Chugai Pharmaceutical

Thank you for joining Chugai Pharmaceutical's earnings call on the financial results for the fiscal year 2024 third quarter. I am Miata from Corporate Communications Department. I'd like to serve as your moderator today. Today, we have an on-site presentation as well as a Zoom webinar, and today's agenda is in the document distributed. And today's call is going to be held in Japanese, but through the Zoom webinar, you will be able to listen to the simultaneous interpretation in English. Please find the interpretation mark at the bottom of the screen and select the language of your choice. We will take questions after the presentations. We plan to have 30 minutes for the question and answer session following the presentations. During the presentations, please allow us to mute your microphones. We thank you for your cooperation. Now, Dr. Osamu Okuda is going to present the fiscal year 2024 third quarter overview.

Okuda, the President. I'd like to give you the third quarter of financial year 2024. Please take a look at page 5. Up to the third quarter, we have achieved increased revenue and profit, and revenue increased by 3.7% year-on-year. This is a turnaround from the slight decrease in the revenue in the second quarter. Operating profit increased by 25.3% year-on-year, so it has continued to increase year-on-year, and both are higher than our original forecast. Domestic sales decreased significantly due to the completion of government supply of loan-approved, which was recorded last year, and NHI drug price revisions, as well as the impact of generics. Overseas sales and other revenue increased significantly, particularly due to exports of Hemlibra, the in-house product, to Roche and Royalty Income. Based on the strong performance, which exceeded original expectation, the initial forecast has been revised upwards to revenue of 1,350 billion yen and operating profit to 540 billion yen. Compared to the original forecast, revenue and operating profit have been revised upwards by 80 billion yen each. As for revenue and operating profit for the next fiscal year, at this moment, we're assuming that they will be at about the same level as the upwardly revised forecast for this fiscal year. The original announcement is scheduled for the end of January next year, and there are some uncertain factors, but we will provide this information as a yardstick based on our current assumption. Please take a look at page 6. will show a breakdown of the difference between the original forecast of 1 trillion 70 billion yen and the revised forecast of 1 trillion 150 billion yen for revenue. Domestic sales are 0.8 billion yen lower than the original forecast, reflecting progress with each product and revision to our assumptions. For overseas sales, we expect Himalaya and Actimura to exceed our original forecast. Himalaya exports have been revised upwards by 36.7 billion yen due to growth in overseas local sales and increased demand. And Actemra exports have been revised upwards by 21.2 billion yen due to the impact of biosimilars being lower than expected. Overseas sales overall have been revised upwards by 64.8 billion yen.

Other sales revenue, royalties, and profit share revenue represents an increase by 4.4 billion yen due to increased revenue related to HemRiver. Other operating revenue represents an increase of 11.6 billion yen due to milestone payments from out-licensed products. The top line was revised upwards by 80 billion yen or 7.5% compared to the initial forecast. Please turn to the next slide. In 2024, significant progress was made in strengthening the foundation for the short to medium term growth, particularly with three of Chugai originated products. PeerSky is our second product using the antibody recycling technology. With once every four weeks subcutaneous injections for PNH, we expect to reduce the treatment burden for patients. Next, as you can see at the center, nebuluvial, an antibody drug that inhibits IL-3-1, which causes itching. Our partner, Galderma, has obtained approval under priority review in the United States for nodular prurigo, and filing has been submitted in Europe. Filing was also submitted for an indication of atopic dermatitis in both the United States and Europe with expectations for early heat relief and improvement with inflammation. Later, Kusano will present data on early efficacy and long-term effectiveness recently shared at EADV and others. The third is Allicenza, approved in Japan, the United States, and Europe as the only ALK inhibitor for early-stage lung cancer treatment. It is expected not only to lower the risk of postoperative recurrence, but also to offer new treatment opportunities that may lead to cure. We will continue to provide unprecedented new value with Chugai-originated products like O4 Glipron and GYM329. Aiming for global product launches every year as outlined in TopEye 2030, we will strive to further contribute to global healthcare. That concludes my explanation. Thank you.

