Earnings Call: Q2 2020

Oct 31, 2019

I am Manabe. I'm truly thankful for your participation in Daiichi Sankyo's financial results briefing despite your busy schedule. I would like to explain our fiscal year twenty nineteen second quarter financial results, which was announced today using the handout materials at your hand. Today, I'd like to explain according to the agenda. Firstly, fiscal year twenty nineteen second quarter financial results, FY twenty nineteen forecast and FY twenty nineteen business update followed by five year business plan update. Then R and D Global Head, Mr. Koga, will update on R and D activities. I'll take your questions after the presentation at the end. Firstly, I'd like to share the overview of FY twenty nineteen second quarter financial results. Consolidated revenue is JPY 4 and 79,600,000,000.0, which is 32,700,000,000.0 increase from the previous year with 7.3% increase. Cost of sales increased by JPY 10,500,000,000.0 on year over year basis. SG and A increased by JPY 1,900,000,000.0 and R and D expenses decreased by JPY 7,800,000,000.0. As a result, operating profit turned to be JPY 86,200,000,000.0, JPY 28,200,000,000.0 more than year over year with 48.6% increase. Profit before tax is JPY87 billion with JPY28.4 billion increase from last year. And profit attributable to owners of the company is JPY 64,400,000,000.0, which is JPY 20,400,000,000.0 more than year over year last year and was 46.4% increase. And actual foreign currency exchange rate are as follows: US108.63 yen with the 1.64 yen appreciation of the yen €1 is 121.41 which is JPY8.43 appreciation of the yen. Please look at the Page four. From here, I would like to explain factors which contributed to the changes from results in the same term last year. Revenue increased by 32,700,000,000.0 yen and its breakdown by major business unit is as follows. Firstly, a business in Japan, including domestic pharmaceuticals, vaccine and healthcare. Products that were playing central role to extend our sales are oral anticoagulant LUXIANA and Ataligieh, the pain treatment drug, and that was launched in April. And Plaria for osteoporosis, anti epilepsy agent Bimpat and CANALIA for Type two diabetes and Daijisankyo S products, including authorized generics. Profit in Japan increased by 16,000,000,000 yen in total. Next is Overseas business. It is described excluding impacts from currency fluctuation. Dai Senjo, Inc. In The United States had a JPY 6,800,000,000.0 decrease in revenue due to decreased sales of Velcol, the drug for treatment of hypercholesterolemia and also Type two diabetes and also due to the Effient, the antiplatelet drug. On the other hand, American Legion in The U. S. Increased revenue by JPY 10,900,000,000.0 with growth of generic injectables and Injectafer, the drug for IDA. Dantasan KYO Europe had a 3,200,000,000.0 yen increase in revenue despite a sales decrease of olmesartan as the loss was covered by LUCIANA's sales expansion. Next is ASKA, which covers Asia and Central And South America. Sales increased in China by JPY 7,500,000,000.0, mostly with Qurate and olmesartan. The total sales as ASCA business unit increased by 11,700,000,000.0 yen And DS-eight thousand 201, for which the contract was signed by AstraZeneca in March, then JPY4.9 billion was posted as a lump sum payment up to the second quarter, and that pushed up the revenue. For your information, FX fluctuation loss was JPY7.2 billion business. This slide shows the change factors for operating profit. I will elaborate the profit increase of JPY 28,200,000,000.0 by items. As explained earlier, revenue increased by 32,700,000,000.0 yen including 7,200,000,000.0 yen loss from FX impact. Now I will explain expenses excluding ForEx impact and special items. Cost of sales increased by JPY 6,600,000,000.0 due to increased cost of goods associated with increased revenue. SG and A increased by JPY 11,800,000,000.0 with impacts such as personnel expenses in The U. S. R and D expenses decreased by JPY 7,000,000,000 by initiatives such as DS-eight 201 cost sharing with AstraZeneca. Expense reduction from FX impact was JPY 4,900,000,000.0 in total. As for special items, expense in this term was JPY 2,000,000,000 less than last term. Excluding impact from FX and special items, the actual profit was JPY 28,400,000,000.0. This is the breakdown of special items. In this fiscal year, JPY 1,300,000,000.0 of the Supply Chain System reorganization cost and the JPY 3,800,000,000.0 of impaired loss of intangible assets for MOLFABOND and ROXBOND were posted. However, there was 10,600,000,000.0 yen expense reduction by sale of tangible fixed asset, which resulted in 5,500,000,000.0 yen reduction in expenses. As a result, expenses were 2,000,000,000 yen less than last year. Now I would like to explain about paint the business of the Daiichi Sankyo Inc, which is a subsidiary company in The U. S. And that posted impaired loans. Sales efforts for Movantik was transferred to AstraZeneca in October. And for Mofovand and Roxabone, Roxibone, cancellation of license agreement was notified to Inspilion in September. With these actions, Sankyo Inc. Exit the pain treatment business and focus on oncology and injectable iron business. Next, I will explain profit. As explained earlier, operating profit gained 28,200,000,000.0 yen including impact from FX and special items. As corporate tax etcetera, by 8,000,000,000 yen the profit attributable to owners of the company was 64,400,000,000.0 yen which is 20,400,000,000.0 yen more than previous year. In Slide nine and ten, I show the revenue of the major business units and major domestic products based on the yen. With Slide four, I explained the situation of each unit excluding ForEx impact. But these slides show the results, including ForEx impact. Next, I will talk about fiscal year twenty nineteen forecast. We are revising our full year revenue forecast upward by a total of 15,000,000,000 yen to $955,000,000,000 yen due to the good progress made by American regions in JECTOFA and also LUXIANA in the domestic Japan business. Regarding SG and A expenses, we're expecting an increase in costs by 5,000,000,000 yen for the establishment of the oncology business structure. We are forecasting a 15,000,000,000 yen decrease in R and D expenditure due to the cost sharing with AstraZeneca related to DS-eight thousand two hundred and one, etcetera. As a result, we are making an upward revision of operating profit by 25,000,000,000 yen to 125,000,000,000 yen and profit attributable to owners of the company by 18,000,000,000 yen to 90,000,000,000 yen on a full year basis. I will give you a business update. First about edoxaban. Its product name in Japan is Lixiana. It's maintaining the one sales