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.

Please see slide 11. This slide shows the sales of Enharts. Fiscal year 2024 Q3 year-to-date sales grew, led by H2 positive breast cancer second-line treatment and chemotherapy pre-treated H2 low breast cancer. And in all regions, sales achieved double-digit growth rate year on year, increased by 128.4 billion yen year on year to 404.4 billion yen. Product sales in FY 2024 are expected to increase in the U.S., and we expect 539.9 billion yen, an increase of 16.9 billion yen compared to the October forecast. The US year-to-date product sales in Q3 FY2024 were 219.7 billion yen, up 35% year-on-year. We maintain the No.1 share of new patients, in breast cancer, gastric cancer, and lung cancer indications. For both HER2-positive breast cancer second-line treatment and HER2-low breast cancer previously treated with chemotherapy, we gained more than 50% of new patients and maintained No.1 share. On January 27 in the U.S. time, we obtained the approval for chemotherapy-naive, hormone receptor-positive, HER2-low or how to outlaw breast cancer. In Europe, sales increased 69% year-on-year toward 9.5 billion yen. Sales grew steadily mainly in Germany, France, Italy, and Spain. the share of new patients with HER2-positive breast cancer in second-line treatment was approximately 70% in Germany and over 70% in France and Italy, and over 80% in Spain, consolidating the top position in the market. We maintain the top position in terms of the share of new patients with HER2-low breast cancer previously treated with chemotherapy in Germany, France, and Italy, and in Spain, Reimbursement began in November. In Japan, sales increased 33% year-on-year to 23.5 billion yen. We are keeping and expanding the number one new patient share in all indications of breast cancer, gastric cancer, and lung cancer. The new patient share in the second-line treatment of HER2 positive breast cancer has expanded to over 50%, and in HER2 low breast cancer previously treated with chemotherapy expanded to more than 60%. Market penetration is progressing steadily. In the Asuka region, sales increased 68% year-on-year to 51.8 billion yen. Sales grew substantially, especially in Brazil and China. In China, approval was granted in October for HER2-mutated NSCLC and for HER2-positive breast cancer second line and HER2-low breast cancer post-chemotherapy. We attained the NRTL listing and reimbursement began in January this year. In Brazil, in addition to a steady increase in prescriptions for existing indications, we received approval for HER2-positive solid tumors in November. Product sales in the Asuka region include co-promotion revenues in China, Hong Kong, and Seoul, where AstraZeneca records product sales. We will continue to work for further market penetration and expansion of the country's regions where the product is available, and to obtain new indications so as to deliver Enhatsu to as many as possible who need it. Next, I will discuss the approval of Dattaraway. Please see slide 12.

We have received approval for the Anti-Trop II ADC Dattaraway in Japan and the U.S. DATRO-A is the second product approved on a DXDA-DC platform following N-HER2. The approval was obtained in December last year in Japan and in January in the U.S. The indication is unresectable or metastatic hormone receptor positive HER2-negative breast cancer with prior endocrine-based therapy and chemotherapy. 6 mg per kg of body weight is administered intravenously at 3 weeks intervals. The global product sales forecast for Datraway in fiscal year 2024 is 400 million yen. We will contribute to more patients by providing a new treatment option for hormone receptor positive and HER2 negative breast cancer. On slide 13, I will talk about the acquisition of intellectual property rights for the anti-TAMAC1 antibody. The anti-TAMAC1 antibody is the antibody of our sixth DXDA-DC, or DS3939, currently under development by Daiichi Sankyo. In 2018, we in-licensed exclusive rights to develop and commercialize Gatipozumab anti-TA MAC1 antibody as an ADC drug using our ADC technology from glycotope. DS3939 is currently evaluated in a phase 1 to clinical trial targeting various types of solid tumors. In light of the product potential of DS3939, we acquired the intellectual property rights of Gatipozumab from Glycotope in December last year. The purchase consideration was 132.5 million US dollars or 22 billion yen. This consideration satisfies all potential milestone payments as well as royalties as part of the 2018 licensing agreement. This consideration will be recorded as an expense over the anticipated exclusive sales period after the marketing approval of DS-3939. Slide 14 provides information on oncology business briefing. We will hold an oncology business briefing in late February. CEO Manabe, Oncology Business Unit Head Ken Kera, and Oncology Business Heads for the US and Europe will be on stage to explain the marketing strategies for Enhards and Dattroway. We'll share the details with you once they have been finalized. Now for an R&D update, I will hand over to Global R&D Head Takeshita.

