Astellas Pharma Inc

Everyone, thank you so much for your participation in this financial results ended June 30th financial call. I'm going to serve as the moderator here for today. I'm Ikeda from Chief Communications and IR officer. Today we are going to give you the presentation first that is followed by a Q&A session. The presentation material is on the website. Including Q&A, a Japanese-English simultaneous translation is available. For the translation, the accuracy of that is not going to be guaranteed by ASTELLAS. The language can be selected from our Zoom webinar screen. If you select the original, then you can hear the original voice without the interpretation. service. 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 a number of factors. They contain information of pharmaceuticals including compounds under development. But the information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these variations from modern approved uses in any fashion, nor provide medical advice of any kind. Participants Atsushi Kitamura, CFO, CMO Tadaaki Taniguchi, CCO, Chief Commercial Officer Klaus Zehler. These three are participants from our end. Now, I would like to start the presentation. Kitamura-san, please start.

Hello, everyone. I'm Atsushi Kitamura from Asteris Pharma Inc. Thank you very much for joining our FY2024 First 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 am not going to read this page. Page 3 is the agenda for today. Starting from the next page, I will explain these topics in this order. On page 4, I will give you an overview of FI 2024 first quarter financial results. First, overall, we have made a solid start towards achieving the FI 2024 initial forecast. In the first quarter, revenue increased by 26% year-on-year. Externally contributed to overall revenue growth, driven especially by the United States. Sales of strategic brands as a whole expanded to 75 billion yen in total, increasing three times year on year with a robust growth of about additional 50 billion yen. SG&A and R&D expenses were invested as planned for future growth. In parallel, we executed timely cost management with a focus on ROI. Core operating profit increased year on year, with significant contributions from the expansion of extended and strategic plans. On page 5, I will explain FY2024 first quarter financial results. Revenue reached 473.1 billion yen, up by 26.2% year-on-year. Core operating profit rose to 88.3 billion yen, up by 20.5% year-on-year. Even excluding forex impact, revenue and profit increased. 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 first quarter. We booked 5.5 billion yen because of fair value increase of contingent consideration for Zorbetaxima, mainly due to Forex impact. As a result, operating profit was 50.7 billion yen, up by 10.6% year-on-year. Profit increased to 37.6 billion yen, up by 13.5% year-on-year. On page 6, I will explain EFI 2024 first quarter results of extended and strategic plans. First, about Xtendi, global sales increased to ¥224.2 billion, up by ¥50.2 billion, or 29% year-on-year. Even excluding forex impact, Xtendi achieved about 16% growth. Global sales off to a strong start, driven by higher-than-expected US performance, in particular. In the United States, which has contributed the most to the overall sales expansion, in addition to the growth of the market as a whole, the penetration of the additional indication of M0 CSPC approved in November last year based on Embark study and its ripple effects on other indications have made great contributions, so demand exceeded expectations. In ex-US regions, demand was as expected or exceeded expectations. Sales of strategic brands supporting a future growth, namely Patsef, Izavei, Bioza, Vailoi, and Zospata, expanded to ¥75 billion in total, increasing three times year-on-year, with a robust growth of additional ¥50 billion approximately. PADSEF global sales increased to 38.4 billion yen, up by 23.2 billion yen, expanding substantially with a growth of 152%. As for Aizabe, first quarter sales were 12.7 billion yen, exceeding expectations. Demand growth was stronger than expected following J-code in April in particular. Increased confidence in its safety profile has also contributed to sales expansion. Global sales of Vioza reached 6.6 billion yen, making a steady growth in line with the initial forecast. Overall initiatives have progressed as planned, such as payer coverage and DTC efforts. Parts of ISAVAY and Vioza will be explained later in detail. Viroi was launched successfully in Japan in June. In just two weeks after its launch, we accessed first majority of target physicians. Information provision to physicians is making steady progress. There is a solid progress in available accounts for Viroi, including 18.2 testing penetration. We will focus on the penetration also in the second quarter and beyond. In the United States, established markets, international market, and China, we are anticipating approval sequentially from the second quarter onwards. We are expecting sales contribution after approval. Regarding DOSPATA, global sales increased to 17.3 billion yen, up by 33% year-on-year. Sales expanded in all regions. Continued steady growth is expected from the second quarter onwards as well. On page 7, I will explain business update for PADSEV and VIOZA. PADSEV achieved robust sales growth in all regions, driven by the United States and established markets in particular. Sales grew by 8.6 billion yen just in three months from the previous quarter. Quarterly growth rate is also making a solid progress. In the United States, sales increased by about $100 million year-on-year on a local currency basis, growing at 128%. Thanks to the penetration of EV302 study data with extremely favorable results presented at ESMA last year, first-line share expanded and contributed to sales growth. New patient share in the first-line settings is over 50%. We believe it's establishing its position of care. In ex-US regions, demand grew strongly in the second-line settings and beyond. Especially, established markets had a strong growth rate of 178% on a local currency basis. Outside of the United States, launched countries increased to 38, with reimbursement initiated in 17 countries. Regarding the additional first-line indication in Europe, CHMP adopted the positive opinion in July, and approval is expected by October. Also in Japan, we are anticipating approval within the third quarter. We are expecting contribution to sales after the respective approval. In addition, in China, approval of the indication is anticipated by the end of the second quarter. If approved, it's going to be a new launch in China. For PatSafe, as countries with first-line approval, new launched countries are increasing outside of the United States. In addition to the growth in the United States, we're expecting further sales expansion. With regards to Veoza, global sales grew steadily, mainly in the United States. In the three months from the previous quarter, global sales increased by 2.9 billion yen with a linear growth in line with the initial forecast. In the United States, payer coverage expanded as expected from 50% as of the end of March to over 60% as of the end of June. HCP's perception of Viosa market access is gradually improving thanks to the promotion of educational activities with direct information provision by field sales force and digital channels. As for DTC efforts, as was shown at the beginning of the year, initiatives with low ROI are being reduced or stopped so that we can invest with a focus on high ROI initiatives. We are trying to optimize DTC at any time. We believe we can aim to achieve profit early by continuing to promote initiatives with a focus on ROI. Partly due to the effectiveness of our DTC efforts, we are observing enhanced patient activation as well. According to market research results, we were able to confirm that the proportion of women who reported high intent to ask ACPs about Vioza has risen. Outside the United States, launched countries increased to 13, and we are expecting contribution to sales growth going forward. For Vioza, we are anticipating continued linear growth from the second quarter onwards, by promoting payer coverage and DTC steadily, mainly in the United States. On page 8, I will explain business update for Aizabay in the United States. Aizabay performance exceeded expectations with sales expansion particularly driven by the J-code and its safety profile. Sales increased to $82 million, up by $35 million, or 73%, in just three months from the previous quarter. It's growing at a speed higher than expected. Demand for an effective J-code in April exceeded expectations, igniting multiple new accounts. As of the end of June, Aizavei is available in over 1,200 Retina accounts. Market share in the previous quarter was about 25%, but based on market research, market share is estimated to have expanded to about 35% in the first quarter. between April and June. Given the fact that a competitor product was launched about six months earlier, we think that the number of new patients is increasing steadily. As for ASRS, the American Society of Retina Specialists, it's the world's largest academic society organization for retina specialists. Its annual meeting was held last month in Stockholm. the society surveyed more than 1,000 specialists on their selection of treatments. The survey results that were made public showed a higher utilization of Izave only over the competitor product only in clinical practice. Achieving these results in a third-party survey is further deepening our confidence in the competitiveness of Izave. By the end of June, over 85,000 vials have been shipped since launch, Furthermore, in July, the number of virus increased steadily and surpassed the milestone of 100,000 virus last week. Post-marketing safety profile remains consistent with clinical trial results. No new safety signals were observed. This offers higher confidence to prescribers to select Izave according to market research results. As for future expectations, the first quarter made a good progress, raising prospects for outperforming the initial forecast. On the other hand, we need to recognize that this is just a progress in the three months. We will consider reviewing our forecast based on the future progress and the latest outlook. We are expecting labor update by the third quarter. based on the two-year clinical study data, which includes 24-month efficacy, safety, and every-other-month dosing data. Aizawai has continued to make good progress since launch in the United States in September last year. We are expecting further sales expansion as a growth driver going forward as well.

