Takeda Pharmaceutical Company Limited

I am. My name is O'Reilly. Thank you for this opportunity.

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starting, I'd like to remind everyone that we'll be discussing forward-looking statements with the meaning of the Private Securities Education Reforms Act of 1995. Actual results may differ materially from those discussed today.

Factors

that could cause our actual results to differ materially are discussed in our most recent Form 20F and in our other SEC findings.

Please also

refer to the important notice on page 2 of the presentation regarding forward-looking statements, which will also be discussed during this call. Definitions of our non-IFRS measures and reconciliations with the comparable IFRS financial results are included in the appendix to the presentation.

Now we'd like to begin. The presentation will be given by Christophe Feva, President and CEO, Mirano Furuta, Chief Financial Officer, and Andy Plum, R&D President. And this will be followed by Q&A session. Let us begin.

Thank you, Chris, and thank you everyone for joining us today. Our fiscal year 2025 first quarter results reflect the significant impact of violence, generic erosion on revenue and corporate profit, which we had anticipated. We actually expect this impact to moderate in future quarters, and fiscal year 2025 will be the last year of significant impact from violence erosion. There is no change to our outlook for the full year. Mirano will discuss our financial results in detail in his presentation. Fiscal year 2025 is a pivotal year for Takeda, not least because of our rapidly progressing late-stage pipeline. I'm very pleased with our pipeline progress so far and excited about the future. As you know, earlier this month, we announced positive results from two pivotal Phase 3 double-blind placebo control studies of Overperxton. Both studies met all primary and secondary endpoints at each of the dose we studied. We are very encouraged by this result and what they could mean for people living with narcolepsy type 1. Later on this call, Andy will walk you through the top-line results and what you can expect next with Overperxton on our OREXIN franchise, as well as other pipeline achievements since Q4. Before we dive deeper into our pipeline strategy, I will pass over to Mirano to review our financial results.

Thank you, Christophe. Hello everyone, this is Mirano Brutta speaking. Let's go to slide 5, which summarizes our Q1 financial results. As we had anticipated, Q1 is highly likely to be the quarter most impacted by loss of exclusivity because of the strong 5N performance in Q1 fiscal year 2024. This created a high comparator baseline for gross rates in Q1, but we expect this to moderate over the rest of the fiscal year. Revenue EQ1 this year was just over 1.1 trillion yen, a decrease of .4% or minus .7% at constant exchange rates or CR. Co-operating profit per OP was 321.8 billion yen, a -on-year decrease of .8% at actual FX or .9% at CR. Reported operating profit was 184.6 billion yen, which grew 11%. Co-EPS and reported EPS were 151.1 and 79.0 respectively. Cash flow was a strong this quarter, with adjusted free cash flow of 190.1 billion yen. Slide 6 shows our growth and launch products, which represents 50% of revenue. In Q1, they grew 5% at CR. We see that's a little bit slow start, but we anticipated a higher growth rate in subsequent quarters. In GI, anterior growth was .9% at CR, partially reflecting intensified competition in the IBD market. We do see increasing number of active NTVO PEN patients in the US, growing approximately 30% since the last quarter. Awareness, prescription and satisfaction level for NTVO PEN are high, and our focus is to reduce complexity along the reimbursement and authorization pathway. As access for the PEN expands, we expect a higher growth rate for NTVO in the coming quarters. In rare diseases, taxidermy continues to grow as a market leader in HIE prophylaxis. In our PDT portfolio, there was some phasing impact in our Q1 results. This is quite common in PDT, where we often see fluctuations on a -to-quarter basis. We expect both IG and albumin to grow by single digit for the full year. In oncology, Frizakla continues to expand as we roll out global launches. In vaccines, Cudenga was impacted by the timing of product shipment as well as transactional effects, mainly the euro appreciation against the Brazilian real. In Q1, QDenga volume is increasing, and we still expect to deliver strong growth for the full year. Slide 7 shows -on-year revenue performance for the total company. Although our growth and launch products are expanding, we had a significant impact this quarter from Vivens' generic erosion. Last year, there was a strong rebound in Vivens' revenue in Q1, mainly due to generic supply constraints in the US and the growth ex-US ahead of loss of exclusivity. This resulted in a high -on-year comparator for Q1 this year. We saw the generic supply situation in the US improved from Q2 last year and the generic launches in Canada, Germany, and Brazil last summer. This means we expect less headwind from Vivens from next quarter onwards. Vivens was the main driver of a revenue decline of .7% at CR, in addition to some impact from the Medicare Party redesign. FX was also a headwind this quarter due to appreciation of the Japanese yen against major currencies. Slide 8 shows -on-year bridge for corporate profit. You can see that the LOE of a high margin in Vivens was the main reason for the -on-year decline of 12% at CR. This was partially offset by operational efficiencies from the enterprise-wide efficiency program we initiated last year, in particular in R&D spend. Next, reported operating profit increased by 11% versus prior year, mainly due to lower impairment and restructuring expenses. Slide 10 is our latest debt maturity ladder. In June and July this year, we executed two leverage-neutral bond issuances, one in Japanese yen and the other in US dollar, to pay off the short-term funding we raised to prepare syndicated loans in March 2025. We had to prepare these loans to streamline our upcoming maturity profile in terms of both duration and currency mix. Of note, these new US dollar bonds generated significant demand, more than four times the 2.4 billion US dollars that we finally issued. This enabled us to secure favorable terms. In addition to these refinancings, we also repaid debt that's matured in Q1 this year, including an 800 million US dollar bond. Slide 11 shows our full year outlook for FY25, which is unchanged since May. As we have explained today, Q1 was significantly impacted by violence and general corrosion, but this was not the case in the previous year. We are not changing our management guidance. Finally, our ward on tariffs. Our FY25 outlook does not reflect the potential impact of tariffs, and in general, we believe that we are well positioned to manage the potential impact at this time. This slide is the same as we showed at Q4, and I would like to emphasize again that the value of our imports into the US is approximately 8 to 10% of our US revenue. And the vast majority of this comes from Europe. The tariff rate, let's say 15%, would be applied to this number once it becomes effective. Thank you, and I'll now hand over to Andy for updates on the pipeline.

