Thank you very much for your joining with us. This is the FY 2025, the third quarter earnings call. My name is Kato. I'm serving as the moderator for today. I am Chief Communications and IR Officer. Today, following our presentation, we will proceed to the Q&A session. The presentation will follow the presentation materials available on our website. The session, including Q&A, will be conducted with simultaneous interpretation in Japanese and English. Please note that we cannot guarantee the accuracy of the simultaneous interpretation. You may select your language from the menu on the Zoom webinar screen. If you choose the original language, you can view the presentation in the original audio without simultaneous interpretation. This is some notes for today's presentation.
This material, presentation, and answers, and statements by representatives for the company in the Q&A session includes forward-looking statements based on assumptions and beliefs, rather, in light of the information currently available to management and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations, promote unapproved uses in any fashion, nor provide medical advice of any kind. The participants here today are Atsushi Kitamura, CFO, Chief Financial Officer; Tadaaki Taniguchi, CRDO, Chief Research and Development Officer; Claus Zieler, Chief Commercial and Medical Affairs Officer, CCMAO. We have three of them with us here today. We start the presentation now. Kitamura-san, the floor is yours.
[Foreign language] Hello, everyone. I am Atsushi Kitamura from Astellas Pharma Inc. Thank you very much for joining our FY2025 third quarter year-to-date financial results announcement meeting out of a very busy schedule today. This is a cautionary statement regarding forward-looking information. As this was explained by Kato earlier, I'm not going to read this page. On page three, I will explain the highlights of FY2025 third quarter year-to-date financial results. Strong momentum from the first half of FY2025 continues. Based on this, we have made another upward revision of our full-year forecast. Continued strong growth of strategic brands by over JPY 100 billion year-on-year has driven double-digit revenue growth. As for SG&A expenses, thanks to the robust progress of what we call SMT, Sustainable Margin Transformation, our company-wide cost optimization initiative, SG&A ratio improved by 2.7 percentage points year-on-year.
Due to the growth of strategic brands and robust cost management through SMT, core operating profit rose significantly, up by 49% year-on-year. Core operating profit margin increased by 7.1 percentage points year-on-year to reach 27.6%. Based on this strong momentum, like the second quarter year-to-date results announcement, we made another upward revision of our full-year forecast by JPY 70 billion for revenue, by JPY 30 billion for core operating profit, and by JPY 100 billion for full operating profit, respectively. Regarding our pipeline, there were four major important progresses. For PADCEV, as part of lifecycle management of strategic brands, development for MIBC, muscle-invasive bladder cancer, made a substantial progress. The additional indication based on EV-303 study was approved in the United States. Also, in EV-304 study, positive top-line results were obtained. Regarding VYLOY, promising combination data in gastric cancer was obtained. Phase III study for combination therapy is ongoing.
As for focus area approach, for ASP3082, promising first-line PDAC data was obtained. We plan to start phase III study by March. Furthermore, regarding ASP2138, POC was achieved in gastric cancer. Phase III study is now under preparation. Page 4 is the agenda for today. From the next page, I will explain these topics. Page 5 shows FY2025 third quarter year-to-date financial results. Revenue and core operating profit, respectively, increased by about JPY 150 billion year-over-year. Core operating profit increased significantly as well. Let me explain main items. Revenue reached JPY 1,601.3 billion, up by 10.2% year-over-year. Core operating profit rose to JPY 442.1 billion, up by 48.6% year-over-year. The bottom half of this page shows our core basis results. Operating profit was JPY 333.9 billion, and profit was JPY 248 billion. Both rose significantly year-over-year. Page 6 shows FY2025 third quarter year-to-date results over main brands.
Sales of all brands increased across the board, with strategic brands sales combined growing by over JPY 100 billion in total year on year. First through third quarter year-to-date sales of five strategic brands, namely PADCEV, IZERVAY, VYLOY, VEOZAH, and XOSPATA, exceeded JPY 350 billion in total, substantially up by JPY 109.3 billion or 45% year on year. PADCEV and VYLOY, in particular, drove the strong growth. We expect total sales of strategic brands as a whole to reach close to JPY 500 billion on a full-year basis. Also, these brands have high profitability, and their growth made a great contribution to core operating profit increase. We expect further growth to continue in FY2026 as well. Next, I will explain individual strategic brands and XTANDI. PADCEV sales increased to JPY 162.6 billion, up by JPY 45.6 billion or 39% year on year.
While robust global growth has been continuing, overall progress is exceeding our expectations, mainly driven by the strong trends in the United States and Europe. As a major progress in the third quarter, in November last year, based on EV-303 study, the additional indication of cisplatin-ineligible MIBC was approved in the United States. Uptake after approval is on track, and in December, PADCEV was included in the NCCN Guidelines many physicians are referring to. In addition, in EV-304 study in cis-eligible MIBC, positive top-line results were achieved. We are now preparing for filing of submission. MIBC is expected to drive further growth of PADCEV in FY2026. As for IZERVAY, sales rose to JPY 55.8 billion, up by JPY 11.4 billion or 26% year-on-year. New patient starts, which are important metrics, are steadily increasing. IZERVAY continues to grow double-digit quarter-on-quarter, both in terms of sales and volume.
