Astellas Pharma Inc

Thank you very much for joining Astellas Pharma Inc.' 's FY 2023 Second Quarter Financial Results Announcement Meeting out of a very busy schedule. I'm delighted to serve as MC today. I'm Ikeda, Chief Communications IR Officer. You can join this meeting through Zoom webinar or live streaming. Live streaming is available in Japanese language only. After our presentation, we will move on to a Q&A session You can ask questions just on Zoom webinar. You cannot ask questions through live streaming. During, including Q&A session, simultaneous interpretation is available in Japanese and English. We cannot guarantee the accuracy of the translation. If you are joining on Zoom webinar, from the menu on Zoom screen, you can select the language of your preference. If you select the original language, you can listen to the original sound without going through the translation. And today we are going to make a presentation based on the meeting materials posted on our website. This material or presentation by representatives for the company and their answers and statements in the Q&A session includes forward-looking statements based on assumptions and beliefs in light of the information currently available to management and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals including compounds and development, but this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations. The participants are as follows. Representative Director, President, CEO, Naoki Okamura. Chief Scientific Officer, Yoshitsugu Sitaka. Chief Medical Officer, Tadaki Taniguchi. Chief Commercial Officer, Klaus Dieder. And Atsushi Kitamura, who has assumed the post of CFO executive today. We have five participants from our company. Before going into financial results, Kitamura will give you a few words of greetings. Kitamura-san, please. Thank you for the introduction. I'm Atsushi Kitamura. I've been appointed CFO of Acela Spam Inc. Effective today. Thank you very much for your support in advance. Here is my brief background. I started my career at Procter & Gamble P&G and then at Skyrack Holdings where I experienced listing on the stock market and direct interaction with investors at CFO. Most recently, I've been involved in corporate management at CFO or Pioneer. By leveraging my global experience and expertise in finance, I will find an optimal resource allocation for Celeste to achieve sustainable growth and maximize corporate value. I would like to further accelerate Celeste's ongoing efforts to optimize its cost structure and foster financial discipline and cost ownership, and I will commit to achieve CDP 2021 as a member of top management. And also, I see it as one of my important roles to deepen dialogue with investors and bring it back to the management of this company. I sincerely am looking forward to having open and constructive dialogue with all of you. Thank you very much. Thank you. Now, I would like to start the presentation. Okamura-san, please start. Hello, everyone. I'm Naoki Okamura from Astellas Pharma, Inc. Thank you very much for joining our FY2023 Second Quarter Financial Results Announcement Meeting out of a very busy schedule today. This is a cautionary statement regarding forward-looking information. As this was explained by KEDA earlier, I'm going to skip this page. Page 3 is the agenda for today. Starting from the next page, I will explain these topics in this order. On page four, I will give you an overview of FI2023 second quarter financial results. We are disclosing the consolidated financial results reflecting the impact of the acquisition of Iverick Bio starting from the second quarter of FI2023. Revenue increased year on year, but decreased year on year due to the impact of Lexiscan generic when excluding the Forex impact. Oncology products, Xtandi, PazSafe, and Zospata combined exceeded expectations. We revised our full-year forecast upward accordingly. On the other hand, the author underperformed versus our forecast. We will review our full-year forecast in accordance with the third quarter progress. The initial uptake of Isovay launched in September, was in line with the expectations, I will explain these products on page 7 through 9 in detail. Next on cost items. When excluding the effect of Forex impact and the acquisition of Iverick Bio, SG&A expenses were on track and R&D expenses exceeded expectations. As a result, cooperating profit increased. decreased by 25% year-on-year, mainly due to the impact of Dexiscan generic and the acquisition of Iverick Bio. Taking these factors into account, we revised our full-year operating profit forecast downward. I will explain our revised forecast on page 11 in more detail. On page 5, before explaining the quarterly financial results, I will explain accounting treatment of business combination with Iverick Bio. Based on the fair value assessment as of the date of business combination, we booked intangible assets of $6.3 billion and goodwill of $251 million. Out of the intangible assets, we booked $5.2 billion for Isavay in the United States and amortization started in the second quarter of FY2023. For Isavay outside of the United States, we booked $1.1 billion, which will be amortized after launches. What I have just explained is subject to change due to the provisional accounting treatment at this moment. If there is a change, we will update at future earnings. On page 6, I will explain FY2023 second quarter financial results. Revenue increased to 767.1 billion yen, up 0.6% year-on-year. The progress was 50.5% of a full-year forecast. Core operating profit was 109.8 billion yen, down by 24.5% year-on-year. The progress was 37.9% of a full-year forecast. In addition to the impact of Lexiscan generic, we booked SG&A costs on the expenditure and amortization costs for intangible assets related to the acquisition of iBREAK Bio, which we did not anticipate initially, so the progress of co-operating profit was much lower than expected. You can see the Forex impact on the right-hand side of the table. There was a positive impact on revenue by 37.8 billion yen and co-operating profit by 11 billion yen. The bottom half of this page shows our full basis results. In the right bottom of the table, we included other expenses booked in the second quarter. In the second quarter, we booked 36.7 billion yen as payment for Iverick Bio's unvested Share-based payments with the acquisition of Iverick Bio also rebooked 8.8 billion yen as fair value increase of contingent consideration for Zolbetaximab due to forex rate fluctuations. The contingent consideration for Zolbetaximab is looked as liabilities in euro. From the end of FY2022, the euro substantially fluctuated towards the lower yen, which resulted in fair value increase of contingent consideration. As a result, operating profit was 51 billion yen, down by 57.4% year-on-year. Profit decreased to 31.7 billion yen, down 67.2% year-on-year. On page 7, I will explain the progress of Xtendi, Budsave, and Zospata and the future outlook. First, about Xtendi, global sales increased to 360.9 billion yen, up by 9% in a year. Following the first quarter, ex-US performance offset the US performance. Global progress as a whole was in line with our initial assumptions, even excluding forex impact. In the United States, the ratio of PAP, a patient assistance program to enable patients to access drugs for free, continues to be higher than expected, but volume excluding PAP grew by 3% year-on-year, so actual demand increased. Other than the United States, established markets and international markets in particular exceeded expectations. Prescription for MRCSPC continued to grow, which contributed to the expansion of sales. Regarding the future outlook, expecting the high PAP ratio to continue in the United States, we made a downward revision of our US dollar-based four-year forecast. On the other hand, we made an upward revision of our four-year forecast for good-performing established markets and international markets, which are expected to outweigh the downside of the United