Daiichi Sankyo Co Ltd Ord

Thank you very much for joining us. We are now starting the first quarter of financial results reporting of Daichi Sankyo for 2025. My name is Asakura, and in charge of corporate communication, I'd like to serve as a moderator today. First, about the language, we are going to use Japanese and English in this meeting. We have simultaneous translation available. Please use the interpretation button at the screen on the bottom, and please choose English or Japanese original audio. If you choose original audio, you will listen to the original sound. On the Zoom screen and live distribution, you are going to see the Japanese presentation material. Japanese, English, and presentation materials are available on our library website. and financial result reference material at the page of our corporate website. You can download them. And today's speakers are Koji Ogawa, a senior executive officer, and Abe, head of R&D division and executive officer. And Ogawa and Abe are going to explain about the outline of the first quarter result. And this meeting is recorded.

Now, let's begin.

Okawa-san, you have the floor.

Okawa speaking. Thank you very much for joining Daiichi Sankyo's financial results presentation out of a very busy schedule today. I'm going to explain our FY2025 first quarter financial results we announced at 1 p.m. on Thursday, July 31st, JST, based on the presentation materials. Please turn to page 3. This is the agenda for today. We will cover FY2025 first quarter consolidated financial results, business update, and R&D update in that order. R&D update will be explained by Yuki Abe, R&D division head. We will entertain your questions at the end. Please turn to page 4. This is an overview of FY2025 first quarter consolidated results. Revenue increased by 38.4 billion yen or 8.8% year-on-year to reach 474.6 billion yen. Cost of sales decreased by 2.6 billion yen from the previous year. SG&A expenses rose by 12.4 billion yen. An R&D expenditure increased by 5.3 billion yen year on year. As a result, whole operating profit increased by 23.4 billion yen, or 32.1% year on year, to reach 96.3 billion yen. Operating profit, including temporary gains and losses, increased by 3.7 billion yen, or 4% year on year, to 96.3 billion yen, Profit attributable to owners of the company increased by 0.1 billion yen a year to reach 85.5 billion yen. As for the actual currency rates, the US dollar was 144.60 yen, the yen appreciated by 11.29 yen against the dollar a year. The euro was 163.81 yen, the yen appreciated by 4.07 yen against the euro. Please turn to page 5. From here, let me explain positive and negative factors for our revenue compared to the previous year. Revenue increased by 38.4 billion yen year-on-year. I'd like to explain its breakdown by business unit. First, in Japan business unit, etc., revenue increased by 2 billion yen, absorbing the revenue decrease of 5.6 billion yen realized gains of unrealized gains of inventory for Diet Sankyo Effa as sales increased for insomnia treatment Belsomna, direct oral anticoagulation coagulant Lixiana, pain treatment Talije, and anti-cancer agent Adatraway, etc. Next, let me explain our overseas business units. Forex Impact is excluded here. In oncology business, revenue increased by 35 billion yen due to the growth of anti-cancer agent N-herd cells and Dr. Wei's contribution to revenue. As for American reagent, sales increased for generic injectables, but sales decreased for iron deficiency anemia treatments, injectifer and venifer. So, American reagent revenue decreased by 2.8 billion yen. Revenue for EU specialty business increased by 6.2 billion yen as sales increased for Lixiana and hypercholesterolemia treatment Nidamdo Nustendi. In ASCA business responsible for Asia, South and Central American regions, revenue rose by 12.5 billion yen due to the growth of NHERT mainly in China. upfront payment and regulatory sales milestones, etc., related to alliance with AstraZeneca and U.S. Merck increased our revenue by 4.7 billion yen due to the booking of regulatory milestone associated with data waste approval for EGFR-muted NSCLC in the United States and upfront payment for strategic collaboration with U.S.

Merck for three DXDADCs.

Forex impact decreased our revenue by a total of 19.2 billion yen.

