Nippon Shinyaku Co.,Ltd. (4516) Q4 2026 Earnings Call Transcript

Now it is time to begin the financial results briefing of Nippon Shinyaku for FY 2025. To begin with, I would like to introduce attendees from our company. This is Nakai, Representative Director, President.

This is Adamitsu, Director, Business Management Sustainability. This is Iwata, Director, Sales, and Marketing. This is Kuwano, Director, Research Development.

I am Inoue from Public Relations Investor Relations department, and I will serve as the moderator. The content of this presentation will be available on our website as an on-demand video streaming and transcript, so please be aware of this when asking questions after the presentation. Then, Mr. Nakai, please start. I am Toru Nakai, President of Nippon Shinyaku. Thank you very much for taking time out of your busy schedules to participate in our financial results briefing for FY 2025. I deeply appreciate it. Today, I will discuss our financial results of FY 2025 and our forecast for FY 2026, as well as updates on CAP 1002 and our GX 121. After that, Mr. Kuwano, who is in charge of research and development, will explain the R&D pipeline. Then, I will explain the financial results of FY 2025 and the forecast for FY 2026. First of all, this slide shows the highlights of the financial results disclosed at noon today. In FY 2025, both the pharmaceuticals and functional food businesses reported an increase in revenue, marking the fourth consecutive year of revenue growth. Operating profit also increased for the third consecutive year. For FY 2026, we expect revenue to increase by 17.1% YOY to 200 billion yen, and operating profit to increase by 7.1% YOY to 38 billion yen. Let me explain in detail from here. Please take a look at slide 5. As a summary of the results of FY 2025, on a YOY basis, consolidated revenue increased by 10,539 million yen to 170,771 million yen, operating profit increased by 46 million yen to 35,496 million yen, and profit before tax increased by 327 million yen to 36,462 million yen. With respect to income tax expense, the income tax rate decreased in FY 2024 due to the recognition of the recoverability of deferred tax assets in NS Pharma, but this has no impact on FY 2025, resulting in an increase in income tax expense, etc. As a result, profit attributable to owners of parent decreased by 2,837 million yen to 29,721 million yen. Please move on to slide 6. In the pharmaceuticals business, despite the effects of the national health insurance drug price revisions and generic competition, consolidated revenue increased by 7.1% YOY to 148,484 million yen, thanks to growth in domestic sales of Uptravi, royalty income from overseas sales of the same product, and growth of new product lines such as Fentepla, as well as the contribution of Erlita, which has been recorded as sales of the company since October last year based on contract revisions. Please turn to slide 7. Here we show the sales of Viltepso, which is sold in Japan and the United States. Sales results of FY 2025 were 4,775 million yen in Japan and 16,413 million yen in the United States. In the US, the sales terms also decreased YOY. The number of patients dropping out of the medication has increased due to stricter insurance reauthorizations, after the launch of several high-cost DMD therapies on the market. However, we have been continuously acquiring new patients. Although the average dose per patient has decreased as the number of patients administer the drug is getting younger, we expect revenue to increase as the drug is expected to be administered over a longer period of time. In light of this, for the full year of FY2026, we expect revenue of 4,800 million yen in Japan and 17,500 million yen in the US. Please turn to slide 8. In the functional food business, sales of preservatives declined as rising prices have led to consumers holding back on purchases, but sales of protein preparations, supplements, and health food ingredients increased, resulting in consolidated segment revenue of 22,287 million yen, up 3.3% YOY. Please move on to slide 9. Next, in terms of cost of sales, the cost of sales ratio worsened by 1.7 percentage point YOY to 33.6%, mainly due to the sales mix and the impact of NHI drug price revisions. SG&AMP, a expenses increased by 14.6% YOY to 43,565 million yen, mainly due to an increase in sales expenses at NS Pharma and preparation for the new product launches. R&D expenses amounted to 36,713 million yen, up 6.9% YOY, mainly due to an increase in contract research expenses and raw material costs related to investigational products. With regard to other income, foreign exchange gains increased. As a result, operating profit slightly increased by 0.1% YOY to 35,496 million yen. Please move on to slide 10. Next, I will explain the business forecast for FY2026. Consolidated revenue is expected to be 200 billion yen, an increase of 17.1% YOY. Regarding cost of sales, the cost of sales ratio is expected to deteriorate by 2.9% points