Thank you, Ogawa-san. And it's a pleasure for me to give you the R&D update. Before I do, I would first like to introduce all of you to Dr. Yuki Abe, who is our new head of our global research program and also the head of R&D Japan division. He's a successor to Dr. Agatsuma, who passed away, as you know, recently. And Dr. Abe is, therefore, his successor.

Hello.

Everyone, my name is Yuuki Abe. I have been working on ADC research with my predecessor, Agatsuma, for the past 15 years and have been responsible for the leadership and management of the team. As the head of the R&D division, I will work with my colleagues to further strengthen science and technology, which is our corporate strength, discover and develop new drugs that can contribute to patients. Thank you. Now I'll hand it back over to Kensa.

And of course, he will participate in these investor calls from time to time in the future. So thank you very much. Okay, now we can go on to the next slide. And we're going to give you some highlights of some recent news in all of our ADC programs. And first and number one is our first approval for DB06 in a new indication for breast cancer. You'll see that this is a new indication and particularly important because we are now in the HER2 ultra-low breast cancer. You will remember that previously with the Destiny Breast 06, we were able to demonstrate efficacy and safety and therefore approval in the HER2 low patient population. And we are now further even lower than low into the ultra-low And so therefore, we are covering more patients. And not only that, Destiny Breast 06 is an earlier line of therapy compared to DB04. This is depicted in the diagram on the right-hand side. This is a breast cancer disease map. And you'll see Destiny Breast 06 outlined in red. compared to the patient population that was a subject of DB04. So we are very excited with this new approval, and we hope to help many patients with breast cancer. Next slide. In addition to breast cancer, NHER2 is also making progress in DESTINY gastric 05 clinical trial. This is a new trial, DG05, intended to demonstrate a value of N HER2 in the frontline setting for HER2-positive gastric cancer. What you see here is the study design that we are, of the clinical trial that we are conducting. This is a new study that recently opened. You'll see that the main cohort is the patients with high PD-L1 expression, The arms are arm M1, which is the experimental arm, with Nr2 plus a combination of either 5-FU or capocitabine plus pembrolizumab. And the control arm M2 is a standard of care, which is trastuzumab plus platinum plus 5-FU or oxaliplatin plus capocitabine and pembrolizumab. We do also have an exploratory cohort you can see below in the lower half of the slide for patients with a low expression of PD-L1. I do want to mention here that this is a study start of a Q4 of fiscal year 24, but in addition, There is a second sister clinical trial called ARTEMIDYTE-GASTRIC-01 study in which we are evaluating the combination of Entertu and Rivagostamib from AstraZeneca. This is the AstraZeneca bispecific PD-1 plus TIGIT. Next slide. In the DATRA-A program, I think you just heard that we have obtained approval, first approval for DATRA-A in indication of a hormone receptor positive HER2 negative metastatic breast cancer. We have obtained approvals in the U.S. and Japan so far, and we are very excited to be moving forward in the breast cancer program with data program. Next slide. In addition to the breast cancer program for natural way, I do want to allure you to the news that I think many of you are already aware of, which is that we have changed our regulatory strategy based on the data that we have so far to focus initially on the EGFR mutated non-small cell lung cancer patients in the U.S. So this is going to be a filing that has been filed already. It is based on the primary study of tropion lung 05 with supportive data from TL01. And we have already received from the FDA the breakthrough therapy designation for this patient population with the data that we have obtained so far. And you can see that PDUFA date is July of 2025. Okay, next slide. These are the data that support our regulatory strategy to focus initially on EGFR mutated lung cancer. You'll see here, this is the data that was presented recently, pooled analysis of EGFR mutated patients from TL01 and TL05, and you'll see very good response rates, PFS, et cetera, in this highly relapsed patient population with a very high unmet medical need. Next slide. Moving on to the HER3 program. We want to indicate to you that we are making progress in our HER3 program. This is our new study that we are showing you here, HERthina Breast-01 study, in which we are combining trastuzumab plus HER3-DXD. And then randomizing the patient into these two arms that you are seeing here. This is a phase 1B plus 2 study. It's basically a signal-seeking study as well as some clinical indication of these two different combinations. These are really based on the more recent breast cancer data from a monotherapy, HER3, that we presented last summer at the ESMO meeting. in which we showed substantial activity of HER3-DXD in breast cancer. So we are very excited again to be moving forward with breast cancer for this ADC. Next slide. Next slide. This one is the IDXD program. This is also known as the original DS7300, target being B7H3. And we have a new study. A phase three study of IDXD in pretreated advanced or