Astellas Pharma Inc

TSE:4503

Q3-2025 Earnings Call

[Hiromitsu "Hiro" Ikeda, executive]

Thank you very much for your attendance on to this Q3 Y-to-D FY '24 Financial Results Announcement Meeting. I'm going to serve as a moderator. I'm from -- I'm Communication -- Chief Communications and IR Officer, Ikeda.

We make the presentation first, and after that, we'll have a Q&A session. The presentation is given based upon the presentation material posted on our website, including our Q&A.

The simultaneous translation for both Japanese and English are provided. For the simultaneous translation, the accuracy cannot be guaranteed by us, the company. You can select the language from Zoom webinar screen menu. If you select the original language, then you can hear the original sounds without the interpreter's voices.

This is some disclaimer. This material or presentation by representatives for the company and answers and statement 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 to management 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. This information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations.

Now let me introduce you the participants here: the Atsushi Kitamura, CFO, Chief Financial Officer; Yoshitsugu Shitaka, our Chief Scientific Officer; Tadaaki Taniguchi, Chief Medical Officer; Claus Zieler, Chief Commercial Officer. We have these 4 representatives here.

Now, Kitamura-san, please start the presentation

[Atsushi Kitamura, executive]

Hello, everyone. I am Atsushi Kitamura from Astellas Pharma Inc. Thank you very much for joining our FY 2024 third quarter year-to-date financial results announcement meeting out of your very busy schedule today.

This is a cautionary statement regarding forward looking information. As this was explained by Ikeda earlier, I'm not going to read this page.

Page 3 is the agenda for today. Starting from the next page, I will explain these topics in this order. On Page 4, I will give you highlights of FY 2024 third quarter year-to-date financial results.

Revenue increased substantially year-on-year by 22%. Sales of Strategic Brands as a whole expanded to over JPY 240 billion in total, with growth of about JPY 140 billion year-on-year.

As for SG&A expenses, excluding U.S. XTANDI co-promotion fees, SG&A ratio improved by 4 percentage points year-on-year, driven by robust growth progress of sustainable margin transformation or SMT initiatives to pursue company-wide cost optimization.

Core operating profit increased significantly year-on-year by 44%, driven by the growth of XTANDI and Strategic Brands as well as the contribution of SMT cost optimization.

As was announced in the press release on the 24th of January, we made an upward revision of our full year forecast for revenue by JPY 100 billion and core operating profit by JPY 70 billion based on robust core business progress. I will explain the details of our revised forecast on Page 9.

On Page 5, I will explain FY 2024 third quarter year-to-date financial results. Revenue reached JPY 1.453 trillion, up by 22% year-on-year. Core operating profit rose to JPY 297.5 billion, up by 44% year-on-year.

The bottom half of this page shows our full basis results. In the right bottom of the table, we included other expenses booked in the third quarter. We booked JPY 180.5 billion as impairment losses on intangible assets for IZERVAY ex-U.S., AT466, iota, et cetera.

As for impairment losses for IZERVAY ex-U.S., we reevaluated based on our decision to withdraw regulatory application in Europe. Based on our discussions with CHMP by now and the competitive situation, we conducted a reassessment from various perspectives such as target countries for filing a submission, the probability of approval and time lines.

We have conducted a review of the asset value based on a conservative scenario. As a result, we booked an impairment loss of JPY 115.1 billion. I will explain the details of the latest status of regulatory activities outside of the United States on Page 12.

AT466 is a gene therapy program for myotonic dystrophy. In R&D, we optimize technology to be utilized, so there is a possibility that we can create highly effective therapeutic candidates. But the development time line and the competitive environment have changed from our initial assumptions. Based on these circumstances, we have conducted a review of the asset value. As a result, we booked an impairment loss of JPY 51.8 billion.

Regarding iota, we examined the project related to its implantable medical devices. As a result, we booked an impairment loss of JPY 8 billion on intangible assets of the projects that we decided to terminate. As a result, operating profit was minus JPY 22.5 billion.

On Page 6, I will explain FY 2024 third quarter year-to-date results for XTANDI and Strategic Brands. First, about XTANDI. Global sales increased to JPY 703.1 billion, up by JPY 143.1 billion or 26% year-on-year. In the United States, M0 CSPC performance and its ripple effects on other indications exceeded expectations, while sales in other regions expanded as expected.

Reflecting the overperformance in the United States, we revised our full year forecast once again following the revision in the second quarter. In line with our guidance from before, we are factoring in the anticipated negative impact from U.S. IRA Medicare Part D redesign in the fourth quarter forecast without major changes in our assumptions.

The impact from Medicare Part D redesign is expected to continue also in FY 2025. We will internally assess the specific level of impact based on the fourth quarter situation. Next time when we announce FY 2024 full year results, we will provide our guidance of FY 2025 outlook, so please wait till then.

Sales of Strategic Brands supporting our future growth, XTANDI, PADCEV, IZERVAY, VEOZAH, VYLOY and XOSPATA expanded to over JPY 240 billion in total with a growth of nearly JPY 140 billion year-on-year. Furthermore, the profit margin of these Strategic Brands is also high, substantially contributing to sales and also to the overall profit growth. We believe that we are fully on track to achieve our full year forecast of over JPY 340 billion, building confidence towards FY 2025 target of JPY 500 billion.

Let me explain individual Strategic Brands as well. I will explain the details of PADCEV, IZERVAY and VYLOY on the next page. Global sales of PADCEV increased to JPY 117 billion, up by JPY 61.4 billion or 110% year-on-year, growing more than twofold.

IZERVAY was launched in the United States less than 1.5 years ago, but its sales expanded to JPY 44.4 billion. Global sales of VEOZAH reached JPY 24.4 billion, making a steady growth. We are continuing to identify initiatives with a focus on ROI and working on them with priority. We're expecting a linear sales growth going forward as well.

As for VYLOY, since its launch in Japan in June last year, the number of launched countries has steadily increased and its global sales reached JPY 4.9 billion. Regarding XOSPATA, global sales increased to JPY 53.1 billion, up by JPY 11.8 billion or 29% year-on-year. Sales expanded in all launched regions. We're expecting continued moderate growth going forward as well.

On Page 7, I will explain business update for PADCEV, IZERVAY and VYLOY.

First, about PADCEV. Ex-U.S. regions such as Japan and Europe grew strongly in line with our full year forecast that we revised upward when we announced our second quarter year-to-date results, driving strong quarterly global growth.

First-line mUC indication is demonstrating an extremely strong uptake. We are hoping this will serve as a growth driver to increase our future sales.

Regional expansion of the first-line mUC indication is making steady progress. The number of countries with approval increased to 16 in total, up by 5 from the second quarter. We're expecting further increase in countries with approval and reimbursement initiation.

