Q&A from Small Meeting with President (Mar. 1-2, 2017)

The message implied in the review of the FY2014–2016 medium-term management plan (hereafter, previous M-T plan) on P.3 of today’s presentation materials is that we have now created the structure that will enable us to make money from specialty businesses. That M-T plan was started up in FY13, prior to which we had experienced losses on a parent-only basis. We now have a specialty products business structure capable of generating close to ¥90.0 billion in profits. Unfortunately, we still have some unresolved issues and fell short of the previous M-T plan’s target by about ¥10.0 billion. The shortfall came in the animal nutrition business, where we are now making drastic structural reforms. The new M-T plan is a solid plan. It includes some very challenging targets, some of which were not presented in detail in the plan. We devoted considerable time to explaining non-financial targets because many are new kinds of targets for which there are no previous examples. We are now reviewing the content of our analyst briefings with the goal of creating a plan that integrates financial and non-financial aspects. However, the volume of information has increased considerably, so we are considering whether to provide separate explanations of financial and non-financial aspects. I think it may be necessary to set up a separate small meeting to explain the non-financial aspects. Our effort to create quantifiable non-financial targets as much as possible, in addition to financial targets, is, I think, almost a first among Japanese companies. However, we do not feel overly proud about that because global top 10 companies have been making that effort for at least 10 years now. Therefore, I am keenly aware that our efforts in this area are far behind those of our rivals for membership in the food industry’s global top 10. I get the feeling that we trail in this respect more than we do in our positioning on corporate value and market capitalization. Therefore, I want us to begin our efforts with a sense of modesty about our current position. 

Assuming that forex rates are constant, the new M-T plan envisions business profit growth of ¥10.0 billion a year. Profit growth will be held down a bit by forward-looking investments, including capital investments in FY2017, but we don’t think it will diverge greatly from ¥10.0 billion. I’ll be able to explain in more detail this May.
In the Healthcare segment, the plan assumes stable organic growth in our amino acids for pharmaceuticals and foods, but we expect profit growth at the medium and large molecule CDMO business will be slow during the first half of the plan and then pick up speed in the latter half. We have been working with a pharmaceutical company from the development stage of this business, but there is some risk that we could be dropped at the clinical trial stage. However, if these trials go well, I see no risk of being replaced by another company at the market launch stage. We acquired Althea and GeneDesign because we see potential for growth in large molecule pharmaceuticals in Althea’s case and for medium molecule pharmaceuticals (oligonucleic acids) in the case of GeneDesign.
(Follow-up question: Are sales of medium and large molecule drugs included in the ¥40.0 billion sales target for the pharmaceutical custom manufacturing business?) Yes. 

Looking at this issue on an individual business basis, the Japan Food Products business is already making improvements at each stage of the value chain. The International Food Products business is achieving topline growth and improving gross profit margin. In particular we are taking urgent action to improve our Thailand business, which has been struggling. As explained earlier, we are drastically restructuring the animal nutrition business. In the Healthcare segment, forward-looking investments made during the previous M-T plan in such areas as amino acids for pharmaceuticals and foods, advanced biopharmaceuticals, and cell culture media are beginning to reap profits. 

We wanted the new M-T plan to be completely different from previous plans. In devising a plan to serve as the guiding light for the 33,000 employees of the Ajinomoto Group, we felt that numerical financial targets alone were insufficient and that we also needed to set non-financial goals. We also set ROA targets for each business and introduced improvements to the cash conversion cycle. Until now, this has taken 18 months. We set our operating cash flow target for the three years at ¥350.0 billion, assuming working capital will increase in parallel in topline growth. However, we could not assume that the cash conversion cycle would accelerate enough to improve cash flow. We estimate that potential improvements in asset efficiency, including through inventory reductions, could add another ¥30.0 billion or so to cash flow. 

This negative association is something we have had to deal with since our founding and there are no simple solutions. The new M-T plan will focus on initiatives to eliminate misunderstandings about our company and MSG. We are in the midst of a worldwide Japanese food boom, and although the deliciousness of Japanese food and usefulness of ‘Dashi (broth)’ has been conveyed, it is has not been linked with MSG. To eliminate the negative image of MSG that has spread through society, we will examine the reasons, including from an academic sociological perspective, and then make appeals to consumers in the US. We expect this will increase our corporate costs, but we will make a thorough effort nonetheless. In addition, our corporate logo is a rather long five-syllable word that non-Japanese speakers have trouble pronouncing, so we are considering a new logo that will be easier for them to say and remember. 

