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.

Now on business update, let me offer you the progress in FI 2023 progress towards maximize 3 ADC. Please refer to slide 12. Slide 12 shows a breakdown of NHER2 sales revenue. In FY 2023, product sales increased by 188.4 billion yen year-on-year to 395.9 billion yen due to the growth in the US and Europe, as well as other regions. For FI 2024, we forecast sales of 508.4 billion yen up by 112.4 billion yen year-on-year. The sales in each country and region will be explained later. As for the development milestone, ¥3.8 billion was recorded in FY2023 following the approval of a second-line treatment for hard to mutated non-small cell lung cancer in Europe in October 2023. However, development milestone achieved in FY2022 was ¥12.4 billion down ¥14.3 billion year on year. due to the impact of the lump sum recognition as revenue in the previous fiscal year from the time contracts were signed to the time milestones were achieved. In FY2024, we expect to record ¥9.4 billion in development milestones achieved in FY2023, a decrease of ¥2.9 billion year-on-year, due to the impact of recording the amount equivalent to approximately five years from the time agreements been concluded to the time the milestones were achieved at sales revenue in a lump sum. For the sales milestone for FI 2023, we've recorded $200 million or 29.6 billion yen at sales revenue in one lump sum due to the achievement of $2 billion in a single year product sales in the co-promotion region with AstraZeneca in the fourth quarter of the current fiscal year. For FI 2024, we expect a sales milestone of 387.5 million yen or 56.2 billion yen to achieve single-year product sales of 3.5 billion dollars. As a result, NHRT revenue, including upfront payments upon contracts and associated with quit as well as development and sales milestones for FY23 was 449.2 billion yen, an increase of 190.8 billion yen from the previous year. For FI2024, we forecast an increase of 136.2 billion yen from the previous year to 585.4 billion yen. Slide 13 onward, I use two slides describing the sales of Enhartu in each country and region. First, sales in the US and Europe. For the United States, the product sales in FY2023 was 225.5 billion yen, or about 1.6 billion dollars. For fiscal 2024, we are aiming for the sales of 266.6 billion yen, or more than 1.8 billion dollars. Current indications are shown here. In April 2024, we received approval and started promotion for the indication of second-line treatment of HER2-positive solid tumors as the first anti-HER2 therapy approved across cancer types. Market share in each indication remained favorable. We maintained the market leader's position with the share of new patients with HER2-positive breast cancer in the second line being at approximately 60%. The market share of new patients with HER2-positive breast cancer previously treated with chemotherapy remained at about 50%, maintaining the top position. We also maintain the top position in new patients for second-line HER2-positive gastric cancer and second-line HER2-mutated NSCLC, respectively. Other progress in FI 2023 include in the NSC and guidelines for several types of cancer, including endometrial cancer and cervical cancer. Sales in Europe is also strong. Product sales in FI 2023 were 101.9 billion yen. or 704 million dollars in fiscal 2024 we aim the sales of 152.1 billion yen or more than u.s 1 billion dollars shares of new patients in each marketed country is steadily increasing and the share of new patients in france germany spain and italy has expanded to the 60 level maintaining a top position The share of new patients with hard to low breast cancer previously treated with chemotherapy also expanded to the 60% range in France and to approximately 50% in Germany, maintaining leading position. In the fourth quarter, we also achieved a top position in Spain and Italy. In fiscal 2023, we obtained approval and started promotion of the drug for the second line and beyond indications of hard-to-mutate NSCLC. In addition, product was launched in Italy, following Germany, France, and the UK, as well as Spain, and it's showing steady growth in that country as well.

Slide 14 shows the sales of NHR2 in Japan and ASCA regions. In Japan, that sales in fiscal year 23 was 23.9 billion yen. We tried to achieve 25.7 billion yen in 2024. The new patient share is expanding steadily in each indications. Her to positive breast cancer second line treatment has 40% for the new patient share, maintaining the leading position. Chemo-treated HER2-low breast cancer has the 20% new patient share, again, that number one position. HER2-positive gastric cancer third-line treatment, the share was 70%, again, number one position. HER2-mutated NSCLC second-line treatment, the new patient share was expanded to 40% level. obtaining the top position, leading position. In the fiscal year 23, HER2-mutated NSCLC second line and after indication was approved, we started the promotion. And also in the lung cancer treatment guideline listed our product as the second line and later HER2-mutated NSCLC as the recommended regimen. In Asuka region, in fiscal year 23, the product sales was 44.6 billion yen. We tried to achieve 64 billion yen in fiscal year 24. Asuka region sales include the joint sales promotion revenues in China and Hong Kong, where the sales is listed for AstraZeneca. And there are other areas like Brazil and China where the sales is growing very steadily. In fiscal year 23 in China, there was a launch with the indication of HER2-positive breast cancer second-line treatment, and then we obtained the approval for indications for HER2-low breast cancer. chemotherapy treated, and we started promotion. In Brazil, HER2-positive gastric cancer second-line treatment and HER2-mutated NSCLC second-line treatment indication was obtained, and promotion started. We would like to continue promoting that market penetration and expansion of the countries and regions where the product would be launched. And we would like to offer in HER2 to the patients who need that. Slide 15 shows the outline of the strategic alliance with US Merck concerning the joint development and joint sales promotion for HER3-DXD, IDXD and DS6000. Three product development is accelerated through this collaboration. and we have expanded the new studies. And we are trying to reinforce the resource allocation for growth drivers after five DXDADCs. Now I would like to talk about the progress made in fiscal year 23 for the existing business and product growth. Please have a look at slide 17. Slide 17 shows the Lixiana share by the country and region In addition to Japan, Korea, and Taiwan, there is a steady growth observed in European countries, including Belgium, UK, and Italy. As a result, the global sales in the fiscal year 23 reached 287.7 billion yen, 43.8 billion yen increased Y-on-Y. And slide 18 shows that change in share by the amount by yen. Nixiana has decreased share in sales due to special expansion repricing and drug price revisions. The sales increased steadily and we have expanded the sales share up to 47% at the fourth quarter of fiscal year 23. And as a result, the sales revenue increased to 115.6 billion yen, 10.4 billion yen above the previous year. than the other activities in Japan.