In the United States, first-line mUC share continues to be at a high level with both new patient start and market share approaching 55%. On the other hand, market share expansion is slightly lower than our initial assumptions, so we revisited our full year forecast.

Based on the recent progress status, we reviewed market share and growth rate assumptions and made a slightly downward adjustment. Having said so, volume is increasing steadily, and there is no change in our outlook for continued moderate growth trend going forward.

As we mentioned when we announced our second quarter year-to-date results, going forward, we're expecting overall sales growth to be driven by ex-U.S. performance and anticipating continued solid global growth as a whole. We have high expectations on PADCEV as an important growth driver also in FY 2025.

Furthermore, the next potential growth opportunity is the additional indication of MIBC, muscle-invasive bladder cancer. There is no change in our outlook to obtain top line results within FY 2025. After approval, we are hoping that it will boost sales growth for PADCEV.

Next, about IZERVAY. The third quarter sales were affected by temporary impact from unexpected CRL, Complete Response Letter, for label update submission and changes in inventory levels. These became factors to temporarily slow down our sales growth.

We have heard that for patients who have reached 12 months of treatment, many retina specialists are pausing treatment with IZERVAY, which affected our sales. However, for patients whose treatment was paused, we rarely heard of switching to a competitive drug.

Once the label update is approved, we assume that retina specialists will quickly resume treatment of patients whose treatment was paused, so we believe the impact is going to be temporary.

Sales slowed down due to temporary factors, but in the third quarter, which was even before label update, high level share was still maintained. IZERVAY continued to be the #1 treatment option chosen for new patient start. New patient start share is estimated at 60% from October to November last year with 40% market share.

Over 210,000 vials have been shipped since launch and the number of vials is increasing steadily every quarter. Increase in the number of our new retina accounts is also accelerating. The number of retina accounts where IZERVAY is available has increased from 1,300 as of the end of September to about 1,800. Nearly 1.5 years have passed already since launch, but post-marketing safety profile remains consistent with clinical trial results, which is highly valuated by physicians.

In addition, the DTC campaign is also progressing steadily. We have obtained analysis results showing high engagement by patients with GA, geographic atrophy. I'm not going into details today as this is still early data. Once we have more mature results, we will share that with you. We have high expectations that the DTC campaign will motivate new patients to seek treatment earlier and further expand the GA market going forward.

We received unexpected CRL, Complete Response Letter, but then we proceeded with resubmission process rapidly. Our label updates resubmission was accepted by the FDA in January and PDUFA date was set for the 26th of February.

As I mentioned earlier, treatment was paused for many patients who reached 12 months of treatment. Many, including patients and retina specialists, are long awaiting label update. We are hoping that after approval, retina specialists will resume treating patients whose treatment was paused.

Combined with the market expansion, thanks to the DTC campaign, we're expecting more accelerated growth trajectory after label update approval. So we have not changed our full year forecast in local currency basis. We will be entering a robust growth phase from now and are expecting strong sales growth in FY 2025.

Last but not the least, about VYLOY. Starting with the launch in Japan in June last year, regional expansion is making extremely good progress. The number of approved countries has increased to 38 and VYLOY is launched in 9 countries. Main progress includes launch in the United States in October and in Germany in November last year and approval in China in December.

Uptake exceeded expectations in all launched regions, primarily driven by Japan and U.S. performance. Higher-than-expected rate of Claudin 18.2 testing was the main factor behind.

Despite the recent launch, VYLOY is already listed as preferred recommendation in many treatment guidelines. For example, many doctors in the United States refer to NCCN guidelines when they determine prescriptions. And there, VYLOY is listed as Category 1, which is the highest level of recommendation. Also in Japan's gastric cancer treatment guideline, VYLOY is recommended as preferred treatment.

Overall, VYLOY is performing well, so we reflected the higher-than-expected progress in each region, driven by Japan and the United States and nearly doubled our full year forecast. In FY 2025, we're expecting further growth in Japan, the United States and Europe as well as sales contribution from China with a big market. We are expecting substantial sales growth of VYLOY as one of the key growth drivers.

On Page 8 I will explain SG&A and R&D expenses. SG&A expenses increased to 7.7% year-on-year when U.S. XTANDI co-promotion fee is excluded and 2.8% when the foreign exchange impact is excluded. The SG&A ratio was 29.7% point, a 4 percentage point improvement year-on-year.

As for the result of progress in cost optimization through SMT, SG&A expenses decreased about JPY 12 billion year-on-year through the progress of global organization restructuring. Sales promotion expenses related to mature products decreased about JPY 8 billion year-on-year. In addition, company-wide efficiency is achieved through the use of digital and AI and it leads to JPY 4 billion reduction year-on-year. The generated resources are reinvested to maximize the potential of Strategic Brands.

R&D expenses increased 16.2% year-on-year or 11.7%, excluding the impact of ForEx rates. The major reasons of this increase are the investments for Primary Focus, life cycle management of Strategic Brands and enhanced R&D functions and about JPY 16 billion is increased year-on-year. Onetime co-development cost payments booked in the first quarter also contributed to the increase.

One of the initiatives at SMT is to reduce outsourcing costs by strengthening in-house capabilities, and it is making steady progress.

Each initiatives in company-wide SMT is making robust progress toward the FY '24 target of JPY 40 billion in cost optimization, and we will continue to control costs with discipline.

On Page 9, I will explain the revised forecast for FY '24. In addition to XTANDI and Strategic Brands, we have also reviewed other products and cost items to ensure that we have the most probable forecast at this time.

First, we have revised our full year forecast for foreign exchange rates to JPY 153 to the dollar and JPY 164 to the euro. For the fourth quarter, we assume exchange rates of JPY 155 to the dollar and JPY 163 to the euro.

The revenue is estimated to be JPY 1,900 billion, an upward revision of JPY 100 billion from the previous forecast. This mainly reflects an increase of about JPY 45 billion XTANDI due to JPY 30 billion of the impact of foreign exchange.

SG&A expenses, excluding the U.S. XTANDI co-promotion fee are expected to be JPY 590 billion, incorporating the robust progress of SMT. As a result, the SG&A ratio is expected to decrease 1.9% points from the previous forecast.

R&D expenses are expected to be JPY 340 billion, which is not significant change from the previous forecast as R&D expenses are being used as planned. As a result, we revised the core operating profit upward to JPY 370 billion.

A full base of OP incorporates the impairment loss of about JPY 180 billion recorded in the third quarter as other expenses. On the other hand, we have released impairment loss risk and other expenses of JPY 60 billion, which have been incorporated in the initial forecast. And we now expect a final figure of JPY 11 billion.