Thank you very much, Milano. Hello to everyone on today's call. I'm very excited to begin with the impactful update we have on overparexin. Narcolepsy type 1 is a neurologic disorder caused by the loss of orexin producing neurons in the brain. It is characterized by daytime symptoms like excessive daytime sleepiness, cataplexy, cognitive effects such as lack of sustained attention, and nighttime symptoms like sleep paralysis and disrupted nighttime sleep, which all have a substantial impact on patients' ability to function as well as quality of life. As we communicated earlier this month, both Phase 3 studies met all primary and all secondary endpoints, demonstrating statistically significant and clinically meaningful improvements at Week 12 across all symptoms at both BID doses. These doses were chosen to provide flexibility for physicians and patients to manage daytime and nighttime symptoms. The p-value you see on this slide of less than 0.001 does not do justice to the statistical significance of the trial. Often, results had many more zeros before the one. Overparexin is on track to be the first in class and potentially best in class orexin 2 receptor agonists that treats the underlying orexin deficiency and has the potential to establish a new standard of care in NT1. In two Phase 3 trials, overparexin demonstrated the ability to normalize the majority of treated patients across almost all NT1 symptoms. Improvements in excessive daytime sleepiness were measured using the Maintenance of Wakefulness Test and the AppWorth Sleepiness Scale. MWT is a test used for regulatory purposes, where patients are kept in a dark room and asked to stay awake for four 40-minute sessions. It is best accompanied with subjective endpoints like the AppWorth Sleepiness Scale that describes how well patients respond to treatment. Most of the patients on overparexin achieved normal ranges for both the MWT and the AppWorth Sleepiness Scale. Cataplexy is a very important endpoint for patients and regulators. We were thrilled to see that it was so significantly improved across all doses as measured by weekly cataplexy rate questionnaires. Cognitive benefits like sustained attention were recorded using the Psychomotor Vigilance Test. And finally, the benefits to patient satisfaction and quality of life were recorded using surveys like the Short Form 36 that includes measures of fatigue. And measures of holistic function like the Narcolepsy Severity Scale for clinical trials that measures the effects on disrupted nighttime sleep, among other symptoms. Nighttime symptoms are also measured subjectively with the use of sleep diaries. Now importantly, all objective measurements were associated with subjective improvements of daily function. Overparexin was generally well tolerated with a safety profile consistent with past studies. No serious treatment related adverse effects were reported. The most common adverse effects were insomnia, urinary urgency, and frequency. As with the Phase 2b experience, the majority of urinary events and insomnia decreased over time in both severity and frequency. More than 95% of participants who completed the studies enrolled in the Long Term Extension. We believe these data and the high enrollment in the Long Term Extension study are strong indicators of the transformational benefit overparexin can deliver across the symptoms that impact NT1 patients. And we look forward to sharing multiple oral presentations starting at World Sleep with more to follow at future medical conferences. Takeda will host an investor call on September 8th, 2025 from World Sleep in Singapore. Based on these strong Phase 3 data, we plan to file for U.S. approval in NT1 later this year with regional filings to occur simultaneously or shortly thereafter. We believe these outstanding Phase 3 results have the potential to establish overparexin as a new standard of care for patients with NT1. The Phase 3 results in NT1 are exciting, and this is just the beginning. We will continue to gather information in the Long Term Extension to see how patients fare over longer periods of time. As previously reported, sustained effects beyond 6 months have been observed with many of the patients being treated for more than 2 years now. We believe the