures. In combination with medicinal chemists that were targeted at making compounds, which are anti-targets, that is they do not interact at the known canonical D2 or 5-HT2A receptors, SEP-363856 was developed and moved into early clinical development. Next slide, please. SEP-363856, on the left-hand side of the slide, is a potent TAAR1 5-HT1A agonist with approximately 100 nanomolar potency. It does not bind to D2 or serotonergic receptors that are thought to mediate the effects of the currently available antipsychotic class, which is cartooned on the right-hand side. By interacting with the trace amine receptor or 5-HT1A and signaling through intracellular G protein-coupled subunits in interactions with ion channels, it's known that this monoamine receptor activator, 856, acts in a completely different and novel mechanism than the known existing antipsychotic class. Next slide, please. Sunovion has used a series of imaging studies, diagrammed here, first where we'll actually speak about the lack of blockade at dopamine D2 receptors in all species tested. The top row is an anatomical structure determination, where you can see the caudate or the putamen in either axial, sagittal or coronal sections. You then see a baseline scan in the middle row where the D2 binding ligand fallypride, F18 (sic) [ 18F ] fallypride is actually shown to interact at known circuits of D2 receptors. In the bottom row, you see the images after SEP-363856 had been administered, a 20-fold effective clinical concentration. The images in the middle row and the images in the bottom are virtually identical, further demonstrating that 856 does not interact functionally at dopamine D2 receptors in all species tested to date. Next slide, please. In a series of functional magnetic resonance imaging studies, the fMRI was actually utilized to probe the core dopaminergic reward circuits of the ventral striatum, the insula or the medial orbitofrontal cortex in humans as far as the brain regions are concerned. In the far left, you see sagittal, coronal or axial cuts through subjects that have received placebo. We've actually drawn an area of interest around the striatum, which is the known core dopaminergic reward circuit activated in schizophrenia. In the middle panel, you see the blockade of that striatal activation by the dopamine D2 antagonist, where you can see reduction in the [ froth color ] image in this circle where the yellow and orange has actually decreased. On the far right, you see the effects of SEP-363856, which has even more efficacy than the dopamine D2 antagonist at blocking the striatal activation region of interest. Interestingly and importantly, for subsequent studies, you can also see that the SEP-363856 pattern of effects in the brain are different from the middle panel of the dopamine D2 antagonist and also to the far left are more similar to the placebo. Next slide, please. On the basis of these imaging studies, Sunovion has conducted a unique proof-of-concept development approach, conducting 2 clinical studies with 856. These were global studies that were registration quality. There were 3 phases: a screening and washout phase; a hospitalization phase, where all subjects were required to be acutely hospitalized; and then an open-label extension. The study enrolled acutely psychotic schizophrenic patients that met entry criteria based on DSM-5. The subjects were recruited -- approximately 245 subjects and they were randomized between 2 different arms of treatment, 1:1, either a placebo arm or a SEP-363856 arm, which was dosed flexibly. At the termination of the 28-day study, the subjects had the potential to roll over to an open-label study, known as 202, which was 6 months in duration and conducted as a monotherapy outpatient protocol. The primary endpoint was the change from the baseline in the positive and negative symptom scale, the PANSS scale, total score, versus placebo at week 4. The PANSS registration scale is the universally accepted registration endpoint for all antipsychotic. In addition, there were secondary endpoints, which included the Clinical Global Impression Scale, each of the PANSS subscales, a measurement of the brief negative symptoms or the BNSS, the Montgomery-Åsberg Depression Rating Scale and PANSS responders as well as safety, tolerability and overall discontinuation from the study. Next slide, please. What's presented here are the results from Study 201. These are the results for the PANSS change from baseline versus the time in hospital for the 245 subjects, which were randomized 1:1 to either placebo or flexibly dosed SEP-856. The purple actually demonstrates the placebo group, which actually did have a placebo response, which was stable at approximately 9.7 points and flattened out after 2 weeks. The green dots demonstrate the very large effect of SEP-363856 on the PANSS primary endpoint, where you see the separation which is increasing at both weeks 3 and weeks 4. The primary week 4 endpoint had an effect size of 0.45 and a p-value of 0.001. So the total score compared to placebo was very robust as far as its overall endpoint was concerned. The results of this Study 201 met its primary endpoint and demonstrated a statistically significant as well as a clinically meaningful result. These results were first presented at American College of Neuropsychopharmocology, ACNP, in 2018. Next slide, please. As I pointed out, one of the major unmet needs in schizophrenia treatment is with respect to efficacy on negative symptomatology or cognition. What's plotted here is the results from the Brief Negative Symptom Scale, total score from baseline to week 4. The placebo, once again, had a placebo response in the group. The 856 group was very robust, achieving separation at day 4 all the way out to week 4. The effect size was 0.48 and the p-value was less than or equal to 