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

Thank you for listening to the financial briefing for Sumitomo Dainippon Pharma. Yesterday, we announced the financial results of fiscal year 2019. We will be presenting the results today as well as the outlook for 2020 and clinical development status updates. To help reduce the risk of spreading coronavirus, this meeting takes place through live streaming and through the teleconference. The attendees today are Hiroshi Nomura, President and CEO; and Toru Kimura, Senior Executive Officer and Chief Scientific Officer. And I am Atsuko Higuchi, I'll be the moderator for this meeting. We will be using the slide deck that's been available on our corporate website. After the presentation, we will have time for Q&A. Please note that this meeting is recorded for us to post the recording to the website at a later date. First, Nomura San will be giving the presentation.

Thank you. Good morning. Thank you for attending our financial briefing despite your busy schedule. Before I begin my presentation, I would like to say a few words. On April 27, we announced recalls of METGLUCO because part of the PTP packages contained levels of N-nitrosodimethylamine above the range. We recall these lots as well as the lots that are potentially not meeting the standard. I would like to express my sincere apologies to patients who are treated with METGLUCO, their families and medical professionals for the concerns and trouble we have caused. We take these issues seriously, and we are committed to quality standards, and providing METGLUCO and all other medicines we manufacture and market by meeting those standards. Now I would like to start my presentation. Please go to Slide 3. The slide summarizes major topics in FY 2019. First is Japan segment. The revenues in diabetes area increased because we added Equa and EquMet in product mix. Meanwhile, profit margin decreased because these are other companies' products. As for North America, LATUDA and APTIOM contributed to revenue increase. However, SG&A and R&D costs increased as a result of consolidation of Sumitovant. In China and other segments, MEROPEN revenues increased. Regarding some R&D topics, we obtained 3 regulatory approvals in Japan. LATUDA for schizophrenia and bipolar depression indications, LONASEN tape and RETHIO. In FY 2019, we also resubmitted apomorphine for approval in the United States after receiving complete response letter from FDA. A Phase III study started for SEP-363856 for the treatment of schizophrenia, and clinical studies initiated for DSP-1181 by applying artificial intelligence platform for drug discovery for the first time in the world, as we announced in the press release earlier this year. An indication candidate is obsessive compulsive disorder in Japan. And you see the list of products we obtained through a strategic alliance with Roivant Sciences at the bottom of the slide. Please go to the next slide. This shows the financial results for fiscal year 2019. Revenues were JPY 482.8 billion, an increase by JPY 23.5 billion. An increase of JPY 10 billion came from Japan, another JPY 10 billion in North America and JPY 4 billion in China. I will explain these increases from each segment later. SG&A expenses were JPY 190 billion, an increase by JPY 3.8 billion. This was driven by consolidating Sumitovant. Please take a look at the yellow table on the right-hand side that explains the impact, where it says SG&A expense is JPY 6.5 billion. Also at the bottom of the yellow box here, it says, excludes acquisition-related costs, JPY 3.9 billion. This means that the acquisition costs also contributed to the increases. Meanwhile, we didn't incur litigation expenses for LATUDA in FY 2019, as was the case in FY 2018. So the net increase was JPY 3.8 billion overall. R&D expenses were JPY 92.6 billion, an increase by JPY 9.7 billion. The increase was driven by consolidating Sumitovant, JPY 9 billion, as is shown on the right yellow box. The core operating profit was JPY 72 billion, a decrease by JPY 5.3 billion from last fiscal year. Changes in fair value of contingent consideration were JPY 48.5 billion. Cost reversal due to stopping development for napabucasin pancreatic cancer, revising business plan for alvocidib, stopping amcasertib development and revising business plan for LONHALA MAGNAIR, as we announced already. We accounted for conditional payments each year to the former owners of the [ Aquari ] as a result of stopping development or revising business plan, fair value of such consideration changed. Other nonrecurring items were JPY 37.2 billion. The explanation is provided at the bottom right box. Impairment losses came from revising business plan for alvocidib, stopping amcasertib development and revising business plan for LONHALA MAGNAIR. All of these are related to changes in fair value of contingent consideration on the expense side. The impairment losses also