Thank you very much for coming over to the conference. On financial results for the second quarter for the year ending in December 2025. I will be leading today's session. I am Kae Miyata from Corporate Communications I/O Department. Today we have the participants at the venue as well as on Zoom. Today's agenda is shown on the screen at the venue as well as on page 3 of the presentation materials. Today's conference will be conducted in Japanese, but we are also providing English on Zoom webinar as a simultaneous interpretation.
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Please select the language that you wish to listen to. Please click the interpretation mark at the bottom of the screen and select either Japanese or English. You can also mute the original audio to listen to the language that you've chosen only.
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Before each presentation, we'll have time for the screen capture, so please make use of the time. We'll take your questions after all the presentations are completed. We plan on spending for about half an hour for Q&A session, so feel free to ask your questions.
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During the presentation, your sound will be all muted.
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Now, we want to pass the floor over to Ms. Okuda to talk about the overview of the second quarter results. We will stop the screen for a while, so please use this time for screen capture.
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Now we would like to begin the presentation.
[Foreign language]
I am Okuda, CEO of the company. I would like to explain about our financial result for the second quarter of 2025. Please take a look at page 5 of your handout. In the second quarter of 2025, domestic and overseas product sales increased, resulting in increased revenue and profit. Compared to the previous year, revenue increased by 4.6%, operating profit increased by 3.5%, and net income increased by 2.1%. Given the steady progress made in the first half of the year, we expect to achieve our full-year forecast. I will explain the details of revenue on the next slide. Compared to the same period last year, revenue increased by JPY 25.6 billion, up by 4.6%. The breakdown is explained from left to right. Domestic sales were negatively impacted by NHI drug price revisions and the penetration of generics. However, sales of new products such as Phesgo, PiaSky, as well as mainstay product Vabysmo increased by JPY 6.1 billion. Overseas sales increased by JPY 19.7 billion, as increases due to export volume and exchange rate and so forth far outweighed the impact of a decrease in export prices. In particular, exports of Actemra to Roche increased significantly. Next, I would like to explain about R&D. This slide shows the status of important R&D milestone achievements this year for in-house developed products. First, regarding our goal for orforglipron, our licensee Eli Lilly announced the success of a global phase III trial for type 2 diabetes in April this year, and presented the result of that trial at the American Diabetes Association in June. As a result, we believe that the probability of success in development in diabetes and obesity has increased. We have confirmed the POC for NXT007.
Based on this data, development is progressing with a decision to start a global phase III trial from 2026. In addition, new in-house projects MINT91 and mid-size molecule project OFF-00 have begun phase I trials. As a mid-to-long-term management decision aimed at accelerating early development in a flexible and strategic manner, we have decided to discontinue in-house development of five projects out of our in-house pipeline that are in early stage. I will explain this in more detail in the next slide. Since the launch of TOPI 2030 in 2021, we have increased new projects through the red shift. As a result, in the past four years, we have enriched our early-stage projects with nine projects of in-house discovered products entering clinical trials. On the other hand, some projects were taking time to develop.
As a result of prioritizing our in-house pipeline products in the early development stage, based on the data obtained to date and the overall status of our portfolio, we have decided to suspend in-house development of five projects: LUNA-18, SAIL-66, SOFT-10, SDA-551, and AMI-109. This decision will enable us to focus resources on much higher priority projects, increasing the likelihood of achieving the goals set in TOPI 2030. LUNA-18. Let me now cover LUNA-18 and the mid-size molecule project. LUNA-18. Confirmed oral absorbability, an important concept for the mid-size molecule platform. Furthermore, the biomarker analysis of tumor tissue and adverse event profile suggested that LUNA-18 was delivered to cells. On the other hand, concerns have risen that the Pan-RAS GDP inhibitor LUNA-18 does not have a sufficient therapeutic window in clinical trials compared to competing products.
According to the data accumulated from clinical trials of this agent and the promising clinical trial results of competitors' Pan-RAS GDP inhibitors, we have decided to shift our focus to the development of OFF-00, a KRAS-selective inhibitor that is likely to demonstrate a competitive advantage over LUNA-18. OFF-00 is targeting solid tumors, and phase I trials began in June. Kusano will provide more details later. In addition to OFF-00, progress is being made with the mid-size molecule portfolio as a whole, including a new project moving into the preclinical development stage for a non-cancer indication targeting acute heart failure. In order to meet unmet medical needs, we will continue to focus on the development of mid-size molecule drugs, which is the third modality. Finally, I would like to touch on our new investments.
In order to strengthen our pharmaceutical manufacturing process development functions that apply Chugai's proprietary technologies, we have decided to build a new research building, UKX, at the Ukima site. The total investment amount is JPY 80 billion. We'll introduce environmentally friendly equipment, such as equipment to reduce fluorocarbons and CO2 emissions. In order to advance the promising drug candidate substances continuously produced from drug discovery research to clinical development, it is essential to quickly establish a manufacturing method for them as pharmaceuticals. We are confident that the construction of this new research building will further strengthen the foundation for doubling R&D output, which is the goal of TOPI 2030. This is a summary of my explanation, and this is all from me.
Next, I would like to invite Kusano to explain about the status of the development pipeline.
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He will pause for a little while at the beginning, so please take this opportunity to capture the screen.
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I am the head of the Project Lifecycle Management Unit. I would like to explain about the status of the development pipeline. Please refer to page 13 of your handout. These are the second quarter topics. In terms of the launch and approval. Except for the launch of the EveryStay tablet, everything else has already been announced. In terms of the approval, we have two in-house developed products and two Roche products. As for the in-house developed products, we have Apumapki, which has been licensed out to Verastem Oncology. This is targeting the KRAS-mutation-positive recurrent low-grade serous ovarian cancer, and this has been approved under US Accelerated Approval System. For Roche product, we have Elevidys, which is a gene therapy product for rare intractable Duchenne muscular dystrophy. This is now approved for the ambulatory individuals whose age is between 3 and 8.