0.001. So on the negative symptom scale, the dedicated negative symptom scale, which was included in the study, there was statistically significant improvement in the Brief Negative Symptom Scale. I do not have time to go through each of the additional PANSS subscales, the PANSS positive subscale, the PANSS negative subscale, the PANSS general psychopathology subscales or the CGI, all of which were highly statistically significant and demonstrated efficacy for 856 compared to placebo. Next slide, please. What's plotted here now is the actual efficacy on the PANSS scale, the Positive and Negative Symptom Scale, on the left-hand side, over the first 4 weeks, which was Study 201, which I had previously presented; and then now in the rollover study, which was Study 202. At the end of the 4 weeks of hospitalization, all subjects have the potential to either lead the study or to roll over into a monotherapy study where they receive only 856. The green dots that you see, for the next 6 months, demonstrate that SEP-856 had a clinically meaningful improvement in the Positive and Negative Symptom Scale total score, and it achieved a group average of a score of 59. It's important to note that the retention in this study was very high at approximately 67% and that the monotherapy was well tolerated over the 6 months. On the basis of the 201 and 202 studies, the FDA has granted SEP-856 as a breakthrough therapy for consideration. The results of studies 201 and 202 were presented at SIRS, the Schizophrenia International Research Symposium (sic) [ Society ] in 2019. Next slide, please. The unmet need in schizophrenia is not just with respect to positive and negative symptoms, but also with respect to functional capacity. So what we've actually included in the studies is a measurement of the performance for UCSD Performance-based Skills Assessment, the so-called UPSA-B, which actually is a measure of functional capacity, both with respect to an individual's ability to complete financial skills and to actually communicate with respect to impaired cognitive domains and cognitive measures. What you see is an approximately 9 point improvement during the 6 months of the open-label baseline, once again, monotherapy SEP-856, where we see an effect size of 0.66. So 856 was associated with functional improvement as measured by the UPSA-B over the 6 months of the open-label extension study. Next slide, please. Just a word about the overall safety and tolerability of SEP-856. In the panel on the left, you can see the preferred terms and the columns reporting the 4-week double-blind period for treatment-emergent adverse events. The #1 treatment-emergent adverse event for SEP-856 was somnolence at 6.7%. You can see that compares to placebo at 4.8% very comparably. Down the rest of the columns, you can see that all of the changes that are seen with placebo are similar to that reported for 856. Importantly, what you do not see is the bottom row where there's a report of patients with any extrapyramidal symptoms, which would be a hallmark for other drugs in the D2 5-HT2A class, notably absent or any effects on extrapyramidal symptoms with SEP-856. In terms of the overall clinical safety and tolerability, we've reported here the 4-week double-blind period. We've reported out the 6-month data as well at SIRS in 2019. There were no new safety or tolerability effects, which occurred over the 6-month open-label monotherapy study with 856. There's a favorable profile for 856 compared to the currently marketed antipsychotics. There was also no effect on extrapyramidal symptoms: weight, cardiometabolic effects on lipids, glucose, prolactin or ECGs. The discontinuation rates for 856 are very low and comparable to that of placebo. Next slide, please. On the basis of this data, Sunovion has completed an end-of-Phase II meeting with the U.S. Food and Drug Administration. As I said, they have granted 856 program breakthrough therapy designation. They've also determined that the DIAMOND program, which is the Phase III registration program, would be determined to be suitable in order to support registration, if successful. And importantly, they counted the SEP-856 201 flex dose study that I just presented as an adequate, well-controlled and registrational pivotal study. Sunovion has initiated a global multicenter program, which includes 4 studies designed to evaluate the safety and efficacy of 856: DIAMOND 1, which is a 6-week, double-blind, placebo-controlled, fixed-dose, multicenter study in acutely psychotic adults and adolescents; a second 6-week randomized, double-blind, fixed-dose, multicenter study in adults with schizophrenia, DIAMOND 2; the DIAMOND 3 study is an outpatient multicenter, flexible-dose, open-label safety study to achieve the ICH exposures, and they actually allow rollover subjects from DIAMONDs 1 and DIAMONDs 2; and finally, DIAMOND 4, which is a 52-week, randomized, double-blind, active comparator study for the safety and tolerability of 856 in adults with schizophrenia. Next slide, please. So finally, the 856 program in terms of next steps, 856 is a novel therapy. It is a TAAR1 5-HT1A agonist, which is distinctly different from the marketed antipsychotics. Its efficacy, safety and tolerability is open -- studied in an open global 4-week study and a 6-month extension. That's how we got the breakthrough therapy. There are no effects on movement disorders, weight, cardiometabolic parameters observed to date. The Phase III DIAMOND studies are underway. The potential exists for a major improvement in a differentiated drug safety and tolerability profile. There is an ongoing proof-of-principle study in Parkinson's disease psychosis, which is expected to read out in the first half of 2020. And additionally, a number of additional indications are under consideration, including mood disorders. Thank you.

