Chugai Pharmaceutical

My name is Miata. I will be facilitating today's session. And this session is held using a Zoom webinar platform. As page three of the presentation material speaks, we would like to go through today's proceedings per agenda. Today's presentations are made in Japanese. However, we do have English simultaneous interpretation service available. Please make sure you select the language of your preference by clicking on the blue mark on your screen. For those who wish to listen to Japanese, please select Japanese. For those who wish to listen in English, please select English. and please make sure that you click on Mute Original Audio. This way, you can only listen to the language of your choice. We will take questions after the presentation. We plan to spend about 30 minutes for Q&A session. During the presentation session, you are all muted. Now, I would like to invite Okuda to give us the review of the first quarter result of 2024. My name is Okuda speaking. I am the representative CEO. I would like to explain about the result of the first quarter of 2024. Please refer to the slide page 5. The first quarter, made a strong start for the core business as been expected. Revenue dropped by 24.1% year-on-year. This was because last year in the same period, we have had a supply of loan approved to the government of 81.2 billion yen. net income and operating profit, although despite the revenue drop, dropped only 3.1% respectivity. This was because we do not have income coming from RONAPRIV anymore, the product mix improved. OP margin was 43.1%, which was high. As you can tell, the core business domestically and globally made a good start. On a four-year basis, we are aiming to achieve the record high number for both operating profit and income. Moving on to the next slide, this shows our global product performance. As for the HEMU library, We see growth momentum for the overseas local sales. And in this fiscal year, we expect that export revenue will grow on a full-year basis. Domestic market, due to the NHI price revision last year, revenue was flat. However, we are gaining share. Now for Akutemura, export was negative. This was due to the timing of the shipment. Overseas local sales, due to some impact of biosimilars, dropped slightly. But this was within our expectation, and we do not change our full-year forecast for export. Export was negative to the previous year. However, this was due to the shipment timing, and we do not change the export four-year guidance. In U.S., NSCLC indications have been added, and we have good expectation on future growth. Japan, Europe, we are expecting to receive approval. For end spring, we see strong growth. domestically and globally. The result of GMG was unfortunately below our expectation. However, NSPRING has several ongoing studies targeting, for example, at TED. And we have a big hope on the success of those ongoing studies. Starting this April, we have new management team. As you see, we have 10 team members with supervisory responsibility. They are going to utilize their expertise, knowledge, and experience. We are going to exchange various opinions. In order to achieve the top I2030, this team is going to lead the business management. With this, I would like to conclude my presentation. Next, I would like to invite Kusano to explain about the development pipeline. I am Kusano from Project Lifecycle Management. I would like to explain about the development pipeline. Please refer to page 9 of the presentation. This is the list of the topics for the first quarter. For approved and filed, except for the public knowledge-based S&DA filing, the information have already been published. For PiaSky, this is the fifth global product. This is targeting at P&H and approved in Japan, China, and reviews going on in Europe and America. This is subcutaneous dosing once in four weeks. This brings great convenience. We would like to contribute to the patient around the world. Alicensa. This was approved in US this year in April for the indication of ALK positive early stage NSCLC. ALK positive early stage NSC. Well, this is the very first adjuvant therapy for that indication. There is no other ALK inhibitor for this same indication. We are bringing in new therapy to the patient. The review is going on in Japan and Europe. Nemorizumab is targeting at the prurigo nodularis and atopic dermatitis, and our finding was submitted this year in February in Europe and US. Please move on to page 10. In terms of the initiation of study, we have three Roche products, RG6299, ASL factor B, will be explained later on. SRP9001 is targeting at non-ambulatory Duchenne muscular dystrophy, we started global phase 3 study. Glofitaba is targeting at previously untreated large B-cell lymphoma. Global phase 3 study was initiated. Readout has already been published. In the N-Spring GMG global phase 3 study, we have achieved the primary endpoint However, the result was below our expectation. As a reference, we have detailed information on the study on slide 17. Based on this time's result, we've discontinued the development. This time's study result does not impact risk-benefit profile of long-term use of N-Spring for NMOSD. MOGAD, AIE, TED, We have other ongoing development effort for AirSpring so that we can offer new value to the global patients. And below that line, we have already published the information. Anemolizumab was presented in the Society, and Xylebesilan, where we signed a licensing agreement with Roche, will be explained later on. Please move on to page 11. The major R&D event in 2024 is summarized here and already been explained in the earlier earnings, but we have highlighted the progress this time.

