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My name is Hisayoshi Kashima. Based on the presentation material, I will report on the third quarter results for FY 2022 and the current status of clinical development. Please refer to Page 3. I would like to report on our financial results on a core basis for the third quarter, the accounting standard is IFRS.
Revenue was JPY 460.3 billion, an increase of JPY 28.2 billion from the same period last year. Although revenue in Japan segment declined due to the NHI drug price revision and other factors, revenue in the North America, China and other regions segments increased due to the impact of foreign currency translation and sales growth of Sumitovant Group products. In addition to the increase in gross profit due to higher revenues, we recorded other operating profit and expenses such as gains on the sales of a priority with the voucher and the divestiture of marketing rights for BROVANA and XOPENEX HFA. On the other hand, core operating profit decreased by JPY 16 billion year-on-year to JPY 42.9 billion due to a significant increase in selling, general and administrative expenses, and R&D expenses caused by the impact of foreign currency translation and other factors.
Other nonrecurring items include a JPY 56 billion impairment loss on KYNMOBI's patent rights and other assets recorded in the second quarter. As a result, operating profit decreased by JPY 76 billion from the same period of last year to a loss of JPY 17.8 billion. Profit before taxes decreased by JPY 63.4 billion from the same period last year to JPY 2.2 billion due to an increase in financial income and costs caused by recording foreign exchange gains. Net profit attributable to owners of the parent also declined by of JPY 64.9 billion to JPY 18.5 billion. In light of recent trends, we have revised our full year forecast I will explain more in detail later.
Page 4 shows revenue for the Japan segment. Revenue decreased by JPY 15 billion year-on-year to JPY 102.2 billion. Sales of LATUDA and TWYMEEG increased, but overall segment sales declined due to the NHI price revision and the impact of the transfer of sales of REPLAGAL. The progress rate against the full year forecast was 81.2%, and the overall progress of the segment was in line with our expectations.
Page 5 shows the revenue of North America and China segments. In the North America segment, revenue in yen terms was JPY 279.4 billion, an increase of JPY 28.7 billion from the same period last year. LATUDA sales increased by JPY 179.3 billion or 14.1% on a yen basis due to the impact of foreign exchange rates, but decreased by USD 100 million on a U.S. dollar basis, mainly due to the lower selling prices resulting from the changes in the payer mix. Sales of BROVANA, whose exclusive sales period ended in the fiscal year 2021 decreased by JPY 8.7 billion. As for the Sumitovant-related products, combined sales of ORGOVYX, MYFEMBREE and GEMTESA totaled JPY 37.4 billion, an increase of JPY 26.7 billion from the same period of last year. Lump sum income and milestone income are included in others, the main breakdown of which is shown at the bottom of the slide.
In the China segment, revenue was JPY 31.2 billion, up 15.6% and progress against the annual forecast was 83.9%. As for MEROPEN, sales decreased by RMB 60 million in local currency terms due to the impact of volume-based procurement that started in November last year.
Page 6 shows the financial results by segment. In the Japan segment, core segment profit declined by JPY 7.4 billion to JPY 9.6 billion due to lower sales. In the North America segment, core segment profit declined by JPY 35.8 billion to JPY 55.7 billion as an increase in selling, general and administrative expenses due to higher expenses in the Sumitovant Group, and the impact of foreign currency translation exceeded the increase in gross profit due to higher sales. The other regions segment reported an increase in both revenue and profit due to the significant impact of onetime revenues from our licensing.
Page 7 is the marketing status of ORGOVYX. ORGOVYX has been prescribed to approximately 26,000 patients since its launch with approximately 4,000 patients being dosed in the third quarter of FY 2022. In addition, ORGOVYX is the number one GnRH antagonist in advanced prostate cancer with a 59% monthly market share and has expanded this market by approximately 2.6x since its launch.
Page 8 is the marketing status of MYFEMBREE. MYFEMBREE has been prescribed to approximately 13,500 patients since its launch, with approximately 4,500 patients receiving the drug in third quarter of FY 2022. The company is expanding prescriptions, including a 38% share of new prescriptions in GnRH antagonist therapies for the treatment of uterine fibroids and endometriosis as of the end of December 2022. In addition, in January of this year, safety and efficacy data of 2-year long-term dosing data for uterine fibroids, which has been submitted to the FDA were added to the prescribing information and will be used for promotion.
Page 9 summarizes the marketing status of GEMTESA. The marketing status of GEMTESA is progressing well against the FY 2022 forecast with just over 57,000 monthly prescriptions in December 2022. We have expanded the coverage of Medicare Part D significantly compared to September 2022, gaining 80% of total Medicare Part D. In addition, television commercials covering major markets, physicians and patients were launched in January of this year to further raise awareness of GEMTESA and promote the product.
