Astellas Pharma Inc

Everyone, thank you very much for your participation in this announcement of Q3 FY2023 financial results and December 31, 2023. I really appreciate your participation, and I'm a kid. I would like to serve as a moderator. My name is Ikeda, Chief Communications and IR Officer. We are going to have a presentation first, followed by a Q&A session. Japanese-English simultaneous translation is available. However, for that translation, the accuracy is not guaranteed by ASTELLAS. For the languages, please select the appropriate channel on the Zoom webinar screen. If you select the original language, you listen to the original language without hearing the translation. And today's presentation is based upon the material available on our website. This material or representation by representatives for the company and answers and statement by representatives for the company in the QA 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 the number of factors. Please do understand about that. And they contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representations or advice of advertisements regarding the efficacy or effectiveness. The participants here today is Atsushi Kitamura, Chief Financial Officer, Yoshi Itsugu Ushidaka, Chief Scientific Officer, Tada Aki Taniguchi, chief medical officer. Klaus Ziller, chief commercial officer. We have all those four on the stage. Now, please start the presentation, Kitamura-san.

Hello, everyone. I'm Atsushi Kitamura from Status Pharma Inc. Thank you very much for joining our FY2023 Third 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 Ikeda 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 FY 2023 third quarter financial results. Revenue increased year on year, but was behind the four-year forecast we revised in the second quarter. Extendi and Zospata was in line with the full-year forecast revised upward in the second quarter. Patsev was in line with the full-year forecast revised significantly upward in the second quarter. Also, potential peak sales forecast was revised upward, incorporating the robust results of EV302 study. On the other hand, regarding Vioza, overall initiatives are progressing, but demand trails internal expectations. Full-year forecast was revised downward. Either way demonstrated encouraging first full quarter performance since launch. This progress made us feel confident about its future growth. SG&A and R&D expenses were on track. Operating profit was behind the full year forecast, mainly due to the performance of Vioza. Taking these factors into account, revenue and operating profit full year forecast was revised downward. On page 5, I will explain FI 2023 third quarter financial results. Revenue increased to 1,189,1 billion yen, up 2.1% year-on-year. The forex had a positive impact of 58.8 billion yen. Core operating profit was 149.6 billion yen down by 36% year-on-year. The Forex had a positive impact of 13.8 billion yen. Due to the impact of the acquisition of Iverick Bio as well as Lexiscan Generic, core operating profit was significantly lower year-on-year. 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 third quarter. In the third quarter, we booked 18.4 billion yen as organizational restructuring cost on a global basis. This impact was already factored into our four-year forecast we revised in the first quarter. As a result, operating profit was 74.1 billion yen, down by 59.1% year-on-year. Profit decreased to 50.3 billion yen, down 65.3% year-on-year. On page 6, I will explain Xtandi and Zospata business update. First, about Xtendi, global sales increased to 560 billion yen, up by 9% year-on-year, in line with the full-year forecast revised upward in the second quarter. In the actual business performance, even excluding Forex impact, Xtendi achieved about 5% growth year-on-year. Sales expanded in all regions, and Xtendi is still growing more than 10 years on the market. In FY 2023, we're expecting sales close to 720 billion yen, exceeding the 700 billion yen mark on a full year basis. In the United States, based on Embark study results, M0 CSPC additional indication was approved in November last year. We are expecting contribution to future sales. On the other hand, Medicare Part D redesign will start from January 2025 as one of the measures by the so-called IRA, Inflation Reduction Act. The redesign is expected to increase the amount to be paid by companies, and we are assuming impact on our sales. We are still examining the specific level of potential impact. We hope to provide guidance in Q4 earnings. Regarding Zospata, global sales increased to 41.3 billion yen, up 14% year-on-year, in line with full-year forecasts