Executives: Ryohei Yanagi - SVP, CFO, Chief IR Officer Ivan Cheung - SVP, President of Neurology Business Group Terushige Iike - SVP, President Oncology Business Group Takashi Owa - VP, Chief Medicine Creation Officer Oncology Business

Group
Analysts: Atsushi Seki - UBS Securities Kazuaki Hashiguchi - Daiwa Securities Shinichiro Muraoka - Morgan Stanley Motoya Kohtani - Nomura Securities Fumiyoshi Sakai - Credit

Suisse
Operator: Thank you very much for taking your time despite your very busy schedule and despite very hot weather to attend the presentation meeting. It is time we would like to begin financial results presentation for the first quarter fiscal 2018 of Eisai Company Limited. I would like to ask you to check that all of the materials are in front of you. First, please find a deck of slides that will be used in the presentations today and flash reports and reference materials, if any of the documents is missing please raise your hand. I would now like to introduce the officers in attendance today.

Senior Vice President, Chief Financial Officer, Chief IR Officer Ryohei Yanagi; Senior Vice President, President of Neurology Business Group Ivan Cheung; Deputy Chief Clinical Officer Neurology Business Group [indiscernible]; Senior Vice President, President Oncology Business Group Terushige Iike; Vice President Chief Medical Creation Officer Oncology Business Group Takashi Owa. Presentation today will be made by Yanagi to cover the first part and operation part presentation will be made by Mr. Cheung, Mr. [indiscernible], Mr. Iike, and Mr.

Owa. Without further ado, I would like to ask Mr. Yanagi to begin.

Ryohei Yanagi: Thank you and I'd like to take the floor to explain the financial section. First, I would like to begin with the report on the Q1 FY 2018 P&L on a consolidated basis, revenue was JPY153.3 billion, up 8% year on year.

There were impacts of drug price revision in Japan and a decrease in Aloxi revenue due to generic in the United States which were resolved by a progress of a business development and four global trends. The JPY6.3 billion increasing with the 30% increase from a year earlier in the four global brands including LENVIMA and so forth. And the business mix was increased cost of sales ratio lowered to 31.3% and a gross profit was increased by 14% with a double digit growth. And due to the financial discipline of controlling expenses within the increasing gross profit, operating profit increased 36% year on year, increased significantly. As for the line items in expenses, firstly, R&D expenses were JPY34.1 billion and then the ratio in the sales was slightly decreased from year to year and R&D expenses grew slightly with 3%.

But this is after the subtraction of the reimbursement from partner for sharing of the cost. There was a contribution of about JPY11.1 billion from a partner and a gross R&D expenses were accounted for the increase over 22% year on year. But due to the partnership model, we have been able to continue the growth in the expenses to this level. SG&A expenses were JPY50.6 billion which was increased by double digit growth rate with 14% with four global brands and we made proactive investment into the marketing the gross driver such as China and Asia. And also regarding the - there was a payment of several billions of yen of profit sharing with Merck which is related to the LENVIMA deal which is also included in SG&A, therefore, this increase was a result of proactive spending.

And I would like to talk about the LENVIMA deal structure. JPY11.9 billion was booked fully by Eisai in terms of sales concerning LENVIMA and subtracting cost of sales and SG&A expenses that is to say operating profit before R&D expenses are evenly shared between Eisai and Merck. So payments of shared profit to Merck is made. That payment amount is included in the SG&A expenses. With this, operating profit was JPY20.6 billion, up 36% year on year.

The bottom line also increased significantly similarly. ROE during the quarter was 8.3% in the first quarter, exceeding the shareholder cost of 8% and then generating the positive equity spread. And a free cash flow JPY10.7 billion due to the global rollout of cash conversion cycle, CCC. And from the partnership between [indiscernible] we also received JPY3.4 billion in cash from this partnership and this is accounting for about one fourth of the annual dividend payment of JPY42.9 billion. Balance sheet net DER was minus 0.25.

We are maintaining over JPY150 billion in net cash position. We are providing the investment profitably into R&D and also maintaining the stable dividend. We have been able to increase in both revenue and profit and also maintain a productive investment in R&D throughout the quarter. On this waterfall chart, I would like to review the breakdown revenue migration. Revenue in Q1 of last year was JPY141.9 billion adding JPY4.6 billion from overseas growth of global brands, in Japan there was about JPY5 billion impact by the drug price revision.