includes stopping SB623 development. The gain from changes in fair value contingent consideration was greater than the impairment losses. As a result, operating profit was JPY 83.2 billion, an increase by JPY 25.4 billion from last year. Please also look at income tax. It was JPY 48 billion, which is a significant amount. As we already announced, the impact came from JPY 23.3 billion in deferred income tax asset for stopping napabucasin pancreatic cancer study. As a result of these, net profit was. JPY 35.9 billion. Net profit attributable to owners of the parent was JPY 40.8 billion. The difference is due to the minority interest of Myovant and Urovant. The next slide is Slide 5 that shows revenues of Japan segment. As I mentioned earlier, the revenues increased by JPY 10.4 billion. The impact from NHI drug price revision since October 2019 was JPY 2.7 billion, as explained on the right bottom corner. Trulicity sales were JPY 30 billion, which was a strong growth. Equa/EquMet revenues were JPY 17.1 billion. LONASEN Tape was a new launch last year, but the revenues were JPY 500 million. Please go to Slide 6. This slide shows revenues of North America and China segments. I'll use the numbers in Japanese yen. LATUDA sales were JPY 189.5 billion, an increase by JPY 5 billion from last year. APTIOM was JPY 23.4 billion, an increase by JPY 2.9 billion. These key products remained strong. As for China segment, MEROPEN sales remained strong. The next slide, please. This slide shows financial results for each segment. Please look at the changes on the bottom. Japan segment increased revenues by JPY 10.4 billion, while the core segment profit decreased by JPY 2.2 billion. This was driven by product mix, that includes more products from other companies that reduces our margin. Both North America and China increased revenues and profit. Please look at Slide 8. This slide shows valuations and accounting procedures by strategic alliance with Roivant. Showing increases of assets and liabilities as a result of partnership. The dark green box shows the after purchase price allocation. You are probably most interested in intangible assets, which are $2.659 million. In-process R&D consists of relugolix $1. 609 billion; vibegron, $1.002 billion. Although we didn't show it here, we recorded $9 million for DrugOme. In the next few slides, I would like to explain the financial forecast for FY 2020. The revenues are expected to reach JPY 510 billion. As you can see on the right, the impact of COVID-19 is not counted in fiscal year 2020 forecast at this point. The impact on the revenues and expenses is not estimated because we don't know how long the impact will last. We intend to revise forecast once we know the impact. So the revenues are projected to increase by JPY 27.2 billion to reach over JPY 500 billion in sales. The increases come from Japan by JPY 15 billion, primarily because of Equa/EquMet, and increases also from North America and other overseas segments. I will explain this later. As for SG&A, the expenses will increase by JPY 39 billion to reach JPY 229 billion. The increase mostly comes from Sumitovant. Please refer to the green table on the right-hand side of the slide, we broke it down to Sumitovant and other than Sumitovant, and years 2019, 2020 and the changes. If you look at Sumitovant SG&A expenses, it's an increase by JPY 39.5 billion. Whereas outside Sumitovant, it's actually down by JPY 400 million. R&D expenses will be JPY 103 billion, an increase by JPY 10.4 billion. As you can see on the same table, Sumitovant increases are JPY 15 billion. Meanwhile, outside Sumitovant, the R&D expenses will be down by JPY 4.6 billion due to development cost decreases in napabucasin, APL, Imeglimin and others. Let me go back to Sumitovant SG&A. The expenses were JPY 6.5 billion in 2019, which was just the fourth quarter spending. Even if you multiply that by 4 quarters, the spending will be a lot more than that in 2020. This is due to the launch preparation for relugolix and by vibegron for Myovant and Urovant. Core operating profit is expected to reach JPY 33 billion, which is a decrease by JPY 39 billion from a high profit level of JPY 72 billion in FY 2019. Changes in fair value of contingent considerations were JPY 48.5 billion in FY 2019, which helped profit. This year, we expect development programs to make progress in BBI and Tolero, so we included JPY 24 billion there. Other nonrecurring items is JPY 15 billion in gain. This is due to sales of asset. Operating profit will be JPY 24 billion, which is unfortunately down from last year by JPY 59.2 billion. Net profit after income tax of JPY 38 billion will be minus JPY 14 billion, and we deduct the minority interest for Myovant and Urovant. As a result of these, net profit attributable to owners of the parent will be JPY 7 billion, a decrease by JPY 33.8 billion from last year. The next slide shows segment information. If you look