Astellas Pharma Inc

Thank you very much for joining this Q2YTD FY2025 Earnings Call by ASTELUS. I would like to serve as a moderator for today. I'm Chief Communications and IR Officer Kato. Thank you for this opportunity. Today, first of all, we would like to give you the presentation, and after that, we'll have Q&A session. On our website, presentation material is available, and in line with that, we are going to make a presentation. Including Q&A, we will provide you the simultaneous interpretation service between Japanese and English. For simultaneous interpretation service, we are not going to guarantee the accuracy of it. When it comes to the language for this meeting, you can select it from the Zoom webinar screen. And if you select the original, then you can listen to the original voices without hearing the interpretation voices. These are some notes. This material or a presentation by representatives for the company and answers and statements by representatives for the company in the QA session includes forelooking 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. So please do understand about this. They contain information of pharmaceuticals, including compounds under development, but this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations, promote unapproved uses in any fashion, or provide medical advice of any kind. Now I'd like to introduce you participants here. Representative Director, Presenter, CEO, Naoki Okamura. Chief Research and Development Officer, Tadaaki Taniguchi. Chief Commercial and Medical Affairs Officer, Klaus Sehler. Chief Financial Officer, Atsushi Kitamura. We have these four representatives here. Now, first of all, Okamura is going to start the presentation.

Hello, everyone. I'm Naoki Okamura from Stellas Pharma Inc. Thank you very much for joining our FI2025 Second Quarter Year-to-Date Financial Results Announcement Meeting out of your very busy schedule today. This is a cautionary statement regarding forward-looking information. As this was explained by Kato earlier, I'm not going to read this page. On page 3, I will explain the highlights of FI 2025 second quarter year-to-date financial results. Overall, we have made exceptional progress at performing expectations. We have made a significant upward revision of our full-year forecast. Driven by continued strong growth of our strategic brands, revenue increased significantly year-on-year, with underlying growth of 10% year-on-year, excluding Forex impact. As for SG&A expenses, thanks to the robust progress of SMT, Sustainable Margin Transformation, a company-wide cost optimization initiative, SG&A ratio improved by 3.1 percentage points year on year. Due to the growth of strategic brands and robust cost management through SMT, core operating profit rose significantly year-on-year, with underlying growth of 57%. Core operating profit margin increased by 7.9 percentage points year-on-year to reach 27.4%. Based on this exceptional progress exceeding our expectations, we revised our four-year forecast upward by 100 billion yen for revenue and by 80 billion yen for both core and full operating profit, respectively. Regarding pipeline progress, for PADSEV, we have unprecedented EV303 study data in MIBC, Muscle Invasive Bladder Cancer, and our SPLA for additional indication was accepted in the United States. As for focus area approach, we obtained promising initial data with ASP3082 and ASP2138, and registrational studies are now under preparation. Page 4 is the agenda for today. From the next page, I will explain these topics. Page 5 shows FI 2025 second quarter year-to-date financial results. Revenue, core and full operating profit all increased by about 100 billion yen year-on-year. Let me explain main items. Revenue reached 1 trillion 30.1 billion yen up by 10.1% year-on-year. Co-operating profit rose to 282.6 billion yen, up by 54.4% year-on-year. The Forex impact is shown on the right-hand side of the table. Forex had a negative impact on both revenue and co-operating profit. Underlying growth excluding this impact was 10% for revenue and 57% for co-operating profit, demonstrating a stronger growth. The bottom half of this page shows our full basis results. Operating profit was 199.4 billion yen, up by 112.8% year-on-year. Profit increased to 147.6 billion yen, up by 100.8% year-on-year. Page 6 shows FI 2025 second quarter year-to-date results of our main brands. strategic brands grew substantially, driven primarily by strong growth in PADSEF and VILOI. First, second quarter year-to-date sales of five strategic brands driving a status growth, namely PADSEF, ISAVEI, VIOZA, VILOI, and ZOSPATA, exceeded 220 billion yen in total, substantially up by 66.2 billion yen, or 43% year-on-year, Underlying growth, excluding Forex Impact, was 47%, showing a strong growth. Due to high profitability of these brands, they not just contributed to revenues, but also made a great contribution to profit growth on a consolidated basis as a whole. We are expecting this strong growth momentum to continue in the second half of FI 2025. Next, I will explain individual strategic brands and extended. Positive global sales increased to 102.5 billion yen, up by 27.1 billion yen, or 36% year-on-year. Robust global growth has been continuously driven by strong first-line MUC demand momentum. Regional expansion in the first-line indication is also making steady progress. First-line MUC approval expanded to 25 countries. We are expecting further expansion of countries with approval, as well as an increase in the number of countries where reimbursement will start. Mainly based on the robust progress in the United States and Europe and FI 2025 second half outlook, we revised our forecast upward by 10 billion yen to expect 210 billion yen on a full year basis. Next growth opportunity is expected from potential MIBC indication approval. EB303 study in cis-ineligible MIBC presented at ESMO the other day demonstrated extremely promising results exceeding our expectations. Based on these results, we already filed a submission in the United States. we are expecting contribution to sales post-approval. Furthermore, based on this exceptional data exceeding our expectations, we are analyzing the possibility of any upside to our sales forecast, including peak sales. Also taking into account the status of EV304 study for CIS-eligible MIBC, we will share our latest outlook as