Shionogi & Co Ltd

My name is Kyokawa from Shionogi PR Department.

Thank you very much for joining us today. This is Shionogi, the financial briefing of the result of the first quarter of 2024. Let me introduce who we have today. First, Dr. John Keller, Senior Executive Officer, Senior Vice President. Senior Vice President, Healthcare Business Supervisory Unit, Dr. Iwasaki. Senior Executive Officer, Senior Vice President, Supply Unit, Dr. Hanazaki. Senior Executive Officer, Senior Vice President, Corporate Business Strategy Division, Dr. Hata Naka. Corporate Officer, Senior Vice President, Dr. Uehara. And then, Vice President, Finance and Accounting, Dr. Kudo. Now let me briefly explain the format for today. We'll introduce the result of the first quarter and also the progress of the pipeline, followed by a Q&A. We are planning to complete the session at 5 o'clock. As to the financial results, Dr. Kudo and Dr. Hatanaka will have a briefing, and then Dr. Wihara and Dr. John Keller will talk about the progress of the pipeline. Today, we have the vice presidents from four divisions and also the head of the R&D and head of finance. We are ready to answer any questions. And now, let me explain simultaneous translation. Simultaneous translation is available today. If you wish to use simultaneous translation, please choose either Japanese or English by clicking the globe icon. Now, let us start. Dr. Kudo. I'll explain the overview of the first quarter financial results. Please refer to page 4 for the highlights. At the left side, revenue was ¥97.6 billion, down from ¥109.3 billion in the previous year. The main reason for this decline was the ¥25 billion one-time payment from the transfer of the ADHD drug license in the first quarter of the previous year. Excluding this, revenue increased by ¥13.3 billion due to significant growth in royalty income and overseas business. Additionally, for all profit items, excluding these one-time factors, we achieved both revenue and profit growth, with operating profit increasing by 6.5 billion yen. Next. Regarding the consolidated financial results, the results were revenue of 97.6 billion yen, operating profit of 228.1 billion yen, profit before tax of 36.5 billion yen, and quarterly profit of 30.6 billion yen. Overall, it might seem that progress against the first half forecast is weak. But this is because we have projected higher sales of Zocova in the domestic market for the second quarter, and the first quarter results are better than expected, thanks to strong growth in the HIV business and overseas business. Despite the significant impact of the one-time payment of the ADHD drug license last year, resulting in decreased revenue and profit. As mentioned earlier, excluding this one-time payment, we achieved revenue and profit growth in all profit items. Regarding foreign exchange, due to the yen depreciating more than expected, we recorded foreign exchange gains in each currency. Moving on to page 6, statement of profit and loss. As mentioned, revenue started with a negative impact of $65 billion, due to one time factor from the previous year. However, thanks to the steady performance of the HIV in overseas business, we achieved better than expected results. On the other hand, cost of sales increased by 10.1% from the previous year. This is due to changes in the product mix, such as the growth of our overseas business, and the result is in line with the first half forecast. As for SCNA, as indicated in our mid-term plan, we are currently forecasting on global expansion. We have increased spending on strengthening our global sales infrastructure compared to the previous year. For R&D expenses, the 70.7% increase year-on-year is due to the smooth progress of our development pipeline and the inclusion of QPEC's R&D expenses. which are not recorded in the first quarter of the previous year. Additionally, both SG&A and R&D expenses are more impacted by foreign exchange due to our expanded global activities this fiscal year. While operating profit and quarterly profit appear to have decreased year-on-year, considering that the 25 billion yen one-time factor from last year was recorded without any expenses, our business is progressing very well. Next, on page 7, revenue by segment. For domestic prescription drug, due to the 25 billion yen one time last year for ADHD drug license, there was a significant impact, resulting in 66.4% decrease year on year. Regarding infectious disease drugs, which we will explain in more detail later, sales have been increasing in response to the epidemic situation. For overseas subsidiaries and exports, revenue from Sefidero coal increased by 50.5% in the US and 45.7% in Europe from the previous year. While foreign exchange had an impact, sales volume also steadily increased due to the expansion of sales countries and the growth of sales in existing markets. Regarding royalty income, the HIV franchise saw significant growth due to actual sales and foreign