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Thank you very much for your participation in this FY '22 second quarter financial results earnings call. I'm Ikeda from Corporate & Advocacy Relations, serving as the moderator for today. Thank you very much for this opportunity. This call is given by a Zoom webinar as well as the live streaming. We make the presentation first, then we'll have Q&A session afterwards. The questions can be accepted only from webinars, not from the live streaming. And also, the simultaneous translation service in Japanese and English is available. For those participating with the Zoom webinar, from the Zoom screen menu, please select your preferred language. And today's presentation is going to be given in line with the presentation material on the website. The participants for today, Representative Director, President and CEO, Kenji Yasukawa; CCO, Chief Scientific Officer, Yoshitsugu Shitaka, CFO, Minoru Kikuoka; CMO, Chief Medical Officer, Tadaaki Taniguchi. These 4 are here with us. And Matsui, Chief Commercial Officer is unfortunately unavailable because of his overseas trip. All sessions, including Q&A, will be held in Japanese and simultaneously translated into English by interpreters, accuracy of interpretation cannot be guaranteed. The material or presentation and answers and statements by representatives for the company in the Q&A session includes forward-looking statements based on assumptions and beliefs in light of the information currently available and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representations or advertisement regarding the efficacy or effectiveness of these preparations, promote unapproved use in any fashion nor provide medical advice of any kind. Now Mr. Yasukawa, please.
Hello, everyone. Yasukawa speaking. Thank you very much for joining our FY 2022 second quarter financial results announcement meeting out of your very busy schedule today. Page 2 is a cautionary statement regarding forward-looking information. I'm going to skip reading this page. Page 3 is the agenda for today. I will cover these topics in line with the agenda. Page 4 is an overview of FY 2022 second quarter financial results, I'd like to start explaining from this page. Revenue and profit increased in the second quarter. Revenue increased by 17% year-on-year and was on track when ForEx impact was excluded. As for XTANDI, sales in the United States were below initial full year forecast, but strong performance in Europe and Japan covered the underachieving performance in the United States. PADCEV showed a strong performance mainly in Japan and sales exceeded our initial full year forecast. COGS ratio was higher than our initial full year forecast due to changes in the product mix. But as we announced last week, considering recent rapid exchange rate fluctuations, the exchange rate used for eliminating unrealized profit was changed from the second quarter to exclude the impact on profit. Please see Slides 20 and 21 for details. SG&A and R&D expenses were controlled in line with the initial full year forecast, excluding ForEx impact. As a result, core operating profit increased by 16% year-on-year, even excluding ForEx impact and was in line with our initial forecast. Full basis operating profit increased by 33% year-on-year. Next, on Page 5, I will explain FY 2022 second quarter financial results, revenue increased to JPY 622.2 billion, up 17% year-on-year. Core operating profit was JPY 145.4 billion, up by 16% year-on-year. You can see the ForEx impact column on the right-hand side of the table. Revenue increased and profit increased by 4% and 3.3%, even excluding ForEx impact. As I explained on the previous page, second quarter cost of sales does not include ForEx impact from the elimination of unrealized profit. On the other hand, we are not restating our historical consolidated financial statements. So the ForEx impact of the elimination of unrealized profit for JPY 0.6 billion remains in the second quarter of FY 2021. The bottom half of this page shows our full basis results. Operating profit was JPY 119.9 billion, up 33% year-on-year. Profit increased to JPY 96.4 billion, up 34.7% year-on-year. On Page 6, let me explain the second quarter results and the future outlook for XTANDI. Due to a substantial ForEx impact in the second quarter, we're showing the results in local currencies as well. First, global sales reached JPY 332 billion in the second quarter, up by 24% year-on-year, and up by 9% when ForEx impact is excluded. Up to the second quarter, the progress was in line with the full year forecast. We explain the outlook for the future later. But we continue to expect the challenging market conditions in the United States. And we have made a substantial downward revision of full year forecast in the United States. We're making an upward revision of our full year forecast in Europe and Japan with strong performance which is not sufficient to cover the downward revision in the United States. So full year forecast of global sales, excluding ForEx impact is revised downward. On the other hand, in spite of the downward revision, we are expecting continued near double-digit growth even with sales already exceeding JPY 600 billion. Next, let me explain the current situation and the future outlook for each region. In the United States, second quarter sales reached $1,304 million, growing by 1% year-on-year. 1% based on the local currency. Continuing from the previous quarter, there has been a negative impact from the so-called PAP, Patient Assistance Program, and competitive Zytiga generics. We were expecting a recovery in our initial assumptions but their levels remain higher than our expectations. New patient starts have not returned to pre COVID-19 levels and below expectations. We are assuming that the duration of treatment with XTANDI is 18 months on the average due to a drop in new patient starts 1 to 2 years ago when COVID-19 has the biggest impact. We believe that demand as a basis of our current sales is also being affected. These factors, including PAP have a lot of uncertainties. So without expecting an improvement for now, we factored in the challenging market conditions for the third quarter and beyond. As a result, we decided to revise our full year forecast downward to $2,618 million.
Comparing the first and the second half, it may seem that we are not expecting growth in our plan, but this is due to the impact of the so-called donut hole or coverage gap on our price in the fourth quarter. On a demand basis, we're expecting an increase by a higher single-digit percentage figure in the second half compared to the first half. So we are planning to grow based on the actual demand. As you know, more than 10 years have already passed since the launch in the United States, sales have grown to a scale of $2.5 billion. On a full year 250 -- $2.5 billion on a full year basis. In the current indications, big market opportunities are not left for us and extend is shifting to a mature phase in our view. On the other hand, the future growth opportunity, EMBARK study is ongoing, with which we are aiming to obtain an additional education of M0 CSPC, we're expecting top line results by the end of the current fiscal year. We're expecting for its contribution to sales after approval as a growth driver for FY 2023 and beyond. Next, established markets. Established markets are above initial forecast and contributing to the expansion of global sales the most. Prescription for early-stage M1 CSPC showed strong growth mainly in Germany, while Italy and Canada also contributed as well with the start of reimbursement for M1 CSPC, so demand rose substantially by 21% year-on-year. As for the price, we were able to reach agreement on the price higher than our initial assumptions in reinvestment negotiations in Germany. We reflected these positive factors and made an upward revision of our full year forecast. In Japan, as a result of active educational and promotion activities by us and our competitors, we are maintaining a high market share in the growing market of novel hormonal therapies with market expansion higher than expected. Reflecting the situation up to the second quarter, we revised our full year forecast upward. In Greater China, demand expanded substantially. But due to the impact of intensifying competition, progress is lower than our initial forecast. We are expecting competitive pressure to continue in the third quarter and beyond and made a downward revision of our forecast. However, we are continuing to see Greater China as a growth market.