metastatic esophageal squamous cell carcinoma. So this is a new indication that we are pursuing in a registration trial. This is a randomized study in which we are studying single agent IDXD versus standard of care. Next slide. In the RDXD program, I think many of you are aware that we have a very robust program of RDXD in ovarian cancer. But in addition to ovarian cancer, we are conducting a new study, which we call Rejoice Pan Tumor 01. So beyond ovarian cancer, we are studying a long list of cancers, endometrial cancer, cervical cancer, et cetera, in this clinical trial. And so these are really exploratory studies, really designed to detect activity of R-DXD in these cancer types. And this is a study that I recently started enrolling. Next slide. In terms of other clinical updates, I just want to mention to you that for the Inherited Program, We are making good progress in developing a subcutaneous formulation, which we are doing with a collaboration with Altheogen, a Korean company. In terms of DatroA program, we have recently started a clinical trial, a phase three combination study called TL1-2 for adjuvant therapy in non-small cell lung cancer, early stage adenocarcinoma, with poor prognosis, including ctDNA positive at the completion of surgery. In the HER3 program, we have an MK1022 program, which is a Phase 1-2 study for colorectal cancer about biliary tract cancer and hepatocellular carcinoma. This is a Merck study, and we are very excited to be doing some signal seeking in these additional cancer indications. For the IDXT program, we plan to start two important studies. One is a Keymaker U06 substudy in which you are studying a combination of IDXT with pembrolizumab in the frontline setting for esophageal cancer. And second, We are starting a combination study of IDXD with MK6070, also known to many of you as the harpoon bispecific. As you may remember, both of these drugs, the harpoon bispecific plus the IDXD, both have demonstrated very high activity in small cell lung cancer. And therefore, we are doing a combination of these two very active agents in small cell lung cancer. And finally, we are very interested in the IDXT and RDXT, both in a key maker U01 study for non-small cell squamous and non-squamous type to evaluate the efficacy and safety of these two agents compared to docetaxel. Next slide. Okay. Now, next wave. So in addition to these five ADCs that I just mentioned to you, we have many other programs going on, and I want to give you a brief update on those non-DXD-ADC programs. First is the Van Vlieta program, the quantum wild study. This is a clinical trial of our Van Vlieta drug in frontline AML saving. In those patients who do not have the ITD mutation. This is based on early data from what's called a KIWI study, which showed a substantial activity of Amphlyta in patients without the ITD mutation. And therefore, we are studying this drug in the phase one, excuse me, phase three setting in a clinical trial that you are seeing here. And this has started to enroll, and we are very hopeful to see the results of this in the very near future. Next slide. This is an update on the Esharmia study program, the EZH1 and 2 combination inhibitor. You'll see that we are studying a combination of this drug with pembrolizumab. And this is based on some very interesting laboratory observations that the EZH inhibition causes activation of T cells and increased anti-tumor activity by T cells. So therefore, it's a natural combination to study two immunotherapeutic drugs, the EZH drug as well as pembrolizumab. And so this is the clinical trial that we are conducting in non-small cell lung cancer in the frontline setting. Next slide. Here is another new program that we are very excited about. This is DS2243. This is not an ADC, but rather a T-cell engager. This is a very interesting T-cell engager in that it's a bispecific T-cell engager in which the target is an HLA802 restricted NY-ESO antibody. Now typically, these targets are detected and targeted using T-cell receptors. But this is a unique antibody in which it is able to recognize in a HLA-restricted manner the target antigen, the NY-ESO. And we are very excited to be able to start this clinical trial very soon, the T2243. OK. Next slide. Okay, in terms of news flow, this is actually a very important slide and I hope you'll agree that there's a lot of information on this particular slide. First of all, I want to alert you to some new data on the DETRO way that's being presented with TB01, the final OS data analysis. This is the ESMO virtual conference. It'll be in mid-February in a few weeks. Next, in terms of important regulatory decisions, you'll see Destiny Breast 06 in Europe. It will be very important. And also, as I mentioned to you, the EGFR mutated lung cancer submission, we should be receiving a FDA decision on this sometime over the summer. And also, we are expecting to receive some indication outcome of the TB01 in Europe very soon. As I mentioned, we have already received approvals for TB01 in Japan and US. Now on the right hand side of the slide, what you'll see is the key data readouts. And there are many of them. And so really what I want to really emphasize here is that this year, we have, I counted eight, eight important key data readouts. just in a period of one year, and so there will be a very exciting time for data for Daiichi Sankyo in fiscal year 2025. Okay, that's it for my side, and let me turn it back to Asakura-san.