We have two death cases in the ambulatory patients who have administered Elevidys, and also we have had one death case which is caused by the developed product by Sarepta using the same vector. Based on these death cases, FDA recommended the suspension of shipment of Elevidys to Sarepta. Here in Japan, we always pay most attention and priority to the safety of patients, and until the completion of the assessment of safety information, we are not going to resume the shipment of Elevidys. We are going to continuously share information with the regulatory authority. Now, Vabysmo has been approved in Japan for the first time for the indication of angioretinopathy. In terms of the finding, we have one in-house developed product and two Roche products, as stated in the list.
For Lunsumio, we have applied indication expansion as the combination therapy with Epkinly, targeting at relapsed or refractory aggressive B-cell non-Hodgkin's lymphoma, and everything else has already been announced. In terms of the initiation of study, we have three in-house developed products and two Roche products. For in-house developed products, we have GM-329, targeting at obesity. In the combination therapy with tirzepatide, phase 2 study of GM-329 has been initiated. Hemlibra has started phase 3 study, targeting at von Willebrand disease. Our mid-size molecule OFF-00, which is our in-house developed product, has initiated phase 1 study, targeting at solid cancer. The details will be laid out later. For Roche product, Vabysmo has started domestic phase 3 study, targeting at non-proliferative diabetic retinopathy. Inabolisib started domestic phase 1-2 study, targeting at PIK3CA mutated breast cancer. Next is readout.
Apumapki has phase 2 study confirming the effective add-on treatment to SOC for the first-line treatment for pancreatic ductal adenocarcinoma. In this phase 2 study, we have seen OS of 83% and confirmed efficacy signal, and next year, 2026, a phase 3 study will be initiated. In terms of conclusion of agreement. We work with Gero, who has a unique AI-based target discovery platform for age-related disease. We have concluded the joint research and licensing agreement. We will be using our own antibody engineering technology to discover new antibody drug candidates for age-related disease. Now, removal from pipeline. As our CEO, Okuda, mentioned, with regard to the five early-stage in-house products, based on the already generated data and status of portfolio, we have decided to discontinue in-house development.
With regard to Roche product for Tiragolumab, we have an ongoing phase 3 study targeting at esophageal cancer as a combination therapy with Tecentriq. Based on the study results so far, we have discontinued the development. For medical conference, we have five in-house products and one Roche product. On top of the Apumapki, we have NEMLUVIO, which has been licensed out to Galderma. We have a long-term extension study for such NEMLUVIO, targeting at atopic dermatitis and prurigo nodularis and showed positive two-year data. Orforglipron. We are targeting at adult type 2 diabetes whose glucose control is insufficient only by diet and exercise. We have conducted a phase 3 AchieveOne study comparing against the placebo in terms of efficacy and safety. The positive result was presented in ADA 2025. The result is published in the New England Journal of Medicine. We've submitted filing in May for Lusimio.
In the combination therapy with Tosivi, targeting at the relapsed refractory aggressive B-cell non-Hodgkin's lymphoma, we have made an oral presentation in International Lymphoma Progress. Next, NXT007 will be explained later in details. With regard to the open innovation, last year in Boston, Chugai Venture Fund initiated a full-fledged operation. In the past three months, we have made three additional investments. Since the foundation, we have completed investment into six companies so far. This is a list of major R&D events in 2025. I think highlighted are the changes from the previous earnings call. As I have explained earlier, with regard to Elevidys, Vabysmo, we have been granted approval. In terms of the initiation of the study, as I mentioned earlier, GM-329 has started a phase 2 study for obesity. Now, this is the result of a phase 1-2 study for NXT007.
NXT007 has been under development as a treatment, next-gen treatment for Hemophilia A. For the first time, we have presented the efficacy safety data targeting at Hemophilia A patient in ISTH in June. First of all, efficacy. The graph to your left shows ABR, annualized bleeding rate, targeting for the Hemophilia A patient by naive Hemophilia A patient. Across all cohorts, prior to the administration, ABR has been dropped. In high-dose cohort B3, B4, the plasma concentrations reached the predicted normal range of FV3 equivalent activity with no treated bleeds observed. Next is safety. The tolerability of NXT007 is good, and no serious adverse events related to NXT007 or thromboembolic events were observed. Anti-drug antibody ADA was observed in 22 patients out of 30. However, many ADA did not impact PK.
The number of ADA-positive patients at the final observation before the data cut out was reduced down to 10, as it shows half of ADA was transient. The ADA was observed in two patients in a way that affected PK. However, no ADA cross-reacting with Hemlibra was observed. In three phase III studies, which are expected to start in 2026, we are going to evaluate efficacy and ADA-related safety. Next, let me introduce OB-00, a pan-KRAS inhibitor discovered in-house. This is our second mid-size molecule project that has advanced to clinical trials. As explained by Okuda earlier, we have decided to shift our focus from the pan-RAS inhibitor LUNA-18 to OB-00 for cancers involving the RAS gene. Let me elaborate the background to this decision. There are three types of RAS genes: KRAS, NRAS, and HRAS. KRAS is one of the most frequently mutated oncogenes with genetic abnormalities.
KRAS-mutated cancers are highly dependent on KRAS with active mutations to survive and grow. Inhibiting KRAS is expected to have an anti-tumor effect. Whereas normal cells survive and proliferate using signals not only from KRAS but also from NRAS and HRAS. Therefore, OB-00 was designed to selectively target KRAS and a wide range of KRAS genetic mutations. As a result, even if OB inhibits KRAS, NRAS and HRAS will act instead, minimizing the impact on normal cells. As a result, OB is expected to have a broad therapeutic window and to have a higher efficacy than LUNA-18, which inhibits all RAS, including NRAS and HRAS. The non-clinical data on the right shows that in a xenograft model of non-small cell lung cancer, where LUNA analogues are not sufficiently effective, OB-00 induced tumor regression, demonstrating strong efficacy.
