In the most recent earnings call, Shionogi & Co., Ltd. (ticker: 4507.T) reported a decline in revenue for the first quarter of 2024, with figures at JPY 97.6 billion compared to JPY 109.3 billion the prior year. The drop was largely attributed to a one-time payment from the previous year related to an ADHD drug license transfer.
However, the company noted that, excluding this one-time event, revenue and profit have actually grown. The HIV and overseas businesses were particularly strong contributors to this growth.
Shionogi also highlighted promising developments in its product pipeline, including an anti-obesity drug and the COVID-19 treatment Ensitrevir, which has shown effectiveness in reducing hospitalizations.
Key Takeaways
- Revenue for Q1 2024 fell to JPY 97.6 billion, primarily due to a one-time payment in the previous year.
- Excluding the one-time event, revenue and profit have grown, driven by HIV and overseas business.
- Ensitrevir, an anti-COVID-19 drug, demonstrated a 37% reduction in hospitalization rates in outpatients.
- The company is optimistic about meeting its first-half forecast and is preparing for the expansion of acute respiratory infections.
- Potential plans for share buybacks were mentioned, but business investments will take priority.
- Shionogi is in discussions with the FDA regarding various drugs, including Xocova and SCORPIO-HR, and is optimistic about the prospects of its long-acting HIV drug Apretude.
Company Outlook
- Shionogi is confident in meeting its first-half forecast.
- The company is preparing for the expansion of its acute respiratory infections segment.
- Ongoing prevention studies for Ensitrevir are being conducted in Japan, the US, and Asia.
- The pipeline includes projects in both infectious and non-infectious diseases.
Bearish Highlights
- The revenue decline from the previous year's figures due to the one-time ADHD drug license transfer payment.
- The need for further clinical data to confirm the effectiveness of the long-acting HIV drug.
Bullish Highlights
- Strong growth in the HIV business and overseas markets.
- Ensitrevir has shown a significant reduction in hospitalization rates for COVID-19 outpatients.
- The company's long-acting injectable HIV drug is seen as a key differentiator in the market.
Misses
- The company did not specify the investment size for the year.
- The revenue decline, despite being attributed to a one-time event, may still raise concerns among investors.
Q&A Highlights
- Shionogi discussed increased market share due to evidence and pricing strategies.
- The company is considering share buybacks depending on the COVID-19 situation.
- Negotiations with the FDA are ongoing for Xocova and SCORPIO-HR.
- There is a potential expansion for cefiderocol in the US, Europe, and Asia.
- Shionogi is actively seeking investment opportunities that align with shareholder value.
Shionogi remains focused on its promising pipeline, with several drugs showing potential in both the infectious and non-infectious disease markets. The company's financials, while down from the previous year due to a one-time event, indicate underlying growth, particularly in the HIV and overseas segments.
With ongoing discussions with the FDA and studies to support drug approvals, Shionogi is poised for potential future growth, balancing the need for investment in the business with considerations for shareholder returns, such as possible share buybacks.
Full transcript - None (SGIOF) Q1 2024:
Yoshimasa Kyokawa: My name is Kyokawa from Shionogi, PR Department. Thank you very much for joining us today. This is Shionogi; the financial briefing of the result of the First Quarter of 2024. Let me introduce who we have today. First, John Keller, Senior Executive Officer, Senior Vice President; Senior Vice President, Healthcare Business Supervisory Unit, Dr. Iwasaki; Senior Executive Officer, Senior Vice President Supply Unit, Dr. Hanasaki; Senior Executive Officer, Senior Vice President, Corporate Business Strategy Division, Dr. Hatanaka; our Corporate Officer, Senior Vice President, Dr. Uehara; and then Vice President, Finance and Account Team, Dr. Kudou. Now let me briefly explain the format for today. We will introduce the result of the first quarter and also the progress of the pipeline followed by Q&A. We are planning to complete the session at 5 o’clock. As to the financial result, Dr. Kudou and Dr. Hatanaka will have a briefing. And then we have Dr. John Keller, who will talk about the progress of the pipeline. Today we have the Vice President from four divisions, and also the Head of the R&D and Head of Finance. We are ready to answer any questions. And now, let me explain simultaneous translations. Simultaneous translation is available today. If you wish to use simultaneous translation, please choose either Japanese or English by clicking the globe icon. Now, let us start. Dr. Kudou?