States. As a result, we are making an upward revision of our global four-year forecast as a whole, even excluding forex impact. Next, for PAD sales, global sales increased to 32.7 billion yen, up by 57% year-on-year. The progress in the United States in particular is exceeding our initial forecast, which contributed greatly to the expansion of global sales. The penetration of the additional first-line cisplatin-ineligible metastatic urothelial cancer indication approved in April continued to exceed expectations. Further sales acceleration is expected for the future. Also, EV302 study results presented at ESMO recently were extremely favorable, exceeding our expectations. Based on these results, we are preparing to file a submission earlier than initial plan and are expecting approval of additional first-line cisplatin-eligible indication in the United States by the end of the current fiscal year. In established markets, reimbursement started in big markets, Germany and Italy, and we are expecting further sales growth from the third quarter. Regarding the future outlooks, We made a significant upward revision of a full-year global sales forecast reflecting the strong U.S. performance and the sales contribution expected from the approval of the additional first-time cisplatin-eligible indication by the end of this fiscal year. Regarding Zospata, global sales increased to 26.3 billion yen, up 12% year-on-year. In all regions, new patient starts were higher than expected and demand increased. Reflecting the strong U.S. of a four-year forecast. So, overall, the three oncology products are performing well. We made an upward revision of our forecast by about 18 billion yen in total for the three products combined. Even excluding Forex Impact, starting with PADSEF, we have high expectations on them as growth drivers for the future as well. On page 8, I will explain the progress of Vioza and the future outlook. including market access, activities for HCPs and patients are on track. On the other hand, second quarter sales underperformed versus initial forecast due to overestimation of demand prior to the launch of DTC, such as TV commercial. From the beginning, we are expecting full-scale sales growth from the third quarter onwards, but we are expecting more demand up to the second quarter as well. There are two main factors for the lower volume. First, usage by out-of-pocket payment not covered by insurance was lower than expected. There was some impact of prior authorization required for prescription, despite insurance coverage in some cases. The procedural burden to complete this prior authorization process has been perceived as more bothersome than we expected. To tackle this issue, we are working to increase awareness of the program to support the prior authorization process. It's difficult to recover the downside through the second quarter, and we're expecting a downside also in a four-year forecast, but as of now, we are not changing our four-year forecast on a local currency basis because the progress in the third quarter with DTC launch is going to be extremely important. Based on the impact of DTC activities and the progress of insurance coverage, we will review our four-year forecast at the time of the third quarter earnings. Next, let me explain the progress through the second quarter. Regarding the status of the market access as a whole, commercial insurance coverage is on track, around 20% of lives right now. Peer discussions are progressing as expected. We're expecting coverage to increase over the course of FY2023. In our activities for HCPs, we have reached 70,000 HCPs in person. we believe that the product profile of Vioza has penetrated as expected. Actually, based on the results of market research with a few hundred HTPs, we have been able to confirm steady increase in their awareness of Vioza's influence. With regards to activities for patients, we started TV commercial from the 9th of October in the United States as planned. Industry benchmark suggests that it takes about two months in general for the impact of TV commercial to appear on a full scale, so we are hoping that this will lead to sales expansion from December. For the future outlook, the initial uptake was lower than our assumptions, but the factors behind would not affect the mid- to long-term business of FIOZA per se, in our opinion. Also, from our recent market research, we confirmed HCP's high assessment of FIOZA. We remain confident about our peak sales forecast. We will continue to maximize the value of Vioza going forward. On page 9, I will explain the progress of Isovay and the future outlook. It was launched in September in the United States. Sales in about one month since launch was 1.2 billion yen. The initial uptake was on track. Our full-year forecast for this fiscal year is 11 billion yen. Through our activities for just one month, it already became available in about 500 retina accounts as of September. We feel there are high expectations for either way. As for insurance coverage, we are anticipating mainly Medicare Part B. We already submitted application for permanent J-code to facilitate billing of Medicare Part B treatments by healthcare professionals We are expecting J-code in April next year. Next, I will explain our future outlook. Before sales forecast, I will explain the amortization for intangible assets for IZABAY. We are expecting about 60 billion yen this fiscal year and 80 to 100 billion yen from FY2024 onward. Regarding Isavay sales forecast, between sales and amortization of intangible assets, SG&A expenses and costs related to Isavay, we are expecting break-even in FY2025 with contribution to profit expected from FY2026. We are expecting peak sales of 200 to 400 billion yen as the product is just launched recently. With a lot of uncertainty, such as the impact of competitive products, we are disclosing with a range by taking into account a certain degree of opportunity and risk. The potential impact of competitive products is still under examination right now. Based on the future uptake and the market environment, we will review the range of peak sales. We have high expectations for the expansion of Isovay sales in the future as an important product to help compensate for the decline in sales from Xtendi LOE. Next on page 10, I will explain cost items. Cost of sales ratio was as expected. SG&A cost excluding US Xtendi co-promotion fees increased by 16.5% year on year. When Forex Impact was excluded, HGN expenses increased by 11.2% year-on-year. The progress was 52.5% versus a full-year forecast. We position FY2023 as the year to make active investments for future growth. Sales promotion expenses related to Vioza increased by about 13 billion yen year-on-year. On the other hand, Sales promotion costs related to mature products such as mirror background decreased by about 4 billion yen. The impact of the acquisition of Iverick Bio on SG&A cost was about 10 billion yen. This includes one-time expenses associated with the acquisition in addition to the actual business costs. Excluding the impact of Forex on the acquisition of Iverick Bio, SG&A costs are in line with our initial expectations. and the expenditure increased by 2% year-on-year and decreased by 1.2% when Forex Impact was excluded. The progress was 56.5% versus the full-year forecast and was higher than expected. Due to the steady progress of Phase II study for Zolbetaximab in pancreatic adenocarcinoma and earlier subject enrollment than we assumed, Development costs were higher than expected, which was the main factor behind the increase. With the acquisition of Iverick Bio, we booked on the expenditure of about 4 billion yen. Page 11. I will explain the revised forecast for FY2023. I will divide the revised forecast into two parts, one based on the progress of the business to date, excluding the impact of the Iberic bioacquisition, and the other on the impact of the Iberic bioacquisition itself. The first is the revised forecast excluding the impact of the Iberic bioacquisition, which is shown in the