Long Term Extension data from the Phase 3 and Phase 2B trials will enhance our deep understanding of overparexin biology and allow us to optimize treatment for patients in need of this lifetime therapy. Our overparexin franchise is making rapid progress beyond overparexin. The next generation of overparexin 2 receptor agonist TAC360 is in Phase 2 development for narcolepsy type 2 and idiopathic hypersomnia. These results are expected to read out at the end of this fiscal year or early in fiscal year 2026. And of course, we continue to work in our laboratories on the discovery and development of additional tailored overparexin agonists that have the potential to address vast unmet needs in diseases where overparexin plays a role. We expect a new, next generation of overparexin agonists to enter the clinic later this year as we accelerate development of our multi-asset overparexin pipeline. Pipeline momentum in fiscal year 2025 is off to a great start. We now have outstanding results from two Phase 3 programs in hand. The Phase 3 verified study of Rusfertide, a first in class synthetic hepcetan mimetic in development to treat polycythemia vera, was presented at the American Society of Clinical Oncology plenary session. The plenary session is where data with the potential to transform medical practice is typically highlighted. The discussant at the plenary session, an ASCO-appointed expert, emphasized that, quote, the study result is practice changing, end quote, and recommended that Rusfertide should become part of the standard of care for patients. In our GI squared therapeutic area, we initiated a Phase 3 -to-head trial comparing Zazocitinib versus Dekravasitinib that is designed to clearly differentiate Zazocitinib in psoriasis. We also initiated a Phase 3 trial for Aritercep. In second line, anemia-associated myelodysplastic syndrome. This is the beginning of a broad, late stage Aritercep development program for which we will have more to say in the future. There are several regional approvals this quarter, including European approval of Etcetris as part of an additional chemotherapy regimen in frontline Hodgkin lymphoma. Our plasma derived therapies continues to broaden indications and enter new markets. Hykuvia was approved in CIDP and multifocal motor neuropathy in Japan. Gamaguard ERC, a new formulation with low IgA antibodies, was approved for the U.S. and European markets. In addition, HiHub and HiHub Duo, two new devices designed to streamline the administration of Hykuvia, were approved in the U.S. Looking forward to the rest of the fiscal year, and if you could move to the next slide please, 2025 is indeed a pivotal year for our late stage pipeline. I have already highlighted the next steps for over Brexton. For Rusfertide, we are targeting a medical conference in the second half of the fiscal year to share our 52-week data update that will include durability of response and additional safety. We plan to file an NDA in the U.S. for Rusfertide and polycythemia vera in the second half of fiscal year 2025. And finally, later this year, we will have top-line data for zazosytenib in two pivotal phase III psoriasis trials, latitude 3001 and 3002. Looking further into the future, next slide please, The six programs in our late stage pipeline have the potential to deliver transformative benefits to patients while contributing to Ticada's long-term growth. Zazosytenib, our oral allosteric TIC2 inhibitor, continues to add expansion opportunities and will start a phase II study in hydradenitis supertiva, or HS, within the next year. HS is a chronic, recurrent, and debilitating inflammatory skin condition. The global prevalence is estimated to be around 2%. There are limited approved treatment options available, and people living with HS continue to experience high disease burden. We believe there is a significant need for a durable and effective advanced systemic therapy. Going forward, we will maintain our strong focus on late stage development activities with a continued emphasis, where possible, on acceleration. These efforts will support our ambition to file up to five additional indications from our late stage programs through fiscal year 2029. Thank you very much, and I'll now turn it back to Chris for Q&A.