Next, I'd like to invite Kusano to talk about development pipeline. I am Kusano, the head of project and lifecycle management unit. I'll explain the status of the development pipeline. Please take a look at slide nine. First, I will present the topics for the third quarter. All of the approvals and applications are already announced. In terms of approvals, our in-house product, PiaSky, was approved in Europe in August for PNH. Also, for our in-house product, Alicensor, an expanded indication was obtained in Japan in August for the urtipine treatment of ALK-positive early-stage non-small-cell lung cancer. As a result, PiaSky for PNH PHN and expanded indication of acensa for the adjuvant treatment of ALK-positive early-stage non-small-cell lung cancer were approved in Japan, US, and Europe as initially planned. And also, nemolizumab, which was out-licensed to Galderma, was approved in the US in August for prurio notivaris under the brand name of Nemoluvio. For rash products, we received approval for Evrisi and Rituxan. In addition, we submitted applications for approval in August for SRP-9001, a gene therapy product for Duchenne muscular dystrophy, and in September for Babismo for angioid streaks, which can cause visual impairment. Both products have been designated as regenerative medicine products for rare diseases and orphan drugs and are eligible for priority review. There are three trials that got started. As for Ray121, the in-house discovery project for anti-complement C1 recycling antibody that we explained in the previous earnings briefing, we started a global Phase 1B basket trial in August. This is for six autoimmune diseases, and we are steadily making progress with the simultaneous development of multiple diseases. Brighten is also an in-house discovery project. Unfortunately, we were unable to disclose the specific target diseases or mechanism of action at this time, but we have started phase 1 trials for chronic disease. Brighten is a clinical antibody designed by Malexa. And this is the first project to advance to phase one trial. Melexa is Chugai's proprietary AI-based antibody drug discovery support technology. For Rush products, a phase three trial of the KRAS-C12C inhibitor, DIVARASIV, for the second line treatment of non-small cell lung cancer was started. Next slide, please. Now we'll discuss the removal of projects from the pipeline. Regarding Spike-04, an in-house project, we have decided to continue development in-house and begin our out-licensing activities. Although we have not disclosed the mechanism of action until now, the MOA of Spike-04 is a rough neck molecular glue. Molecular glue is a term for a small molecule compound that acts like glue to bind two or more proteins together. In addition, we have decided to discontinue the development of Tovem's Domeg, a bispecific antibody that targets PD-1 and LAG-3 in light of the results of clinical trials conducted overseas by Roche. Next, the result of the study of nemolizumab, which were presented at the European Academy of Dermatology and Venetology EADV Congress in September, will be explained in more detail on the following slides. In the third quarter, we concluded licensing agreements with Roche for two projects. These two projects are the PI3K inhibitor inabolizumab and anti-TL1A antibody, which I will also explain later. In summary, research and development activities are progressing in a variety of ways to continuously create innovative new drugs, including early drug discovery research, late-stage development, including regulatory submissions, and drug discovery using AI. Next slide, please. Next, I'll talk about the progress of major R&D events in 2024. Changes from the previous time are underlined and in bold letters. As I mentioned, we were able to obtain all of the approvals we had planned for this year for Pierre Sky and Alice Sensa. The readout timing of the Sunmo study conducted using Mosunetsuzumab and Olaibi and Manatee study conducted using combination of GIM329 and LBCD has been changed to 2025 as announced by Rush already. Next slide, please. In the next two slides, I would like to show you the characteristics of Nemolizumab also known as NEMLUVIO overseas, including its early onset of action and long-term efficacy. First, let's take a look at nodular prurigo. The top part shows the results of post-hoc analysis of two Phase III studies presented at EADB, up to day 14 from the start of the treatment. After treatment was started, there was an early onset of efficacy with statistically significant and clinically meaningful improvements in pruritus observed as early as the second day or even first day. The lower graph shows the long-term data from the phase 3 study for nodular prurigo that was presented at the AAD, American Academy of Dermatology, in March. On the left, the percentage of patients whose pruritus improved over 52 weeks increased with the admission of nebulism, and nearly 90% of patients experienced complete or almost complete disappearance of pruritus. On the right, the overall evaluation of skin lesions also showed continuous improvement over 52 weeks. From this result, it was shown that this drug, Nemolizumab, can be expected to further improve symptoms with long-term administration. In addition, although not shown here, similar results were obtained in improving sleep disorders, and it was confirmed that safety was the same as before. Next slide, please. Next, atopic dermatitis. The top part row shows the results of post-hoc analysis of the two Phase III trials presented at RAD revolutionizing atopic dermatitis in June, up to 14 days after the start of treatment. As with prurigo nodularis, statistically significant and clinically meaningful improvements in pruritus were seen as early as day 2 or even day 1. The lower part shows the long-term data from the page 3 study for atopic dermatitis that was presented at EADB recently. Over 56 weeks, the overall evaluation of skin lesions on the left side and severity of the extent of skin lesions on the right side showed continuous improvement. In addition, although not shown here, similar results were obtained in terms of improvements in sleep disorders, and we have confirmed that safety profile was the same as before. What is common to patients with atopic dermatitis and prurigo nodularis is poor sleep and reduced quality of life caused by pruritis. We expect the nemolizumab, which targets IL-31 signaling involved in pruritus and inflammation, will be an effective and convenient treatment for patients with these diseases around the world.

