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 2019 second quarter financial result, which was announced today, using the handout materials in your hand. Today, according to the agenda, I would like to explain , firstly, fiscal year 2019 second quarter financial results, FY 2019 forecast, and FY 2019 business update, followed by a five-year business plan update. R&D Global Head, Mr. Koga, will update on R&D activities. I will take your questions after the presentation at the end. Firstly, I would like to share the overview of FY 2019 second -quarter financial results. Consolidated revenue is JPY 479.6 billion, which is a JPY 32.7 billion increase from the previous year, with a 7.3% increase. Cost of sales increased by JPY 10.5 billion on a year-over-year basis.
SG&A increased by JPY 1.9 billion, R&D expenses decreased by JPY 7.8 billion. As a result, operating profit turned out to be JPY 86.2 billion, JPY 28.2 billion more than year-over-year, with a 48.6% increase. Profit before tax is JPY 87 billion, with a JPY 28.4 billion increase from last year. Profit attributable to owners of the company is JPY 64.4 billion, which is JPY 20.4 billion more than last year, with a 46.4% increase.
Actual foreign currency exchange rates are as follows. $1 is JPY 108.63, with the JPY 1.64 appreciation of the yen. EUR 1 is JPY 121.41, which is an appreciation of JPY 8.43 of the yen. Please look at page four. From here, I would like to explain factors that contributed to the changes from the results in the same term last year. Revenue increased by JPY 32.7 billion, and its breakdown by major business unit is as follows.
A business in Japan, including domestic pharmaceuticals, vaccines, and healthcare. Products that are playing a central role in extending our sales are the oral anticoagulant LIXIANA and Tarlige, the pain treatment drug, which was launched in April this year. PRALIA for osteoporosis, the anti-epilepsy agent VIMPAT, and CANALIA for type 2 diabetes and Daiichi Sankyo asthma products, including authorized generics. Profit in Japan increased by JPY 16 billion in total. Next is overseas business. It is described excluding impacts from currency fluctuation. Daiichi Sankyo, Inc. in the U.S. had a JPY 6.8 billion decrease in revenue due to decreased sales of Welchol, the drug for the treatment of hypercholesterolemia and type 2 diabetes, and also due to Effient, the anti-platelet drug. On the other hand, American Regent in the U.S. increased revenue by JPY 10.9 billion, with growth of generic injectables and Injectafer, the drug for IDA.
Daiichi Sankyo Europe had a JPY 3.2 billion increase in revenue, despite the sales decrease of Olmesartan, as the loss was covered by LIXIANA's sales expansion. ASCA, which covers Asia and Central and South America. Sales increased in China by JPY 7.5 billion, mostly with Cravit and Olmesartan. The total sales of the ASCA business unit increased by JPY 11.7 billion. DS-8201, for which the contract was signed by AstraZeneca in March this year, had the JPY 4.9 billion posted as the lump sum payment up to the second quarter, and that pushed up the revenue. For your information, FX fluctuation loss was JPY 7.2 billion in total business. This slide shows the change factors for operating profit. I will elaborate on the profit increase of JPY 28.2 billion by item. As explained earlier, revenue increased by JPY 32.7 billion, including a JPY 7.2 billion loss from FX impact.
Now, I will explain expenses excluding forex impact and special items. Cost of sales increased by JPY 6.6 billion due to the increased cost of goods associated with increased revenue. SG&A increased by JPY 11.8 billion, with an impact such as personal expenses in the U.S. R&D expenses decreased by JPY 7 billion by initiatives such as DS-8201 cost sharing with AstraZeneca. Expense reduction from FX impact was JPY 4.9 billion in total. As for special items, expenses in this term were JPY 2 billion less than last term. Excluding impact from FX and special items, the actual profit was JPY 28.4 billion. This is the breakdown of special items. In this fiscal year, JPY 1.3 billion of the supply chain system reorganization cost and JPY 3.8 billion of impaired loss of intangible assets for MorphaBond and RoxyBond were posted.
However, there was a JPY 10.6 billion expense reduction by the sale of tangible fixed assets, which resulted in a JPY 5.5 billion reduction in expenses. As a result, expenses were JPY 2 billion less than last year. Now, I would like to explain about the pain business of Daiichi Sankyo, Inc., which is a subsidiary company in the U.S., and that posted an impaired loss. Sales efforts for Movantik were transferred to AstraZeneca in October, and for MorphaBond and RoxyBond, cancellation of the license agreement was notified to Inspirion in September. With these actions, Daiichi Sankyo, Inc. exits the pain treatment business and focuses on the oncology and injectable iron businesses. Next, I will explain profit. As explained earlier, operating profit gained JPY 28.2 billion, including impact from FX and special items.