However, through the business development projects and we made our internal efforts at Eisai Japan to overcome the impacts of the drug price revision and achieving a large increase in revenue in core businesses, adding JPY9.4 billion and China and Asia have continued to grow over 20%. Therefore, adding JPY4.1 billion in revenue. Aloxi revenue, the business has shifted almost 86% to generics; therefore, there was a decrease in revenue of Aloxi by JPY9 billion in the United States. However, due to the divestiture appeal and then the revenue for the quarter was JPY153.3 billion, JPY11.4 billion year on year. And next, this waterfall chart provides the breakdown of operating profit migration.

OP in Q1 of last year was JPY15.1 billion. In parallel with the growth in revenue, significant increase well above JPY10 billion in total was achieved; JPY12.8 billion was achieved by global brand Japan, China, and Asia businesses. On the other hand, R&D expenses have slightly increased by JPY0.9 billion but decreasing Aloxi profit and increase of payment due to profit sharing with Merck, and OP for the quarter was JPY20.6 billion, increased by JPY5.4 billion year-on-year. Here you see the R&D expenses breakdown is given on the right hand side. As I said, R&D cost sharing by partner was about JPY11.1 billion, adding this amount, the real water R&D expenses was JPY45.2 billion, increase by JPY8.7 billion.

This was the over 20% growth - 24% growth over the previous year. In addition to the reimbursement from Biogen antibody in cost of sharing in R&D expenditures and this has been booked already. However, from this fiscal year onward the contribution from Merck as in the form of reimbursement of share the cost concerning LENVIMA started to arise and to be booked. Cost of R&D expenses is shared by Eisai and Merck. And cost sharing by Merck will be reimbursed through Eisai.

And furthermore, regarding the Eisai's own share as costs in R&D, as you may remember at the end of March this year, there were R&D cost advances of US$450 were received in cash, therefore, Eisai is reversing from that amount advances. Therefore, during the Q1, Eisai's net expenditure concerning LENVIMA projects during the quarter was almost zero. So as such, due to the partnership model we have made for active investment into R&D activities however we have been able to achieve increase in profits. This is my last slide. Full year focus for full year 2018 has stayed unchanged.

Revenue will be JPY632 billion, up 5% year on year. R&D expenses will seem to increase 5% year-on-year but as I said earlier, real term investment in R&D will increase by double digits because of the partnership model. And SG&A - gross profit will increase by 12% and SG&A expenses will increase by 16% mainly due to the cost sharing by the Merck which is included in the SG&A and operating profit will be JPY86 billion which is 11% double-digit growth from year earlier and profit for year bottom line will be also growing 11% year on year. ROE will be 9.5%, very close to double digit ROE in 2020 which we aim at and we are making steady growth towards achieving that goal with positive equity spread of 1.5% secured. Therefore, we like to continue to generate shareholder value dividend of JPY150 is translated to a payout ratio of 75% with ROE 7% or 8% and with net cash position given optimal dividend policy based on optimal capital structure we are confident that we will be able to maintain stable dividend while making for active investment.

Furthermore, these numbers being the focus for full year, during Q1 so called reimbursement, the one-time payment from Merck is not accounted for, but we expect that such payment like milestones, sales milestone, development milestone or other one-time payments will arise from Q2 onward and with the high probability of receiving such payments with probability of success. Therefore, we are very confident to meet this forecast for this fiscal year. Through partnership model, we will continue to make proactive investments in R&D, at the same time, ensuring revenue and a profit increase in order to continuously has long term and sustainable shareholder value. With this I would like to conclude my financial section. Unidentified

Company Representative: First, I would like to share with you the results of phase II study of BAN2401 which were presented at AAIC last week.

In this study, 856 patients with early AD were enrolled and they were treated for 18 months. I believe you have being already informed through press release and presentations at AAIC. In this study, target end points were met and successfully demonstrating disease modifying effects of BAN2401 for Alzheimer's disease. In amyloid PET imaging, Centiloid scale, a method to standardize data was used for analysis. And on the score ranging from zero to 100, reduction by as many as 70 units on the average, significant reduction was confirmed at 18 months in top dose arms versus placebo arm.

