Shionogi & Co., Ltd. (SGIOF) Q3 2022 Earnings Call Transcript

Shionogi & Co., Ltd. (OTCPK:SGIOF) Q3 2022 Earnings Conference Call January 30, 2023 1:00 AM ET

Company Participants

Yoshimasa Kyokawa – Investor Relations

Masako Kudou – Vice President, Finance and Accounting Department

Ryuichi Kiyama – Senior Executive Officer and Senior Vice President, Corporate Strategy Division and Corporate Planning Department

Takeki Uehara – Corporate Officer, Senior Vice President, Drug Development and Regulatory Science Division

Toshinobu Iwasaki – Senior Executive Officer, Senior Vice President, Healthcare Business Supervisory Unit and Pharmaceutical

Conference Call Participants

Motoya Kohtani – Nomura Securities

Eiji Ueda – Goldman Sachs

Hidemaru Yamaguchi – Citi

Fumiyoshi Sakai – Credit Suisse

Naomi Kumagai – Mitsubishi UFJ Morgan Stanley

Kazuaki Hashiguchi – Daiwa Securities

Yoshimasa Kyokawa

Hello, everyone. My name is Kyokawa from Public Relations Department of Shionogi. Thank you very much for joining us today. This is the briefing for the Financial Result of the Q3 of Fiscal Year 2023. From Shionogi today we have Dr. John Keller, Senior Executive Officer, Senior Vice President, Supervisory Unit and then we have Dr. Iwasaki, Senior Executive Officer, Senior Vice President, Healthcare Business Supervisory Unit and Pharmaceuticals Commercial Division; and then, Dr. Ryuichi Kiyama, Senior Executive Officer, Senior Vice President, Corporate Strategy; and then Dr. Uehara, Corporate Officer, Senior Vice President; and then we have Masako Kudou, Vice President, Finance and Accounting Department.

Today, Kudou is going to brief you on the financial results for the Q3 and then Mr. Kiyama is going to explain our undertaking for the future growth, then we will have Q&A session. We are planning to end the session at 04:00.

Now let me explain simultaneous translation. Simultaneous translation is available for this session today. If you wish to use simultaneous translation, please click the globe icon at the bottom of your screen. And choose either Japanese or English.

Now, let us start, Kudou-san .

Masako Kudou

My name is Kudou, I’ll give you the briefing of the financial result of Q3 and the amendment of the forecast.

Now page four. This is the actual JPY338 billion for revenue, operating profit of JPY146 and then the net profit JPY198 billion. [indiscernible] Xocova we booked JPY100 billion for the of Xocova. And for base business, it’s been going very well. So as you can see at the right, as I can see, the revenue and other profit categories are achieving higher figures as compared to the previous year. This time, we are indicating how many times we’ve increased our revenue and profit. And the progress as of Q3 is going very well. We’ve achieved — we’ve already achieved the forecast at the time of the Q3. So we are going to revise our forecast upward again, and also the corporate operating profit and profit before tax and profit attributable to owners of parent have already achieved the record high.

Page five. It’s a statement of profit and loss. As to revenue, purchased by the Japanese government was booked for the third quarter. And as to other products, the tendency or the trend is same as Q2. In addition to the Xocova, HIV royalty has increased as well because of the good sales and also the favorable exchange rate. And also, cefiderocol is serving very well in western countries. As to cost, it’s very difficult to forecast the cost of COVID-19 products. So the progress rate is 55.7%% for this. And this has been factored into the revision of the forecast. The cost of sales and SGA, as we have invested heavily, but the overall expense has been well controlled. So the operating profit is JPY146 billion and it’s already exceeding JPY120 of our original budget.

As to financial income and costs, it’s JPY52.3 billion and it’s increased a lot from the previous year. This is thanks to the increased dividend from ViiV. The timing of the receipt of the dividend has shifted to April. That’s one factor. And ViiV is doing very well because of the reasons we are now having very good figure. And the dividend is fluctuated because of the cash available at the ViiV. Because of that, we are very conservative, but the progress rate is more than 90%.