Page 9. I will explain the cost items. As shown in the top row of the table, the cost of sales ratio to revenue is 19.3%. This is 0.9% points increase year-on-year because of one of factors including provision for U.S. Mira background inventory disposal due to generic entry and royalty payment adjustment. The SG&A expenses, excluding U.S. extended co-promotion fee, increased 17.5% year-on-year. Excluding the Forex impact, it increased 6.6% or about 8 billion yen. This is mainly due to an year-on-year increase of about 12 billion yen in promotional expenses for strategic brands, mainly Isovay and Vioza. The acquisition of Averik Bio had not been completed at the year-on-year time point, and therefore the costs related to Isovay had not been booked, which leads to this increase. On the other hand, mature products related to expenses such as Mira background decreased by about ¥4 billion year-on-year, and the global organizational restructuring in 2023 resulted in a decrease of SG&A expenses about ¥2 billion year-on-year. While investing is planned for future growth, we also revisited investments with a focus on ROI and managed expenses in a timely manner. As a result, during part of the shift to the growth phase, the SG&A to revenue ratio decreased by 2.3 percentage points year-on-year. R&D expenses increased 34.4% year-on-year. Excluding the forex impact, it increased by 23.6%, or about 15 billion yen. Also, mainly due to investments to strengthen the primary focus and R&D functions, it increased about 7 billion yen year-on-year. The booking of one-time co-development cost payments is another factor of this increase. This impact has already been factored in our initial forecast, and the R&D expenses have been as expected. I will now explain the new initiatives for sustainable growth. The progress of key expected events in FY2024 with respect to extended and strategic brands are described here on page 11. The update since the last financial results announcement is indicated in blue. Xtendi was approved in China in June for the additional indication of M1-CSPC metastatic castration-sensitive prostate cancer based on the China ARCHES study. As for PADSEV, for the additional indication of first-line locally advanced or metastatic urothelial carcinoma, the CHMP adapted the positive opinion based on the EV302 study. That is, in July. BILO will be explained on the next slide. There has been no major update on ISA in the past three months, and the regulatory review of the US labor updates and the application in the EU is still ongoing. For the EU regulatory submission, we received a day 180 list of questions from the CHMP in the first quarter following the standard timeline. We will continue to communicate with the authorities for the approval and will update you with the results when we receive the CHMP's opinion. Page 12, I will explain the latest status of Vailoi. We are actively pursuing life cycle management initiatives to maximize the value of Vailoi as a first-in-class anti-clotin 18.2 antibody. First, we are progressing toward the global launch of Vailoi for geographic expansion. In Japan, BILOI was launched on June 12. In the US, we resubmitted the application after receiving the complete response letter from the FDA in January. The submission was acknowledged on May 30, and the PRUFA date was set as November 9. Regarding EU, the positive CHMP opinion was adopted. on July 26, and the approval is expected by October. In China, the review of the dossier is still ongoing, and the regulatory decision is anticipated in the fourth quarter. Left bottom of the slide, the Phase II registration study for the pancreatic adenocarcinoma is ongoing. The patient enrollment was completed in March earlier than expected, and the top-line result is anticipated in the fourth quarter. As shown in the lower right-hand corner of the slide, we have also decided to conduct a new Phase III trial in combination with the CPI or immune checkpoint inhibitors and chemotherapy. In this study, for the first line, a treatment of gastric cancer in patients with a HER2-negative, Clotin-18.2-positive, CPS1 or higher, the efficacy and safety of zovirataximab or placebo in combination with immune checkpoint inhibitors and chemotherapy will be evaluated. The study is scheduled to start in the first half of calendar year 2025. Bylaw is currently approved for the combination with chemotherapy including 18.2 positive gastric cancer. In addition to this, we expect to make further contributions to the treatment of gastric cancer with high unmet medical needs by offering combination with an immune checkpoint inhibitor as a new treatment option for patients with high CPS. Page 13. Next is progress in focus area approach. Projects in the clinical trial stage with updates since the last financial announcement are shown in blue. ASP1570, Immune Oncology in the Primary Focus. An application of the post-representation in September was accepted by ESMO for the post-representation with early data, including part of the ongoing Phase 1 study. ASP213A was granted with orphan drug designation for pancreatic cancer from the FDA in June. For ASP, we published the information that this is a bispecific antibody targeting clouding 4 and CDR137. CLOUDIN4 is known to be highly expressed in various types of cancer. CD137 is expressed on the surface of activated T cells. We hypothesize that ASP1002 will enhance the antitumor response of T cells by binding CD137 positive T cells to CLOUDIN4 positive cancer cells. The first patient dose of ASP1012 was achieved in May. ASP30A2 is a targeted protein degradation based on data obtained in the monotherapy dose escalation cohort of the Phase 1 study. A dose expansion cohort was started. A presentation on the initial data from the Phase 1 study was accepted for oral presentation at ASIMO. We are considering holding a brief session on the presented data after the conference. We will inform you of the details as soon as they are finalized. ASP5502, our primary focus candidate for immune homeostasis, has entered a clinical trial phase. ASP5502 clinical development phase. ASP5502 is a low-molecule weight sting inhibitor that is expected to improve the symptoms of chronic autoimmune diseases by modulating the immune response pathway involving sting. We plan to conduct clinical trials. First, a full primary Sjogren's syndrome. The last slide on page 14 summarizes our progress in the first quarter of FY24. As shown on the left side of the slide, our strategic brands grew strongly, notably driven by PADSF and ISAVE. We also achieved several regulatory milestones for PADSF and VILOI. The focus area approach program also progressed, with early clinical data from ASP3082 and ASP1570 accepted for presentation at ASMO. We will continue to accumulate data to judge POCs and build a pipeline that will allow us for sustainable growth. As shown in the figure on the right, we expect total sales of strategic brands to grow to approximately 300 billion yen in FY24, and 500 billion yen in FY25. The first quarter total sales increased by about 50 billion yen year-on-year to 75 billion yen, and we are making steady progress toward achieving this goal. Overall, the first quarter was a quarter in which strategic brands moved into a growth phase, and the focus area program made progress toward the judgment of POC. We are off to a solid start toward achieving our full-year focus set at the beginning of the fiscal year. We will continue to make steady progress in the second quarter and beyond with a focus on achieving our goals. That is all from me. Thank you very much for your attention.

