Chugai Pharmaceutical

Thank you very much for coming over to conference on financial results for the second quarter for the year ending in December 2025. I will be leading today's session. I am Miyata from Corporate Communications Ayo Departments. So today we have the participants of the venue as well as on the Zoom. And today's agenda is shown on a screen at the venue as well as on page 3 of the presentation materials. and today's conference will be conducted in japanese but we are also providing english on zoom webinar as a simultaneous interpretation please select the language that you wish to listen to please click the interpretation mark at the bottom of the screen and select either japanese or english And then you can also mute the original audio to listen to the language that you've chosen only. And before each presentation, we'll have time for the screen capture. So please make use of the time. And we'll take your questions after all the presentations are completed. We plan on spending for about half an hour for Q&A session. So feel free to ask your questions. And during the presentation, your sound will be unmuted. So now we want to pass the floor over to Ms. Okuda to talk about overview of the second quarter results. So we'll stop the screen for a while, so please use this time for screen capture.

So now we would like to begin the presentation. I am Okuda, CEO of the company. I would like to explain about our financial result for the second quarter of 2025. Please take a look at page 5 of your handout. In the second quarter of 2025, domestic and overseas product sales increased, resulting in increased revenue and profit. Compared to the previous year, revenue increased by 4.6%, operating profit increased by 3.5%, and net income increased by 2.1%. Given the steady progress made in the first half of the year, we expect to achieve our full year forecast. I will explain the details of revenue on next slide. Compared to the same period last year, revenue increased by 25.6 billion yen, up by 4.6%. The breakdown is explained from left to right. Domestic sales were negatively impacted by NHI drug price revisions and the penetration of generics. However, sales of new products such as Fesco, Piascai, as well as mainstay product Babismo increased by 6.1 billion yen. Overseas sales increased by ¥19.7 billion, and increases due to export volume and exchange rate and so forth far outweighed the impact of a decrease in export prices. In particular, exports of Actimera to Roche increased significantly. Next, I would like to explain about R&D. This slide shows the status of important R&D milestone achievements this year for in-house developed products. First, regarding our goal for Lipron, our licensee Eva Liddy announced the success of a global phase 3 trial for type 2 diabetes in April this year and presented the result of that trial at the American Diabetes Association in June. As a result, we believe that the probability of success in development in diabetes and obesity has increased. We have confirmed the POC for NEXT-007. Based on this data, development is progressing with a decision to start a global phase 3 trial from 2026. In addition, new in-house projects, Mint91 and the Media Molecule Project OF00 have begun Phase 1 trials, as long-term management decisions aimed at accelerating early development in a flexible and strategic manner, we have decided to discontinue in-house development of five projects out of our in-house pipeline that are in early stage. I will explain this in more detail in the next slide.

Since the launch of TopEye 2030 in 2021, we have increased the new projects through the redshift. As a result, in the past four years, we have enriched our early-stage projects with nine projects of in-house discovered products entering clinical trials. On the other hand, some projects were taking time to develop, As a result of prioritizing our in-house pipeline products in the early development stage, based on the data obtained to date and the overall status of our portfolio, we have decided to suspend in-house development of five projects, Luna18, Sail66, Soft10, SDA551, and AIME109. This decision will enable us to focus resources on much higher priority projects, increasing the likelihood of achieving the goals set in TOP-I 2030. Let me now cover LUNA18 and the mid-size molecule project. and confirmed oral absorbability, an important concept for the midsize molecule platform. Furthermore, the biomarker analysis of tumor issue and adverse event profile suggested that LUNA18 was delivered to cells. On the other hand, concerns have risen that the pan-RAS GDP inhibitor LUNA18 does not have a sufficient therapeutic window in clinical trials compared to competing products. According to the data accumulated from clinical trials of this agent and the promising clinical trial results of competitors' PAN-RAS GDP inhibitors, we have decided to shift our focus to the development of OBE-00, a KRAS-selective inhibitor that is likely to demonstrate a competitive advantage over LUNA-18. OBE00 is targeting solid tumors, and Phase 1 trials began in June. So, Kusano will provide more details later. In addition to OB00, progress is being made with the mid-size molecule portfolio as a whole, including a new project moving into the preclinical development stage for non-cancer indication targeting acute heart failure. In order to meet unmet medical needs, we will continue to focus on the development of media molecule drugs, which is the third modality. Finally, I would like to touch on our new investments. In order to strengthen our pharmaceutical manufacturing process development functions that apply Chugai's proprietary technologies, we have decided to build a new research building, UKX, at the Ukima site. The total investment amount is 80 billion yen. will introduce environmentally friendly equipment, such as equipment to reduce fluorocarbons and CO2 emissions. In order to advance the promising drug candidate substances continuously produced from drug discovery research to clinical development, it is essential to quickly establish a manufacturing method for them as pharmaceuticals. So we are confident that the construction of this new research building would further strengthen the foundation for doubling r d output which is the goal of top by 2030. this is a summary of what of my explanation and this is all for me next i would like to invite xano to explain about the status of the development pipeline