Now we'd like to move on to Q&A.

I'm Hashiguchi from Daiwa Securities. I have a couple of questions. My first one is on DSP-1181, particularly around the utilization of AI and in silico to expedite time line to transition to clinical study. I don't quite understand how it's different from the conventional approach. So could you describe it more in detail? You mentioned that it usually takes an average of 4 to 5 years with a conventional approach. But I think it's also a matter of chance, that is you happen to be fairly quick in research transition or vice versa. So I'd like to know how long it would have taken using conventional approach and what sort of unique strategy you employed to expedite the time line and by how many months. Do you also think that this technology is highly applicable to other projects? Or do you say that you just happen to be successful at this time?

Thank you for your question. As I presented, with the application of the technology, it requires less than 12 months for us to complete the exploratory research phase for DSP-1181. To walk you through the process of drug discovery, there is a screening process in which we conduct in-vitro screening of tens of thousands or hundreds of thousands of chemical compounds. This is a research phase to explore a compound with targeted or potential mechanism. Then we move on to assess safety of the compound we identified. Under biological experiment, we observe pharmacological effect more in detail to lead to the -- to lead the compound to the clinical stage. This is what is called wet study in collaboration with Synthesis (sic) [ Centaur ] Chemist. What we can say is that the target we used in this project was suited to the research with this in silico approach. A target in CNS area is GPCR, G protein-coupled receptor, ligands of which are dopamine and serotonin. Almost all of drug discoveries in this area are target GPCR. There is database of interaction between GPCR and several hundreds of thousands of compounds, and we utilized the database to explore a compound with potent activation of serotonin 1A receptor. It's a screening against the database, which allowed us to skip wet study this time, and that worked for the best. Data of the database, as I mentioned in my presentation, that has been accumulated as the information of compound and physiological action internally in Sumitomo Dainippon Pharma as well as externally. The target, as I mentioned, was quite suited to the research use in this type of technology, but the technology should work for any target in principle.

My second question is on pipeline or portfolio in Regenerative Medicine & Cell Therapy. You presented on Page 47, but you didn't touch upon it in detail. I'd like to know more, especially the course of future direction. I understand that the focus on iPS cell therapy has become stronger. What are technical challenges in the therapy or changes in the market? With the application of your know-how in iPS cell therapy, how do you plan to expand or downsize, for example, this area of company's focus?

Challenges in safety is getting a lot of media attention in the context of iPS cell therapy, but we believe that the issue of carcinogenesis has been fully addressed, given that we are aiming to further advance iPS cell-related programs I just presented. Going forward, we plan to develop our therapy based on fuller potency from either iPS cells or ES cells to regenerate tissues such as retina, and organs such as kidney. This is one of our strategies, but we are also interested in applying gene modification technology to iPS cells to enhance its fuller potency or mitigate risk of immune deficiency. Combination of various technologies is something that we'd like to materialize. At the end of the day, we want to shift our focus completely on to autologous cell therapy, and to realize that, we started our discussion already on how to build manufacturing process and infrastructure. As a result of the alliance with Roivant, we have new gene therapy in the pipeline, which covers regenerative and cell therapy in Japan. We're looking forward to its development as well.

My last question is around the development strategy for SEP-856. I believe that the clinical study program you presented today is designed to support the approval of the drug. But my question is what do you do to improve the access of drug with good profile like SEP-856 to patients? Do you believe that the study is also designed to generate data for payers to support reimbursement or cost effectiveness? Or are there any other studies you plan to run to generate this data? What do you say about the application Roivant's know-how to design new clinical studies?

Dr. Koblan will take the question.

Sunovion is collaborating with Roivant with respect to delivering differentiated products. The clinical program that has been developed, we believe, will deliver both important efficacy and safety data in order to deliver a differentiated label for subsequent regulators, payers and patients to deliver this breakthrough medicine.

The design in nonclinical study still is conventional despite of the change in competitive landscape such as genericization of the market. What is your take on this?

Sunovion and DSP group have marketed therapeutics in this space, and they are very knowledgeable about delivering value with respect to the existing program as well as how to, importantly, differentiate it as well as expand it into other potential indications. So we have good confidence in the differentiated profile. I will point out that the cartoon in the early part of the deck clearly go and demonstrate that it acts through a completely novel mechanism of action. And that novelty, we believe, has now been demonstrated both in terms of the overall retention of the subjects in the subsequent studies as well as the differentiated safety profile where we see no effects on prolactin, no effects on weight and cardiometabolic parameters and where the FDA has granted breakthrough therapy designation. That point, in and of itself, is an important indicator for the FDA's early opinion that still needs to be proven in the subsequent Phase III studies.