We will now move on to the question and answer session, but before that, we announced in our press release at 1 o'clock p.m. today Okuzawa is appointed as Representative Director, President and CEO effective April 1. Okuzawa would like to make a few remarks. This is Okuzawa, and starting from April, I'll be taking this heavy responsibility of CEO of Daiichi Sankyo. The purpose is to make a contribution to the rich and healthy life for the people in the world. Our science technology needs to be further strengthened so that we will be able to make another step of growth and development. in our company. And the current CEO, Manabe, actually embodied science and technology decision-making and having the unwavering commitment to the patient and their friends would like to continue to achieve the short-term performance as well as the long-term performance results. I'd like to ask for your continued support and cooperation. Thank you. Thank you very much. And I would like to start taking questions. If you have any questions, please press the raise hand button at the bottom of the Zoom screen. I will take you in turn. So when your name is called, please unmute yourself and ask your question. And when you have finished, press the hands down button and turn on the mute again. Now, any person, if you have any questions, please. The first question is Yamaguchi-san from Citigroup, please.

Can you hear me?

Yes, I can. I'm Yamaguchi. Thank you. The first question is about the broadcast that Mr. Ogawa said in his last presentation. I think you talked about the broadcast being over, but Thank you very much for your question.

I would like to explain.

This time, without slides, I gave you that explanation. Therefore, it might be ambiguous. But in April 2024, we make the financial results briefing. And in line with that, in this final year of the five-year business plan concerning financial KPI we updated. And in that update made then, revenue is 2.1 trillion yen and R&D expenses, the core operating profit 40% before deducting R&D expenses 40%. These are the set KPIs and we expect to achieve them. And those were updated and ROE 16%, DOE 18.5%. And at the same time, concerning the expected R&D spending, we also talked about it, it's ¥1 trillion for both the fiscal year 2024 and 2025. So ¥470 billion for FY24 and ¥530 billion for FY25. Those are the numbers that we announced back then. And currently concerning the numbers for FY25,

I made a comment and in April the Five Year Business Plan was updated and back then KPI

It was talking about the revenue of a 2.1 trillion yen. Although there was a change of strategy in terms of that way, we believe that we will be able to achieve the total revenue. Next, about 40% core OP. I think that we can also say that we will be able to achieve this 40% and R&D expenses. As an estimate, we discussed 530 billion yen for FY25. Regarding this number, we have been controlling the expenses so that we'll be able to control R&D expenses within that number, and by so doing, the operating profit, the assumption back then, should be surpassed. And I think we should be able to progress toward that goal.

Thank you very much. And another question.

