Daiichi Sankyo Co Ltd Ord

I am Okuzawa. Thank you for taking time out of your busy schedule to attend Daiichi Sankyo's financial results presentation today. I would like to explain the consolidated financial results for Q2, which were announced at 1 p.m. today based on the presentation materials. Please see slide 3. This is what I will talk about today. Consolidated financial results for Q2 strategic collaboration regarding three ADC products, FY 2023 performance and annual dividend forecast, business update, and R&D update. I will follow this order. Regarding the R&D update, Takeshita, Global R&D Head, will provide an explanation. And we will take your questions at the end. Please see slide 4. This slide shows an overview of consolidated financial results for Q2. Revenue increased by ¥118.5 billion or 19.5% year-on-year to ¥726.3 billion. Cost of sales increased by ¥29 billion. SG&A expenses increased by 66.9 billion. R&D expenses increased by 12.2 billion, all compared to the same period last year. As a result, core operating profit increased by 10.5 billion yen, or 12.4% year-on-year, to 95.3 billion yen. Operating profit, including temporary income and expenses, was ¥95.1 billion, that is the same level as the same period last year. The profit attributable to the parent company is increased by ¥38.7 billion, or 66.4% year-on-year, to ¥97 billion. As for the exchange rate performance, $1 was 141 Japanese yen. It's a yen depreciation of 7.02 yen year-on-year, and 1 euro was 153.38 yen. That's an yen depreciation of 14.66 yen year-on-year. Please see slide 5. From here, I will explain the factors behind the change compared to the same period last year. Revenue increased by 118.5 billion yen year on year. I will explain the breakdown by business unit. First, Japan business. Direct oral anticoagulant lixiana. anti-malignant tumor agent Enharts, pain treatment drug Tarije, and increased sales of Daichi Sankyo Healthcare drove a revenue increase by ¥18.7 billion. Next, I will explain the overseas business units. The figures are presented here, excluding the effects of exchange rates. Oncology business growth in the U.S. and Europe and the launch of the anti-malignant tumor drug VanFlighter in the U.S. pushed up the revenue by 70.7 billion yen. As for American region, although sales of iron deficiency anemia treatment benefit increased, A decline in sales of injectifer and ion deficiency anemia treatment and other factors led to a revenue decrease by 300 million Japanese yen. As for EU specialty business, due to growth in sales of lixiana and hypercholesterolemia treatment Niremdo and Nastandi, revenue increased by 6.3 billion yen. As for Asuka Business in charge of Asia and Latin America, due to growth in Enhatsu mainly in Brazil, revenue increased by 11 billion yen. Enhatsu and Dato DXD upfront and quit payment regulatory milestones and sales milestones were booked last year in a manner that the total amount from the time the contracts were signed until the milestones were achieved was booked as revenue all at once because of this revenue decreased by thirteen point four billion yen the overall impact of foreign exchange on revenue was twenty five point five billion yen Slide 6 shows the factors contributing to changes to core operating profit. I will explain the 10.5 billion yen increase in profit by item. As I explained earlier, revenue including an increase of 25.5 billion due to the impact of exchange rates increased by 118.5 billion yen. Next, I will explain the cost of sales and expenses excluding the impact of exchange rates. The cost of sales increased due to an increase in revenue by ¥22.9 billion. SG&A expenses increased due to an increase in profit share with AstraZeneca related to Enhaus by ¥56.8 billion. R&D expenses increased due to an increased R&D investment in 5 DXDA DCs by 5.7 billion yen. The total cost increase due to exchange rate impact was 22.7 billion yen. The actual increase in core operating profit excluding foreign exchange impact was 7.7 billion yen. Slide 7 shows the increase and decrease in profit. Core operating profit was, as was explained earlier, increased by 10.5 billion yen, including the effect of foreign exchange rates. As to temporary revenue and expenses, due to the effect of the gain on sales of products and subsidiaries in China in the previous fiscal year, it was a decrease of 11 billion yen year-on-year. As to financial income and expenses and others, the increase in interest income and improvement in valuation of investment securities and foreign exchange gains had a positive impact of 11.4 billion Japanese yen year on year. Regarding corporate income tax, etc., while profit before tax increased, quarterly tax expense calculated with the simplified method as well as the impact of the tax effect accounting associated with the transfer of Daiichi Sankyo ESFA contributed to the decrease by 27.9 billion yen year-on-year. As a result, profit attributable to the owners of the company was ¥97 billion, an increase by ¥38.7 billion year-on-year. Slide 8 and 9 show changes in the revenues of business units and major products in Japan on a yen basis, whereas slide 5 showed the situation of each unit excluding the impact of fraud in exchange rates, but here its impact is included. Next, I would like to give you an overview of the strategic collaboration agreement with U.S. Milk for HER3-DXD, DX7300, and DX6000, which was recently concluded on October 20th. Please see slide 11. Daiichi Sankyo and U.S. Milk will co-develop and co-commercialize HER3-DXD, DX7300, and DX6000 worldwide, excluding Japan. By collaborating with U.S. Milk, we will accelerate and expand the development of the three products and maximize their product value and at the same time allocate resources quickly and flexibly to the next growth driver after 5 DXDADCs, post-DXDADC modalities, etc., Mono and combination therapy for the three products will be co-developed, and U.S. milk will bear 75% of the development expenses up to $2 billion for each product, and subsequent development expenses will be split equally between the two companies. In terms of sales, the two companies will jointly commercialize the products in regions outside Japan and split U.S. The gross profit and sales promotion costs and so on equally. In Japan, we are the sole marketer of the product and will pay royalties to U.S. milk. Revenue is booked by Daiichi Sankyo in all countries and regions where we have footprints, including Japan, and Daiichi Sankyo will manufacture and supply the three products. Slide 12 shows the financial terms. Through this strategic collaboration, in total, Daiichi Sankyo will receive up to U.S. $22 billion or 3.3 trillion yen at exchange rate of 150 yen to the U.S. dollar. The upfront payment is 1.5 billion U.S. dollars for each of three products for a total of 4.5 billion U.S. dollars or 675 billion yen. The timing and amount of upfront upfront payment to be received for each product is shown in the table the upfront payment upon contract execution will be deferred and booked as revenue over multiple years considering the estimated period of exclusivity In addition to the upfront payment upon contract execution, we will receive R&D expenses related upfront payment for HER3-DXD and DS7300 of U.S. $500 million each for a total of $1 billion or ¥150 billion. How do we share development expenses and how cash is paid? This is quite complicated, so I will explain that with the next slide. Sales milestone will be up to 6.5 billion U.S. dollars or 2,475,000,000 yen. The sales milestone for each of the three products is up to 5.5 billion yen, which will be booked as revenue in a lump sum in a year of achievement. Slide 13 describes how R&D expenses are to be shared and how cash is to be paid. The ratio of amount paid is the same for all three products. As shown in the bottom right, U.S. milk will bear 75% and we will bear 25% of the development expenses, up to $2 billion per product. In other words, U.S. milk will pay $500 million more than when expenses are split evenly development expenses exceeding two billion u s dollars will be split equally between the two companies as shown in the upper part of the figure the method of payment of the five hundred million u s dollars borne by u s milk varies depending on the product. First, regarding HER3-DXD and DS7300, this is paid upon contract execution as R&D-related refundable upfront payment as lump sum. An amount equivalent to 25% of R&D expenses will be appropriated from this R&D upfront payment every time expense incurs. On the other hand, R&D upfront payment is not paid upon contract execution for DS6000. U.S. Merck will pay 75% of development expenses each time expense incurs in the future. The accounting treatment of R&D upfront payment will be announced once it is determined, but later when I discuss the full-year forecast, it is assumed that an amount equivalent to 25% appropriated from this lump sum payment will be deducted from R&D budget when expense incurs. Next is FY 2023 forecast. Please see slide 15.