We do not expect a 100% success rate with M&A. We have experienced many failures in the past and have learned from them. We have narrowed down the targets for our M&A, and during the previous M-T plan we acquired sales channels in emerging markets, such as Africa, Turkey, Pakistan, and India. Having established footholds for future business expansion, during the new M-T plan we will be focusing on strengthening our business foundations. Meanwhile, we could use M&A to acquire businesses or technologies needed for further growth in the Five Stars. In Europe, we are still looking for a foothold and hope to somehow secure a sales channel in that region. We are presently selling our frozen foods on our own but we need to secure a sales channel to expand our sales. As M&A targets, we are looking for candidates in our new Integrated Food Solutions business domain. The ability to develop products for key accounts is crucial to developing new business, and we plan to expand overseas using our Japan business model. We are also looking for M&A candidates in the biopharmaceutical-related areas. Our acquisitions of Althea and GeneDesign have helped those companies secure funds needed to expand their business while adding to our pipeline. Both companies have product pipelines that rank in the global top three medium and large molecule domains. The environment in this industry can change very fast, so there could be more M&A deals in the future. 

For starters, we selected Interbrand because it has almost 20 years’ experience in calculating brand values for global companies. Its assessments take into consideration indicators in three areas, one of which is financial indicators. Our FY2016 earnings guidance was for a year-on-year decline in profits, but our 2016 brand value announced after we released that guidance was higher, not lower, than in the previous year. We think that positive assessment is because Interbrand does not use financial indicators alone but also takes into consideration stakeholders’ evaluation of a company and our expanding overseas business led by Ajinomoto® brand products.
Our business is 80% foods and 20% AminoScience. We must more aggressively appeal to our expansion of both of these businesses as drivers of brand value. If we can achieve our ¥137.0 billion target for business profit in FY2020 solely from specialty businesses, our brand value could rise to $1.5 billion. 

You may be on to something here. For starters, Ajinomoto Windsor will not limit itself to product-focused communications but will also strengthen activities under the Ajinomoto brand. We will kick off an “UMAMI Project” in the United States. I believe that we cannot raise our brand value unless America is the starting point. 

The project is being conducted from two approaches—biological science and social anthropology. We are resolutely continuing academic studies, with these activities now shifting from a focus on the safety of “Ajinomoto” to its usefulness. We are not able to sweep away the negative view of MSG. We are planning to hold a forum in the US together with a renowned American anthropologist and biological scientist that will examine the history of the misunderstandings about MSG. This will lead into lobbying activities. In support of these activities, we are thinking of holding events that inform people about umami and let them experience umami in Japanese food and regional soul food. We plan to kick off the UMAMI Project in North America and then take it to other major countries. 

By focusing advertising on further raising our corporate brand recognitions, we will improve business efficiency. All global companies are doing this. Focusing on corporate ads instead of product ads enables people to show that the company is indispensable to society. When we think of the future and strive to perpetuate our business, we must be aware that generational changes are often accompanied by changes in people’s values. For example, millennials (the generation under 35 years of age today) are not motivated solely by sales, profit levels and other financial indicators. There is an increasing number of people who care about how much they contribute to solving social problems. This is the same in America and France. If brand value increases by the time the millennials are ready to assume leadership positions after 2020, we will be able to attract top-quality human resources to the company. That will also strengthen our financial foundation. From the perspective of sustainability, it has meaning both internally and externally. 

In addition to the personnel changes, I want to strengthen governance and make more compact board of directors. The head of each business division will also have representative authority as the person responsible for their business. Internally, we will implement a “troika” system.
(Follow-up question: What exactly has changed by giving business division heads representative authority?) Business heads have always had a certain amount of decision-making authority. This decision-making authority is unaffected by the existence, or lack thereof, of a representative authority. However, it does clarify internal and external responsibilities. In addition, representative authority has a huge meaning overseas and will speed up the decision-making process.
(Follow-up question: Will it increase their commitment to generating profits?) They all have been responsible for an individual business in the past and so that commitment is not low. At a minimum, I think the change will strengthen their consciousness of profits. 