at the change table on the bottom, revenues in Japan will increase, but the profit will be down due to product mix. In North America segment, although revenues will be up, expenses related to Sumitovant are increasing as I explained earlier, so the core segment profit will be down by JPY 26.8 billion. Next slide, please. Slide 12 shows revenues in Japan segment. The revenues will increase by JPY 14.7 billion. The impact of NHI price revision will be about JPY 10 billion when it's compared to the change from the April 2019 price revision. Equa/EquMet revenues will be JPY 40.5 billion, which is a substantial increase. Trulicity will reach JPY 36.6 million. LONASEN Tape was disappointing in this reporting period. However, the revenues for FY 2020 will be JPY 5.3 billion. LATUDA will launch in June, and we expect revenue to be JPY 2.2 billion. As for North America and China segment, I'll explain revenues in Japanese yen. LATUDA continues to grow. BROVANA will be down by JPY 3.4 billion due to a competition with performance and also because the market is shifting from nebulizer to inhalers. In China, MEROPEN continues to remain strong. Next, I'd like to explain finance and dividend policies. First is financial policy. In the 5-year Mid-term Business Plan, we plan to spend JPY 90 billion each year for a total of JPY 400 billion for 5 years. We expect R&D cost to increase due to Sumitovant investment and we intend to improve efficiency in R&D spending. As for M&A investments, we said in the Mid-term Business Plan that we invest between JPY 300 billion to JPY 600 billion. We already invested JPY 330 billion. So at this present time, we are not thinking about large-sized investment. We will focus on key pipeline like relugolix and vibegron we acquired from Sumitovant and Roivant. Even if M&A opportunities are variable, we would only consider something that would enhance the pipeline. We have a bridge loan of JPY 270 billion. Perhaps we consider part of it to hybrid financing. Right now, the financial market is unpredictable. We will choose the right timing to shift bridge loan to long-term financing. Next is dividend policy. For the fiscal year 2019, dividend per share is JPY 28. Based on the forecast that I just went over, we keep the dividend at JPY 28 per share. However, please note that this could change after the negative effect of COVID-19 is more clear. The next slide, please. So on the Slide 16 shows key activities for fiscal year 2020. We intend to become #1 in psychiatry and neurology and diabetes areas in Japan. When we say #1, it being #1 company that our customers trust the most and be the go-to person for our customers. When customers trust us, the numbers will follow. Nevertheless, we just faced quality challenges in the diabetes product, as I said at the very beginning. We need to regain trust from customers that will help -- that will be the first step. For psychiatry and neurology areas, we are scheduled to launch LATUDA in June. We will do everything we can to achieve quick penetration to the Japan market. LONASEN Tape was launched last year, but we didn't achieve satisfactory results. This year, we will be expanding sales. For the diabetes field, we promote Trulicity, Equa/EquMet and will be filing NDA for Imeglimin. As for North America, our goal is to further strengthen foundation and prepare to launch new products. Sunovion continues to keep LATUDA strong until February 2023. Sunovion will also prepare for a successful launch of apomorphine in September. We launched shared services for companies in North America, including Sumitovant. Sumitomo Dainippon Pharma America used to be just a holding company, but starting this April, they offer shared services. And under Sumitomo Dainippon Pharma America, we integrate 2 oncology companies into one. That is scheduled to take place in July. So that we can improve efficiency in managing oncology companies. We focus on building the commercial structure this year to support the launch of vibegron and relugolix. The sales reps and medical affairs will be hired by the respective companies, but utilize the commercial infrastructure of Sunovion can be shared as appropriate in order to generate synergies. Next slide, please. Another activity for this year is to strengthen foundations for Digital Innovation. Before the strategic alliance with Roivant took place, we've been focusing on digital transformation. And through the alliance with Roivant, we obtained DrugOme and Digital Innovation technologies and talent. We are committed to promoting Digital Innovation even more. Another thing for this year is strengthen corporate governance. We established supervisory committee for conflict of interest in transactions between group companies. The committee consists of independent and outside directors only, and we'll discuss matters from a view point of protecting the interest of minority stakeholders. Next slide, please. Next is