Astellas Pharma Inc

Thank you very much for your attendance on this Q3 Y2D FY24 Financial Results Announcement Meeting. I'm going to serve as a moderator. I'm Chief Communications and IR Officer, Ikeda. We make a presentation first, and after that, we'll have a Q&A session. The presentation is given based upon the presentation material posted on our website, including a Q&A. The simultaneous translation for both Japanese and English are provided. For simultaneous translation, the accuracy cannot be guaranteed by the company. You can select the language from Zoom webinar screen menu. If you select the original language, then you can hear the original sounds without the interpreter's voices. This is some disclaimer. This material or presentation 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 as 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. This information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations. Now, let me introduce you, the participants here, the Asushi Kitamura CFO, Chief Financial Officer. Can't you tell the yours to go shitaka chief scientific officer? Medical Tanto Tadaki Taniguchi, chief medical officer. How might talk about class silver chief commercial officer? We have these four representatives here now. Akitamura simply start the presentation.

Hello, everyone.

I'm Atsushi Kitamura from Astellas Pharma Inc. Thank you very much for joining our FY2024 third quarter year-to-date 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 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 highlights of FI2024 third quarter year-to-date financial results. Revenue increased substantially year-on-year by 22%. Sales of strategic brands as a whole expanded to over 240 billion yen in total, with growth of about 140 billion yen year-on-year. As for SG&A expenses, excluding U.S. extended co-promotion fees, SG&A ratio improved by 4 percentage points year-on-year, driven by robust growth progress of sustainable margin transformation, or SMT, initiatives to pursue company-wide cost optimization. Core operating profit increased significantly year-on-year by 44%, driven by the growth of Xtendi and strategic brands, as well as the contribution of SMT cost optimization. As was announced in the press release on the 24th of January, we made an upward revision of a four-year forecast for revenue by 100 billion yen and core operating profit by 70 billion yen based on robust core business progress. I will explain the details of a revised forecast on page 9. On page 5, I will explain FI2024 third quarter year-to-date financial results. Revenue reached 1,453,000,000 yen, up by 22% year-on-year. Core operating profit rose to 297.5 billion yen, up by 44% 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. We booked 180.5 billion yen as impairment losses on intangible assets for Isovay XUS, AT466, IOTA, etc. As for impairment losses for Isovay XUS, we re-evaluated based on our decision to withdraw regulatory application in Europe. Based on our discussions with CHMP by now and the competitive situation, We conducted a reassessment from various perspectives, such as target countries for filing or submission, the probability of approval, and timelines. We have conducted a review of the asset value based on a conservative scenario. As a result, we booked an impairment loss of 115.1 billion yen. I will explain the details of the latest status of regulatory activities outside of the United States on page 12. 8466 is a gene therapy program for myotonic dystrophy. In R&D, we optimize technology to be utilized. So there is a possibility that we can create highly effective therapeutic candidates. But the development timeline and the competitive environment have changed from our initial assumptions. Based on these circumstances, we have conducted a review of the asset value. As a result, we booked an impairment loss of 51.8 billion yen. Regarding IOTA, we examined the project related to its implantable medical devices. As a result, we booked an impairment loss of 8 billion yen on intangible assets of the projects that we decided to terminate. As a result, operating profit was minus 22.5 billion yen. On page 6, I've explained FI2024 third quarter year-to-date results for extended and strategic brands. First, about Xtendi, global sales increased to 703.1 billion yen, up by 143.1 billion yen, or 26% year-on-year. In the United States, M0 CSBC performance and its ripple effects on other indications exceeded expectations, while sales in other regions expanded as expected. reflecting the overperformance in the United States. We revised our four-year forecast once again following the revision in the second quarter. In line with our guidance from before, we are factoring in the anticipated negative impact from US IRA Medicare Part D redesign in the fourth quarter forecast without major changes in our assumptions. The impact from medical party redesign is expected to continue also in FI 2025. We will internally assess the specific level of impact based on the fourth quarter situation. Next time when we announce FI 2024 four-year results, we will provide our guidance of FI 2025 outlook, so please wait till then. Sales of strategic brands supporting our future growth expanded to over 240 billion yen in total, with a growth of nearly 140 billion yen year on year. Furthermore, the profit margin of these strategic brands is also high, substantially contributing to sales and also to the overall profit growth. We believe that we are fully on track to achieve a four-year forecast of over 340 billion yen, building confidence towards FY 2025 target of 500 billion yen. Let me explain individual strategic plans as well. I will explain the details of PADSEF, ISAVE and Viroi on the next page. Global sales of PatSafe increased to 117 billion yen, up by 61.4 billion yen, or 110% year-on-year, growing more than two-folds. Aizabay was launched in the United States less than one and a half years ago, but its sales expanded to 44.4 billion yen. Global sales of Veoza reached 24.4 billion yen, making a steady growth. We are continuing to identify initiatives with a focus on ROI and working on them with priority. We are expecting a linear sales growth going forward as well. As for Vailoi, since its launch in Japan in June last year, the number of launched countries has steadily increased, and its global sales reached 4.9 billion yen. Regarding Zospata, global sales increased to 53.1 billion yen, up by 11.8 billion yen, or 29% year-on-year. Sales expanded in all launched regions. We're expecting continued moderate growth going forward as well. On page 7, I will explain business update for PADSEV, ISAVE and VAIGOI. First, about PADSEV. Ex-US regions such as Japan and Europe grew strongly in line with our four-year forecast that we revised upward when we announced our second quarter year-to-date results, driving strong quarterly global growth. First line MUC indication is demonstrating an extremely strong uptake. We are hoping this will serve as a growth driver to increase our future sales. Regional expansion of the first line MUC indication is making steady progress. The number of countries with approval increased to 16 in total, up by five from the second quarter. We're expecting further increase in countries with approval and reimbursement initiation. In the United States, first line MUC share continues to be at a high level, with both new patient start and market share approaching 55%. On the other hand, market share expansion is slightly lower than our initial assumptions, so we visited a four-year forecast. Based on the recent progress status, we reviewed market share and growth rate assumptions and made a slightly downward adjustment. Having said so, volume is increasing steadily, and there is no change in our outlook for continued moderate growth trend going forward. As we mentioned when we announced our second quarter year-to-date results, going forward, we are expecting overall sales growth to be driven by ex-US performance and anticipating continued solid global growth as a whole. We have high expectations on PADSEF as an important growth driver also in FY 2025. Furthermore, the next potential growth opportunity is the additional indication of MIBC, Muscle Invasive Bladder Cancer. There is no change in our outlook to obtain top-line results within FY 2025. After approval, we are hoping that it will boost sales growth for Partsev.