That's all for our presentation. We're going to entertain your questions. If you have a question, Please press the raise hand button you can find at the bottom of the Zoom screen. If you join from your smartphone, please tap the details and then a raise hand will be shown. So please press it. The MC is going to name you one by one. If your name is called, please unmute yourself on your screen, mention your name and affiliation, and ask your questions. So anyone with questions? Mr. Yamaguchi from City Group Securities, please. Yamaguchi from City Group. Can you hear me? Yes, we can hear you. I have three questions. First, the results. The revenue in the first quarter extended either way. as of now exceeded the forecast regarding these two products, there can be an upside exceeding the expectations. Is my understanding correct for this product? Thank you very much. Kitamura would like to respond. First of all, if you look at the results of the first quarter, Xtendi and Isovey progressed very strongly, higher than expected. Yes, that's true. And going forward, Listening to your presentation, there's going to be no element for all the sales to decline, but IRA may affect Xtandi. Regarding Xtandi, Medicare Part D could have an impact from the fourth quarter. We are expecting some decline, according to a regional assumption that is already factored into a plan. Isabel would not have any factors for decline, right? It's growing very strongly right now. So how far it can go in the second quarter and beyond, we cannot examine the details so that we can report to you. Understood. My second question is about Izabay. I understand it may be difficult for you to comment, but this is a great opportunity. So in Europe, day 180 list of questions was sent to you, after you respond, then there's going to be the remaining 30 days to be addressed. But on your side, whether you have submitted your questions or responses or not, so it's just the timing to wait for the response to the European authorities. What's the current situation or the potential nuance? Regarding the ISAVE approval in Europe, of course, we can share some. There is something we cannot share, but CMO can comment. So I'd like to talk about the current status of our submission in Europe. Based on the standard timeline in the first quarter from CHMP, we received a list of day 180 questions. Currently, at our company, our team is addressing this towards an early approval. We are making utmost efforts towards that goal. Right now, there is no change from before. In Europe, the final decision would be in the second half of this year, so we are doing our best to promote our development. So later this year, okay. It may be difficult for you to comment whether you have submitted your responses or not. Today, we'd like to refrain from commenting on that today. Thank you very much. That's all from me.