As corporate tax, et cetera, increased by JPY 8 billion, the profit attributable to owners of the company was JPY 64.4 billion, which is JPY 20.4 billion more than the previous year. In slides nine and 10, 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 result, including Forex impact. Next, I will talk about the fiscal year 2019 forecast. We are revising our full -year revenue forecast upward by a total of JPY 15 billion -JPY 955 billion due to the good progress made by American Regent in Injectafer and also LIXIANA in the domestic Japan business. Regarding SG&A expenses, we're expecting an increase in costs by JPY 5 billion for the establishment of the oncology business structure.
We are forecasting a JPY 15 billion decrease in R&D expenditure due to the cost sharing with AstraZeneca related to DS-8201, et cetera. As a result, we are making an upward revision of operating profit by JPY 25 billion -JPY 125 billion and profit attributable to owners of the company by JPY 18 billion -JPY 90 billion on a full -year basis. Next, I will give you a business update. First, about edoxaban. Its product name in Japan is LIXIANA. It's maintaining the number one sales share in the Japanese market. Its share is growing to 37.4% as of the second quarter of fiscal year 2019. The second -quarter year-to-date revenue results increased JPY 11.7 billion year-on-year to JPY 41.8 billion. 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 the U.K. In Asia, it's doing well in Korea and Taiwan. It's also making solid growth in Brazil, where it was launched in August 2018. Global revenue results up to the second quarter of FY 2019 were up JPY 19.6 billion year-on-year to JPY 73.8 billion . The product was launched in China in August 2019, we will work on its further expansion. Next, on the launch of new products. We launched four new products in Japan, the U.S., and China over the past few months. In the oncology area, we launched two products, VANFLYTA in Japan and TURALIO 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 a risk evaluation and mitigation strategy, or the so-called REMS program, so that we can obtain prescriptions of this drug at certified healthcare providers. Next, I would like to give you our five-year business plan update. Over the past year, we have seen a further increase in the value of three ADC projects, thanks to the strategic collaboration and the progress of clinical studies. Regarding DS-8201, we are expanding the development plan by a 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-1062 and U3-1402, we have steadily accumulated efficacy and safety data through the progress of phase I studies.
As for DS-1062, 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 U3-1402, as well as possibilities of faster markets by shortening the development period and the review period. Let me explain the expansion of the DS-8201 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, we are planning 16 additional studies within one or two years. We plan to expand the development to at least 26 studies. Later, Koga will explain the details. We will further expand our investments into ADCs in response to the situation of the ADC franchise.
As for capital expenditure, we will newly invest JPY 100 billion or more to be prepared for the increase in demand for the ADC franchise's investigational drugs and products. Concerning R&D investments, we will concentrate our investment 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-8201, Daiichi Sankyo's R&D expenditure in total will not be changed from before, at around JPY 1.1 trillion for the five years. We expect further growth in oncology business revenue based on the progress of the three ADC projects I explained earlier. When we announced our plan last year, we said JPY 500 billion by FY 2025, we will aim for growth exceeding that level.
Last but not least, I'd like to explain the direction of our five-year business plan targets and the next mid-term business plan. Period until FY 2022 will be positioned as the prior investment period, and the period for FY 2023 and beyond will be the profit expansion period. We will maintain our FY 2022 targets of JPY 1.1 trillion revenue and JPY 165 billion 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&D update. I'd like to hand over to our Global Head of R&D, Koga.
I am Koga. Today, I would like to update you on R&D activities. I often do something more than I planned, but let me show you this trophy. The World ADC Conference is held every year in San Diego, and I just visited there last month. We never asked for it, but The Most Promising Clinical Candidate award was given to us. Well, DS never made a donation to this academic congress and never had involvement. Pharmaceutical companies such as Genentech, AstraZeneca, ADC experts, Seattle Genetics , Immunomedics, small companies, and Lonza and CMOs are members of this congress. From such an organization, we are acknowledged and awarded for The Most Promising Clinical Candidate. It's very good news to share with you. Going back to the main topic.
First, I'd like to update you on the DS-8201 submission plan. It is already announced by press release: the application for approval for the indication of HER2-positive metastatic breast cancer as a drug for third-line treatment and beyond was accepted in Japan in September and in the U.S. in October. In the case of the U.S., it takes 60 days from submission to acceptance by the FDA. We received a notice from the FDA a few days earlier, and we had already started the communication with the FDA immediately after submission. It shows how much the FDA expects from this project. It is determined to be a breakthrough product. It takes 12 months at maximum in Japan for review. PDUFA date in the United States is planned for April 29, 2010. The development progressed much faster than the original plan.