soon as we complete our analysis. As for either way, sales rose to 34.1 billion yen, up by 6 billion yen, or 21% year-on-year. On a quarterly basis, double-digit growth is continuously maintained, but patient affordability headwinds weighed on new patient starts and sales, so progress was lower than initially expected. Based on the second quarter year-to-date progress and FI 2025 second half outlook, we revised our forecast downward by 25 billion yen and are expecting 80 billion yen on a full-year basis. We revised our full-year forecast downward, but we are expecting continuous growth. Also from now on, one factor behind is new patient starts recovery. Although it's moderate, we are seeing signs of recovery in new patient starts from August. The share is also improving from the lower 50% level in June to the upper 50% level in August. Another factor is the use of GLADA2 open-label extension study data presented at AAO, American Academy of Ophthalmology, this month. Over three and a half years post-isovir dosing, increased benefit was demonstrated according to long-term efficacy data. In addition, favorable long-term data was obtained also in terms of safety and tolerability as well. By broadly disseminating this kind of data in the market, we will aim to further increase the awareness of the importance of treating RGA and the benefit of ISAVEI. You can find together two extension study data on page 34 and 35 in the appendix for your reference. Please refer to those pages at your leisure. We believe in the mid- to long-term potential of ISAVEI, and we are expecting that we can reach the peak sales forecast range. We have high expectations on ISAVE as an important growth driver for Stellis also into the future. Global sales of Vioza increased to 22.9 billion yen, up by 8.1 billion yen, or 55% year-on-year, demonstrating a solid growth continuously. We are anticipating this steady growth trajectory ahead in the second half of FY2025. With regards to Viroi, global sales reached 26.6 billion yen. Its outstanding performance is exceeding expectations. Due to active awareness campaign, we were able to realize exceptional colding 18 testing rate penetration and lower treatment discontinuation through appropriate information provision activities on adverse event management. regional footprint is expanding steadily with approval in 47 countries and launches in 26 countries by now. Based on this strong global momentum as a whole, we have made a substantial upward revision of our full-year forecast from ¥40 billion to ¥60 billion, which is 1.5 times compared to the initial forecast. Regarding Zospata, global sales reached 34.4 billion yen. There are some regional differences, but overall performance is largely on track. We are anticipating a moderate growth trend within the current indication of relapsed or refractory AML. As a future growth driver, top-line results for the additional indication in newly diagnosed AML are anticipated in the first half of FY2026. If approved, we can offer a treatment option to a new patient population, so we are hoping for contribution to sales. Last but not least, extended. Global sales increased to 477 billion yen, up by 25.3 billion yen, or 6% year-on-year. Sales expanded in all regions. Reflecting strong global performance as a whole, we revised our four-year forecast upward. Page 7 is about cost items. SMT initiative made more progress than our expectations. We realized cost optimization of about 16 billion yen in total for SG&A expenses and expenditure and cost of sales combined. Excluding U.S. extended co-promotion fees, SG&A ratio improved by 3.1 percentage points year-on-year. Let me explain a specific breakdown of SG&A costs and R&D expenditure. SG&A expenses fell by 1.3% year-on-year, trending at a similar level compared to the previous year. SG&A ratio was 26.9%. As SMT progress, we realized cost optimization of about 7 billion yen through continuous global organizational restructuring, reduction of mature products, related expenses, and streamlining IT infrastructure, etc. In addition to investments to maximize the potential of strategic brands driving our future growth, we will continue to make investments needed for SMT execution in order to realize further cost optimization. and the expenditure decreased by 16.9% year-on-year. As a main factor behind, in addition to Forex Impact, we made progress in outsourcing costs reduction through insourcing development capabilities, including clinical trials, etc., under SMT, which led to cost optimization of about 7 billion yen. Furthermore, due to the completion of large clinical studies for strategic brands, clinical development costs decreased by about 6 billion yen. In addition, one-time co-development cost payment booked in FY 2024 was another factor for cost decrease year-on-year. In the second half of FI 2025 onwards, we are expecting expansion of investments aligned with primary focus progress. In April this year, we implemented R&D organization restructuring, enabling activities from research to development all throughout. By pursuing operational efficiency, we are creating a cycle of making investments needed for the future continuously. Page 8 is about the revision of FI 2025 full-year forecast. Based on the robust progress exceeding our initial forecast up to the second quarter, we have made a significant upward revision of revenue, core and full operating profit. We are expecting core operating profit margin of 24.1%, improving by 2.9 percentage points compared to the initial forecast. We revised our full-year forecast forex assumptions to 145 yen against the US dollar and 170 yen against the euro. From the third quarter onwards, we are assuming forex rates of 144 yen against the dollar and 172 yen against the euro. We have made an upward revision of revenue forecast by 100 billion yen, including 20 billion yen for Viroi, 10 billion yen for Patsef, and 70 billion yen for Xtandi. We are expecting revenue of 2 trillion 30 billion yen, exceeding the 2 trillion yen mark for the first time since the establishment of Stellas. We are expecting SG&A expenses, excluding U.S. extended co-promotion fees, to decline from the initial forecast. If we exclude Forex impact, reflecting robust progress of SMT, we are expecting 586 billion yen. As for the expenditure reflecting operational efficiency in R&D reorganization, we are expecting 322 billion yen.