Thank you very much.

Next, Mr. Wakao from JP Morgan Securities, please. Mr. Wakao, could you unmute yourself? Yes, now we can hear you. Thank you very much. Wakao speaking. Thank you very much for the presentation. I also would like to ask you questions about ISAVE. It's doing very well on a $400 million or more on a four-year basis. So it can be great, according to my impression. Feedback from physicians was explained, but I'd like to know more details. The key is that there is no new safety signals. Confidence has been enhanced. Resulting in their selection of either way, not a safe or free, no new safety signals being observed. And they are selecting either way because so far we had issues initially. So there is a negative image. But for either way, there's almost no issue or problem leading to their confidence is my understanding, correct? I'd like to know. the meaning here more deeply.

Thank you for the question. That is about the safety profile of ISAVE, I believe. I'm going to make an answer for that, and if it is necessary, Klaus or Taniguchi are going to follow up. First of all, toward the end of June, 85,000 vials. At the end of July, 100,000 vials that we've already achieved for the shipment. The new information about the safety profile, that is not taking place. Retina inflammation, for example, well, there is one off-level usage of the drug that we've recognized, but that is the only one. So there was no new safety-related information came up. So the data we gained from the clinical trial is also possible to be clearly applied to the real world as well, according to the kind of situation. And also the specialists also recognize the benefit of this drug. That's why they make such a favorable comment of this product in the Society Congress. Is there any supplement or additional comment, Klaus?

Yes, can you hear me? Yeah, thank you, Atsushi, and thank you for your question. There are really two factors driving ISAV growth. One, as you're aware, we got the J-code, the permanent J-code in April, and we clearly see a jump. as a result of that reimbursement modality coming into place. But the other factor is exactly as you and Atsushi said, it's the confidence in the medication based on the volume that has now been used in the market. So with 100,000 vials shipped as of the end of July, and a consistent safety profile with label, the confidence of the of the retina specialist community is quite strong. And we see that in the survey results that Aksushi mentioned. But I also see that anecdotally when I talk to doctors. So there's a very clear signal from the retina community saying, you have had no additional safety signals. Your volume is now at a level where we think this is a relevant data point that we take into consideration when we make our choice of drug.

Compared to Sifovir, the confidence or trust of this drug is enhanced. Is that what you mean? Because there are only two drugs available for this class. You are talking about Izave alone or you are comparing Izave with Sifovir when you talk about the increase of the trust?

I usually don't want to talk about my competitors, so I'll leave that to Pellis to do that for them. I can only tell you that when we ask doctors, of course doctors compare. And we have several data points. We have data points from chart reviews. We have data points from the survey that Atsushi mentioned, which indicate to us that when we ask the question in new patients, which drug do you choose? When we ask doctors that question, We believe the data points show that we have a majority of patients being put on Isurban. So I think that's a very strong statement of confidence in our product. Thank you.

Target share is already close to the 40% of the target as of the end of this fiscal year. But considering this trend, to what extent this market share is going up, you expect? Thank you for the question. Yes, we see the strong growth of ISAV, which is a fact. To what extent we can grow, that is what we can learn in the second quarter and afterwards, and we would like to update you around that time. Understood. Thank you. Another one. Mira Begrum. Looking at your number and looking at the prescription trend, the generic is not really increased in a prescription. The first quarter cells so far is better than you've expected basically, I believe. What is the current status of mirror background cells? Why the generic is not so much increased for the usage? Thank you.

Mirror background generics? and their impact originally compared to our assumptions. The decline is milder. That's a fact. If there were litigations, including suspension, we took a variety of action. And as of now, generic manufacturers, two of them are just entered the market. In that sense, We were expecting a decline and there is some impact already, but the decline compared to initial assumptions is murder. That's a fact. Klaus, any additional comment from your side?