center of the table. We have revised our forex assumptions and the set and exchange rate of 140 yen per dollar and 150 yen per euro from the third quarter onward. While factoring in a decrease in sales of lexiscan due to the impact of generics, we're taking into account the positive impact of foreign exchange rates of approximately 90 billion yen and a total increase of approximately 18 billion yen for the three oncology products as a whole. The revenues forecasted as 1,597 billion yen. The forecast for SGA expenses is 699 billion yen mainly due to the impact of forex rate. R&D expenses are expected to be 271 billion yen, taking into account the impact of foreign exchange and an increase in development expenses due to the positive progress of studies of Soviet tax money, as explained earlier. As a result, core operating profit, excluding the impact of average buyer acquisition, is expected to be 302 billion yen. About 7 billion yen of the fair value increase of contingent consideration for Zofia Taxim is included into other expenses, but the full-year operating profit is forecasted as 263 billion yen thanks to the positive impact of Forex rate. Next, I will explain the revised forecast including the impact of acquisition of Averroes shown on the right side of the table. Revenues are expected to be at 1,608 billion yen, including 11 billion yen of ISA-based sales forecast. SG&A expenses are expected to be 737 billion yen, including about 38 billion yen. This also includes the increase of SG&A expenses in the actual business, as well as one-time costs associated with acquisitions. R&D expenses are expected to be 290 billion yen, including about 19 billion yen. In addition, amortization of intangible assets of about 60 billion yen has been factored in. As a result, co-operating profit is projected to be 199 billion yen. On a full basis, operating income is expected to be 123 billion yen, including about 37 billion yen in payment for uninvested share-based payment associated with acquisition of Iberic Biotech. From here, I would like to explain the initiatives for sustainable growth. Page 13 shows the overview of key updates on initiatives for sustainable growth since the last financial announcement. There has been significant development progress in extended and strategic products and focus area approach projects. Details are provided in the following slides. In the RxPLUS program, A Phase III trial evaluating ASP5354, a fluorescent contrast agent for urethral visualization during surgery, has started and achieved the first subject-first treatment. On page 14, here I will discuss the key events we expect to see in FY23 for extended and strategic products. The progress made in the past three months is shown in red. Of an extent, the submission was accepted for the additional indication of M0-CSPC, non-metastatic castration-sensitive prostate cancer with a high risk of biochemical recurrence in the U.S. in August and in Europe in September. The U.S. application was granted priority review status by the FDA, where the PIDUFA target was set as the third quarter. The application for an additional indication of M1CPC, metastatic gastrointestinal prostate cancer, based on the China RG study, has been accepted in China in September. As for PADSF, the EV302 study showed positive top-line results in September. Based on these results, we are now moving ahead of our initial plan to file a global application and aiming at the submission in the U.S. by December. For Vioza, Aceros received a CHMP positive opinion in October. Isovei received approval from the US FDA, and it was accepted for filing in Europe in August. In September, we received a positive 24-month top-line results from the GATHER-2 study. Based on these results, we plan to submit an application for label revision in the fourth quarter. The current label specifies a maximum dosing period of 12 months and a dosing frequency of once a month, but we plan to discuss with regulatory authorities to improve the convenience for patients and physicians. We plan to hold a presentation meeting on the 24-month GALA-2 study on November 6, immediately following the presentation at the American Academy of Ophthalmology, or AAO, to provide more details. Other updates are listed outside of this chart. Regarding its extent, the Embark study data was published in the New England Journal of Medicine. For PADSF, results from the EV-103 study cohort L and the EV-302 study in muscle-invasive bladder cancer were presented at ESMOD. EB302 study data will be explained with the next slide. Posts of a tax map, follow-up data from Spotlight and Glow studies were presented at ISMO. Other activities and a way to bring the product to market will be described in the later slide. As of today, 12 months' data of the GATHER2 trial was published in the Lancet. On page 15, I discussed the EV302 trial data for PADSEP, which was presented at the ESMO in October. The EV302 study compared the efficacy and safety of Baclitaxel in combination with Keytruda to chemotherapy in patients with treatment, i.e., locally advanced or metastatic rothelia cancer. I've shown in the chart the combination of Paracetamol and Alkytruda reduce the risk of cancer progression or death by 55% versus chemotherapy with a hazard ratio of 0.45 for PFS, and the risk of death by 53% with a hazard ratio of 0.45 for overall survival. The median survival in both PFS and OOS was approximately twice as long as that in chemotherapy. In the subgroup analysis, consistent improvement in OOS was observed in various patient populations regardless of cisplatin eligibility and PD-L1 expression level. When the study was presented at the ESMO the other day, there was a standing ovation in the audience, that's what I heard. This means the presentation was highly acclaimed by the experts and attracted a lot of attention. Aiming at the position as a new standard first-line treatment for metastatic urethral cancer, we are planning to submit regular applications globally, starting with the U.S. In addition, due to the extremely positive results that exceeded our expectations, we have started to consider the possibility of raising our peak sales forecast. At this time, we don't comment on the specific range of the increase, but we will provide further guidance after we have conducted a thorough review. Next is the ZOVA tax map update. We have submitted applications for Zolvitaximab in Japan, the U.S., Europe, and China, and are working with regulatory authorities in each region on the review process. If approved, Zolvitaximab will become a first-in-class drug targeting clothing 18.2. In parallel with it, we are proactively conducting activities to raise awareness of importance of clothing 18.2 as a biomarker and its recognition by setting up a booth at major academic conferences around the world and by launching a website to educate physicians and pathologists who treat gastric cancer. Roche is developing the companion diagnostic needed for patient screening. In addition... Early access programs are planned in about 20 countries to ensure patient access to sovietaximab until its launch. We plan to hold a meeting to explain in detail our commercial strategy and sales outlook after the approval in the U.S. The timing will depend on the timing of the approval, but we are currently anticipating it will be a December to January time frame. On page 17, I will explain progress in a focus area approach. Projects and clinical trials at clinical stages that have been updated in the past three months are shown in red. In the primary focus of genetic regulation, we have been working on resuming the administration of AT845 since the clinical hold of the Fortis trial was lifted and the first subject was dosed in September as planned. will continue to enroll and evaluate subjects to determine the POC. In the area of immune oncology, we disclosed that the target molecules of ASP2074, a bispecific immune cells engager, are tetraspanin-8 and CD3. Tetraspanin-8 is a non-tumor-associated antigen that is overexpressed in