Please look at Page 11. I would like to explain the revisions to the fiscal full year forecast. Revenue is expected to be JPY 563 billion, a downward revision of JPY 41 billion from the previous forecast. The reduction is mainly due to the impact of the revision of exchange rate assumptions from JPY 140 to the dollar to JPY 135, and from JPY 20 to the yuan to JPY 19.5 and the downward revision of LATUDA sales in the North America segment.
Revenue forecast of LATUDA has been revised downward due to lower selling prices resulting from changes in the payer mix and the review of the impact of the end of the exclusivity period. SG&A expenses have been also revised downward due to the significant impact of revaluating foreign exchange rates. But excluding expenses associated with making Myovant Sciences a wholly owned subsidiary, actual expenses would be higher than the previous forecast.
R&D expenses have been revised downward, mostly due to the impact of foreign exchange rates. Other operating income on a core basis has been revised upward incorporating gains on the sales of forecast in Sumitomo Pharma food and chemical, assuming a closing by the end of the current fiscal year, in addition to gains on the sales of assets recorded through the third quarter. As a result, the core operating profit forecast is increased by JPY 2 billion to JPY 34 billion. And the operating profit forecast is increased by JPY 3 billion to a loss of JPY 27 billion. Since financial income is expected to decrease significantly due to the strong yen, net profit attributable to owners of the parent is expected to decrease by JPY 20 billion to a loss of JPY 35 billion. Please note that we are currently reviewing our business plan in preparation for the formulation of a new midterm business plan, which may further affect the full year forecast.
Page 12 shows the financial forecast by segment. In the Japan segment, we expect a decrease in SG&A expenses, mainly selling expenses and have increased our core segment profit forecast by JPY 1.4 billion. In the North America segment, the core segment profit forecast has been revised downward by JPY 29.4 billion excluding the impact of foreign exchange rates, largely due to the downward revision of the sales forecast and the inclusion of expenses to make Myovant a wholly owned subsidiary. In the China segment, the sales forecast for MEROPEN has been revised upward, and the core segment profit forecast has been revised upward by JPY 0.8 billion.
Please refer to the Page 14. The following is an explanation of the development status. This table lists the development stages of our development items. Changes since October 2022 are explained in detail on the next page.
Please refer to Page 15. This is a summary of the changes that have been made since October 2022. In the psychiatry and neurology area, we initiated a Phase II/III study of ulotaront, which is being codeveloped with Otsuka Pharmaceutical for generalized anxiety disorder in the U.S. and Japan. This clinical study will be conducted by Sunovion Pharmaceutical and our company. An overview of the clinical study is shown on the slide. The Phase III study of LATUDA in China for bipolar I depression has been discontinued due to a review of a business strategy.
In the oncology area, the Phase I/II study of DSP-0509 in solid tumors was terminated. The future development policy of this drug is currently under consideration. The decision was made to discontinue the development of the DSP-7888, which had been under consideration of the development policy.
Please refer to Page 16. Progress on major events and targets in R&D for FY 2022 has been updated. In addition to the initiation of ulotaront-GAD study, our partner, Gedeon Richter, has filed an application for relugolix in Europe for endometriosis. We started trial sales of VR content for mental health in our frontier business in the U.S. in November 2022 under the product name First Resort.
This concludes the presentation.
Now we would like to move on to the Q&A session.
First of all, you explained that the forecast for the full year may change in relation to the formulation of the midterm business plan in the future. Is it correct to understand that this means that there will continue to be initiatives to sell assets or divest businesses that were quite active in the second and the third quarter of FY 2022?
My name is Toru Kimura. I'll take your question. Exactly as you mentioned, we have been working on various initiatives since last fall. We are in the process of compiling our business policy for the next 5 years in the form of a midterm business plan.
On the other hand, as we do every year, we also test for impairment at the end of the fiscal year. And we don't exclude the possibility that something may come up in the future.
Okay. So should we assume that most of the profitable initiatives have been completed by the third quarter of FY 2022 and that there is a possibility of additional expenses in the fourth quarter?
I think that is correct.
In light of this situation, could you please explain how much SG&A expenses should be expected in the next fiscal year? It will be helpful if you could explain quantitatively, if possible, the effect of the reduction in SG&A expenses resulting from the reorganization of a series of businesses as far as you can see at this point.
We are now sorting that out in the midterm business plan and other measures we cannot say for sure at this point.
I understand. Finally, you explained that GEMTESA's third quarter of FY 2022 sales are looking up. Am I correct to understand that this figure does not include temporary factors such as gross net adjustments or fluctuations in actual inventories?
No, it does not include any particular onetime factor, but is due to strong sales.
You explained that you have factored in costs related to making Myovant a wholly owned subsidiary. This cost appears to be about JPY 6 billion. Is that correct?
