Daiichi Sankyo Co Ltd Ord

Thank you very much for waiting. From now on, we would like to start Daiichi Sankyo FY2023 Q1 financial results presentation. I serve as today's moderator. I am Masakura from the corporate communication. First, about the language. Today, we are going to utilize both Japanese and English, and we have a simultaneous interpretation. So please click the interpreter icon at the bottom of the Zoom and select from Japanese, English, or off. If you select off, then you will hear the original voice. Zoom and live transmission, we will show the Japanese presentation materials, and the Japanese and English presentation material can be downloaded from the corporate website via library financial results presentation material. Today's presenter will be Executive Officer and CFO Ogawa, Executive Officer, Head of R&D Unit Takasaki, and Head of Global R&D Takeshita. First, Ogawa and Takasaki will explain about FY2023 Q1 financial results and others, and we would like to entertain questions. Now, today's meeting will be recorded. Then we would like to start. Ogawa-san, please.

Ogawa speaking. Thank you very much for joining Daiichi Sankyo's financial results presentation out of a very busy schedule today. I'm going to explain our FY2023 first quarter financial results we announced at 1pm on Monday, July 31st JST based on our presentation materials. Please turn to page 3. This is the agenda for today. We will cover FY2023 first quarter consolidated financial results, business update, and R&D update in that order. R&D update will be explained by Wataru Takasaki, Head of Japan R&D. We will entertain your questions at the end. Please turn to page 4. This is an overview of FY2023 first quarter consolidated results. Revenue increased by ¥70.5 billion or 25.2% year-on-year to reach ¥350.8 billion. Cost of sales increased by ¥18.9 billion from the previous year. SG&A expenses rose by ¥39.3 billion, and R&D expenditure increased by ¥2.2 billion year-on-year. As a result, core operating profit increased by ¥10.1 billion or 29.4% year-on-year to reach ¥44.5 billion. Operating profit, including temporary gains and losses, increased to ¥44 billion, up ¥9.7 billion or 28.1% year-on-year Profit attributable to owners of the company increased by 38.2 billion yen or 202.4% year-on-year to reach 57 billion yen. As for the actual currency rates, the US dollar was 137.37 yen, the yen depreciated by 7.80 yen against the dollar year-on-year. The euro was 149.46 yen, the yen depreciated by 11.36 yen against the euro. Please turn to page 5. From here, let me explain positive and negative factors for revenue compared to the previous year. Revenue increased by 70.5 billion yen year-on-year. I'd like to explain its breakdown by business unit. First, in Japan business, revenue increased by 12.2 billion yen. as sales increased for direct oral anticoagulant Lixiana, pain treatment Alije, anti-cancer agent Enhert, anti-platelet agent Effient, and Daiichi Sankyo Healthcare. Next, let me explain our overseas business units. Forex Impact is excluded here. In oncology business, revenue increased by 39.1 billion yen due to the growth of N-herd in the United States and Europe. As for American regent, sales decreased for iron deficiency anemia treatment injectifer, but sales increased for iron deficiency anemia treatment venifer. So American regent revenue increased by 0.8 billion yen. Revenue for EU specialty business increased by 1.2 billion yen as sales increased for Dixiana and hypercholesterolemia treatment Nidemdo Nustendi. In ASCA business, responsible for Asia, South and Central American region, revenue rose by 6.9 billion yen due to the growth of Enhut centering on in Brazil. Forex impact increased our revenue by a total of 11.5 billion yen. Page 6 shows positive and negative factors for core operating profit. Let me explain the profit increase of ¥10.1 billion by item. As I explained earlier, revenue increased by 70.5 billion yen, including the increase of 11.5 billion yen due to forex impact. Next, I will explain cost of sales and expense items excluding forex impact. Cost of sales increased by 15.6 billion yen due to the revenue increase. SG&E expenses increased by ¥34.1 billion due to an increase in NHERT-related profit sharing with AstraZeneca, etc. R&D expenditures remained flat year on year. Cost increased due to Forex impact by a total of ¥11.5 billion. Core operating profit increased by ¥10 billion, excluding Forex impact. Next, page 7 shows positive and negative factors for profit attributable to owners of the company. As I explained earlier, co-operating profit increased by ¥10.1 billion, including forex impact. Financial income, expenses, etc. increased our profit by ¥13 billion year on year due to improvement in forex gains losses and investment securities valuation gains losses, as well as increase in interest income. income taxes, etc. decreased by 15.4 billion yen year-on-year as we book tax expenses by using the simplified method in our quarterly account settlement. Also, due to the impact of the tax effect accounting associated with the decision to transfer Daiichi Sankyo ESFA, the first quarter income tax was minus 4.9 billion yen. As a result, profit attributable to owners of the company increased by 38.2 billion yen year-on-year to 57 billion yen. Page 8 and 9 show revenue increase or decrease in Japanese yen by business unit and major product in Japan. Earlier, on page 5, I explained the situation of each unit by excluding the forex impact, but here we are showing the results including the forex impact.