In 2019, anti-cancer agent Banflita was launched for the indication of relapsed or refractory FLT3 ITD mutation-positive acute myeloid leukemia. In May last year, we obtained an additional indication for the first-line treatment of FLT3 ITD mutation-positive AML. Also in May last year, we launched a new formulation, orally disintegrating tablet, OD tablet of Terlije, a pain treatment originally launched in 2019. In December last year, we started supply of Digerona Omicron XBB 1.5 adapted monovalent vaccine for COVID-19, which is the first messenger RNA vaccine made in Japan. By continuing to strengthen our product portfolio, we will further enhance our contribution to the patients. As part of our enhancing transformation into a profit structure focusing on patented drug, in May last year, we concluded a shared transfer agreement with Daiji Sankyo Esfa, which handles our generic drug business in Japan. The buyer is Quaron Holdings Corporation, and the transfer price was 25 billion yen. Based on the transfer agreement, On October 1st last year and April 1st we transferred 30% and 21% of our shares respectively. Since 51% of the shares have been transferred and Daiichi Sankyo ESFA is no longer a consolidated subsidiary of the company, we plan to record a gain of approximately 16 billion yen from the transfer of shares as one-time income in the first quarter of FY24. Although we will be in charge of distribution from FY24 onward, for the time being, we will not record product sales of Daichi Sankyo ESFA products in our consolidated financial statements, but only revenues related to distribution operation. Slide 20 shows other initiatives in the U.S. and Europe. In the U.S., we launched anti-cancer drug Abraxin generic in May last year and an anti-cancer drug Banflita for the first-line treatment of AML in August last year in U.S. and in February in Europe. In Europe, as for Nilemd and Nustendi, our European subsidiary, DSE and Esperian entered into an amended agreement in January this year under which the manufacturing and supply rights will be transferred from Esperian to DSE. In March this year, based on the result of the CLEAR Outcomes Study, we received a positive opinion from the CHAMP Committee for Medical Products for Human Use recommending an additional indication for cardiovascular disease risk reduction, and we expect the value of nilamdo-nustendi to expand in the future. Next, I would like to talk about our progress in FY23 toward creating shared value with stakeholders. Please refer to slide 22. Slide 22 shows the annual dividend forecast for FY23. In FY23, we plan to raise the annual dividend per share by ¥20 year-on-year to ¥50, mainly due to the strong performance of NHAR2, as well as the receipt of an upfront payment in connection with the strategic alliance with SMARC of the United States. We will continue to maximize shareholder value by improving capital efficiency as well as shareholder returns. Next part is the R&D update. I will now hand over to Takeshita, Global R&D Head.

