Takeda Pharmaceutical Company Limited (4502) Earnings Call Transcript & Summary

Good morning. I am Christophe Weber, Representative Director, President and CEO of Takeda Pharmaceutical Company, which we will refer to as the company in this proceeding. I would like to express my deep appreciation to everyone attending today's meeting, both in person and virtually. Pursuant to Article 13, Paragraph 3 of the Article of Incorporation of the company, I will serve as Chairman of the Meeting, based on the decision of the Board of Directors. I will now open the company 148th Ordinary General Meeting of Shareholders. Mr. Costa Saroukos, director of the company, who is retiring this year, is absent from the meeting due to other obligation. I would appreciate your understanding. Mr. Milano Furuta, who has been serving as CFO since April this year and whom we propose to the meeting as a new director candidate, he's with us here on the stage. In addition, please be informed that there may be members of the media during the live stream of the meeting. We respect the privacy of our attendees, but please understand that some of you may appear briefly and occasionally on the live stream. Also, please be informed that, to reduce the frequency with which the proceeding of the meeting must be interpreted and to enable it to run as smoothly as possible, I have appointed Mr. Nakagawa, Takeda Global General Counsel, as the chairman-authorized representative. He will lead this meeting in accordance with my direction. I will now hand over to Mr. Nakagawa.

[Interpreted] Good morning. I am Yoshihiro Nakagawa, Global General Counsel. I will proceed with the meeting as the chairman-authorized representative based on my appointment by Chairman. Please pick up your receiver for simultaneous interpretation for a while because I will proceed with the meeting in Japanese for the moment. As the purpose of the meeting appear on the Notice of Convocation at hand, I will submit them to the meeting. Furthermore, I would like to report the number of shareholders who may exercise voting rights at this meeting and the number of the voting rights after I explain the matters to be reported. Now I would like to start the proceedings of the meeting. In order for us to have the meeting run as smoothly as possible, I would greatly appreciate your cooperation. I would like to propose that we proceed with the meeting today as follows. First, I will explain the matters to be reported and matters to be resolved that appeared on the Notice of Convocation. Second, I will take questions and opinions from shareholders about all of these matters to be reported and matters to be resolved. And finally, each of the matters to be resolved will be brought to the Board in sequence without taking any questions or opinions from shareholders. Do you support this proposal? Thank you. As many shareholders support this proposal, I will proceed with the meeting accordingly. Please be reminded that we cannot receive any questions or opinions after the end of the question-and-answer session that will be held later. In the proceedings of the meeting today, non-Japanese officers, including Mr. Christophe Weber, the President and CEO, will provide an explanation in English. Shareholders can hear the explanations in Japanese through simultaneous interpretation by using the receiver distributed to each shareholder today. Please note that the shareholders who are viewing the meeting on the Internet can hear them in Japanese if you choose the Japanese language at first. Now among the matters to be reported today, I will report on the contents of the business report, the consolidated financial statements and unconsolidated financial statements for the 147th fiscal year. They are described on Pages 27 to 87 of the Notice of Convocation and other items which are provided electronically, both of which are posted on the company's website. Then, Mr. Christophe Weber, President and CEO, will report on the current status and strategy of the company by using the slides. Please note that the presentation by the President and CEO will be interpreted into Japanese by the interpreters. Shareholders in the room can hear the presentation in Japanese with simultaneous interpretation by using the receiver distributed to each shareholder today. Please put on your receivers as appropriate, referring to the manual at hand, if necessary. If there are any unclear points about how to use the receiver, please feel free to ask a staff nearby by raising your hand. Please also note that the shareholders who are viewing the meeting on the Internet can hear the presentation in Japanese, if you choose the Japanese language at first. Then, Mr. Christophe Weber, President and CEO, will report on the current status and strategy of the company. At the beginning of the presentation, we would like to share with you the new Takeda's corporate branding campaign TV commercial plan to be aired from this summer. Please note, although the language of the video is in Japanese. The presentation will be made by Christophe, after the media without rewinding, so please put on your receiver after the video. [Presentation]