We conduct global survey’s to gauge the motivation of our employees. The Ajinomoto parent company has conducted this survey every other year for the past 10 years. In the last survey, 78% of employees replied that they were motivated. That figure could fall considerably now that we are a company with a global work force of 33,000 people. For starters, we have set our goal for the Group as a whole at 80%, near the parent company level.
Changing work styles is a nationwide theme for Japan. We have set a policy that funds saved by the reduction in overtime hours and other changes in work style be reinvested in our human resources. Those funds are being used not just for remuneration but also for infrastructure development to further advance education and reform of the ways our employees work. We will also promote organizational reforms. In FY2016, we prepared our Global Headquarters, and going forward we will clarify the headquarters' functions for executing corporate strategy and supporting the entire group. The strategy execution unit will thoroughly advance diversity. We will also accelerate our global growth by making English the official internal language of the Group. Motivating our employees is not solely for the purpose of reaching our financial targets. Many employees at our corporate divisions are making efforts to contribute to social value and want to be able to monitor their progress and see the eventual fruits of their efforts. The millennial generation that will support the Ajinomoto Group in the future will not be motivated solely by the Company's financial results and their compensation. To benefit from the activities of employees with such social values, we must be a company that is recognized by society and that has the confidence of its employees. 

As part of our effort to reform work styles, we have adopted a clear policy of returning the money saved by reducing overtime hours to our employees. We are doing this through pay and other compensation and by investing in employee education and in the infrastructure that will lead to a better ways of working. As the reform of working styles is not an issue for Ajinomoto alone but one that is being taken up by all of Japan, we will expand our efforts in this area to all our affiliated companies in Japan. Compensation and working conditions differ from company to company, but by adopting common policies we can realize a favorable cycle. 

We have been engaged in that effort long before announcing the plan. Eighteen months ago, management staff and executive officers began discussing the matters related to the plan’s financial and non-financial targets. The plan’s goals were therefore arrived at through a combined top-down and bottom-up process. We were not able to tie all the ends together, but we have achieved a common understanding on the main concept. In July last year, I explained our policy to all units in our corporate organization. Prior to the analyst’s briefing on February 21, we held an information meeting for the media that was also broadcast live to employees. From next week, the leaders of each of our Group companies will explain and discuss the three-year plan for their business. We will review the plan each year. We have also established an ASV award system that will present awards as determined by deliberations that will include the participation of outside directors. I will present the awards.
(Follow-up question: Who will the awards be presented to?) They could go to Group companies or individual business groups. I want the award system to serve as a motivation for employees. 

Speaking from personal experience, I have observed a certain Brazilian major global company that has a business scale more than 10 times larger than ours. Yet this company is very good at connecting with society. Here at Ajinomoto, our efforts are divided into food, animal nutrition, and environmental initiatives, and I unfortunately cannot say that the Group as a whole has established contact points with society. As a result, corporate brand penetration has made little progress. In Asia, unification of product brand and corporate brand has facilitated business expansion and enabled the corporate brand to penetrate the local markets. However, we have not had the same success in Europe and the United States, where we are more focused on BtoB business. Consequently, we have not had the same impact on society that we have had in Asia.
In addition, since around FY2005, we have been received opinions from key opinion leaders in various positions about our company's management and social issues needing solutions solved. To date, we have received input from around 80 such opinion leaders. The most common request has been for us to use our business to seek solutions to health problems.
These experiences have raised doubts in my mind about the appropriateness of our current structure that separates individual businesses. Therefore, with this new M-T plan we have aligned the direction being taken by each of our businesses with these opinion leaders’ requests for our medium-term development.
Lastly, the future sustainable growth of the Ajinomoto Group will eventually be in the hands of millennials now under the age of 35. Their motivation will support the Company’s future growth, but we do not expect their actions will be motivated by economic rationality alone. To attract the best talent from this age group, Ajinomoto must gain greater recognition from society.
With that in mind, I thought that we had to create ESG targets in this new M-T plan in order to facilitate evaluation of our activities from a non-financial viewpoint. I do not think we can achieve our goal of becoming a global top 10 food company unless we share the details of our plan and the progress made toward its goals with everyone in the Group and the outside society. It took me a year just to build an in-house consensus for my way of thinking. The plan is still insufficient in some areas and I hope to sort out these remaining details in time for the publication of our annual integrated report to be issued at the end of July this year. 