As to profit before tax and profit attributable to owners of parents, it seems lower than the previous year. But last year, there was a one-off factor of return money from Osaka tax office. And this is revenue by segment. As to prescription drug in Japan, the actual between April and December is 54.7. It’s a big down from the previous year. This is because of the Intuni and Vyvanse they are doing well. However, because of the generic Cymbalta and also because of the return of the anti-influenza, the sales declined. As to progress rate at 71.5%, it seems lower figure. However, the weight of the infectious disease is big in the fourth quarter. Therefore, it’s on track for Q3.

And as to overseas subsidiaries and export, it’s going very well. As to Shionogi Inc. it seems like same as the previous year, but there was JPY2.2 billion of onetime revenue for the last year. But this year, we are seeing a big increase because of the sales of Fetroja. As to contract manufacturing, it seems delayed. However, on the full year there will be no difference from the budget. As the OTC, because of the [suite] (ph) of COVID-19 is going very well. As to royalty income, continuing from the second quarter HIV franchise is going very well in terms of the sales and also there is a favorable effect of the exchange rate. So it’s going very well.

As to Crestor for this year from AstraZeneca, we didn’t factor in the royalty from AstraZeneca. But it’s selling very well globally. Therefore, we received JPY1.3 billion as royalty. As to COVID-19related products, the purchase of the Xocova by government, that was JPY100 billion, JPY10 billion more is necessary to achieve the target. And we will try our best in Korea and China, so that we can achieve our target.

Page seven. This is the revenue forecast for prescription drugs in Japan. With regard to the revenue of this, as I have said, it is smoothly progressing. With regard to influenza family in the second quarter there were some returns, so it was minus JPY3.8 billion, but as it says in the notes, from — there was a revenue of JPY1.5 billion from April to December.

The next page, this is the results and progress in Q3 of FY 2022. What I would like to tell you is that, we are finally able to deliver Xocova to our patients. Up to now to COVID-19, we have conducted a much investment and at least this is contributing to our revenue and profit. And also with regard to vaccine S-268019, we are conducting the submission for the approval, and we have been able to attain great progress.

With regard to the settlement in the cost and also SGA in the COVID-19 related financial forecast, there were a lot of uncertainties. Therefore, we had a very conservative forecast, however, we were able to exceed our forecast.

And now, I would like to explain the financial forecast for 2022. This is regarding the changes in earnings forecast. In the HIV business, we are doing well and there is a royalty from ViiV, and therefore, we are going to revise our forecast. Xocova cost and also because of the volume increase of the manufacturing, the cost ratio has increased or improved. With regard to general and administrative expense in order to prioritize COVID-19 related business, some of the originally planned growth investments will be shifted to the next fiscal year. And also, it is — there is going to be a proactive investment and increase in R&D expense in order to cope with the R&D expenses, aggressive investment in product development, including COVID-19 related projects.

Page 11. Because of there were uncertainties in the past. I said that there is going to be a revision in the forecast. And because of the clarification of the Xocova and the HIV business situation, we are going to implement a second upward forecast revision. It seems like there is not much a difference in the forecast, but because of Xocova business in Korea and China [STS] (ph) 2030 update will be conducted and also the forecast will align with that forecast starting from April. And this is a forecast that we are quite sure that we would like. We would be able to attain. And therefore, further increase in sales are may be expected from overseas progress of Xocova and reflecting this situation, the second upward forecast revision will be conducted.

Page 12 is the revision of earnings forecast: statement of profit and loss. Revenue and all the profit categories are upgraded. Page 13. This is revenue by segment after revision. As I explained, royalty from ViiV and also royalty for Crestor for [indiscernible] have been incorporated. We are going to achieve our target and for the next year, we would like to achieve further increase of both sales and revenue.