share in the Japanese market. Its share is growing to 37.4% as of the 2019. Our second quarter year to date revenue results increased 11,700,000,000.0 yen year on year to 41,800,000,000.0 yen This page shows the volume based share trend not only in Japan but also in other countries. In Europe, edoxaban has been growing steadily in Belgium, Germany, Italy, Spain and U. K. In Asia, it's doing well in Korea and Taiwan. It's also making a solid growth in Brazil, where it was launched in August 2018. Global revenue results up to the 2019 were up 19,600,000,000.0 yen year on year to 73,800,000,000.0 yen The product was launched in China in August 2019, so we will work on its further expansion. Next, on the launch of new products. We launched four new products in Japan, U. S. And China for the past few months. In oncology area, we launched the two products, Vanslita in Japan and Tulareo in The United States. We will strengthen the structure to establish a foundation for future oncology business. Here, let me explain TURALIO, our new product in The United States. It was launched in August 2019 as the only therapy for TGCT, tenosynovial giant cell tumor. This is the first drug to provide a new treatment option for patients with unresectable TGCT without other satisfactory therapies. Treatment of tGCT by this agent has been designated as a high level Category one evidence based therapy by the National Comprehensive Cancer Network in The United States in their NCCN clinical practice guidelines in oncology. To manage the risks of serious liver injury, we are implementing risk evaluation and mitigation strategy or the so called REMS program so that we can obtain prescriptions of this drug at certified health care providers. Next, I would like to give you our five year business plan update. Over the past year, we have seen further increase in the value of three ADC projects, thanks to the strategic collaboration and the progress of clinical studies. Regarding DS-eight thousand two hundred and one, we are expanding development plan by our strategic collaboration with AstraZeneca. Also, we were able to achieve a submission earlier than planned in Japan and in The United States. As for DS-ten sixty two and U3-fourteen oh two, we have steadily accumulated efficacy and safety data by the progress of Phase I studies. As for DS-ten sixty two, there are possibilities of expansion to tumors other than lung cancer and also possibilities of expansion to tumor types other than lung and breast cancer for U3-fourteen oh two as well as possibilities of to market by shortening the development period and the rigid period. Let me explain the expansion of TS-eight thousand two hundred and one development plan. We have had rounds of discussions in detail with AstraZeneca about new clinical studies to be implemented since the strategic collaboration. Currently, 10 studies are in progress, but we are planning 16 additional studies within one or two years. So we plan to expand the development to at least 26 studies later. Koga will explain the details. Also, we will further expand our investments into ADCs in response to the situation of ADC franchise. As for capital expenditure, we will newly invest 100,000,000,000 yen or more to be prepared for the increase in demand of ADC franchises investigational drugs and products. Concerning R and D investments, we will concentrate our investments on the three ADC projects. As you can see the image at the bottom of this page, we will clearly prioritize our investments for others and substantially increase our investments into the three ADC projects. We will share costs with AstraZeneca about DS-eight thousand 201 so like Sankyo's R and D expenditure in total will not be changed from before at around 1,100,000,000,000.0 yen for the five years. Also, we expect further growth in oncology business revenue based on the progress of the three ADC projects I explained earlier. When we announced the plan last year, we said 500,000,000,000 yen by FY 2025, but we will aim for growth exceeding that level. Last but not the least, I'd like to explain the direction of our five year business plan targets and next midterm business plan. Period until FY 2022 will be positioned as prior investment period and period for FY 2023 and beyond will be profit expansion period. We will maintain our FY 2022 target of 1,100,000,000,000.0 yen revenue and 165,000,000,000 yen operating profit as is. The next company wide midterm business plan will cover the period between FY 2021 and FY 2025. We will develop further detailed targets and explain them to you in the future. From here on, we will give you our R and D update. I'd like to hand over to our Global Head of R and D, Koga. REPRESENTATIVE:] I am Koga. Today, I would like to update on R and D activities. I often do something more than I planned, but, let me show you this trophy. World ADC conference is held every year in San Diego, and I just visited there last month. And we never asked for it, but most promising clinical candidate award was given to us. DS never made a donation to this academic congress and never had involvement. Pharmaceutical companies such as Genentech, AstraZeneca or ADC experts, Seattle Generics and Inomelex and small companies, and Lonza and CMOs are members of this congress. And from such organization, we are acknowledged and awarded for the most promising clinical candidates. So it's a very good news to share with you. So going back to the main topic. Now first, I'd like to update on DS-eight 201 submission plan. As it is already announced by press release, application for approval for the indication of HER2 positive metastatic breast cancer as a drug for the third line treatment and beyond was accepted in Japan in September and in The US in October. In case of US, it takes sixty days from submission to acceptance by FDA. But we received a notice from the FDA a few days earlier, and we have already started the communication with immediately after submission. So it shows how much FDA expects to this project. And it is determined as a breakthrough product and it takes twelve months at maximum in Japan for review. And PDUFA's date in The United States is planned for April 2930. So the development progress much faster than the original plan. So this application was realized in four years since the start of the clinical study, which is quite quick as a biologics. We were actually kind of amateur or not expert in biologics, but we get a very accelerated notification. Application for breast cancer in EU is planned for the 2020. Application for gastric cancer in Japan is planned for the 2020. As you know, regarding DS-eight thousand one, DS signed a collaboration agreement with AstraZeneca at the March, and