Furthermore, 81% of patients in top dose arm were converted from amyloid positive to negative suggesting that BAN2401 has disease modifying effect on AD through clearing amyloid beta aggregating the brain. It not only demonstrated improvement on imaging but also achieved 30% less decline on outcomes in clinical symptoms for top does arm versus placebo arm with significant difference. Thus, in this study, we succeeded in blowing the progress of AD through significant reduction of amyloid beta in the brain and demonstrated disease modifying effect based on amyloid hypothesis. These results can be a great hope for AD treatment. We are going to explore with regulatory agencies proactive future programs so that we can deliver such hope to patients with dementia as soon as possible.

Regarding implication of the result of this study, I would like to give the floor to [indiscernible] to explain. Unidentified

Company Representative: I am in charge of clinical research; my name is [indiscernible]. Based on results represented at AAIC, we have seen a lot of reactions with comments from all over the world, many people are interested in the design of the study particularly about the imbalance patient background due to the restriction of randomization of ApoE4 carriers to the highest dose arm and its impact. We have already explained that such imbalance does not affect the comparative analysis against the placebo, but I would like to explain this again. Following a regulatory request, at the interim point during the study, the allocation of ApoE4 carriers to the highest dose arm was restricted.

As a result, 71% of patient in placebo arm were ApoE4 carriers while 30% were in the highest dose arm. In double blind study, imbalance in background factors like this among arm is usually adjusted for analysis utilizing the specific methods for adjustment. Here we used mixed model repeated measures or MMRM, a standard method for analysis, please have the next slide. In this MMRM, how much impact of ApoE4 status may have on the progress of the disease is firstly analyzed and estimated. Comparison between treatments arms, placebo arms and the highest does arm is implemented based on the adjusted estimation of the result.

Assuming the proportion of ApoE4 carriers in BAN2401 ten milligram per kilogram biweekly arm and the placebo arm are evenly constant. This analysis method stated above is used in the study imbalance in the ApoE4 carrier would not have impacts on the analysis for the study results and ApoE4 is known to be the factor for increasing the risk of the onset of the disease. But, however, there is, it is said that there is a little or no impacts on the disease progression. Our ApoE4 status itself is assumed to not affect the disease progression. And even if there is an impact on disease progression through MMRM methodology the imbalances of patient background are adjusted so as not to bias the result.

As a result, the percentage of ApoE4 carrier imbalance reaffirm will not affect the comparative analysis, subgroup analysis and additional analysis will be carried out and those results are scheduled to be presented at international conferences including CTAD. Another point on which we received many comments from the world is 30% slowing of progression in terms of outcomes, generally in Phase III study of disease modifier drug of Alzheimer's disease, as clinically meaningful drug size 25% slowdown is used to design Phase III and that 25% slowdown of clinically meaningful size, study sample size is determined assuming the statistical power to show that. And we were able to obtain 30% defect size and outcomes changed from baseline is shown black is placebo and green is BAN2401 highest dose arm. As you can see, disease progression has substantially slowed down and slowed in BAN2401 in less steeper than placebo and slowdown of 30% was shown at 18 months and this will be continuously observed. Disease modifier effect is to be sustained over time and is expected to increase over time and thus ultimately, it is expected to slow down the progression of disease stage.

In top dose arm, in 81% of the patients, brain amyloid was converted to negative status and those patients after converting to a negative brain amyloid, if they continue with BAN2401 treatment; these patients will not be diagnosed as Alzheimer's disease in the future. Amyloid is the basic fundamental pathology of Alzheimer's disease and amyloid has been in these patients. Please think about the life span of those patients who have converted negative in brain amyloid. We can expect a greater disease - greater effect of slowing down the disease progression over time into the future that is the impact of treatment with BAN2401. And I would like to ask - I hope that this major or potential impact is clarified through this presentation.

This slide shows pipeline that we are proud of at neurology business group. In dementia, BACE inhibitor elenbecestat for that drug two Phase III studies MISSION AD1 and MISSION AD2 are steadily progressing. And based on positive Phase II study results that were announced at AAIC, we will accelerate enrollment of patients and expect to finish enrollment in Phase III studies within this fiscal year. And in July, for Aducanumab, two Phase III studies EMERGE and ENGAGE are finished patient enrollment according to the schedule. Next orexin receptor antagonist Lemborexant in June at a Japanese Academy of Sleep, at the academy, positive results of 304 study were presented.