He will pause for a little while at the beginning, so please take this opportunity to capture the screen. I am the head of the Project Lifecycle Management Unit. I would like to explain about the status of the development pipeline. Please refer to page 13 of your handout. These are the second quarter topics. In terms of the launch and approval, except for the launch of the EveryStay tablet, everything else has already been announced. In terms of the approval, we have two in-house developed products and two broached products. As for the in-house developed products, We have APMAPG, which has been licensed out to Verestim Oncology. This is targeting the KRAS mutation positive recurrent low-grade serous ovarian cancer, and this has been approved under U.S. accelerated approval system. For Roche products, we have Elevides, which is a gene therapy product for rare intractable deceptive muscular dystrophy. And this is now approved for the ambulatory individuals whose age is between 3 and 8. We have two death cases on the ambulatory patients who's administered LFGVS. And also we've had one death case which is caused by the developed product by Sarepta using the same vector. Based on these death cases, FDA recommended the suspension of shipment of LF visages to Sarepta. Here in Japan, we always pay most attention and priority to the safety of patient And until the completion of the assessment of safety information, we are not going to resume the shipment of elevages. We are going to continuously share information with the regulatory authority. Now, Babissimo has been approved in Japan for the first time for the indication of NGO districts. In terms of the filing, we have one in-house developed product and two rush products, as been stated in the list. For linsumio, we have applied indication expansion as the combination therapy with poliv targeting at relapsed or refractory-aggressive B-cell non-Hodgkin's lymphoma, and everything else has already been announced. In terms of the initiation of study, we have three in-house developed products and two rush products. For in-house developed products, we have GYM329 targeting at obesity. In the combination therapy with therizepatid, Phase II study of GYM329 has been initiated. HemRibra has started Phase III study targeting at Fon-Wilbrand disease. Our mid-size molecule O-0-0, which is our in-house developed product, has initiated a phase 1 study targeting at solid cancer. The details will be laid out later. For rush products, Babismo has started a domestic phase 3 study targeting at non-proliferative diabetic retinopathy. and uh inability started domestic phase one to study targeting at the peak 3ca mutated breast cancer Abumapke has a Phase II study confirming the effective add-on treatment to SOC for the first-line treatment for pancreatic ductal adenocarcinoma. In this Phase 2 study, we have seen OS of 83% and a confirmed efficacy signal. And next year, 2026, a Phase 3 study will be initiated. In terms of conclusion of agreement, we work with Gero, who has unique AI-based target discovery platform for age-related disease. We have concluded the joint research and licensing agreement. we will be using our own antibody engineering technology to discover new antibody drug candidate for age-related disease. Now, removal from a pipeline. As our CEO Okuda mentioned, with regard to the five early-stage in-house products, based on the already generated data and the status of portfolio, we have decided to discontinue in-house development. With regard to Roche product for tiragolumab, we have ongoing phase three study targeting at esophageal cancer as a combination therapy with Dicentric. Based on the study results so far, we have discontinued the development. For medical conference, we have five in-house products and one Roche product. On top of the Avomapki, we have Nemluvio, which has been licensed out to Garderma. And this We have a long-term extension study for such nemoluvial targeting at atopic dermatitis and prurigo nodular lysis and showed positive two-year data. Or for glipron, we are targeting at adult type 2 diabetes whose glucose control is insufficient only by diet and exercise. And we have conducted a phase three achieve one study comparing against the placebo in terms of efficacy and safety. And the positive result was presented in ADA 2025. Result is published in the New England Journal of Medicine. We've submitted filing in May for Lunsumio, and in the combination therapy with Polivy, targeting at the relapse, the refractory-aggressive p-cell non-Hodgkin lymphoma, we have made an oral presentation in International Lymphoma Progress. Next 007 will be explained later in details. With regard to the open innovation, last year in Boston, Shugai Venture Fund initiated a full-fledged operation. In the past three months, we have made three additional investments. So since the foundation, we have completed investments into six companies so far. This is a list of major R&D events in 2025. Item highlighted are the changes from the previous earnings call. As I have explained earlier, with regard to levities, Bavismo, we have been granted approval. In terms of the initiation of the study, as I mentioned earlier, GIM 329 has started a Phase II study for obesity. Now, this is the result of the Phase 1-2 study for NEXT-007. NEXT-007 has been under development as a treatment, next-gen treatment for hemophilia A. For the first time, we have presented the efficacy safety data targeting at hemophilia A patient in ISTH in June. First of all, efficacy. The graph to your left shows ABR annualized breathing rate targeting for the haemophilia A patient by naïve haemophilia A patient. In across all cohort prior to the administration, ABR has been dropped. In high-dose cohort B3-B4, the plasma concentrations reached the predicted normal range of FB3-equivalent activity with no treated bleeds observed. Next is safety. The tolerability of NEXT-007 is good, and no serious adverse events related to NEXT-007 or thromboembolic events were observed. Anti-drug antibody, ADA, was observed in 22 patients out of 30. However, many ADA did not impact PK. The number of ADA-positive patients at the final observation before the data cut out was reduced down to 10. As it shows, half of ADA was transient. The ADA was observed in two patients in a way that affected PK. However, ADA impacting PK, no ADA cross-reacting with hemophilia was observed. In phase three studies, which are expected to start in 2026, we are going to evaluate efficacy and ADA-related safety.

I would like to introduce OVE-00, which is a anti-keras detergent.