Compared to the forecast announced in April, we expect a decrease in sales of generic injectables at American region while factoring in the forex impact of the weaker yen, sales expansion mainly by NHER2, and deferred revenue from the upfront payment associated with the strategic alliance with U.S. Merck for three DXT ADC products. The forecast has revised upward by 100 billion yen from the April forecast, to 1.55 trillion yen. While cost of sales is expected to increase due to Forex impact, it's expected to increase only by 10 billion yen due to an improvement in the cost of sales ratio resulting from changes in the product mix. We expect the SG&A expenses to increase by 60 billion yen considering the increase due to Forex impact and the increase in profit sharing with AstraZeneca following in HER2 sales growth. R&D expenses are expected to increase by 15 billion yen including an increase due to Forex impact and an increase due to accelerated development of DXC ADC product lines and a decrease due to the commencement of cost sharing with US Merck for the three DXC ADC products. As a result, core operating profit and operating profit are revised upward by 15 billion yen to 155 billion yen and 150 billion yen respectively. Profit before taxes is revised upward by 25 billion yen to 160 billion yen, taking into account an improvement in the financial account balance due to rising interest rates in the U.S., etc. The current profit attributable to the owners of the company is revised upward by 20 billion yen to 135 billion yen, reflecting the upward revision of the profit before taxes. The exchange rate assumptions for the third quarter and beyond are 145 yen to the U.S. dollar and 155 yen to the euro, and the forex impact of the yen's depreciation versus the April forecast is expected to be about an 80 billion yen increase in revenue and a 6 billion yen increase in core operating profit. Slide 16 shows the revised annual dividend forecast. We will increase our annual dividend forecast for FY 2023 from 34 yen to 40 yen per share. At the time of the April 2023 announcement, the annual dividend was planned to be ¥34 per share, an increase of ¥4 per share over the actual dividend for FY 2022, based on the increased likelihood of achieving the KPIs for FY 2025 by the expansion of sales of NHER2 and other factors. In October 2023, following the conclusion of strategic alliance agreement with U.S. Merck for the three DXT-ADC products, Daiichi Sankyo will receive an upfront payment upon signing the agreement, and due to the strong performance of NHER2 and other products, The consolidated financial forecast will be revised upward. The dividend will be revised to 40 yen per share, an increase of 6 yen per share compared to the April announcement, and an increase of 10 yen per share compared to the actual dividend for FY2022. We will continue to improve capital efficiency and further enhancement shareholder returns, aiming to achieve a DOE of 8% or higher in FY 2025, which is a KPI of the fifth midterm plan. Next, I'd like to discuss our business update. Slide 18 shows a breakdown of NHER2's revenue. Product sales for the FI 2023 Q2 year-to-date increased by 93.9 billion yen year-on-year to 173.4 billion yen due to growth in the U.S., Europe, and other regions. The sales performance in each country and region will be explained later. Regulatory milestone payments for the FY2023 Q2 year-to-date decreased by 12.7 billion yen year-on-year to 4.2 billion yen due to the impacts of recognizing the amount equivalent to the regulatory milestone payments achieved in the previous fiscal year from the time of... contract signing to the time of milestone achievement as revenue in a lump sum amount. As a result, in HER2's total revenue, including upfront and quit-related payments, and the regulatory and sales milestones for the FY2023 Q2 year-to-date was 183 billion yen, an increase of 81.2 billion yen year-on-year. The full-year forecast for FI 2023 has been revised from the forecast announced in April to 433.6 billion yen, an increase of 65 billion yen from the forecast announced in April due to strong sales. Using the two slides starting on slide 19, I will discuss the sales of NHER2 in different countries and regions. First, let's look at sales performance in the U.S. and Europe. Product sales in the U.S. for FI 2023 Q2 year-to-date totaled 105.9 billion yen or $751 million, an increase of 50.5 billion yen year-on-year. The full-year forecast for FY 2023 has been revised from the forecast announced in April to ¥229.5 billion, an increase of ¥34.4 billion from the April forecast, reflecting strong sales. The current indications are as shown on this slide. Market share for each indication is also on track, with approximately 50% of new patients in the second-line HER2-positive breast cancer treatment solidifying our leading position. Chemotherapy pretreated HER2 low-expressing breast cancer also holds the top position with new patient share in the mid-50% range. And HER2 also maintained its leading position in new patient share in the second-line treatment of HER2-positive gastric cancer and the second-line treatment of HER2-mutant NSCLC, respectively. Sales performance in Europe is also on track. Product sales for the FY 2023 Q2 year-to-date totaled 39.2 billion yen or $278 million, an increase of 25.6 billion yen year-on-year. The full-year forecast for FI 2023 has been revised from the forecast announced in April to 92.8 billion yen, an increase of 17 billion yen from the forecast announced in April due to strong sales. The share of new patients in each marketed country and region is also steadily increasing, with France and Spain maintaining the top position in new patient share for the second-line treatment of HER2-positive breast cancer at approximately 60% and the mid-50% range, respectively. In the UK, the new patient share expanded to approximately 50%, achieving the top position. The share of the post-chemo new patients with HER2 low-expressing breast cancer is in the mid-30% range in France and Germany, maintaining the leading position. As for other progress, in October, we received approval for a new indication of HER2 mutant NSCLC for the second-line treatment and beyond, and we have started promotion of For this new indication, slide 20 shows and her two sales in Japan and the ASCA region. In Japan, results of the product sales for the FI 2023 Q2 year-to-date totaled ¥10.4 billion, an increase of ¥5.2 billion year-on-year. The full-year forecast for FI 2023 has been revised from the forecast announced in April to 21.5 billion yen, an increase of 1.6 billion yen from the April forecast reflecting strong sales. In August, a new indication of HER2 mutant NSCLC was added for the second-line treatment and beyond. The market share of new patients for each indication is steadily increasing, and the market share of new patients for the second-line treatment of HER2-positive breast cancer has grown to the upper 30% range, maintaining the top share. The market share of the post-chemo new patients with HER2-low-expression breast cancer also grew to approximately 20%, and it gained the top share. And HER2 also maintained its leading position in the third-line treatment of HER2-positive gastric cancer, maintaining its market share in the 60% range. The share of new patients in the newly added second-line treatment of HER2 mutant NSCLC is also steadily increasing. The results of the product sales in the ASCA region for the FY2023 Q2 year-to-date totaled ¥17.9 billion, and an increase of 12.6 billion yen year-on-year. The forecast for the full year of FY 2023 is 37.8 billion yen, an increase of 8.6 billion yen from the forecast announced in April as a result of strong sales. Product sales in the ASCA region also included co-promotion revenues in China, Hong Kong, and other countries where AstraZeneca recognizes sales. The sales performance in the region is on track, with significant revenue growth especially in Brazil, China, and Taiwan. we will continue to strive for further market penetration and expansion in the countries and regions where the product is sold, as well as to obtain new indications in order to deliver NHER2 to as many patients as possible in need of the product. Next is Lixiana. Slide 21 shows the changes in the market share of Lixiana in volumes in each country. In addition to Japan, South Korea, and Taiwan, Sales have been steadily increasing in Belgium, the UK, Spain, and other European countries. As a result, global revenue for the FY 2023 Q2 year-to-date was 137.7 billion yen, an increase of 20.4 billion yen year-on-year. For the full year of FY 2023, we expect the revenue to be 277.3 billion yen, an increase of 33.4 billion yen from the previous year. Slide 22 shows the market share in Japan in terms of monetary value. Although Lixiana's sales share declined in April 2020 due to the reduction of NHI drug prices as a result of the drug repricing for expanded use, it has since increased its market share again, maintaining the top share at 45.4%. As a result, the revenue for the FY 2023 Q2 year-to-date was 57.1 billion yen, an increase of 6.4 billion yen year-on-year. For the full year of FY2023, we expect a revenue of 112.9 billion yen and increase of 7.7 billion yen from the previous year. Slide 23 provides a major update on our patent dispute with C-Gent regarding our ADCs. In October of this year, the U.S. District Court for the Eastern District of Texas made a first-instance decision ordering Daiji Sankyo to pay Sijin the damages of $41.8 million determined in the July 2022 judgment, plus an 8% royalty on inherited sales in the United States from April 1, 2022 to November 4, 2024, when Sijin's U.S. patent expires. We are appealing this decision and are considering all legal options with AstraZeneca, including an appeal to the U.S. Court of Appeals for the Federal Circuit. The current ruling will have no impact on the consolidated earnings forecast for this fiscal year. Meanwhile, we have filed a request with the USPTO for a post-grant review, PGR, to examine the validity of CJEN's U.S. patent on the grounds that the patent is invalid. The PGR has now been reopened on the grounds that Daiichi Sankyo has presented convincing evidence of patent invalidity and a decision is expected within the next few months. We will continue to consider all measures to protect our rights. The next part is the R&D update. I'll now hand over to Mr. Takeshita, Global R&D Head.