Overall progress is in line with our expectations vis-à-vis our full-year forecast we updated in the second quarter. We continue to have high expectations on IZERVAY as one of the important growth drivers. With regards to VYLOY, sales reached JPY 46.1 billion, performing well at a pace higher than our full-year forecast we revised upward in the second quarter. Continuously from the first half, high Claudin 18.2 testing rates and lower than expected discontinuation rates are contributing to the overall good progress. We are meticulously conducting information provision activities about AE management by focusing on the prevention of nausea and vomiting, particularly in the initial cycle. We believe we can reduce discontinuation and enhance treatment continuation rate. Regional footprint is expanding steadily with approval in 48 countries and launches in 30 countries by now. VYLOY, since launch, has been performing extremely well by now.
We are expecting further growth also in FY2026 and beyond. Sales of VEOZAH increased to JPY 35.2 billion, up by JPY 10.8 billion or 44% year-on-year, demonstrating a solid growth continuously. With recent new coverage starting in January this year, commercial lives covered expanded to about 80%. With improved access, we are expecting stable growth also into the future. A new non-hormonal drug was launched in the United States, but the launch impact as of now is in line with our assumptions. With the launch of another treatment in the same class, we are hoping that the market will expand further going forward. Regarding XOSPATA, sales reached JPY 53.5 billion. Overall, it's making steady progress. Top-line results are expected in the first half of calendar year 2026 for Phase III PASHA study with newly diagnosed AML as a potential new indication.
Where we have high expectations as a future growth driver for XOSPATA. If approved, we can offer this treatment option to a new patient population, so we are expecting contribution to sales. Last but not least, XTANDI sales increased to JPY 732.2 billion, up by JPY 29.1 billion or 4% year-on-year. Progress is exceeding expectations driven by continued global demand growth. We are expecting XTANDI to reach its peak level in the current fiscal year. Page seven is about cost items. SMT initiative is progressing ahead of our plan. We realized cost optimization of about JPY 20 billion in total for SG&A expenses and R&D expenditure and cost of sales combined. We are fully on track to achieve FY2027 cost optimization target of JPY 150 billion. Excluding U.S. XTANDI co-promotion fees, SG&A cost ratio improved by 2.7 percentage points year-on-year.
Let me explain a specific breakdown of SG&A costs and R&D expenditure. SG&A expenses trended at a similar level compared to the previous year. SG&A cost ratio was 27%. As an SMT progress, we realized cost optimization of about JPY 9 billion through continuous global organizational restructuring, reduction of mature products-related expenses, and streamlining IT infrastructure, etc. In addition to investments to maximize the potential of strategic brands driving our future growth, we will continue to make investments needed for SMT execution in order to realize further cost optimization from next fiscal year onward. R&D expenditure decreased by 12.9% year-on-year. As a main factor behind, in addition to forex impact, we made progress in outsourcing cost reduction through insourcing development capabilities, including clinical trials, etc., under SMT, which led to cost optimization of about JPY 8 billion.
Furthermore, due to the completion of large clinical studies for strategic brands, clinical development costs decreased by about JPY 9 billion. One-time co-development cost payments booked in FY2024, etc., was another factor for the year-on-year cost reduction. Up to the third quarter, we were in a transitional period with the completion of large clinical studies for strategic brands moving on to prepare for new late-stage development studies. From now on, we are planning to initiate multiple Phase III studies. From the fourth quarter and FY2026 onward, we are expecting investments to increase aligned with the progression to late-stage development.
Page 8 is about the revised full-year forecast of FY2025. Based on strong momentum through the third quarter, we have again revised upward our full-year forecast for revenue, core, and full OPs. The core OP margin is expected to increase by 4.2 percentage points year-on-year to achieve 24.8%.
Regarding foreign exchange assumptions, we have revised the full-year forecast exchange rates to JPY 150 per U.S. dollar and JPY 174 per euro. For the fourth quarter, we assume an exchange rate of JPY 154 per U.S. dollar and JPY 180 per euro. Revenue is projected to reach JPY 2.1 trillion and upward revision of JPY 70 billion from the previous forecast in the second quarter announcement incorporating the upward revision of full-year forecast for XTANDI and mirabegron, as well as the impact of the changed exchange rate assumptions. SG&A expenses, excluding U.S. co-promotion fee for XTANDI, are projected at JPY 600 million. Excluding the forex impact, this is the similar level as the previous forecast. R&D expenses are projected at JPY 315 billion, reflecting the prioritization of programs in the research phase. As a result, operating profit has been revised upward by JPY 30 billion.
From the previous forecast, we expect our core operating profit to reach JPY 520 billion, exceeding the JPY 500 billion mark for the first time since Astellas' inception. Next, full basis operating income. We have incorporated JPY 30 billion into the latest forecast under other income, including changes in the fair value of contingent consideration related to VYLOY following the discontinuation of PDAC program booked in the third quarter. Additionally, we partially released JPY 40 billion of other expenses, including an impairment loss reserve previously booked at the start of the period, reflecting this in the latest forecast. As a result, full-year operating profit is projected at JPY 340 billion. We will now discuss pipeline progress. Page 10, progress on key events expected in FY 2025 for our strategic products, strategic brands.