Now, we might open the floor for questions. We have Christoph, Milano, Andy, and US President and

President Julie Kim as well to ask their questions.

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please let us know with the raise a hand button on Zoom.

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in the Japanese channel, please ask your question in Japanese. If you're participating in the English channel, please ask your question in English. If you're listening in the live audio,

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First question, Morgan Stanley, Murawka-san, please

unmute yourself and ask your question.

Thank you. This is Murawka Morgan Stanley. About the sales

of individual products, looking at that Entavio, IG, Vyvans, Kyodenga, they were relatively weak. And I think your message was they're okay, but in the second quarter, for those four products that I just mentioned, do

you

expect recovery?

That's my first

question. And the second question is,

Orexin.

After 861 and 360, I think you have another molecule coming into the pipeline. So what is the additional benefit and what kind of clinical advantage can we expect? For this new molecule that will be added to the pipeline.

Thank

you.

First

question was about IG, Entavio, Vyvans, and what was the fourth one? Kyodenga. Thank you.

Thank you very much. So the first question about some of the products that were a little bit weaker in Q1, so IG, Entavio, Vyvans, Kyodenga in particular, how are these looking to perform in the rest of the year? Perhaps I'll ask Christoph to begin that answer and then Julie to add detail as required. And then the second question was for any additional data that we can, or any additional direction we can provide on the next additional Orexin agonist coming through into the pipeline later this year. I'd like to ask Andy to comment on that, please. Thank you.

Thank you, Chris. It's very clear that in our mind, the first quarter is quite soft and does not reflect the underlying dynamics of our product. And this is why we have not changed our guidance for the year. We believe that this first quarter does not reflect the dynamic of the product. So in the case of Entavio, the pen continues to accelerate. We are not at full market access yet in the US. So that means that we are losing some prescription and therefore some switch opportunity from IV to sub Q. But we are progressing in terms of market access and will reach the maximum and the optimal stage during that this year. So that we continue to accelerate the pen and the feedback we are getting on the pen is very strong. Julie can explain further on Vyvanse. Milano has explained that the Q1 is extremely impactful in terms of growth rate because of year on year comparison. We also know that eventually there will be, we will reach a plateau. So that's why we believe that this year is the last year of significant impact of Vyvanse generic exposure. So you will see a waning impact during the year, especially because there was a very significant generic penetration at the end of last year. In immunoglobulins, there is always some quarter by quarter growth rate change. But we remain committed to the forecast that we gave in Q4, which is mid single digit overall PDT franchise growth, high single digit for IG. So you see we are slightly lower. I mean, remember that when it comes to immunoglobulin, the demand is greater than supply. So it's all about, you know, allocation and we have a very competitive portfolio right now with new indication. And Codunga is actually the same. You know, we, the demand is greater than supply. We are ramping up our supply. So it's all about shipment and allocating our doors to where we have greater demand. So we are very much convinced that Codunga will continue to grow in the future. And this is why overall we believe that we will, you know, deliver our guidance, which is broadly flat in revenue, for example, for the year.

Murukasan, this is Andy. Maybe I can dial up and provide some context regarding our approach to orexin and our broader orexin franchise. So we think of diseases that could potentially be managed through orexin agonism in three buckets. There's orexin deficiency, which is NT1. There are there are other rare diseases that are characterized by normal orexin levels like NT1 and idiopathic hypersomnia. And then there's a large array of more common diseases that have symptoms like disruptions in sleep-wake cycles, like other neuropsychiatric symptoms that we believe modulation of the orexin pathway could be beneficial. And it's clear that TAC 861 is not just a first in class for type 1 narcolepsy, but a potential best in class with potentially very little room for additional differentiation. For TAC 360, as I've mentioned, we're still learning a lot about TAC 360. And we have two ongoing phase 2B programs in type 2 narcolepsy and idiopathic hypersomnia. So rare diseases that are characterized by orexin deficiency. We'll have another molecule coming into the clinic later this year, and we continue to build additional molecules that have differentiated pharmacology that we can use to begin to explore benefits and more common disorders. The way I would think about orexin is that with 861, we're really just scratching the tip of the iceberg.