to 36.5%. SG&A expenses are expected to amount to 47,500 million yen, mainly due to an increase in sales expenses at NS Pharma in preparation for the new product launches. R&D expenses are expected to be 40,500 million yen, mainly due to an increase in contract research expenses. As a result, operating profit is expected to increase to 38,000 million yen, profit before tax to 38,600 million yen, and profit attributable to owners of parent to 30,300 million yen. Please move on to slide 11. In the pharmaceuticals segment, revenue is expected to be 176,500 million yen, an increase of 18.9% YOY. In addition to CAP-1002, which is scheduled to be launched in the US by the end of this year, as well as to new domestic products such as Erlita, Fintepla, and Uptravi, we expect growth in royalty income associated with overseas sales of Uptravi. Please move on to slide 12. In the functional food segment, we expect revenue of 23,500 million yen, an increase of 5.4% YOY, by further focusing on the development and launch of new products and strengthening our efforts in key products. Please move on to slide 13. For FY 2025, the company will pay a year-end dividend of $62 yen per share, which, together with the earlier interim dividend of $62 yen per share, will result in an annual dividend of $124 yen per share. For FY2026, the company plans to pay an interim dividend of $62 yen per share and a year-end dividend of $62 yen per share, which will result in an annual dividend of $124 yen per share. That is all for my explanation of the financial results of FY2025 and the forecast for FY2025. Next, I will explain the update of CAP 1002. Please move on to slide 15. On May 7, Capricor filed a lawsuit against the company and its U.S. subsidiary, NS Pharma, seeking termination of the U.S. marketing agreement for CAP 1002, which has been filed for approval with the expected indication of DMD cardiomyopathy. As we currently understand it, Capricor is claiming that the company is insufficiently prepared to handle the revision of the current contract and to launch CAP 1002 in the U.S. We have been taking appropriate and sincere measures to ensure that the treatment of DMD patients will not be delayed and have been preparing for the launch of the product. While we recognize that Capricor's claims lack merit, we are committed to continuing our dialogue with Capricor in the best interests of DMD patients and their families in the U.S. The forecast for FY2026 that I have just explained incorporates sales and marketing expenses for Cap 1002. However, we will revise this forecast as necessary in light of the status of the lawsuit by Capricor. Next, I will explain the update of RGX-121. Please move on to slide 17. RGX-121 was placed on clinical hold by the FDA in January 2026, which has since been lifted. The FDA issued a complete response letter in February 2026, for which RegionXBio subsequently filed an appeal. The company will continue to work closely with RegionXBio to determine a schedule for the future. That is all from me. Next, Mr. Kuwano, in charge of research and development, will explain the R&D pipeline. I am Kuwano in charge of research and development. I will continue with the R&D pipeline that has been updated since the financial results briefing for Q3 of FY 2025. Please move on to slide 19. NS-401, Elzonris, was listed on the NHI drug price list and launched on March 18. As for RGX-121, the clinical hold has been lifted. Also, RegionXBio recently filed an appeal against the CRL. As for the status of CAP-1002, the situation is as explained earlier by Nakai, and the Padufa date is set for August 22. As for Ghaziva, yesterday on May 14, Shugai Pharmaceutical submitted an application to the Ministry of Health, Labor and Welfare for an expanded indication for idiopathic nephrotic syndrome. As for NS304, Celexipag, a domestic Phase III study for the indication of arteriosclerosis obliterans, was initiated in April. Both NS035, for the treatment of Fukuyama congenital muscular dystrophy, and NS863, for the treatment of pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung disease, are in preparation for phase 2 studies. Please move on to slide 20. The company concluded a collaboration agreement with X-Force Therapeutics on Drug Discovery Research targeting RNA structures in March 2026. Under the agreement, the company will systematically advance the discovery and evaluation of small molecule compounds that target RNA structures. That is all for the R&D pipeline. Then, we will now go to the question and answer session. We will take questions first from analysts and institutional investors and then move on to questions from the press. If you have any questions, please click the raise hand button. If connected from a phone, you can raise your hand by pressing the star key in 9. When asking questions, please state the name of the company and your name before speaking. Now, we will take your questions. Mr. Yamaguchi from Citigroup Global Markets, please ask your questions.