As to Xocova, we believe that we are going to increase the sales further. COVID-19 will be categorized as category five and as because of this change, I think more people would use our product. And we also like to negotiate with the government about the storage of the product. And depending on the situation in China and Korea, we may further increase our sales. And also, we are thinking of getting approval for vaccination. In April, we are going to update our midterm plan and [indiscernible] activities will be done very actively. There are many other items that we cannot disclose now. However, we are taking a lot of measures and please stay tuned. That’s all. Thank you very much.

Ryuichi Kiyama

Now we are going to — Kiyama is going to talk about Q3 and the growth for the future. This is about the Xocova. And this is the summary. And page 16. And because of the approval last year and for Shionogi getting approval is not the start, it is a start, not the end. As the new variant comes up, the role of the antivirus is increasing, and we believe that there will be strong needs. Shionogi is going to sell Xocova globally and we will also focus on pediatric and prophylactic. And then along COVID, we are going to gather evidence so that we can contribute to the normalization of people’s lives.

As to the coexistence with the COVID-19, we will continue to take measures to fight against COVID-19. And using the following two slides we are going to explain a situation. This is the Japanese situation for Xocova. Supply from government purchase is different from the normal sales and we have been able to deliver Xocova to more than 20,000 patients in Japan and there is no major safety concerns. For the future, we are under discussion with MHLW and PMDA for general approval and also the Phase 2 — Phase 3 part of the Phase 2/3 trial conducted in Japan and Asia, the data of that will be announced at academic conference.

We will talk about the long follow – along the COVID follow-up interim analysis results and antiviral reduction effect around February of this year. With regard to the Xocova, in Korea, we have submitted an approval application on January 3 of 20 23. Initially, we were going to aim for approval under condition. But right now, we are continuing discussion with Korean government and regulatory authorities. And we are aiming at approval by fourth quarter of fiscal year 2022.

And next is the global study situation for Xocova. With regard to SCORPIO-HR, we are increasing sight outside of the United States. And in 2023, we are aiming for completion. And also, a STRIVE trials for the hospitalized patients, we will be starting this trial in February of 2023. And also SCORPIO-PEP, right now we are continuing protocol discussion with PMDA and FDA, and we will be starting this trial in February of 2023.

Next, with regard to Xocova in China. There is a greater need for the clinical trial. And right now, PingAn-Shionogi is preparing to apply for NDA. After we have gained approval, we want to be able to deliver at Xocova as soon as possible. So we will provide the product from Japan initially and then switch to domestic production in China as soon as preparations are completed.

And also with regard to the construction of the production system, we have completed PV at drug substance and formulation plants. Right now, we are aiming to build a production system to supply more than 20 million people a year. And 100 million production capability is also available at this point. And also with regard to the supply and sales system, our license agreement for import and distribution with SHAPHAR and license agreement for promotion with a CTTQ has been conducted. And with this, we would like to — and we have established the system so that we can deliver a Xocova to all of the population throughout China.

Next is the pipeline progress. In total, the development is in progress smoothly. And today, I would like to highlight on S-309309 and Olorofim. With regard to S-309309, this is an indication of obesity and it’s a mechanism different from GLP-1 for obesity. With regard to S-309309, it can be provided at low cost and with a nonclinical study, there is an expectation for high efficacy and it can be combined with GLP-1 as well. So we will be able to deliver another option for treatment. And therefore, we are aiming at a global development. And also, we have not seen any adverse events of any concern so far, and there is a high tolerability as well as efficacy. Based upon this good study result, we are going to conduct a global Phase 2b study.

Next is the Olorofim. It is a new mechanism of action and its indication is a limited treatment options for invasive fungal infection and invasive aspergillosis. F2G is conducting a Phase 2b study right now, Study 32, and it’s mid-term result has become available. A Study 32 is for any unlimited treatment options for invasive fungal infections and invasive aspergillosis, which does — patients who do not have any other treatment options, so it’s an open label study in patients with limited treatment options and you can see that the results — 87% is the death rate for the control. However, with Olorofim this rate has been reduced to 32%. So as you can see, the efficacy including high survival rate was shown and also it was well tolerated even with dosing up to two years. Therefore, NDA based on positive results is underway — under review by FDA at the moment. And we will be making steady pipeline progress, including these two progresses.