I am Wakao from Mitsubishi UFJ Morgan Stanley. My first question is for Dr. Kimura on Page 23, where you mentioned about elevating the number of clinical candidate nominations in Psychiatry & Neurology in fiscal year 2020 and 2021. It seems to me that the elevation number is quite aggressive. I'd like to know your rationale in this expectation in the context of platforms or initiatives you may apply. Is this going to be a onetime jump in number or will it continue? Will it be sustainable, is my question?

Thank you for your question. First and foremost, I'd like to verify my statement that all of 11 candidates may not be nominated to advance the development stage all together, but they could if everything goes well and on schedule. So you may want to discount the number a little. That said, researchers, CRR, and I all agree that research efficiency has been significantly improved in Sumitomo Dainippon Pharma. Our partners outside of the company, who have been working with us for assay, speak highly of the enthusiasm and passion among researchers in Sumitomo Dainippon Pharma recently. Of course, we have been improving our basic technologies and introducing new technologies. But most of our achievements so far have been supported by the kind of organizational activation I have presented today. In other words, we haven't been leveraging and activating these targets in the past. Did I answer your question?

Yes. That goes to say that with the organizational activation, we can expect sustainable growth in clinical candidates nominations going forward.

Yes, we can. We're talking about drug discovery here, and we are not there yet to look for programs 5 or 6 years ahead. We are currently running a cycle of 3- to 4-year time window. So 11 nominations may be too aggressive, but I feel that the productivity has been doubled or tripled.

I have 2 more questions in Psychiatry & Neurology. You introduced the concept of precision medicine during the presentation. How advanced are you? You also explained about the diseases such as Alzheimer's disease and dementia. In the treatment of dementia, do you plan to develop therapies for peripheral symptoms of neurogenerative diseases or BPSD? Or are you focusing on early-stage Alzheimer's disease or dementia itself?

On your point of precision medicine, with the application of gene background study such as GWAS or the specification of clinical symptoms, more specific indicators to specific patient population are available. We incorporate both clinical and basic research to fully identify patient population as our drug discovery effort. I believe it will lead to the realization of precision medicine. On your point of dementia treatment, let me take a drug discovery for Alzheimer's disease for an example. We have a program to develop a disease-modifying drug that is to suppress the accumulation of amyloid or tau in the brain and a program to alleviate BPSD and peripheral symptoms of neurogenerative diseases, and they are running in parallel. It is not that we are focusing on either one, but we understand the challenge in the development of disease-modifying drug for Alzheimer's disease and the importance of minimizing social burden by delivering therapies for peripheral symptoms.

Have you already identified a chemical compound of sort that has the potential to create target patient population through the identification of the population with precision medicine? When do you expect to initiate a clinical study for the compound?

You may be referring to the combination with gene inspection, but we don't have anything material at this moment. But we have information that enables us to understand clinical symptoms, interpret EEG and correlation with pharmacological action to support our drug discovery programs, just as the one I highlighted today for the treatment of OCD. I expect our programs to lead us to specifically identify patient population in a clinical setting moving forward.

I also have a question for Oncology, specifically on TP-0903 or dubermatinib. It is true that there are several multi-kinase inhibitors, but what is unique about your compound is the fact that it's discovered by phenotypic screening targeting EMT. Do you say that it could demonstrate higher inhibitory activity against EMT than other multi-kinase inhibitors? I'm also interested to know the potential of the EMT inhibitor. This mechanism is attracting a lot of interest and attention from pharmaceutical companies and the market, but I don't really know how it works. Is there any qualitative assessment you could share with us today?

Thank you for your question. EMT is epithelial to mesenchymal transition and involved in oncogenesis such as proliferation and metastasis. Malignancy may be suppressed by inhibiting the transition, and that is why it's much talked about. We don't know whether or not AXL directly affects EMT, but we support our theory that dubermatinib has a very unique biological response based on the results we have obtained from the screening approach. This compound demonstrated inhibitory activity directly to EMT in part of our zebrafish body we used for the screening. And this was a very unique screening approach that we used today, this time.

Does it demonstrate higher inhibitory activity than others?

We cannot say, since there is no head-to-head comparison against other multi-kinase inhibitor. As I said, it is very unlikely that AXL and EMT are functionally coupled.

I'm Sakai from Crédit Suisse. I have a couple of simple questions. But let me ask the first one on SEP-856. You introduced a platform called SmartCube that you utilized for the development of SEP-856. But are there any other pipeline assets you have identified through the platform? Or is SEP-856 is the only one at the moment? How do you plan to apply the platform in your drug discovery moving forward?