I am Yamaguchi from Citigroup Global Markets. Thank you for your explanation. This may be a sensitive question, and I know it is difficult to say many things because this is related to a lawsuit. My understanding of what you just said is that the original license agreement currently exists, and Nipon Chinyaku is preparing for it, but Capricore Therapeutics is saying that they have already hired staff to prepare for it. I think the next step might be a preliminary injunction or various other moves, but in your statement, you said that you would review the forecast according to the circumstances. When I heard it, you sounded as if the launch might be suspended. As it stands, the original license agreement is still there, so have you talked about the preparatory steps with Capricor? Or since Nipanch and Yaku and Capricor are now in litigation, has the negotiation come to a standstill? Could you tell us a little more since everyone is very interested in what is going on?

Thank you for your question. We are currently continuing to prepare for the launch. Although the complaint was served on NS Pharma on May 13, U.S. time, we will make proper preparations for the launch of the product, and we will communicate appropriately with Capricor regarding the collaboration between the two companies. For the time being, we will internally work to avoid receiving a preliminary injunction order, and if the injunction order is not issued, there will be no way to stop our activities of launch preparation for Cap 1002. In that case, both NS Pharma and Capricor will proceed with preparations for the launch, based on the original license agreement.

Thank you. Second, you did not update on Phase 3 of Viltepso, but isn't there any update on the current U.S. situation, including negotiations with the FDA?

I will answer that question. As you just mentioned, we did not have any specific updates, so I didn't mention that, but we would like to continue to communicate with the FDA, so we move forward. There is no update at the moment. I understand. Thank you. I would like to add one more thing. As I mentioned earlier, the complaint has been served on our subsidiary, NS Pharma. However, since our headquarters is located in Japan, it is expected to take several months to serve the complaint on Nippon Shinyaku under the Hague Convention. Thank you. Now, Mr. Tanaka from Mizuho Securities, please ask your question.

I am Tanaka from Mizuho Securities. This is hard to ask, but looking at the complaint, it seems that the meeting between Mr. Nakai and Ms. Marban took place on March 27th this year. Then your side proposed the PLD, but Capricor could no longer tolerate the situation. Ines Pharma distributes Viltepso in the US and presumably has expertise in US insurance reimbursement, so why did the issues that Capricor raised occur?

Thank you for your question. Capricor and Nippon Shinyaku have been aware of the pricing issue since March 2025, one year ago, and as a means of resolving the situation, both sides have proposed to each other to amend the original license agreement. As to why such a situation occurred, given the experience with Viltepso, as for Viltepso, this kind of problem does not occur because it is a product transfer between a parent company and a subsidiary. Both Nippon Shinyaku and Capricor were not aware in advance that the pricing issues in this case could arise from something between two independent companies.

In fact, Capricor is writing in the complaint that NS Pharma proposed an amendment on April 10th, asking Capricor a surrender of the product. Does that mean it's difficult to sell because it won't be reimbursed through any other method?

Please understand that we cannot disclose the specifics of what both sides were thinking during that discussion. We do not believe that the scheme change based on the PLD model we proposed would be particularly disadvantageous to Capricor. The PLD model is a model for price reporting to the U.S. authorities and is mainly used for biosimilars. We have proposed it to Capricor after confirming that several such PLD models have been used for new drugs. Therefore, we thought it was reasonable to proceed with this scheme because it involves the minimum necessary modification in accordance with the content of the original license agreement that we concluded.

I understand. I don't know how long a preliminary injunction is supposed to take, but how long do you think it will take? Is there anything you can say here?

This has already been published by the court in New Jersey. In U.S. time, NS Pharma must file a written opposition by May 26. In response, Capricor must file an answer by June 2. The hearing date has been set for June 3. 3rd.

So, will there be a hearing on June 3rd? You are correct. I understand. And secondly, I would like to ask Mr. Kawano, and this is related to the earlier question, do you have any idea why the update of Viltepso is not going forward with the additional phase 3? I think Sarepta submitted supplemental new drug applications in April.