Next, I will explain about enavolizib, a PI3K inhibitor, also in-licensed from Roche. This slide shows the mechanism of action of enavoliziv. PL3K has multiple isoforms of proteins with partially different structures, and it has a significant role to play. RLG6631 This will be the best treatment options. On the right-hand side, as you can see, Phase IIb study results are shown. For the placebo injection, compared to the placebo injection, the high effectiveness was confirmed, and we are planning for the global Phase III study to start soon. Next, I will explain about inabolisiv, a PL3K inhibitor also in license from Rush. This slide shows the mechanism of action of inabolisiv. PI3K has multiple isoforms of proteins with partially different structures. Among them, PI3K-alpha in particular is deeply involved in the proliferation and survival of cancer cells. In a volisive, is a catalic subunit of PI3K alpha and is expected to exert a strong and lasting effect by selectively inhibiting the kinase activity of P110 alpha, which is responsible for the main function of PI3K alpha, and promoting the degradation of the mutant P110 alpha protein by specifically inhibiting PI3K alpha It is expected to have less impact on the other PI3K isoforms involved in physiological functions unrelated to cancer, reducing the risk of side effects. These are the results of the overseas phase 3 trial of inabolizib. The overseas phase 3 trial was conducted for recurrent breast cancer that is PIK3CA mutated positive, hormone receptor positive, and HER2 negative. PIK3CA mutation positive breast cancer is a type of cancer where mutations in a PIK3CA8 genes leading to constant activation of the PI3K, AKT, mTOR, or PAM pathway promoting cancer cell proliferation and survival. In the overseas P3 trial, inavolacive was added to palcocelecleve a CDK4 and 6 inhibitor, and fulvestrant, a selective estrogen receptor degrader, SERD, which are standard treatments for the PIK3CA mutation positive, hormone receptor positive, and HER2 negative. A statistically significant and clinically meaningful improvement was observed in progression-free survival, which was included in the primary endpoints. Specifically, the combination group of inabolisib, palvocyclib, and fulvestrant reduced the risk of disease progression or mortality risk by 57% compared to the palvocyclib and fulvestrant group. Evaluation of overall survival period was immature at this point, but showed a positive trend and follow-up will continue until the next analysis. PIK3CA mutation-positive breast cancer has a poor prognosis and high unmet needs. Development of INAVOLICIV is progressing ahead in Europe and in the United States. In the United States, INAVOLICIV has been designated a breakthrough therapy by the FDA and approved on October the 10th of this year for PIK3CA mutative positive. hormone receptor positive and HER2 negative locally advanced or metastatic breast cancer with a priority review designation. It is also under review for approval in Europe. In Japan, we will swiftly advance development to deliver this innovative drug to patients. Here are the future submission plans. Red stars indicate new additions and green stars indicate changes in submission timing. I would like to add one note. Regarding NEXT-007 currently in Phase 1 and 2 trials, it was previously listed in the Phase 1 category in the development pipeline slide, but has now been updated to Phase 2 with a submission planned for 2027 and beyond. This aligns with the transition to the patient part to obtain efficacy, safety, and dosage setting data, and rushes update to phase two, adding it to the submission plan table. The readout of the ongoing Phase 1 and 2 trial is planned for the next year of 2025, which will be the basis of our decision as to whether to proceed to Phase 3. A few reference materials are attached for your reference as needed. This concludes my presentation.