304 study showed superiority against comparator zolpidem. It was the first ever Phase III study to show superiority against zolpidem. Together with the results from 303 study, we plan to file submission before the end of this fiscal year. Regarding PDE9 inhibitor E2027, in the second quarter, Phase II/III study, first patient in was achieved for Lewy body dementia. Internally developed antidrug antibody E2814 is expected to go into Phase I before the end of this fiscal year.

E2814 development policies will be accelerated going forward. Next, in Epilepsy area, regarding Fycompa, in the first quarter, 4.5 billion revenue was achieved, this was 41% growth over the previous year, a major growth regarding Fycompa LCM in Japan monotherapy agreement Phase III study is ongoing fairly smoothly and we expect to file submission before the end of this fiscal year. Pediatric indication, PDUFA action date in the United States is September 28 this year. For a novel synaptic functional modulator, E2730, in the first quarter, we started preparation of Phase II. With that in BELVIQ in the United States, large scale CVOD study was completed and we were able to obtain overall positive results.

Going forward, our biggest focus will be the earlier mentioned BAN2401 and to accelerate development of BAN2401. With that I will like to end report from neurology business group. In oncology business, I would like to make report mainly focusing on LENVIMA and also Japan. Last March in the hepatocellular carcinoma, in Japan, we obtained approval of the first approval in the world and in the past four months, we have focused on promotional activities. That is in order to have LENVIMA preferred to appropriate patients through medical rep activities and through KOL seminars we are thoroughly disseminated this information.

As a result from early on, we have received high response not only for progressive disease patients but case refractive patients in early stage are also being indicated. TACE is transcatheter arterial chemoembolization, even despite multiple TACE, some patients did not respond and even those patients are now indicated for and in the past four months about 2,800 patients were prescribed with LENVIMA and especially as the first line prescription is increasing at a pace that is twice as much as our internal plan. And revenue is 92% above the plan. And Japan is showing 2.9 times as much growth as the previous year. On July 14, at HCC-related study session, there was a report of use of LENVIMA in more than 10 patients.

And our arm was very high of 40% to 46%. This is Phase III REFLECT study. And from that study, Japanese population is selected and 46.9% was ORR in Japanese population and that result is produced in clinical practice - in actual clinical practice. This is the first first-line hepatocellular carcinoma in about 10 years. Patients reviewed the images together with their physicians and they see too much shrinkage.

And alpha-site protein marker, two more markers by reducing dramatically and patients themselves feel stronger motivation in their treatment. That is the feedback that we are receiving. We are about to bring about revolutionary change in hepatocellular carcinoma treatment. LENVIMA/KEYTRUDA combination therapy will be presented by Mr. Owa.

Takashi Owa: I would like to discuss clinical data on LENVIMA/KEYTRUDA combination. This slide shows four different cancer types. This is a waterfall plot of combination of LENVIMA/KEYTRUDA. As I review this slide together with you, I'm struck that across cancer types this combination therapy has potent anti-tumor effect. To discuss in more detail, regarding endometrial carcinoma first, irrespective of PD-L1 status and irrespective of microsatellite instability, strong anti-tumor effect is observed.

In renal cell carcinoma, irrespective of prior therapy history and irrespective of PD-L1 status, broadly tumor shrinkage effect is observed in head and neck cancer. One of the carcinogen background factor is reported to be human papillomavirus. Irrespective of viral infection status in most of the patients, tumors shrinkage was confirmed. Lastly, hepatocellular carcinoma, disease background of this carcinoma is very complex and hepatitis B, hepatitis C virus and alcoholic backgrounds; irrespective of these factors, a very strong tumor shrinkage effect was observed. How to interpret this data, first, indication population with a combination we may be able to expand indication by a large margin.

That possibility is suggested. As one example of that, the other day regarding endometrial carcinoma, FDA gave designation of research therapy, we reported on that earlier and this breakthrough therapy designation is also given for renal cell carcinoma. And LENVIMA combination therapy was also earlier given this designation for renal cell carcinoma. So, LENVIMA/KEYTRUDA combination late stage development will be pursued continuously and we would like to continue to make contribution to patients together with Merck. LENVIMA/KEYTRUDA combination is compared against monotherapy of each drug according to reported data so far.