As a result, we'll continue to work to deliver innovative medicines to patients as soon as possible in order to overcome KRAS-mutated cancers, which have high unmet medical needs. Next is our in-house developed product, ROSE-12. As its mechanism of action is now available, we'd like to take this opportunity to explain this. ROSE-12 is an anti-CTLA-4 antibody that uses our proprietarily switched antibody technology. CTLA-4 is one of the membrane proteins highly expressed in highly immunosuppressive regulatory T cells. It is known as an important therapeutic target in cancer, but controlling systemic side effects is a challenge when using drugs that target this molecule. ROSE-12 is expected to exert an anti-tumor effect while suppressing systemic side effects by acting selectively on tumors using switch technology.
In non-clinical trials using mice, the effective and safe doses of non-switched anti-CTLA-4 antibodies were similar, whereas the effective and safe doses of switched antibodies were approximately 30-fold higher, demonstrating a wide therapeutic safety margin. In the ongoing phase I study, we are evaluating ROSE-12 as a single drug and in combination with Tecentriq, and we hope that the switch antibody technology will provide high efficacy while providing a favorable safety profile. Following the cancellation of all projects, we would like to present the status of our portfolio for each modality. We continue to have a wealth of in-house developed projects. In particular. In mid-size molecule drugs, which is our third pillar of focus, two projects are in a preclinical development stage, and another 25 projects are in the drug discovery stage and are progressing smoothly.
As reference materials, we have attached slides at the back of this presentation that provide detailed information on small molecule drugs, mid-size molecule drugs, antibody drugs, and cell and gene drugs. Please review them as well. Finally, here is our projected submissions. Projects with light blue stars are newly added projects. The following slides are attached as reference materials. The appendix explains von Willebrand disease, for which Hemlibra has now begun its phase 3 trial, so please review them as needed. This concludes my presentation.
Next is a presentation by Taniguchi on the consolidated financial result for the second quarter of 2025. He will pause for a while, so please take this opportunity to capture the screen. Now, let us begin the presentation.
[Foreign language]
I am Taniguchi, CFO of the company. I would like to explain about the consolidated result for the second quarter of 2025. First of all, the second quarter 2025 revenue was JPY 578.5 billion, up by 4.6%, or JPY 25.6 billion. OP was JPY 272 billion, up by JPY 9.2 billion, or 3.5%. Let me explain about the breakdown of revenue. Now, out of revenue, sales was JPY 511.4 billion, which was up by JPY 25.9 billion, or 5.3%. If you look at sales by region, domestic sales was JPY 223.3 billion, up by 2.8%, or JPY 6.1 billion. The strong performance of new products and mainstay products outweighed the negative impact of the NHI drug price revision and penetration of generics. Overseas was JPY 288.1 billion, up by 7.3%, or JPY 19.7 billion. If you look at the second quarter alone, Actemra export was extremely strong, and other revenue was JPY 67 billion, almost flat to the previous year.
Although we have seen an increase in income related to Hemlibra, one-time income has dropped, and that is the reason why other revenue stayed flat to the previous year. Now, moving on to expense, cost of sales was JPY 175.2 billion, up by 9.4%, or JPY 15 billion. The sales increased, and the cost of sales also increased as a result. The cost-to-sales ratio compared to the previous year went up by 1.3%, and now it has become 34.3%. The background is Actemra composition, which has a relatively higher cost, has grown in the second quarter. SG&A has been impacted by the inflation and the personnel cost increase, but we have increased the operational efficiency, and it has come down by JPY 1.2 billion from the previous year. Hold on.
R&D cost reflected the stronger progress of the early development projects and drug discovery researches, and went up by JPY 2.3 billion from the previous year. Other operating income was down by JPY 400 million year-on-year. As a result, OP was JPY 272 billion, up by JPY 9.2 billion. OP margin was 47%. Net income was JPY 193.5 billion, up by 2.1%, or JPY 4 billion. Next. This is the sales by product year-on-year. First, domestic oncology. It was JPY 116.6 billion, down by JPY 2.2 billion, or 1.9% from the previous year. Vasting was negatively impacted by the penetration of generics. However, new product fiscal sales outweighed the decline in PREGETA. Now, specialty was JPY 106.7 billion, up by JPY 8.3 billion, or up by 8.4%. We were impacted by the NHI drug price revision in general.
However, our mainstay products, such as Hemlibra, Actemra, and Vabysmo, and new products, the PiaSky, have grown the sales. Now, overseas sales. As I mentioned earlier, Actemra increased the performance. We were able to increase overseas sales by 7.3%, or JPY 19.7 billion. This page shows the forecast of our mainstay product, which is Hemlibra and Actemra. This is the full-year forecast for those two products. Now, Hemlibra. In the second quarter, the revenue of approximately JPY 38 billion, which was scheduled to be recorded or recognized in late June, was delayed to July due to a delay in delivery procedures. This happened in the past, but we've had this in the second quarter. Hemlibra global sales have been growing steadily. Based on the current shipment schedule, we are expecting to go above the initially forecasted revenue by JPY 10 billion.
Actemra, while biosimilar penetration is delayed, and based on the current shipment trend and based on the strong inventory needs, we believe on a full-year basis that we can overshoot our initial forecast by more than JPY 10 billion. Next page shows changes in OP. Last year was JPY 262.8 billion, and we are expecting an increase by JPY 9.2 billion this year. Now, domestic sales volume outweighed the negative impact of NHI drug price revision, and we expect that jump in OP. As for overseas sales, export unit price has come down. Hemlibra sales is growing, particularly in emerging markets, but volume is actually growing more than that. We also have positive impacts from FX. We are expecting JPY 19.7 billion increase in overseas product. Other revenue. Sales itself is growing, so cost of sales is also growing by JPY 15 billion.