Next, about Aizavei.

The third quarter sales were affected by temporary impact from unexpected CRL, complete response letter, or label update submission, and changes in inventory levels. These became factors to temporarily slow down our sales growth. We have heard that for patients who have reached 12 months of treatment, many retina specialists are pausing treatment with Isavay, which affected our sales. However, for patients whose treatment was paused, we rarely heard of switching to a competitive drug. Once the label update is approved, we assume that retina specialists will quickly resume treatment of patients whose treatment was paused, so we believe the impact is going to be temporary. Sales slowed down due to temporary fractures, but in the third quarter, which was even before label update, high-level share was still maintained. ISAVE continued to be the number one treatment option chosen for new patient start. New patient start share is estimated at 60% from October to November last year, with 40% market share. Over 210,000 vials have been shipped since launch, and the number of vials is increasing steadily every quarter. Increase in the number of new retina accounts is also accelerating. The number of retina accounts where Isovay is available has increased from 1,300 as of the end of September to about 1,800. Nearly one and a half years have passed already since launch, but post-marketing safety profile remains consistent with clinical trial results, which is highly evaluated by physicians. In addition, the DTC campaign is also progressing steadily. We have obtained analysis results showing high engagement by patients with GA, geographic atrophy. I'm not going into details today as this is still early data. Once we have more mature results, we will share that with you. We have high expectations that the DTC campaign will motivate new patients to seek treatment earlier and further expand the GA market going forward. We received unexpected CRL, complete response letter, but then we proceeded with resubmission process rapidly. A label updates resubmission was accepted by the FDA in January, and PDUFA date was set for the 26th of February. As I mentioned earlier, treatment was paused for many patients who reach 12 months of treatment. many, including patients and retina specialists, are long awaiting label update. We are hoping that after approval, retina specialists will resume treating patients whose treatment was paused. Combined with the market expansion thanks to the DTC campaign, we are expecting more accelerated growth trajectory after label update approval, so we have not changed our four-year forecast in local currency basis. We will be entering a robust growth phase from now and are expecting strong sales growth in FI 2025. Last but not the least, about Viroi. Starting with the launch in Japan in June last year, regional expansion is making extremely good progress. The number of approved countries has increased to 38, and Viroi is launched in nine countries. Main progress includes launch in the United States in October and in Germany in November last year and approval in China in December. Uptake exceeded expectations in all launched regions, primarily driven by Japan and US performance. Higher than expected rate of clothing 18.2 testing was the main factor behind. Despite a recent launch, Viroi is already listed as preferred recommendation in many treatment guidelines. For example, many doctors in the United States refer to NCCN guidelines when they determine prescriptions. There, VILOI is listed as Category 1, which is the highest level of recommendation. Also, in Japan's gastric cancer treatment guideline, VILOI is recommended as preferred treatment. Overall, VILOI is performing well, so we reflected the higher-than-expected progress in each region, driven by Japan and the United States, and nearly doubled our four-year forecast. In FI 2025, we're expecting further growth in Japan, the United States, and Europe, as well as sales contribution from China with a big market. We're expecting substantial sales growth of Viroi as one of the key growth drivers.

On page 8.