Slide 6 shows the factors contributing to the increase or decrease in core operating profits. We will explain the ¥23.4 billion increase in profit by item. As explained earlier, revenue increased by ¥38.4 billion, including ¥19.2 billion decrease due to foreign exchange effects. Next, we will explain cost of sales and expenses, excluding foreign exchange effects. Cost of sales increased by ¥1.5 billion only due to an improvement in the cost ratio resulting from the change in product mix, such as increased sales of in-house developed products like Enghar II, whereas a ¥57.6 billion increase in sales revenue, excluding foreign exchange effects. SG&A expenses increased by 22.3 billion yen, primarily due to an increase in profit sharing with AstraZeneca. R&D expenses increased by 10.8 billion yen, primarily due to increased R&D investments with the progress of 5DXD ADC's development. Foreign exchange effects reduced expenses by a total of ¥19.6 billion, and core operating profit, excluding foreign exchange impact, increased by ¥23 billion. Next, I will explain the changes in the profit of the period on slide 7. Core operating profit increased by ¥23.4 billion, including the impact of foreign exchange as explained earlier. As to temporary income and expenses, in the same period of the previous fiscal year, a gain on the sales of shares of Daiichi Sankyo AESPA was recorded as temporary income. Without such impact in the current fiscal year, there was a decrease of ¥19.7 billion in profit. In terms of financial income and expenses, etc., due to the deterioration of foreign exchange gains and losses, profit decreased by 8.5 billion yen, corporate taxes decreased by 4.9 billion yen due to the decrease in pre-tax profit as well as a decrease in the effective tax rate compared to the same period last year. As a result, profit attributable to the owner of the company for the current period increased by 100 million yen compared to the same period last year to 85.5 billion yen.

Next time we talk about business update, please turn to page 9. This page shows the status of Enherd and Dutroway performance. First, I'm going to explain Enherd. FY 2025 first quarter product sales increased year-on-year by ¥25.6 billion to ¥155.2 billion due to sales growth mainly in breast cancer. Across main countries and regions such as the United States, Europe, Asuka and Japan, Enherd has maintained the No.1 new patient share in each of the existing indications including breast, gastric and lung cancer and established its position as a standard of care. As for chemo-naive, HR-positive, HER2-low or ultra-low breast cancer, since we started promotion in January this year in the United States, solid progress has been made in market penetration. We have already acquired more than 50% new patient share and maintained the No.1 market share. In Europe, we obtained approval for the same indication in March and started promotion in April. With regards to how to lower breast cancer post-chemo, in main countries in Europe, such as Germany, France, Italy and Spain, we have maintained the number one new patient share. In addition, in France, reimbursement started in public sector in April. In China, sales are increasing steadily following the inclusion in the NRDL National Reimbursement Drug List in January this year for each breast cancer indication.

Next, I will explain about Datoroe. Sales for the first quarter of 2025 reached 5.3 billion yen. approved for hormone receptor-positive and HER2-negative breast cancer with a history of chemotherapy. The product was launched in the United States in January and in Japan in March, and sales have been steadily increasing. We have updated our full-year forecast to ¥21.6 billion, an increase of ¥16.9 billion from the April forecast. For better management of adverse reactions such as rheumatitis and dry eyes, we distribute pamphlets to educate patients on preventive care and treatment methods, as well as educational activities for healthcare professionals. In Europe, we launched in June, following the approval for the same indication. Additionally, in the United States, we have initiated promotion for EGFR-mutated NSCLC with a history of prior treatment with EGFR-targeted therapy and platinum-based chemotherapy. And it has been adopted in the NCCN guideline, and we have started a promotion in June. We will deepen its penetration where it's already launched and expand further with new launches in other countries and regions. Acquiring approvals on new indications, we will deliver MH2 and Datroy to as many patients as possible who needs them. Finally, even though we haven't prepared slides for this, we would like to provide an update on the setting of the cap on share buybacks we announced in April as we received many inquiries. Although it's still the period for the buyback, no shares have been acquired to date. We will consider share buyback as to the 200 billion yen of the cap, comprehensively considering factors such as stock price levels and execute it when conditions are met. Although we have prepared for flexible share buyback, we will commit ourselves to achieve DOE of 8.5% of this fiscal year even if we do not acquire own stocks. We will continue to provide returns to the shareholders through increase in dividend proportionate to the profit growth and flexible share buyback to enrich the shareholders' value. Regarding U.S. tariffs and most favored nation treatment for drug prices, in relation to the external environment, we were closely monitoring the situation and taking measures to minimize the impact. Especially in terms of the tariff to minimize its impact, we are trying to expand our own production capabilities in the United States among other options being considered. We believe the impact to this fiscal year's business performance will be limited at this point even though it may have been introduced since we have already adjusted inventory levels for ENHA2. So this concludes my presentation, and now for the research and development update, I'd like to hand over to Abe-san, Head of Research and Development.

