Eisai's (ESALF) Q3 2016 Results - Earnings Call Transcript

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Eisai Co., Ltd. (OTCPK:ESALF) Q3 2016 Earnings Conference Call February 2, 2017 3:00 AM ET


Ryohei Yanagi - Senior Vice President, Chief Financial Officer and Chief IR Officer

Ivan Cheung - Senior Vice President, President, Neurology Business Group

Terushige Iike - Senior Vice President and President of Oncology Business Group

Teiji Kimura - Chief Discovery Officer, Neurology Business Group

Takashi Owa - Chief Medicine Creation Officer, Oncology Business Group


Kazuaki Hashiguchi - Daiwa Securities

Atsushi Seki - UBS Securities

Yasuhiro Nakazawa - SMBC Nikko Securities

Unidentified Company Representative

[Starts Abruptly]. Before taking time today. We would like to begin Q3 earnings results session of Eisai Company Limited. We would like to present financial results from Q3 Fiscal 2016. Please make sure that you have all of the materials. Please find slide deck for today’s presentation and press report and references. If any of the document is missing, please raise your hand.

I would now like to introduce the directors in attendance. Mr. Ryohei Yanagi, Senior Vice President, Chief Financial Officer and Chief IR Officer; and Mr. Ivan Cheung, Senior Vice President, President, Neurology Business Group; and Mr. Terushige Iike, Senior Vice President and President, Oncology Business Group.

Today the presentation will be given by Mr. Yanagi for the first finance part, and the second operation part will be presented by Mr. Cheung and Mr. Iike.

Now without further ado, the presenters will begin presentation.

Ryohei Yanagi

Thank you. I would like to start explaining financial section. Please look at this first page, first slide. This shows the consolidated statement of income for the nine months of fiscal year 2016. We achieved increase in profit and we secured financial integrity.

Top line, revenue was ¥409.2 billion, which was 96% of the previous year. However there was impact of foreign exchanges of ¥28.5 billion, excluding such impacts, this was up 3% year-on-year. Particularly in Japan as well, we overcame the impact of the drug price revision of ¥15.5 billion in Japan but we grew in all regions on a local currency basis.

Cost of sales ratio out of the revenue was 36.1% which was an increase from a year earlier. However excluding the impact of drug price revision, this was almost flat from a year earlier. As a result, gross profit was ¥261.4 billion, which is 94% of the previous year.

We have effectively controlled the expenses within the fluctuations of gross profit. Due to this effective financial discipline, profitability was increased. First, R&D expenses were ¥79.5 billion, which accounted for less than 20% at 19.4%. We made a step closer to the global standard level which was 87% of the previous year. However excluding the impacts of forex as well as the impacts of reimbursements from partners, Eisai increased investments in priority pipeline projects, so we have continued to make a proactive investment in R&D activities.

SG&A expenses were ¥132.9 billion, which accounted for 32.5% of revenue, which was 91% of the previous year, but excluding forex impacts, SG&A expenses has stayed almost at flat from a year earlier.

We have continued to make proactive investment in marketing activities across regions, like for example restructuring costs that were incurred in the United States last year which did not occur this year and we have been controlling sales promotion expenses for BELVIQ effectively in the United States.

Other income was ¥8.7 billion, which was almost the same as last year. Last year there was ¥8 billion which was recorded last year as the gain from the transfer of EIDIA, and this year, ¥9.3 billion was recorded as gain from the bargain purchase following the acquisition of EA Pharma Company shares. And operating profit was ¥57.6 billion, up 18% from a year earlier. Significant increase in profit was achieved.

Profit for the period attributable to owners of the parent was ¥38.4 billion, up ¥100 million from a year earlier at 100% of the previous year.

Returning to the growth trajectory in main business. For your information, excluding the forex impacts, pharmaceutical business segment achieved - increased by 4% in revenue and 6% in profit year-on-year. Although this is the reference value, covering on the nine months for the year, ROE was 8.8% exceeding the estimated capital cost generating positive equity spreads. Free cash flow was ¥59.3 billion, which was ample. Net DER was minus negative 0.01x. We continued to maintain net cash position from the end of September.