Thank you very much, Oksawa-san. This is Ken Takeshita, Head of R&D, and I'm pleased to give you an update from the R&D side. This slide is a summary of the R&D major accomplishments for fiscal year 2023. Many of you will remember that recently we had been talking about maximizing three ADCs and identifying pillars for further growth as the alpha program. However, because of the success of our DXD-ADC program, we have expanded the number of ADCs from three ADCs now to five DXD-ADCs that are listed in green here in HER2 data that you're familiar with. as well as the three new ones, HER3, IDXD, and DS6000. So we now refer to our entire program as five DXT-ADCs and the next wave. And the next wave, of course, is in light blue. This includes additional compounds and pipeline drugs in oncology, as well as specialty medicine and vaccines. Next slide. So I'm going to now first focus on the progress we're making in our ADC programs. And I'm going to be going over with you some very important clinical data that we have presented over the last year or so. First is the NHER2 program, Destiny Pan Tumor 02 study. This is a clinical trial in which patients with HER2 positive tumors of various types that are listed here, various gynecological cancers, bladder cancer, biliary tract cancer, and pancreatic cancer were enrolled in this clinical trial. And you'll see the data here, very good response rates in many of these indications. And this data set led to an FDA approval of N HER2 as the first tumor agnostic HER2 directed therapy in unresectable or metastatic HER2 positive solid tumors in April with the HER2 positivity being defined as a three plus. And in fact, the data was so impressive that even before the approval, These data, DESTINY PEN202 data resulted in US NCCN guidelines that listed N HER2 as a treatment option for HER2 positive cancers at the IHC level of not just three plus, but also two plus in many of these cancer types. Next slide. In addition, I want to report to you that HER2 program is expanding treatment opportunities beyond Japan, US and EU to include especially indication expansion in China on the basis of various clinical trials in the HER2 low base breast cancer patient population, HER2 positive gastric cancer in a third line setting and HER2 mutant non-small cell lung cancer in a second line setting. So these are really major progress that we are making in our China programs. Next slide. Now we switch over to the DATO program and just to give you a very brief update on the tropion lung 01 trial data. This data was presented previously at ESMO 2023, and we have filed, this data for non-squamous, non-small cell lung cancer second plus indication in the US in February, 2024. And in March of 2024, we filed the same data set in Europe. So we are awaiting a decision from the various regulatory agencies. And as you can see here, the PDUFA date in the US is December 20th, 2024. Next slide. Next, in terms of the new studies in the DATO program, I would like to describe our new study called Tropion Lung 10 Study. This is a new phase three study combination study of DATO plus a drug that comes from our AstraZeneca partner. This is a bispecific drug that targets both PD-1 as well as TIGIT. And you can see the study design here. It's a randomized study with three arms, the bottom cohort being the pembrolizumab control, The second arm is the bispecific antibody only. And of course, at the very top is the combination of DATO plus the bispecific, this combination that we're most interested in. The target patient population is non-small cell lung cancer in a frontline setting, previously untreated with the high PD-L1 expression. Okay. And I do want to mention to you just at the note that on the lower right corner that the primary endpoint in this study is PFS and OS in a biomarker defined TROP2 positive patient population. This study is slated to start in the first half of 2024. Next slide. Tropion lung 14 study. This is another new study in a data program. And this is a phase three randomized study targeting patients who have the frontline EGFR mutated locally advanced or metastatic non-sequamous non-small cell lung cancer. This is a new study that started enrollment actually this month. And this is a study design with a randomized two arm study, the control being the osimertinib alone, which is a standard of care currently. And the experimental arm is a combination of osimertinib plus the DATO program. And first subject in has already been achieved. And this is a very important study that allows us to keep pace with the competition in this patient population, along with the other two directed ADCs that are being studied by other sponsors. Next slide. In the breast cancer field for the DATO program, I'm very happy to report to you that the filing for the DATO based on the tropion breast zero one study has been achieved for the treatment of hormonal receptor positive her to low or negative breast cancer in US, Europe, China, and Japan. This is a data that I think many of you are familiar with from ESMO 2023. And you can see here now that the PDUFA date in the US is listed as January 29th, 2025. Next slide. Next, we are going to shift to the HER3 program and describe to you what progress we're making in the HER3 program. So based on the HER3 lung zero one study data, which was the phase two single arm study of HER3 DXD, in patients with EGFR-mutated relapsed non-small cell lung cancer. The data has been submitted for approval, and the PDUFA date on this submission is June 26, 2024, just a few months from now. I also want to mention to you that we have additional studies that are going on The HERTINA Lung 2.0 study, which is a phase three randomized study, which is in progress to obtain top-line results in the second half of 2024. And also the Pantumar 01 HERTINA study, which started enrollment in March of 2024. And finally, I want to make sure to mention that the NDA review from the HL01 study is progressing very smoothly. And that's, I think, reasonable to say that we are on track to meet the PDUFA date. Next slide. In terms of what additional things we are doing in our DxDADC program, we're very interested in combinations of the DXT-ADCs with various internal assets that make sense from a scientific standpoint. And here you see one example of a unique combination, novel combination in which a DXT-ADC is combined with a drug called Valmetastat. Well, metastat, as you remember, is our EZH1,2 dual inhibitor. And since the target of the drug is EZH, it is thought to be a drug that modifies the chromatin structure. And based on preclinical data, we can see very interesting synergies between Valmetostat and all of our DHT ADCs. So you can see here in this clinical trial that we're reporting to you, we have started this combination study, initially starting as a phase one dose escalation combination study. And then eventually we will take this combination for signal seeking in various key indications for which we have approval, we're about to have approval for both Nher2 and DATO. Next slide. Okay, next slide. Okay, now I would like to give you an update on the two additional DXDA-DCs, the ones that are now partnered with our MARC Alliance Partnership. In the iDXD program, also formerly known as DS7300, targeting the antigen B7H3, This is just a review of the data that we have previously presented at ASMO last year, showing that this drug appears to have activity in small cell lung cancer, esophageal squamous type lung cancer, prostate cancer, as well as squamous type non-small cell lung cancer. And these are very important data. And we are very happy to report to you that we have initiated a new phase three study of this drug in small cell lung cancer called the ID8 Lung-02 study in a relapse small cell lung cancer, which compares IDXD versus a physician choice. And this is scheduled to start for enrollment in the first half of fiscal year 2024. Next slide. In addition, in this IDXT program, in addition to what I just mentioned to you about the phase three study in the relapse setting, we are, of course, very interested in studying this compound in the frontline setting. And these are some combinations that we are studying now or about to study in the frontline setting in small cell line cancer. These are, for example, a combination of IDXD with atezolizumab, which is really a drug that has been approved in a maintenance setting for small cell lung cancer. Okay, next slide. Finally, we do believe that this drug, IDXD, because of the pattern of expression of the target antigen B7H3, which is broadly expressed in many cancer types. We have initiated a phase two study targeting multiple solid tumors using this study design you are seeing here. There's a whole long list of the solid tumors that are being enrolled and studied in this trial. And it is hoped that this drug IDXT will show activity in all of these solid tumors. Next slide. In the DS6000 program, this is another DXDE-ADC targeting the antigen catherin-6. We are continuing to pursue the very promising data that we have reported already in platinum resistant ovarian cancer. And based on these data, we have initiated a new phase two slash three study called Rejoice Ovarian 01 Study. This is for a platinum resistant ovarian cancer that started enrollment in April of 2024. And these are really based on all the very strong data that's coming from our phase one study. Okay, next slide. I do want to make sure to remember to mention that in addition to our DXD-ADCs, we also have other programs going on. First one is the VAMPLITA program, the inquisitative. It is approved now in the countries shown below based on the quantum first study for the FLT3 positive, ITD positive AML in the frontline setting. Vermetostat, also known as Ischarmia, is an EZH122. dual inhibitor that I mentioned to you earlier. This drug is already approved in Japan for the treatment of a relapse refractory adult T-cell leukemia lymphoma. And now based on the new study, Valentine PTCL01 study, we have submitted the data for approval in Japan for the treatment of relapse refractory PTCL, peripheral T-cell lymphoma. Next slide. And to complete the picture, here are additional programs that we have going and a progress update. DS3939, this is a MUC1 directed ADC, DXT-ADC. DS1471 is the anti-CD147 antibody. This is not an ADC, but a naked antibody. DS-1594, this is a Menin-MLO binding inhibitor in AML, and we have discontinued development of this program. From the vaccine program, I think you heard already that we have achieved approval in Japan for the RNA-based COVID vaccine. And we have also filed for approval of a mixed measles, mumps, rubella vaccine. In the specialty medicine area, I would like to mention three programs. 1211, this is a TNAP inhibitor for the treatment, for the potential treatment of a pseudodensoma elasticum. And from a very early study, we are seeing some positive top line results on phase two study. DS7011, this is an anti-TLR7 negative antibody inhibitor. intended for the treatment of systemic lupus. And finally, DS2325. This is a KLK5 inhibitor that's been designed to target a particular gene that is abnormal in a syndrome called Netherton syndrome, but it also has much broader potential applicability in various skin disorders. Okay, next slide. Okay, so in terms of some news flows and upcoming conference calls for the investor community, I do want to mention that at ASCO this year, we do intend to have an investor relations conference call at the time and date shown on this slide. Next slide. In terms of what you can expect from a news flow standpoint, this slide lists the fiscal year news flow, including some data disclosures and publications coming at the upcoming ASCO meeting at the end of May in Chicago. Here's a list of all the enter to and data data that is anticipated to be made public at that point. We also expect a number of regulatory decisions coming in the fiscal year 2024 in HER2 program, the DATO program, the HER3 program, as well as the Valmetostat program. And finally, in terms of key data readouts, here is a list of important data coming from the HER2 program, DATO program, as well as the HER3 program. OK, so with this, let me turn it over to the next speaker for the five-year business plan update.