research and development topics. I would like to explain key events and targets. First is psychiatry and neurology. Our goal is to obtain approval for apomorphine, determine the second indication for SEP-856 and decide the next step for SEP-4199 after results are available from Phase II study. In oncology area, I would like to say that Phase III trial is ongoing for colorectal cancer for napabucasin and patients are recruited. However, in the process of data analysis, data cleaning and necessary processes to do data analysis are not happening as usual because the access to study sites are difficult given the circumstances. We previously said top line results will be available in the summer, but it will possibly be delayed. Another item for oncology is relugolix. As you know, we submitted NDA for prostate cancer indication in the United States. Regarding regenerative medicine and cell therapy area, we received complete response letter for RVT-802. The regenerative medicine team from the DSP is working altogether to resubmit the filing by the end of the year. Start clinical study for age-related macular degeneration and complete transplant in investigator-initiated clinical study for Parkinson's disease, those are other main events. I will discuss infectious diseases later, but we work diligently on the current project. Others include vibegron, which was submitted at the end of last year and expected to receive approval this year. As for relugolix, we obtained SPIRIT2 results in April, and we expect to see results from SPIRIT1 in the first quarter from a Phase III study for endometriosis. The goal is to submit NDA. We will submit NDA for uterine fibrosis in the United States in May and obtain approval for the same indication in Europe, which was already submitted. In Japan NDA will be submitted for Imeglimin for the treatment of type 2 diabetes. We are also promoting frontier project with outside partners. We work diligently on many Japan projects. Once we identify probability, we will begin mid- to long-term projects. This slide shows a list of development pipeline. The red ones are new updates. The Slide 21 shows the summary of what I already described. So I will skip here. The Slide 22 shows discontinuation of the dasotraline development for both U.S. and Japan. After receiving complete response letter for ADHD indication, we informed you that we would examine development strategies. Meanwhile, we submitted binge-eating disorder indication. Through the interactions with FDA for both indications, we were not able to reach an agreement on the risks and benefits and additional studies were needed. We found it difficult to do more studies from commercial assessment point of view. We invested in developing this asset and it was a difficult decision to discontinue the program. The next item is the impact of COVID-19 on clinical studies. As we have expressed previously, the patient safety is the priority. We follow the local regulations and guidelines. We try to continue studies if it's possible. However, we have paused some studies where new patients have to be recruited and sites have to be activated. As for the studies that already enrolled patients, such as the Phase III study for napabucasin in colorectal cancer and SEP-4199 Phase II study, the study results will probably be available with some delay. This slide shows relugolix endometriosis Phase III study results from SPIRIT2. This is one of the 2 studies and SPIRIT2 is a combination therapy study with hormonal therapy. There are 2 primary endpoints, dysmenorrhea and nonmenstrual pelvic pain. Both endpoints have been met. Safety is generally well tolerated with minimum bone mineral density loss. Adverse events were similar to placebo, so we are pleased with positive results. As I said, we are waiting for the results from SPIRIT1 and build strategies for the next step. Next slide, please. We issued a press release in April on this topic. We entered into a joint research agreement with National Institutes of Biomedical Innovation, Health and Nutrition. And the research is funded by the Japan Agency for Medical Research and Development. As you can see on the chart here, novel toll-like receptor 7 adjuvant by Sumitomo Dainippon Pharma is at the core. Research focuses on universal influenza vaccine. Through the joint research, the 2 parties aim to prevent new strains of influenza, in addition to response to antigen mutation of seasonal influenza. The same adjuvant will also be used for the joint research and development with Ehime University and PATH for malaria transmission blocking vaccine. The drug program is supported by GHIT Fund. We are also doing research for prevention of malaria infection. So the goal is to eliminate malaria through 2-pronged approach and contribute to global health. The last slide shows product launch target, and this is the end of my presentation. Thank you. I would like to welcome your questions.