Masako Kudou: I will explain the overview of the first quarter financial results. Please refer to Page 4 for the highlights. At the left side, revenue was JPY97.6 billion, down from JPY109.3 billion in the previous year. The main reason for this decline was the JPY25 billion one-time payment from the transfer of the ADHD drug crisis in the first quarter of the previous year. Excluding this revenue increase by JPY13.3 billion due to significant growth in royalty income and overseas business. Additionally for all profit items, exporting these one-time factors, we achieved both, revenue and profit growth, with operating profit increasing by JPY6.5 billion. Next, regarding the consolidated financial results; the results were revenue of JPY97.6 billion, operating profit of JPY28.1 billion, profit before tax was JPY36.5 billion and quarterly profit of JPY30.6 billion. Overall, it might seem that progress against the first half forecast is weak, but this is because we have projected higher sales of Xocova in the domestic market for the second quarter. And the first quarter results were better than expected. Thanks to strong growth in the HIV business and overseas business. Despite the significant impact of the one-time payment of the ADHD drug license last year resulting in decreased revenue and profit; as mentioned earlier, excluding this one-time payment we achieved revenue and profit growth in all profit items. Regarding foreign exchange due to the yen depreciating more than expected, we recorded foreign exchange gains in each currency. Moving onto Page 6, statement of profit and loss. As mentioned, revenue started with a negative impact of JPY65 billion due to one-time factor from the previous year. However, thanks to the steady performance of HIV in overseas business, we achieved better than expected results. On the other hand, cost of sales increased by 10.1% from the previous year. This is due to changes in the product mix such as the growth of overseas business, and the results is in line with the first half forecast. As [indiscernible] has indicated in our mid-term plan, we are currently forecasting a global expansion. We have increased spending of strengthening our global sales infrastructure compared to the previous year. For R&D expenses, the 70.7% increases year-on-year is due to the smooth progress of development pipeline and the inclusion on Qpex R&D expenses which are not recorded in the first quarter of the previous year. Additionally, both SG&A and R&D expenses are more impacted by foreign exchange due to our expanded global activities this fiscal year. While operating profit and quarterly profit appear to have decreased year-on-year, concerning [ph] that JPY25 billion one-time factor from last year was recorded without any expenses; our business is progressing very well. Next on Page 7, revenue by segment. For domestic prescription drug due to the JPY25 billion one-time last year for ADHD drug license, there was a significant impact resulting in 66.4% decrease year-on-year. Regarding infectious disease drugs which we will explain in more detail later, sales have been increasing in response to this epidemic situation. For overseas subsidiaries and exports, revenue from cefiderocol increased by 50.5% in the US, and 45.7% in Europe from the previous year. While foreign exchange had an impact, sales volume also steadily increased due to the expansion of sales in countries and the growth of sales in existing markets. Regarding royalty income, the HIV franchise saw significant growth due to actual sales and the foreign exchange effects. Progress has already exceeded 50% of the first half forecast and we expect to have planned at around the same level as the current forecast for the first half. That concludes my explanation.