In the international markets, performance looks strong, but that's due to early shipment. Excluding that factor, performance is in line with our initial forecast. So excluding ForEx impact, full year outlook is in line with our initial forecast. We have expectations on international markets as a growth market like Greater China. In the United States, XTANDI is approaching the mature phase, but outside of the United States, we have expectations for Greater China and international markets in particular as growth market. We continue to expect sales expansion globally as a whole. Next, on Page 7, let me explain our strategic product first on PADCEV. Global sales grew to JPY 20.8 billion, exceeding our initial expectations. Countries with approval expanded to 41 countries. Regional expansion is making steady progress. Factoring in the strong performance mainly in Japan, we will revise the full year forecast upward. In the United States, PADCEV is growing in line with our initial forecast. We already achieved a high market share with the current indications, We're expecting significant sales growth after the anticipated approval of first-line metastatic urothelial cancer indication. In the established markets, the number of launched countries has increased to 16 since the approval in April this year, market penetration is exceeding our initial expectations, reflecting the situation after the second quarter, we made an upward revision of our full year forecast. We are expecting a further increase in the number of launched countries. Reimbursement is expected to start in Austria, Switzerland, Belgium and Nordic countries in the latter half of FY 2022. In Japan, market penetration is continuing to exceed expectations at the speed faster than our initial forecast. New patient starts substantially above our expectations. And the duration of treatment in the clinical settings is actually confirmed to be longer than the clinical trials in many cases, which we think is contributing to sales expansion. Reflecting the market penetration much above our initial assumptions, we made a significant upward revision of our full year forecast. In the international markets, PADCEV was launched in Singapore in July this year, we are hoping for contribution to sales as we expect an increase in the number of launch countries in the future. The key to global growth in the future is the expansion in the current indications as well as the additional indication in the first-line settings. We're expecting full-scale sales contribution starting from the United States. As for XOSPATA, due to the impact of a weak performance, mainly in the United States and Japan, global sales were below expectations. In the United States, the largest market, we maintained a high market share and demand has been increasing, but the market growth was lower than expected. As a factor for the slowdown of the U.S. market, FLT3 screening rate is already high, but has not reached our goal we set at the beginning of the fiscal year. So new patient starts are below our expectations according to our analysis. In Japan, increased competitive pressure is serving as a factor for the weak performance. Reflecting these situations in the United States and Japan, we made a downward revision of our full year forecast. As for EVRENZO, sales in Japan and Europe are below expectations. Factors behind have not changed much from the previous quarter. EVRENZO has continued to be affected by competitive pressure in Japan and low penetration of differentiation from the existing standard of care in Europe. We are expecting launch and reimbursement in France, Italy and Spain in the latter half of this fiscal year, but factoring in the challenging situation up to the second quarter, we made a substantial downward revision of our full year forecast. On Page 8, I will explain cost items. COGS ratio increased by 0.8 percentage point year-on-year and was above initial forecast due to changes in product mix, such as sales increase for XTANDI ex-U.S. and EVENITY in Japan. SG&A cost, excluding XTANDI U.S. co-promotion fees increased by 9.5% year-on-year. When ForEx impact is excluded, SG&A expenses decreased by 2.6% or JPY 5.1 billion year-on-year, under control in line with our initial forecast. Personnel costs fell by about JPY 6 billion with global optimization of commercial-related personnel aligned with transformation of product portfolio. We're also trying to reduce sales promotion costs related to mature products such as mirabegron, which decreased cost by about JPY 4 billion year-on-year. On the other hand, we are making active investment for new product launch readiness for PADCEV and fezolinetant. Sales promotion expenses rose by about JPY 4 billion year-on-year. We will continue to allocate our resources to strategic products with higher priority. R&D expenditure increased by 16.9% year-on-year but by 4.2% when ForEx impact was excluded. We booked onetime expenses of JPY 13.5 billion for using a priority review voucher in the first quarter for the application of fezolinetant. Excluding this cost, R&D expenditure decreased year-on-year. The progress against the initial forecast, excluding ForEx impact, was high at 52%, but the use of a priority review voucher was already factored in at the beginning of the current fiscal year, and this is in line with our initial forecast.
