Thank you. This is Yanagi, CFO, speaking about financial part. Please look at page two. Here, you see the consolidated statement of income, or P&L, for the first quarter. Based on our partnership model, we have overcome the impact by COVID-19. We have exceeded plan and achieved increase in both revenue and profit. Top- line revenue was JPY 165.6 billion, up 8% from a year earlier. There were impacts of COVID-19, drug price revision in Japan, and foreign exchange rates, which was partly offset by royalty for tazemetostat and core growth driver, LENVIMA, increased revenue by JPY 10 billion, leading to 8% increase in revenue from a year earlier. LENVIMA's profitability is very high. That is to say, cost ratio is very low. Together with the business development project, cost ratio has been reduced to 23.1%.
Gross profit was JPY 127.3 billion, up 15% from a year earlier, with double-digit growth. This total expenses increase was contained within the increase in the gross profit, therefore leading to a significant increase in profit. R&D expenses were JPY 30.5 billion, up 4% from a year earlier. BAN2401 and other next-generation Alzheimer's disease therapies, we made a proactive investment into this pipeline. R&D expenses account for 18.4% of the revenue, in line with global players. Actual gross R&D expense, including partners reimbursement, was JPY 47.2 billion, accounting for 28.5% of sales. We have continued to be one of the most proactively investing global pharma in R&D activities. SG&A expenses were JPY 64.9 billion, up 8% from a year earlier. This accounts for 39.2% of revenue. This is the SG&A expense ratio.
This JPY 5 billion increase in SG&A expenses, considering the shared profits paid to Merck for LENVIMA increased by JPY 5.6 billion. Considering this, we have made a positive and proactive expense features. Considering the cost for preparation for launch of DAYVIGO and for maximization of contribution to patients are considered. The SG&A expenses, excluding these shared profit impact, was less than 30% of sales. Therefore, sound P&L has been maintained. Last year, other increment of expenses included JPY 4.4 billion as gains on transfer of Elmed Eisai shares last year, which we do not have this year. Operating profit was JPY 32.1 billion, over a 20% increase year-over-year. OP margin was 19.4% of the sales and in- line with the global standard. Bottom line, similarly achieved a double-digit growth.
For your reference, the average ROE was 14.4% over the three months, exceeding last year's ROE. Equity spread was 4.4% from residual profit. Value creation was significantly achieved. If you look at the balance sheet items, net DER was -2.25. From the end of March, net DER has declined a little bit, this is because of the six months dividend was paid based on the operation for three months, excluding MGI acquisition. A record high capital expenditure of JPY 56 billion annually will be made this year. With this positive investment, cash is declining a little bit. We will maintain net cash of JPY 170 billion, and equity ratio is 65%. Based on optimal capital structure, we have a leeway in financial structure.
Based upon this financial integrity, credit agency R&I has upgraded our rating from A to AA- for the first time in five years. Based upon the financial integrity, we are going to overcome the impact of liquidity. Liquidity, given the COVID-19 impact and the CapEx expenditure at JPY 160 per share, which has been increased for the first time in 10 years last year, we are assured that we would be able to maintain all these investment expenditures with this strong balance sheet. On next page, you see on this waterfall chart, breakdown of revenue migration is provided. Last year, revenue was JPY 154 billion. Growth drivers, LENVIMA and other global brands increased revenue by JPY 8.9 billion. There were impacts of drug price revision in Japan, and discontinuing of sales of BELVIQ in Americas and Asia. Contracts with Humira was discontinued in Taiwan.
Given the royalty increase for tazemetostat, revenue increased to JPY 11.6 billion year-on-year to reach JPY 165.6 billion. Core business, pharmaceutical business revenue was 99% year-on-year. Considering the JPY 3.8 billion impact by Forex. The pharmaceutical core business revenue was 101% of last fiscal year. Excluding the impact of royalty for tazemetostat, we have achieved increase in revenue. Next page four. Here is the waterfall chart representing breakdown of operating profit migration. JPY 25.8 billion was recorded for OP last year. Global brands increased profit by JPY 10.2 billion. In parallel with improvements in revenue, there were impacts in Japan by drug price revision and also, cost for the launch of DAYVIGO was recorded in Americas and in China. Over achievement of plan, a 3.1 increase was recorded for China.
R&D expenses were increased by JPY 1.1 billion, centering on the development of next- generation AD treatment, and profit was increased by JPY 6.3 billion year-on-year to reach JPY 32.1 billion. On the right-hand side, the reference box, you can see the R&D expenditures. As I said earlier, including the reimbursement from partners, the expenditure stayed at high level of JPY 47.2 billion, almost flat from last year. By segment, Pharmaceutical business operating profit was up 3% from a year earlier. Considering the - JPY 1.1 billion as the impact of foreign exchange rate on a CER basis of increased by 5% and excluding the tazemetostat impact, we have achieved the increasing profit. In the core operations, we have achieved increasing profits and significantly exceeding the target. That is all I have for the financial section for the first quarter.