I will explain SG&A and R&D expenses. SG&A expenses increased 7.7% year-on-year when U.S. extended corporate fee is excluded and 2.8% when the foreign exchange impact is excluded. The SG&A ratio was 29.7%. a 4% point improvement on year. As for the result of progress in cost optimization through SMT, Asian expenses decreased about 12 billion yen on year through the progress of global organization. Restructuring. Sales promotion expenses related to material product is decreased about 8 billion yen year-on-year. In addition, company-wide efficiency is achieved through the use of digital and AI and at least 24 billion yen reduction year-on-year. The generated resources are reinvested to maximize the potential of strategic brands. R&D expenses increased 16.2% year-on-year, or 11.7%, excluding the impact of Forex rates. The major reasons of this increase are the investments for primary focus, left-second management of strategic grants, and enhanced R&D functions, and about 16 billion yen is increased year-on-year. One-time co-development cost payments booked in the first quarter also contributed to that increase. One of the initiatives of SMT is to reduce outsourcing costs by strengthening in-house capabilities, and it is making steady progress. Each initiative in company world SMT is making robust progress for the FY24 target of 40 billion yen in cost optimization, and we will continue to control costs with discipline. On page 9, I will explain the reverse forecast for FY24. In addition to extending and strategic brands, we have also reviewed other products and cost items to ensure that we have the most probable forecast at this time. First, we have reversed over full-year focus for foreign exchange rates to 153 yen to the dollar and 164 yen to the euro. For the fourth quarter, we assume exchange rates of 155 yen to the dollar and 163 yen to the euro. The revenue is estimated to be 1,900 billion yen, an upward revision of 100 billion yen from the previous forecast. This mainly reflects an increase of about 45 billion yen extended due to 30 billion yen of the impact of foreign exchange. SG&A expenses excluding the U.S. extended equal promotion fee are expected to be 590 billion yen incorporating the robust progress of SMT. As a result, the SG&A ratio is expected to decrease 1.9% points from the previous forecast. R&D expenses are expected to be 340 billion yen, which is not significant change from the previous forecast as R&D expenses are being used as planned. As a result, we revised cooperating profit upward to 370 billion yen. A full base of OP incorporates the impairment loss of about 180 billion yen recorded in the third quarter as other expenses. On the other hand, we have released impairment loss risk and other expenses of 60 billion yen, which had been incorporated in the initial forecast. And we now expect a final figure of 11 billion yen. Now I'm going to explain the initiatives for sustainable growth. On page 11, we provide an overview of the progress of key events expected in FY24 for extended and strategic brands. Progress since the last financial announcement is indicated in blue. Parsev was approved in China in January for the additional indication of first-line treatment of MUC based on the EV302 study. VILO was approved in China in December for the treatment of patients with locally advanced or metastatic gastric and GEJ adenocarcinoma last December. In the Phase II trial for pancreatic adenocarcinoma, a per-protocol interim analysis was conducted by an independent data monitoring committee. As a result, it was recommended to continue the study until the final analysis and to conduct a more comprehensive evaluation by increasing the number of events to be analyzed. The final analysis results are currently expected to be available in late FY25. ISA-B will be explained on the next slide. Slide 12 provides the latest status of the ISA-B global regulatory activities. In the U.S., as explained earlier on page 7, the revised S&DA for level update was accepted and at PDUH for a date is set as February 26. In the EU, we have just started discussions with the regulatory authorities in major countries. We will consider the way of submission in the EU after the discussions with regulatory authorities are completed. At this point, we will refrain from providing individual updates on the status of discussions, but we will provide a further explanation once we decide the strategy. In Japan, we plan to make an NDA submission for conditional approval in February, based on the results of the GATHER study and other overseas clinical trials. We are also working on regulatory applications in other regions to bring Azebe to the world. To date, we have completed regulatory applications in nine countries, including the UK, Canada, and Australia, and additional submissions are planned. We will update this appropriately when there is progress. On page 13, I will explain the progress of the focus area approach. The updates of programs in the clinical trial phase since the last financial results announcement are indicated blue. We have decided to terminate ASP2802 in Immune Oncology and ASP2016 in Genetic Regulation. As noted at the bottom of this slide, we have also decided to dissolve the primary focus candidate, immune homeostasis. The background to this is explained on the next slide. The four flagship programs for each primary focus marked with a star are progressing according to plan toward the POC judgment by the end of FY25. We will provide an update when there is significant progress. On page 14, I will explain our approach to the improvement of R&D productivity. In order to achieve sustainable growth for Asteras, it is necessary to strategically review the priorities of R&D and improve productivity. In the third quarter, we have conducted in-depth analysis to assess probability of success and future value potential individually across the entire R&D portfolio. As a result, we have decided to strategically terminate a total of seven programs, including ASP2802 and ASP2016, which I mentioned on the previous slide, as well as those in the preclinical stage. We have also decided to dissolve the primary focus candidate, immune homeostasis. From now on, we will further increase the allocation of resources to the high-priority assets shown in the center of the slide. First, we will increase investment in the late-stage development of the primary focus flagship programs after the POC judgment. In addition, we will focus more on the development for education expansion as part of our lifecycle management in order to accelerate the growth of our strategic brands. In business development, we will look for opportunities to acquire de-risked assets in the later stages. Up until now, we have been forming many partnerships in the early stages of technology and assets that lead to the strengthening of our existing primary focus. But as we move into the conversions phase, we'll be evaluating early stage deals more strictly. Through these priority investments, we aim to expand our earnings potential in the short to mid-term, while also aiming for the assets created from our primary focus to contribute to the long-term growth. Slide 15, this slide summarizes the progress and the latest outlook for the third quarter of FY24. In the third quarter, our strategic brands continue to show strong growth and the SG&A ratio has been improving since the start of fiscal 24. As shown in the figure, total sales of strategic brands expanded to over 240 billion yen as of the third quarter. And one will believe that achieving the target of ¥340 billion for fiscal 2024 is well within reach. We are steadily progressing towards our target of ¥500 billion in fiscal 2025. We also expect the co-op margin to improve to 19.5% in fiscal 2024, and we are becoming more confident that it will grow to low 20% level by FY 2025. We believe that the reason for the strong progress is that the three enterprise priorities listed on the right side of the slide have continued to be successful, and we have entered a full-fledged growth phase. We'll continue to promote these initiatives and aim for further growth beyond extending loss of exclusivity. Page 16 shows the schedule of upcoming events. The annual sustainable meeting is scheduled to be held on February 21st this year. I hope you will be able to attend. This concludes my presentation. Thank you very much for your attention.

That's all as a presentation. We not like to entertain questions from the audience. If you have a question, please press the raise hand button at the bottom of your Zoom screen. If you're joining from your smartphone, if you type details, raise hand option is going to be shown. So please press it. The MC is going to name you one by one. So if your name is called, please unmute yourself on your screen and please mention your name and affiliation and then ask your questions. Anyone with a question? Thank you for waiting. First, Mr. Yamaguchi from City Group Securities, please. Yamaguchi from City Group. Can you hear me? Yes, we can hear you. Thank you very much. It's an individual question. I have two questions about Ayzabey. The PDUFA date is newly set, and according to your presentation, patients are waiting for the treatment, and it's going to be addressed sufficiently. The details have not been disclosed, but is it going to be every other month, or one year, or two-year administration? What is prioritized? So the details of the PDUFA and also the relationship with Mata King, I'd like to hear your comments. Thank you very much, Yamaguchi-san. Regarding the specifics, we'd like to refrain from commenting right now. As you pointed out, as soon as possible, we would like to realize the label update as soon as possible. So it's up to the 26th of February right now. resubmission is accepted, and if the label update is going to be approved, we'd like to take action. Understood. A similar question to you. When patients who received a one-year treatment is paused, they are waiting without switching to another drug, as you presented. You have heard such cases, so you're hoping to pass the PDUFA date, and there's going to be a lot of resumption of treatment for those patients, right? Yes, you're right. Regarding ISAVE, it's very important. If Klaus has any additional comments, please.

So your summary is absolutely correct. So what we are hearing in the market is that doctors are not switching patients. They're essentially delaying patients. And exactly as you said, we are expecting that once the label update comes, that all these patients will be then called back into the clinics for their next injection. That would suggest that once the label update is granted, that we would expect a bolus of patients for injections that have been waiting so far.