Please turn to slide 12. For Nemorizumab at AAD annual meeting, the long-term data for Atopic dermatitis and prurigo nodularis was published. On the left-hand side is atopic dermatitis phase 3 test study results. The improvement of itchiness at week 16 with nemolizumab continued to week 48. As you see in the purple line, even when the dosing interval is extended from once every four weeks to once every eight weeks, the efficacy was maintained. On the right-hand side is phase 3 study for prurigo nodularis. With the dosing of nemolizumab, the percentage of patients who saw improvements in itchiness for 52 weeks has increased. And in close to 90% of the patients, the itchiness was eliminated or almost eliminated. As you see in the blue line, For patients switching from placebo to enamelizumab, a similar result was seen in each study. As you see in asterisks number one and two, we saw improvement in skin lesions and sleep disorders. In each study, for the safety, the results were the same as we have seen in the past. For both diseases, in the United States and Europe, the submission was accepted in February of this year, and in the United States for Prurigo nodularis. Priority review designation was made. Please turn to the next page, which is for ASO factor B. ASO factor B is uptaken selectively by hepatic cells. And it is a nucleic acid drug that inhibits a complement B factor production. The target disease is IgA nephropathy. We see deposition of complements and IgA at the glomerulide. Hematuria and proteinuria are seen persistently. On the left-hand side is ASO. As you can see on the left-hand side, ASO factor B is uptaken into the cell, and this factor B will be released from N-acetylgalactosamine, and the protein that will cause the disease, messenger RNA that produces that protein, will bind complementarily and create a double protein. And afterwards, this double chain with the specific enzyme will be degraded. So on the right-hand side is the mechanism of the onset of IgA nephropathy with complement B factor. complement, the second path of a complement will be activated. And with ASO factor B, a complement B production will be inhibited, and the pathway activation will be suppressed. It will suppress the progression of IgA nephropathy. And next is the licensed in. a contract concluded with Roche, which is RNAi . RNAi is a mechanism that exists in the human body, and it interferes with messenger RNA, which transmits proteins of DNA. And the RNA treatment drugs utilizes this mechanism. This is a new modality. The RNA inhibitor treatment drug, siRNA, moves to the hepatocell and it will create or produce a complex with the protein necessary for RNA interference. This complex will bind to the small interfering RNA and this messenger RNA will be degraded. And the next page is the RNAi treatment drug, which is being developed for hypertension. As you see on the left-hand side, zilabesirag is at the most upstream portion of the renin-angiotensin aldosterone. which is related to blood pressure regulation. It inhibits persistently the synthesis of AGT. As you see on the right-hand side in the Phase 2 study overseas, For hypertensive patients who saw a lack of efficacy with standard of care, with the use of dilvesiran, at three months after start of treatment, compared to placebo, there was a significant decrease in blood pressure. The safety profile was good with no adverse events leading to death or discontinuation. For hypertensive patients with uncontrolled blood pressure, the cardiovascular event risk will go up and there is unmet medical needs. With the new modality, value will be provided to patients. We are working with RAS L9. Alnylam on this. These are the main project market. At the top, you see the domestic sales. On the left-hand side is Chugai Products. On the right-hand side is Roche. At the bottom, you see the products that are being developed or the ones that are being developed in multiple projects. So these are in-house products, overseas sales. And therefore, Hem Libra and Alicenza, which we introduced to you last year, are not included. For Roche products that were disclosed this year in February, the reasons for changes are shown. For Enspring, The GMG was deleted, but for 1BM positive CHF potential shows high promising results. It is not included in the chart, but for hemolibular. The domestic environment is very difficult, and further growth in the market is expected. For Alicenza NSLLC adjuvant treatment, additional indication increasing sales is expected. This is a submission. Schedule, the right stars are for new indications, and the blue is the change in submission year. With the progress of the test, the submission year was changed for some. Please refer to the following slides for your reference.