revised upward in the second quarter, like Xtandi. Zospata is expanding steadily, even in the current indication. We are expecting the achievement of a full-year forecast. On page 7, I will explain PADSAFE business update. PatSafe global sales increased substantially to 55.6 billion yen, up by 68% year-on-year. Performance is in line with a four-year forecast, which was revised upward by nearly 20 billion yen in the second quarter. The United States in particular contributed the most to global sales expansion. This is driven by the market penetration of first-line SIS-ineligible MUC based on EV103 study approved in April last year. In addition, in December last year, first-line MUC additional indication was approved based on EV302 study for both cis-eligible and cis-ineligible patients. What's noteworthy is an incredible speed up to approval. Approval was granted only two weeks after the FDA filing acceptance. We believe that FDA also highly evaluated the robust data of EV302 study. We are expecting significant sales contribution in FY2024 and beyond, driven by the penetration of the robust EV302 study data and further expansion of eligible patient populations. In Europe, reimbursement started in three new countries, including Spain, with a big market. We have obtained reimbursement in a total of 13 countries by now. We are expecting further sales contribution. Furthermore, we updated potential peak sales forecast for PADSEF. Incorporating the robust results of EV302 study, which even exceeded our initial expectations, we revisited our market share assumptions. We made an upward revision of potential peak sales forecast from 300 to 400 billion yen to 400 to 500 billion yen. We will aim to achieve 500 billion yen with Budsafe as an important growth driver. Peak sales forecast is disclosed as in-market sales, not ASTELLAS revenue. This is calculated as a total of sales booked by Pfizer for the Americas plus sales booked by ASTELLAS for ex-Americas. Indications in early clinical phase are not included in peak sales forecast, such as NMIBC, no muscle invasive bladder cancer, and other solid tumors. So depending on the future progress, there can be an upside for peak sales forecast. Based on progress, we will also update you on peak sales forecast at an appropriate timing. Just for your reference, you can find the image of economic conditions with Pfizer in the right bottom of this page. Schemes vary slightly by region, but we are assuming profit sharing on a global basis. Both the current progress and the outlook are extremely positive. We're expecting PADSEV to serve as a solid growth driver in FY2024 onwards. On page 8, I will explain Vioza business update. Third quarter year-to-date sales were 3.6 billion yen or 25 million dollars. Overall initiatives are making steady progress, such as market access and DTC activities. We feel more confident about the future product potential of Fioza. On the other hand, with regards to FY 2023 initial uptake, demand trails internal expectations, and the actual results so far are behind our initial assumptions. There are two main factors for demand lower than expected. First, the impact of DTC activities we started in October last year onto the actual demand is lower than expected. The level of interest among consumers and ACPs is rising steadily with DTC activities. We are very confident about the direction of our initiatives. On the other hand, for women who have seen our DTC activities to actually ask ACPs about Vioza, the timeframe is longer than our initial assumptions. As a result, it's taking longer to impact the demand increase. Secondly, many ACPs feel that Vioza's current payer coverage is not enough. Total lives covered are expanding steadily, but based on market research, more HCPs than we assumed have a perception that the current coverage progress is not enough to actively prescribe Vioza, which is impacting the uptake. Full year forecast of $375 million we decided to keep in the second quarter has been revised downward to $50 million by incorporating the demand ramp delay due to these factors and by reassessing the timing and pace of the full-scale growth curve we expected in the fourth quarter. Next, I will explain the latest progress. As for market access, total lives covered expanded to about 35% as of the end of December last year. Payer discussions are ongoing right now. We are expecting over 50% payer coverage by the end of FY 2023. Regarding the effectiveness of DTC activities, we have received a lot of positive response. The level of interest among consumers and HCPs is going up steadily compared to the time before the initiation of DTC activities. In