Chugai Pharmaceutical

Thank you for joining Chugai's conference on financial year 2024 second quarter financial results. I am Miyata from Corporate Communications and IR. I would like to serve as your moderator today. Today we have an on-site presentation as well as a Zoom webinar. Today's agenda is on the screen in the venue as well as on the screen of the web streaming. Today's conference is going to be held in Japanese, but through the Zoom webinar, you'll be able to listen to the simultaneous interpretation in English. Please choose the interpretation icon at the bottom of the screen, and if you'd like to listen to Japanese, please select Japanese, and if you'd like to listen to English, please select English. After selecting the language of your choice, please mute the original audio. Before each speaker's presentation, we will allow you to capture the screen. Questions will be taken after all the presentations are over. We have half an hour for Q&A. Please ask your questions actively. During the presentation, your audio is muted. Please understand. Now, Dr. Okuda is going to present the financial year 2024 second quarter overview and refinement of five reforms on top I-2030. If you'd like to capture the screen, this is your time to do so. Now, Okuda-san, the floor is yours. I am Okuda. I am president and CEO. First, I would like to look back on the first half performance of the year, and I would like to talk about TopEye 2030, our strategy, and refinement of five reforms on TopEye 2030. Please turn to page 5 of your material. The first half performance progressed very nicely on track. The revenue compared to the last year was minus 4.6%. And this was a marked improvement compared to the big negative growth of the first quarter of 24.1%. And it's because of the run-up rate of supply to the government of 81.2 billion yen in the first quarter of the last year. And operating profit and net income, despite of the declining revenue, increased by more than 10%. And this is thanks to the good performance of exports to Roche, especially Hemlibra. Hemlibra export grew quite dramatically. And because of the product mix change, the operating margin was 47.5%, which is high profitability. So thus, the progress in the first half was very good. And for the full year, we expect record high operating profit as well as record high net income. Next slide, page 6, please. Our core business is nicely growing according to this chart. This is looking at factors affecting the difference of the top line compared to the same period of last year, excluding run-up relief, the revenue increased by 54.4 billion yen, or 10.9%. So let's go from the left. The domestic sales. New products and mainstay products grew very nicely, but there was a negative impact of NHI drug price revisions. Due to that, domestic sales declined by 15.2 billion yen. Overseas sales increased, significantly by higher sales volume and forex impact, surpassing the declining export unit price. And overseas sales increased by 59 billion yen. Especially, Hemlibra and Actemra progressed very well in terms of exports and other revenue. increased mainly due to the increase in him library-related royalty income as well as one-time income. As a result of that, our core business grew very nicely, except for a factor. In the recent years, Hemolibra has contributed to the overall performance of Chugai for some years, and I am putting together the progress in hemophilia A treatment by Hemolibra. We have solid data of efficacy and safety. Evidence has been accumulated for over years. This is a strength of Heber Library. Especially, we have rich real-world evidence. And this gives a sense of comfort to patients and patients' families, as well as health care professionals. And we consider having such real-world evidence to be very important. Since the first clinical trial, it's been over 10 years. And overall, across the world, over 26,000 patients are using Hemlibra for the treatment of hemophilia A. And we now have more than 100 papers published, including the data of more than 10,000 patients. we have real-world clinical evidence, which is very robust in terms of both efficacy and safety. Top right, we are looking at heaven 1 to 4 long-term analysis results. This is an integrated result. More than 80% of the patients had annual bleeding of zero for a long time. And from the real-world data of the advanced nations, compared to the previous treatment, Hemlibra increased the zero bleeding rate. meaning that Hemlibra is providing stable prophylaxis of bleeding events in hemophilia patients. And also, there was a reduction, a significant reduction, of the annual joint bleeding rate, as you can see at the bottom of the slide. And in terms of safety, we have real-world safety data over a long period of time of over 1,000 patients. And just like in clinical trials, we were able to confirm a very favorable safety profile of the product. We have always listened to the voices of patients and the patient's families as well as the health care professionals. and worked on improving the convenience of the administration of Hemolibra. And going forward, we would like to work on improving the convenience of the administration even further, and we are now working on the development of auto-injector for this product. Thus, Hemolibra has a lot of real-world evidence for a long time, and based on the experience of the use of this product, we have been able to confirm a high level of satisfaction on the part of the patients as well as the healthcare professionals, and we do believe that this can lead to further competitive advantage. We will continue to commit to hemophilia. including next 007. We would like to continue to increase the value of our portfolio in hemophilia. So from the next slide, I would like to talk about the refinement of five reforms of top one 2030. Top Eye 2030 is a 10-year strategy through the backcasting from the 2030 vision. And this is a long-term strategy. And it has been three years since the start of these strategies. So we thought we should stop here to review. the progress so far and what kind of external environment shifts are taking place and what kind of execution progress is being confirmed in the internal environment. And given such review, for the remainder of the seven years, what do we have to do and how do we have to do things and at what speed in order to achieve the vision of 2030? So first on the external environment at the top left, on the left, The value that pharmaceutical innovation brings to society remains unchanged. This assumption has not changed. But on the other hand, drug discovery and generative