And next, I would like to explain about the progress of HIV franchise by ViiV Healthcare. As you can see from the financial report of ViiV, their sales is increasing, driven by the HIV franchise. With regard to Dovato, the sales was 360 million pounds in Q3 2022. It was an increase of 73% Y-o-Y. And as you can see for each quarter, it is increasing and it is offsetting the decline of the others.

With regard to Cabenuva, the Q3 2022 sales has been over 100 million pounds. With regard to Apretude, which is a long acting inject in for prevention. It will be an important growth driver going forward and up to 2026 towards 100 billion pounds goal, it will be growing steadily. And also for S-365598, it is penetrating into the U.S. market very smoothly. And also, we will be going into the European market and that we are expecting growth, that was with regard to Apretude, sorry.

And next is with regard to S-365598. It is an ultra-long acting injection and Phase 1 trial has been initiated already in December of 2022. It is an oral administration formulation and the steady growth of innovative portfolio and development progress of next generation long acting products to drive medium to long term growth can be seen.

Next is, with regard to the development status of the combination candidates for ultra LA Injection. As you can see, these are not compounds developed by Shionogi, but they are the combination candidates for our LA Injection. Virus resistance should be prevented by combining with other drugs. And therefore, we need to develop combination drugs. And ViiV company is right now developing five compounds as combination candidates.

And today, I would like to give you a progress report on broadly neutralizing antibody N6LS. By blocking HIV’s entry into human CD for a positive cells, the HIV transmission process may be prevented by this N6LS. And a single infusion of N6LS demonstrated strong antiviral efficacy, while being well tolerated by the participants. And also we expect to begin Phase 2b trial of this N6LS in combination with other antiviral — retroviral in that 2023. That is all from myself. Thank you very much.

Question-and-Answer Session

Operator

Thank you very much. Now the floor is open for Q&A. [Operator Instructions] First, Mr. Kohtani from Nomura.

Yoshimasa Kyokawa

Kohtani from Nomura. Do you hear me okay?

Motoya Kohtani

Yes. About the Xocova, as you mentioned, after becoming category five, I think there will be spread of COVID-19. We’ve used a lot of the drug for influenza, so I think people would use it for COVID-19. And the reason why because we are using other anti-influenza in order to lower the risk. There is non-COVID problem as well. So I think people would use it. And as compared to influenza, there was no selling of the antigen tests, but now antigen test is available for people. And if the government subsidy maintains, I think it would be easier for COVID-19 product as compared to influenza. But there is also a negative scenario and the current share price is reflecting that.

So I have a question to [indiscernible]. If it’s categorized as category five, what will be the reasons — potential reason why it wouldn’t be used if there is any reason for not being — Xocova to not be used.

A – Unidentified Speaker

Okay. Thank you for your question. As you mentioned, at to Xocova at influenza, we got less of risk factors once people get positive they would receive the medicine so that they can prevent the spread of virus and to decrease the conditions, not only the patient themselves, but also their family members and community as a whole can be benefited. Thanks to this drug. And that’s how we obtained the data. Therefore, as you mentioned, after getting emergency approval it would be shifted to regular distribution, and then it will be easier for people to get access to this product.

And you asked if there is any negative scenario about Xocova, if there is any potential scenario where people wouldn’t use our product Xocova and that would — so far, more than 20,000 people use this drug, and we now have accumulation of safety data. And there’s no concern about safety so far. Therefore, I think that people would continue to use Xocova. But if something happens in terms of the safety, then, of course, doctors may not prescribe this drug to low risk patients. However, we don’t see any signal, but if you ask that will be one factor. I hope I answered your question.

Motoya Kohtani

Drug drug interaction. What about drug drug interaction?