Next, let me introduce OV00, a pan-K-RAS inhibitor discovered in-house. This is our second mid-size molecule project that has advanced to clinical trials. As explained by Okuda earlier, we have decided to shift our focus from the pan-RAS inhibitor Luna18 to OV00 for cancers involving the RAS gene. Let me now break the background to this decision. There are three types of RAS genes, KRAS, NRAS, and HRAS. KRAS is one of the most frequently mutated oncogenes with genetic abnormalities. KRAS mutated cancers are highly dependent on KRAS with active mutations to survive and grow, so inhibiting KRAS is expected to have an anti-tumor effect, whereas normal cells survive and proliferate using signals not only from KRAS but also from MRS and HRAS. Therefore, OVE-00 was designed to selectively target KRAS and a wide range of KRAS genetic mutations. As a result, even if OVE inhibits KRAS, NRAS and HRAS will act instead, minimizing the impact on normal cells. As a result, OBE is expected to have a broad therapeutic window and to have a higher efficacy than Luna 18, which inhibits all RAS, including NRAS and HRAS. The non-clinical data on the right shows that in a xenograft model of non-small cell lung cancer where lunar analogs are not sufficiently effective, OB00 induced tumor regression demonstrating strong efficacy. As a result, we'll continue to work to deliver innovative medicines to patients as soon as possible in order to overcome cancerous mutate cancers which have high unmet medical needs. Next is our in-house developed product, ROSE 12, as its mechanism of action is now available, so we'd like to take this opportunity to explain this. ROSE 12 is an anti-CTLA-4 antibody that uses our proprietary switch antibody technology. CTLA-4 is one of the membrane proteins highly expressed in highly immunosuppressive regulatory T cells. It is known as an important therapeutic target in cancer, but controlling systemic side effects is a challenge when using drugs that target this molecule. ROS-12 is expected to exert an antitumor effect while suppressing systemic side effects. by acting selectively on tumors using switch technology. In non-clinical trials using mice, the effective and safe doses of non-switched anti-CTLA-4 antibodies were similar, whereas the effective and safe doses of switched antibodies were approximately 30-fold higher, demonstrating a wide therapeutic safety margin. In the ongoing Phase 1 study, we are evaluating ROSE-12 as a single drug and in combination with Ticentric, and we hope that the switch antibody technology will provide high efficacy while providing a favorable safety profile. Following the cancellation of all projects, we would like to present the status of our portfolio for each modality. We continue to have a wealth of in-house developed projects. In particular, in mid-size molecular drugs, which is our third pillar of focus, two projects are in a preclinical development stage, and another 25 projects are in the drug discovery stage. and are progressing smoothly. As reference materials, we have attached slides at the back of this presentation that provide detailed information on small molecule drugs, mid-sized molecule drugs, antibody drugs, N-cell and gene drugs, so please review them as well. Finally, here's our projected submissions. Projects with light blue stars are newly added projects. The following slides are attached as reference materials. The appendix explains Flon-Biele-Brand disease, for which HemLibra has now begun its phase 3 trial, so please review them as needed. This concludes my presentation.

Next is a presentation by Taniguchi on the consolidated financial results for the second quarter of 2025. He will pause for a while, so please take this opportunity to capture the screen.

Thank you.

Now let us begin the presentation. I am Taniguchi, CFO of the company. I would like to explain about the consolidated results for second quarter of 2025. First of all, the second quarter 2025 revenue was 578.5 billion yen, up by 4.6%, or 25.6 billion yen. OP was 272 billion yen, up by 9.2 billion yen, or 3.5%. Let me explain about the breakdown of revenue. Now, out of revenue, sales was 511.4 billion yen, which was up by 25.9 billion yen, or 5.3%. If you look at sales by region, domestic sales was 223.3 billion yen, up by 2.8%, or 6.1 billion yen. The strong performance of new products and mainstay products outweighed the negative impact of the NHI drug price revision and penetration of generics overseas with 288.1 billion yen up by 7.3% or 19.7 billion yen. If you look at the second quarter alone, Akutemura export was extremely strong, and other revenue was 67 billion yen, almost flat to the previous year. Although we have seen an increase in income related to Himlaibra, But the one-time income has dropped, and that's the reason why the revenue stayed flat to the previous year. Now, moving on to expense, cost of sales was 175.2 billion yen, up by 9.4%, or 15 billion yen. Sales increased. And the cost of sales also increased as a result. The cost-to-sales ratio compared to the previous year went up by 1.3 point, and now it has become 34.3%. The background is art camera composition, which has a relatively higher cost, has grown. in second quarter. And SGMA has been impacted by the inflation and the personal cost increase, but we've increased the operational efficiency and it has come down by 1.2 billion yen from the previous year. Hold on. R&D caused reflected the strong progress of the early development projects and drug discovery researches and went up by 2.3 billion yen from the previous year. Other operating income was down by 400 million yen year on year. As a result, OP was 272 billion yen, up by 9.2 billion yen. OP margin was 47%. Net income was 193.5 billion yen, up by 2.1%, or 4 billion yen. Next, this is the sales by product year on year first, domestic oncology. It was 116.6 billion yen, down by 2.2 billion yen or 1.9% from the previous year. We were impacted, Avastin was negatively impacted by the penetration of generics. However, new product festival sales outweighed the decline in Progetta. Now, speciality. was 106.7 billion yen, up by 8.3 billion yen, or up by 8.4%. We were impacted by the NHI drug price revision in general. However, our mainstay products, such as Himuraivra, Actimra, and Spring Vavismo, and new products, the Piascai, have grown the sales. Now, overseas sales. As I mentioned earlier, Actemera increased the performance, and we were able to increase overseas sales by 7.3% or 19.7 billion yen. This page shows the forecast of our mainstay product, which is Himuraibara and Axtemora. So this is your forecast for those two products. Himuraibara. In the second quarter, the revenue of approximately 38 billion yen shipped, which was scheduled to be recorded or recognized in the late June, was delayed to July due to a delay in delivery procedures. This happened in the past, but we've had this in the second quarter. Now, Himuraibara global sales have been growing steadily, and based on the current shipment schedule, We are expecting to go above the initially forecasted revenue by 10 billion yen. Akutemura, biosimilar penetration is delayed. And based on the current shipment trend and based on the strong inventory needs, um we believe on a four-year basis that we can overshoot our initial forecast by more than 10 billion yen next page shows changes in op last year it was 262.8 billion yen and we are expecting an increase by 9.2 billion yen this year now a domestic sales volume outweighed the negative impact of NHI drug price revision, and we expect that jump in LP. And as for overseas sales, export unit price has come down. And Hemlibra sales is growing particularly in emerging market. But volume is actually growing more than that. And we also have positive impact from FX. And we are expecting ¥19.7 billion increase in overseas product. Sales itself is growing, so cost of sales is also growing by 15 billion yen. So total, we are expecting OP increase by 9.2 billion yen from the previous year. Now, this is the structure of cost and profit by quota. so these are the quarterly numbers just so you know there tend to be quarterly fluctuations as a result of delayed revenue recognition due to the timing of the export but if we compare q2 this year and last year q2 well last year q2 we had a strong sales of him library So against such a higher bar to compare, this year's number has come down.