Kazuhiro Hatanaka: This is Hatanaka speaking. Let me present the achievement of the first quarter. Please refer to Page 8 for the HIV franchise. The graph on the left shows the quarterly transition of Shionogi’s HIV royalty income. While there are slight fluctuations in quarterly income for various reasons, it can be seen that it has been increasing very steadily in the mid-to-long term. Compared to the first quarter of the last year, it’s increased by JPY15.5 billion. The main factor driving this steady growth is the expansion of market share of new products, including LA formulations. The graph on the right compares the sales of 6 products, including ViiV's Dolutegravir and Cabotegravir with the last year. The dark color represent the sales of new products, including LA formulations. And as you can see, the sales of new products have grown significantly, especially LA formulations sales have increased by strong 76.8% year-on-year. We anticipate continued growth centered on new products. Next, this is overseas business. Our overseas business is achieving steady growth centered on Cefiderocol. The graph on the left shows the quarterly sales transition of our overseas business which has increased significantly by JPY3 billion compared to the previous year. Regarding Cefiderocol, Sobi which signed a sales agreement last year has started sales in Central and Eastern Europe, and we anticipate further penetration of prescription in existing markets and expansion into new sales countries. In China, we have achieved a primary endpoint in the Phase 3 trial and are preparing for the approval application. We will continue to aim for further growth in our overseas business, including through PingAn Shionogi. From now on, I'll explain the situation regarding acute respiratory infections, particularly COVID-19. The graph of the left shows the transition of COVID-19 and the influenza infection trends. Since the first quarter of FY24 which the influenza epidemic has rapidly subsided, COVID-19 infections have gradually been increasing. Next, the graph of the right shows the sales of acute respiratory infection drugs for the first quarter of the past few years. Like last year, sales of the influenza family were almost zero in the first quarter of this fiscal year. While sales of Xocova were recorded to the certain extent. Traditionally, there has been almost no sales in the acute respiratory infection area in the first quarter. However, by having treatments for both COVID-19 and influenza, we are becoming able to secure certain revenue. Regarding acute respiratory infections, by having multiple infectious disease assets we are simply building a new business model. I meant, all is secure a certain level of revenue. Next, again about COVID-19. This is detailed overview of the prescription of Xocova. This shows the trend of prescription rates for oral COVID-19 treatment since February this year. Although the special measure for full public funding ended in April, increasing the out-of-pocket costs for patients. The importance of early treatment with anti-viral drugs has become well recognized; so the prescription rate has not declined much and is gradually increasing. Additionally, there is a trend of rising prescription rates as the number of infection increases, and we anticipate that the prescription rate will continue to expand. This shows the share transition of 3 oral drugs with the red line indicating Xocova’s share. Amongst the three, Xocova’s share is increasing, especially since April 2024, with the expansion in prescriptions for patients with risk factors for severe diseases. Later in this session we will introduce various real-world evidence accumulated for Xocova, such as it’s effect in preventing hospitalization in patients with risk factors. We'll continue our efforts to ensure that Xocova reaches the patients who need them. This is the summary of the first quarter and outlook for the first half of 2024. As mentioned, the topline is steadily progressing, driven mainly by the HIV business and overseas business. Excluding one-time factors, we achieved year-on-year revenue growth indicating a solid earning capability. Regarding Xocova, we anticipate a way of COVID-19 infections in the second quarter, and the first half forecast is weighted [ph] towards the second quarter. Given the steady expansion of Xocova’s market share, we expect to achieve the first half revenue forecast. We'll continue to strengthen our efforts to prepare for the expansion of acute respiratory infections. On the cost side while maintaining meticulous cost management, we will prioritize and actively remove R&D. Considering the achievements of the first quarter and our future initiatives, we currently to expect to meet the first half forecast. That concludes my explanation.