The message is very simple; the combination has clinical effects, so that is above the monotherapy. And this effect seems to be synergistic effect not additive effect. I would like to address each cancer type in more detail. First endometrial carcinoma, objective response rate and PFS progression-free survival data are data that I would like to call your attention to, ORR is close to 40% for the combination therapy and PFS median is 7.4 months in comparison to reported data for each monotherapy, they are higher and it is better than addictive result. The synergistic effect is suggested for RCC, ORR and PFS are shown.

Regarding ORR, it's about 70% 18 months PFS. And these are better than each monotherapy and better than additive results. And disease control rate is more than 90%. In all of these measurements, ORR, DCR, PFS - these are the results we have and in comparison to nivolumab and ipilimumab, for all of these items we have shown a better result and approval was received earlier in the United States. Regarding head or neck cancer, the second-line therapy or in later therapy, data was obtained but we did not have such data for LENVIMA monotherapy, so here keynote data for KEYTRUDA is shown, ORR for combination is 40%, PFS is eight months.

Regarding KEYTRUDA monotherapy in comparison to recorded data it is twice as much or four times as much remarkable clinical results in fact are shown. Lastly, as for hepatocellular carcinoma, ORR is 40% or above them progression free survival is 9.7 months. LENVIMA alone or KEYTRUDA alone results are exceeded by a combination therapy. Earlier stage in this study, so we do not have definitive results yet, but best response and progressive disease, patient that was determined to be progressive disease but zero in combination therapy and this is a remarkable in comparison to monotherapy. In almost all patients, there was no PD.

So in that sense, not additive but synergistic effect is suggested. In these four cancer types, we will continue with our development and accelerate development, and together with Merck, we will pursue late stage development. For other cancer types, we would also like to develop and at the earliest possible stage would like to report the outcome to you. Unidentified

Company Representative: In oncology area, this is the pipeline that we have. We have these key words as the basis for the pipeline.

First is tumor micro environment, there are two major platforms related to tumor microenvironment. First is, as Mr. Owa explained, LENVIMA and PD-1 antibody combination. TKI and PD-1 antibiotic combination is showing synergistic effect and the mechanism is now being elucidated. And in this area, we believe that we are the front runner in the world and that is requested in the pipeline.

Second platform is halaven Eribulin or Halichondrin platform. Using that platform, we have these two themes, MORAb-202, which is an ADC and Halichondrin deliberative. These are being developed. And the second keyword is cancer evolution. Cancer cell genetic mutations will change over time and will be changed other result of radiotherapy and pharmacotherapy.

To approach this cancer evolution, targeting hormone positive breast cancer, we have ESR-1 inhibitor in the pipeline and those that act on [indiscernible] factor. Thirdly, they key word is precision medicine which is an approach against cancer driver gene, FGFR4, FGFR1, FGFR2, FGFR3, EZH2; these are targeted in the development. Depending on the assets, we may continue to encourage develop or depending on the assets we may partner with the best partner and through these approaches we would like to continue to make efforts to cure cancer. Thank you for your kind attention. Unidentified

Company Representative: We would now like to open the floor for questions.

First, in this call, we would like to entertain questions before [indiscernible]. Q -

Atsushi Seki: My name is Seki, I'm from UBS Securities, thank you for your presentation and congratulation on that data from the BAN Phase II of the BAN2401. My first question is about MMRM, you explained about the MMRM method for making adjustments. I'm not well versed in statistical analysis, so I'm not sure whether I am asking a relevant question but without the adjustment by MMRM, how much is the improvement of the outcomes, do you think that the third of that would have been different from 30% difference?
Unidentified

Company Representative: Primary end point, well first, the adjusted analysis is done in the top-line results, which are available now. But regarding other analysis which we are going to make, we do not have that results yet, thank you very much.

Atsushi Seki: My second question is about the ApoE4 carrier patients, the allocation of such patients to the higher does arm was restricted. And in Phase III study, do you think that this restriction may be lifted, do you think it will be possible?
Unidentified

Company Representative: We believe it will be possible. In early course of the study when experience was not accumulated as related to earlier, in order to protect the subject, regulatory authorities requested such restriction, but when we conduct the Phase III we did not believe the same restriction will be applied, thank you very much. Next question?

Kazuaki Hashiguchi: I'm Hashiguchi from Daiwa Securities, I have a few questions. First, slide nine, BAN2401, long-term effect is to be sustained over a long term.