Good morning again, and welcome to this 2024 Annual Shareholder Meeting. It's a pleasure to be with you today. First, I'd like to remind everyone that we'll be discussing forward-looking statements and actual result may differ materially from those discussed today. You can refer to the important notice on Page 2 of the presentation for more details. Before we begin, I'd like to express my deepest condolence to the family and friends of Kunio Takeda, who passed away earlier this month. Kunio Takeda was a visionary leader who built the foundation for Takeda's internationalization. He will be deeply missed by everyone who knew him. The video we just watched is a preview for our new TV corporate campaign in Japan. It shows Takeda environmental strategy in action. It underscores the relationship between the planet and human health. And it illustrates how our innovative approach to energy consumption is one way in which we are integrating environmental sustainability across our operation. I will discuss more about our planet commitment later in my presentation. Takeda today is a truly global company with a considerable and competitive scale. With our global headquarter here in Japan, in Tokyo and a global hub in Boston, we have a presence in approximately 80 countries and region, including more than 25 manufacturing sites worldwide and 2 research sites in the U.S. and Japan. Close to 90% of our revenue and colleagues are outside of Japan. Our scale allow us to invest heavily in R&D and to reach patients and communities all around the world with our therapies and vaccines. On the next slide, I will discuss the environment in which we are operating. First, let's consider the headwinds. Today, health care systems around the world are critically underfinanced. In the decade since most were designed, treatment option have advanced, life expectancy has increased and population have aged. This has led to significant escalation of health care costs and, by consequence, because of the underfinancing, pricing pressure. The risk is that reimbursement policies could negatively impact the R&D investment needed to sustain a high level of innovation. We believe that these issues can be addressed through more financing towards health care and a transition towards data-driven value-based health care, which could slow the pace of rising health care costs, while improving access and health equity and promoting innovation. We continue to engage with government, industry and other stakeholders on this issue. The third headwind is the geopolitical fragmentation. The increasing global fragmentation in technology and other sectors has been well described. Thankfully, we have not yet seen this kind of decoupling in the health care sector. And my hope is that the health care ecosystem does not become another tool of geopolitics, with trade and health care policies creating negative impact on patient and society. Now let's consider some of the opportunities. Scientific innovation continues to advance and is revolutionizing drug development, extending life expectancy and bringing hope to patients who have limited or no treatment option today. These advancements are driven in large part by the acceleration of data and technology in health care. Takeda is at the forefront of this movement. By integrating data, digital and technology, including AI, artificial intelligence, across our value chain, we are finding a way to discover, develop and deliver innovative medicine with enhanced speed and quality. I will discuss this in more detail later. China is another major growth driver for our business. And as the country takes steps to prioritize health for its citizens and nurture pharmaceutical innovation, Takeda is well positioned to meet the growing demand for innovative therapies. Takeda has launched 14 new therapies in China in recent years. Actually, the most of any multinational pharma company operating in China. And our business unit there in China has maintained strong double-digit growth, exceeding overall market growth since 2020. At the same time, we remain vigilant about the risk associated with geopolitical tension as well as the legal environment in China, and we factor it into our business strategy. I'm very confident that Takeda has the right strategy to succeed in the global environment I just described. We are doubling down on driving growth and improving our margin in spite of the pricing pressure we are encountering. We are doing this through a focus on innovative, life-transforming medicines that can move swiftly through the approval process and qualify for reimbursement. Our advances in data, digital and technology position us to discover and deliver these medicines with enhanced speed, quality and efficiency, and we are doing this while staying true to the values that define us. Every decision we make is guided by our values of Takedaism, which incorporates integrity, fairness, honesty and perseverance with integrity at the core. These values are brought to life through actions based on patient trust, reputation, business, doing the right thing for patients, reinforcing trust on our reputation and developing our business in that order. We responsibly translate science into highly innovative, life-transforming treatment and vaccines for patients and community worldwide. We recognize that the future of human health is inextricably linked to the health of our planet, and we will harness our unique capabilities to deliver a high standard of environmental leadership that protects our planet natural systems. While maintaining our deep commitment to ethical decision-making and Takeda's value framework, we are also scaling data, digital and technology. We believe this is one of the way to build a sustainable business model and stay at the forefront of advancement in health care and life science. And we aim to create a diverse and inclusive organization for our people, an exceptional working environment and culture where our employees have a strong sense of belonging and empowerment and can thrive, grow and realize their own potential while enabling our purpose. Our leaders are responsible for making sure we achieve this aim and the approach they take to management and mentorship is something we call caring leadership. We invest in our people, creating a culture that foster collaboration and resilience to meet the challenge of a continuously changing world. We address life-work alignment to enhance well-being and productivity and we are driving positive change through advancing diversity, equity and inclusion in an environment that stimulates learning and excellence. This includes encouraging our people to adopt a digital-first mindset and innovate with technology in every aspect of our work because we think there are extraordinary benefits from applying digital and AI at scale across our organization. We are proud that this focus on our people has led to our recognition as a global top employer for the 7th year in a row. The Takeda executive team sets the tone for our organization and helps create an environment where leaders can focus on delivering results, while prioritizing the well-being and development of our people. This group of 17 leaders, representing 9 nationalities and with a 50-50 gender split has the experience, diversity and energy to lead our business and approximately 50,000 colleagues in 80 countries and region. I would like today to acknowledge Elaine Shannon, our Global Quality Officer; Akiko Amakawa, our Corporate Strategy Officer and CEO Chief of Staff; and Asuka Miyabashira, President of Japan Pharma Business Unit, have joined the executive team since our last general meeting. I am immensely proud to welcome on site such a talented and diverse group of individuals. Takeda's Board of Directors comprised 14 members, including 11 independent external directors. The Board oversees 3 committees, the Audit and Supervisory Committee, Compensation Committee and Nomination Committee. These committees are chaired and comprised entirely of external directors and provide a robust governance and supervision of our strategy and execution as well as director succession. I would like to thank [indiscernible] for his leadership as Chair of the Board meeting. I also wish to offer our sincere condolences to the family and friend of Olivier Bohuon, our long-standing external director who passed away on May 5 this year. Olivier was a respected and caring leader, and he will be greatly missed by all who were fortunate enough to know him. Also on behalf of the Board of Directors, we are pleased to propose Milano Furuta as a candidate for internal director. Milano joined Takeda in 2010 and has been CFO since April 2024. If approved, Milano will join the Board effective today. I will also take the opportunity to thank Costa Saroukos, who is retiring today, for his outstanding contribution and leadership during his 9 years with Takeda. I will now discuss our progress towards our planet commitment. As a value-based global biopharmaceutical company, we recognize that we have a role to play in the protection of our planet. Accordingly, we aim to integrate environmental sustainability into every facet of our operation. Decarbonizing our operation and our value chain is central to our planet initiatives, and I'm pleased to report that we are making meaningful progress. At the end of fiscal year 2023, we achieved our near-term Scope 1 and 2 reduction target 2 years early. In fact, we exceeded it, reducing carbon emission by 53% relative to 2016, over-delivering by more than 30%. Our next target for Scope 1 and 2 is to achieve net 0 by 2035, aligned with science-based target initiative standards. Takeda is also on track to meet our supplier engagement goal, which seeks to have 67% of Scope 3 emission from suppliers committed to set science-based climate target by fiscal year '24. At the end of fiscal year '23, 56% of Takeda suppliers had made this commitment, up from 45% in 2022. We are working to minimize our impact on nature and continue to identify the environmental risk factors that may impact our business. In alignment with this approach, in January 2024, Takeda was among the first cohort of companies to commit to make disclosure aligned with the task force for nature-related financial disclosure recommendation. We will continue to do what we can as an organization to decarbonize and to mitigate the impact of climate change on human health. Turning now to our most recent full year business performance. As expected, fiscal year '23 was a tough year due to the entry of generic version of large products, including VYVANSE in the U.S. and AZILVA in Japan. However, the year was well managed and we met or exceeded our management guidance for change at constant exchange rate in core revenue, core operating profit and core EPS. Our core revenue grew 1.5% at constant exchange rate with the impact of loss of exclusivity offset by solid performance from our growth on those product, which grew 12.8%. Consistent with our full year guidance, core operating profit and core EPS both declined by 13.3% and 15.7%, respectively. This reflects the higher margin of the product that face loss of exclusivity as well as our continued investment in R&D and data digital and technology to secure future competitiveness. In fiscal year '23, we made significant progress in our pipeline with 3 new products approval in the U.S. and several important life cycle management approval for our Growth & Launch Product. In fiscal year '24, we expect now to have up to 6 program in Phase III, including zasocitinib, TAK-279, in psoriasis and psoriatic arthritis, and TAK-861 in narcolepsy type 1, which has the potential for significant patient and commercial impact. Alongside this success, with innovative drug development, there is inevitably the risk of setbacks. In fiscal year '23, after a careful analysis of the data, we decided to discontinue 3 Phase II pipeline programs in oncology. We also voluntarily withdrew activity globally and took the decision not to pursue regulatory filing for Alofisel in the United States. These decision are not easy, but they are part of the journey of innovative drug discovery. They are also a reminder of the importance of financial resilience, agile, data-driven decision-making and rigorous prioritization. Turning to our outlook for fiscal year '24, we expect revenue and profit to be impacted by 1 more year of significant headwinds from VYVANSE loss of exclusivity in the U.S. As a result, we expect revenue to be flat to slightly declining, core operating profit to decline approximately 10% and core EPS to decline a little over 10% at constant exchange rate. We remain very confident in our medium and long-term outlook and a return to sustainable revenue on profit growth from fiscal year 2025. This confidence is underscored by our decision to propose an increase in our annual dividend for fiscal year '24 to JPY 196 per share, which I will discuss later in my presentation. Now let me explain the source of our confidence in our future growth outlook. We expect our high-margin Growth & Launch Product to continue to deliver double-digit revenue growth at constant exchange rate in fiscal year '24 and account for around 50% of our total company revenue. Coupled with the washout of VYVANSE generic impact, we believe this position us well to return to revenue and profit growth in fiscal year '25. On the following slide, I will discuss the generic impact we have faced to date and our Growth & Launch Product in more detail. This slide illustrates the scale of the generic impact we experienced from fiscal year '22 to '24, but also the strong momentum of our Growth & Launch Products. On the left, you can see that VYVANSE and AZILVA accounted for 13% of reported revenue in fiscal year 2022 or JPY 532 billion prior to loss of exclusivity. By the end of fiscal year '24, reflecting the impact from generics, we expect that figure to have declined by more than half. Meanwhile, we expect that revenue from our Growth & Launch Product will increase from about JPY 1.5 trillion in fiscal year '22 to more than JPY 2 trillion in fiscal year '24 and will account for approximately 50% of total company revenue. Beyond fiscal year '24, the picture of generic impact looks very different. With limited loss of exclusivity impact after VYVANSE until the early 2030s, until the end of the decade, we expect generic or biosimilar competition over the next 7 years to total less than 10% of single year revenue in fiscal year '23. This creates a dramatically more favorable situation for us to achieve renewed growth And increase corporate value. This slide show our portfolio of Growth & Launch Product. EOHILIA, ASZYNMA and FRUZAQLA are 3 new additions to the portfolio following the U.S. FDA approval in fiscal year '23. Following an important FDA approval for ENTYVIO PEN, we expect ENTYVIO, our largest selling product, to return to robust growth in fiscal year '24. And we continue to see strong demand for our dengue vaccines, QDENGA. While we do not have currently a growth on launch product in neuroscience, we have an exciting pipeline, most notably with TAK-861 in late-stage development. The second pillar of our return to growth strategy is to deliver an innovative pipeline, while carefully managing our overall R&D investment. This require active pipeline prioritization especially during this phase of pipeline maturation. Our pipeline is now positioned to have up to 6 programs in Phase III development in fiscal year '24, which we believe will help us grow beyond 2030 when ENTYVIO will start facing biosimilars. Let's now take a closer look at our late-stage development programs. Together, these programs have the potential to generate significant value for patients and Takeda. One of these programs, Soticlestat, and its Phase III readout 2 weeks ago. The result was not as expected as we missed our primary endpoints. On the other hand, we had encouraging results in key secondary endpoints as well as in prespecified sub group of patients. We look forward now to engaging with regulatory authorities to discuss the totality of data and determine next steps. The other program that will be in Phase III development during fiscal year '24 are. Zasoc, TAK-279 for the treatment of psoriasis and psoriatic arthritis. Fazirsiran, TAK-999, for the treatment of alpha-1 antitrypsin-associated liver disease; TAK- 861 for the treatment of narcolepsy type 1; Rusfertide TAK-121 for the treatment of a rare chronic blood disorder, Polycythemia Vera; and Mezagitamab TAK-079 for patients with persistent or chronic primary immune thrombocytopenia, ITP, a rare immunoglobulin mediated autoimmune disease. All these programs, all these 6 programs have produced promising clinical data to date and together they are aimed at addressing significant unmet medical need for millions of potential patients. They are also innovative in many ways. For example, TAK-861, the lead asset in our [indiscernible] franchise, has a potential to be the first therapy to treat the underlying pathophysiology in narcolepsy type 1 and may lead to transformative benefits. TAK-279 is azocitinib, has the potential to make an impact in multiple indications, including psoriasis, psoriatic arthritis, Crohn's disease, ulcerative colitis and potentially other immune-mediated inflammatory disease. And TAK-999 Fazirsiran is a first-in-class RNA interference therapy partner with Arrowhead for the treatment of Alpha-1 Antitrypsin Deficiency Liver Disease. Additionally, we recently signed an option agreement with [indiscernible] Pharma for the exclusive licensing of [ overanbatanib ], a Phase III candidate currently in development for the treatment of chronic [indiscernible] leukemia and other hematological cancers, in line with our commitment to rebuild and replenish our oncology pipeline. As I mentioned earlier, we are prioritizing our R&D expenditure in fiscal year '24 to ensure that we can invest appropriately in this exciting Phase III pipeline. We also have strong potential in our early and mid-stage programs and look forward to make further announcements as this progress through the pipeline. I will now explain how we are driving efficiency across our organization to improve our core operating profit margin over the coming years. Margin expansion is a key theme for the management team. Our target is to deliver 100 to 250 basis points of core operating profit margin improvement each year from fiscal year '25. We are pushing this through significant multiyear efficiency programs in 3 main areas: organizational agility, procurement savings and data, digital and technology. First, we are simplifying our business by increasing management span, broadening roles and refining operating models to improve our agility across the enterprise. Second, we are initiating procurement-led savings to optimize our external spend and materially reduce our cost. And third, we are continuing our investment in data, digital and technology, which we call DDT to be better, faster and more productive. At Takeda, we have long been committed to realizing the potential of Data, Digital and Technology to discover and deliver medicines more efficiently and transform our company. We are closely integrating DDT, including AI, throughout our value chain from R&D through to business operations. We have detailed information about our DDT initiatives on our website with many examples of the positive impact we are creating for our patients and our business, but let me illustrate just a few cases. In R&D, for example, we are leveraging AI real-world evidence and digital tools to accelerate the clinical trial recruitment and regulatory filing. This approach can produce considerable cost savings and reduce development time lines by several years. In manufacturing and quality control, for example, we are using sensor and digital cameras to generate data, which is then analyzed by AI to improve our efficiencies in areas such as maintenance, root cause analysis and deviation analysis. In commercial operation, one example is our use of predictive analytics algorithm to create data-driven, personalized engagement with health care providers and optimizing our digital patient experience through technology-driven support programs improvements. And finally, in business operation, we have the example of adopting workforce digital tools to optimize efficiency and productivity in everything we do from internal communication translation to a high enhanced carrier planning and skill development. We are supporting this with a comprehensive rethink of infrastructure and training, which include establishing our own digital factories for sustainable in-house digital capability development. It is hard to overstate the role that we expect DDT to play in creating a new era for Takeda and the patients we serve, and you can expect to hear more from us on this topic. So let me now bring together the key point of my presentation and then explain what this means for you, our shareholders. We have made meaningful progress in our strategy to return to revenue growth. Our pipeline includes a significant number of promising late-stage programs with potential to generate significant value. And we are pursuing comprehensive measures to maintain cost discipline and boost margin throughout our value chain. We are confident that this growth strategy will generate strong cash flow and contribute to better returns for shareholders. This slide summarize our approach to capital allocation. Our aim is to maintain our solid investment-grade rating, while investing for long-term growth and delivering on our commitment to competitive shareholder return. We are investing in our growth drivers, and have a promising pipeline that we continue to enhance with internal and external opportunities. We are launching new products, expanding our PDT, plasma-derived therapy, business and always thinking ahead to manage headwinds and take advantage of tailwinds. Last year, we raised our dividend and updated our dividend policy to a progressive policy of increasing or maintaining the dividend each year. Under this policy, we are proposing a further increase to JPY 196 in fiscal year '24, demonstrating our confidence in a return to growth. That concludes my part of today's presentation. Thank you again for joining us today. Our annual integrated report will be published on our website on July 1, so I hope you will take a moment to learn more about Takeda then. Thank you.