Takeki Uehara: And this is Uehara from R&D, and I would like to give you an update on the progress of our pipeline. First, with regard to 309039, this is MGAT-2 [ph] inhibitor for anti-obesity. And as we have explained in the R&D, they held in June. We were unable to confirm the 5% or more weight loss effect of a single drug which we had set internally. On the other hand, since this is a new mechanism action and there are still unmet needs in the anti-obesity drug market. The safety risk and also from the cost perspective, we would like to seek for a way to have this used as an add-on. And also as maintaining a weight loss after discontinuing GLP-1 agonist, we will be able to provide less expensive and safe and convenient oral regiment. So for add on, and for maintenance, we are conducting a clinical study. And at the timing of the latter half of this year, we will be able to provide you with the result of the study and we would like to consider the design of the clinical study, and also the partnering engagement as well based upon these results. Next, I would like to give you some clinical data update on Ensitrevir in Japan. On the right hand side, as you can see, this is the post-marketing data, and there has been data for patients with risk and without risk, and there has been no changes from the clinical study results. We have been able to confirm the characteristic of the drug in the actual practice. On the left hand side, we see the effectiveness in reducing hospitalization and it is a large scale Japanese health insurance claim database where we have made analysis and we will give you some details in the following slides. In the patients with serious disease or severe disease risk factor, we have been able to show that there is an evidence that the risk of hospitalization was statistically significantly reduced by a certain percentage. And also here, 167,310 COVID-19 outpatients were given the drug and we have collected the data of these patients, and the hospitalization rates of one month after the administration has been investigated, and we have been able to aggregate the number of the reduction of the hospitalization of such patients, and we have been able to confirm that the hospitalization was reduced by 37%. And therefore, by administering this drug early we can say that severe disease aggravation can be prevented. And also there has been a progress with the global Phase 3 HR-SCORPIO study results. Last week at Millenhiem [ph] in Germany, there was a conference in which we had been able to provide the information of the results of our Phase 3 trials. And also in this study, regarding Long COVID we had been doing some follow-up. A 6-month follow-up has been completed, and the key has been broken based upon the data that has been fixed, and a very interesting data has been become available. And therefore with regard to this data in the international conference going forward, we would like to provide the results so that we can proceed with the discussion with the doctors of NIH. Now in Japan we are collecting more cases, and right now there is more COVID-19 patients in Japan, so we would like to complete our effort in the summer season of this year in order to file. And also for prevention in global Japan, US and Asia, in the global nations we are doing a study. So by administering Ensitrelvir we want to prevent the onset of COVID -- of the people or around the patients. And so with regard to this study the enrolment will be completed in the first half, and as soon as we get the results we will make this available to you. And we want an early recovery from hospitalization as soon as possible, and that is the objective of the STRIVE study and right now we are collecting various information. And also with regard to Long COVID, we are conducting a prospective study for Long COVID in Japan as well. With regard to SCORPIO-HR study, this is the result of the -- some symptom endpoints. At the very top, these are the endpoints of SCORPIO-HR study of 15 symptoms, all of the symptoms. So after the resolution has started, after more than two days we have collected the data as to the total resolution of the symptoms. And so with regard to the HR study, 0.07 was achieved. And so with regard to the SCORPIO-HR study, although the endpoint could not be achieved, however with regard to the secondary endpoint, and with regard to the SR studies, you can see the results and there are five symptoms. That is a resolution of the symptoms for more than one day, and 0.04 is the p-value which showed a significant difference. And so in the SR study in the Asian area in the third phase, the endpoints could be applied to the six symptoms in the global. And with regard to the six symptoms in global, we were able to see the significant difference in the global study with regard to the six symptoms. So the result of the Asian study was reproduced in the global study. And so, with regard to the direction of the eluviation of the symptoms, we were able to confirm the efficacy. And based upon this result, we will be able to discuss with regard to this issue with the authorities of various countries. And with regard to the anti-viral results. And as you can see, the study environment is a little different. So it is difficult to do a direct comparison but PCR has been measured and in the global environment from the administration point of time, the viral copy number is about two levels lower. And in this kind of environment, there has been a statistical significant difference between the active drug patients and the control patients. And therefore in the SR and the HR studies, we were able to confirm the anti-viral activity. And on the right hand side, we see the anti-viral effects. So anti-viral on the fourth day, negative 95.5%. So most of them after three days of administration, on the fourth day the virus had become negative. Therefore from this perspective, there was no rebound and also there was no recurrence of the symptoms. This has been confirmed, and from this point we can say that the virus level had been minimized. And so with regard to the tighter and also with regard to the rebound, we were able to confirm the efficacy of the drug in the third phase study. So in US, Asia and in different countries, we are engaged in the consultation with the authority.