To include such targets in KPI, they must be clearly defined. The targets for consumption of meat and vegetables are targets for the amount of these foods consumed through the use of our products, calculated from the amount of key items used in popular food recipes. In Japan this includes main products in our Cook Do® lineup and our frozen Gyoza. Products sold in the Five Stars center on flavor seasonings. Since the standard amount of meat and vegetables to be used in each product’s recipe is fixed, there is a direct link between the sales volume for our target products and the amount of meat and vegetables consumed.
We can therefore provide society with evidence that sales of our products are contributing to the increased consumption of meat and vegetables in each country. We can also appeal to our contribution to the achievement of nutritional targets established by each country’s health ministry. With cooperation from each country’s government, we can also use this data for Group PR activities. This should increase business opportunities and improve our corporate image, which should contributes to our business results. Although our non-financial goals are limited to operations in Japan and the Five Stars, we will implement the same initiatives in all countries we do business in. For example, in the United States, Ajinomoto Windsor is considering using the same indicators, and we expect Group companies in other countries to do the same. Related details will be presented in our integrated report. 

We established a new Global Communication Department in FY2016. The new department is charged with strengthening our communication with society in each country. It also is responsible for enhancing our corporate brand value in each country. Under the new M-T plan, we will considerably strengthen our PR activities. To date, we have been rather passive about the anti-MSG sentiment in the United States. Going forward, however, in addition to the earlier mentioned academic approach via scholars and other authorities, we will seek to remove this misunderstanding through our PR activities, including historical approaches. Through such activities we will be aggressively investing in raising our corporate brand value. 

We see room for efficiency improvements in every part of the value chain. At the production stage, we will be making gradual capital investments together with our Group companies that will promote consolidation and introduce labor-saving, state-of-the-art equipment. However, at this time I cannot provide any details regarding specific plants or the scale of investment. We have already announced measures being taken at the logistics stage. Specifically, we collaborated with other companies to establish F-LINE, a joint venture logistics company. The JV will start making deliveries in Hokkaido and expand its joint distribution area in stages until FY2019, which will be a watershed year because the company also will expand operations to Honshu. At the sales stage of the value chain, we will establish key account sales teams and strengthen our ability to offer solutions to CVS and other customers growing their business. Back office operations will be made more efficient by consolidating common corporate functions within the Group and making greater use of outsourcing. This will enable us to get by with fewer employees.
The estimated synergies from these initiatives is partly incorporated into the new M-T plan’s target for profit growth at the Japan Food Products segment. However, production-related capex will proceed in stages, so we expect it will be FY2020 or later when we begin to see the full impact of these investments on segment earnings.
Also, because the preparations for nationwide joint distribution will take until FY2019, the synergistic cost benefits will not appear until FY2020 and therefore are not included in the new M-T plan. Shared companywide expenses will be kept to about 2.8% of current sales. The above-noted preparations could temporarily push infrastructure capex up to about 3%, but it should fall back to the 2.8% target thereafter. 

We forecast the domestic value chain’s shift to state-of-the-art facilities and transition of the animal nutrition business to specialty products will each cost us about ¥4.0 billion. However, I cannot comment on the timing of the posting of these extraordinary costs for strategic reasons. 

Value chain efficiency improvements are only partially reflected in this figure. The full impact of the improvements will come in FY2020 and beyond. We cannot consolidate and rationalize production facilities at the same time. As for back office systems, we need to invest in core computer systems, which we expect will increase capital investments over the plan’s three-year period. The upgrade to core computer systems also will require various preparations, including changes in work procedures and our internal report formats. The majority of that 1ppt improvement is expected to come from normal cost-cutting measures, such as improving procurement efficiency.
(Follow-up question: Are you factoring in any product mix improvement or price hikes?) In Japan, it is hard to win acceptance of simple price increases, but we have factored in some price increases related to product improvements.
(Follow-up question: Please give us a breakdown of the 1ppt improvement in gross profit) The entire improvement in gross margin will not be reflected in business profit. We also will be investing in marketing of the new Integrated Food Solutions business, which we plan to nurture into a new core business. We also are considering measures to resolve nutritional challenges unique to each prefecture. The 1ppt targeted improvement in our business profit margin takes into consideration cost increases related to these measures. The contribution to gross margin improvement alone will be larger. 

The coffee business faces two risks. The first is the low profitability of bottled coffee products, which account for a large share of the business’ sales. This is due to severe price competition, and we have accordingly based the new M-T plan on rather conservative forecasts for this business. The other risk is the price of green beans, a raw material. The new M-T plan assumes the current price plus alpha. A greater than expected increase in the price of green beans would have a negative impact on our coffee business. 