A particularly significant advancement shown in the center of the slide was approval in the U.S. last November for the expanded indication of PADCEV based on EV-303 trial for cisplatin-ineligible MIBC patients. Noteworthy is the remarkable speed of approval achieved just one month after the submission was accepted in October, more than four months ahead of the PDUFA date. Following the U.S., we submitted for this expanded indication in Europe in November and in Japan in January. Furthermore, the EV-304 trial for cisplatin-ineligible MIBC also made its primary endpoint. Detailed data from this trial will be presented at the February ASCO GI meeting. VYLOY data from the phase II ILUSTRO trial was presented at ASCO GI in January. Details are provided on the following pages.
As other updates, as noted in the table footer, we obtained favorable top-line results from the Phase III STARLIGHT 2 study, the pivotal Japanese trial for VEOZAH. We plan to submit for a regulatory approval in Japan after obtaining results from the STARLIGHT 3 trial evaluating long-term safety. Page 11 shows the latest data of VYLOY. We presented promising data at ASCO GI supporting its combination with immune checkpoint inhibitors plus chemotherapy. Cohort 2B of the Phase III ILUSTRO trial evaluated the efficacy and safety of VYLOY in combination with nivolumab and chemotherapy for first-line treatment of gastric cancer. The median PFS progression-free survival, the efficacy endpoint was 14.8 months across the entire cohort, 18 months in patients with CLDN18.2 high expression. And as indicated by the red line in the graph, 23.6 months in patients with both Claudin 18.2 high and CPS 1 or higher.
This significantly exceeded previously reported data for combination therapy with chemotherapy alone. Currently, the Phase III LUCERNA trial is underway as a confirmatory study for the combination therapy. The LUCERNA trial evaluates the efficacy and safety of the combination therapy of VYLOY pembrolizumab and chemotherapy in gastric cancer patients with CLDN18.2 high expression and CPS ≥1 or higher who demonstrated the longest PFS in the ILUSTRO trial. Patient enrollment is progressing smoothly with interim analysis data expected to become available in FY 2027 or later. We anticipate that this combination therapy will further contribute to the treatment of gastric cancer, an area of high medical need, and maximize the product value of VYLOY. Page 12, regarding the Focus Area Approach, we describe the progress of the flagship programs for each primary focus. For ASP3082 under Targeted Protein Degradation, clinical trial data for PDAC was presented at ASCO GI in January.
Details are provided on the following page. ASP2138 under immuno-oncology achieved critical milestones by demonstrating proof of concept in gastric adenocarcinoma and GEJ adenocarcinoma. This is based on the promising first-line data presented at ESMO last October. Preparations are underway to initiate Phase III trials promptly. Clinical trials for AT845 in gene regulation and ASP7317 in blindness and regeneration are progressing as planned, with the POC judgment still targeted by March. Page 13, progress on ASP3082 under primary focus targeted protein degradation in regarding ASP3082 for first-line PDAC. Pancreatic ductal adenocarcinoma treatment promising data was presented at ASCO GI, and we anticipate to initiate the Phase III by March. PDAC is a disease with a high medical need as the current standard chemotherapy-based treatment struggled to achieve sufficient efficacy.
In evaluating ASP3082 in combination with chemotherapy as first-line treatment for PDAC, we also observed a high anti-tumor activity and ORR, 58.3%, and DCR disease control rate of 83.3%. ORR stands for objective response rate. The safety profile showed no major concerns, yielding promising findings supporting further development in PDAC. Based on these results, preparations are underway for Phase III trial targeting first-line treatment of PDAC scheduled to start by March. For NSCLC, development plans are being reviewed to initiate the registration of studies earlier. For colorectal cancer, POC judgment is anticipated by March. Regarding follow-on program progress, ASP5834, a Pan-KRAS degrader, received the Fast Track designation from the FDA for NSCLC. We anticipate this will accelerate its development. ASP4396, which was being developed as a drug targeting the same KRAS G12D mutation as ASP3082, has been terminated based on data obtained to date.
Going forward, we will focus development efforts on ASP3082, which has demonstrated promising data for this target. Page 14, today's summary. Strong momentum continued in the third quarter. Strategic brands maintained strong growth. Cost optimization through SMT progressed well, with the G&A ratio continuing to improve. Following the Q2 earnings announcement, we have made another upward revision of our full-year forecast of revenue by JPY 70 billion, core OP by JPY 30 billion, and full OP by JPY 100 billion. Our pipeline also made a significant advancement. As for strategic brands, lifecycle management progressed notably for PADCEV and VYLOY. The focus area approach, ASP3082 and ASP2138 progressed toward initiation of phase three trials. We'll continue pursuing further profit growth and enhancing pipeline value. At the end, this is an update on upcoming events. Our annual sustainability meeting is scheduled for the 26th of this month.
We'll present Astellas' sustainability philosophy-specific initiatives and the outcomes achieved through these efforts. We really encourage you participating in. Next, we plan to hold an R&D day in late March. This session will provide an in-depth explanation of our current R&D status and further direction. In late April, we will hold the FY 2025 earnings call. Then, in late May, we plan to hold a briefing on our next corporate strategic plan. We hope to demonstrate how Astellas will achieve sustainable growth beyond the expiration of extended exclusivity. Details for all these events will be announced as soon as they are finalized. We look forward to your continued interest. That's all from me. Thank you very much for your attention. [Foreign language]。
It was a presentation by Kitamura. Next, we are going to entertain questions from the audience.