This is Hashiguchi from Daiwa Securities. I have a question about dividend policy. Earlier, you implied a possibility of changing dividend, depending on the impact of COVID-19. Other companies have shared their plan and the effect of COVID-19. I didn't think the impact would be severe enough to change the dividend amount, but how concerned are you? How likely is it that you would change dividend policy?

Thank you for your question. Regarding the impact of COVID-19 in Japan, we will be affected to a certain degree, especially in the new product launches because we cannot do face-to-face promotions. The bigger concern is in the United States. Many people have lost their jobs due to COVID-19. Before, they had commercial insurance coverage for them and for their families. And they were treated with LATUDA or other Sumitomo products with the health insurance policies that they had with their employers. Now the unemployment rate is rising, people are changing health insurance policies or apply for Medicaid, which would result in brand switches from LATUDA to something else due to price differences. So we expect some downside impact. We also assume downside revenues due to not promoting face-to-face. Meanwhile, expenses will be underspent because big events like lecture meetings and congresses are not happening. Some of the market have begun to restore economic activities, but the world is different now after COVID-19. And we don't know what it looks like. That is why I said the magnitude of the impact is unknown. Although we assume some downside impact on revenues, that's where we are today.

My second question is regarding the timing of availability of napabucasin Phase III study results. You implied a possibility of delaying the timing from summer to later. There's always a possibility for anything for that matter, but I don't want to sound rude here. But would you say, given what's happening, the results won't be available in the summer, for sure? Would you say the likelihood is high, and the data will be announced in the fall or even in wintertime? How likely is it? And also, you said before that the Mid-term Business Plan will be announced after the Phase III results become available. Would you postpone that as well?

Thank you for your question. Yes, the timing of napabucasin results will be delayed for sure. But we don't know how many months it will be delayed. The napabucasin study is running in the U.S. and in Europe, we don't know the full impact in each different region. So yes, there will be a delay, but we don't know whether it's going to be 1-month, 2 months or 3 months delay. Once data becomes available, we will be ready to start analysis. So we will be prepared. Regarding the Mid-term Business Plan, with the delay of napabucasin results availability, we would have to present the Mid-term Plan later because napabucasin plays a significant role in the midterm. It's difficult for us to publish the Mid-term Plan without clearly knowing napabucasin results. We want to avoid a situation where we announce the Mid-term Plan and then the results come out soon after that. So we will wait for the number for napabucasin results to be available before presenting the Mid-term Business Plan. Having said that, we have already investigated a few scenarios for the Mid-term Business Plan beyond 2022.

I just want to clarify. According to clinicaltrials.gov, the primary completion date is June 2020. With a month or 2 delay, it would still be in the summer. So would you say that you would not present in the summer?

That's right. We will present in the fall rather than summer.

Okay. My last question is this. In the previous financial briefing, a graph was presented showing business performance outline after 2020. And the core operating profit was estimated to decrease in FY 2020. You presented today the forecast for FY 2020. Are they both in line or are there any changes since the last update?

The trend is in line.

Oda from Morgan Stanley. Can you hear me okay?

Yes.

I have a few questions about FY 2020 forecast. First is SG&A expenses. Earlier, you said you included marketing expenses for a relugolix and vibegron in the guidance. Now given the circumstances with coronavirus, it's difficult to do sales activities, and we don't know when sales activities can be restored. Did you include the numbers assuming that you would be hiring sales reps this year and start sales activities as scheduled?

The earliest possible launch is probably December for vibegron, and we are planning on approximately 200 reps to promote the product. So we think the expenses for vibegron are included. The number is not for the full year. As for relugolix, the plan for this year, this fiscal year is to prepare for the marketing activities and hiring sales reps. That's what we budgeted. Now we don't know the extent of impact from COVID-19. We don't know how the world is going to change. We don't know if NDA will be approved on time or delayed. We don't -- we just need to monitor very carefully how things unfold before hiring and spending expenses. The management team at Sumitovant, share the same understanding.

Speaking of the COVID 19 impact, other companies have seen an increase in inventory on the part of wholesalers and some companies saw positive short term effect. Between January and March in this reporting period, did you see a positive impact due to, for example, increasing wholesalers inventory?

We don't have the exact number but inventory building to place qualitatively by wholesalers. Meanwhile, some sales activities were restricted, and we were underspending the expenses in Japan.

The next question is regarding relugolix. The SPIRIT1 results will be available in the first quarter of 2020, which is between April and June. We are in the middle of May now. Do you think you will be able to show us the results by the end of June?

Yes. What I presented today is the latest information. I was told the first quarter. So that's my understanding, too.

My last question is NDA timing for relugolix, uterine fibroids indication. It was originally scheduled to file in the U.S. in March. Now it's been delayed to April and now May. Is this because of COVID 19? Is it because of the program issue? Or is it because of the external reasons?

Well, it's not really a delay. The NDA submission for uterine fibroids was scheduled first. However, the prostate cancer results were very positive. So prostate cancer indication was submitted first. I was told the NDA for the uterine fibroids will be submitted this month. So it's not delayed too much.