So total, we are expecting OP increase by JPY 9.2 billion from the previous year. Now, this is the structure of cost and profit by quarter. These are the quarterly numbers, just so you know. There tend to be quarterly fluctuations as a result of delayed revenue recognition due to the timing of export. If we compare Q2 this year and last year Q2, last year Q2, we had a strong sales of Hemlibra. Against such a higher bar to compare, this year's number has come down. This page also shows the sales mix trend by quarter. Looking at the domestic. We saw the increase by JPY 6.4 billion year-on-year, as I mentioned earlier. Because of the impact of booking timing for the export, we have confirmed the drop in overseas sales here. This slide. As of Q2 results.
Comparing to the forecast number announced at the beginning of the year. We are showing the progress against the forecast here. Any of the items comparing to the progress rate as of last year, both sales revenue and the profit, operating profit has generated positive numbers. In terms of progress, I think we are having pretty good progress so far. This is shown by different segments and by product in terms of progress against the initial forecast as of now. As you can see, we see some strong area and weak area for the domestic oncology, domestic specialty, and overseas by different segments. Comparing to last year's progress, they all show positive results. They are all showing good progress. This is FX impact. Last year's actual rates is utilized in this comparison. The far left is quite important.
On revenue, we are showing plus JPY 23.3 billion OP, JPY 22 billion positive impact. Comparing to last year. Especially against Swiss franc, we saw the yen depreciation. That is a major reason. Swiss franc is our largest trading currency. Last year, Swiss franc was JPY 168.90 to a Swiss franc, and this became JPY 171.31 this year. It has depreciated more than JPY 10. Next, a balance sheet situation. Total assets amounted to JPY 2,278.3 billion, reflecting an increase in cash and deposit and increase in tangible fixed assets such as factory facilities. Went up by JPY 69.9 billion. Net assets increased as well by JPY 83.6 billion to JPY 1,985.1 billion, reflecting accumulation of equity capital through profits. This pushed up the shareholders' equity ratio to 87.1%. Net cash increased by JPY 31.3 billion from the end of 2024 to JPY 1,027.6 billion.
This slide shows the change in net cash, which I just mentioned, and showing there's some breakdown since last year, an increase by JPY 31.3 billion. The operating cash flow inflow from operating profit we had increased due to the decrease in networking capital and a decrease due to investment we had. All in all, operating free cash flow came to be JPY 236.8 billion. After deducting corporate taxes and dividend, cash increased by JPY 31.3 billion over the past six months. This slide shows. We show this every time, but this is showing our near-term capital investment plan, which has been approved internally. It includes the new capital investment project of JPY 80 billion at the Ukima facility that was announced today. Next page. We've been only talking about on a core basis. This is IFRS basis results. What the adjustment looked like here.
Intangible asset amortization, impairment, the business restructuring cost, ERP implementation. Also, the asset sales gain in Q1, we saw the R&D. Site, ex-R&D site in Kamakura. Those are all considered as adjustment. Last page, this is in-house global products. We have five products, including PiaSky. Showing the six-month sales at Roche outside of Japan. I hope you can use this info for your reference. This concludes my explanation.
Thank you so much. Thank you very much for your attention. Now we are moving on to Q&A session. With regard to Q&A, we also have Hidaka, Head of Sales, Senior Executive Director, and Takano, Head of Marketing and Sales, to be present as well. In order to have as many questions as possible, I'd like to limit the questions to two per person.
Also, the sound of the presentation, questions and answers will be posted to the website on a later date along with the presentation. We'd like to take questions from those who are in the room, and then we'll take questions from the Zoom webinar. If you have questions and those who are in the room, please raise your hand, and we'll bring you a microphone. Please state your name and company name and your name and start asking your question.
[Foreign language]
My name is Hashiguchi from Daiwa Securities. My first question is related to tariffs. From a medium to long-term perspective, when you think about supply chain, is there any possibility that you're going to make some changes? It seems like the tax rate may gradually go up. If a higher percentage of tariff is going to be imposed on the pharmaceuticals in the future, are you planning to ship out the pharmaceutical products to the U.S. as a preparation? I mean, to prepare for that to happen.
Thank you very much, Hashiguchi-san, for your question. Yes, that was a question on the supply chain. Yesterday, Japan and the U.S. have come to an agreement regarding the reciprocal tariff. So 15% is the decided percentage. Pharmaceuticals are not within the scope of this 15% tariff. In early July, President Trump,
[Foreign language]
The U.S. is conducting a survey to identify the exact percentage of tariff based on the trade law of 332 and maybe like 200% or so. There will be one or two years duration given to the companies to relocate the production base to the U.S.
To your second question, under such circumstances for the pharmaceuticals product, what level of tariff are going to be imposed? I mean, it's very difficult for us to foresee the expected percentage of tariffs. As Hashiguchi-san mentioned, if the percentage of—it may—we don't believe that the tariff percentage will gradually go up. As Prime Minister Ishiba commented last night, if in the future when tariff is imposed,
[Foreign language]
Our country's priority will not be lowered compared to the other countries. Still, for pharmaceuticals, I mean, we still need to be carefully monitoring how things will go. Then coming back to your first question again. Are we going to relocate production sites to the U.S., or are we going to do a technology transfer to the U.S.? Are we considering that? We are exploring and considering various options right now.
My second question. You are not. Studying into the second point. Making changes in the supply chain, you are currently contemplating, but then maybe you can increase the production volume and then ship out those produced products to the U.S. in early phase to mitigate the potential risk of a higher tariff %. You do not think about increasing the production volume. Again, I would like to just say that we are exploring different options.
[Foreign lanugage]
My second question is related to Hemlibra improvement of convenience. I know you are trying to improve the convenience at ISTH Nombralo Disc. With regard to the BIM-8 device, the patients who are enrolled in a clinical trial said that it is easier to use compared to Hemlibra, and that the data was presented. What is your takeaway of this and the current initiative to improve the convenience of the drug? What is the current status? BIM-8 information and our efforts to improve the convenience of Hemlibra. Those are the two questions.
Kusano-san, can you respond?