This is Ivan Cheung from Neurology Business Group. Today, I'll provide an update on the important progress of our neurology franchise. Let me start with Alzheimer's disease on slide five. The annual AAIC, Alzheimer's Association International Conference, just wrapped up last Friday. The pace of progress in the Alzheimer's disease field is more promising than ever, and this field is now very different from over 20 years ago when we launched Aricept. We now understand that the underlying disease pathophysiology starts many years before the onset of symptoms. We now understand that this disease is a continuum driven by changes in the central pathophysiology of A, Amyloid, T, Tau, N, Neurodegeneration, meaning neuronal cell death and synaptic loss, and potentially I, Immunological dysfunction caused by overactivated microglia.
We now understand that we have the ability to measure the biomarkers that characterize these ATIN pathophysiology, not only through imaging, but also through CSF and blood biomarkers. In the bottom table, you can see in the red font that just in the past couple of years, new biomarkers have rapidly emerged and new risk genes are being identified. At Eisai, as seen in the middle of the slide, we're very excited that we have completely transformed our Alzheimer's disease pipeline based on this state-of-the-art understanding of the AD continuum with novel therapeutic candidates that precisely target each component of the entire ATIN spectrum. Later on, I'll provide an update on our three most advanced candidates. Aducanumab, under co-development with Biogen, BAN2401, also under co-development with Biogen, and E2814, our novel anti-tau antibody.
With this comprehensive yet targeted portfolio, our goal here in Eisai is not only to delay the progression of Alzheimer's disease, but to one day stop the progression of Alzheimer's disease. Moving to slide six. One of the big news last week at AAIC was a realization that blood-based diagnostics are probably more imminent than expected, as new findings are being published continuously. With regard to A, Amyloid, with ample evidence that not only a blood test is feasible to diagnose Alzheimer's disease, but also blood Aβ42/40 ratio may detect Alzheimer's disease earlier in the AD continuum than amyloid PET.
With regard to T tau, the big news last week was the publications around blood p-tau217, which not only could diagnose Alzheimer's disease as seen on the left-hand side graph, but also could differentiate between Alzheimer's disease specific tau pathology versus non-AD tau pathology as shown on the right-hand side graph. At Eisai, we're working closely with Sysmex to co-develop a blood Aβ measurement using Sysmex's HISCL system, which we believe holds tremendous potential to realize a low-cost and quick turnaround test and allows for simultaneous measurement of multiple biomarkers down the road, such as tau. We're now incorporating clinical data from our MISSION AD studies to progress this blood Aβ measurement towards regulatory submission, starting with Japan. Our logic here at Eisai, though, is to one day develop a blood panel test with multiple biomarkers so that we can enable early and individualized diagnosis across the AD continuum.
Moving to slide seven. All these scientific advances are now more crucial than ever because Alzheimer's disease is an epidemic. 50 million people in the world are living with dementia today, and this number will only explode to over 80 million people in 10 years. The annual cost of dementia globally is estimated to be over $ 1 trillion today, and this number will double in 10 years. On the right-hand side of the slide, you can see that if we can delay the progression of Alzheimer's disease by five years, the prevalence curve of Alzheimer's disease will almost flatten over the next 30 years, and significant cost savings to the healthcare system could be realized. It is indeed more urgent than ever that we must bring a disease-modifying therapy to patients around the world. Moving to slide eight.
We are very excited that our partner, Biogen, completed the BLA submission to the U.S. FDA for the approval of aducanumab last month, which marks an important milestone of potentially bringing the first therapy to market to reduce a devastating clinical decline and meaningfully change the course of Alzheimer's disease. The submission followed ongoing collaboration with the FDA, and the data package includes positive results from the phase III EMERGE study, supporting data from the phase III ENGAGE study, and also positive results from the phase I-B PRIME study. The FDA has up to 60 days from the submission date to decide whether to accept the application for review, and if accepted, we expect that the FDA will also inform us whether the BLA has been granted priority review designation. In Europe, Biogen held formal meetings with EMA and is now preparing for the MAA filing.
In Japan, Biogen initiated interactions with the PMDA and is now preparing for the formal consultation meeting with the PMDA, with a goal of submitting the JNDA application. Last but not least, we're continuing to strengthen our partnership with Biogen for the launch readiness of aducanumab, increasing our collective engagement with medical experts, payers, and various stakeholders in the Alzheimer's disease ecosystem. Together with our partner, Biogen, we remain optimistic and are very excited about the prospect of bringing aducanumab to market. Moving to slide nine. Let me provide an update of BAN2401, which is undergoing a pivotal phase III study, Clarity AD, in early Alzheimer's disease subjects.
We are glad to report that we have successfully implemented a number of initiatives, including home infusions, telemedicine, and other digital transformation approaches to mitigate the risk caused by the COVID-19 pandemic, with our foremost priority being protecting the safety of the patients and the data integrity of this trial. We are also glad to report that this study has been initiated in China since June. All these tremendous efforts allow us to stay on track to complete patient enrollment for this study this year, and we eagerly look forward to the final readout of the results in the second quarter of FY 2022. Last week at AAIC, we also reported preliminary data from the open-label extension OLE phase of Study 201. ARIA-E incidence rate in the OLE phase so far is similar to the rate observed in the core study at below 10%.