Thank you very much. The pancreatic adenocarcinoma might like to hear about the analysis. The independent data monitoring committee recommended the continuation of the study. According to the interim results, efficacy and safety Issues did not occur. There can be discontinuation due to effectiveness or futility. Finally, Zolbetaximum, you're talking about the pancreatic adenocarcinoma. Originally, top-line results analyzed for interim analysis, but the clinical trial itself is planned until the final stage, and we're going to do it as planned. Any additional comments from medical perspective? Taniguchi-san, please. Thank you for the question. Yes, you're right. We have the interim analysis we were planning, and Independent Data Monitoring Committee check the details of the results in terms of safety and efficacy. They look at both until the final analysis. They recommended that we proceed until the final analysis. Final analysis, as was mentioned during the presentation, is expected in the second half of 2025, next school year. Depending on the onset of events, it may shift a bit, but for the time being, it's going to be the second half of FY 2025 for the time being.

One additional question. That's about ISA-B. I believe you mentioned about the inventory, and does that impact negatively or positively? Negative or, well, basically, as a part of post-merger integration, distribution integration is also taking place, and inventory level is therefore reduced tentatively. So tentatively, it has a negative impact. However, we are quite sure that it's going to be built up. So in the fourth quarter and afterwards, we would like to show the farm growth afterwards. Is it okay to consider this is a Q3 event? Yes. That's all from me. Thank you. Thank you very much. Next question is JP Morgan Securities. Mr. Wakao, please. Thank you. JP Morgan, Wakao. First question is about Aizuwe. Yamaguchi-san asked almost all the questions that I wanted to know, but I have a couple of still questions here. Why no switch to Saifovari? Why? the patients are posing the treatment. How do you analyze that situation? I'm asking this question because Apiris, well, based upon this situation, they are fully prepared to accept the ISA-VA patients. when they want to switch. But there are no such patients so far. In that case, the safety of ISA-B might be far better. That's what I assume. So I want to clarify about that. And also, the submission details is not disclosed. But this once or twice administration, even if that is not achieved, considering the current market share, the growth of this product in the market, even the indication is just once per month, still the market is quite viable for the as of today. Thank you, Wakao-san. Klaus, could you make a comment about this?

Thank you, Wakao-san. So let me take your questions one at a time. The first question you asked was about why are doctors not switching? If we do go into claims data, so real processing of claims from the insurances, we see that about 60% of the new patients receive iSurvey. That gives us the feeling that there's a very strong belief in the marketplace that is starting to consolidate in favor of ISERVEY. That is probably due to the safety profile that we've established since launch with now 200,000 vials shipped. and safety signals which are very much in line with the labeled indication and the studies that we saw. That is a very impressive record for doctors, and they take that into account when they make a product choice. So we hear that very consistently from doctors. that they have a, you know, 60-40 favorability towards iZervay, and it's usually due because of the safety profile that doctors attribute to iZervay. So I think that also explains why doctors are saying, hmm, before I take the risk of switching, let me wait 26th of February is not that far, and then I can start my patients up again. A lot of what I'm telling you here is anecdotal. We've not conducted formal market research, but that is the picture we're getting from how the market is behaving. So let me go to your second question. I think your second question was about is it the 12-month extension in the label or is it the every other month part of the label that we are focusing on? We are very clearly focusing on the 12-month extension. That's what doctors are waiting for. That's what insurance is waiting for. Doctors are saying, I have started a patient, I want to continue the patient, but please give me the label so I'm within the label to do so. That's the main question that they're asking. The question on every other month is something I would like to describe it this way. You have in every indication you have a label, but you also have clinical practice. And I don't want to be perceived of speaking outside of label, but what we observe in real life in the marketplace, both for our competitor product as well as for iSurvey, is that doctors tend to take more a six week interval for the injections. So they're not strictly following labels. That is clinical practice that we are observing. We don't know the reasons for that. We don't know why doctors are doing that, but that's what we are observing. So that is also why we have prioritized the 12-month extension in our label update versus the every other month data, which of course is useful for doctors, but doesn't happen to coincide with clinical practice anyway.

Thank you very much indeed. I have a second question. Your outlook for next fiscal year, I'd like to know more. On page 15, achieving 500 billion yen and core open margin of a 20% level to achieve this, you are building confidence. Then you are making an upward revision, OP, 370 billion yen, an increase in revenue and profit may be in your sight to a certain degree. Am I too optimistic or any other negative factors? If any, anything we should monitor more carefully regarding extended fourth quarter assumption figures. Based on that, the products you have to grow compared to their growth, Medicare Part D impact on a full year basis is going to be smaller. On a net basis, next fiscal year, you can generate a certain amount of revenues and open margin can be improved. Then, I'm not sure about the revenue increase, but you can achieve a profit increase. What do you think? I'd like to hear your current philosophy or view. Thank you for your question. Next fiscal year's outlook. For the details, when we announce our full-year results, including our fourth quarter results, we will give you our outlook. Regarding our current plan, We are now entering a growth phase, so this is for both revenue and profits. As you mentioned, we have strategic plans how far they would grow, including vital. We have global launches we have been able to realize. So in that sense, continuing the growth is very important for us. just revenue increase and improvement of the profit. Of course, we will achieve profit increase, so we'd like to work on this. As for Xtandi, Medicare Party impact is expected in the fourth quarter. On the other hand, right now, a strong growth has been seen, so the base situation is going up for Xtandi, so we are taking this positively. Any downside? We are going to look into details from now, but the current growth phase is not anything temporary. But for us, this is something we can continue. It's sustainable for us. That's our stance right now. That's something I'd like to communicate to you. For details, in three months' time, we'd like to explain to you. Thank you for your question. Thank you very much. That's all from me. Thank you very much. Next question, Morgan Stanley, MUFJ Securities. Mr. Muraoka, please. Muraoka from Morgan Stanley speaking. Thank you very much. Regarding Wakao-san's question about your stance on the business results, OP margin, would be expanding. That's your goal. Close to 25%. So I thought you would increase your profit by 20% or so. That's my personal view. I have a question about dividend. 74 yen, 4 yen increase is maintained. On page 24, there is a chart on dividend. up to 80 yen, it can increase next fiscal year just to that level. I think there's going to be a dividend increase, but the pace of dividend increase regarding the... It was increased from 70 to 74 yen. Should I consider the extension of this growth or are you saying you're growing so there is room for further growth or increase in dividend level? Thank you very much. Thank you for a difficult question for us to respond. So we wonder how to respond. We reviewed the pace of dividend increase for our growth story. We are confident that we can fulfill our goals. That's why we decided to increase our dividend to ¥74 by increasing ¥4. In the short term, the results increased, so that's why you're increasing and know. continuity for a certain period of time was considered and this is our conclusion we came up in the end. So we had profits because we couldn't increase a dividend decrease is not considered. So we'd like to ensure a stable dividend for a certain period of time to return to shareholders as such a means we are paying out dividends. So it's not going to change our stance overnight.