So I want to make the five-year business plan update. I'm Okuzawa. Please have a look at page 46. This slide shows the target for fiscal year 25 for this mid-term plan and the four strategic pillars to move on to the growth stage, continuous growth stage. The strategic pillar will be explained with utilizing the next two slides, and I would like to explain the progress made during the three years after 2021. First, three ADC maximization to be realized Concerning in HER2 during the last three years, there is a second-line treatment for HER2-positive breast cancer, and the chemo-treated HER2-low breast cancer and NSCLC were obtained as indications. and it was obtained the indication for second-line treatment of HER2-positive solid tumor as the first pan-cancer pan-tumor anti-HER2 treatment, and the value of the product is expanding. And also, there is an increase in the number of countries and regions where the product is approved, and the market penetration is expanding, and in HER2 cells has been expanded. above the planned goal. And in addition to this, HER2-positive breast cancer, first-line treatment, DB09 study, and other indication expansion is moving. And DatoDxD is used, and there is a submission made for the hormone-positive HER2-low breast cancer or negative breast cancer, and HER3-DXD is submitted for the third-line treatment of EGFR-mutated and SCLC. We may be able to provide the treatment options for the patients, and we are also conducting the studies to expand the indication for earlier lines of therapy. HER3-DXD, together with IDXD and DS6000, we have accumulated the favorable clinical study data and we are shifting toward the stage where the product value is maximizing. We have a harsher competition in ADC development, so in order to maximize the ADC franchise, we have to enhance the capacity, resource and capability in order to provide the products to as many patients at an earlier stage, earlier timing. We started the joint development with milk through a strategic alliance, and the new development plan is expanding rapidly. For the existing business and product growth, the sales of Lixiana is expanding with the higher value of product. Talija, Vanofa, Nilemdo, Nustendi sales is growing steadily. and it is contributing to the creation of the capitals for the return to the shareholders and for the investment for continuous support. The transformation to new business structure is expanding steadily, There is a launch of new products such as Emgaldi or Azomia, and also there is a transfer of product after the exclusivity is expired in regions and countries, and Daichi Sankyo stock is transferred. In that way, we are enhancing the profitability. American region and Daichi Sankyo healthcare profit is growing steadily. and it would reach half of the consolidated core business revenue in 2024. Please have a look at page 48. There is a growth, further development in the future growth pillars for IDSD and DS6000. We have accumulated the favorable clinical study data. Product potential is enhanced. So we put it as a growth driver after three ADCs. IDXD is developed for SCLC, DS6000 is developed for platinum-resistant ovarian cancer. We are accelerating the development through the strategic alliance with Merck. And the second-generation ADC DS9606 clinical study was started, and COVID-19 messenger RNA vaccine Dijlona approval was obtained, and we realized the supply of the vaccines. There is a steady growth in the selection of the post-DXDA-DC modalities. The co-creation of value with stakeholders. Concerning this, there is the growth of revenue through the growth of NHER2. There is the strategic alliance with Merck, and there is a one-time lump sum payment at the time of the closure of the agreement. and we decided to increase the dividend after second consecutive years. Omicron XBB.1.5, a monovalent vaccine, Dicelona, is supplied, and we are trying to prepare for the pandemic risk. The value chain as a whole is also working on, we are working on the value chain environmental load reduction, and we try to make 100% renewable energy use for the electricity we are using in our business. There is the workshop with the management and all the employees, and we are trying to deepen our understanding of three modalities of behavior, which is the core culture of Daichisankyo, and we are trying to promote these activities, and we are trying to nurture 1DS culture across that nationality and culture. As shown before, the four strategic pillars of the fifth midterm plan is making steady progress, and we are more confident to achieve the goal for the fiscal 25. Now, I want to talk about our expectation on the achievement of KPI for the fifth midterm plan. Please have a look at slide 49.

We expect revenue of 2.1 trillion yen in FY 2025 up by 100 billion yen from the 2 trillion yen forecast as of April 2023 due to unexpected revenue in the oncology field. Although SG&A is expected to grow in line with the revenue growth, We continue to aim at 40% of core operating profit ratio before R&D expense by improving the cost of sales ratio due to changes in the product mix and by efficiently and effectively executing expenses. As the pipeline potential is steadily expanding, we will aggressively invest into R&D for sustainable growth. However, we will continue to aim for ROE of 16 percent or higher by balancing cash allocation with shareholder returns. We expect the dividend on equity ratio DOE to be 8.5% and higher, up from the 8% or higher we had expected as of April last year, by improving capital efficiency and enhancing shareholder returns. The currency rate assumption for the KPI forecast as of April 24 are 145 yen to the dollar and 155 yen to the euro. Please refer to slide 50. Oncology revenue in FI25 is expected to be more than 1 trillion yen. The revenue forecast for DatoDxD in FI25 has decreased from the April 2023 level due to the revision of target patient based on the result of the TL01 study and the revised timeline of the TL08 study. On the other hand, we expect further increase in revenue of NHER2 in the breast cancer market based on the results of DB03 and DB04 trials. Mainly due to the impact of increased revenue from the upfront payment received from the strategic alliance with US Merck for HER3-DXD, IDXD, and DS6000, we expect oncology sales revenue to exceed 1 trillion yen in FY25. up 100 billion yen from our April 23 forecast. Slide 51 shows projected R&D expenses. Total R&D expenses for FY24 and FY25 altogether are expected to be about 1 trillion yen, about 150 billion yen up from the estimate as of April 2023, mainly due to the start of trials of 5 DXDADCs. compared to the forecast as of april 23 we expect a decrease in the share of development cost associated with the strategic alliance with us mark for heart 3dxt idxd and ds6000 but we will actively invest these resources in r d for sustainable growth And with respect to NHAR2, we aim to maximize product value by initiating new studies based on DPT2 study result. And three products development cost was decreased compared to a year ago. and we continuously make investment into the resources. For NHAR2, we aim to maximize the product value by initiating new studies based on the DPT-02 study result. DS3930 and following DXD-ADC products, and other next wave product groups we are going to accelerate the development and we are going to develop a next growth pillar following 5dxt adc in addition uh and hard to indication addition dato dxd heart to dxd launch related the new evidence creation information dissemination, and the other medical affairs activities will be expanded. And we are going to accelerate the five DXD ADCs by expanding the R&D resources. We are going to further enhance the R&D structure, which will lead to the cost increase of R&D. Slide 52 shows the cash allocation to investment in growth and the shareholder returns. the source of cash allocation during the midterm management plan period which is the cash on hand at the beginning of the fifth midterm management plan plus operating cash flow before deduction of r d expenses for five years is expected to be approximately 3.7 trillion yen an increase of 600 billion yen compared to the forecast as of April 2023, mainly due to the receipt of upfront payment for the strategic alliance with U.S. Merck. And the increased cash allocation will be used to increase R&D and CapEx for the future growth and strengthened shareholder returns. We plan to allocate about 1 trillion 950 billion yen, an increase of 150 billion yen, from the April 23 forecast to R&D expenses, which will place priority on the data ADC development. CAPEX will increase by 200 billion yen in FY24 and FY25 combined. The main application is to strengthen the production system, and a large portion of this increase will be for CAPEX to strengthen the DXD data production system. The company will respond to the growing demand for DXD-ADC, which has been fueled by the steady growth of the NHAR2 business, progress in the development of NHAR2-DATO-DXD, and the conclusion of a strategic alliance with US Mark IV-HAR3-DXD, IDXD, and DS6000, as well as progress in their development. We will continue to invest in our own production facilities and in external CDMOs in a balanced manner. Regarding our own production facilities for DXDADC, we'll also invest in Daiichi Sankyo Europe's Pfaffenhofen plant and American Regents' new Albany, Ohio plant. We intend to further strengthen shareholder returns by increasing dividends in line with profit growth and by flexibly repurchasing own shares. The dividend forecast for FI24 and share buyback will be explained later today. Over the past three years, product value of NHAR-2 has greatly exceeded our original plan. Following NHAR-2, we plan to realize the launch of DATO-DXD and HA-3-DXD in FI-24. In addition, strategic alliance with USMARC will rapidly expand the development plan for HA-3-DXD, IDXD, and DS-6000, which is expected to significantly enhance product value. In order to achieve our goals for fiscal 25 and realize our vision for 23D, we intend to achieve sustainable growth while maintaining a balance between investment and shareholder returns necessary for future growth.