Thank you very much for that introduction. And I'm very pleased to be giving you an update on our ADC program, also the NextWay program, as well as information about our research and development day and our news flow for the next few months until the end of the fiscal year 23. Next slide. So much of the data that we'll be talking about today is recent data that was presented at ESMO. And the first one here is about the expansion of our leadership in the HER2-targetable tumors beyond breast cancer and lung cancer and gastric cancer that you're familiar with. Recently, we reported on data from the multiple numbers of indications that we have listed here on the left-hand side as a result of two clinical trials, DESTINY pan tumor 02 and DESTINY CRC01 and 02. And these two trials led to two breakthrough therapy designations from the FDA. And it's very important to note here that these results reaffirm the potential of N HER2 as a tumor agnostic therapy. And we are currently in discussion with the regulatory agencies towards filing these data. Next slide. So here are the data from the PANTUMER02 clinical trial. And we have listed here over a half a dozen different cancer types in the response rates for each category of tumor type. And you'll see that in nearly every single case, except for pancreatic cancer here, every single case there is clinically meaningful and durable responses across a broad range of HER2-expressing advanced solid tumors. And this includes, for example, very high response rates that we can see in diseases like endometrial cancer and cervical cancer, et cetera, that you can see here, particularly in those patients who are IH3 3 plus positive. We can also see additional good responses in IHC 2 plus positive patients as well. Overall, in the ITT patient population, the response rate was 37.1% with a median duration response of 11.3 months. But among the IHC3 plus patient population, the response rate was a 61.3%, a median of duration of response of 22.1 months. These are very important numbers to look at, particularly in the context of the patients who enrolled in these trials, which are patients who had prior multiple lines of therapy and therefore had refractory disease in the vast majority of patients. Next slide. In terms of additional updates on clinical trials for the INHER2 program, you'll see here listed that in the recent months, we have obtained approval in Japan for the HER2 mutant non-small cell lung cancer in the second line setting. We have also received a recommended for approval in Europe by the CHMP in September. And we did obtain, in fact, approval in Europe for this particular indication in October. In terms of the Destiny Pan Tumor 01 study in the HER2 mutant solid tumors, the data that I just mentioned, the data was presented at ESMO in 2023, just one month ago. Next slide. In addition, I'm going to be giving you an update on our data program. And the first one here is the lung cancer program, Tropion01. Here we show you the overall efficacy in second and third line non-small cell lung cancer patients. This is the data already presented at ESMO 2023. And very important to note here that this is a positive data, positive clinical trial in which we are reporting on the PFS as part of our interim analysis. And you'll see here that in the ITT patient population, we can see positive data in terms of statistical significance, the p-value of 0.004, which is less than the pre-specified p-value of 0.008. And you'll see numerically that we can see a PFS, a median of 4.4 months versus a docetaxel control arm of 3.7 months. What is very important and quite interesting clinically to note here is the data that's shown on the right hand panel of this slide. These are subgroup analysis of progression-free survival in the key subgroups. And I want to draw your attention, particularly to the bottom, where it says histology, the non-squamous versus squamous patient population. And what you'll see there is that in the squamous patient population, the hazard ratio is 1.38. However, In a non-squamous patient population, the hazard ratio is 0.63. So therefore, almost a 40% reduction in the risk of progression in a non-squamous patient population. This is a very important event and, in fact, quite impressive hazard ratio in this non-squamous patient population. I also want to note here also that the hazard ratio for the patients without AGA versus patient with AGA, the hazard ratio in patients with AGA was 0.38. So therefore, almost a 60% reduction in the risk of progression in patients with AGA compared to patients without AGA, where the hazard ratio was 0.84. Next slide, please. So I'm going to be focusing a little bit more on these histologic subtypes, and you'll see that in the patients with non-squamous, non-small cell lung cancer, the data shown on the left-hand panel here, you'll see that PFS is 5.6 months within the data arm and 3.7 months in the docetaxel control arm with a hazard ratio of 0.63. And so the duration response and overall response rates are shown here. This is a pooled analysis of both patients with and without AGA in a non-splemous histologic subtype. And at the bottom, you'll see here that the PFS hazard ratio for the non-squamous patients without AGA was 0.71. So therefore, really what this says is that regardless of whether you have AGA or not in a non-squamous patient population, there is a meaningful reduction in the hazard ratio based on the data shown here. In contrast, on the right-hand side, you'll see the data for the squamous type non-smellsome lung cancer patients. You'll see that the hazard ratio is 1.38. And so basically what we see here is that the tremendous amount of concentrated efficacy really in the non-squamous patient population. So these data have been shown and discussed with the FDA, and we have a discussion ongoing with the regulatory agencies towards the filing of this data. First of all, therefore, that in the ITT patient population, we see a positive statistically significant data in the entire patient population, but with a very interesting and very important efficacy, particularly in a non-squamous patient population. I also want to mention here that, as many of you know, we have simultaneously ongoing right now a clinical trial called Tropion Lung 08. This is a frontline clinical trial in which data is studied, data DXT is being studied. Up until now, this clinical trial had enrolled all subtypes of non-small cell lung cancer, and we now plan to amend the protocol to cap the squamous patient population, really to focus, therefore, our efforts on the non-squamous patient population. Next slide. I do want to mention here the safety data that we are seeing in the tropion lung 01 study in terms of all grades of safety adverse events, grade three, but with a focus on what we call adverse events of a special interest that are listed on the right-hand side, stomatitis, ocular events, and ILD. Mucositis and ocular events, we believe, are really related to the TROP2 target because we don't really see that in other types of DXDA disease. And you'll see the numbers listed there. Ocular events and some of the titers are very manageable. Toxicities with various prophylaxis and also treatment of emerging toxicities. In terms of the ILD, the numbers are listed here in terms of all grades and grade three and worse. What is actually very interesting to note here is that if we do the subgroup analysis of these toxicities as well, you'll see at the bottom here, you'll see that in terms of the non-squamous patient population, the number of seven adjudicated drug-related grade five events falls out in terms of four out of 232 patients were 1.7% for the non-squamous versus three out of 65 patients or 4.6% for the squamous patient population. So there is a suggestion that there is a difference also, not just in efficacy, but also in the safety of the data analysis. when classified according to the histology, non-squamous versus squamous. Next slide. We're going to switch over to a different study called Tropion Lung 05. This is a clinical trial, a Phase II clinical trial, in which data was studied in a single agent in patients with heavily pretreated non-squamous lung cancer, non-small cell lung cancer patient population, with AGAs. So this clinical trial enrolled only patients with AGA type of non-small cell lung cancer. And you'll see here that in this Lung05 study, there's good response rate in the 30s with a very good duration response. And this data here, this is a single-line phase two trial, this complements the data that we are seeing in a TL01 in the AGA patient population that we saw in the TL01 study. Next slide. Finally, in terms of the lung cancer program for the data, the last clinical trial I want to mention here is tropion lung 04. These are data from interim analysis in which data combined with various types of chemotherapy as a doublet or a triplet is being studied in the frontline setting, previously untreated patients. These are small numbers of patients we are reporting so far, 14 patients as a doublet, with pembrolizumab and Dato, or it is a triplet combination in the cohort four. And you'll see that, however, that the response rates are quite high, 50% in the cohort two as a doublet, and the response rate of 76.9% as a triplet. And we also see a very good durability of response in terms of progression-free