[Interpreted] This is the end of the report and the business report the consolidated finance statements and the unconsolidated finance statement for the 147th fiscal year. Please be informed that the presentation materials used now will be posted on our website later for your reference. Next, with regard to the second item of matters to be reported. Reports on the audit report on the consolidated financial statements were the 147th fiscal year by accounting [indiscernible] Mr. Hatsukawa, Director and Head of ASC will give the audit report of the company.

[Interpreted] I am Koji Hatsukawa, Head of the Audit and Supervisory Committee. In accordance with the results of the declaration in the Audit and Supervisory Committee, I will give the audit report of the company. The ASC of the company has audited the performance of the duties of the directors during this fiscal year. First, we confirm that the business report and the company supplementary schedules clearly present the status of the company in conformity with the applicable laws and negations as well as the articles of incorporation of the company. Second, with regard to the performance of the duties of the directors, we confirm that there are no fraudulent acts or material facts that violate the applicable laws and regulations or the articles of incorporation with the company, the cost of the performance of the [indiscernible]. Also, we confirm that the substance of the resolution made the Board of Directors regarding the internal console systems appropriate. We do not recognize any matters that should be pointed out in regard to the content of the business report and the performance of the duties of the directors regarding the internal control system, including internal control-related financial reports. Next, I will present the audit report of the financial statements of the company. With regard to the consolidated and unconsolidated financial statements for the fiscal year, we received an opinion from the accounting auditor that the board statements are there. We, the ASC members confirmed that the methods and the results of the audit conducted by the accounting auditors are both appropriate. Those above reported in certified copy of the independent auditors report and audit report on Pages 89, 95 of the Notice of Convocation posted on our website. Finally, the content of each of the proposals and documents submitted to the meeting today comply with the laws and regulations and the articles of incorporation of the company, and we do not recognize any matters that should be pointed out. This is the end of our report.

[Interpreted] With that, I come to the end of the matters to be reported. Next, I will report the number of the shareholders who may exercise voting rights at this meeting, the number of their voting rights and other relevant information. The number of shareholders who may exercise voting right at this meeting is 575,270 and the number of their voting rights is [ 50,732,700 ]. The number of the shareholders who are present at this meeting, including the shareholders who exercised their voting rights through the voting right exercise form or electronic means is, as of 10:00 a.m. today, 210,323 and the number of the voting right is 11,713,445. Therefore, there is a sufficient number of the shareholders and voting rights to reach the forum necessary to resolve each proposal requiring a quorum. Now I will explain the details of each proposal that appears on pages through 6 to 26 of the Notice of Convocation. We would like to submit the first proposal, appropriations of South West. The company proposes that the year-end dividend will be JPY 94 per share, and the total amount will be JPY 148,041,018,112. Also, the effective date of distributions of the dividend will be June 27, 2024. We would like to submit the second proposal, election of 10 directors who are not Audit and Supervisory Committee Members. Mr. Olivier Bohuon, who was one of the directors who are not ASC members passed away and retired on May 5, 2024. And the term of office of the 10 incumbent directors who are not ASC members will expire at the close of the General Meeting of Shareholders. Therefore, the company proposed the election of the 10 candidates for directors who are not ASC members as shown. Amongst them, the 7 members specified Masami Iijima, Ian Clark, Steven Gillis, John Maraganore, Michel Orsinger, Miki Tsusaka, and Emiko Higashi, are the candidates for external directors. We would like to submit the third proposal election of 4 directors who are Audit and Supervisory Committee Members. The term of the office of the 4 incumbent directors who are audit and supervisory committee members will expire at the close of this general meeting of shareholders. Therefore, the company proposes the election of the 4 candidates for directors who are ASC members as shown. All of them are the candidates for external directors. We would like to submit the first proposal, payment of bonuses to directors who are not ASC members. The company proposes to pay bonuses up to the total amount of JPY 5 million to the 2 directors who are not ASC members, excluding directors residing outside of Japan and external directors in office as of the end of the fiscal year, in keeping with the achievement of the key performance indicators for this fiscal year. The content of this proposal were deliberated upon the compensation committee and the resolutions were approved by the Board of Directors based on the directors' compensation policy and the company, therefore, considered this proposal is reasonable. These are the explanations of the matters to be reported and the matters to be resolved. We have provided the shareholders with the opportunity to ask the question in advance we explained in the Notice of Convocation. Amongst the advanced questions, we will answer to the 2 questions in which many shareholders seems to be interested. Please note that when we answer questions in English, you can hear the answers in Japanese through simultaneous interpretations by using the receiver. Please note that the shareholders who are viewing the meeting on the Internet can hear them in Japanese or English, which you choose at first.