Last but not least, I'd like to invite Taniguchi to talk about the fiscal year 2024 Q3 consolidated financial overview on the core basis. I'm Taniguchi, CFO. Well, the video is not shown properly. Well, I'd like to explain about the results of the third quarter based on the core basis. First of all, revenue was 868.5 billion yen, year-on-year increase of 30.9 billion yen, or 3.7%. Operating profit was 426.6 billion yen, or rather, a year-on-year increase of 25.3%, or 86.1 billion yen. The main factor behind the increase in sales was a significant increase in export sales of products such as Hemlibra and Actemra. This growth in sales completely absorbed the impact of the loss of sales of 81.2 billion yen. from non-approved and even exceeded it let's take a look at the breakdown sales were 750.3 billion yen an increase of 8.2 billion yen or 1.1 percent looking at the sales by region uh domestic sales and overseas sales but as for domestic sales they were down 97.5 billion yen year-on-year. But excluding run-approved, the decrease was 16.3 billion yen. The main factors were the impact of NHI drug price revisions and penetration of generic drugs. Overseas, exports of products such as Hemlibra were strong and sales grew by 105.8 billion yen or 33.8% year-on-year. Other revenue increased by ¥22.7 billion or 23.8% year-on-year to ¥118.2 billion due to factors such as increase in royalty income from him library and one-time income. Now, the cost items. Cost of sales was ¥244.1 billion with decrease of ¥76.1 billion or 23.8% year-on-year. Reason for this is that cost of sales of Rona Preve which had a high cost-of-sales ratio, had disappeared, and the relatively low cost-of-sales ratio of our in-house products has increased. As a result, the cost-of-sales ratio has improved by 10.6 points to 32.5%. Despite the impact of rising prices and higher personnel costs, we made efforts to improve efficiency, and R&D expenses increased by 6.2 billion yuan a year. as the projects in drug discovery research and early development progressed smoothly. And as for estrogen expenses, they only increased to 1.1 billion yen year-on-year. Expenses by 1.1 billion yen year-on-year. And operating income decreased by 13.9 billion yen due to significant decrease in gains on sales of products transferred this year. As a result, operating profit increased by 86.1 billion yen year-on-year to 426.6 billion yen. Operating margin increased by 8.4 percentage points to 49.1%. Net income was 301.3 billion yen, increase of 51 billion yen or 20.4%. Next page shows the breakdown changes in sales. First, in the domestic oncology field, the sales increased by 11.1 billion yen or 5.8% year-on-year. As for the breakdown, sales of Abastin decreased due to the impact of the penetration of generics products, but sales of the new products increased to a greater extent than the decrease in sales of Regetta and Herceptin. In the specialty area in domestic market, the decrease in sales was 86.6 billion yen or 36.4%, but this was due to the decrease in sales of previously mentioned Ronaprev, and tummy flu which is a large seasonal fluctuation trend excluding the decrease in sales of those two sales were generally at the same level as the previous year while overall sales were affected by the later drug price revisions sales of new products such as grew steadily. Overseas sales of products in gray increased by 105.8 billion yen or 33.8%, mainly due to growth in sales in Libra and four other core products. The next page shows the breakdown of the increase in operating profit. The content of the slide has been enhanced since the previous quarter, with more detailed disclosure of information such as domestic and overseas breakdown and impact of foreign exchange rates. As for the domestic ones, Impact of energy drop price revisions and impact of run-up relief were the factors that led to the decline in operating profit. As for overseas sales, the increase in sales volume and positive impact of foreign exchange rates greatly exceeded the decrease in export unit prices, and this was a factor in the increase in operating profit. Other revenue increased by 32.7 billion yen. The increase in royalties compared to the last year for Hemlibra and one-time income such as milestone payments contributed to increase in operating profit. In addition, the significant decrease in cost of sales due to changes in the product mix was a major factor in boosting operating profit. And there are some cost items increased. But 86.1 billion yen increase was achieved. The next page is the trend of profit and loss items by quarter by every three months. This has been shown since a year before. And there are some ups and downs and timing delay in exports. But as you can see, In second quarter and third quarter, operating profit grew significantly because of export growth. Next page, likewise, every three months from the third quarter last year, you see the sales composition. I'm not going to go into details, but the overseas sales of products have made significant progress since the second quarter of this year.

Please turn to the next slide. As I have explained, our performance this term has been extremely solid. And considering the current situation, we have decided to revise our earnings forecast at this time. Details are as stated. Sales is revised upward by 80 billion yen to 1.15 trillion yen compared to the initial forecast. We've also revised operating profit upward by 80 billion yen to 540 billion yen and net profit by 52.5 billion yen to 388 billion yen, all upwards revisions. The main factor for this revision is the significant increase in overseas exports to Chugai-originated products, including Hemrypha and Actemura, and other one-time revenue was increased. there was an upside as well. Those are the main factors. As I mentioned before, the sales cost, because of the sales mix, the low cost products increased in the overall composition and Forex impact as well. On the cost, there was not much Forex as expected. So with the sales increase, the sales cost ratio remained same so that's why we revised upward by 80 billion yen for both sales and profit for that dividends we will consider We will reconsider based on the revision and based on the progress towards the year end forecast, but it remains undecided at this time. Next page shows the difference between the initial forecast and the revised forecast for sales by segment and major products for each major category. As you can see, The product sales, 64.8 billion yen, is the increased portion. And the right-hand side shows the forecast by product. Hemipra is generating upside compared to the initial forecast, as you can see. And these are the impact of Forex. This is the updated slide from last time. The left-hand side, C versus A, shows the actual rate comparison between last year and this year and its impact on sales and profit. And C versus B in the middle, compared to the initial Forex assumption, the actual Forex is compared here and those portion that is not that does not have the forward forex contracts there has been some positive impact from that open position so these are the effects and next page This balance sheet, the top side, cash and equivalent has been accumulated and AR has accumulated thanks to increased sales and long-term investment. The fixed asset has increased to 2 trillion yen and 69.7 billion yen compared to December. 127 billion yen has increased and the liability there was a minus of 36.8 billion And there was an increase of 178 billion. And equity ratio is now standing at 87%. And net cash, there is an increase of 106 billion yen. And there is a detailed explanation on the next page. And these are the cash and why there is a significant increase. Well, this is based on the operating profit and the operating free cash flow is 340 billion yen or so. And deducting the cash dividend, there is 106.3 billion yen over the nine months. And over the nine months, there has been an increase as you can see as a result. Next page, please. and we have been discussing the core base performance but this slide covers the non-core adjustments and impairment of intangible asset and other items the business rebuilding costs and erp is now being upgraded and there is a 5.2 billion name recorded for that purpose And these are reflected in these numbers here. Next page, please. And this has been updated compared to the revised forecast. And how the sales and profits and costs are progressing are shown on this slide. As you can see, mid 70% to high 70%. This is for remaining three months. So these are the levels that we are looking at and we are comparing this against the progress rate we saw at the same period of last year. Next page shows the numbers based on revised forecasts. the progress rate that we are observing right now. There are some variances among products, but the remainder is just three months, and it looks the progress rate is somewhat lower for some of the categories, but we are confident that we will be able to achieve the forecast. Next page. This was included in APEX appendix last time. This time, Four products other than Pia Sky, the actual performance up to third quarter and the growth rate in local sales have been reflected. Hemerifera grew by 10%, Actimura by 4%, Alicensa by 8%, and Spring 62%. So this significant growth has been achieved. And these are the overall situation of our business at this point in time. The last page, Well, this is the same slide we have been showing for a while. These are the CAPEX plans for the time being. At this point in time, these are the CAPEX plans that have been authorized internally. That concludes my presentation. Thank you.