Thank you.

So the

product

that is different in pharmacology, is that for more general diseases, more common diseases? Is that the correct understanding?

That's our intent at this point. We have to also recognize that there's still an immense amount to learn about this pathway after type 1 narcolepsy. So we have the level of experience that we have in type 1 narcolepsy with these phase 3 results and with the extension from our phase 2B study, where we have patients now up to have been on therapy for up to two years is quite extensive. There's still very little known about this pathway outside of type 1 narcolepsy. Our intent is to win and own this pathway with multiple molecules and explore the vast potential of this disease in both rare and common disorders.

Thank you very much. Thank

you. Next question is Yamaguchi-san from Citi.

Can you hear me? Yes, we hear you. Thank you very much for taking my questions. This is Yamaguchi from Citi Group. I have two questions. The first question regarding the competitive landscape of narcolepsy. Recently, alchemy put a top-line release on the elections and there seems to be a missing catalepsy portion of the data. And you talk about catalepsy importance. You don't need to talk about competition, but can you elaborate how this is important and how this is going to be differentiated from your products and alchemy products? That's the first question. The second question is a more broad question. Christoph Sammer talked about some general investment strategy for the US, which does not really contain new things, but it was like 30 billion in total. And globally speaking, a global major company like you companies trying to put up some investment to the US market for the future, especially on the manufacturing side. Do you have any kind of a new plan how to accelerate those investments in the US? Or can you make any kind of comment on what's the new sort of business model that US companies, including your companies, are looking for in the US, like DTC, trying to control the cost structure? So that's an open question. The second one. Thank you.

Thank you, Yamaguchi-san. So the first question on our thoughts on evolving data in the narcolepsy landscape, I'd like to ask Andy to comment on that. And then the second question on investment in the US or how our business may evolve, given the changing landscape in the US, I'd like to ask Christoph to comment on that, please.

Thanks, Chris. And thanks for the question, Yamaguchi-san. So as I mentioned, we believe that TAC 861 over Praxton is not just first in class, but potentially best in class agent. We've seen benefits across all symptoms using both objective and subjective measures. And in many cases, these benefits normalize these patients across all many or some of the symptoms of narcolepsy type 1, including cataplexy. Cataplexy is a somewhat variable measurement. We were very pleased to see that our results in cataplexy are quite significant and very meaningful for patients, and we look forward to presenting those data at World Sleep next month. It's hard to comment on the competitive landscape because we haven't seen data. So we'll see data rolling out in sleep. But I think suffice it to say, we really believe with the time advantage that we have and with the data that we'll present next month that over Praxton is a highly competitive agent in this class.

Thank you, Yamaguchi-san. Regarding our investment first, I would like to remind everyone that we are highly invested in the US. For example, if you look at our manufacturing network, the country where we have the biggest manufacturing presence in terms of number of sites and number of products we manufacture, number of colleagues that are involved is by far the US. So that's why we are extremely balanced and we will continue to invest in this manufacturing network in the US. And that's also why our exposure to tariffs is limited, as Milano explained. So strategically we continue to take into consideration many parameters when we decide a new investment. And of course we are very much aware of geopolitical consideration and other considerations so that will drive our investment decision in the future. But I want to really refute the fact that we are extremely invested in the US on the manufacturing side, obviously also on the R&D side. We do the majority of our research and development activities in the US. So that we think is important for our long-term strategy and strategic situation because we also do the majority of our revenue, the biggest part of our revenue in the US. When it comes to the DTC, I will ask Julie to comment on the -to-consumer model. If Julie, you could give your perspective about that, that would be great.

Yes, thank you, Christophe. In terms of the -to-consumer model that you've heard about in the news, this is an opportunity for the pharmaceutical companies to be able to offer their medicines on a platform cutting out the middlemen in the US. So this would allow us to go direct as the platform indicates and this would provide lower pricing directly to patients without necessarily impacting the pharmaceutical companies negatively because as you're probably aware on average across the industry, roughly 50 cents of the dollar goes to other players in the value chain. So the manufacturers currently receive on average 50 cents on the dollar. So being able to offer a significant discount on the list price through these platforms does give patients a direct benefit and it's also good from the manufacturer's standpoint as well.

Julie, can you comment still just to manage expectations, how our portfolio product is not an easy one to apply DTC? Can you comment on that?

