Sumitomo Pharma Co U/Adr

I am Toru Kimura, Representative Director and President of Sumitomo Pharma. Thank you for joining us today for the presentation of the financial results for Q2 of FY2025. I will then explain according to the materials. First, please go to page 3, the financial results for Q2 of FY2025 on a core basis. As you can see, revenue was 227.1 billion yen. Compared to the revised Q2 forecast announced in July, the increase is 20.1 billion yen. Compared to last year, this represents an increase of 46.4 billion yen. On the other hand, SG&A expenses and R&D expenses have been well controlled, with SG&A expenses down 4 billion yen and R&D expenses down 4.5 billion yen from the figures announced in July. Compared to the previous fiscal year, the amount of these items was 9.5 billion yen and 7.6 billion yen respectively, which is well controlled. Since we have recorded a 49 billion yen gain on the transfer of the China-Asia business, the total core operating profit is 96.1 billion yen. This is an increase of 26.1 billion yen compared to the projected figure in July. Operating profit was 96.2 billion yen, followed by a reversal of deferred income tax liability for income tax expenses of 6.1 billion yen, resulting in an interim net profit of 98.9 billion yen. This is a 42.9 billion yen increase. Both sales and profit were over the Q2 forecast announced in July, and we are issuing a press release today to announce the revised forecast. I would like to continue with an overview of Q2 financial results. I will first explain the revenue of our main products, starting with the figures for North America. Orgovix is doing very well with 69.1 billion yen. This is an increase of 33.6 billion yen over last year. or 95%. Jemtesa is also 43.4 billion yen, which is an increase of 18.1 billion yen, or 72%. Aptium had LOE, so the total amount was 10.7 billion yen, a decrease of 9.3 billion yen. We had originally projected a milestone of $500 million in sales for Orgovix in Q3, but since sales have been strong and we are now in Q2, we have included a milestone of $100 million or 14.9 billion yen. In total, sales in North America were 163 billion yen, a 58.8 billion yen or 56.4% increase over the previous fiscal year. I would like to continue by presenting the revenue from sales of our major products in Japan. First, Japan as a whole is down 6 billion yen to 46.9 billion yen. This is due to the fact that Ekwa Ekumet had their LOEs, and after last year's LOE of Tree Leaf, sales continued to increase but then gradually decreased. This has had an impact on our business. On the other hand, the sales of TWIMIG increased by 40.3% to 5 billion yen. Compared to the initial forecast at the beginning of the fiscal year, 54.7% as shown in the lower right hand corner indicates that we are making good progress. The next page shows financial results by segment. As shown at the bottom of the slide, the difference between the results of Q2 of last year and this year's results, Japan's sales decreased but the results of business structure reforms are showing results, and core segment profit increased by 1.7 billion yen. As mentioned earlier, sales in North America performing well alongside a 58.8 billion yen increase in revenue the results of structural reforms are also emerging here with effective control of SG&A expenses leading to a 39.1 billion increase in core segment profit. Since the China-Asia business was transferred to a joint venture with Marubeni Corporation in August there are some challenges comparing numbers with regard to the figures for Asia. Continuing on with the Q2 results, which were very strong, we have revised our financial forecast for the current fiscal year. Please see page 8. The forecast for revenue is 429 billion yen, an increase of 74 billion yen from the previous forecast. On the other hand, SG&A and R&D expenses were much lower in first half of the fiscal year, but are almost on par with the initial budget for the fiscal year. In other score basis, there is the 49 billion yen gain from the transfer of the China-Asia business that I mentioned earlier, and we are forecasting 97 billion yen in core operating profit. This is an increase of 41 billion yen over the initial figure. Finally, we are forecasting 92 billion yen in net profit attributable to owners of the parent, an increase of 52 billion yen over the initial figure. Both core operating profit and net profit are the highest figures we have ever achieved. Our forecast for FY 2025 is shown below, with figures for North America and revenue from sales of our main products. Orgovix is doing very well. and our revised forecast is 147.9 billion yen in yen terms and $1,020 million in dollar terms, which means that we expect to reach sales of $1 billion. As for sales of my family, which will be explained later as well, they are in line with expectations. Gem Tesser is up 2.4 billion yen to 85.3 billion yen. Exports to Europe, are also strong, so we have added exports which are expected to increase by 10.6 billion yen to 49.3 billion yen for total sales in North America of 313.6 billion yen. This is an increase of 65.4 billion yen compared to the previous forecast figure. Let me continue with a brief explanation of each product. Orgovix is doing very well, which is $473 million against the Q2 plan, or 133% of the achievement rate. Compared to the previous fiscal year, this is almost double