Can we expect such data to be published soon? BAN2401, is administration continuing beyond 18 months, Elenbecestat Phase II study, you have also shown 18-month data. Drug administration has been finished or is treatment containing beyond eighteen months?
Unidentified

Company Representative: Regarding Phase II that was finished, treatment was finished, administration was finished. But long-term extension study is now being planned.

Kazuaki Hashiguchi: What about Elenbecestat, is it in the similar situation?
Unidentified

Company Representative: Yes.

Kazuaki Hashiguchi: I see.

Now in combination therapy development possibility were mentioned from some time ago and Phase II study is successful with BAN2401, it may be possible to move onto combination therapy, what is the development primarily as I believe that base inhibitor and combination Phase II study is started by Eli Lilly in view of this combination, competitor situation I think you have to start sooner. Unidentified

Company Representative: You're correct, it is very clear now, BAN2401, aducanumab, and Elenbecestat; these are all very encouraging and interesting assets for both Eisai and Biogen going forward. And you're correct this must be an important topic for Eisai and Biogen to consider going forward and you're correct. There are many possibilities, we are talking about just combining them together, for example, antibody and base inhibitor or are we talking about some kind of pulsing or sequential type therapy, we are having many discussions with key opinion leaders right now on what the possibilities are and of course is a bit premature to give a definitive answer. But there is obviously one possibility for example you use a very strong antibody like what you see here from BAN2401 in terms of the ability to clean out the amyloid in the brain initially and then maybe this is more like an induction therapy.

And then as a maintenance therapy, a base inhibitor might come into play. But that's one possibility. Another possibility as you mentioned that's what Eli Lilly has started already, combine them together from the get go, so we have to evaluate what the best option is going forward but you're right, now there are a lot of interest in the scientific community to work with Eisai to pursue these opportunities. Thank you.

Kazuaki Hashiguchi: Lastly about LENVIMA and KEYTRUDA combination development, I would like to ask about your position.

Earlier, Mr. Owa presented and I thought that the nuance was somewhat different from past presentations, please correct me if I'm wrong, you've shown four cancer types and you said that development will be accelerated for these four cancer types and you will also pursue other cancer types. And it sounded to me that it was different regarding these four cancer types and other cancer types, what is your priority?

Takashi Owa: Mr. Hashiguchi, thank you for your question. Probably I did not explain fully.

This Merck - we are also pursuing other cancer types, as we reported before lung cancer, melanoma, and bladder cancer, epithelial cancer of urinary tract. In comparison to four cancer types, it's not that these cancer types are given lower priority, with Merck or all of these cancer types, we are discussing clinical trial protocol design and for most of the cancer types, in terms of priority, they are given same priority. But if you look at disclosed information in clinical.gov, endometrial cancer clinical trial is already starting. Eisai was already moving ahead with this cancer type even before starting partnership work. But for other cancer types, they will be given all the same priority and we would like to be able to publish trial design for all these cancer types from this year to next year.

It's not that we're prioritizing certain cancer types over the others. Any other questions?

Unidentified Analyst: My name is [indiscernible], I'm from Tokio Marine Asset Management. Well, this may be flattering question, on the system, BAN2401, you have two promising projects, base inhibitor and amyloid beta antibodies. These areas almost all competitors have failed, so what do you think has been the difference? Is it because of the design of the trial, the compound, and also the difference in understanding of pathophysiology? Well, I mean not only was amyloid but also anti-tau, well in the development of the Alzheimer's disease treatment, do you think that your success that has been made will be reproducible going forward. What has been the differentiation between you and others?
Unidentified

Company Representative: Regarding the antibodies, first, antibody itself where and how you will observe the aggregation of the amyloid beta to which antibody it has to bind.

That is first point. Our antibody part of [indiscernible] is the main target and the more aggregated once and the higher order structure is recognized for binding; therefore, aggregate types particularly very strong and binding specifically to the soluble materials. In clinical trials how we can select the appropriate dose in our testing because without administering sufficient dose we will not be able to expect efficacy. In the past examples, in area was concerned for those was contained to low level in other clinical trials but as a result of this study, area instance was not high. And PET SUVR reduction was very significant with physician dose that is the key point I think that these are two differentiations.

