Nxera Pharma Co Stock

[Interpreted] It is time to start Nxera Pharma's Q3 FY 2026 Results Briefing and R&D Day. Thank you very much for joining despite your very busy schedule. I will be serving as the MC, Nomura, CFO of the company. Today, Chris Cargill, CEO of the company; COO and President of Nxera Pharma Japan, Toshi Maeda; CSO and the President of Nxera Pharma UK, Patrik Foerch, are attending.

As usual, we have the simultaneous interpretation. Please set the language selection icon of the Zoom and you can listen to either Japanese or English. You can also hear the original speaker voice.

Now according to the presentation materials, we will do the presentation. We have the Q&A after the presentation. We have the materials on the screen, and they are uploaded on the website. If you need them, please go through Investor Relations IR library and presentation to access the materials. As for the Q&A session, institutional investors and analysts and media people, you may raise question by raising hand. The other people may ask -- submit questions by Q&A button. We will respond to questions as long as the time permits.

Let us move on to presentations. At the outset, Chris will talk about the operational highlights, then I will cover the financial results summary. Maeda will do the update on Japan APAC Commerce. Patrik will do UK R&D progress, and Chris will talk about the road ahead.

Now please take a look at Page 5. Chris, over to you.

Thank you, Nomura-san, and thank you, everyone, for joining us today. If you remember one sentence from today, let it be this. Nxera is profitable in Japan. We are discovering in the UK, and we are partnered with the world. So I've got 3 messages here. First, we're profitable and we're growing. Nine-month revenue rose 27% to JPY 27.7 billion. Core operating profit was JPY 9.8 billion, already 126% of full year guidance, with JPY 7.1 billion from our Japanese business alone. Now in October, we added lucerastat for a rare disease called Fabry disease, and this will be our fourth product in Japan.

Second, our science is something that partners are paying for. Partnered revenue was JPY 13.3 billion, up 63%. Seven molecules from our UK discovery platform are in partners' clinical trials with 1 in Phase III. And our partnerships carry more than USD 4.5 billion in potential milestones plus royalties. And thirdly, we are on track for 2030, more than JPY 50 billion of revenue and operating margin above 30% and at least 5 products in Japan. So 3 strengths, 1 company listed in Tokyo, and I'll return to this at the end of today's presentation. So we're profitable today, and we're building value in every part of the business through to 2030.

Next slide, please. So here are the 9 months on one page. One fact stands out, Nxera is now profitable, and both our businesses are contributing. So on the left, revenue grew 27% from JPY 21.8 billion to JPY 27.7 billion. Reported operating profit was JPY 3.2 billion against a loss of JPY 5.9 billion a year ago. In the middle, our medicines in Japan. PIVLAZ helps prevent a dangerous narrowing of blood vessels in the brain after ruptured aneurysm. Sales of the product grew 10% to JPY 9.9 billion.

QUVIVIQ for insomnia grew 43% to JPY 4.5 billion. And on the right, our partners, Neurocrine, Centessa, AbbVie and Lilly all paid us milestones as their programs advanced. Lilly acquired Centessa in a transaction worth up to $7.8 billion. Nxera is eligible for milestones and royalties across that whole orexin portfolio worldwide. And a new company licensed one of our GPCR programs for up to $275 million in milestones plus royalties and an equity stake. So a year ago, a loss, this year, a profit from both businesses.

Please turn to the next slide. So in February, we made 5 promises for 2026, and here is where each one stands today. One, more than JPY 19.5 billion of sales from PIVLAZ and QUVIVIQ. And after 9 months, we are at JPY 14.4 billion, 74% of the target and on track. Two, at least one late-stage medicine for Japan and Asia Pacific, and we've delivered this with lucerastat. Three, one or more high-value partnerships, and this is in progress, and we will report when there is news. Four, at least 1 Phase II trial started by a partner, and this has been delivered.

Three programs are moving into Phase II, NBI-'570 and NBI-'567 with Neurocrine and ORX142 with Lilly. And five, cutting costs by more than 10%, and we expect to be profitable for the full year. Core R&D is down 20% and core SG&A is down 11%. We are profitable after 9 months and ahead of the plan. So clear promises reported openly and profit ahead of plan is my summary.

Hiro will now take you through the results in detail, including our forecast for the full year. Thank you, Hiro.

[Interpreted] Thank you, Chris. This slide summarizes our results for the first half of 2026, showing each revenue segment alongside its historical trend. This is a familiar format. The revenue went up against JPY 21.8 billion, increased by 27% to JPY 27.7 billion. The milestone revenue became JPY 11.8 billion from JPY 6.5 billion, and the product sales grew to JPY 14.4 billion from JPY 12.2 billion, respectively. The milestone revenue had progress in development, resulting in milestone among our key partners, Neurocrine, Lilly, AbbVie and Centessa.

Product sales were covered earlier. So I will skip the figures here, but both PIVLAZ and QUVIVIQ delivered strong growth. On the profit side, we moved into black with JPY 9.8 billion in core OP and JPY 3.1 billion on IFRS basis. Although this was slightly lower than Q1, in Q3 the core was JPY 3.3 billion. On IFRS basis, it is black by JPY 1.2 billion.

Now please move on to the next page. As usual, this is by business domain split into core OP and reported OP. On the far left, in blue is our platform business, which follows what you call biotech venture business model. Just to the right red is our commercial business, which follows pharma-style business model. Platform profit depends heavily on milestones from our partners and difficult for us to control. So we are controlling to grow the commercial business spread and stabilize our earnings. Until Q3, for both platform and commercial, we see the increase in revenue and the cost. Especially for SG&A and R&D, we have been able to reduce by 10%, 20%, and we are trying to generate a profit.

Please move on to Page 11. This page is very close to the previous figure, but just the percentage. Compared to the year-on-year basis last year, this shows the progress against our guidance. The guidance uses the bottom of the range. So as a company, we are not evening out by quarter, but suppose that it is evened out since this is Q3, it will be 75%. Please do interpret that way. The message is basically the same as the previous slide. And as Chris said, we have steady progress. And going to the far right, if you take a look at the progress on IFRS basis, revenue is now 82%, which is good progress and cost is basically in line, roughly 3/4, and this is maintained at roughly 75%. This is very brief.

But with this, I would like to conclude the financial part of Q3. Next, Maeda will explain Japan APAC business. Over to you, Maeda-san.

[Interpreted] This is Maeda, COO. From here, I will explain our Japan and APAC business, starting with the status of 2 products we already sell. Next slide, please. Both the products we already sell are on track towards this year's full year targets. First is PIVLAZ. Sales for January to September were about JPY 9.9 billion, up 10% year-on-year, which is about 71% progress against the full year target. In March of this year, clazosentan practical dosing guide was released for use in clinical practice led by the academic society, and we will continue our commercial activities making full use of the guide.

The second is QUVIVIQ, our treatment for insomnia. Sales for January to September were JPY 4.5 billion, up 43% year-on-year, which is about 82% progress against the full year target. Shionogi also revised their sales upward. And so we expect a further boost of the growth of QUVIVIQ overall. On overseas expansion, this month, we signed a license agreement with Synmosa for 8 APAC countries. In the rest of APAC, we expect a product launch in Taiwan from the second half of this year and South Korea next year, which we expect to further boost the growth of QUVIVIQ overall.

Next slide, please. So third product, vamorolone, acts on the same receptor as conventional corticosteroid, but differs in its downstream effects. We aim to offer a new option to patients who need long-term treatment. Top line results from the GUARDIAN clinical trial showed markedly improved safety compared with corticosteroid. On the business side, we are focused on being able to leverage our existing commercial base. At the facility level, we expect a sales synergy of about 70% with PIVLAZ. On the development time line, we have agreed with the regulators in Japan and Korea that no additional clinical trials are needed before approval.

In Korea, we completed the filing this month. And in Japan, we plan to file next year. In both Japan and South Korea, we plan for approval and launch during 2028. The graph on the right shows sales forecast in the U.S. and EU, which exceeds JPY 100 billion at peak. These are partner sales, not Nxera revenue. So please view them as reference information showing the product's potential.

Next slide, please. This Wednesday, we signed a license agreement with Idorsia of Switzerland for the development and commercialization of lucerastat in Japan and APAC. Lucerastat is an oral drug for Fabry disease. The upfront payment is about JPY 1.3 billion. This is the amount that was pre-agreed when Nxera acquired Idorsia's Japan and Korea businesses in 2023. Nxera will co-fund part of the global clinical trials and will lead development in Japan. The strategic significance of in-licensing lucerastat comes down to 4 main points. First, it targets a rare disease, which is a focus area for us. Second, it is late stage and derisked with more than 6 years of data. So development risk is low.

Third, it is a differentiated oral therapy with orphan drug designation in the U.S. and EU. And fourth, we enjoyed modest upfront. We see peak sales of over JPY 15 billion in Japan alone. Global NDA is expected as early as 2029, and the market launch in Japan is planned for the early 2030s.

Next slide, please. Some supplementary explanation on Fabry disease. It is an inherited disease. Patients lack the enzyme, alpha-galactosidase A, that breaks down fatty substance called Gb3. As a result, Gb3 gradually builds up and damages the kidneys, heart and nervous system. There are currently 2 treatments. One is IV infusion that replaces the missing enzyme, which requires visits to the hospital every 2 weeks. The other is an oral drug that can be used only by people with certain genetic changes.

Lucerastat has a different mechanism of action. Rather than breaking down Gb3, it reduces the amount of Gb3 that is made in the first place. Therefore, it could be widely used regardless of the type of genetic change. The Fabry disease drug market in Japan is about JPY 30 billion, while some estimates suggest that about half of diagnosed patients are not receiving treatment. Considering that many Fabry disease patients are of working age, we believe the need to switch from existing drugs that require hospital visits every 2 weeks to an oral drug is very high. So that was our latest information on lucerastat.

Now Patrik will talk about UK development drug discovery status.

Thank you, Toshi. Can we move to the next slide, please? Let me start with the value that our UK science is creating through our partnerships. Over nearly 20 years, our teams accumulated knowledge in GPCR drug discovery that helped us create a partnered portfolio that now includes 7 molecules in clinical development with 1 in Phase III. With Neurocrine, we have one of the largest muscarinic clinical pipelines. Direclidine is in Phase III for schizophrenia, alongside 3 other clinical muscarinic programs in schizophrenia, Alzheimer's cognition and psychosis.

These programs generated this year USD 32.5 million milestones and have an overall value of USD 2.6 billion plus royalties. In our orexin collaboration, we have 3 programs in the clinic, which I will cover on the next slide. Overall, these clinical programs give us exposure to several important neuroscience opportunities, creating value for Nxera and for patients as our partners advance them in the clinic. For our discovery collaborations with AbbVie in neuroscience and Eli Lilly in diabetes and metabolic diseases, we generated milestones in excess of USD 20 million.

Across our main partnerships, the headline potential economics exceed USD 4.6 billion plus additional royalties. In the first 9 months, the partner revenue was JPY 13.3 billion, and the discovery platform generated a core operating profit of JPY 2.7 billion over the same period. This is a strong demonstration of the strength of our NxWave platform, the value of our discovery collaborations, which contribute to the group profitability and help discovering novel medicine addressing unmet clinical need. And obviously, this clinical pipeline will deliver additional milestones in 2027 with a key milestone of Phase III data for direclidine in second half of '27.

Next slide, please. The orexin field has moved forward significantly this year. During the summer, the FDA approved Takeda's first orexin agonist in narcolepsy type 1. This is an important validation of the biology and showing the potential to restore orexin signaling in disease. Lilly's acquisition of Centessa brings substantial resources and strategic focus to the orexin class of medicine that we discovered together with Centessa. The transaction was valued at approximately USD 6.3 billion with a further USD 1.5 billion linked to approvals beyond narcolepsy type 1.

Lilly has described orexin as one of the most compelling mechanistic opportunities in neuroscience, acting as a master switch in the sleep-wake cycle and opening significant opportunities beyond sleep with the potential to explore the role of orexin agonist in ADHD and other neurodegenerative or neuropsychiatric conditions. At Nxera, we are very excited about the clear commitment from Lilly to these 3 molecules that are discovered through our collaboration utilizing our NxWave technology.

Lilly is progressing ORX750 in narcolepsy type 1 and 2 and idiopathic hypersomnia, ORX142 in neurodegeneration and ORX489 in neuropsychiatry. We're eligible for milestones and low single-digit royalties across the portfolio globally. And based on Centessa's forecast, ORX750 alone is expected to reach sales in excess of USD 6 billion in 2040. Can we move to the next slide, please?

Why does our platform continue to generate new opportunities? Because it is built on an unprecedented depth of GPCR data and experience that has accumulated over nearly 2 decades. The data set now includes over 500 structures for more than 62 receptors. We have more than 30,000 stabilizing mutations, over 5 million data sets for 150,000 compounds and many thousand synthesis routes that our scientists generated. Each new program adds to the data moat and helps us make faster and better informed decisions about what to test next.

As we prove our platform continuously, we are measuring the impact on the speed of our discovery projects. When comparing to historic data, we reduced the time for hit finding activities by 50%, decrease the time for hit to lead phase by around 45%. Not only are we progressing our projects faster, we also generated structures for 69 receptors this year, 50% more than in 2025. The discovery portfolio, highlighting the efficiency of our NxWave engine.

Together, these results show how our proprietary data and scientific excellence, combined with lean execution are translating into greater speed across all discovery stages to bring medicine into the clinic. Let me show on the next slide how we are implementing our AI activities into our drug discovery projects.

Next slide, please. There's enormous interest in AI, and we are seeing very clearly the enormous potential AI brings to our industry. Equally, we see that a differentiating asset are the data, data that teach the models what to look for. In drug discovery, that means high-quality experimental evidence linked to receptor structures, mutations, assay results and associated chemistry. And Nxera has built that foundation over the last 20 years. 527 GPCR structures, more than 30,000 mutations, 5 million data sets associated to 30,000 molecules.

This gives NxAQ a unique data moat and a very distinctive starting point for each of our targets versus models that are based only on publicly available data. The workflow puts this data to work, AI ranks the ideas, physics checks the short list and our chemists decide what to make. Our labs then test the molecules to confirm the predictions with our in-house Cryo-EM structures and every result feeds into the next round. And that closed learning loop is how we make better choices and generate data faster, all while maintaining the high level of quality of the molecules Nxera generated so far is well known for and respected across the industry.

We have built this workflow and our first AI designed molecules are due for lab testing in the first half of 2027. Can we please move to the next slide? And let me close with our next wave of our oral programs focused on proven targets and very clear areas of patient need. In obesity, our amylin agonist is aimed at the still very large group of patients who are poorly served by today's GLP-1 medicines.

Our broader next-generation obesity portfolio is exploring multiple targets to address limitations of current standard of care, the well-known side effects, muscle loss and also address about 50% of patients that are stopping treatment within the first year. All of that in a market that is estimated to be in the range of USD 200 billion. Beyond obesity, our small molecule TSHR negative allosteric modulator targets Graves' disease and TED with a validated mechanism and a strong fit for our Japanese commercial business.

Our PTH1R agonist treats a proven receptor in hypoPT, a rare endocrine disease with very significant patient need. A very brief update about our clinical stage assets. We have completed the work to bring NXE'744, our EP4 agonist for IBD and NXE'149, our GPR52 agonist for schizophrenia to a Phase II-ready state. Both are ready for the next stage, and active partnering discussions are ongoing for each of them, as Chris has pointed out. NXE'732, our EP4 antagonist, is in Phase IIa with Cancer Research UK with interim data expected by the end of 2026. This gives a focused next wave of oral metabolic and endocrine programs alongside Phase II-ready assets with clear partnering potential.

And with that, I'll hand over to Chris.

Wonderful. Thank you, Patrik. Next slide, please. So Nxera essentially runs on 2 loops, and they connect everything that you've heard today. The first is a data loop. Our UK teams design medicines using nearly 20 years of our own GPCR data, and that's now combined with AI and physics. And every program adds to that data set. So the next one moves faster, and we have already roughly halved the time for early discovery.

The second is a cash loop. We license global rights to partners such as Neurocrine, Lilly and AbbVie, and they fund late-stage development and pay us milestones and royalties. And in Japan and Asia Pacific, we bring medicines to patients, including medicines we in-license such as lucerastat. Together, product and partner cash funds our discovery. And so on this slide, we've got 5 commitments for the future: one, a lean specialty and rare disease business in Japan; two, larger partnerships; three, a focused oral pipeline of next-generation GPCR-targeted medicines; four, AI-led drug discovery projects; and five, more than JPY 50 billion of revenue at a margin above 30%.

Both loops serve one purpose, more medicines for more patients in Japan and around the world. Japan's profits fund our discovery, our discovery attracts new partners and our new partners fund development. Please turn to the next slide. So what does this mean for the numbers? Well, our 2030 targets are unchanged, more than JPY 50 billion of revenue and an operating margin above 30%. We start from the JPY 28.8 billion in FY '24, and that means average growth of close to 10% per year, and the growth comes from 4 places.

We grow from what we already sell. So PIVLAZ is the standard of care in Japan. QUVIVIQ has grown 43%, and we are adding new Asia Pacific markets. We will launch AGAMREE for Duchenne muscular dystrophy, a rare muscle disease that mainly affects boys, and we expect to launch in Japan in 2028. We add specialty and rare disease medicines like lucerastat, which will be in Phase III, and that will start the next wave and partners' economics, milestones today and royalties as those partnered medicines hopefully reach patients in the future.

And the margin comes from how we are built as a company, a lean specialist sales force, new products that go to the same hospitals, high-margin royalties and cheaper discovery with a stop rule for every program. And beyond 2030, we aim for an operating margin of around 40% by 2035. So 4 drivers of growth, 4 drivers of margin, one target, more than JPY 50 billion at more than 30% margin by 2030. And finally, on the last slide, here is what you can hold us to.

So as we look forward over the next 18 months, there's 3 events that matter most to us, and all of them are expected to occur in the second half of 2027. We expect the Phase III data for direclidine in schizophrenia from our partner, Neurocrine. There will be Phase II/III data for ORX750 in narcolepsy and idiopathic hypersomnia, chronic sleep disorders from our partner, Lilly, and there will be our filing for AGAMREE in Japan with the launch expected in 2028. Each one is a step towards new medicines for patients. Behind them is the full list.

By the end of this year, we expect a new partnership or licensing agreement for either NXE'744 or NXE'149 and interim data for NXE'732, our cancer program with Cancer Research UK. And in 2027, the first lab test of our AI designed molecules from the AQ platform and lucerastat Phase III enrollment will begin, including in Japan. And of course, at any time, we can execute new partnerships and bring in new late-stage medicines for Japan. And we will report against every one of these as we have in 2026. This is our list, and you can hold us to it. So let me begin where I began, Nxera, profitable in Japan, discovering in the UK and partnered with the world.

Thank you very much for your attention, and we will now take your questions.

[Interpreted] Thank you, Chris. And then let us move on to the Q&A session. Those of you who are institutional investors, analysts, and media, please use the raise hand function. [Operator Instructions]

Wada-san from SMBC Nikko Securities.

[Interpreted] The first question I have is fiscal -- this quarter, you have profit. And for next quarter and the quarter after, will it be possible to continue profit? You have Neurocrine, Centessa. And on the last slide, you have a milestone and you will have the Phase III data available in the second half. So you will begin to have the royalty from 2028. And what will be the position for next fiscal year? That is the first question I have.

[Interpreted] It's about figures. So let me respond at the beginning. This is an important point. And can we stably generate profit? It seems like this year is a good year. I understand that is your question. Speaking from the conclusion, we cannot guarantee that. But the next fiscal year, we have multiple milestones, as you can see on the slide. In addition to that, we have the possible new partnerships expected in the second half, and you might wonder that we only have 2 months to go. But this is an area we are focusing at the moment.

So from that background, the existing partners and new possible partners, combining the milestones together after next fiscal year, we should not have any issue for generating profit. Of course, we may be influenced by the timing of the milestone. But as Wada-san, you pointed out, one point is that once we have the Phase III results next year, if we go successfully, we will have a royalty revenue for UK business. And on the other hand, the commercial will continue to increase as we showed you. So personally, we believe we can generate profit next year. And as the time passes by, the hurdles or the volatility will diminish. That is my view. I hope I answered your question.

[Interpreted] Yes. And another question is about partnership. In principle, the commercial business will have a stable profit. And for pipeline, including lucerastat, you should be able to generate more profit. The negative factor will be platform business milestone. It may drag slightly. But for the new partnership, I believe that it will become the backup. So I believe that I can expect to see the continued profit. But I think you have some candidates for drugs. So can we hear about that?

[Interpreted] Yes, since this is new partnership, I would like to ask Chris to explain. So Chris, you are on mute, but do you think you can explain?

Yes, certainly. Thank you for the question. Let me begin with one statement I heard, which is that our platform could be a negative drag. I just want to be clear, we never think that our drug discovery platform will be a negative drag. Our drug discovery platform is incredibly unique amongst small and midsized Japanese pharmaceutical companies, and it is continuously generating new seeds and new assets that have the potential to create amazing value for shareholders.

So I just want people to understand that there is a lot of value tied up in our drug discovery platform. Now to your question on partnerships, our ongoing partnering discussions are going well, and we are actively working towards another transaction. And that won't be the only transaction. We see potential for additional partnerships and near-term milestones in FY 2027 next year as well. So that concludes my response. Thank you.

[Interpreted] Thank you. Yes, I am well aware of that and your core technology. I understand the value of your core technology is there. It may drag figures next fiscal year, but that's a trivial remark. That's all. Wada-san, thank you.

And if I may elaborate one more point, there is so much focus on the new partnership for this fiscal year. But next fiscal year, we are going to have more partnerships, and we may have some that will close this year, and we can continue next year. So we would like to continue to make effort. And combined with what was discussed, we will continue to have the growth of the platform, and we are also expecting to see the growth in commercial as well. That was additional comment.

We'll move on to the next questioner, Jefferies, Yamakita-san from Jefferies.

[Interpreted] Yamakita from Jefferies speaking. I have first question, QUVIVIQ. So Shionogi's sales is growing steadily as you showed, they revised upward. Your sales has some ups and downs, it seems, but royalty ratio is increasing, and there are some ups and downs in shipment. Is that understanding correct? So if you could give us a little more color to this?

[Interpreted] So this is about Japan commercial business. So Maeda will explain. Maeda-san, over to you.

[Interpreted] So simply put, you are right. Royalty is monthly QUVIVIQ market sales. That is the basis for the calculation. So if there is an upside, the upside will come in the following month. The big part is our product supply. And this is planned beforehand. And so just because the market goes up, the manufacturing cannot change immediately. There is a slight time lag. And therefore, this year, Shionogi sales target is up, revised upward, and that will be reflected in the supply volume next year.

[Interpreted] Understood. Second question is about Wada-san's -- connected to Wada-san's question. So about your out-license going forward, your clinical stage, you have multiple candidates, compounds. And so the out-license, maybe 1 per year, I think, will be the frequency. I think it's safe to say. Now going forward, you will develop and sell in-house. Is that your target? Then your in-house development up to Phase II or Phase III, it depends, I think. But for the in-house development and out-license, what is the judgment criteria? How do you decide which to go for?