particular, activation of consumers and HCPs is an important progress. According to market research, 70% of women reported high intent to ask HCPs about Vioza. Also, 76% of HCPs report they're extremely willing to prescribe Vioza. We believe activation is important for the growth of Vioza. We'd like to aim for further investment in this regard for the future as well. As for our future initiatives, in order to address HCP's perception that payer coverage is not enough, we will promote information provision to HCPs by Salesforce in an active and timely manner on the progress of expanding payer coverage. In DTC activities, we will broadcast a Vioza TV spot focusing on the product brand during the Super Bowl in the United States. More than 100 million people watch the Super Bowl every year. Last year, we ran a VMS disease awareness-related TV commercial and received a lot of reaction. We are hoping to reproduce such success. Regarding the future outlook, we are expecting a further increase in the percentage of lives covered and continued momentum from commercial investments in FY2024. Mid- to long-term peak sales outlook will be reviewed based on the progress of overcoming HCP's perception that coverage is insufficient, and we will provide guidance at an appropriate timing. Lastly, update on Europe. We obtained approval in December last year, and the product was launched in a total of seven countries, including Germany and UK. We will aim to increase launched countries and obtain reimbursement in various markets. On page 9, I will explain ISA VA business update. About the progress since launch, ISAWAY was launched in the United States in September last year. Sales in about four months since launch were 5.3 billion yen. This is an encouraging performance after launch. Despite being before permanent J-code and label update, this progress was great. and made us feel more confident about its future growth. Since launch, more than 17,000 vials have been shipped and become available in over 920 retina accounts. In particular, the Gather-2 data released at AAO 2023 in November last year was highly evaluated by specialists, and accelerated growth in eyes-away usage was confirmed after the presentation. Based on the reported shipment volume data, we estimate market share in the third quarter period to be about 20%. Taking into account the fact that it's just about four months since launch, we think this is an extremely positive number. Safety profile so far in the real-world settings has been consistent with clinical trial results according to the report. We remain confident about the product profile of Aizavei. Next, about DTC activities aiming to increase awareness of the Isovay product brand and GA as a disease, shown on the right-hand side of the page. Since the approval of Isovay, we have been rolling out branded campaign for Isovay. We have achieved 55% brand awareness among GA patients post-launch. As for disease awareness campaign for GA, we formed partnership with two-time Emmy Award-winning actor Eric Stonestreet, who shared his personal connection with GA in a peer effort. These initiatives turned out to be successful and contributed to 56% awareness of GA among dry AMD patients. Lastly, about the future outlook. We are expecting two major milestones in FI 2024. First, we received confirmation of permanent J-code effective April 1st this year. The other is that we are anticipating approval of label update within FI 2024. We are expecting significant growth in FI 2024 driven by these upcoming milestones. Together with PADSEF and Vioza, we are expecting ISAWAY to contribute to sales as an important growth driver for the future. Next, on page 10, I will explain cost items. As is shown in the table, cost of sales ratio was 18.4%, improving by 1 percentage point year-on-year, and was on track. SG&A cost excluding U.S. extended co-promotion fees increased by 20.4% year-on-year. When Forex impact was excluded, the year-on-year increase was 14.6% or about ¥49 billion. As main factors behind, the impact of IVREC bioacquisition was about ¥20 billion. Fiosa-related sales promotion costs rose by about 30 billion yen year-on-year. On the other hand, sales promotion costs related to mature products such as Mira Begron decreased by about 6 billion yen year-on-year. We reduced investments in mature products actively and allocated resources to important growth drivers we should invest in, such as ISAFE and Vioza. We are on track in our spending. R&D expenditure increased by 5% year-on-year and increased by 1.6% when Forex Impact was excluded. With the Iberic Bio acquisition, we booked R&D expenditure of about 8 billion yen, and we use it as planned.