Reflecting the strong progress in our core business, cooperating profit is revised upward by 80 billion yen from the initial focus, now expected to be 490 billion yen. Hubei's operating profit is also revised upward by 80 billion yen from the initial focus, now projected to be 240 billion yen. We continue to incorporate a certain amount into the focus for other expenses to prepare for risks such as impairment losses. Next, I will explain the progress of our pipeline. Page 10 shows the progress of key events expected in FY25 for our strategic brands. Particularly significant development, as shown in the center of the slide, is the successful completion of the PADSF EV303 trial and acceptance of its supplemental BLA in the U.S. Details are provided on the next page. Azabay was approved in Japan in September for the indication of suppression of GA growth in atrophic AMD. Aiming to rapidly deliver this treatment for severe GA with a higher need to Japanese patients, the development team engaged in constructive discussions with the authorities. This led to a submission based on overseas clinical trial results using the conditional approval system resulting in approval just seven months later. Furthermore, as noted in outside of the table, approval was obtained in Australia in October as well. We will continue to pursue further submissions in other countries and regions with the aim of delivering Azovay to patients worldwide. In addition, we presented efficacy and safety data from the GAZA-2 open-level extension study covering up to 3.5 years after administration of ISV at the AAO in October. The final analysis results of the Phase II glim trial of Vyloin in a pancreatic ductoid in the carcinoma or pre-duct became available, and the primary endpoint was not met. We are currently analyzing the detailed data. As part of the life cycle management of VILOI, the Phase III Lucerna trial evaluating its combination with pembrolizumab and chemotherapy in gastric cancer is ongoing. Page 11 shows the latest status of parts of MRBC development. For details, please refer to the materials from last week's online briefing on our oncology pipeline. The EV303 trial yielded unprecedented data, suggesting that the PADCF has the potential to become a new standard of care for cisplatin-ineligible MRBC. EV303 trial compared the efficacy and safety of PADCF plus pembrolizumab as adjuvant therapy before and after radical cystectomy. The current standard of care in patients with MRBC who were ineligible for or declined cisplatin-based chemotherapy. versus surgery alone. The figure shows the efficacy results from the first interim analysis. The left panel displays the primary endpoint, event-free survival or AFS, and the right panel shows the key secondary endpoint, overall survival or OS. Compared to surgery alone, the combination therapy group or ARMS showed a hazard ratio of 0.40 for EFS, representing a 60% reduction in the risk of tumor recurrence, disease progression, or death, and a hazard ratio of 0.50 for OS, indicating a 50% reduction in the risk of death. Subgroup analysis confirmed consistent improvements in EFS and OS regardless of age, sex, or PD-L1 expression status. The safety profile of the combination therapy arm was consistent with the previously reported trials, with no new safety concerns identified. Following the top-line results in August, we rapidly advanced the process for additional indications. Within just over two months, the USSBLA was accepted and granted prior review designation, with a target PDUFA date set for April 7, 2026. We're also progressing discussions with regulatory authorities in other regions toward submissions. Furthermore, the Phase III EV304 trial for cisplatin-treated MABC is ongoing, with interim analysis data anticipated in the latter half of fiscal year 2025. Page 12 for focus area approach. I will explain the progress on flagship programs. ASP3082, targeted protein degradation, and ASP2138, immunooncology, presented promising clinical trial data in October. While details were already explained during last week's online briefing, the following slides briefly recap the current status. Clinical trials for AT845 in genetic regulation and ASP7317 in blindness and regeneration are progressing as planned, with POC assessment still scheduled for the second half of FY25. The current status of other programs is summarized on slide 41 in the appendix. Page 13 explains the progress of SP30A2 and the primary focus targeted protein degradation. Specifically, SP30A2 has presented promising data in NSALC, or non-small cell lung cancer, and we have initiated preparations for registration studies targeting PDAC and NSALC. SB3082 has achieved POC in both PDAC and SCLC. This time, it presented clinical data for its monotherapy in second-line and later treatment settings for SCLC at an October Congress. Last week's online briefing preceded the Congress presentation, so we provided an explanation aligned with the abstract. Today, however, we will use the data presented at the Congress shown in the figure on the right. SCLC has a high unmet medical need. The