Wakao from Mitsubishi UFJ Morgan Stanley. My first question is on Slide 10. You presented the numbers for Sumitovant. I want to understand the scale for next year. In the next fiscal year, the product will be available. So I'm assuming that SG&A will be about JPY 46 billion, benchmark. Meanwhile, R&D costs will be probably decreasing. Could you give me an idea as to SG&A and R&D spending?

Regarding the forecast for fiscal year 2021 and later years will be included in the Mid-term Business Plan, we are working on the numbers for the next business plan. JPY 46 billion this year includes hiring sales reps and marketing expenses. And these will slightly increase as you said. So you're right. As for R&D expenses, most of the spending were made for relugolix and vibegron, this part will start to decrease, but I don't have the exact number to show you how much increase on SG&A and how much the decrease for R&D expenses. What I just described is the overall trend in spending.

I understand. My impression on the marketing costs is that these SG&A expenses are bigger than I expected. Previously, you said Roivant should be able to promote products effectively. Did you include efficiency gain in the expenses? Or do you think the efficiency is not as high because the fixed cost is higher than you thought? I also would like to understand profit and loss forecast. Next fiscal year, the profit will decrease, but not a loss. At this point in time, do you think -- do you still believe the profit can be achieved, not a loss, excluding the impact of coronavirus?

Regarding the first question, the number of sales reps for relugolix in the field of gynecology will be about 150 to 200 reps and 164 prostate cancer at most. The number of sales reps for vibegron will be about 200. These are not big numbers. A relatively small sales team will be promoting products through a data-driven targeting approach. So the direction hasn't changed. Furthermore, some of the prescribers of vibegron will be urologists and some are primary care physicians. So the existing footprint of Sunovion sales team can also help through collaboration. So all kinds of sales activities are being investigated. As for the next question about core operating profit, you are asking whether the next year will be a loss or not? We will do everything we can not to end up in the loss by building business plan and managing cost.

My last question is the reasons for terminating dasotraline development. Did you stop BED and ADHD development for different reasons? Or were they the same? The slide you showed, say benefit risk profile. So I'm assuming safety issues that put you withdraw from ADHD and then BED.

Thank you for your question, Kimura San will take your question.

Yes, thank you. So you are asking about the reasons for discontinuing dasotraline development for ADHD and BED. In summary, it was discontinued due to risk-benefit profile or commercial assessment. In our interactions with FDA on both indications, we discussed a very small number of patients who experienced psychosis related otherwise event symptoms. We stated that defining patients in the label would help to avoid such AEs, but FDA insisted otherwise. We reviewed commercial assessment and decided to discontinue for both ADHD and BED indications.

Yamaguchi. I think apomorphine PDUFA date is next week. Do you anticipate any issues after resubmission?

Thank you for your question. I haven't heard any issues at this point, so it's on schedule.

I see. My next question is SEP-856 Phase II for PDP, PD psychosis results that you obtained.

Yes. The Parkinson's disease psychosis.

Yes. So in your slide, it says the primary endpoint did not reach statistical significance, but result in numerical improvement. And it was an exploratory study. What are your thoughts on the study results? And the other data you published in New England showed clear separation between 2 to 4 weeks. Did you see similar trend?

Thank Kimura San will take your question.

Yes. We cannot disclose detailed data here. But as it says on the slide, this was a Phase II study. The intent was to verify if a novel mechanism demonstrates efficacy in PD psychosis patients as we demonstrated in nonclinical studies. Although statistical difference was not reached, we believe it was a positive result because the pharmacological effects have been confirmed as we anticipated.

Okay. I just want to confirm, would you continue with the indication for PD now that you have data?

We started a Phase III study for SEP-856 for the treatment of schizophrenia. The follow-on indication will be the key as we expand psychiatry business. So the second indication is being discussed internally and PD psychosis is 1 of the possibilities because Phase II data demonstrated the pharmacological action as we predicted. So PD psychosis will be one of the candidate's second indications based on the results that we obtained.

I see. My last question is LONASEN Tape. The ban on 2-week prescription will be lifted in September. After 2 weeks limitation is removed, revenues will increases significantly for the second half, I think, without taking into account the current circumstances. So please explain how you came up with the forecast.