survival so far. So these are the basis for our initiation of the clinical trials in the frontline setting, the TL-07 and TL-08 that I mentioned to you earlier. Next slide. And finally, for the data program, I want to mention to you the Tropium Breast-01 clinical trial. This is a randomized phase three clinical trial in which data was studied in patients with hormone receptor positive HER2-low or negative breast cancers. And you'll see here the data that we reported recently at ESMO. This is data from our interim analysis in which progression-free survival was the focus of this analysis. And you'll see here positive data in which the p-value is less than 0.0001. The median PFS are shown here as 6.9 months in the experimental arm with DATO and 4.9 months in the investigator choice control arm. It has a ratio of 0.63. These are really very good numbers. And of course, we have communicated these data with the regulatory agencies and we are proceeding towards a filing. Next slide. We also want to mention here for the data program, data that was presented as part of an AstraZeneca sponsored clinical trial, the Begonia trial. And this is, what we're seeing here is just arm seven of the Begonia trial, in which the combination of Duralumab and DatoDXT is being evaluated in patients with frontline advanced metastatic triple negative breast cancer. Here you'll see that This combination, the two-drug combination of data of DXD plus duvalumab gave a response rate of 79%. And the median PFS was 13.8 months. And these are really very meaningful data when we consider that in the... The current standard in which pembrolizumab was studied in Keynote 355 study, the median PFS was, in that study, was reported to be 9.7 months. So we think that these are very meaningful data and really demonstrate the potential value of DATO and duvalumab in the setting of triple negative breast cancer. Next slide. Finally, we're going to touch on the remaining of the DXDA DCs first. the HER3-DXT-ADC program. Here, I show you the data from a pivotal registration study, HER3-Lung01 study. This is a phase two single arm study in which HER3-DXT was studied as a single agent in patients with multiply relapsed EGFR-mutated non-small cell lung cancer. And here you'll see response rates that reported to be 29.8%, median duration of 6.4 months, PFS of 5.5 months. And you can see that efficacy was observed across a diverse mechanism of EGFR TKI resistance. And I want to remind you here again that these are multiply relapsed patients with multiple prior lines of therapy. So we believe that the response rate and duration response that we see here is clinically meaningful, and we are proceeding to file the data with regulatory agencies worldwide. Next slide. Next is an update on our DS7300 program. This is a DXD-ADC directed against the antigen called B7H3. And you'll see here, we are starting to show a lot of efficacy of this DXT-ADC in several different tumor types. Going from left to right is small cell lung cancer, esophageal cancer, prostate cancer, and squamous type non-small cell lung cancer. We are in early stages of our clinical trial and signal seeking in our program already. you can see activity of 7,300 in all these four different types of cancer indications. And these response rates that we are reporting here is particularly meaningful when you consider the number of prior treatments. So again, these are patients who have multiple relapse disease, really refractory disease. And despite that, we are seeing very good activity in terms of response rates. in these four cancer types. So we are very encouraged with these data and we are proceeding to prepare registration programs for many of these indications. Next slide. This is an update on our DS6000 program. This is a DXD-ADC directed against an antigen called CDH6, which is abbreviation for Caterin 6. And here we have focused our efforts on ovarian cancer because ovarian cancer is a disease that is known to express high levels of CDH6. And here, Again, these are patients with multiple prior systemic regimens. Here you can see that the median line of prior therapy is four. And despite that, we see a response rate of 46% and duration response of 11.2 months. So these, we think, are incredibly great efficacy data in patients who are basically fifth-line patients. And so here again, we are very eager to start a registration program that would lead to approval of DS6000 in ovarian cancer. In these three ADCs that I just mentioned to you, the HER3 program, the DS7300 program, and DS6000 program, All of these three ADCs have additional cancer indications to explore beyond the one that I just mentioned to you. So there's going to be likely to be much more cancer indications, cancer types that we will be exploring for these three ADCs. Okay, next slide. Okay, finally, in terms of our DXD-ADC program, I do want to mention to all of you that we have received a Prime Minister Award at the sixth Japan Medical Research and Development Grand Prize Session. And so we are very happy and honored to have received this award from the Prime Minister of Japan. Okay, next slide. Okay, in the next few slides, I want to give you an update on the next wave, which is all of our programs beyond the five DXDA-DC that we have covered. Next slide. First is our development status of our COVID-19 vaccine. This is an RNA-based vaccine that we are developing in close collaboration with the government of Japan, really for the benefit of the patients in Japan. And here is our update. We have obtained approval in August for the booster vaccination of the original strain, which is a monovalent RNA vaccine against COVID. In September, We have completed regulatory submission in Japan as a booster vaccine of a monovalent RNA vaccine for the XBB1.5 strain for COVID. So I do want to mention to you here is that this program represents the first RNA vaccine made in Japan by a Japanese pharma using the cationic lipids originally optimized by us at Dysonkyo. And we do plan to supply, start to supply within this year with the Omicron XBB strain monovalent vaccine by the end of this year. And I do want to mention here also that one of our unique features about our vaccine is that it can be stored at the refrigeration temperature and does not require freezing. Next slide. Okay, in terms of more progress on this next wave program, the van flight program, the quisartanib, the FLT3 ITD patients with the acute myelogenous leukemia, we have been recommended for approval by the European Union, by the CHMP in September. So we hope to receive official approval for van flight in the very near future. We also have a new program. This is, again, another ADC called DS3939. This is a DXC ADC directed against the antigen called MUC1. This is intended for solid tumors, and we initiated a phase one trial of this new program in September of 2020. And finally, we also initiated a phase one program with DS-1471. This is an anti-CD147 antibody. This is not a DXDA-DC, but just an antibody. And this is a new antibody against a new target. And of course, we're very interested in to see how this program turns out also. Next slide, please. Next slide, next slide again. I do want to mention to you a little bit more information about our R&D day for 2023, in which we will be focusing really on the range and breadth and depth of our R&D program, our pipeline, and that will take place in December, on December 11th, and it will be a virtual meeting. Next slide. In terms of the future news flow, I just want to very briefly go through what's likely to be reported between now and the end of the fiscal year 23, which is end of March 24. First, in terms of major publications, you can expect to hear The data from the Destiny Breast 08 trial. This is a new study, new data that you'll be hearing at San Antonio in patients who have HER2 low breast cancer, who are chemo-naive and post-op chemo. And this is a phase 1B clinical trial with various combinations of N-HER2 plus additional agents. later that month in December, also in December, at the American Society of Hematology, you'll see the primary analysis from the Valentine PTCL01 study. This is a study of our drug, is harmia, the dual EZH2 drug in patients with PTCL relapsor refractory. In terms of planned regulatory admissions, on the right you'll see We hope to be submitting a filing for both Destiny Lung 05, which is the HER2-mutated non-small cell lung cancer in the second line plus, and also Destiny Gastric 06 HER2-positive gastric cancer in the third line setting, both for China in sometime in the first half of, excuse me, second half of fiscal year 23. In terms of regulatory decisions, we expect to have a regulatory decision made by the European Union for the quantum-first AML trial for the PlanFlight program, and also the COVID vaccine from the PMDA sometime between now and the end of fiscal year 23. And finally, in terms of key data readouts, we do expect to be seeing data from Destiny Breast 06 clinical trial. This is a large randomized phase three trial who are in patients who are chemo-naive and who have hormone receptor positive and HER2 low and breast cancer. And this patient population also includes not just the HER2 low, but the ultra low. So this is a very important clinical trial for us. Next slide. Okay, so this completes my presentation, and I turn this over to Asakura-san.