In addition, the OLE phase allows us with those subjects who received placebo in the core study with a 10-mg biweekly dose and take PET scans of these subjects as early as three months. We are reassured by seeing meaningful amyloid reduction as early as the three-month time point upon treatment initiation, as it underscores the importance of the dosing regimen of 10 mg biweekly with no titration, which is exactly the dosing regimen being deployed in the Clarity AD phase III study. Next slide. Moving to slide 10. Our plan for BAN2401 is not limited to early Alzheimer's disease. We believe BAN2401 has potential to be used much earlier in the AD continuum. We are very excited about the initiation of the AHEAD 3-45 clinical study in collaboration with ACTC last month. This clinical study plans to enroll 1,400 participants with preclinical AD into two double-blind trials.
The A3 trial, as you see on the left-hand side, will enroll cognitively normal individuals with intermediate level of amyloid in their brains, i.e., they are in between amyloid negative and amyloid positive. The A4-5 trial, as you can see on the right-hand side, will enroll cognitively normal individuals with elevated level of amyloid in their brains, i.e., they are amyloid positive. The endpoint in the A3 trial are completely biomarker driven, with amyloid PET being a primary endpoint, tau PET being a secondary endpoint, and exploratory endpoints being a biomarker panel of CSF and blood biomarkers. The A45 trial will have a cognitive primary endpoint, PACC, secondary endpoints with amyloid PET and tau PET, and exploratory endpoints with a biomarker panel just like the A3 trial. This clinical study has been initiated in the U.S. and will be expanding to many countries such as Japan and Europe.
We look forward to ramping up subject enrollment into AHEAD 3-45 in collaboration with ACTC, as we're optimistic that BAN2401 may delay disease progression across a wide spectrum in the AD continuum from preclinical AD to early AD. Moving to slide 11. Let me now provide an update of our novel anti-tau antibody, E2814. It's widely known that neurofibrillary tangles is one of the pathophysiological hallmarks of Alzheimer's disease. Specifically in Alzheimer's disease, it is believed that propagation of tau pathology is mediated by tau species containing the microtubule binding region fragments, MTBR fragments, since an increased amount of MTBR tau is found in the brains of CSF of Alzheimer's disease patients. E2814 is uniquely designed to target MTBR tau and capture extracellular MTBR tau fragments to prevent the accumulation and spread of tau seeds, specifically in Alzheimer's disease patients.
E2814 is progressing on track in a phase I clinical study. We're diligently working on accelerating the clinical development of E2814 targeting the AD continuum. Next slide. On slide 12. Our vision at Eisai is not just medical innovations. Our ultimate goal is to become a medical societal innovator. We are very excited about last week's launch of the Easiit brain performance app in Japan in collaboration with DeNA. We firmly believe that the Easiit app is a foundational element of our dementia ecosystem platform, Easiit. We envision Easiit to be a bridge between the daily living domain, as depicted on the left-hand side, which aims to cultivate healthy habits to maintain brain performance, and the medical domain, as depicted on the right-hand side, which aims to enable efficient early diagnosis and optimal treatment.
The Easiit app, powered by AI algorithm, allows individuals to record and visualize their brain and body health data and receive useful individualized information to improve their brain performance during their daily living. Later this quarter, we plan to equip the Easiit app with a link to our brain performance self-check tool, NouKNOW. Then we plan to equip the Easiit app with connection to medical data in the medical domain, such as Cognigram that we're developing with Cogstate and various imaging and biomarker data in order to improve each individual patient's journey from diagnosis to treatment to monitoring. We look forward to creating new benefits to the society at large through the Easiit dementia ecosystem platform, enabling wide adoption of brain performance checkup, lifestyle improvements, early detection and diagnosis in the AD continuum, and ultimately eliminating the chasms associated with dementia in our society.
Moving to slide 13, let me now switch gear and provide an update on DAYVIGO, our newly launched treatment for insomnia. On June 1st, we launched DAYVIGO in the U.S. On July 6th, we launched DAYVIGO in Japan. With the increase in sleep problems due to life changes caused by the COVID-19 pandemic, it's crucial to offer a new treatment option like DAYVIGO to patients and physicians. With our enhanced digital capabilities, even under the challenging COVID-19 pandemic situation, DAYVIGO is off to a promising start both in the U.S. and Japan. In the U.S., our MRs, including the digital MR team, are finding themselves in high-quality engagements with healthcare professionals about DAYVIGO. In just the first month, we secured DAYVIGO's placement into the national preferred formulary of the largest PBM in the country, Express Scripts, which covers 25 million lives, with 50% having no utilization management.
In Japan, likely due to the COVID-19 pandemic situation, the insomnia treatment market is expanding, and the prescription volume overall from psychiatry departments is also expanding. Since launch, DAYVIGO has been ranked number one in Japan in terms of the total volume of details to healthcare professionals driven by our omnichannel presence, including a newly established digital MR team and web-based consultation system. In addition, since launch, over 30,000 facilities have already purchased DAYVIGO in Japan, mainly from psychiatry departments. Beyond the U.S. and Japan, we are actively working on regulatory submissions to expand the availability of DAYVIGO worldwide.
