Good day, everyone, and welcome to the Conference Call of Takeda Pharmaceutical Company Limited. This conference call may contain forward-looking statements, beliefs or opinions regarding Takeda’s future business, future position and results of operations, including estimates, forecasts, targets and plans for Takeda.

Any forward-looking statements in this conference call are based on the current assumptions and beliefs of Takeda in light of the information currently available to it. Such forward-looking statements do not represent any guarantee by Takeda or its management of future performance and involve known and unknown risks, uncertainties and other factors.

Takeda is currently in offer period with respect to Shire Plc. Please carefully read the information on Slide 2 of the presentation as it contains important information. During the presentation from the Company, all the telephone lines are placed for listening mode only and a question-and-answer session will be held after the presentation.

Now, we’ll start the conference. Mr. Okubo, Please go ahead..

[Foreign Language] Thank you very much for joining our 2018 Q1 Conference Call despite your busy schedule. I am the facilitator of this meeting today. I am Head of IR. My name is Okubo. The presenters and also responders to the Q&A includes the present CEO, Mr.

Weber, Chief Financial Officer, Costa Saroukos; and R&D Integration Head, Christopher Morabito. Those three are joining with us. First, we’d like to have the presentation from Costa Saroukos, the CFO of the Company about the outline of the Q1 results, and then, we will have the Q&A session.

Now, please prepare the presentation slide as per this conference call..

Thank you, Takashi, and hello everyone. Thanks for joining Takeda’s quarter one conference call. Please turn to Slide 3 in the Slide Deck. I am pleased to announce that Takeda’s strong business momentum continues in 2018.

This year, we have continued to make solid progress against our key priorities to grow the portfolio, strengthen the pipeline, and boost profitability. I will introduce some business highlights on the next slide.

With regard to the financials, we made a very strong start on underlying revenue and profitability led by our growth drivers and disciplined OpEx initiatives. For reported operating profit and EPS, as expected, growth was impacted by two large transactions we did in quarter one fiscal year 2017.

First, we booked ¥106.3 billion, one-time gain on the sale of Wako shares. Second, we benefited ¥16.8 billion from the second tranche of long listed products we sold to the Teva JV in Japan. If you exclude these two large exceptional items, reported operating profit grew 37.5% and reported EPS grew 32.6%.

On the bottom right of this slide, you can see our strong underlying performance with revenue up 6.4%, underlying core earnings grew substantially by 40.3% and underlying core EPS was up 51.1%. Slide 4 shows progress against our key priorities. In Grow portfolio, underlying revenue was solid at 6.4% with growth in every region.

Takeda’s growth drivers of GI, Oncology, Neuroscience and emerging markets continued to drive the top-line increasing by 11.8%. We continue to look at optimizing the portfolio through business development and in June, we acquired TiGenix to strengthen our leadership in GI.

We have treated our first patient in Europe and we will strive to make it available to patients in other regions as quickly as possible. We have also been active in divesting non-core businesses and within quarter two, we will close the divestitures of Multilab in Brazil and Techpool in China.

In Strengthen Pipeline, we had several important updates this quarter. ENTYVIO was approved for ulcerative colitis in Japan and we aim to launch in the coming months. We also had a positive readout from a Phase 3 study for a subcutaneous formulation.

In Oncology, we achieved the primary endpoints in Phase 3 studies for ALUNBRIG in first-line non-small cell lung cancer and NINLARO in multiple myeloma maintenance post-transplant. Data from these studies will be presented at future academic congresses and we look forward to discussions with health authorities around the world about label updates.

We also had two new molecular entities into Phase 1 this quarter, one in Oncology and one in GI. Finally, Boost Profitability is progressing very well with the global OpEx initiatives now fully integrated into how we work. The underlying core earnings margin increased by a significant 640 basis points predominantly driven by OpEx discipline.

Slide 5 shows the financial highlights of quarter one. First, the reported numbers. Reported revenue was up slightly at 0.4% with our growth drivers offsetting the negative impacts of foreign exchange, minus 0.5 percentage points and divestitures, minus 5.6 percentage points.