Now we would like to start taking questions from the audience. The first question comes from UBS Securities, Haruta-san. Please go ahead. I am Haruta from UBS. My first question is, and this is looking at only Q2, cost of sales improved for Q2. As Enharts sales proportion goes up, cost of sales is going to improve further, I think. having a bigger contribution coming from Enharts. And I would like to ask you to what extent this could further improve for ADC production you are using outside CMOs? And what about the investment level there? And what about the efficiency of CMO producing this drug for you? Thank you for your question about the cost of sales ratio. Basically, Enhatsu is contributing to the improvement of the cost of sales. And as Enhatsu sales is going to go up, which means a better product mix, meaning that cost of sales is going to come down in terms of the ratio to a certain extent in the mid-term. In terms of the supply of this product, in April of this year, we already made an announcement that we will have sufficient supply capacity for ADCs to be prepared. We have in-house facilities as well as the external CMO facilities being sort of upgraded with further CAPEX investment. Therefore, we will be able to secure enough supply capacity going forward. That's what we believe. Thank you very much. So I think cost of sales is going to come down even further, or there is further room for improvement of cost of sales. Is that right? Yes, that is right. Thank you. I have a second question. In the ESMO highlight, I think nobody asked this question so much, but this is about DS6000 potential. I'd like to learn more about that. Right now, ovarian cancer is the targeted indication. And in this indication, the folate receptor targeting ADC is there in the competitive environment. And if DS6000 is going to get more market share in the market, folate receptor targeting ADC can be one of your benchmarks. Cadherin 6 potential against the folate receptor targeting ADC. What is the potential of your compound vis-a-vis the competition?