Yes, thank you, Atsushi. You have to imagine the entry of generics in two stages. One, as Atsushi said, we have two generics on the market right now. That creates a certain level of competition. But we also know that a number of additional generics have filed with the FTA. And when they get approval, and you know, approval times for generics are usually 90 days, right? So when they get approval, you have a number of additional competitors entering the market. And that really affects the dynamics of the market. So we are expecting that to happen in the next quarter.

Understood.

Thank you very much. Understood. Thank you. That's all for me. Thank you very much. Next, Goldman Sachs Securities. Mr. Weda, please. Weda from Goldman Sachs Securities. My first question is about Xtendi. I have a question on the Xtendi trend. Just looking at the numbers, There seems to be an acceleration once again. Now there is an additional indication. Is that the only factor, the additional indication or the inventory level and the price? Is there any special factors behind? Mr. Weda, thank you for your question. Why Xtendi is performing well? As you pointed out, there are two major factors behind. First, the entire market is growing, and that's one thing. And also, in addition, because of EMBARC study, last year in November, we got the indication, and the study grew a lot since. For other cases, there can be ripple effects, and overall, it's increasing. It's not about one-time inventory adjustment, but rather, this is a major trend which is happening right now.

Hey, Klaus.

Okay, can you hear me now? Yeah. So thank you for the question. Exactly right. As Atsushi said, there are two major factors. So I think I told you in the Q4 call last quarter, I told you that the volume growth of this market is quite significant. So we're seeing a 16% volume growth in the market as a whole, which, you know, given the maturity of the market is quite significant. It's quite exceptional to have a market growing at that clip with the class of products being more than 10 years on the market. So that's one factor. So we have a strong underlying growth rate in the market. But Xtendi with the Embark data is really keeping its share, which again, we've been We launched 2012 and there are generic options for abiraterone available on this market. So again, this is quite a remarkable performance of Xtandi within this market to be so competitive. And that is due to the embarked data. So those are the two factors driving the Xtandi performance.

Thank you very much. My second question is about Vioza trend. In particular, doctors who have used the OZA as well as the feedback from patients, I'd like to hear safety, efficacy, and the convenience, what kind of feedback you have received. I'm sure you have accumulated such feedback from physicians. Insurance payer coverage is not sufficient according to physicians before. And the coverage is expanding and increasing, so their assessment or perception is changing. Thank you very much, Vioza. And the actual feedback from HCPs, right? We'd like to ask Klaus to explain. Klaus, please.

Yeah. So the feedback from doctors and from patients is very positive because the drug works according to this feedback and the drug works quickly and it does alleviate the symptoms it is designed to treat. So in that context, we have very good feedback from doctors both the patient side and the HCP side on Veoza. As we described before, the major hurdle that HCPs have told us in market research has been their struggle with the coverage. Now that is, as you know, the coverage is improving from 50% at the end of last quarter to more than 60%, which is very much in line with our projections. And HCP feedback is also starting to improve. It's not a category jump. It's not dramatic. But we can see in the market that HCPs are starting to recognize that, oh, yes, coverage is improving. And we do get more writers and we do get more pull through when our sales force sits down with the physicians and especially with the physician staff to explain which payer now has coverage and how to fill out the forms and go about that. So I think we're making good progress there and we're on track to achieve the 80% coverage and then you know, getting to that recognition in the market at the end of the year.

Thank you very much. I understand. That's all from me. Thank you. Next, UBS. Ms. Haruta, please. Haruta from NCB. I can hear you. First question is about Vioza. When do you think or when are you targeting to achieve break-even? According to the past example, 50 billion sales timing is what you suggested about the time of the break-even, but still in the face of the expansion of the recognition of this drug and still in the timing of investment. But you focus on ROI, you mentioned, but with this point, what kind of view do you have? Would you please share your focus within this one or two years? Mr. Haota, thank you very much. First, it's about Vioza. We have a strong confidence in it. At the end of last year, we did some revision and revised the pixels. That is what we are aiming at to achieve. and we'll do our best for that. The purpose is not shrinking investment. Cost benefit is also what we are aiming at. When we can achieve a break-even, please wait a little bit more. Currently, our eye analysis is ongoing based upon our new approaches and based upon that we will look at the second half plan. So PDCA is always ongoing for us. So a little later we can show you probably the timing of the break even as well. So we need to have a little more time for the further analysis. This might be the repetition. Our purpose is not reducing the spending on investment, but also peak sales. In order to achieve that as early as possible, we are going to wisely use our money. So we need a little more time to evaluate this. Understood. Thank you. And that cost-benefit, for example, what kind of indicators are you referring to? Well, the authors themselves look into the details, what would be the key parameters. So for that purpose, we set up various parameters, and we are having the IDTC activities, and with what activities leads to the increase of KPI. That kind of approach is which is quite standardised, I believe, currently what we are doing. Understood. Thank you very much. Second question is about ISAVE. The number of files and also the sales with a simple calculation, if I do, then gross to net is not so much discounted, I feel, but appropriate price maintenance is important. But since the launch, how do you view about the gross to net changes? What's the trend of that? And for further fun of the market share, this growth to net focus, do you have any? Thank you very much for your question. First of all, as of a pricing strategy, that is not going to be disclosed. That's the principle for us. So I rather would like to refrain myself from talking about the details. It's not something like that we are selling it with a large amount of their discount. As has been mentioned by Klaus, the current expansion is the effective J-code, effectiveness of J-code and a safety profile. data. And also, because this is a new treatment, so the educational activities, that is also the factors for this growth.