Next, on Page 9, I'd like to explain our revised FY 2022 full year forecast. First, we reviewed our ForEx rate assumptions and decided to use JPY 140 against the U.S. dollar and JPY 140 against the euro for the third quarter and beyond. In our revised forecast, revenue is expected to increase to JPY 1,529 billion, up by JPY 86 billion from the initial forecast announced in April. ForEx impact is raising our revenue by JPY 115.5 billion. So in reality, this is a downward revision by about JPY 30 billion. As I explained on Page 6, we expect XTANDI's challenging market conditions in the United States to continue in the third quarter and beyond. Sales forecast excluding ForEx impact was revised downward. On the other hand, we made an upward revision for Europe and Japan with performance higher than our assumptions. SG&A costs as a whole are expected to reach JPY 642 billion, up by JPY 44 billion, mainly due to ForEx impact. U.S. XTANDI co-promotion fees will decrease along with the downward revision of sales forecast in the United States, but we slightly increase on a Japanese yen basis due to ForEx impact. R&D expenditure will increase to JPY 278 billion, up by JPY 24 billion, according to our forecast, we factored in a ForEx impact, an increase in inventories related to commercial production of zolbetuximab for about JPY 6 billion. These factors could reduce the core operating profit, but partly due to positive ForEx impact, we decided to keep JPY 290 billion in our revised forecast. The core operating profit margin is expected to fall by 1.1 percentage points from our initial forecast. This is mainly due to an increase in cost of sales ratio as well as a one-off factor, an increase in R&D expenses from an increase in inventories related to commercial production of zolbetuximab. Full basis forecast remains unchanged as there is no particular event beyond our expectations. Page 10. Here's a description of our initiatives for sustainable growth. On Page 11, we discussed the progress of key events expected in FY 2022 for XTANDI and our strategic products. Because the onset of events are happening later than originally anticipated, the expected timing of obtaining top line results from the EMBARK study has been moved to the fourth quarter. Accordingly, we expect filing in the following fiscal year or later. Regarding PADCEV. Based on the positive efficacy results of the EV-103 study, including Cohort K, we discussed with the FDA and submitted sBLA in October for an additional indication of first-line locally advanced or metastatic urothelial cancer who are cisplatin ineligible. In addition, we obtained positive results from a bridging study in China in treated metastatic urothelial cancer. The application for fezolinetant was accepted for review in the U.S. in August, and the FDA has set the PDUFA target date, February 22 next year. The filing in Europe for fezolinetant was also accepted in September. Other updates include the fast track designation granted from the FDA for XTANDI for the treatment of M0 CSPC and zolbetuximab for the treatment of gastric and GEJ adenocarcinoma. We look forward to further accelerating the development of these components and the timing of the duration, until the launch will be shortened. On Page 12, I described the key success factors and development progress for fezolinetant in the U.S. and in Europe where we have submitted filing. It is estimated that there are approximately 10 million patients with moderate to severe VMS who are eligible for fezolinetant in both the U.S. and Europe. In the case of Europe, it's about 30 million. In both markets, we believe it is important to raise awareness of VMS and to promote fezolinetant nonhormonal properties, but there are differences in the market environment. Based on the market research conducted by ourselves, we recognize that in the U.S. it is relatively easy for patients to communicate their intention for prescribed drugs to their physicians and therefore, educating VMS patients to seek treatment with nonhormonal agents is an important initiative. In Europe, on the other hand, the first important approach is to make sure that the patients recognize VMS as a treatable disease and actively go to their doctors for consultation. In terms of pricing and reimbursement in the U.S. with the pharmaceutical companies can have the right to set the price, it is important to create an environment in which patients have optimal access to new nonhormonal products through private insurance. Whereas in Europe where governments are involved in setting prices, the key to success is to obtain a reimbursement with the price that reflect the product value in each country. And the progress in development relating to reimbursement in Europe, the patient enrollment in the Phase IIIb DAYLIGHT study was completed faster than planned. .
For the SKYLIGHT study, which was conducted for submission in the U.S. and Europe and the late-stage Phase II SKYLIGHT study being conducted in Japan, both were also completed enrollment earlier than planned, indicating that both health care professionals and patients participating in these clinical trials are highly interested in nonhormonal treatment of VMS. On Page 13, I would like to explain about the progress made in the Focus Area approach. The progress during the quarter is shown in red. In immuno-oncology primary focus, ASP2074 is scheduled to enter Phase I trials in January and March, further bispecific immune cell engager. The details of the target molecule are not disclosed at this time, but it will be disclosed at an appropriate time in the future. This is the second project into clinical trials in the Focus Area approach using the bispecific antibody. And we intend to continue to create subsequent projects based on the concept of the Focus Area approach. In cell therapy program, the screening of ASP7317 clinical study was restarted in August. In ASP0367, our mitochondria primary focus, additional screening activity was discontinued in the Phase Ib study in DMD. The reason for this decision was not the safety issues were observed, but it was more difficult than expected to enroll patients in the study and to obtain sufficient data for analysis, even if the study continued as it is. We will consider the future development strategy in DMD after analyzing the available data. We are going to let you know about the things will happen afterwards. ASP8731 received orphan drug designation from the FDA for the treatment of sickle cell disease in September. In addition, we have selected targeted protein degradation, which had been a primary focus candidate as our fifth primary focus. The details will be explained in the following slides on Page 15 or afterwards. Targets that are difficult to approach with ordinary compounds are called as undruggable targets. In this primary focus, we approach undruggable targets by utilizing the ubiquitin-proteasome system and intrinsic proteolytic mechanism as an approach. As you see on the right picture, the new modality consisting of 3 moieties, one that binds to the target protein and one that induces degradation and a linker that bridges them together was created to establish series of technology platform. We believe now we can continuously generate promising assets from the technology platform and we will proactively invest the resources to the primary focus to continuously create programs in oncology and extend it into non-oncology field as our primary focus. Next, I talk about the advantages of this technology. The first characteristic is that it can be applied for wider targets. It has a strong binding to the target for the direct inhibition. That is not what this mechanism has, it is serving as the catalyst to promote the degradation of the target. Therefore, it does not require high binding affinity like conventional modalities and is expected to be effective against target proteins that now have a structure suitable for compound binding such as [ share ] pockets. Second, because of its physical properties as a low molecular weight, it can be administered systemically, including orally and conventional established methods and knowledge can be applied to its manufacturing process and regulatory compliance matters. Next, I will explain the applicability and expandability of this technology. On the right picture, the left part of the figure binds to the target protein. And by replacing this part, the technology can be applied to a wide variety of targets. The right side binds to E3 ligase and is involved in inducing degradation. By modifying this site or the structure of the linker, we can aim to enhance the efficacy and tissue specificity of degradation. We believe that this new modality could