various types of cancers. The mechanism of action is that ASP2074 specifically binds to cancer cells expressing tetraspanin 8 and CD3-positive cells, bringing them closer together and activating the T-cells to cause cancer cell damage. ASP10 out of a systemic oncolytic virus has entered the clinical stage and is expected to enter phase 1 trials in the fourth quarter. ASP10 out of its lead program acquired through an exclusive license agreement with Calivir in 2020, and this is Oncolytic Vaccine Variable Scarring, the gene for fusion protein of leptin and interleukin-2. After intravenous administration, the virus is designed to reach tumor tissues through other body to simultaneously cause local damage to cancer cells and enhance the cancer immune response. We expect that the drug will easily access to cancers that are difficult to treat with local administration to tumor tissue and will be applicable to many cancer therapies. AC3082, a targeted protein degrader, has been granted first-track designation by the FDA for the treatment of locally advanced or metastatic colorectal cancer and nosomal cell lung cancer with KRSG12D mutation, respectively. Together with pancreatic adenocarcinoma, for which the designation was also granted in February of this year, we were able to obtain fast-track designation for three cancer types known to have a high frequency of KRAS G12T mutations. We look forward to accelerating the development of this innovative treatment for these cancers with high unmet needs. On page 18, I would like to explain the current outlook toward achievement of CSP 2021. Through the full-scale sales of Vioza, further acceleration of growth of PASA based on the EV302 study, and the global launch of Zovitaximab, we will achieve significant growth in revenue and profits toward FY2025. This initial plan hasn't been changed, and we will continue to aim to achieve our goals, including a core OP of 30%. In addition to this, we expect either the sales to grow and the which break even with associated expenses, including amortization of intangibles in FY2025. As a result, when the impact of ISABE included, we expect that it will be difficult to achieve a core P of 30% in FY2025. On the other hand, we expect ISABE to continue to grow in FY2026 and beyond, contributing to profit growth along with other strategic products. This will bring us on solid ground to achieve what we are aiming for in our SASB 2021, namely sustainable growth after the loss of the extended exclusivity period. Page 19, this is the last slide. You see the schedule of upcoming event. The SFA meeting for 24-month data will be held on November 6th. The Zolvay-Taksimov meeting will be held after anticipated U.S. approval between December this year to January next year. The annual sustainability meeting is scheduled to be held on February 21st this year. I hope you will join us. That is all. I have to say thank you very much for your attention. That's all as our presentation. We now would like to entertain questions from the audience. You can ask questions only through Zoom webinar. You cannot ask questions through live streaming. If you have a question, please press the raise hand button at the bottom of the Zoom screen. If you're joining from your smartphone, if you tap details, raise hand will be shown, so please press it. If your name is mentioned by MC, please unmute yourself on your screen, mention your name and the affiliation, and then ask your question. Today, our Chief Commercial Officer, Klaus, is joining us as well. As we said at the beginning, if you select original from the Zoom screen menu, you can listen to the original sound without going through simultaneous translation. You can change the sound settings at this time if you want. We now would like to entertain questions, please. First, thank you for waiting. Mr. Yamaguchi from Citigroup Securities, please. Hello, can you hear me? Yes, we can hear you. Thank you very much. I'm Yamaguchi from Citigroup Securities. There are so many topics included in the presentation. Thank you for the presentation. Regarding the Vioza business update, I have a question first. This was a topic during the Q1 earnings. Even if there is a prescription, there is a hurdle to clear until the actual prescription that was explained today. After the insurance reimbursement, it takes some time, and you are going to resolve this issue, as was mentioned. You have a variety of programs going on to resolve these issues. In the short term, these issues will be resolved. Insurance coverage will increase. And even after insurance coverage, there may be some issues because of the process. I'm sure there is some impact, including time frame, how much you can resolve these issues. Thank you for your question. First of all, I'd like to briefly explain, and then Klaus may add some comments, if any, afterwards. First of all, as you said, what is going to happen to insurance reimbursement? That's one factor. And also, for DTC, those who respond to DTC and patients usually would have an annual health checkup to visit physicians. But because they looked at DTC, they have certain symptoms and they want physicians to check their symptoms, whether they would go to the physicians or not. So there are these two factors. Insurance reimbursement. Once we began discussions with payers, insurance reimbursement is not decided immediately, we need negotiations for a few months before decision. As you know, US payers varies. Small ones and big ones, the number of people they cover is also very different. And some payers adopt something new quite quickly, and others need a lot of discussions before approval. For the time being, We mentioned 20% of lives being covered of the population in the United States. We received a reimbursement from such payers. As for the remaining ones, we have larger accounts. One insurance has many people being covered. We ought to discuss with those payers. Of course, we are expecting tough negotiations with them. We shouldn't be too easy to determine the price because it will continue over the life cycle as a whole. So the value of the user must be fully recognized to determine the insurance reimbursement. Probably by the end of FY2023, the ratio of the U.S. population, it's going to be a little more than 50% of the coverage of lives according to our forecast right now. On the other hand, After lunch until now, prescription is not growing so much. There is another reason behind. At the Super Bowl, we had an advertisement, so awareness increased in society as a whole. We thought that happened, including the results of the market research with or without prescription. quite a large number of patients would visit their HCPs that's what we thought but not so much as we expected and to write a prescription it didn't happen or they brought a prescription to fill at the pharmacies but they know that it's not going to be filled with their insurance they decided not to receive it for the time being that's the situation up until now since launch we started DTC from October so more than before The target patient population for Vioza exists. VMS, as you know, has subjective symptoms. If patients have subjective symptoms, they have an annual health checkup, but rather, because of the symptoms, and I heard about this product, doctors, please check my symptoms. By increasing such visits to HCPs, it's easier to write prescriptions. They may have no other choice but to write a prescription. Because of the prescriptions, payers would be pressured to know that there are so many patients, and the discussions about insurance reimbursement will accelerate. If we have those factors as we expected, we can draw a picture as we expected. And prior to that, whether it's going to be realized in accordance with expectations, in the third quarter, we'd like to identify the situation, and based on that, 49 billion yen. We communicated at the beginning of the year how much we can achieve. The figure will be reviewed so that we can announce to you. Klaus, any additional comments from you?