You know, ultimately, it's a data-driven decision in terms of how physicians view the 6,000 versus, for example, the folate receptor targeting drugs. You know, right now we are fairly early in our program, but I think I do want to mention here that Right now, we do see activity that seems to be at least as good as, if not better than, other drugs that are, the other recent drugs like the folate receptor targeting the ADCs that have been reported for ovarian cancer. I do want to mention, for example, that so far we do see a lot of activity of DS6000 regardless of the expression of the CDH6. So that may be an advantage for our DS6000 program. But ultimately, I have to say that it really requires us to generate clinical data to be absolutely sure of how our physicians may use DS6000 versus other drugs available in the city.

Thank you very much. Understood. Next question is from Yamaguchi-san from Citi Group. This is Yamaguchi from Citi. Can you hear me? Yes. Thank you. My first question is about the share buyback. I believe this is a repeatedly asked question. You're having a very good performance with upward revision of the performance and there is an increase of the dividend being announced. However, the stock price is not that high right now, and I think this is really a good timing to talk about the share buyback. Are you thinking about this as an option? Right now it's not happening yet, but is it still an option? This is my first question. Yes, thank you very much for your question about the share buyback. As we have been mentioning in the past already, we include it in the return to the shareholder policy in the fifth midterm plan. We believe this is an effective way of returning the value to shareholders, and we always consider how possible it is that we can realize that all the time. So when the legal conditions are met, we'd like to consider share buyback with an agile manner so that we can give a better return to the shareholders. Thank you very much for your answer. My second question is about filing of Her3DXD. You received the breakthrough designation, so you can already go ahead with the filing, I believe. But I think it really depends upon the position of FDA. And so how is the filing situation of HER3-DXT right now?

Yes, we are proceeding to file the data with the regulatory agencies, and I don't really anticipate major issues at the moment, but we'll have to see exactly what the FDA says. And so once we have submitted the information, the file to the agencies, we will certainly let you know.

The second question regarding this one is that You didn't write the Toropyon or DattoDXT filing into your news flow for the second half. Is that meaning it's not in the second half or you really don't know at the moment regarding DattoDXT filing timing? I see Enhato China and I see Heart3DXT, but I don't see DattoDXT here. What's your opinion?

I think that's probably an oversight, because we do plan to submit the TL01 data. I mean, within this fiscal year? We haven't announced exactly when we will file.

Okay, that's why you didn't put in. That's right. Thank you. And finally, regarding torpion breast and torpion lung, which comes first? Torpion lung comes first for fighting or breast comes first?

You know, that's a very interesting and very important question that really relates to regulatory strategy. And I don't think we have actually announced the sequence of how we will file either. But it's a very important question, of course.

Thank you.

Now next question is from Goldman Sachs, Ueda-san. I am Ueda from Goldman Sachs. My first question is about DedoDxD Tropion Lang 08 study. You mentioned the design of the study is going to be modified. squamous lung cancer patients' enrollment is going to be stopped. So going forward, whether the primary endpoint is going to be met or not, is that going to be analyzed upon the basis of PFS only for non-squamous lung cancer patients, or are you going to be analyzing all of the patients who have been enrolled so far?

So we haven't announced the details of this amendment. So I can only tell you that we're going to restrict the number of patients who have the squamous type. And that really our major focus of the clinical trial and really the filing ultimately is going to be in the non-squamous patient population. Once we're ready to announce the details of the amendment, we can certainly let you know about that.

Thank you very much. My second question is about Tropion-Lang-01 study, and it's about the endpoint of the study. It says it's a dual primary endpoint. That is how it is described here. Is this a co-primary endpoint, which means you have to evaluate all of the items in the composite endpoint? Or is this a multi-primary endpoint where if you can confirm just one out of the items, it's considered a success?

It has dual endpoints, as you mentioned. And at the recent ESMO meeting, we reported on the first in-term analysis for efficacy, which is a focus on progression-free survival. There will be a final analysis that really focuses on overall survival. And both of these are designed to be primary endpoints. So these are really dual endpoints. positive data, technically, the positive data with either one of these endpoints is considered to be result in a positive study. But of course, ultimately, it's not just the endpoint, but also really the what is the clinical data look like. And so, so these are very important points that we will be discussing with the regulatory agencies.