On page 11, I will explain the FY23 revised forecast. We have revised our full-year revenue forecast downward by 46 billion yen to 1,562 billion yen, incorporating the current progress of Vioza. The foreign exchange rates and revenue of products other than Vioza have not been revised from the full-year forecast disclosed in the second quarter. SG&A expenses are expected to be 731 billion yen, a reduction of 6 billion yen. In alignment with reassessing the timing and pace of demand ramp-up of Vioza, we have revealed some investments timing that we have planned in this fiscal year. We will continue to invest to maximize the product value of Vioza, but we will do so after carefully examining the optimum timing for the greatest return on investment. R&D expenses are expected to be 286 billion yen with a reduction of 4 billion yen. The production cost of commercial inventory of asaphe, which was included in R&D expenses in the second quarter, will be recognized as inventory assets as a result of Asila's re-examination of its accounting treatment, and the impact of this change has been incorporated. As a result of the above course review, the impact of the downward version of VOZ has been partially mitigated, and the cooperating profit is expected to be 164 billion yen. On a full basis, operating profit is estimated to be 83 billion yen mainly due to the core base revision. From here, I will explain our initiatives for sustainable growth. Page 13 summarizes the main updates regarding R&D since the last financial announcement. Over the past three months, there have been a number of important progress, particularly with the regulatory submission for Extendi and key strategic products. Details are provided in the following slides. Page 14. Here, I describe the progress of the key events expected in FY23 for Extendi and key strategic products. Progress since the last announcement is shown in red. Extendi received approval in the U.S. in November last year for the additional indication of ME0-CSPC, a non-metastatic castration-sensitive prostate cancer with a high risk of biochemical recurrence, based on the EMBARQ study. Regarding POTSF, based on the EV302 study, for the additional indication of first-line treatment of locally advanced metastatic erythelial gas norma, the filing in the U.S. was accepted in November last year, and the approval was granted in December. The filing for additional indications in Europe and Japan were also accepted in January. As for ZOVA-Taximab, in January, we received a complete response letter from the US FDA. I'll provide an update about this later in this presentation. The OZA was approved in Europe last December. For Izabay, we submitted a US-level update application in January based on 24-month data from the GATHER2 study. Other updates are listed outside of the chart. For Beoza, we will conduct phase 3 studies with the aim of regularly submission in Japan. Starlight 2, a pivotal study, and Starlight 3 to evaluate the long-term safety will be studied in the fourth quarter. Regarding Zospada, after reviewing the top-line results of the Phase III MOFO study for post-HSCT-mint-acute myeloid lymphoma, together with additional analysis and consideration, we have decided to discontinue the development based on the result of this study. By accelerating the implementation of measures in each project, we were able to accomplish all the key events planned for FY23 as of January. Page 15. We have made progress in the late-stage pipeline with four regulatory approvals for new Indicational Region received during the quarter. I will discuss these in more detail. Xtendi. It is the first novel hormonal therapy receiving USFDA approval for M0-CSPC. Based on the result of the EMBARQ study, Xtendi is now approved for monotherapy as well as combination with gonadotropin-releasing hormone analog. Regarding the addition of new indication for Part 7, we expect that this will be a new treatment option to transform the current standard of care for decades and will bring significant value to patients in the first-line treatment of locally advanced or metastatic urethral carcinoma. In addition, as I mentioned earlier, PADSF was approved in less than three months after the top-line results read out of EV302 study and, incredibly, only two weeks after the SBLA accepted by FDA. Beoza was also approved in Europe as the first in-class non-hormonal treatment. Bus motor symptoms associated with menopause are known to be a common medical need not only in the U.S., but in many other countries as well, and this approval gives us the opportunity to serve more women suffering from this condition. Chris Semba has an additional indication for pediatric patients with very high medical needs. In addition, pediatric exclusivity was granted by the FDA, extending its market exclusivity period by six months in the US. We hope that these achievements will help maximize the value of each product. On page 16, I will provide an update on the status of Zovetaximab. In early January, we received a complete response letter from the FDA informing us that the FDA could not approve Zovetaximab by the target date due to unresolved deficiencies following the pre-license inspection of the contract manufacturing organizations or CMO facility. On the other hand, the FDA has not raised any concerns related to clinical data and is not requesting any additional clinical studies. Let me explain our action plan in light of this situation using the diagram in the middle. We are currently working closely with