More specifically, next fiscal year, we are going to brush up our plan for the next fiscal year. We need to think about the financial needs for various perspectives. And in line with that, we would like to discuss and we share the information when it is available. I hope this answers your question. Understand, three months after, we will wait. I will wait for the coming three months. Next question is about ISA-V. In Europe, you are discussing with the authorities. What I feel, based upon your presentation explanation, is that the priority is lifting of this 12-month restrictions. So every two-month indication in Europe or something more, I feel that you need to conduct additional study. I just wonder if you should do to that extent. Up until 2030 or up until 2034, you have the patent of this material and also usage. But how do you calculate overall this situation? Thank you for the question. First of all, the level update. I cannot tell you the very details here, but what we view or what we think based upon the opinions of the specialists, the priority is just like that. I cannot tell you the details about that, though. For GA, medical news, this is for sure. So we would like to expand the market. And at the same time, we would like to provide this product to the global level. That is extremely important. That's why we are doing the activities currently. And we have the US data, and that can be made useful for the expansion. And when it comes to EUs in the major countries, we are having the discussions with the authorities. And with doing what, we can increase our probability. So that is currently we are working on. More specifically, what we can share with you is quite difficult, but Taniguchi might have additional comment here. I believe there are two questions in your question. First of all, especially about the US market, this 12-month restriction and every two-month administration, the clause already mentioned about this or explained about this. So first of all, there are patients who are waiting for the additional treatment. So this lifting of the dose restrictions of the 12-month, that is definitely the priority. And to add that, We are going to make use of the data that is available. Actually, with using that, we are already discussing with the authority. When it comes to European countries, as has been explained, currently at each country, we have been working on the discussions. And after the discussions, our next strategy is going to be considered, and once it becomes clear, then we believe we can share that with you.

Understood.

Thank you for your explanation. A little while ago, I mentioned about the 2030-2034 patent situations, but this is a different angle question about the ISA way. As long as I know that generic development hasn't been in the clinical development phase yet. But if the patent is 2030, then some companies are expected to start the development of the generics, but it is not really so. So the generic launch opportunity or the possibility in 2030 is extremely low. Rather, you think probably if there would be a generic launch, it would be around 2034 or so? Well, that's again a difficult area that we make a comment, but basically, it's not only Aizabe. Our approach is that, of course, we do whatever we can do for the preparation of the worst case. So, for the risks, we try to do what we can do beforehand. That's part of day-to-day activities. So we shouldn't be too optimistic, and we still need to do the preparation, especially about what we can do. I'm not going to tell you any specific information here about that.

Understood. Thank you very much. That's all from me. Thank you very much. Next question. Goldman Sachs Securities. Mr. Weda, please. I'm Ueda from Goldman Sachs Securities. I have a few questions. First, positive plan was reviewed.

U.S.

forecast was revised downward. In the second quarter results announcement, there was revision of the plan. The revision seems to be larger. What changed in the assumptions? According to Mr. Kitamura, there seems to be no particular problem, but this is one of the future drivers, so I'd like to know the background. Mr. Weta, thank you very much. We got input. First line, uptake was fast in the United States in the first quarter. Compared to our initial plan, there was a speedy increase. That's part of the fact. And first line share was like 52% or 55%. It was at a high level. So there were expectations for higher figures initially. But now it's between 52% to 55%, which is maintained and sustained. And based on this, our forecast was reviewed. We've maintained this going forward. And outside of the United States, we have the first line indication. So we'd like to increase this quickly, similar to the U.S. That is going to be the driver for PADSEF class. Anything to add?

Yeah, I mean, hindsight is 2020, as they say, right? When you look back, you always know a little bit more than when you look forward. So the pattern that we see is very similar to what we saw in the second line. Remember, PatServe has had an extremely steep uptake from the very beginning. That was true in second line launch. It was also true in first line launch. And then it came very quickly to, after about six months, it comes to a plateau. That plateau is not flat, but it's just slower growth. we reached that plateau in the U.S. with first line in June. And we predicted a mid-single-digit growth from then on. And that is still true. When we now look back and we compare with the second line pattern, We also see that there's a little bit of a lull for about three months. We can't explain it, but it's as if the market takes a deep breath and then starts growing again. And that's what we think is happening now with the first line in Q3. So we're very confident on the growth, even though it's mid-single digits. We're confident on the growth of PADSEF going forward in the U.S., Of course, XUS is now in the steep uptake and will grow the brand very steeply from now on. But it's just that lull in Q3 was too much for us to say we can catch up in Q4. And then we said, well, let's be transparent and just revise the numbers down for FY24. even though we think that the growth trajectory into FY25 is intact. Thank you very much.

I have my second question. 8466, impairment loss related question. Right now, in the field of gene therapies, I'd like to hear your company's view. In this field, You have for dentists related products such as AD132 and 466 and AD101 is in Lancet, so you're still focusing on this area. But how do you evaluate the progress in this field? And dentists related products have any issues? What have you reviewed and what is going to be the direction you'd like to head into into the future? Thank you very much for your question. Gene therapy and our stance on gene therapy was your question. In principle, there is no change. Gene therapy is one of the important primary focus areas for us. So there is no change in that. And 8845... is a lead program. We are going to judge POC by the end of FY 2025. That's a major milestone for us. AT466, initially, when we acquired Odentis, the assumptions have changed in some cases. There were some substances where we should do different things. So based on this, we changed the plans. As a result, timeline was a bit delayed, and we are reviewing the plans. So for gene therapy, it's still one of the important primary focus areas, and we have to identify 8466. Tanuki-san, anything to add?