the amount of the previous year. In particular, if you look at the bottom right hand side, we have broken down the contents and most products show good quantities. The fact that it is an oral drug and that it is very easy to take due to safety profile has become widespread. And at the same time, the maximum drug price has been capped at $2,000 by the RRA. Next is my February. As I mentioned earlier, sales were almost in line with our forecast, up 10% year-on-year. But as you can see on the lower left, we terminated our sales collaboration with Pfizer in Q4 of last fiscal year, the beginning of this year. Since then, we have been selling the products independently, and we have been devising sales strategies even while reducing our sales force. Until now, Pfizer and our company have invested the same sales force to expand the market. But now we are working on this alone, and we are also reducing our sales expenses to two-thirds of what they would have been. As a result, although sales appear to have remained almost flat, there has been a very significant qualitative change in the way profits are generated from single products. Next is Gemtesa. The achievement rate for Q2 of 2025 was 109%, which is 1.8 times that of the same period of the previous year, so we are doing very well. As I explained last term, due to the drug price issue, we have been negotiating on Medicare Part D about removal of the list of certain payers and we accept it to be removed from the list, this strategy has proven successful yielding positive results in pricing. Coverage that had previously dropped off is steadily returning. In terms of volume, while the beginning of this calendar year as well as last fiscal year's Q4 and Q1 fell below the previous year's levels. Starting from this year's Q2, we have returned to record highs. Forecast by segment is shown here on a core basis, and the difference from the previous forecast is shown at the bottom of the page. Again, North America is doing very well, and Japan is also becoming more profitable. Let me continue by explaining that we have been making a major effort since the 1st of October. Last fiscal year, while undertaking a very large-scale business restructuring, we also saw a decline in our product portfolio. Consequently, we implemented a regional sales structure domestically called the area system, assigning each MR a designated area and having them handle all of our products, CNS, diabetes, and others. We have been operating under this system since December of last year. On the other hand, since the beginning of this year, we have established sales alliances with Ziplion and Ziplion TRI for CNS and Ozempic and Wegovy for diabetes and obesity. So the number of products has increased and we have reverted to the previous regional rep allocation system. The reps in the CNS area will mainly focus on four products shown here and for diabetes, which also includes obesity. The reps here will now focus their sales activities on enhancing expertise around six products shown here. We apologize for any inconvenience caused to hospital doctors and others by the change in our sales structure, but we intend to continue to compete with the same highly specialized sales capabilities as before. Next, research and development. This is the overall table. Previously, we included a column for development regions, but since products are fundamentally globalized, regardless of where development occurs, we have removed the development region column. On the other hand, for regenerative medicine and cell therapy, each country has its own circumstances, so we have made a change to clarify state in which country the clinical trial is being conducted. There is one other major change which will be explained on the next page. Following are the major topics in clinical development. Topics since the first quarter announcement. First, in the psychiatry and neurology field, including regenerative medicine and cell therapy, we completed the regulatory submission for allogeneic iPS cell-derived dopaminergic neural progenitor cells on August 5th this year. based on data from the investigator-initiated study by Kyoto University. We are currently working to obtain approval by the end of this year. In oncology, Enzominev has already been administered as a single agent in a validation study and a pivotal study. In Japan, we have made great progress in completing the single-agent part of the pivotal study and agreeing on the design with PMDA, and we are in the process of presenting the Japanese data at the annual meeting of the Japanese Society of Hematology, as I will explain later. On the other hand, TP3654, Novicertib, was also presented at the Japanese Society of Hematology as an encore presentation. As for other topics, we have received samples up to four weeks after the second dose of the universal influenza vaccine, and we are presenting some of the results of the post-treatment follow-up. This will also be explained with the illustration later. This is the data on efficacy of Enzominev in Japanese population with cancer. The total number of the Japanese population are shown around the middle, and even when focusing solely on the Japanese population, the results obtained are nearly identical to the data in the far right of the overall population column. This will be the last of my presentations. This shows the results of the universal influenza