[Interpreted] So this is about strategy in most parts. So Chris, if you could start answering the question and then Patrik, if you have anything to add. So Chris, could you start off?

Certainly. Thank you. Thanks, Yamakita-san, for your question. It is very difficult to commit to exactly one licensing transaction per year. As you know, the timing of these very difficult negotiations is very difficult to control. However, I think if you look at our track record as a company and as a team, over the journey, we would average almost one major licensing transaction per year. So it is certainly a goal, but it is a hard one to commit exactly to.

For this year, as I mentioned previously, in my previous question, the ongoing partnering discussions are going well. So we are actively working towards another potential transaction this year, and we do see potential for additional partnerships next year. And so we will be absolutely striving to do a major partnering transaction every year where we can. Now the second part of your question is the important one. In order to do major partnering transactions, you need to have programs or potential products that have value.

And so we have a pipeline, and we will actively move that pipeline into early clinical development. And by that, I mean Phase I, Phase Ia, Phase Ib, expanding from volunteers sometimes into a small patient cohort. In terms of which ones we decide to move forward internally versus which ones we decide to out-license, I mean, if we look at this page, for example, amylin, a small molecule amylin program, is clearly not something targeted for obesity and chronic weight management. This is not something that we ourselves as a company are best positioned to do late-stage clinical development or even commercialize outside of Japan.

And this is a program we are very deliberately planning to take into early clinical development. And then we would license it out to a major multinational company that is capable of developing and commercializing it. Now if I look at the other programs in our pipeline, for example, the TSH program or the PTH program, these are programs that are, I believe, well suited for us to take them forward in clinical development in Japan. So we would go into Phase I, and then maybe at the end of Phase Ib, we would seek a partner for the worldwide rights outside of Japan and APAC. However, we would keep the rights for Japan and develop them ourselves.

So that is how we're thinking about it. If it's something we can do well in Japan, we keep the program, we develop and we commercialize. And if it's not, then it's something suitable for out-licensing with a major multinational company, then that's what we will do. That's the strategy, and I hope that, that was clear. Thank you. That concludes my response.

[Interpreted] Thank you, Yamakita-san for your questions. Let us move on to the next question. [Operator Instructions] We have only few hands. But since this is a good opportunity, we would like to take questions from chat.

The first question is the sales of PIVLAZ. On a full year basis, 5% increase is expected in revenue so far compared to last year, there is 10% growth on a year-on-year, and it is expected to exceed our guidance. What is your view? Maeda-san, can you respond?

[Interpreted] Yes. Thank you. On PIVLAZ, in Q4 from October to December, we have more cases in wintertime. So we are setting our target higher. So there's a possibility for exceeding the guidance, but I think it will be basically on track. Thank you.

[Interpreted] [indiscernible] of JPMorgan.

[Interpreted] Can you hear me?

[Interpreted] Yes.

[Interpreted] [indiscernible] from JPMorgan. So this is connected to Wada-san's question earlier about partnering partnership. So the 2 products partnership, we have 2 months left this year. But in the material, the expression has changed a bit. So the partnership is progressing and the discussion is ongoing. It says in the last material, it said with few companies. So for EP4 is the probability rising, I think. So the 2 products, partnership progress or the probability of achieving by the end of this year, if you could -- I know it's negotiation, it's difficult to say much, but if you could give us a little more detail, I'd appreciate it.

[Interpreted] So Chris, if you could, please.

Sure. Thank you for the question. Look, I mean, all I can really say is we are getting closer to the end of the year, which means we are getting closer to the end of negotiations. So we're very happy to be in the position that we are in. And I can't tell you whether the probability is rising or not because I cannot speak for the other parties involved in discussions, except to say that we are closer to the end than we are to the beginning. So hopefully, that answers your question. Thank you.

[Interpreted] So which one of the 2 are progressing or now you're coming to the end, what kind of risk should we anticipate or be prepared for on the partnership about the amount, the value, any changes in the value compared to the ones in the past? Anything else you could share with us?

Thank you for the question, but no, I can't share any more information. I can't. Obviously, I can't tell you which asset and I can't tell you valuation. So we will keep that information confidential until there is potentially information to disclose publicly. Thank you.

[Interpreted] Thank you. This is negotiation, so we cannot talk about the scale. But one point, according to the materials of Q2, it's above JPY 1 billion. And that is the indicator. And I think that will be the yardstick. It's already public information. So allow me to elaborate on that. Thank you.

Now Yamakita-san, you're raising hand again. Yamakita-san from Jefferies Securities.

[Interpreted] I'm sorry to ask questions second time. This is a follow-up from the previous question. And I asked about the criteria for making judgment of out-license or on proprietary, but how about out-license or spinout? Is there a possibility for particular assets for out-license or spinout?

[Interpreted] Yes. Thank you for the questions. This is related to strategy. So can I ask Chris to respond?

Yes, absolutely. Thank you, Yamakita-san. I think I have addressed this topic on previous calls, but let me try and be very clear. When we, as a company, create a new program with potential value for patients, and we have completed, for example, Phase I, our #1 goal if this is a product that we are unable to develop or commercialize ourselves because the development plan is very expensive and complex and because it requires commercialization in North America, for example, then our #1 strategy is to do a licensing deal. We find a big pharma company that can take that program forward, we will do a licensing deal.

Now not every program or potential product that we create is always suitable for a large pharmaceutical company. Sometimes those companies don't have interest in the mechanism of action or they don't have interest in the modality or they don't have interest in the therapeutic area. However, venture capital investors are prepared to take more risk, and we have found that if we cannot license potential products, then sometimes the next best way to ensure that our medicine continues to be developed and can make a difference for patients is to partner with the venture capital community, and that is exactly what we did earlier this year when we licensed a GPCR program to a venture capital fund.

And then together with that venture capital fund, we raised a $60 million Series A, and that program is now advancing through preclinical and into clinical development. It's a wonderful example of another way that we can move our innovations forward so that in the future, hopefully, patients have more potential opportunity for new therapies. So if we -- I guess, to summarize your question, if it is not a transaction that is suitable for licensing, we then always look at the potential, can we work with the venture capital community to move this program forward. And that will always be part of our thinking.

I guess the only thing that has changed in the last 3 years is following the acquisition of Idorsia Japan and Korea, we now have an absolutely amazing late-stage development and commercialization business in Japan for specialty and rare disease products. And so in that pipeline that you can see on this slide, the TSH program and the PTH program these are programs that we are able to develop and we would be able to commercialize in Japan.

So that would be a good example of programs that we hope in the 2030 and beyond time frame can become internally discovered programs that will make a difference for patients in Japan. And outside of Japan, we will utilize partners to get those products developed, approved and hopefully launched. Thank you. I know that was a long response, but hopefully, it's helpful for you to understand our thought process around how we move the pipeline forward as fast as possible.

[Interpreted] I have one question about figures, and that is commercial 74% for sales and revenue and cost of goods is 66%. And can you talk about those 2?

[Interpreted] Yes. Thank you very much for your question. So since these are figures, I will respond simply. In terms of the progress of revenue, 74%, but the cost of goods progress is low. I think that is the question. Relatively speaking, there are 2 reasons. We are working on cost reduction activities continuously, and this is functioning quite well. So rather than what we have been looking at this conservatively, we don't require as much cost as necessary.

And the second one is related to that as well. As we have been explaining, depending on quarter, as you can tell, for example, we provide a lot to Shionogi. And because of such reasons, it just seems that way. But overall, we are reducing cost compared to the beginning of the year. So it's not bad, but we do have some fluctuating factors.

[Interpreted] Those are all my questions.

[Interpreted] So next, [indiscernible] Toyo Keizai.

[Interpreted] [indiscernible] from Toyo Keizai. Can you hear me?

[Interpreted] Yes.

[Interpreted] So I have 2 questions. First is the in-license to Japan. This year, vamorolone, lucerastat, 2 products. In your medium-term vision, you are saying 5. So one more remaining. By next year, can you front-load in-licensing around next year? I know, including the ones you're negotiating, is there a possibility you can do another one next year? And lucerastat, the way you sell in Japan, will you do this yourself or through partnership? Vamorolone, according to what you said, is specialty and it has commonality with PIVLAZ. And so I think you will do this yourself, I would assume. But lucerastat, how will you sell sales method in Japan? If you could give us more information, that is my first question.

[Interpreted] Thank you very much. So the first point from me and the second one from Maeda-san. So first of all, about in-licensing, we did 2 this year. When will the next one be? When will that be? To be honest with you, vamorolone was the deal last year and announced was this year. Lucerastat, there is an option right. So whether it's an in-licensing, we did put a checkmark in-licensing, but it's a borderline. So our answer is we want to continue being aggressive.

And like licensing out, this has the other party. So it's difficult to say. But if possible, one more this year would not be a surprise or first half next year, we will have more probability, more clarity. It's difficult to see the time line because it's a negotiation, but we are being aggressive. So that is the second point. And the next point, Maeda-san, lucerastat, please?

[Interpreted] Thank you for the question. So lucerastat, basically, we are thinking of doing sales in-house. Roughly speaking, vamorolone launch for the pediatrics and for the neurology, we will have the doctor's network. And there will be a big overlap. Lucerastat will have a big overlap. It is an inherited disease. It's more for male and pediatrician may continue seeing taking care. So we haven't gotten so much into detail, but it may overlap with vamorolone. And in terms of number of patients, vamorolone, the muscular dystrophy, we think about half is the patient size. So with vamorolone team, they can cover lucerastat, I think.

[Interpreted] Understood. And my second question is muscarinic. Next year, the long-awaited Phase III test data will come. I am looking forward to it. On the other hand, Bristol, that is ahead. Cobenfy, it's been a year since launch, but it seems like they're off to a slow start. It seems like they're having some difficulty. So when your drug is approved, what will this -- how will this impact you? And what is the difference, your strength? Will you play to your strength that they don't have? What is your view?

[Interpreted] Thank you very much. So this is about R&D. So Patrik, if you could start off and then Chris, if you could add something if you do.

Yes, absolutely. Very good question. To be clear, we have a different mechanism between Cobenfy and our muscarinic compound from the pharmacology, we are very confident that our molecule will have superior efficacy and safety ratio. Therefore, we believe we cannot do a direct comparison between our molecule and the competitor molecule. Second, we all know in this type of neuroscience clinical trials, it is absolutely critical to run these trials very efficient with very stringent criteria.

And I would say from what we've seen with Neurocrine, they are undisputed experts in this area. They're executing these trials very, very efficiently. They are preparing a very comprehensive package that would differentiate our molecule versus Cobenfy. So we are very confident that there is a very significant market in an indication that is undisputed, still underserved and there is a very considerable patient need remaining. Chris, anything you want to add?

I mean, just one thing, and it's a bit of a reminder of the history of both of these medicines or potential medicine. Cobenfy is a combination of xanomeline, which is a drug that is active over the M1 and M4 receptors, but also active over M2 and M3, which causes side effects and tolerability issues. Our molecule was discovered using our structure-based drug design platform and our StaR technology to only activate the receptors of interest, M1 and M4. There is no activity over M2 and M3, which causes GI and cardio side effects or tolerability issues.

And we think that could potentially -- I'm only talking anecdotally, but if you do some research into Cobenfy, you may find some commentary that physicians are experiencing some tolerability issues in the GI region with their patients, and that could be one of the potential factors slowing down its launch. We do not expect to have those same issues with our product, which is being developed and will be launched if it is successful by our partner, Neurocrine. So there is a different approach, which Patrik touched on earlier. But the key difference is we specifically designed a molecule to be active over M1 and M4 and not M2 and M3. So that would be my summary addition. Thanks, Nomura-san. Thanks, Patrik.

[Interpreted] Thank you for your questions. In the interest of time, but since this is a good opportunity, we would like to take one last question from the chat.

So this is a question to Chris. The stock option plan, the long-term incentive plan that was announced the other day, what is the background for setting this? And what is the aim for setting that the stock option plan? Chris, can you respond?

Certainly, I can respond. I mean, the first thing I would say is the plan is obviously set by the group's Compensation Committee, which does not -- for this particular topic does not include me. However, the intention is very clear. We want to incentivize -- as a company, we want to incentivize management and the plan should pay out only if every shareholder and our employees that own shares win. So it is a pay-for results type plan. Nobody gets anything unless the share price grows. The higher levels of the plan are deliberately very stretching and nothing can be realized for a minimum of 3 years.

I think the other thing that the committee is responding to here is we are a company that is always trying to market ourselves in North America. We want special U.S. biotech institutions to own shares in our company. And they want to see management have a meaningful stake in the company. And if we can do this, we can drive much more significant international shareholder demand, which will drive the share price, which will fund more science.

And the other thing I would add is that this plan has been carefully considered over a number of years. I know that the committee worked with an independent external firm to design the plan and it's been worked on for a number of years. The committee and the Board of Directors, excluding myself, have reviewed it. And the major shareholders of our company were consulted on aspects of the plan. And so for anybody that is a shareholder, whether you're an investor, whether you're an employee, we are all in the same boat that the plan is designed to reward everyone if significant value is created. So that's how I would describe the logic and the process and how it came to be.

[Interpreted] Thank you. There are so many other questions on text, but we already exceeded the scheduled time. So we would like to conclude the briefing for today. For the questions we could not respond during the time allocated, we would like to respond in our official blog. It may take some time, but we will respond. As for this presentation, for this briefing, we will upload the video. Thank you very much for bearing with us. And with this, we would like to conclude the briefing for Q3 of 2026. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[Interpreted] It's time to start Nxera Pharma webinar for first half FY '26 financial results. Thank you very much for joining despite your very busy schedule. My name is Nomura, CFO of the company, serving as the MC. Today we have CEO Chris Cargill, COO and President at Nxera Pharma Japan, Toshihiro Maeda, CSO and President of Nxera Pharma UK, Patrik Foerch with us. We have simultaneous interpretation. Please click the icon of language and select either Japanese or English for interpretation. If you turn it off, you can hear the original voice of the speaker. As for today, we will have the explanation of the materials, and in the latter half, we will have the Q&A session. Presentation slides are available on the screen, but they are on the company's homepage as well. If you need them, please enter from Investor Relations, IR Library, and Presentations to access the materials.

As for the Q&A, institutional investors, analysts, and media people, when the time comes, please ask questions by raising hands. The others, please submit the questions from Q&A button. During the webinar, you will be able to submit your questions, and we would like to respond as long as the time permits. Without further ado, we would like to move on to the presentations. First of all, Chris will talk about operational highlights. I will talk about the summary of the financial results. Maeda will speak about Japan, APAC, commercial, and Patrik will talk about U.K. R&D. Lastly, Chris will talk about the road ahead. Please turn to page 5 of the materials. Chris, over to you.

Thank you very much, Nomura-san. Just a quick disclaimer, please note that today's presentation does contain forward-looking statements, and the actual results may differ from them. The details are here on slide number 2.

Welcome, and thank you for joining us for Nxera Pharma's results for the first half of financial year of 2026. I am Chris Cargill, President and Chief Executive Officer of Nxera Pharma. This is the story of a company that is moving rapidly from investment to delivery, and I am very pleased to take you through it. You will see growth of revenue, a return to profit, and a clear external validation of our science. The next slide brings the whole half together on one page, so please turn to it now. In the first half, we grew revenue, returned to profit, and saw our partnered science validated in the market.

On financial performance, revenue grew 25% to JPY 18.9 billion. Operating profit moved from a loss of JPY 2.8 billion to a profit of JPY 1.9 billion. Core operating profit increased from JPY 364 million to JPY 6.5 billion. Both our commercial products business and our platform business turned profitable. In commercial products, PIVLAZ sales reached JPY 6.3 billion, up 9%, and QUVIVIQ sales reached JPY 3.6 billion, up 127%. On the platform side of our business, we achieved multiple revenue-generating milestones from Neurocrine, AbbVie, Centessa, and Lilly. We created the new company for a GPCR-targeted program with up to $275 million in potential milestones, plus royalties, and a significant minority equity ownership stake.

Our orexin agonist science was validated in the market. Lilly's acquisition of Centessa, whose orexin portfolio was generated on our platform, valued that business at up to $7.8 billion. This is an external arm's length reference point for the value that our platform creates, and it highlights just how serious Lilly are in making brain health and broader neuroscience the next big category beyond obesity. Our muscarinic science is also advancing on its own terms. Our partner, Neurocrine, continues to progress direclidine, the differentiated M4 program, which is moving towards a phase III data readout in the second half of 2027. And we regard this as a distinct source of value within our partnered portfolio. Let me turn now to how this progress maps against the objectives that we set out at the start of the year. Please turn to the next slide.

Against the five priorities we set for this year, we are on track or ahead on every objective. On net product sales, we've reached JPY 9.9 billion, which is 51% of our JPY 19.5 billion plus target for the year. On adding late-stage assets for Japan and Asia Pacific, we have multiple discussions ongoing. And on new high-value partnerships, we are in active term sheet discussions. On partner-sponsored trials, we achieved our goal with the start of a phase II study of NBI-570. And on cost and profitability measures, we set out to reduce total costs by 10% and to reach full-year profitability on an IFRS basis, and we achieved profitability in the first half following Q1. Now, to take you through the financials in detail, let me hand over to our Chief Financial Officer, Nomura-san.

[Interpreted] Thank you, Chris. Here, I will explain the summary of financial results in first half FY 2027 by segment and the historical trend. Please turn to page 8. As Chris mentioned, the revenue against JPY 15.1 billion last year, increased by 25% to JPY 18.9 billion. The milestone revenue grew from JPY 5 billion to JPY 8 billion, and product sales, in red, from JPY 7.5 billion to JPY 9.9 billion, respectively. These are the major drivers. We received milestone from our key partners, Neurocrine, Lilly, AbbVie, Centessa, and once again, since this was acquired, Lilly. With these four partners, saw progress in development, resulting in milestone payments. I will skip the numbers as they were mentioned earlier, but both products grew steadily. In terms of profit, core OP was JPY 65 billion, JPY 1.9 billion on IFRS basis.

Although it slightly declined compared to Q1, where milestone was concentrated, the progress is in line with the full year forecast for both revenue and cost. On the next page, I would like to show the breakdown. Turning to page 9. As usual, it shows breakdown by business domain and consolidated P&L core and IFRS. The far left blue platform business is so-called bio venture type business model, as you know, and next to it in red is the commercial business, so-called pharma-type business model. The profit of the platform business is heavily dependent on milestone from partners. While it is difficult to control by the company, we aim to stabilize revenue, in red, by driving commercial business. We achieved steady progress on milestone during the first half of the year.

The platform business secure profitability on a core basis. The commercial segment saw significant growth in both revenue and profit. Regarding costs, specifically SG&A and R&D expenses, which have been working to reduce since last year, spending is tracking in line with our full year forecast, standing at 49% and 50% of the projected amounts despite some minor fluctuations in specific areas. Thanks in part to these efforts, the commercial business in particular is shifting toward a higher profitability structure, with profit growing by 38% against sales growth of 11%. That concludes my brief explanation on first half financial results. Next, Maeda will cover Japan APAC commercial. Over to you.

[Interpreted] I will now provide an overview of our Japan and APAC operation. I am Maeda, COO. Thank you very much for today. I will explain the current status for our three main products. First is PIVLAZ. It is an endothelin A receptor antagonist for prevention of cerebral vasospasm after aneurysmal subarachnoid hemorrhage. It's our first in-house product to be launched. The graph on the left shows quarterly sales. As you can see, there's a seasonal pattern with higher sales in Q4. If you compare the same quarters across different years, you will notice that sales have grown year-over-year. In Q2 of 2026, total sales totaled JPY 3.4 billion, and cumulative sales for the first half reached JPY 6.3 billion, showing steady growth compared to the same period last year.

As our market share exceeds 70%, it stands to reason that our future growth drivers will shift from securing new sites to optimizing dosing and expanding the patient segment receiving prescriptions. From this perspective, a key initiative is the practical guide to clazosentan administration, published by the [Academy] Society in March of this year. These guidelines systematically organize insights regarding the administration of PIVLAZ in real-world clinical practice. We believe they will lead to appropriate treatment for a greater number of patients. Next, I will explain QUVIVIQ, a medication for treating insomnia. It is a novel drug belonging to a class known as dual orexin receptor antagonist, or DORA. First, please look at the graph on the left, which shows the structural changes in the market itself. In the field of insomnia treatment, DORA is rapidly establishing its position, replacing traditional benzodiazepine.

The DORA market share based on the number of tablets is projected to reach 40% by 2026. In terms of market size, the total DORA market has expanded to JPY 83 billion. We believe this structural shift is still underway and that there's significant room for growth. The graph on the right shows QUVIVIQ's position within this context. Revenue in 2024 was JPY 1.3 billion, while in 2025 it reached JPY 4.3 billion, a significant increase of 224% year-over-year. For the full year FY '26, we project revenue of JPY 5 billion-JPY 6 billion, representing 30% increase year-over-year. As of the first half, revenue stood at approximately JPY 3.6 billion, indicating steady progress. As of June 26, QUVIVIQ's market share within DORA class stands in the low 9% range. Although the market is still dominated by leading drug, lemborexant, the growth is driven by two concurrent tailwinds.

The fact that this product as a latecomer is steadily gaining market share, and the fact that the class itself is expanding. We will continue to work with Shionogi to carefully communicate this drug's key features, such as minimal carryover to the following morning and improved daytime function, and expand the base of prescribing physicians.

Next, please. Finally, let me explain vamorolone, a new product we launched in early 2026. The drug is indicated for the DMD. For many years, corticosteroids have been standard of care for treating this disease. However, adverse events such as growth suppression, decreased bone density, fractures, and cataracts have been main challenges, and it is not uncommon for patients to find it difficult to continue the treatment. Vamorolone is a drug that directly addresses the challenge of strong effects, but side effects that are too difficult to tolerate.

Top-line results from the recent GUARDIAN trial demonstrated that compared to standard corticosteroids, vamorolone significantly improved safety while maintaining efficacy. I would like to highlight 3 specific features. First, regarding growth, normal growth was maintained with an average height difference of 12 centimeters at the 5-year mark. Second, regarding bone health, the vertebral fracture rate was 8% in the vamorolone group, compared to 42% in the deflazacort group. Third, regarding eye health, the incidence of cataracts was 5% in the vamorolone group, and there were zero cases of glaucoma. All three factors determine whether patients and their families can continue treatment over the long term. We believe that the reduced side effects, which enhance treatment adherence, represent the greatest value of this drug. The chart on the right shows the consensus sales forecast for vamorolone in other countries.

According to Evaluate Pharma's forecast in December 2025, which combines data from Catalyst in North America and -santhera in Europe, the market is expected to grow to $670 million. We believe that this level of international recognition serves as an important reference point when considering the potential of this drug in Japan and the APAC region. Based on this clinical differentiation, we will steadily proceed with preparations for our regulatory submission. This concludes my presentation on our Japan and APAC operations. Nomura-san, over to you.

[Interpreted] Thank you, Patrik. Can you move on to R&D?