So this page also shows the sales mix trend by quarter. Looking at the domestic... We saw the increase by 6.4 billion yen year-on-year as I mentioned earlier. Because of the impact of booking timing for the export, we have confirmed the drop in overseas sales here. This slide, as of Q2 results, comparing to the forecast number announced at the beginning of the year, so we are showing the progress against the forecast here. So, all the items comparing to the progress rate as of last year, both sales revenue and operating profits has generated positive numbers. So, in terms of progress, I think we are having pretty good progress so far. This is showing by different segment and by product, terms of progress against the initial forecast as of now. As you can see, we see some strong area and weak area, but for the domestic oncology, domestic specialty, and overseas by different segment, comparing to last year progress, they all show positive results. so they're all showing a good progress. And this is FX impact. Last year's actual rate is utilized in this comparison. The far left is quite important. On revenue, we are showing past 23.3 billion, OP 22 billion, and passive impact. Comparing to last year, especially against Swiss franc, we saw the yen depreciation. That is a major reason. And Swiss franc is our largest trading currency. And our share of Swiss franc was 160.90 yen to Swiss franc, and this became 171.31 yen this year. So it's depreciated more than 10 yen. Next, a balance sheet situation. Total assets amounted to 2,278,000,000,000 yen. reflecting an increase in cash and deposit and increase in tangible fixed assets such as factory facilities went up by 69.9 billion yen. Net assets increased as well by 83.6 billion yen to 1,985.1 billion yen, reflecting accumulation of equity capital through profits. And this pushed up the shareholder's equity ratio to 87.1%. And net cash increased. and by 31.3 billion yen from the end of 2024 to 1 trillion 27.6 billion yen. this slide shows the change in net cash which i just mentioned and showing you that some breakdown since last year and increased by 31.3 billion yen the operating cash flow inflow from operating profit we had increased due to the decreasing networking capital and a decrease due to investment we had and only not operating free cash flow came to be 236.8 billion yen and after deducting corporate taxes and dividend Cash increased by 31.3 billion yen over the past six months. This slide shows, we show this every time, but this is showing our near-term capital investment plan, which has been approved internally. It includes the new capital investment project of 80 billion yen at the Yukima facility that was announced today. Next page. we've been only talking about on a core basis this is IFRS basis results so what the adjustment look like here intangible asset, motivation, impairment, the business restructuring cost, ERP, you know, implementation, also the asset sales gain. In Q1, we saw the R&D site, XR&D site in Kamakura. So those are all considered as adjustments. Last page, this is in-house global products. We have five products, including Pure Sky. So, showing the six-month sales at Roche outside of Japan. And I hope you can use this info for your reference. This concludes my explanation. Thank you so much. Thank you very much for your attention. So now, we are moving on to Q&A session. With regard to Q&A, We also have Hidaka, head of sales, senior executive director, and Takano, head of marketing and sales, to be present as well. In order to have as many questions as possible, I'd like to limit the questions to two per person. To get also the sound of the presentation, questions and answers will be also posted to the website on a later date along with the presentation. And we'd like to take questions from those who are in the room, and then we'll take questions from the Zoom webinar. Okay, so if you have questions, and those who are in the room, please raise your hand, and we'll bring you a microphone. Please state your name and company name and your name, and start asking your question.

My name is Hashiguchi from Daiwa Securities. My first question is related to tariff. From medium to long-term perspective, when you think about supply chain, is there any possibility that you're going to make some changes?

And also, it seems like

The tax rate may gradually go up. But if a higher percentage of tariff is going to be imposed on the pharmaceuticals in the future, are you planning to ship out the pharmaceutical products to U.S. as a preparation, I mean, to prepare for that to happen? Thank you very much, Hashiguchi-san, for your question. Yes, that was a question on the supply chain. Yesterday, Japan and the U.S. have come to an agreement regarding the reciprocal tariff, so 15% is the decided percentage. Pharmaceuticals are not within the scope of this 15% tariff. In early July, President Trump

For pharmaceuticals, the U.S.

is conducting a survey to identify the exact percentage of tariffs based on the trade law of 332 and maybe like 200% or so. There will be one or two years. given to the companies to relocate the production base to U.S. To your second question, under such circumstances for the pharmaceuticals product, what level of tariffs are going to be imposed? I mean, it's very difficult for us to foresee the expected percentage of tariffs. So as Hashiguchi-san mentioned, you know, if the percentage of... It may... We don't believe that the tariff percentage will gradually go up. But as Prime Minister Ishiba commented last night, if in the future, when tariff is imposed... our country's priority will not be lowered compared to the other countries. But still, for pharmaceuticals, I mean, we still need to be carefully monitoring how things will go. And then coming back to your first question again, Are we going to relocate production sites to U.S., or are we going to do a technology transfer to U.S.? Are we considering that? We are exploring and considering various options right now.

My second question is,

so you are not studying into the second point so making changes in the supply chain you know you are currently contemplating but then maybe you can increase the production volume and then ship out those produce the product to you as you know in early phase to mitigate the potential risk of a higher tariff percentage. So you don't think about increasing the production volume. Well, again, I would like to just say that we are exploring different options. My second question is related to Himalaya Bra, improvement of convenience. I know you are trying to improve the convenience at ISTH non-browder BISC with regards to the BIM8 device. the patients who are enrolled in a clinical trial said that it's easier to use compared to him live bra and not the data was presented how do you what's your takeaway of this and the current initiative to improve the convenience of the drug you know what's the current status so I MIM-8 information and our efforts to improve the convenience of HIM Libra. Those are the two questions. Kusano-san, can you respond? Thank you, Hashiguchi-san, for your question. Currently, for HIM Libra,

We are developing AI.