Now I'm going to explain the initiatives for sustainable growth. On Page 11, we provide an overview of the progress of key events expected in FY '24 for XTANDI and Strategic Brands. Progress since the last financial announcement is indicated in blue.

PADCEV was approved in China in January for the additional indication of first-line treatment of mUC based on the EV-302 study.

VYLOY was approved in China in December for the treatment of patients with locally advanced or metastatic gastric and GEJ adenocarcinoma last December. In the Phase II trial for pancreatic adenocarcinoma, a protocol interim analysis was conducted by an Independent Data Monitoring Committee.

As a result, it was recommended to continue the study until the final analysis and to conduct a more comprehensive evaluation by increasing the number of events to be analyzed. The final analysis results are currently expected to be available in late FY '25.

IZERVAY will be explained on the next slide. Slide 12 provides the latest status of the IZERVAY global regulatory activities. In the U.S., as explained earlier on Page 7, the revised sNDA for label update was accepted and a PDUFA date is set as February 26.

In the EU, we have just started discussions with the regulatory authorities in major countries. We will consider the way of submission in the EU after the discussions with regulatory authorities are completed. At this point, we will refrain from providing individual updates on the status of discussions, but we will provide a further explanation once we decide the strategy.

In Japan, we plan to make an NDA submission for conditional approval in February based on the results of the GATHER study and other overseas clinical trials. We are also working on the regulatory applications in other regions to bring IZERVAY to the world.

To date, we have completed regulatory applications in 9 countries, including the U.K., Canada and Australia and additional submissions are planned. We will update this appropriately when there is progress.

On Page 13, I will explain the progress of the Focus Area approach. The updates of programs in the clinical trial phase since the last financial results announcement are indicated blue.

We have decided to terminate ASP2802 in immuno-oncology and ASP2016 in genetic regulation. As noted at the bottom of this slide, we have also decided to dissolve the Primary Focus Candidate, immune homeostasis. The background to this is explained on the next slide.

The 4 flagship programs for each Primary Focus marked with the star are progressing according to plan toward the POC judgment by the end of FY '25. We will provide an update when there is a significant progress.

On Page 14, I will explain our approach to the improvement of R&D productivity. In order to achieve sustainable growth for Astellas, it is necessary to strategically review the priorities of R&D and improve productivity.

In the third quarter, we have conducted in-depth analysis to assess probability of success and future value potential individually across the entire R&D portfolio. As a result, we have decided to strategically terminate a total of 7 programs, including ASP2802 and ASP2016, which I mentioned on the previous slide, as well as those in the preclinical stage.

We have also decided to dissolve the Primary Focus candidate, immune homeostasis. From now on, we will further increase the allocation of resources to the high priority assets shown in the center of the slide.

First, we will increase investment in the late-stage development of the primary focus flagship programs after the POC judgment. In addition, we will focus more on the development of education expansion as part of our life cycle management in order to accelerate the growth of our Strategic Brands.

In business development, we will look for opportunities to acquire derisked assets in the later stages. Up until now, we have been forming many partnerships in the early stages of technology and assets that lead to the strengthening of our existing Primary Focus. But as we move into the convergence phase, we'll be evaluating early-stage deals more strictly.

Through these priority investments, we aim to expand our earnings potential in the short to midterm, while also aiming for the assets created from our Primary Focus to contribute to the long-term growth.

Slide 15. This slide summarizes the progress and the latest outlook for the third quarter of FY '24. In the third quarter, our Strategic Brands continue to show strong growth and the SG&A ratio has been improving since the start of fiscal '24.

As shown in the figure, total sales of Strategic Brands expanded to over JPY 240 billion as of the third quarter, and we will believe that achieving a target of JPY 340 billion for fiscal '24 is well within reach.

We are steadily progressing towards our target of JPY 500 billion in fiscal 2025. We also expect the core OP margin to improve to 19.5% in fiscal '24, and we are becoming more confident that it will grow to low 20% level by FY 2025.

We believe that the reason for the strong progress is that the 3 enterprise priorities listed on the right side of the slide have continued to be successful, and we have entered a full-fledged growth phase. We'll continue to promote these initiatives and aim for further growth beyond XTANDI loss of exclusivity.

Page 16 shows the schedule of upcoming events. The Annual Sustainable Meeting is scheduled to be held on February 21 this year. I hope you will be able to attend.

This concludes my presentation. Thank you very much for your attention.

[Hiromitsu "Hiro" Ikeda, executive]

That's all as presentation. We'd now like to entertain questions from the audience. [Operator Instructions] First Mr. Yamaguchi from Citigroup Securities, please.

[Hidemaru Yamaguchi, analyst]

Yamaguchi from Citigroup. It's an individual question. I have 2 questions about IZERVAY. PDUFA date is newly set. And according to presentation, patients are waiting for the treatment and it's going to be addressed sufficiently. The details have not been disclosed, but is it going to be every other month or 1-year or 2-year administration? What is prioritized? So the details of the PDUFA and also the relationship with Mitokyne, I'd like to hear your comments.

[Atsushi Kitamura, executive]

Thank you very much Yamaguchi-san. Regarding the specifics, we'd like to refrain from commenting right now. As you pointed out, as soon as possible, we would like to realize the label update as soon as possible, so it's up to the 26th of February right now. But our resubmission is accepted and if the label update is going to be approved, we'd like to take action.

[Hidemaru Yamaguchi, analyst]

Understood. A similar question to you. When patients who received 1-year treatment is paused, they are waiting without switching to another drug as you presented. So you have heard such cases. So you're hoping to pass the PDUFA date and there's going to be a lot of resumption of treatment for those patients, right?

[Atsushi Kitamura, executive]

Yes, you're right. Regarding IZERVAY, it's very important. If Claus has any additional comments, please.

[Claus Zieler, executive]

So your summary is absolutely correct. So what we are hearing in the market is that doctors are not switching patients. They're essentially delaying patients. And exactly as you said, we are expecting that once the label update comes that all these patients will be then called back into the clinics to -- for their next injection. So that would suggest that once the label update is granted that we would expect a bolus of patients for injections that have been waiting so far.

[Hidemaru Yamaguchi, analyst]

Zolbetuximab, sorry to switch the topic. But regarding Zolbetuximab, the pancreatic adenocarcinoma, I'd like to hear about the analysis. The Independent Data Monitoring Committee recommended the continuation of the study. According to the interim results, efficacy and safety issues did not occur. There can be discontinuation due to effectiveness or futility.

[Atsushi Kitamura, executive]

VYLOY, Zolbetuximab, you're talking about the pancreatic adenocarcinoma. Originally, top line results analyzed for interim analysis, but the clinical trial itself is planned until the final stage, and we are going to do it as planned. Any additional comments from a medical perspective, Taniguchi-san, please?