detailed discussions are held for a new study plan. The potential of GS8201 includes different types of cancers in wide range of treatments from early treatment to the third line treatment. So therefore, we prioritize studies and review the study plan from various perspectives so that it will have a higher chance of success. And currently, we are working together with AstraZeneca. So the review is still ongoing. So today, I will show you the number of studies that will be starting in a year or two. And then also of the area of treatment that is subject to this agent. As mentioned by Mr. Manabe, 10 studies are ongoing currently and 16 new studies are being planned. The details of three these studies will be introduced on R and D Day in December. And Antwa will also join R and D Day. So we will share this new information in Tokyo and then also with New York. I was going to mention actual kinds of cancers that actually it's shown in the slide. From now, I would like to introduce you the data of DS-ten62 and U3-fourteenO2 that are presented at the WCLC World Conference on Lyme Cancer. This slide explains the Phase I study design of DS1062 for relapsed NSCLC. So this study enrolls unselected patient with relapsed or refractory NSCLC without prior selection by expression of TROP-two. And TROP-two expression is observed at high chance in various kinds of the cancers, especially in lung cancer, there's eighty percent of the TROP-two expression chance. So we can assess the chance of a drop too in future. Next slide. So this is the summary of safety data. In dose limited toxicity study, mucosal inflammation and stomatitis were observed at ten milligrams per kilogram. It's strange to say it was expected in a way. There are some cases with a TOP2 expression on the skin, and we anticipated this adverse event, and it was observed at ten milligrams per kilogram. So that means this onset of adverse event was expected from the nonclinical study. So we determined the maximum toxic dose as eight milligrams per kilogram. And then due to onset of these adverse events, it was just that the further dose escalation is difficult and eight milligram per kilogram was selected as MTD and the recommended dose in escalation part in Phase one study. So we received many inquiries after WCLC And eight milligrams per kilogram is recommended dose in dose escalation part, but not decided as the final dose. Those will be determined after confirming efficacy and safety data from now on. Next slide. There are many inquiries about lung related adverse events with DS-ten sixty two, and this is a summary. At first, based on our experience from DS-eight thousand two hundred and '1, signs and symptoms of suspected ILDs such as cough, shortness of breath, fever, pneumonia are categorized as adverse event of special interest and the cases are reported and collected in a timely manner. At the point of time when it is reported by investigators, they are cases with signs and symptoms of suspected ILD and not a definitive diagnosis of ILD. All collected cases are sent to external ILD adjudication committee to evaluate whether it can be confirmed as ILD, and it is related to study drug. This is a common procedure for all studies in DS-eight 201, DS-ten 62, U3-fourteen oh two and will be applied to all future studies in other ADC projects. So TDL, TDX technology and then also that the relationship with the ILD will be proven later on. At the bottom of the slide, you see the table that shows the summary of DS-ten 62. By now, five cases are reported as lung related adverse event. And one of them was judged by the ILD adjudication committee as death due to respiratory failure from disease progression and not ILD, and it is not related to study drug. Remaining four cases are obtained after data cutoff at WCLC and still waiting for the evaluation by adjudication committee. Evaluation results will be available by the November. So I should be able to update on details at R and D Day in December. Next, this adds a spider plot by different doses to identify efficacy. At the time of WCLC, partial response was observed in 12 subjects. At eight milligram per kilogram that was selected for escalation part, five out of seven cases showed partial response. And those all comers without the drop to screening in Phase I study, those patients who received IO treatment or standard of care before, but we can see this much of efficacy ending Phase I study in dose escalation period. Next slide. I would like to show you the data of U3-fourteen oh two. This is a design for Phase I study for NSCLC with EGFR mutation. In this study, we don't select patients by prior screening by HER3 expression. REPRESENTATIVE:] Next page, please. This is a safety summary page. As DLT or dose limiting toxicity, platelet count decrease occurred, but we have been able to observe tolerability profile for now. So MTD maximum dose has not been reached. It is still possible to further increase the dose. Next page. This is efficacy waterfall chart. Anti tumor activity was demonstrated in patients other than one case, Like DS-eight thousand two hundred one, the situation is similar. And we also confirmed antitumor activity in patients with various resistance, which could develop after dosing with TKI. Tyrosine kinase inhibitors such as osimertinib HER3 is a target. So this is its feature. In the dose expansion part, five point six milligram per kilo has been selected as RDE, recommended dose for expansion. Next page, please. Next, I'd like to explain a Phase III study of our fourth ADC DS7300. DS7300 is antibody drug conjugate targeting B7 H3. It has a selective drug antibody ratio, DAR, as four, the same as TS1062 in the design. P7 H3 is highly expressed in various tumors such as head and neck, esophageal, NSCLC and prostate cancer. Its high expression is associated with poor prognosis in some cancers. Another thing I should mention is that functions of B7 H3 remain to be fully elucidated, but still as a molecule family, PD-one, PDL-one, for example, these are molecules similar to those according to understanding. In that sense, it's likely to be involved in immune regulation. In Phase onetwo study and also in the future clinical research, we can get new insights. One subject has already been enrolled. Can we say that? The study, eDosing, has started already. Could I say that? Next, this page shows DS7300 Phase III study design. There are two parts, dose escalation and dose expansion parts. In the dose escalation part, as you can see on the slide, we are planning to enroll patients with various tumor types shown on the slide. In the dose expansion part, we are focusing on several tumor types. In both parts, there is no prior V7 H3 based patient selection. The