The timing is difficult for us to comment clearly, but in one to two years or so, we should be able to complete the development. And next 007, we are developing a device for easy administration. So we should be able to fairly compete against MIM-8. So that's the status right now. Thank you.

Thank you so much.

Next person, please. from JP Morgan. My first question on slide 34.

It's about the export of Hemlibra.

I was looking at rush results today. They showed very good results. But in Q2 number, there was a surprise. According to investor relations, and that large amount actually got delayed into july that's what we heard so the amount was quite big wasn't a belief and how much it was if they came into june then what would have been like in second half and because of this delay what happens to second half so please share those information In Q2 in June, about 38 billion yen or so was originally planned, but that got delayed into Q3 in July. So if we had this 38 billion in Q2, what happens for the remaining six months? The remaining six months, as I mentioned earlier, Compared to the full-year forecast, it looks like we have an upside of over 10 billion yen. So, 38 billion, even if you deduct 38 from this number, then still you see a positive upside. So, originally, if you had 38 billion in June for the second half, you had a bigger upside? No. Compared to 318.6 billion for the full year, in either way, we would have seen over 10 billion upside. So, this delayed 38 billion would be the incremental for the second half. Yes, that's right. So, what was the reason for delaying? So, basically, I believe you have to catch up with the demand because there's a very strong demand. So, why there was a delay? We did see such a timing delay in the past a few times. So, because of the booking, revenue booking according FIFRS, not just according to the shipping, they have to be delivered and the risk must be transferred over to the other party to book a revenue. And you're going to have to go through a very complicated documentary process. You have to go through the custom duties because of the cross-border procedure. And you have to go through the quality check. And that is quite complicated. And we need to prepare, you know, resources or many other reasons. It is possible to see a potential delay for this process. And it's just, you know, happened this time. So this upside of over 10 billion yen, is it because of the strong demand in the market? Yes, overall, yes. The end market strength. It's seen, and we are also seeing demand for inventory. So you're not adding that inventory because of the tariff situation. No, that's not the case.

My second question is the Luna 18.

So the reason for the failure of Luna 18, can you clarify that? Because of the PAN-RAS, safety PAN-RAS, that we weren't able to get good balance against the safety profile, or what is the reason? Can you clarify that? And OBE-00, compared to Luna-18, looks like it is a better product, potentially. KRAS inhibitor that's been developed right now, compared to that, what would be the profile expected for OBE-00? Wakao-san, thank you very much for your question. Luna 18, regarding its negative aspect, exactly as I mentioned, the Luna 18 with the PAN-RAS inhibitor, not just for KRAS, but also NRAS and HRAS, all RAS will be inhibited. and so for many kinds of different cancer types we can expect in a potential impact but the the safety a window extensive enough whether that can be ensured or not was a major challenge but at the same time looking at the competitive product in the market status the competitive products are showing pretty good results in the clinical studies. So according to the results obtained from the current clinical studies, comparing to those competitors' study results, we started to see a concern of not being able to ensure enough amount of the treatment window. So that's why making it more difficult for us to differentiate from the others. Therefore, as we reshuffled our portfolio, As introduced in today's presentation, compared to Lunar-18, we believe there is much higher possibility of being able to show the competitive advantage as fan or as inhibitor against Lunar-18 with days of 0-0. That's why we decided to suspend the development. And Obe00, this is the second mid-size molecule drug discovery. So what did we learn from Luna18? It's going to be quite important to develop this Obe00. As we were going through development of Luna18, we were able to confirm a good oral absorption ability. Also, we have seen the indication of transfer inside the cells. especially the oral absorption ability along with the the dose increase of luna 18 and we were able to confirm the increased level of the inner dose inside the blood and and also we are able to also observe on a human compared to what we confirmed on a in a mice in terms of absorption capability a map keynote signal pathway downstream there are five molecules and the amount of messenger RNA occurrence are also confirmed to be reduced so our mid-sized molecule inside the cells in terms of all absorption ability absorption ability also the term for inside the cell would be also implemented on all 00s that's why we still maintain very high expectation for all 00 And so right now, we have to see how it goes unless we go through the clinical trials. What we learned from LUNA18, all this, based on this experience, we will verify them completely in a Phase 1 study. So, in conclusion, Dr. Kusama-san also mentioned that making good progress with the mid-sized molecules, but on the other hand, OBE Phase 1 ending timing would be in 2013, so soon likely it's going to be delayed by about five years. Looking from outside, as an outsider perspective, I don't think it's making a smooth progress. What is your intention of mentioning that you're making good progress so far? What is the difference from my understanding? For each drug, there could be a potential delay, but we have now two drugs in the preclinical, even before that stage, and one is cancer-related, one is non-cancer-related, and we have 25 research-level drug projects. So, of course, we haven't been able to introduce the drugs to come to the clinical stage. However, there are many mid-size molecule projects going on at the preclinical stages or beyond that. So, you're saying it's taking longer time than you have in these potential projects. Yes.

Next.

I am from Nikkei BP.