This application was realized in four years since the start of the clinical study, which is quite quick for a biologic. We were actually kind of amateurs or not experts in biologics, but we got the very accelerated notification. Application for breast cancer in the EU is planned for the first half of 2020. Application for gastric cancer in Japan is planned for the first quarter of 2020. As you know, regarding DS-8201, DS signed a collaboration agreement with AstraZeneca at the end of March, and detailed discussions are held for a new study plan. The potential of DS-8201 includes different types of cancers in a wide range of treatments, from early treatment to third-line treatment. Therefore, we prioritize studies and review the study plan from various perspectives so that it will have a higher chance of success. Currently, we are working together with AstraZeneca.
The review is still ongoing. Today I will show you the number of studies that will be starting in a year or two. And also 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 these studies will be introduced on R&D Day in December. Athva will also join R&D Day. We will share this new information in Tokyo and with New York. I was going to mention actual kinds of cancers; actually, it's shown in the slide. From now on, I would like to introduce you to the data of DS-1062 and U3-1402 that are presented at the WCLC, the World Conference on Lung Cancer. This slide explains the phase I study design of DS-1062 for relapsed NSCLC.
This study enrolls unselected patients with relapsed or refractory NSCLC without prior selection by expression of TROP-2. TROP-2 expression is observed at high chance in various kinds of cancers, especially in lung cancer, where there's an 80% chance of TROP-2 expression . Next slide. This is the summary of safety data. In a dose-limited toxicity study, mucosal inflammation and stomatitis were observed at 10 milligrams per kilogram. It's strange to say it was expected in a way. There are some cases with a TROP-2 expression on the skin, and we anticipated this adverse event, and it was observed at 10 mg per kilogram. That means the onset of the adverse event was expected from the non-clinical study. We determined the Maximum Tolerated Dose as 8mg per kilogram.
Due to the onset of these adverse events, it was judged that further dose escalation is difficult, and 8 mg per kilogram was selected as MTD and the recommended dose in the escalation part in the phase I study. We received many inquiries after WCLC and 8 mg per kilogram is the recommended dose in the dose escalation part but not decided as the final dose. Dose 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-1062, and this is a summary.
At first, based on our experience from DS-8201, signs and symptoms of suspected ILDs, such as cough, shortness of breath, fever, or pneumonia, are categorized as adverse events of special interest, and cases are reported and collected in a timely manner. At the point in 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 an external ILD adjudication committee to evaluate whether they can be confirmed as ILD and are related to the study drug. This is a common procedure for all studies in DS-8201, DS-1062, and U3-1402 and will be applied to all future studies in other ADC projects. TDL, TDX technology, and then also 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-1062. By now, five cases are reported as lung-related adverse events, 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 the study drug. Remaining four cases are obtained after the data cut-off at WCLC and are still waiting for the evaluation by the adjudication committee. Evaluation results will be available by the end of November, so I should be able to update on details at R&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 8mg per kilogram that was selected for the escalation part, five out of seven cases showed partial response. Those are all- comers without the therapeutic screening in the phase I study. Those patients who received IO treatment or Standard of Care before—we can see this much efficacy in a phase I study in a dose -escalation period. Next slide. I would like to show you the data of U3-1402. This is a design for a phase I study for NSCLC with an EGFR mutation. In this study, we don't select patients by prior screening by HER3 expression.
Next page, please. This is a safety summary page. As DLT, Dose-Limiting Toxicity, and platelet count decrease occurred, we have been able to observe the tolerability profile for now. The MTD, Maximum Tolerated Dose, has not been reached. It is still possible to further increase the dose. Next page. This is an efficacy waterfall chart. Antitumor activity was demonstrated in patients other than one case. Like DS-8201, 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 the target, so this is its feature. In the dose expansion part, 5.6 mg per kilo has been selected as RDE, the Recommended Dose for Expansion .
Next page, please. Next, I'd like to explain a phase I/II study of our fourth ADC, DS-7300. DS-7300 is an antibody-drug conjugate targeting B7-H3. It has a selective drug antibody ratio, DAR, as four, the same as DS-1062 in the design. B7-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-1, PD-L1, for example, are molecules similar to those according to understanding. In that sense, it's likely to be involved in immune regulation. In the phase I/II study and also in future clinical research, we can get new insights.