the FDA and the CMO as well to address the findings. Once Astellas confirms that the CMO's response is complete, we will resubmit the BLA and a new PDUFA date will be identified upon FDA acceptance. The FDA will then conduct an inspection of the facility and decide whether or not approval is granted. The target date for BLA resubmission is the first quarter of FY 2024. In parallel to that, reviews of applications outside of the US are continuing as planned. Regulatory agencies around the world conduct their reviews independently, and the review decisions are based on the different requirements and expectations of each regulatory agency. This incurs no impact on other SLS products. We will keep you updated on any developments as they occur. On page 17, I will provide an overview of the current status of the focus area approach projects in clinical phase. There have been no major changes in the past three months, and each project continues to progress in clinical studies. Of these, ASP1570 and ASP2138 in primary focus immuno-oncology and ASP3082 in targeted protein degradation are aiming to obtain early data readouts in Phase 1, a monotherapy dose escalation study ongoing during FY2023. We are prioritizing the three projects as the lead projects for each approach and expect to obtain data that will lead a POC in FY2024 or later. Since the studies are still ongoing, we are unable to provide specific status at this time, but we will provide updates as soon as they become available at an appropriate timing, such as when we announce financial results. On page 18, I will explain recent examples of open innovation initiatives such as activities at research stage and at early development stage. As part of activities at research stage, we focused on incorporating external innovation and co-creation through collaborations with academia and other companies and contributions to life science ecosystems. As part of these efforts, we are leveraging open laboratories and have established SAKULA Tsukuba and TME ILOVE in Tsukuba and Kashiwanoha areas in Japan. SAKULA Tsukuba is an open innovation center established in the Astella Tsukuba Research Center and is equipped with experimental facilities that can be used immediately after move in. Academia and startups that move in here will have the opportunity to network with other users and with Astellas researchers in addition to support from various Astellas experts. The TME ILOVE was established in the Kashiwanohara area as an open innovation center for cancer microenvironments, an issue in interactive cancer, where researchers from inside and outside the company can freely discuss and advance their research. The Kashiwanohara area is in close proximity to the National Cancer Center and many of Japanese leading advanced medical facilities and academia, and we expect to promote collaboration by maximizing the advantage of this. On the right side of the slide, as activities are a little bit more staged, we have entered into a five-year strategic collaboration with Mass General Brigham, MGB. MGB is based in Boston and provides medical education as a teaching hospital at Harvard University. At the same time, MGB is known as one of the top medical research institutions in the world. conducting a wide range of translational and exploratory research. Through this collaboration, the two companies aim to combine their expertise and knowledge to accelerate the early development of innovative therapies. The collaboration has agreed to initially focus on Astellas' core R&D areas of oncology, rare diseases, and cellular medicine gene therapy. We expect that partnering with highly specialized academic institutions such as MGB will help us to better understand disease and modalities, optimize clinical trials, and accelerate the early development of relevant primary focus areas. We also expect that Astellas' presence in Boston area, one of the world's leading life science area, will be further reinforced, which creates new opportunities for open innovation. On page 19, I will explain a summary of our progress to date in FY2023 and our outlook. So far in FY2023, revenue and cooperating profit have been below our initial focus due to the lexicon generics and iveric bio-acquisition, as well as lower-than-expected progress in BIOSA. On the other hand, we made significant progress in the development of key strategic products including the launch of Vioza and Isovay and the new indication of PADSEV. We have achieved a number of important milestones which we expect to become full-fledged growth drivers from FY2024 onward. The order has been slow to ramp up due to the fact that many physicians feel that insurance coverage is insufficient, which is a barrier to prescribing. In response, we will work to further expand insurance coverage and promote the active and timely provision of information to physicians, which will lead to full-scale growth. In addition, while ensuring investment in growth drivers, we have begun considering various measures to improve margins, strictly control expenses, and revision of our planning process. As the CFO, it is my responsibility to ensure that these initiatives are carried out. We'll provide details of these initiatives at an appropriate time in the future. As a result of the above, we expect to achieve an increase in revenue and profit in FY2024. We hope to show that we will be able to achieve sustainable growth from FY2024 onward with setting FY2023 as the turning point. That is all. Thank you very much for your attention.