Base inhibitor, selectivity to base one is the key because of the chemical structure. This is due to the lessons learned base one and base two, the significance and difference between the two have been clarified. And due to the chemical structure off target side effect like hepatic disturbances which brought about failure to several competitors' compounds but we haven't seen any such events. So this is due to the chemical structure and also as a profile and seeing selectivity as the key. Then, the compound itself, the understanding of the compound does matter.

And in the clinical setting, on the world, in the clinical scale, so you were able to predict what will happen in the clinical setting or clinical site and that's different to Mr. [indiscernible] who is the Chief Creation Officer. Nodding, so I think we agree with you. Any other question?

Shinichiro Muraoka: Muraoka from Morgan Stanley. Regarding the performance, I'd like to clarify future events and one-time things.

First, Mr. Yanagi in your part, [indiscernible] and other one-time events occurred in the first quarter other than those are related to Merck, one-time events are they more or less included in the first quarter that are included in the budget?

Ryohei Yanagi: Thank you very much, LENVIMA related Merck partnership related receipt other than those are one time receipt, there is nothing in particular that I can add in addition to what I mentioned in the presentation. But it's real action depending on the changing performance and changing our negotiation with our counterparts; we may accelerate or remain select and focus on. Business development team is always looking into this and always are looking for promising way globally, so I cannot say that there will be no such event going forward, but what we can say definitively, there are no such definitive events that I can refer to today, but in view of real option and the status of the negotiation we will be flexible and expenses of budget, business development, net cash position is 150 billion, so based on the BD positive we have ample funding, so anytime we are ready to fire our weapons and thank you.

Shinichiro Muraoka: Regarding milestone related to Merck, I do understand that this was not included in the first quarter and if it's a three months behind schedule, and then after approval, it will be included in second quarter that is my estimate.

And in the third quarter European approval milestone maybe received. And in the fourth quarter, the US$324 million will be received, is that the correct understanding?

Ryohei Yanagi: I would like to refrain from commenting on precise timing, however, I don't think it will be very much different from what you have in mind. In Merck 10-K, 325 million option exercise one-time payment is disclosed, so the amount is 325 million, development milestone, HCC approval, reimbursement in Europe amount and timing I would like to refrain from commenting on those, but in the United States, we believe approval is imminent as you may be aware of. And a large amount receipt is we expect will be quite soon. And as for sales milestone, the first threshold is US$500 million global sales that are disclosed in the past.

And LENVIM forecast is JPY58.5 billion, so it is the time that this is hit and usually it will be the quarters in the second half of the year that is what we can estimate. Thank you very much. Unidentified

Company Representative: Other questions, the person in the second row, please.

Motoya Kohtani: My name is Kohtani from Nomura Securities. I have several questions.

First regarding APOE4, probably it won't affect analysis, but I want to confirm. This is very difficult question, MMRM, in what method and how MMRM is meant to make moderating to make adjustment to the imbalance and randomly or fixed model, there may be some random cases included in simulation that is how I assume regarding how MMRM is used for analysis. Could you please elaborate on how analysis is done?
Unidentified

Company Representative: It's very complicated, I mean, the confounding factors include diseases stage and Alzheimer's disease, use of the current AD treatment, and a baseline bodies. There are various important parameters included in the confound factors and confounding is tested for analysis. So, in order to explain properly, I think I would need a lot of time to explain this fully, but in simply put, suppose that there are 100 patients in placebo arm and 100 patients in active arm, suppose that incidence of stroke is to be compared between the arms and 70% of placebo arm patients were hypertensive, in active arms, only 30% were hypertensive.

Of course, the hypertensive patients who had a higher incidence of stroke, then you have to make correction or adjustments for this, otherwise, it will affect the comparison of the efficaciousness of the track. So with the hypertensive of blood, how much higher risk they have been in terms of incidence of stroke and then comparing that and suppose that the 70% patients are included in both arms who are hypertensive and then for each parameter, we have to calculate and make adjustments for each. That is how this algorithm, with this short time frame, I am not able to fully explain but do you understand this?

Motoya Kohtani: I'm sorry for a difficult question, but thank you very much. From a different perspective, APOE4, I think the day before your presentation at the international conference, [indiscernible] in the world made a presentation on APOE4, heterozygous four times and homozygous twelve times as high as the risk. And the onset of the disease may be faster earlier, however, this APOE4 does not affect the progression of the disease after manifestation, well that is mean the age of the onset of Alzheimer's may be earlier that means that may suggest that the progression of that is maybe also accelerated, so this is how I assume, but this may be again difficult question.