One subject has already been enrolled. Can we say that? The study dosing has started already. Could I say that? Next. This page shows DS-7300 phase I/II study design. There are two parts, dose escalation and dose expansion . 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 B7-H3-based patient selection. The study already started. Next page. This is the ADC franchise summary to show the current status. As explained on earlier slides, our application for DS-8201 for breast cancer was accepted in Japan and the U.S. If the review progresses well, we're expecting the launch in the next fiscal year. The results of the pivotal phase II study used for the submission will be presented already on December 11th at the San Antonio Breast Cancer Symposium. For gastric cancer, we are planning to file an NDA in Japan in the first quarter of FY 2020. For DS-1062 and U3-1402, we are accumulating efficacy and safety data steadily.
Dose expansion parts are now ongoing for both studies. We will present our new development plan on R&D Day in December. Regarding DS-7300, we started a phase I/II study in October 2019. I'd like to give an update on DS-3201. This is a chemical product. DS-3201 is a dual EZH1/2 inhibitor. It's a dual inhibitor designed to demonstrate an effect to stop tumor growth. We are hoping this is going to be a new novel anti-tumor therapy. Our phase I clinical studies are in progress for various cancer types right now. We received Sakigake Designation for peripheral T-cell lymphoma. Adult T-cell leukemia lymphoma phase II studies will be started, we made the decision to do so. Adult T-cell leukemia /lymphoma phase II study information can be found in the appendix. The so-called ATL. In western Japan, Kyushu and Shikoku, there are more incidents and higher rates of incidents.
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 1, HTLV-1. 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. Phase I interim results will be announced at ASH in December, the 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 the AML franchise and breakthrough science update. Unfortunately, we launched quizartinib as VANFLYTA in Japan on the 10th of October this year, but we received a negative opinion from the regulatory authorities in Europe following a CRL in the U.S.
Future plans for U.S., E.U. will be determined with the results of the first-line study, QuANTUM-First, which has already completed enrollment. pexidartinib was launched as TURALIO in the U.S. in August this year. It's already being provided to the patients as well. Next. Lastly, an announcement on R&D Day 2019. 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&D strategy and updated development plans for DS-8201, DS-1062, and U3-1402. Guide for the One and Beyond, our appendix list of major milestones and R&D pipelines can be found. Please refer to them at your leisure. Thank you very much. That's all from me.
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. Once you're appointed, please tell us your name and attribute, and please give us your question. Is there any question from the floor?
Hidemaru Yamaguchi from Citi. The first question is about the target of the next five-year business plan. You just updated on the plan for the next five-year business plan starting from March 2022. When will you announce the next five-year business plan?
Yes. We will discuss and decide the details of the next five-year business plan next year. At the end of fiscal year 2020, which is March or April of 2021, we will disclose.
As for the target of fiscal year 2022, will we maintain, or will you revise it?
We will keep it as is. In the discussion for the next business plan, we will discuss it again. As announced last year, we believe it is very important as a top management commitment, so we want to have a thorough discussion. Maybe we will discuss this later more.
You had a concrete business development plan for DS-8201, but for DS-1062 and U3-1402, it may depend on the strategy, but is there a possibility of partnership? The media quoted that it may be possible to develop the project standalone without a partner, but what do you think?
Yes, this is a frequently asked question. Firstly, about the DS-8201. In order to maximize the value of the product, we decided on partnering. For U3-1402 and DS-1062, for those projects, as an option to maximize the value, partnering is possible. We just started the phase I study, top-line results are not available yet. We want to wait for those data and have a further discussion. Regarding DS-7300, a clinical study has started.
It just started? What about the first readout? Do you think you cannot disclose the data at ASCO next year?
Well, we just enrolled one case only, we are not sure to what extent we can disclose data. If we can observe efficacy from a lower dose, maybe we can disclose data next year, it's too early.
Another point, GPR for just Q4, is it going to be in your assumption?
It can be in the fourth quarter according to the current plan. Any other questions? Yes, please.
Hashiguchi from Daiwa Securities. Midterm outlook, the meaning of maintaining—could you elaborate? To a certain extent, it's not really examined, but you calculate the numbers 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 them, or as of now, you haven't examined the details yet, or you just haven't reviewed them? What's the meaning of your saying maintaining?
We are presenting this to you with a full 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 DS-1062 and U3-1402 as well. 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, when you explained this page, maybe I might have misheard. DS-1062 and U3-1402, the development period and the review period can be shortened according to your perspective. What do you mean by shortening the review period? DS-8201 was designated as Sakigake and breakthrough therapy. DS-1062 and U3-1402: I haven't seen such announcements. What do you mean by saying so?