The last divestiture item impacting quarter one was a sale of seven additional long listed products in Japan to the Teva JV in May of 2017. Reported operating profit declined by 49.3% impacted by the sale of products to the Teva JV in addition to a ¥106.3 billion gain from the sale of Wako shares booked in quarter one last year.

If you exclude the impacts of both Wako and the Teva JV product sale, operating profit would have grown at 37.5%. Reported EPS decreased 46.1%, also impacted by these two large one-time gains in quarter one last year. Underlying performance was particularly impressive led by our growth drivers and OpEx discipline.

Underlying revenue was up 6.4% despite price pressures in certain regions, especially, Japan. Underlying core earnings increased by 40.3% with 640 basis points of margin improvement driven predominantly by OpEx discipline. Underlying core EPS for the period increased by 51.1%.

Operating free cash flow decreased 90.6% due to positive R&D milestones for the approval of ALOFISEL and AZILECT and the impact from the sale of additional products to the Teva JV. I will explain this in more detail in the coming slides.

In line with our plan to unlock cash for non-core assets, we gain additional cash of ¥31.9 billion from the sale of real estate and marketable securities. Slide 6 shows the reported profit and loss statement. Revenue grew 0.4% to ¥449.8 billion with our growth drivers overcoming the negative impacts of foreign exchange and divestitures.

We are very pleased with the positive momentum of core earnings growing 9.8% to ¥116.8 billion. As a reminder, this do include the negative of divestitures and foreign exchange which we adjust to reach the underlying core earnings growth rate of 40.3%. Operating profit declined by 49.3%.

As I’ve already highlighted, the main items impacting these with the sale of additional products to the Teva JV and the ¥106.3 billion, one-time gain from the sale of Wako, both booked in quarter one 2017.

Other moving parts impacting operating profit in fiscal year 2018 compared to prior year includes ¥10.4 billion loan gains from the sale of real estate. This was somewhat offset by ¥8.8 billion lower amortization cost, mainly due to the completion of amortization of VELCADE.

In addition, we booked ¥4.6 billion of G&A expenses related to the proposed Shire acquisition, but despite these, total SG&A declined in quarter one through strong OpEx discipline. Reported EPS for Q1 was ¥100, a decline of 46.1% versus prior year.

In addition to the items impacting operating profit, this was also impacted by financial income, expenses, partially offset by improved tax rate. Financial income declined due to the recognition of ¥8.1 billion gain on sales of securities in fiscal year 2017.

Although we also sold securities in 2018, we can no longer recognize the gain in the P&L under new IFRS 9 accounting standards. Within financial expenses, ¥6 billion of cost related to Shire acquisition were recorded in this period.

Our reported tax rate improved by approximately 10 percentage points from 26.9% to 16.8% due to the partial release of an uncertain tax provision and favorable statutory earnings mix. Slide 7 shows the underlying P&L. Revenue was solid at 6.4% growth. Gross profit increased by 8.8% outpacing revenue growth.

This led to an underlying gross margin of 73.2%, an improvement of a 160 basis points over prior year. The gross margin improvement continues to be driven by favorable mix as higher margin products like ENTYVIO and NINLARO continued to grow.

The gross margin also benefited from the conclusion of a distribution bill for lower margin consumer healthcare products in Japan. OpEx expenses declined by 3.4% resulting in a significant improvement of 480 basis points.

This has been driven by seamless execution of the global OpEx initiatives, which we have integrated into how we work through KPIs, objectives, budgets and systems. Underlying core earnings is growing 40.3% with 640 basis points of margin improvement. The results are truly impressive.

However I do want to emphasize that this is not indicative of the full year due to some phasing impact. We remain committed to our full year outlook for underlying core earnings margin improvement at the lower end of the 100 to 200 basis points range and our longer-term goal of 100 to 200 basis points improvement every year.

Underlying core EPS for the quarter was ¥126, up 51.1%. Our underlying tax rate improved by 3.6%, - sorry 3.6 points from 21.2% to 17.6%. There were also some timing benefits here can we expect the full rate to be in the low 20s for the full year. On Slide 8, you can see the performance of our growth drivers.