Thank you very much. That's all from me. Thank you. Next question is from Morgan Stanley, MUFG, Muraoka-san. Please go ahead. Good evening. I am Muraoka from Morgan Stanley. Very nice to meet you. I'm sorry, I may be repeating the same question, but this is again about the share buyback. The stock price is as it is, and of course it depends upon the external environment, but shareholders who are owning your stock for a long time may be facing a quite difficult time. So the reason why you didn't buy back your share, although you have raised your dividend It is because of the legal conditions, as you have mentioned. But what do you mean by that? The legal framework or the legal conditions have not been met at this timing? Or even if those legal conditions are met, it's not a good timing for you to have share buyback. And I'm asking you this question because I do want you to support the share price. Thank you for your question about share buyback. The assumption is that the legal environment should be met. And this is one of the policy for the return to the shareholders in the midterm plan. So it really depends upon the situation. We always have this as one of the options. I'm sorry I'm being very persistent, but the legal situation did not allow you to have share buyback this time. We are not disclosing the details. I'm sorry. Understood. Thank you very much. Now, next question on slide 15. And this is about the revision of the guidance. I have not fully understood the figures myself yet. I'm sorry. But the U.S. milk regulation. The deferred revenue is included in here, but still the increase of only this level for the core operating profit, because U.S. milk, the deferred revenue alone can boost the profit by about. 15 billion yen for half a year, right? But excluding that, profit is barely increased. Is it offset by SG&A expenses? In relation to the collaboration with U.S. Milk, as you have just pointed out, one thing is the upfront payment. of about 10 billion yen in size, and this is received upon contract execution, and that is included as a top line. And another thing is an R&D expense, upfront payment, and how this is going to be booked. Accounting-wise, this has not been completely decided yet. So as to the financial forecast, R&D expenses have been reduced by about 10 billion yen, and this is already being factored in, so these two factors have already been reflected in this forecast. Thank you very much for your explanation. An increase of 60 billion yen to the SG&A, I am afraid that is too much, even considering your payment to AstraZeneca. The stock price linked compensation that was quite popular in the US is not a factor, I believe. So it's not really convincing. So can you please elaborate it more in detail, this increase of 60 billion yen in SG&A? Ogawa-san, please. I can't hear Ogawa-san. Yes, I'm sorry. So about the increase of SG&A. And this is due to the foreign exchange. We have about 45 billion yen and that is the impact factored in. And the payment of the profit share is also reflected in here. And in addition, Enhatsu indication expansion and geographical expansion of Enhatsu cost associated to that is also included in here. Thank you very much. Next, from JP Morgan, Wakao-san, please. Go ahead. I'm Wakao from JP Morgan. Tropion Lang 01, I have some questions about the timing of OS according to clinicaltrial.gov, primary endpoint. or completion was supposed to be January of 2024 according to the site, but it depends on the event occurring. So what is the timing of OS data announcement? Is it going to be expected around February to March of next year? So please make a comment on the timing of OS data coming out.

The OS data analysis is really event-driven, as you mentioned. And at the moment, it's difficult to predict exactly when that will be. So we cannot say it's going to be January or February or March. So you just have to wait for the events to happen, just like the rest of us, really.

Thank you. The second question. Takeshita-san, even without AGA, actionable gene, non-square-mass hazard ratio was 0.7, which is meaningful. I think Takeshita-san said that. So based on this, in your mind, Takeshita-san, About the first line from these results, I don't think it's changed or because of the data accumulated more, therefore you are probably improving the confidence for the first line. So any change in the impression based on this data about the first line therapy? How do you see this right now?

01 data is very informative in terms of how we think about the frontline study. because we know now that much of the efficacy data is concentrated in the non-squamous patient population. So by focusing on the non-squamous patient population for our frontline clinical trials, we believe that we have reduced the risk by focusing on what we think is the patient population that benefits the most from the drug. Thank you very much.

My last question. Prop 2 ADC. Especially EGFR mutated patients, AGA, it works very well from your own data as well as the data from milk. I would like to understand the mechanism more. Therefore, if you know, please let me know. As for the results of TL01, TROP2 expression and AGA with or without, was there any correlation between the two? If you do not have the data suggestive of that, when would you be able to obtain such data in the form of presentation or paper?

Question about what we know about the mechanism of why there is particularly notable efficacy in the AGA patient population. And right now, we don't have an answer to that question. It's a very interesting question from a biology standpoint. It's not clear to us whether it's related to TROP2 level of expression, at least if you look at the standard IHC assays, which is what we have done so far. We just have to do some more digging to understand what is the molecular basis for the activity of at least the data DXT in the AGA patient population.

Thank you very much. Well understood.

Next question is from Hashiguchi-san of Daiwa Securities. Please. I'm Hashiguchi. Thank you. I have two questions in relation to the development. The first question is about DADO-DXD for NSCLC and combined with the immunotherapy in the past phase one study result, I would like to ask a question. And in this study, or have been already presented at their conferences, and for the squamous versus non-squamous cells, And maybe this is the first time you split the non-square mass versus square mass to announce. And this 08 study, the design will be modified. And in the first line combination with immunotherapy, phase one study. and in non-square mass cell carcinoma had higher efficacy than the non-square mass cell carcinoma. So based on that kind of difference, you have decided to make this change.

The TL04 clinical trial data. And the question really is, have we done the subgroup analysis of patients who are non-squamous versus patients who are squamous? And we haven't reported that yet. So please, I hope you please wait until we have that reported so that we can answer that question for you.

Thank you.

The second question is about the presentation scheduled in San Antonio of breast cancer. And you are going to announce the part of the cohort of this study and endocrine therapy sensitive patient will be the target and then a combination with the there is a cohort of combination with the other the therapy and how to rule or the encounter patient and this the hormonal therapy the center the patient and what do you think What is your idea of the possibility of developing a drug further for such a patient?

So, yes. At the San Antonio Breast Cancer Conference, there is a plan to show clinical data from this Phase 1b study. These are combination studies that you mentioned. Now, I don't think we have actually said anything about which cohorts we are going to be reporting at the San Antonio, so I hope that you can wait until we have that information, and then we can talk about what is our strategy going to be based on the data in that particular cohort.

Thank you very much. This is it.