So we can assume the appropriate pricing. Yes, thank you very much. That's all from me. Thank you very much. Next, Morgan Stanley, MUFG Securities. Mr. Muraoka, please.

Mr. Mudaoka.

Mudaoka from Morgan Stanley. Thank you very much. Almost all questions I wanted to ask were already asked. Regarding X Stanley, the growth, it was not growing much. The volume was growing, but the unit price is a tough element according to my memory before. But So the growth mode switch is turned on by now. Thank you very much. Basically, yes, as we mentioned and explained from before, the entire market is growing and also there is a new indication and there is a ripple effect. according to what we are seeing. Klaus, any additional comments in detail?

Yes, thanks, Atushi. I think we've talked about this before, that the volume The volume evolution is extremely strong and extremely positive for us. That was true in the Q4 of last fiscal year and it continues to be true in Q1 of this year. Where we do see pricing effects coming is in Q4. So with the Medicare revisions that kick in on the 1st of January 2025, then we will see pricing impacts. Those have been factored into our forecast, so there's going to be hopefully no surprises there. The volume is slightly stronger than what we anticipated, so we're benefiting in the good phase now. As you say, the growth phase is turned on, and the pricing impacts that we talked about are not relevant yet because they are coming in the future. Thank you very much.

And also, this may be a question too early to be asked, but regarding this performance momentum, if that is going to continue, there can be a variety of revisions or review in the second quarter. Regarding the dividend, you were increasing by ¥10 every year before, but this year it was just a ¥4 increase because of the situation you're facing, according to my understanding. But ¥10 increase every year for the dividend, Is that beginning to be in your sight or am I jumping too much to the future? Thank you very much for your question. Shareholder return is very important element. It's one of the important elements in the capital allocations. Short-term profit increase or decrease is not determinant within the CSP. In the longer range of timeline, we want to give a stable dividend payment. So because of the good performance in the first quarter, so quickly an increase in dividend? No, that is not going to happen in principle. We'd like to have a good performance in the current fiscal year, and we'd like to sustain our growth beyond the current fiscal year. We'd like to create such a mechanism, and we need to discuss the shareholder return. Understood. Thank you very much. That's all from me. Thank you very much. Next, Daiwa Securities, Mr. Hashiguchi, please. Hashiguchi speaking. Thank you very much. I have a question about focus area approach. It's PE3082 and 1570. You're going to present data at ESMO. POC judgment has been made. Do you have such data to enable the POC judgment? Or it will take some more time until POC judgment. But as of now, You have some data you have in your hand to be presented. Thank you very much for your question. We are going to present the data, Phase 1, Unico study. Data is partly included in the presentation. But is that equivalent to POC? The timeline is slightly different. So we are going to explain just briefly.

Thank you. At ESMO? Well, ESMO is going to take place in September. And there. 3082, that is a KRAS G12D degrader, and also 1570 DGK inhibitor. These two study results will be presented. The study results, well, in other words, this is very first occasion to announce the clinical data. What's going to be announced? Well, first of all, Phase 1, those escalating study results, will be the center of the presentation and other collected data will be also shared as well. And needless to say, in a parallel manner, expansion cohort of study will be conducted with aiming at POC. So the plan that we shared with you last time is what we are currently following, and things are going without any bumps. Thank you very much. In my understanding, the original concept of focus area is that with the lead product, positive sign is observed. within the same primary focus, the following pipeline will be further accelerated for the DevOps Meta activities. But including the DOS expansion cohort, you need to gain more information to do that. And also the protein degradation, about two years ago, there is an R&D briefing session took place, and you mentioned there are some follow-ups. Do you have the multiple candidates waiting after this 1570? Let me answer to that as well. Regarding a focus area approach, just like you mentioned, we first have one product. That is the first product. And if we see some potential of the efficacy, then same class drugs will be continuously developed. That is our strategy. For the protein degrader, or in other words, 3082, as you see it here, 4396, the next generation is continuously worked for the development. And there are many in the clinical phase. So within a couple of years, they are expected to get into clinical development phase. For DGK inhibitor, This is the general type of small molecule drug, and for this, currently, because this is a low-weight molecule, low molecular weight compounds, and we do not have followings. So first, we focus on Y570 to identify the efficacy level amongst multiple cancer types or some cancer types, and we'll think about the future based upon that. I understood it clearly. Thank you very much. That's all from me. Thank you. Next, Mitsubishi UFJ. Mr. Hyogo, please. Mitsubishi UFJ Trust, thank you very much for this presentation today. Kitamura-san, you talked about ROI. Now you assume it as the CFO of this company and for the budgeting and cost management, do you identify any challenges within this period of time? Did you realize something? And for the ROI, how it's managed, it's okay that you can mention only the possible comment, but would you please share your Thank you very much, Mr. Hyogo. As CFO, how the cost is managed, how ROI is followed, I think that's basically your question. It's not something that we didn't have such kind of approach from the beginning in our company. We've been working on that. However, there are some points that we need to improve. Of course, in this industry, there is always uncertainty. So coming up with a different scenario, what would we do with what happened? So that kind of scenarios are prepared. It's not something that this is the thing, so we budget in this way or that. Rather, we come up with several slides and expand that kind of options of the scenario so that we can think with a wide scope.