On the slide, I would like to share with you the waterfall chart showing the overview of the revenue migration. Last year, revenue was ¥426.4 billion for the nine months. Overcoming the impact of forex, growth of global brands contributed to increase of ¥5 billion in profit. In Japan as well, we overcame the impact of drug price revision and contributed to the increase by ¥2.3 billion. However impact of the foreign exchange fluctuations were significant, therefore we ended at ¥409.2 billion in revenue.

On this waterfall chart, we would like to provide you with this breakdown of operating profit migration. OP last year was ¥48.6 billion. Similarly as in revenue, due to the growth of the global brands which contributed to an increase of ¥8.5 billion in the profit, as I said earlier, there were factors for increasing revenues but controlling of marketing expense for BELVIQ and others were effective in improving profitability.

In Japan the drug price revision hit hard the Japan business, therefore decreasing the profit by ¥10.1 billion. However there was a contribution of ¥11.9 billion was made in R&D expenses.

The efficient use of expenses through collaboration with partners and strategic partnership were effective in improving the OP. As I said earlier regarding, the priority pipelines projects, we are making proactive investments in these projects. As I said earlier, with other factors, there was almost no change. As a result, OP increased by ¥9 billion from a year earlier reaching ¥57.6 billion for the nine months.

On this slide, I would like to give you the summary of balance sheet and cash flow statement. On the balance sheet, ¥214.8 billion in interest-bearing debt, and a total cash and securities were ¥221.9 billion, which was more than interest-bearing debt. So for the first time in nine years, we have been maintaining this, so-called net cash position in the amount of ¥7.1 billion. Therefore net debt to equity ratio was minus 0.01x on the sound basis and so-called equity was almost ¥600 billion. Equity ratio was very high level at 57%.

For cash flows, due to the improvement in working capital, net cash from operating activities recovered to ¥42.6 billion. EA Pharma integration and extraordinary factors related to transfer of Sannova, capital expenditures ended at ¥16.7 billion. As a result for the nine months, free cash flow was ¥59.3 billion, exceeding ¥42.9 billion. For the annual dividend payment, ¥59.3 billion cash was generated during the nine months.

For your information, the impacts of the EA Pharma integration and as well as the Sannova transfer on the underwriting operation and investment, free cash flow was about ¥33.3 billion, for the ¥4.4 billion pro-rated annual basis. Therefore on this basis, cash has been generated on an accrued basis exceeding the annual estimated dividend payments. Based upon the strong balance sheet, based upon net cash as well as the ample cash flows, free cash flow exceeding estimated dividend payments, we are confident that annual payment dividend of ¥150 per share can be maintained.

This is the last slide in my part. This shows the forecast of consolidated performance for fiscal year 2016, which has remained unchanged. As I said earlier, we would like to make the - we would like to show the resilience through the growth - returning to the growth of main business and we are expecting that we proceed in line with the plan under the EWAY. Revenue estimated at ¥548 billion, and operating profit at ¥60 billion. Profit for the year attributable to owners of the patent at ¥41.3 billion.

ROE is estimated at 7.5% almost covering capital close and DOE in the level of 8% which is the global standard. Payout ratio will be almost 100%, but as I said earlier, based upon strong balance sheet and ample cash flow, we would like to continue to have the optimal dividend based upon the optimal capital structure and return to the growth in the main business and the financial strategy with being mindful of the corporate body, we would like to continue to work towards the mid-to long-term maximization of shareholder values in a sustainable manner.

Thank you very much. And we believe annual dividend of ¥150 per share is to be maintained.

Ivan Cheung

We would like to continue to explain the Elenbecestat, E2609. I would like to give you the progress of the new generation AD treatment. During the third quarter, we agreed with FDA in the U.S., EMA in Europe and PMDA in Japan. We agreed with these authorities on the efficient study design and we are promoting the project with two pivotal Phase III studies, MISSION AD1 and MISSON AD2.

For MISSION AD1, in October, earlier than original schedule, we started the first - we achieved the first patient in October, and we achieved the first dosing in December. And for MISSION AD2, we also achieved the first patient in December. In November last year from FDA in the United States, Fast Track destination for new drug is expected to demonstrate high efficaciousness was granted to us. During the fiscal year 2020, we are aiming at obtaining top-line results from MISSION AD1 and AD2 studies.