study already started. Next page. This is ADC franchise summary to show the current status. As explained on earlier slides, our application for DS-eight thousand two hundred one for breast cancer were accepted in Japan and The United States. If the review progresses well, we're expecting the launch in the next fiscal year. And the results of pivotal Phase II study used for the submission will be presented already on December 11 at San Antonio Breast Cancer Symposium. For gastric cancer, we are planning to file NDA in Japan in the 2020. For DS-ten sixty two and U3-fourteen oh two, we are accumulating efficacy and safety data steadily. Those expansion parts are now ongoing for both studies. We will present our new development plan on R and D Day in December. Regarding DS-seven thousand three hundred, we started Phase III study in October 2019. Next. I'd like to give an update on DS-three thousand two hundred one. This is a chemical product. DS-three thousand two hundred and one is a dual AZH12 inhibitor. It's a dual inhibitor to demonstrate effect to stop tumor growth. We are hoping this is going to be a new novel anti tumor therapy. Phase I clinical studies are in progress for various cancer types right now. We received SAKIGAKI designation of four for the peripheral T cell lymphoma, adult T cell leukemia lymphoma Phase II studies will be studied, and we made the decision to do so. Adult T cell leukemia and lymphoma Phase II study, information can be found in the appendix, the so called ATL. In Western Japan, Kyushu and Shikoku, more incidence, higher incidence. This is unique to Japan, and this cancer is often seen in Japan. Once it develops, it's difficult to treat and progression is fast. It's caused by human T cell leukemia virus type one, HTLV-one. We are hoping to provide a good treatment for this. And also non Hodgkin's lymphoma, we'd like to roll this out globally as well. Based on interim results, we'll be announced at ASH in December, American Society of Hematology meeting in December. Here, AML franchise and Breakthrough Science. Two franchises. After ADC, I'd like to give you an update on AML franchise and Breakthrough Science update. We launched crizotinib dance leader in Japan on the October 10. But unfortunately, we received a negative opinion from the regulatory authorities in Europe following CRL in The United States. Future plan for U. S. EU will be determined with the results of the first line study, Quantum First, that has already completed enrollment. Pexidartinib was launched as to RARIO in The United States in August. It's already been provided to the patients as well. Next. Lastly, announcement on R and D Day twenty nineteen. This year, we will organize this not only in Tokyo but also in New York as well for the first time. Contents will be the same for both days according to our plan. We plan to explain our new R and D strategy and updated development plans for DS-eight201, DS-ten62 and U3-fourteen O2. Slide 41 and beyond are appendix. List of major milestones and R and D pipelines can be found. So please refer to them at your leisure. Thank you very much. That's all from me. UNIDENTIFIED Now we'd like to take some time for questions and answers. If you have a question, please raise your hand, and I will appoint that person to make the next question. And once you're appointed, please tell us your name and attribute, and please give us your question. Is there any question from the floor? I am Yamaguchi from Citi. The first question is about the target of the next five year business plan. We just updated on the plan. But for the next five year business plan, that is starting from March 2022. And when will you announce the next five year business plan? Yes. We will discuss and decide details of the next five year business plan next year. So at the end of fiscal year 2020, which is March or April 2021, we will disclose. And as for the target of fiscal year 'twenty two, will we maintain or will you revise it? We will keep it as is. But in the discussion for the next business plan, we will discuss it again. So as announced last year, we believe it is very important as top management commitments. So we want to have a thorough discussion. Maybe we will discuss this later more. You had a concrete business development plan for DS 08/2001. But for DS October and fourteen o two, it may be depending on the strategy, but is there a possibility of partnership? The media quoted that it may be possible to develop REPRESENTATIVE:] the project standalone without partner, but what do you Yes, this is a frequently asked question. Firstly, about the DS 8,201. In order to maximize the value of the product, we decided to partnering for 1402 and October. For those project as an option to maximize the value, partnering is possible. But we just started phase one study and top line result is not available yet. So we want to wait for this data and have a further discussion. And regarding July, clinical study has started. It just started. But what about the first readout? Do you think you cannot disclose the data in ASCO next year? Well, we just enrolled one case only. So we are not sure to what extent we can disclose data. But if we can observe efficacy from a lower dose, maybe we can disclose data next year, but it's too early. REPRESENTATIVE:] And another point, GPR for just Q4, is it going to be in your assumption? It can be in the fourth quarter according to current plan. Any other questions? Please. Hashibuchi from Daiwa Securities. Mid term outlook. The meaning of maintaining, could you elaborate to a certain extent? It's not really examined, but you calculate the numbers. And as a result, if you think you can achieve sales and profits not very different from those numbers, have you checked those in saying that you're going to maintain? Or as of now, you haven't examined the details yet, just you haven't reviewed. What's the meaning of you to say maintaining? UNIDENTIFIED We are presenting this to you not without any discussion of the numbers. We have been discussing and explaining based on certain assumptions. However, in terms of accuracy, particularly, we still need to discuss 10/2002 as well, so we hope to discuss these in more detail as part of the midterm business plan discussions. We are showing this with such intention behind. On Page 19, can you explain to this page? Maybe I might have misheard, but October and 1402 development period and the review period can be shortened in according to your perspective. What do you mean by shortening the review period? 