If I talk about disciplines, we are reducing costs. And instead of coming to the bottom line, it may be used somewhere else to be even in the end. There were such cases. So we'd like to ensure good management. So that's one improvement. And as was mentioned for Vioza, We will monitor KPIs and based on the progress, we run a PDCA cycle. So we want to enhance visibility as well as the attention of the management. This is something everybody takes for granted, but we are reinforcing such areas. So cost reduction, not just spending for Vioza, but Cost reduction programs do exist, and whether we did a good job or not, if we did, is that reflected onto the bottom line? From the budgeting phase, we create a mechanism, and we are implementing this right now. Then PDCA cycle for Vioza is accelerated and managed well. Yes. You are reducing costs and I'm expecting that you would achieve great results. Thank you very much. Next. Ms. Sogi, please. Thank you very much. I have a few questions. First, about Xtandi, as you mentioned, It's a mature market, but the entire market is growing right now. What's the reason behind? And the market growth will continue into the future. Is that what you can expect? An extended 16% growth based on the growth. Is it driven by the market growth? And also, extend its share progress, continuation, because of Embark data. So 16%, what's the breakdown of this 16% based on the idea? Sogi-san, thank you very much. Rather than my feeling, I think it's better to ask Klaus. So first, we'd like to ask Klaus to comment.

Thank you, Sogi-san. So yes, the market growth is strong. It's actually been strong for some time on a volume basis. What we are now seeing is a combination of the strong market growth and our embarked data really making a difference in the market. I'll give you an example. We see in the United States, 5% more HCPs writing for Xtandi than before. So we're getting traction with that scientific data that we published last year with the approval of this additional indication that we got at the end of last calendar year. And it is making a difference in the market. We hear that anecdotally. And I think it is contributing to the fact that not only the market is growing, but it can grow with the market. We have a very strong positioning in spite, as I said before, of other generic molecules being available in this market. So it's a fight between... Do you want to give the most affordable molecule to a patient or do you want to give what a doctor perceives to be the molecule with the most extensive data sets and convincing science to a patient? And that's where we are really making a difference with the Embark data set.

That's clear. Thank you very much. I'm actually really curious to see, I'm sorry if I'm asking the kind of repetitive question, but what is really driving the overall market expansion? It's something you were saying that that's happening over time. Is it because, you know, there's some patients who are not underdiagnosed during the COVID and somehow those people are coming out? Or is there anything that can explain the underlying market expansion?

Yeah, thank you, Suli-san. So maybe COVID has some implications that would have to go back, but COVID is more of a blip and now we're back to normal. The underlying market dynamics is that you still have a lot of doctors treating with traditional ATT right so if you look at the part of the market that uses ADT versus ADT plus the NHT class there's still room for growth I mean and there's still tremendous room for growth and that is what's happening so it's the NHT class that that is just becoming relevant in the doctor's minds as a meaningful addition, a treatment addition to therapy. And because the ADT mono is still such a large part of scripts today, that's where the NHT growth is coming from. And as I said, it is the NHT class growth. That's what we refer to as market growth.

Does that help? Yeah, yeah. Actually, I'm just really impressed that because of the maturity of the drug, that kind of shift has already happened, but it's still continuing. So it's great.

It's still continuing. Exactly.

Yeah, that's great. And then I have some additional questions around the PADSERV. I was really impressed by the strong growth in Europe, especially in Europe, the first line of the indication has not been approved yet. So can we expect even further acceleration of growth in Europe with the first line approval?

We continue to be very, very optimistic on the growth of PADSEV. And I think you've captured the situation well. We are on the verge of the first line now driving demand in the European and then in other ex-US geographies. We've been benefiting from that, of course, in the US. But I do want to manage expectations a little bit in the sense that what we've consistently seen in Padsurf is a very steep ramp up because the data is so convincing, a very, very steep penetration curve. But then when you get to sort of the peak share that is realistic in the market, you have a very sharp leveling off. So we expect that to happen in the US. We don't know exactly when, but in the next six months that will happen. So while Europe will continue to drive growth and then other geographies will continue to drive very strong growth with the second-line reimbursements and then first-line launches, the U.S. will have a tendency to now level off in the next six months.

Okay, thank you.

We're very optimistic about this. And Zogi-san, you will remember last quarter, I told you that. I told you we have very strong growth in Patsiv, and I think maybe we feel we've not been recognized yet for that very strong growth of this fantastic treatment option.