I think Okamura-san described the situation very accurately. Maybe I can only add that the payer negotiations and the direct-to-consumer demand of course are linked because the payers are also trying to estimate what demand they should be expecting. So the direct-to-consumer campaign that we have started on the 9th of October As it increases demand, we expect that that will then also enable us to progress with the payer negotiations. So the two go hand in hand. Thank you very much.

Another simple question. The startup of ISA-B is really good, and I understand in that way, but faithfully, the competitor showed the news of the inflammation in the eyes and I just wonder if it is the product specific or the class problem. So for either way, I just wonder if that kind of side effects happened or not happened or how the HCPs are talking about this. What's the current situation? Thank you for the question. As a fact regarding the eyes of A, the vasculitis is reported, although it's just one case. So in that sense, it's difficult for us to say that this drug is completely clean. But how we evaluate that, rather than myself, Taniguchi is better to explain about this. So, Taniguchi-san, would you please answer for this? Let me answer for this. For intraocular vasculitis, This now observed in competitors or other companies' product, and that is collecting addition. In gather one, gather two, two studies are conducted, and the result is disclosed, and there, such event, it didn't take place. At the same time, although this is the report from other company, post-marketing, just one case of the vasculitis was reported. But this patient used this drug. outside of the indication, off-label indication. And the method of the administration is that with using other companies' drug, on the latter side, ISAB was administered, so the situation was quite complicated. So there is such a one-patient report, and for this patient, we are currently still checking the current situation. So in other words, that is only one case that this vasculitis is observed. Yes, that is only one case that we have recognized. Thank you very much. I understand that.

Next question.

Next question. Mr. Hashibuchi from Daiwa Securities, please. Mr. Hashiguchi, Hashiguchi from Daiwa Securities. Thank you very much for your time. First of all, I also have a question about the OZA and either way. Regarding the OZA insurance reimbursement, you have negotiations to get the reimbursement and also the timing to get the coverage. Okamura-san explained, listening to his explanation, compared to before, you will plan to spend a longer time to negotiate. That's what I thought. Is my understanding correct? Klaus is going to explain.

So the payer negotiations right now are fully on track. So the 20% of lives covered that we achieved by the end of September is exactly what we were expecting. So I think so far we can say we are fully on track with the payer negotiations. Of course, going forward, we are negotiating with the bigger payers and we're negotiating larger volumes. Again, it goes hand in hand with the direct to consumer campaigns, adding demand to the payers. So it's a little bit difficult to predict, but I would say, We are on track, and I would not say that we will be far off our initial expectations at the end of the year.

Thank you very much. Now about ISA Bay. The startup is in line with the expectations as you explained, but the expectations itself, the expectation of when, at what point of time, and what exactly the expectation is. Well, because of this situation, I just would like to hear. And after you decided the acquisition, the competitor safety-related issue took place. So after you made the decision and the situation afterwards might have been changed, So regarding the impact of the competitor's product, the mechanism is closer. That's why some doctors might be cautious about adopting Isovay, or the situation where the treatment option is limited, that's why Isovay is utilized. So there are such a complicated situation, so I just wonder what factor works in what way, and how do you see about the new patient shift? Thank you for the question. First of all, in terms of I explained about the accountants of the accounting treatment of business combination and that is a valuation based upon the time that we decide this acquisition. Therefore, in line with the expectation or better than the expectation, that means that The evaluation result that we've done on our own is always referred to. And 200 to 400 billion of peak cells that we expect, and there are several reasons of this wider range. That's because we need to take into consideration about the competitor's situation, meaning that this is not the factor that is handled only on our own, meaning that we need to look at the data disclosure from the competitor And also the causality identification is also needed to be considered as a factor. There are various parameters, and if it is getting a positive, it can reach to nearly 400 billion. But if it is not really so, then it becomes smaller to the level of like 200 billion. It's been only three months after the closure of the contract of this acquisition, and it's just one month after the launch of the product. So what would happen cannot be precisely predicted at this moment. However, we decide the purchasing price, acquisition price, based upon the due diligence. So the valuation we made at that time is also the foundation to think about what will happen to the future and pick sales guidance. Therefore, it's going to be let you know in appropriate way at appropriate timing so that you can have a better understanding. Understood it quite well. So the current market, what about the current share among the new patients? Current share of this product among the new patients?

So as Okamoto-san said, thank you for your question. As Okamoto-san said, it's very, very early with one month data. We are in a data set that is too thin to really estimate accurately. We do have some anecdotal evidence from doctors when our sales people contact them. And that anecdotal evidence seems to suggest that we get a mixture of reactions. We get some doctors saying, I'm aware of the adverse events of the competitor product, so I'll be more careful. But we have other doctors saying, I'm aware of the competitor's adverse events, so I will prefer either way. So anecdotally, we get a big mix of hesitancy and or switch behavior, which is impossible to quantify at this point. So I would argue that we will need probably another four to six months data before we have stable market share trends.