Sure. The key aspect of the DTC platforms that I should have mentioned is that this is cash paying for the patients and so this is primarily more retail medicines. The current products like insulin are offered in this type of platform as well as GLP-1, for example. So our portfolio is not necessarily this type of retail medicine, but we will look at opportunities for products such as Trintellix on this platform.

Thank you. Thank you Yamaguchi-san. Moving to the next question then. Next question I'd like to call on Stephen Barker from Jeffreys, please.

Yes, Steve Barker from Jeffreys. Thanks for taking my questions. My first question is related to spending. You are forecasting full year SG&A flat year on year and a small increase in R&D, but both SG&A and R&D were both down substantially in the quarter. So I was wondering if you'd comment on that and the outlook for spending. And then the second question is related to Orexin. As per the slide, you are looking for the new compound which is scheduled to enter development this year. So you're looking at indications like sleep, wake, respiration, metabolism, sleep, wake. I think that's something related with Alzheimer's, respiration. Should we be thinking sleep, wake, is Alzheimer's, respiration, sleep apnea perhaps and then metabolism. Is that something if you could comment on how Orexin might affect metabolism and if it could actually be useful in treating obesity. I'd like to comment on that too, please. Thank you.

Thank you, Steve, for your question. So the first question on trends of spending Q1 versus the full year outlook. I'd like to ask Milano to comment on that and the second on the new compounds in Orexin looking at sleep, wake disorders. You know what potential exists in these areas, particularly obesity is an area of interest. I'd like to ask Andy to comment on that, please.

Hi Steve, thank you for the question. So let me answer about SG&A first. So this is mostly this decline comparing to the -on-year, the last quarter one is for SG&A it's more like FX. If you compare the constant exchange rate, it should be mostly flat. That's SG&A. So it's in line with the full year forecast. For R&D, we do the invest for the pipeline developments and still we anticipate the R&D investment is ramping up. For example, now we start -to-head study with NADUCRA in July. LTERiCept also in July, we started the trial. For 360, also we started the trial in April. So we are ramping up all the activities. But still it's a good thing is we also see the savings from the efficiency program we initiated last year. And then we are also keeping the very tight management of the headcount, the cost to both sides. So that we see also the benefit from all the savings efforts. So that's how the Q1 numbers eventually landed. But eventually we are still keeping the full year forecast management guidance for both SG&A and R&D.

Thank

you. So now we are starting to imagine and develop molecules that have an array of pharmacology that will allow us to explore opportunities in other rare disorders like type 2 narcolepsy, like idiopathic hypersomnia, and then begin to explore opportunities in other disorders that are characterized by either sleep-wake cycle disruption, because there's an obvious link there. And then we are also seeing that there are unique properties of this pathway in respiration. And based on extensive scientific literature and the expression patterns of the erection receptors in the hypothalamus, we believe that there are potential opportunities in metabolism. I don't want to get too far out ahead of ourselves. Our goal is to develop the array of molecules that will allow us to explore this breadth of indications and to go from there.

Understood. Thank you.

Thank you, Steve. Okay, moving on to the next question, I'd like to call on TD Cowan, Michael Nidelkovich. Please go ahead and ask your question.

Hi, thank you for the questions. I have two. My first is on intivio. You've noted in the past that transitioning patients from part B to part D coverage has been a hurdle to adoption of the pen. Why should we expect that dynamic to fall away in the coming quarters? And on the same topic, a competitor IL-23 will likely soon offer subcutaneous induction and maintenance. How do you think that might change the competitive landscape, especially considering that the intivio pen seems to be helping to ward off competition? So that's my first question on intivio. And then my second question is on Zezo sitinib. In the head to head trial versus Dukravist sitinib, can you remind us if it's powered for superiority? And in that trial, if Zezo sitinib only shows non inferiority, how would that affect your three to six billion dollar peak sales ambition in psoriasis? Thank you.

Thank you, Mike. So the first question on intivio coverage and competition landscape, I'd like to ask Julie to comment on that. And the second question on the head to head, is it powered for support superiority? Andy, if you could take that one, please.