be an innovative therapeutic tool, and we aim to create a program continuously to address previously undruggable target proteins by converting targets or further improving function. Page 15. Here, I will explain the details of ASP3082, the lead program for the targeted protein degradation as a supplement to the previous financial results presentation. As shown in the figure on the right, ASP3082 has the mechanism to bring the target protein KRAS G12D mutant and E3 ligase into close proximity and the E3 ligase ubiquitinates the KRAS G12D mutant. The ubiquitination of the KRAS G12D mutant makes it more easily recognized by proteasomes, which are enzymes that selectively degrade proteins and proteasome degrade the KRAS G12D mutant. Thus by degradating KRAS, a major factor in cancer cell proliferation, it is expected to have an inhibitory effect on cancer cells. The KRAS mutation, the target of ASP3082 is widely known to be involved in cancer development, but because of the lack of suitable pockets and sites for compound binding, it is regarded as an undruggable target, making it difficult to develop inhibitors. Among the many mutations, the G12D mutations occurs most frequently and occur reportedly in more than 51,000 new cancer cases per year in the United States. A small molecule inhibitor for the G12C mutant, another type of mutation is already on the market. G12C mutation has highly reactive sites called cysteine residues. And with the tight binding to this side, it is believed to inhibit KRAS function. On the other hand, in the case of 12D mutant which does not have such a site, it is believed to be difficult to create compounds that bind tightly here. ASP3082 is expected to be an innovative therapeutic approach to inhibit the function of KRAS G12D mutants as a protein degrader. In order to further deepen your understanding of this primary focus, we are planning to hold an R&D meeting on December 9, where our representative will provide a comprehensive explanation. We look forward to your participation. Page 16. I would like to explain strategic investment with Taysha announced the other day. Under the terms of the agreement, Astellas will invest a total of $50 million to acquire 15% of the outstanding common stock of Taysha, 1 Board observer seat on Taysha’s Board of Directors, an exclusive option to obtain exclusive license for 2 of Taysha programs as well as certain rights related to any potential change of control of Taysha. Taysha possesses multiple gene therapy programs in CNS. It uses AAV9, a clinically proven vector and intrathecal administration is adopted as a route of administration to improve the balance between efficacy and systemic exposure. This investment gives us the potential to expand our pipeline in CNS genetic diseases in addition to our existing muscle-related diseases. In addition, Astellas' new manufacturing facility in Sanford, North Carolina is capable of manufacturing AAV9. This service manufacturing technology is a major effect that led us to this mutually complementary partnership with Taysha's promising pipeline. On the right side of the slide, I will describe the 2 programs that are the subject of this exclusive licenses. TSHA-102 targets Rett syndrome, which is a severe genetic neurodevelopmental disorder, happening mostly in females, and it replaces mutated MECP2 gene. Currently, it is on the stage of Phase I/II clinical trials with a preliminary clinical data from adult study expected in the first half of 2023. The timing for exercising the option will be after receipt of the preliminary clinical data from the pediatric study, which will be initiated following the report of preliminary adult data. TSHA-120 targets, GAN or giant axonal neuropathy, which is an ultra-rare progressive neurodegenerative disease and it is designed to replace the mutated gigaxonin gene. Currently, Phase II trials have been completed and a positive data have been obtained in terms of motor function improvement and safety. A Type B meeting with the FDA based on the study will be held in December of this year. And the minutes of the meeting are scheduled to be received in January 2023, based on which we will consider exercising our option rights. While we continue to actively consider partnering by leveraging our capabilities to accelerate the development of gene therapy and expand the pipeline. Page 17. This summarizes the progress made in the first half of the current fiscal year toward achieving CSP2021. In extend, left above, sales in the U.S. is below full a forecast -- our initial forecast, but were offset by strong sales in Europe and Japan and progress was in line with the initial forecast. PADCEV showed better-than-expected growth globally, and sBLA was submitted for the first-line metastatic urothelial cancer, an important growth driver for us. For fezolinetant, we achieved an important milestone with acceptance of regulatory submissions in the U.S. and Europe. And the focus there approach left bottom, in addition to the development of individual projects, activities to further expand the pipeline such as the launch of new primary focus and strategic investment progressed. In terms of core OP, right upper, we continue to thoroughly review costs, while securing a proactive investments for new product launches. And SG&A expenses, excluding the impact of exchange rate fluctuations, decreased year-on-year. In the Rx+ program, which was not discussed today, we have initiated a Phase II study of ASP5354 for lymph node mapping prior to cancer resection surgery with the aim of expanding the indication. In terms of sustainability, we have released the Integrated Report 2022. The report presents in an easy-to-understand manner our medium- to long-term goals or the way we would like to be as well as the initiatives and progress for the goals. If you have not yet read the report, please take a look at it and feel free to contact our IR group with your comments and your requests so that we can make improvements in the coming fiscal year and beyond. Page 18, this is the last slide for today. Here's a schedule of upcoming events. The R&D meeting will be held on December 9, as has been mentioned. Sustainability meeting will be held on February 17. I hope you will join us. That is all I have to say here today. Thank you so much for your attention.
That's all about the presentation. Next, we'd like to entertain your questions. [Operator Instructions] Thank you for waiting. First, Citigroup Securities, Mr. Yamaguchi, please. Mr. Yamaguchi from Citigroup Securities, you may be on mute. So please unmute yourself.
Can you hear me now?
Yes, we can now hear you.
Sorry. Yamaguchi speaking. Thank you. Can you hear me now?
Yes.
I have 2 brief questions. First the foreign exchange rate changes, Q1 results last year's figures have not been changed. In the second quarter, you are making a revision -- no changes in Q1, but you're eliminating the impact of the ForEx impact on Q1 and Q2 and you are eliminating all these impact in the second quarter, all at once, correct?
Kikuoka, would like to respond?
If you look at Page 21 in the presentation material, as I showed here, with an auditing firm, RCPA, we discussed. This would not constitute a change in the accounting policy. So as you said, we didn't restate our historical statements. Not really all at once, but in the second quarter in the account settlement for April to September period, we decided to introduce the system. So the first quarter numbers have not been changed.
What is the meaning of this table?
In 2021 fiscal year, well, we can go back if we want. But the impact was not so big in some years.
So if we were to follow this method from the first quarter of last fiscal year, what would be the core operating profit? The red portions are explaining that question. What is the difference compared to the numbers announced already?
That's shown on this page, as you see here, in the second quarter in the current fiscal year. From the 6 months account settlement, if you deduct the first quarter from the April or September period, that is the figure. After the first quarter, the yen continued to depreciate. So JPY 4.5 billion for the fourth quarter, as we said before; JPY 12.8 billion as we announced. JPY 12.8 billion figure is included in the first quarter because you are deducting that figure. The second quarter is plus/minus 0, JPY 77.3 billion, minus JPY 12.8 billion. That figure is the appropriate number -- sorry, rather than JPY 77.3 billion, the higher figure. And by deducting the figure for the first quarter, if you look at the second quarter figure, just appropriately, JPY 77.3 billion is the correct figure for the second quarter. Do you have a clear understanding? Yes.