[Interpreted] The first question among the advanced questions is as follows. The company announced its plan to increase the dividend to JPY 169 for the fiscal year 2024, while the EPS is forecasted to be JPY 36.70 for the year. The core EPS is forecasted to be JPY 431, does this mean that the dividend increase is not an issue since the core EPS can cover it? So this is the first question. Christophe, would you please go ahead?

Thank you so much for the question. It's actually a very important question. I will ask Milano Furuta, our new CFO, to explain the technicality. But before that, I would like to stress that our dividend decision is a very thoughtful decision. We look at many parameters to define what should be our dividend policy. We look at short-term and long-term outlook for the company and this is discussed in the executive team and of course, in the Board, and this is a very thoughtful process. So before asking Milano to join us to explain the difference between EPS, core EPS and other parameters, I would like to say a few words regarding Milano Furuta our new CFO. He joined Takeda in 2010, first in the corporate strategy department. And then he experienced directly being in charge of the business in emerging countries, in Mexico, then he become General Manager in Europe, then he became the Head of Corporate Strategy Department before being in charge of the -- of our Japan business for a few years before becoming CFO. Before joining Takeda, he started in the finance actually, in banking, so he has this very strong knowledge of finance as well as a very good knowledge of Takeda's product and business. So a fantastic complementarity. And he has demonstrated over the years that he's also a great leader, as we stressed out in my presentation earlier, being a strong leader is very important, of course, in Takeda. So Milano if you could join me to introduce yourself, but also answer the questions regarding the dividend. Thank you.

[Interpreted] Good morning, everyone. Thank you for the introduction. I am Furuta. Since this April, I serve as the Chief Financial Officer. Nice to meet you all, thank you for the question. With regards to this question I think the shareholder has the right understanding. Of course, when you have surplus, that will be the source for the dividend and EPS per share. EPS is a very important interest for the shareholder as one of the parameters. On the other hand, when it comes to finance the EPS it is greatly impacted by the amortization of the intangible assets and other noncash items. However, we hope to have a stable supply payout of the dividend. So when deciding on the dividend, we look at the core-based EPS, which is one of our important parameters to decide on the dividend payment. During the last 2 terms, we continue to increase our dividend payment, and this decision is based on the core EPS. And the core payout ratio of ours is equivalent to and competitive to our peer on a global basis. Dividend for next year onwards, we not only look at accounting profits, but the cash flow and other parameters and long-term growth of profit and other factors are to be looked into for aiming for the cumulative increase. Thank you for the question.

[Interpreted] Let's move on to the second advance question, it is about diversity. And subject to the approval of the second and third proposal at this meeting, the Board of Directors will consist of 14 members with only 3 female members, all of whom are external directors. We would like to hear about your human resource development plan, especially regarding the appointment of the female internal directors and female managers. We have also received another question regarding diversity, is the lack of female internal directors due to the lack of qualified candidates? This is the question. Christophe, please go ahead.

It's a very important question. You saw in my previous presentation that diversity is absolutely critical. It's a big priority for us. So first, I will focus on the senior executive diversity, the Takeda executive team, diversity and then the Board. And then I will invite Lauren Duprey, our Head of HR, Chief HR Officer, to explain what we do more globally about diversity at Takeda. You look at the Takeda executive team. So we have a 50-50, actually slightly greater than 50% female on the Takeda executive team. This is really strong. We are probably one of the most diverse senior executive team in the industry and we are very pleased about that. So the majority -- more than 50% of the Takeda executive team are female. So we have a strong leader female in the company. At the board level, we are not at 50% yet, but we have been progressing and will continue to progress towards 50%. It's a matter of time before an internal director is a female because we have, again, 50% female level in the [ TT ] and the internal directors come from the [ TT pool ], if you like. So it's just a matter of time. But I can guarantee you that our diversity at the executive level is very strong. By the way, not only in terms of gender diversity, but also nationalities and age diversity, which is important. It's important to have different age group in the company and in the executive level to understand the world trend and also to leverage data and technology revolution that I was explaining earlier. Lauren, can you join me to talk a bit more about our overall policy in Takeda on our current situation on gender diversity?

Yes. Thank you, Christophe, and good morning, everyone. As Christophe said, I'm Lauren Duprey. I'm Takeda's Chief Human Resources Officer, and I've been in this role now for about 3 years. As you saw in Christophe's presentation, diversity, equity and inclusion is very important to us. In fact, it's one of the 4 imperatives of our overall people strategy, alongside investing in learning, well-being and broad talent development. As Christophe said, our executive team, the Takeda executive team shows great gender diversity at nearly 50-50 split across 9 nationalities and across a broad age range, ranging from 40s to 60s. Across the company as a whole, we see very healthy gender diversity actually. So we are 53% female for our global employee population. And within our senior leaders, so sort of the level below the Takeda executive team, we see 46% represented as female. We do have an aspiration to see our senior leader group, reach gender parity at 50-50 by the year 2027, and we'll continue investing in a variety of mechanisms to see that happen. In Japan, specifically, I do want to comment there. We do have more work to do. Our overall employee basis is 70% male and 30% female in Japan as a whole. And our goal is to increase gender representation, while simultaneously increasing the amount of women that we see in management roles in Japan. Our aspiration, our goal there is to see at least 30% of our management positions filled by women in Japan. In fiscal '23, we saw that number reach 20%. And so we are seeing progress being made in Japan with representation of female management. We take a number of measures towards this. One, which I will comment on is our Takeda resource groups, which are global employee networks that provide different employee groups with the opportunity to come together to share development opportunities, career advice and also to make recommendations to the company on things that we might do differently to improve or to continue growing. In Japan specifically, we have a group called [ Hanamizuki ] that supports women in their career growth, and we listen very carefully to the recommendations of this group to continue our progress here. So we will continue investing in diversity, equity and inclusion globally as well as locally to see us make the progress that we need to make. Thank you.

Thank you, Lauren.

[Interpreted] Those are all of our answers to get past questions from the shareholders. Now if you have any questions other than the ones we have already answered, I would like to receive questions and opinions from shareholders. But before that, I would like to ask you the following point. I'd like to receive questions, opinions from as many shareholders possible. Thus, I would ask you to provide brief questions, opinions. In principle, I'd like to receive up to 2 questions or opinions per person within 3 minutes per person, designating one opportunity per person. Does this sound fine to you? Thank you. I'd like to receive questions and opinions in the aforementioned manner, I would appreciate your cooperation. [Operator Instructions] Furthermore, as a general rule Mr. Christophe Weber, President and CEO, or a person designated by him will answer questions from the shareholders. Now I'd like to receive some questions and opinions from a shareholder. Do you have any questions? Yes, the person at the front row.

[Interpreted] May I be seated? Thank you. Number 73. One question is that about the dividend payment. I, myself, EPS it should be paid within EPS. Currently it has been the case that you are paying more dividend over EPS as if it's like a bonus payment. It seems to me that the company asset is being reduced if you continue doing this. So it should be paid within the profit that you raised. The stable dividend payment is something that you should put aside, but rather you should pay the dividend in accordance with the profit you make. If your revenue and profit improves and if the profit is doubled, this may be a different thing. But in the long run, I don't want you to continue paying as you do now. Please don't take the short-term view in providing and making decisions and dividend that will hurt the company from the long run, that I don't think is advisable. So please think very carefully. And the bonus of the directors should not be paid much. I think you have a lot of borrowings at the moment. And in the future, we expect the interest rate to go up and NHI pricing will be even more stringent. So your revenue or profit conditions will be very tough in the future. So please be very considerate of these factors in managing the company. Why is it that you continue to increase the dividend more than you gain? In the short-term, directors may retire after some years, but please manage the company with a long-term perspective. Why is it that you would continue with this type of dividend? This is my question. Thank you.

[Interpreted] Thank you. The question or maybe the opinion is that with regards to dividend, it should be paid within the framework of EPS. Otherwise, the company's asset will decline. And if this type of dividend payment is continued, then in the long run, it will not be viable. And at the same time, the directors' bonus should be managed within what we gain. That was the question. Christophe, please?