Abe speaking. I'm going to talk about R&D update. First, an update on five DXD ADCs. Please turn to page 12. As part of the progress of N-Hert clinical development in HER2-positive breast cancer, I'm going to use two pages to explain Destiny Breast 09 study we presented at ASCO this year. Destiny Breast 09 is a Phase III study to evaluate the efficacy and safety of N-Hert with or without peritudumab versus standard of care, THP, In first line, HER2-positive advanced or metastatic breast cancer. Primary endpoint is PFS. Secondary endpoints include OS and ORR objective response rate. At ASCO, we reported interim analysis results. In the N-HERT monotherapy arm, evaluation is ongoing. On page 13, I will share the data we presented at ASCO. Enhert in combination with Peltudemab showed statistically significant PFS extension compared to the standard of care arm. The median PFS was 40.7 months in the combination therapy arm with 44% reduction in the risk of disease progression or death compared to the control arm. Clinically meaningful PFS improvement was demonstrated. Safety data in the combination arm was consistent with known profiles of individual treatments. The majority of ILD events were low-grade. Two Grade 5 ILD events were reported. Based on the study results, NHERT, in combination with piltuzumab, was granted breakthrough therapy designation by US FDA in July. We will share efficacy and safety data with regulatory authorities towards regulatory submission, aiming to establish a new first-line treatment for HER2-positive breast cancer. Please turn to page 14. I will give you an overview of DESTINY Breast 11 study. We are evaluating the efficacy of NHERT followed by THP in HER2-positive early breast cancer neoadjuvant settings. N-HERT THP therapy demonstrated statistically significant and clinically meaningful improvement in the primary endpoint of PCR pathological complete response compared to the standard of care DDHC THP therapy. No new safety signals were identified. safety profile of NHERT-THP therapy was favorable compared to the standard of care in the control arm. We will present the data at ESMO 2025. On page 15, I will explain our efforts to establish an earlier treatment of HER2-positive gastric cancer with NHERT. DESTINY-GASTRIC-04 is a Phase III study to evaluate the efficacy and safety of N-HERD monotherapy versus the current standard of care, ramucilimab and paclitaxel combination therapy in second-line HER2-positive gastric cancer and gastroesophageal junction adenocarcinoma. In the interim analysis, N-HERD demonstrated median OS as primary endpoint of 14.7 months, showing clinically meaningful improvement. with 30% reduction in the risk of death compared to the control arm. NHERT is already approved for second-line HER2-positive gastric cancer in the United States and Europe. If the second-line indication is established in Japan based on this data, N-Hert is expected to become a global standard of care indicated for HER2-positive gastric cancer and gastroesophageal junction adenocarcinoma in the second-line settings and beyond. From page 16, I am going to explain two phase 3 studies as a new challenge N-Hert is taking on in the field of gynecological cancer. First, DESTINY endometrial O1 study in HER2 expressing mismatch repair proficient endometrial cancer. DESTINY PANTUMER 02 study, which we presented at ESMO 2023, demonstrated encouraging efficacy signals of N-HER2 in HER2-positive endometrial cancer. Based on that data, we will evaluate the efficacy of N-HER2 in combination with real vagal stomach or N-Hertz in combination with Pembrolizumab in primary stage 3, stage 4, or recurrent endometrial cancer in the first-line settings. We initiated the study in June this year. On page 17, I will explain the other phase 3 gynecological cancer study for N-Hertz, Destiny Endometrial O2 Study. This is a study to evaluate the efficacy of NHERT for adjuvant therapy in high-risk HER2-expressing endometrial cancer with no evidence of disease post-surgery. Primary endpoint is ADFS . Aiming to cultivate early identification of HER2-expressing endometrial cancer, and establish a curative treatment, we are planning to start this study in the second half of FY2025. Please turn to page 18. As a new formulation of NHERT, we initiated the development of a subcutaneous formulation containing hyaluronidase. Currently, NHERT is administered intravenously, but subcutaneous formulation is expected to provide shorter injection time, reduce the burden, and enhance convenience for patients contributing to better QOL. Phase 1 study consists of dose escalation and dose expansion parts. In the first half of FY2025, we plan to initiate the study. Based on this study outcome, a registration of study is to follow. From page 19, I will cover Datoroei. The first indication for Dutraway was HR-positive HER2-negative breast cancer. In June this year, we obtained Dutraway's first approval for lung cancer in the United States. Dutraway was approved for the treatment of patients with locally advanced or metastatic EGFR-mutated NSCLC previously treated with EGFR-targeted therapies and platinum-based chemotherapy. Based on the results of Tropion Rang 05 and Tropion Rang 01 studies, the indication was granted accelerated approval following breakthrough therapy designation and priority review. Right now, Tropion Rang 15 is ongoing as a confirmatory study. On page 20, I will explain the results of Kuniko study data analysis using a biomarker candidate in NSDLC. QCS is a novel computational pathology approach that precisely quantifies and locates targets. TropII NMR by QCS potentially predicts the efficacy of Dutroway through analyzing the TropII expression in the cell membrane relative to total TropII. Tropion-Lang O2, shown here, is a study to evaluate the efficacy and safety of Dutraway and Pembrolizumab with or without platinum chemotherapy in patients with non-actionable genomic alteration NSEOC. In the analysis of first-line treatment as a whole, which we presented at ASCO, Both doublet and triplet showed durable anti-tumor activity and tolerability of the combination was also good. TROP2-NMR was applied as a biomarker to TROP1-Lang02 study data and retrospective analysis was performed. And in TROP2-NMR positive patients, improvement of both PFS and OS was observed compared to negative patients. Out of the ongoing phase 3 studies for Dutraway, we plan to stratify the patients based on TROP2-NMR as a biomarker in Avanzar and TROP-Lang10 studies. On page 21, I will explain HER3-DXD. HER3-DXD has been under development for EGFR-mutated NSCLC as the first indication. Based on HERCINA-LANG01 study results, our regulatory submission was accepted in the United States in December 2023. Its confirmatory study, HERCINA-LANG02 study, met primary endpoint, PFS, without any new safety concern. However, based on the subsequent OS results from Haseena Rang 02 study and our discussions with USFDA, our application based on Haseena Rang 01 study was voluntarily withdrawn in May this year, as was already announced in a press release. On the left, you can find PFS and OS data from Haciena Lung O2 study, which we presented at ASCO this year. HER3-DXD is under broad clinical development across multiple solid tumors, including Haciena Breast O4 study, which I will explain on the next page. The position of HER3-DXD in a pipeline has not been changed.