Thank you very much for your attention. I would like to move to the question and answer session. And as for Q&A, we also have Mr. Takano, head of marketing and sales division, is present as well. And in order to make sure that as many people as possible can ask questions, we can limit the questions to two per person. And the sound of the questions will be posted onto the website together with the presentation. So I'd like to ask for your kind understanding. So let me explain how to operate this. If you choose the language that you'd like to listen to, please click on the interpretation mark. And if you wish to listen to Japanese language, please choose Japanese. And if you wish to listen to English, then please choose English. If you don't set this up, then sound may not come out. So please make sure that you set up on this. Now let's start taking questions. Please press raise hands button at the bottom of the Zoom webinar. And if your turn has come, your name will be called. And then we would ask you to unmute yourself. So please unmute yourself and identify yourself and your affiliation. And if you cancel your question, please push the lower hand button and also if you are participating on the telephone then please push 9 after the star and your name is called please identify yourself and your affiliation and if you cancel that your question please push the star so JP Morgan Mr. Wakao please go ahead and ask questions Thank you very much. Wakao from J.B. Morgan. Can you hear me? Yes. Thank you. The first question has President Okuda. talked about the forecast for the next fiscal year. The upward revised number would be the one that you would reach in the next fiscal year. But what will be increased and what will be decreased, especially exports of MLibra and exports of Actemra and the other revenue that is the reason for upward revision this time. What would happen to those items, especially? Thank you very much for your question. I can't turn the video on. Yes, I was able to. Thank you for the question. The next fiscal year forecast, we are not in a position to give you details, but at this moment, what we can see is quite uncertain. So as Wakosan said, Hemlibra and Actemra and other performance forecasts, there are a lot of uncertainties involved. So at this moment, we cannot give you any details at this moment. At the end of January next year, When we will have earnings briefing, looking at the situation, we'll come up with more details for next fiscal year's forecast. I'd like to ask for your kind understanding. Understood. Thank you. Then one question. The same level as this fiscal year's level for the next fiscal year. So there are a lot of uncertainties, but at least you can reach that level or that performance is expected. Is that true? I'm so sorry, but there's a lot of uncertainty. So many different factors could change or subject to change. So just a yardstick for the moment is given as more or less the same as the forecast for this fiscal year. That's how I put it. Thank you. Okay. Then another question. That's for Tamara. the impact of biosimilar has been less than expected more recently. So how has it been analyzed in the ROS group? And also for the next fiscal year onward, what would be the forecast? And along with that, export sales, how are we supposed to forecast that? Can you elaborate more on that? Taniguchi speaking. Thank you for your question. As for Actemora, For this fiscal year, as I said, biosimilar entry has been weaker than expected or delayed. And as for the next fiscal year, it's hard to say, but at this moment, if you look at the situation in the U.S., things are still weak. But that's as far as I can go today. Thank you. And if that's the case... Then in the US, if the situation stays the same, then export sales won't drop that significantly. Is that correct? I think that is true. But for the next fiscal year, of course, we are now sorting out the things. So I would like to refrain from commenting. Another question. Why the impact of biosimilars was weaker or milder? The timing of the launch of biosimilar was just as expected. Then why was the impact was less? What was the factor? Well, it's about other companies, so I shouldn't comment that much. But the way we look at this, that supply chain, especially the procurement of raw materials, there has been some bar that has been set higher or difficulty level has been increased. And also price-wise, have they been attractive enough? So they may not have put enough resources, but that was just an impression that I was under. So those factors may not change for the moment. Is that true? Well, for the moment, that is true, but I'm not sure about the next fiscal year. Thank you.