Thank you very much. That's all from me. Thank you very much. Next. Morgan Stanley, MUFJ Securities. Mr. Mudaoka, please. Hello. Mudaoka from Morgan Stanley. Can you hear me? Yes, we can hear you. Thank you very much. First of all, amortization Cost, 60 or 80 or 100 billion yen. What is the duration of amortization? Period. 10 years? Around 10 years? Or I think it can be a little bit shorter. Until when you would amortize? And the countermeasures against LOE. With this drug, generic could be launched quite soon, given the modality. So did you take that into account in calculating the amortization period? Thank you for your question. Regarding the amortization period, we are not disclosing the information. However, this year, our amortization amount this year from August for eight months starting from August for this fiscal year. When I explain the amortization cost of 80 to 100 billion yen, The two reasons. One is this would include the amount outside of the United States and because of the long period, based on yen, we cannot make a specific amount in Japanese yen. That's why there is a range. In 2023 fiscal year, the amortization cost for FY2023 is for eight months, and we have intangible assets outside of the United States. So what is the assumption for the amortization period? You can back-calculate the period. With your calculation, you can set the duration. That's our stance. As for life cycle management, based on the intellectual properties of the product, we determine the amortization period. But as a lifecycle management, we may change formulations or we may go for different indications. And we may be able to get the usage pattern, for example. So depending on the But it's going to happen in the future. If there's anything we should disclose to you at the proper timing, we'd like to explain to you in an easy-to-understand fashion. For the time being, there are a few puzzle pieces. There is still some space, but from the remaining puzzle pieces, you're going to feel the space. That's the stance we are taking for the time being. Thank you for your understanding. Thank you very much. So this nucleic acid-based drug, considering about 10 years later, you are not thinking that it is not easy to make a generic for nucleic acid product. I don't know if I'm the right person to answer this, but probably 10 years later, technologically, I assume that it will not be that difficult, that extremely difficult to make it. When the antibody becomes available at that time, it was said the antibody is difficult to be made, and also there are multiple layers of the intellectual property. Therefore, generally, it's difficult to be made. developed, but currently biosimilar is not that difficult to be made. So same situation might happen no matter what the modality is. That way we better assume. That's our stance. Thank you very much. For ISA-B, the initial anecdotal feeding is what you talked about. And you talked about the safety, but the 12-month restriction of the usage, and currently just a once-monthly product available. Regarding this point, although it's just one month after the launch, what is the doctor's response about this? Is there any negative comment about this? What you're asking is, rather than the doctors conducting clinical trials, but the doctors who are actually using this product in the market, is you want to hear the... Reaction of them? Yes, that's right. Now, Klaus, would you please answer to that?

Thank you for your question. We don't have robust market research data to answer that question. But as an indicator, we do get reorders from clinics who have ordered multiple times now. So that gives us a lot of confidence that the doctors who are using the product are satisfied with the effect.

Thank you very much. Last question. This is going to be a brief question. Somewhere in the supplemental documents, you discontinue phase 3 of mirabegron in pediatric patients because of the issues in the clinical study. I think this was to extend LOE for mirabegron for six months, but we shouldn't expect this further for the future, correct? Correct.

Then may I?

Pediatric indication, clinical studies for that indication. We decided to terminate because of the enrollment. Enrollment was not so favorable with the European authorities. We had consultations and decided to do this. We made that decision. And into the future, how this will affect the AOE and the six-month extension, probably discussions with authorities will continue. So we don't have any information we can disclose. We cannot respond right now. It's limited to Europe. Yes. Understood. Thank you very much. That's all from me. Thank you. Thank you. Next, JP Morgan Securities. Wakao-san, please. JP Morgan Wakao is my name. Thank you. First question is about the OSA from me as well. This might be the repetition, but I'd like to make a confirmation. For the coverage, it might take longer than you've expected. Thank you. In the first quarter, in the third quarter and afterwards, you are expecting the coverage of the private insurance, and the end of 2025, the coverage will be established to a great extent. But based upon the current assumption, the coverage is going to be reduced further. I believe you mentioned about the 50% of the coverage. At the end of this fiscal year, what will be your target of the coverage? And also the impact of this time, well, it's not the level enough to change the peak forecast, but 525, 300 billion, for example, such a mid-time target. I guess, do you think the situation will have impact, or this is just a couple of months delay? Because I cannot learn about the magnitude of this situation, the magnitude of the impact of this situation.

Thank you so much for your question. I believe your first question was about the payer coverage and what we are expecting at the end of the fiscal year. Our projections that I believe we have communicated since the beginning was that we would achieve a majority of lives covered by the end of the fiscal year. And as I alluded to an earlier question, at this point we are fully on track with the lives covered. We don't see any indication that we should be off target from that, you know, more than 50% expectation of lives covered by the end of fiscal 2023. So that would be what I can share today on the expectations. Okay.

What about the impact against the sales? So far, this is just about a couple of months delay, or FY25 300 billion forecast is also difficult to be achieved. Let me explain about this a bit, and if there is additional information, Klaus would make a comment. In the response in the first question, I mentioned there are two stages, meaning that the DTC impact after the launch, there will be a certain period of time. And the DTC effect is that it will appear and the patients go to the doctors and explain about the symptoms and the prescription is written. So there is a phase one and a phase two. And what is currently ongoing now and what you see is this phase one. But for this phase one, we were too aggressive for the forecast. We thought it could have been better than our current situation. So for this itself, our forecast was not accurate enough. And within this couple of months, there are some patients started to use this drug and they continue to use it within this fiscal year. In other words, a refill will take place. But that is already done, so we cannot recover that. But on the other hand, phase two will come, meaning that the DTC efficacy becomes effective, tangible, and the patient actually goes to the hospital further for their prescription. And for that setup, we need to have very keen eyes so that we can verify it is in line with our expectation or not. And if that situation is completely in line with our expectation, we believe we can achieve the targeted pixel. So I would like you to wait until the end of the third quarter, meaning that we have to wait 13 months. So phase two forecast, that might be varied. Is this understanding right? Yes, that's right. That's right. I understand. Thank you. Now I understand clearly.

Yes, I understand.