Unidentified Speaker

I don’t think that will be a problem. Now under the situation of emergency approval, there are complicated process, such as informed consent, therefore, some hospitals and pharmacists are not using this drug. However, once it shifted to regular distribution, it will be easier to prescribe Xocova. And as you mentioned, for young people, they don’t generally use other drugs. And once they get used to it then they can immediately check if there is any problem in terms of DDI according to the feedback from our doctors. So I don’t think that’ll be a big problem.

Motoya Kohtani

With regard to the treatment for COVID-19, Xocova overseas. I am a little pessimistic. Vietnam is complicated, but also in Korea and China I think on 28 of December, Xocova was not approved. And your partners’ stock price declined. And after that, you have submitted for the approval. So I don’t think that Korea, you can — I don’t think for Korea you can expect approval? On the other hand, China too, it is not being approved. We [indiscernible] is being announced in [MDGM] (ph) and it seems that the Chinese made drugs are being prioritized. Therefore, again, for China too, I do not have a very optimistic forecast for [indiscernible] in China. So what do you think about your forecast in China and Korea?

Unidentified Speaker

Thank you for your question. So activity in Asia for Xocova. With regard to Korea, first of all, in Korea, our partner company has told us that for ERA we were not able to apply. But the result of the Phase 3 study has — is a data that can be reviewed. And so, as a conditional approval, we made progress with regard to the application of — for the approval. But we were going to shift to ERA and we are expecting that we will be able to receive the review from the authority of Korea. And with data package we will be subject to discussion as to whether it is applicable for ERA in Korea.

In China, the Chinese made drug is being gone through reviews, and we have heard that they might receive ERA in China. On the other hand, Xocova is also applying. So the data review is being made for Xocova in China as well. And we will be considering whether NDA will be possible in China based upon their review of our data.

Motoya Kohtani

I hope that you can hear me.

Unidentified Speaker

Yes.

Motoya Kohtani

And also, with regards to Phase 3 study, the SCORPIO study, PEG study in U.S. What is the situation? So in 72 hours after the event and I think the condition was the same as in Japan. And for HR study, it was within 130 hours. So with the longer duration after event, I think there’ll be more noise and therefore I would think — I would say that the success rate would be lower for the HR study. And so do you think that you will be shortening the duration? Or do you think that you will be successful with the present condition of the hours after the event down set?

Unidentified Speaker

In the global Phase 3 study, the protocol is going to be changed. We are discussing with FDA so that we can change the protocol. And NIH is fully committed with this study, so NIH chair and the committee will be having a discussion for this protocol discussion. And therefore, it might take some time, but we are in the process of trying to change the protocol. So thank you very much. I look forward to your further feedback.

Operator

Next, Ueda-san from Goldman Sachs.

Eiji Ueda

My name is Ueda from Goldman Sachs. I have a question about Xocova domestic market. Going forward, when do you plan to get full approval? And you also talked about long COVID. You said that you are getting information about long COVID. What kind of criteria did you use for evaluation? [indiscernible] criteria, have you made agreement with the authority?

Unidentified Speaker

Thank you for your question. About the process of the full approval — for regular approval [indiscernible] MHLW and PMDA, we are discussing the schedule. We don’t have the specific dates or schedule yet. As you know for emergency approval there is a condition that we have to get full approval within a year. We have to submit all the data so that we can move on to the regular approval process.

About your second question, about long COVID. We’ve conducted Phase 2 and Phase 3 and all the patients in this study after one month, three months, and six months — excuse me. Three months, six months, and 12 months at each time point we check if they have any non-COVID conditions. It may not possible to get answers from all the patients, but the feedback ratio is very high in Japan. The result of the feedback will be analyzed and then we are going to announce that figure in February. We looked at 12 conditions and also hearing and smelling. I mean, the taste and smelling and also other psychological or psychiatric long COVID conditions. We ask them if they have such conditions, and we also ask the grade of those conditions. We will analyze those information, and then we’ll see in which way we can lower the risk, and that information will be disclosed soon.