Dr. Koblan takes the question.

Thank you for the question. As a result of the collaboration with PsychoGenics, Sunovion has developed 4 clinical candidates, of which 856 is the most advanced. In early clinical development, as you can -- which you can see on our pipeline as well as on the DSP pipeline, there are 3 additional clinical development stage molecules that are currently ongoing early clinical development: 8608, which is a drug for bipolar depression; 614, which is a drug for treatment-resistant depression; and 135, which is a drug for BPSD in Alzheimer's agitation. So it has been a very fruitful collaboration. 856 is the most advanced, but we have 3 additional programs that are in early clinical development on -- in ongoing experimental medicine studies, very similar to what was presented on 856.

So can you, once again, identify the compound that you just mentioned?

On the website, you can see presented here, SEP-378608, SEP-378614 and 380135. So the compounds with the SEP numbers in front, 8608 for bipolar depression, 614 for treatment-resistant depression and 135 for BPSD Alzheimer's agitation are the 3 compounds that are listed on Slide #9 that Nomura-san presented.

Compound name SEP at the beginning is the one that was discovered through the SmartCube platform, is that correct?

Let me add that SEP-4199 is not a compound discovered by SmartCube, but all the others with SEP in its name, SEP-608, SEP-614, SEP-135 are the 3 compounds we discovered through the collaboration with PsychoGenics. It's listed on Page 9 of the slide, and they are in the earlier stage of the development.

Understood. Does that say that these are compounds that have been quickly discovered and advanced to Phase I?

We don't say it was quick, but we -- they were discovered through a screening based on similar behavioral analysis. SEP-856 has been prioritized. So there is a gap in development pipeline between 856 and those in the early stage, but we believe that those early-stage compounds are as promising as SEP-856.

This may sound a naive question, but I think SmartCube can eliminate noise during drug discovery process. Is this a proper assessment?

It's not an elimination of noise, but it's about analyzing animal behaviors. We use scores to assess behavioral pharmacology as well as we do observation. Computer analysis of animal behaviors to translate them into psychiatric and neurological symptoms such as schizophrenia or depression. This enables us to identify target indication during in-vivo study, which ensures formable safety and mechanism. This is the benefit of the screening with SmartCube platform.

A comment I would make, Kimura-san, is that similar to your presentation on 1181, advanced computational chemistry that the medicinal chemists are utilizing and work in collaboration with people at the DrugOme, for example, with Roivant also give us an interesting platform to make the next generation of compounds in CNS as well as in other therapeutic disciplines.

I have another question to Dr. Kimura. You mentioned during the presentation that safety concerns in iPS cell therapy have been completely addressed. Then what comes next is the transplant process or application process of iPS cells. Sumitomo Dainippon Pharma now takes a control over the retina project with Healios. Now I remember you mentioned in the past that we identified some issues in transplant process to be corrected. That I think is a common issue in any iPS cell therapy. Based on your experience in the project with Healios, how do you see the entire development of the therapy? Could you give us more information?

I appreciate your interest in this area. When I say transplant process, I don't mean the transplant technique itself, but the process that runs before the application of cells to human with transplant. That includes manufacturing process, and we need more assessment there. Healios thinks it's almost ready to go to clinical study based on their standard. And it's about different standards in different companies. What we try to address is a unique challenge in RPE therapy.

You can make a big advancement if you can overcome the challenge, is that what you are saying?

That's correct. We apply our standard to be confident in non-therapy before going into clinical study.

I'm Kohtani from Nomura Securities. My first question is on Page 16 and onward that cover Psychiatry & Neurology area. Both Psychiatry & Neurology are presented today as one therapeutic area. But if we take a look at them in the context of psychiatric diseases and neurological diseases, I think they are not the same. Neurological diseases such as dementia, Alzheimer's disease and Parkinson's disease are being analyzed and understood to some degree, thanks to genetic evidence. We are learning more about protein accumulation in brain. These discoveries could lead us to the development of the disease-modifying drugs. But when it comes to psychiatric diseases such as schizophrenia and depression, I don't think we are quite there to understand genetic factors, for example, by using technologies like GWAS, if I'm not mistaken. Also, I got the overall impression that the company is shifting its focus from phenotypic drug discovery to precision medicine, more dependent on the scientific evidence targeting specific patient population. But if you look at drugs in the pipeline, they are mostly discovered by phenotypic discovery approach. So I'm confused with the company's direction. Do you plan to focus on both or defocus on phenotypic approach? This is my first question.