Development milestones were regulatory part, TLO1 Europe. And this time, I think it's withdrawn. So what is your plan as a next step? And how three? I think it's delayed. Last year in June, I think a complete response was provided. And what is the current situation? I'd like to have these two points update. Thank you very much. First, talking about the milestone, I'd like to respond. Talking about the European development milestone, did you say European milestone? No, no, TA01 development status in Europe or for Europe. Thank you. Then Dr. Takeshita will answer to your questions.

Yes, on the HER3 program, we are still in discussion with the FDA on the on the path for HL01 and 02. And as of today, we don't have any more updates for you on that.

How about Europe? TL01 withdrawn. How are we going to do? Are we going to do the same thing like FDA?

Yes. So for Europe, it's a similar discussion. And we don't yet have a firm decision on the on the European strategy. But we are, of course, very much thinking about a similar strategy for Europe.

Thank you.

Next question from JP Morgan, Wakao-san, please. I'm Wakao from JP Morgan. Thank you for this presentation. This is a follow-up on Yamaguchi-san's question and your forecast in the mid-term business plan. So 2.1 trillion yen for the revenue, and it's within the reach. If you look at the content, it's 1 trillion yen for oncology and a data DXD. TL01 has been withdrawn, but then NHR2 is doing very well. What about DB06? It's been approved and sales is going to expand. And Enhatsu sales is very good right now. But DATO, DXD, in the absence of that and HER3's delay, can you really do 1 trillion yen for oncology? Or within 2.1 trillion yen, do you have a different composition now? Thank you for your question. And I think I missed to answer this part of the question in the previous question. As you have rightly understood, that roadway development plan has been changed. And as of April last year, we had an update of mid-term business plan. And that is a major factor that's different now. And to what extent Enhatsu can make up for that. So that is under consideration right now. And this is a very important key factor for us to see whether we can do 1 trillion yen or not. And we'll be able to make some kind of announcement in April. So DB06, this is a future thing. But if you look at the progress so far, Enhato can probably make up for the loss of Datraway. Is that your understanding? Yes. To what extent we can fill the gap produced by Datraway, this is under consideration right now. But then it's under consideration. the possibility that it has can do that. And in terms of the revision, I couldn't fully understood the point because for each product, if you put all together, I think 31 billion yen upward revision is possible and milestone is 1.1 billion yen revision downward. So all in all, net net, it has to be upward revision. But then you have not changed operating profit. I didn't really understand the reason why. So are there any other negative factors at play? How could I understand this? Thank you for your question. Yes, other factors. There are some negative factors we are looking at, like one is vaccine. This is actually one big uncertainty. And considering that, still the potential factor for upward revision, is it possible or not? There are still certain uncertainties there. But as much as possible, we would have liked to consider the upward revision. However, because of the uncertainty regarding the vaccine business, we have not changed the operating profit. And in relation to that, in the third quarter, the cost of sales ratio has really deteriorated, looking at Q on Q, not Y on Y. And if you look at the other sales revenue, it looks like it's a negative figure. And is it due to the vaccine sales, sluggish vaccine sales, or that's nothing to do with the vaccine? Well, yes, actually, you're right. For the third quarter, the cost of sales seems quite high, and it's because of the seasonal factor in a bill and a vaccine. These played a role because they have high cost of sales, and that affected the overall cost of sales. What about Daiichi Rona? Is that also included? Is that also a negative factor? Yes. Yes. OK. And finally, study and the same population, Phase 1-04 study, and you are using QCS MR. Are you going to use it or not? Are you able to make an announcement regarding that or not? And what is the significance of doing that? I think you are trying to set the threshold for that, but I'd like to once again know a little more about that.

To advance our study, we haven't really published anything or made any public announcements on this regard. It is very important to note that EVANZO is a study in which QCS will be applied, and we do think it's a very important part of our overall lung cancer strategy for data.

I see.

Okay, so you're not making an announcement, so you are not going to let us know. Okay, that's all.

Thank you.

Next question, Jeffreys Securities. Barker-san, please.

Hi, Jeffreys Shoken, Steven Barker.

Barker from Jeffreys Securities. Regarding the IDXT, I'd like to ask a question.