Yes. Thank you. My name is Patrik Foerch. I'm the CSO of Nxera. Can you move to the next slide, please? The first half of 2026 was a period of strong execution across the portfolio. We achieved multiple milestones spanning discovery, clinical development, partnering, and regulatory process. In discovery, our collaboration with AbbVie and Lilly generated further milestones, reinforcing the value of the NxWave platform. In the clinic, Neurocrine initiated a phase II development for NBI-570 schizophrenia, triggering a JPY 22.5 million milestone. We also continued to build value across the orexin portfolio, receiving milestones linked to the progression of orexin 142 and 489. Beyond this part of the pipeline, we advanced our broader strategic portfolio through the licensing and approvals in Japan and selected Asia Pacific regions. More importantly, these milestones underline the exceptional commercial potential within our portfolio. Particularly our neuroscience portfolio is very compelling.

With Neurocrine, we now have the world's broadest muscarinic franchise covering M1, M4, and dual muscarinic agonist. Direclidine is the most advanced and the first selective M4 agonist currently in phase III trials, together with a wider muscarinic pipeline across schizophrenia and Alzheimer's disease. We believe direclidine's competitive position has become even stronger following MapLight's recent phase II readouts for their M1, M4 program that only achieved a modest placebo-adjusted benefit dosed once daily. For orexin, the acquisition of Centessa by Eli Lilly provides a powerful validation of the quality and the strategic importance of the 3 orexin agonists discovered through the collaboration with Nxera. We're very excited that Lilly indicated progressing all 3 orexin programs and that they are benefiting from Lilly's global capability. That substantially increases the potential of the orexin molecules across sleep, neurological, and wider neuropsychiatric disorders.

The key message for the first half is not only that we delivered a strong series of milestones, but that the underlying clinical pipeline is becoming increasingly valuable, increasingly validated, and increasingly capable of generating significant future return for shareholders as well as value for patients. Can we please move to the next slide? Along these partnered assets, our internal portfolio includes three differentiated clinical stage programs in schizophrenia, IBD, and immuno-oncology, each with a clear upcoming value creation opportunity in the second half of 2026. The first program is NXE-149, our GPR52 agonist for schizophrenia, and that represents a generally novel approach to the disease by addressing positive symptoms, improving negative symptoms and cognition, areas where current therapies remain inadequate. NXE-149 has completed phase I development with a strong data package and is fully phase II-ready.

We are in advanced discussion with several parties to partner that program. The second program is NXE-744, a gut-restricted EP4 agonist for IBD. The program has delivered strong phase I-B data by proving pharmacological activity in human indomethacin challenge model, and therefore showing that it's promoting mucosal healing. As the exposure has got restricted, we see minimal systemic exposure and an excellent safety profile.

As this mechanism is applicable as a monotherapy as well as an add-on to biologics, we do see great interest in the program and have selected a number of major players in the I&I space for advanced negotiation. The third program is NXE-732, an EP4 antagonist for immuno-oncology. The ongoing phase II A study is sponsored and operationally delivered by CRUK, allowing Nxera to generate an important clinical proof of concept in a capital-efficient manner.

Importantly, Ono's EP4 antagonist data for 4578 recently produced positive randomized phase II results in first-line HER2-negative gastric cancer. These Ono data provide strong independent clinical validation that inhibition of EP4 can enhance antitumor activity in combination with checkpoint inhibition. This meaningfully increases our confidence in the therapeutic relevance of the EP4 mechanism as we approach our own phase II A interim readout. Hence, we are very excited about this recent data and looking forward to our interim phase II A results in the second half of this year.

If we can move to the next slide, please. This slide captures one of the most important elements of our R&D strategy, building a differentiated high-value franchise in obesity, metabolic, and endocrine disease. The market opportunity is substantial with the next generation of medicine moving beyond maximum weight loss, especially combining strong efficacy with better tolerability, improving body composition, durable comorbidity benefits, and allowing broad access and long-term adherence. This is where Nxera is particularly well-positioned. Our NxWave platform allows us to design oral small molecule against highly valuable but technically challenging GPCR targets. Our lead metabolic programs cover several of the most strategically important mechanisms in the sector: GLP-1 agonism, amylin agonism, and the GIP receptor, alongside different sets of endocrine opportunities.

The commercial and scientific validation for this mechanism continues to strengthen. Lilly's oral small molecule GLP-1 orforglipron demonstrated that an oral non-peptidetic can achieve meaningful efficacy without the administrative restrictions of peptides. Importantly, our GLP-1 chemistry is structurally distinct from the described small molecule scaffolds that we know are primarily based on danuglipron and orforglipron.

Similarly, for our amylin program, we have generated multiple proprietary series. We achieved a 10,000-fold improvement in potency in just three months. Most importantly, our chemistry is completely distinct from any chemistry described, and we are on track for IND studies next year. Execution is critical, Nxera has the platform, the chemistry, and the portfolio breadth to become a meaningful next-generation player into metabolic and endocrine disease. We remain on track for 4 IND-enabling studies in 2027 and subsequent clinical start in 2028.

In summary, our R&D portfolio has made substantial progress in the last six months. Strong delivery of milestone in the first half, progression of the muscarinic portfolio with Neurocrine. The orexin portfolio attracted a multibillion-dollar strategic investment. We have 2 phase II-ready assets at advanced partnering stage, and our discovery pipeline is progressing to deliver multiple IND-enabling studies in 2027.

With this, I'm handing over to Chris.

Wonderful progress. Thank you, Patrik. Let me now take you through the road ahead at Nxera. Can you please turn to the next slide? We are moving from an investment phase to a delivery phase, and I want to show you how all of the pieces fit together. We run our business as four value engines, and each one is now substantial and independently valuable. Each engine, as you can see, fuels, de-risks, funds, and accelerates the other engines. Let me show you how they compound. Here are the 4 engines on one page. Please turn to the next slide.

Sorry, we might need to go back one slide if that's okay, guys. Of the 4 value engines, products, platforms, pipeline, and partners, and as I said, each is substantial and independently valuable. Products is a profitable and growing commercial platform in Japan.

We're targeting JPY 40 billion-JPY 50 billion in net product sales and an operating profit margin above 30% by 2030. Our NexAQ and NxWave platforms pair artificial intelligence and quantum-level simulation with a proprietary GPCR data set. This engine is targeting 5 AI-led discovery projects by 2028. As Patrik just mentioned, pipeline is our emerging metabolic and rare disease biotech, and we're targeting 4 clinical stage programs for the U.S. market by 2028. Our partnerships represents more than $4.5 billion of partner-funded milestones and royalties, and we have a goal of executing a new partnership above $1 billion in total deal value later on this year. Let me take each engine in turn, starting with products. Now we can go to the next slide, please.

Our commercial products engine has more than doubled its sales since 2023, and it is profitable, and it is cash generative. Since we acquired this business from Idorsia Pharmaceuticals Japan in July 2023, we've scaled revenue 2.6 times, and we've removed 20% of the cost base. PIVLAZ is the market leader with 74% share in the prevention of cerebral vasospasm. QUVIVIQ is growing in triple digits with Shionogi as commercial partner, and our forthcoming Taiwan launch is secured for the second half of 2026. Vamorolone is moving forward in clinical development. Note, the product is now broadly approved for Duchenne muscular dystrophy across the U.S., Europe, U.K., and China. We see substantial peak sales opportunity across all three products with PIVLAZ at JPY 15 billion-JPY 16 billion, QUVIVIQ at JPY 15 billion-JPY 20 billion, and vamorolone at JPY 10 billion-JPY 20 billion.

Every well-chosen medicine that we add from here lands on this lean, highly focused commercial infrastructure. Now we plan to extend vamorolone into further rare disease areas as well. Please turn to the next slide. We plan to take vamorolone beyond Duchenne muscular dystrophy, or DMD, into at least three further rare diseases. We are evaluating vamorolone in Fukuyama congenital muscular dystrophy, FCMD, a disease found almost only in Japan. We're also evaluating it in pediatric nephrotic syndrome and in juvenile dermatomyositis. In each of these, the current standard therapy relies heavily on glucocorticoids, where a more tolerable steroid such as vamorolone could make a real difference to patients. This keeps us highly focused on serving more rare disease patient populations, particularly in our home market of Japan. Let me turn to our platforms and the new company that we recently created to drive them.

Next slide, please. On the 1st of July 2026, we created a dedicated company for our NexAQ platform. Our starting 5, all experienced drug hunters, have now initiated the first AI-led research project. It's led by an experienced team spanning computational sciences, data science and engineering, AI and machine learning research, platform engineering, and computational engineering. These are people who have built and applied AI drug discovery techniques at leading organizations.

Let me explain what makes this platform different. Please turn to the next slide. The NexAQ platform pairs fine-tuned AI models, large scale virtual screening, and quantum-level simulation with more than 15 years of our proprietary GPCR data sets. This data set includes 493 experimentally determined GPCR structures, 59 receptors, more than 400 small molecule entities, and over 30,000 mutation data points across more than 100 projects.

This proprietary data asset compounds because every program feeds it with experimental outcomes flowing back in through the loop, so our predictions keep improving and sharpen the decisions on what to progress, what to make, what to test, and what to stop. All training data is private. None of it is available via public databases. This platform is cloud-based. It's built exclusively on AWS infrastructure, giving us compute at an unprecedented scale to be structure-based and prediction-led, to materially accelerate the timeline to a development candidate, and to scale our pipeline through automation and agentic orchestration. The result is going to be a step change in speed and cost. Please turn to the next slide. The NexAQ platform compresses the time and the cost of early drug discovery dramatically.

Traditionally, reaching a development candidate takes 4 to 5 years and maybe JPY 10 million to JPY 15 million of investment. With NexAQ, we are targeting 1 to 1.5 years and less than JPY 5 million of investment per program. That is around 70% compression of front-end time and a more than 50% cost reduction. Speed to development candidate is going to be our core measure, and we are scaling to 5 AI-led research programs by 2028. Because every program continues to feed the data set, each one makes the next program faster. Our third engine is the pipeline that our platforms are building. Please turn to the next slide.

We believe the next generation of obesity therapies will compete on far more than just weight loss. We are designing for greater efficacy and for better quality of weight loss that preserves lean muscle mass. We are designing for access and adherence with oral small molecules and convenient dosing, and we are designing for greater tolerability. Gastrointestinal side effects remain a major issue for current GLP-1 therapies. They drive high discontinuation rates, and they limit the maximum dose that can be reached in real world clinical practice. So, a gentler, better tolerated profile is central to adherence and compliance. The goal is healthy weight reduction that protects muscle and organs, and weight reduction that lasts.

Here is how that pipeline builds over time. Please turn to the next slide. We are clearly aiming our next generation metabolic and rare disease pipeline at the U.S. market. Our 2026 discovery pipeline spans GLP-1, GIP receptors, and amylin mechanisms alongside targets for rare endocrine diseases. These discovery assets are designed to become clinical programs over the coming years, and our target is clinical programs for the U.S. markets in chronic weight management, muscle preservation in weight loss, and rare endocrine diseases. Our fourth engine turns all of this science into funded development and cash, and that is our partnerships.

Please turn to the next slide. We hold more than JPY 4.5 billion of headline economics plus tiered royalties through partners, and the quality of these partners is being validated regularly in real transactions. As we mentioned earlier, Lilly's acquisition of our orexin partner, Centessa, valued that business at up to JPY 7.8 billion. An external arm's length reference point that supports the value of the partnered orexin pipeline in which we continue to hold economics.

We await further publications in 2026 regarding the future of orexin science beyond sleep weight disorders and towards brain health and broader CNS such as cognition, fatigue, and mood disorders. We believe this is the next big category beyond obesity. Our muscarinic partnership with Neurocrine is progressing towards a phase III data readout for direclidine, the M4 program, in the second half of 2027. We regard this as one of the largest sources of potential value within this partnership and within our partnered portfolio. The partnered economics turn our science into funded development and cash, and we expect new partners again in the second half of 2026. Let me bring the 4 engines back together and what comes next for each. Please turn to the next slide. Each of these 4 engines has a clear next milestone, and together they all continue to compound.

In commercial products, we expect new in-licensed products for Japan in the second half of 2026, as well as filing for the approval of vamorolone in Japan. In platforms, we expect the data readout from our first AI-led research program in the second half of 2026. In our pipeline, we expect a new global out license transaction in the second half of 2026. Our first metabolic disease program, we're aiming to enter the clinic in 2028. With our partnerships, we expect further clarity on Lilly's plans for the orexin portfolio in the second half of 2026, and we look forward to Neurocrine's M4 phase III readout for direclidine in the second half of 2027. With that concludes the main presentation. I'm going to go back to open the floor to questions. Please turn to the next slide.

We'd be glad to take your questions now, and I'm joined by my colleagues from finance, commercial, and research development. Over to you, Nomura-san, to manage. Thank you.

[Interpreted] Thank you, Chris. As Chris mentioned, we would like to move on to Q&A session. As usual, institutional investors, analysts, and media people, please use the raise hand function. Since we already have the hands, we would like to take the question. Hashiguchi-san from Daiwa Securities, please unmute yourself and ask questions. Yes, Hashiguchi from Daiwa Securities. Thank you.

[Interpreted] The first question is the license out negotiation of your products. From January, you started negotiations and a few months passed. Two products were the main targets. At this point in time, what is the progress of the out-license program, and will you be able to complete during this year? Thank you for the question. This is about out-licensing. Chris would like to respond to the question.

Yes, thank you very much, Nomura-san, and thank you, Hashiguchi, for the question. I think you will understand from our previous experiences that partnership negotiations can take some time, but that usually, we open the year at the J.P. Morgan Healthcare Conference, where we have many strong and good conversations with potential partners and then we move forward through the rest of the year with a goal, usually, towards executing these partnerships by the end of the 12-monthly cycle. We are continuing to have discussions on both programs right now. I'm very confident. Our goal for this year is to, I mentioned it on our previous slides, execute at least one new major out-license across some of our clinical projects. We're on track to do that. We are now moving into the second half of the year.

Discussions with partners are becoming much more serious, much more focused. You can expect to hear from us in the second half of the year regarding a new potential transaction. Thank you very much for your question.

[Interpreted] Thank you. I have another question. The forecast for sales of PIVLAZ and QUVIVIQ, you have not made any revision. At this point in time, how likely will you be able to reach the target? Especially the progress of QUVIVIQ seems very high. On a full-year basis, is it possible to see go upside? Thank you.

[Interpreted] Let me respond briefly to this question. Both of them are in line. That is our view from the company as of now. PIVLAZ and QUVIVIQ, they have different significance. PIVLAZ, we are distributing ourselves, and we can have the revenue. This is in line and in line, but as Hashiguchi-san, you pointed out, with respect to QUVIVIQ, as you know, we are not selling directly. Amongst our revenue, product supply is accounting for quite significant amounts. Shionogi, if they increase the inventory for the future, then there will be increase of revenue and if they reduce inventory, that will not be the case, so the actual demand, that is not synchronized. These figures are from these range. Personally, I do agree that this may not fit within the range, but it is not controllable by the company, so this is still within the range at the moment. Did I respond to your question?

[Interpreted] Yes, thank you. You responded to my question. Thank you.

[Interpreted] We will now take the next question. Nomura Securities, Matsubara-san, please unmute yourself and ask a question.

[Interpreted] Thank you. Can you hear me?

[Interpreted] Yes.

[Interpreted] Thank you for the explanation. I also have two items for the out-license. At least one out-license this year, I understand. Phase II study has already completed the preparation, but has not started yet. The out-license, if you cannot do the out-license, this phase II study will not start. Am I right?

[Interpreted] Chris, if you could answer that question, please.

Yes. Thank you for the question, Matsubara-san. That's correct. If we don't out-license the EP4 agonist or the GPR52 agonist, it is not our intention to conduct global phase II studies ourselves. These programs have been taken to their logical point of inflection for our company, and it is best that both of them are moved or advanced by partners. If you think about what we are discussing here, EP4 IBD, very, very large global indication. That is much better suited to a large company that has an IBD franchise to take that program forward through phase II and phase III. Similarly, GPR52, this is a mechanism of action that is indicated for schizophrenia or psychosis in Alzheimer's disease patients. Again, it's a very, very large indication. We need the support and the expertise of a large partner to move that forward through phase II and phase III. So, hopefully that answers your question.

[Interpreted] Yes. Understood. Thank you very much. For this IBD, there are some oral disease competitors, too. If you cannot have the good partner, it will be an opportunity loss. Rather than that, but that cost is more important, is a higher priority for you. Am I right?

[Interpreted] Chris, if you could answer that question, too.

Yeah. Thank you for the question. Look, generally speaking, our preference is to out-license to a large partner that is fully funded to do all of the clinical development required to make the medicine a success. As you know from our history as a company, there are other ways that we can move programs forward without necessarily doing a licensing deal as well. Now, our current focus and our current priority is to find a licensing partner. However, if we were unable to find a licensing partner, we could create a spin co, and we could bring venture capital investors in to fund the trial, and we could, in return, earn significant minority equity stake in that spin co, and the venture capital funds could move the project forward cost effectively. That would be another way that we could realize value from these projects.

I just want to make it very clear that Nxera will not be spending 100% of the development costs on these projects. Priority number 1 is a licensing transaction with a major pharmaceutical company. If we were not able to do that, priority number 2 would be a spin co with top-tier venture capital providers to move the asset forward in that fashion. Hopefully, that answers your question, Matsubara-san. Thank you.

[Interpreted] Yes. Thank you very much. My second question is AI drug discovery strategy. Data accumulation, you are accelerating the speed, and you are reducing the time required. I understand that. On page 26, [indiscernible], there is an ethical drug. In the development, what you are aiming for the new drug is first-in-class or best-in-class? What is your preference right now? Thank you very much.

[Interpreted] Patrik, if you could answer that question, and if there is something to add, Chris, also, please.

Okay. Thank you for the question. Generally, when you look at the targets that we work on, they are currently primarily dominated by peptide drugs. There are certainly in the GLP-1 and amylin other small molecules that are ahead of us. However, given that we have the structural insights in these programs, we have a clear way how we can differentiate as a best-in-class molecule. We know that certain molecules in the GLP-1, GIP, or amylin space got some limitations.

That's what we are very much focusing on achieving weight loss, not to the maximum extent, but quality of weight loss, preserving muscle mass, and also what we see in the clinic, which is very important, achieving high compliance of getting good tolerability with patients, because we do see quite significant dropout rates at the moment, certainly with the GLP-1, that's a way how we position our molecules. Generally, as I said, focusing on small molecules, replacing a market that is currently dominated by peptides, for the small molecules, very much best in class, following the front runners and adjusting our profile accordingly. Chris, anything you want to add?

No, just except to reiterate. Thank you. That was clear, Patrik. Just wanted to reiterate. Last year in November, we were very clear that we would be largely moving away from novel first-in-class drug discovery and moving very much towards working more on clinically or biologically validated GPCR targets, where our platform enables us to drive differentiated chemistry and differentiated potential outcomes and molecule profiles. That remains the focus. As you can see on this page, many of these targets on the left-hand side are well-known, and they are well understood.

However, the companies that are pursuing them do not have access to the 15 years of proprietary data sets, know-how, knowledge, nor our platform to drug these targets really well. That's what we're going for, differentiated molecules to well-understood and validated targets. We see that as a much more effective, high probability of success strategy for our drug discovery operation. Thank you.

[Interpreted] Thank you very much.

[Interpreted]: Thank you, Matsubara-san, for your question. Let us move on to the next question. Pathology Associates, Dion, please. Please unmute yourself and ask your questions.

Thank you very much for taking my question, congratulations on a fantastic quarter. I have 2 questions, the first regarding QUVIVIQ. I know what you've said, Nomura-san, regarding the situation with inventory and also the class expanding. I wonder if you can add anything related to new patient starts versus patients switching from competing therapies, regarding this. Thank you.

[Interpreted] Thank you. May I? So, Maeda would like to respond to your questions. Please go ahead.

[Interpreted] Yes. Thank you. At the moment, for those patients who start sleep treatment, that is being done at the moment. As to which drug is selected at the beginning, it is most impactful for the prescription, and if it is prescribed at the beginning, it will be used for a long time. We will ensure to have the new patients. The figures here do not only include the new patients, but this 9% represents other patients as well. If there are new patients, there will be more patients who will continue. At this point in time, it's 9%, but this is promising. In a few years, if new patients continue, and if we can gain more patients, then this is going to be a large drug. I hope that answers your question.

[Interpreted] Thank you, Maeda-san. So, Dion-san, there was a background noise, so I muted you, but if you can continue with the second question.

Thank you. Thank you very much, Nomura-san. That was perfectly clear. My second question is just regarding Centessa, and with the acquisition now closed, I wonder if there's anything that you can comment on the economics that you receive or will receive from the transaction, and whether there will be any additional proceeds related to the transaction. Thank you.

[Interpreted] Thank you. Chris would like to respond to the question.

Thanks, Dion. Thanks for the question. Obviously, our agreement with Centessa is confidential, so I can't disclose the specifics. But certain details have been disclosed previously in the public filings of Centessa. I can confirm that there are still milestones that we are to receive for the progress of the 3 molecules, and they will continue to progress under Lilly's stewardship, that's clear. They will be moving forward. In terms of the royalty economics that have been referenced in Centessa's public documents, it's single-digit royalties is what's been referred to in the past. I won't say anything more than that, except to say, obviously, it's truly fantastic that Lilly have recognized the value not only in the programs we discovered, but the incredible effort that the team at Centessa did to develop those molecules so quickly.

We're just really excited to hear more about what Lilly plans to do. So far, there's been general comments publicly from the CEO and the CSO of Lilly around what they plan to do with these programs. Clearly, they have ambitions beyond just sleep-wake disorders and, as I said, into broader brain health and neuroscience, looking at potentially cognition, mood disorders, fatigue disorders, et cetera. Yeah, we're really excited and what a great outcome for the team at Centessa. We really look forward to seeing what Lilly will do with the programs going forward. Thank you. That concludes my response.

Understood. Thank you very much. Can I just ask one further question, if possible, regarding your NexAQ platform, which is very exciting. I wonder, you mentioned creating spin co or involving VC funds, and given the value, what must be a very large value of 15 years of proprietary GPCR data, if there's any opportunities that you can think of to leverage this asset beyond keeping it internally and potentially suffering a bit of a conglomerate discount, if I can use that term, given the valuations achieved generally by AI companies. Can you make any comments on that? Thank you.

That's a really good question. I think it's clearly been very front of mind for me. In a way, we set this platform up as a separate company already. If you look at the company's house filings in the U.K., you will see that Nxera Pharma AQ Limited has already been established as a separate entity. What that means is it gives us flexibility in the future should we want to attract direct investment into that entity and the build-out of the platform, we can. Also, of course, with a view to the future, Dion, we're always considering what is the most appropriate venue for a company like this. Is the most appropriate place for our AI and quantum platform to be sitting within a Japanese pharmaceutical company? Maybe that's not the case in the future.

Because we've already established it as a separate legal entity, we have maximum flexibility if we wanted to, in the future, spin it out or take direct investment from what I would call not traditional pharmaceutical investors, right? Currently, a lot of the money that's being invested in this space comes from the likes of the SoftBank of the world, the Nvidia of the world, the tech [buyer] investment community. We've already set it up from day one to be structured so that it's really easy to do that. Hopefully that answers your question without giving you too much detail.