Please now look at slide 22. The Herthena Breast 04 study is a new phase 3 study evaluating HER3-DXD for hormone receptor-positive HER2-negative metastatic breast cancer with progression after CDK4-6 inhibitor as the first-line therapy with BFS and OS as the primary endpoints. As a prerequisite of this study, ACARUS Breast O1, a Phase 2 study, confirmed the efficacy of HERD3-DXD in the setting of post-first-line CDK4-6 inhibitors and chemotherapy. The Herthena Breast O4 study is scheduled to begin in the first half of this fiscal year. Now, please look at slide 23. We obtained promising data of the I-DATE lung 01 phase 2 study in April this year, evaluating IDXD's efficacy as a second line and beyond on extensive stage small cell lung cancer. In this study, we compared 8.0 mg per kg and 12 mg per kg doses, and 12 mg per kg was chosen in the dose extension part. Data will be presented at upcoming congresses. In extensive stage small cell lung cancer, in addition to this study, 88 lung O2 study, a phase three study, a second line therapy is ongoing. Slide 24 summarizes the progress of other studies and approval status of five DXD ADCs. We have initiated a phase one to study of HER3-TXD on refractory pediatric cancers. We have initiated two Phase III studies of IDXD, namely ED8-esophageal O1 study on esophageal squamous cell carcinoma as a second-line therapy, and ED8-prostate O1 study on chemo-naive metastatic castration-resistant prostate cancer. We have begun two R-DXD studies, namely REJOICE-GI-01, a Phase II study to explore signals for gastrointestinal cancers, and REJOICE-OVARIAN-02, Phase 1B2 study, evaluating combination therapy for ovarian cancer recurrent after platinum-based chemotherapy. From slide 25, we will talk about the next wave update. First, please look at slide 26. We have been actively conducting research on immuno-oncology and acquired several candidates for further development. and one of these is the IOADC, namely ADC effective on cancer immunity, which we are introducing today. DS3610 is an ADC that combines a sting agonist with an antibody. By deliberating our proprietary sting agonist to cancer tissues, it activates anti-tumor immunity locally in the tumor. It employs a novel SC modification technology which is expected to diminish systemic cytokine release. In the preclinical research, we have confirmed the activation of immune cells and sustained anti-tumor effects and combination effects with variety of therapeutic agents were observed as well. We are planning to begin DS3610 first in human study in the second half of this fiscal year. From slide 27, we will discuss updates on the licensed-out products.

Now please look at slide 28.