Now, I would like to talk about the innovative solution provisions, and we would like to contribute to the higher enrichment of quality of life around the world. And lastly, but not least, I would like to talk about the fiscal year 2024 forecast. Please have a look at the slide 56. In fiscal year 24, there is the sales revenue of ¥1 trillion, ¥750 billion. Core operating profit will be ¥210 billion. That sales revenue would be realized through the expansion of the sales of Enher2, Lixiana, and Talisia. Also, there is an increase in the deferred revenue through the strategic alliance with Merck. So we would have the operating revenue of 1 trillion 750 billion yen, 148.3 billion yen over the previous year. The sales cost will be reduced by the cost improvement and there is a decrease. of 19.8 billion yen expected. For SG&A, the sales expansion of Enher2 would increase the profit share, and we would have the resource investment into the oncology business. And we try to make an investment to the DXIT human resources, as well as the strategic investment And there is an increase of those expenses by 47.7 billion yen for R&D. We are focusing on five DXD ADCs, which has a high potential. And we also make further investment in R&D so that we can make a further growth. And we would enhance the medical affairs activities. to enhance the product value. And it would increase our research and development cost would increase by 105.7 billion yen. Core operating profit would increase by 14.7 billion yen to 210 billion yen. operating profit would increase by 18.4 million yen. 2024, fiscal 2024, we have the temporary revenue through the transfer of stock of Daiichi Sankyo ESFA. However, there is no temporary cost calculated, so we would have more operating profit. than core operating profit. And before tax revenue would be 235 billion yen minus 2.2 billion yen over the previous year. The revenue for this year would be reduced because of the tax accounting in relation to the transfer of Daiichi Sankyo S Fund. But fiscal year 24, we don't have that effect. So there is an increase in the cost related to taxation. So we would have the negative revenue of 10.7 billion yen to 190 billion yen. Exchange rate was calculated as 145 yen per dollar. and 155 yen per euro. Slide 57 shows the annual dividend. As mentioned before, we are trying to increase the dividend and fiscal year 24, we are expecting to provide the annual dividend of 60 yen. Please have a look at slide 58. In order to improve the capital efficiency, we decided to obtain our own treasury stock. We would obtain the treasury stock up to 55 million stocks or that 200 billion yen between the 26th of April 2024 through 15th of January 2025. All these stocks will be paid back as of the 31st of January 2025. We have an increase in the dividend and flexible acquisition of our own stocks so that we may have a DOE of 8.5% or over, which is above our goal or our objective of 8% or higher. We are going to enhance the capital efficiency and enhance the shareholder returns. We would like to maximize the value to the shareholders. Now we would like to answer the questions.

From here onward, we would like to move on to the Q&A session. For those who have a question, please click on the raising hand button at the bottom of your screen. I'm going to announce your name, so when your name is announced, please unmute yourself and state your name and affiliation. Once you are done with your question, please click on the raising hand button once again to put your hand down. The first question is from Citi Group Securities Yamaguchi-san, please. Can you hear me?

Thank you.

This is Yamaguchi speaking from Citi. My first question is related to Enharto sales forecast for this fiscal year. Penetration is quite high and in US, The deemed nominal growth may slow down. However, that's within your expectation for FI 2024. Pantumar, Loher 2 are included. However, penetration is already high, so you're expecting a growth to be slowed down. And the P6, when it's introduced, can we expect acceleration of the momentum once again? Thank you very much, Yamaguchi-san, for your question. As you mentioned, that's our plan.

And HART2 in US, there has been

PROGRESS IN INDICATION, BUT BEFORE DB04, SO WE ARE EXPECTING MODEST PROGRESS, BUT IN EUROPE AND THE OTHER REGIONS, THE INDICATION APPROVAL WILL BE LATE FROM U.S., BUT REIMBURSEMENT WILL COME IN. probably they may catch up with the growth in U.S. or even exceed the growth of U.S. So FI2024, we believe, and HER2 will strongly grow.

Thank you. The next question is on DatoDxD. As mentioned before, the HER3 study is making a very good progress. And what about that data of DXD? Are there any information you can disclose to us?

That review is also concurrently ongoing. And we do have the Purdue for data that's been announced. And I do not expect that that data is going to change based on how the discussions are going.

The TROP2 positive study was started. TROP2 biomarker selection, was it an issue?

In the current TL01 clinical trial, the TROP2 biomarker is, of course, of interest to the FDA, but it is not critical to the submission. On the other hand, in the new trial that we discussed earlier today, there is an important component of the TROP2 biomarker.

Thank you.

With regard to your outlook into R&D expense, the Merck's burden is growing, but the total R&D seems to be growing on a net basis. So the total R&D is, I think, growing excluding FX impact. So more than additional burden on mark, I think R&D cost is increasing. Yes, this is Ogawa speaking. FI2425 total R&D expense 1 trillion yen. That's our forecast. And due to the weak yen impact, we have 100 billion yen impact compared to April 2023. And then The other incremental factor is investment into 5 ADC. This is continuing, and the medical affairs function is being reinforced, going to be strengthened. So this is an investment into the capability, and at the same time, this is an investment to generate new evidence and also early access program. Beyond 5 ADC, we have investment planned. So altogether, this is the amount of investment planned for two years. Thank you very much. That's all.

Next question. Mr. Wakao of JP Morgan, please. Wakao of JP Morgan. Thank you. My question is the R&D development. R&D development is enhanced. And from this year, it is the phase of expansion. But you are prioritizing the R&D investment. So the profit standard or profit level is a little bit suppressed. Am I right? and you are trying to expand the profit and the future profit level. Are there any changes in the profit level you are expecting to have? And page 51, NHER2 study is to be started. DPT-02 study results will be a basis of the start of that experiment of this study. Thank you very much, Wakao-san. Concerning the R&D cost and the profit growth, shifting to the growth increase or profit growth, and her two growth and expansion is further possible, further expansion is possible. And also there is the collaboration and alliance with Merck. So R&D is expanding greatly. And as mentioned today, 3939 or 5DXD and other internal assets are also enhanced. So we have a lot of growth opportunities within the company. That's the decision we made, and that's why we decided to continue making positive and active investment. And the bottom line of the profit shift would be fiscal year 2025. That's something we would like you to expect. And concerning the other NHER2 study, Takeshita will answer the question.

I think the question was Destiny Pentumor 02 study. And this is a global multicenter open-label phase two study for N HER2 in HER2-expressing tumors. And as we mentioned earlier, the data was used to gain approval in a broadened indication of HER2-positive cancers at the three-plus level or greater. And these data were really the basis for many additional clinical trials in the frontline setting in the various cancers that were studied in the panther study, most notably the gynecological cancers. So these are really additional investments in clinical trials in the frontline setting. And of course, I do want to mention that the details of these new studies will be announced to you in the future when we are ready to make the details public to you.