As we reported at the interim results briefing last November 8, the home use market is robust and the restaurant and industrial market is steady. Those trends are continuing. In the home use market, weak sales of products used in bento (boxed lunches) are being offset by strong growth in sales of Gyoza and The Chahan for consumption at home. Consumers have a need for high-quality, easy-to-prepare frozen foods. Recent trends are supported by the high ratio of convenience stores now handling frozen foods. We have seen a big change in the 10 years since 2005. Drugstore chains are also increasing their frozen food offerings, with stores located in residential neighborhoods enabling consumers to purchase frozen food products without the risk of them melting before they get home. We expect this trend to continue. We are well positioned to meet the growing need for high-quality, delicious frozen foods, and our new M-T plan envisions strong growth in our frozen foods business. 

Although issues arose at the Thai business, the Five Stars overall achieved average annual sales growth of 9.3% on a local-currency basis during the past M-T plan. In addition to Thailand, the Philippines fell short of expectations and was a bit of a drag on Five Star earnings. While we were not able to completely offset those negatives, many of the Rising Star countries achieved growth above our expectations. Taking all these factors into consideration, we set the target in the new plan for double-digit growth again. The Thai business is presently on pace with its previous year performance. In particular, we plan to make a big push for sales of Birdy® 3 in 1 and Birdy® canned coffee. We have prepared the framework for using our deliciousness technologies to enhance Thailand’s Birdy® brand products. We have also laid the foundations for achieving synergies with AGF from FY2017 and will be making every effort to increase those synergies. The 1ppt decline in the Thailand business’ sales growth rate weighs heavily on the International Food Products business but the real problem is the struggles in Myanmar. In response, we will start up a new MSG plan in Myanmar from this autumn. Myanmar’s transition from a military government to a civilian government has made the promotion of domestic industry a top priority, which has made it difficult to receive preferential treatment unless products are made domestically. The consumption of domestically produced items is rising in Myanmar, making it very difficult to export product from Thailand. Our market share for powdered drinks in Myanmar has shrunk rapidly in just the past three years. This autumn we will start packaging AJI-NO-MOTO® at a new factory in Myanmar and will also begin packaging Birdy® 3 in 1 in 2018. The start of local production in Myanmar has a very significant meaning. 

The new M-T plan targets 20% annual growth in total sales in Rising Star markets on a local-currency basis. However, these countries presently account for only 2% of total food business profits. Although we saw some tailwinds in FY2015, conditions in Nigeria were quite difficult. Nigeria’s sales of AJI-NO-MOTO® have made it a very profitable market, but country risks in FY2015 and FY2016 made for difficult business conditions, and as a result our Nigerian business weighed heavily on overall results at the Rising Stars. Our acquisition of an equity stake in Promasidor Holdings and turning Nigeria Ajinomoto into a JV with Promasidor will generate synergies and serve as a risk hedge going forward. In addition, consumption in Nigeria is now rebounding. We expect to resume growth at the Nigerian business during the new M-T plan. In Turkey, we plan to integrate our nonconsolidated subsidiary Kukre with Orgen, which we acquired during FY2016. Adding these two companies to consolidated accounts will contribute to higher sales at Rising Stars in the coming years. We therefore think the new M-T plan’s 20% sales growth target for Rising Stars is a rather attainable goal.
(Follow-up question: Within the new M-T plan, when do you expect Nigeria and Turkey to contribute to earnings?) We took an equity stake in Nigeria’s Promasidor in November 2016. PMI will take about one year, so we expect profit contributions from FY2018. In Turkey, we plan to increase our equity stake in Kukre from the current 50% to 100%, making it a wholly owned subsidiary sometime in FY2017 or early FY2018. That will make both Kukre and Orgen wholly owned subsidiaries. 

Ajinomoto Windsor expands its business scale before we acquired it, so we hope 10% will represent a minimum business profit margin. As this portion increases, its margin will probably fall over the medium term when compared with the margin of around 15% seen when its business was focused on conventional seasonings and processed foods.
(Follow-up question: Your target for the international seasonings and processed foods business also appears conservative compared with the past.) Margins on umami seasonings and flavor seasonings are different from the margin on processed foods. You can therefore consider the new plan’s targets to reflect changes in the product mix. We also will be investing in new categories. Expansion of our umami seasonings and flavor seasonings in recent years has raised our share of the global dry savories market to 21%, much higher than it was about 10 years ago. Flavor seasonings were not profitable in the early stages, but they become profitable after we have made them a top brand. We therefore are committed to investing in the marketing of new product categories. 