Tilectinib is an oral ROS1-NTRK inhibitor. We have discovered as DS6051 and licensed out to Anchored Therapeutics in 2018. And currently, Nuvation Bio has extensive exclusive rights to develop, manufacture, and commercialize it worldwide. This titrectinib received approval in January in China and in June 2025 in the United States, indicated for locally advanced or metastatic ROS1-positive non-small cell lung cancer. We are pleased that the asset we have discovered will be able to contribute to treating patients. Next. We would like to make announcements on IR events associated with WCLC and ESMO. Now please look at slide 30. We will be hosting IR events in association with WCLC and ESMO. For WCLC, September 18th at 8 a.m. Japan Standard Time, and for ESMO, on October 21st at 9 p.m. Japan Standard Time. Both events will be held virtually. Slide 31 onwards will cover the upcoming news flow. Now please look at slide 32. As for presentations at major congresses, we plan to present the results of the intracranial efficacy analysis of the Tropion Lung O1 study at WCLC 2025. At ESIMO 2025, primary analysis of Destiny Breast 11 study and the data presentation of Tropion Pantuma O3 study, as well as first data presentation of DSA. 3939, the next DXDA-DC following five DXDA-DCs, among others. Regarding regulatory review outcomes, for the Destiny Breast-06 study from Japanese authorities, for Tropion Breast-01 study from Chinese authorities, we expect to receive a review result in the first half of this fiscal year. Regarding the anticipated timing for obtaining key data in the near future, The data of NHA2's ADESNY breast O5 study is expected to come out in the second half of this fiscal year and DATROA's TRIPON-TROPION breast O2 study for triple negative breast cancer as the first line therapy in the second half of this fiscal year. Incidentally, the timeline for obtaining data from DATROA's AVANZA study is now anticipated to be the first half of calendar year 2026. Slide 36 and beyond are the appendices for your later reference. This concludes my presentations.

Now we'd like to move on to a Q&A session. You can ask questions either in Japanese or in English. If you have multiple questions, please ask your questions one by one. Each person can ask up to two questions. If you have a question, please press the raise hand button at the bottom of your screen. First question. Mr. Yamaguchi from City Group Securities, please. Can you hear me? Yes. Hello. Yamaguchi from City Group Securities. Thank you for your time. First about Avanza study, the timing of disclosure has been postponed from later this year to early next year. It's an open study. At the end of last year, enrollment was completed, as I heard before. The reason for the delay, I think, is because of the events. If there is a delay in general, We feel a bit worried. Any impact on the probability of success? It's not blinded, so I'm sure you know the data. Anything you can share with us?

Abe would like to respond.

Yamaguchi-san, thank you very much. Regarding Avanzar study, we are waiting for the results as well, but it's being postponed. AZ is very confident in its development. We don't have any further information on our end, so we will do what we can do. That's our stance. There's no other impact according to our view. Understood.

Another question about IDXD.

I just recalled your commentary before, and promising data will be available in April, and I thought you said that at the last time, or is it the very first time you say this? No, this is the first time. And based on that, since you say this is promising, so in a very early stage, you may be able to file for approval or do you have to wait for additional studies otherwise you cannot go to registration and you say the data is promising and then if it is good enough for the early approval then I'd like to know that thank you thank you for your question detail of the data will be presented at the Congress and at this moment We just can communicate that we got the promising data. And before going to the filing for the approval, to the timing of when the filing is accepted by the authority, then we'd like to make an announcement separately. So you are not really commenting whether you are going to go for the filing or not? No, not yet. That's something we are going to consider going forward. Thank you.

It's not in time for WCOC, so it's difficult for you to say the timing, like when. We are going to present the data within the end of this year at Congress. I see. Thank you very much. That's all from me.

Next question from Hashiguchi-san of Daiwa Securities, please.

This is Hashiguchi speaking.

Good evening. The first question is about the DB02 study and this result. How will it be reflected to the clinical practice? And the doctors amongst the physicians or clinicians, some of them may continue the combination therapy until the progression of disease, or rather, If they see the response to a tumor shrinkage, then they may stop doing HER2 and then switching to other maintenance therapy for considering the balance with the safety. I believe some physicians are thinking like that. Of course, there's no evidence that that is the better way or right way to do, but if this regimen is approved, and then how will that be actually used? And evidence tells that you can continue until the progression of disease. So most of the cases, the drug will be used in such a way, but are you going to consider that kind of usage going forward? Or practically speaking, there is a possibility that there may be many different uses considered. Then to answer such clinical question, Are you going to collect the evidence? Do you have any plan to collect clinical evidence to answer such questions? Thank you. Thank you, Hashiguchi-san, for your question. So the first question, actually the speaker didn't work, but you are talking about DP09, right?

Yes. Thank you.

Yes, and I would like to point this out to the development departments. And at this moment, DBO9 interim results analysis, and then from the evidence, the exacerbation or the adverse events, or the desire of the patients in SARTU will be continued and considering the risk over benefit and the benefit of the risk. But what you have just pointed out is going to be discussed amongst our development team. Thank you for your comment.

Thank you. Understood. So at this moment, You are not really having any consensus in the clinical practice in terms of the right duration of administration.