In GI, underlying revenue growth was strong at 19.3% mainly driven by ENTYVIO growth of 34% and TAKECAB 26%. Oncology was up 6.7% with a strong performance of NINLARO able to offset most of the VELCADE decline. We also continue to see steady growth of ALUNBRIG and ICLUSIG.

With these two assets from the ARIAD acquisition last year contributing almost half of the oncology franchise growth in quarter one. Neuroscience growth of 23.5% continues to spearhead through strong TRINTELLIX performance in the US. Emerging markets was 6.2% growth driven by innovative products such as ENTYVIO and ADCETRIS.

In total, our growth drivers were up 11.8% in the first quarter and represent 62% of our total revenue. Slide 9 shows the performance of our key products. ENTYVIO continues to power ahead as Takeda’s top-selling product with ¥60 billion of revenue and 34% growth.

This growth is driven by further penetration of the binary segment in marketed countries and also from launches in new geographies. TAKECAB is too displaying robust growth of 26% with volume expansion in Japan more than enough to offset the 16.1% price cut applied to the product on April 1.

The key products in our Oncology franchise all displayed compelling growth rates. ADCETRIS booked double-digit growth in Europe, Japan and emerging markets and ICLUSIG has done very well in the U.S. due to increased share on voice. NINLARO and ALUNBRIG continue to perform well in their marketed indications.

And as highlighted earlier, we had positive data readout this month. TRINTELLIX also continues to advance strongly on the back of our effective promotion activities growing 29.4% over prior year. Turning now to key geographies on Slide 10. The U.S.

continues to grow very strongly, up 14.1% year-on-year, driven by ENTYVIO, NINLARO, ICLUSIG and TRINTELLIX. Europe and Canada was up 2% with double-digit growth of ENTYVIO and ADCETRIS and the steady rollout of NINLARO but there were some negative impacts from timing of shipments.

In Japan, our portfolio was subject to an average price cut of approximately 6.5% on April 1. However, despite this significant headwind, we delivered revenue growth of 6.6% driven by continued volume expansion of TAKECAB, AZILVA and LOTRIGA and the new launch of AZILECT in June. As mentioned on the Growth Drivers Slide, emerging markets was up 6.2%.

Importantly, we have returned to growth in China, up 28.6%. While it is still early days, we are encouraged by this turnaround and position China as an important region in the medium-term with seven new product launches planned over the next five years. Brazil continued to show strong momentum with 41.7% growth.

However, Russia was slightly weaker due to the return of some products licensed from Merck. Growth of our Consumer Healthcare in Japan was predominantly impacted by the conclusion of a distribution contract for Bio-Termin products in September of 2017. Slide 11 gives a snapshot of the Takeda pipeline today.

We have continued to invest in early pipeline innovation while maximizing the value of our marketed portfolio through lifecycle management. Since we last gave an update in May, we have had two new assets enter into Phase 1. In Oncology, TAK-164 is an antibody drug conjugate that we are exploring in gastrointestinal cancer.

In GI, our partner PVP Pharmaceuticals has commenced Phase 1 studies in Celiac Disease for Kuma062, an enzyme that degrades glutens so that it is no longer recognized by the immune system. On Slide 12, we show the progress versus the important R&D milestones expected this year.

In Oncology, we had important successful readouts for both ALUNBRIG in first-line positive non-small cell lung cancer, and NINLARO in multiple myeloma maintenance post-transplant. We have also had important progress for ENTYVIO in Japan with approval grant for ulcerative colitis and the submission completed for Crohn’s Disease.

There were two other data readouts this quarter that are important precursors for milestones expected in the second half of the fiscal year. For ENTYVIO, we recently announced that a Phase 3 trial evaluating a subcutaneous formulation in ulcerative colitis met the primary endpoint of achieving clinical remission.

For TRINTELLIX, we have announced the success of a Japanese Phase 3 study in adults with major depressive disorder. With the positive outcomes of both of these studies, we intend to move forward with preparation for regulatory submission shown as milestones in this chart. Slide 13 gives an update on the global OpEx initiatives.