Next, we will take questions from Yamaguchi-san from Citi Group Securities. Please go ahead with your questions. Can you hear me? Yes. Thank you. This is Yamaguchi from Citi. First question is regarding the revision to the earnings forecast, the policy around that. the actual performance was reflected. And it was a good thing that you made the upward revisions as of the end of third quarter, the sales 10% and profit 30%. Unless there is a variance of this amount, there is no revision. But this time, the variance is not as much as 10% and 30% in sales and profit. But did you change any policies around revision to the earnings forecast? Thank you for your question. It is not a policy that we have, but this is regarding the policy about the voluntary disclosure. How we are disclosing this should be in line with the expectation of the market as well as the expectation of the investors. And we wanted to meet the expectations of those outside stakeholders. It is not related to the change in management, but we would like to disclose as much as possible. The sales region is 7.5% and it is close to 10%. So considering the significance, we decided to up. revise the forecast. And in terms of the decision criteria, that needs to be adjusted depending on the situation of the world as well as expectations of the investors. So we'd like to be flexible in revisions as well as disclosure. And regarding the changes to the export sales of Hemlibrary, the sales at the rush and the shipment from your side, there is a time lag. And Q2, the volume was big. And in Q3 as well, in terms of the value, it is on par with Q2. And Q4, the plan is half so in q2 the local sales especially in emerging markets there is a building up of inventory and you needed to respond to that and this trend is going has been continuing in q2 and q3 and the situation will settle in q4 is that right so please comment on the difference between the local sales as well as the export timing well as for the export Well, this is related to the Russia's inventory status, but it is also dependent upon the shipment timing. While we are not shipping at the same time in each month, the factory situation and supply chain situations, we are sometimes doing bulk shipment, but sometimes do not do that. And as you can see, the financial results of Russia, the international growth rate is very high. So this strength and momentum has been evident in Q2 and Q3. And we question whether this trend will all of a sudden change in Q4. So in terms of the situation, the overarching trend will continue for a while. The international growth is expected to continue at least as far as we can logically estimate this trend will continue. So, for Q4, instead of 50, 80 can be achieved. Is that right? Well, it is not true to say that we are making bulk shipment every month. It depends on the timing and the... And for the remainder of two months, we'd like to forecast as much as possible. But towards the end of the year, there will be a holiday season for which we cannot have an accurate prediction. But as much as we can anticipate, the assumptions will be reflected in our plans. Thank you.

Morgan Sterling, MUFC Securities. Mr. Moroka, please. Morgan Stanley Morioka speaking. Can you hear me? Yes, we can hear you. Thank you. I would like to ask about the pipeline. First of all, NEXT-007, earlier, as was mentioned, phase three you could go to phase three next year based on the result of phase two so just recently things have seemed to have been accelerated and while it had taken so much time uh Up until recently. So what was the factor for this accelerated process? NIM rate was something that cautioned you and you had in rush. That's what I was suspecting. But can you elaborate more on that? Thank you very much, Muraoka-san. Aksano speaking. I'd like to pick that up. So previously and now, we are always trying to go forward with the study as fast as possible. So during the COVID-19, the studies were less, but we are trying to maximize the speed, not the meme rate, but We are making steady progress on our own, and Phase 1 and Phase 2 studies are ongoing. I expect it to have positive results, and that would lead to Phase 3 next year. So in the next generation products, whether they can replace them, that is often talked about in the improved products. But P&H, it went well. But as for hemophilia, with the next generation products, the conventional ones would be completely replaced. Would that be correct? Then the mid-rate could take over the share. That's our concern, if that is the case. Can you elaborate on that? Thank you very much. So as we have been saying from the last time, if you look at the result of MIM-8, especially there's no data that would show that it would overtake the hemlobular. So we are able to maintain the patients and also they were able to control the disease with hemoglobin, so there's no reason to switch over to mean weight. But NEXT-007, of course, it depends on future results, but the objective of NEXT-007 is the normal performance as a healthy adult. So there will be blood bleeding that will be stopped. And even the children can live a normal life. That is the objective. And also in terms of PK, this has been also received. So M-Libra and Nexo07 could be used by different groups of patients depending on their purpose. So, Jim329 is the next question. So, as for Jim329, you produce the products and then supply the products to Roshisa, correct? Correct. Is that correct? Yes, you're correct. If that is the case, then the rush is getting quite serious about this. And the production capacity, is it enough with UT3? Or would you have to consider something even bigger? Aniguchi speaking. Thank you very much for your question, Raoka-san. Well, at this moment, the project has a long way to go. So as for the clinical material production capacity, we are on the conservative side, and there shouldn't be much of a problem. But after the launch, to what order of magnitude we would have to supply, we have to determine. But of course, we can use CDMO, not just our own production capacity, so we can depend on various networks. Thank you. Then with regard to Jim, there is RT. The Scalarock SMA success the other day had a positive implication for you. And Rush is talking about that. I was wondering why they are talking about that. But that data score was 1.8 points out of 66. 1.8 improvements. Would it be enough? So your expectation from Manatee was higher. Would that be higher? So is there any metrics that you have about this data? Thank you very much for your question, Maruka-san. For Scalarox phase 3 study result that has been this myotin antibody in SMA has achieved primary endpoint for the first time. So, we have the similar mode of action. So, for GIMS 329, I think this has been quite positive and the probability of success has been enhanced. And as for your question, so this is about the clinical study results of other companies. So, we're not in a position to comment on that, but 1.8. Is it really big enough? Well, if you look at the data, the lower dose has more positive results compared to higher dose. How to interpret this is going to be what we would look at when we look at the sub-analysis. So what would be the point in primary endpoint setting in our study? That is a confidential matter. So at this moment, we are not able to disclose that. Thank you. So early next year, phase two result from Manatee will be out, right? Well, at what point in time in next year, we cannot say, but within next year, we'd like to come up with the result. Thank you.