Thank you very much for your comment and questions. They are very important. The first -- the first thing I would like to say is that we are very long-term focused and very careful about our long-term outlook. We don't take a decision with only a short-term outlook. In fact, every year at Takeda, we do 10 years business outlook, both revenue as well as profit. And we do the 3 years very detailed plan as well. So these 2 exercise, 10 years and 3 years, give us the indication about how our business will evolve. And that is driving -- that is really what is allowing us to make the decision regarding the dividend payout, for example. So that's really important. We have a long-term view. We don't want to put Takeda in difficulty for the long term. We know that we are in the long term business as well. All the R&D investment that we are doing now will benefit the company in 10 years and beyond. Now on your questions regarding EPS versus core EPS. I would like to invite Milano again to explain how we think about that and how our profit is impacted by some one-off effect. And therefore, why we are looking at core EPS very much and free cash flow to decide our dividend policy. Milano, can you reexplain? Thank you.

[Interpreted] Thank you very much, I'm Furuta. Before answering the question, thank you for your comment and opinion. When it comes to the dividend, yes, it is a very important topic and I would assume that many shareholders sometimes give us requests from different perspectives, like it should be within the framework of the profit or sometimes people say it should go up and down every year or other people would say that the cash balance should be looked into for stable supply of dividends. A different perspective of opinions. But in our case, we like to look at both short term and long term in a balanced manner to make a comprehensive decision with much discussion. As our President has mentioned, EPS is a very important parameter and, as I answered earlier, in the end the surplus from the profit is the -- where we would pay the dividend. So this accumulation of the profit is where we pay the dividend. But on the other hand, we have exchange rate impact. And as I mentioned earlier, the amortization of the intangible assets, which is the noncash expenses, depending on the term they fluctuate greatly. So these are some of the parameters. And that is how the EPS has been calculated. So the overall cash balance should be looked into to decide on the dividend payment, and noncash expenses should also be excluded in some effect to come up with a core EPS based on which we look at payout ratio. We have other different parameters looking to. Thank you very much for your comment. We look at both the long-term and short-term aspects, and we also look at the profit growth. And we would like to have a detailed discussion and continue having a good decision. Thank you very much for the question.

[Interpreted] Thank you. Any other questions?

[Interpreted] 388 is admission number. The most important question here is the very low ROE. Other listed company is around 9% ROE. Relative to this, Takeda is 2.11% ROE. And amongst the global pharmaceutical companies, it is a 20% average. According to your explanation, Christophe, about the year, you are going to make the efficiency program executed, but I would like to understand the specifics in those measures. And also, how do you think about this 2.11% ROE percentage? And what is your target to elevate this low ROE in the future?

[Interpreted] Thank you for your question. So your concern is about the very low ROE percentage for Takeda. Takeda is 2.11% ROE. And he -- she also would like to understand efficiency programs details as it is presented earlier. And as a result of the efficiency programs, what is your aspiration to improve ROE percentage by what number?

It's a great question. So the way to improve our ROE is by improving our profitability. So our return to profit growth and margin, as I explained earlier, will certainly help very much the improvement of our ROE, and our goal is to have a very competitive ROE. I will, however, stress out that the ROE is not a criteria used much in the pharmaceutical industry because it's a very -- it is a lagging indicator. The strongest criteria used in the pharmaceutical industry to determine how healthy is the company is EBITDA growth outlook or, in our case, core operating profit. It's quite close to EBITDA growth outlook. This is the closest correlation to actually how the share price will evolve. So that's why our returning to growth, both on the revenue side, as I explained earlier, as well as improving progressively our profit margin will improve our core operating profit. We'll -- we will have our EBITDA grow, and certainly, it will impact positively the ROE. In our case, also, please note that the -- we made a significant acquisition. So there is a significant level of amortization of intangible. This is impacting the ROE. So I think if you look at actually the core ROE, we are doing quite well. But again, the ROE will improve as our core operating profit margin will expand in the future. And that's why I wanted to spend time today to explain how we will return to growth, both on the revenue side as well as on the core operating profit margin side. And then the ROE will increase all along. Thank you.

[Interpreted] Are there any questions? Please raise your hand. If you have any. Yes, the person on the left-hand side, the person here in the cap, the second row, please.

[Interpreted] #53. Is the microphone on? #53. About the dividend of your company, I was surprised to see that the payout ratio is very high compared to EPS. In the next term, JPY 196 is the dividend. With that dividend, the payout ratio is 326%. It's extremely high. Payout ratio of 100% is high enough, but why is it that you have such a high payout ratio and dividend? I just -- I don't understand. The dividend should meet the capability of the company. That's my request. And if we had to increase the dividend this high, then, if possible, please have your own share buyback. The share buyback is -- with -- has an expectation to increase the share price in the future. In fact, with this high dividend, you would see a share price decline. So please take a positive view of the possibility of a share buyback. And another thing, compared to your peer, I'm -- I attended the shareholders' meeting of Ono Pharmaceutical. They have Opdivo, and it was an innovative new drug. It was quite a headline. But what happens then is that in order to be reimbursed, they had to reduce the drug price. I don't know if I'm right or wrong, but they reduced NHI price by 50%. That's my knowledge. We now heard this. What I felt is that when a pharmaceutical company comes with an innovative new drug, then something similar may happen in the future as well. If that's the case, the pharmaceutical companies may not be encouraged to come up with innovative new drug because that will not contribute to the growth of their sales and revenue and profit. Another thing is that you have NHI repricing, it used to be once every 2 years. Recently, it has become an annual repricing. When it comes to NHI repricing, it means that they try to reduce the NHI price. So in your case, in your company, the new drug development investment may face risk. How are you going to counteract that risk exposure?

[Interpreted] Thank you very much. In the first part, I think the question was similar, opinion was similar. Dividend has already been mentioned by the previous shareholder. The payout ratio was surprisingly high in a company. If the dividend is JPY 196, then the payout ratio is more than 300%. Is it really in line with the company's capability -- should be in line with the company's capability? If you are capable by having that kind of high dividend, then please consider positively about the possibility of share buyback. In the second part of the remarks, he quoted Ono Pharmaceutical. In order to be reimbursed, you would need to reduce NHI pricing. That what happens with ONO. So in case of Takeda, if something happens in a similar manner, then coming up with innovative drug may not contribute to the business based on which -- the question is what are you doing about -- what are the countermeasures that may just taken for NHI repricing?

Thank you very much for your comments and your observation. I'll start with the observation about price pressure. You mentioned that in Japan, we faced a lot of price pressure. Every year, there is a repricing. Actually, in the last 10 years, probably the pharmaceutical market in Japan has been the most impacted by price cut. But optimistically, in the last year also, we have seen the government slightly changing its policy so that the more innovative medicines will face less price pressure. That's very important because we need what we call reward for innovation. So if we are unable to have good reward in term of pricing for our innovative medicines on which we invest billions in R&D, it's very difficult for the industry. So very tough environment in Japan, but some encouraging signs in the last 12 months. But otherwise, in the last 10 years, I started in Takeda 10 years ago, the Japanese market has been the toughest among developed countries in the last 10 years. But I hope it will change, and I'm optimistic about that. How to respond to that? First is by being global. So by being very strong in the United States, which is 50% of the pharmaceutical market, in Europe, in Japan, in China, we can -- when we discover highly innovative medicine, we can launch by ourselves globally, and that's a great way to get payback. And that's why it is so important to be a global company. So you can invest in R&D and then you commercialize your product globally. Today, 90% of our revenue comes from outside of Japan, about 50% in the United States, about 30% in Europe. China is growing fast, but still very small. So I think that's one way. The other way to mitigate the impact of price pressure is to come up with highly innovative medicines. You have a better chance to be reimbursed and to have a good price. Having said that, what you described is really real. The pharmaceutical industry is always, in a sense, quite cyclical because you discover great medicines, but eventually, these medicines will face generic. And therefore, this medicine will disappear, and our job is to manage this type of cycle. And that's why earlier, I explained that our next big cycle is when ENTYVIO, our largest product, will face biosimilars, which are a form of generic from, let's say, 2031. And that's why we want to be successful with our pipeline because we will need to offset this big decline, which will come from 2031 onwards. Right now, we are facing a generic exposure, but between 2025 and 2031, we'll have very much limited generic exposure. So that would be a period of growth for us and will reconsolidate our margin and develop our pipeline. So this is the nature of the industry to have this type of cycle. What I say very often is that great medicines, which generate a lot of revenue, eventually, in our industry becomes a great problem because it will face generics, and you need to be prepared for that. That's why we do this 10 years' long-range exercise every year to have a good understanding about this type of cycle. Now on your question on payout ratio, payout ratio and EPS is one parameter, but we look more, and every company is doing that, at the payout ratio vis-à-vis the core EPS and free cash flow. The company is generating cash flow. We use this cash flow to invest in R&D, but also to reward shareholder. And our payout ratio, if you look at this parameter, is lower than 50%. It's about 42%. And that make us competitive versus other companies but it's not greater than 100%. So it's -- don't look only at EPS, look also at core EPS and at free cash flow because that's also determine our ability to increase the dividend. That's very important. And you mentioned share buyback. We did it a few years ago. This is an option that we have. The feedback we are getting is usually investors prefer dividend than share buyback. But we will still -- we still have the option, and it's an open option for us in the future. Thank you very much.