08/2001, it was designated as SAKIGAKE and Breakthrough Therapy. But October and 1402, I haven't seen such announcements. What do you mean by saying so? COMPANY We have not received any official agreement from the regulatory authorities yet. But the possibility of breakthrough therapy or SAKIDOKE designation is not zero. And also, we'd like to bring it to usage as soon as possible. That's why we made the earlier statements. If I may add, application for 8201 are based on Phase onetwo studies. There have been accelerated procedures even prior to breakthrough therapy designation. We try to accelerate the execution of the clinical studies and submit it to applications. Because of the remarkable efficacy, we could file a submission as a third line or last line treatment. We think we can expect fourteen oh two and ten sixty two efficacy and safety to be comparable to eight thousand two hundred one depending on target diseases. Therefore, one arm open label phase two study can be implemented. Such an approach could be possible, for example. We don't know whether we can finish in four years, but we think we can shorten the time frame and file our submissions. Lastly about Talijia, the actual results. How do you expect the results for TALYJE? Could you give us a conservative figure? UNIDENTIFIED Well, as actual, it's 3,300,000,000.0 yen and the outlook for full year is not disclosed. But just for the quantitative explanation, within this ethical product development, we introduced many new products so far. And then we actually get the best response from the market. So we get the comments that this product has the best response from the market. So we have a big expectation to this product, and we cannot say anything more. So the best response from the market, that means do you think it will create the biggest sales in Japan? That's the start up of the newly launched products. We will have a very good start. So I believe the start up of the sales right after the launch will be as good as we expected. We cannot share any specific figures now. Any other question? UNIDENTIFIED I'm Wakawa from Mitsubishi UFJ Morgan Stanley Securities. First about page 23. This time, you have classified the periods into prior investment period and profit expansion period. Previously, when you reviewed your mid term business plan targets, you drew a picture with an increasing trend between FY 2020 and 2022. It was leveling off between March 2019 and March 2021, then followed by a growth. This time during the prior investment period, there seems to be a dip at some point in time during that period. You have a picture like this, because operating profit has an upside in the current fiscal year for March 2020 with a high hurdle to clear right now. Is my understanding correct? Revenue target is JPY 1,100,000,000,000.0, no change from before. So I believe how you're going to use your expenses will not be different. Am I correct? Or is there any possibility that you may spend more because of the mention of 1,100,000,000,000.0 yen Could you please elaborate? We reviewed our midterm business plan in October. We raised our goals of JPY 1,100,000,000,000.0 revenue and JPY 165,000,000,000 operating profit for FY 2020, the last year of the fourth midterm business plan. But as of October, there was a delay by two years. So we wanted to maintain these goals for FY 2022. Regarding the blue arrow at the bottom, we will be mostly maintaining the JPY 1,100,000,000,000.0 target as is. So R and D expenditure will not change according to understanding. We should say that the operating profit target could be more difficult than the revenue target. We announced our forecast for FY 2019 today, but for FY 2020, we will examine the numbers again. And at the end of the current fiscal year, we'd like to share as well as for FY 2022. When we draw a picture like this, people tend to ask whether it's remaining flat or going up. REPRESENTATIVE:] You can understand our intention is reflected a little here for the prior investment period. Number two, Page 27. Eight two hundred one, you have additional studies to be performed after the strategic collaboration with AstraZeneca. On R and D Day, more details will be explained. More specific targets, The lines of therapies are positive or not and specifics and the concrete contents of the studies will be shared. To what degree we should be able to share? We cannot make a commitment right now, but what's shown here is in breast cancer, seven studies in breast cancer, two studies in gastric cancer and a certain number in lung cancer. According to this classification, when we are going to go into adjuvant therapy, what about early lines of therapy? That's still under discussion. With AstraZeneca, we'd like to discuss, and we will make the announcement about what we are able to reach agreement on. And AstraZeneca, also make the announcement. I hope I didn't confuse you, but the picture may be a bit confusing to you. So we see the number of studies. We understand that. And maybe you just explained that those timing to finish the those studies, like breast studies and then also the gastric cancers. Is there any possibility that you may end those additional clinical studies earlier than the plan? It's difficult to answer because it's quite a highly competitive situation. Maybe it's a little bit different topic. But for ADCs, probably there's 70 to 80 items and conducting more than 100 studies right now. So in such a situation, well, as we see the advantage of the DS-eight 201, we will accelerate the studies more. And then also the name value and the technology and medical affairs capability of AstraZeneca will be utilized so that we can accelerate the studies even more. But the concrete idea of timing cannot be mentioned now. But in general, we try to accelerate the studies. And at last, about AstraZeneca, so there is studies utilizing their products. Maybe they want to use the Limpada, for example. But those studies are using the estrogenic product as concomitant studies. What is the situation? Of course, the TKI, TKY and IO drugs, we are discussing right now. But we don't know we cannot tell you when we will make an official announcement. But of course, we are considering every possibility. But if you will not announce that on R and D Day, maybe we can Next question. The person on the far right hand from Goldman Sachs Security, my name is Ueda. I have a question about Page 21 about R and D investment. So in this diagram, so for DS-eight thousand and one and other products, there's some difference in investment amount. And then for DS-three 201 with other products. And it seems like those products will have a less amount of investment. But what is the priority of investment? And comparing to 8,201, when we look at other projects, what about the speed of the development? Do you think it takes more time for other programs? For DS-eight 201, as you see in this