Next, Markley Capital. Tony Ken, please go ahead with your question.

Hi there. This is Tony Ren from Macquarie. First of all, congratulations on a set of very strong data for the third quarter. This is my first time participating live on your briefing call, so I appreciated the opportunity. So a couple of questions from me. The first one is hemophilia, NXT Next 007. So I attended the Roche Pharma Day in London, and I was very pleasantly surprised when they said they will release the Phase 2 NX007 data. And then on Wednesday night, we were even more surprised when they say that they expect the data to be Phase 3 enabling, which is another positive step forward. That being said, in my estimation, you should be able to run a phase three program fairly quickly, given historically you've run these phase three studies only about six months of dosage, dosing the patients for six months. So just curious why Do you expect the BioLogic license application to be in 2027 and possibly later, but not in 2026? It feels a little bit longer than I would have expected.

Tony, Ren-san, thank you very much for your question. First off, Phase 1 and Phase 2 test results. In next year, we will be able to disclose the data as we need to determine whether or not to move on to phase three. At what timing we'll be able to move on to phase three, of course, we'll be working throughout these clinical testing so as to deliver the solution to patients as fast as possible. Whether it's going to take three months or six months, we would like to refrain from disclosing the timing at this point in time.

Okay, understood. So a key selling point from Novo Nordisk Mainnet is their dosing schedule, which appears to be more convenient, as well as the subcutaneous auto-injection. Would you be able to comment on the dosage form and the frequency at this point for NEXT-007?

Thank you very much for the question. So phase one study with the healthy adults was conducted, and next 007, the period has been extended to 10 weeks, and it has been elongated. And going forward with the further test, we would like to consider the optimal frequency At this point in time, we cannot comment on that, but based on the test results from phase one and two, we'd like to consider the optimal dosage frequency going forward. Thank you.

Okay, great. Thank you. So my next and the last question before I jump back into the queue is on obesity and GYM329. So typically we see similar trial designs in the same indication. But in this case, in spinal muscular atrophy, your Manatee studies and the Skylarock Sapphire studies are quite different. Notably, you have decided to combine GYM329 with Evrizdi. I just wanted to see what is the thinking behind that trial design using two agents versus doing a single agent study of GYM329. And Roche also commented on Wednesday night that they believe the Skylarock agent and GYM329 are very similar antibodies. So now that you've seen the SAFIRE study succeeded, are you planning to design a similar trial, phase three trial, as using the SAFIRE design?

Thank you for the next question. First of all, the GYM-329-Arysnevram combination rationale is the GYM-329-Arysnevram has been already approved. In terms of the action, increase the central nerve function. And this will be effective for nerves and genes. And as for the SMA patients, their muscle has been weakened. So with the GYM329, we are targeting to increase the muscle. And we believe that the combination therapy has a certain rationale from that perspective. With regard to manatee testing, those patients who are able to work and who are not able to work, and for each age group, we are conducting the testing. And as for the protocol for phase three, based on the results of the manatee study, we'd like to consider the optimal protocol for phase three.

Okay, very good. Yeah, thank you for providing the answers. Yeah, I'll get back into the queue.

Thank you very much. Next, SMBC and Equal Securities, Wada Son. Mr. Wada, please. Wada from SMBC and Equal Securities, can you hear me? Yes. Yes. The third party out licensing project is what I like to ask about. Well, GIM 329 obesity phase one data. Is there any plan to disclose that? The combination study is going to be started, right? So what about that? Mr. Water, thank you very much for your question. So the phase one data is ongoing. The data is not going to be disclosed. But the next year, GIMS 329 combination study is planned to be started. So what is the agent that you're going to combine the GIMS 329 with? We have yet to decide. Thank you. And then the next question. After Metinib. So Spike-04, Ravmec molecular glue, as that compound, you're going to do the outsourcing. What is the difference from this drug compound? Avatamexinib as a mode of action. Rachmeclamp is what you mentioned, but is this an extension of the compound or further development stage? Thank you for your question. So Avatamexinib, as for that, It has been out-licensed to Belastem. So as for the details of the compound, we cannot answer the question. But Spike-04 that has been decided to be out-licensed, like in out-of-the-brace Ravmec inhibitor. I mentioned a mode of action slightly, but Ravmec molecular glue. rach-mec bonding will be stabilized and inactivated rach-mec complex will be formed and then a rach-mec signal will be inhibited and rach-mec dependent tumor will be attacked. So spike-04 and avatamazine, in terms of molecules, they are quite similar. So I ask this question because in terms of platform, you can create a group of molecules. Is there any platform that you have that can be used for something other than Ravmec? Thank you for your question. So as for the early research direction, I'm so sorry, but we are not in a position to disclose that strategy. So we'd like to refrain from commenting on that. Understood. Thank you.