We have not received any official agreement from the regulatory authorities yet. The possibility of breakthrough therapy or Sakigake designation is not zero. 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, applications for DS-8201 are based on phase I/ II studies. There have been accelerated procedures even prior to breakthrough therapy designation. We try to accelerate the execution of the clinical studies and submit them 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 U3-1402 and DS-1062 efficacy and safety to be comparable to DS-8201, depending on target diseases. Therefore, a one -arm open -label phase II study can be implemented. Such an approach could be possible, for example.
We don't know whether we can finish in four years. We think we can shorten the time frame and file our submissions.
Let's talk about Tarlige and the actual results. How do you expect the results for Tarlige? Could you give us a quantitative figure?
Well, as I'm sure, it's a JPY 3.3 billion. The outlook for the full year is not disclosed. Just for the quantitative explanation of this ethical product development, we introduced many new products so far, and then we actually get the best response from the market. We get the comment that this product has the best response from the market, so we have a big expectation for this product, and we cannot say anything more.
The best response from the market, that is, do you think that it will create the biggest sales in Japan?
As the startup of the newly launched product, we will have a very good start. I believe the startup of the sales right after the launch will be as good as we expected. We cannot share any specific figures now.
Thank you very much.
Any other question?
I'm Wakao 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 midterm 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, followed by 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 higher hurdle to clear right now. Is my understanding correct? Revenue target is JPY 1.1 trillion, no change from before. 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 JPY 1.1 trillion? Could you please elaborate?
We reviewed our midterm business plan in October last year. We raised our goals of JPY 1.1 trillion revenue and JPY 165 billion operating profit for FY 2020, the last year of the fourth midterm business plan. As of October last year, 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 1.1 trillion target as is, so R&D expenditure will not change according to our 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, for FY 2020, we'll be examining the numbers again, and at the end of the current fiscal year, we'd like to share as well for FY 2022.
When we draw a picture like this, people tend to ask whether it's remaining flat or going up. You can understand our intention is reflected a little here for the prior investment period.
Number two, page 27: DS-8201, you have additional studies to be performed after the strategic collaboration with AstraZeneca.
On R&D Day, more details will be explained.
More specific targets?
The lines of therapies are HER2-positive or not, and specifics and the concrete contents of the studies will be shared.
To what degree should you be able to share?
We cannot make a commitment right now, but what's shown here is 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 advanced therapy,
What about early lines of therapy?
That's still under discussion with AstraZeneca, we'd like to discuss it, and we will make the announcement about what we are able to reach agreement on. AstraZeneca will also make the announcement. I hope I didn't confuse you, but the picture may be a bit confusing to you.
We see the number of studies, we understand that. Maybe you just explain the timing to finish those studies, like breast studies and then also 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, there are probably 70 - 80 items and more than 100 studies being conducted right now. In such a situation, well, as we see the advantage of the DS-8201, we will accelerate the studies more. Also, the name, value, and technology and the medical affairs capability of AstraZeneca will be utilized so that we can accelerate the studies even more. The concrete idea of timing cannot be mentioned now. In general, we try to accelerate the studies.
Thank you. At last, about AstraZeneca. There are studies utilizing their products. Maybe they want to use LYNPARZA, for example. Those studies are using the AstraZeneca product as a concomitant study. What is the situation?
Of course, their TKI and IO drugs are what we are discussing right now. We cannot tell you when we will make an official announcement. Of course, we are considering every possibility.
You will not announce that on R&D Day?
Maybe we can disclose the personal information, but we cannot make a commitment now.
Thank you. That's all.
Next question. The person on the far right end.
From Goldman Sachs Securities. My name is Ueda. I have a question about page 21, about R&D investment. In this diagram, for DS-8201 and other products, there's some difference in investment amount. Then those are all DS-3201 and other products. It seems like those products will have a smaller amount of investment. What is the priority of investment? In comparison to DS-8201, when we look at the other projects, what about the speed of the development? Do you think it takes more time for other programs?
For DS-8201, as you see in this table, there is an investment from Daiichi Sankyo and AstraZeneca, so we'll have more investment for DS-8201, followed by DS-1062 and U3-1402.