Hi, Michael. Thank you for the question. When you look at the dynamics in the US around pen access, you are right. There have been challenges in terms of making the switch. But we're working through the quality. I'll call it the quality of the access at the local level. Sometimes this is a challenge of the coverage that's provided at the parent plan not being pulled all the way through to the local plan. Sometimes it's because of that switch from IV to pen medical to pharmacy. Sometimes it's a system issue and helping at the again at the very local level addressing those specific system issues. So we're we're we're attacking all of these one by one. And as we clear through them, we are seeing the pull through on pen. So this is why we believe that as we continue to improve the overall coverage level and that quality of the pull through that will see the benefit from from pen driving further growth as we're we're seeing roughly 30 percent growth. Quarter over quarter on the pen in terms of the second part of your question in regards to sub cue induction, that is something that we are also looking at. And for right now, and TVO still has very strong bio naive starts within you see in particular. And so this is something that as we continue again to pull through on the access, we expect to see further growth for the pen.

And my cloud, I'll start on Zazzo and then hand it over to Christoph to talk about the competitive dynamics. So we're seeing great progress in our overall Zazzo program, as I mentioned on track to read out our two psoriasis phase three studies later this year. Our psoriatic arthritis program is going well to phase to be studies in UC and Crohn's that will read out next year, starting now in H.S. And then we have an additional indication, perhaps indications that we look forward to starting soon. Your question specifically on the head to head with the Kravis, it and yes, this study is powered for superiority. And Christoph, I'll hand it back to you.

Thank you, Andy. Thank you, Mike, for the question. Yeah, it's a it's a head to head superiority because we are very confident, obviously, that the profile will deliver this type of result. It is important because we want to demonstrate that the city is a new class of oral, which change the efficacy profile of the oral treatment. Overall today, the oral treatment have around 16 percent market share and it has been it has not been growing. And we believe that our compound that we see in EAP, perhaps also with another compound of another class in development, an oral, you know what I'm talking about, will change that. And we believe that that's a promise of this new role is to really change the importance or the contribution of oral treatment to the treatment of psoriasis. So this head to head is important to really create a new role standard in terms of efficacy. But of course, we will also use the phase three result. Thank you.

Thank you, Mike. So the next question,

Nomura securities, Matsubara, please ask your question.

Yes, this is Matsubara Nomura

securities. Can you hear me OK? Yes, we can hear you.

Thank you for the presentation. My first question is related

to an earlier comment. First quarter growth,

first quarter numbers doesn't

necessarily represent the overall growth dynamics. But if you look at the sales in the US, it looks quite weak. So I won't understand why. That's my first question. And the second question is about tax. Again, tax is weak in the United States. What is the reason behind this? And also, I only don't know. Sen is going to be launched very soon. So this is going to be a competition for new patients.

So

should we have some concern for this product in the future?

Thank you, Matsubara. So the first question on the US revenue performance in Q1 and what some of the dynamics there are. And then the second question on tax IRO specifically. So I'd like to ask Julie to comment on those, please.

Hi, thank you, Matsubara, for the question. One of the things that pleased to remember in terms of the US performance is that you're also seeing reflected in these numbers, the impact of the Medicare Part D redesign across key products in our portfolio. So that is part of the impact on the growth in regards to tax IRO in particular. Tax IRO continues to have strong performance in the US. And yes, there are new competitors coming on to the market. But in terms of efficacy, there is really not a significant change in efficacy from those competitor products. When you look at the long term history that we have both in terms of performance and safety, and you look at the real world data that we've collected on tax IRO since its launch, we are in a very strong position to defend tax IRO in HEE.

Thank you very much. This is Furuta speaking.

I would like to add just one comment.

In the United States,

Christophe and Julie has already mentioned the product dynamics. And also, I don't have any additional thing to say about the whole situation. But

everything

that we have explained so far is US focused,

including

VIVANS. VIVANS impact is the biggest in the US. And this is why the US numbers, the performance looks a little bit softer. As

far

as tax IRO is concerned, demand continues to be strong. But the channel inventory is now lower. That's another factor behind the weaker performance of tax IRO.

I

understand. Thank you.

Thank you. Next question is

Wakao-san, JP Morgan, please.

JP Morgan, Wakao. JP

Morgan, Wakao.

So, the OPEC poll is done. The study is now completed. There also does not seem to be a factor that drives an increase in this fiscal year. That's the first question. And the second question is about MFN. You briefly mentioned US policy. But I'd like to know more about most favored nations' drug pricing policy. Are you currently in discussion with the US government on MFN? And have you received any indication of targeting pricing? That's it.