Last week at AAIC, we presented DAYVIGO's Alzheimer's disease SWD, irregular sleep-wake rhythm disorder data from the phase II open-label extension phase, showing that DAYVIGO is well-tolerated among these Alzheimer's disease patients with long-term treatment, and the improvement based on the caregiver-evaluated SDIs, sleep disorder inventory, is maintained long term. We're now continuing to work on the design for the phase III program for DAYVIGO in Alzheimer's disease patients suffering from SWD. Moving to slide 14. This is my last slide. Here you can see the robust mid-to-late-stage pipeline from the Neurology Business Group. For Fycompa, we launched a fine granular formulation last month in Japan, and we're continuing to make steady progress in various lifecycle management projects. Fycompa, together with DAYVIGO, aducanumab, BAN2401, and E2814, which I have updated earlier, represent our five key growth drivers over the near-to-mid-term.
In addition, we have E2027, a PDE9 inhibitor in a phase II/III study in dementia with Lewy bodies. Moreover, in our immunology portfolio, eritoran, a TLR4 antagonist, was recently selected as a first immunomodulation therapy to enter the REMAP-COVID platform trial to address cytokine storm in hospitalized COVID-19 patients. E6742, a TLR7/8 inhibitor, was recently selected by the AMED CiCLE Grant Program for clinical development in SLE. In summary, we have a broad and deep pipeline with multiple assets of significant paradigm-changing potential. Thank you very much for your time today. Let me now turn the presentation over to Mr. Iike.
On oncology business, I would like to present. Please turn to page 15. First, in oncology area, we have a pipeline concept, which I would like to explain first. At the top of the slide, it says cancer continuum discovers entire process from pre-cancerous stage to various advancement stages of the cancer. In terms of molecular cytology, there are various events in the background. Lineage dependency, driver gene mutation, clone proliferations are all events related to cell proliferation, while microenvironment modulation and treatment resistance are related to tumor malignancy. We are working to establish LENVIMA and LENVIMA/KEYTRUDA combination as our backbone therapy. These target microenvironment and immunology. What about the earlier stage projects in our pipeline? E7438 and two others are shown in orange color. These three themes target specific cell lines or lineage and driver gene mutation.
With relatively small sample size clinical trial, it is possible to pursue development with higher probability of success. Below that is H3B-6545. This aims to establish new treatment paradigm to overcome breast cancer hormone therapy resistance. E7386, which is CBP/beta-catenin inhibitor, targets to enhance actions of LENVIMA and KEYTRUDA and to overcome resistance to treatment. E7090, FGF is a driver gene and also involved in cancer microenvironment. E7389 and two items below are based on Halaven platform, these are drug discovery projects leveraging unique actions on microenvironment. As shown here, at various points in cancer continuum, the aim is to suppress cancer and to develop with high probability for success. liquid biopsy is mentioned on the slide with a blood sample to analyze a gene to trace changing cancer and to select appropriate treatment. To utilize that information in drug discovery will only grow in importance.
Liquid biopsy project is pursued by our Tsukuba Research Institute. Please turn to page 16. I would now like to report on the performance of LENVIMA from the first quarter. First quarter revenue was JPY 34.7 billion from LENVIMA, increase of 40%. Americas account for more than 60% of total revenue of LENVIMA. The region grew 56%. In HCC, we enjoyed the top share, and in the United States, endometrial cancer was approved, and this also helped achieve growth. In China, new scheme was introduced in patient assistance program, thereby increasing access for patients. In Japan, HCC, BC, LCB, intermediate stage patients not indicated for TACE is now recommended to use LENVIMA as first treatment option. Towards achieving JPY 158 billion annual revenue target, we were able to make a good start. Page 17 shows RCC treated with a combination with our KEYTRUDA.
Study 111 results were presented at ASCO for RCC phase II study with LENVIMA/KEYTRUDA combination. These patients are patients who progressed after receiving anti-PD-1/PD-L1 antibody treatment. As shown on the left, majority of the patients have received a third-line or beyond treatment. In many cases, prior treatment were ipilimumab combination or PD-1 antibody and anti-angiogenic agent combination. Despite that, as shown on the right, ORR was above 50% and duration of response was one year. We were able to obtain favorable results. For your information, on the left, first-line results from other drugs are shown. Study 111 include patients who are refractory who had received multiple treatment, including immunology treatment. This is not an apple-to-apple comparison in terms of patient background, but we were able to achieve similar results.
We have high expectations for phase III results on first-line and phase III top-line results are expected before the end of this fiscal year. Including Study 111 data, we are going to take into consideration the possibility of submission. Next is page 18. HCC first-line Study 116 was also presented at ASCO. This is LENVIMA/KEYTRUDA combination, and this study was conducted in parallel with phase III LEAP-002 study. At academic conferences, we have presented on the interim analysis of 116 Study. Since results were favorable, we were also able to recruit patients faster in LEAP-002 study than originally scheduled. Since final results from Study 116 was favorable, we tried to file for accelerated approval in the United States. We have received Complete Response Letter from FDA, which pointed out the importance of showing superiority over existing therapy to meet this request.