If you have a question, please press the raise hand button at the bottom of your Zoom screen. If you're joining from the smartphone, please tap details, and you will find a raise hand, so please press that button. I will name you one by one. If your name is called, please unmute yourself on your own screen. Please mention your name and affiliation and ask your questions. So we now would like to entertain questions. First, Mr. Yamaguchi from Citigroup, please.
My first question is about the upward revision. In the second quarter, you made an upward revision. And once again, in the third quarter, this is a very positive message to the market. mirabegron, XTANDI, forex, and SMT R&D are the factors. The main factor is the upside of the important product.
On a full-year basis, do you think you can have some room for another upward revision?
We still have Q4. I'd like to confirm a bit. There was some noise. Sorry for that. We made another upward revision, and you'd like to ask about the factors behind forex, XTANDI, and mirabegron. We made another upward revision. Up to the third quarter, there was a very strong momentum. And we are seeing a lot of progress in cost optimization. We are seeing in the third quarter, everything to be updated to create another forecast? No. Rather, we create an annual plan, and we check the progress in PDC cycle. And at the end of the third quarter, we made a review. If there's anything major in the third quarter, others can be updated. And this time, up to the third quarter, we have seen a strong momentum.
We didn't include everything into the upward revision. On a full-year basis, we selected some.
What was a major factor?
Overall priority, strategic brands are growing very strongly in accordance with a plan. We see some great performance. In a month or two months to come, we didn't touch on that very much. mirabegron and XTANDI, clearly speaking, overachievement is continuing, so we decided to reflect it as well as the forex rate. Regarding the visible cost elements, we did some update. Full basis numbers are also revised upward. Full basis cost in the second quarter, the visibility did not change much. We didn't change. At the end of the third quarter, we reviewed. Full basis costs had a higher visibility as well, so we decided to reflect that as well.
With this, in the fourth quarter, did we redo from the bottom up? Not really. We do what we need to do. Based on our plan for FY 2026 and beyond, we are developing our plans. So thank you for your understanding.
Okay, thank you very much. Thank you for your understanding. Just briefly, another question. About IZERVAY, in the second quarter, you made a revision, and you said you are on track. Extended a patent cliff in order to deal with that. I believe this is quite an important asset. So what you are doing currently or new initiatives you are trying to do, if there's something, would you please answer that?
Thank you for your question. As has been pointed out, IZERVAY is an extremely important brand for us, so we're doing different activities.
So rather than me, then Claus is going to explain what we are doing currently. Claus, please.
Yes, Yamaguchi-san, thank you for your question. Let me just briefly sketch what we see in the US market for geographic atrophy. As you're aware, in the beginning of the fiscal year, we had a significant turbulence in the market due to affordability issues with the foundations withdrawing. And that meant certain patients couldn't afford their copay. Since that time, we have seen demand coming back steadily. So we now have two quarters in a row where we see the underlying demand, so the new patient starts, growing by about 10% quarter-over-quarter. So that gives us the confidence that we will be able to achieve the forecast that we made at the end of Q2. Does that answer your question?
Yeah, thank you.
Is there any new initiative we should have at the moment or not?
Not since our disclosure in forecast two. So at the end of Q2, you may remember that we had reorganized our market access team to provide better support for the retina clinics. That is ongoing, and we see very good success from that. We're continuing to focus our promotion on the retina specialists because we think that that's the education that first needs to be embedded. And we're seeing good progress there. So there's nothing new, if you want. Of course, our DTC campaign is continuing to educate patients. So there's nothing new, but just a continuation of the activities we started after Q2.
Yeah. [Foreign language]。
Thank you very much, Yamaguchi-san. Let me make some additional comment. So Claus was very modest. He just explained what should be done is done.
But during the DTC, what is actually working? What kind of message is communicated? Of course, we have to make a new market as well. So the PDCA is turning around in terms of the contents of what we are doing. We have to establish a market for that. We are working as a team effort. And also, this product is launched in Japan as well. So not only U.S., but also we are thinking about global expansion. So as a company, as a big world, we are currently working on that. Thank you very much.
That's all.
Thank you very much.
Next. JPMorgan Wakao-san, please. JPMorgan Wakao, can you hear me? Yes, we can hear you. Please.
Page eight of your presentation. I have a question on this slide. SG&A and R&D expenses, based upon the current currency level, it's quite suppressed. Seemingly, it's on the increase.
But I have the impression that those are quite well controlled. And now my question is, next fiscal year, SG&A, excluding XTANDI co-promotion fee, then how do you view about R&D for R&D expenses? For SG&A, with this forex status, it is suppressed in this way. SMT is ongoing in a very smooth manner. In that case, absolute value basis, next fiscal year, the direction will be on the decrease. And at the same time, R&D, for you are going to start some more pivotal studies, so it's likely to increase. That's the view that I have. Would you please make a comment?
[Foreign language] Wakao-san, thank you very much. Regarding the numbers for next fiscal year, we will explain the details when we announce the FY 2025 full-year results.
Basically, we should continue the good momentum, and we are trying to develop a plan for revenue and profit increase. SMT is optimizing the cost by JPY 20 billion this year. We have still balance to go, so we have to handle this. That's important. We do have a plan, so we have to increase the accuracy of execution so that we can front-load our planning. What about SG&A's cost in the end? For me to say this is going to be the situation, it's not appropriate. But needless to say, we have to clarify where to increase and where to reduce. Based on the SMT philosophy, there is a huge room for reduction. So we are assuming that we are going to work on it as far as the expenditure.