My name is Yokoyama. Thailand TAFE, I have a question. Based on this data you are going to submit finding, TAFE PFS, which is a primary endpoint, At 18 months, Kaplan-Meier curve is almost overlapping. And for OS, there is no significant difference. It's immature. But hazard ratio is 0.96 compared to LEAP. It's not as good. what's your expectation on this? Thank you very much for your question regarding Talentes. So for TACE PFS, TACE PFS is met, but OS is not met. So... Currently, we are going to refrain from submitting a filing. We are going to look at the result of the analysis next time, and if OS looks good, we are going to move on to the actual filing. Thank you. i finally started to move i was expecting earlier you know move but for inability you have a proven data and i was hoping to get this product available in japan and you don't list this uh in the findings list i was wondering when is the expected timing for the submission of fighting thank you very much for your question on in abolishes Currently, Phase 1-2 study has been initiated, and we are promoting the clinical trial in a Russian manner. And as you have pointed out, this has been approved outside of Japan and also in Europe. And at ASCO, OS data was presented. So we would like to bring this product as soon as possible to Japanese patients. We would like to complete Phase 1-2 study, and we would like to do a bridging to Phase 3 study so that we can submit some filing. We do our best. So sometime next year? Sorry, I cannot comment on the timing, but we will take actions as soon as possible. Thank you.

and next person behind in the same room.

Ueda from Goldman Sachs Securities.

My first question is about Luna18 and ERP00.

For Luna18 clinical testing,

I think it seems like you're making very cautious steps in moving forward clinical studies, including safety profile. And this would be the very first mid-size molecule technology. I guess you've been quite cautious in proceeding with this project. So looking at it, has there been any concern about the safety and also the molecule, mid-size molecule so far? And I think it's possible. Do you think you can obtain a data result for the mid-sized molecules smoothly? On a plan, you're talking about 2030, but you may expect to see the result earlier than that. Ueda-san, thank you very much for your question. For Luna 18, as we have been talking about regarding safety profile, there was a concern area. So that's why, as mentioned in the past several times, in Phase 1 study, So, those limits, toxicity testing were also conducted with a cautious manner, and that's what took so long. The more detailed result to come out on papers or to be presented at the academic conference. And that, just like in the past, the RASMAP kinase was inhibited to cause the result of some symptoms. And so the drug-effective side effects are expected, seems like. Also, some mid-molecule-specific side effects are not confirmed, so I don't think there is any concerns on that point. There are more details to be shown at the academic conference or on the papers. So we have learned a lot from the Luna. So we have conducted many phase one trials for the different antitumor drugs. So we try our best so that we can complete this phase one trial as soon as possible earlier than Luna. Thank you for your answer. And your second question is about the US tariff situation. Does the qualitative information

So you're part of the Roche group.

So reviewing the production footprints or the supply chain, would there be any merits or advantage or if you can actually take some flexible actions to address those areas? Thank you for your question. You may already know this as part of the Roche group. In the U.S. market, there are multiple manufacturing operations in the U.S. market. So we can also there's an option of leveraging on these facilities as an option as part of the group. As I mentioned, there are many different options. So including them, we will look into different options.

Thank you.

Thank you very much. That's all from me.

Thank you.

I am Sawai from UBS.

Rose, 12. The mechanism seems to be very complicated and difficult. So Treg is like a boom. Nowadays it's gaining a lot of attention, but I think there is a difficulty being reported. So you have a switch antibody technology. So you can make switch on and off clear without increasing Treg. You can improve the immunity. And then you use the centric. together with ROS12 to further enhance efficacy. Thank you very much, Sakai-san, for ROS12 question. This time, we use switch antibody technology. ATP adenosine 3 phosphate expresses highly in cells, and with and without, antibody can bind or not bind. So it's not about the volume of Treg. Rose 12 may be more likely to be binding to Treg or not. So in tumor cells, when ATP is... large or big in quantity, we can catch Treg more. And in healthy cell, ROS12 does not function, and that is the mechanism of action. So while maintaining good safety, we can dose up. That's the design.

So you're talking about solid tumor this time.

So the expression of Treg, that's matter when we talk about a solid tumor, right? Yes. 30 times efficacious. That was proven in the mouse. Yes.

You have dropped six R&D development projects. No, not six.

I've been following your company for a long time, but I think this is your first time to drop so many development projects at the same time. What's the reason behind? I know you have a richer R&D pipeline. Is that the only reason, or is there any changes in your R&D policy? If there is any particular background, please enlighten me. Thank you, Sakai-san, for your question. You know, dropping this number of projects at once, has never been done before in July. TOP-I 2030 started in 2021, and the core strategic concept is the red shift. We reinforce the red function, and we are going to increase the R&D project number, and at the end of the day, we are going to launch one global product per year. That's the strategy. But now we've generated or load of projects and they went into preclinical and a clinical phase in the past you have pointed this out and we've had discussion internally but depending on the project we had to proceed R&D development very thoroughly we had to generate a load of data but as a result in some projects the time frame got longer than our initial expectation and in order to address that has been explained per each project's goal or no-goal decision criteria was clearly set. And when a milestone is met based on the data and based on the competitor's data, we you know, make go or no go decision. So that's the strategy we've been upholding. But then in the meanwhile, the number of projects has gone up quite a bit. The question is, do we want to stay fully focused on the development of all those many projects with the full resources? Well, even before go-no decision or milestone achievement timing, we look at the clinical and non-clinical data, especially competitiveness, safety, and efficacy, and PK. We look at those data and then we prioritize the different projects. And then we've decided to discontinue those five projects who have the least priority. As a result, I guess the researchers were, in a way, inspired. Well, as we did the prioritization work, Well, our research has been working on the development project based on the science, so based on the data, we say, I mean, we look at competitiveness, safety, accuracy, assessment, and then we did the prioritization work, and that was well understood. And by doing this prioritization work, we were able to narrow down on more promising projects. And for those promising projects, now we are able to accelerate the development. And we can allocate more resources and money behind those projects. So by dropping those projects, now we have more opportunities. Thank you.