Thank you, Hashiguchi-san, for your question. Currently, for Hemlibra, we are developing AI. The timing is difficult for us to comment clearly, but in one to two years or so, we should be able to complete the development. NXT007, we are developing the device for easy administration. We should be able to fairly compete against BIM-8. That is the status right now.
Thank you. Thank you so much. Next person, please.
[Foreign language] JPMorgan
Wakao from JPMorgan. My first question on page slide 34 is about the export of Hemlibra. Looking at Roche results today, they show very good results, but in Q2, the number was low. That was a surprise. According to investor relations, a large amount actually got delayed into July. That is what we heard. The amount was quite big, was it not? How much was it? If they came into June, then what would it have been like in the second half? Because of this delay, what happens to the second half? Please share that information.
In Q2, in June, about JPY 38 billion or so was originally planned, but that got delayed into Q3 in July. If we had this JPY 38 billion in Q2, then what happens for the remaining six months? The remaining six months, as I mentioned earlier, compared to the full year forecast, looks like we have an upside of over JPY 10 billion. JPY 38 billion, even if you deduct 38 from this number, then still you see a positive upside. Originally, if you had JPY 38 billion in June for the second half, you had a bigger upside? No. Compared to JPY 318.6 billion for the full year, in either way, we would have seen over JPY 10 billion upside. This delayed JPY 38 billion would be the incremental for the second half. Yes, that's right.
What was the reason for delay?
Basically, I believe you have to catch up with the demand because there's a very strong demand. Why was there a delay? We did see such a timing delay in the past a few times. Because of the revenue booking according to IFRS, not just according to the shipping, they have to be delivered, and the risk must be transferred over to the other party to book revenue. You have to go through a very complicated documentary process. You have to go through the customs duties because of the cross-border procedure, and you have to go through the quality check, and that is quite complicated. We need to prepare resources. For many other reasons, it is possible to see a potential delay for this process, and it just happened this time.
This upside of over JPY 10 billion, is it because of the strong demand in the market?
Yes, overall, yes. The end market strength is seen, and we are also seeing demand for inventory. You're not adding the inventory because of the tariff situation. No, that's not the case.
My second question
[Foreign language]
Is the LUNA-18. The reason for the failure of LUNA-18, can you clarify that? Because of the pan-RAS. The pan-RAS, that we were not able to get a good balance against the safety profile, or what is the reason? Can you clarify that? And AUBE00. Compared to LUNA-18, looks like it is a better product, potentially. KRAS inhibitor that's being developed right now, compared to that, what would be the profile expected for AUBE00?
Wakao-san, thank you very much for your question. LUNA-18, regarding its negative aspect, exactly as you mentioned. The LUNA-18 with the pan-RAS inhibitor, not just for KRAS, but also NRAS and HRAS, all RAS will be inhibited. For many kinds of different cancer types, we can expect a potential impact. The safety window extensive enough, whether that can be ensured or not, was a major challenge. At the same time, looking at the competitive product in the market status, the competitive products are showing pretty good results in the clinical studies. According to the results obtained from the current clinical studies, comparing to those competitors' study results, we started to see a concern of not being able to ensure enough amount of the treatment window.
That is why making it more difficult for us to differentiate from the others. Therefore, as we reshuffle the portfolio, as introduced in today's presentation, compared to LUNA-18, we believe there is a much higher possibility of being able to show the competitive advantage as pan-RAS inhibitor. Against LUNA-18 with this AUBE00. That is why we decided to suspend the development. And AUBE00, this is the second mid-size molecule drug discovery. So what did we learn from LUNA-18? It is going to be quite important to develop this AUBE00. As we were going through the development of LUNA-18, we were able to confirm a good oral absorption ability. Also, we have seen the indication of transfer inside the cells, especially the oral absorption ability. Along with the dose increase of LUNA-18, we were able to confirm the increased level of the dose inside the blood.
Also, we are able to also observe on a human compared to what we confirmed on the mice in terms of absorption capability. And MAP kinase signal pathway downstream, there are five molecules, and the amount of messenger RNA occurrence are also confirmed to be reduced. So our mid-size molecule inside the cells, in terms of oral absorption ability, also the transfer inside the cell will be also implemented on AUBE00. That is why we still maintain very high expectations for AUBE00.
今の段階ではやはり臨床試験をやっているので。
Right now, we have to see how it goes unless we go through the clinical trials. What we learned from LUNA-18, all this based on this experience, we will verify them completely in a phase I study. In conclusion, as Kusano-san also mentioned, making good progress with the mid-size molecules. On the other hand, AUBE phase I ending timing would be in 2030. It seems like it is going to be delayed by about five years.
Looking from an outside perspective, I do not think it is making smooth progress. What is your intention of mentioning that you are making good progress so far? What is the difference from our understanding?
For each drug, there could be a potential delay. There are two. We have now two drugs in the preclinical, also even before that stage. One is cancer-related, one is non-cancer-related. We have 25 research-level drug projects. Of course, we have not been able to introduce the drugs to come to the clinical stage. However, there are many mid-size molecule projects going on at the preclinical stages or beyond that.
You are saying it is taking longer time, but you have increased the potential projects.
Yes.
ありがとうございました。 では。 次の。 真ん中の方、お願いいたします。
I am from Nikkei BP. My name is Yokoyama. Talent taste. I have a question. Based on this data, you are going to submit findings. PASE PFS, which is a primary endpoint. At 18 months, Kaplan-Meier curve is almost overlapping, and for OS, there is no significant difference. It is immature. Hazard ratio is 0.96 compared to LEEP. It is not as good. What is your expectation on this?
Thank you very much for your question regarding Talent taste. For PASE PFS, TASE PFS is met, but OS is not met. Currently, we are going to refrain from submitting the finding. We are going to look at the result of the analysis next time. If OS looks good, we are going to move on to the actual finding. Thank you.
Inabolisib finally started to move. I was expecting earlier move, but for Inabolisib, you have proven data. I was hoping to get this product available in Japan. You do not list this in the findings list. I was wondering, when is the expected timing for the submission of findings?
