Daiichi Sankyo Co Ltd Ord

Thank you for waiting. We would like to open fiscal year 2023 financial results presentation. I'm Asakura of corporate communication. I will serve as a MC concerning the language. In this presentation, we use both Japanese and English. We have simultaneous interpretation. So will you please click the icon of the interpreter logo at the bottom of Zoom and select Japanese-English original audio. When you select original audio, you can listen to the original sounds. and we would present the presentation materials in English or in Japanese, depending upon the language used by the speaker. And in the live demonstration, we would present the Japanese presentation materials. The materials are available on the IR library of our corporate website, financial presentation related materials. Please download it as needed. Today, we have Okuzawa, the Representative Director, President and COO Ogawa, Executive Officer and CFO, and Takeshita, Global R&D Head. First, Okuzawa and Takeshita will explain the presentation outline of the financial results of the fiscal year 2023, update of the fifth mid-term plan, as well as the expected performance for the fiscal year 2024. We would take questions from the investors and analysts at 4.30, and the media question will be taken separately after 4.40. I'm Mokuzawa.

Thank you very much for attending the FI2023 financial result presentation for Daiichi Sankyo. We have announced FI2023 result today at 1pm. I would like to go through the presentation as per the material. Please refer to slide 3. This is today's agenda. FI2023 consolidated financial result, business update, R&D update, five-year business plan update, FI2024 forecast. As for the R&D update, the global R&D head Takeshita will take you through the presentation. We are going to address your questions at the end. Please refer to slide four. This slide shows a summary of consolidated financial result for FI 2023. Revenue increased 323.2 billion yen or 25.3% year-on-year to 1,601,007 billion yen. Cost of sales grew by 65.7 billion yen year-on-year. SG&A rose 157.2 billion yen of which the profit share of DXD ADC products increased 79.8 billion yen, and other SG&A expenses rose 77.5 billion yen. R&D expenses grew by 27.6 billion yen. As a result, core operating income increased by 72.7 billion yen, or 59.3% year on year, to 195.3 billion yen. Operating income, including one-time gains and losses, increased 91 billion yen or 75.5% to 211.6 billion yen. Net income attributable to the parent company rose by 91.1 billion yen. or 83.8% to 207 billion yen. As for the actual FX rate, the yen was 144.62 yen to the dollar, a depreciation of 9.14 yen from the previous year, 156.79 yen to the euro, depreciation of 15.82 yen from the previous year. Please refer to slide 5. From here, I will explain the four factors behind the year-on-year revenue change. Revenue increased by 323.2 billion yen year on year. The breakdown by business unit is as follows. For the Japan business, sales of anti-influenza agent Inovir, anti-malignant tumor agent Enhartu, a direct oral anticoagulant Lixiana, and pain treatment Terlije increased. And the sales in the vaccine business, including Digerona COVID-19 vaccine, grew to drive the sales by 57.6 billion yen. Next, I will explain the overseas business unit. This section excludes the impact of FX rate. As for the oncology business, sales increased by 128.1 billion yen, mainly due to the sales growth of Enhartu in the U.S. and Europe, and the contribution of Vanflita, an anti-myeligalant tumor agent launched in the U.S. and Europe in fiscal 2023. Sales of American region increased by 3.2 billion yen, mainly due to the sales growth of Vinofa, and iron deficiency anemia treatment and GE injectables, despite decrease in sales of injector for an iron deficiency anemia treatment. For the EU speciality business, sales increased by 19.7 billion yen, mainly due to sales growth of Lixiana and Lemdomustendi treatment for hypercholesterolemia. The ASCA business, which covers Asia and Latin America, reported an increase in sales of 33.1 billion yen, mainly due to increased sales of NH2, which grew mainly in Brazil. As for the upfront payment and development sales milestone related to the alliance with AstraZeneca and US Mark, despite the decrease in development milestone for NH2, sales milestone payment for NH2 increased. Deferred revenue of 12.9 billion yen related to the upfront payment for the strategic alliance with U.S. Merck for DXD83 products, including HART3 DXD, was recorded at sales revenue. As a result, it increased by 14.7 billion yen. The change in development and sales milestone for NHER2 will be discussed in more detail later in this report. FX effect had an overall positive impact of 66.8 billion yen on net sales.

Slide 6 shows the factors affecting the core operating profit. There is an increase of profit of 72.7 billion yen. As explained before, the sales revenue increased 323.2 billion yen, including the forex impact of 66.8 billion yen. Now, I would like to talk about the cost of sales and expenses, excluding the forex impact. The cost of sales increased by 53.1 billion yen due to the increase in the sales revenue. For S&G expenses, there is an increase of the profit share with AstraZeneca due to the sales revenue expansion of NHER2, and also there is the cost increase for the preparation of DatoDXD, HER3-DXD, and entered two new indications, so this increased by 131.0 billion yen. R&D cost increased 10.2 billion yen due to the increase in R&D investment for five GXD ADCs. The forex impact affects 56.2 billion yen. Excluding this, the core operating profit increased by 62.1 billion yen. The slide 7 shows the profit of this fiscal year. There is an increase of 72.7 billion yen, including the forex impact. TEMPORARY INCOME AND COST INCREASED BY 18.4 BILLION YEN Y-ON-Y AND THE TEMPORARY REVENUE AND EXPENSES INCREASED BY 5.4 BILLION YEN DUE TO the sales of the Kyushu branch building, 8.1 billion yen, Daichisankyo Beijing transfer, 5.9 billion yen, as well as the payment of the settlement from Novartis concerning the US patent infringement against Plexiglas, 26.4 billion yen. For temporary cost, there is the loss of Turalio, 14.2 billion yen. However, there is also the environmental expenses for ex-Yasugawa factory, 4.1 billion yen. So there is a decrease of the temporary cost of 13 billion yen. Concerning the financial profit and cost, there is the increase by 19.4 billion yen due to the improvement of the security evaluation. For corporate tax, there is an increase in the tax before tax profit, so there is an increase of the tax by 18.6 billion yen. Profit at the owners of the company increased by 91.5 billion yen to 200.7 billion yen. Slide 8 and 9 shows the sales increase and decrease by the business unit and that major product in Japan. And in slide 5, there is the unit situation explained without the impact of forex, but here there is a forex impact included.