Clearly, late-stage development is something we are going to move on to, so there's going to be an increase there. Overall, to what extent we can offset? So in the budgeting process, we are discussing right now increasing the revenue. Because we increase the revenue or increase the R&D, it may not lead directly to R&D cost increase. So how we can take measures to optimize our costs first. This fiscal year and last fiscal year, that's how we have been addressing. So that approach is not going to change in principle. Regarding these specific numbers, please wait for some more moment. I have a follow-up question. SMT target is JPY 150 billion. Its effectiveness will be higher in FY2026 rather than compared to FY2025. That's my understanding. You will have sales promotion, but it doesn't mean that you have a new drug to be launched.
SMT effectiveness can be seen more easily in terms of the balance. Am I wrong? SMT effectiveness, up to FY2027, we are going to reduce the cost by JPY 150 billion. 40 billion out of that was done last year. This year's plan was JPY 20 billion. On a cumulative basis, it's going to be added up. On a cumulative basis, this year's target, JPY 40 billion last year and JPY 20 billion this year. So that's JPY 60 billion in total. We have to do this by the end of March, according to a plan. Right now, as of December last year, we reached JPY 60 billion cost reduction. We have JPY 90 billion to go to reach JPY 150 billion target. So how to do this is the SMT's approach and philosophy.
What we are discussing right now is as follows: how we can realize the remaining part in the next fiscal year at an accelerated pace. Late-stage development studies will be initiated, as you said. And as a company, it's not a net increase, but rather we can manage the cost to a certain degree. Understood. At any rate, it's working well. My second question. ASP3082, I have a question. ASP3082, ASCO GI had a presentation about good data. Revolution Medicines are the competitors. And the data was similar, according to the presentations. How you can differentiate is something I'd like to know. One element is going to be the speed. Anything else as well? ASP4396 was discontinued. ASP4396 had higher expectations at certain timings, so terminating this program. What's the intention behind? ASP3082, data is better. That's why you terminated ASP4396.
3082, our philosophy, including the competitive edge against the competitors. On that point first, Taniguchi is going to explain. Let me explain first. 3082, particularly from the differentiation perspective, compared to Revolution Medicines products, Revolution Medicines drugs, oral KRAS inhibitors. 3082 and their products are completely different. Our agent is targeted protein degrader. Protein with KRAS mutation is going to be degraded by agent. The target is the same, but MOA is different. [Foreign language]
Then, how it is represented within the clinical data. Of course, we have to look to the data. Especially, needless to say, when it comes to the protein inhibitor, the resistance against inhibitors is quite frequently reported, so we have to have our eyes on it. And at the same time, our protein degrader against the 3082, the semi-resistance is under the research in our end as well.
Likely to be the biggest difference is the continuation level of the efficacy. We are going to accumulate more data to look at the sustainability of the effect as well. And in our knowledge, the first-line study of the pancreatic cancer hasn't been started by the competitor. So we would like to accelerate our speed so that we can start the combination treatment with a chemotherapy for pancreatic cancer. The prognosis is quite poor. So we would like to start clinical trials as early as possible so that we can deliver better therapies to the patients. And 4396, termination of the development. For 4396, KRAS G12D is the target. So it is exactly the same target as 3082. The one difference is E3 ligase is a Cereblon type. So 3082 VHL, with that, it is quite different. 4396 and 3082 efficacy are compared according to our original plan.
If there are some differences, we are going to consider about that. That was our plan. We haven't opened the data yet. But 4396, the data, is not better than 3082. So because 3082 is more advanced comparatively, so we decided to prioritize 3082 in terminating 4396.
Understood. Thank you very much. [Foreign language]
Thank you very much. Next. Goldman Sachs, Ueda-san, please.
Thank you, Ueda from Goldman Sachs. Thank you very much for this opportunity. First question. That's about the progress of SMT. I have an additional question about that. Currently, your core OP margin. FY 2027, 30% is the target. And currently, I think your progress level is more than you've expected, or this effect of SMT is way more effective than expected? Is that how you view? Please explain about this.
Thank you, Ueda-san.
SMT, by FY 2027, JPY 150 billion net benefit is what we would like to realize. Then, within 2 years, JPY 40 billion and JPY 20 billion in total, JPY 60 billion. So the speed is not extremely fast. Rather, with the wider scope, we see that it's in line with the plan a little earlier than planned. Lastly, it was JPY 40 billion. But we walked toward only the lower hanging fruits because it came up with the result quickly.
But on the other hand, transformation type of the measures that takes a bit more time. Last year, we've been working on the planning before coming up with the result. And from this year, the transformation realizing measures are started to be working or operating. Because this is a transformation, so it takes a relatively longer time. And for those, you have to change something. So you have to spend a certain level of the money.
That's why including that current is JPY 20 billion. Without such an initial investment, it could be more beneficial. But currently, we are focusing on the transformation part now. So it's not extremely faster than expected. Basically, it is on track of the plan. But if you look into more details, there was something that we could be more accelerated in terms of the speed. So that is exactly currently what we are working.