Thank you. In relation to Takeshita-san's comment, the new study

is for pan tumor.

So you are, are you initiating like a several independent studies separately or this type of like a early phase basket type of clinical trial? Is that what you're planning?

Strategy in the frontline setting, but so I think he could just wait for that. when we are ready to make that announcement.

Thank you very much. My second question is related to DatoDxD overseas first line treatment and development plan. TROP 08 first, and then TROP 2, the one to be initiated this time. With regard to TROP 2 positive, you set up the primary endpoint, and also you have other clinical trial going on. So for the first line setting, TROP 2 positive, is the main focus for your clinical development. Is that correct?

Let me try to answer your second question first. The question was about the use of the TRAP2 biomarker. And the details of this particular biomarker that we are using and they're very interested in. We have not disclosed that a lot of that information comes from our partner AstraZeneca. So we are going to wait for our partner AstraZeneca to be ready to disclose the details of this biomarker strategy to all of you. in terms of your first question, which was about what are the reasons for the delay that we are reporting now for TL08? What I can say to you today is that there are a multitude of reasons behind this delay. We have not really disclosed the details of the delay, but just to say here today that it is due to multiple factors.

The TROP2 biomarker is the simple TROP2 expression. It is not a simple expression, higher expression of TROP2, or have you identified several biomarkers? And TL08 is delayed. Is it the strategic delay on your side, or there are various factors and that you try to make it as scheduled, but there is a delay.

Yeah, the TL08 delay is not specifically linked to the biomarker that you mentioned. I think, of course, however, I do want to mention that we are very interested in understanding the biomarker as it might be applied to TL08 or even TL07, of course. But in terms of the details of biomarker, again, I ask you to please wait for announcements and public disclosure of the information on the biomarker from our partner, AstraZeneca.

Thank you very much. Next question. Morgan Stanley, MUFG, Securities. Muraka-san, please. Good afternoon. I'm Muraka of Morgan Stanley. My question is related to R&D cost and the future perspective of the R&D. In the previous presentation, you made the correction for the outlook for FY25. So R&D would be 45, 450. So it would be 350. That's what you mentioned. But the figure you mentioned would be 310 when I made the simple calculation. The growth of R&D is bigger, so the core business revenue profit will be lower, but you are going to expand the value of Datto DXD, correct? Is that the correct understanding? Thank you very much, Muraoka-san, for your question concerning the 5-DXD ADC's potential expansion. The specific planning, we have made specific ideas, and we have a lot of ideas to expand the value of Dado-DXD. In addition to 5DXDs, there are internal assets and there are promising internal R&D assets we have. So we would like to make an investment so that we can develop those. pipelines. And after fiscal year 26, long-term and very long-term sustainable development will be assured. And that's why we make a decision, as mentioned before, and that is reflected in our forecast for the revenues. For our reference, It is not a very good timing, but 470 billion yen. Are there any possibilities that you may not consume all those budget? And you have more than 500 employees in the US, so you may be able to utilize those budget. Do you think that you have a high probability of using all these budget? Yes, correct. That's the basic understandings. there is a big influence of the foreign exchange market. So it is very difficult for us to make a correct forecast how the forex would affect.

For DB06, I would like to confirm one thing. Ultra-low population is included in the secondary endpoint.

Ultra low.

Even if it doesn't show good efficacy, but still you will be able to achieve the primary endpoint. So if you look at the DB 06 only for ultra low. Primary if if you can achieve the primary endpoint at IHC low, you can still make a submission. Is that the correct understanding?

actually, that the clinical trial is not specifically focused on the ultra-low, but the agency and, of course, us in the primary endpoint will be looking at the total patient population that enrolled in the clinical trial, which is far more than just the ultra-low.

Thank you very much.

Understood. That's all from me. Next question.

Mamegano-san of BOA Securities. Mamegano-san is not here, so UBS Securities, Mr. Haruta, please. Ms. Haruta, please. Haruta of UBS Securities, the first question, 200 billion yen, and there is a very big announcement. And so far, you have studied the possibilities, but this is the decision you made at this point in time. What is the background behind this? Before the submission or the approval, this period, it is very difficult to purchase the treasury stock, but it is a road restriction period. We would like to know the background of your purchasing your own stock. Thank you very much, Ms. Haruta. We decided to purchase our own stock, and the timing and the background behind this is the question. And the fifth midterm plan, and there is a big plan, and we are going to make investment for growth, and we have to balance it with the return to the shareholders. And in that situation, Enher2 is growing very strongly. above our expectations, and it becomes a pillar to support us. And also, there are other DXDA DCs who are growing. So five DXDA DCs have been promoted through our collaboration, strong collaboration with AZ AstraZeneca and Merck. So we would like to further support the future growth and we can be confident in our future growth. And that's the background behind our decision made to purchase our own stock. And of course, the basic reason is that the legal conditions were satisfied. Thank you.

My second question. is related to Tropion Lung 01. We are waiting for OS data, but FDA received the finding for non-skeletal cell cancer. And the result, we are expecting for the result on the overall patient population. If superiority is not shown, but if superiority is shown only for non-SQ, would that still be accepted? I guess best case is to show significant difference for total patient population as well as non-SQ. But how should we approach this?

As you may remember in the prior data set that was disclosed already, the pre-FS data was positive in the overall patient population and not just the non-squamous. But with the agency, as you know, we have said to the agency that we are focused really on the non-squamous because that is our best data set. But in terms of the details of how the agency will interpret the overall survival data and how it affects our position or likely have an FDA approval, we're not really able to comment on that. These are confidential discussions that we are having with the regulatory agencies.

Thank you very much for your answer. The next question, BOB Securities Megano-san please. Sorry, I'm . I have one question, and this is an update for the midterm plan. And this time for DOE, 8.5% or higher, and that's the update you made. Concerning the ROE, there is no change made. and you decided to purchase your own stock for 200 billion yen. ROE is not mentioned because there is some decline from the original plan. What's the situation on ROE? This time, ROE KPI was not changed. Of course, there are some upside possibilities and 16% or higher. That's what we mentioned. And the guidance has not been changed a lot. And that's why we haven't made any changes. Concerning DOE, including our purchase of our own stock. There won't be a rapid growth of revenue or profit in a short term. However, it would be an investment for future growth, and we have a high expectation to the future growth, and we would like to try to balance it with the return to the stockholders. And that's why we changed DOE to 8.5% or higher. Okay, thank you. So we can have a higher expectation of that. Thank you.