Eiji Ueda

Thank you very much. Was it a blinded study? And as to those criteria, have you made agreement with the authority?

Unidentified Speaker

It was an unblinded study. Because they don’t know if they are having active drug, but the key has already been opened. So this is unblinded test. And as to long COVID, a definition of the long COVID and also any effectiveness of treatment. There is no fixed or established ways or established definition. Therefore, we are going to analyze the information that we are getting from this study and then we will talk to PMDA and experts so that we can have discussion and digest or interpret the results together.

Eiji Ueda

You said that this is an unblinded test. And patients, did they know that they’ve got placebo or effective drug?

Unidentified Speaker

As if they try to get information, the doctors have information at the sites. But I don’t think they informed patients whether it was placebo or not. I think that they don’t know which they take. That’s my understanding.

Eiji Ueda

So with regard to the forecast of the expenses for the future R&D. So after next year, what will be the standard or the numbers for the R&D expenses? And will we consider the R&D expense for your company, I think, Xocova will have a great impact. So when making the plans for R&D expenses, what are your conditions that you are using?

Unidentified Speaker

Thank you for the question. With regard to R&D expense, I will give you some figures with regard to vaccine, the COVID-19 drugs as well. We will be accumulating evidence and also expanding indications. And therefore, in the fourth quarter and the next year, we will be conducting several studies. With regard to the expenses, the expenses will not be so large [indiscernible] the R&D will be conducted proactively and investment will be conducted — R&D investment proactively. But after next year, I think the R&D expenses will be similar to prior COVID-19.

Unidentified Speaker

With regard to the second question, could you repeat your question?

Eiji Ueda

Yes. Xocova sales will have an impact on the R&D expenses that will be available for your company. So based upon that, do you have any plans for the investment for R&D going forward?

Unidentified Speaker

So it will have an impact both on, to some extent, on R&D investment, but also on strategic investments where further expansion of the pipeline and other activities. So we will be obvious calibrating those expenditures along with our top line. Both for Xocova sales, as well as, of course, the royalty and other factors that usually impact.

Eiji Ueda

Thank you very much. That’s all from myself.

Operator

Next is Yamaguchi-san from Citigroup.

Hidemaru Yamaguchi

Do you hear me?

Unidentified Speaker

Yes.

Hidemaru Yamaguchi

My name is Yamaguchi from Citi. My first question is about the revision of your forecast. As you explained, as to Xocova the sales remains the same and the cost of goods was lower than the previous forecast. For other items, if it was not approved that’s about JPY30 billion buffer in case it’s not approved. This time that had been advanced or is there any other upfront potential?

Unidentified Speaker

For [SGA] (ph) there is a buffer — feature growth buffer in FGA. But this time there are some uncertainties about the global development of Xocova. And as I mentioned, we have to strengthen our financial foundation and we want to invest in growth driver for the future. So as of now, including that buffer that’s the minimum figure that we are having now.

Hidemaru Yamaguchi

Okay. And my second question is about the revision of the midterm plan. Do you have any specific date? Is it in April to revise your midterm plan?

Unidentified Speaker

We are planning to have it next spring, but we don’t have the specific date yet.

Hidemaru Yamaguchi

My last question is about domestic Xocova. [indiscernible] has IVMS. So you have some sales booked, and I think it’s going very well. It’s about JPY30 billion. On the other hand, [indiscernible] and government purchase, so we don’t have any figure, and it’s 20,000 people have taken this drug. But you are not — you are not able to do marketing yet [indiscernible] is used a lot, and other drugs are not used. So there is a bias or imbalance in terms of the uptake, what do you think is the reason? And do you think this situation will be resolved? And about the onset of your drug, do you have any feedback from hospitals? Onset of the effect.