Thank you very much.

[Interpreted] Thank you very much, Dion-san. Time is limited so we will move to the next questioner. Jefferies Securities, Yamakita-san. Please unmute yourself and ask your question, please.

[Interpreted] I have first question. Your fair value and market evaluation difference discrepancy. This year, there were many positive news, but your share price, especially recently, has been rather sluggish. On the other hand, looking at the market in the U.S., biotech companies share price is recovering, but Japan, including yourselves, biotech shares are still weak. My question is the following: if in the Japanese market you are not evaluated fairly, maybe listing in Japan to unlock the value, fair value, or do you have the acquisition possibilities? How you plan to unlock your value? Any methods that you have in mind?

[Interpreted] Thank you. Chris, if you could answer that question, please.

Yeah. Thank you, Yamakita-san. Yeah. This is quite topical for us at the moment in our discussions, particularly with U.S. institutional investors this year. This question continues to be raised. It is natural for a company to periodically consider if it is listed in the right market, a market where the company should be valued fairly and appropriately. I've said for many years, we're very proud that we were founded, and we're very proud that we are listed in Japan, and it is my duty to make sure Nxera becomes a Japanese biotech champion. Just to be clear, we are not considering delisting from Japan. I do think it is a fair comment that if we were starting this company today, we would clearly be targeting a U.S. Nasdaq listing. That's clear now. We have options available.

We could do a direct dual listing, or we could do a carve-out listing. Regarding the latter, the concept of a carve-out listing, I have already proposed this to our Board of Directors, and the Board of Directors is already considering it as part of our midterm business plan. For this strategy, we firmly believe our obesity and rare endocrine disease pipeline, plus even the AI discovery platform, which I just mentioned, we've already established it in a separate legal entity. We think that the pipeline and the platform would be valued far more highly by U.S. institutional investors, and perhaps in the future, U.S. Nasdaq is much more appropriate for the pipeline and for the platform. Given where our share price is, it's a long way below fundamental intrinsic value. We understand as a company what our fair value is.

If I look at yourself and the analyst community, you have a median consensus target price of between JPY 1,800 and JPY 1,900 per share. This is, from our perspective, very, very conservative. We have internal risk-adjusted models of our cash flows. We know that the value is much, much higher than where the analyst consensus is, and we know that because only we know the confidential information in our contracts and our agreements, and therefore we know how to appropriately value it. I think the last thing I would say on this topic of fair valuation, another reference point, Lilly has acquired Centessa for $6.3 billion, maybe up to $7.8 billion. Centessa's entire pipeline came from our platform, right? That's a very fantastic validation of not only the quality of our science, but the value of what we produce.

I'll leave my response there, but hopefully, I've given you lots to think about. Thank you, Yamakita-san.

[Interpreted] Thank you very much. That is all from me. Thank you very much.

[Interpreted] Thank you, Yamakita-san. We are behind schedule, but there is one last question I would like to take up from the chat. This is on product target that is shown here. In 2030, a revenue of JPY 40 billion-JPY 50 billion. This meaning, in the past, that we had the 2030 vision, and this is also on our website, corporate homepage. How is it related to JPY 50 billion? Since this is related to finance, let me respond. In the past, we said that JPY 50 billion by 2030, and that includes a milestone and the platform business between JPY 10 billion-JPY 15 billion. This JPY 40 billion-JPY 50 billion is products only. If you add them up, roughly JPY 50 billion to JPY 60 billion, JPY 65 billion, will be the total amount.

At least the JPY 50 billion is maintained as we mentioned in the past vision. If we add them together, between JPY 50 billion to JPY 60 billion. Please do understand this way.

We were only able to take up just one question from the chat, and my apologies, but as the time is already here, we will like to conclude. Since we have the blog, official blog, we would like to respond to your questions through the blog. We will upload this session, including the Q&A on the website. After this, thank you very much for joining this session. With this, we would like to conclude the first half financial results meeting for FY 2026. Thank you for joining.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[Interpreted] Good morning, ladies and gentlemen. My name is Christopher Cargill, Representative Executive Officer, President and CEO. Thank you very much for taking the time out of your busy schedules to attend today's meeting. In accordance with Article 15, Paragraph 1 of the Articles of Incorporation, I will serve as the Chair of this meeting, and I respectfully ask for your cooperation.

I hereby declare the 36th Ordinary General Meeting of Shareholders of Nxera Pharma Company Limited open. For the smoother conduct of the meeting in Japanese, Executive Officer, Nomura, will facilitate the proceedings at my designation as Chair. Mr. Nomura, please proceed.

[Interpreted] I am Nomura, Executive Officer. Based on the Chair's designation, I will serve as moderator of today's meeting. As previously announced, this meeting is being live streamed via the Internet for shareholders. While we will not film shareholders attending in person, please understand that any remarks made during the meeting will be broadcast. We kindly request that you refrain from stating your name when speaking. For shareholders viewing online, please note that video or audio restrictions may occur due to network conditions, computer settings, heavy access traffic or other factors.

In addition, we respectively request that all shareholders refrain from photographing, recording, audio recording or saving any part of this meeting. We will take questions and comments from attendees collectively after all reports and explanations of the proposals have been completed. When asking a question or making a comment, please speak from the nearest standing microphone. Should an unforeseen event such as an earthquake occurred during the proceedings, please remain calm and follow the instructions of our staff.

The matters to be addressed at today's general meeting are as stated in the notice of convocation provided on our company website in accordance with applicable laws and our articles of incorporation, printed materials have not been sent. A summary will be projected on the screen at the front later, so please refer to it. You may also view the notice of convocation on our company website using your smartphone or other device.

Next, I will report the number of shareholders in attendance and the number of voting rights they hold. Out of a total of 25,623 shareholders, the number of shareholders entitled to exercise voting rights at this AGM is 23,160. The total number of voting rights is 904,371. Including shareholders attending today as well as those who exercised their voting rights via Internet or by mail, the total number of shareholders represented is 13,863 and the total number of voting rights represented is 640,132.

Next, since we are meeting the quorum, I would like to report that. Next, I will report the results of the audit conducted by Audit Committee. The audit results are as stated in the audit report of the Audit Committee on Page 80 of the notice of convocation provided on our company website. The Audit Committee conducted an audit of the execution activities by the directors and executive officers for the 36th fiscal year from January 1 to December 31, 2025. The results of the audit are as follows: the business report and its supplementary schedules are recognized as properly prepared in accordance with applicable laws, regulations and the articles of incorporation and as accurately represent the status of the company. No fraudulent acts or material facts in violation of those regulations or the articles of incorporation were found in relation to execution of duties of the directors and executive officers.

The resolutions of the Board of Directors regarding the internal control system are deemed appropriate. The description in the business report concerning the internal control system as well as the execution of duties by the directors and executive officers have no matters required comment. With respect to the consolidated financial statements, the nonconsolidated financial statements and the respective supplementary schedules EY are considered appropriate. That concludes the report. Thank you for your attention.

Next, we will proceed to the reports and an explanation of our business outlook. The details of the reporting items are stated in the notice of convocation provided on our company website. However, we will present a summary and our future business outlook by video. Shareholders attending in person are asked to view the screen at the front of the venue. Shareholders participating online are asked to view the broadcast screen on your device. Questions will be taken collectively after the reports and explanations of the proposals.

[Foreign Language] My name is Chris Cargill. I'm the CEO of Nxera Pharma. Thank you for being here. And I have a lot to share with you today.

Now I want to begin by addressing our share price. Your frustration is legitimate, and it is shared by every member of our leadership team, including me personally. I'm not here to make excuses, I'm here to explain what we have been building beneath it and to show you concretely why I believe the next chapter looks very different. We have a clear focus, we have a sound strategy, and we have the capital and patience to execute it. And this is not the first time Nxera has been in this position. The chart on the left shows our share price between 2011 and 2014. It looked very similar to today. The shareholders who held through that period were rewarded. By 2016, the share price had risen more than 10x from its lowest point. We know what an investment cycle looks like. We have navigated one before. And our 2030 vision, revenue above JPY 50 billion, operating profit margins above 30% remain unchanged.

I want to address directly why we have reported losses. These are not accidental losses, but with a deliberate cost of building something valuable. Look at the green bars on the right. Each year, our research and development investment has grown. This represents investments in new medicines and our drug discovery platform. Every yen of these reported losses was matched by new investments in Nxera's future. A pharma does not call the seed a loss. They call it the beginning. This investment phase is now changing.

In FY 2026, we expect to reach core operating profitability. The direction has changed. The returns phase is beginning. In 2022, we had a very solid base from which to build from. we made a deliberate choice. Products, platform, programs and partners. These are not 4 separate businesses. Each one was designed to fund, derisk and strengthen the others.

Now let me show you what we are building. More products for patients in Japan and Asia Pacific, more data to enable the AI drug discovery revolution, more programs in the largest areas of global unmet medical need and more partners with 10 programs now advancing through global clinical development. Japan is our home. It is our #1 market and our #1 patient priority. The Japanese pharmaceutical market is worth USD 76 billion. We have built our commercial foundation here in Japan first in specialty medicines, in rare diseases and soon pediatric care. And we are beginning to expand that foundation across the Asia Pacific region. 3 years ago, our Japan revenue was 0. In FY 2025, our revenue in Japan reached JPY 17.8 billion. That is growth of 27.5% in 1 year.

Now let me show you how we did it. PIVLAZ is a treatment for dangerous condition affecting the brain blood vessels after hemorrhage. It now holds 74% of its market in Japan. QUVIVIQ is our treatment for insomnia. We launched it in December 2024 with our partner, Shionogi. Sales grew 224% in FY 2025. And we just added a third product, Vamorolone, a medicine for children living with Duchenne muscular dystrophy, and I want to tell you more about that.

This is Dr. Vasantha Gowda. She is a specialist children's neurologist at Evelina London Children's Hospital. Some of her patients are now being treated with Vamorolone. And I would like you to hear directly from her.

[Presentation]

This is why we do this work. There are more than 2,000 children and families in Japan living with Duchenne muscular dystrophy. We hope to bring Vamorolone to them. Duchenne muscular dystrophy is rare. It's progressive and today, incurable. It weakens the muscles over time, leading to loss of mobility, heart problems and a shortened life. Until now, the only treatment in Japan was corticosteroids, medicines that work but cause serious side effects in growing children. Vamorolone works differently. It targets the same receptors but with a gentler effect and fewer side effects. It is already approved in the U.S., Europe, the U.K. and China, and we are proud to bring it here to Japan.

Now I want to show you the engine behind our future program pipeline. Artificial intelligence is changing how medicines are discovered. It's not a prediction, it's already happening. But there is an important point that many people miss. When every company uses the same public training data, the results converge. The real advantage comes from the proprietary data that you train the AI. We have spent more than 15 years building a unique scientific data set, 493 protein structures, 59 biological targets studied in detail, 30,000 measurement points and more than 100 active projects.

No other GPCR focused company in the world has this specific data set. It cannot be bought and it cannot be copied, and that is our advantage. We are building what we call the AI+Q platform. This combines artificial intelligence with quantum level simulation technology. In plain terms, it allows us to predict how a potential medicine may interact with the GPCR in the body before we even make a single molecule in the laboratory. This makes discovery faster, more precise and less costly.

We have invested USD 5 million in our London discovery center to build this capability. We chose London as the base given its excellent access to world-leading data science talent for AI drug discovery. Google DeepMind and Isomorphic Labs developers of AlphaFold and large language model companies such as Anthropic, OpenAI and Meta all have large operations in London, which enhances the local talent pool.

Our new AI+Q platform is expected to activate by the end of 2026. This slide shows what our AI+Q platform does at a molecular level. We can simulate in precise detail how a drug candidate interacts with its target inside the body. The AI+Q platform is currently in beta development. The first programs generated entirely by this platform are expected in 2027. This is the sprout that will become a significant flower.

I now want to show you something that our current share price does not reflect at all. This is our pipeline of new medicines in development. On the left, our neurology programs already partnered with Neurocrine and Centessa. And on the right, what comes next. We are now discovering medicines in metabolic disease and rare endocrine disorders. These are conditions where today's treatment options are mostly limited to chronic injectable therapies, a burden for patients.

This slide shows the 6 new programs we are advancing and the estimated size of the global market for each one. The combined market for these programs is estimated at more than USD 220 billion by 2030, 1 billion patients seeking better tolerated, more convenient treatments. The value of this pipeline in our share price today is approximately 0. We believe that will change. There is strong strategic logic to selecting these targets. They are highly synergistic. The metabolic programs will combine to drive 10% weight loss or more, placebo-like tolerability and muscle preservation, the future of chronic weight management. Patients and payers want oral therapies. And clinical endpoints for these programs are biomarker-driven, enabling speed and capital efficiency.

This slide shows the 3 clinical stage programs that we have earmarked to new partnerships. The EP4 agonist program, NXE'744, has demonstrated early efficacy signals in an indomethacin challenge study. With the GPR52 agonist, NXE'149, we've run imaging studies that suggest it has effects in brain regions similar to other approved antipsychotic drugs. And the EP4 antagonist program, NXE'732 showed early efficacy signals, including 2 partial responses. And continues its Phase IIa study with Cancer Research UK. Active discussions are ongoing, and we expect new licensing transactions in 2026.

I want to explain how the world's most rigorous pharmaceutical companies view us. Neurocrine Biosciences, Eli Lilly, AbbVie, Centessa Pharmaceuticals. These companies choose their partners carefully. When a company of that scale signs an agreement with us, it means our science has passed their highest level of review. Our partnership with Neurocrine alone has a total potential value of USD 2.6 billion. Our partnerships with Lilly and AbbVie add a further USD 2 billion in potential value. These partners provide an important source of nondilutive capital for Nxera. They offer our science a global reach from a Japanese base.

As I said at the beginning, we are not the first company to go through a period of trading where we are undervalued. Both Amazon's and Apple's share prices fell over 80% between 1999 and 2001, both recovered. This is what investors call the J-curve, and this is where we are on that curve. The dot marked we are here, that is today. The investment phase is largely behind us, and we are at the inflection point. The returns phase lies ahead. Short-term sacrifice, long-term value creation. That is the thesis, and we are executing it.

Let me be specific about what the near-term future looks like financially. In FY 2025, our revenue was JPY 29.6 billion, and we held JPY 20.4 billion in cash. In FY 2026, we expect revenue of JPY 33.8 billion and a core operating profit of JPY 7.8 billion. Breakeven is in sight. We have also made significant changes to our cost structure. Since 2023, we have reduced our global headcount by over 30%. Multiple pipeline programs with low probabilities of success have been culled. We are spending and allocating shareholder capital as if it were our own money because it is.

This is the Nxera leadership team. Every leader you see here holds shares in this company. When the share price is low, we feel it personally. When the value is created, we share in it alongside you. Our interests are aligned with yours. I do not ask you to trust words, I ask you to watch the milestones. In 2026, we expect to submit QUVIVIQ for approval in Taiwan. We expect clinical data and milestones from multiple partnered programs, including Neurocrine and Centessa. We expect the first development candidate from our metabolic pipeline, and we expect to launch our AI+Q drug discovery platform.

In 2027, we expect approval and launch of QUVIVIQ in South Korea. And with our newest product, Vamorolone, we've already commenced our preparations for engaging with the PMDA as we plan to bring this very important medicine to patients in Japan as soon as possible. We expect top line Phase III data for direclidine, our lead partnered program with Neurocrine. And we expect multiple more development candidates to come through the metabolic and rare endocrine disease pipeline. And we expect the AI+Q platform to start rapidly generating optimized lead programs.

Each of these milestones is a sprout becoming above. Each one moves us closer to the harvest. More products, more data, more programs, more partners. The flywheel is turning. The next chapter of Nxera is not yet written, but the foundation is laid. The strategy is clear, the team is ready. We planted the seeds that others could not see. And today, I'm showing you the first sprouts. We will not stop until you see the harvest. Thank you. [Foreign Language]

[Interpreted] Thank you very much. We have now explained the matters to be reported and our business outlook going forward through the video presentation. Next, we will proceed with the proposal. The details of the proposal are stated in the notice of convocation provided on our company website.

I will now explain the proposal election of 7 directors. All 8 current directors will complete their terms of office at the conclusion of this general meeting. Accordingly, based on the resolution of the Nomination Committee, we propose the election of 7 directors. The director nominees are Christopher Cargill, David Roblin, Rolf Soderstrom, Eiko Tomita, Naoko Shimura, Nicola Rabson, Takeo Morooka, total of 7 nominees. The career summaries and the other details of each nominee are stated in the notice of convocation.

We will now invite the candidates for the external directors to share their aspirations. Please note that when speeches are made in English, that will be followed by Japanese interpretation. We would like to, first of all, hear from Director David.

Good morning, fellow shareholders. My name is David Roblin. I'm a medical doctor, and I've been practicing in research and development for new medicines for 30 years. And I've had the privilege and honor of developing 11 medicines in my career to date with Pfizer, Bayer and in biotech. I serve because I wish to transform patients' lives through the medicines that I've been involved with, and I remain honored to be an independent Nonexecutive Director of our company, Nxera.

I'm confident that we are on a journey together based on a sound strategy to deliver value. Value for patients in the Japan and Asia Pacific region, and it is important that we can already see the benefits of our medicines to patients in that region. Value through our R&D activities, our best-in-class strategy that the CEO described, our new AI platform allows us to keep pace with the competition. And our business development partnerships with big pharmaceutical companies. And third, value to shareholders in the way in which our company is valued.

I remain confident. You all know that the R&D process takes time. There are challenges in that process but success leads to massive rewards, rewards for patients and rewards for shareholders. I remain confident, and I thank you for your votes for me as a Nonexecutive Director.

[Interpreted] Thank you very much, Director David. Now moving on to the Director Rolf.

Good morning. My name is Rolf Soderstrom, and I'm honored to be a Director of Nxera. I've worked for over 20 years in biotechnology, building successful companies and have helped bring several medicines to both commercial and clinical success. I'm very excited by the opportunity of Nxera and believe that the strategy will deliver both a unique and valuable company to Japan. The investments we have made over the past few years are building a very strong foundation on which to build the next phase of Nxera's growth. I am honored and remain very dedicated to supporting Nxera over this next phase, and I would like to thank all shareholders for their continued support. Thank you.

[Interpreted] Thank you very much, Director Rolf. Now I would like to ask Director Tomita to say a few words.

[Interpreted] My name is Eiko Tomita. Very nice to meet you. For the past 30 years or more, I've been working for pharmaceutical companies, including Bristol Myers Squibb and AstraZeneca. I was involved in R&D of drugs and also regulatory affairs and also decision-making of such companies. Based on those experiences, I would like to make contributions to Nxera Pharma business. I'm very honored.

As was explained in the presentation video, there are various programs that have already started. And the company is also working to utilize the scheme of drug discovery using AI. So we are now facing the new phase. So I would like to continue to take -- to capture the opportunities and to make sure that reduce risks. And I'm hoping that I will be able to make contributions to the development of this company. Thank you.

[Interpreted] Director Tomita, thank you very much. Now Director Nicola, please.

Thank you. I am Nicola Rabson. I am a senior partner at Linklaters, one of the world's largest law firms. I specialize in dealing with corporate employment and governance matters. In that capacity, I work alongside some of the world's largest and most successful companies, including Nomura and Mitsubishi. I have held numerous executive positions within Linklaters and a Nonexecutive Director of a FTSE business. I am truly privileged to be involved in this next phase of Nxera. I believe in this company, its vision and its prospects.

On a personal note, I was diagnosed with lupus as a young woman and have personally benefited from the discovery of drugs during my lifetime. I am committed to being part of the journey, and I look forward to the future and our collective success. Thank you.

[Interpreted] Thank you very much, Director Nicola. Now, Director Shimura, please.

[Interpreted] My name is Naoko Shimura. Very nice to meet you. On Page 8 of the complication notice the skill matrix. What is expected of me is legal affairs and compliance according to my understanding. I would like to make sure I have the courage to be [indiscernible] by other members of the company. And at the same time, I would like to make contributions to make this company the very first Japanese leading international biotech company. I would like to make sure that, that will not deaccelerate the company's growth. I'm very much looking forward to working with all of you. Thank you.

[Interpreted] Director Shimura, thank you very much. Last but not least, I would like to ask Mr. Takeo Morooka to say a few words.

[Interpreted] My name is Takeo Morooka. I am -- I've been trained as plastic and reconstructive surgeon in the emergency medicine. And after that, I worked for WHO and also for Ministry of Health and Welfare of Japan. I have been focusing on the Japanese market and through health care policymaking and so on, I would like to make sure I can make contributions to the development of the company. Thank you very much.

[Interpreted] Mr. Morooka, thank you very much. This concludes the explanation of the proposal.

[Interpreted] Now we would like to proceed to the vote. CFO, Nomura, please.

[Interpreted] We will now proceed to vote on the proposal, election of 7 directors. The details of this proposal are -- has been explained. Those in favor of this proposal, please indicate your approval by applause.

[Voting]

[Interpreted] Thank you very much. As a result of the votes just taken, including voting rights exercised via the Internet and by mail, we have received approval from a majority of the voting rights of shareholders present. The proposal is therefore approved and passed as proposed. Thank you very much.

[Interpreted] This concludes all matters to be addressed at this Annual General Meeting of Shareholders. This concludes the 36th Annual General Meeting of Shareholders of Nxera Pharma Company Limited. Thank you very much.

[Interpreted] Directors and executive officers, please stand. Once again, thank you very much for your attendance today. To further enhance our corporate value, we will continue working together as one company, and we sincerely appreciate your continued support.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[Interpreted] It is time. From now, we would like to start Nxera Pharma's FY 2025 Full Year Financial Results Briefing. Thank you very much for joining despite your very busy schedule. I will be serving as the MC today, CFO, Nomura.

Today, we have Mr. Chris Cargill, CEO; COO, President and Nxera Pharma, Japan, Toshihiro Maeda; CSO, President and Nxera Pharma, U.K., Dr. Patrik Foerch attending the meeting.

We have simultaneous interpretation as usual. Please click the globe icon and select the language, Japanese or English and you will be able to hear the interpreter's voice. If not, you will be able to hear the original voice of the speakers.

In the first half, I will be presenting, and there will be Q&A session in the second half of the session. We have the materials shared on the screen. We are also uploading on the website. If you would like to have the materials from Investors, IR Library, Presentation, please access the materials.

In the latter half of the session in Q&A, institutional investors, analysts and media people, you will be able to ask questions by raising hand. The others will be able to submit questions from Q&A button. You will be able to submit questions at any time and we would like to respond to your questions as long as the time permits.

Without further ado, we would like to move on to the presentation. I will talk about the financial results. After that, Chris will talk about the operating highlights, Mr. Maeda will talk about the Japan commercial business update, Patrik will provide update on U.K. R&D progress and lastly, Chris will talk about FY 2026 objectives and beyond.

Now please turn to Page 5 of the materials. This is Page 5 of the materials. Here, summary of FY 2025 full year financial results, along with the past trend by revenue segment is indicated. The revenues against the JPY 28.8 billion last year, this was JPY 29.6 billion, slight increase. Milestone revenue decreased from JPY 11.2 billion to JPY 7.9 billion and the product sales grew from JPY 14 billion to JPY 17.8 billion.