I want to emphasize that I am dedicated to delivering on our commitment of margin improvement and that the global OpEx initiative is now fully integrated into how we work at Takeda. Total OpEx spend in quarter one was down 3.4% versus prior year trending ahead of our full year target.

This contributed 480 out of the 640 basis points improvement in underlying core earnings this quarter. There were some phasing benefits in this strong result but we are also making tangible progress in many areas. Zero-Based Budgeting is helping to drive savings ahead of targets across our cost packages.

We have now embedded targets into the KPIs of all management and this is helping to drive savings of 4.7% ahead of target across our cost packages for the quarter. We are also making great progress in embracing a cost-conscious mindset across the organization.

As one example, we have seen a 70% rise in the first months of 2018 in the use of global video conferences as an alternative to travel. Smart choices like these on a daily basis and sharing of best practices across Takeda will continue to drive further efficiencies. Slide 14 shows our cash flow statement.

Operating free cash flow declined by ¥ 50.3 billion or 90.6%, compared to the same period last year. The biggest item impacting this was the sale of additional products to the Teva JV in quarter one of last year representing ¥28.5 billion. Furthermore, in quarter one this year, we paid ¥8.8 billion of tax-related to these transactions.

If you were to adjust both years for this impact, net cash from operating activities would have been positive. The other large item impacting operating free cash flow is a ¥10.6 billion increase in the acquisition of intangible assets.

This is mainly due to higher R&D partnership investments including milestone payments for the approvals of ALOFISEL in Europe and AZILECT in Japan.

Net debt-to-EBITDA is now at two times which is a slight increase from the end of fiscal year 2017 due to the dividend payment and the structuring phase for the bridge term loans as it related to the proposed acquisition of Shire in quarter one.

However, this multiple is lower than the 2.1 times ratio we had at the end of quarter one last year, which was just after we received the cash for the Wako sale. The strong underlying performance in quarter one confirms our guidance for the full year shown on Slide 15.

While quarter one is tracking significantly higher than the plan for the full year, please bear in mind that this does include some phasing benefits and that our guidance assumes one additional VELCADE competitor launching in September 2018.

We expect this to result in a loss of ¥54 billion of VELCADE revenue which will significantly impact our growth rates in the second half of the year. Slide 16 summarizes the full year outlook for both underlying guidance and reported forecast. Both of these are unchanged since the May announcement.

The reported forecast does not change despite the ¥10.6 billion cost related to the proposed Shire deal booked in quarter one. Based on our strong quarter one momentum and OpEx discipline, we were able to absorb this deal-related cost for the quarter.

As communicated previously, we expect to close in the first half of calendar year 2019 and the full year financial year 2018 estimated financial impact of the deal would also depend on the speed of progress.

A forecast that does include the estimated financial impact of the deal for the full fiscal year 2018 will be announced by Takeda once a reasonable assumption has been confirmed. So to summarize, the quarterly results demonstrates encouraging business momentum with significant progress in all areas of the business.

Although reported operating profit declined 49.3%, this was mainly due to two large extraordinary items in quarter one last year. We had the ¥106.3 billion, one-time gain on the sale of Wako and also ¥16.8 billion from the sale of additional products to the Teva JV. Excluding these items, operating profit grew at 37.5%.

The underlying financials are off to a very strong start led by our growth drivers and OpEx discipline. Underlying core earnings grew 40.3% with 640 basis points of margin improvement. This was predominantly driven by OpEx discipline being 480 basis points and gross profit representing 160 basis points.

Our strong quarter one confirms confidence in the full year underlying guidance and our reported forecast remains unchanged. Now before moving into Q&A, allow me to give a couple of updates beyond the Q1 results as it relates to R&D and Shire.

First, I am delighted to announce that we have finalized the dates for Takeda’s upcoming R&D days in Tokyo and Boston. We will kick-off with a deep dive session in Tokyo on Thursday, September the 27th followed by a similar deep dive at our Boston campus on Wednesday, October the 10th. Please standby for more details soon.