Thank you.

Just like Kitamura explained, for gene therapy, that's the center of the primary focus. So strategic-wise, this AT466 impairment dose is not having the impact. AVIAD or TEI. and such other companies' collaboration or partnership are ongoing, and for 88845, POC judgment timing is almost there. In reality, when it comes to gene therapy, especially AAV, platform is what we have great confidence so how we can make use of this aab platform for the generation of the new program toward the future, including the partnership with other companies. We consider that strategy good direction. What we take is quite important, and there is no change about this. So we are going to pursue what we've decided as the strategies that we take. That's all. That's all from me. Thank you very much. Thank you. Next question. Nomura Securities. Mr. Matsubara, please. Matsubara speaking. Can you hear me? Yes. Thank you. I have two questions. First question is about Vioza. This insurance coverage rate in Arizona that will be available from a bio And in that situation, what kind of promotional activities would you do? What would be the growth strategy? First of all, about Viosa, as has been mentioned a little while ago, the growth is quite steady, and it's all according to the plan. And what about the competitor situation? We haven't seen the level yet, so till then we cannot say anything. But things are just what we expected in the very beginning. With this product, competitor's product, we can make a market together or it's going to be head-to-head competition. But for us, before the launch, we consider it is important to establish the market for this area. For the viewers, do you have any additional comments, Klaus?

Not really much to add, Kitamura-san. I mean, the product is growing on track. The label from the Bayer competitor is not known yet, so we can't really speculate. We are fully prepared in terms of Salesforce deployment, direct-to-consumer deployment. Across the market, we're fully prepared for Bayer entry into the market. You know, we have a very selective molecule that targets one receptor. So we'll have to wait and see what the FDA grants for the Bayer competitor.

Thank you very much.

Next question is about the MENA Begron. The US sales in the third quarter is greatly increasing these days. And what's the background of this? For this, in the beginning of this fiscal year, generic entry was confirmed, and it was that based on the forecast, we came up with the conservative focus and expected to the negative impact. And for that, we are adjusting the cost or expenses. On the other hand, We want to, of course, defend our asset as we've been conducting the current activities. So, currently, we see two generic companies entry, and the price erosion is not that extreme. That's the current situation, and that is adjusted in December to a certain extent. That's why the number in December is a bit high. But as for what's happening currently, Well, is that what's case is expected? We did our activities and our defense is good level and erosion is not taking place now. What about the future then? Well, of course, we would like to always prepare for the countermeasures to deal with this situation. So it's going to be about the next fiscal year and afterwards. So please wait for a moment. Then in that case, to consider about the next fiscal year and afterwards, because you have the account of measures, so there would not be a great reduction of the revenue. Is that OK to understand that way? Well, that's something we can talk three months later. But as has been mentioned, for the risks, we are not going to deal with that in an optimistic manner. We look at the downside. We come up with a plan. And what we can defense is defensed. That proceed always the same. And as a result, what will happen to the figure on the next fiscal year, that's coming later on. But our position on the stance will not be changed. Please do understand in that way. Understood. Thank you.

Thank you very much. Next, Mitsubishi UFJ Trust Bank. Mr. Hyogo, please. from Mitsubishi UFJ Trust Bank. Thank you for naming me. Thank you for the presentation as well. I have one question to you. According to the press release, There was an announcement about the change of the management structure from the initial stage of R&D to launch. Across the board, you'd promote this efficiently and rapidly according to this. What would be the bottlenecks? What's the reason for the change? Because of the side or because of bottlenecks, you'd like to make these changes. That's why you were expressing such an intention. What's in the background? There have been impairment losses one after another. And is that related to this? I'd like to know. And also, legal and compliance is going to be newly launched, established by separating the functions of what could be achieved. I'd like you to explain. The details may be explained in May, but together with the results announcement, there was a press release, so I'd like you to explain. Mr. Hyogo, thank you very much. We issued a press release, the management structure, as of the 1st of April. The objective is, as you said, As follows, for Astellas Pharma Inc., patient value would be created. That's our primary, most important goal. So we generate and create value for the patients and deliver it to the patients. What is the most important thing necessary for that? From R&D up to the launch, we'd like to enhance the speed to do this across the board. any bottlenecks. We have not been able to launch. Setting that aside, we have to increase the speed. That's for sure. So across the board, we're going to handle this. That's one thing. At the same time, deliver value is important, commercial and medical. would be able to promote co-work further into the future commercial. A medical officer is going to be close to supervise both functions. This fiscal year, we think we explained this before, but the field genba are focusing on the brand teams. They should be able to work in an organic fashion without the borders of the functions. At a fast speed, they should do business. And this was worked on in the United States, and very good results were achieved. And that's one of the reasons why the growth is fast in the United States. So a land-dedicated system would be built to remove the layers in the middle. We'd like to have a rollout globally. That's part of the growth strategy led by Klaus. Together, we are going to combine these. So any major bottleneck? No. But rather, we'd like to accelerate growth further. So that's the nature of the initiative we are working on. Legal and compliance would be integrated regarding that. For details, How far I can talk about it today. There was an announcement today. Tatiana in charge of legal and compliance. She's a lawyer. An ethics compliance head is her current role. So she's going to wear two hats. That's the main objective behind. It's not about impairment loss. Her expertise is taken into account and her role is going to be expanded.

Impairment loss is related to this?

No, not at all. But in order for us to further accelerate sustainable growth, this is a measure necessary for that purpose. Thank you very much for your question. Thank you very much. I was able to understand clearly. If you are going to evolve, how you are going to change, including that, I'd like you to explain in the future. That would be highly appreciated. Thank you very much. And also, at a certain time point into the future, impairment loss management, how you are evolving in this respect. There can be impairment losses for sure, but I'd like you to explain. Regarding impairment loss, I'd like to add Regarding in-process R&D, 8466 impairment losses were booked. The programs and projects, when they make progress, the priorities may be lowered or something may not work and we have to select and discontinue some. In-process R&D, was impaired a lot, so the balance which remains is not so large compared to what existed up until now. On the other hand, we do have a large size of impairment losses, so we would like to increase the accuracy, and we will work on this. Thank you very much.