Next question, fezolinetant. Today, you introduce us key success factors. Country-wise, the situation is well understood. So as an community, while the level of the success in the United States, that is going to be one important key factor to consider the success of this product. But next fiscal year, well, the approval is going to be this February. And after that, you are ready to go. Next fiscal term should be asked in the next fiscal term, but sales-wise, this will contribute. Well, you will make an investment, but the sales will be increased. I think that's your forecast for the preparation. Is this understanding right? And also considering the Western countries, I just wonder if the penetration rate will be higher in the United States compared to Europe.
Thank you for the question. Around the end of the fiscal year, the detailed number is planned to be explained. And still, it's under the review. Therefore, the pricing forecast, that is something we rather refrain ourselves from explaining. And the target in the United States next year is about the mid of 3 digits.
Hundreds of millions. And therefore, I would like to rather refrain talking about the further details. It's the 3-digit million yen of the middle is around JPY 50 billion. That's between [ JPY 100 billion to JPY 1000 billion ], right?
Yes. That's right.
Next, Mr. Kohtani from Nomura Securities.
Kohtani from Nomura Securities. Can you hear me?
Yes.
I have 3 questions. First, a very simple question. Continuously XTANDI Patient Assistance Program and the Zytiga generics product leader is your competitor. In the third quarter, it's growing in the United States. So it seems that competitive products are taking market share away from you. Is that correct? And the diagnosis rate of the prostate cancer is declining. Is that rising now? If nothing has changed as is, according to a forecast, XTANDI in the United States may not grow so much. There's another study which will be coming to an end. But other than that it may not grow as is.
We don't have Matsui today. So Yasukawa, would like to respond?
Zytiga. We are behind Zytiga in terms of the market share because of the rapid inflation and the economic slowdown or recession, not all patients are economically rich. So cheaper Zytiga generics may be the drugs they want. And some patients or more patients are using PAP according to assumptions. So this tendency will continue. Given the current economic conditions, this tendency is expected to continue in our view. On the other hand, competition against the new products, we are not behind according to analysis. Patients who are newly diagnosed, we are looking at various statistics. It's slightly increasing as a trend but it's not returned to pre-COVID-19 levels yet. That's our understanding based on the statistics. COVID-19 is coming to our end. And now there is almost no impact of the pandemic. But in the past 2.5 years, patients who were underdiagnosed, risk factors overlap between COVID-19 and prostate cancer, we cannot calculate the numbers. Some patients unfortunately might have passed away by now. Those who are still alive -- in the COVID-19, it does not mean that they would not develop prostate cancer. And because of the underdiagnosis, they would progress and they would come back to the market. Regarding this return of the patients, how salespeople will approach these patients to gain the business. That's going to be the key. As I said during the presentation already in the United States, close to 10 years the past since the launch in the United States, considering the situation in the U.S. society, untapped market does not remain much for past 2.5 years, there has been underdiagnosed patients, and that may be an untapped market for us.
The second question. This might be the difficult question, but this is extremely important. That is the impact of IRA. The catastrophic phase, the increase of the medical prices, I think that is important. 2025 and afterwards, there is a cap of the price and XTANDI, I don't know, suppose it to close about 100,000 before and after IRA, the increase patient becomes 1.7 to 70, and there is an increase of the payer. And also, there is less PAP necessity, no increase of price, the price also reduced paid by the patient, but the step edit in the prior authorization that leads to an availability of XTANDI in order to prevent that, the rebate has to be increased. If so, for 2025, great level of the rebate is expected. Therefore, the 2026, the FY 2026, there may be the decrease of the revenue of PADCEV and [indiscernible]. All of these products are likely to be impacted with IRA, so with this perspective, how do you see the current situation?
Yasukawa, myself is going to answer this as well. XTANDI and the Myrbetriq is likely to be the target of the price negotiation. That's what we think. And XTANDI in fiscal -- the first year or FY 2026 becomes the target of the price negotiation. Then based upon the current rule, the price is possible to be reduced by around 35%. But the precise criteria is under the development currently. So in rarity, how much it will be, we cannot predict. So this is just based upon our imagination. LOE is 2027, so we do think there will be the long-term impact. But when accurate calculation result becomes available, then I would like to let you know. Regarding mirabegron. When Part D redesigning is done, then the upper limit of the out-of-pocket payment patient becomes $2,000 per year. And currently, those who are using the very expensive drugs and those with no cap for the other pockets, there will be the great reduction of the burden.
And in the case of the designing of Part D, then payment exceeds more than $2,000, then payer -- payment is going to be increased. Therefore, payer might incur with the financial burden. So payer might have the strict control of the cost and prioritize generic. So there are several factors. In the background, we haven't done the accurate calculation yet as well, but Medicare currently, the sales prediction of mirabegron is 65% currently.
What about this? XTANDI '25 and afterwards, you expect the growth considering the catastrophic phase, the lever has to be increased greatly. So FY '25 and afterwards, it is better that you would say there will be no growth expected. Well, as has been explained, the new indication is going to be submitted. And if that is approved, then we have a room for the increase of the sales. But excluding that, then as we mentioned, 2.5 years portion of underdiagnosis, even that is excluded in the United States, we don't see much of the untapped market remains. So the growth room in the United States is quite limited. If the price is reduced there, it is definitely happening that the sales in the United States would be decreased even before the patent matter.
Next on fezolinetant as you say, to a certain extent, penetration will be quite fast, because globally, 10% of the patients are not indicated for hormonal therapy. So there can be early penetration among those patients. But if it's just 10%, it's just around JPY 200 billion. In the remaining 50% of the patients, they have to be careful about for hormonal therapy, BMI 30 or higher or hypertension or dyslipidemia or diabetes. What do you think that the ramp-up in these patients? Are you expecting an increase in 1 step or 2 steps? You go into the initial patient population? And then gradually, it's going to expand. Is that the image you have? This is my last question.