table, there is an investment from Daiichi Sankyo and AstraZeneca, so we'll have more investment for 08/2001. Followed by October and 1402. So currently, we give the highest priority to three ADC projects. So then if we have a budget, of course, we want to spend more on the fourth and the fifth priority, but we have to have good priorities to make a successful development. So that's why this is the idea. But for the fourth priority and beyond, if we find project is more have a successful chance and maybe we consider another partnering with other companies. So but the speed of development, so as an image, other project will be proceeded more slowly. Oh, that's not the idea. Because for other projects, for non ADCs, but there are other pipelines or noncancer projects. So we finished a major project in a noncancer area, and then we are now in the fund of basic research again. So it seems like the investment is less in those non cancer projects, but we are also making efforts to create a new pipelines after 2025. So it's not that we will slow down other projects. And then for DS-ten 62, as it moves on to the next phase, we will see better ideas in a year or two as we have a better outlook for those projects. And then we will decide the investment in those projects. So whether we will utilize our internal budgets or maybe seeking for external collaboration, we will decide later on. So we never it's not our intention to slow down other projects. UNIDENTIFIED Secondly, I have a question about your shareholder return policy. This was not mentioned today, but the total return ratio will be 100% REPRESENTATIVE:] during the course of the current midterm business plan. You can expect a lot from oncology agents. Can I understand that there is no change in that Yes? Based on what we announced, until FY 2022, we promised the total return ratio of 100%, so there is no plan to change it as of now. My third question, in The United States, you are exiting and reorganizing the pain treatment business in The United States. But in Japan, regarding your business strategy, focusing on certain therapeutic areas or OTC generics, what to do with them? You had a full lineup to generate value. No change in that policy? Or for the next midterm business plan, are you going to discuss further, including a review? What's the positioning? Regarding the domestic Japan sales and marketing, we have a lot of products in our lineup, and we have new products as well. We will have oncology products as well. So how we would be able to launch? At what timing we have what product? UNIDENTIFIED We'd like to change our sales and marketing structure accordingly. We have quite a large number of products right now. We are not expecting any immediate change. Generic ESFA, we are discussing these all the time. What is the optimal business portfolio for Daishankyo? We are continuing such discussions. As of now, there is no particular decision we have made. So this is going to be a continuous discussion. Thank you very much. That's all from me. Anyone else? A person close to us? I am Mitsui from Nikkei Biotech. I have two questions about the developing project. The first question is about the helpless virus for the cancer treatment 1647. You are planning to submit for approval in the 2019, but it is changed to the second half. What is the reason why you changed the timing? That was the first question. And second question, you are developing a CAR T cells development. And as Kymolia is listed in a drug price, is there any submission plan for the future? Thank you for your question. For the first question, so called oncolytic virus got a very good clinical results, and it was already announced. However, regarding the production, it is taking time. So the production was available in University of Tokyo, but we have to make further efforts in our production plant. So we are working on this improvement right now. And so we want to file submission as soon as possible. But the most difficult part, the clinical part is completed already. So once we address the situation, then we will apply for approval. As for the CAR T, drug price was determined. Drug price in Japan is not as high as U. S. Or EU. So you may question about the contribution to sales. However, with this drug price, there is no impact on the timing for application for NDA. So originally, you plan to submit for approval by the 2019 for CAR T? It's by the 2019. So that's the target. Thank you very much. First on Page 22, you have specific numbers for oncology business revenue. Did you add up individual products to come up with these numbers? Or is this just a tentative image as you indicated earlier, particularly for FY 2022 and 2025. You mentioned 40,000,000,000 yen in FY 2020. Pixabotinib is in trouble a little bit. So we can just see pixabotinib only. What numbers are included in here? UNIDENTIFIED FY 2020, denosumab is included in here, I think, yen 40,000,000,000. We think this is the size of revenue we can achieve. How much is denosumab here? 20,000,000,000 yen or so? That's one thing. And regarding the size of the bubble or circle, is it based on our gut feelings? As Manabe said, internally, have been working very hard to calculate by ourselves. As of now, when we have the midterm business plan announcement, we would be able to share these numbers. What about crizotinib? Crizotinib, first line, is ongoing. So based on the results, we will decide. But AML franchise, we have to deprioritize clearly. Deprioritize, did you say? Yes. Next, Page 27. Specifically, 8201 plan, there are many tumor types here you are addressing, including others. If that's going to be the case, ten fifty two and fourteen oh two, you need fine tuning of tumor types to make the R and D expenditure more efficient in lung cancer. It might be faster to collaborate with AstraZeneca, in my view, because they have Tagrisso and they have a lot of know how and expertise. Including that, ten sixty two and fourteen oh two development, how should I understand REPRESENTATIVE:] this table, including fine tuning possibilities? 8,201, first. All possible scenarios are being discussed with AstraZeneca as we move forward. Ten sixty two, U3-fourteen oh two, on our side, We also pursue all possible ideas. There can be some overlaps with eight thousand two one or there may be some points we should pay attention to. Are we going to do this in house? That would be one of the issues we need to address. Another thing we have to consider is that eight two twelve-two is the target. 