AI and digital technologies, we have seen a lot of advancement in those technologies. And due to that, the importance of open innovation has risen even further. Now let's talk about the strategy execution of Chugai. R&D output doubling and launch of Chugai product every year globally without compromising quality. These are the two important goals of TopEye. In these regards, we have been able to confirm a steady progress. And many projects have had some progress. And of course, we have hit some difficulties. But five reforms have been advanced quite steadily. Looking back on the past three and a half years, we do believe that we don't have to change the goal and the outline of TOPAI 2030. We do believe that this is a robust strategy. But at the same time, we do understand this is quite a challenging goal. Business as usual will not be able to lead us to achieving the goal. But at the same time, on the contrary, we now have quite a lot of confidence in terms of achieving this goal, because we can now identify what kind of tactics need to be changed in order to achieve this target through our review this time. meaning that we can now refine the reforms that are required to achieve the target. Out of the five reforms, I would like to focus on drug discovery, development, pharmaceutical technology, which are all very important to achieve the goal of top-I strategy. This is about refinement of the function of red reform. We have two important strategic pillars which have not been changed. The red letters represent minor changes. To the left, global first-class drug discovery. In this pillar, We now have maximization of the value of development projects by pursuing translational research and pharmaceutical technologies. And to the right in the pillar of futuristic business model, we now have development of PHC solutions. This is redefined. Looking back on the progress of R&D progress, we have defined what kind of challenges need to be overcome. Drug discovery, development, pharmaceutical technology, I would like to look into each modality. First, about the antibody. The new technology has been advanced. We now have proprietary antibody engineering technology based on which a lot of projects have moved on to the clinical stage, and we are now simultaneously developing different indications. We are using digital and robotics, and we have been able to improve the efficiency of drug discovery to a certain extent. But we do believe that in terms of the progress of many of the projects which are in the early clinical stage, we still have some room for improvement. Next is mid-size molecule. Luna-18 oral absorption has been confirmed. Mid-size molecule modality now has a better probability of success. But at the same time, or on the other hand, POC has not been achieved yet. For mid-size molecule, a lot of non-clinical projects have made advancement. They are close to portfolio in. And in terms of the pharmaceutical technology, In terms of the development of that, there has been a lot of progress in terms of difficult meat-sized molecules with high activity and high difficulty. But compared to antibody, the speed is slower for pharmaceutical technology of meat-sized molecules. So we need to create a platform and accelerate the development. In the past three and a half years, we now can identify common challenges. We have a lot of projects which are in the early stage clinical development, but they are still taking too much time. We need to accelerate the early stage clinical development even further. We need to reduce the time of development and improve the probability of success even further, and identify the potential of the value as early as possible and concentrate our resources, meaning that strategic prioritization is required. And if you think about the long-term growth of Chūgai, We need to further polish new modality in drug discovery, and we should be able to generate molecules at a stage of drug discovery which are close to the perfection as much as possible.

Like this, while we have had a number of achievements, the challenges that we have to overcome have become visible. Based on this, we have refined respective reforms. In draft discovery, to clarify the direction of reforms, We have revised the descriptions based on our R&D principles. However, our basic strategy remains unchanged, that is to pursue the multi-modality drug discovery. R&D principle is what articulates the success factors that led to the development of competitive products such as Hemlibra and Alicensa. This includes technology-driven drug discovery and quality-centric drug discovery. With these two as the pillars, we set open innovation as the third pillar. The box at the center shows the direction of each specific initiative, and their goals are shown to the right. As we have always done so, we will commit to the drug discovery, which nobody else but we are able to do more than ever. We will target the molecule which nobody else could target. We will do the drug discovery, which will realize the MOA, which nobody could ever think of. One of the examples is middle molecule. To keep our competitive advantages, we will further our technological development. To double the output, we will select the molecule with high level of completeness as a development candidate. Combined with human predictive technology, we will aim to achieve high clinical success probabilities. At the same time, we will leverage external innovations. and drive Chugai's unique technological development and drug discoveries. These reforms will not only contribute to doubling the R&D outputs up to 2030, but will also form the foundation for growth beyond 2030. As you can see, we have refined the reforms and targets for each of the early-stage and late-stage developments. In order for us to be able to make the judgments about project values at the early stage, we will create the silence-based appropriate clinical development options planning and execution. As was explained earlier, in the past, It was too time-consuming for us to estimate the values of the projects in the early clinical, so we will set the highly probable goal and no-goal criteria so as to make agile judgments. And we will focus resources in the promising projects. And by running this challenge cycle quickly, we'd like to double the output while keeping the quality. And this is critical in order for us to achieve the top I goals. And these are the drug development reforms that have been refined. In pursuit of the global standard, we'd like to refine for the antibody and for the middle molecule as well. We will have to pursue. the global technology. As for production, not