Thank you very much for your question on Inabolisib. Currently, phase I/II study has been initiated, and we are promoting the clinical trial in a rush manner. As you have pointed out, this has been approved outside of Japan and also in Europe. At ASCO, OS data was presented. We would like to bring this product as soon as possible to Japanese patients. We would like to complete phase I/II study, and we would like to do a bridging to phase III study so that we can submit findings. We do our best. Sometime next year. Sorry, I cannot comment on the timing, but we will take actions as soon as possible.
Thank you. Next person in the same room.
[Foreign language]
Ueda from Goldman Sachs Group. My first question is about LUNA-18 and AUBE00. LUNA-18. For LUNA-18, for clinical testing, I think since you are making very cautious steps in moving forward to clinical studies, including safety profile, and this will be the very first mid-size molecule technology, I guess you have been quite cautious in proceeding with this project. Looking at, has there been any concern about the safety and also the mid-size molecule so far? I think it is possible. Do you think you can obtain a data result for the mid-size molecule smoothly on a plan? You are talking about 2030, but you may expect to see the results earlier than that.
Ueda-san, thank you very much for your question. For LUNA-18, as we have been talking about regarding safety profile, there was a concern area. That is why, as mentioned in the past several times, in phase I study, those limit toxicity testing were also conducted with a cautious manner. That is what took so long. The more detailed result to come out on papers or to be presented at the academic conference. Just like in the past, the RAS-MEK kinase that was inhibited to cause the result of some symptoms. The drug-effective side effects are expected since, like, also some molecule-specific side effects are not confirmed. I do not think there are any concerns on that point, but more details to be shown at the academic conference or on the papers. For the AUBE00, we have learned a lot from LUNA. We have conducted many phase I trials for the different antitumor drugs. We. Try our best so that we can complete this phase I trial as soon as possible, earlier than LUNA-18.
Thank you for your answer. Your second question is about the U.S. tariff situation. Just the qualitative information. You're part of the Roche group. Reviewing the production footprint, so the supply chain, would there be any merits or advantage, or if you can actually take some flexible actions to address those areas?
Thank you for your question. You may already know this as part of the Roche group. In the U.S. market, there are multiple manufacturing operations in the U.S. market. We can also, there's an option of leveraging these facilities as an option as part of the group. As I mentioned, there are many different options. Including them, we will look into different options.
Thank you. Thank you very much. That's all from me.
[Foreign languge]
Thank you.
[Foreign language]
I am Sawai from UBS.
[Foreign language] ROSE-12。
ROSE-12?
非常に難しいちょっとメカニズムなんで。
The mechanism seems to be very complicated and difficult. TREG.
[Foreign language]
It's like a boom.
[Foreign language]
Nowadays, it's gaining a lot of attention. I think there is a difficulty being reported. You have a switch antibody technology. You can make switch on and off clear without increasing TREG. You can improve the immunity. Then you use Tecentriq together with ROSE-12 to further enhance efficacy.
Thank you very much, Sakai-san, for ROSE-12 question. This time, we use switch antibody technology. ATP adenosine 3-phosphate expresses highly in the cells, and with or without antibody can bind or not bind. It's not about the volume of TREG. ROSE-12 may be more likely to be binding to TREG or not. In tumor cells, when ATP is large or big in quantity, we can catch TREG more. In a healthy cell, ROSE-12 does not function. That is the mechanism of action. While maintaining good safety, we can dose up. That's the design.
[ Foreign language]
You're talking about solid tumor this time. The expression of TREG does matter when we talk about solid tumor, right?
Yes.
[ Foreign language]
30 times efficacious. That was proven in the mouse. Yes.
[ Foreign language]
In development,
[ Foreign language]
You have dropped six R&D development projects.
No, not six.
[Foreign language]
Following your company for a long time, but I think this is your first time to drop so many development projects at the same time. What's the reason behind? I know you have reached your early pipeline. Is that the only reason, or is there any changes in your R&D policy?
[ Foreign language]
If there is any particular background, please enlighten me.
Thank you, Sakai-san, for your question. In the drop, being this number of projects at once,
[ Foreign language]
Has never been done before in Chugai. TOPI20 started in 2021. The core strategic concept is red shift. We reinforce red function. We are going to increase the R&D project number. At the end of the day, we are going to launch one global product per year. That's the strategy. Now we've generated a lot of projects, and they went into preclinical and clinical phase. In the past, you have pointed this out, and we've had discussion internally. Depending on the project, we had to proceed R&D development very thoroughly. We had to generate a lot of data. As a result, in some projects, the timeframe got longer than our initial expectation. In order to address that, as has been explained, per each project, go or no-go decision criteria was clearly set. When a milestone is met based on the data and based on the competitors' data, we make go or no-go decision. That's the strategy we've been upholding. In the meanwhile, the number of projects has gone up quite a bit. The question is, do we want to stay fully focused on the development of all those many projects with the full resources? Even before go/no decision or milestone achievement timing, we look at the clinical and non-clinical data, especially competitiveness, safety, efficacy, and PK. We look at those data, and then we prioritize the different projects. We've decided to discontinue those five projects who have the least priority. As a result, I guess the researchers were, in a way, inspired. As we did the prioritization work, our researchers have been working on the development project based on the science, based on the data. We say, I mean, we look at competitiveness, safety assessment, and then we did the prioritization work. That was well understood. By doing this prioritization work, we were able to narrow down on more promising projects.
For those promising projects, now we are able to accelerate the development. We can allocate more resources and money behind those projects. By dropping those projects, now we have more opportunities.
Thank you.
[Foreign language]
Okay, another person in the back.
[ Foreign language]
This is Banner from the Japanese Economic Newspaper.
[ Foreign language]
Talking about the construction of the R&D facility. Can you hear me okay? Can you repeat? About the R&D facility. UKX, you're talking about? Yes. JPY 80 billion investment is quite a large number, I believe. For the mid-size molecule, the antibody modality research would require this level of investment. What is the reason for this amount of the investment? Also, you are trying to reinforce the development function, but what do you expect as a result of having this new facility?