John Keller: This is John Keller from R&D and I will share with you some of the information presented by the recent ACE 2024 Conference in Munich, as well as additional highlights of the pipeline progress. First, with respect to the ACE 2024 Conference. On the left side of this slide, with respect to Dovato, the oral combination of Dolutegravir and Lomivirdin [ph], two drug combination, and still a very important product for us. There is additional data supporting it’s further use. It’s direct comparison to Biktarvy, first of all, we were able to confirm non-inferior anti-viral efficacy, but also significantly less weight gain. And as shown below, roughly one kilo less weight gain, and the proportion of participants with over 5% weight gain and about 10% advance [ph] in the Dovato group. And so showing that it continues to be a very attractive treatment option, not only in terms of viral suppression, but also with respect to the impact on weight. On the right side of the slide, turning to long acting injectable compounds, our S-365598, which we have licensed to ViiV as a next-generation integrase inhibitor for long-acting; we were able to demonstrate, first, non-clinically that this compound 598 maintained anti-viral activity against strains with mutations resistant to other integrase inhibitors. And furthermore, in the initial Phase 1 oral results to control favorable blood concentrations and tolerability. Now, over the next 9 months there will be 3 additional elements of important data related to this compound that will be coming out. First will be additional oral administration data, this time in HIV patients showing we hope, both tolerability and also viral load reduction. With respect to the injectable formulations of the same compound, data with respect to every two month at Home Administration format, and also with respect to ultra-long acting upto six month injectable format, data will be coming out over this period. Next slide, please. Now with respect to progress of the pipeline; first, in infectious disease. With respect to those projects that we have not discussed so far, which just to briefly note that Japan approval last month of COVGOZE. And then turning to 337395, our RSV anti-viral; to note that it is in the progress of a human challenge study, and that results from that study will be emerging later this year. Furthermore, the Qpex collaboration and the compounds that we have brought in by the acquisition, both combinations are now progressing well. Next slide, please. Turning to the non-infectious disease parts of the pipeline; first, the digital therapeutic for ADHD has been filed for approval in Japan and review is in progress. With respect to Zuranolone for depression, we expect that filing to be done quite soon towards the end of the summer. For Zatolmilast, for Fragile X, our pivotal studies are continuing. And I'll just skip to the bottom here, with respect to the maze [ph] compound, 606001; the other compound that begins to form our rare disease franchise, for Pompe disease in this case, the tech and information transfer from maze [ph] has been successfully completed, and we are on-track to begin Phase 2 next year. Moving further back up into the slides; just to mention that the first combination from our [indiscernible] joint venture with Actimid [ph] will be entering Phase 2 around October. And then that 011, our anti-CCR8 [ph] for oncology is progressing well in the continuing Phase 1b2 studies. Thank you very much.
Operator: Thank you very much. So now we would like to move onto Q&A session. [Operator Instructions] From Citi, we have Mr. Yamaguchi.
Hidemaru Yamaguchi: I have three questions. First, 309309, non-clinical environment add-on in maintenance. I was bit confused about this. So this is not clinical trial. Is this animal study?
Unidentified Company Representative: This is animal study; mouse. After obtaining new data, we will consider the clinical trials. Thank you. And the result of the study will be available in Q3, i.e. October-December. So that will be after October-December.
Hidemaru Yamaguchi: So the timing of the partnering will be in the next year?
Unidentified Company Representative: You’re right. We will be both disclosing our plan to the future clinical planning, as well as our plans with respect to partnering after receiving those results.
Hidemaru Yamaguchi: Thank you. My second question is about Xocova sales. After the environment, are you expecting the increase of the sales in the second quarter?
Unidentified Company Representative: Having said that, nobody can tell about the future. As compared to the last year, the sales might be smaller than the previous year according to my simple calculation. So based on the result of the Q1, the full year -- I think it’s about JPY600 million; so you think that you can achieve your forecast.
Toshinobu Iwasaki: Iwasaki speaking from healthcare unit. As compared to the last year, the circulation delayed a little bit. Considering that, the increase of the sales delayed. There is no other [indiscernible] and the market share because of lower NHI price -- it was less than 50% last year but now it's about 70%. Considering these factors if it circulates, I think we'll be able to achieve target.
Hidemaru Yamaguchi: The reason for increased share is evidence and also the price. Is that correct?
Unidentified Company Representative: Yes, of course. As to evidence, we have data about Long COVID, and those are all supportive data but the out-of-pocket is very big factor. But high risk patients and daily patients, they have to pay about 10% to 20%, so rather than price for elderly patients, I think real-world evidence is having a positive impact in terms of the share.
Hidemaru Yamaguchi: Okay, thank you. The last question. I might -- this question might sound strange but share buyback, you are very active in share buyback in the first quarter. And we were expecting -- some people expecting to have another round of share buyback. There's been no announcement so far, but if you can explain your stance on share buyback?