Menu-specific seasonings included in external market information have ketchup, mayonnaise, spice mixes, etc., all products with low profit margins and not products that we are targeting. Our menu-specific seasonings have a gross profit margin close to that of flavor seasonings. However, the SG&A expenditures required when nurturing a new product limits their profit contribution.
(Follow up question: If you can use higher priced items to improve the product mix, will it be readily apparent?) We have achieved a certain scale but menu-specific seasonings still account for only about 10% of sales. We expect to increase sales about 20% a year. We keep PLs for each product and plan on high gross profit margins at the product design stage. The key, however, is to be a leader in that product category. Thereafter, marketing expenditures are required so it will take some time. 

We are not particularly concerned about such risks. Thailand stood out because it accounted for a large share, but the Philippines also has fallen short of targets. The Philippines’ business scale places it in the Five Stars, but competition in that market is extremely severe. In addition to GDP growth rates, we analyze consumption rates and other data. Based on our analysis of these indicators, we do not see growth rates in any country falling sharply below the targets in our new M-T plan. 

That refers to menu-specific seasonings, a category we expect to grow by more than 20% a year. For example, seasonings for fried chicken. Also, the number of convenience stores in large cities in Southeast Asia has increased in recent years, and I would like to start marketing frozen foods that are sold as hot deli items displayed at cash register counters. Thailand will probably be a test market. 

We plan to sharply reduce in-house production, but for strategic reasons I cannot give you a specific level. We intend to make drastic changes to the business structure, so you can assume it will not be a small scale. 

Yes, that is correct. We are shifting to specialty products. We want to shift to a solutions-type business model, which will not need commodities.
(Follow-up question: Can we assume that you will have a full lineup of specialty products?) Yes. Our FY2016 operating income forecasts are for a ¥1.1 billion loss from commodity business, offset by ¥1.1 billion profit on specialty business. And specialty business still account for a small percent of overall sales. As things stand now, we cannot be in the animal nutrition market with specialty business only. After FY2020, when we expect specialty business to be generating ¥5.0 billion in business profit, we will consider whether or not our business model at that time still needs commodities. We plan to collaborate with other companies on both commodities and specialty businesses. There will be different alliances for each business area. We will change our business model. You may not recognize this change because we continue to develop highly functional premix products as second and third generation products of our AjiPro®-L lineup of specialty products. But we are also now making preparations for the start up in FY2020 of a diagnosis-based solutions business that uses ICT (information and communication technologies). This will result in a complete change in our business model. 

We do not want to move slowly but must also consider other parties. Raw materials and fuels are often procured via medium- and long-term contracts, so suddenly cutting off the procurement of such materials would violate contracts and result in penalties and other losses. We want those losses to be as small as possible. Once such one-off expenses fall into a more tolerable range, we will move quickly to outsource lysine production. 

We plan to hold a small meeting to explain our AminoScience business in the near future. Until now, our contracted business has revolved almost entirely around small molecule biologics. Excluding the output from our Tokai Plant, small molecule biologics produced by S.A. Ajinomoto OmniChem N.V. in Belgium account for the majority of sales of this product. Small molecule face intense competition even though they are not commodity products. We are doing okay now but face the risk that increased competition will lower profits in the future. Our advanced biotechnologies already include the technology needed to efficiently mass produce medium molecule biologics, but we could not find a plant to outsource production to that was capable of using our technology. We therefore acquired Althea, which already had the needed facilities. Althea was a start-up venture, and our capital contribution provided it with the funds needed to invest in production facilities and expand its scale. We expect it will begin to generate a return on these investments during our new M-T plan. GeneDesign is a start-up venture that has been supporting the development of oligonucleic acid medicine, a medium molecule biologic. GeneDesign has a broad range of development themes, and its acquisition will enable us to create synergies by combining those themes with the mass-production technology of our Tokai Plant. The acquisition of GeneDesign has expanded our product pipeline. Both companies have the potential to rank in the global top 3 in their fields - GeneDesign in medium molecule biologics and Althea in the large molecule field. We therefore look forward to AminoScience becoming a pillar of our business from FY2020 onwards.
(Follow-up question: So, can we assume this business will begin to bloom from FY2019?) Yes.