Finally, on Slide 19, I would like to give a quick update on the Shire transaction. Preparations for long-term financing are progressing well and we announced last month that we have reached an agreement for a $7.5 billion term loan with leading global financial institutions.

We have also commenced the regulatory review process and we are pleased to receive clearance from the US FTC early in July. This is clearly a positive milestone for the acquisition and indicates the process is on track. Integration preparation is also well underway led by a dedicated integration team with members from key functions in both companies.

Moving forward, we will commence more detailed integration planning consistent with Takeda’s core values leveraging expertise from both sides. Other key next steps include obtaining regulatory approvals in further key jurisdictions including the EU, China, Japan, and Brazil.

Some countries may take more time than others and our expectation remains that we will close the deal in the first half of calendar year 2019. That concludes my presentation and we would like now to open up the call for Q&A. Thank you..

[Operator Instructions] The first question is from Seki, UBS. Please go ahead..

Hello, this is Seki, UBS. So thank you for taking my question. So, I have two questions if I may, so number one, what’s your updated thought on timing for the EGM, Extraordinary General Meeting? If you have a plan or date, when do you plan to communicate that date for the financial community? Then number two on VELCADE.

So what’s your rate – sold on VELCADE generics? So, do you still expect some generic to hit the market by September, so if I check the FDA website so it seems like be no other generics been approved by FDA. Thank you..

Thank you, Seki. It’s Christopher Weber, yes, I’ll take the first question and Costa will cover the VELCADE generic. So, the date of the shareholder will depend on the regulatory approval that we need to obtain from the different authorities. So we obtained the U.S. FTC approval which is a great news and it was also very fast.

Now we need to progress in Europe, Japan, China other authorities and other countries. So, a bit too early to give you a date, also of course for us just sooner is better, but we are dependent on these authorities..

Thanks, Seki for your question regarding VELCADE. Our financial assumptions for VELCADE is based on one additional therapeutically non-equivalent competitor launching in September 2018 with both IV and subcutaneous administration. Our assumption is not based on public information.

It’s not that the FDA nor the other companies have made any announcement as of yet. But depending on the competitive landscape, it could be potentially an upside there.

So we continue to monitor the situation but even – just want to draw your attention, even if it is therapeutically non-equivalent, if our competitors approved as a subcutaneous and we will take potentially modest pricing cuts, which will have an impact on our share, on our market share and loss of VELCADE revenue..

Thanks so much..

Thank you very much. Next question please. The next question is Cairnes from Deutsche Bank. Please go ahead..

Good evening. Thanks for taking my questions. Jo Cairnes from Deutsche Bank here. I have three questions. First on the tax rates, you mentioned it’s low due to the possibilities of an uncertain tax revision. Just wondering if you can give us an idea of how big this was in relation to what and how much is left? The second question would be on G&A costs.

If we are stripping out the ¥4.6 billion of G&A booked to the M&A-related expense the underlying is down some 4% year-over-year or it’s a one percentage point improvement to the European margin? Could you give us an idea of where this is coming out? So, I mean, you mentioned videoconferencing.

But it would be great to hear in a bit more detail about the global OpEx initiative and - and how you Costa are pushing this forward? And then final question for – on Slide 19, you are talking a bit about the efforts that you are making in preparation for the Shire acquisition. Just wondering how – well, if you could discuss these in more details.

How you guys are allocating your time between the Shire M&A deal and your normal management roles, how you are delegating to the different teams in charge of the process? So they are my three questions. Thank you..

Thanks, Jo, for the questions. I’ll answer the first two and then I’ll hand it over to Christopher to talk about the time spent in the Shire acquisition process. So firstly, with regards to the quarter one tax rate, we had a favorable from a reported tax rate perspective, we had a favorability of 10 percentage points.

And it was driven by mainly two areas, favorable statutory earnings mix. So we had larger gains in Japan in fiscal year 2017 and lower U.S. tax rates in fiscal year 2018. We also had a transfer pricing negotiation of an advanced pricing agreement which we received positive news.

So that was in the vicinity of around ¥60 and that was partially released due to the favorability of the outcome there. So, these are the two key elements that has given us a positive tax rate – effective tax rate for both reported and also the underlying tax rate.