We are going to get the approval in the first-line usage. That's it. Thank you.

Secondly, I have a question about Datorage. Your sales are forecasted. revision in May, or rather in April, there was a forecast, you made a lot of changes or revisions. Compared to your assumptions, what was different? How did you change your assumptions in what respect? Any specific comment? Thank you for your question. Regarding the changes in the assumptions in detail, There's nothing, unfortunately, we can explain, but with regards to the market penetration, I have not been able to predict the market penetration accurately. That's why there is a big gap, but it's a positive gap. The adoption at institutions is making steady progress.

In Japan, U.S.

respectively, initial uptake has been positive and strong, particularly in the United States. HR-positive HER2-negative breast cancer, late-line settings, share is rising there. In lung cancer, we have just started. It's going to be seen from now on. In lung cancer, there are high unmet medical needs in the target patient population, so there are needs to a certain degree in our view. At any rate, regarding our revised forecast, the proportion in cells with cancer has a large proportion.

That's all from me.

So most of the revision is from breast cancer, right, in the current forecast. That's all from me.

Next question is from Wakao-san of JP Morgan, please. This is Wakao of JP Morgan.

Can you hear me?

Yes, very clearly. Thank you.

Good evening.

I have a question. In the first quarter of this year, the growth margin was quite favorable, and are there any special factors, or is it just because of the product mix? That is my first question. Thank you for your question. In principle, it is coming from the product mix. Enhatsu and Ericssiana are selling very nicely. This is the first quarter result, so this may change going forward. But in the latter half of the fiscal year, that we will be selling more vaccines, and as the cost ratio, the vaccine may give some impact. So, the annual rate, the cost ratio is as expected, but the major factor is the product mix. Thank you. So, ENHA2 and that way, margin didn't change, right? No. No, we do not expect.

As a follow-up question, profit share looks small.

Any special factors here?

Nothing we are aware of.

No particularly special background. I heard that way profit sharing regions based on other sales and half of the gross profit is booked. Yes?

Yes. I know nothing coming over the different period.

And when we consider the tariff impact, then can you eliminate the impact Well, of course, we need to consider the duration. And there is a grace period of one year, one and a half years. Some companies are telling that they are going to bring the manufacturing site all over to the United States. And of course, you are considering the manufacturing site in the United States. But if the duration of the grace period is only two years, then how much can you make a transfer? Do you think that you can make a sufficient amount of the transfer during this period?

Thank you for your question.

Yes, we are still considering that seriously and investigating that. And in a timeline, it is told that one and a half years or two years, and we are now considering what we can do in that period. And production location, especially in terms of ADC, we have the steps. to manufacture such as the antibody conjugation or whatsoever. So what would be done where? And considering the TARIS mechanism, we are considering a variety of different scenarios so that we can cope with the situation as much as possible. And that actually will depend upon the amount and also the rate of the tariff. It should also be considered. Therefore, it really depends upon the tariff rate. And on top of that, in a two-year timeline, how much can we prepare? Apart from that, internally or maybe externally manufacturing site, may be considered and also aware what we put in what part of the world in terms of our supply chain, and we are now considering that internally. Thank you, understood. So, no problem for this term, but we may expect uncertainty in the next year. Well, of course, it really depends upon the trade rates But if the tariff rate is not that high, then you believe that it's manageable. Well, of course, it really depends upon the rate and also how the tariff is levied in what part. And of course, it really depends upon how the financial evaluation or the amount will be evaluated. So it really depends upon those factors. It's so difficult to make any forecast of a specific amount of the financial impact. Thank you.

Once the rules are determined, please let us know. That's all for me. Thank you very much. Next question. Biobay Securities, Mamegano-san, please.

Thank you very much.

Mamegano from Biobay Securities. Can you hear me?

Yes. Thank you.

As Yamaguchi-san asked the question, there is some overlap with his question. I'd like to know about the data in small cell lung cancer. In the dose expansion part, there's going to be promising data. Does that include dose extension as well? Last year at WCOC, 80 mg was already presented at the Congress. for the 80 cases, rather. But the additional 100 cases are included in the data? Yes. There's a mention of dose extension, but dose expansion is included as well, although the slide says dose extension. Understood.

Thank you.

I'd like to confirm. In the earlier question, by the end of this year, you're going to present at Congress. by the end of December?

Yes, understood. Thank you very much.

Another question is about HER3. HER3, you mentioned the result. What is the population? It may be overlapping with TB06. Is there any cannibalization you are considering or not? And how are you going to market HER3? Thank you for your question.

There's no overlap.