Today, Matsui is absent. I don't know further details about marketing strategies. So when Matsui is attending, we'd like to explain further details.
Next, Credit Suisse, Mr. Sakai, please.
Credit Suisse Securities, Sakai speaking. First question. Zolbetuximab, the commercial inventory, production will be increased. Therefore, you increased R&D costs for this as well. But what is the current status? That is -- well, we have -- are waiting long-term for this matter. But if there's a focus, I would like to know your outlook. That's the first question. Second question, that is about the products. That's about fezolinetant. If you open advisory committee or not, that's what I want to know. The notification will be probably 2 months or 3 months before the actual date. But -- what kind of communication are you having with FDA or no communication?
The first point, let me answer for the first question, and Taniguchi is going to talk about the second. The first question that's about the zolbetuximab. As you know, 2 Phase III studies are ongoing. If you refer to Slide 11, soon, the result is going to be available. For example, fezolinetant 12-month administration, 4 weeks' administration, that is not the case for zolbetuximab. This is an event-driven study. So the accumulation of the event is the key. So we cannot predict the pinpoint to date of the top line result. That's why we have these bars from the late third quarter of this fiscal year to the middle of the next year fourth quarter. So some point around this time, we believe that we can communicate you the result. That's the response to the first question.
The second question is going to be answered by Taniguchi san.
There is a question about the submission status of the fezolinetant in the U.S. With the U.S. FDA day-to-day basis, we have the very close communication. The submitted data is very clear. So the data itself is -- but we have great confidence. So currently, U.S. FDA advisory committee is not expected to be held. So far, things are ongoing in a smooth manner. And after submission, the discussion is going without any problems.
One more additional question. Taysha, your investment with Taysha. Wouldn't is AT132 is still pending. Under these circumstances, adenovirus 8 and Taysha as AAV9, there is some difference there in the use of different AAV. But in this area, your initiatives and your activities in this field. If one is going to be successful, are you going to have consecutive successes, one after another, you may have such a way you're thinking. How should we interpret this adenovirus vectors are used for gene therapies. Your initiatives in gene therapy is very difficult. And you are making additional investments into Taysha. There can be some associated risks you have considered by now. So from where you have decided to make strategic investments in Taysha, including your experiences with Audentes? Could you explain please.
Yasukawa would like to respond first.
It's the same AAV, but systemic administration into the blood and local administration are different things. Ophthalmology and Taysha is using a local administration, intrathecal administration. It's not a systemic administration. So liver side effects would be a lower risk. In that sense, those in the clinical stage, there are 2 programs for us. They are using -- we are using systemic administrations. And what's different from that is a local administration. So continuously, it's the same AAVs, but there's a slightly different risk philosophy in here. From that perspective, we wanted to -- decided to advance the Taysha's programs. Kikuoka would like to add?
As you know, biotech shares, of course, we took that into account because of the situation of biotech shares, and we decided to secure the rights to these 2 programs. We would like to minimize the risks in doing this in our investment. So please take that into consideration as well. In principle, in being opportunistic, we'd like to leverage these opportunities, flexibly and that's why we are doing this. For a listed company, investment in a listed company to secure the development rights uniquely, we had this transaction.
Understood. In the R&D meeting on the 9th of December, you're going to focus on gene therapies to present, correct?
In the R&D meeting, we're going to discuss the targeted protein degradation on the 9th of December.
Morgan Stanley, MUFG Securities, Mr. Muraoka, please.
Morgan Stanley, Muraoka is my name. I haven't really read through the material. So my question might not be really pinpointed but the generics of Lexiscan, Lexiscan number data base. There was no change about their budget, but generic is already on the market or not. And also the precondition of this budgeting this time. What is it? And the budgeting up until last time, I think that is in others. But what about the designing this time? Would you please explain about that?
First of all, let me explain. Well, let me explain about the history of litigation from this May. And after that, Kikuoka is going to explain you about the condition of the budgeting. First of all, in May, the patent infringement litigation with the first instance, our appeal was not approved. So we lost the case. Then in June, the Court of Appeals for the Federal Circuit or CAFC, toward that, we appealed the case. And on top of that, to the district court, which made the first instance or appealed for [ foraminal ] injection, but that was rejected. On the other hand, for the district court, in 2022, up until the 5th of October, the preliminary junction order for the generic launch was given -- granted. And September 27, CAFC issued the temporary stay that refrain themselves for the -- launching the generics at-risk temporarily to Hospira. Then October 28, only recently, CAFC entered an order extending a temporary stay through December 6, 2022. That's the -- what's happened recently. Of course, the situation is still ongoing. But by December 6, there will be no launch of the generics. And December 7th and afterwards, what would happen? Well, the -- this company might launch a generics at-risk. Hospira might launch the generics at-risk. That's the current situation.
Regarding the budget, let me explain about it. Kikuoka speaking. As has been mentioned, when we budget for this fiscal year, like we mentioned, we didn't change the forecast of the sales and the risk and opportunity. Within the overall sales of the revenue, we took this factor into consideration. But just like Yasukawa explained our assumption in the beginning -- of course, the result of this litigation is something that we have to wait. But compared to what we expected in the very beginning, this can be to a certain extent. So compared to the past, the impact on to this fiscal year is smaller than the previous.
I see. So you reduced the portion that was partially included in the others. Is that right?
Yes, that's about it.
Understood. One more question. [indiscernible] Sorry to ask a question again. Next fiscal year, you're expecting sales between JPY 10 billion to JPY 100 billion, profit contribution by [indiscernible], we don't think there's going to be a contribution in the initial year. But can it contribute to profit in the second year or the third year and beyond, what should be the image we should have?
Kikuoka, would you like to respond?
As Yasukawa explained, as for the timing, it's difficult to communicate the details of the marketing strategy. But as for the numerical image on the sales side, we are discussing right now. From that perspective, that is going to be the basis. Then from the first year, contribution to profit is insight in developing the budget for the next fiscal year.
So is it going to be work positively for the profit from the initial year? Is that within your scope or insight?