Let me continue with Elenbecestat. At CTAD Annual Meeting which was held in the United States in December last year, study results for E2609 were presented. As you can see here, for E2609, the more dose of E2609 is administered. The lower the CSF amyloid-beta level was at daily dose of 50 milligram at medium, there was 70% reduction in CSF amyloid-beta. In Icelandic genetic study demonstrated protective mutation that demonstrated 40% reduction in CSF amyloid-beta. At least this level of amyloid-beta reduction was shown to be efficacious and efficacy was demonstrated by this level of reduction.

On the other hand, clinical data for BACE has shown to inhibit 100% of BACE with that and then there is concern about the side-effects, so long-term administration of BACE inhibitor, such as E2609. In order to secure the balance of efficacy and safety, optimal dose was identified at 50 milligram per day. With this, we aim to accelerate the development phase through adoption of efficient Phase III study design of single dose.

In addition, between Japanese and Caucasian subjects, equivalency was confirmed in PK and PD, and we plan to enroll Japanese patients to account for 10% or more in total population in MISSION AD studies.

Next, study for BAN2401 is ongoing. First interim analysis after Last Patient In was conducted in January and IMC recommend the confirmation of the study. As for going forward, every three months interim analysis will be carried out, and after 12 months, next fiscal year in the third quarter primary endpoint analysis will take place in 18 months. After 18 months including secondary endpoint, full data analysis is scheduled. As you know, anti-A-beta modify your clinical efficacy start to appear after around 12 months. When we obtain good results, we would like to use Phase II study results as pivotal study and we would like to have consultation with the authority on this point.

Furthermore for Biogen’s Aducanumab, we have option rights and in two Phase III studies are steadily making progress. In December last year at CTAD that I mentioned earlier, at this annual meeting, Aducanumab Phase Ib dose titration cohort and long-term two-year extension portion data which were promising were presented. AD disease modifier is pursued in three projects and these are promising projects that are making steady progress.

Next I would like to discuss Lemborexant, orexin receptor antagonist and its progress. Irregular sleep-wake rhythm disorder, ISWRD, is frequently seen in AD patients. This means lower QOL and risk of falling and increased burden for the caregiver. AD patient sleep efficiency correlates with CSF orexin level, and Lemborexant can be a first-in-class for this symptom. That is the expectation. Last year in October with 125 mild to moderate AD dementia with ISWRD subjects in the Phase II study that were initiated in October 2016, primary endpoint is sleep efficiency and wake efficiency measured by actigraphy.

For insomnia indication in older patients, two Phase III studies are also steadily ongoing. For these two indications, in fiscal 2019, we are making efforts to prepare to file submission.

Next Fycompa. In the third quarter on a cumulative basis, the revenue was 138% year-on-year. Excluding the effects of foreign exchange fluctuations, it achieved a high growth of 158%, up ¥7.4 billion revenue. In order to maximize the value of Fycompa, various new efforts are underway.

First the most important monotherapy indication. In the United States, submission was accepted for additional indications by FDA and PDUFA action date is July 26 this year. In Japan towards obtaining approval for indication, relatively small-scale efficient data package for submission was agreed with PMDA and expeditiously Phase III study will be initiated in this fiscal year. And pediatric indication and LGS indication for these two Phase III studies were started in the third quarter.

Regarding BELVIQ, in the third quarter we have seen major progress. Last year in December, with Arena, we were able to reach agreement worldwide regarding development and submission for regulatory approval for all of the rights we were able to acquire for BELVIQ, and therefore royalty and milestone payments to Arena included - financial terms were modified. And regarding development submission and marketing, if I can now make decision single-handedly and therefore we were able to make progress for greater freedom in development and submission.

And technology transfer is planned for manufacturing in Korea, Taiwan and Israel. Arena has third-parties with which they have exclusive distribution agreements and we are able to market through them. And as for evaluation of MACE+, CVOT trial for that process is also steady - are also ongoing in a steady fashion.

Next E6011, anti-fractalkine antibody for rheumatoid arthritis and Crohn's disease. Currently TNF-alpha and IL-6 are used. These are cytokine targeting therapies but E6011 targets fractalkine, which is a chemokine. This is first in the world such antibody drug. E6011 we believe targets the origin of the inflammation cascade and will be able to have long-term effect. And we also expect that there will be smaller lower systemic side-effects.