objective response rate with the existing standard of care in the second line and beyond is reported to be in the single digits, reaching a maximum of around 18%. ASP308 monotherapy demonstrated significantly superior anti-tumor activity compared to a standard of care, achieving an ORR of 37.5% across all second line and beyond and 42.9% specifically in second and third line. Furthermore, the median duration of response was 9.72 months, and the median progression for survival of PFS in second and third line was 8.25 months, confirming sustained efficacy. The safety profile showed no major concerns, with no treatment-related adverse events leading to discontinuation observed at the data cutoff date. Development of ASP3082 across various hematopoiesis progressing for PDAC. Preparations are underway to initiate a pivotal trial for first-line treatment in the latter half of FY25, with data presentation also targeted for the latter half of FY25. For NRCLC, planning is ongoing to initiate a restoration of studies as early as possible. For CRC, colorectal cancer, the POC judgment remains targeted for the second half of FY25. Furthermore, research and development for follow-on programs is advancing. ASP5834, a pan-carious degradation targeting diverse carious variants, achieved its first subject dosing in August. Under the new R&D structure launched in April, the team achieved dispersed subject dosing in a record 27 days after the FDA IND clearance thanks to close cross-functional collaboration. We will provide progress updates as data becomes available from clinical trials. Page 14 details progress on SB2138 and primary focus immunooncology. Specifically, ASP.238 is demonstrating the benefit of subcutaneous administration in combination with the standard of care steadily progressing toward POC achievement. Phase I trials are currently underway for gastric and gastroesophageal junction adenocarcinoma, or GGEJ, as well as PDAC. These trials evaluated SB2138 as a monotherapy in combination with standard-of-care IV and subcutaneous across multiple treatment lines. Data presented at ESMO in October showed no major safety or tolerated concerns and supported combination with current standard-of-care. Furthermore, the ORR, when combined with the standard of care by a convenient biweekly subcutaneous administration, demonstrated high antitumor activity in gastric cancer at a 2,000-microgram dose, 62.5% in first line and 37.5% in second line. In the figure above right, the values indicated in red represent the clothing 18.2 expression levels for each subject. By low, it targets patients with high expression, 75 and above. This data confirms efficacy not only in high expression patients, but also in those with moderate to low expression levels, suggesting the potential to expand the patient population eligible for this treatment. A POC judgment is planned for the latter half of FY25 pending further data accumulation. Given the compelling data obtained thus far, we have initiated discussions on the development plan to enable a prompt execution of the registration trial following POC achievement. For clotting 18.2 targeted therapy, we aim to provide treatment options to a broader patient population. To strengthen our leading position, we are advancing the development of the antibody drug conjugate ASP546C in addition to ASP2138. Research and development of follow-on programs are also progressing. Multiple programs utilizing a similar mechanism of action, including the clinical stage ASB1002, are advancing, including by specific. Additionally, a research is advancing toward clinical trials for IADC. Immunostimulatory Antibody Drug Conjugate Utilizing New Antibody Modification Technologies. We will provide updates including detailed explanations as progress is made in each program. Page 15 shows today's key takeaways. The second quarter delivered exceptional financial results. Parts F and Y led the way with strategic brands demonstrating strong growth. SMT progressed well, achieving robust cost optimization. Based on this strong progress in our core business, we have reversed our full-year revenue forecast upward by 100 billion yen and both core and full operating profit by 80 billion yen. Our pipeline also showed robust progress. Parts have showed unprecedented data in the EB303 trial, significantly advancing its development for MIBC. In the focus area approach, promising data was obtained for ASP3082 and ASP2138, and preparations are underway to conduct registration trials. Throughout FY25, we will aim for further profit growth and enhanced pipeline value. At the end, I would like to announce upcoming events. On Tuesday, December 9, we plan to hold a discussion session with outside directors. At this session, we will explain the evolution of Astella's governance structure. Additionally, directors newly appointed in June will share their perspectives on joining the Astella's Board of Directors, as well as their experiences and impressions from their first 150 days in office. We encourage your participation. That concludes my presentation. Thank you very much for your attention.