This is Taniguchi speaking. I am a CFO of the company. Now, I would like to explain about the core base, the first quarter result. The revenue dropped by 75.3 billion yen year-on-year, and it was 236.9 billion yen. Operating profit dropped by 3.3 billion yen, and it was 102.1 billion yen. The major reason for the drop was because last year in the first quarter, we had revenue of COVID-19 treatment run up previously. which we do not have anymore. So except for the RONAPRIV impact, the revenue actually increased. Now, out of the revenue, the product sales was 204.5 billion yen, dropped by 29.8%, which is 87 billion yen. Domestically, revenue dropped by 89.5 billion yen, including RONAPRIV. But if we exclude RONAPRIV, The drop range was 8.3 billion yen, reason being the GX penetration of the NHI price revision. Overseas, Himalaya doing well, up by 2.5 billion yen year-on-year, growth of 2.5%. The other revenue, so increase in Himalaya royalty income and one-time income and increased by 57% year-on-year, which is up by 32.5 billion yen. The cost of sales ratio was high with Rona Pre, but we don't have this anymore. So the cost-to-sales ratio improved by 16.3%. and became 35.5%. Expense side, we improved the efficiency, SG&A increased only by 200 million yen. R&D expense under the Redshift strategy, drug discovery and early development project progressed quite well and increased by, R&D expense increased by 5.1 billion yen. As a result, operating profit was 102.1 billion yen. 43.1% up by 9.3% and income tax decreased and net income was 76 billion yen dropped by 3.1%. This is the change in product. sales, domestic oncology area revenue dropped by 6.5%, equivalent to 3.9 billion yen. Due to the impact of GX generics penetration, Avastin revenue dropped. And for the growth of Fesco sales exceeded the drop of the Progetta and Herceptin. For the specialty, revenue dropped by 64.6%, which is 85.7 billion yen. But the RONAPRIV 81.2 billion yen and TAMIFOR 4 billion yen revenue drop impacted quite largely. Except for those two, the revenue was in part with the previous year's level. The NHI drug price revision impact we saw, however, for BISMO and SPRING, the sales grew nicely. Overseas, it grew by 2.5%. Actemra is seeing the impact of BIOS similar. However, HemRibra and Enspring grew its export sales. Moving on to the next page, this shows the change in operating profit. From left, you see growth. gross profit. This was dropped by 8.7 billion yen. As you can see, we had a negative impact from NHI price decrease and export unit price. However, we made some We complemented that with the increase of export. However, we were not fully able to absorb that. As for the impact of sales volume, the magnitude of this range was relatively low. That's because of the impact from the run-up period. And this is the change of the operating income. A profit, excuse me. And this is the quarterly change in cost and the profit. So this shows basically the quarterly trend. To your left, you see the first quarter last year. The size of the bar is quite big, but this is due to the roadmap pre-sales. But since then, the profit level has been normalized. There are some changes in the timing of export. Sales recognition timing as a result varies, thus quarterly profit can move. Next page shows the structure of revenue by quarter, on a quarter basis. In 2023 first quarter, we recognized the sales of RONAPRIV to the government. And as a result, the domestic product sales was boosted. And overseas product sales. I would like to explain about this later in more details, but the revenue dropped in Akutemura, but somewhat compensated by Himuraibara. Next page. And it shows the progress against the four-year guidance published at the beginning of the year. Last year, due to the impact of corona, the first quarter number is looking quite high. And this year, first quarter, for both sales and expense items, they are trending in our expectation as per our expectation. The first quarter domestic product sales is impacted by the lesser number of business days, meaning that sales volume tends to be low in the first quarter compared to the other quarters. And overseas product sales, the export to Russia due to the production and exporting schedule, can move by product on a quarterly basis. But just like domestic sales, the number in the first quarters tends to be low compared to the other quarters from April and beyond. Regarding hemorrhoid reality, the rate increases against the four-year cumulative sales, meaning that we have a tiered structure, meaning that the reality tends to go up toward the end of the year. And for the expenses. The expenses is expected to fall under our four year expectation and based on those situation in general, things are moving as per our expectation as per our four year guidance announced at the beginning of the year.