In September last year to differentiate with biologics and existing therapies two Phase II studies were initiated. For Crohn's disease Phase I/II study is currently ongoing. As for prediction of clinical efficacy prognosis and safety et cetera, biomarker candidates are identified and usage of these biomarkers in clinical trials are under consideration.

This is my last slide in Neurology Business Group. Development pipeline in Neurology Business Group is summarized on this page. The biggest focus area in dementia, we have three disease modifiers and two symptomatic treatments. So we have the world’s biggest AD pipeline which we consider to be our strength. In epilepsy area, we have LCM projects for Fycompa as well as two new compounds in early clinical phase, so we have a robust pipeline in epilepsy which is quite exceptional and we are aiming to become a leading company in epilepsy area. We have end-to-end capabilities with a drug discovery and development team and two commercial team and we are united under HCC spread to make contribution to the patients at the earliest possible timing. Thank you.

Terushige Iike

Next I would like to present our activities in Oncology.

Last week, we published that in HCC, LENVIMA achieved primary endpoints. So at the outset, I would like to discuss liver cancer. In liver cancer, the number of patients who die is the second highest after lung cancer. According to data, every year those who are newly diagnosed as liver cancer number 780,000 worldwide. On the other hand, every year 750,000 die from liver cancer, especially advanced liver cancer is poor prognostic dangerous cancer, but is characteristics of this is that majority of the patients are in Asia including China and Japan.

Also in the United States, overall cancer incidence and mortality are declining. However only for liver cancer, these are increasing, and the etiology includes hepatitis B virus and hepatitis C virus and there is also non-B non-C or alcohol abuse and the lifestyle hepatocellular carcinoma are also increasing.

Next, HCC. Prognosis is very poor as I've mentioned earlier. And for HCC systemic therapy that was approved with confirmed survival benefits, there is only currently only one, sorafenib. This was approved in the United States in 2007, therefore close to 10 years only sorafenib is used as HCC systemic therapy, and in the meantime, at least three molecular targeting drugs had head to head non-inferiority global Phase III clinical trials with sorafenib as comparator, but all failed by not being able to show non-inferiority. By weight 12 mg or 8 milligram lenvatinib will be given. This is based on Phase II results. And sorafenib approved 800 milligram per day is given and sorafenib arm is compared, and non-inferiority of OS was proven.

We were able to obtain positive results. As for secondary endpoints, PFS and TTP time to progression and overall response rate, statistically significant and clinically meaningful results were obtained and safety profile was similar to what was previously observed. And these results we would like to publish at appropriate early timing in academic Congress, so please look forward to that.

As for number of steps and the achievement of event in the protocols was delayed by two months and therefore in the first quarter 2017 after consultation with various authorities, we would like to file submission for approval globally.

First indication for LENVIMA is thyroid cancer, and for this indication it is approved in already over 50 countries and its market share is growing steadily in these countries. In China, local Phase III study was started which is necessary for submission. And in the U.S. and in EU, RCC second line was approved, and this is in combination with Novartis Afinitor or everolimus

In the United States, we are co-detailing with Novartis, and in Europe we are launching in increasing number of countries. And regarding RCC first line, global Phase III is underway. PD-1 antibody, pembrolizumab combination arm and everolimus combination arm, these two regimens are developed simultaneously and we are aiming to obtain top-line in fiscal 2019.

LENVIMA and pembrolizumab combination Phase II. Phase Ib was dose setting and Phase II are carried out in one protocol and target patient number is nearly achieved in six cancer types and 20 is the patient target number for each cancer type. And Phase Ib interim analysis is already published. In all of the patients, tumor is shrinking. This is a promising result. As for RCC, as I mentioned earlier, we already have advanced to Phase III. And next for endometrial cancer, the protocol was revised in this study and it was decided out of 40 patients, additional patients, enrolment will start soon. Once we obtain this data regarding regulatory pathway, we would like to start consultation with the authorities.