I will talk about the details later on, but especially QUVIVIQ product supply and royalty became the drivers of the product sales. The milestone is declining. The blue is declining. But in 2024, Neurocrine had $35 million, close to JPY 5 billion, milestone revenue, but primarily low milestone in 2025.

In terms of profit core OP was minus JPY 400 million. IFRS basis was minus JPY 8.4 billion. On a year-on-year basis, SG&A was compressed by 4% to 5%, about JPY 800 million. Clinical study development and investment in obesity, the expenditure in R&D increased by JPY 2.7 billion. There were impairment in part of the assets, primarily due to incur of JPY 1.8 billion one-off costs related to business rebuilding and structural reform. It is not included here, but the operating profit was JPY 20.05 billion deficit, and there was the costs related to the change of the terms of the corporate bond of JPY 4.6 billion in IFRS basis.

In Slide 6, this is by business domain and core operating profit and accounting operating profits are shown as the breakdown. On the far left, in blue is the platform business. This is so-called bioventure-type business model. The red one to the right is a commercial business, so-called pharma-type business model. Platform profit is largely dependent on milestone for partners. Self-control is unfortunately difficult. But on the other hand, commercial, by growing that, we are targeting for the stabilization of the revenue. This is the company policy. As explained, in platform business, large-scale milestone was lacking. There was increase of R&D expenses. As a result, the core operating profit turned deficit. But last November, as we announced individually, we are rebuilding business for turning profitable.

Commercial business is growing steadily on a core basis. It became in black, JPY 6.5 billion, targeting for stable growth in the next fiscal year. As for the forecast, later on, Chris will cover this in FY 2026 objectives.

Please move on to Slide 7. As I mentioned about the R&D expenses, I would like to talk about the difference on a year-on-year basis in detail. Last November, we showed this slide in R&D Day. The trend has not changed significantly, but the development products in the clinical stage last year, reached the peak of expenditure, and we announced in August last year, but there was significant increase in investment for obesity area, and there was exchange rate fluctuation compared to the assumption. So this is very brief, but I would like to conclude the explanation on the financial results.

Next, Chris will talk about the business highlights. Chris, over to you.

Thank you, Nomura-san, and good afternoon. Now let me start by saying FY 2025's financial results, particularly the operating profit level were unacceptable. We have initiated changes to management, changes to research strategy and implemented cost controls, and I expect the benefits from these changes to become apparent in the second half of this year, FY 2026.

Our strategy is clear. We aim to strike a balance between investing in research to create future value, while at the same time being as close as possible to breakeven or profitable financial status.

Now there are many factors in our industry that are 100% outside of our control, such as scientific or clinical outcomes or partner-regulated strategies. However, how we allocate our capital is within our control, and we must do better.

In FY 2025, we did continue to invest in programs and products that will shape our future growth. And I am proud to say that our Japanese operations are highly profitable on a stand-alone basis. Our U.K. drug discovery operations require a sharper strategic focus and stricter capital allocation. And in FY 2025, we took necessary steps to correct this.

Please turn to Slide 9. Sales of PIVLAZ and QUVIVIQ exceeded our goal of over JPY 17 billion net product sales. And as I mentioned, I'm extremely proud of our teams in Japan for their continued commitment to expanding access for patients to these important products. After the year-end, we completed the in-license of vamorolone for Duchenne Muscular Dystrophy, or DMD, adding a late-stage rare disease product with a strong strategic fit for our business in Japan and the high-growth APAC region.

In our drug discovery business, we were unsuccessful in completing a new high-value business development partnership deal in FY 2025. However, we did successfully begin a new Phase II trial with our EP4 antagonist program. And the early clinical data from this program is very encouraging as we aim to fast follow Ono's product with the same mechanism of action.

Now following the acquisition of Idorsia's business in Japan late 2023, almost all planned PMI or post-merger integration investments across IT and business systems are now complete, which means we can look to operate much more efficiently going forward. And our goal of positive IFRS operating profit was missed due to the GPR52 option not being exercised last year in FY 2025.

Please turn to Slide 10. So we do continue to advance rapidly both the drug discovery business and commercial side of the business. Our U.K. drug discovery business progressed 5 programs in Phase I, 5 programs in Phase II and 2 programs in Phase III trials across our key focus areas. Our commercial business in Japan experienced strong growth across 2 commercialized products, PIVLAZ and QUVIVIQ, and it is poised to advance 2 clinically derisked rare disease products as we expand the late-stage clinical pipeline. I believe we're on track to continue strong growth trajectory through 2026 and beyond.

Please turn to Slide 11. PIVLAZ delivered $13.5 billion in sales, 7% year-on-year growth, and it's now firmly established as the standard of care in Japan. QUVIVIQ delivered $4.3 billion net sales and is now showing strong momentum with our partner, Shionogi in Japan as the 2-week prescription limitation ended in December 2025, and we expect 30% annual revenue growth for QUVIVIQ this year in FY 2026.

And as I mentioned, our new late-stage product of vamorolone is highly synergistic with our existing development and commercial infrastructure. And we expect once launched that the product will contribute meaningfully to our business.

Please turn to Slide 12. Now as I mentioned earlier, despite the heavy R&D expenditure last year, we did build value by advancing our wholly owned in-house drug discovery programs as well as strong momentum from our core partners, Neurocrine and Centessa as they advance our partnered programs. Now in our partnered portfolio, Neurocrine maintains the world's most comprehensive portfolio of muscarinic agonists to treat neuropsychiatric disorders, and these were all developed using our NxWave drug discovery platform. The most advanced program, the muscarinic M4 agonist, now called direclidine, is in Phase III trials for schizophrenia and top line clinical data is expected by the end of 2027. There are also several other muscarinic agonists advancing through Phase I and Phase II studies across multiple indications.

Now Centessa is advancing its lead asset, ORX-750, towards a registrational program this year to treat narcolepsies type 1 and 2 as well as idiopathic hypersomnia, all huge areas of unmet medical need. And in our wholly owned in-house portfolio, we have 2 Phase II-ready assets now, NXE'149, a GPR52 agonist for schizophrenia and NXE'744, an EP4 agonist for IBD. These are both undergoing competitive licensing processes. And our aim is for both of these programs to be partnered by the end of FY 2026, if not sooner.

NXE'732, our EP4 antagonist for advanced solid tumors is progressing through Phase IIa trials with Partner Cancer Research U.K., and we expect data in 2027. Our CSO, Dr. Patrik Foerch, will discuss these programs in further detail, including an outline of some of the strong indicative clinical data we have seen so far.

Please turn to Slide 13. Now we recently refocused the U.K. drug discovery portfolio to prioritize areas with the greatest potential so that we can broaden our patient impact. Now this includes an innovative portfolio of next-generation small molecules for obesity, metabolic and endocrine disorders with very significant total addressable patient markets. We also work with global investment firms to create new biotech-focused companies to advance medicine through clinical development, and we disclosed plans for a new company yesterday via a press release, and we look forward to hopefully launching this company from stealth very soon.

Now our GPCR know-how and our flexible chemistry approaches remain unmatched, and we plan to continue to deliver differentiated best-in-class medicines to address these high unmet areas of need.

I'm going to hand over now to Maeda-san to discuss the Japan and APAC clinical development and commercial businesses in more detail. Thanks, Maeda-san.

[Interpreted] Thank you. Then I would like to talk about Japan and APAC. Please turn to the next page. First of all, the actual of our first commercially available product, PIVLAZ and its highlights as of 2025. Since the launch, this was used and positioned as the standard of care in Japan for the prevention of cerebral vasospasm in patients with aSAH. And as of the end of last year, it has grown sales to JPY 13.5 billion. And this fiscal year 2026, we are expecting to see the stable growth of over 4%.

On patient base from 34% in 2022, the share expanded to 74% in 2025, securing dominant position in the domestic market. On the right-hand side, you see the 2025 highlights. Since the launch to December 2025, PIVLAZ patients reached 25,470 patients. In STROKE2025, over 100 abstracts were presented.

Looking at this year, summarizing the Practical Guide to the Administration of Clazosentan, it is expected to be published in March. So we are expecting to have further promotion of use in the medical field. As you can see, PIVLAZ has established clinical value, market penetration and scientific evidence and growing steadily as the mainstay product.

Next page, please. Let me now turn to the explanation on QUVIVIQ. QUVIVIQ is the novel dual orexin receptor agonist, so-called DORA, and this is an insomnia treatment drug, especially recently in Japan, rapidly establishing its position in the treatment paradigm for insomnia in Japan. On the left-hand side graph, you see Japan market size, and you can tell that the DORA overall is expanding. The right graph shows the sales of QUVIVIQ from JPY 1.3 billion in 2024. Last year, it reached JPY 4.3 billion. On a year-on-year basis, it exceeded 224%, demonstrating powerful growth. This fiscal year, it is expecting to see further growth to JPY 5 billion to JPY 6 billion -- 7 billion. Next slide, please.

On this graph, you see the sales and profit structure of QUVIVIQ and the cost reduction outlook in the future. At this moment in time, the profit is basically royalty income. But in the future, independent low-cost supply chain will be formulated, and we are targeting for profitability from product supply already established Nxera independent supply chain from the licensor last October. Regulatory approval on second API source was obtained in October 2025. In the latter half of this year, second API is expected to contribute to profit.

Going forward, cost optimization of raw materials, drug product and packaging sourcing optimization through that, we are targeting for further improvement on the profit margin.

Next slide, please. From here and onward, I would like to introduce newly introduced DMD treatment drug, AGAMREE. DMD is a rare and life-threatening neuromuscular disorder characterized by progressive muscle dysfunction leading to ambulation loss, respiratory failure, heart issues and premature death. No efficacious therapy apart from corticosteroids. However, presently, there are many severe adverse events with the existing steroid treatment. AGAMREE is the first class drug candidate to treat DMD that binds to the same receptors as corticosteroids, but modify the downstream activity to express the different characteristics. The company has the development rights for Japan, Korea, Australia, New Zealand and DMD treatment is concentrated in limited number of centers. And there is approximately 70% sales synergy with PIVLAZ, which is extremely strategic product for the company. Next slide, please.

On this slide, it shows the characteristic of AGAMREE. Compared to conventional corticosteroid, there is a higher likelihood of reducing adverse events significantly. The GUARDIAN study showed durable efficacy and markedly improved safety versus standard corticosteroid, specifically growth maintenance, lower fracture rate, lower incidence of cataract. Important indicators for patients are improving.

Looking at the sales forecast in other countries, we're expecting to see robust growth in North America and Europe. AGAMREE is strategic product, which has potential to become long-term pillar of the company.

Lastly, on the last slide, I would like to talk about the sales synergy between PIVLAZ and AGAMREE. DMD treatment is concentrated in a limited number of centers, and there is approximately 70% commercial overlap with PIVLAZ. Therefore, the network we've already forged with university hospitals can be leveraged for deployment of AGAMREE. Through this sales synergy, speedy market penetration and efficient sales activity will be possible. As an overall portfolio, we can expect to see a high level of synergy effect.

This concludes my commercial business explanation on Japan and APAC. Now I would like to turn over to Patrik to talk about the R&D update.

Okay. Thank you. My name is Patrik Foerch. I'm the Chief Scientific Officer. And I'll now move over to our pipeline of innovative drugs developed through our NxWave drug discovery platform. Next slide, please.

At the end of last year, we renewed our R&D focus to prioritize the programs in areas with the greatest potential for patient impact. We launched a new wave of oral small molecule programs targeting high potential targets in obesity, metabolic and endocrine disorders by leveraging our NxWave platform to deliver novel differentiated small molecules. We have 2 Phase II-ready assets, NXE'149, our first-in-class schizophrenia candidate and NXE'744, our EP4 agonist for IBD. Both of them are undergoing competitive licensing processes, which we announced earlier in the year during JPMorgan Conference.

NXE'732, our novel immunotherapy for advanced solid tumors is in a Phase II clinical trial with our partner, Cancer Research U.K. And I will be providing more details on these programs over the next few slides. Next slide, please.

NXE'744 is a gut-restricted selective EP4 agonist with dual mode of action. It's combining an anti-inflammatory activity and is promoting mucosal healing in IBD. All first-in-class study elements have completed dosing in the clinic. And in the SAD and in the MAD studies, there have been no concerning safety signals detected so far.

Importantly, no systemic exposure, but very high gut tissue levels were observed in healthy volunteers. And we are very pleased that in preliminary analysis, this gut-restrictive profile was also confirmed in a cohort of UC patients. In addition, we are very excited about the interim analysis of our indomethacin study, showing a highly significant reduction of around 50% of indomethacin-induced permeability in our NXE'744 treatment group and thereby confirming target engagement. This asset is now Phase II ready, and we are currently engaging in a competitive licensing process and are in discussions with a number of major pharma companies. Next slide, please.

NXE'149 is a first-in-class GPR52 agonist offering a novel mechanism that addresses the positive, negative and cognitive domains in schizophrenia. NXE'149 has successfully completed Phase I studies and is fully enabled for Phase II. Data from the Phase I show predictable pharmacokinetics and CSF sampling confirmed high levels of central penetration. NXE'149 clearly engaged brain circuitry relevant for the treatment of schizophrenia and also demonstrated increased alertness, which is reflected in a better cognitive performance following 10 days of treatment with NXE'149. This potential first-in-class asset is now fully Phase II ready and is undergoing competitive licensing that we announced during the JPMorgan Conference in January. Please move to the next slide.

NXE'732 is a potent and selective EP4 antagonist aimed at reversing immune suppression in solid tumors. And in a Phase I study, we're very encouraged to see 2 partial responses in microsatellite stable CRC and in PD-L1 resistant RCC with tumor shrinkage of over 30%. The data also showed a very good safety profile and strong target engagement supporting its potential as a best-in-class profile.

The Phase II expansion study is underway in combination with atezo and is being led by our partner, Cancer Research U.K. Please move to the next slide.

As we announced earlier in the year, we are leveraging our NxWave to design the next generation of small molecules for obesity, metabolic and endocrine disorders. As we communicated, we launched a broad new pipeline strategically focused on best-in-class therapies to achieve long-term weight maintenance through convenient oral small molecules. We are targeting a number of receptors, GLP-1, GIP, amylin plus multiple others and are focused on safety, tolerability and expanding access to a diverse patient population.

Our metabolic disease portfolio underscores the versatility of our NxWave platform and our commitment to tackling major global health challenges. Next slide, please.

Moving on to our partner portfolio. Our long-standing collaboration with Neurocrine showcases Nxera's GPCR discovery power and industry-leading muscarinic pipeline. Neurocrine's muscarinic portfolio now includes 5 clinical stage programs spanning selective M4, M1 and dual M1/M4 orthosteric agonist, addressing cognitive and psychotic syndromes across a range of psychiatric disorders.

Our most advanced candidate is a M4 selective direclidine, which is currently in Phase III for schizophrenia and in Phase II for bipolar mania. NBI-'570, the dual M1/M4 agonist also initiated a Phase II trial in schizophrenia in Q4 last year. This continued momentum underscores the quality of our assets and is a major validation for our platform. Please move to the next slide.

Centessa is advancing a portfolio of potential best-in-class orexin receptor agonist discovered through our NxWave. The most advanced asset, orexin 750 is in development for the treatment of narcolepsy type 1, type 2 and idiopathic hypersomnia. Initial Phase IIa data show robust efficacy in addressing wakefulness needs of patients across all 3 indications, and this matches rival molecules from competitors.

A registrational program is expected to initiate in Q1 this year, positioning ORX-750 as a potential best-in-class treatment for hypersomnolence disorders.

And I now hand back to Chris to outline the objectives for 2026 and beyond.

Wonderful. Thank you, Patrik. Please turn to Slide 30. So looking ahead to the next 12 months, these are our priority objectives. We want to achieve net product sales of more than JPY 19.5 billion across PIVLAZ and QUVIVIQ. We aim to secure at least one additional late-stage product for Japan and APAC as we continue to build out our highly profitable pharma business unit in Japan.

We want to execute or sign one or more high-value partnership deals from our portfolio of wholly owned in-house programs, and we want to initiate at least one new Phase II trial with a partner. Of course, we want to reduce total costs in the business by over 10%, and we aim to achieve full-year profitability on an IFRS basis. Slide 31, please.

So for the full year 2026, achieving both core operating profit and operating profit is our aim. As you can see from the chart, top line revenue growth, excluding any new business development deals, has been strong since FY 2023, reflecting our commitment to building a highly profitable commercial pharma business in Japan and APAC. And if we can achieve multiple milestone payments from our existing partners and successfully out-license multiple Phase II-ready wholly owned in-house programs, then I expect to see a strong year of performance. We will continue to review our wholly owned in-house portfolio dynamically and allocate capital more effectively. Slide 32, please.

Now this slide provides a bit more detail about our 2026 guidance. The drug discovery platform side of the business should be able to reach breakeven on a core basis. We expect to see continued strong growth from our Japan and APAC commercial business. And with disciplined execution and continued cost rationalization, we believe profitability is achievable for FY 2026. I'll just add one more point, and I said this at the beginning, we implemented changes to management, changes to pipeline and cost reduction initiatives, and we expect the second half of 2026 is when these changes will start to wash through our financial statements. Please turn to Slide 33.

So the year is shaping up to be another strong year of execution as we work towards our 2030 vision. As you can see on this slide, we are expecting several potential catalysts, both internal and partner-led as multiple clinical trials reach key development milestones with partners. Slide 34, please.

The 2030 vision rather, remains intact, and it is to build a high-growth, highly profitable Japanese biopharma company. We're very happy with the addition of vamorolone to our late-stage portfolio. It provides further growth potential towards reaching our goal of $50 billion of annual revenues and operating profit margins above 30% by the end of 2030. So we're very excited about what's to come this year, and we believe we are well positioned for success much beyond 2030.

So thank you for your time. Management team and I are very happy to take any questions now. Thank you.

[Interpreted] [Operator Instructions] The first question is from Hashiguchi-san from Daiwa Securities.

[Interpreted] Hashiguchi from Daiwa Securities. The performance outlook, the forecast, I would like to know the basis for the forecast. The lower limit does not include the new partnership. But on the other hand, with respect to the milestone, there are some which may incur and which may not, and there are the ones with high probability and not. And for the lower limit, the uncertainty of a milestone, how are you factoring in?

And on the other hand, between the lower limit and the upper limit, it is JPY 15 billion. And this JPY 15 billion, with what kind of idea is this based on in order to set this figure?

[Interpreted] Yes. Thank you for the question. There were 2 questions. And since this is related to the performance forecast, I would like to respond. And if there is any additional remark, Chris will respond.

Page 32 is the breakdown of the lower amount, especially the top left platform milestone part. How much uncertainty is involved? I understood this was the question. The platform milestone, as Mr. Hashiguchi mentioned, this is milestone in the first place. So we still do not know.

It really depends on the progress as we have been explaining. And there are many pipelines in the late stage of the clinical stages. And also, there's also public comments as well. And we have accumulated the figures as a result of that, and we have deducted some of the figures, and that will arrive at JPY 40.3 billion.

And the milestone is JPY 2.5 billion, and that is equivalent to the milestone. This is quite conservative, not everything. But even what is likely to occur is deducted. So this is the milestone part.

And moving on to the second part of your question. So your second question was JPY 15 billion and the rationale for JPY 15 billion. The rationale for JPY 15 billion, this is BD. So there is no solid rationale. From our perspective, this is our aspirational target. Of course, if these 2 out-licenses go well, there is a possibility of exceeding JPY 15 billion. But rather than having the rationale, the 2 assets we have, this is more of the expectation to our 2 assets. So Chris, do you have anything to add?

Thank you, Nomura-san. I mean Hashiguchi-san, I think the easiest way to think about this is lower end of the range is my minimum expected performance from the business. And the top end of the range is if there is absolutely 100% perfect execution across all elements of revenue generation. The important caveat is, as I know you know, we operate in the biotech industry. So there's lots of risks. But equally, a lot of our large sized milestone income comes from partners. And that is without -- it's not within our control.

So this is our best guess estimates for my minimum expected performance, both internally and across our partner portfolio. However, we need to have an aspirational goal because if we are successful in marketing programs that are in our pipeline and executing new business development deals as historically, we have demonstrated we are very good at doing, then perfect execution leads us much closer towards the top end of that range. So that is -- that would be my additional response to your question. Thank you.

[Interpreted] I have one additional question. And the structural reform effect is expected to incur in the second half of the year. And also compared to the full year expense of this year, there will be less expense in the next fiscal year. Am I correct to understand this way? Or that effect or benefit, that there is a possibility for reinvestment. So it is not possible to decrease in the next fiscal year. Am I correct to assume this way?

[Interpreted] Thank you for the question. Your question is related to the expense this year and the next year. So I would like to ask Chris to respond. Chris, can you respond?

Yes, certainly. As I mentioned during the presentation, our goal is to reduce costs across our business -- across our core businesses. So our business today is very heavy on costs throughout research and development, which is expected. We also have costs across G&A, which is another area that we will be focused on reducing expenses. And technology is helping us in being able to drive down cost in that part of the business.

I think the business has made great progress in reducing sales and marketing expenditure, particularly last year. So we are becoming much more efficient in our commercial organization. Of course, if we can reduce costs by as much as I expect that we will, that should have the benefit of increasing our chances of achieving profitability. But we always have opportunities to reinvest capital, and we will continue to do so if we believe that there are high-value programs or high-value other opportunities that we can invest in that will create value for the future, particularly things that will contribute to our 2030 vision.

That would be how I would respond to that question. Thank you.

[Interpreted] Matsubara-san from Nomura Securities.

[Interpreted] I am Matsubara from Nomura Securities. Can you hear me okay?

[Interpreted] Yes.

[Interpreted] My first question is about EP4 agonist. It's for IBD. And there are different mode of actions being available, TYK2, IL-23 as oral compounds, they may come and EP4, how would you differentiate that from others? And then what are the discussions taking place with your potential licensing partners?

[Interpreted] Thank you very much. So this is about R&D. So Patrik, would you be able to answer this question? Patrik?

Yes. I'm happy to take that question. You're right, there are multiple assets on the market or in clinical trials for IBD. Where we see a clear differentiation for EP4 agonist is that we're having, as you pointed out, a dual mode of action, anti-inflammatory as well as a barrier repair function.

Most of the treatments in IBD at the moment are anti-inflammatory with a clear efficacy ceiling. And when we see how to position EP4, I think there are 2 separate TPPs. You can see EP4 agonist as a monotherapy in mild to moderate cases. But equally, there's also a clear opportunity to use our EP4 agonist small molecules as an add-on to biologics to break through the resistance barrier and efficacy barrier that most of the treatments have at the moment. So as an add-on to classic biologics, which are approved.

And a last comment to the process. As we started off this partnering discussion during JPM, we got very good tractions. We have quite a few discussions with some of the major players. The mechanism certainly resonates. And what is very clear, the target engagement showing functional response in the indomethacin challenge study is very well received and the overall package that we have in our -- from our Phase I studies, again, is clearly recognized that this is a very consolidated package understanding the mechanism as well as positioning this program to move forward into a Phase II trial.