I will answer that question. We do not know all the details of Sarepta's situation. It seems that they are communicating with the FDA, but it is difficult to tell whether or not they have actually had a meeting with the FDA. I have a feeling that they might just be communicating through written documents, just like we are. However, aside from other companies, as I answered last time, the FDA is in the process of carefully considering how to handle these DMD drugs or exon-skipping drugs in general, and their response to us has been delayed. My personal guess is that there will be some kind of cohesive answer to both Sarepta and us once the FDA's policy is clearly defined. That is all. I understand. Thank you. Now, Mr. Hashiguchi from Daiwa Securities, please ask your question.

I am Hashiguchi from Daiwa Securities. Thank you for taking my question. I understand that NS Pharma proposed the PLD model to Capricor. I would like to know whether your side expressed an intention to purchase the other rights for Deremyocell, and if so, do you continue to do so under this situation, which has developed into a lawsuit?

Thank you for your question. We do not think that there is any disadvantage to Capricor with what we are proposing, and it is not as if we are proposing taking something out from them, but simply in terms of which side reports the price to the authorities, we were discussing on the necessary modifications on the original agreement. In the PLD model, NS Pharma is the entity that reports prices. Capricor cannot accept that. It seems that they still feel that Cap 1002 is theirs. We had no intention of making CAP 1002 our own just because we adopted the PLD model, but rather to promote collaboration under a framework of equal partnership between the two companies, with Capricor in charge of development and manufacturing and NS Pharma in charge of sales and marketing. We have been explaining to them that we would like to collaborate with them based on such a framework. However, they insisted that they would like to be the main entity to report prices to the US authorities, and no agreement was reached on amending the original license agreement.

Thank you. In that case, I think that the current right of your company is limited in terms of indications and regions compared to the future potential, as the indication is limited to DMD and sales are limited to Japan and the US. Is it correct to say that this is not a proposal to expand the scope of the right? You are correct. Thank you. Second, I would like to ask you about the assumption for the sales forecast of 11.4 billion yen for Deremyo Cell. Could you comment on the timing of the launch, and how have the number of patients, frequency of administration, and price been assumed to expect this figure?

Well, I think we have already informed you that we are planning to release the product by the end of this year. With regard to the breakdown. Excuse me, I am Edamitsu. As we mentioned, the Padufa date is August 22, and we would like to launch the product as soon as possible before the end of the year. Is there anything that the Secretariat can add about the details? I will answer. We do not disclose the number of patients in detail, but since the drug is to be administered once every 3 months and we plan to launch the product within this year, we are assuming that a certain number of patients will start the second administration. That is all.

When you disclosed the FY2026 sales forecast for Deremyocell a year ago, I think it was 7.3 billion yen. Regarding why it is larger than the previous forecast, you just said that some patients will have a second administration, but may there be an exchange rate factor, or a price revision?

I will answer that question. It's due to a gap in the timing of the launch. This time we are assuming the launch before the end of this year. Padufa date is August 22nd and the launch is a few months from there. Last time, Padufa date was scheduled for July, I think. August 31st, 2025. It was, but the timing of the launch is a little different, so that is why we have a difference. Thank you. That is all. Now, Mr. Wakao from J.P. Morgan Securities, please ask your question.

I am Wakao from J.P. Morgan. Thank you. First, to confirm Mr. Tanaka's question regarding the preliminary injunction, you said that there will be a hearing on June 3rd. Do you think that a conclusion will be reached on the same day?

I will answer that question. A hearing date has been set for June 3rd, but we do not know whether a decision will be reached immediately on that date. However, we believe that it will be out promptly anyway. That is all.

I understand. Second, if the preliminary injunction is dismissed, you said that you are selling the product. However, I think under the current agreement, there are economic issues to begin with, so even if the launch is possible, there would be disadvantages for both companies in actually doing so. What is your company's understanding of this? If you actually sell the product, the ASP will probably be formed based on Capricor's wholesale price to your company, so I think that ultimately neither your company nor Capricor will be able to generate a profit. I would appreciate it if you could let me know about that.