The ESCC and the newly started SCLC, new clinical trials introduced today,

In that tumor type, what is the percent of the patients expressing the B783 expressions? And I want to screen this expression level and recruit a patient for those studies.

Yes, that's a very interesting question. So in both of these studies, we are aware that most if not all patients express some level of B7H3. So for this reason, the clinical trials are designed so that we are enrolling all comers regardless of the B7H3 expression status.

Thank you very much.

That's all.

Next question. from Nikkei. Kurose-san, please. Nikkei newspaper.

Thank you.

I am Kurose from Nikkei newspaper. I have a question to Okuzawa-san regarding the new appointment as CEO. So back in 2023, you became president. And in the past two years, what are the focuses of your work? And what's your aspiration going forward as a new CEO?

Thank you.

I became CFO back in 2021 and that was the first year for the fifth mid-term business plan and I was a CFO for five years and in 2023 and 2024 as a COO I worked on this mid-term business plan for The total of four to five years, I have been leading this mid-term business plan together with CEO Manabe. And during this time, we had a major decision made, which is the collaboration and partnership with Milk. And then different organizations within the company, I listened to them, and then I evaluated pros and cons to come to the conclusion for that partnership. And then in the chair of president and COO, I myself focused and committed to the enhancement of human resources development. And in the first year of being appointed, I looked at all of the functions within Japan. And from the second year, US, Europe, as well as China, I visited all of their sites. And I covered almost 90% of the employees in terms of my reach and explain with my own words the current state of Daiichi Sankyo and the future vision of the company. And through doing that, our innovative and inclusive corporate culture has been nurtured. And that was always at the back of my mind. And going forward, talking about my aspiration, I have always been committed to the fixed mid-term business plan and next year will be the last year of this plan. We have been attracting a lot of questions about this plan today as well. So I would like to make sure that we achieve all of the KPIs of this plan. So that's the first top priority. And then starting 2026, we need to have the next five-year mid-term business plan and the discussions for that. have already started, so I'd like to lead the discussions. And by 2030, in oncology, we would like to become one of the top 10 companies in the area of oncology. So I'd like to solidify that target. And beyond 2030, sustainable growth needs to be secured. And together with Abe-san, I would like to enhance our power to discover and develop drugs even further. And I'd like to make very strong commitment in doing that as a CEO. Thank you very much. Thank you.

Next question.

Morgan Stanley, MUFG, Securities. Muraoka-san, please.

Thank you very much.

Muraoka, Morgan Stanley. I have a question to Ogawa-san first. And it is also a follow-up of Wakao-san's question, maybe, that there are some points not answered. And deducting all the segments, the other business part numbers seem somewhat strange. And I think vaccines, it's understandable. However, there is about 20 billion yen downward change seen in the numbers. Don't we have to worry about this too much? Or is there any major changes in your forecast? Or is it a kind of a buffer? Please tell this on this point. Thank you for your question. I would say you don't have to care this too much. It is not a buffer. And this is not really a big concern point, meaning that I do not have any extra information in this regard. And if there is anything that we are missing the sufficient explanation, I would be happy to cover that, but there is nothing in special. So even if having some 20 billion yen difference here in the forecast, it won't have any major impact onto the revenue forecast. That's right. We don't see any major risks there. Thank you. My second question. is about R&D. DBO6 approval, congratulations. And going forward, in the medical practice, there will be, I think, changes. If it becomes available for outdoor law, even hard-to-testing, missing, do you think that your product will be utilized in the practice, or the guideline will be changing? Or at any rate, everyone will get the heart rate testing. Therefore, it's not a big issue. How should we view this? I believe that there is no negative, but what are the positive degree of disapproval?

Yes. So, yes, you're absolutely correct that one wonders whether there's any more need to test for HER2 expression in these breast cancer patients who are candidates for HER2 therapy. I think that technically that will be an off-label use, and it's really up to the physician to make that decision. You know our our our label clearly says that they have to be at least have the ultra low, which is the you know what we would call that I don't know zero plus level of expression so. So it's a little bit difficult to predict how this new indication will. change the field, particularly with respect to the pathological assessment of breast cancer. I think we're just going to wait to see how things go in the next few months, and we can report back to you then.