Thank you, Wakao-san. So, the first question on R&D expense progress towards the full year guidance. Is this in line with plan? Milano can comment on that. And then the second question on discussions around most favored nations. I'd like to ask Julie to comment on that, please.

Thank you, Wakao-san. So, I'm going to comment on the first R&D spending, Q1. So, if you compare against last year Q1, there is a multiple effect. Sorry, I think to Steve's question previously, I explained as a kind of efficiency program as a whole. But there's a bit of a detailed explanation I can add. So, comparing to last year, we had a few program terminations like Sothec-Lestat or 062. So, these program terminations create some space for the budget. That's one. The second, we had some pipeline financing arrangement with Blackstone. That also helps for the R&D savings. And the third one is something I mentioned previously. We are continuing for the efficiency program efforts. So, we manage the overall budget. Everything is very tight. So, that's also creating the savings space. So, if you recall our explanation of the Q4, we are making all these savings, and then we will reinvest for those savings for the pipeline development. That's going to happen. So, from July, we are starting the phase three for Delta Recept, -to-head study with the Ducre. So, this will ramp up, and then we will increase. We will ramp up all these R&D operations. So, eventually, all in all, we are in line with the plan.

Could you clarify, the first quarter performance was in line with your internal plan or

below? Yes, we are making savings, but overall, we are in line with the plan.

Okay,

thank you. And thank you, Wakau-san. In terms of MFN discussions in the U.S., so, there have been numerous different statements about MFN, both from the president, as well as others in the administration, at a high level. So, details have not really been shared yet at this point. We have not been contacted directly in terms of price negotiations at this point. We are gearing up and preparing for the potential negotiation of Antivio as part of the IRA Medicare price negotiations. Now, MFN in general, there are a basket of countries that are being considered, we think, and we are assessing what the potential impact of that could be, depending on a variety of different scenarios for how MFN can be applied. So, we are working on our own mitigation plans for that, and we are preparing, as I said, for the price negotiations as part of the IRA Medicare price negotiations. That is a place where the MFN type of approach could be applied, but we are waiting to see further details.

Dan, thank you.

Thank you very much. Due to time limitations,

the next question will be the last question,

which is from

Ueda-san from Goldman Sachs. Please unmute yourself and ask your questions.

Yes, this is Ueda,

Goldman Sachs.

I want to ask a question

about the preparation for the launch of Oveproxton. -in-class and -in-class potentials were mentioned today, but what about the sales team, and what other preparations are underway for the launch of Oveproxton? And because you're focusing on -T-1, I think diagnostics is very important.

Last year, in

R&D day, you talked about the use of digital technology potentially, so I want to understand how this technology is being prepared leading up to the launch. Thank you.

Thank you for the question, Ueda-san. So a question on how we are preparing for the launch of Oveproxton. What are the approaches we're taking, including use of digital, et cetera? So I'd like to call upon Julie to answer that question, please.

Yes, thank you for the question, Ueda-san. As you can imagine, we are very excited to be preparing for the potential launch of Oveproxton for narcolepsy type 1 patients. So we are gearing up in terms of our commercial structure and organization, as well as our medical team, which is already out in the field, educating on Oveproxton in narcolepsy type 1. In terms of the digital support for Oveproxton, we are looking at a number of different avenues and approaches to support, particularly diagnosis in narcolepsy type 1. This is an area where we are looking to unlock the bottleneck that exists in terms of diagnosis through sleep centers. So we will share more detail once we're able to do so. But this is quite an exciting opportunity for us. And as I said, we're looking at multiple digital avenues to support diagnosis and the overall patient experience. Thank

you very much. That's all the questions I have. Thank you. Additional

comment from Furuta-san.

Yes, Mr. Wakau.

Q1 R&D spend. I just wanted to add some comment because there may have been some inaccuracies in what I said earlier. Q1, we had savings. And your question was whether this was according to our internal plan. And I have to say that the savings actually was bigger than what we had planned for.

But

R&D delivery implementation is according to plan. So saving is not impairing the

delivery

of R&D.

And

we are really enjoying the benefit of the efficiency programs in the past, which means that it's possible that savings may be a little bit higher than we plan.

Thank you very much.

With that, we would like to conclude today's webinar.

We would like to thank

you all again for being a part of this program, despite a very busy schedule, and we appreciate your kind continued support.