But for TPC, the physician can choose if they like. Therefore, the study is designed in such a way. But her 3D XT with the Icarus O1 breast study, it has a very good result or promising result. Therefore, HER3-DXD is the area that it covers, and also we have a different safety profile. Therefore, having more option for the treatment, we would like to focus HER3-DXD in this area. Well, I don't understand what you mean by not overlapping the HER2 negative. breast cancer, that is IHC0, but also 1 plus or 2 plus, you are talking about heart low or outer low, are included, right? Am I correct? Well, I would like to explain more. And Hasina breast O4 study, CDK4-6 inhibitors and also endometriosis, and the hormonal therapies, and following that therapy, it will be used. Therefore, there is no direct competition with a CD4-6 inhibitor. And let me also repeat, and the TPC group and EN-HATU can also be an option, so doctors can choose it if they like. So that is the situation. But still, as I said, that HATU-DXT is going to be developed in this treatment line. That is our idea. So that may be used before the ENHA-2. You are considering that, too? Yes. Yes, that's right. So yes, that's why we are designing the study in that way. Next question.

Sanford Bernstein, Nissogi, please. Thank you very much.

First,

At ASCO, you presented on TLO2 QCS analysis.

By looking at that data for avant-garde study, positive results can be expected with higher confidence. On your end, doublet results were very good.

If you look at the patient population and the dose being used, that was different from the triplet cohort. Still, the results were very good. So based on these results, what kind of clinical studies are you going to proceed in lung cancer with Dutterway? Thank you for your question. You asked two questions.

First, biomarker candidate.

And with the higher possibility or probability or development of a right-of-way in lung cancer in NSTLC, if there is a biomarker, we have a higher probability that is a learning for us. That's how we see this. That's one answer to your question. Next, doublet and triplet results were available, and recruitment was not so sufficient, so we are going to do more. But as for learning, in both triplet and doublets, there was sustained efficacy we are able to confirm. treatment option is being expanded. TLO7 or 8, based on our ideas, we are proceeding, including Avanzar, what kind of combination therapies are good, we'd like to discuss, and based on the results, we'd like to proceed with new clinical studies. Did I answer your question? Thank you.

I have another question. Enharts subcutaneous formulation is what I'd like to talk about. And Enharts has a variety of indications right now. But ultimately, phase three should be carried out by a different indication. Thank you for your question.

First, we

have to do the clinical study for the subcutaneous formulation. That is the beginning. And then the target population. Oh, thank you. I will be now checking. Yes, well, development, that would be discussed going forward. Thank you for the answer.

Next, Morgan Stanley, MUFG Securities.

Mr. Madoka, please.

Thank you very much.

Muraoka from Morgan Stanley speaking. First question. Share buyback.

You have not used the limit yet.

You have not reached the criteria yet. If I may, the stock price was in the early $3,000 level, but you don't think that it's a low level. Is my understanding correct?

Thank you for your question. It's difficult to judge. As for the stock price, There are a variety of factors for the share price.

So, looking at the stock prices, whether our corporate value is reflected completely, there may be some of the enterprise value which may not be fully reflected in our view. But still, reacting to everything is by back our shares, no, that's not really the case. We have to consider comprehensively. We will look at the stock price level to execute share buyback, and that's why we set the limit for share buyback. And you may wonder what kind of conditions we have set, but as of now, We will judge comprehensively and be flexible. That's why we have set the limit.

Thank you very much.

In other words, the stock price of 3,200 yen or so, if that is that low, you didn't execute that exercise. but once the year has ended, then the DOE, well, if the unused portion could be returned to the shareholders or not. Can we see the situation in such a way? Well, the stock price level, of course, it really depends upon the consideration timing and also it depends upon the background. In April, When we set the cap of the buyback and it was written in a press release, and in the release, considering the stock price level and we would be operating flexibly, that was stated in the press release, and based on the stock price the market condition we may exercise or we may not exercise a complete amount until the limit and in the financial result the summary and in that we have also made an announcement of the comprehensive decision of our securities and for we have to make investment for the long-term growth therefore we have to make capex investment and also we have to invest to r d and at the same time the business is expanding and also operating cash is now expanding so we have to consider these factors but at the same time we would like to establish a good balance to the return to the shareholders and in terms of the return to the shareholders And our policy is that stable dividend payment and proportionate to the increase of the profit, we will increase the return. So we have committed the DOE of 8.5%. Thank you. Thank you very much for your answer. One more question about Datoway.