Next question.

Mitsubishi UFJ Trust Banking Corporation. Hyogo-san, please. I am Hyogo. I'm the fund manager from Mitsubishi UFJ Trust Banking Corporation. Thank you for your detailed explanation. I truly appreciate it. So about the share buyback, once again, I'd like to ask you some questions. There are some sales side people who are interested in that as well. So DOE 8% or higher, and this goes above the capital cost. that's eight percent and after data dxd data announcement the share is very volatile and i think the cost of capital is actually going up so in against this backdrop i think a share buyback is one way to And of course, canceling that, how much ROE is going to go back. But then I think share buyback is one way to reduce the volatility of the share price. And the cost of capital, it's not very clear. DOE 8%, that is the focus. But if that is the only focus, it is as if you are not really putting the top priority on share buyback. So could you comment on that? Thank you very much for your question. So as a company, cost of capital is something that we are very much aware of, very much we are conscious of in our management in the fifth midterm management plan. This is about the discipline of finance. Right now it's 6%. As you have pointed out, beta value, goes up and down, and this is affected by beta value to a certain extent. But in any case, it's around 6%. And this is something that we are very much conscious of. And as a KPI of shareholder return, DOE of 8% or higher by 2025, and ROE of 16% or higher, these are very important targets. And as the management, we are committing to these target numbers. Therefore, it's not as if, as you have pointed out, a share buyback is underestimated. It's not the case. because we think that a share buyback is a very important, effective manner to return to shareholders. Therefore, we always have it in mind as one of the options. Thank you very much for that. Beta value is one, but also the long-term interest rate is going up. Therefore, you have very good... And if you do DCF, the target price always goes down. That's my idea. Therefore, DOE of 8%, when you meet that target beta value and because of the long-term interest rate going up, the expected return may not be realized for Minority shareholders, which is not a good thing. And the deal with milk, I think transiently probably, but this is going to really change the balance sheet because of the cash in. So given all of these factors, please have internal discussion thoroughly. And with the deal of AstraZeneca, I think the cost structure was not very clear either. enhance revenue going up, but in terms of the costs, maybe I'm not really understanding it very well, but then oftentimes the cost was not very clear, and then we often missed the actual performance prediction. Therefore, please visualize it. Probably this deal is different, and the deal is very well thought through. And the structure is very well thought through and it's very interesting. But please visualize the cost structure in order to avoid any misleading situation for the investors. So that's my suggestion. in my humble position. Thank you very much for your pointing out the interest rates going up in the US and also the interest rates globally. We are always very conscious of those interest rates, and we're not trying to be closed in this country of Japan in terms of KPIs, and we do not always believe that our KPIs are right, so we really have flexibility so that we'll be able to give back to our shareholders in our management. In terms of the deal with the milk, and that is added on top of the deal with AstraZeneca, and more than ever before, the cost structure needs to be clarified in our IR activities, as you have pointed out. So we will continue to make efforts in that regard. The deal has just been concluded. Therefore, as of now, as I have already said, in terms of the impact of this milk deal, we have the upfront deferred revenue booking, the top line, and also we have the refundable R&D upfront. money being paid of around 10 billion yen plus minus, and that's being reflected on the earnings forecast. And then the development planning will start for the three ADC products. The people from the two companies are going to work on the details of the development of day three, what kind of development is going to be done, at what timing. Once that's decided, US$2 billion R&D expenses, the benefit of us paying only 25% is going to be quantified in a detailed manner going forward. Therefore, I do hope that you will see our efforts going forward. Thank you very much. Thank you. So in terms of the loss, profit and loss, and of course we have a lot of expectations for you, but still the profit and loss should be clarified in a better manner. And of course we needed to endure a certain period. So from the next fiscal year, if we'll be able to see that more clearly, that would be good. I'm sorry to have said everything I have said in my humble position. Thank you.

In the interest of time, the next question will be the last question. Sogi-san from Sanford Bernstein, please. Thank you. The first question is about R&D related question to Takeshita-san.

Please correct me if our understanding is wrong, but we understand that there was a protocol amendment for TL01 In the middle to to accept those patients who have the actionable genetic alteration. So, which means that, you know, we can assume that, you know, that there was some enrichment for those population who. likely to receive the benefit from the drug, especially toward the end of the study, meaning that that can actually increase the probability of success for OS. So is that right, the understanding? Yes, that's correct. Great. Thank you very much.

And another question is about the financial question. In the presentation, yen depreciation has been mentioned, and due to yen depreciation, top line and core operating profit impact have been also shared in the presentation. And in a core operating profit has a negative 6 billion impact due to the yen depreciation. Why? I ask this because naturally there is an increase of the cost due to the yen deprivation. That's understandable. But normally with the increase of the revenue, the impact would be smaller. Therefore, if you add everything, then the impact will be rather positive rather than the negative. So can you please explain? impact of yen depreciation to especially the profits the development cost overseas is really the major the major contributor and of course there are other costs incurred overseas so these are actually plus and minus so if that is translated into the operating profit then impact somewhat offset so the in terms of profit share the similar the same thing also applies understood one last question in her to u.s sales and in japan the growth rate wise it's in a good progress but in the united states it seems like it's slowing down little But actually, you really have a very quick ramp up. Therefore, is it within your expectation, or do you still also feel that this is really slowing down? Well, in HATU in US, in the first quarter and second quarter, and based on the US dollar, then it may look rather flat rather than growing. That's what you are talking about, I guess. Yes, it's true that in HATU in the United States, Had a very sharp growth initially since last year and had to positive second one and how to know the have been indication we have acquired or approved so that we now line with that we had a major growth and a second line. and Hachiro and both of them are growing in terms of market share steadily and it's around 50 or even more than 50 percent market share we have obtained so it's smooth and there is some seasonality here I thought actually there is a summer holidays and also the independent day holidays and those may be giving some minor negative impact to this but In the second line or how to low and further we expect the growth of the sales and also in the WAC or the wholesale purchasing price is actually higher than we have originally expected. Therefore, including all this, the whole year forecast will be the one, there is increase by 100 million to the 1605 million. Thank you.

Still some of you are raising your hands, but I'm really sorry that this is a time to close this part of the question and answer session with investors and analysts. Investors and analysts, thank you very much for your attendance today. Thank you.