Thank you very much.

That's all. Next question is from UBS Securities Sakai-san, please.

Thank you.

I am Sakai from UBS Securities. I have two questions. First, DS2234 with milk.

6070 and DS7300.

I think a combination trial, Phase 1-2, is ongoing right now. DS2234, the target engagers are different. Therefore, probably the target cancer types may be different, and you'll be exploring that. But what is the target of having this DS2234? I'm sorry about this very broad-based question. But what would be your target going forward? Outside of testis, there is a very high binding, and including that kind of a characteristic. And is there any difference in concept in this collaboration with Merck?

Yes, the major scientific differentiation is the target. You know, the bispecific that we are collaborating with Merck has a target of DLL3. This is a target that's predominantly expressed in small cell lung cancer. And so, therefore, it's a natural drug to be developed in small cell lung cancer. especially not just as a monotherapy, but also in combination with our B7H3 ADC, as I indicated earlier. For this new T cell engager from us, the DS2243, the target is NY-ESO. The antigen is called NY-ESO. So it has a very different antigen expression pattern. in that it is expressed in various tumors such as sarcomas and certain types of non-small cell lung cancer. So that's where the difference is. And so we do expect that the development path for 2243 will be substantially different from the development path for the DLL3 T cell engager.

Thank you very much.

Understood. So the priority is really going to be shifting towards 2243.

I think it's a little bit difficult to talk about priorities. I think for 2243, we need to get this compound into the clinic and see how active it is in various cancers, sarcomas, small cell lung cancer, et cetera. And then we can make a determination of whether or not we want to prioritize this one versus some other one. But for now, because we have so much outstanding data on both DLL3 T cell engager and the DS7300, the B7H3 ADC, you know, our main priority is those two compounds going into small cell lung cancer.

Thank you very much.

I have another question. And it's a very basic question. I'm sorry. And it's a kind of a rudimentary question. And in the material, NCCN guideline updates are written. And there is a list of a lot of different cancer types here. And how are you handling those updates like the pancreatic cancer and also other adenocarcinoma, small bowel adenocarcinoma? You don't have indications for that. And how American physicians are treating those other cancer types?

It's called a compendial listing. And so in the absence of official approval, of regulatory approval, if a drug is listed on the compendial listing, it is reimbursable by insurance. So the NCC guideline is really formulated by a group of academic oncologists who create these guidelines. Now, a lot of the NCCA guideline is based on clinical trial data, as well as the approval status of the drug. And so these various types of cancer that's listed as part of the NCCA and guideline update, a lot of this was based on the pan tumor clinical trial for N HER2. You remember that recently we received in the U.S. a pan tumor approval for cancers with IHC expression of 3 plus or greater. And in that list of cancers, all these cancers that are listed here in NCCN guideline, that was part of our IHC 3 plus FDA approval. What is a little bit different in the NCCA guideline compared to what's in our label is that for many cancers, the NCCA guideline also includes the IHC 2 plus as well as the 3 plus. So that's an actually important difference for many patients. I hope that answered your question.

Yes, okay. I need to dig in a little bit more, but you're not going to actively promote all these non-approved tumors, right? So it's a physician's choice, if you like.

That's correct. We do not actively promote the use of N-HER2 in patients where we do not have an indication.

Hmm.

But the physicians are very free to refer to the NCCN guideline to making decision on how to treat their patients.

Right. Okay. Very clear. Thank you very much.

Next question. SMBC NICCO Securities. Wada-san, please. SMBC NICCO Securities. Can you hear me okay? Yes, we can. Thank you.

I have two questions.

One is page 31, news flow, Avanza study results publication. When is the timing? Looking at Enhards, it's like in the first half or second half of the fiscal year, but Avanza study, it says second half of FY2025. Is it like from July to September timeframe? That's my assumption. So could you tell me the timing of publication of Avanza study results?