Masako Kudou: Kudou speaking. First of call, for this year, we will continue to consider the investment in business. And as to COVID-19; the forecast depending on the circulation of COVID-19, we will choose appropriate timing to do or consider sharing buyback.
Operator: Thank you very much. So from Goldman Sachs (NYSE:GS), Mr. Ueda please.
Eiji Ueda: This is Ueda from Goldman Sachs. The first question that I have is with regard to HIV franchise. The royalty progress, I think, is a higher than the level plan, and is there any special factor behind that or is it just because you are progressing very smoothly? And also, this time you introduced -- you have also presented the usage expansion of Apretude in the conference. And I would like to ask you about the future prospective of Apretude as well?
John Keller: So first with respect to royalty, yes, it is going according to plan. I think both, ViiV’s sales growth has been very strong, and so far continues to be this year; and so we don't see any change to those underlying trends. And then, on top of it, of course, the currency does help somewhat which we said. And with respect to Apretude, yes, two things I would note. First of all -- I guess three things. One is -- yes, the progress of Apretude has continued strongly. Secondly, as we presented and the plan is coming up, the every four month version to follow, we anticipate certainly the formulation of Dolutegravir is clearly capable, and we should be able to launch that by 2026. And then I guess, with respect to the overall prevention market, we certainly expect the prevention market to continue to grow. And I think our own forecasts are that the prevention market should at least triple in the future. There are some forecasts that go upto 10-fold increase in prevention forecasts. For the US, that's globally. For the US, specifically, the critical factor in dramatic growth doubling, tripling or beyond is really government support. And that has been progressing now, it's not completely in place yet, and of course, the election creates some unpredictable on timing. But overall, I think we are confident that the government supported path will be expanding most likely in the coming year.
Eiji Ueda: My second question is with regard to Xocova. So with regard to the prescription rate and also the share rate that you introduced. So compared to the company plan, what is the actual situation? How do you evaluate this? And also with regard to the anti-viral effect, and with regard to the Long COVID data; has the understanding at the practical clinical practice changed? And also has there been any negative impact by the fact that the endpoint could not be achieved in the SCORPIO study?
Unidentified Company Representative: No. So 90% of market share is being attend for Xocova. And therefore, in a good sense, our anticipation had not come true. And also, rather than people saying that treatment is not necessary, I think in the society, the environment is that there needs to be a prevention of severe diagnosis and JPY15,000 or even JPY20,000 payment should be worthwhile in order to prevent severe disease. And I think that is the understanding of the society. So in July compared to this year, the prescription rate is only down by 10%, and therefore I think the situation is quite positive.
Operator: Next, from JPMorgan (NYSE:JPM) we have Wakao-san.
Seiji Wakao: Just to confirm, following up to Ueda-san’s question. HIV royalty had an upturn; is this correct? According to explanation, first quarter it progressed well. But for the first half, you will land at the expected level indicating that it may be slower in the second quarter. So how can I understand the situation?
Masako Kudou: Kudou speaking. As to HIV royalty as we mentioned, because of the increase of the sales, it’s exceeding the budget. In the first half, first quarter, it’s 35% increase from the previous year; it’s very strong. But for the first half, we are expecting to have the regular increase of the sales; so we are expecting to have the land at the budget level for the full half year.
Seiji Wakao: I couldn’t understand because if the sales in the first quarter is strong, it should be strong in second quarter. So are you saying that it's going to be dropped in the second quarter?
Masako Kudou: Some of the sales come earlier in the first quarter; that's what we think. And GSK (LON:GSK) financial results will be announced, so you may want to listen to their presentation of the financial results.
Seiji Wakao: Okay, understand. And the second question about Xocova; your negotiation with FDA, can you elaborate on what's going on? If there is any additional update from the previous discussion with FDA; has there been any progress or update? Or what about the timing of the application?
Unidentified Company Representative: Thank you for your question. We have Type-C [ph] meeting with FDA once. Based on the data we have, we discussed how we should proceed going forward. The data we presented was SR and HR studies, and also real-world evidence. Those data was presented at the negotiation, and then we had discussion. More specifically, as to the application -- as to real-world data, we have to follow the guideline of FDA in analysis. There are many follow-up discussions with FDA, so we have to have more follow-up discussion with FDA. In those follow-up discussions we are going to have negotiation or discussion about real-world and other data.