[Interpreted] I have additional comment. So existing ones for anti-inflammatory suppressing the immunity, but ours is completely different. It promotes the recovery. And Patrik mentioned add-on. So it's very different from the existing one. So we can differentiate ours from others. That's all from me.

[Interpreted] So it has a different mode of action. So you are expecting the milestone upfront and this compound may actually exceed the expected value going forward.

[Interpreted] Yes, I'd like to give you a brief answer to that question. So realistically speaking, yes, there is a possibility. But at JPMorgan, as has been explained, several companies have shown interest. And these big companies, more than 5 companies are in discussion with us. But when it comes to actual deals, to what extent they are serious. So this is something that we would have to pursue going forward, but then we have quite high expectation.

[Interpreted] My second question is about obesity and your development strategy. So oral GLP-1 and GIP drugs are being available and for subcu, INHBE, so which maintains the muscle mass while reducing the body weight. So these are new ones. And then you are spending a lot of money for R&D right now. But going forward for obesity, what would you be doing to overcome your competitors?

[Interpreted] Thank you very much for your question. So this is about R&D. So Patrik, would you be able to take this question?

Yes, happy to take that question. You're absolutely right. This is a very competitive field. We are very much aware about that. However, when you look at these targets obviously GPCR targets where -- which is right in our wheelhouse, where we are best placed to come up with very selective high-quality molecules. And with the exception of GLP-1, most of these targets are very much driven by, as you said, subcut or generally peptide molecules.

When you look at the cost of goods, and convenience of administration, the next wave of these targets is clearly small molecules where we are very well placed to follow the data coming out of the frontrunner molecules and then follow up with a very clearly defined TPP for a best-in-class small molecules, especially as we see that the whole metabolic area, the whole indication field expanding very, very rapidly. So we are working, and you might have seen the announcement of our Metabolic Advisory Council to have very clearly defined TPPs for our metabolic pipeline that we can position our selective and highly efficacious small molecules exactly at the right position in the market.

Nomura-san, I might just add a comment to that, and thank you very much, Patrik, for your answer. Our approach to this area is not solely about obesity. We are thinking much longer term. Many of the top pharmaceutical companies have GLP-1s. And as Patrik said, they are either subcutaneous injectable peptides. They are going to need small molecules to follow on to those franchises, and they are going to need GP antagonists, amylin agonists, et cetera, as part of their portfolio of combination therapies that will go with the GLP-1s.

But it's not just about obesity. This is about chronic weight management for the long term and longevity. So the way that we see the market shaping out over the next 10 to 20 years, we want to see really strong health outcomes for patients the world over and the market will eventually shift towards once-daily oral small molecule approaches to treat not just obesity, but the range of comorbidities that come with that and then longer-term chronic weight management, which will produce health outcomes across the board.

So it's not just an obesity play in competition with current obesity companies. It's about thinking about longevity for human beings and health outcomes over a much longer time horizon. And that's why we are planning to offer a portfolio for pharmaceutical partners to look at where we've got oral small molecule approaches to all of the necessary targets to deliver on those goals. Thank you.

[Interpreted] Moving on to the next question. Pathology Associates, Dion-san. We cannot hear anything at the moment. Can you hear my voice? It seems like there is technical trouble. So excuse me, Dion-san. We would like to move on to the next question from Jefferies Securities, Yamakita-san.

[Interpreted] Yamakita from Jefferies. Can you hear me?

[Interpreted] Yes, we can hear you.

[Interpreted] I have 2 questions. The first question is on cost. The SG&A cost in platform, you see a slight increase in SG&A. And this is for the promotion of out-licensing. I would like to know the details. And the overall cost, suppose it is difficult to achieve profitability, how much buffer do you have? Is it a level you cannot go further for the reduction? Can you give us the sense?

[Interpreted] Yes, I would like to respond to the question. Starting from SG&A increase, as you said, this year, we need to be more active on BD activities and IT investment for the purpose of efficiency, we need to continue this year as well. And in commercial business, we had some SG&A costs. But in platform, there was a transfer internally. So it is slightly shifting. So that's the technical part. Combining that together, there is a slight increase.

On the other hand, if we cannot achieve profit, then we -- do we have room for further cost down? The answer is both yes and no. Of course, we are continuing such efforts. And when we face such circumstance, we need to consider additional measures. But this cost reduction from the second half of this year, Chris mentioned that we will be addressing more seriously, but our outsourcing company, if we need to stop that, there will be further time buffer to that. In that context, we will be making such efforts. So in that context, it is yes.

But can we do this flexibly? Unfortunately, we will be too late if we start that in the second half of the year. So if possible, in the first half of the year, we would like to accurately grasp the business situation and BD. We would like to make sure that we can close the big deal. So we are now focusing on that now.

Thank you, Nomura-san. I might just add 2 comments. I mean we are an extremely cost-conscious operation. Now we will always be looking to take costs out of our business and become more efficient. For example, over the last 3 years, we've been making enormous gains from implementing new IT systems and business systems that we will be able to extract significant efficiencies from going forward. And as Nomura-san said, I expect those efficiencies to come to bear in the second half of 2026.

So we will be able to operate significantly more efficiently going forward. That is something I'm very, very excited about. Of course, we can't take too much cost out of the business. If you get to a point where you remove too much, the business will stop functioning. So it's a balance, and we always need to be able to invest for the future so that we can achieve our 2030 vision, which is to have JPY 50 billion of sales and 30% or more operating profit margins. But I just want to give all of the analysts and investors out there the comfort that both Nomura-san and I are continuously -- and the broader management team as well, but in particular, it is very clear across my management team that we are always looking to reduce costs wherever any cost can be taken out of the business and technology can be used to be more efficient. Thank you.

[Interpreted] That's clear. And coming to my second question, it's about licensing out. And these days, the Japanese companies are struggling on out-licensing and partnership. And that is probably because of the uncertainty in the U.S. drug price. Especially for the large assets, the global pharmas are scrutinizing quite seriously, and there will be more requirement for additional data compared to the past. Is my understanding correct?

And you mentioned that the discussion is ongoing in JPMorgan. But with the current data available, do you think you can close the deal? If additional data is required, what will be required? Do you already know what is necessary? So what is the environmental change in out-licensing? And I would like to know how you would like to react to that?

[Interpreted] So on BD, Chris -- I would like to ask Chris to respond. Chris, are you able to respond to the question?

Of course. Yes. Thank you. And I'll make a very bold statement. I think we have one of the best business development teams of any company that's listed in the biotech or biopharma space in Japan. If you look at our track record over the last 10 years, the number of partnerships that we have been able to execute with top 20 global biotech and biopharmas, I honestly don't think that there are any companies in our peer set that can match what we can achieve.

We have a fantastic team. We have a business development group that is split across 2 territories. We have key members in Japan. We have key members in the U.K., and we have extremely strong business relationships with the biggest and best pharmaceutical and biotech companies in the world. So I think we have a fantastic opportunity to do business development this year.

Of course, whether or not we can convince another partner to do a deal is another question. But from our capability standpoint, I think we've got a fantastic opportunity.

Now to your point around other Japanese companies potentially struggling with business development, that's a very broad statement. I don't necessarily believe that is true. There is clearly -- for the very large companies, they are operating in a very difficult environment right now, particularly those that have U.S. businesses. There's a lot of uncertainty from the regulatory perspective, and there's also a lot of uncertainty around pricing and how that will ultimately shake out.

The best thing about our business, though, is when it comes to business development, we're pretty much Japan only focused on the way in. So we are in-licensing products for the Japanese market from small to midsized biotech and pharma companies that are not as concerned or susceptible to some of these global regulatory or pricing pressures.

As you will see, at the start of this year, we were able to in-license vamorolone. That was a competitive process. We did that process from start to finish in 8 weeks. So when we choose to execute, we can execute very quickly and very effectively, and that has always been a strength of our team.

From the U.K. drug discovery side of our business, where we are out-licensing programs, we're typically giving global rights away or certainly, we are giving rights to global ex Japan, which ultimately hands the project or the program over to the partner, and they have full control at that point.

So I don't think that we're really going to see any problems. I think we're really well positioned, both on the way in for products that we're trying to bring into Japan and on the way out where we're trying to license programs, particularly for the U.S. market for a U.S. biotech or U.S. pharma company to control. So that concludes my response. Thank you, Nomura-san.

[Interpreted] I think we are running out of time. So I would like to conclude this Q&A session for direct questions. We have a lot of questions in the Q&A box. But I think there are 2 questions that are similar about the Japan business, which I would like to take up. And it's about vamorolone.

Vamorolone, one thing is that PMDA skipping the Phase III, do you have any feedback from PMDA regarding skipping Phase III for vamorolone?

Another one is assuming that you are to conduct a bridge study, while you have cost pressure, can you invest enough resources for the bridging study?

So Maeda-san would like to answer this question. Maeda-san, please?

[Interpreted] Yes. Thank you very much for that. So the first question is about the feedback from PMDA. We are in the process of planning to have the consultation with PMDA. And probably in the second quarter, we will have more visibility regarding that point.

And if possible, as you have pointed out, we would like to have this consultation as soon as possible. But given the past track record, this is -- unless it's a really, really special case without having any Japanese data, you can't really file. So from the past experience, it could be difficult. But given the recent attitude of PMDA for pediatric and rare disease development, they have been quite flexible. So we'd like to have thorough discussions with PMDA so that we can skip Phase III trial.

Another one is about bridging trial. If we have to conduct a bridging study, it's not going to be a large-scale trial. That's what we assume. And therefore, as you can see, the Japan and APAC budget within this budget framework, we will be able to afford such a bridging trial. That's all from me.

[Interpreted] I hope that responds to your question. There are many questions in the Q&A box, and we are sorry, we have not been able to respond to you. But for the ones we weren't able to respond, as usual, we would like to respond through our official web blog. It may take some time, but I hope to ask for your understanding, and we would like to upload this video to our website.

And now unfortunately, the time has come. So thank you very much for joining this session. With this, we would like to conclude FY 2025 full year financial results briefing. Thank you very much for your participation. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good afternoon, everyone. Welcome to the JPMorgan Healthcare Conference. I'm Seiji Wakao, Japan Pharma Analyst at JPMorgan. And it's my pleasure to introduce Chris Cargill, President and CEO of Nxera Pharma, and welcome him to the conference. Chris, please go ahead.

Excellent. Well, good afternoon. It's great to be back at the JPMorgan Healthcare Conference. Thank you to our bankers at JPMorgan, and thank you all for being here. If you're new to Nxera Pharma, we are not a traditional or average Japanese pharma company. From our research labs in Cambridge, we pioneered structure-based drug discovery against GPCRs with the NxWave platform. And today, we leverage our proprietary data assets, coupled with advances in structural biology and AI. And the results, we've delivered 30 drug candidates over the past 12 years.

Now in Japan, where we are headquartered, we've built a lean development and commercial business modeled on the U.S. go-to-market model, where our bilingual teams guide approval and launch to deliver specialty and rare disease-focused medicines to patients with unmet needs in Japan.

I'm pleased to say that both sides of the business are advancing to plan. The next wave drug discovery platforms productivity is unprecedented. We've now got 15 clinical programs that are being advanced by our partners across multiple therapeutic areas.

On the commercial side in Japan, we've got 2 marketed medicines, PIVLAZ and QUVIVIQ. They continue to grow and make a real difference for patients. And just last week, we're actually very excited to announce the addition of a new medicine in our Japan portfolio, Vamorolone, an FDA and EMA-approved medicine for patients living with Duchenne muscular dystrophy, which we will now look to move rapidly through the regulatory process in Japan.

So the growth trajectory for 2026 and beyond is actually very promising. So now for the detail, and I'll start with the commercial business here in Japan highlighted. So the business is performing very well, ahead of plan. PIVLAZ is now 3.5 years post launch and has established itself as the standard of care in Japan for the treatment of aneurysmal subarachnoid hemorrhage. With over 70% market share in the category, QUVIVIQ, which is our dual orexin receptor antagonist is 12 months post launch and has been steadily increasing sales for the treatment of insomnia with the great support of our commercialization partner, Shionogi.

Now the 2-week prescription limit that applies to new medicines in Japan was recently lifted on this product, and we've already seen a material uptick in scripts -- in monthly scripts of that product through December. Now as I mentioned at the top, we secured an exclusive license from Santhera Pharmaceuticals in Switzerland to develop and commercialize Vamorolone in Japan. It's a next-generation corticosteroid treatment for Duchenne muscular dystrophy.

So Vamorolone is approved and marketed as AGAMREE in the U.S. and selected EU countries, the U.K. and also China. Now corticosteroid therapy is currently the only established treatment for DMD in Japan. However, existing medicines come with a lot of serious side effects that limit dosing, which is where we expect Vamorolone to significantly improve the standard of care.

So Vamorolone addresses the need for a much more tolerable steroid. Recent top line data from their long-term GUARDIAN study demonstrated that the long-term efficacy of Vamorolone compared to existing corticosteroids, markedly improved safety alongside a reduction in key steroid-related adverse events related to growth, bone health, eye health, et cetera.

So we expect that this may allow us to dose earlier aged patients and at a higher dose and to maintain that treatment for much longer than with existing corticosteroids. And as you can see on the chart here, the consensus forecast for the product as it is being marketed in the U.S. and core EU markets indicates there's clearly a demand and high unmet medical need for this product. And the product plugs in very nicely to our Japanese commercial infrastructure. We have existing overlap presence of approximately 70% across university hospitals and specialty care centers.

So this is going to enable us to launch rapidly and deliver this treatment to patients once the product is approved in Japan. And we see this really as just the beginning for us in Japan. We will add more rare neuromuscular and adjacent rare disease products to the franchise, which aligns with our mission to contribute to improving Japan's drug lag and drug loss problem and to bring innovative medicines to patients in Japan with a U.S.-style speed to market.

So turning now to our innovation research labs in the U.K. and the productivity and progress of the NxWave drug discovery platform. This is how it looks like here. Here's a snapshot. There's a lot of programs ongoing through Phase I, Phase II with partners, and we've also got a lot going on in discovery.

So we recently refocused this portfolio with [indiscernible] impact. So we announced [indiscernible] programs targeting high potential targets. We're looking at chronic weight management, obesity-related comorbidities and other endocrine disorders. We expect our GPCR know-how and flexible chemistry will truly deliver best-in-class medicines to support the combination treatment approaches that are likely to be required. And that's exactly what the NxWave platform is primed to deliver on.

So on this slide, you'll see some Phase II-ready clinical assets and also the current Phase II clinical assets. So NXE'149 and NXE'744 in the middle of the page here, these are Phase II-ready novel clinical candidates in the neuropsychiatry and immunology and inflammation areas. These programs have now completed their early clinical packages, and they are available for partnering with a leading biotech or pharma company. No further investment is required from us for these programs.

NXE'732, which is a combination immunotherapy for advanced solid tumors. It's moving forward as planned. It's currently undergoing a Phase IIa expansion study and execution and financial contributions are provided by our partner, CRUK.

So now for the detail. So as I mentioned, NXE'149, it's a neuropsychiatry product. It's a first-in-class GPR52 agonist, offers a novel mechanism that addresses, hopefully, the positive, negative and cognitive domains of schizophrenia. So NXE'149 has successfully completed Phase I studies. We saw predictable PK and CSF sampling confirmed high levels of central penetration. Pharmacodynamic measures showed evidence of engaged brain circuitry relevant to the treatment of schizophrenia and further demonstrated increased alertness, which was reflected in the better cognitive performance following 10 days of treatment with NXE'149.

So as I mentioned, the product is Phase II ready, and we are actually going to be launching a competitive partnering process for this program following the conference. We want to put this program in the hands of a leading biotech or pharma partner with a strong neuropsychiatry franchise.

Turning now to NXE'744. Now this is a gut-restricted selective EP4 agonist designed to promote mucosal healing in patients with IBD. So currently approved IBD agents are immunomodulatory in nature. So we see a good synergy in combining an anti-inflammatory approach with a barrier repair approach. SAD/MAD studies have completed. There was no concerning adverse events to date and importantly, no systemic exposure was observed with the program. Previous attempts by other companies and others to agonize the EP4 receptor had resulted in early signals of clinical efficacy, but they were limited by systemic safety issues. With NXE'744, we've got a gut-restricted profile, which was confirmed with high gut tissue concentrations measured following oral dosing.

We've also completed an ulcerative colitis patient cohort, which has completed dosing and the PK data readout is imminent. We've done an indomethacin challenge cohort that is also completed with final data due to be read out by March 2026. The interim analysis is currently ongoing. This candidate is Phase II ready. And similar to our candidate in schizophrenia, we're going to launch a competitive partnering process to place this candidate in the hands of a leading biotech or pharma company with a strong I&I franchise.

NXE'732, this is our potent selective EP4 antagonist aimed at reversing immune suppression in solid tumors. So in the Phase I study, we were very encouraged to see 2 partial responses, one in microsatellite stable colorectal cancer and PD-L1 resistant renal cell carcinoma, and we saw meaningful tumor shrinkage of approximately 30%, it's an attractive mechanism. We recently saw a competitor, Ono Pharmaceuticals, demonstrate mechanistic proof-of-concept in gastric cancer with the same mechanism.

Our data with NXE'732 also showed very strong safety and target engagement with no dose-limiting toxicities, which we think supports its potential best-in-class profile. And as I mentioned earlier, it's in a Phase IIa expansion study across 4 tumor types in combination with atezolizumab, and it's being led by Cancer Research U.K. as our operational partner.

As I communicated at the top, the NxWave platform is actually now primed to deliver the kind of next-generation of small molecules for obesity, metabolic and endocrine disorders. We launched this broad pipeline, primarily targeted to treat long-term weight maintenance and associated obesity-related comorbidities with convenient oral small molecules that can be manufactured and delivered at scale. So we've got active discovery programs to several receptors, including GLP-1, GIP, amylin plus multiple others. And we're very focused on delivering safe, tolerable molecules that will expand access for very diverse patient populations. So we look forward to delivering more news on development candidates over the next 12 to 18 months.

So now moving on to the assets that are in our clinical portfolio that are with partners. So we have a long-standing partner, Neurocrine Biosciences. And they're advancing the world's most comprehensive portfolio of muscarinic agonists to treat neuropsychiatric disorders. Now all the molecules that you see here on the slide were licensed from Nxera, demonstrating the power of our research labs, the NxWave platform and, of course, our GPCR drug discovery capabilities.

Now Neurocrine's muscarinic portfolio has 5 clinical stage programs spanning, selective and preferring M1, dual M1/M4 and M4 orthosteric agonists. So they're designed to broadly address the cognitive and psychotic symptoms across a wide range of neuropsychiatric disorders. Now the most advanced candidate is called Direclidine, compound code is NBI-568. This is a selective muscarinic M4 agonist. It's in Phase III registrational studies for schizophrenia. and in a Phase II study for bipolar mania. The top line data on Phase III, we believe, is on track for the end of 2027. So that will be a pivotal moment for our company. If there is success there, that will be one of the first -- will be the first molecule to have come out of our labs and gone through approval and hopefully a launch. So we're looking very much forward to the end of 2027 there. That's a big focus for us as a company.

NBI-570 is a dual M1/M4 agonist, which has also recently initiated a Phase II trial in schizophrenia in the fourth quarter of last year. And there are additional Phase I studies of early-stage programs ongoing, underscoring both Neurocrine's momentum and commitment to this important therapeutic area.

Another partner that we have is Centessa. So Centessa are advancing a portfolio of potential best-in-class orexin 2 receptor agonists, and these were discovered using our NxWave platform. The most advanced asset, ORX-750, is in development for the treatment of narcolepsy type 1, 2 and idiopathic hypersomnias. The initial Phase IIa interim data, which was released last year, marked the first robust demonstration of this oral orexin 2 agonist addressing wakefulness needs of patients across all 3 indications. So we expect to see them initiate a registrational program shortly in Q1 2026. So that's also something that we're very much looking forward to.

So now to the big picture for our company. Our long-term goal really is to build a very high-growth highly profitable Japanese biopharma company. We are aiming for JPY 50 billion of annual revenues and operating profit margins above 30% by the end of 2030. And we think that, that would help us very much stand out from the pack when we talk about midsized pharma companies that are listed in Japan. So to deliver this, the pipeline is focused in areas where the science is the strongest and the biology is most validated and where there is clear unmet medical need.

Wave 1 should deliver launches before the end of 2030. The Japanese commercial business will deliver the bulk of the stable and growing revenues from its rare and specialty-focused portfolio of medicines. And U.K. research will deliver the balance via milestones, royalties, and those will come from existing or new partners. Wave 2 really represents upside. These are products that can potentially launch in the 2030 to 2035 window. And if successful, would deliver a very significant step change in the directory and trajectory of the business.

So looking ahead to 2026, we actually expect a number of potential catalysts. They'll be both internal and partner-led, particularly watch for the clinical progress of Centessa and Neurocrine. You can see there's a large weighting of milestones in the first quarter and the first half there. We also have discovery collaborations, which I didn't touch upon that are ongoing. They've been ongoing for a number of years, and we expect milestones from AbbVie and Lilly across those [both] collaborations.

And of course, as I mentioned earlier, there is 2 Phase II-ready programs that we are very much expecting to have competitive partnering processes for. And those, whilst not baked into our catalysts for the year, are transactions that we are very much seeking to transact upon ideally before the end of the first half, but hopefully by the end of the year. And so for us, as a company, internally, we'll be focused on execution as we build towards that 2030 vision. We really want to lead the next era of medicine in Japan. And the best way to do that is to build a very high-growth, high-profit enterprise, one that can consistently reinvest in the best innovations for patients. That was everything for me today. So thank you very much for your time. The management team and I are available for questions. Thank you.

Thank you, Chris. I will start Q&A session. And from here, Nomura-san, CFO; and Patrik Foerch, Chief Science Officer, will also be joining us. Thank you.

So I want to start with my question. Firstly, regarding the partnering. So for 2026 partnering, how confident are you in the partnering prospect for GPR52 in schizophrenia or the EP4 agonist in IBD?

Yes. Thank you. As I mentioned, we're very confident. And the reason I can say that we are confident is our track record in this area is very strong. So actually, all of those molecules that you've seen in the presentation that are with Neurocrine were originally with Allergan. We've got a number of other molecules in our portfolio that are now moving through the clinic that were originally with other pharmaceutical companies.

So we've got a strong track record in basically getting molecules back, adding to them if they need to be added to and then repartnering them out. So in this situation, we did get the molecule 452 back from Boehringer Ingelheim, and that was announced just before Christmas last year. So that one is one that is genuinely Phase II ready and we don't believe that the reason that it came back to us was not for any adverse events or anything seen in the clinical data. It was purely a strategic decision. Pharmaceutical companies, large pharmaceutical companies do this all the time. The assets come back to us, and we package them up and then we re out-license them again. So that's what's happening with 52.

With the EP4 agonist, we just back ourselves in to absolutely license that product out. I might just let Patrik talk a little bit perhaps about our strength and conviction in the data behind why we think we can confidently out-license these programs.