Currently, we give the highest priority to three ADC projects. If we have a budget, of course, we want to spend more on the fourth and fifth priorities, but we have to have good priorities to make a successful development. That's why this is the idea. For the fourth priority and beyond, if we find a project has a successful chance, maybe we consider another partnering with other companies. About the speed of development. As an image, other projects will proceed more slowly. That's not the idea. For other projects, for non-ADCs, but there are other pipelines or non-cancer projects. We finished a major project in a non-cancer area, and we are now in basic research again. It seems like investment is lower in those non-cancer projects.
We are also making efforts to create new pipelines after 2025. It's not that we will slow down other projects. For DS-1062, 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. We will decide the investment in those projects. Whether we will utilize our internal budgets or maybe seek external collaboration, we will decide later on. It's not our intention to slow down other projects.
Thank you. Secondly, I have a question about your shareholder return policy. This was not mentioned today, but the total return ratio will be 100% during the course of the current midterm business plan. We can expect a lot from oncology agents. Can I understand that there is no change in that policy?
Yes. Based on what we announced, until FY 2022, we promised a total return ratio of 100%. 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 Japan, regarding your business strategy, focusing on certain therapeutic areas or OTC, generics, what should you do with them? You had a full lineup to generate value. No change in that policy? 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. We have new products as well. We will have oncology products as well. How we would be able to launch and at what timing we have what products, 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 ESAs?
We are discussing this all the time. What is the optimal business portfolio for Daiichi Sankyo? We are continuing such discussions. As of now, there is no particular decision we have made. 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 projects. The first question is about the oncolytic virus for the cancer treatment DS-1647. You are planning to submit for approval in the first half of 2019, but it has changed to the second half. What is the reason why you changed the timing? That was the first question. Second question: you are developing a CAR-T-cell development, and as Kymriah is listed in a drug price, is there any submission plan for the future?
Thank you for your question. For the first question, the oncolytic virus got a very good clinical result, and it was already announced. However, regarding the production, it is taking time. The production was available at the University of Tokyo, but we have to make further efforts in our production plant.
We are working on this improvement right now, we want to file a submission as soon as possible. The most difficult part, the clinical part, is completed already. Once we address the situation, we will apply for approval. As for the CAR-T, the drug price was determined. Drug prices in Japan are not as high as in the U.S. or EU, you may question the contribution to sales. However, with this drug price, there is no impact on the timing for application for the NDA.
Originally, you planned to submit for approval by the end of 2019 for CAR-T.
It's by the end of fiscal year 2019. That's the target.
Thank you very much.
Person sitting in the front row.
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 JPY 40 billion in FY 2020. Crizotinib is in trouble a little bit, so we can just see pexidartinib only. What numbers are included in here?
FY 2020, denosumab is included in here, I think. JPY 40 billion. We think this is the size of revenue we can achieve.
How much is denosumab here?
JPY 20 billion or so.
That's one thing. Regarding the size of the bubble or circle, is it based on our gut feelings?
As Manabe said, internally, we 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 quizartinib?
quizartinib , first-line, is ongoing. Based on the results, we will decide. The AML franchise, we have to deprioritize clearly.
Deprioritize, did you say?
Yes.
Next, page 20... Sorry, 27. Specifically, the DS-8201 plan. There are many tumor types here you are addressing, including others. If that's going to be the case, DS-1062 and U3-1402, you need fine-tuning of tumor types to make the R&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 the DS-1062 and U3-1402 development, how should I understand this table, including fine-tuning possibilities?
DS-8201 first. All possible scenarios are being discussed with AstraZeneca as we move forward. DS-1062 and usually U3-1402 on our side. We also pursue all possible ideas. There can be some overlaps with DS-8201, 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 DS-8201, HER2, is the target. U3-1402, HER3, is the target. DS-1062, TROP-2, 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, is different.
What should be the positioning?
We are still in phase I. We are still searching for this. In the case of HER2 high to high or low, we have to test as we proceed.
What about TROP-2?
We don't have to do the same. Maybe it may not be necessary. U3-1402 in a steady state at this level. With drug therapy, there can be a higher expression. Various treatment schemes may exist. There may be schemes we haven't set yet. There can be new therapeutic areas that may emerge.
We have very robust tools we have right now. We have to search for this in the future. Sorry, it may not be right to the point, but there are a lot of uncertainties we have not been able to illustrate. Three ADCs. If they're in the development stage simultaneously, it's difficult to discuss the overlap of the indications. DS-8201 was ahead. We already started partnering, and both parties are trying to maximize this. That's at the top. The indications will be decided accordingly. We would consider the second ADC and the third ADC. Instead of doing this all at once, it's easier. DS-1062, lung cancer. In the remaining spot, we should aim for it based on these conditions. Instead of simultaneously, it's easier to develop a strategy more easily.