Thank you very much. Understood. [Foreign language] My second question. The trend of the main brands in the United States, in the quarter between October and December XTANDI, at the end of the year, did not have a high level of sales, unlike usual years, PADCEV in the United States. Quarter on quarter, it was almost flat, according to my image. Any sense of deceleration, or what's the current trend of the businesses here?
Thank you for your question. So I'd like to briefly respond, and then I'd like to hand over to Claus later so that you can have more information. What you have said is different from our perspective. As for PADCEV in the United States also, there is very good progress being made. In the third quarter, that is continuing as well on a continuous basis. XTANDI, in terms of the volume, there is a strong demand growth, which is continuing. So there is no slowdown in our viewpoint. Claus, anything to add from you, please?
Yeah, you're absolutely right. So PADCEV is continuing to surprise us positively. You noted the very fast approval by the FDA of our MIBC, the EV-303 MIBC indication. And we're already seeing uptake in that indication. It's been included in the NCCN Guidelines. So all of that is going very, very well.
Please do note, however, that our experience with PADCEV has consistently been that we see a very fast uptake in the first six months and then a very sharp plateau as we penetrate the relevant patient population. And I think that's exactly what's happening right now. The uptake right now is faster than we expected, which is why we are saying it's above expectations. But there will be a plateau after about six months as we penetrate the new patient population completely.
Thank you very much. What about XTANDI?
So XTANDI is, I mean, continuing at an amazing pace for a drug that's on the market for, what is it, almost 14 years now. So the underlying demand growth in paid demand in the U.S., but also outside of the U.S., is continuing at a double-digit pace.
So in the US, more than 20% demand growth in paid demand. So that's continuing. However, we do see a consistent slowing of the increase in paid demand from the high 20s and 30s to now the lower 20s. So you're right, there's some slowing. But it's still at an amazingly robust pace, which is why we're increasing the guidance of XTANDI at this point in time.
[Foreign language] Okay, understood. Thank you very much. I was able to understand clearly. That's all from me. Thank you very much.
Thank you very much. Matsubara-san from Nomura Securities, please.
Matsubara from Nomura Securities, can you hear me?
Yes, we can hear you.
Thank you very much. My first question is about VEOZAH. There is now a competitor, but it's within your assumptions in terms of the progress. If I look at the third quarter, the growth rate is slowing a bit.
New patients start and the existing patients, VEOZAH, the competitor's product. What about the shares and how it's going to grow? I'd like to hear about your assumptions, status assumption.
Matsubara-san, thank you very much. Regarding VEOZAH, I'd like to briefly comment. If there's anything to add, I'd like to ask Claus to comment. As for VEOZAH, basically, it's on track. As it's described here, there is now a competitor which is launched. But the real impact to be judged will require more time. But as of now, it's not very different from our assumptions as of now. This is a new non-hormonal drug. So it's important to create a market here. And we have been working on this by now. One of the important elements here is access. How to enhance and increase access? We have been working on this in January this year.
New commercial coverage started, and it's now 80% commercial lives coverage. We'd like to continuously increase further. Claus, anything to add from you?
Yeah. I think there are three factors to note on VEOZAH. VEOZAH is just chugging along. It's very consistent in the underlying demand growth. It's fully on track and in line with expectations, especially in the United States. Now, as Kitamura-san noted, it's very early days to judge the market share distribution between the competitor and VEOZAH. We do have now 80% of lives covered in the U.S. from a market access standpoint. That gives us a very good basis, which the competitor first has to establish. I think it'll be some time before we can fully judge how the market decides between the two products. Right now, it's fully aligned with our expectations, as Kitamura-san said.
I think the more important factor, however, is how will two companies trying to develop this market, how will we be able to displace the SSRIs and the other off-label non-hormonal drugs in this market? Remember, VEOZAH right now only has about 14%-15% of the non-hormonal market. So there's a lot of room to grow. And I think two companies working on that will be more effective than one company alone. So that is what I really would like to watch as the new year unfolds. The third factor, maybe just to complete, is the question of different monitoring requirements and different side effects, like the somnolence that our competitor has. We don't know yet how that will play out.
But we can say for VEOZAH that the wobble in the market that we had when we had the label update on the liver monitoring in the US, that has washed out. And we're back on that growth track. ex-US, where the label update came later, we're seeing the same pattern replay, right? A certain uncertainty in the market, then a stabilization, then a reuptake of the growth. So we're seeing exactly the same pattern, ex-US, as we had in the US, just with a delay in timing. So that's why I say it's in line with our expectations because we're seeing the same pattern replay in the ex-US markets. I hope that answers your question.
Thank you very much for your response. Next is AT845. And in the fourth quarter, you are going to judge the POC and adenoviruses administered.
I just want to confirm, if any liver adverse event is not taking place and the stability is maintained for 13 years or so, I think that's been mentioned. So considering that risks, I would like you to explain about this liver toxicity matter.
Let me explain about that. AAV8 vector is utilized as the gene therapy. That is AT845. And this is targeting Pompe disease. And currently, the patient enrollment is completed, and we're just waiting for the data becomes available. For liver toxicity, of course, we don't say there is no liver toxicity at all. Just like other AAV8, the increase of the liver enzyme is observed in a couple of or some cases. But so far, it is not really a big issue.
Therefore, as it's been planned, by the end of March, data is going to be collected, and we make the final analysis looking at the balance of efficacy and safety. Then we are going to make a judgment on the POC.