Yes. Expenses in the next fiscal year, mirabegron costs are being reduced for legacy products. But at the same time, in the first year, it's going to contribute to profit positively, mirabegron and other products. These are legacy products, and we will try to reduce the cost for those products. But per brand, we have PL for each brand. We're looking at from that perspective. In the current fiscal year, the expense -- compared to the expenses used for education activities, based on the expected launch. Sales promotion costs will increase even -- with that, profit contribution by an individual product could be a possibility. So we are discussing based on that.
Understood. Sorry to ask again, but partnering is insight. That's why you are thinking that there's going to be a contribution from the initial year?
No. No, that's not our assumption.
Next, Daiwa Securities, Mr. Hashiguchi, please.
Hashiguchi speaking. Thank you very much. Fezolinetant, you have the forecast and based upon that, next fiscal year, R&D in total, what's your outlook? In these 5 years, [indiscernible] is set as a flat. Absolute value is maintained in your plan. In the previous fiscal year, there's a bit of the increase, but this time excluding the foreign currency impact, you are trying to bring it back to the 2 fiscal years before level. But you explain us the focus of the sales considering that for mid- to long-term, you can spend a lot of R&D and still that is reasonable from a strategic perspective. So what do you think about the possibility of that inflate a little bit tentatively?
That's about the next fiscal year. So we are still working on that currently. But basically fezolinetant, considering that is going to be approved within this fiscal year, the big landmark like development is completed. So considering the allocation of the investment for the strategic products, so far, we are not expecting the large amount of investment will be made as R&D.
Hashiguchi, you're asking the SG&A or R&D?
SG&A.
So sorry, it's about SG&A. I misunderstood. As for SG&A, the strategy is similar with this fiscal year and also for the products that we mentioned, as has been mentioned already, we are going to make a proactive investment. However, even that take into consideration -- taken into consideration, the factors of the currency, that is something we have to consider based upon the initial assumption. We do not think that there will be the bigger impact out of that. But November and afterwards, we are going to work harder for the budgeting for next fiscal year. We need to communicate with the -- our sales team as well, so that we can have a discussion for another opportunity of the revenue. If we can grow in certain area, then we'll make a certain investment. Here, I cannot tell you any detailed number, but anyhow, there is no change about the policy of continuing the SG&A flattened level as now. Sorry, I misunderstood about R&D.
I see. It's okay. But for SGA for 5 years. Well, so far, there was no change about the flattening it, right?
That is the current policy. And as has been explained repeatedly, we've done the proactive investment. We have to get the result out of that. So now what we can do is the selection and consideration. So we concentrate the investment so that we can be efficient.
Next. Goldman Sachs Securities, Mr. Ueda, please.
Ueda from Goldman Sachs Securities. Initially, I'd like to ask you about PADCEV. In the United States, if you look at the quarterly figures, the second quarter figures look weak. But as Dr. Yasukawa mentioned, because of the coverage already for the second round, already if there is any information about the inventory. Could you explain the first slide data disclosure and any assessment in the clinical setting or any change in how they use the drug?
In the United States, it's $105 million. Before we showed you a long-term diagram, first line treatment. -- and noninvasive will be boosters for the future.
Then we would have the second rocket to be launched. Recently, at academic societies, we are disclosing the data. What has been the reaction. Can you give some any information you may have?
As you know, at ESMO, 103 study cohort K was presented. There was a very good response. There cisplatin ineligible or intolerant, you see patients -- was 64.5%, which is very high response. So there are high expectations about this data. With this, we would use this data to file a submission first in the United States. We did file the submissions. In our discussions with doctors, there are higher expectations about this drug among the physicians.
Understood. Second question, that's about fezolinetant line extension and expansion of the indication [indiscernible] -- cohort FLASH is working for the expansion of the indication for cohort FLASH for the breast cancer patients. So Astellas as well. you thinking about the expansion of the indication beyond the VMS hot flash. This 10 receptor inhibitor, as 1 thing and fezolinetant NK3 receptor inhibition. So when you think about these 2 types of the inhibition, what will be the difference?
The first question, Taniguchi, could you answer the first question?
The breast cancer indication is probably a question. Of course, as well have has -- we also have a knowledge about the development situation in other companies. So as, as well.
Could you mute your microphone?
Well, regarding the second question, what would the difference when 1 thing is another -- 1 thing different is tapped on, what kind of difference would have happened so far? We don't have any doubt information. So I would rather not answer.
The first question, Mr. Ueda. We don't have Matsui here. So I would like to add. First quarter and second quarter, difference for PADCEV. First quarter, temporary clinical order sales for [ 10 million ] was included in the first quarter. If you deduct this from the first quarter to the second quarter, you can see good growth. So that's something I wanted to add on behalf of the IR team.
Then JPMorgan, Mr. Wakao, please.
Wakao from JPMorgan. First, XTANDI. Explain the details, sorry to ask again, in the United States, those who are not diagnosed may contribute positively. On the other hand, if you look at the number of prescriptions, Zytiga generics are growing, XTANDI growth is slowing or becoming flat. Considering the situation, the [indiscernible] diagnosis may increase, but XTANDI may not necessarily benefit from that, as I felt. So could you elaborate on this? In the United States, you already explained the situation. But what about Europe? A similar thing must be included in your assumptions for Europe, like the U.S. Zytiga generics already launched in the European regions as well. So what is the impact? That's my first question.
Patients with underdiagnosis, we don't know and we cannot investigate the details of the economic conditions of the underdiagnosed patients. Patients who are not economically in good conditions may be diagnosed. When their disease is already progressing, it might be discovered, at the time they may go to cheaper generics. There is such a possibility. So patients would return, may not necessarily receive the prescription for XTANDI. But still, we'd like to continue appropriate education activities. Then for patients who would best fit for XTANDI prescription, we would like to deliver the prescription and drug to them. There is appropriate activities. Underdiagnosis is continuing in the United States and economic conditions right now would intensify the competition against generics right now. Similar signs, not only in Europe, but in other regions globally, for the -- in the quarterly meeting. I asked this question to salespeople. At such a meeting, there are no clear signs according to their reply. For the time being, we don't have clear signs but continuously we'd like to pay attention and watch it carefully.