We reached the conclusion that results from LEAP-002 study, which is a comparison with the existing LENVIMA treatment, is necessary and have reached agreement with FDA. LPI of LEAP-002 was completed in April, and from that point in time, we expect results in about one year, and we would like to aim for early submission. LENVIMA monotherapy contribution is expanding. In NCCN guideline in the United States, it's Guideline 1, and there is also recommendation in BCLC guideline. Because of COVID-19 pandemic, there is also a guideline to recommend oral anti-cancer drug, which are all supportive of our drug. Next is page 19. This is about LENVIMA monotherapy. In Japan, we have filed for thymic carcinoma in Japan. t hymic carcinoma is a rare disease. The second-line treatment does not have a standard of care treatment.
At National Cancer Center and at seven other sites, investigator-initiated studies were conducted, and favorable results were obtained, as shown at the bottom of the chart. After consultation with the authority, we were able to receive orphan designation. Upon approval, we expect a re-examination period of 10 years. In high unmet needs indication, we believe that LENVIMA can make further contribution. Next is slide 20, progress in pipeline. As shown on the left side, we have filed in Japan for tazemetostat for EZH2 gene mutation-positive follicular lymphoma. EZH2 has been our focus as an epigenetic drug discovery target. We have been engaged in joint research with U.S. company, Epizyme Inc. Lineage dependency and driver gene mutation are the target or concept for this drug discovery. With a relatively small-scale phase II study, we filed for approval.
We aim to become first- in- class, and we have expectation that this will be our first-ever precision medicine. On the left, E7386 is shown. This is also first- in- class. Beta-catenin is one of cancer big four, which are four cancer-causing proteins that are promising targets. In terms of microenvironment, it will enhance immune checkpoint inhibitor action. In terms of treatment resistance, LENVIMA-resistant tumor vessels are inhibited. In monotherapy and in combination with LENVIMA, phase I studies are conducted in parallel. Colorectal cancer and HCC are the targets. In both of the studies, initial anti-tumor activity was confirmed. High-precision development and synergy between pipelines are pursued to offer a new treatment paradigm. Next, slide 21, please. This is a development of a combination between LENVIMA and KEYTRUDA.
After reaching alliance globally for LENVIMA with Merck in March 2018, we have agreed to conduct trials, and all of them have been started so far. Those shown in green in the slide, these five studies had completed patient enrollment. Especially at the top, RCC, endometrial cancer, HCC are in phase I and II, as I have explained earlier, and we have been able to obtain favorable results. To obtain early results from phase III, we are making preparations. On the right bottom, Pace combination for HCC, this was not included in the original contract, but after consultation with Merck, this was started. About new programs and additional indications, development teams of the two companies are actively considering. To maximize the value of LENVIMA, the collaboration between the two companies are making good progress. That concludes the presentation on oncology business.
Now, this is Yanagi, CFO, speaking once again. Full- year outlook and overall summary are what I would like to offer now. Please turn to summary page on page 22, consolidated financial forecast for fiscal 2020. After flash report was announced in May, there have been no changes. Top- line for the year is JPY 719 billion. This is 3% increase from the previous year. Especially, growth driver is LENVIMA, and it will achieve above JPY 150 billion. Together with our milestone contribution to the top- line is around JPY 220 billion, including milestone contribution. Because of this LENVIMA's contribution, cost of goods sold is decreased and gross profit is JPY 547.5 billion, 5% increase. From there, as the intention of the management, maximization of LENVIMA and next- generation Alzheimer's disease patients preparation, we will be making advanced investments. R&D expenses, SG&A expenses will be growing by double digits.
Because of these strategic intentions, operating profit will be JPY 88 billion. R&D expenses are intellectual capital and labor cost is human capital investment, and therefore, these expenses can be considered investments. Therefore, before R&D expense, SG&A expense, operating profit, it will be above JPY 360 billion, a record high from the previous year, in comparison to the previous year. Despite that, we still enjoy high profitability and annual return on equity is 9.7%. Equity spread is close to 2%. We would like to maintain our position as a value creator, and shareholder equity is also at a record high level. DOE is 6.7%. In one fiscal year, rather than dividend payout ratio that may be subject to fluctuation, we focus more on medium to long-term dividend payout ratio. That is why we use DOE as a KPI.
From a financial standpoint, this is still a number with headroom, and we are confident to achieve these numbers. Next, page 23. This is my last slide. Overall summary is presented on this page. In this first quarter, we were impacted by COVID-19 and drug price revision, but we were able to overcome these impacts and were able to achieve increase in both revenue and profit. At the same time, as Ivan Cheung and Iike explained, in neurology business and in oncology business, in core projects, we were able to make good progress. As for annual projected performance for fiscal 2020, we aim to achieve planned increase in revenue and gross margin position as a core. Moreover, based upon financial soundness, we would like to implement proactive investment to contribute to patients in the future and maximize the corporate value.
We will continue to create value in the medium to long term. Therefore, we appreciate if shareholders and investors can support Eisai from medium to long-term perspective. With that, we would like to conclude the presentation on first quarter results. Thank you very much.