[Tadaaki Taniguchi, executive]

Thank you for the question. Yes, you are right. We have the interim analysis we are planning -- we were planning. And Independent Data Monitoring Committee checked the details of the results. In terms of safety and efficacy, they looked at both. Until the final analysis, they recommended that we proceed until the final analysis.

Final analysis as was mentioned during the presentation, is expected in the second half of 2025, next fiscal year. But depending on the onset of events, it may shift a bit. But for the time being, it's going to be the second half of FY 2025 for the time being.

[Hidemaru Yamaguchi, analyst]

One additional question. That's about IZERVAY. I believe you mentioned about the inventory and does that impact negatively or positively?

[Atsushi Kitamura, executive]

Negative or -- well, basically, as a part of post-merger integration, distribution integration is also taking place and inventory level is therefore reduced tentatively. So tentatively, it has a negative impact. However, we are quite sure that it's going to be built up. So in the fourth quarter and afterwards, we would like to show the pharma growth afterwards.

[Hidemaru Yamaguchi, analyst]

Is it okay to consider this is a Q3 event?

[Atsushi Kitamura, executive]

Yes.

[Hiromitsu "Hiro" Ikeda, executive]

Next question is JPMorgan Securities, Mr. Wakao, please.

[Seiji Wakao, analyst]

JPMorgan, Wakao. First question is about IZERVAY. Yamaguchi-san asked almost all the questions that I wanted to know, but I have a couple of still questions here. Why no switch to SYFOVRE? Why the patients are pausing the treatment? How do you analyze that situation?

I'm asking this question because Apellis, well, based upon this situation, they are fully prepared to accept the IZERVAY patients when they want to switch. But there are no such patients so far. In that case, the safety of IZERVAY might be far better. That's what I assume. So I want to clarify about that.

And also the resubmission details is not disclosed, but this once or twice administration, even if that is not achieved, considering the current market share, the growth of this product in the market, even the indication is just once per month, still the market is quite viable for the IZERVAY.

[Atsushi Kitamura, executive]

Thank you, Wakao-san. Claus could you make a comment about this?

[Claus Zieler, executive]

Thank you, Wakao-san. So let me take your questions one at a time. The first question you asked was about why are doctors not switching. And if we do -- go into claims data, so real processing of claims from the insurances. We see that about 60% of the new patients receive IZERVAY. That gives us the feeling that there is a very strong belief in the marketplace that is starting to consolidate in favor of IZERVAY. That is probably due to the safety profile that we've established since launch with now 200,000 vials shipped. And safety signals, which are very much in line with the labeled indication and the studies that we saw.

That is a very impressive record for doctors, and they take that into account when they make a product choice. So we hear that very consistently from doctors that they have a 60-40 favorability towards IZERVAY, and it's usually due because of the safety profile that doctors attribute to IZERVAY.

So I think that also explains why doctors are saying, before I take the risk of switching, let me wait, 26th of February is not that far, and then I can start my patients up again. So a lot of what I'm telling you here is anecdotal. We've not conducted formal market research, but that is the picture we're getting from how the market is behaving.

So let me go to your second question. I think your second question was about, is it the 12-month extension in the label? Or is it the every other month part of the label that we are focusing on. We're very clearly focusing on the 12-month extension. That's what doctors are waiting for. That's what insurance is waiting for. Doctors are saying I have started a patient, I want to continue the patient, but please give me the label, so I'm within the label to do so. That's what -- that's the main question that they are asking.

The question on every other month is something -- I would like to describe it this way. You have -- in every indication, you have a label, but you also have clinical practice. And I don't want to be perceived of speaking outside of label. But what we observe in real life in the marketplace, both for our competitor product as well as for IZERVAY is that doctors tend to take more a 6-week interval for the injections. So they're not strictly following labels. That is clinical practice that we are observing.

We don't know the reasons for that. We don't know why doctors are doing that, but that's what we are observing. So that is also why we have prioritized the 12-month extension in our label update versus the every other month data, which, of course, is useful for doctors, but doesn't happen to coincide with clinical practice anyway.

[Seiji Wakao, analyst]

I have a second question. Your outlook for next fiscal year, I'd like to know more. On Page 15, achieving JPY 500 billion and core OP margin of 20% level, to achieve this you are building confidence. Then you are making an upward revision. OP, JPY 370 billion, an increase in revenue and profit may be in your sight to a certain degree. Am I too optimistic or any other negative factors, if any, anything we should monitor more carefully?

Regarding XTANDI, fourth quarter assumption figures based on that, the products you have to grow compared to their growth, Medicare Part D impact on a full year basis is going to be smaller. On a net basis, next fiscal year, you can generate a certain amount of revenues and OP margin can be improved. Then I'm not sure about the revenue increase, but you can achieve a profit increase. What do you think? I'd like to hear your current philosophy or view.

[Atsushi Kitamura, executive]

Thank you for your question. Next fiscal year's outlook, for the details, when we announce our full year results, including our fourth quarter results, we will give you our outlook.

Regarding our current plan, we are now entering a growth phase, so this is for both revenue and profits. As you mentioned, we have Strategic Brands, how far they would grow. And including VYLOY, we have global launches we have been able to realize. So in that sense, continuing the growth is very important for us. Just revenue increase and improvement of the profit, of course, we will achieve profit increase, so we'd like to work on this.

As for XTANDI, Medicare Part D impact is expected in the fourth quarter. On the other hand, right now, a strong growth has been seen. So the base situation is going up for XTANDI. So we are taking this positively.

[Seiji Wakao, analyst]

Any downside?

[Atsushi Kitamura, executive]

We are going to look into details from now, but the current growth phase is not anything temporary. But for us, this is something we can continue. It's sustainable for us. That's our stance right now. That's something I'd like to communicate to you. For details in 3 months' time, we'd like to explain to you. Thank you for your question.

[Hiromitsu "Hiro" Ikeda, executive]

Next question, Morgan Stanley MUFJ Securities, Mr. Muraoka, please.

[Shinichiro Muraoka, analyst]

Muraoka from Morgan Stanley speaking. Regarding Wakao-san's question about your stance on the business results, OP margin would be expanded, that's your goal, close to 25%. So I thought you would increase your profit by 20% or so. That's my personal view.

I have a question about dividend, JPY 74, year-on-year JPY 4 increase is maintained. On Page 24, there is a chart on dividend. Up to JPY 80 it can increase next fiscal year, just to that level I think there's going to be a dividend increase. But the pace of dividend increase regarding the -- it was increase from JPY 70 to JPY 74, should I consider the extension of this growth? Or are you saying you're growing, so there is room for further growth or increase in dividend level?