Next, I would like to give a business update. Slide 11 shows the breakdown of Enhato revenue. In the first quarter of FY2023, product sales increased ¥50.4 billion year-on-year to ¥81.7 billion due to growth in the U.S., Europe, and other regions. The sales situation in each country and region will be explained later. Regulatory milestone payment in the first quarter of fiscal 2023 was 2.1 billion yen down by 1.3 billion yen compared to the regulatory milestone achieved last year, which was booked as a sales revenue for the equivalent amount during the period since the contract signage till the achievement of the milestone. As a result, Enhata revenue, including upfront payments with related payment and development and sales milestone payments, increased by 49.2 billion yen to 86.6 billion yen in the first quarter of FY2023. For the fall year of FY2023, we forecast the revenue to be at 368.6 billion yen, an increase of 110.2 billion yen year-on-year, no change from the April figures. From slide 12, for two slides, the sales performance of Enhatu in each country and region will be explained. First situation in the US and Europe. Sales in the US were 51.6 billion yen, up by 31.5 billion yen, or $375 million from the same period last year. The current indications are as shown here. So market shares for each indication are also favorable. The share of new patients with second-line HER2-positive breast cancer is about 50%, maintaining the top share. Post-chemo breast cancer with HER2-low also showed a strong growth, maintaining its number one position with new patient share growing further to nearly 60%. To positive gastric cancer in second line also maintained its number one position with approximately 50% of new patient share. To mutant NSCLC second line treatment maintained its top position with approximately 60% of new patient share. europe shows a steady performance product sales in the first quarter of fy 2023 were up 11.1 billion yen to 17.8 billion yen or The new patient share in each marketed country and region is also expanding steadily. The new patient share with HER2-positive breast cancer in second-line treatment is approximately 60% in France, in the upper 40% range in Germany, and in the 50% in Spain, maintaining the top positions. In addition, in France and Germany, the share of new patients with HER2 low breast cancer treated with chemotherapy grew to mid-40% range and the mid-30% range, respectively, achieving the top position. As for other progresses, with a product launch in Italy in July, we have achieved launches in five major countries in Europe. Slide 13 shows the sales status of N-HER2 in Japan and the Asuka region. In Japan, the product sales for the first quarter of fiscal year 2023 were 4.4 billion yen, up by 1.9 billion yen from the same period of previous year. The current indications are as shown here. The share of new patients in each indication is steadily increasing, and in the second-line treatment of HER2-positive breast cancer, it increased to the mid-30% range, capturing the top share. HATU low treated with chemotherapy also saw a steady uptake. The share of HATU positive gastric cancer in the third line grew to the 60% level, solidifying its number one position. The product sales of the first quarter in the Asuka region increased by 5.8 billion yen year on year. standing at 8.0 billion yen. The product sales in the Asuka region include revenues from co-promotion in Hong Kong and other markets by AstraZeneca. Sales in the region have been favorable, with significant revenue growth mainly in Brazil. As for other progresses, the product was launched in China in June for the second-line treatment of HER2-positive breast cancer, and in July it was approved for the treatment of breast cancer in HER2-low patients previously treated with chemotherapy, and the promotion activities have started. In China, as in the case in the United States and Europe, the product will be co-promoted with AstraZeneca, but AstraZeneca will recognize the product sales and we will record 50% of gross profit as co-promotion revenue. We will continue to work for further market penetration and expansion of the country's regions, as well as to obtain new indications so that we can deliver NHAT to as many patients as possible who need it. In slide 14, I will present our initiatives related to profit growth for current business and products in Japan. In October of 2019, we launched the anti-cancer agent Vansilita for the indication of relapsed or refractory FLT3 ITD mutation positive acute myeloid leukemia, or AML. And in May this year, we obtained a partial change approval for the AML first-line therapy, including untreated patients in addition to the relapsed or refractory patients. In May, we also launched OD tablets, a new formulation of the pain treatment Taolijie, which has been marketed since 2019. We will further enhance our contribution to patients by strengthening our product portfolio. In May, we concluded a stock transfer agreement with Daiichi Sankyo Esfa Company Limited as part of a transformation into a profit structure focused on patented drugs. Transferree is Qual Holdings and the transfer price is 25 billion yen. On October 1st, 2023, 30% of the shares held by the company and on April 1st, 2024, 21% will be transferred. The execution date of the share transfer of the remaining 49% will be determined through separate discussions. I now hand over to Mr. Takasaki, General Manager of R&D Division, who will give you an update on R&D.