Okay, this is the Avanza study that is being run by AstraZeneca, and it refers to the calendar year, which is what the AstraZeneca company is using, not the physical year that begins. In April, you know, they're a calendar. their physical actually starts in January. So that's why it's expressed the way it is.

Thank you very much.

Another question is about DS2243, T-cell engagement. The target patients, how many patients do have or what kind of percentage of patients do have this expression and HLA-A2? peptide is detected by this antibody, I think, and how broadly indication will be. So HLA-24 or HLA-03 or HLA-02, I think it's only 20% in Japanese patients, so it is applicable to other HLAs. Because if it is an antibody binding to this HLA-02, that seems to be challenging.

This antibody is designed to detect this HLA-restricted antigen complex with NY-ESO. And the HLA restriction of A2 was chosen because It is really the most common HLA type. And so the way it was designed was really designed to capture as many patients as we can.

Thank you very much.

And the epitope, I think, varies from person to person. Within any SO, which kind of epitope would you use? And even in HLA-A2, I think depending upon epitope, the target patient may be further limited. Is that right?

The epitope that is detected by the antibody should be the same. So really, the HLA complex plus the epitope should be the same, because that's how the T-cell engager and the binder part, the antibody detection portion, that's how it was designed. So it's the same.

Depending on the person, I think there could be different ectopes detected. And as a result, I am worrying that there will be a further narrow down of the patient population.

There may be variations in the expression level of the particular epitope that a patient's tumor expresses. Because as you know, we're talking about NY-ESO, not the whole protein, but peptide. In general, when these HLA-restricted antigens are expressed, they can be detected even though the expression level may be very, very low. So these are very special antibodies that we are using here. So I would expect that in terms of expression level, It would be my guess, because we haven't really yet done the clinical trial, but it would be anticipated that even low levels of expression will be detected by the binder that we're using here.

Thank you.

And just for final confirmation, regarding the generalization of this technology, 509 eptop binding antibodies, I think, is the antibody that you have. So it could be generalized, right?

We're not able to comment on the amount of research we're doing with these HLA-restricted antigen programs. But it is, of course, a very interesting way to target cancer cells for sure.

I agree.

Thank you very much. That's all.

Due to the time limitation, the next one is going to be at the last question. Sogi-san from Bernstein, please.

Thank you very much.

Can you hear me okay? Yes.

So this is a question regarding IDxD program. So a few things. So IDxD, you know, now you are saying that, you know, there will be a phase two readout from the ongoing IDxD, I think it's ID8L01. Is this the results coming from the additional 70 patients you added to the initial ongoing program? And also, based on that data, is it that there's a possibility that you might consider the filing for accelerated approval for the third-line plus small cell lung cancer? So that's one question. And secondly, and also you also mentioned about the combination study with the IDXD plus MK06070 for relapsing refractory small cell lung cancer. But we thought that, you know, actually the alternatively, you know, this combination can be or should be, you know, tested for a first dose. setting. So this phase 1B2 design does not necessarily exclude the possibility that this combination will be tested in first line in a pivotal trial. So those are the questions for IDSD. Thank you.

Okay. So on the IDSD program, and I think your first question was whether or not any of the currently ongoing clinical trials could lead to a submission for an approval. And I think that's a, I guess that is a possibility. It really depends on the data, and we have to see the data first. But I hope you appreciate that we are very impressed with the activity of this drug in small cell lung cancer. So we just have to wait to see what the data shows. And in terms of your other question about whether or not we have any interesting moving into earlier lines of therapy for small cell lung cancer, The answer, of course, is absolutely yes.

Okay, thank you. And finally, for the T cell engager bispecifics, DS2243, is this the modality coming from Daisankyo, and you do have a modality platform beyond this one particular molecule?

Okay, so this is a result of an internal research effort. And I think it's a bit premature to say whether or not this is part of our modality strategy, but really to say that this is a very interesting and unique product of our internal research. We're very proud of this.

Thank you very much.

Thank you.

We already surpassed the expected closing time, so we would like to close and finish Q&A. We understand that there are still people raising their hand, but please give questions to our investor relations. Thank you very much for your attendance today. We would like to conclude the briefing.