Masako Kudou

Masako speaking. As to [indiscernible], as you mentioned, after regular distribution because of the public subsidy, the restriction is about 10,000 or 11,000 or even 15,000 and that would increase to about 40,000. And the other factor is that, in the government purchase there is a process of patient registration. And once it gets full approval, that kind of complicated process will be eliminated. And then I think the number of patients would increase. But on the other hand, if it’s categorized as five the number of patients may increase. However, we are not sure if all [DGPs] (ph) would accept COVID-19 patients. That’s something that we are not sure. It will depend on NHI price and the number of patients. But if we assume that we will get public subsidy, we can expect certain number of patients.

Hidemaru Yamaguchi

Do you have any feedback with regard to the drugs?

Unidentified Speaker

Well, seven days — well, eight days has become seven days. So there’s one day reduction. And all five symptoms are being improved. And also in the clinical level, the fever declines and the sore throat has improved. So individual symptoms are being improved. And there are some doctors who are very positive with regard to that. And also, there is an advantage in preventing worsening. So once you’ve used it, clinically speaking, the symptoms do improve. And we have received many of such voices.

Hidemaru Yamaguchi

Thank you very much.

Operator

Thank you. Next, Credit Suisse, Sakai-san, please.

Fumiyoshi Sakai

This is Sakai from Credit Suisse With regard to Xocova from myself as well. I have two questions. one is with regard to the — so JPY100 billion for the third quarter, that’s the sales. And how have you settle this based upon the [VS] (ph). There seems to be no changes in the VS. So Kudou-san, could you tell me with regard to how it has impacted the VS?

Masako Kudou

It’s a government purchase of JPY100 billion and it was divided into two occasions in the VS. With regard to the second income, it is written here in the settlement financial report. And also, again [indiscernible] the increase will be seen in January, that will be the next increment.

Fumiyoshi Sakai

So this is a government budget. So all of the incomes will be coming in by March 2023, correct? And it will be incurred as cash. Is that correct?

Masako Kudou

Yes, that is correct.

Fumiyoshi Sakai

So whether it’s going to be category five or whether it’s going to be subsidized. If it becomes a category five, it will automatically become a normal distribution. And so what do you think about this? Could you reorganize your thoughts with regard to how you forecast? Whether it will — what will happen if it is re-categorized to category five and what will become of the subsidy from the government?

Masako Kudou

With regard to category five — Sorry. With regard to the official subsidy, I think up to the next fiscal year, I think the government subsidy will continue. Maybe the amount may be declining. However, the official subsidy will continue in the next fiscal year as well. With regard to category five, the government has made the official announcement only last week. So if it becomes a normal distribution and the illicit price will change, I think our sales will increase because it will be expanded to greater number of patients. And I do not know exactly how it will relate to category five.

Fumiyoshi Sakai

So in the next price listing, will it be included in the agenda item?

Masako Kudou

So the announcement was made only last week. But one of the point is that because — with the pandemic, the listing of the price is going to be revised and also with the listed price, whether it is going to be unique to COVID-19 or whether it is going to be a list similar to influenza drugs is still a matter of discussion. I think the timing of the listing will be in — like in the normal case. But as far as how the price will be settled is unknown. So in other words, the purchasing price from the — purchasing by the government will not be repeated in the normal pricing listed price, correct.

Operator

Thank you. Next from Mitsubishi UFJ, Ms. Kumagai.

Naomi Kumagai

Kumagai speaking. Do you hear me? My question is about Xocova in Korea. Is it going to be government purchase? And the second question is, the sales of COVID-19 products, JPY110 billion and the remaining JPY10 billion is mainly in Korea. Because for China, because of the fiscal year ending that the sales will be booked for the next year, that’s my understanding. Is it correct?

Unidentified Speaker

With respect to Korea, those aspects with respect to purchase are also under active negotiation by our partner at present. And with respect to sales — about the sales of the China, as you mentioned, the booking period is different by three months. So the figure until December will be booked only. But the sales — when the sales is significant and when the profit is booked, then that should be reflected on our statement. So it will be depending on the significance of the amount. If it’s big, that will be booked for this fiscal year.

Naomi Kumagai

Thank you. About China, I understand that they are doing rolling submission. When is the last submission and what is the expected approval date?