First of all, precision medicine and phenotypic drug discovery do not contradict, in my opinion. They both support drug discovery targeting specific patient populations. That said, I agree with what you said about unavailability of data to identify gene factors of psychiatric diseases. GWAS has led us to some risk factors, but you're right about the gene factors. Among psychiatric diseases, OCD, for example, gives us more clear mechanism, which is hyperactivation of neural circuit. Apathy may be caused by hyperactivation of a different neural circuit. EEG or MRI are available to understand the correlation between the brain activation and psychiatric diseases. With the advancement of all of these, we will be able to develop assessment method, which is different from conventional method for us to assess animal models. I can't describe it in detail at the moment, but there are in-vitro studies to replicate responses that are different between patients with diseases and healthy people. New approaches are becoming more available to realize novel drug discovery in psychiatry. This is also a part of phenotypic approach. We call it microphenotype. And this is why we believe phenotypic drug discovery and precision medicine do not contradict against each other. We will continue to focus more specifically and precisely on target diseases and populations for future drug discovery. Approach we use to discover SEP-856 is in-vivo phenotypic screening, and we are aiming to utilize phenotypic screening with more specific focus and to target specific molecules when we know what they are. We plan to utilize both in combination. We may see some lag in the time line of our clinical activity, but development pipeline may not fully represent what we are currently doing in our clinical activities.

I want to repeat my first quote about differences between psychiatry and neurology. And I think it is to challenge every CNS pharma thesis. Mechanism in cancer, for example, is very clear in molecular level. Clear mechanism in molecular level can be translated for effective application of PD-1 or CTLA-4. That's probably why pharmaceutical companies in the U.S. heavily focus on oncology. On the other hand, in psychiatry, if MRI is available to understand structural element, but it's not translated into molecular mechanism. Is this the right assessment of this area, what do you say?

This may be conceptual, but I generally agree with what you mentioned about the difference. But mechanisms are being broken down into in-vitro level or into cell level. We understand the contrast in drug discovery between oncology and psychiatry, and we discuss about it internally as well.

Understood. My last question is about SEP-856. Please help me refresh my memory. The data, which was released back in April was a full data set from Study 201. And the data you released in December was the data presented today on Page 71. Is it correct? I didn't get the chance to go through the data released in December.

The December release was with respect to the outcome from the 202 study, which is the 6-month open-label extension study, which was completed. All of the subjects had completed their 6 months of therapy. So there were 2 different reports. First was 201, which was the 4-week in hospital readout; and the second was the outcome of study 202, which was the 6-month open-label safety study, which was, once again, a monotherapy study, all subjects received only SEP-363856.

Let me ask the very last one. A unique characteristic of SEP-856 is TAAR1 agonism. But how so? It is true that the results are very exciting, especially on the efficacy for negative symptom. And as it says on Page 73, there is almost no EPS observed. How does the mechanism work? Is there any scientific description on this?

We believe that the TAAR1 5-HT1A system acts at both the VTA and the dorsal raphe to alter dopamine synthesis and release as opposed to blockade of dopamine D2 or 5-HT2A receptors. So we believe that the mechanism underlying the efficacy also is responsible for the differentiated safety profile. There are manuscripts that have been published in the past year that the corporate relations group can supply you around the molecular characterization of the target.

I'm Barker from Jefferies Securities. I have 3 questions. First one is about AMD. I believe clinical study is expected to be initiated by the end of the year. How long will it take to complete?

We plan to initiate a clinical study in fiscal year 2020 at the moment, but the future time line is under discussion. So I'd like to refrain from commenting on the time line.

Okay. Page 52 says the registration has been completed for the study of DSP-7888. When was it -- when do you expect to get the results?

Registration was completed recently. It's just completed. Events for final analysis are expected to be achieved by the end of the year. So results are expected to be available at some point next year.

Do you plan to submit NDA with the data from the study?

This trial is a Phase II study, so we will evaluate the data from the study to decide whether we move on to Phase III study. We may be able to submit NDA if we are unexpectedly successful, but there is not -- but this is not our base case scenario at this moment.

Understood. My last question is on Page 71 about SEP-856. Changes of PANSS score in SEP-856 group was about minus 35 over 3 months. Do you think it supports the drug to be the best-in-class?

With -- 856 is internally controlled. We are unable to compare the relative efficacy of 856 to other products in as much as it was not conducted in a head-to-head study. In the DIAMOND 4 protocol, Sunovion will study an active comparator against 856 for its overall efficacy. But it is unfair and not scientifically sound to make cross-study comparisons.

I'm Oda from Morgan Stanley. I'll ask one question. The company announced a collaboration with JCR yesterday. But is it possible to share with us more about the collaboration? How many candidates do you have in research stage? And how long will it take to move on to clinical studies? Will it be a year? I appreciate it if you could tell us more. I think it's with JCR and J-Brain Cargo. And you just presented some of the challenges in CNS area. But how can you utilize J-Brain Cargo in R&D activities in CNS? CCR announced yesterday talking about milestone achievement in research stage. Anything you can add on this?