exchange effects. Progress has already exceeded 50% of the first half forecast, and we expect to land at around the same level as the current forecast for the first half. That concludes my expansion. This is Hatanaka speaking. Let me present the achievement of the first quarter. Please refer to page 8 for the HIV franchise. The graph on the left shows the quarterly transition of Shionogi's HIV royalty income. While there are slight fluctuations in quarterly income for various reasons, it can be seen that it has been increasing very steadily in the mid to long term. Compared to the first quarter of the last year, It's increased by 15.5 billion yen. The main factor driving the steady growth is the expansion of market share of new products, including LA formulations. The graph on the right compares the sales of six products, including beefs, doltegrava and kaltegrava, with the last year. The dark color represents the sales of new products, including LA formulations. And as you can see, the sales of new products have grown significantly. Especially for LA formulations, sales have increased by a strong 76.8% year-on-year. We anticipate continued growth centered on new products. Next. This is overseas business. Overseas business is achieving steady growth centered on Cefidelo Call. The graph on the left shows the quarterly sales transition of overseas business, which has increased significantly by 3 billion yen compared to the previous year. Regarding Cefidelo Call, Sobi, which signed a sales agreement last year, has started sales in Central and Eastern Europe. and we anticipate further penetration of prescription in existing markets and expansion into new sales countries. In China, we've achieved a primary endpoint in the Phase 3 trial and are preparing for the approval application. We'll continue to aim for further growth in the overseas business, including through Pingyang Xiongnoji. From now on, I'll explain the situation regarding acute respiratory infections, particularly COVID-19. The graph on the left shows the transition of COVID-19 and influenza infection trends. Since the first quarter of FY24, which the influenza epidemic has rapidly subsided, COVID-19 infections have gradually been increasing. Next, the graph on the right shows the sales of acute respiratory infection drugs for the first quarter of the past few years. Like last year, sales of influenza family were almost zero in the first quarter of this fiscal year. while sales of Zakova were recorded to a certain extent. Traditionally, there has been almost no sales in the accused respiratory infection area in the first quarter. However, by having treatments for both COVID-19 and influenza, we are becoming able to secure certain revenues. Regarding acute respiratory infections, by having multiple infectious disease assets, we are steadily building a new business model aiming to always secure a certain level of revenue. Next. Again, about COVID-19. This is detailed overview of the prescription of Zocoba. This shows the trend of prescription rates for oral COVID-19 treatments since February this year. Although the special measure for full public funding ended in April, increasing the out-of-pocket costs for patients, the importance of early treatment with antiviral drugs has become well recognized, so the prescription rate has not declined much and is gradually increasing. Additionally, there is a trend of rising prescription rates as the number of infections increases, and we anticipate that the prescription rate will continue to expand. This shows the share transition of three oral drugs with the red line indicating the cobalt share. Amongst the three, the cobalt share is increasing. Especially since April 24, with the expansion in prescriptions for patients with risk factors for severe diseases. Later in this session, we'll introduce various real-world evidence accumulated for the COVA, such as its effect in preventing hospitalization in patients with risk factors. We'll continue our efforts to ensure that the COVA reaches the patients who need them. This is the summary of the first quarter and outlook for the first half of 24. As mentioned, the top line is steadily progressing, driven mainly by the HIV business and overseas business. Excluding one-time factors, we achieved year-on-year revenue growth, indicating a solid earning capability. Regarding the Koba, we anticipate a wave of COVID-19 infections in the second quarter, and a first-half forecast is weighted towards the second quarter. Given the steady expansion of the Koba's market share, we expect to achieve the first-half revenue forecast. We'll continue to strengthen our efforts to prepare for the expansion of acute respiratory infections. On the COTS side, while maintaining meticulous cost management, will prioritize and actively promote R&D. Considering the achievements of the first quarter and our future initiatives, we currently expect to meet a first-half forecast. That concludes my explanation.