[Atsushi Kitamura, executive]

Muraoka-san, thank you for a difficult question for us to respond. So we wonder how to respond. We reviewed the pace of our dividend increase for our growth story. We are confident that we can fulfill our goals. That's why we decided to increase our dividend to JPY 74 by increasing JPY 4. In the short term, the results increased So that's why you are increasing? No, continuity for a certain period of time was considered, and this is our conclusion we came up in the end.

So we had profits. Because we couldn't increase, a dividend decrease is not considered. So we'd like to ensure a stable dividend for a certain period of time to return to shareholders. As such a means, we are paying out dividends. So it's not going to change our stance overnight.

More specifically, next fiscal year, we are going to rush up our plan for the next fiscal year. We need to think about the financial needs for various perspectives. And in line with that, we would like to discuss and we share the information when it is available. I hope this answers your question.

[Shinichiro Muraoka, analyst]

Understand. 3 months after, we will wait. I will wait for the coming 3 months. Next question is about IZERVAY. In Europe, you are discussing with the authorities. But what I feel, based upon your presentation explanation, is that the current priority is the lifting of this 12-month restrictions. So every 2-month indication in Europe or something more, I feel that you need to conduct additional study.

I just wonder if you should do to that extent the -- up until 2030 or up until 2034, you have the patent of this material and also usage. But how do you calculate overall this situation?

[Atsushi Kitamura, executive]

Thank you for the question. First of all, the label update. I cannot tell you the very details here. But what we view or what we think based upon the opinions of the specialists, the priority is just like that. I cannot tell you the details about that, though.

For GA unmet medical needs, this is for sure. So we would like to expand the market. And at the same time, we would like to provide this product to the global level. That is extremely important. That's why we are doing the activities currently. And we have the U.S. data and that can be made use of for the expansion.

And when it comes to EUs and the major countries, we are having the discussions with the authorities and with doing that we can increase our probability. So that is currently we are working on. More specifically, what we can share with you is quite difficult, but Taniguchi might have additional comment here.

[Tadaaki Taniguchi, executive]

I believe there are 2 questions in your question. First of all, especially about the U.S. market, this 12-month restriction and every 2 months administration, Claus already mentioned about this or explained about this. So first of all, there are patients who are waiting for the additional treatment, so this lifting of the dose restrictions of 12 months, that is definitely the priority. And towards that, we are going to make use of GATHER2 data that is available or actually with using that, we are already discussing with the authority.

When it comes to European countries, as has been explained, currently, at each country, we have been working on the discussions. And after the discussions our next strategy is going to be considered. And once it becomes clear, then we believe we can share that with you. Understood?

[Shinichiro Muraoka, analyst]

And a little while ago, I mentioned about the 2030, 2034 patent situations, but this is a different angle question about IZERVAY. As long as I know, the generic development hasn't been in the clinical development phase yet. But if the patent is 2030, then some companies are expected to start the development of the generics, but it is not really so. So the generic launch opportunity or the possibility in 2030 is extremely low. Rather, you think probably if there will be the generic launch it will be around 2034 or so?

[Atsushi Kitamura, executive]

Well, that's again difficult area that we make a comment. But basically, it's not only IZERVAY -- our approach is that, of course, we do whatever we can do for the preparation of the worst case. So for the risks, we try to do what we can do beforehand. That's day-to-day -- part of day-to-day activities. So we shouldn't be too optimistic and we still need to do the preparation, especially about what we can do. I'm not going to tell you any specific information here about that.

[Hiromitsu "Hiro" Ikeda, executive]

Next question, Goldman Sachs Securities, Mr. Ueda, please.

[Akinori Ueda, analyst]

I'm Ueda from Goldman Sachs Securities. I have a few questions. First, PADCEV was reviewed. The U.S. forecast was revised downward. In the second quarter results announcement, there was a revision of the plan. The revision seems to be larger. What changed in the assumptions? According to Ms. Kitamura, there seems to be no particular problem. But this is one of the future drivers. So I'd like to know the background.

[Atsushi Kitamura, executive]

Mr. Ueda, thank you very much. Regarding PADCEV, first-line uptake was fast in the United States in the first quarter compared to our initial plan, there was a speedy increase. That's part of the fact. And first-line share was like 52% or 55%. It was at a high level. So there were expectations for higher figures initially, but now, it's between 52% to 55%, which is maintained and sustained. And based on this, our forecast was reviewed. We've maintained this going forward. And outside of the United States, we have the first-line indication, so we'd like to increase this quickly similar to the U.S. That is going to be the driver for PADCEV. Claus, anything to add?

[Claus Zieler, executive]

Yes. I mean, hindsight is 2020, as they say, right? When you look back, you always know a little bit more than when you look forward. So the pattern that we see is very similar to what we saw in the second-line. Remember, PADCEV has had an extremely steep uptake from the very beginning. That was true in second-line launch. It was also true in first-line launch. And then it came very quickly to -- after about 6 months, it comes to a plateau. That plateau is not flat, but it's just slower growth. We reached that plateau in the U.S. with first-line in June. And we predicted a mid-single-digit growth from then on. And that is still true.

When we now look back, and we compare with the second-line pattern, we also see that there's a little bit of a lull for about 3 months. We can't explain it, but it's as if the market takes a deep breath and then starts growing again. And that's what we think is happening now with the first-line in Q3. So we are very confident on the growth, even though it's mid-single digits, we're confident on the growth of PADCEV going forward in the U.S.

Of course, ex-U.S. is now in the steep uptake and will grow the brand very steeply from now on. But it's just that lull in Q3 was too much for us to say we can catch it up in Q4. And then we said, well, let's be transparent and just revise the numbers down for FY '24, even though we think that the growth trajectory into FY '25 is intact.

[Akinori Ueda, analyst]

I have my second question. AT466 impairment loss related question. Right now, in the field of gene therapies, I'd like to hear your company's view. In this field, you have Audentes related products such as AT132 and 466 and [ AT101 ] is in license. So you're still focusing on this area. But how do you evaluate the progress in this field? Audentes related products have any issues? What have you reviewed? And what is going to be the direction you'd like to head into the future?

[Atsushi Kitamura, executive]

Thank you very much for your question. Gene therapy, and our stance on gene therapy was your question. In principle, there is no change. Gene therapy is one of the important Primary Focus areas for us. So there is no change in that. And AT845 is a lead program, and we are going to judge POC by the end of FY 2025. That's a major milestone for us.

AT466, initially, when we acquired Audentes, the assumptions have changed in some cases. There were some substances where we should do different things. So based on this, we changed the plans. As a result, time line was a bit delayed, and we are reviewing the plans. So for gene therapy, it's still one of the important Primary Focus areas, and we have to identify AT466. Taniguchi-san, anything to add?