We cannot disclose detailed information since we have a contractual agreement with JCR, and it is still in early stage. We have programs targeting CNS diseases using J-Brain Cargo from JCR. It is going well, and as it was press released, we have achieved a milestone that enabled us to move on to the next stage, but it's still nonclinical.

Okay. One more question. The company received a complete response letter for RVT-802. And you said, it's not about the data but about manufacturing method or quality-related issues. You also said that the company plans to -- plans for resubmission by the end of the year. Does it mean that the issue can be addressed within that time frame?

We need to respond to FDA's letter. So we need to be diligent, but technically, it's not impossible to solve them, and I believe we'll be thorough to ensure resubmission as planned by the end of next fiscal year.

I'm Ando from Nikkei Newspaper. I have 2 questions, one of which is about the collaboration with Healios. You mentioned about the company's standard to ensure the process. I thought it meant to say that the quality of differentiated RPE produced by Healios was not up to your standard. It probably means that the differentiation induction has not been complete enough, or there has been impurity or genome analysis has not been enough. If you make changes to these things to meet your standard, it could be the revision of all of the process going back all the way to the first manufacturing process. It means a lot, doesn't it?

Thank you for your question. It may sound vague, but the technique of differentiation induction for RPE cells has been and is completed. Transplant technique is a medical and surgical technique and is not of a concern either. Our concern is in the process in between, and it is under consideration. We don't want to explain it in detail, because it highlights the issue. But differentiation induction for RPE cells is not at all an issue.

Then you don't need to go back all the way to the very beginning of the process.

That's correct.

My second question is around regenerative medicine and related manufacturing process. CiRA's iPS cell bank is expected to be managed by a public interest corporation and budget has been allocated for this fiscal year, but the operation remains to be an area of concern. Given the concern over the finance of the operation, how do you plan to manage it? Do you see it as a risk to your business? Or do you think it's not as you shift to autologous cell therapy? Is there a plan to make an investment for the bank to support?

We are not in the position of making suggestions in terms of the operation of CiRA, but we see almost no risk to our business. Budget is expected to be allocated to secure 10 lines of iPS cell stocks. And when they become available for manufacturing, we should be able to advance our R&D activity in regenerative medicine as planned. It's up to CiRA, how they operate them, and I'd like to refrain from commenting on it.

I'm Hashimoto from Nikkei Business. My question is around the activation of the organization such as research project system and Virtual One Team in Psychiatry & Neurology, which improved R&D efficiency. Has it been successful because it's been implemented in Psychiatry & Neurology team? Or do you plan to roll out -- roll this out to other therapeutic team like Oncology?

In our organization, we have research teams in 3 therapeutic areas: Oncology, Regenerative Medicine & Cell Therapy as well as Psychiatry & Neurology. Psychiatry & Neurology team is the biggest in size and is diversified. Efficient management of this team has been a challenge, but the initiative of organizational activation has been fruitful. Oncology and regenerative medicine are smaller organizations and have been operated under project-based system. So the initiative in Psychiatry & Neurology team that -- which I just explained earlier is not necessarily applicable to the teams of oncology or regenerative medicine, in my opinion. Dr. Koshiya, what is your thought?

As Dr. Kimura explained, we have about 40-plus members in oncology research team, but we have a lot of research teams. Project system is not quite practical in this type of organization. That said, we also have leaders in our projects, we -- who solicit the collaboration from counterparts in the United States to accelerate the project, which is similar to what Dr. Kimura presented today.

I have one more question. In the wake of what's happening with the virus outbreak, many companies have canceled and are canceling this type of large-scale meeting. But you decided to go ahead to hold this meeting with the contents on earlier-stage development compound. Teleconference is also being arranged, because the company wanted to invite presenters from the United States today. What is the message that you hope to get across by soliciting all these efforts to organize the meeting? This is the question to President Nomura.

We have had a number of opportunities to touch upon our development pipeline in the past. But there has not been enough opportunity to share with you our recent strategy to advance early-stage compound. I understand the recent trend against the background. But instead of canceling all of it, we wanted to provide this opportunity so that we can talk about our strategies for your valuable information. I'm also looking forward to gaining your support on our R&D activities.