I raised some difficult points, so sorry about that, but thank you very much. for your response. Thank you. Let's move on. Ms. Sogi, please. Thank you very much. First of all, question to Kitamura-san. The third quarter, this time the guidance is revised, so you have remaining just one fiscal year. So this revision, I understand its precision is quite high, accuracy is quite high. The revenue is plus 100 billion, In fact, the impact is 45 billion, and extend the U.S., maybe? 30 billion is coming, and there's a gap of 25 billion yen. And there is a talk about Mira Beggar on Japan's side. That might be another factor to be taken into. Then this 25 billion yen gap, to what extent it is now well calculated? Well, the revision is in the situation exactly what you mentioned. So we have remaining just one quarter. So we try to make it as accurate as possible. So what about the difference? We are going to sell further in the fourth quarter. But of course, what's been delivered up until the third quarter is incorporated. In that perspective, we believe that a great portion is already delivered. On top of that, the third quarter number, just like you pointed out, Mila Petric, that you pointed out the difference for the product is quite well, so there's an increase here. Thank you very much. Next is a question to Klaus. It's about PADSEV.

So I understand that in the U.S., the PADSEV sales has been almost flat. So it was completely almost flat or in a slightly declined from the first quarter to second quarter. And we understood that it was because there was a one-time net growth adjustment. And while the actually volume grew the high single digit, I believe. And then this time, there was an increase from 174 million to 179 million to this quarter for the U.S., And so I assume that there is no growth to net adjustment this time. And so that's just a confirmation of this. The current dollar-based sales is reflecting the actual volume growth. That's the first question. and also kind of granular level, I'm a little bit surprised that we don't see the quarter-over-quarter growth for PADSEV because unlike chronic disease, it's true that the penetration in new patients has been very quick. But at the same time, for cancer, there are always new patients coming in every month. And there are the continuing patients as well. Of course, there are patients who are drop-off. But in first line, there are patients who the patient should stay longer on the treatment. I thought, no, no, no, just, you know, we have not really done the, you know, really the granular math, but we believe that we expect that then there will be a more stronger growth quarter over quarter. So I just wanted to see whether we are missing something here.

No, no, no, you're not missing something. So first of all, if you look at Q3 growth, we reported 12% growth globally. If you divide that into U.S. and ex-U.S., ex-U.S. grew 29% quarter over quarter. U.S. grew 3%. quarter over quarter. So it's not a decline, it's just a more moderate growth rate than we had assumed. That's what I meant before when one of your colleagues asked the question. We had assumed after reaching that inflection point, which is very, very marked for PADSF. Honestly, it's more marked for PADSF than I've seen in other drugs, but that extremely steep uptake And then within one month, it goes into single-digit growth mode, right? That's the pattern we're seeing in every single country we launched in. Now, we had assumed for the U.S. from June onwards amid single-digit growth, but 3% was just a little bit lower than we had assumed. And that's what I meant that maybe... Like in second line, we saw the same pattern, that there's a little bit of a lull for about three months, and then growth picks up just a little bit. So 3% is not a bad growth. We had assumed a little bit higher. That's the basis of the numbers that you see. But let me also comment. your maybe exploratory part of your question on how high can it go? We are approaching 55% patient share, new patient share. 55%. If you look at analogs, That is quite high. That's usually when cancer drugs start plateauing out. There are some exceptions which go higher. We've seen a little bit higher in some countries. But remember that first line is a combination treatment with PADSEV and PEMBRO. That means you have two molecules with two side effects. And doctors take that, of course, into account when they see more fragile patients. So we're approaching 55%. How much higher can we go? Maybe a little bit. But I don't think you should expect, you know, 60, 70, 80% patient shares. I think it's probably not in the realistic realm in this kind of disease setting.

Thank you. The one more question, in terms of the duration of treatment, so, you know, in the trial, I think, you know, I believe PFS was around 10 months for this combination. What is the treatment duration? I know that it's been a little bit over 12 months since, you know, since the actual approval, so you may not get the actual sense, but What are you hearing about the treatment duration in first line setting with this combination?

Yeah, DOT is still evolving, Sogi-san, so it's a moving target. I don't think it's stabilized at a number yet. We're still below the trial rate, so we think it will grow more. I would be hard-pressed to make a prediction at this point, but it's still evolving, so it's still extending as we get more patients on the drug.

Thank you very much. Thank you.

Thank you very much.

Next question. UBS Securities, Mr. Sakai, please. Sakai from UBS speaking. Kitamura-san, you touched on impairment, so I'd like to ask you questions. Rather than impairment, losses, your core and reported The gap is widening between the two. You're always exposed to the risk of impairment. Accounting-wise, it's not a healthy sound status. Impairment might be accepted according to the wording. I shouldn't say this to Kitamura-san. You're like booking losses for the past investments. You have to ensure good management. Management could not be done, but this gap should shrink. Otherwise, the undervaluation of your stock price could be seen as CFO. What's your opinion? That's my first question. Saka-san, thank you very much. We are not underestimating impairment, but we have to address impairment in a timely fashion, so we have to evaluate very well. Assets on the balance sheet in a timely fashion, in a consultative fashion, we have to do this according to the rules. That's the basic stance. A full and core gap is not so big. There are two major elements here. First, the amortization of intangible assets. I think bio was acquired. After that, it's increasing. So amortization of intangible assets up to the third quarter, it's like 100 billion yen in the current fiscal year up to the third quarter. So this is not really a surprise, but every year this is going to be amortized every year this much. So rather than a surprise, this is what we're expecting.

Regarding impairment,

That is going to be something additional. This time we have a big impairment loss. We are reviewing why. It's not just a matter in the past, but rather when we acquire something from outside, how we should use our learnings there. We are discussing that. On the other hand, like in the past, we do have impairment losses on the balance sheet with regards to in-process R&D. The book prices are declining. The impairment, a big impairment is going to be repeated. We don't have a lot of base figure. So what to do with the forecast is a difficult question.

If we know impairment losses, we have to account for it.