[Tadaaki Taniguchi, executive]

Thank you. Just like, Kitamura explained, for gene therapy, that's the center of the primary focus. So strategic wise, this AT466 impairment loss is not having the impact. Aviad or Tay such other companies' collaboration or partnership are ongoing. And for AT845 POC judgment timing is almost there.

In reality, when it comes to gene therapy, especially AAV platform is what we have great confidence. So how we can make use of this AAV platform for the generation of the new program for the future, including the partnership with other companies, we consider that strategy good direction and what we take is quite important. And there is no change about this. So we are going to pursue what we've decided as the strategies that we take.

[Hiromitsu "Hiro" Ikeda, executive]

Next question, Nomura Securities, Mr. Matsubara, please.

[Matsubara, analyst]

Matsubara speaking. I have 2 questions. First question is about VEOZAH. This insurance coverage rate, it is learned that it will be available from Bio. In that situation, what kind of promotional activities would you do? What will be the growth strategy?

[Atsushi Kitamura, executive]

First of all, about VEOZAH, as has been mentioned a little while ago, the growth is quite stead and it's all according to the plan.

[Matsubara, analyst]

And what about the competitive situation?

[Atsushi Kitamura, executive]

We haven't seen the level yet, so until then, we cannot say anything. But things are just what we expected in the very beginning. With this product, competitors' product, we can make market together or it's going to be head-to-head competition. But for us, before the launch, we consider it is important to establish the market for this area. For the VEOZAH, do you have any additional comments, Claus?

[Claus Zieler, executive]

Not really much to add, Kitamura-san. I mean the product is growing on track. The label from the Bayer competitor is not known yet, so we can't really speculate. We are fully prepared in terms of sales force deployment, direct-to-consumer deployment. Across the market we're fully prepared for Bayer entry into the market. We have a very selective molecule that targets one receptor. So we'll have to wait and see what the FDA grants for the Bayer competitor.

[Matsubara, analyst]

Next question is mirabegron. The U.S. sales in the third quarter is greatly increasing these days. And what's the background of this?

[Atsushi Kitamura, executive]

In the beginning of this fiscal year, generic entry was confirmed and it was that based on the forecast, we came up with the conservative forecast and expected to be a negative impact. And for that, we are adjusting the cost or expenses.

On the other hand, we want to, of course, defend our assets as we've been conducting the current activities. So currently, we see 2 generic companies entry and the price erosion is not that extreme. That's the current situation, and that is adjusted in December to a certain extent. That's why the number in December is a bit high.

But as for what's happening currently, well, is that worst case is expected. We did our activities and our defense is a good level and the erosion has not taking place now. What about the future then? Well, of course, we would like to always prepare for the countermeasures to deal with this situation. So it's going to be about the next fiscal year and afterwards. So please wait for a moment.

[Matsubara, analyst]

Then in that case, to consider about the next fiscal year and afterwards, because you have the countermeasures, so there would not be a great reduction of the revenue. Is that okay to understand in that way?

[Atsushi Kitamura, executive]

Well, that's something we can talk 3 months later. But as has been mentioned, for the risks, we are not going to deal with that in an optimistic manner. We look at the downside, we come up with a plan. And what we can defense is defense. That per se always the same. And as a result, what will happen to the figure on the next fiscal year, that's coming later on. But our position and the stance will not be changed. Please do understand in that way.

[Hiromitsu "Hiro" Ikeda, executive]

Thank you very much. Next, Mitsubishi UFJ Trust Bank, Mr. Hyogo, please.

[Shinichiro Hyogo, analyst]

Hyogo from Mitsubishi UFJ Trust Bank. I have one question to you. According to the press release, there was announcement about the change of the management structure from the initial stage of R&D to launch across the board, you would be promote this efficiently and rapidly according to this. What would be the bottlenecks? What's the reason for the change? Because of the silo or because of bottlenecks, you'd like to make these changes. That's why you were expressing such an intention. What's in the background? There have been impairment losses one after another. And is that related to this? I'd like to know.

And also, legal and compliance is going to be newly launched -- established. By separating the functions, what could be achieved? I'd like you to explain. The details may be explained in May, but together with the results announcement, there was a press release. So I'd like you to explain.

[Atsushi Kitamura, executive]

Mr. Hyogo, thank you very much. We issued a press release, the management structure as of the 1st of April. The objective is, as you said, as follows: for Astellas Pharma Inc., patient value would be created. That's our primary, most important goal. So we generate and create value for the patients and deliver it to the patients.

What is the most important thing necessary for that? From R&D up to the launch, we'd like to enhance the speed to do this across the board. Any bottlenecks, we have not been able to launch. Setting that aside, we have to increase the speed. That's for sure.

So across the board, you're going to handle this. That's one thing. At the same time, deliver value is important, commercial and medical would be able to promote co-work further into the future. Commercial and medical officer is going to be close to supervise both functions. This fiscal year, we think we explained this before, but the field, Genba focusing on the brand teams, they should be able to work in an organic fashion without the borders of the functions. At a fast speed, they should do business. And this was worked on in the United States and very good results were achieved. And that's one of the reasons why the growth is fast in the United States. So plant dedicated system would be built to remove the layers in the middle. We'd like to have a rollout globally. That's part of the growth strategy led by Claus. Together, we are going to combine these.

[Shinichiro Hyogo, analyst]

So any major bottleneck?

[Atsushi Kitamura, executive]

No. But rather, we'd like to accelerate growth further. So that's the nature of the initiative we are working on. Legal and compliance would be integrated. Regarding that for details, how far I can talk about it today? There was an announcement today. Tatjana in charge of legal and compliance, she's a lawyer. And as compliance head is her current role. So she's going to wear 2 hats, that's the main objective behind. It's not about impairment loss. Her expertise is taken into account and her role is going to be expanded.

[Shinichiro Hyogo, analyst]

Impairment loss is related to this?

[Atsushi Kitamura, executive]

No, not at all. But for in order for us to further accelerate our sustainable growth, this is a measure necessary for that purpose. Thank you very much for your question.

[Shinichiro Hyogo, analyst]

I was able to understand clearly. If you are going to evolve, how you're going to change, including that, I'd like you to explain in the future. That would be highly appreciated. And also at a certain time point into the future, impairment loss management, how you are evolving in this respect? There can be impairment losses for sure, but I'd like you to explain.

[Atsushi Kitamura, executive]

Regarding impairment loss, I'd like to add. Regarding in-process R&D, AT466 impairment losses were booked. The programs and projects when they make progress, the priorities may be lowered or something may not work, and we have to select and discontinue some. In-process R&D was impaired a lot. So the balance, which remains is not so large compared to what existed up until now. On the other hand, we do have a large size of impairment losses. So we would like to increase the accuracy, and we will work on this. Thank you very much.

[Shinichiro Hyogo, analyst]

I raised some difficult points. So sorry about that, but thank you very much for your response.