Unidentified

Company Representative: Well APOE4 itself binds to amyloid in the brain and transport and clear amyloid from brain. So, the APOE4 has weaker capability of doing that, with their weaker capability, therefore, with APOE4 have tendency to have accumulated amyloid, and amyloid cascade and tau will start to intervene. With the intervention of tau and then neurodegeneration happens, after that perhaps clearance, that the effects of clearance of amyloid may not carry much significance. So by onset, APOE4 may affect, however, after reaching that point onward when other mechanisms started to set in and then APOE4 will not have much as much influence as it had before. But as you pointed out, there are mixed opinions with different papers where APOE4 may accelerate a little bit, the progression of the disease and some people say that it doesn't change and the population base the studies are conducted may not be scientifically proven yet.

But even if there are impacts of APOE4 it has been already adjusted and [indiscernible] in Boston have made a comment, second top doses, over 90% of patients in second top dose were APOE4 positive and then, in the placebo it was only 70%. And if APOE4 was affecting - APOE4 positive was affecting and then second top dose have demonstrated more efficaciousness, [indiscernible] commented second top dose with APOE4 for positive patient in 70% but still efficaciousness data same. So other than the comments that APOE4 may affect the progression of the disease, but this is the data presented from different perspectives.

Motoya Kohtani: Understood, last question about amyloid beta reduced in the brain that was very clear to me, however, the slowing the cognitive decline, I don't think that the linkage between the two is necessarily not clear. So why now, tau is involved, so therefore this makes it more complex.

So, why the relationship between the two is not one to one? Could you explain?
Unidentified

Company Representative: The relation of the amyloid beta in brain has been for the first time cleared so much by this drug. In Centiloid scale 5.5 on average. Centiloid zero means a healthy young adult, so young healthy adults. So, the Centiloid has been reduced to almost the same level as a healthy adult such removal clearance has been demonstrated and also the data needs to be accumulated going forward, outcome of Phase III results will become available, so combining all such data we will study. And our antibody as we said earlier, high order structure is recognized by antibodies, it's not plaque specific, it's about the soluble protofibril to which it has highest binding and binding efficacy affects the protofibril is not absorbed with amyloid PET as we made a presentation at AAIC.

CSS amyloid beta 1 through 42 is elevated. Probably this is because of our antibody, amyloid beta 1 through 42 have some kind of a soluble aggregate reach our antibodies bind and half-life is increased and then that is leaked out into CSS. So, how it is affecting the efficacy of that disease progression, clearing the accumulated plaque in the brain to the level of healthy adult and neutralizing and blocking the soluble protofibril. So, how these two factors are counting in the efficaciousness, we like to clarify this.

Motoya Kohtani: Sorry, about this technical question, why tau is also refused? Tau was reduced as well, right?
Unidentified

Company Representative: CSS tau, after the death of the neurons, taus are leaked.

So with the elevation of tau, these neurons are occurring, other than this neuronal cell death, the biomarkers showing the neuronal cells deaths are being analyzed and we like to combine such data for evaluation that reduction of the tau is then - the indicator of neuronal protective. Thank you very much, any other questions.

Fumiyoshi Sakai: Sakai from Credit Suisse. In the interest of time, I have only one question, a very simple question. Last week, I received presentation from [indiscernible] and there was a mention of subgroup analysis APOE4 negative, positive sub analysis that table was included.

MMRM was discussed today and it sounded as though sub analysis is more or less finished. So what data will come out of sub analysis going forward or are you suggesting that sub analysis is finished? Is there any information that you can share with us. Unidentified

Company Representative: I think [indiscernible] explained enough already. We are conducting the subgroup analysis right now, it is ongoing. We are looking forward to sharing those information soon at the right occasion, and let us do the work and again, we look forward to sharing those information, but today I believe what [indiscernible] really wanted to convey and I think he clearly conveyed is the robustness of the overall data that we presented last week in AAIC.

We are very confident about the robustness of the data we presented last week, thank you.

Fumiyoshi Sakai: So, I look forward to the publication of those data in the future. Unidentified

Company Representative: Thank you very much. We went beyond time slightly. With this we would like to conclude financial result presentation session from the first quarter fiscal 2018 of Eisai Company Limited.

Thank you very much for coming today.