Seiji Wakao: So you are having discussion now?
Unidentified Company Representative: So there has been -- we cannot tell if there has been any progress. Specific milestone like application, there is no such thing that we can announce. We continue to have discussion with FDA.
Seiji Wakao: So at Shionogi, do you think the response is positive? Do you think it’s more certain now?
Unidentified Company Representative: It maybe subjective. I refrain from answering your question but we can -- but we still have the possibility that what I would say.
Seiji Wakao: And lastly, 309309, I want to understand the current situation? As of now you are not doing partnering activities yet? Or based on the current data, are you sharing the data with your potential partner? I would like to understand the situation of your partnering activities.
John Keller: We are sharing data but there is definitely interest in the buildout of the preclinical package and further, as we described. There is a very strong impact of diet by this mechanism and both are -- our pre-clinical model were very much on focused on the high fat diet induced on system where our clinical studies by FDA requirement, you must impose a 500 calorie reduction on patients. And so there is considerable interest in the part of partners into understanding more in pre-clinical models, how those different diet conditions might affect pre-clinically as they consider together with us, not to proceed clinically [ph].
Operator: UBS, Harita [ph].
Unidentified Analyst: This is Harita from UBS. With regard to HIV franchise, so Gilead (NASDAQ:GILD) [ph] for presentation once every six months study showed good positive results. And in your case, it was a once every four month kind of administration, and I would like to ask you what kind of marketing strategy you have for a long-acting -- I know that you have a good situation or positioning and how are you going to defend yourself against Gilead?
John Keller: The injection [ph] that they are pursuing is a subcutaneous administration where it’s swinging from muscular administration. And while I think Gilead has been eager to possible advantages of subcutaneous. It is important to note, and it's in the beginning actually for the solid tree indication from which it's already been approved, There is a significant frequency, 25% upto 30% of nodules occurring at the subcutaneous injection site. And these modules end all readiness, are visible and palatable external. And from our experience with patients and prep subjects receiving long acting injectables, privacy is extremely important. Is sort of the main attractions, probably half of the line acting injectable up to you. And if there were visible nodules which can last for upto 5 or 6 months; in other words, the duration of the prep premium for Gilead’s competitor, and they are visible on the comparable when touched. We believe that a serious concern for patients with long acting injectable [ph].
Unidentified Analyst: I understand. So with regard to privacy, that would be your differentiation; so that's how I understand explanation. And how about every four months and versus every six months?
John Keller: Of course, that is a difference, and we are continuing to work towards it in every six months. But I think really the acceptability to the patient overall, not just a frequency of injection, is key. I should mention also there is some drug-drug interaction with [indiscernible] which also is important with Gilead’s competitor. But I think overall, the properties of the compound in it’s entirety and the impact on the patient in it’s entirety, not just the space between injections is important.
Operator: Thank you. Next is [indiscernible].
Unidentified Analyst: First, SCORPIO-HR. You said type C meeting, it’s not type D, it’s type C. So can we say that they -- it's a very good response from FDA? And what’s going to be the next milestone? What’s your plan?
Unidentified Company Representative: As you mentioned, this was not type D, it was type C. And indicating that FDA wanted to have a comprehensive discussion; so I think it was a very positive thing. Having said that, as we mentioned, we have to have follow-up discussion with FDA. For each action, we'll have to discuss if it's going to be type D or type C, but we will have to apply for discussion.
Unidentified Analyst: Okay, thank you. Another question is about HIV. At ACE 2024, there was a presentation about 598; resistance profile was very good, as I understand. So 148 or 155 and 140 effect weren’t good. Is this a correct understanding? And this time, it was a data about oral drug. Based on this drug data, internally can you forecast if it can last for six months? So I want to understand how we should interpret this data?
John Keller: I mean we are very pleased to see the oral data so far, and it's consistent with what we are modelling for the long acting. But the long acting, we have to compare currently until we have clinical data in the animal models because the properties of the long acting formulation are very different. So based on our animal correlation of how oral behaved and how our animal long acting looks, we are predicting that the long acting will look good but we need the long acting clinical data to confirm.