Next, about ISAWAY. On the slide on the impact on the business results this year, you explained the impact on SGA and R&D expenditure. Next fiscal year, ISAWAY, hybrid bios, SGA costs and R&D expenditure, how much should we expect on a full year basis? There can be a decrease for SGA costs, but there can be a possibility of an increase in SGA costs and earned expenditure may decrease. So what's your view on this? It's rather difficult to understand perhaps, but SGA costs include, as you can see here, one-time expenses associated with the acquisition. So in FY2024 and beyond, business as usual, what is going to be the amount is very difficult to tell, perhaps, based on these figures. On the other hand, As of today, it's a new product. So it's not as much as the other, but for the launch of a new product, we need spending. Right now, it's just for the United States, but in FY2024, outside of the United States, we are going to launch it as well. So what I want to say here is that from FY23, some of the costs will disappear, but some of the costs included in FY23, but the amount may increase for the future. It's not included in FY23, and it's going to be added to FY24, for example. So we have to take these factors into consideration to think this could be an approximate level. On the expenditure in the life cycle management, For that purpose, new formulations might be developed or every other month dosing may require the accumulation of more clinical data. We can assume such scenarios. average BIOS trend, based on the trends by now, there can be a slight decrease. But on the other hand, we will continue to make these efforts as well. So reducing, coming down to zero, or suddenly doubling are not expected. Understood. Lastly, ISFA vasculitis. Could you elaborate on that? Our first vial is supplied in one case, so 0.1%. So this rate is similar to the competitor's product. And you explained to us about the case of the vasculitis. The administration is quite complicated, so if the administration is in line with the guided administration way, this kind of escalators will not take place. What do you think about it? That's a clinical perspective, so Taniguchi-san is going to explain about it. But the 10,000 bio in one case, so one out of 10,000, I don't think that is the right way. So please abolish that way of thinking. And what Taniguchi explained a little while ago is that, first of all, why this is complicated? Well, first of all, this patient is of label use. And one eye is where the competitor's product is used, and the other is as a way. So once something happens, it's very difficult to identify what's the cause. That's why I'm saying this is quite a complicated situation. So one case per 10,000? Well, that is a completely different way of thinking. Please do understand it in that way. Taniguchi-san, do you have any additional comment on this? Well, onset rate, well, for post-marketing, that is very difficult to define the onset rate. So we are going to make an effort, but for the future as well, it might be difficult to give you the precise number. What is clear is the calculation of data in the clinical trial. I believe that that is the precise event rate of E that can be communicated, and I believe that other companies do the same way. I ask this because compared to APIDIS, What is going to be the incidence? On the other hand, your company's product may have a lower incidence. The difference may affect the upcoming penetration in the market. That's why I wanted to confirm. Yes, you're right. That's why our current guidance has a big range. You may not think this is the right guidance, but for us, with our efforts, we would like to clarify various factors. The third party, we may have to depend on information from third parties in some aspects, so there are certain uncertainties. That's why we have a wide range in our guidance right now. If there is a Any event we become aware to narrow the range and if there is any supporting information, based on that we will change our guidance and we will communicate to you at an appropriate timing. Understood. That's all from me. Thank you. Next, Goldman Sachs Securities. Weda-san, please. Thank you, Weda, speaking from Goldman Sachs. My first question is also about Vioza. So what's the current evaluation by the user doctors for this drug, efficacy, safety, the onset of efficacy, convenience? I'm looking at it in a comprehensive manner. I think this is the drug very easy to use, but what is the actual voice from the using doctors, the prescribing doctors? Klaus is going to answer for that.

Thank you for your question, Wadasan. We conducted recently market research to confirm doctors' impression of Vioza. And quite honestly, we were very positively surprised how positive the reaction is of those doctors who are writing, who are actively writing Vioza, prescribing Vioza. The confirmation of the unmet medical need, the confirmation of the scientific progress that Vioza offers, the confirmation that it helps patients. So the reaction is resoundingly positive from doctors who have used Vioza. That, of course, gives us a lot of confidence that Vioza is really going to fill the need that women have in this indication.

Thank you very much. By the way, regarding that positive reaction, what are the points about Vioza? What kind of Vioza profile is being highly evaluated in your view?

It's above all the efficacy and, of course, also the fact that it's a non-hormonal treatment. So those would be the two aspects that... that stand out in our market research. So the mechanism of action and the effectiveness of the treatment. Thank you very much.

Secondly, regarding either way, I have a question. Towards FY2025, sales are going to grow substantially according to the image you have shared with us. For the future, What's your view of the speed of market development? It's going to be a grow in parallel or if there's going to be certain acceleration at some point in time, the label update with the 24-month data, are you assuming a certain trigger event? Thank you for your question. Of course, it's not going to be linear in our view because 24-month data from the current data, reflecting that data to change and to update the label, that is going to be a major trigger in our view. One more thing is as follows. In the actual clinical settings, instead of the clinical studies with a controlled environment, in the real-world usage, Doctors will have their impression if this is the product, this could be used in these patients. If that is going to happen or not, it's going to be a major driving force. In that sense, it's just one month. The doctors who are using seem to be using a lot, but the true capability of ISAVEI, must be fully understood in the clinical settings so that it can be used in patients. That would facilitate the growth in an accelerated fashion. Thank you. Understood. That's all from me. Thank you very much. UBS Securities Sakai-san, please. UBS Sakai is my name. For Vioza and RSVA, there are a lot of detailed questions already asked, and I believe that the questions are exhausted. But this might be a more bigger picture perspective. OAB, BPH. And such a new disease, so such a disease, what you said, is the new target, and for those new areas, you made a success. But VMS and dry AMD, roughly speaking, these are also what you are working as the very new treatment area. And Okamura-san is repeatedly saying you are still early start phase. And I think that is right. So they're developing a new field. Of course, you have already accumulated your experience so far getting into such a new field. What do you see the current situation? This current hurdle you are facing is what you've expected from the beginning, or you have to change it. your way to look at it, your attitude toward this drastically? Do you have any qualitative information? Do you have any particular answer for this question? And if that is the case, then the way of issuing the guidance is going to be quite important, $200 billion, $400 billion. I want to be closer as much as possible. There will be the request for that as well. I believe it doesn't have to be a quarter, but at a certain timing, I would like you to work on that as well. That's a request. The second question is quite similar to the first question, so let me continuously ask. Is the ISA-8 gathered to the dose once in two months, and how that data is handled or treated? I don't understand that quite well. The design itself is not really the one that proves. that shows the superiority. The meeting in December, you are going to explain about that further. But as of this moment, is it possible for you to make some specific comments? So I have those two questions. Thank you very much. Before answering your question, I would like to confirm your intention of the first question, Sakai-san. So we've tried, Aster has tried something new conventionally, and based upon that, we have Vioza and Isobay currently, and PXL, so even for PADS, PXL, so those information provided based upon our past experience. Yes, that is right. You've tried new challenges, new disease, or new treatment area challenged. So in the urology, ophthalmology, you get into new field and there have you used your experience or know-how established so far to come up with a prediction? For example, did you see in a Super Bowl and the reaction is not as expected, but you see that in that way itself is surprising because something unexpected always happened. So I believe you are saying that... It's coming because you are still in a very earlier phase. So I just wonder what's your perspective now on that for the future? That's my intention. Klaus also would like to answer something, so Klaus will make a comment first.