[Hiromitsu "Hiro" Ikeda, executive]

Thank you. Let's move on. Sanford C. Bernstein, Ms. Sogi, please.

[Miki Sogi, analyst]

First of all, question to Kitamura-san. The third quarter, this time the guidance is revised. So we have -- you have remaining one -- just one fiscal year. So this revision, I understand, its precision is quite high, accuracy is quite high. The revenue is plus JPY 100 billion and FX impact is JPY 45 billion and XTANDI U.S. maybe JPY 30 billion is coming. And there is a gap of JPY 25 billion. And there is a talk about mirabegron Japan side, that might be another factor to be taken into. Then this JPY 25 gap or rather JPY 25 billion gap, to what extent it is now well calculated?

[Atsushi Kitamura, executive]

Well, the revision is in the situation exactly what you mentioned. So this -- we have remaining just one quarter. So we try to make it as accurate as possible. So what about the difference? We are going to sell further in the fourth quarter. But of course, what's been delivered up until the third quarter is incorporated. In that perspective, we believe that a great portion is already delivered. On top of that, the third quarter number, just like you pointed out, in the metric that you pointed out the defense for the product is quite well. So there is an increase here.

[Miki Sogi, analyst]

Next is a question to Claus. It's about PADCEV. So I understand that in the U.S., the PADCEV sales has been almost flat. And when -- so it was completely almost flat or a slightly decline for -- from the first quarter to second quarter. And we understood that it was because there was a one-time net gross adjustment. And while the -- actually volume grew the high-single-digit, I believe. And then this time, there was an increase from $174 million to $179 million to this quarter for the U.S. And so what is -- so I assume that there's no gross to net adjustment this time. And so that's just a confirmation of -- so the current the dollar-based -- the sales is reflecting the actual volume growth. That's the first question.

And also kind of granular level, I'm a little bit surprised that we don't see the quarter-over-quarter growth for PADCEV, because unlike a chronic disease, the -- yes, it is true that the PADCEV -- the penetration in new patients has been very quick. But at the same time, for cancer, there are always new patients coming in every month. And there are the continuing patients as well. Of course, there are patients who are drop off. But in first-line, there are patients who -- the patients should stay longer on the treatment.

So just we have not really done really the granular math, but we believe that -- we expect that there will be a more stronger growth quarter-over-quarter. So I just wanted to see whether we are missing something here?

[Claus Zieler, executive]

No, no, no, you're not missing something. So first of all, if you look at Q3 growth, we reported 12% growth globally. That -- if you divide that into U.S. and ex-U.S., ex-U.S. grew 29% quarter-over-quarter. U.S. grew 3% quarter-over-quarter. So it's not a decline. It's just a more moderate growth rate than we had assumed. That's what I meant before when one of your colleagues asked the question.

We had assumed after reaching that inflection point, which is very, very marked for PADCEV. It's -- honestly, it's more marked for PADCEV than I've seen in other drugs, but that extremely steep uptake. And then within 1 month, it goes into single-digit growth mode, right? That's the pattern we are seeing in every single country we launched in.

Now we had assumed for the U.S. from June onwards, a mid-single-digit growth, but 3% was just a little bit lower than we had assumed. And that's what I meant that maybe like in second-line, we saw the same pattern that there's a little bit of a lull for about 3 months and then growth picks up just a little bit. So 3% is not a bad growth. We had assumed a little bit higher. That's the basis of the numbers that you see.

But let me also comment your maybe exploratory part of your question on how high can it go? We are approaching 55% patient share -- new patient share, 55%. If you look at analogs, that is quite high. That's usually when cancer drugs start plateauing out. There are some exceptions which go higher. We've seen a little bit higher in some countries.

But remember that first-line is a combination treatment with PADCEV and Pembro. That means you have 2 molecules with 2 side effects. And doctors take that, of course, into account when they see more fragile patients. So we're approaching 55%. How much higher can we go? Maybe a little bit, but I don't think you should expect 60%, 70%, 80% patient shares. I think that's just -- it's probably not in the realistic realm in this kind of disease setting.

[Miki Sogi, analyst]

One more question. In terms of the duration of treatment, so in the trial, I think the PFS was around 10 months for this combination. What is the treatment duration? I know that it's been a little bit over 12 months since the actual approval. So you may not get the actual sense. But do you see -- what are you hearing about the treatment duration in first-line setting with this combination?

[Claus Zieler, executive]

Yes. DoT is still evolving, Sogi-san. So it's a moving target. I don't think it's stabilized at the number yet. We're still below the trial rate. So we think it will grow more. I would be hard-pressed to make a prediction at this point. But it's still evolving. So it's still extending as we get more patients on the drug.

[Hiromitsu "Hiro" Ikeda, executive]

Thank you very much. Next question, UBS Securities, Mr. Sakai, please.

[Fumiyoshi Sakai, analyst]

Sakai from UBS speaking. Kitamura-san, you touched on impairment. So I'd like to ask you questions. Rather than impairment losses, your core and reported the gap is widening between the 2. You're always exposed to the risk of impairment. Accounting-wise, it's not healthy, sound status. Impairment might be accepted according to the wording.

I shouldn't say this to Kitamura-san, you are like booking losses for the past investments. So you have to ensure good management. Management could not be done, but this gap should shrink. Otherwise, the undervaluation of your stock price could be seen. CFO, what's your opinion? That's my first question.

[Atsushi Kitamura, executive]

Sakai-san, thank you very much. We are not underestimating impairment, but we have to address impairment in a timely fashion. So we have to evaluate very well, and assets on the balance sheet in a timely fashion, in a concerted fashion, we have to do this according to the rules. That's the basic stance.

Full and core gap is not so big. There are 2 major elements here. First, the amortization of intangible assets. Iveric Bio was acquired. After that, it's increasing. So amortization of intangible assets up to the third quarter, it's like JPY 100 billion in the current fiscal year up to the third quarter. So this is not really a surprise. But every year, this is going to be amortized every year this much. So rather than a surprise, this is what we're expecting.

Regarding impairment, that is going to be something additional. This time, we have a big impairment loss. We are reviewing why. It's not just a matter in the past, but rather when we acquire something from outside, how we should use learnings there, we are discussing that.

On the other hand, like in the past, we do have impairment losses on the balance sheet with regards to in-process R&D, the book prices are declining. So the impairment -- a big impairment is going to be repeated. We don't have a lot of base figure. So what to do with the forecast it's a difficult question. If you know impairment losses, we have to account for it. But we shouldn't confuse the market when we provide our guidance. Did I respond to your question?