Now, that being said, we still believe throughout – this will true up towards the average tax rate for the full year because we expect less R&D credits coming through in Japan in the latter half of the year and so that will pretty much smooth the phasing of that back to our normal tax rates that we’ve communicated at our forecast for 2018.

With respect to G&A, maybe I can just start by saying that, we have integrated our overall global OpEx initiative within the ways of working. So what that means is, we’ve rolled out the Zero-Based Budgeting process, it’s linked now to a overall budget by our system. We have also enhanced the overall KPIs of much more transparency on a monthly basis.

And then, more importantly, we’ve also factored the objectives of the targets of the cost –the overall OpEx and cost packages that now part of the senior management organization in their own individual objectives.

So, it’s a end-to-end process whereby we are fully focusing on transparency, accountability, as well as agility to make these improvements in the overall OpEx. So the ¥4.6 billion that you refer to was coming out of SG&A and we were able to absorb most of that throughout the first quarter and it’s too early days. It’s through only the first quarter.

We – some of it was phasing, but we also do believe that it’s encouraging signs. And I believe that the organization has been fully integrated to price OpEx and we will update you in the coming quarters once we feel these further improvements..

Great, thanks. And for the further question regarding how we are getting organized were, of course everything is conditional to the approval, but what we are doing is that, on one side we don’t want to distract our business as usual. So, whether decisions are made or committees that we have to make decisions, so - it’s not distracted.

So we continue to drive our business. So that’s very important. In parallel, on the other hand, we are starting to look at preparing the integration.

We have set up some integration team on the different functions and this integration teams are now working in twenty different areas from both Takeda and Shire and we are starting to plan what could be the integration and to start planning for that.

So I think that’s progressing well and both companies have their integration lead which has been nominated. So we are starting to map what the integration would look like, but also strategically how we could get organized in the future. So it’s work in progress which is very much in parallel of our business as usual.

So, our business as usual is not distracted by this..

Great. Thanks very much..

Thank you, very much. The next questioner please? The next question is from CLSA Securities. Please go ahead..

Hi, it’s Steve Barker from CLSA. I have two questions. The first one is about your P&L on Page 8 of the English punching. I am looking at the other operating income of ¥9.3 billion and then other operating expenses, a positive ¥1.4 billion.

Could you please explain in a little bit more detail, what’s actually in those two numbers, please?.

Sorry, Steve.

Which page are you referring to?.

It’s the consolidated – interim consolidated financial statement, and major note it’s on Page 8 of the – of the financial statement, the English version.

So, I am just, - be interested, so you had the other operating income of ¥131 billion last year which was mainly from Wako and in this year, you’ve got 9.3 which, I think you mentioned something about real estate sales..

Yes, so, you are right. So, from the operating profit point of view, we had a significant impact on the gain on sale of Wako 1006 Oku Yen in 2017 which we are not obviously getting in 2018. In 2018, we have a gain on sale of property, plant and equipment and that’s mainly 58 Oku Yen driven by the sale of land in Dosho, in Osaka, okay.

And then, we have some other in the expense line, we have some expenses there in restructuring expenses in 2017 of around 65 Oku Yen and it’s relative to approximately 60 Oku Yen in fiscal year 2018 for June quarter. The other key drivers that we highlighted in Q1 results there..

Yes, but the Q1 number is actually positive.

So, I mean, what is that? Is that something like reversal of operating expense number?.

So, regarding the - that's got to do with the prelaunch inventory reserve. So the prelaunch inventory reserve relates any products that have not been – we haven’t received FDA approval or marketing authorization approval. Basically, what happens there, it’s the expense line.

It’s the operating expense line until we get approval for that, once we get approval for that, it gets reversed and restated to cost of goods..

Okay, got it. Thank you. And then, my second question is about the – I am looking at Slide 19 in the presentation. The cost of the Shire deal in the Q1, so ¥4.6 billion G&A, financial expense of ¥6 billion. I mean, when you reported your forecast for the current year in May, this deal was underway already.