I just wanted to respond to your use of DTC in the Super Bowl campaign. That is not DTC. That is disease awareness. Disease awareness is without the name of the drug. DTC is with the name of the drug. So the coverage that we got before we got approval had a very different character from the DTC campaign that we launched on the 9th of October. The DTC campaign on the 9th of October says Veoza. and please consult your doctor. Whereas before, we were informing the public on what is VMS, and we did not say there's a new drug in our Super Bowl commercial. That came later through the media in May when we got the approval from the FDA. Then the media spontaneously, without us doing anything, said, oh, there's a new treatment. And that fact led us to believe that because they were saying, oh, there's a new treatment, we thought women would start consulting with the doctor. But now we see that it really takes a targeted DTC campaign, you know, a TV commercial the way we have started on 9th of October, which says the brand name, which explains the context and asks women who are interested to consult their physician. That's a much more targeted approach than before. You have to divide these two phases from the disease state awareness phase before and the targeted DTC branded campaigning that we're doing now. Okay, we're understood. Thank you.

And coming back to me, of course, among what we have done by now, capabilities we can use under the current circumstances, and we have the knowledge and skills we are using or we can use right now. On the other hand, what we are seeing right now regarding the group of new products, Tamazotin for BPH and OAB struck, Vesicare, Mirabegron, compared to them, Some look different. If we depend too much on what we did before, we shouldn't make a mistake. We are trying to be careful. So we are using whatever we can. But at the same time, we try not to depend too much on what we have done before. Because it's too early. I don't want to say that too much. But in reality, it's just one month after the launch or three months after the launch. And what is going to happen in 10 years' time? That's the question, right? So we cannot say. I think it's irresponsible to say this is going to happen definitively. You have to accept this kind of a range. Otherwise, it will become difficult for us to talk to you, in my view. So on our end, we try to be transparent. as much as possible. And we shouldn't say what comes to our mind instantly. We have to be consistent. If we say something a year ago, no more update for the subsequent year, we try to be careful in this regard. So having something in our hands without disclosing or based on our intention, which is not right, to manipulate the information, please don't think so. We are very serious-minded. We are thinking that we are responding to your questions with sincerity. We are disclosing whatever can be disclosed to you, so thank you for your understanding. I don't think you are hiding anything. Of course, as Okamura-san said, I totally agree with you. I have a good understanding of your company situation. Thank you very much. What about Gather2, by the way? Taniguchi is going to respond. Regarding the gather-to data, as has been mentioned from before, this week, at the end of this week, there's going to be a presentation at AAO. So I'd like you to look at the data at that time, and then at an explanatory meeting, we're going to explain further details to you. So as of now, what we can say is that 24-month data. Regarding the design, 12 months, monthly dosing for 12 months and reallocation to monthly dosing and dosing once every two months. Then up to 24 months, we follow up on the subjects. And we have the results regarding the efficacy, the primary endpoint. we achieved the suppression of GA secondary to AMD and with 12 months data, there is consistency with what we have seen with 12 months dosing. Regarding the other details, I'd like to refrain from further comments. So you have confirmed those two points? Other data, of course, have corrected such data. I understand. Thank you very much. Thank you. Next, Miss for Securities, Tsuzuki-san, please. Tsuzuki from Miss for Securities, can you hear me? Yes, we can hear you. I have one question each. Just like asked by Sakai-san, ISA-V, that is once in two months administration, that is the regimen and the clinical trial as well In AAO, the data out of that will be published. But, of course, the background of the patient will be different, but the cyphophoric comparison will be also possible in that data? Let me answer. So the once in two months data, that is going to be shown together with once monthly data. But comparison with cyphophoric, That is not done within this study. So that kind of head-to-head comparison data is not going to be shown. I see. So that is going to be indirect comparison done by ourselves. Thank you. And another is about parts of PD-L1. CPS over 10 or less than 10, the efficacy is really good, and the peak sales is going to be revised, and that says the data itself is really good. And it's difficult to what extent you are going to revise. It's difficult to be answered, but the first line, MUC, overall market size that you are expecting, how big would that be? Is it possible for you to mention that size? Is that information available somewhere? I believe that slide is on the screen currently. Is it about the target patient or overall market? Or looking at this, it's 300 to 400 billion and a five-line MUC. That's a little less than half of that in your assumption. To what extent it would be? Because originally this first one, MUC, the adverse drugs are already available. And what's your assumption of the market size? And if you have that kind of data, would you please share that with us? Then it's not this one. Or here. Here we see our market size. 300 to 400 billion is the total. Out of that, about half is the first-line MUC. But the market size, including other competitors, other companies' products, this is your own market, right? Including other products, what would be the overall market size, including other checkpoint inhibitors? We don't have any market size information disclosed, but the target patient number, 76,000, that is overall market size, we assume. And also as additional information, sales-wise, Out of this, about two-thirds will be from the United States. And out of that, half is CIS eligible and half is CIS eligible. Number of the patients and dollar-based calculation, that might be a bit different, but that is the guidance that we have provided already. Understood. Thank you very much.

Thank you.

Thank you very much. This is going to be the last question. Thank you very much. Regarding Isavay, I have a question. It's just after the launch, and the information from the field and the market research you have conducted so far can be the basis for your answer to my question. How to use this drug in reality? We interviewed a US ophthalmologist to use this drug in one eye or in both eyes. If a GA is going to occur in both eyes, if it's just one eye and there's almost no vision in one eye and regarding the other eye, the symptoms begin. For those patients, this is going to be used according to the approach mentioned by the physicians. What's your view? on this, regarding this approach. Depending on the doctors, is there going to be any difference, or if one eye is almost blind, are you going to focus on such patients, or no problem at all in one eye, but GA begins in the other eye, is that the timing to start the treatment? I'd like to know more.

I am informed our label covers both unilateral and bilateral use, so we're not focusing on any particular patient type.

In the actual clinical settings, no information yet from the physicians in the clinical settings yet.

be much too early. I'm sorry, that would be much too early to have that specific information. Of course, when we gather that information, we'll be happy to share that with you.

Thank you. And for PADSEF, so you are going to do the submission by the end of December. Approval is planned around the end of March. I think that's what's stated within the presentation material, but I think it's very fast. But is this understanding right? This PADSF 302 study, as has been explained, data-wise, we say that it's quite valuable, high value. And also, medical needs in this field is extremely high. So for us, this is most prioritized product, so as early as possible, we would like to receive the approval in the United States, and also would like to expand the activity other areas so that we can get approval as well. FDA discussion is ongoing. And at this timing, we are doing our best so that we can get the approval at the timing that is expected and described here. Thank you very much. Thank you very much. Some of you are still waiting to ask questions, but time is up, so we'd like to close this meeting today. Thank you very much for joining this meeting.