Next Halaven for breast cancer as well as for soft tissue sarcoma. We were able to obtain the approval last year and it grew 106% excluding the effects of foreign exchange fluctuations to ¥28.4 billion and it was approved - after it was approved in February of last year is now given to more than 600 Japanese patients. In Japan, the estimated number of soft tissue sarcoma patient is 4,000 so this shows high level of expectations from patients and we are able to achieve double-digit growth in Japan. And in the U.K., although it took much time but long last we were able to obtain recommendation from NICE.

This is the first breast cancer drug that received NICE recommendation from since 2007. We hope that this adds momentum in Europe. And for Halaven as well, we are also developing combination therapy with pembrolizumab PD-1 antibody, and in breast cancer, very intractable for prognosis a triple negative breast cancer with about 100 patients Phase II is underway. This is interim analysis result and response rate is 33.3%.

Halaven alone has effect on triple negative breast cancer. It is said that it is effective. However response rate is about 10% and pembrolizumab PD-1 antibody relatively speaking is not so effective on triple negative breast cancer but combination has shown a good response rate from interim analysis.

And what is interesting is that PD-L1 status. As for non-small cell lung cancer, the status is PD-L1 positive. However in triple negative breast cancer, irrespective of PD-L1 status, we are seeing a good response rate, and I believe this shows good effect of Halaven on mature tumor environment.

Now as for pipeline in the third quarter with our partner, SymBio, and thanks to the efforts by SymBio, Treakisym first-line indication was obtained. And with this in hematological malignancy in Japan, we are making even greater efforts. Early phase pipelining has become richer and richer. Hematological malignancy and HCC programs are making steady progress.

And this time E7386 is shown for the first time. This is product where we are in collaboration with PRISM, Wnt signal or Wnt pathway modulator is E7386 and Phase I preparation is underway.

These are early pipeline projects. And in 2017 - in fiscal 2017, HCC LENVIMA preparation and submission preparation and launch preparation will be one of the focus areas for fiscal 2017. Thank you.

Question-and-Answer Session


[Operator Instructions].

Kazuaki Hashiguchi

From Daiwa Securities, my name is Hashiguchi. I have several questions. First question is about LENVIMA, regarding the cumulative actual results through the third quarter against compared with the full-year forecast, I think the progress is rather slow and for RCC approval was obtained in May in the United States, particularly where we see delay in the progress, and I think that the penetration with RCC indication or usage is delayed. So we would like to hear your take on this.

Unidentified Company Representative

Thank you for your question. Of course there has been impact on foreign exchange fluctuations. As you pointed, RCC area we are struggling, which is different from thyroid cancer. This area is very competitive [indiscernible] entering into this area.

In our aim to increase share of the market, we are not progressing as we expected. However we are conducting co-detailing with Novartis in the United States so share voice [ph] is the highest in the market. And then we would like to recover from April by expanding. Based on the Phase II data, the approval was obtained. The expert suggestion experience has not been accumulated yet and the awareness of this drug has not been wide yet, therefore we are expanding our approach to KOLs and Phase III study for first-line indication which has been initiated through such initiative. We would like to increase our awareness level of this indication and track. Thank you.

Kazuaki Hashiguchi

Thank you. Regarding the HCC LENVIMA’s Phase III study results, probably we have to wait until the presentation will be made at the Congress meeting. Probably last year or the year before last, LENVIMA sales potential was mentioned by the company. Compared to that assumption in the past, this time the data - we do say that this data was more favorable or not less favorable compared to what you expected non-inferiority in OS was demonstrated, however superiority was not demonstrated. So could you please share your opinion on this?

Unidentified Company Representative

Thank you for your question. We would appreciate if you could wait until the disclosure of the detailed data, but our assumption, we expect it and we hope that superiority will be demonstrated, however in the secondary endpoint there was some very robust results obtained, so we do not think that there will be a very significant impact. That's all.

Kazuaki Hashiguchi

So statistically not robust results were obtained in terms of the extension of OS. You were not worried about this?

Unidentified Company Representative

Right, because projected is to demonstrate the non-inferiority in OS, therefore we decided the sample size as well as the analysis of the statistics. So those endpoints were met as planned. That's our take.