[Fumiyoshi Sakai, analyst]

We just want you to do the earnest management, that's only thing I can say. If the gap is not shrunken, there is definitely the amortization of this intangible asset remains. We cannot avoid that. But how it is reflected into the stock price, I haven't really digested that part yet. If the dividend is not as favorable level for us, that will be the problem if that continues. So please have that in your mind.

And next question is about IZERVAY. The retina specialists -- amongst the retinal specialists, SYFOVRE -- efficacy for SYFOVRE is better. IZERVAY is better in terms of the safety. It seems that, that recognition is now quite prevailed in the U.S. So 12 months and after that, the level is changed or not -- there will be the lift of the restriction. But 12 months thing, well, Claus mentioned when this level issue is settled, then the patient would come back. I think that's the comment basically made by Claus. But after the drug holiday of 12 months, some patients might drop. So based upon your experience, how many patients drop out from the treatment of IZERVAY during this drug post period?

[Claus Zieler, executive]

I don't have the number on hand, I'm sorry. Of course, we do already after 1.5 years in the market see some patients dropping out. But I would have to get back to you in terms of quantification of that percentage of patients. I do want to respond to one thing you said. You said in efficacy, SYFOVRE, of course, you said is better. I would challenge you on that statement.

[Fumiyoshi Sakai, analyst]

I'm sorry, that's not my observation. It's a hearing from the expert calls.

[Claus Zieler, executive]

Yes. So I think these experts are comparing studies, which are not head-to-head studies with different placebo arms. I really think you cannot make that statement on the efficacy unless you have a head-to-head trial of the 2 drugs. What you can say, however, is that our safety profile is in line with our clinical study, and I don't think Apellis can say that about its competitor drug.

[Fumiyoshi Sakai, analyst]

Okay. So how about this 12 months duration?

[Claus Zieler, executive]

Yes, they have a 24-month label at this point, and we have a 12-month label at this point. That's what we are focusing on to extending and then we'll be at par.

[Fumiyoshi Sakai, analyst]

Then patient can stay out of the medication for 12 months and coming back to the treatment?

[Claus Zieler, executive]

Of course, yes, that's exactly what we are assuming.

[Fumiyoshi Sakai, analyst]

Okay. So 12 months could be a time horizon, time frame that we're talking about, the patient coming back to the treatment after all?

[Claus Zieler, executive]

So we were licensed in August of 2023. We launched on the 1st of September of 2023. That means the first patients that were put on drug, which at the time were very, very few in September of 2023, they started elapsing outside of the 12-month label in September of '24. If the FDA gives us the 24-month label on the 26th of February, so September, October, November, December, January, February, these patients would be maximum 5 months out of treatment.

[Fumiyoshi Sakai, analyst]

Right. So, yes, '25, okay.

[Hiromitsu "Hiro" Ikeda, executive]

Thank you very much. Next question, Daiwa Securities, Mr. Hashiguchi, please.

[Kazuaki Hashiguchi, analyst]

Hashiguchi speaking. Thank you very much. My question is about Page 14 of your slide. That is about your strategy for R&D. What will be the trigger? And what's the background to come up with this idea, would you please explain about that?

On the left, there are 7 programs. You focus on 5 in clinical -- for preclinical, you take high risk to pursue high returns by now according to my understanding. Then at a broad base, pursuing a variety of possibilities is going to be important as well, in my opinion. You have to have something new, but there is just a mention of terminated programs. So what do you think of the expansion of the base?

In the middle at the bottom, business development for late-stage derisked assets. Late stage, for each of the programs, the probability of success is going to be higher for each of the programs. But the value-wise it's going to be big for each of the programs. And it's necessary to make each of these programs a success if it's early stage, one-by-one, the value-wise is going to be smaller, so you can work on many programs or projects. And if there's anything with a big success, you can get a high return. So where to focus on? It depends on what kind of a pharma company you're going to aim for. I think that's core. I'd like to hear more about your approach you're going to take?

[Atsushi Kitamura, executive]

Hashiguchi-san, thank you very much. Improvement of R&D productivity, in principle, our stance is not going to change, but it's about phases. We have primary focuses we worked on by now. And last year, mitochondria was reviewed in terms of the priority to remove Focus Area approach, primary Focus Area. Instead of working broadly, which primary focus area is going to win, we try to select the winners. We have 4 lead programs. Lead programs, they are such in a stage as a Primary Focus program, so we try to converge. Those who can win would have more lead on more broadly.

Our decision would not be eternal. There can be dynamic changes. And we are now in such timing -- at such a timing. Primary Focus, in order to strengthen Primary Focus, we try to get early-stage assets in many cases. But in addition, where we can win and also where we can reinforce our portfolio in late-stage we -- late-stage and derisked assets would also be explored. We're going to consider that. So that's our idea.

[Kazuaki Hashiguchi, analyst]

The value is going to increase. Is that going to be okay?

[Atsushi Kitamura, executive]

We will strengthen our balance sheet. At the same time, in order to increase the probability of success, we will consider necessary countermeasures. This is about portfolio. So Taniguchi, our CMO, is going to make additional comments.

[Tadaaki Taniguchi, executive]

Thank you very much. I'd like to make some additional comments from my side, how to look at portfolio. As you can see on the right on this page, we are aiming for sustainable growth, which is very important issue for us. In particular, as you know, 2027 and beyond, we will have XTANDI LOE. So we have to look into the future to make up for our pipeline, which is an urgent task we have to address.

Late-stage development programs, there is a gap in our pipeline in that regard. So derisked late-stage assets and business development for those at the core is important for our strategy.

In parallel, needless to say, there are 4 early-stage important programs or products; ASP2138, ASP7317, AT845 and ASP3082. Early-stage programs should be accelerated. And as there was a question earlier, having a broader base is important for a strategy we have taken. At the same time, what we have to do right now is to in-license late-stage and derisked assets, but we should also focus on our current late-stage assets. And promote the development for launch and how we can accelerate is also very important challenge for us.

Because of this, in PF areas, we are reviewing the PF area and individual products in clinical stage -- to clinical stage inclusive, where to focus on, where we will increase our investments. That's a very important strategic issue for us.

Needless to say, at any company such work is ongoing. Focusing on discontinuing or terminating development programs is a critical decision. It's not an easy decision for us. But going forward, for sustainable stage, we have to review our portfolio continuously and important products.

The products we believe are important must be focused on in terms of investments. We have to allocate resources with priority. Lower prioritized products, which do not fit our strategy, the project termination should also be considered, including that possibility, we have to do this on an ongoing basis. We have to do this continuously and then we can achieve sustainable growth and we can create value in an accelerated fashion. That's our belief in ensuring resource allocation, and we can improve on the productivity.

[Hiromitsu "Hiro" Ikeda, executive]

Thank you. There are still those waiting for the questions, but time is up. With this, we would like to close this meeting.

Thank you very much for your joining with us.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]