[Interpreted] Any other questions? The person in the gray shirt.

[Interpreted] 226. I have questions about the risk management at Takeda. First of all, the risk management in supply chain, how do you manage suppliers? And which department is responsible for? And what kind of method are you using to manage that risk? And also, I think you have a procurement of the materials, raw materials from overseas suppliers. And how you are managing that procurement from overseas suppliers? And how do you evaluate what's the quality materials?

[Interpreted] So thank you very much. Your question is about the supplier management, risk management-related topics. So which department and how they're doing risk management of the suppliers? And the second question is about the raw materials coming from the overseas. How do you evaluate, assess them? And how do you secure the quality of those raw material coming from the overseas suppliers?

Thank you very much for the question. It's very important, especially now with the geopolitical context. You need to be also very careful about where are your suppliers and where do you source your materials. So first, in terms of risk, every year, we do a holistic enterprise risk mapping, which identify all the risk that the company is facing. And we discuss remediation against these risks, and this is also discussed at the Board. So we talk about the geopolitical risk, the China risk, the cybersecurity, for example, and we develop remediation. More specifically on the supplier, first, we try to reduce the number of suppliers that we are using. So we try to concentrate our supplier base because that's a way also to limit your risk. So we want to have some preferred suppliers instead of having thousands of small suppliers. That's one thing. For every new supplier, we do a third party -- we do risk assessment of the supplier. So it's very important. Of course, for raw materials, which is used in our manufacturing, they are reviewed and approved by our quality department. At Takeda, we have 7,000 colleagues working in quality. So it's a very important investment that we make. The other thing that I'd like to mention is that we decided years ago to have no dependency on any Chinese supplier because of the risk -- of the geopolitical risk. So Takeda today is not dependent on any Chinese supplier. Actually, if you look at our manufacturing network, we have manufacturing site -- global manufacturing site today in Japan, Singapore, Europe and U.S. That's where our manufacturing base here. But we were very careful, and we decided that years ago not to have any dependency on Chinese supplier. Now let's be also honest here. We -- it's very difficult to be totally independent because we are sometimes dependent on a certain product or that we purchased, for example, from a supplier in the United States, and they might supply themselves from China. So it's quite difficult actually to have the full control on your entire value chain. But at least we have 0 direct dependency from any Chinese supplier. And we think it's the right position to have considering the geopolitical situation. Thank you.

[Interpreted] Thank you. Any other question? Please raise your hand. Yes? The person holding a paper on the left-hand side, please.

[Interpreted] 342. Doshomachi originated Japanese pharmaceutic company is Takeda, and I have a great expectation to Takeda. Just like the share price, it seems like you have a ceiling of your share price. If you look at other pharmaceutical companies, share price is not going up. The reason behind that is that, for example, your pipeline. Whether you have an appropriate pipeline or not is one point. For rare diseases, your investment in R&D was heavy. This -- is this the cause of the share price or, as others ask, dividend? Maybe you have excessive dividend and that may be the reason why people are not willing to increase the share price by the society. So can you share with us the management view on this?

[Interpreted] Thank you. The share price of ours is not going up high, and this was the question. What is the cause behind this? For example, is that we have a reasonable target of our pipeline? The focus on rare disease is what we have. Is that the right policy to take? What is the view of the management? Also, the fact that we have a high dividend maybe another reason why our share price is not high enough. So this is a question about the view from the management.

Thank you very much for the question, and this is a question we ask ourselves not every day, but a lot. I think there are 2 key parameters which are driving share price in the pharmaceutical industry today. One is your EBITDA or core operating profit is very similar. Growth outlook, what does it look like in the next 5, 6 years? That's the first parameter, which is so important that determine, one, your share price. The other parameter is how people view your pipeline. Now what has changed quite a lot in the pharmaceutical industry in the last 5, 10 years is that investors don't give you the benefit of the doubt, for example, on the pipeline. I showed earlier, our 6 assets in late stage. It's great. They have a very high potential. Revenue potential is very high, but we need to conduct the Phase III and share the result and have positive result. Only when we will show this result that people will value that pipeline. In the past, there was more anticipation. So people were saying, "Oh, I look at your Phase II," that's a trigger no more. I think there is really now you need to show the pipeline, not only Phase III result, but even sometimes investors wait for approval of a new product to really value it. So I think we need a few more years to really demonstrate the value of the pipeline and the 6 assets. On the EBITDA and growth outlook. Today, of course, we are not growing. So this is a deterrence to our share price. But we are very confident that we'll be able to grow. Some investors anticipate that. Some will wait for fiscal year '25 to see how our margin will improve and will continue to grow. So I am confident that our share price will -- if we return to growth as we expect, if our pipeline is delivering, I'm very confident and we are very confident that our share price will reflect that. I don't think -- and we don't think that our dividend is a deterrent to our share price. From all the metrics we are using, our dividend is not too high. It's -- we are very convinced about that. Thank you.

[Interpreted] Next question please. The person with a cap or hat.

[Interpreted] 187. I have a request to the President and CEO. Enterprise value should be directly linked to the share prices. So if I talk about the conclusion first, the corporate value or EPS -- sorry, the share prices should be JPY 4,635 per share. The reason why I'm demanding this number is that the EPS, core [ BPS ] is JPY 4,635. So considering this, the real nominal PBR 1x. If it is the case, PBR is onetime. JPY 4,635 should be the number. JPY 4,635, you have not attained to that level yet. So I'm demanding to recover the share prices to that level. That's all.

[Interpreted] So your question is about the share prices. You'd like to make it to the JPY 4,635 and he just showed his thoughts about the ground of this request. Could you answer to this question, Christophe?

Well, what I would say is that you could be a sell analyst because all the analysts who are following Takeda, the professional analysts, their target price right now is JPY 4,700. So you are very close to their calculation. Usually, they use discounted cash flow model to project the share price of Takeda. Of course, they take a lot of assumptions when they do this model. Sometimes, we have different assumptions, and we share our own assumptions. For example, we believe that our revenue growth will be higher than their assumptions. One thing is that if you look at all the sell-side analysts who are analyzing Takeda, the majority of a buy on our share price, some are neutral. And the average target price that they think we should be valued today based on their assumptions is JPY 4,700, very close to JPY 4,635 that you come up with. So congratulation for that. Thank you.

[Interpreted] Any other questions? Please raise your hand. Yes, the person with a hunting hat.

[Interpreted] May I be seated? 245. I was with Takeda until 2009 when I retire. I have a question on pipeline and one request. With regards to the pipeline question, I read the papers in detail. You have 8 items on pipeline, which are very important for the future. And the one that is most important is TAK-279, zasocitinib. You completed Phase IIb, and you are running 3 -- 2 Phase IIIs. Between '26 to '27, you are thinking of NDA. And I heard that in '23, you acquired Nimbus Therapeutics. And Nimbus Therapeutics -- and you have JPY 600 billion. I think you should focus more on that upfront payment. Maybe you should have 3 Phase III projects, not 2. In addition, the psoriatic arthritis is also impacting your share price. As the President's attitude, I should focus -- I would say, you should focus on that. Chronic immunological diseases are suffered by 10 million people globally, and $0.5 billion sales is expected. So in order to achieve that, execution of more Phase IIb programs as well. That is my proposal to the President. One more thing. This is a request. I used to work with Takeda and Mr. Takeda Kunio passed away on 8th of June,. Unfortunately, there is still gatherings to miss him and hosankai group of Takeda want to say goodbye and to say a farewell to him. So I understand you have JPY 1.8 billion of revenue. Perhaps you can contribute to JPY 100 million to hosankai to held a farewell gathering for Mr. Kunio Takeda, which will, I think, boost up the share price.

[Interpreted] Thank you very much. In the first part, which was the question, with regards to the pipeline of Takeda at the moment, TAK-279 is the most important item according to the shareholder. And for that item, for TAK-279, after Phase IIb, there are 2 programs in Phase III. The shareholders' view is that they should -- the company should invest more and have more Phase III programs. That is the question. Whether that should be the case or not is the question. The second point. This is a request. Mr. Kunio Takeda passed away recently. At hosankai, they want to hold a farewell gathering . That is his view and suggestion or request. Christophe, please.