Certainly, around EP4, we have a very strong data package from our Phase I data. Our hypothesis that we get a gut-restricted compound is absolutely confirmed. We have gut restriction. We know that this is not only the case in healthy volunteers, we also see a very similar pattern in a disease population that confirms our hypothesis together with the modality that we are tackling both the inflammation as well as gut repair that resonates very well with the key players in the field. We had [indiscernible] team. We had already a few discussions with potential partners, and that resonates very well.

On the barrier function, we also are looking at a challenge model where we are at a stage of interim analysis, which looks very, very promising that we can really confirm that we have a clear target engagement and see a clear effect for our EP4 program, addressing the liabilities whatever have seen for a systemically exposed EP4 agonist program. So very confident around the EP4.

Around GPR52, we all know this is a very novel modality, 2 key regions in the brain, which are addressed. And where we see great potential is that we're addressing both the positive as well as the negative symptoms in schizophrenia, really setting us into a very different path compared to how other people are trying to address the unmet need in schizophrenia.

Okay. So I'd like to know more on GPR52. So I'd like to know the reason why Boehringer Ingelheim did not exercise this option. And could you elaborate on the Phase I data? Maybe data is favorable, but paying [indiscernible] at this point.

Yes, no worries. As I sort of alluded to in my first response, we don't know exactly why the decision was made, candidly, because they didn't provide one. However, we have seen the data. So we don't think that the decision is related to anything with the program. We think it is more a, let's call it, a very senior level strategic decision to not participate in this disease area.

So I think it's what you would classically call a cessation of activities due to strategic reasons, not because of anything that they have seen in the clinical data. But I mean, Patrik, you can confirm, of course, -- it's what we can say.

It's -- we don't know the real reason, but certainly looking at the data from what we've seen together with the BI team, we are all very confident that the novel biology translates. It's safe, it's well tolerated. We have clear PK. We have clear engagement of the brain region circuitry that we would expect. We have multiple readouts that are confirming that from our perspective, this is not really just the non-exercise option, I don't think is driven by the data that we generated. It's probably -- I don't know whether it is related to some of the previous schizophrenia experience. We can't tell. Certainly, from our perspective, it doesn't seem to be data-driven.

Okay. What is the uniqueness for these drugs? I think mechanism is differentiated.

Absolutely. It's a novel mechanism. It's got great potential to address multiple components of schizophrenia, and that's why we are so excited. And that's why we invested quite heavily into our Phase I studies to really prove the mechanism. That's why we are very confident that we can partner this with the right partner. Again, we are not equipped to run a Phase II study, but the whole program is absolutely Phase II ready.

Yes. I think I would just add something, Patrik. We know there's a number of neuropsychiatry players that have had a go at this target and not been successful in getting candidates into the clinic. We have been. With our platform and our insights, not only have we got one into the clinic, we've gone through 1a/1b and we've got a Phase II-ready asset that any neuropsych player that wants to have another go at this target can pick up and move straight into a Phase II study.

So if you have a question, please raise your hand, wait for microphone. Okay. So I'd like to move on the next question about BioMarin for DME treatment. What is your development and submission plan for BioMarin? Are you considering another -- and also are you considering another in-licensing opportunity? Or do you plan to pause in-licensing for a while?

Thank you. That's a good question. Yes, this is a really interesting one. So Japanese PMDA and all regulators in Japan in general are very focused on solving the very widely publicized drug lag, drug loss issue. And they've sought to do that by also offering incentives for things like pediatric drug development or orphan drug development.

The reason I say that is this product ticks all of those boxes, right? It's a pediatric -- effectively starts as a pediatric medicine. We're very confident it will receive orphan drug designation. The drug is approved in all the key markets around the world, but it has never been developed for Japan. So it's there to solve the drug lag, drug loss issue. So with all of that information, we will be approaching the PMDA for a formal consultation as soon as possible now that we've executed the in-license. And the goal is we're actually going to try and be quite candid with them and see if we can persuade them to skip the Phase III clinical development locally, if possible.

Now we've seen that done before in ultra-rare diseases in Japan. We haven't seen it done in these sorts of diseases, but we think that there's a lot of long-term safety data associated with this product. We think we have a credible argument to make. Now if we're unsuccessful, then the base case scenario is a small bridging study and a Phase III will be required and the launch time line in the base case would be 2029. But anything that we can do to accelerate that is something that we'd be really focused on.

Okay. Base case 2029?

Base case is 2029 for launch if we have to do bridging and a Phase III study. And just the associated time lines for talking to the [indiscernible] and getting pricing, if skipped 2027, which is obviously a win for everybody. It's a win for those problems that I mentioned that everyone is trying to solve, and it's a win for patients.

Okay. Understood. Next question about restructuring. So could you tell me the background behind the restructuring announced last year? Has it already been completed?

Yes. The restructuring has been completed. The restructuring is largely as a result of some of the things we've discussed today. We have completed early clinical work on the GPR52 program on the EP4 agonist program. And those programs are now earmarked to be partnered. We do not have any other programs that are ready to move into Phase I for the time being. So the restructure was really focused around -- we had some resource that was not really required in that area given the fact that there's no active programs to work on. So that was largely part of the decision there. It was around the streamlining of the portfolio basically.

And with that comes an associated cost reduction, of course, which is also helpful because we are working very hard to reset the cost base. For a number of years, we've seen a lot of inflation through not only the costs of conducting external research, but also just having a presence in the United Kingdom and other markets. Now that is starting to calm down, but we have to be cognizant of how much money we spend. So an added sort of focus of the restructure was really around a bit of a reset of the cost base to put ourselves in a stronger position to achieve profitability as early as possible.

Okay. Leading to restructuring, how do you plan to grant in-license activities and internal drug discovery going forward?

Yes, yes. Sorry, I didn't actually answer your question earlier on whether we would do more in-licensing for Japan. Yes, we will. We absolutely will. The one thing I would say is -- we made a fantastic strategic transaction a few years ago when we acquired Idorsia, their business in Japan. And from the moment we acquired that business, we've been seeking to add to the portfolio. It's taken us 2.5 years almost to find the right product, and we've participated in a lot of processes.

So licensing on the buy side is very competitive and the chances of securing deals is relatively low when they're competitive. So it does take time. So whilst we probably won't be immediately looking to license something in the next 3 months, I guess the point I'm trying to make is you have to be involved in all of these processes to be able to find the right assets to add to the portfolio. So we will continue to very actively pursue business development. And if there are products that fit with our disease area focus in Japan, which, as I mentioned earlier, is largely going to be rare disease and specialty care focused. Yes, we're going to look to continue to add there because we really want to build a strong, high-growth, high profitable business.

How -- in terms of how we balance that versus research expenditure, obviously, the more we grow our top line in Japan, the more of that revenue and income we can kind of cycle into research. But it is true growth in research expenditure is still outpacing probably growth in revenues. So the way that we will manage that is we will be very aggressive around making go/no-go decisions on the research portfolio.

So we have a lot of -- as you've seen today, I mean, over the last 10 to 12 years, we've generated 30 to 35 preclinical candidates. It's a very productive group. It's capable of working on a lot of programs and projects concurrently. But the easiest way to kind of manage research expenditure is to prioritize which are the best assets that we want to work on and move forward. And those ones we doubled down on. And the ones that are perhaps aren't generating the sorts of data on the time lines that we would expect, we just have to be brave to make a decision to not invest further in them a lot faster.

So I think what you'll see is just a much more dynamic management and shifting of portfolio priorities. You have to be nimble in this day and age, right? The external environment changes very quickly. There's a lot of emerging competition out there, both in Western and Eastern markets. We have to go fast as well.

Okay. Understood. Any question, please?

You alluded to this transformational transaction 2.5, 3 years ago, Idorsia? For those of us less familiar with the Nxera story, what were the products? What has worked well? What could have worked better? Can you give us?

Yes, yes. No, thanks. Good question. So actually, the acquisition came with people and 2 products. One product was a Japan-specific product called PIVLAZ, which I mentioned earlier. And I can honestly say to you that its performance is far outstripping what we expected at the time of the transaction. So we're really happy with its performance. It's doing a lot for patients in preventing cerebral vasospasm. It's -- yes, we couldn't be happier with it.

The second product, QUVIVIQ, I mean, we made a very strategic decision on this one. This is a primary care call point. So we were not going to spend money hiring the hundreds of people that we would need to compete with the likes of Eisai and Daiichi Sankyo, who market DAYVIGO and Belsomra in the marketplace. We made a strategic decision to partner with Shionogi. We think that was a fantastic decision. They are a great company. They think like we do, they move very quickly, and they're rapidly building a big presence in what we call sort of quality of life diseases in Japan.

So sleep disorders, depression, again, that product is performing far better than what we thought it would. We thought it would be a loss generator for us. Right now, it's basically purely profitable, right? We receive royalties from our partner. We generate product supply, revenue supply in the product to the partner. So actually, we've really flipped the script compared to what we thought we would have to do when we did the acquisition 2.5 years ago. So if you -- we all know it inside our company, right? We know what our market cap is, and we know what we paid for this business. We also know internally what the projections look like and what the profit margins look like. So we can categorically say the fundamental value of the business is much more than what we paid for it.

So we're very happy with it. The market doesn't reflect it. I can't control the share price, but the business is performing really well. And the addition of Vamorolone is just going to help that business grow and prosper.

Any other questions?

Okay. Regarding going back to GPR52, so have you had any meetings for partnering discussion regarding 52 yesterday or today? Can you share your initial feedback?

No, we can't share feedback. But thank you for trying to ask the question. Look, we're just -- we're very confident in the data package that we've generated. I think everybody knows who the big players are out there in neuropsychiatry who have the franchises. We know which companies have had goes at this target previously and never been successful in getting into the clinic.

So we know we're going to be able to have meaningful discussions. A lot of those discussions happen this week. A lot of them will happen as a follow-up because actually, we -- everybody has so many meetings at the conference. We can't get around to see everyone. But -- and it's the exact same story for the EP4 agonist. So we're going to do what we always do. We know how to do these processes. And yes, we're very confident. Our track record speaks for itself. If you look at our pipeline, we have executed collaborations on both the discovery side or the licensing of clinical assets with pretty much all of the biggest companies in the industry. So we know what we're doing, and we'll see.

The only thing I would caveat is that these are not best-in-class targets. These are novel first-in-class mechanisms. And so we're going to need partners that are willing to take a little bit more biology risk when it comes to these -- in-licensing these for their portfolio. But there's no question, they're incredibly interesting from a target product profile perspective, and they do both serve real areas of unmet patient need.

Okay. Understood. Now could you remind your 2030 plan? And do you think you are on track to achieve it?

Sorry, for which year?

Your 2030 plan?

Yes. I do think we're on track. Yes, I do. I mean we -- like all companies in the biotech, biopharma space, we're going to need a little bit of luck. We've had all sorts of things happen to us over the journey over the last 35 years as a company. I mean it's clear we will be really helped if that 2027 data on the muscarinic M4 agonist is positive. If that becomes a commercial product, it will be transformative for the company. And if not, we are going to have to be very aggressive when it comes to in-licensing and adding products to our portfolio. But we're very capable of achieving both things.

So I'm very comfortable that this is the right plan to have. But yes, it's true we need a bit of a fair tailwind and a bit of luck, but all companies in this space need that from time to time.

Okay. Any questions from floor? Okay. A couple of minutes left. So lastly, please remark you mind significant catalyst for 2026, which is important for company future.

Sure. Well, I think -- what we always like to see is just continued progress from our partners that have assets in the clinic. And I think 2026, you're going to see good steady progress from Neurocrine across a number of programs, and you'll see good steady progress from Centessa. And when there's progress, there's milestone income.

So that is something that we expect, and we have no reason to not believe that there will be progress and milestones that come from those partners. I think the biggest thing that we can't control is -- that has the biggest potential to be a catalyst is the timing of these out-licensing deals on GPR52 and the EP4 agonist -- if we can -- if we're successful, that's going to be unexpected by the market. And I think it has the potential to bring in significant revenues that are not baked into our forecast.

So that will be really helpful. But yes, look, I don't want to -- the process is difficult. So we have to work very hard to make sure that, that happens. Outside of that, you will continue to see very stable growth from our Japanese pharmaceutical business. It's not going to be astronomical, but you will start to see QUVIVIQ accelerate now that the 2-week script limit has finished.

But certainly, yes, biggest potential catalyst for us will probably be the licensing of 1 or 2 assets. And outside of that, it is just the continued progress of Neurocrine and Centessa for the most part. You will also see -- I'm very much expecting that there will be progress from our discovery collaborations with AbbVie and Lilly, albeit because those are earlier-stage collaborations, the milestones and things that come with those are a little bit smaller.

Okay. Thank you. So I'd like to wrap up this section. Thank you for your presentation. Thank you so much.

Excellent. Thank you, Seiji.

[Interpreted] [Operator Instructions] We'd like to start the presentation with Chris. We'd like to cover the business highlight, followed by Maeda to give the highlights of the Japanese business, and Patrik will give the U.K. pipelines. And I will be talk about the third quarter financial results.

Please turn to Page 5 of the presentation. Chris, over to you.

Excellent. Good afternoon. Thank you, Nomura-san. My name is Chris Cargill, CEO of Nxera Pharma. Thank you for joining our 2025 R&D Day. Let me start by welcoming our new Chief Scientific Officer, Dr. Patrik Foerch. Patrik is an accomplished R&D leader with over 2 decades of experience across immunology, oncology and neuroscience. He has deep expertise in working in both pharma and venture capital-backed biotech companies and in supporting the development of AI-driven drug discovery platforms. Patrik brings a very sharp execution-oriented focus to our R&D business. We're very excited to have Patrik on board to drive delivery of the research pipeline to support near-term value creation.

Please turn to Slide 6. So yesterday, we announced a focused restructuring to enhance our path to profitability and to increase the returns across the portfolio. So we have completed a review of the pipeline and prioritized programs with the greatest potential. And for commercial reasons, several programs will be partnered or terminated. We will remain very active in drug discovery, and we will prioritize targets with derisked biology and we'll leverage our NxWave platform to design oral small molecules that can win with superior product profiles. Obesity, metabolism and endocrinology is where we're going to focus a lot of our effort.

Now our first-in-class drug for schizophrenia, NXE-149, has completed Phase I studies and will potentially be licensed by our partner, Boehringer Ingelheim, in the near term. We will stop investing further in our first-in-class drug for IBD, NXE-732 (sic) [ NXE-744 ] as this is simply too complex and expensive an area for us to develop going forward, and we will seek a partner for this novel product.

And in addition to pipeline changes, we announced we are slimming down the leadership and the workforce and a reset of the cost base. We expect to achieve significant cost savings, and these changes create a leaner, more execution-oriented company focused only on the highest potential opportunities.

Please turn to Slide 7. So despite the business changes announced yesterday, our long-term vision remains unchanged: JPY 50 billion of annual revenues and operating profit margins above 30% by the end of 2030. Now the goals for our Japan commercial business remain unchanged as well: 5 medicines launched in Japan by the end of 2030, and we are actively hunting for new medicines for patients in Japan. The changes are about how we execute research, the biggest value driver, and this is how we can get back to creating asymmetric upside returns for our investors.

Now effective today, our investments will focus on best-in-class product opportunities, as I mentioned, to tackle obesity and chronic weight management as we announced in August 2025, plus other metabolic and endocrine disorders. 80% of the research portfolio will be allocated to these therapeutic areas. These are therapeutic areas where we believe we can deliver programs with speed to an early safety efficacy signal and measure physiological changes in early patient cohorts resulting in a better probability of success.

Now please turn to Slide 8. As I said at the beginning, we've done a focused restructuring to enhance our path to profitability and increase return across the portfolio. So the R&D focus is clear, the prioritized programs are clear, and Patrik will lead the execution and delivery. And for commercial reasons, several programs are no longer a priority, and they will either be partnered or terminated. But either way, we will not allocate capital or resources to these programs anymore.

Our operations will be streamlined. We are removing layers of management to enable faster decision-making and to align our resources with the renewed R&D focus. Now these actions will drive a cost base reset that will enhance our path to profitability. There will be onetime restructuring charges, JPY 500 million booked in FY 2025. We have a near-term cost base reduction of over JPY 1 billion from FY 2026. And cash R&D expenditure at our research facility in Cambridge, U.K. is expected to decline by approximately JPY 3.5 billion in FY 2026.

And now, of course, these changes will impact our people, and these decisions are always very difficult and were considered deeply. We will say goodbye to many talented colleagues that have poured enormous effort into Nxera over the years, but the changes are necessary to simplify how we work and operate with discipline and speed in the current environment.

Now please turn to Slide 9. So the reset puts us in a very strong position to capitalize on the momentum we have in the discovery and in the clinic as well as the commercial growth we are achieving in Japan. So our existing programs, both in-house and partnered, have real momentum at the moment. So our partner, Neurocrine, is advancing the muscarinic M4 agonist, now known as Direclidine, for schizophrenia through Phase III registrational trials in the U.S. And soon, an additional Phase II trial will begin for patients with bipolar mania.

Our partner, Centessa, last week demonstrated the potential best-in-class profile of ORX750 for the treatment of narcolepsy type 1, narcolepsy type 2 and idiopathic hypersomnia in initial cohorts of an ongoing Phase IIa study and expect to initiate a registrational program in Q1 2026. Our in-house program, NXE-732, the EP4 antagonist, has advanced to Phase IIa expansion studies across tumor types for patients suffering from cancer. And our in-house program, NXE-149, the GPR52 agonist to treat schizophrenia, will soon complete Phase I, meaning our partner, Boehringer Ingelheim's decision to license is near term, a decision that could bring a EUR 60 million milestone.

So as we approach next year, our medicines are poised to make an impact for our partners and, most importantly, for patients. We have the potential to generate important financial milestones next year, which when combined with the focused restructure, enhance our path to profitability.

Thank you. I'll now pass over to Maeda-san, the President of Nxera Pharma Japan, to update you on the growth of our commercial business in Japan and APAC. Thank you, Maeda-san.

[Interpreted] Thank you very much. So my video is -- can you turn my camera on? Can you hear me?

[Interpreted] Yes. Your voice is fine.

[Interpreted] I'm sorry, I cannot operate my camera. So thank you so much. Thank you. Sorry for the wait. I am Maeda, Group COO. So next, I will explain our Japan and APAC business.

Next slide, please. First, let me explain the market environment in Japan and APAC, so left side. Japan serves as the base, the most important market for the APAC market expansion and is the world's third largest market. The key characteristics of the Japanese market include a comprehensive national health care insurance system and the ability to achieve rapid insurance reimbursement within 90 days after regulatory approval. And the Japanese government is advancing policies to reduce drug loss and drug lag. So we can see that the market is in a favorable condition.

Now on the far right, regarding APAC, it is the world's second fastest-growing pharmaceutical market with a population exceeding 700 million in ASEAN alone and continuing to grow, it is expected to become an even more promising market in the future. Leveraging these favorable market conditions, we will accelerate our business expansion in APAC, centering on Japan.

Next, the update on individual products. PIVLAZ. This is our first marketed product. PIVLAZ is a therapeutic agent intended for the prevention of cerebral vasospasm in patients with aneurysmal subarachnoid hemorrhage. Its market share reached 73% as of August 2025. And by September this year, the number of patients treated with PIVLAZ reached 23,000. It has firmly established itself as the standard of care in Japan.

One highlight to mention this year is the practical guidelines for clazosentan administration currently being developed by the relevant subarachnoid hemorrhage academic societies. Currently, so this explains -- puts together the opinion on the proper use of clazosentan. Currently, in the public comment phase, it is scheduled for final publication in February 2026. It is rare for a society to issue such proactive guidance. We will maximize this opportunity in next year's commercial activities, focusing on further growth and market expansion for PIVLAZ.

Next slide is QUVIVIQ. QUVIVIQ is a novel dual orexin receptor antagonist, DORA. In Japan, where conventional antianxiety drugs and Z-class drugs tend to be avoided by physicians, DORA is rapidly gaining traction. Japan is the world's largest DORA market with its market size estimated at up to USD 1 billion or approximately JPY 150 billion. Regarding QUVIVIQ, while there is currently a 2-week prescription limit, the restriction will be lifted next month in December. So significant sales growth is anticipated starting next month.

Next slide, please. Now I will explain the sales and profit structure of QUVIVIQ. So as you can see in the graph, for the time being, revenue comes from royalty income. But in the future, profit growth is expected through cost reduction effects. We are advancing a comprehensive strategy to optimize the supply chain. And up to now, we have completed establishing Nxera's independent supply chain separate from the licensor. And most recently, in October, last month, we also obtained a regulatory approval for our second API manufacturing facility.

Usually, API cost is the largest cost item. And so the second API manufacturing facility approval means that we have a clear road map towards cost reduction. Moving forward, we will steadily implement actions to optimize costs such as raw material procurement and formulation, packaging process optimization. So this end-to-end supply chain is now being revisited to continue reducing costs and strengthen our profit structure.

And lastly, let me explain 2025 sales guidance. No change from the initial guidance. For PIVLAZ, target sales of JPY 13 billion to JPY 14 billion, while QUVIVIQ aims for JPY 4 billion to JPY 5 billion in royalties and product supply. Sales trends remain strong with PIVLAZ projected to grow plus 7% year-on-year and QUVIVIQ over 200%. We will continue to focus on expanding the market for both products and maximizing the profitability. Thank you. That is all for the APAC update.

Hello, I will be giving the research update. And as Chris has alluded, Nxera is entering a new chapter: focused, data-driven and ready to deliver best-in-class GPCR medicine with precision and speed. We are a global leader in GPCR drug discovery built on the strengths of our NxWave platform. We sold nearly 500 molecular structures across 60 receptors, and our portfolio has delivered 24 clinical stage programs to date. Today, I'll share how we're advancing our strategy with a sharp focus on best-in-class programs where the biology is derisked and the opportunity for patient impact is the greatest.

Please turn to the next slide. As you're aware, we launched a new wave of oral small molecule programs, targeting high-potential targets in obesity, metabolic and endocrine disorders, leveraging our NxWave platform to deliver novel and differentiated small molecules. NXE-149, our first-in-class schizophrenia candidate, is approaching pivotal Phase I readout, which will trigger a license decision from our partner, Boehringer Ingelheim. NXE-732 is a novel molecule as an add-on to immunotherapy for advanced solid tumors that is being progressed through clinical trials with our partner, Cancer Research UK. I will provide further updates on these programs over the next few slides.

Please turn to the next slide. NXE-732, our EP4 antagonist, is our candidate that we're progressing in solid tumors. The rationale behind EP4 antagonism is strong and well established. When EP4 is activated, it dampens the immune response and promotes tumor growth by allowing tumors to evade immune surveillance. Currently, less than 20% of patients are eligible for checkpoint inhibitors that would deliver lasting benefit. However, EP4 antagonism offers a way to restore immune surveillance and enhanced efficacy of those existing therapies.

Interestingly, Ono's recent success with their EP4 antagonisms validates the mechanism and highlights the opportunity for this target class. NXE-732 is destined to deliver a high-potent, selective and safe molecule positioning Nxera to lead this next wave of innovation in immuno-oncology.