UKX, JPY 80 billion investment, if it's appropriate or not, if it's—I think that was the question. Like I said, within the red shift strategy, now we're starting to increase the number of projects and antibody drugs and mid-size, small-size molecules are being focused more. To appropriately produce all these clinical drugs at the appropriate timing. The components that we are developing are quite complex at the same time. Much faster delivery. Also, we need to establish the production methodology as quickly as possible. That was a major challenge. Of course, antibody mid-size molecule projects are increasing, and we would need more spaces. We need more resources. At the same time, in the existing facility, we will not be able to accommodate them all. Therefore, we decided to build this UKX at this size. This is an R&D facility to develop production engineering technology. If JPY 80 billion is appropriate or not, I know it is a quite large number. We, of course, went through the bidding process and compared different prices. We selected the more reasonably priced project. We also looked into similar facilities outside of Japan and how much it cost for those facilities. We compared to their numbers, and we confirmed this number we are talking about is not too far off of what was invested in other facilities. Lately, we are experiencing inflation, price increases, and labor cost increases. The construction cost has increased a lot compared to a few years ago. That is also another truth. We got quotes. We actually received quotes a few years ago, but even since then, we got re-quotes. Recently, we saw huge increases in the actual costs. Just because having this investment is very high does not really lead us to not making this decision to invest. We think this is an essential part of accomplishing TOPI2030 targets.
Just to elaborate more, also in Ukima facility, there are several buildings available. Since they are getting older, we want to consolidate them into a bigger facility so we can be more efficient in communication at the same time. That is another purpose. I forgot to mention this. In this UKX R&D facility, it is also being friendly to the environment. We try not to utilize fluorocarbon as much as possible. We want to have zero exposure to fluorocarbons and zero CO2 emissions. We have tried to accommodate those impacts into this building. That is also another reason for seeing higher cost.
[ Foreign language]
Next, we would like to entertain questions from the online participants. You can click on the raising hand button at the bottom of your screen. [ Foreign language] I will pronounce the name of the person who can ask questions. When your name is pronounced, please state your name and affiliation and start the question. From Morgan Stanley, MUFG Muraka-san, please. Thank you very much.
[Foreign language]
My name is Muraka from Morgan Stanley. My first question is related to the export of Actemra and Hemlibra. On a four-year basis, there is a possibility to overshoot the forecast by JPY 20 billion in total on top. I was looking at the numbers presented by Galderma. NEMLUVIO seems to be selling quite well. Can we expect upside from NEMLUVIO? This is a type of drug that you need to carry a high level of inventory. Looking at this number so far, it seems like we can expect some upside.
Thank you very much, Muraoka-san. This is Taniguchi speaking. Hemlibra, Actemra, I said more than 10 billion. Not 10 billion. The export to Galderma, based on the current sales pace of Galderma, it's actually been accelerated.
[ Foreign language]
We haven't quantified the potential upside impact as a result. If we have more visibility and information, we would like to update you in the next earnings call. NEMLUVIO is growing more than I have expected.
Yes, thank you. GM-329, when I look at the presentation by Roche, dip-bound combination therapy, phase two, Gemintia, details have been laid out. I looked at the clinicaltrials.gov site, and I thought this is quite interesting. The 48-week dip-bound combination therapy study, 24 weeks extension is going to be dim monotherapy. Combination therapy only 48 weeks, and remaining is a monotherapy. Compared to the other myostatin, this is quite a unique way of using the drug or design. What is the reason for this unique study design? What is the expected best-in-class unique profile? Can you explain about your intention behind this unique study design?
Thank you very much, Muraoka-san. Yes, GM-329, phase two study, initially 48 weeks, the investigational drug will be administered together with tirzepatide. Low dose, mid dose, high dose, there are three doses to be compared. On top, we have a placebo arm. Following 24 weeks in all arms, tirzepatide will be suspended, but for high dose, only GM-329 will be extended for 24 weeks. That's the clinical trial design. Incretin, as you know, once administration is stopped, body weight is expected to increase. If GM-329 follow-up is given, the body weight increase can be suppressed. That's something we are expecting to see in the maintenance therapy period.
[ Foreign language]
Thank you very much. When the muscle mass goes up and then we don't see any rebound of the body weight. Sorry, one quick question. For the actual financials in export, you didn't have any impact from tariff, meaning that Roche didn't decide to increase the inventory volume in April to June.
As far as I understand, Roche didn't do that.
Yes, thank you.
Next, from Citigroup Securities, Yamaguchi-san.
[Foreign language]
Can you hear me?
Yes, we do. Thank you. I'm Yamaguchi from Citigroup. The canceled project among them, the switch antibody was one of them, I believe. Now you are talking about the switch antibody project, STA-551, I believe. The reason for the cancellation of this, can you explain? Also, the concept of switch antibody, was it also available in the project or not? Can you comment on this project?
Yamaguchi-san, thank you for your question. STA-551, regarding this project, the target molecule was the CD137. So, STA-551. To be combined with the CD137, that was also part of the mechanism.
As a result, in a clinical study, the result cannot be disclosed at this point. Without the switch function, CD137 antibody, it would not have delivered, reached to the level of dose. It's actually confirmed. I think it's because it was confirmed to some level. More details will be presented at the academic conference anyway. On ROSE-12, as I mentioned before, the Tregs, CTLA-4 is the targeted on the Tregs, so it's a completely different target. With this SDA-551 cancellation, looking at the portfolio level, we made a decision. The switch antibody expectation, also the ROSE-12 expectation, won't be affected. Thank you. The details to be confirmed in data, as we see. You saw improved tolerability, but you didn't see a clear efficacy, I believe that's what you saw. As of now, at this point, we are not able to disclose detailed data yet. Later, please refer to them in the papers or the academic conference. Thank you.