vaccine. First of all, as a result of the follow-up observation for four weeks after the second dose, no serious adverse events or deaths were observed, and the most frequently observed adverse events were pain at the injection site and headache, which are the side effects that are frequently happening with vaccines. On the other hand, as shown on the right, the data show that the titer of attacking antibodies increased as expected as the amount of adjuvant was increased. In the future, follow-up observation after one year is a matter of course. and we will use this collected sample to determine the most crucial factor across reactivity whether it reacts to a different type of virus than the antigen it was immunized with or We are also looking forward to confirming whether antibody-dependent cytotoxicity or ADCC activity can be observed in vitro by the end of this year. And we hope to have such data by the end of the year. That is all the explanation from me. from JP Morgan. Thank you for your time. First, please tell us about the difference between your revised plan for second half of this fiscal year and second half of the previous plan. Fundamentally, we expect top-line growth in the second half, with previously scheduled milestones shifting from second half to the first half. However, looking at the profit side, the plan only projects about 900 million yen in core operating profit for the second half. Can you please elaborate a bit more from the perspective of how this compares to the original plan? Yes, thank you for your question. That is precisely the case. The first half saw excellent results and this momentum carried directly into the annual core operating profit and net income. This base is somewhat conservative due to the fact that first half saw the transfer of the China-Asia business and the LOE of Aptium, which were significant events. On the other hand, as I explained earlier, the figures for the cost portion, SG&A and R&D expenses are almost the same as in the first half. We are also taking a conservative view of the situation, partly because of President Trump, but also because of the fact that there may still be instability. However, as you know, the temporary factor will end in the first half of this year, and from second half of this year, the results will be the result of our current capabilities in a sense. Initially, we received comments suggesting we might post a loss in the second half, but based on the figures we are seeing now, we can achieve a solid profit. Through our efforts, we hope to exceed the 900 million Japanese yen. Thank you very much. I understand that you have factored in various risks and are being conservative in your approach. But where exactly are you being conservative? Is it sales or expenses? The point we are being most conservative is on the cost side. For example, we have explained that R&D expenses were 4 billion yen short in first half of the fiscal year, but we are going to spend 44 billion yen as planned for the fiscal year. If so, we will accelerate our R&D activities only in the second half, and we are actually forecasting that. But as I said, we are somewhat conservative in our estimates as to whether the numbers will reach this level. Sales figures remain exceptionally strong, but as you know, there are uncertainties such as the entry of generic versions of Mirabel Grom. Therefore, we are presenting figures that we are confident we can achieve. I understand. Incidentally, regarding this R&D expenditure, based on your current explanation, it seems the actual amount will likely fall short of the planned figure. Consequently, should any delays in development There was no delay in development, but there was a delay of a few months because we had to make some modifications to the protocol when we started the insomniac validation test and pivotal phase. On the other hand, we have already started enrollment and administration, and we hope to catch up in the future. Thank you very much. The second question is about the trend of three key products. I understand that all of them are doing well, especially Orgovix. Orgovix, while it may be influenced by RRA, is clearly highly effective and safe when taken orally compared to existing drugs, as you mentioned. Therefore, I don't really anticipate its growth slowing down once the RRA effect runs its course. However, I wonder whether the current trend will continue steadily going forward.

Could you tell us what you are thinking at this point?

If you look at the monthly sales by months, as you can see here, they have been rising since the turn of the year this year, around Q4 of 2024. I don't think this growth trend will accelerate dramatically going forward, but there is still plenty of potential. So I expect it to continue growing. Specifically, since we have Mr. Nakagawa handling North America, I will have him provide his comments. Yes, Nakagawa speaking in charge of North America. As you have just pointed out, I believe that Orgovix originally had very good product characteristics. Furthermore, with the cap on patients' out-of-pocket expenses being lowered, I believe this is creating a tailwind. How long this trend will continue will depend on our sales efforts to make various doctors and patients aware of the power of our products. We are working with Pfizer to develop a sales strategy to ensure that this trend continues for as long as possible.