Next question is from Sanford Bernstein. Sogi-san, please. Thank you. I have a couple of questions to Takeshita-san.

around the new study, the tropion lung 10. So for this one, I'd like to understand, are you getting the subpopulation analysis with trop2 positive patients? Are we able to see the data at some point? And also the combination partner, this real vagal stomach, the specific for PD-1 and the TGET. So we understand that there are some combination studies ongoing by different companies for the combination of PD-1 or PD-L1 and TGIT. So what is the, you know, the scientific rationale of making it as a bispecific? What is important to have, you know, the simultaneous binding to these targets with one molecule? So that's the first question.

Okay, so the first question about the TROP2 biomarker, and as I mentioned, you know, it's something that our partner AstraZeneca has developed, and we haven't then the data has not yet been made public so we're going to have to ask you to wait until you see the data in public and then we can discuss further about how we are applying this biomarker to tl010 okay now in terms of the digit uh it's a tj by specific uh also to include uh the standard, I guess more the standard checkpoint PD-1. And it's because it basically, it allows us to hit two targets with one molecule. And if you could just think of it as that, that you can do two things with a single drug, that will be sort of a simple way of thinking about bispecific. And it's very fortunate for us that are part of AstraZeneca had in their pipeline a TIGIT molecule so that we can be competitive as the non-small cell lung cancer field moves into TIGIT as a very potentially very important treatment modality in the treatment of lung cancer. So it's just a way that TIGIT by specific is just a way to give, allow us to hit two targets with one drug. Great, thank you very much.

And the second question is around combination of Enhurt and also the dato with valimetostat. So it feels like if you look at the target indication, these studies seem to be a little bit redundant because the target cancer types have been already addressed by the monotherapy of these drugs. And so what is the really, you know, the scientific rationale or the preclinical data that you see to really support this study? And also, is your partner AstraZeneca funding these studies?

Okay, so the scientific basis for this combination is really coming from various preclinical models in which these two drugs were combined. And we do see a lot of synergy between the two drugs. We don't yet know exactly what is a molecular mechanism for the synergy between these two drugs. Our current speculation is that Valmetastat being an epigenetic agent acting on a chromatin allows easier access of and HER2 to the chromatin that the DXT payload on the HER2 to the chromatin by the valmetastat allowing more of an open configuration of the chromatin so that the DXT drug can access the DNA target of the drug. So that is currently the working hypothesis for this combination. And why are we doing this combination? Let me try to answer that question. Yes. Yes, we are studying cancers that are already approved within HER2. So with this combination, therefore, what we want to achieve is efficacy that is superior to N-HER2 alone. So you can imagine that in the future, if we were to do, let's say for example, that this combination that we're seeing here, it looks quite good from an efficacy standpoint, perhaps better than single agent NHER2 or DATO. Then you can imagine in the future, we will be conducting a randomized phase three study in which the control arm now is NHER2 or DATO depending on the indication And the experimental alarm will be the combination of the DXT-ADC with Valmetastat. So you can kind of see now that it is a way to, of course, improve the outcomes on patients with solid tumors. And at the same time, from an overall pipeline perspective, it allows us to offer to patients yet another drug, Valmetastat, for the treatment of solid tumors such as breast cancer, gastric cancer, lung cancer, for example.

So then, sorry, that's great. So valimetastatin pretty much sounds like a chemo if it is targeting the chromatin. Is that a right way to think about it?

No, it's not a chemotherapeutic agent. It's what would be called an epigenetic agent. It targets a protein found in the chromatin. It's not a cytotoxic agent, but it acts on a particular target, a protein target that's involved in chromatin configuration. Thank you.

And then final... Yeah, no, great. Thank you for the clarification. And then final question is, so is AstraZeneca funding these combination studies?

Okay, now, so this one, I don't remember this now for sure, but do you know? Yes? Okay. Yes, I think they are funding part of this study. I don't quite remember. Yes, they are funding part of this study is what I'm told. But I don't quite remember. Thank you very much.

Thank you very much for the answer. Thank you.

We have already exceeded 4.30 finish time. So we would like to conclude the Q&A with the analysts and investors. I do understand that some people are still keeping their hands raised. But please reach out to our department of the company later. Thank you very much, everyone. From 4.40 Japan time, we are going to have a Q&A session with the media and journalists. So media and journalists, you can stay on this line.

Thank you very much for waiting. We would like to have the Q&A with the media and journalists. The speakers are Okuzawa, the representative director, CEO, and the CFO. Ogawa and Takeshita Global R&D Head. Would you please use the raise hand icon at the bottom of the Zoom and I would call your name and then we would like you to unmute your microphone and ask questions. And after you raise the questions, would you please lower your hand and mute yourself. Any questions? If you have any questions, would you please use the icon of raising hand at the bottom of the Zoom screen? The first question, Nippon Keizai newspaper, Kurose-san, please. Thank you. I'm Kurose. Can you hear me? Yes, we can hear you. Thank you very much. I have a question. 25 will be the last share of this fifth midterm plan, and you have made that changes, and it is over the 1 trillion yen. In her two presentations, you stated that you want to be the top 10 in oncology. And if you reach the 1 trillion yen, the top 10 will become visible, and it is accessible to be a top 10. What will be the timing? Thank you very much, Kurosawa-san, for your question. We want to be a top 10 company in the field of oncology. And this is the question you raised. And currently, when we look at the sales levels of different companies, in 2025, we reach 1 trillion yen. Even if that is what we reached, we may not be in top 10 in fiscal year 25. However, there are very promising pipelines we have in oncology. and HER2 have already achieved a lot of cells growth, and there are products which would follow and HER2, and it is very promising at this moment. So we think that by 2030, we would be a member of the top 10, global top 10 in the field of oncology. That's what we are expecting right now.

Thank you.

Please use raising hand button at the bottom of your screen if you have any question. Next question is from Jiho. Horiguchi-san, please. Hi, my name is Horiguchi from Jiho. Can you hear me okay? Yes. In the earlier, sorry, I was not attending the Q&A session with the investors, so please forgive me if I repeat the similar question, but on page 40, You talk about your oncology DS1594, whose development was suspended 1594. What is the reason for the discontinuation of this program?

I think the question you're asking is DS1594. This is the Menin binding inhibitor. which was thought to be possibly developable in AML and other hematologic malignancies. And the reason for discontinuation was because of a lot of competition with other men inhibitors in the field, which resulted in substantially lower enrollment and interest among the patients and investigators. in our program. And this resulted in substantial shift in the timelines. And for this reason, this was the reason for discontinuation of the drug.