Thank you for your question. The issue with price reporting and pricing under the current agreement is that the price of the transaction from Capricor to NS Pharma will be the price covered by insurance. If NS Pharma becomes the price reporting entity, the price sold by NS Pharma to the market will be the price reported, and we propose that if the agreement is changed so that NS Pharma is the price reporting entity, this price reporting issue will be eliminated. Under the current agreement, such pricing issue inevitably arises. So, we insisted that with the change of the reporting entity, the project would be able to proceed without any change in economic conditions or pricing. I think this is a rational proposal we have been putting forward. I hope this answers your current question.

What I wanted to ask is, even if the preliminary injunction is dismissed, in the end, if the terms of the current agreement are not modified, there is no way to sell the product, is there?

You are right. I think that part needs to be corrected.

Well, okay. If so, even if the preliminary injunction is dismissed, I think that at some stage you will have to come to terms with each other, but on the other hand, I think that the lawsuit itself will continue. So, whether the injunction is granted or denied, I believe there is a risk that the current situation will persist. How are you going to deal with that risk?

We are aware that patients being unable to access CAP-10-02 is highly detrimental to the patients themselves, as well as to both of our companies. Therefore, we will consider what we need to do to make CAP-10-02 truly available to patients and take action in the future. I think that's we are going to do. As to what exactly is being contemplated, I would like to refrain from giving you an answer.

I understand. Thank you. Also, one more thing I would like to know is, in light of the various questions we have had about the situation with Viltepso, as well as the fact that there was a structural problem with the original agreement for CAP 1002, I think that there are some issues that need to be addressed in the area of commercialization and the regulatory compliance of your US business. Do you think that NS Pharma has a challenge now? In addition, I think that the US business will become even more important in the future as you launch new products, including gene therapy drugs. I would like to know again how your company will strengthen the US business. That is all.

Regarding the pricing and contractual issues with Capricor, we recognize the pricing issue and sought to revise the agreement to address it. Unfortunately, negotiations with Capricor have reached this situation. On the other hand, Regarding our GX121 with RegionX Bio, we have already agreed to proceed under the PLD model, so the PLD model is not a strange scheme at all. I feel that this is a management issue in terms of the relationship with Capricor. We will continue to proceed as we have in the past, and we will take measures as necessary for the so-called risks in the US business. We are not in a situation where our US business is going down the drain, and we believe that we are capable of handling the Capricor matter properly. We are not in a position to update on Viltepso including the discussion with the FDA at this time, but we would like to use the results of the continuation study of Viltepso from study 301 as materials for communication with the FDA, so we will be working on that as well. We have already established a structure for regulatory affairs and reinforced our MDs, and we will continue to build the necessary organization as needed. Thank you very much. That is all. Now, Mr. Yamakita from Jefferies, please ask your question.

I am Yamakita from Jefferies. Thank you for your explanation. I am very sorry to be persistent, but I would like to ask about the lawsuit by Capricor. It is written in the complaint that your company's proposal was APLD model and Capricor rejected it, but is it correct to understand that Capricor has also made a proposal to your company and that the details of that proposal are not currently stated anywhere? This is the first question.

Capricor has made a proposal, as announced in the conference call, for a co-commercialization approach. We would like to avoid mentioning specific details.

Thank you. You said that the specifics are undisclosed, but you mentioned before that neither of the proposals were for the benefit of either party. In other words, is it correct that a proposal from Capricor is not to increase Capricor's share or to take profit from your company?

Well, I can't go into detail, but we are generally working in such a way that we want to minimize any necessary modifications.

Thank you. Lastly, I would like to ask about Viltepso. In H1, you revised the guidance in February, and I think you expected a recovery in H2, but in the end, you failed to meet the guidance for the fiscal year that just ended. I think you expect growth again this fiscal year, in the US. Is there any difference in the way this is forecasted from the way you forecasted for the H1 results? Please answer.

Well, regarding Viltepso, the number of patients receiving the medication has been progressing according to plan. What I mean is the total number of patients on medication, though, as new patients come to complement those who are dropping out. The average dose per patient has decreased because the patients newly receiving the medication are very young, so although progress has been made in terms of the number of patients, the reduction in average dose per patient negatively impacted its contribution to the total sales amount. This is the result of the situation. On the other hand, if they start the medication at a young age, they will be administered for a long time. Since this means that the duration of the medication will be longer, that will contribute to the future growth, so we are making this plan with high expectation.