Thank you very much.
Any other question? The person on the third line.
I am the editor of the Pharmaceutical Journal. My name is Edita. In this briefing, you get the negative figures in the U.S., what is the outlook for the second half or the full year? In the U.S., the U.S. market is the biggest market in the world, I believe the oncology development is progressing very well. What is the outlook for the second half of this first full year and the fourth year, and when will the trend be upward in the U.S. market?
Thank you for your question. In the U.S., we have two subsidiary companies. One is Daiichi Sankyo Inc. In the past, we had olmesartan and more products in the market, and we have a major business. Most of them actually expired patents already.
Welchol or Effient is not the off-the-patent product, but Savaysa , Lixiana, and edoxaban are sold in the U.S. For those products, we cannot expect the rapid increase or growth in the future. We will have a slow shrink in the future. For American Regent, we have Injectafer and generic injectables, and those products are quite successful. For Injectafer, we will have a competitor's product in the future, probably. We have to look at the competitor's movement. Up until 2027, we have a patent. American Regent will be the very important source of revenue. When we consider the U.S. market, Daiichi Sankyo, Inc. will shrink the original business, but it will have an oncology business from now on. The actual main product will be different.
For American Regent , generic injectables and Injectafer are leading sales in the U.S. market. For those, ADC franchises will be developed in the future, and as they start the business in the U.S., they will be sold by Daiichi Sankyo, Inc?
Yes. Yes, the revenue will be posted under Daiichi Sankyo, Inc. Yes.
Thank you very much. Another question about the quizartinib. In Europe, there was negative feedback, in Japan, it is approved. In the U.S. and EU, is there a difference in the approval policy, and how do you see the difference?
It is a difficult question to answer. In the United States and Europe, there is a similar drug from AstraZeneca. AstraZeneca's drug is developed and approved in advance already. In Japan, the environment is not so different. Our efforts and explanation made a very good result in Japan.
In the United States, our presence to the FDA cannot be communicated sufficiently. That was the situation. However, the drug profile is sufficient. Actually, in ODAC in the U.S., we received good comments from physicians. As we proceed with clinical development, there are some questions about the quality of the clinical development as published already. Our explanation in this part was not smoothly accepted. It may not be a direct answer to your question, but because of the combination of these situations, we got this result.
If I may add, I was engaging in R&D for a long time. In the past, if the FDA gave approval, other regulatory authorities also approved. Otherwise, not. Japanese regulatory authorities responded by checking the reaction of the FDA. In discussing pros and cons fully, we know that the responders and patients who are waiting for a product, so the PMDA has reviewed our filing from that perspective. They were able to make judgments 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. The Nihonbashi 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 Daiichi Sankyo, how to look at non-core assets is a question. Regarding real estate properties, we still have real estate properties. Regarding non-core business, it's shrinking, so there is no change in that direction. Where and when should we head in that direction? We have to look at PL and the overall business situation and BS. We have to consider comprehensively. It doesn't mean that it's already completed. We'd like to continue our discussions.
Thank you for your answer.
A lady here.
I am Mochizuki from Mix. I have a question about the domestic market. Firstly, for confirmation, Olmetec impacts have influenced financial settlements. The impact of Olmetec is over now? It seems like impact is much smaller this year, is it over? New product, Tarlige, is penetrating the market very quickly, according to some data. How do you want to develop this product further in the future?
As for Olmetec and other long-listed products, we still have some more long-listed products. This time, once the prescription exceeds 80%, then the drug price will be revised. Our long-listed products did not reach the level of 80%, it is about 60%-70%. Olmetec is also close to this level. Regarding Tarlige, new patients are using Tarlige and also the existing patients.
For those patients who were on the conventional treatment but could not have a good response. Some patients are not satisfied because of the side effects. Those existing patients are using Tarlige. We believe Tarlige is a very good drug, and we have data to support it. As we continue communicating data to prescribers accurately, the value of the product will be well understood.
I also have a question about Lixiana. It is growing very rapidly. What is the factor? Is this a 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 an OD tablet. It's an oral disintegrating tablet. The patients can take it without water. That is the advantage of Lixiana, because it is important that Lixiana be prescribed to elderly patients who have difficulty swallowing. For those patients, an oral disintegrating tablet is a good advantage and well accepted.
Lastly, about quizartinib. In the U.S. and Europe, you received negative feedback for approval. Is there an impact on the Japanese market and also on the positioning of the product in Japan?