Understood. Thank you very much.
Thank you very much. Next, Sanford C. Bernstein, Sogi-san, please.
Thank you. First question. That's about PADCEV. YTD number and updated guidance, if we look at that Q3, you showed strong growth. But for Q4, the growth level is a bit lower according to your guidance. That's my understanding. In a full year, guidance, you think there's a potential for further upside or Q3, Q4 for the PADCEV are there any background?
Forecast. As for the full year forecast, Sogi-san, as I said at the beginning, revisiting everything to update, no. We saw the strong momentum and updated some elements.
If you look at the numbers by brand for strategic brands, we have the same numbers as before. We are not expecting a slowdown in the fourth quarter. Rather than updating that, we wanted to reflect on what's working well right now to discuss what are we going to see for the next fiscal year. That's how we are steering our operations on a full year basis. If we update everything, the numbers might be different, but we do whatever we need to do in the current fiscal year and how to address the further growth next fiscal year. So that's how we are discussing.
Thank you for understanding. Okay. Next, about the cost. From the fourth quarter, the cost and expenditure will increase because you will shift to more investments. Full year and year to date, numbers can be compared. Then in the fourth quarter, a little less than JPY 100 billion will be spent, according to my understanding. In 2026, Phase III in oncology would be initiated. At that pace, you're going to proceed. Is my understanding correct? Also, you have SMT initiative. It would take time for transformation and initial investment period. We'll transition to harvest the fruits. How it's going to be offset into the future?
Let me start with SMT. Your basic understanding is correct. Upfront investments are being made, so we are going to recover those investments. You're right. However, we have things to do in the remaining two years. We would recover investments, and we make another investment to recover the investments. This is a series of activities. It's not just for a short term in a single year, but this is more continuous activity.
So for each product, you're right. But overall, it's going to be slightly different. In the end, by FY 2027, we are going to optimize the cost by JPY 150 billion. Regarding the expenditure in the fourth quarter, you may think the number looks large. We understand your concern. But what about the space, including the outlook for next fiscal year and so forth? We'd like to explain when we announce our forecast next fiscal year. It's not 1,000 times 4.
Understood. Thank you very much.
Thank you very much. Next, UBS Securities. Sakai-san, please.
Sakai from UBS Securities. Thank you very much for your presentation. On page 24, I have also a question about SMT. It's now JPY 150 billion. Without the lower limit of JPY 120 billion, 30% operating margin is going to be achieved even after extending LOE?
Our confidence level is enhanced? The answer is yes.
In the summer of 2023, we started SMT. In 2024, we disclosed this activity to you. At that time, a multiple-year plan was developed back then. What we can do, and there are other elements we are not sure about. So 70% was the plan. And the remaining 30% gap must be filled. We worked on the execution together. And to build our ideas, we have accumulated that much. Our confidence level is higher? The answer is yes. If we do this after extending LOE, is it going to be sufficient? No. Maybe. FY 2027, up until FY 2027, before extending LOE starts, we are going to do this. After LOE, we have to address that situation. And the state of the company after LOE must be discussed. So this is not going to be the end of the story.
By FY 2027, this is what we are going to do as a preparation.
But once it starts or after it starts, what's the aspirational state of the company?
We would develop a new corporate strategic plan, which we are discussing in May this year. We will explain further details. Thank you very much. していま [Foreign language] We are looking forward to May.
Next question is about XTANDI. This is an extremely big product. Therefore, are there some possibilities in Japan, U.S., Europe? The generic market launch is going to be delayed. Could that kind of a scenario be conceivable? How do you view about it?
Could you repeat your question once again?
Well, that's XTANDI. In this pharma world, after the exclusivity expired, generics are not going to be launched in a timely manner. Do you view that it's also possible for XTANDI as well? Thank you very much.
I'll make the brief comment. If there's additional comments, please. Well, first of all, because of LOE, everything is done? It's not really so. How can we continuously provide the value of this drug? That is an extremely important point. Having said that, this is, again, a very big product, and there are the matters of generics to be launched. So our corporate plan is not the assumption that we can protect completely. Of course, we have a certain assumption. But it's not something that we are looking at a situation that is on a decrease of the sales. We are thinking about the countermeasures to what extent we can protect XTANDI. That is also something we are discussing under the new strategic plan. Claus, do you have any additional comments?
Yes. A few considerations, maybe.
So I think the first consideration is that the patent that we have, the compound patent for XTANDI, expires at different times in different geographies. So in FY 2026, we'll already see patent expiry in some geographies like Brazil, like Turkey, like Korea, China. Then 2027, the patent expires in the US, 2028 in Europe. But we do have some geographies like Japan, which you mentioned, which go all the way to 2030. And there are some other geographies as well which have a very, very long patent life. So the first comment I would like to make is that this is not one timing, but it's more a curve as different geographies where the patent expires come into play. We do expect generics to enter as soon as they can because it is a big asset, and it is a big market.
And we've seen that also with abiraterone when abiraterone went generic. However, the other thing I would like to mention is that we have two formulations in the market, a capsule formulation and a tablet formulation. For the tablet, we have a formulation patent which extends the life and the protection of the tablet into the early 2030s. Now, how the market is going to play between capsule generics and protected tablets is going to be a tricky analysis. And we're working on that right now. But we do see some potential to maybe protect XTANDI partially with the formulation patent on the tablets that we have in place.