We would like to open the floor for Q&A session. We would like to take questions from participants who are joining in this conference from telephone system. Please press zero one before you state. Please press zero and one. I am going to name you one by one. We are registering those people who wish to ask questions. There was first person who accessed from Citigroup Securities, Mr. Yamaguchi. Mr. Yamaguchi from Citigroup Global Markets Japan, please have the floor.
Can you hear?
Yes.
Can you hear me?
Yes.
Thank you. My name is Yamaguchi. I'm from Citi. I have two questions. First question, as CFO explained, the performance has been very strong. I understand that. When it comes to breakdown, I think out-licensing is very significant. In Q1, I know that the performance forecast is not disclosed, but it is written that you are expecting better than planned.
How better than a performance target? In the medium term, do you think that there will be further incremental growth in performance?
CFO Yanagi is going to respond.
Yes. Q1 business plan itself is not going to be disclosed every three months, so it is very hard to understand. When I said that we achieved the plan at the outset, what is most important is gross profit. We could achieve and exceeded the plan for gross profit because of the product mix improvement, given the LENVIMA and tazemetostat royalty and over JPY 10 billion in royalty for tazemetostat. It was stated in the first place for the fourth quarter, but this was incurred in the first quarter. Excluding the impact by tazemetostat, we could achieve the target. Furthermore, in R&D expenditures, on the contrary, the progress was slower than expected. Because of this situation, people couldn't visit the hospitals. Early-stage enrollment in clinical trials in early stage have been delayed. In particular, SG& A has been progressed in line with the business plan.
All in all, gross profit was much better than planned, and R&D expenditure has been delayed, and SG&A expenses were better than planned in progress, and in total, less than JPY 10 billion in terms of increase of the expenses. The gross profit increased, and expenses were contained. Therefore, the profit line was exceeding the plan. For all those profit lines over exceeded the plan. I think that there is much focus on tazemetostat royalty. Of course, it was beyond our plan. Even without this impact, we could achieve the target. Tazemetostat, JPY 11.5 billion is included on page four in the bottom right box, and the JPY 4.4 billion was recorded last year as a gain on transfer of share of Elmed Eisai and JPY 5.6 billion for the increase of shared profit. Also JPY 1.1 billion in foreign exchange.
All in all, JPY 12.2 billion was the impact, and therefore by segment, pharmaceutical business total should be referred to. You can see that the profit was increased by 3% from a year earlier. This is the supplementary explanation for the overachievement of the plan.
Second question is about aducanumab. Biogen is leading this program rather than Eisai. I understand that. Priority review is requested, and Biogen applied for priority review and coupon. I don't know whether it is called a coupon, but Biogen had something like coupon for priority review that is included. Do you think that there is a higher probability of obtaining priority review at Eisai?
Thank you for your question. I would like to call upon Neurology Business Group President, Mr. Cheung, to respond.
Thank you very much for the question. As you may know, Biogen has not commented on their plans for using their priority review voucher. Specifically, with regard to Aducanumab, please do note that Aducanumab does have fast-track status and as both Biogen and Eisai have announced, we have requested priority review to the FDA, and as we hear back from the FDA on the potential acceptance of filing, we will hear back about the priority review. I hope you understand our position. Thank you.
Thank you very much. That's all.
Next, we have from Mitsubishi UFJ Morgan Stanley, Mr. Wakao. Mr. Wakao, can you hear me?
Yes. This is Wakao from Mitsubishi speaking.
Yes, we can hear you.
Thank you for taking my question. First question is a follow-up question to earlier discussion regarding SG&A. First quarter was according to the plan. That was what you have explained. In the beginning of the year, I felt that some sizable amount was planned for SG&A cost. Aducanumab preparation expenses are included, I believe. Is it correct to understand that some of the expenses will be spent in the second half? The pace of spending SG&A will pick up in the second half? That is my first question.
Mr. Yanagi, CFO, will respond.
Regarding SG&A, this is according to the budget or slightly higher than the budget. It's not underachieving. We are making good investment in a forward-looking fashion related to LENVIMA. With Merck, we have profit sharing. This has increased by JPY 5.6 billion. That is also having an effect. About your question, aducanumab or next- generation Alzheimer's drug and preparation to make a patient contribution will pick up in the second half. SG&A expense ratio in the first quarter was 39%. 41% is the annualized forecast vis-à-vis the sales. In sales and milestone included, there will be accelerated pace in the second half. Current projection is that from the previous year, annually, SG&A will grow 15% that we can make future patient contribution to maximize value over medium to long term. SG&A will increase in positive manner. That is our expectation. Thank you.
I have a second question. This is about LENVIMA and KEYTRUDA combination. You have received Complete Response Letter from FDA and with LEAP-002 study result, I believe you will file submission. At this timing, approval was not given. What is the impact on milestone for LENVIMA in this fiscal year, and what is the impact on the revenue? I was under the impression that you do not expect a large impact from the way you have presented.
Oncology Business Group President, Mr. Iike, will respond.