I understand. The average age of the entire patient population is getting younger, so in the previous fiscal year, you faced a negative result due to drops, but are you assuming that you can bring it to a positive result in this fiscal year? Is it correct to say that the average age is getting that young?

Well, young patients have a longer period of time before dropping out, so they can use Viltepso for a longer period of time, and this has the cumulative effect.

Thank you. That is all from me.

Now, Mr. Wada from SMBC Niko Securities, please ask your question.

I am Wada from SMBC Niko Securities. Thank you. I would like to ask about the sales and profits of DeremioCell. Are you assuming that this scale of sales will be profitable if the current economic conditions continue?

Are you asking only for this fiscal year?

Yes. You are right. You expect 11.4 billion yen.

The 11.4 billion yen is only from the last quarter after the end of the year, but since sales expenses are incurred throughout the fiscal year, there is no particularly large contribution to earnings in FY2026. But the structure is designed to make a solid contribution to profits if it becomes to contribute throughout the year.

Thank you. And I would also like to ask about RGX121. You have shown the slide. I would like to ask whether it is likely to be approved or not? I think the Commissioner of the FDA has changed recently, and do you feel that the status of the FDA's response has changed?

It was only recently that the Commissioner resigned, so we are not sure what the impact will be. As the background to the appeal, we have heard that the FDA has a sense that there is some inconsistency between the FDA's decision on our GX121, for which ACRL was received that denied approval, and the fact that other products have been approved. We have heard from RegionXBio that they are fully aware of the need to make decisions in a consistent manner within the FDA.

I understand. Thank you. That is all.

Now, Mr. Kawamura from SBI Securities, please ask your question.

Thank you for your explanation. I am Kawamura from SBI Securities. Thank you. I'm really sorry to be so persistent, but could you follow up and tell me about CAP-10-02. Based on the Q&A so far, and also on Capricor's Q1 result, your company wanted APLD model and the other party wanted joint commercialization. I believe Capricor commented that they couldn't stand the idea of your company being involved in the various regulatory relationships and initiatives. What part of Capricor's proposal was most unacceptable to your company, while both proposals are compromised in terms of profits?

That would mean that I would have to talk about the details of Capricor's proposal here, so I would like to refrain from answering about the details of the joint commercialization scheme, as we cannot disclose that.

I understand. Also, with all the uncertainties that have emerged, when will you be able to give us a plan B for the future, or explain to us in concrete terms what will happen in the future? I know there are a lot of things that could happen, such as an immediate or delayed ruling, but could you tell me when you will be able to give us a more concrete explanation of your company's future?

Thank you for your question. Well, first of all, we will work to avoid receiving an injunction by addressing this issue. Depending on that situation, we will know more about the future status of this CAP-1002. We will also be discussing how to collaborate with Capricor on this CAP-1002, although that will depend on the court's decision. As Capricor and we have repeatedly said, we share the same desire to bring CAP-1002 or Deremiocel to patients as soon as possible. The other party is saying that NS Pharma is not ready for sales, but NS Pharma has more than five years of experience in the sales of Viltepso. They have a solid track record in the DMD field in the US, so I do not think that the future trend will be that Capricor can only do what it can do on its own. We believe that their claim is not true. NS Pharma is making preparations without delay, and progress is being made on the sales structure. As for your question about when there will be an update in the future. As soon as we know the situation with Capricor, we will have an opportunity to explain appropriately. I understand. Thank you. That is all. Some of you have raised your hands for the second time, but due to time constraints, I would like to make the next question the last one from the analysts and institutional investors. Mr. Lee from Morgan Stanley MUFG Securities, please ask your question.

Yes. I am Lee from Morgan Stanley MUFG Securities. Since our time is limited, I will ask only one question. What are the cost assumptions for the new fiscal year? First, R&D has increased this time. I think this is due to an additional Phase 3 trial of Viltepso, or Study 303, and I would like to know whether the cost of starting this is factored in. SG&A has also increased this time, due to the cost of sales for CAP 1002. How much is this factored in? I think the amount has been increased quite a bit why oh why, so please tell me about these two points.