1400013 is the target. Ten sixty two Trop-two is the target. Lung cancer or gastric cancer, if you talk about certain tumor types, the target of the drugs where we should deliver the drugs, the target is different. So what should be the positioning? We're still in Phase I. We're still searching for this. In the case of HER2, HER2 high or low, we have to test as we proceed. What about Trop-two? We don't have to do the same? Maybe it may not be necessary. Fourteen oh two in a steady state at this level. But with drug therapy, there can be a higher expression. Then various treatment schemes may exist. There may be schemes you haven't set yet. There can be new therapeutic areas which may emerge. So we have a very robust tools we have right now. We have to search for this into the future. Sorry, it may not be right to the point, but there are a lot of uncertainties we have not been able to elicitate. Three ADCs, if they are in the development stage simultaneously, it's difficult to discuss the overlap of the indications. 8201 was ahead, and we already started partnering. And both parties are trying to maximize this. That's at the top. And the indications will be decided accordingly. And then we would consider the second ADC and the third ADC. Instead of doing this all at once, it's easier. October, lung cancer, in the remaining spot, we should aim for it. Based on these conditions, instead of simultaneous, it's easier to develop a strategy more easily. Any other question? The person on the third line? I am editor of the Pharmaceutical General. My name is Edita. And in this briefing, you get this negative figures in The U. S, but what is the outlook for the second half or the full year? Well, in The U. S, The U. S. Market is the biggest market in the world. And then I believe the oncology development is progressing very well. So what is the outlook for the second half of this fiscal year and the fourth year? And when the trend will be upward in The U. S. Market? REPRESENTATIVE:] Thank you for your question. In The U. S, we have two subsidiary companies. One is Daiichi Franco Inc. In the past, we had all Mesultan and more products in the market. We have a major business, but most of them actually expired patents already. So Velcro, Effient or it's not the off the patent products, but the Savvasa, Lixiana, Edoxaban are sold in The U. S. But for those products, we cannot expect the rapid increase or growth in the future. So we will have a slow shrink in the future. But for American Legion, we have InjectaFAR and generic injectables. And then those products are quite successful. For InjectaFAR, we will have a competitor's product in the future probably. So we have to look at the competitor's movement. But up until 2027, we have patent. So American Legion will be the very important source of revenue. So when we consider The U. S. Market, Daichi Sankyo Inc. Will shrink the original business, but they will have oncology business from now on. So the actual main product will be different. And for medical region, generic injectables and injector are leading sales in U. S. Market. So those ADC franchise will be developed in the future. And as they start the business in The U. S, they will be sold by Daichi Sankyo Inc. UNIDENTIFIED Yes, the revenue will be posted under Daichi Sankyo Inc. Another question about the gisladinib. In Europe, there was a negative feedback, but in Japan, it is approved. So in U. S. And EU, is there a difference in the approval policy? And how do you see the difference? It is difficult question to answer. In The United States and Europe, there is a similar drug from Astralis. So Astralis drug is developed and approved in advance already. In Japan, the environment is not so different. But our efforts and explanation made a very good result in Japan. But in The United States, our presence to FDA cannot be communicated sufficiently. So that was the situation. However, the drug profile is sufficient. Actually, in ODAC in US, we received good comments from physicians. And as we proceed clinical development, there are some questions about the quality of the clinical development as published already. So our explanation in this part was not So it may not be a direct answer to your question, but because of the combination of these situations, we get this result. If I may add, I was engaging in R and D for a long time. In the past, if FDA gives approval, other regulatory authorities also approved. Otherwise, not. Japanese regulatory authorities responded by checking the reaction of FDA. In discussing pros and cons fully, we know that the responders and patients who are waiting for a product, so PMDA has reviewed our filing from that perspective. REPRESENTATIVE:] They were able to make judgment without checking the reaction of the other regulatory authorities. We are grateful. Lastly, the former President and Mr. Manabe, the current President, as a business policy, non core business reorganization has been talked about. Nihonbasi Building is being sold in the current fiscal year. Is this already completed or is it going to continue? Non core business sales, how much is this going to continue? For Daishankyo, noncore, how to look at noncore assets is a question. Regarding real estate properties, we still have real estate properties. Regarding noncore business, it's shrinking, so there is no change in that direction. So then where and when we should head into that direction? We have to look at PL and overall business situation and BS. We have to consider comprehensively. So it doesn't mean that it's already completed. So we'd like to continue our discussions. Thank you for your answer. Lady here. UNIDENTIFIED I am Mochizuki from MiX. I have a question about domestic market. Firstly, for confirmation, COMPANY Olmecec impact have been influenced on financial settlements. The impact of Olmecec is over now. It seems like impact is much smaller this year, but is it over? So new product, Teliger, is penetrating into market very quickly according to some data. But how do you want to develop this product furthermore in the future? As for Olmetek and other long listed products, we still have some more long listed products. And this time, so once the prescription exceeds 80%, then the drug price will be revised. But our long listed products did not reach the level of 80% is about 60% to 70%. And Olmecc is also close to this level. And regarding Talige, new patients are using TALLEGE and also the existing patients. For those patients who were on the conventional treatment, but could not have a good response or some patients are not satisfied because of the side effect. So those existing patients are using TALLEGE. So we believe TALLEGE is very good drug and we have data to support it. So as we continue communicating data to prescribers accurately, the value of the product will be well understood. UNIDENTIFIED I also have a question about LICSENTATIVE. It is growing very REPRESENTATIVE:] rapidly. What