Kazuaki Hashiguchi

Lastly about the rights obtained for BELVIQ and I was not really comfortable in understanding why you did this, the direction you are heading for at Eisai I believe towards the areas of Oncology and Neurology, and I think that BELVIQ does not fit perfectly in this direction? For the drug itself I think you believe that this is viable and worthwhile doing this but from the perspective of entire company's business portfolio, I think it would be better idea to transfer this drug or agent to the company which can expect synergy. Why are you pursuing this drug business, or if what is your thought about how this BELVIQ thing will be connected to the future pipeline and direction going forward?

Ivan Cheung

Question. Yes, first of all, it is correct that our main focus is in neurology and oncology. That's correct.

Now with regard to this particular project, we always have a goal for BELVIQ to be contributory from a financials perspective. As you may have heard from Arena upon the arrival of their new CEO, they would like to redirect their company’s future in that pipeline. So both companies have discussed quite a bit in the past few months about what to do with this asset. And I believe we have found a win-win situation for both companies, especially for Eisai from - firstly from - or actually I would say many aspects of the financials. You can see here, number one, the royalty and all the milestones have been submitted complete improved and you have heard from Yanagi earlier that this year we've already improved the BELVIQ P&L a lot, and with this, we can even improve more.

Secondly you see that we have also secured some additional territories here and you may know that BELVIQ is actually actively marketed in South Korea right now, so that stream of income will also come to Eisai. And Taiwan and Israel are under regulatory review right now, so upon launch those income again will come to Eisai. And I must remind everyone that with this project we did not pay any upfront payment. We did provide Arena with some manufacturing support payments to ensure stable supply of the product, so overall financially makes a lot of sense, why not.

Now secondly in terms of the future development of a compound, CVOT, if I may use a financial term as in a way a past - majority of them are past investments already, we're waiting for the readout very soon. So future development of the compound now is really fully in our control, whether we do something or we don't do something. So I think that that freedom is also needs to be considered. That's all I have. Thank you.

Kazuaki Hashiguchi

Thank you very much.

Unidentified Company Representative

Next question please.

Atsushi Seki

Seki from UBS Securities. I have two questions on Oncology. First is LENVIMA HCC study results. Congratulations on the successful results. And in this slide or in the press release - in this slide on the first line statistically significant, this is clearly defined, but clinically meaningful improvement. What is the definition of clinically useful? According to Nexavar PI, 2.1 improvement over placebo is the description. So what is the definition of clinically meaningful?

Unidentified Company Representative

I'm afraid that there is no clear definition. Statistically significant as far as the end of the story and even without a clinically meaningful difference there can be sometimes statistically significant difference. And if you look at the actual numbers, this is different that has clinical impact, and that is the meaning.

Atsushi Seki

Thank you very much for the very clear answer. In this clinical trial design, if it improves the non-inferiority and then - or what’s the design such that in cascaded fashion superiority will also be tested?

Unidentified Company Representative

Yes, that is the design. First non-inferiority will be tested.

Atsushi Seki

Thank you. And the second question is Mr. Iike in your presentation in combination with the pembrolizumab, I thought you mentioned 40 patients are in endometrial cancer. There will be additional 40 patients. Why are you going to add a patient number only for endometrial cancer? Is there something that you're trying to achieve? What is the background?

Terushige Iike

I would like to ask Dr. Owa to respond.

Takashi Owa

Thank you for that question. Yes, there is a very clear background. As Mr. Seki knows very well, endometrial cancer, the first-line is a combination therapy with a chemotherapy, so platinum and taxanes added on. That is a standard regimen that is very well established. But second line beyond, there are no established regimens. And therefore when we think about the combination therapy, there is a strong unmet medical need.

And as it was announced at ESMO the other day such second line and beyond is those heavily pretreated patients, the responses are observed. So when we think about the development, we are seeing effects that we cannot ignore and therefore by expanding, we wanted to increase the number of patients. And other cancer types such as melanoma and head and neck cancer and epithelial cancer, so the endometrial cancer and others who were moving ahead and as for other four types of cancers, if we see effects, it is also possible to increase the number of patients for these four types of cancer ourselves.

Unidentified Company Representative

Thank you very much. Are there any other questions?

Unidentified Analyst

Tokio Marine Asset Management. My name is Mizuno [ph]. I would like to ask a question about Alzheimer's disease BACE inhibitor, regarding the safety. Amyloid-beta level is reduced to 100%, it will be dangerous, so that's why you selected 50 milligram per day. So other than that for other safety profiles, do you think that the 50 milligram would be the dose to be chosen? If you chose the 100 milligram per day, do you think it would be more risky?