So I am just wondering what is in your forecasts for this deal in terms of G&A and financial expenses inside your full year forecast?.

Yes, that’s a great question. As I mentioned in our presentation, the full fiscal year forecast does not change despite the ¥10.6 billion that we’ve already absorbed in quarter one. Based on our strong momentum that we saw in the OpEx discipline we were able to absorb that in the first quarter.

But, we expect to close the deal in the first half of calendar year 2019 and the full year – of fiscal year 2018 estimated financial impact of the deal would also depend on the speed of progress. So, our forecast at the moment, we haven’t been able to identify the full – because it’s a bit of a moving target.

So, the forecast at the moment is, we’ll come back to you and announce what the overall impact will be at a reasonable time juncture..

So, there is nothing in the forecast right now?.

Yes, so, basically, what we are saying is, the forecast – the full year forecast has not changed from what we presented in the outlook in May and the forecast that does include the estimated financial impact on the deal for the full fiscal year 2018 will be announced once a reasonable assumption has been confirmed..

Okay, thank you..

Thank you very much for your questions. Now, I would like to take other questions please. The next question is Sakai from Credit Suisse. Please go ahead. [Multiple Speakers] [Foreign Language] [Interpreted] Yes, please go ahead. Ask your question in Japanese. First question is a simple one.

Non-core assets divested, from the second quarter onwards, can you – Sakai you are in the line in English, so you have to ask questions in English please..

You have divested the investment so far. It’s been rumor, comment on rumor that my question is, do you have in your description agreement when you and Shire how to divest non-core assets..

I am not sure. No, I am not sure I – and you are not so clear on the line, Sakai, but in the agreement with Shire, there is no agreement about non-core asset disposal. So it’s really something that we have to do based on the strategy we want to follow. I hope I answered your question, because I am not sure how I understood well your question..

You are kind of breaking up. It’s very difficult to have – so we’d like to move on to take other questions. So going back to the operator please. Next questioner from Daiwa Securities, Mr. Hashiguchi. Mr. Hashiguchi, please. [Interpreted] I am Hashiguchi. I have only one question regarding Brigatinib.

Earlier, when you acquired ARIAD, Brigatinib peak sales potential was estimated at more than $1 billion per year or more. Has it changed still? Or front-line Phase 3 study readout was already available.

So what kind of impression do you get? And also, updated competitors of clinical trials, how do you see their data? And according to the data book, Brigatinib lifecycle management trend is underway of revisiting. So, peak potential sales, is this review going to impact on the peak potential sales of this product..

Thank you for the questioner. We are actually – overall, extremely satisfied with the ARIAD acquisition. We – Brigatinib data will be disclosed at a later stage at the global congress. But in our mind it still has the potential that we saw when we acquired ARIAD as being one of the best-in-class ALK inhibitor.

So at the present time, we are absolutely confirming the potential of sales above US$1 billion. We are seeing also – performing very well and we will do further lifecycle management to strengthen the product and we have also 788 in the pipeline which is progressing. So overall, on the ARIAD front, all the traffic lights are green and doing very well..

Thank you very much. So, now, I would like to take the next question. The next question is from Sakai from Credit Suisse. If you have questions in Japanese, Please go ahead. Next question is from Sakai from Credit Suisse, go ahead please..

So, there was a confusion, can you hear me now?.

Yes, it’s very clear. Thank you. Please go ahead..

So, the previous question was answered. So there is no restriction whatsoever about non-core asset divestiture. So, divestiture of each side reciprocates..

No restrictions..

Okay, thank you. I have another question, which is simple R&D update related question. Today, you didn’t give us an update on R&D. So I wanted to ask you this question.

Relugolix TAK385 for prostate cancer, Phase 3 readout in Japan, when it’s going to be? Myovant is starting a Phase 3 and that’s readout is very close and do you have an option for the U.S. market? I think, this is very close to your expertise.

So could you please update on this?.

Thank you, very much. This is Chris Morabito from R&D. The bulk of the Relugolix activity is being handled by Myovant, as you know, but we do retain active interest in developing this for prostate cancer. The trial is going well. We can’t give an update on the date of the data at this time because of the way the clinical trial is designed.