Unidentified Analyst: Understood. If once in six months can be achievable, we will have to have additional data. What do you think about the additional data about injection?
John Keller: That will be a merging over the next 9 months, as I said. Again, it takes longer. So there's 3 pieces of data coming across; the viral load drop in orals, the 2-month format at home, and the 6-month data. So those are ongoing -- all of those are ongoing studies. Obviously, the 6-month takes the longest, just from a practical point of view, so that will be the last piece of data emerging. But those will all be emerging over the next period.
Operator: From Bernstein, Sugi-san [ph], please.
Unidentified Analyst: First of all, with regard to HIV royalty, I have a question. The royalty is growing and I understand that it is a very positive phenomenon and the product portfolio of HIV ViiV is growing and that’s reflected upon the royalty. And the [indiscernible] where does the growth comes from is the question I have? So as you said, the patient number itself is growing but at the same time, amongst the patients, the growing patients -- the market share is also growing I think. So what is the portion of the contribution to the growth?
John Keller: So the market -- sorry, the patient growth overall is really in the very low single digit percentages; so the growth is driven by market share. The predominant product for growth is somewhat different in different regions. First of all, with respect to Apretude just quickly, it’s all growth because for prior to Apretude, ViiV did not have a product; so Apretude is pure capture of market share for ViiV. For Dovato, obviously as we noted key competitor [indiscernible]; in addition to a very intense competition in US market, in Europe certain countries and elsewhere have an extremely good growth rate of Dovato, possibly in part due to overall cost difference. Dovato can be the most cost-effective integrase-driven modern regimen, but that's one factor in certain markets.
Unidentified Analyst: With regard to cefiderocol I have a question. Cefiderocol, this is being used in the hospitals, as I understand, and the fact that it is growing is good. But -- so in hospital, in each account cefiderocol is being accepted I suppose. And I suppose that that is the reason why the sales is increasing. And so in terms of account open from that perspective, how much do you think that you will be able to grow further? So with regard to account opening -- towards the target, how much have you achieved in terms of account opening with regard to cefiderocol?
Toshinobu Iwasaki: This is Iwasaki responding. Are you talking about overseas market?
Unidentified Analyst: Yes.
Toshinobu Iwasaki: As of today in large hospitals in terms of prescription share is about 20% or so, I think. And also with regard to diagnosis kit introduction included, which is automatic; I think this is very important in large hospitals. And so the emergency indication and other appropriate indication included. When we have achieved this, I think 25% is our target; so we have 5% more to go since it's about 20% right now. With regard to the market share in US and Europe, and also we provide to Omic [ph] and say also to the Asian countries too, I think the cefiderocol can be further expanded.
Yoshimasa Kyokawa: Okay. Thank you very much. We have 3 more minutes to go. Any other question?
Operator: [Indiscernible]. This is going to be the last question.
Unidentified Analyst: About the COVID [ph], you said that you achieved the forecast for the COVID [ph] in the first half. In the current situation in the second quarter, as I recall, the domestic budget was about JPY60 billion for the full year. And you previously mentioned that 50% for the first half, and other 50% in the second half; if that's so, JPY3.9 billion in the first half. Deposit is 32.7 [ph]. So if you can reassure us that you are going to achieve the target?
Unidentified Company Representative: Let me add to my prior explanation. In July, there is big circulation and it was more than JPY10 billion in July alone. Based on that situation, I think for the first half, we were able to achieve the budget.
Unidentified Analyst: Okay, thank you. One more question about business development. You said you forecast on business development; what is the size of the investment for this year? Including the financial asset, you have like JPY550 billion, for this year how much investment are you going to make?
John Keller: We haven’t said it particularly. I will say you are all aware, of course, of our current cash position; but at the same time, Shionogi from an asset valuation, we tend to be conservative, some would say cheap. But with that said, we are extremely active, looking at opportunities but it does have to absolutely meet our value judgment to support use of shareholder’s money. So, not apologies -- not going to set a target but there is lot of activity ongoing.
Unidentified Analyst: Okay. Thank you very much. That’s all for myself.
Operator: Thank you. So, I think it’s time to close. With this, we would like to close the first quarter fiscal 2024 financial results presentation session. Thank you very much for your participation.
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