I am Adamitsu. As for the first question about VolTepso, the situation has been as explained earlier, and it depends on how the situation unfolds, but we are assuming that the timing will be as we have explained. We have calculated R&D expenses based on that assumption. As for your second question, as I explained earlier, taking into account the sales and expenses, the impact on performance and profit is not so large this fiscal year. I would like to refrain from giving specific figures about the cost. That is all.

Thank you. Let me ask an additional question. Sarepta did not do the additional phase 3 and filed for the regular application, so I think your company should do better to handle that in the same way. If phase 3 is no longer needed, you would expect a reduction in R&D. In addition, even if CAP 1002 is not released this year, which I think should not happen, that will not have much impact on the operating profit plan for this fiscal year. I think that could be a rather positive thing, so please let me know if that is the correct understanding. That is all.

Yes. Well, if the additional phase 3 study of Viltepso is not needed or required, we believe that we can remove that amount from the cost. As for CAP 1002, as you have pointed out, it will not contribute to sales and will be removed from expenses. So if CAP 1002 is removed from sales and then from expenses, the situation would probably be neutral in terms of operating profit.

Thank you. By the way, regarding the phase 3, do you have any thoughts that your company could address this in the same way as Sarepta?

Yes. We would like to be flexible to include such possibilities. Thank you. That is all. We will now take questions from the press. If you have any questions, please click the raise hand button. When asking questions, please state the name of the company and your name before speaking. Mr. Kuriyama from Yakuji Nippo, please.

I am Kuriyama from Yakuji Nippo. I'm sorry to be persistent, but I would like to ask about Deremi Osel. President Nakai mentioned that the pricing issue under the current agreement is that price of the transaction from Capricor to NS Pharma will be the price covered by insurance. Do you mean that the wholesale price from Capricor to NS Pharma would be the so-called insurance reimbursement price, or the selling price, so it would not sell at the selling price as expected. Is it correct to understand that this pricing would make it impossible to provide the drug in an economically viable manner?

Yes. You are correct.

I understand. Was there any recognition of this issue when the license agreement was signed?

No. We were not aware of that.

I understand. I would like to ask about one more point. I understand that you have been preparing for the launch of Deremyocell so far, but what specific preparations have you made and how much money have you invested in them? In light of this lawsuit, could you tell me a little more about the status of such preparations, whether they are still ongoing or have been suspended for a little while, and the impact of the lawsuit?

The status of preparation and various launch preparation tasks are detailed, so I won't explain them in particular this time. Taking personnel recruitment as an example, as I mentioned earlier, the recruitment of personnel for the sales department, or for commercial as we call it, has been proceeding smoothly, and the establishment of the system is almost complete. In the fiscal year that ended, FY 2025, NS Pharma increased the number of employees by 40, so that is the situation. Therefore, we already have sufficient personnel to launch CAP-1002 or DEROMIOCEL. I would like to refrain from explaining for a moment as to how much this is.

I understand. If so, as for whether the preparation would temporarily suspend or not depending on the lawsuit, would it be correct to say that the preparations are already complete?

Well, we have almost completed the establishment of the system. Only the truly essential tasks remain, and we will allocate the necessary budget to complete them. Therefore, we feel that it is not reasonable for them to claim that the sales structure and preparation for the launch is insufficient or inadequate.

I understand.

Thank you very much. That is all. Now, Ms. Ishii from Nikkei, please ask your question.

Thank you. I am Ishii from Nikkei. I would like to ask you about your performance in the previous fiscal year, FY 2025. Regarding the background to the decrease in net profit despite the increase in revenue, there are SG&A expenses, R&D expenses, and NHI price revisions, and other factors. What is your view on expenses?

I am Adamitsu. I'm a little unsure about the intent of your question just now, but the company has used it as planned. Does this answer your question?

Thank you. Net profit decreased by 9% YOY. Which specific expenses had the most significant impact on this?

I'm sorry. You are talking about profit attributable to owners of parent. Profit attributable to owners of parent was affected by special factors in the previous fiscal year. In other words, this is a reversal of the temporary reduction in the tax burden due to the recoverability of deferred tax assets in NS Pharma, a subsidiary, in the previous fiscal year. This level will continue for the foreseeable future. That is all.

Thank you. Also, I would like to ask one more question. Regarding CAP 1002, I know there is the litigation, but do you anticipate that there will be no profit reported if the trial results are good, but the approval is not granted?