Thank you for your question. Regarding LENVIMA revenue this fiscal year and the profit of LENVIMA for this fiscal year, we expect no impact. Phase III LEAP-002 study results were originally to be used for submission, but Study 116 results were favorable, and we took on the challenge of trying to apply with that result. Regarding LENVIMA performance with monotherapy and endometrial cancer in the United States are growing, and therefore we plan to achieve the budget.
Thank you. Finally, about aducanumab. I also have a short question. According to Biogen conference call. There was a question regarding advisory committee. Biogen responded that this is a drug of new mechanism of action. They responded that there may be a revision. Regarding Advisory Committee, if you have any view, could you share your view with us?
Mr. Cheung will respond.
Thank you very much for the question. We are in agreement with Biogen that an advisory committee would not be unusual for the first potential disease-modifying therapy for Alzheimer's disease, and we await the FDA to make the determination on the potential for an advisory committee meeting. Thank you.
Yes, understood. Thank you very much.
From Nomura Securities, Mr. Kohtani. Mr. Kohtani from Nomura Securities, can you hear me? Please have the floor.
Yes, this is Kohtani of Nomura Securities speaking. I have two questions about oncology. First one is, I think as has been explained, the peak sales of LENVIMA, could you please give us your take on this? In March 2018, when you signed the alliance with Merck and the JPY 500 billion was estimated, starting from FY 2021 onward, the indication was estimated to be expanded. After the end of phase III studies, what is the contribution for expansion of business? Breakthrough therapy will be just a mere factor for accelerating the development. RCC and HCC were not successful. That means that the acceleration could not be achieved, therefore it will not affect the peak sales projection.
In RCC area, OPDIVO, DAYVIGO and KEYTRUDA combination therapies are available and in go 0:1 study in HCC, I think peak sales will be affected in some way with emerging competitors therapies getting available. Could you please give us your take?
From Oncology Business Group, President Mr. Iike is going to respond.
Thank you very much for your question, Mr. Kohtani. In March 2018, when we formed a strategic alliance with Merck, in 2025, peak sales was expected to exceed JPY 500 billion at peak. That assumption, as you pointed out, Mr. Kohtani, for example, accelerated approval in HCC was not factored in for phase III, will be the assumption for getting approval. The JPY 500 billion as the long-term target has remained unchanged and there are no changes to the assumptions supporting for that.
In RCC in particular, I know that it is a very competitive franchise and that was already factored in since two or three years ago. Therefore, in that sense, there is no big change made to the projections in medium term to long term. As you can see on page 21, in 2018, when the alliance was started, the combination with stays for HCC, which was not stipulated at the time of alliance formation, and there are other indications which are proactively considered between the two companies which are not listed here on this page. Once we start embarking on these potential projects, we would like to give you update. Thank you for your question.
Thank you. My second question is kind of a maniac question maybe that should be addressed by Dr. Owa. Based upon the announcement on the results for the second quarter by the European and American companies, this is the third, Pfizer, number three study, HR-positive CDK inhibitor and the third will be combined, OS was extended and this has become available for the third line and therefore third is getting focus and intramuscular injection is used. Probably tablet will be appreciated. On the one high, there is no ADR of the bradycardia particularly AstraZeneca, bradycardia should have been in place otherwise. Without bradycardia, you would have concerns. That is what they said. I would like to ask for your H3B-6545, I think the ADL may be very similar in bradycardia.
How do you think about the QT extension? Phase III studies have been started by competitors. Avastin combination is the only available option, with other competitors launching their therapies, do you think that you can continue to be competitive enough?
Oncology science specialist, Dr. Owa, is going to respond.
Thank you very much, Mr. Kohtani. Regarding bradycardia, I think you asked a question about bradycardia. Our concept is this is a kind of class effect. Roche compound, according to ASCO presentation, there was a presentation about the bradycardia, and cardiovascular experts were retained. If it is asymptomatic Grade 1, Grade 2 bradycardia, for hormone line, the last- line or even earlier line, it will be acceptable clinically. We know that there are many investigators who accept that ADR. If it comes to QT extension or any major impact on the cardiovascular system, it will be a big problem. Those selection will be very important.
H3B. Our H3B feature is, as you know, ESR1 gene mutation, drug therapy resistance. Resistance to hormone therapy is related to this gene mutation. I believe that there is a big differentiation factor. Different drugs have different mechanisms or structures. ESR1 gene mutation, polyclonal, therefore there are various mutations. What are the features? Biomarker strategies will be very important for differentiating us, and we are very much confident in that. We are going to compete, fight, and win against them. Palbociclib combination, we have already started our project. Of course, although there is a delay, but we would like to utilize our technology in biomarker, and we would like to compete and win in the end.
If I may supplement. You said biomarker, ASCO 2019, H3B-6545, Sysmex liquid monitoring. I think that you are utilizing this technology to differentiate you.
Liquid technology. I think that we are yet to disclose with whom we are going to partner. Liquid biopsy will be utilized to ctDNA, will be utilized for detecting the mutations. That is what we are considering as first option.
Thank you very much.
We have from Morgan Stanley MUFG Securities, Mr. Muraoka. Mr. Muraoka, can you hear me?
Yes. This is Muraoka speaking. Thank you for taking my questions.