I'm Wakao from Mitsubishi UFJ Morgan Stanley. Thank you for taking my additional question. It's on Page 36 about call transplant therapy for Parkinson's disease. If I'm not mistaken, the efficacy of the therapy has been confirmed with the transplant of embryo-derived dopamine neuron. So all we need to do is to create dopamine precursor cells from iPS cells for transplant. Transplant of tissues is all we need to do, in my assessment. For therapy with RPE, as you explained, process like manufacturing or transplant will need to be enhanced. But I expect the therapy to be successful as long as differentiated cells are ready for transplant. If this is the right assessment, iPS cell therapy is a therapy with higher possibility of success. So what I'd like to know is unknown risks or potential risks in the process from differentiation to transplant if there are any? Are there any challenges you are foreseeing in the context of Parkinson's disease therapy? Will there be a different efficacy, depending on the brain vision we will touch with stereotactic neurosurgery, for example?

Thank you for your question. As you rightly pointed out, there have been several hundred cases worldwide in which embryo-derived neurons are transplanted in -- to treat Parkinson's disease. It's a stereotactic neurosurgery to transport neurons in the area close to striatum, and it's an established technique. Challenges are close to none, except the wide application with therapy. This is a common challenge in Regenerative Medicine & Cell Therapy, but stereotactic neurosurgery is just a surgery and the wide application of the technique is going to be a challenge moving forward. I don't see any other emerging challenges at this point.

I'm [ Ishi for Press ]. My first question is to Dr. Kimura on your new appointment as Chief Scientific Officer. And my second one is on SEP-856 on additional indication. Will bipolar disorder or depression be the additional indication?

What I'd like to achieve is this as a new Chief Scientific Officer. In the strategic alliance with Roivant, we have added new subsidiaries in the group. That makes our platform in the United States bigger with Sunovion in Psychiatry & Neurology, BBI and Tolero in Oncology and Sumitovant in women's health, neurology as well as cell and gene therapies. Now we have a diversified pipeline at hand. We need to have an assessment approach we can employ to manage programs in the pipeline. We have management committee and corporate executives to manage our portfolio, but my mission is to enable deep discussion based on scientific interpretation of data in the organization. This is a very important responsibility and I'm humbled, but at the same time, I'm committed and I'm very excited.

Second question is for Dr. Koblan on depression and bipolar disorder as an additional indication of SEP-856.

The company is -- the clinical development group is currently awaiting results from the Parkinson's disease psychosis proof-of-principle readout. That study will rely on the SAPS-PD, which is the registration endpoint for psychosis in Parkinson's disease. Given the molecular target and the early proof-of-principle data that we have, both in schizophrenic subjects where we employed the MADRAS reading scale, mood is an obvious place for us to look. So bipolar depression is a potential indication as is MDD, adjunct MDD. So there are a number of potential options in mood disorders. And it is an active discussion ongoing within the clinical development group and in consultation with the drug development group at Sumitomo Dainippon in Japan as well.

I'm Ando from Nikkei Newspaper. My question is around Infectious Diseases area, where you mentioned that the company continues drug discovery of adjuvanted vaccines for universal influenza. Can this technology be applicable to the treatment of coronavirus-induced symptoms? Is there anything the company is currently working on against the virus outbreak?

Thank you for your question. Our technology is to develop adjuvanted vaccines with strong potency and safety. One of the targets is to treat universal influenza. Finding the right combination with antigens to induce potency is also important, and our drug is potent to induce an action. In that context, it could work as a vaccine in the combination with antigen of coronavirus, but we don't have data to assess the possibility at the moment.

So you are interested in the possibility? This is the technology you can apply as a universal platform, correct?

Yes. We believe that the technology can be developed as a major infrastructure of vaccine creation for wide application.

I'm Oda from Morgan Stanley. This is not quite about R&D activities you presented today, but I'm curious to know the synergy between Sumitomo Dainippon Pharma and your parent company. Are there any synergies you have achieved? And could you share a specific example with us today?

If you look at the synergy with our parent company, Sumitomo Chemical, we can see some in our research sites for Psychiatry & Neurology and Oncology teams. It's located inside Sumitomo Chemical's facility in Konohana Ward in Osaka. Our facility is next to Sumitomo Chemical's research facility. Programs in regenerative medicine, eye-related programs in particular, were originally from Sumitomo Chemical Group. They did a basic research, and we took over to start applied research. We may be able to see more synergy as we advance these programs and our technology to create cells and their technology to manufacture API may be able to realize synergistic effect. We both are looking for more synergy in our businesses, and we will continue to discuss how to achieve it.

Understood. It is my impression that both companies can create more synergistic effect. So I believe you continue to look for more opportunities.

Yes. The example I just shared is just one of them, and we're both looking for it in wider areas.

Thank you very much for your questions. I'd like to close Q&A session. Thank you very much once again for listening to our presentation in -- on R&D activity. We appreciate your continued support. This is the end of the meeting. [Statements in English on this transcript were spoken by an interpreter present on the live call.]