Thank you very much. First, I hope you have a happy retirement, and that you have a good life after your retirement. I'll -- on TAK-279, this is our highest priority in R&D, probably along with TAK-861, our orexin agonist. So we are going full in, and we are developing multiple indication. I will ask Andy to talk a bit more about it and remind us about what is TAK-279, how we think it is differentiated from other product and how we are developing it as well because we don't focus only on 2 indications. So Andy will cover that. On Kunio Takeda farewell hosankai, I mean, as you know, hosankai is supported by the company. I can say that I had the chance to meet many times Kunio Takeda when I joined the company,. I had a great discussion with him many times. I used to visit him in Singapore once a year minimum, not in the last few years, he was too fragile probably. But I had a really great moment to interact with him and to discuss about Takeda history and future because he was also very much focusing on the future. So if we can support a specific hosankai meeting, we will. Andy, can you come to talk about TAK-279?

I always -- I miss him. Thank you very much, Christophe, and thank you for the question. You didn't say where you worked at Takeda. I hope you were an R&D employee. I'm Andy Plump. I'm the Head of R&D at Takeda in my 10th year here in Takeda. And thank you very much for the question on zasocitinib, or TAK-279. As Christophe has mentioned, this is one of our most exciting and highly prioritized programs. We are -- we believe it has best-in-class potential in psoriasis and psoriatic arthritis. There is a molecule known as deucravacitinib that's ahead of us. And we think we have first-in-class potential in ulcerative colitis and Crohn's disease. We have many studies ongoing right now. We have 2 Phase III studies in psoriasis. We're about to start a Phase III program in psoriatic arthritis. And we have a Phase IIb study ongoing in Crohn's disease and a Phase IIb study ongoing in ulcerative colitis. That's a lot of work. We think there could be additional indications for this molecule, and we have a team that's actively working on those possibilities. We're so excited about this molecule. The reason we're so excited is the pharmacology of the molecule. It's truly a best-in-class molecule relative to the front-runner, but also relative to the many programs that are a bit behind us. So why is this? Well, it's a very selective TYK2 inhibitor. TYK2 is part of a class of enzymes, kinases known as JAKs. And it's very hard to make a molecule that selectively inhibits TYK2 and doesn't also inhibit, at some level, JAKs. And that's true of the front-runner, deucravacitinib. Our molecule was designed in a very special way so that it selectively inhibits TYK2, and it has no activity on JAK. And the reason that that's very important is because when you inhibit JAK, you do get efficacy in some autoimmune diseases, but you also have very serious safety issues. So because of that selectivity, we're able to dose up much higher than other molecules. And by dosing up higher, we believe we can see more efficacy in diseases like psoriasis and psoriatic arthritis and have efficacy where deucravacitinib doesn't in IBD, ulcerative colitis and Crohn's disease. So thank you very much for the question. Thank you.

[Interpreted] Any other questions? The person over there.

[Interpreted] 95 is my number. Sorry to ask a naive question. Regarding the net profit, I would like to ask the question. This year, revenue is JPY 4.3 trillion, and profit is reduced by 40% from previous year and JPY 58 billion. I would like to understand the reason why you have experienced such reduction in profits. And how long does this situation continue?

[Interpreted] Thank you for your question. So your question is about the profit or profitability of the Takeda. So this year's revenue target is exceeding JPY 4 trillion, and the profit target is a 40% decline from previous year to the JPY 58 billion. So you would like to understand why is this profit dip is expected and what is the countermeasures and how long does it take to recover from this situation.

It's actually a great question. And again, it goes back to what we discussed earlier, the difference between core operating profit and profit. So first, the decline is due to the fact that this year, our last year, if you talk about 2023, our revenue declined and our core operating profit declined. So that's one of the reason. But our core operating profit declined by 13%, so not much less than the decline in net profit. And you have other factors. We had some impairment of assets. So I explained earlier, for example, that we decided to withdraw EXKIVITY. We decided not to file ALOFISEL. So you have to impair this asset. We had some -- which had some intangible value. So that's impacting our profit. It's a one-off. This impairment will not -- it will not be a recurrent, but it is impacting in fiscal year '23. Another reason is that -- and that's important, again, to think about cash flow, as we discussed earlier. If you look at VYVANSE, VYVANSE is this big product which is facing generic, we lost half of VYVANSE in one year. But VYVANSE is still fully currently amortized. At one stage, the amortization of VYVANSE will stop, but it will not stop this year. It will stop in the future years. So we'll not have the -- so we have a big divergence between the VYVANSE revenue declining, but we still face a full amortization, which is impacting our profitability. This amortization will stop eventually, but there is -- it's not synchronized with the generic entry for technical reason. So again, it shows that there is all this amortization impairment are noncash. They do impact our profit. They don't impact our core operating profit. So that's why it's important to look at these 2 metrics. Bottom line is that when we will return to growth, our profit will return to growth. And actually, you might have a faster increase of profit as well because we won't face this impairment every year. And we will have our overall amortization of intangible reducing very significantly when we will stop amortizing VYVANSE. I'm sorry, it's a technical answer. But I had to explain the difference between operating profit and our profit evolution. I mean, did I miss anything? Milano can confirm it, no?

[Interpreted] Thank you for your question. I think Christophe has covered most of the explanations. But if I may add some things. In terms of the profitability, there is the factors coming from the ForEx. Our revenue are coming majority from overseas operations. So if it is the depreciations of yen situation, we would see growth in the revenue. But more than that, the base of the operation is sitting in overseas sites so that more than revenue growth or almost the same levels of the revenue growth, we would see the increase in expenses. So to the profit, the impact is not so much. So the revenue goes up and profit becomes neutral. So if you take a look at the percentage, it would be seen as a decline. And as other shareholder raised the question earlier, so this type of short-term impact, like LOE of VYVANSE, we have seen the decline of the revenue. But even in that situation, we would like to maintain the R&D investments for the future growth. So that's also one of the deterrent factors on the profit growth. As Christophe mentioned earlier, we are going to see the amortization disappearance of the VYVANSE, and then we are executing efficiency programs in our operations. And we would see the improvement of the profit in the future. Thank you.

[Interpreted] Any other questions? Yes, the person over there.

[Interpreted] 76. My question is -- I'm a Japanese. And based on Japanese yen, if you look at financial statements and the share price, the revenue, U.S. come from 50%, from overseas -- 90% overseas. So in maybe the reality reflects well on a dollar basis. In terms of share price in the Japanese yen, JPY 4,000 to JPY 4,500, you're going back and forth in that framework. But in case of ADR or ADS, perhaps I should say ADS, but in any case, in the American market, the listed share price is coming down. For that, there has been several questions about the share price increase. What are your policies to increase your share price? On U.S. dollar basis, do you have any initiatives or ideas to increase your share price on U.S. dollar basis?

[Interpreted] Thank you for the question. The question is -- this is about the share price. Normally, our performance is looked into on the Japanese yen basis in the financial statements. But actual business of Takeda is that it would be better to assess the company on dollar basis. So ADR or ADS, if you look at the price, it's relatively low. And in order to increase this, do you have any policies and measures to that end? Christophe, please.

It's a great question. Actually, we are, of course, very impacted by foreign exchange and currency exchange because the majority -- 90% of our revenue is outside of Japan. 50% U.S., 30% Europe. We shouldn't forget the euro also. The euro play a big role. Our cost base is also very much U.S., Europe. Actually, we have a slightly higher cost base in Europe compared to the revenue from Europe. So when the euro appreciate or the yen depreciate versus the euro, it's a negative for Takeda because our cost base in Europe is quite high. So that's why we -- actually, you notice that we report -- we assess our performance at constant exchange rate. Because long term, that's what matter is. Of course, we need to look at whether we are exposed based on currency, but looking also at constant exchange rate is very important. So for the -- we are still in a fortunate position, by the way, that we are a company where when the yen depreciates versus the dollar, it's a positive for both revenue a lot, much less on profit, but still it's a positive. Euro is a different matter, again because of our cost base. On your point on ADS, the ADS, we are listed since 2019 in New York. But the ADS is directly connected to our share price in Japan. There is no disconnection. So for example, if the yen depreciates, immediately, the ADS value will depreciate to reflect the U.S. dollar-to-the-yen ratio. There is no disconnection between the 2. It's totally connected, and it's not completely synchronized but almost. So don't see the ADS as trading separately from our share in Japan. They are totally connected, and the exchange rate is just impacting the ADS. And that's why recently, the yen depreciate, it is versus the dollar, it is a positive for Takeda but it takes time to demonstrate it. At the same time, when the yen depreciates, the ADS drop to reflect that value and, again, totally correlated to our share value in Japan.