This is Uehara from R&D, and I would like to give you an update on the progress of our pipeline. First, with regard to 309309, this is a MGAT2 inhibitor for anti-obesity. And as we have explained in the R&D day held in June, We were unable to confirm the 5% or more weight loss effect of a single drug, which we had set internally. On the other hand, since this is a new mechanism action and there are still unmet needs in the anti-obesity drug market, the safety risk and also from the cost perspective, we would like to seek for a way to have this used as an add-on and also as a maintaining weight loss after discontinuing GLP-1 agonist, we will be able to provide less expensive and safe and convenient oral regimen So for add-on and for maintenance, we are conducting a clinical study. And at the timing of the latter half of this year, we will be able to provide you with a result of the study. And we would like to consider the design of the clinical study and also the partnering engagement as well. based upon these results. Next, I would like to give you some clinical data update on citroen bill. In Japan, on the right-hand side, as you can see, this is the post marketing data, and there has been data for patients with risk and without risk, and there has been No changes from the clinical study results. We have been able to confirm the characteristic of the drug in the actual practice. On the left-hand side, we see the effectiveness in reducing hospitalization, and it is a... large-scale Japanese health insurance claim database where we have made analysis and we will give you some details in the following slides. In the patients with serious disease or severe disease risk factor, we have been able to show that there is evidence that the risk of hospitalization was statistically significant reduced by a certain percentage. And also here, 167, 310 COVID-19 outpatients were given the drug and we have collected the data of these patients and the hospitalization rates of one month after the administration has been investigated and we have been able to aggregate the number of the a reduction of the hospitalization of such patients and we have been able to confirm that the hospitalization was reduced by 37% and therefore by administering this drug early, we can say that severe disease aggravation can be prevented. And also, there has been a progress with the global phase 3 HR-scopio study results. Last week at Munich in Germany, there was a conference in which we had been able to provide the information of the results of our phase three trials. And also in this study regarding long COVID, we had been doing some follow up, a six month follow up study. has been completed and the key has been broken based upon the data that has been fixed and a very interesting data has been become available and Therefore with regard to this data in the international conference going forward We would like to provide the results so that we can proceed with the discussion with the doctors of NIH now in Japan We are collecting more cases, and right now there is more COVID-19 patients in Japan, so we would like to complete our effort in the summer season of this year in order to file. And also for prevention in global Japan, U.S. and Asia as well. In the global nations, we are doing a study. So by administering Enstrovelbio, we want to prevent the onset of COVID of the people or around the patients. And so with regard to this study, the enrollment will be completed in the first half. And as soon as we get the results, we will make this available to you. we want an early recovery from hospitalization as soon as possible. And that is the objective of the STRIVE study. And right now we are collecting various information. And also with regard to long COVID, we are conducting a prospective study for long COVID in Japan as well. With regard to Scorpio HR study, this is the result of the census study symptom endpoints at the very top. These are the endpoints of a Scorpio HR study of 15 symptoms, all of the symptoms. So after the resolution, has started after more than two days, we have collected the data as to the total resolution of the symptoms. And so with regard to the HR study 0.07, was achieved. And so with regard to the SCOPIO-HR study, although the endpoint could not be achieved, however, with regard to the secondary endpoint and with regard to the SR studies, you can see the results, and there are five symptoms. That is a resolution of the symptoms for more than one day, and 0.04 is the p-value, which showed a significant difference. And so, in the SR study in the Asian area, in the third phase, the endpoints, could be applied to the six symptoms in the global. And with regard to the six symptoms in the global, we were able to see the significant difference in the global study with regard to the six symptoms. So the result of the Asian study was reproduced in the global study. And so with regard to the direction of the alleviation of the symptoms, we were able to confirm the efficacy and based upon this result, we will be able to discuss with regard to this issue with the authorities of various countries. And with regard to the antiviral results, and as you can see, the study environments is a little different, so it is difficult to do a direct comparison, but PCR has been And in the global environment, from the administration point of time, the viral copy number is about two levels lower. And in this kind of environment, there has been a statistical significant difference between the active drug patients and the control patients. And therefore, in the HSR and the HR studies, we were able to confirm the antiviral activity. And on the right-hand side, we see the antiviral effects. So antiviral on the fourth day, negative. 95.5%. So most of them, after three days of administration, on the fourth day, the virus had become negative. Therefore, from this perspective, there was no rebound and also there was no recurrence of the symptoms. This has been confirmed. And from this viewpoint, we can say that the virus level had been minimized. And so with regard to the titer and also with regard to the rebound, we were able to confirm the efficacy of the drug in the third phase study. So in US, Asia and in different countries, we are engaged in the consultation with the authority.