The market for crizotinib is small, even if it is approved, there is not much impact on revenue. If we cannot get the first-line indication based on QuANTUM-First, crizotinib sales will not grow. As I said before, there are 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 to these patients. The person in the second row over there.
Thank you for your explanation. I am from Merrill Lynch. My name is Arai. I have one question only. ADC technologies, licensing out ADC technology to monetize and to get short-term profits in the revised mid-term business plan for FY 2022, R&D costs will rise. DS-8201 and DS-1062 as well. There is a higher evaluation of these compounds, and you have great linker and payload technologies, and other companies' antibody technologies can be combined or added for joint development. Such a strategy to 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. ADCs are available in the world. There is T-DM1 technology. Even if we say our technology is great, if there is something else that is already established, it's difficult. We wondered whether we could work with other companies. Since the disclosure of a patent, we have been taking action. Recently, we also handle other companies' antibody production. They're not in the clinical stage yet, that's why it's not included in the slides, but there will be time when we will share such information. We are taking such action already. 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, we're already taking such action. One person there. No?
Morgan Stanley. My name is Muraoka. Sorry to ask. Page 27, ADI-1201 chart. How to read this chart? Other than breast cancer, synthesize gastric cancer, CRC, and NSCLC. Second line or first line? Up to that level. In December, you can explain the details. Are they already on such a site or in the first line?
Not yet. Not yet for the first line. To make it larger, we should go to earlier lines as much as possible. Earlier lines of therapy. There is one thing we have to be careful about: safety. Ease of use and safety. What about safety? It's a question. We accumulated our experiences. Early onset of adverse events and to be controlled. If that happens, we can go to earlier lines, but towards maximization, earlier lines are important. We are discussing right now. To what extent? Why? It is not too clear, but that is the message. We are having discussions.
DS-8201, just briefly, advisory committee, is that going to be a possibility before April 29th? Is it better to just wait for April 29th?
It's not my decision.
During the course of the discussions, you can imagine by yourself. Could you give me any clue?
Well, I should not be a person to give you a clue, but maybe I should stop here.
Thank you.
Next question.
[Aya Mizuno] from Tokio Marine Asset Management. I have three questions. Firstly, about page 21. You mentioned the JPY 100 billion of the CapEx in the future. Is this for the linker and payload, I assume? What about the location? For the geographical risk hedge, are you planning to build a new plant somewhere in the future? In the future, when the demand jumps up, what about the demand and the supply balance for the DS-8201 and DS-1062? Because of the partnership with AstraZeneca, do you have to give priority and supply the linker to DS-8201? Next is about investment. We must make investments in various areas, including antibodies, linkers, payloads, and conjugations. We are discussing internally and also involving the external parties like the CMO. We want to consider geographical perspectives, but it's difficult to identify the candidate locations.
As I mentioned earlier, DS-8201 must be maximized together with AstraZeneca. There's no change for that. Currently, we are taking many different initiatives to prepare sufficient production for clinical use and commercial products and IPs.
Second question about page 27, the plan for DS-8201. As a principle, you are going to use ADC to replace chemotherapy. You mentioned the combo of the nivolumab and pembrolizumab. It's not proceeding very well. Is that because of AstraZeneca's PD-L1, because you have a PD-L1 that is serving as an obstacle?
No, that's not right. Well, the treatment has to be in combination with IO all the time. We must consider that again. ADC and IO are a very reasonable combination. First, work on the disease with ADC quickly. Then improve the immune system in the body and maintain the treatment effect.
ADC plus IO is quite reasonable, but now we are seeing sufficient efficacy from ADC standalone, so we should focus on that also. I am not excluding the idea. To answer your first question, the DS-1062 and DS-8201, we have sufficient production capabilities for these products, and we have to be ready for the further increase in the demand. There is an antibody production capability available around the world, so we should consider which area, which site, should be used first. In summary, we have sufficient preparation to supply the commercial launch plan and also the IPs.
Last question about the R&D expenses was actually decreased in this fiscal year because of the cost-sharing with AstraZeneca. There is cost-sharing with AstraZeneca, but is there anything else, any other initiatives, internal initiatives to reduce R&D expenses?
As for R&D expenditure, in terms of the payment by AstraZeneca, it has not been made public by us, but this time on page five, JPY 7 billion in costs are decreasing. This is mostly due to cost-sharing with AstraZeneca. Sorry, it's a quality issue, but thank you for your understanding.
Thank you.
Any other questions? It's almost time, we'd like to close this meeting here. Thank you very much indeed for coming.