Thank you. The lifting of the ban for 2-week prescription will be one of the drivers. And key messages are also important. Since the launch, last year, we have not been communicating effectively the food effect and stable concentration level. Those are positive things for patients and prescribers in this therapeutic area. It's difficult to switch formulations, especially if the conditions are stable, but we believe that keeping the blood concentration level consistent is definitely a positive profile for patients. So we will deliver key messages to gain understanding from prescribers and patients.

Sakai from Crédit Suisse. I have a question regarding delay in the napabucasin study. I understand patients recruitment is completed, and this is an event-driven test. I'm concerned about the impact of coronavirus. The death toll in the U.S. and Europe is very high. And these patients who passed away from coronavirus could have been enrolled in the trial? I'm just wondering how this will affect the statistics. And this is a concern for other studies, not just napabucasin, but this could be a concern. So what are your thoughts on this issue? What information have you heard from the local team in the regions?

I'll take your question. I understand your concern about delay in napabucasin and corona impact. As you said, the subject entries are completed and actually events have been reached. So let me explain about the delay. So the worst case would be the recruited patients are not treated per protocol, and that puts the trial at jeopardy. The worst-case scenario have been reviewed for any studies, not just napabucasin. Fortunately, the patients who are enrolled in the study have not been affected. And they are receiving treatment. There is almost no impact in the study sites around the world. This is because the outpatients and trial patients are completely separated and the type of severe patients for the type of cancer we investigate are treated properly in hospitals. Meanwhile, where we see the impact for napabucasin is in the data cleaning process. Like I said, the events have been reached. In the process of final data analysis, data has to be cleaned by visiting each study site to understand what kind of data is available for analysis. We or CRO partners visit these hospitals and confirm the details of medical records of each patient, so that the patient information can be included in the statistical analysis. If data errors need to be corrected, that's also done as well. So that process called data cleaning is facing challenges because of COVID-19. We are not visiting. We are not able to visit these hospitals. Hospitals are not taking visitors from outside. Some of the highly advanced institutions are equipped with remote capabilities so that we can do data cleaning through online from home or from outside the hospital, but not all the hospitals are capable of that. We have so many sites in so many different countries for this trial. That is why the final results for napabucasin will be available in the fall rather than in summer, this is what's happening, and this is why we are not ready to present the results in the summer.

I see. Just to confirm, events have been reached?

Yes, in study 303C, events have been reached.

I see. Just one more question from Nomura San. You mentioned hybrid finance of JPY 270 billion. It's hybrid finance, not hybrid loan. Is this equity related?

Okay. So of the JPY 270 billion in short term borrowing, half of it will be subordinated debt and the other half will be long term borrowing.

This is Steve Barker from Jefferies. I have a question about FY 2020 forecast. The revenues for Sumitovant is JPY 4 billion. What are they? Did you include vibegron in sales to a certain degree?

Most of the JPY 4 billion is a milestone payment from Gedeon Richter. It's a European company that Myovant entered into a license agreement for relugolix. Although vibegron revenues are included, but not very much.

And did you include amortization for intangible asset for vibegron?

The amortization will begin for vibegron and relugolix intangible assets at the time of approval, not at the time of launch, the amortization is in the budget.

And could you tell me how much? And please also explain how you handle intangible assets in the core operating profit?

Intangible assets are in the SG&A. As for the amortization of intangible assets, it's JPY 3.4 billion for Sumitovant.

How long is amortization period?

Until patent expires, I think.

Do you have the timing?

Competition with matter of vibegron is until 2034 and relugolix until 2028.

Muraoka from Morgan Stanley. Just a few questions, please. Ministry of Finance issued a list of companies to be screened prior to inward investment following the amendment to the Foreign Exchange and Foreign Trade Act. Sumitomo Dainippon was the only big company in pharmaceutical industry in the list of 518 companies. Do you know why? The other question is relugolix uterine fibroids indication. The progress is delayed, is this because the fixed-dose combination formulation and CMC is taking time. Is that the reason?

Regarding the first question, we don't know, to be honest with you. As for relugolix, as I said earlier, it's not really a delay. The decision was made to submit prostate cancer indication first. It's a matter of sequencing priorities. It's not because of fixed-dose combination or CMC issues? No.

This is the end of Q&A. Thank you very much for your time today.