But we shouldn't confuse the market when we provide our guidance. Did I respond to your question?

We just want you to do the earnest management. That's the only thing I can say. If the gap is not shrunken, there is definitely the amortization of this intangible asset remains. We cannot avoid that. But how it is reflected into the stock price, I haven't really digested that part yet. But if the dividend is not as payable level 4 as that would be their problem if that continues. So please have that in your mind. And next question is about Aizabe. The retinal specialist, among the retinal specialists, Sifovir, efficacy was Sifovir is better. Isavir is better in terms of the safety. It seems that the data recognition is now quite prevailed in the U.S. So 12 months, and after that, the level is changed or not. that would be the lift of the restriction. But 12 months thing, well, you know, Klaus mentioned when this level issue is settled, then the patient would come back. I think that's the comment basically made by Klaus. But after the drug holiday of 12 months, some patients might drop. So based upon your experience, how many patients drop out from the treatment of ISAV during this drug pause period?

I don't have the number on hand, I'm sorry. Of course, we do already, after one and a half years in the market, see some patients dropping out. But I would have to get back to you in terms of quantification of that percentage of patients. I do want to respond to one thing you said. You said, in efficacy, syphovry, of course, you said, is better. I would challenge you on that statement.

I'm sorry, that's not my observation. It's the hearing from the expert course.

Yeah. So I think these experts are comparing studies which are not head-to-head studies with different placebo arms. I really think you cannot make that statement on the efficacy unless you have a head-to-head trial of the two drugs. What you can say, however, is that our safety profile is in line with our clinical study, and I don't think Apellis can say that about its competitor drug.

Okay, so how about this 12-month duration?

Yeah, they have a 24-month label at this point, and we have a 12-month label at this point. That's what we are focusing on to extending, and then we'll be at par.

then patient can stay out of the medication for 12 months and coming back to the treatment.

Oh, of course. Yes, that's exactly what we are assuming.

Okay, so 12 months could be a time horizon, time frame that we're talking about. The patient coming back to the treatment after all.

So, we were licensed in August of 2023. We launched on the 1st of September of 2023. That means the first patients that were put on drug, which at the time were very, very few, in September of 2023, they started elapsing outside of the 12 month label in September of 24. If the FDA gives us the 24 month label on the 26th of February, so September, October, November, December, January, February, these patients would be maximum five months out of treatment.

Right. So yeah, 25. Okay. Thank you.

Thank you very much. Next question, Daiwa Securities. Mr. Hashiguchi, please. Hashiguchi speaking. Thank you very much. My question is about the page 14 of your slide. That is about your strategy for R&D. What would be the trigger and what's the background to come up with this idea? Would you please explain about that?

On the left, there are seven programs. You focus on five in clinical. For preclinical, you take high risks to pursue high returns by now, according to my understanding. Then, at a broad base, pursuing a variety of possibilities is going to be important as well, in my opinion. You have to have something new, but there is just a mention of terminated programs. So what do you think of the expansion of the base? In the middle at the bottom. Business development for late stage de risk assets. Late stage. For each of the programs, the probability of success is going to be higher for each of the programs. But the value-wise, it's going to be big for each of the programs. And it's necessary to make each of these programs a success if it's early stage. One by one, the value-wise, it's going to be smaller. So you can work on many programs or projects. And if there's anything with a big success, you can get a high return. So where to focus on depends on what kind of a pharma company you're going to aim for. I think that's core. I'd like to hear more about your approach you're going to take. Hashibutsan, thank you very much. Improvement of R&D productivity. In principle, our stance is not going to change, but it's about phases. We have primary focuses we worked on by now, and last year, mitochondria was reviewed in terms of the priority to remove focus area approach, primary focus area. Instead of working broadly, which primary focus area is going to win, we try to select the winners. We have four lead programs. Lead programs are there such in a stage as the primary focus program. So we try to converge. Those who can win would have more lead on more broadly. Our decision would not be eternal. There can be dynamic changes. And we are now in such a timing, at such a timing. primary focus. In order to strengthen primary focus, we try to get early stage assets in many cases. But in addition, where we can win and also where we can reinforce a portfolio in late stage, we late stage and de-risked assets would also be explored. We're going to consider that.

So that's our idea.

The value is going to increase. Is that going to be okay? We will strengthen our balance sheet. At the same time, in order to increase the probability of success, we will consider necessary countermeasures. This is about portfolio, so Taniguchi CMO is going to make additional comments. Thank you very much. I'd like to make some additional comments from my side. How to look at portfolio? As you can see on the right on this page, we are aiming for sustainable growth, which is a very important issue for us. In particular, as you know, 2027 and beyond, we will have an extended LOE, so we have to look into the future to make up for our pipeline, which is an urgent task we have to address. late stage development programs, there is a gap in a pipeline in that regard. So de-risked late stage assets and business development for those at the core is important for strategy. In parallel, needless to say, there are four early stage important programs or products, ASB 2138, ASB 7317, 8845, and ASB 3082. Early stage programs should be accelerated. And as there was a question earlier, Having a broader base is important for a strategy we have taken. At the same time, what we have to do right now is to in-license late-stage and de-risked assets, but we should also focus on our current late-stage assets and promote the development for launch. And how we can accelerate is also a very important challenge for us. Because of this, in PF areas, we are reviewing the PF area and individual products in clinical stage, at the clinical stage, inclusive, where to focus on, where we view increase or investments. That's a very important strategic issue for us. Needless to say, at any company, such work is ongoing. Focusing on discontinuing, terminating development programs is a critical decision. It's not an easy decision for us. But going forward, for sustainable stage, we have to review our portfolio continuously and important products. The products we believe are important must be focused on in terms of investments. We have to allocate resources with priority. Lower prioritized products which do not fit our strategy, the project termination should also be considered, including that possibility. We have to do this on an ongoing basis. We have to do this continuously, and then we can achieve sustainable growth, and we can create value in an accelerated fashion. That's our belief in ensuring resource allocation, and we can improve on the productivity.

Understood. Well, thank you very much. That's all from me. Thank you. There are still those waiting for the questions, but time's up. With this, we would like to close this meeting. Thank you very much for your joining with us.