[Interpreted] As we see continued questions and that we had a diligent discussion and we would like to receive 2 more questions before we move on to the vote. Thank you. So we would like to take 2 more questions from 2 people. If there's any questions related to the proposal, please raise your hand. The person in blue shirt.

[Interpreted] 56 is my number. Share price is low because of M&A, so acquisitions of the companies, and you have a debt. And I believe that you are making repayment gradually of those debt. But once it's declined a bit in debt levels, I see some amount goes up. If you diminish all those debt amounts, we would see improvement of the share prices. That is my opinion or question.

[Interpreted] So your question is also related to the share price, and the current share price is sluggish because of huge amount of debt that Takeda hold. So due to the M&A, there is the debt, and the amount of the debt is gradually reduced by repayment. But then you made additional M&A, and then that is increased. That's why the share price is not recovering. What do you think about this?

First, I agree with you, enterprise value equal debt plus market capitalization. So if we reduce our debt, our share price will increase. We do -- we understand that very well. So we are very much committed to reduce our debt over time. We have reduced quite a lot. But then you're right, we bought TAK-279. It cost us USD 4 billion, so quite a lot. So it's always a big decision. We need to think about our long term, our growth outlook, and sometimes we have to make some acquisition. Since the big acquisition in 2018, we have not made big acquisition because we do want to reduce our debt. We do want to reduce our debt, and we are very committed to go back to what we call low 2 ratio, so net debt-to-EBITDA ratio. Today, we are around 3. We want to go back to 2, and that's very much a commitment. And you're right, it will contribute to a share price improvement. I want to mention actually on the debt, that our totality of our debt is at fixed interest rate. So we are not -- if the interest rate is increasing, no impact. And that's important because interest rates are increasing right now, even in Japan slightly. And our average interest rate at Takeda is below 2%. So it's -- we are in a very good position in term of interest rate, but we are committed to reduce the debt. Thank you.

[Interpreted] Thank you. We'd like to take a question -- the last question from one last person. Yes, the person on the right holding a paper.

[Interpreted] 359. As I attended this shareholders' meeting for the last 10 years, the same discussion is going on and on. That's my impression. Yesterday, in Tokyo, I attended a shareholders' meeting. It was an oil company. It was wonderful and a very sincere meeting. And I'm attending today, looking back to the shareholders' meeting I attended yesterday, with regards to shareholders' views and opinions, I just wonder what the independent external directors have in mind as they listen to the shareholders' opinions today. We have Ms. Higashi, who is an experienced investment banker, if you could please share with us your view of Takeda as an external director. What advice would you like to give?

[Interpreted] Thank you. We received questions, opinions today. And the question is what would be the reaction of the external directors how they look at Takeda? What are their contemplated advice and proposals on the part of the external directors to Takeda in the future?

I was waiting for an opportunity to first ask Iijima-san, who is chairing our Board meeting, to actually express his view about how he sees Takeda. And Iijima-san has been on the Board now for a few years. And then you mentioned Emiko, so yes, she also could also complement. So Iijima-san, perhaps, if you could come and share your view and then Higashi-san?

[Interpreted] Thank you for the question. As an external director and I'm Chairing the Nomination Committee and I also serve as the Chair of the Board, my name is Iijima. Shareholders ask questions about the dividend, about the profit and share price. For these points, we take these points very seriously. In 2019, Takeda acquired Shire under the leadership of Mr. Weber. We had a successful acquisition of Shire. And in a very short period of time, he launched one team, Takeda, and we are on a growth -- we should be on the growth track. As external shareholders, we take this very seriously. The current situation surrounding Takeda has just been explained by Mr. Weber. We have many pipelines in the later phase, which are expected to be launched in the years '26 and onwards, and the VYVANSE with high profit and the REMICADE and other products are losing LOE. And because of LOE, for the shareholders' hope, that you would be patient about the growth of Takeda from fiscal '25. We're expecting the outcome of the efficiency program. Hope that you would stay with us. We will monitor the progress carefully. So hope that you would warmly encourage us and monitor us. We are committed to look at every step of the progress of the pipeline and the efficiency program using [ EET ]. We try to see how much benefit and fruits we can gain. We will do our best in monitoring them. Hope that you would be patient with us. Thank you for question.

Emiko?

[Interpreted] Thank you for your question. Thank you for naming me. As the Board of the -- Chairman mentioned, my personal experience as the external director of Takeda, I'd like to share with you my personal view. As Mr. Iijima, the Chairman of the Board mentioned, profitability this year, the price and total shareholders' return, we have received questions. I did note -- and I need not to rephrase what the President has just mentioned. However, Takeda is a pharmaceutical company. And Christophe mentioned about the long-term perspective, to develop pipeline and to promote R&D. He talked about the importance of having a long-term view. I need not to explain to you, but this is a very important point for a pharmaceutical company. The short-term investments and the long-term investments, we should strike a balance between the 2. For the management, this is the area where they have to really exercise their capabilities. And from my view, the long-term management policy and the long-term investment should be mindful of the fact that your decision now have return after your retirement, that is something important that you have to keep in mind. And management should always be mindful of the fact that the decisions you make will come up with a return in 10 years from now where you may no longer be in the same position. So the role of external director, it's not only to support the management. But also risking management in this modern -- there was a question about the supply chain risk management. The enterprise risk management is important. How are we going to look at the risk? It's not just a short-term risk, but there could be a long-term risk for the shareholders. As external directors, we need to make a good assessment. We need to ask questions to the management. It's important as external director, we'll make decision and ask questions and -- to the management. That's not just my personal opinion, but also I would assume that other external directors that are seated here all concur with me. So that's my comment. Thank you very much.

[Interpreted] Now may I move on to vote on the matters to be resolved? Thank you. Now I would like to vote on the first proposal, appropriations of surplus. Do you support this proposal? [Voting]

[Interpreted] Thank you. First proposal has been approved and passed as originally proposed by majority of the votes in paper, including those exercise with voting right, exercise forms and electronic means. Next, I would like to vote on the second proposal, election of 10 directors who are not ASC members. Do you support this proposal? [Voting]

[Interpreted] Thank you. The second proposal has been approved and passed as originally proposed by majority of the votes in favor, including those exercised through the voting rights exercise forms and electronic means. Next, I would like to vote on the third proposal election of 4 directors who are ASC members. Do you support this proposal? [Voting]

[Interpreted] Thank you. The third proposal has been approved and passed as originally proposed by a majority of the votes in paper, including those exercised through the voting rights exercise forms and electronic means. Next, I would like to vote on the fourth proposal, payment of bonuses to directors who are not ASC members. Do you support this proposal? [Voting]

[Interpreted] Thank you. The fourth proposal has been approved and passed as originally proposed by majority of votes in favor, including those exercised through the voting rights exercised forms and electronic means. Now as the business of the meeting has been concluded, I hereby declare the meeting closed. I take it back this opportunity. I now introduce to you in person the directors who have just been elected. Firstly, directors who are not Audit and Supervisory Committee members: Mr. Christophe Weber, Dr. Andrew Plump, Mr. Milano Furuta, Mr. Masami Iijima, Mr. Ian Clark, Dr. Steven Gillis, Dr. John Maraganore, Mr. Michel Orsinger, Ms. Miki Tsusaka and Ms. Emiko Higashi. Next, the directors who are Audit and Supervisory Committee members. Mr. Koji Hatsukawa, Mr. Yoshiaki Fujimori, Ms. Kimberly Reed and Mr. Jean-Luc Butel. Finally, Mr. Christophe Weber, President and CEO, will deliver a closing remarks.

Well, I would like to thank you again for attending our 148th Ordinary General Meeting of Shareholders. Thank you for your question. It was a very engaging meeting. I enjoy very much. I hope you get a feel that the future is bright for Takeda. We have the right people, that's the most important, the right teams. We have the right values. In life science, it's so important. And we have the right strategy on our promising pipeline, and we will grow again once the generic impact is behind us and we'll generate shareholder value. So again, thank you very much for attending this shareholder meeting, and we'll see you next year. Thank you.

[Interpreted] That is all. I greatly appreciate your dedicated deliberations at today's meeting. Please cooperate in exiting in order for the safety. Staff will provide instructions. So please wait in your seats for a little while longer. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]