Frankly, I wasn’t aware of your keen interest in this study and we could provide you some additional information if that’s your focus area. Overall, we are quite pleased with the progress of our relationship with Myovant on this study and Myovant as well, could provide you some additional context if you are so desired..

Yes, thank you very much please do so. Thank you very much and I am really sorry once again about the confusion. Well, thank you very much for joining us anyway..

Now, let us move on to the next questioner. Next question is from Merrill Lynch Securities, Mr. Watanabe..

[Interpreted] Good evening. I am Watanabe. Do you hear me? Yes, clearly. Thank you. I have three brief questions, one of which is about the Shire acquisition related cost. Sorry to repeat this question, but, ¥10.6 billion is extraordinary cost for this quarter. And through year, expenses for fiscal 2018 should depend on the speed of the deal closure.

So I understand that you don’t know the exact amount. But what is the assumptions of the total amount for the acquisition-related cost at the closing? And the second question is about the non-core assets divestitures, when you consider the standalone Takeda operation, Brazil, China, and also real estate and securities divestitures have been going.

So we are concerned that you’ve already used up all of the instruments. So from fiscal 2019 and onward, non-core assets can be divested furthermore from fiscal 2019 and onward as a standalone Takeda? And the last question is about the R&D Day. You scheduled September 27th and October 10.

We are looking forward to that and I understand that you cannot talk about the Shire’s pipeline. But when you consider a new Takeda, we are very much keen about the U.S. strategy going forward. So, you have two separate R&D days.

What kind of message are you going to communicate to the market or existing shareholders? To what extent, what can you tell us, so, as just a preview, could you talk about that a little bit here?.

Okay. So, it’s Costa here. I’ll answer the first question regarding the Shire acquisition-related cost for the quarter one and full year and I’ll hand it over to Christophe to talk about the non-core assets and then Chris to talk about the R&D Day.

So, as I mentioned today, the ¥10.6 billion deal-related cost was predominantly driven by advisor fees and banking fees et cetera. So, this was – the great news is that, we were able to absorb that cost and no changes to the forecast for the full year. Our forecast, as I mentioned for the full year will depend on the time that we close.

So, it’s difficult to come to you right at this stage with a final number. But, at some – at a reasonable juncture in the coming months, we would have an opportunity to share that with you in more detail..

So, on the non-core assets, I mean, first, you are right. We did some disposal in the past acquire strategy like Wako. There is still some opportunities to do that. We did Multilab in Brazil recently. Techpool in China even more recently.

I cannot disclose what is our internal list, but there are still some areas which are not within oncology, neuroscience area. But also we have many – because of the historical businesses we have many products outside of these areas.

So we don’t – we just don’t look only at that, but we look at businesses which we think are underperforming or businesses that which could be in better - managed better, managed by other companies. So, we’ll still have some room for doing that. And on the R&D Day, I mean, we’ll only be able to comment on the Shire pipeline after closing.

So before closing, we cannot of course comment on the qualitatively let’s say on the Shire pipeline. So after closing, we will have of course another R&D Day, by combining the two pipelines.

But we – what our goal with the upcoming Takeda R&D Day, is to share with you how our R&D transformation that we have initiated three years ago is really starting to deliver and to gain momentum and how our pipeline has progressed but also, what is our R&D model, our R&D engine that we have built over the years. How it’s starting to deliver.

And this is very important in the context of Shire as well, because this R&D engine will be the R&D engine – will be the model that we will leverage with after Shire acquisition.

And so – and as we have announced already, instead of focusing on three therapy areas, we’ll focus on four by adding rare disease, but it will be pretty much the R&D engine and the model that we have built in the last four years. So at this R&D Day, we will share with you how it has progressed and how it’s starting to deliver.

So I think it will be quite interesting..

Thank you very much. So, with this answer, I would like to close this Q&A session, because it’s already 6 P.M. So with this, we conclude the conference call. So once again, thank you very much for joining us despite of your very busy schedules. And I ask you for your future support. Thank you very much..