Second, the last question of fezolinetant. Today in the meeting, I got a very good understanding and I understand status of the potential patients. But as a draft version is currently available. And if I refer to that, regarding the safety with the long-term usage, there might be the risk of regarding safety, especially for those over 60 years old, the risk might go up. So the risk just you explained is not covered by the [ ASA ] draft version. So I feel a bit of the gap existing here. How do you view? Well, it's [ ASA ]. So that's about for the reduction of the cost. Therefore, the way of the description might be quite conservative. But what's your opinion about [indiscernible] draft version.
[Interpreted] I am Ikeda speaking. Regarding [ ASA], well, that is independent or reported by themselves. So we don't have any clear stance, position for their view. So we couldn't answer you some clear answer.
I see. So you do your own analysis study, right?
So for the safety, we have a SKYLIGHT 4 result is available with the comparison to placebo and the safety requested by the authority is secured to a certain extent or great extent. So that is our position.
Next, Jefferies Securities, Mr. Barker, please. You may be on mute. Please unmute yourself.
Stephen Barker from Jefferies Securities. Fezolinetant sales in the initial year is my question. As you said, JPY 10 billion, somewhere between JPY 10 billion to JPY 100 billion could be achieved. But -- could you be more specific regarding this number?
Thank you for your question. What I mentioned earlier is 3-digit -- the middle of the 3-digit oku yen. It's not like you can do away with JPY 10 billion or JPY 99 billion, but somewhere in the middle in that range.
From the media, we have received a question, Nikkei Biotech, Ms. Kubota, please.
Can you hear me?
Yes.
Two questions about gene therapy that you touched upon at the very end. Any explanation AAV can be also produced in your new production site in the U.S. So Taysha, well, this production capability of GMP production of AAV is something looked for by Taysha and you have it. That's why you came to this investment or your production capacity may be also made use of through this investment as well.
Thank you for the question. Taysha. Well, our GMP production sites in Sanford, that is where also Taysha is having the great interest. That's why that's one of the reasons why we are selected. So the investigational product and also the production site, those -- what the Taysha do not have -- does not have. Probably, they are outsourcing for such process. However, for the commercial production, if that approach will be continued or their partnership with us so that we ourselves can produce the products. I think that's what currently they are thinking.
One more question about this investment partnership. To control the overexpression of the transgene, they have the technology program. Is there any possibility of using this for your systemic administration programs of Astellas, you're talking about the TSHA-120 is using the miRARE platform to control the overexpression of the genes. And ACP2 gene is half. You'd like to regain one. There are duplications of the gene in other diseases. It should not be 2. So there should be a feedback mechanism to make it always one. Such a mechanism is entailed. Similarly, if there is a need of a similar thing in the genetic diseases, a similar technology might be required.
Next will be the last question. Tokyo Tokai Research Center (sic) [ Tokai Tokyo Research Institute ], Mr. Akahane, please.
Can you hear me? I'm Akahane. First question, that's about the business in China. Greater China sales that is on the progress smoothly, 36% increase and that there is an increase in the plan as well. But 80% is Prograf that is contributing to the increase. But as you know, in China, there's an issue of the COVID-19 and also their own program for the purchasing. And there's the case that only the rich people can get the benefit of the [indiscernible]. But overall, how do you view the Chinese business?
Thank you. Yasukawa is going to explain first of all, and Kikuoka will make a supplement comment if necessary.
It's been more than 30 years since we started business in China. For a longer time, Prograf and tamsulosin dependent business is what we've been doing there. But of course, relying on only these 2 products will not make us to further expansion, rather shrink, especially tamsulosin, there is no future expansion program might be survived for a certain period of time. So that's one thing the percent in mid-2010 and afterwards, the known -- foreign companies for China, meaning us, and towards them, they opened the door. That's a big change of their policy. And also their economy is enriched currently and also iPhone and such communication measures, although there is still certain restriction, but they can get the information about the treatment taking place in overseas. So in Western countries and Japan, the treatment available, that market is not available in the Chinese market. If that is lined by the national public, that's going to be the risk for the communist regime. So in China is now approved. But as long as it is a superior product, they are going to grant approval immediately. That's what we've been looking at the China. Therefore, we enhanced the development group in China. So XOSPATA XTANDI -- XTANDI, we have been doing even before this. It took time. But XOSPATA and afterwards, in the Western advanced countries, they we are trying to shorten the interval so that we can launch the kind of products in Chinese market soon. So XOSPATA parts as well, we have the averaging study for China that made a success zolbetuximab, that is for gastric cancer, Southeast Asian countries, the gastric cancer [ prevalence ] is really high. So we are aiming at the development even from the beginning in China. So Prograf, tamsulosin, such conventional drugs are going to be replaced, especially with the area of oncology.
May add. Regarding Prograf, you ask a question. So let me add. As you said, Greater China is growing a little less than JPY 6 billion, we have Prograf in China. At the end of FY '21, due to COVID-19 Shanghai factory, we were shut down. The market inventory was depleting. And because of the resumption, the shipment increase, there were some special factor behind. Please that into consideration as well.
Understood. And last question. Sorry to ask again, but fezolinetant, on Page 12, in U.S. and Europe, the expression is slightly different in prescription to patients. Hot flash. There is an ethnic difference and also whether to see this as a disease or not, there may be some cultural differences in the market. My point is that in expanding this, there may be a lot of costs required for education activities. In China, it was not so successful, but how do we -- should I see this for the future in China?
Today, we don't have Matsui. Today in Europe, the -- how much patients are aware of this, we cannot give you a concrete explanation today. So we'd like to do this next time to explain by Matsui or from Corporate Communications. In China -- as you know, China, Korea and Taiwan, we had a study there and endpoint set for the study were not met. In China, 30 milligram -- we had a study up to 30 milligram in China, the 45-milligram is submitted in Europe and the United States only. So using the data from Western countries, we cannot file our submissions using that data only. According to that judgment, the team is now considering the next program. Once we have further discussions and are ready to announce the next plan, we'd like to explain the details to you. Time is up. So with this, we'd like to close today's explanatory meeting here. Thank you very much for your attendance today.
Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]