Daiichi Sankyo Co Ltd Ord

Thank you very much for waiting.

We would now like to start. Thank you for the financial results briefing for the third quarter of fiscal year 2024. My name is Asakura from Corporate Communications. First, I will explain about language setting. This session will be conducted in Japanese and English, and simultaneous interpretation will be provided. Please click on the interpretation icon at the bottom of the Zoom screen and select either Japanese or English, or original audio. If you select original audio, you will hear the original audio. The Zoom screen displays the presentation material in Japanese or English, depending on the speaker's language. The live webcast will display the presentation in Japanese. Both Japanese and English presentation materials are available on the earnings release materials page, IR library of our corporate website. Please download them as necessary. Today's speakers are, as presenters, Ogawa, Executive Officer and CFO. Takeshita, head of global R&D. Okuzawa, Representative Director, President and COO, and Abe, Corporate Officer and Head of R&D Division, will join for the Q&A part, making a total of four members. First, Ogawa and Takeshita will give an overview of the third quarter results. After that, we will take your questions. Please note that today's briefing will be recorded. Now we will begin. Ogawa-san, please. My name is Ogawa. Thank you for taking time out of your busy schedule today to attend Adaito Sankyo's financial results briefing. I will now explain the consolidated financial results for the third quarter of fiscal year 2024 which we announced at 1 o'clock PM today based on the materials. Please refer to slide 3. We will present the consolidated financial results for the Q3 FY2024 and forecast for FY2024, the business update, and the R&D update in that order. Dr. Takeshita, global R&D head, will present the R&D update. And we will take your questions. in the end. Please see page 4. The slide shows the overview of FY2024 Q3 results. Revenue increased 194.3 billion yen or 16.6% year-on-year to 1,367.6 billion yen. Cost of sales increased 11.1 billion yen year-on-year. SG&A expenses increased 82.7 billion yen. R&D expenses increased by 43.8 billion yen. As a result, core operating profit increased 56.8 billion yen or 33% to 229 billion yen. Operating profit including temporary income and expenses increased 53.8 billion yen or 27.6% to 248.3 billion yen, and profit attributable to owners of the company rose 45 billion yen or 27.5% to 208.6 billion yen. As for the actual currency rate, the yen was 152.56 yen against the dollar, down 9.27 yen year-on-year, and 164.82 yen against the euro, down now 9.54 yen year-on-year. Please see page 5. I will now explain the factors behind the year-on-year increase and decrease. Revenue increased by 194.3 billion yen year-on-year. I will break it down by business unit. In the Japan business unit, sales of Lexiana, a direct oral anti-coagulant, Talije, an analgesic, and Enhards. an anti-cancer agent increased, as did sales of Daiichi Sankyo Healthcare. While a gain on realization of unrealized gain on inventories of Daiichi Sankyo ESPA was also recorded, sales of Daiichi Sankyo ESPA products are no longer recorded from April 2024 following the deconsolidation of the company. As a result, we had a negative 21.6 billion yen. Next, I will explain the overseas business units. The slide excludes the impact of foreign exchange rates. In the oncology business unit, sales increased by 83.7 billion yen, Due to growth in sales of N-Hertz in the US and Europe, sales of American reagent increased by 7.6 billion yen mainly due to an increase in sales of genetic injectable drugs and benefit for iron deficiency anemia treatment. In the EU specialty business, sales increased by 30.4 billion yen mainly due to sales growth of Lixiana, and Niremuno Nustandi, anti-hyper-cholesterolemia agents. The Asuka business, which is in charge of Asia-Latin America, recorded an increase of 23.2 billion yen, mainly due to the growth of Enhatsu, especially in Brazil. Revenue from upfront payments, development and sales milestone payments, etc., related to the alliance with AstraZeneca and US Mark increased by 25.3 billion yen, mainly due to the recognition of the second upfront payment for HAL 3 DXG received from US Mark in October last year as revenue from the third quarter. The overall impact of foreign exchange rate on revenue was 45.7 billion yen.

Slide 6 shows the factors behind the increase and decrease in core operating profit. I will explain the 56.8 billion yen increase in profit by item. As explained earlier, Revenue increased by 194.3 billion yen, including a 45.7 billion yen increase due to the foreign exchange impact. Next, I will explain cost of sales and expenses excluding the forex impact. Although revenue increased, cost of sales decreased by 100 million yen due to an improvement in the cost rate because of a change in the product mix caused by factors such as an increase in sales of in-house products such as Enhatsu and the elimination of sales of Daiichi Sankyo ESFA products. SG&A expenses increased by 60.3 billion yen due to an increase in profit share with AstraZeneca for Enhatsu. R&D expenses increased by ¥30.7 billion due to an increase in R&D investments, including a rise in R&D headcounts in line with the progress of the development of five DXDA DCs. The increase in expenses due to the impact of Forex was a total of 46.6 billion yen, and the actual increase in core operating profit excluding the impact of Forex was 57.7 billion yen. Next, on slide 7, I will explain the increase and decrease in profit attributable to owners of the company. As explained earlier, core operating profit increased by 56.8 billion yen, including the forex impact. Temporary income and expenses decreased by 3 billion yen year-on-year due to a decrease in temporary income. In this fiscal year, we recorded gains on stock transfer of Daiichi Sankyo ESFA, and in the same period of the previous year, we received lump sum payment from Novartis for a U.S. patent infringement lawsuit against our U.S. subsidiary, Plexicon, as one-time income. Financial income and expenses increased by ¥21.9 billion year-on-year due to an improvement in foreign exchange gains and losses and an increase in interest income. Income taxes increased by ¥30.7 billion year-on-year due to an increase in profit before tax and the absence of the impact of tax effect accounting in this fiscal year which reduced income taxes last fiscal year following the decision to transfer Daiichi Sankyo ESFA. As a result, profit attributable to the parent company increased by 45 billion yen year-on-year to 208.6 billion yen. Next, I'd like to talk about our business forecast for fiscal year 2024. Please see slide 9. Regarding the revenue, we have reduced the revenue forecast for Datraway due to delays in approval and launch in the lung cancer field, but we expect this to be covered by increased sales of main products such as Enhatsu, and therefore, we have not revised the forecast announced in October. Please refer to the supplementary materials for the latest forecasts for each business unit and product. Core operating profit and operating profit have not been revised from the forecast announced in October either. Meanwhile, profit before tax has been revised upward by ¥15 billion to ¥300 billion, reflecting an increase in financial income due to the improvement in foreign exchange gains and losses on a cumulative basis up to the third quarter, and profit attributable to owners of the company has been revised upward by ¥15 billion to ¥240 billion. The exchange rates for the fourth quarter are assumed to be 145 yen to the dollar and 155 yen to the euro. I will now explain our current outlook for the financial results for fiscal 2025. Due to a change in the development policy for Datraway, in the second-line treatment and beyond of non-small-cell lung cancer, the number of target patients is expected to decrease more than initially expected for the time being, and the timing of approval is expected to be delayed from the initial schedule. As a result, we expect that product sales of Dutraway in lung cancer in fiscal 2025 will be lower than those projected at the time of the mid-term plan update in April 2024. On the other hand, we believe that the decline in natural way sales will be offset by the steady expansion of sales of mainstay products such as Enhertz. In addition, we will aim to achieve core operating profit at or above the level set at the time of the mid-term plan update in April 2024, while controlling R&D expenses and others. Specific performance forecasts will be provided in April. Next, I would like to talk about the business update.