Unidentified Speaker

Actually, it’s is a little ahead of our projections that there’s two things to consider. One is, as you recall, Cabenuva launched during the period of COVID. So it took some time to set up the injection at the sites, as well as the purchase and billing processes. It turns out that the overlap between sites that provide LA treatment and sites that provide LA prep is only about 40%. So although we are now outside of — mostly outside of the COVID window, we have to do a lot of that basic work that was done for Cabenuva needs to be done for the sites for Apretude as well.

With respect to reimbursement, we are on track with our own projections [indiscernible]. But it certainly would be helpful if there is more government support for the prep area. From a policy point of view, that is under discussion with many positive words, but there hasn’t yet been a federal strong position taken fully supporting preps. Individual states and individual plans are. So we are hitting the trajectory, we anticipated to hit at this stage, but there is as you know, a lot of startup work still to do.

Naomi Kumagai

Very helpful. Thank you.

Operator

Thank you very much. The next question will be our last question. From Daiwa Securities, Hashiguchi-san, please.

Kazuaki Hashiguchi

This is Hashiguchi. With regard to Xocova in Japan, I have two questions. The first question is, going forward, in order to expand Xocova one of the important points would be, I think, the guideline. The guideline will be revised. That’s my forecast. And also if — I think this will be a drug, who are not high risk patients? And also in non-high risk patients, the judgment of non-high risk patients need to be made carefully, that’s what the guideline says. And in order to apply the Xocova to abroad set of patients, I think the guideline is based upon evidence. So in going forward, what kind of data will you publicize us in order to revise the guideline? And what is the timing of the data which will be available, which will figure the revision of the guideline?

Takeki Uehara

This is Uehara speaking. Let me respond to your question. So as I have indicated in this diagram, right now in ERA, the primary symptom is to be shortened. This is included in the package insert. So with regard to antiviral efficacy in the second and the third Phase study, all of the analysis has been completed. And so with regard to the Omicron, the Phase 3 part data, what kind how many hours will be necessary in order to have an antiviral efficacy is included in this study results. So we will disclose this and not only this antiviral efficacy with regard to non-high risk patients, whether this is applicable to such patients. Safety is one of the important factors that is important. And another factor is with non-risk, high risk patients, there are many patients who suffer from the aftermath symptoms. Therefore, we have taken data with respect to those symptoms, and these symptoms will be confirmed by the specialists. And by applying Xocova if such aftermath symptoms can be alleviated by Xocova. This can lead to the promotion of the prescription of Xocova. This is our expectation.

In the third phase apart, this is data of after the onset and three months and six months data is available today. And this will be disclosed in the conference in February of [indiscernible]. And also, for longer period data, we are now collecting such data.

Kazuaki Hashiguchi

In the Congress, in February, with that data which you will be announcing, do you think it will have an impact to revise the guideline or is that too much to expect?

Takeki Uehara

I do not know how to respond to that question. I hope that the doctors will look into the data and I hope that the doctors will discuss about the impact of this data to the guideline.

Kazuaki Hashiguchi

With regard to the listed price, I think there is much discussion ongoing. And I think there is going to be a hearing from the patient organization as well. And — sorry, the industry organization, sorry. And so what kind of opinions do you want the industry or organization to express and advocate.

Toshinobu Iwasaki

This is Iwasaki speaking. The epidemic or the pandemic, the seventh wave, the eighth wave, ninth wave, when it will come has been forecasted. And based upon this forecast, the listed price is to come down. I think that’s the intention. So the listed price is always ready to decline. And this seems to be universal to all kinds of drugs so they are ready to reduce the price for all kinds of drugs at any time. However, this time, this is a drug for pandemics. So I think we should advocate that point.

Yoshimasa Kyokawa

Thank you very much. So with this, we would like to conclude the third — the announcement of the third quarter of fiscal 2022 financial results for Shionogi & Company. And thank you very much for your attendance and participation.