only the cost competitiveness, but we will have to consider the factors of the robust supply system, that is, the stable supply factor. And these are the four goals shown on the right-hand side. And the second development period is that this is the period from the selection of the candidate compounds up to the submission of the clinical trials. We'd like to benchmark against the top-level companies in the world, and for each of the antibody and middle molecule, we have set these targets up to 2030. So we will pursue to enhance our competitiveness in all of the quality, speed, cost, and drug development fronts. I have explained about the refinement of the reforms and as for the RET functions. Next slide shows the five reforms summaries, including the functions other than RET. And the portions shown in red are the changes that we have made this time. I will skip the explanations about the functions of other than red. As for the progress and challenge of each reform and about the refinements, we have attached additional slides, so please refer to the slides as necessary. Based on the refinement, we have revisited the mid-term plan. milestones, and I have added some slides at the end. I will skip the explanations, but we have made the disclosures limited to the following three. First one is towards the achievement of the top I2030, the ones that have the strategic importance. The second one is the one with which the clear endpoints evaluation metrics have been identified. The third one is the ones that investors have high interest in. This is the last slide. Reflecting the top-I 2030, when we reflect the first three years of top-I, we have started to make the focused investment into the R&D under redshift. The number of PC transitions and P1 transitions compared to the past 10 years, the number has increased. So we have started to see the signs of changes. But on the other hand, as for the originally anticipated initiatives, we have started to see the gap against the targets. So we will have to accelerate further the rate shift. As for the pharmaceutical development, this is a long-term effort, so we may not see the outcomes immediately, but with the acceleration of initiatives, we believe that the outcomes will be expanded further. And this slide shows a curve. As you can see, the curve becomes steeper And that reflects the image that I just explained. With the size of our business, it is a very high target to launch the global product each and every year. But we will not only pursue the numbers. We would like to work towards the realization of the sustainable medicine with high level and focused on patients. We'd like to overcome the unmet medical needs one by one. We'd like to keep producing the values that are truly sought out by patients. So we will never compromise the high degree of completeness. Utilizing our science and technological capabilities, we would like to keep producing the innovations to address the challenges, unmet needs. And top I includes the I. I stands for innovator and I. That means that each one of us will own the reform challenges. Each and every employee will transform themselves in order to do what they are supposed to do and what they are trying to do. And that will create autonomy. And that autonomy will become a chain to create the strength and synergy of the organization. And after achieving the reforms, we believe that the achievement of our ultimate goals will become visible. So we'd like to start anew to become the true innovator of the world and do our best towards that end. That concludes my speech.

Now I'd like to ask Kusano-san to give a presentation on the pipeline. So we will change the page of the slide. So this is the time for the screen capture. Now, Dr. Kusano, please. Now, I am Kusano from Project Lifecycle Management Unit. I'd like to give you an update on the development pipeline. Please turn to slide page 24. This shows the second quarter topics regarding launch approval and filing. Apart from Adesense approval in China and Sigma cell sept approval, other topics have already been announced. Piaskai is the fifth antibody drug developed in-house by Chugai for PNH. and it was launched in Japan ahead of the rest of the world, and it has been approved in the U.S., and it has received a recommendation for approval in Europe. Michiga, this has been launched in Japan for the treatment of atopic dermatitis in children and prurigo nodularis. Alescensa has been approved in Europe and China as an adjuvant treatment for ALK-positive early-stage non-small-cell lung cancer following the U.S. As the first ALK inhibitor for this indication, it has begun contributing to the treatment of patients around the world. Abutomecinib, in combination with defactinib, has begun rolling submissions in the U.S. for the treatment of KRAS-mutated recurrent low-grade serous ovarian cancer. As for initiation of study, two of them are Shugai in-house developed drugs, and two others are the product developed by Roche, GIMM329. For that, the phase 1 clinical trial has begun by Roche for obesity, DONC52. The clinical trials to evaluate the pharmacological effects of wheat intake in patients with celiac disease have started. I would like to turn to this later on. ASO factor B is for IgA nephropathy, and global phase 3 trials have started. This has begun phase 1 to clinical trials in Japan for the treatment of hypertension. There are five items removed from the pipeline. Chiragormab and Tecentric, in combination with chemotherapy, which has already been announced, and including this, there are five items. Piersky, an in-house developed drug. This was excluded from the pipeline as a part of the portfolio review of Roche for lupus nephritis. The study development was discontinued for this indication. Therefore, this is now removed from the pipeline. And the development of T-centric plus Avastin was discontinued following results from the INBRADE 050 trial evaluating the adjuvant treatment of hepatocellular carcinoma. Development of migoprotafib, an unlicensed product from Roche, has been discontinued due to the termination of the collaboration and license agreement between Roche and Relay Therapeutics. Development of prurucetinib, also unlicensed from Roche, was discontinued due to the expiration of the global collaboration agreement between Roche and Blueprint Medicine. Two items for medical conference have already been announced. AP306, an oral phosphate transporter inhibitor already licensed out to Alubund Corporation has received breakthrough therapy designation in China for the treatment of hyperphosphatemia in patients with chronic kidney disease.