Thank you for your question. The results of the Phase 3 trial were very positive, so the review clock is now running again, and a decision on whether to approve or not is scheduled for August 22nd. We expect that the approval will be granted, and we are not thinking that it will not be approved.

Thank you. That is all.

Now, Mr. Takayama from Kyoto Shimbun, please ask your question.

I am Takayama from Kyoto Shimbun. Have you factored in the impact of the situation in Middle East in your forecast for the current fiscal year?

Thank you for your question. In particular, we have not factored in any significant impact on both the pharmaceuticals and functional food businesses. That is all.

I understand. Just one more point. With the exception of Deremyosel, could you give me a few words, President Nakai, regarding your company's overall business this fiscal year?

Yes. For the current fiscal year, the sales forecast for Deremyocell is expected to be 11.4 billion yen. If we exclude that, 11.4 billion would be reduced from the 200 billion in revenue plan. If we also remove SG&A expenses as well as the costs associated with Deremyocell, there will be no significant impact on this fiscal year's performance, and I would like you to understand that the operating profit itself will not be significantly changed from the 38 billion that we have announced today. I understand. Thank you. Now, Mr. Shimomura from Nikon Yakugyo, please ask your question.

I am Shimomura from Nikon Yakugyo. I would like to ask you about the medium-term management plan up to FY 2025. You mentioned a variety of things this time, and based on these situations, do you think that you are able to achieve the targets for the medium-term management plan?

Thank you for your question. Yes, we expect to achieve the medium-term management plan. Since there was a lawsuit filed by Capricor this time, we have refrained from giving a long-term outlook on how Cap 1002 will turn out, but we are actually planning to market the product. Assuming that this progress is made, I believe that the achievement of the medium-term management plan is fully possible.

Am I correct in understanding that you can get through the Pattencliffe of Uptravi?

Yes, we believe so.

Thank you very much. Ms. Kawachi from Nikkei Biotechnology and Business, please.

I am Kawachi from Nikkei Biotechnology and Business. Regarding RGX121, could you tell me whether you intend to continue the clinical trial to obtain additional data in preparation for resubmission, or whether there is a possibility that you will conduct a completely new trial, including a review of the protocol.

Well, our GX121 is a gene therapy, so we are thinking that phase 3 would be feasible if we continue to observe patients who are currently receiving the drug. Also, after we start negotiations or discussions with the FDA, it will become clear what kind of trials are necessary and what kind of data will be required. That is all I can tell you at the moment.

Thank you. You are at the stage of starting discussions with the FDA, so I assume that the approval schedule will be delayed. If you have any target for when you would like to clarify the updated schedule, I would appreciate it if you could let me know.

Thank you for your question. As soon as the content of our discussions with the FDA indicates that this is something that should be made public, we will be able to inform you in a timely and appropriate manner. If the progress is in line with a normal situation, it will be included in the update of R&D products at the time of the next Q1 financial results briefing.

Thank you. As the last question, I believe that the clinical hold has not yet been lifted on RGX111. If you have any plans for its future development, please let me know.

Thank you for your question. The clinical hold has not yet been lifted for RGX111, as you pointed out. The FDA has sent us a letter of clinical hold, indicating what they want us to show, and RegionXBio is now addressing that accordingly. As for what can be done by when, RegionXBio has not disclosed that, and I would like to refrain from disclosing that.

Am I correct in understanding that it is your company's policy to continue to promote development positively?

Yes.

You are correct. Thank you. That is all.

Some of you have raised your hands for the second time, but due to time constraints, I would like to make the next question the last one. Mr. Sakaguchi from Risfax, please.

I am Sakaguchi from Risfax. I would like to ask only one question. Regarding DereMioCell, depending on the decision on June 3rd, will there be any impact on the medium-term management plan?

Well, as I mentioned earlier, it is still unclear whether or not we will be able to find out anything definite on June 3rd, but depending on the actual outcome of the hearing, we may have to take a variety of different approaches.

I understand. That is all. Thank you.

Some of you have raised your hands, but if you have any additional questions, please contact our Public Relations or Investor Relations staff. With that, we conclude the financial results briefing of Nippon Shinyaku for FY 2025. Thank you very much for joining us today.