No, it's amazing, you know, how it's growing. And also, definitely, the first-line data is amazingly good. I definitely think so.

At the end, now it's about the eyes of a regularly question in Europe. They don't have clinical efficacy data. That's why it's not approved in that market. So I think that is something common with the ISABE data set as well. From this perspective, what's the current status of AME negotiation? Or what kind of scenario are you considering currently? Thank you for the question. ISABE, European market status. I believe I've touched upon this a little bit, but as you know, needless to say, the European authority, they always look at efficacy, safety, and also risk-benefit balance. They consider these factors and ultimately decide about the approval of this drug.

That's what we think.

Then, about our eyes survey, with the Japanese Phase III, we confirmed the positive for both, and as has been discussed, In the case of the United States, Gather 1, Gather 2 study result safety data, equivalent or consistent data, is available now. Concerning those information and data, And based upon that, European authority would make the decision about the approval. So in order to support that, we are going to submit the available data so that earlier approval is achieved. Thank you very much. Thank you. Mr. Tony Ren, please.

Yeah, Tony Wang from Macquarie. Thank you very much for the chance to ask my questions. Just two from me. So one is, again, going back to ISERVAD European application. Is the EMA asking for an oral explanation, an oral meeting? I believe that typically happens at day 210. So just want to see if that is happening. And then just also going back to PatSeth, very strong sales revenue. When I was at, so I think, you know, first question is about the clinical profile. When I was at ESMO, In Barcelona, there was some concern about peripheral neuropathy and the skin toxicity. Now you get a lot more experience with this EV302 regimen. Just want to see how that is playing out in the GU oncology setting. And then the second question is probably for Klaus. It's about the Medicare Part B inflation rebate, how that is affecting PACEF.

Thank you, Tony. That's your question. Maybe three, actually. The eyes of pain, European status, and also the past seven, the EB302, and also skin irritation, those kinds, right? Correct. And then, you know, the external area. So, first two questions will be covered by Tadaki, you know, medical officers. Last one will be in class.

First question.

As of a status in Europe, once again, as there was another question, I'd like to respond. As I explained earlier, as of a submission in Europe, needless to say, we are submitting a document in writing, in principle, where necessary, from the regulatory authorities, They may request for a meeting in person. So we'd like to use both ways so that either way, safety and efficacy data can be fully communicated to them. That's how we are proceeding. What about the second question? About PADSF, skin adverse events and peripheral neuropathy, there was such a question. Needless to say, the so-called GU, bladder cancer treaters, regarding these symptoms, They have never handled these adverse events before in reality, but second-line monotherapy is already approved and marketed. Medical affairs and commercial are providing information to the physicians to promote appropriate use. In case of adverse event, what they should do? They are communicating how to manage adverse events so that the situation can be addressed appropriately. We have such educational programs and providing necessary information. We are doing our best in these activities. For the time being, doctors are very interested in prescribing this drug, as we have heard, and safety management into the future. will be important in continuing to use this drug. So we will continue to make utmost efforts to provide information to them.

Let me add maybe to the PADSEV question. So both, of course, both the skin toxicity and the neuropathy are known adverse events. So this is nothing new. And the question of educating doctors on how to deal with them has been with us from the very, very start of the launch of PADSEV. So in that sense, this is not... This is not an unexpected discussion that you're witnessing at ESMO, Tony. It's the grappling with how do we do the best for patients because the efficacy of the treatment has been published and has been demonstrated and is recognized. And people are trying to understand how do we best grapple with the AEs. And that's a normal discussion. we don't see that affecting market penetration. We have, I think I told you at the last quarter that we had almost 50% of new patient share. We're now up to 54 to 56, somewhere in that range of new patient share for Patsyf in the US in first line. So, you know, we're continuing to make progress shared progress, which speaks for an understanding in the community of how to handle this balance of efficacy and adverse events. So I don't think you should take the ESMO discussion as anything that affects the market performance of PADSERV and the acceptance of PADSERV to appropriate patients in the market. I think your last question, if you could just repeat it.

Yeah, I suppose the Medicare Part B, the inflation rebate.

Correct. Yes. So our last price increase on PADSEV was in March and we factored the Part B legislation into that. So I don't anticipate major deviations and major corrections in terms of Part B for PADSEV in the future.

Okay, yeah, if I may just very quickly, Klaus, you said that the market share in frontline Eurothelial customers in the US is already 56%, right? Between 54 and 56, yeah.

Between 54 and 56, yeah.

So that's a pretty narrow range. And you said that it's going to peak out in the next six months. So when do you think the peak will be? 65 or something?

That's the million-dollar question, Tony. I wish I knew the answer to that. We've been surprised by PADSEV in the past, and I don't want to fall into the trap of getting into a linear extrapolation. So we honestly don't have a very clear view of where the peak will be. We're essentially already where we thought we would be six months from now, and we're already there. So the upside is there. Whether that will continue, I don't know.

Okay, very good. Thank you very much.

Thank you very much. I'm sure that you are waiting for the opportunities of asking questions, but it's the time, time's up. So with this, we would like to close today's announcement. Thank you very much for your participation.