Please turn to the next slide. I will now be sharing some results from our Phase I study together with Cancer Research UK, which was recently published in a poster format. The Phase I study was evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics as well as antitumor activity of NXE-732 as a monotherapy, and in combination with a checkpoint inhibitor in patients with advanced solid tumors that are resistant to standard therapy.

As you can see on this slide, we were extremely encouraged to see 2 partial responses in 2 patients in renal and in colorectal cancer in the combination arm of our study. This showed more than 30% tumor reduction, especially in these tumor types, which are typically refractory to immunotherapy.

Please turn to the next slide. On this slide, you can see very strong target engagement on the left-hand side of this slide, which is in line with our preclinical observations. And our population PK model confirmed that at 160-milligram daily dose, we achieved greater than 90% receptor occupancy. Importantly, this was exactly the same dose received by these 2 patients who achieved a partial response. And more importantly, that dose was not limited by safety. So we retain the flexibility to potentially explore higher doses if we need to.

With those data in hand, the study moved into a Phase II expansion in September 2025 in colorectal cancer, in GOJ, clear renal cell carcinoma and metastatic prostate cancer. This combination of safety, tolerability and early efficacy signals demonstrate a real best-in-class potential to overcome the immune resistance in these hard-to-treat tumors as we move forward into our expansion cohorts.

Please turn to the next slide. NXE-149 is our first-in-class GPR52 agonist, offering a novel mechanism in schizophrenia. GPR52 is a unique target that is expressed both in the striatum as well as in dopaminergic neurons in the prefrontal cortex. An activation of these pathways has the potential to replicate benefits of the dopaminergic mechanism while also enhancing cognition, something that is not currently treated. NXE-149 has completed its Phase I single ascending dose study, confirming excellent safety and a PK profile that enables convenient once-daily dosing.

The Phase Ib, including pharmacodynamic measures of GPR52 activation in the brain is currently on track to deliver data by the end of the year. As you're aware, we're advancing this program in collaboration with Boehringer Ingelheim under an option to license agreement. The decision point is expected near-term positioning NXE-149 as a potential first-in-class asset in this very important indication.

Please turn to the next slide. We leveraging our NxWave to design the next generation of small molecules for obesity, metabolic and endocrine disorders. And as we communicated earlier this year, we launched a broad new pipeline strategically focusing on best-in-class therapeutic to achieve long-term weight maintenance through convenient oral small molecules in a market that is currently dominated by peptide drugs. We're focusing on improving outcomes for patients with obesity-related comorbidities such as cardiovascular, renal and liver diseases, which is a very rapidly expanding market.

We're targeting a number of receptors, for example, GLP-1, GIP, amylin, plus multiple others. Our focus with our unique platform and small molecules is safety, tolerability and expanding access to diverse patient population. Our metabolic portfolio underscores the versatility of our NxWave platform, our commitment to tackle global health challenges and applying the same data-driven approach with aggressive time line that have defined our success in GPCR drug discovery in the past.

With this, I will now provide a couple of updates on our partner portfolio. Please turn to the next slide. I will start with our long-standing collaboration with Neurocrine, showcasing Nxera's GPCR discovery world-leading muscarinic pipeline. Neurocrine's muscarinic portfolio now includes 4 clinical stage assets spanning selective M4, M1 and dual M1/M4 orthosteric agonist, addressing cognitive and psychotic syndromes across a range of neuropsychiatric diseases.

Our most advanced candidate is the M4-selective molecule, NBI-568. This is currently in Phase III in schizophrenia, and a Phase II is initiated this year in bipolar mania, which is ahead of schedule. NBI-570, the dual M1/M4 agonist is scheduled to initiate Phase II in schizophrenia in Q4 of this year. Two Phase I studies are ongoing for a preferring-M1 molecule, 567 and a preferring-M4 molecule, 569. And the data for these ongoing studies will likely be shared from Neurocrine during their R&D Day on the 16th of December.

This continued momentum underscores the quality of the assets and the robustness of the underlying muscarinic platform, while avoiding the off-target effects that historically have limited the utility of muscarinic agonists in the clinic.

Please turn to the next slide. Our partner, Centessa, recently reported strong positive IIa data for ORX750, the oral orexin-2 receptor agonist for the treatment of narcolepsy type 1, narcolepsy type 2 and idiopathic hypersomnia. Across all 3 endpoints, ORX750 showed a strong dose-dependent efficacy. On mean sleep latency, that increased more than 20 minutes at a 1.5-milligram dose, and we've also seen at a lower dose group achieving over 30 minutes improvement. Equally, the ESS score did fall significant at the 2 doses relative to placebo. Also, the WCR improved significantly with 87% reduction.

These initial data communicated covers only a small cohort. But they mark the first robust demonstration of the oral orexin agonist addressing wakefulness needs of patients across all 3 indications with efficacy that seem to match rival molecules. Centessa plans to initiate a registrational Phase III program in Q1 2026, positioning ORX750 as a potential best-in-class treatment for these diseases.

Now I will pass over to Nomura-san, who will go through our Q4 financial results.

[Interpreted] Patrik, thank you very much for your presentation. This is an R&D Day, yet I'd like to give a short summary of the financial results for the third quarter fiscal year 2025.

Next slide, please. This shows the summary of financial results together with the historic trend. Upper half is net sales. So against the JPY 21.9 billion in the same period last year, it was mostly flat at JPY 21.8 billion. While the product sales increased driven by growth of PIVLAZ and the addition of the product supply and royalty revenue from QUVIVIQ, we did not have in the prior year, milestone revenue decreased from JPY 10 billion last year to JPY 6.4 billion.

Now this decline mainly reflects the fact that in the previous year, we recorded more than JPY 5 billion in milestone revenue from Neurocrine equivalent to USD 35 million.

Turning to operating income shown in the lower part of the slide. Core operating income was a loss of JPY 0.9 billion for the first half of this year compared with the profit of JPY 4.4 billion in the third quarter last year. As I will explain shortly, this was mainly due to the higher R&D expenses driven by investment in clinical stage development programs and in obesity franchise.

This page summarizes the breakdown of business domain and also distinguishing the financial results or accounting purposes. On far left, blue is our platform business, bio-venture type of a business model. Right, red bar is a pharma type of business model, which is rather traditional. Now although the profitability of the platform business depends on milestones and other payments from partners, and it is therefore less directly controllable.

And yet commercial, red part, need to be grown more so that we'd like to generate the profits at the company level. There is no change in our direction. In the third quarter, core operating income turned negative mainly due to R&D expenses in blue, particularly in U.K., increased by 36% year-over-year. Therefore, it posted a loss. But as Chris mentioned from the beginning, we try to optimize our spending.

Next slide. Now regarding the increase in U.K. R&D expenses, after the announcement of the third quarter results, we were asked to answer the breakdown. So I'd like to show. Now this is the changes from the previous period. So EP4 antagonist, EP4 agonist and GPR52, the development items like this, these are having the peak spending year. And also what we have announced in August, investment in obesity has increased tremendously. So these are the major changes from the previous year.

Next slide. Now R&D expenses and SG&A costs. This is the full year forecast at this moment, and there is no change from the original announcement. And in fact, we are going to finish within the range. And there's no update.

So we will conclude very shortly. So that is all from the company's prepared remarks. Now -- we now would like to move on the Q&A.

[Interpreted] [Operator Instructions] So first question I would like to direct Citigroup. Yamaguchi-san, please.

[Interpreted] This is Yamaguchi from Citi. So my first question is Boehringer Ingelheim project. So according to what you said, license out seems possible, but readout has not happened yet. And so any changes in the situation, if you could update us? So that's my first question.

[Interpreted]. So this question, Chris, could you answer this question?

Yes, sure. Thanks, Yamaguchi-san. No, there's no real change here. We are rounding out the Phase I package, and what that then catalyzes is a review period for the partner. So I would expect that by the end of this year, the Phase I package will be nearing completion. And then that means the partner has a period of time to review that data and then effectively make their decision around either licensing the program into their portfolio or not.

Now we remain confident. We've had a great collaboration with Boehringer Ingelheim, fantastic team to work with. We think the asset would fit very nicely in their portfolio. But if for whatever reason, they chose not to, the Phase I data package is strong. There would be many companies in the area -- in this therapeutic area that would like to take this program on, I suspect. But of course, our focus is solely on making sure that this product ends up in the portfolio of Boehringer Ingelheim, who've been just truly a fantastic team to work with.

[Interpreted] Another. $35 million U.K. R&D reduction, you said. In the case of development, if you reduce the number of projects, the development costs can go down. But your other core is research. So research side is also decreasing. And the number of headcount or capacity on the research side is reduced this time. What was the background, the reason that led to your decision? And the amount is quite large. So if you could quantify this, how many people, for example, if you could elaborate?

[Interpreted] So Chris, could you answer this one again? And I will also add, if any.

Yes, sure. Thanks Yamaguchi-san. I won't comment specifically on personnel or headcount. But what I would say is if you think about where the majority of expenditure occurs, once you move into early clinical development, for example, Phase Ia, Phase Ib and then Phase IIa, the costs in the United Kingdom escalate rapidly. So the cost of doing early clinical development in the U.K., as it is in the United States as well and other Western markets, has been increasing steadily over the years and it is very expensive.

Now if you think about where we are today, we are terminating any further investment in the EP4 agonist program. And that program, we will finish the Phase I data package, and we will seek a partner. So there's no further expenditure for us on that program going forward. We will not be taking it ourselves into Phase IIa. So that's the EP4 agonist. So there's a significant decline in forward expenditure as a result of that.

Similarly, on GPR52, that is a program that we are responsible for spending on. And again, the Phase I study package is basically complete. There's no further expenditure on our side for that program going forward. It now turns into the phase whereby Boehringer Ingelheim will soon have the opportunity to assess that data and make a decision to take the program into their portfolio. And so with the cessation of investment in those programs, it does drive a very significant decline.

On the research side of things, actually we're probably spending more quite candidly. But because the programs are very early stage, they are compared to the early clinical development programs, markedly more cost-effective. So as you've heard, we are working through early discovery on multiple targets across obesity, chronic weight management, metabolic disorders in general and also endocrine disorders. It's just that progressing programs through that stage of research is much more cost effective. It is our bread and butter, so to speak. It's what we're very, very good at.

But with the cessation of investment going forward in early clinical development, that's what's driving the significant decline in early clinical development expenditure. And of course, as I mentioned at the outset, this will have an impact on some personnel, I expect, within our company. If we have no programs that we are developing ourselves in early clinical development, then there will be an impact on resourcing in the U.K.

In our press release, you would have also noticed it's not just the U.K. that is impacted. There is going to be some small headcount reductions that will take place in Japan as well as we further optimize the business that we acquired 2 years ago. As Toshi said, the sales of that product are growing very well. We have very, very good market penetration and market share. The product has clearly become the standard of care. On the second product, QUVIVIQ, Shionogi is the commercial partner. They are responsible for the expenditures. So we have been taking cost out of our Japanese business as well. I hope that concludes my response, and I hope that answers your question.

[Interpreted] Thank you. Yamaguchi-san, I would like to add one point, so U.K.'s R&D strength until now. You may be worried that the strength that we have may be reduced in U.K., but that is not the case at all. We will continue maintaining our strengths. That part is intact. The key point is the left side of Page 8. So it says a strong message of best-in-class. And 80% is obesity. So obesity tends to take focus, but best-in-class research and development. The new mechanism exploration or unvalidated target validation, we do not need to use resource in these areas. And that is the big change. So structure base, the strength will be retained. But by changing the way of doing things, we can reduce the cost. And so that is where the headcount reduction is also coming into play.

[Interpreted] Moving on to the next question. SMBC Nikko, Wada-san.

[Interpreted] Wada speaking of SMBC Nikko. Can you hear me? Well, I'd like to refer to the business performance. Now timing of start generating profits is something that I'd like to explore. I know it may be a bit difficult to answer. But for instance, there's a onetime milestone money will be paid before the end of this year by Boehringer Ingelheim. Then can you make further profits in the next fiscal year? So that's my simple question.

[Interpreted] So if the payment is being made this year, and that's probably a bit making the whole situation a bit different for us to make profits in the next year. So JPY 64 million will make us big profits for this fiscal year. If Boehringer Ingelheim milestone payment be made and what about next fiscal year? I believe that the company's performance is shifting based upon the milestone payment.

But Neurocrine unofficially that they -- officially said that they are going to start the Phase II and Centessa is prepared to start the pivotal Phase III study. They already disclosed that information. And therefore, milestone payment from the partners are relatively easy to forecast at this moment. And therefore, it's all up to the partner, and that's a bit difficult to answer to you. But in Boehringer Ingelheim, if it is paid before this fiscal year, even beyond that, milestone payment candidates are quite rich in the next fiscal year.

[Interpreted] So let's say that how to read the R&D expenses? For this fiscal year, your plan has already been shown. But for the next fiscal year, what about the absolute amount of R&D expenses? What is your projection? Do we expect that the R&D expense is going to decline in the next year?

[Interpreted] Correct. That is our forecast as well.

[Interpreted] One point, if I may ask is, so EP4 inhibitor, I would like to ask about. It seems that your company is still going to work on your own and then Cancer Research UK is going to cover the cost, and therefore, that should be okay. But what about the cancer type? So Ono has the gastric cancer, and probably you're expanding a lot -- and Ono is actually spending more cost for targeting at the breast cancer and so forth.

For CRC or the ccRCC are the target now. So probably that is where the PD-L1 is not really working. And therefore, it is going to be co-administration with others and try to pursue the development going forward?

[Interpreted] Patrik, can you take this question?

Yes, happy to take that question. Given the data for ONO-4578, that is obviously very encouraging for us, seeing that they have seen a positive outcome for the gastric/GEJ cancer. It's certainly an area that we will be focusing on. We expect that Ono will publish more data at ASCO GI earlier in the year, and that will be very informative for us to adapt our strategy together with CRUK, which patient population we will be focusing on and also to make sure that we're progressing with our biomarker strategy in parallel.

[Interpreted] May I ask a further question? So PD-1, PD-L1 is going to be the co-administration drug, combination drug. And therefore, you need to buy this medicine at the time of Phase II or Phase III, in my opinion. So it's probably difficult for you to pursue on your own. So what timing -- which timing that you're going to enter into the partnership?

[Interpreted] We'd like to have Chris to answer this question.

Yes, sure. So I think one thing that is important to make clear is we will still contribute investment in this program, but it is not 100% our responsibility. So CRUK covers the majority of the costs, and we contribute a minority of the costs. They run all of the trial execution. So we are not committing resources to this program, just financial contribution.

We retain the rights to this program. So if we see good results through the Phase IIa expansion, there is opportunity to partner this program early. As you say, this is not a program that we would conduct ourselves through Phase III trials. It's simply too complex and too expensive for a company of our size. But you can imagine that the way that this mechanism works in combination with checkpoint inhibitors, it could become very interesting to some of the major oncology players, particularly after that ASCO conference in June next year, where we expect Ono to release more Phase II data on what they saw in their study with ONO-4578.

So yes, this is definitely -- if all going well and if we can follow the trajectory that has been set by Ono, we think there's a very high probability that this product will end up in the arms or in the portfolio of a very large oncology company. But yes, we won't be conducting the Phase III studies ourselves globally. We would not be doing that.

[Interpreted] Next question. Pathology Associates, Dion-san.

This is Dion, Pathology Associates. I don't know if this is maybe for Chris or for Patrik, but I wonder if you can speak a little bit about the profile of GPR52, given that you are now nearing the completion of the Phase I data package. And it seems that at least all indications that we're looking at, it looks like Boehringer will go ahead. But in the event that they do not, what do you think are really the key differentiations relative to the emerging class of M1/M4 agonist. Do you think it is cognitive benefit or functional improvement or tolerability? Could you say anything about the competitive profile of the product?

[Interpreted] So Patrik, if you could please answer that question.

Yes. Happy to do so. Seeing that it's a novel mechanism, and when you look at the expression of GPR52 where you have it expressed into major brain region where you effectively can trigger or address cognitive function as well as address positive symptoms, we believe that is a very clear differentiation to what is currently on the market with the muscarinics.

Based on the data that we have collected so far, we are very confident that the overall package they will get will be very strong. But as the study goes on, we will need to evaluate the data and first discuss with our partners, BI. And if they would take the decision not to take this forward, then obviously position this ourselves. But before having seen the data, it's probably a bit too premature to do a head-to-head comparison versus other mechanisms.

Understood. Patrik, can I just maybe also ask about your obesity program? So among GLP-1, GIP, amylin, I was wondering about your process for selecting a lead molecule and when you might anticipate the first program to be moving forward towards the clinic. You mentioned liver and kidney, which I think is very interesting. Is there other specific markers that you could mention maybe lipids, maybe hemoglobin A1c, maybe blood pressure, anything else that you would particularly be looking at in moving a first program towards the clinic?

Yes. Just to be precise, kidney and liver, I think it was probably more a long-term positioning of the molecule. Obviously, first clinical readout would be a shorter study with relevant biomarkers, just to be very clear. That's what we'd be looking for. In terms of time lines, we're expecting to move our programs forward where we're expecting a couple of programs to reach candidate stage towards end of next year, beginning of the following year, again, with a very specific profile with our small molecules. And at least for one of the targets also very differentiated chemistry, while for that particular target, the industry has been struggling finding chemical matter has been -- had very limited chemical space they could explore. So we are quite hopeful. And as we are progressing the program, obviously, we are cognizant that we need to build a differentiation over peptide drugs and other competitors that are currently ahead of us.

Nomura-san, can I ask one more question? I wonder if perhaps Chris may have any comments regarding ORX750, which seems to be very much a first-in-class molecule, regarding DEA scheduling or generally access for orexin agonists with payers in the United States, but also globally.

Yes. Thanks, Dion. Look, I'll be a bit cautious here because at the end of the day, this is the core product of partner, Centessa. So I don't want to speak out of turn. What I would say is for anyone that's been following the story, there are multiple companies that are pursuing this mechanism. And it has always been our long-held belief that the structural insights that we brought to the initial joint venture, which was called Orexia Therapeutics almost 5 years ago, were very enabling for the teams, both our teams in drug discovery, but also the team -- that the team at Orexia and Medicxi and Centessa brought to bear that -- they're really looking at creating a drug that has the potential for a best-in-class profile versus all of the competition.

And they've been very clear that NT1, NT2 and idiopathic hypersomnia is really just the beginning here. There are a lot of areas where they would hope to expand this mechanism of action and the molecules that they are advancing. And they've done a really great job to date. It's very exciting if you just watch the share price growth Centessa has experienced over the last little while. It's an amazing story to follow. And they've raised capital again recently. So they are sufficiently capitalized to really test and move forward a bunch of molecules over the course of the next 2 to 3 years. So we're very excited to see in which direction they will go.

And I think that's probably all I would say on that point because I think otherwise, I'll be speaking out of turn. But obviously, Centessa being a publicly listed company, shareholders, institutional investors and analysts can follow all of their press releases and publications and disclosures and meeting events very readily. Thanks, Dion.

[Interpreted] Well, we're already at the 6:00. But if there's anything, we would like to entertain one more question.

[Interpreted] Hashiguchi-san of Daiwa Securities.

[Interpreted] Hashiguchi of Daiwa Securities. Now in regard to research asset allocation, I'd like to ask furthermore. Earlier, in regard to the in-house development products and where the allocation is going to be made, and we were able to hear in regard to the drug discovery partnership, what is your approach, Eli Lilly and AbbVie that you are having partnership?

What the activity -- or what are the positioning of that type of activities going forward in your company? In such a partnership, well, do you be hoping to be regarded as an attractive partner? Do you maintain capabilities to be being regarded as attractive partner? Or by -- are you focusing more resources on developing your own pipeline? Which way are you going to pursue?

[Interpreted] Chris, can you answer that question?

Of course. Thank you so much for the question. It's a very good one. So right now, as you are aware, we have 2 ongoing and active multi-target discovery collaborations. One is with Lilly in the metabolic disease space and the other is with AbbVie in the neurology space. Now those discovery collaborations are slightly different. For Lilly, we are almost at the completion, I guess, of the research plan. And we will be handing over our work, and Lilly will be taking that work into their portfolio and taking those programs forward.

With AbbVie, it's slightly different. We are responsible for continuing the development of those programs basically all the way up to an IND-enabling package. So we've got quite a long time to go working with AbbVie. So that's the status of the current discovery collaborations.

Do we remain an attractive company to work with on a discovery basis? Absolutely, we do. And we will always consider the opportunity to work with major companies that want to do a discovery collaboration with us. However, what I would say is when we do a discovery collaboration with a big company such as Lilly or AbbVie, it can be quite resource intensive. It requires us to spend a lot of our resource and effort supporting those programs. And we have some goals now which are to move a number of programs in obesity, metabolic disease, endocrine disorders rapidly through discovery and towards Phase I. To do so, we need to spend a lot of our resource on pushing those programs forward.

So we will never say no to a potential discovery collaboration. However, in the future, I think you'll probably see us do less major discovery collaborations going forward unless there is a very large financial benefit of doing so. But you will probably see the pace of those discovery collaborations slow down. We continue to work on AbbVie. Lilly will be handed over to Lilly very shortly. And we will be focused certainly next year on advancing the prioritized programs that Patrik wants to go very fast on. Hopefully, that completes the answer.

Nomura-san, you may want to add some additional comments perhaps, unless I was very clear.

[Interpreted] Well, we would like to focus on more efficient programs and others will be gradually decreased. Did I answer your -- did we answer your question, Hashiguchi-san?

Well, sorry, we are 5 minutes longer, but we've received some Q&A. So we'd like to pick one question from the Q&A box. So the questions which we received on Q&A, we are responding via blog as much as possible. So if you -- there are some people who are still raising hands, but if you could write your questions in Q&A boxes as soon as possible, we will answer on the blog. So while we are answering the last question, please quickly type in your questions into the Q&A.

So we received many questions in the Q&A. In-licensing in Japan, so you were targeting one this year. So what is the progress so far? So that is the question. Chris, could you update us on this?

Yes, certainly. We remain pretty confident, actually. I think we will be able to find one more very interesting product to license for the Japanese market. As shareholders and investors and the analysts are aware, we have a commercial footprint in Japan. We have a clinical development team in Japan. We are very focused on helping Japan close the gap when it comes to approved medicines overseas that have not yet been made available to patients in Japan.

We are currently in an exclusive diligence process with a potential partner. And we are hopeful that if we work very, very hard over the next 4 to 5 weeks that we may be able to complete bringing an extra product into our Japanese portfolio by the end of this year. That would be very exciting for all of us. We've been working very hard. We've looked at lots of potential products. We think we found a really good one that will make a difference for patients in Japan, and we're very hopeful that we can complete it by the end of this year at the very latest before the JPMorgan Healthcare Conference in January. But we're working very hard to complete it as soon as possible. Thank you.

[Interpreted] Thank you very much. So I'm sorry, but we would like to close the Q&A session. There are so many that we have not been able to answer. So to repeat myself, we will answer them later in our blog. And I think the questionnaire will show up later. So if you could write it in the questionnaire or in this Q&A section, I would appreciate it.

So thank you very much for your attendance today. The video will also be uploaded to the web later. So we would like to bring this R&D Day to a close. Thank you very much for your attendance.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]