On page 39, there was a future milestone, TLO7 or 8, by the end of next fiscal year, according to the update. Oh, it's earlier than before. And Avanzar is being delayed. It may become available almost the same timing or later in the fiscal year, TLO7, TLO8 do not include biomarkers. QCS is not included in here. Even without QCS, it's going to be fine. What's your rationale? Why you think so? Thank you for your question. TLR 07, 08, FY2026, according to a discretion of the slide. When is that? Please allow us to refrain from commenting on that specifically. The other question was about QCS. It's not included in these studies, but is it going to be fine? What's the rationale behind? Why do you think it's going to be fine? in all seven or eight studies we have a clinical study results to date so we are proceeding with confidence and also qcs nmr for patients is desirable if that's the case what to do with this we will do our best in development we are discussing internally so Regarding how we are going to proceed, it's now under consideration and discussions. TL 07 or 08, we are proceeding with the development with confidence right now.

Okay, so QCS is not included in both of them. Am I correct? Yes, that's right. Yes, that's correct.

Understood.

Thank you. That's all for me.

Next question from Goldman Sachs.

Ueda-san, you have the floor. Well, let me move to Sakai-san on UBS securities, please. Well, it took some time until I can release the mute. Yes, I can hear you. Well, the time is limited, so I would like to just one question. Abe-san, this is a retrospective question. I'm sorry about that. On page 21, her three data, and when I look at OS data, and actually there's no difference or rather, placebo or the standard of care versus this seems to be better than the drug. So it's so difficult to verify this, but what actually is causing this phenomena? Have you analyzed that? And based on such a result, once you get a PFS, You have two endpoints, and you are going to use PFS first for filing, and then you will follow up with the OS data later. And can you do that? And have you discussed that matter with Merck? And as lessons learned for the future, I'd like to ask for your comment. Thank you. The most important part is the lessons learned after the clinical trial. So what it actually means is now being discussed at the working level. And we have also learned that ORR or PFS And when we cannot expect the OS extension, then what data will be required so that we can carry out the clinical trial to get the early and expedited approval? That's now being discussed also.

That's what we can tell you right now.

Once you conclude the discussions, please give us an educational lecture. Can we ask you? Lessons learned should be shared, so including Congress in a formal way. We'd like to present even in such a format. We'd like to have another opportunity to explain. Thank you very much for comment. Your comment is heard. Thank you very much. Thank you.

The next question is from Barkerson from Jefferies.

Please go ahead. Thank you very much.

And my question is about the share buyback. And according to your presentation, The major goal and the purpose is the DOE KPI to achieve. So I believe this is one of the tools to achieve that. That's my interpretation. And looking at the result, you have more profit than you have originally planned. Then without a share buyback, you may be able to achieve DOE. Therefore, there's no necessity for you to buy back the share right now. Am I correct? Thank you for your question. In terms of DOE, as I have just explained, the 8.5% can be achieved without any share buyback.

That's how we see it.

But on the other hand, in terms of the share buyback, considering the stock price level, we would like to be flexible. That's what I have just said, and that's our position right now. So stock price level and the situation in the stock market, we will behave flexibly.

Thank you.

Understood.

The last question is from Tony Rensan from Macquarie. Please go ahead.

Hi there. Can you hear me?

Yes.

Okay, perfect, yeah. So first of all, a quick one. So about your effective tax rate on slide number seven, it looks like there is quite a bit of decline in the first quarter compared to previously. Do you think this is sustainable?

Thank you for your question.

Corporate tax rate this year in the first quarter, if you look at the tax rate on a quarterly basis, it's calculated based on the simplified method or abbreviated method. This can be subject to change. The tax rate expected in FY25 is 19.9% we're expecting. but this can be subject to further change from now on.

Okay, perfect.

Thank you very much.

I would like to ask about your new sting agonist ADC, DS3610. So first of all, about the mechanism of action here. Looking at the cartoon, historically, all your ADCs have been internalized by the tumor cells. the payloads released conditionally within the tumor cells. Looking at the cartoon, it looks like here it's the T cells that's doing the anti-tumor, eliciting the anti-tumor activity, and the payloads will be released into the tumor microenvironment. Just want to understand if my understanding is correct.

Thank you very much for your question.

The detail of this research, in the interest of time, will be explained more in detail in other opportunities. This is our original sting agonist, how it is released, including that information, and at the time, we would like to give you the information, but we are very glad that you are interested in that.

Okay, perfect. Yeah, we look forward to more information on the antibody linker and the payload. Yeah, thank you.

I see more hands, but we have exceeded the scheduled closing time. So with this, we would like to conclude today's financial results reporting. And if you have more questions, please contact our IR or the public relations members. Thank you very much for your attendance and attention.