Okay, another person in the back. This is Banno from the Nihon Keizai newspaper. I'm talking about the construction of the R&D facility. Can you hear me okay? Can you repeat? About the R&D facility, UKX you're talking about? Yes. So 80 billion yen investment is quite a large number, I believe. So for the mid-sized molecule, the antibody modality research would require this level of investment. What is the reason for this amount of the investment? And also, you are trying to reinforce the development function, but what do you expect as a result of having this new facility? So UKX, 80 billion investment, if it's appropriate or not, if it's... So I think that was the question. Like I said, within the Redshift strategy, now we're starting to increase the number of projects and antibody drugs and small-sized molecules are being focused more to appropriately produce all these clinical drugs at the appropriate timing. And the compounds that we're developing are quite complex at the same time. And much faster delivery. Also, we need to establish the production methodology as quickly as possible. And that was a major challenge. And of course, antibody, mid-sized molecule projects are increasing, and we need more spaces. We need more resources. At the same time, in the existing facility, we won't be able to accommodate them all. Therefore, we decided to build this UKX at this size. This is an R&D facility to develop production engineering technology. So if 80 billion yen is appropriate or not, I know it is a quite large number. And we, of course, went through the bidding process and compared different prices, and we selected the more reasonably priced project. And we also looked into similar facilities of federal Japan and how much it costs to those facilities. And we compared to their numbers. And we confirmed this number we are talking about isn't too far off of what was invested in other facilities. And lately we are experiencing inflation, price increases, and labor cost increases. And the construction cost has increased a lot compared to a few years ago. That is just another truth. And we got quotes. We actually received quotes a few years ago, but even since then, we got re-quotes. Recently, we saw huge increases in actual costs. So just because having this investment is very high doesn't really, you know, lead us for not making this decision to investment. And we think this is an essential part of accomplishing top I2030 targets. And just to elaborate more, also in Ukima facility, there are several buildings available. And since they are getting older, so we want to consolidate them into a bigger facility so we can be more efficient in communication at the same time. That is another purpose. I forgot to mention this. In this UK, X R&D facility is also being friendly to environment. We try not to utilize fluorocarbon as much as possible. We want to have zero exposure to fluorocarbons and zero CO2 emissions. And we have tried to accommodate those impacts into this building. And that is also another reason for seeing higher cost.

Next, we would like to entertain questions from the online participants. You can click on the raising hand button at the bottom of your screen. Secretariat will pronounce the name of the person who can ask question. And when your name is pronounced, please state your name and affiliation and start the question. From Morgan Stanley, MUFG, Muraoka-san, please.

Thank you very much.

My name is Muraoka from Morgan Stanley. My first question is related to the export of Actimura and Hemulibra. On a four-year basis, there is a possibility to overshoot the forecast by 20 billion in total. On top, I was looking at the numbers presented by Deborah. Nemorubio seems to be selling quite well. Can we expect upside from Nemorubio? This is the type of drug that you need to carry a high level of inventory. But looking at this number so far, it seems like we can expect some upside. Thank you very much, Mr. Muraoka. This is Taniguchi speaking. I said more than 10 billion, not 10 billion. So the export to Garderma, based on the current sales pace of Caldemira, it's actually been accelerated, but we haven't quantified the potential upside impact as a result. So if we have more visibility and information, we would like to update you in the next earnings call. Am I... it is growing more than I have expected.

Yes, thank you.

Jim329, when I look at the presentation by Rush, they've found combination therapy phase 2, Gementia, details has been laid out, and I looked at the clinicaltrial.gov, And I thought this is quite interesting, 48-week step-bound combination therapy, 24-week extension is going to be the monotherapy. So combination therapy, only 48 weeks, and remaining is a monotherapy. Compared to the other myostatins, this is quite a unique way of using the drug or design. What is the reason for this unique study design? And what is the expected best-in-class unique profile? Can you explain about your intention behind this unique study design? Thank you very much, Muraoka-san. Yes, GM329 Phase 2 Study. Initially, 48 weeks, the investigation drug will be administered together with Timosupacil, low dose, mid dose, high dose. There are three doses to be compared. And on top, we have a placebo arm. And then following 24 weeks in all arms, telazepacid will be suspended. But for high dose, only GYM329 will be extended for 24 weeks. That's the clinical trial design. In creatine, as you know, once administration is stopped, body weight is expected to increase. But then a GYM329 follow-up is given. The body weight increase can be suppressed.

So that's something we are expecting to see in the maintenance therapy period.

Thank you very much.

When the muscle mass goes up and then we don't see any rebound of the body weight. Sorry, one quick question. For the extra financials in export, you didn't have any impact from tariff? meaning that Roche didn't decide to increase the inventory volume in April to June. As far as I understand, Roche didn't do that. Yes, thank you.

And next, from Citi Group Securities, Yamaguchi-san. Can you hear me? Yes, we do. Thank you. I'm Yamaguchi from Citi Group. The canceled project among them, the switch antibody was one of them, I believe. And now you are talking about the switch antibody project, STA551, I believe. The reason for the cancellation of this, can you explain? And also the concept of switch antibody, was it also available in the project or not? Can you comment on this project? Yamaguchi-san, thank you for your question. STA551, regarding this project, the target molecule was the T-side CD137. So, STA551 to be combined with the CDA137, that was also part of the mechanism. And as a result, in a clinical study, the result cannot be disclosed at this point. But without the switch function, CD137 antibody, it would not have delivered, reached to that level of dose. It's actually confirmed. I think the efficacy was confirmed to some level, but more details will be presented at the academic conference anyway. But on Rose 12, as been mentioned before, the T-REX CTLA-4 is targeted on Diatrex. So it's a completely different target. So with this STA-551 cancellation, looking at the portfolio level, we made a decision that switch antibody expectation, also the rose wealth expectation won't be affected. Thank you. So the details to be confirmed in data, as we see, so you saw improved tolerability, but you didn't see a clear efficacy, I believe that's what you saw. As of now, at this point, we are not able to disclose detailed data yet. And so later, please refer to them in the papers or the academic conference. Thank you. Another quick question. Muraoka-san also asked this. Name Luvio. So this is part of the other revenue, right? Yes. This is part of the overseas. There's other section. And so that's part of this other under overseas. Looking at this number, it seems like there's no major change in Q1 and Q2. So what Gaudella is saying to the investors are not really reflected into these numbers? Or because of the other, under the other sector, is it invisible? I think it's going to come stronger towards the end of the year. Okay, so there is a potential increase expected towards the end. It could be actually stronger than what you expected. There is, yes, such a potential. Understood. Thank you so much.