About Royalty Pharma. To recap, please allow me to ask this question. Earlier, you've mentioned that instead of the third quarter as originally planned, it is included in the first quarter, JPY 102 billion is included. Let me confirm that. It will not be JPY 102 billion per year. About the timing of incurring these expenses, maybe I'm mistaken, but last year in November, Royalty Pharma, after rights were transferred, looking at the press release, the transfer was in November 2019 and upfront of JPY 110 million and up to $220 million maximum as an upside was mentioned in the press release. In April to June quarter, why was there a receipt of this money? I was not able to understand fully. Could you elaborate on this, please?
Mr. Yanagi.
This is Yanagi, CFO speaking. About Royalty Pharma agreement. Agreement was reached in 2019. At the time of the agreement, JPY 110 million, and then next milestone, another JPY 110 million. That was two streams of revenues that we booked in fiscal 2019. In terms of cash, not entire amount had already been received, but there were two JPY 110 million receipt from Royalty Pharma in fiscal 2019. There is another JPY 110 million milestone receipt for different indication in fiscal 2020. In terms of our relations with Royalty Pharma, there are three milestones, last of which is included in this quarter. In waterfall chart, JPY 11.5 billion is one of the amounts indicated, and the cash receipt is not taking place yet. This is over a longer term.
It is discounted back to present value. It's about JPY 108 million. It is translated into Japanese yen. Therefore, it is not exactly the same as $110 million. The amount is slightly different because of a present value discount. It is rather complex, but to rehash, in fiscal 2019, there were two JPY 110 million milestone payment and one JPY 110 million milestone in fiscal 2020.
Thank you very much. One more question. Regarding China business, I believe in January to March quarter, there was a significant deterioration of the business, but it seems that you have achieved dramatic V-shaped recovery in China business in April to June quarter. Do you believe that there was a bottom out of the revenue growth in China and it is now once again showing a momentum of achieving double-digit growth? Would that be a fair characterization?
Thank you for your question. Okada, responsible for China business, will respond.
This is Okada speaking. Thank you for your question. As you commented regarding China, immediately after the outbreak of COVID-19 throughout the nation, there was a lockdown in China, especially for chronic diseases, there was a huge drop in demand for drugs. After the emergency declaration was lifted, market has recovered quickly, our products also have enjoyed recovery. We are using digital technology as well. In comparison to pre-COVID-19 situation, we are performing even better than pre-COVID-19 situation, we would like to make sure to maintain this momentum. Thank you for your question.
Thank you. One more question. LENVIMA April to June revenue was very strong, which is a very good news. Is there increase in inventory at the end of the supply channel? Is this purely due to stronger demand?
I would like to once again respond. This is [Okamoto] speaking. Prescriptions are growing in volume. It is not due to increase in inventory. Regarding LENVIMA, this is now limited to China, but globally, is the situation the same?
This is Iike speaking. Yes, the situation is the same globally. Month- by- month, May was down, but in June, overall, there was a recovery. This is not as a result of increase in inventory.
Thank you very much.
[Non-English content] Although we have passed the time to end, but we have the last person from Goldman Sachs Securities, Mr. Ueda is going to be the last person to ask. Please have the floor. Can you hear us, Mr. Ueda from Goldman Sachs Securities?
I have only one question because of the time constraint. On page six, blood test for diagnosis, I think you touched upon amyloid-beta.
In order for wider use of this, I think it will be very important. When do you think that this will be realized in actual clinical practice so that this test can be used for amyloid beta? For using this drug, ARIA-E monitoring will be necessary. How would you do this? Like in clinical trial, do you need to have MRI for ARIA-E monitoring? Could you please elaborate on this?
Thank you very much for your question. For your question, I would like to invite from Neurology Business Group, Mr. Kimura, who is in charge of science in the group. From Neurology Business Group, Kimura is responding to your question.
Regarding blood biomarkers, at AAIC held last week, the progress has been published and reported a lot. Now we are seeing a lot of publication of data from various sources.
Of course, one good benefit of a blood biomarker, Aβ42/40 ratio is written here. At the same time, other biomarkers like p-tau217 can be measured at the same time. Although we didn't touch upon this time, neurofilament test, the light chain can be monitored as well. Various factors can be measured at the same time. At submission, or when do we expect that to be usable? Sysmex and other companies are collaborating with us, and we are talking with them so that we can find a way to introduce these tests into the market as soon as possible on our side. Also we are discussing with the regulatory authorities.
Regarding the ARIA-E monitoring, what is your take on this?
Sorry, could you please repeat your question because it was hard to hear.
ARIA-E monitoring.
Usually in clinical trials you are using MRI, and in real-world clinics, do you need to use MRI for monitoring? Are there any other methods for monitoring ARIA-E?
Kimura is responding to your question again.
ARIA-E? MRI is going to be the standard monitoring method for ARIA-E. Having said that, we would like to find a way which will be more friendly to patients. We are exploring other ways, but now MRI is still the standard method for monitoring ARIA-E.
Thank you. Understood. Yes, that's all I have. Thank you very much.
Now it is time to conclude.
We would like to end today's financial result presentation session. Thank you very much for taking time out of your busy schedule to participate.