Thank you very much. Next question. of . Can you hear me? Yes. I have a question. I haven't heard the explanation a lot. What would be the capital investment? And you said in Japan, Europe and the US. You are talking about this. So what plant and what you are going to do in what plant in Japan? Would you please explain what kind of capital investment you are going to make in the factories, production facilities in Japan, US and Europe? and 800 million yen capital investment up to 25. After fiscal year 26, what would be your plan? What is the size of the capital investment after fiscal year 26? Thank you very much, Saegusa-san, concerning the capital investment. This time, in the cash allocation, We made additional 200 billion yen, and it is focused on DXDADC productions. There are several investments we are going to make to produce other products. And as Daichi Sankyo Group, and also outside the Daichi Sankyo Group, there are production facilities. And for the Daichi Sankyo production centers where we are going to make the productions in Japan, the Japanese factories, all Japanese factories in Japan are involved in the production of DXDA DCs. So they would be the target of the investment. for Germany, Daiichi Sankyo Europe, DSC Europe, half and fourth and factories. Concerning this, the DXADC capital investment has been made. and we have expanded the production facilities and we would reinforce it. And in the US, there is a factory in Ohio. This is the factory of American Regent Inc. This is the subsidiary of our company. It is the generic injection drug was produced in that factory. but the ADC production would be made so that they can be a part of the global supply chain. And that's the decision we made.

Thank you. And from FY2026 onward, what will be the expected magnitude of CAMPEX? Well, for the time being, DXDA-DC pipeline is seeing a strong development progress. So in order to capture that demand, we are going to continue the current investment momentum.

Thank you.

Thank you very much.

If you have any questions, would you please click the button to raise hand at the bottom of the Zoom screen? The next question, Mix Mochizuki-san. Please. Can you hear me? Yes, I can hear you.

Mochizuki of MEX.

My question is, the sales and the revenue, sales revenues and the profit is increasing. And I would like to ask Okuzawa-san to comment on the financial results. And also, some of your product would be re... reimbursement would be changed. So does that affect your future production of futures activities? Thank you very much, Mochizuki-san. First of all, the domestic reimbursement a long-term listing in the formularies. Lixiana, Talige, and in HER2, these drugs would be listed for a long period, and the system would not be affecting us, first of all. And for 23 financial statements, how to look at these financial results, We have a higher achievement than expected, especially in the field of profit. It is above 50 billion yen over the original budget. And there is the collaboration and agreement was made with Merck in October So there is a one time payment made lump sum payment made. And so these are the advantages in our revenue and profit. In addition to this, our major product, including in her to the oncology products and primary business, Lixiana and others, they are making a very solid growth. So our main business have made a lot of achievements, and this would affect the revenue increase and profit increase of the single year, but not limited to the single year. It would allow us to lay the foundation for the future growth, and that is really important for our long-term and ultra-long-term growth.

Thank you very much. Please use the icon at the bottom of the screen if you have any question. Next question is from Bloomberg at Terukina-san, please.

What's my seat?

Hello.

Hi.

This is Terukina from Bloomberg. I would like to ask you a question related to the FX rate. How do you see the current FX rate? And when you look at your FI2023 performance, what kind of impact did you see and what kind of impact are you looking into in FI2024? And how are you prepared for the long-term FX rate change? Do you need to take any actions? Thank you very much for your question. With regard to the FX impact, well, FX does not make a major impact on the revenue. And in this time's presentation material, We are saying that, you know, on OP level compared to revenue, R&D cost in US is to be spent quite significantly. So, you know, we do not expect a major impact on OP and FI 2023 FX impact 56.2 billion yen negative impact on profit and revenue 66.8 billion yen impact positive impact on revenue So this positive was somewhat offset, negative 56.2 billion yen. And FX sensitivity for FI2024 has been presented. And on the revenue side, $1 move would mean 4.3 billion yen, 1 euro, 2.3 billion yen. And the core OP-wise, minus 200 million to the dollars and plus 300 million to the euro. And that's the FX impact. It's very difficult to navigate through this FX change. It's not easy work for us, but we will continuously monitor the FX move and try to achieve a high accuracy in our forecast.

Thank you.

Next question, Nihon Keizai Shinbun Kurose-san, please. Sorry, this is the second time I ask questions. I have another question. First is the messenger RNA vaccine. The Moderna have a messenger RNA vaccine plant built in Kenya, and COVID-19 is subsided and the demand is reducing. So at Daichi Sankyo, you have the Saitama production facility to be re-enhanced. So what is your prospect for the production facilities for vaccines? And how do you look at the decline in the demand for COVID-19 vaccines? Or can you use that same system or the same technology to produce different vaccines other than COVID-19? So we would like to hear your strategy. on vaccine production. Thank you very much for your question on vaccine production. Last year, we got the approval and we started the supply of Dicerona. And we have 1.4 million injection value of product is shipped and supplied. And the target or the objective of the production facility enhancement is to reach 20 million vials, and Daichi Sankyo Biotech is located there, and we are enhancing the production capacity there. Of course, the COVID-19 pandemic may take place. It is very difficult to predict what kind of mutant variant would come, but we had several years being affected by pandemic of COVID-19. We have to be prepared for the future pandemic. And we think that we have made an agreement, national agreement, that we have to be prepared for the coming pandemic. And vaccine production capability should be maintained, including Daichisankyo. And we have been supported so that we could have a good foundation for the production of vaccines when needed. And Dicerona production capability should be further improved. And as mentioned by you, not limited to the COVID-19 vaccines, but we also have to consider the new modalities and messenger RNA technology. It can be used to produce seasonal flu vaccines or the flu vaccines or. or we may be able to have a combined vaccines or combination vaccines of flu, seasonal flu and COVID-19. And so we have to enhance the R&D capability as well as the production capability. This is important for the health security for the Japanese population, and we would like to contribute to that.

Thank you very much. Well understood. Next question from Iyaku Keizai. We have Sakaguchi-san, please. Thank you. This is Sakaguchi speaking. Can you hear me? Yes. On page 40. You talk about the transformation and you talk about a share of Daiichi Sankyo ESFA. Daiichi Sankyo Healthcare, how is it going to be positioned into the future? Well, thank you very much for the question related to Daiichi Sankyo Healthcare. In today's presentation, I briefly mentioned the follows. Within the Daichi Sankyo Group, Daichi Sankyo Healthcare is steadily generating a profit, and they are making a contribution to the group. And after several years of COVID-19 pandemic, importance of self-medication is better understood or recognized by Japanese people. On top of that, we have 2030 vision. As a part of such vision, we would like to become a global healthcare company. And we would like to respond to each individual needs of consumers using DXIT technology. We would like to introduce new services.

So from that perspective, in the area of treatment,

Daiichi Sankyo Healthcare has made contribution, but even in the area of the prevention of the disease, the positioning of Daiichi Sankyo Healthcare remain quite important within the Daiichi Sankyo group. So Daiichi Sankyo Healthcare's positioning within the group will remain unchanged. Thank you very much.

So it is the planned time to close this Q&A session with the media and journalists. Thank you very much for your participation today.