Ivan Cheung

Thank you for the question. In our Phase I data, we tested the drug up to 400 milligrams. At 400 milligram, we do see some potential signals. At 100 milligram, we did not. Now the small sample size, so you can never extrapolate to a large study. So we carefully looked at the 50 milligram data and the 100 milligram data and asked ourselves, this is such an important disease. We have one short to really get it right. We want to get it right, okay. And then earlier I apologize, my brain froze when I tried to explain in Japanese.

So Kimura and the team has looked into a lot of different data and literatures, and of course the Icelandic genetic test and also a lot of the key opinion leaders with what were - saying that, one may even argue, you don't even need 50% inhibition. There is a long-term. We are now doing a two year study, right, 24-month endpoint, but in the real world, this could be potentially taken by patients for five years or more.

So do you really want to push up to 100 milligram when you don't know what can happen in a large population. So we reach the conclusion in about 70%. It's about the sweet spot we believe that we should take forward in the Phase III setting. Kimura, do you have any additional comments?

Teiji Kimura

I am in charge of the Neurology Business Group. My name is Kimura. Ivan Cheung has almost covered what was expected to be told. We saw that there was need you need to up-titrate it to 100 milligram per day and there may be - but there was no data show the specific toxicity specific to the compound. However at the median 70% was opted for. Of course there would be intra subject viability and then for the 50 milligram should be covered, we are not saying that there was data showing the risk or dangers in human subjects but [indiscernible] data and pharmacology data and there is potential risk stand for consensus. With this does, we do not think that we are able to suppress everything. As Ivan Cheung mentioned, I believe that we have been able to identify optimal dose.

Unidentified Analyst

Another question about the BAN2401 Alzheimer’s Aducanumab CDR-SB is included, that's what I understand. When you analyze CDSRB [ph] will be extracted. CDR-SW [ph] will be extracted for analysis. [Indiscernible] CDR-SB was successful I think that was announced the other day therefore I would like to know...

Ivan Cheung

Of course as per protocol we’ve defined ADCOMS as the endpoint, but as you said, CDR-sum of boxes is one component, of course even though CDR-sum of boxes is not the timely endpoint, we will of course analyze all the data to make sure that we understand what BAN2401 is doing in this clinical trial, and I would also say thank you for raising this point on CDR-sum of boxes. I would like to remind everyone that our BACE inhibitor, Elenbecestat, MISSION AD1, AD2, the endpoint is CDR-sum of boxes, which we believe is a more sensitive endpoint in the early AD population, and as you have heard from Biogen in their Aducanumab Phase III studies ENGAGE And EMERGE, they also use as CDR-sum of boxes as the primary endpoint. Thank you.

Unidentified Company Representative

Thank you very much. Any other questions? No further questions? Yes. Next question please.

Yasuhiro Nakazawa

I am Nakazawa from SMBC Nikko Securities. I have question on Alzheimer's disease. BAN2408 [ph] if the results are good, then with that study alone, is it possible to submit?

Ivan Cheung

Thank you for your question. In general in the CNS area, you need at least two Phase III studies for registration, so our proposal here is if this Phase II study is as successful as we expect, this potentially could become supportive complimentary study so that we only leave one more Phase III study instead of two more Phase III studies. That is our current plan. Thank you.

Unidentified Company Representative

And not just that one study, if it is successful, so another study will be planned. These two phase - so instead of two Phase III study, additionally there will be only one Phase III study. Thank you.

Yasuhiro Nakazawa

So in some cases, the sample size might be smaller and the study duration may be shorter if it can be one more Phase III study?

Ivan Cheung

There are many possibilities. It depends on how this data looks like, then we have to design for further study. At this moment - yes, there are possibilities of course, yes. .

Yasuhiro Nakazawa

Thank you.

Unidentified Company Representative

Thank you. Are there any questions? Are there any questions from participants who are participating through telephone conference? If not, we still have some time, but at this moment, I would like to conclude today's briefing session for the third quarter results. Thank you very much for gathering and taking time out of your busy schedule. We would appreciate your continued understanding and support for us.

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