[Foreign language]
Another quick question. Muraoka-san also asked this. NEMLUVIO, so this is part of the other revenue, right?
Yes. This is part of the overseas. There's another section, and so that's part of this other under overseas.
Looking at this, this number seems like there's no major change in Q1 and Q2.
[Foreign language]
Galderma is saying to the investors are not really reflected into these numbers, or there's an, because of the other under the other sector, is it invisible?
I think it's going to come stronger towards the end of the year. Okay, so there is a potential increase expected towards the end. It could be actually stronger than what you expected. There is, yes, such a potential.
Understood. Thank you so much.
[Foreign language]
Next from Macquarie Capital, Tony Ranson, please.
Hi, can you hear me?
[Foreign language]
Okay, perfect. This is Tony Ran from Macquarie. A couple. First, a couple of questions on your Hemlibra next generation product, NXT007. Specifically, I want to ask about the dosing. In the phase I to study, you guys used every four-week dosing. Previously, you guys had hinted that you might be able to dose it at much longer intervals, possibly every two to three months. I just wanted to see why did you decide to settle with a far more frequent monthly, every four-week dose? Would that be the dose you will take into phase III trials? Also, in the future, do you think you can get an extended dosing interval longer to more than four weeks? That's on NXT007. The second question is on the gene therapy Elevidys. You guys had it approved in May in Japan in ambulatory patients. I just want to see how many patients have you dosed, have you given the gene therapy to in Japan, and. Have there been any patients in the non-ambulatory situation receiving the gene therapy?
Yeah, thank you.
[Foreign language]
Thank you very much. Kusano, I would like to respond to your questions. Thank you very much.
[ Foreign language]
Mr. Tony Ren, for your question. With regard to dosing frequency of NXT007, in terms of the future regimen, unfortunately, there is nothing I can comment on. We are sorry about that. Half-life is quite long, so there is a possibility that we can extend the interval between dosings. With the high half-life, the change in PK between peak and trough can be controlled better. In the future trials, we will be investigating into the dosing frequency. If I may, I would like to move on.
Sure, yeah, please.
Next, eligibility. Japan. Japanese dosing experience or usage experience currently in Japan. From age four to seven ambulatory use and muscle dystrophy. Patient is enrolled in the clinical trial. Actually, we have enrolled five patients as such so far. Those are the five ambulatory patients. Non-ambulatory patients targeted clinical trial is participated by Japan, and four Japanese subjects have been enrolled. The clinical trial targeting at non-ambulatory patients is blinded, so we do not know whether they are randomized to placebo group or active drug group. That's all.
Okay, perfect. If I may just have a quick clarification. I just want to confirm that I heard you saying that you will increase your guidance for Hemlibra.
Sorry, Tony-san, we would like to limit the number of questions to two per person. Sorry about that.
[Foreign language]
Thank you very much. Next.
[Foreign language]
Sugi-san from Sanford C. Bernstein.
[Foreign language] US tariff impact.
You're looking at different options right now. This is a question related to the assumptions you have. The cost came out to be quite high this time because
[Foreign language]
Active RAI versus export was high, I think you mentioned. US genetic facility was utilized, and you outsourced manufacturing for Actemra. I think you mentioned that before. Is that the reason why you saw the higher cost? If that's the case,
[Foreign language]
In the US, if pharmaceutical is going to be also in that scope of pharmaceutical tariff in the future, and the Hemlibra production could be also transferred over to US, potentially. When that happens,
[Foreign language]
As far as we heard from Roche, they're saying that manufacturing capacity-wise, it seems like they have enough capacity right now.
Compared to the capacity by Roche, then you may outsource your manufacturing to Roche capacity. Would that be also possible? If that's the case, just like with Actemra, that could actually increase the cost at the same time. Would that be true?
Of course, this is just one of the options. I just wanted to know if there is such a possibility as well. I have Taniguchi to answer this question.
Sugi-san, thank you very much. For Actemra, cost came out to be higher from a relative perspective. It's not just because of the genetic site issue. There are multiple impacts. Antibody production for Actemra cost was high, regardless of the site location. There are other elements as well. Regarding manufacturing sites, as Okuda mentioned earlier, there are different options available. We are looking at them from different perspectives right now. We haven't really decided to set up a certain direction forward. It depends on the actual tariff being imposed and also manufacturing costs compared to the cost we have right now. The labor cost, personal property cost will be needed to confirm if it were outside of the U.S., what happens. We also need to factor in all these elements to make a decision. At this point of time, it's quite difficult for us to give you a clear answer to your question.
Thank you. Next question. SAIL-66, I think. Tri-specific T-cell engager product. You decided to discontinue this product. This T-cell engager, tri-specific T-cell engager modality itself, had a challenge. Is that the right understanding? What is the reason for your decision to discontinue this? This tri-specific T-cell engager, what is your thinking going forward for this?
SAIL-66. It was your question. Regarding SAIL-66, protein 6 was the target in tumor, also on T-cell CD3 and CD137. Triple specific code, antibody to be bonded to both of them. Dual Ig technology is utilized. The protein 6 and also CD3 on T-cell went through to results that, in effect, and also CD137 cell, it is bonded to the cell. It can actually have a continuous activity to see stronger results to anti-tumor activity. As I mentioned, the results will be presented in the upcoming paper, also in the academic conference. Regarding triple specific antibodies, dual Ig technology, we have ALPHAS-12 drugs right now. This is for small cell lung cancer and neuroendocrine cancer. This is a target. They also utilize dual Ig technology. The testing for these are underway still right now. Dual Ig technology will be further pursued.
Understood. Thank you very much.
[Foreign language]
We are afraid that we will have to close Q&A session since we have come to the scheduled end time. With this, we would like to conclude. Our next call for the second half of 2025. Due to the time limitation, we were not able to entertain all the questions. For those additional questions, please reach out to the IR department of our company. The contacts are shown in the last page of your handout. Thank you very much for your participation despite your busy schedule.