[Foreign language]
Understood. Thank you very much. That's all from me. Thank you very much.
Thank you. Next, SMBC Nikko Securities. Wada-san, please.
SMBC Nikko Securities. My name is Wada. Can you hear me?
Yes. Please start.
Full basis operating profit increase is my question. Impairment loss risk, and that is released partially. I think that's what it is about. But would you please explain the background of that? This time, focus area approach for programs coming up with the favorable result or the data. And that impairment, loss, risks are likely to be now lowered down. And when it comes to strategic brands, IZERVAY, VEOZAH, they are on track. So impairment, loss, risks, I think there are no supporting backgrounds for that. That's how we look at it. But the question is, please explain the background of this. That's one thing. [Foreign language] Focus Area Approach with full programs. If you achieve POC in March for everything next fiscal year, you can move on to late-stage development. Is there any such possibility?
Thank you very much, Wada-san, for your question.
Full-basis review core was increased in the second quarter and also in the third quarter as well for the upward revision. Because of the increase in the core, the full was also increased in the second quarter. After three months, we reviewed everything, and we are conservative in developing the initial numbers. So we could review. We are checking the progress of various programs and projects. But it has not achieved a POC. We cannot guarantee that it's going to work for sure. But the assets in question, what about the probability of each? That's how we check. It's not just about the impairment loss. But there was a change or remeasurement of the fair value on contingent consideration. In sum, we review non-core cost and additional JPY 100 billion forecast for revenue as an assumption this time after upward revision.
If we achieve POC for all four programs, are we going to go to Phase III in next fiscal year? That's our wish. Yes. One more question. ASP3082. There was a mention of the discontinuation termination of 4396 E3 ligase, which is Cereblon. Did you see the depletion in 4396 E3 ligase? Can be seen here? We haven't disclosed the data yet. So I'd like to refrain from touching on the details. As we said, ASP3082 and 4396, the difference is the E3 ligase.
What would be the results?
I know you are very interested. As soon as we have the data, including 4396, we are hoping to disclose as soon as possible.
Okay. Understood. Thank you very much. That's all from me.
Thank you very much. Due to the limited time, the next question is going to be the last question. Morgan Stanley MUFG Securities. Mr. Muraoka, please.
Thank you very much. Muraoka from Morgan Stanley speaking. MFN, tariff. I have a question to you. Western major companies, by the end of the year, were able to settle. But for Japanese companies, no one has mentioned this yet at all. For your company, on a standalone basis, have you negotiated already? And you have an outlook? Or by country, it's negotiated in group? By country, you may say that you cannot tell us at all. But in the near future, can we expect that this is going to be settled, resolved? Because you have a high proportion of your business in the United States and Medicare, I am very concerned.
Muraoka-san, thank you very much. As you said, there are things we can tell you, and there are things we cannot tell you. Thank you for your understanding. Astellas Pharma's discussing with the US government.
We are monitoring. And as of now, an official letter has not been received by us as of now. So that's the status right now. Internally, as we said from before, there are a variety of potential scenarios. So we are discussing such scenarios. Still, there's nothing we can comment as anything specific as for the tariff. As we said in the previous meeting, we have U.S. business whose size is quite large. We have a large proportion of manufacturing in the United States. That's like 70%. We don't know about other companies. But for us, given the current status of our supply chain, tariff is going to be a big obstacle for us. We don't think so, according to analysis. But this is a very important topic. So internally, we are discussing and doing simulations right now to respond to your question. Thank you very much.
[Foreign language] And one more question. This is the second big revision, upward revision. The question is dividend. In the beginning of the fiscal year, you came up with the level of dividend, and that is maintained. What's the background of not changing it?
Thank you for your question. Basically, our principle for capital allocation hasn't been changed. We continue to invest with the growth. At the same time, to the shareholders, we are going to return in a stable manner. If there is an excessive fund, we are going to purchase our shares so that it can be returned to the shareholders. IVERIC bio is acquired, and the net is increased. That is considered to be returned according to the capital allocation. For the dividend, it's not something that we are thinking with just one year performance.
We are considering for a couple of years when we think about the cash flow. So it was good this year. That's why it will be increased. Next year, it was not really good. So it reduced. It's not something like that. So that is our basic principle for capital allocation. And we stick to that. That is how we are. Understood. Thank you very much. One last question from me. That is a follow-up question by Wada-san a little while ago. That's about IZERVAY. It is about impairment loss-related. I would like to confirm, especially about IZERVAY. This time, the range of the impairment is reduced, and IZERVAY business is ongoing quite well. So IZERVAY, US impairment loss proportion is not something that you have as a concern for the operation? Thank you. For IZERVAY, there's no change. We have to continue to grow it as well.
And we are working on the initiative one by one. We do not think. Of course, we don't think that the sales would be flat as it is. Of course, we have to grow it further. That as an assumption, we do our activities. But we haven't seen any big impairment loss risk. And ex-US, well, it's been mentioned that the approval here in Japan is also granted. And also, the launches, sales have started. And this is an asset, not amortized. But it is now in that process. So for the IZERVAY, the situation is ongoing quite well.
Thank you very much.
Thank you very much for giving us so many questions. But time's up. With this, we would like to close this next call. Thank you very much for your participation.