Thank you. Next, Daiwa Securities, Hashiguchi-san, please go ahead. This is Hachi Gucci. Thank you for taking my question. My first question is regarding the dividend forecast. Well, you changed it to undetermined. The business environment has been evolving significantly, as you mentioned. 82 yen forecast was disclosed earlier. And what has changed since then? as i heard your presentation i wasn't sure about that and the profit forecast revision will be considered in the future is that right or the capital policy remains unchanged but The earnings forecast and strategic investment needs may change as for the business performance. The next fiscal year will be on par with this fiscal year. That was what clearly mentioned. So the strategic investment needs may increase in the future. At least that's my impression. And could you elaborate further on these points? This is Taniguchi. Thank you. As for the upward revision of the business performance based on this, of course, the net profit and BS may change. But what's going to happen by the end of year, we'd like to monitor that. And we would like to... consider dividends. And at the time we are disclosing this fiscal year's performance, we'd like to talk about this. Other than that, at this point in time, we cannot make any comments, unfortunately. Compared to the beginning of the fiscal year, we have now completed the third quarter, and we believe that the probability of achieving the full year forecast has increased. But when it comes to dividend, you changed the description to undetermined. Well, in the past, when we made the revisions as of the end of third quarter, we also changed the dividend forecast to undetermined. So the full year net profit is something that is not finalized. So based on that net profit, we'd like to discuss dividends. Jim329, sales potential is the second question I'd like to ask. For Roche, they... have been showing the forecast between 0.5 to 1 billion. And up until last year, it was above 1 billion. So I believe this is effectively a downward revision. How do you understand the revision? And if you have any different views, would you be able to share that? Thank you for the question. In terms of our understanding, I'm sorry, we have difficulty turning on the camera. Sorry. In terms of our understanding, as it's shown in my slide, at this point in time, GIMS 329 rushes forecast SMA FSHD between 0.5 to 1 billion and obesity related sales forecasts are not included in this number. That's something that we wanted to share. So the unit is Swiss franc, not the US dollars compared to one year ago. Can you comment on the change from one year ago? As far as I know, The sales forecast explained by Rush is between 0.5 to 1 million Switzerland franc. That's all we have in terms of the information. Thank you.

Mr. Haruta from UBS Securities, please. Ms. Haruta. Haruta from UBS Securities. Can you hear me? Yes. One question. Team 329. obesity study. At the moment, with SMA, a small group of patients are targeted, but obese patients, once they use the GM329, dose should be increased higher. With the sweeping antibody, you can suppress the dose to some extent, but if you combine this then the muscular strength is weakened in the elderly people, but that is a demand that is coming from elderly people. So are you going to also consider enrolling those types of patients as well? Thank you very much for your question, Ms. Haruta. As you rightly pointed out, we are now having discussion with Roche. Roche is now running phase one study. So healthy overweight people is looked at for PKPD and teriability and safety. So, instead of SMA, for these patients, what would be the right dosing is now being sought out with this study that is ongoing. So, what about elderly people with less strength in muscles? So, how are you looking at targeting those people with reduced strength of muscles? Well, inclusive of that, The results of phase one and various data will be taken into account to consider phase three. So the phase one of these three GEM study, once this is over, then you're going to start combination study for GEM next year. Is that correct? Well, whether it is going to be sequential or in parallel, I have not disclosed yet, but as for Phase 3, of course, you have to look at the Phase 1. For next clinical study, we have to take a look at the result of Phase 1 closely to decide. Thank you. Then to change the case slightly, AMD gene therapy in rush earnings in regions other than Europe and US, they are starting up quite well in sales. But what about the demand in Japan? Skipping drug is not used by some patients, and that would be the demand coming from. But every SMA patient's sales network could be used, even though the diseases are different. Are you going to use that network as well? Takano from Marketing and Sales. Thank you for your question. As you said, The new therapy is what we are going to enter, and gene therapy is quite complex, and you need a quite complex system and mechanism involved, including RCD. Neuromuscular disease is something that we're working on, and the market launching plan is going to be worked out based on that. Well understood. So basically, exon skipping drug cannot be used by some patients, and that is going to be the target, basically. Is that correct? Correct. So based on indication, we are going to launch the product. Thank you.

We are very sorry that we are pushing the allocated time. So we'd like to take the next question as the last question. Alliance won't find securities. Sagi-san, please go ahead. Sagi-san, can you hear us okay? Sagi-san, can you hear us? We are very sorry. We are not hearing you. We are very sorry, but we have come to the end of the allocated time. So we'd like to close this Q&A session. Now we'd like to close the earnings call for the Chugai Pharmaceuticals for fiscal year 2024, third quarter. For those questions we weren't able to answer, please reach out to communications and IR department. with your questions and the contact details have been provided at the last page of the presentation materials. Thank you very much for taking the time out of your busy schedule to attend this earnings call. Thank you.