Thank you.

Next, from Macquarie Capital, Tony Ransom, please.

Can you hear me?

Yes, we can hear you.

Okay, perfect. So this is Tony Rahn from Macquarie. So first, a couple of questions on your Henlebra next generation product, NXT-007. Specifically, I want to ask about the dosing. So in the phase one-two study, you guys used every four-week dosing. Previously, you guys had hinted that you might be able to dose it at much longer intervals. possibly every two to three months. So I just wanted to see why did you decide to settle with a far more frequent monthly, every four-week dose? Would that be the dose you will take into Phase III trials? And also, in the future, do you think you can get an extended dosing interval longer to more than four weeks? So that's on next 007. The second question is on... is on the gene therapy L-levitis. So you guys had it approved in May in Japan in ambulatory patients. So I just want to see how many patients have you dosed, have you given gene therapy to in Japan, and have there been any patients in the non-ambulatory situation receiving the gene therapy? Thank you.

Thank you very much.

Kusano would like to respond to your questions. Thank you very much, Mr. Tony Ren, for your question. We forgot to dosing the frequency of next 007. In terms of the future regimen, unfortunately, there is nothing I can comment on. We are sorry about that, but half-life is quite long, so there is a possibility that we can extend the interval between dosings. And with the high half-life, the change in PK between peak and trough can be controlled better. So in the future trials, we will be investigating into the dosing frequency. Now, if I may, I would like to move on.

Sure, yeah, please.

And next, eligibility, Japanese dosing experience or usage experience currently in Japan. from age to four to seven ambulatory juice and muscle dystrophy patient is involved in the clinical trial and actually we have enrolled five patients as such so far sorry the five ambulatory patients and Non-ambulatory patient-targeted clinical trial is participated by Japan, and four Japanese subjects have been enrolled. But the clinical trial targeting non-ambulatory patients are blinded. So we do not know whether they are randomized to placebo group or active drug group.

That's all. Okay, perfect. Yeah, if I may just have a quick clarification. So I just want to confirm that I heard you saying that you will increase your guidance for Han Libra.

Sorry, Tony-san, we would like to limit the number of questions to two per person. Sorry about that.

Okay.

Thank you very much. Next.

Sagi-san from Sanford Bernstein. U.S. target impact. So you're looking at different options right now. So this is a question related to the assumptions you have. So the cost came out to be quite high this time because i think you mentioned so u.s genetic facility was utilized and you outsourced manufacturing for actimra i think you mentioned that before is that the reason why you saw the higher cost if that's the case Now, in the U.S., pharmaceutical is going to be also in the scope of the tariffs in the future, and the Libra production could be also transferred over to the U.S., potentially. When that happens, As far as we heard from Roche, they're saying that manufacturing capacity seems like they have enough capacity right now. And compared to the capacity by Roche, then you may outsource your manufacturing to Roche capacity. Would that be also possible if that's the case? And just like with Actimura, that could actually increase the cost at the same time. Would that be true? Of course. This is just one of the options. And I just wanted to know if there is such a possibility as well. I have Taniguchi to answer this question. Thank you very much. For Actemra, cost came out to be higher from a relative perspective.

It's not just because of the genetic site issue.

There's a multiple impact. So, antibody production of Actimra cost was high regardless of the site location, so there are other elements as well. And regarding manufacturing sites, as Okuda mentioned earlier, there are different options available. And we are looking at them from different perspectives right now. So we haven't really decided to set out a certain direction forward. It depends on the actual tariff being imposed and also manufacturing costs. Compared to the cost we have right now, the labor cost, personal property cost, will be confirmed if it were outside of U.S., what happens. So we also need to factor in all these elements to make a decision. So at this point in time, it's quite difficult for us to give you a clear answer to your question. Thank you. Next question. 66, I think. Try specific T-cell engager product. You decided to discontinue this product. So this T-cell engager, twice-specific T-cell engager modality itself had a challenge. Is that the right understanding? What is the reason for your decision to discontinue this? And this twice-specific T-cell engager, what is your thinking going forward for this? Sale 66 was your question. So regarding Sale 66, Clodin-6 was the target in a tumor. Also on T-cells, CD3 and CD137, triple specific antibody to be bonded to both of them. And this is dual Ig technology is utilized. The Clodin-6 and also CD3 on T-cells. went through to resolve the anal effect. And also, C377 cell, it responded to this cell, so it can actually have a continuous activity to see stronger results to anti-anal tumor activity. As I mentioned, the results will be presented in the upcoming paper, also in an academic conference. And regarding triple-specific antibodies, 12-IG technology, we have upwards of 12 drugs right now. This is for small cell lung cancer and neural secretion cancer. So this is a target. They also utilize dual IG technology, and the testing for these are underway still right now. So dual IG technology will be the first part of the pursuit.

Understood. Thank you very much.

We are afraid that we will have to close Q&A session since we have come to the scheduled end time. With this, we would like to conclude earnings call for the second half of 2025. Due to the time limitation, we were not able to entertain all the questions. For those additional questions, please reach out to IR department of our company. The contacts are shown in the last page of your handout. Thank you very much for your participation despite your busy schedule.