is the Is this the question about the Japanese market? Of course, it is thanks to our sales capability, but the biggest factor is the nature of this product, which is OD tablet. It's an oral disintegrating tablet. The patient can take it without water. So that is the advantage of Lixiana because it is important that the Lixiana will be prescribed to elderly patients who have difficulty to swallow. So for those patients, oral disintegrating tablet is a good advantage and well accepted. Lastly, about gislotinib. In The U. S. And Europe, you received negative feedback for approval. Is there impact on Japanese market and also the positioning of the product in Japan? UNIDENTIFIED Originally, the market for gizotinib is small. So even it is approved, there is not much impact on revenue. If we cannot get the first line indication based on QUANTON first, gizatinib sales will not grow. But as I said before, the patients waiting for this, for sure, as long as they're able to use it, even though the impact may not be so big, we are hoping to contribute REPRESENTATIVE:] to these patients. Person in the second row over there. I am from Merrill Lynch. My name is Arai. I have one question only. UNIDENTIFIED ADC Technologies. Licensing out of ADC Technology to monetize to get profit short term in the revised midterm business plan for FY 2022, R and D costs will rise. And 08/21 and October as well, there is a higher evaluation of these compounds. And you have a great linker and payload technologies and other companies' antibody technologies can be combined or added for joint development. Such strategy or monetize the ADC technology can be a possibility. Regarding these strategies, what's your current view? I'd like to hear your thinking. Yes. We have been taking such a strategy from before because ADCs are available in the world. There is TDM one technology. Even if we say our technology is great, if there is, something else which is already established, it's difficult. So we wondered whether we can work with other companies. Since the disclosure of a patent, we have been taking action. Recently, we also handle other companies' antibodies. They're not in the clinical stage yet, so that's why it's not included in the slides. But there would be time when we would share such information. We are taking such action already. But we are too busy with our products, I mean, our researchers. Are we going to expand this area substantially? That's a difficult separate question, but we're already taking such action. Morgan Stanley, my name is Muruka. Sorry to ask Page 27, 81 chart, how to read this chart other than breast cancer, gastric cancer, CRC and NSDLCO, second line or first line. Up to that level, in December, you can explain the details. So are they already in such site? Or first line, not yet? Not yet for first line. But to make it larger, we should go to earlier lines as much as possible. Earlier lines of therapy, there's one thing we have to be careful about is safety, ease of use and safety. What about safety is a question. We accumulated our experiences, early onset adverse events and to be controlled. If that happens, we can go to earlier lines. But towards maximization, earlier lines are important. So we are discussing right now. To what extent? Why it's not too clear, but that's the message we are we are having discussions. 80021, just briefly. Advisory Committee, is that going to be a possibility before April 29? Or is it better to just wait for April 29? It's not my decision. During the course of the discussions, you can imagine by yourself. Could you give me REPRESENTATIVE:] any clue? Well, I should not be a person to give you a clue, but maybe I should stop here. UNIDENTIFIED I have Mizuno from Tokyo Marine Asset Management. I have three questions. Firstly, about the Page 21. You mentioned the JPY 100,000,000,000 of the CapEx in the future. Is this for linker and payload, I assume? So what about the location? For the geographical risk hedge, are you planning to build a new plant somewhere in the future? And in the future, when the demand jumps up, what about the demand and the supply balance for the DS-eight thousand two hundred one and October? Because of the partnership with AstraZeneca, do you have to give a priority and supply the Zinker to 08/2001? Next is about investment. We must make investment in various area, including antibody linker payload and conjugations. So we are discussing internally and also involve the external parties like a CMO. We want to consider geographical perspectives, but it's difficult to identify the candidate locations. As I mentioned earlier, H H2O1 must be maximized together with AstraZeneca, and there's no change for that. So currently, we are taking many different initiatives production for clinical use and commercial products and IPs. Second question about Page 27, the plan for DS 08/2001. As a principle, you are going to use ADC to replace chemotherapy. And you mentioned that the combo of the nivolumab and pembrolizumab, but it's not proceeding very well. Is that because of the estrogenic as PD L1? Because you have PD L1 that is serving an obstacle. No. That's not right. Well, treatment has to be in a combination with IO all the time. We must consider that again. ADC and IO is a very reasonable combination. So first, work on the disease with ADC quickly and then improve immune system in the body and maintain the treatment effect. So ADC plus IO is quite reasonable. But now we sufficient efficacy from ADC stand alone. So we should focus on that also. But I am not excluding the idea. To answer your first question, the DS ten sixty two and eight thousand two hundred one, we have sufficient production capabilities for these products. And we have to be ready for the further increase of the demand. And there is a antibody production capability available around the world. So we should consider which area, which site should be used first. So in summary, we have sufficient REPRESENTATIVE:] preparation to supply commercial launch plan and also the Last question about the R and D expenses was actually decreased in this fiscal year because of the cost sharing with AstraZeneca or so there is a cost sharing with AstraZeneca, but is there anything else, any other initiatives, internal initiatives to reduce As to R and D expenditure, in terms of the payment by AstraZeneca, it has not been made public by us. But this time, on Page five, yen 7,000,000,000 decrease in costs. And this is mostly due to cost sharing with AstraZeneca. Sorry, it's qualitative, but thank you for your understanding. UNIDENTIFIED Any other questions? UNIDENTIFIED It's almost time. So we'd like to close this meeting here. Thank you very much indeed for coming