I also think the finance cost is about JPY 250 billion. I would appreciate it if you could tell us what the interest cost and the other costs associated with that will be in the future?
Thank you very much for your question. We have factored in a total of about JPY 8 billion in costs related to making Myovant a wholly owned subsidiary as reported in the financial forecast section, including costs related to the calculation in stock option plan, compensation paid to the financial advisers and retention costs.
The total amount of the costs related to the acquisition is approximately JPY 250 billion, but partially using our own funds, we would like to limit the amount of borrowing to less than JPY 100 billion. Interest will accrue in the next fiscal year and thereafter.
While interest rates are rising in Japan right now, I believe global rates are extremely low. What interest rates do you expect? Is it around 1% or 2%?
We would first borrow from the main bank through a bridge loan. And in this case, I think the interest rate would be that level. As for the interest rate for long-term funding, after that, as you say, it is going up now. So it is hard to say at this point.
Also, the sales of the business this fiscal year does not include Sumitomo Pharma Animal Health. And this will be next fiscal year, correct?
Regarding Sumitomo Pharma Animal Health, the closing is expected to be delayed to the next fiscal year, so it is not included in the figures for this fiscal year.
I understand. The amount was disclosed, wasn't it?
We cannot disclose the amount, sorry.
I understand. Also, I'm thinking that ulotaront's schizophrenia data disclosure will take place later this year. Is the schedule clear at this point?
I believe that we will be able to provide data on schizophrenia for ulotaront at some point in FY 2023. As we have mentioned, we are currently working on the schedule that will allow us to launch in FY 2024.
I understand. So you are still unable to disclose the schedule such as first half or second half of the fiscal year?
No, we cannot. Naturally, we have some estimates within the company, but we cannot fix it yet.
Perhaps you have explained this, but it appears that you have slightly revised downward this time the forecast figure for the total of the 3 Sumitovant products for this fiscal year. Is this forecast unchanged or has it changed?
The forecast for the current term is shown on Page 20 of the presentation. The revised forecast is JPY 86.8 billion for the 3 products in total, a downward revision of JPY 8 billion from JPY 94.8 billion. However, this includes about JPY 2 billion for the exchange rate revision. So excluding this, the revision is about JPY 6 billion.
Is the main factor MYFEMBREE?
Yes. Sales from ORGOVYX and MYFEMBREE are slightly lower than originally forecasted. So we have revised it downward to reflect this.
I understand. Next, I'd like to ask about the revised core operating profit forecast of JPY 34 billion. Considering that the costs related to Myovant have also been factored in, is it safe to assume that the landing will not be far off from JPY 34 billion? Or are there still possible major variables, except for the exchange rates?
I don't think there will be a significant change in core operating profit, but the costs associated with the acquisition of 100% ownership of Myovant may be a variable factor.
I understand. I think the net will shift to minority interest, so I think it will change. So regarding the midterm business plan, I believe you have mentioned several times in the past, that a deficit for 1 year in the fiscal year 2023 is unavoidable, but that the company will return to profitability after that. Is there no significant change in this concept?
No, we are currently preparing a midterm business plan in that direction.
So do you mean a V-shaped recovery on a business basis without selling off assets?
In the medium term, we would like to consider selling assets again.
First, I would like to know about the cost reduction. You said you cannot comment now on the amount for the next fiscal year and beyond. The number of sales reps shown on Page 8 of the supplemental material, especially with regard to the U.S., the data as of December 31, 2022, does not show such a large decrease. Is it correct to assume that this will decrease significantly in the next fiscal year and that SG&A expenses will go down?
The figure shown here is as of December 31, but we have already reduced the number of LATUDA related sales personnel by more than 300, since we liquidate LATUDA-related sales staff in January 2023. On the other hand, as you know, there are many companies in the U.S., and we are now considering ways to reduce duplication costs in this area.
I understand. Is the current situation where the number has decreased by more than 300, the approximate final shape? Is there a possibility of reducing it a little more?
It is difficult to say about the possibility. Currently, we have actually reduced by 365 people. And based on this, we will develop our business plan. Regarding the number of sales reps, I said 365, but please understand that this includes not only sales representatives, but also management personnel and not only LATUDA sales personnel. We reduced the number of people involved in the LATUDA business.
Understood. The forecast for ORGOVYX and MYFEMBREE have been revised upward again -- downward again, but I feel that the forecast was too strong to begin with. Looking only at the number of patients administered as you have shown us, I believe it is growing. You mentioned that you are aiming for a total of JPY 100 billion for ORGOVYX and MYFEMBREE by 2024. Is that still achievable? Is the forecast too strong to begin with? I wonder if the current growth will not get you there. If the forecast was too strong to begin with, could you please explain that point again?
We are in the process of acquiring 100% ownership of Myovant. We believe that can be closed by the end of this fiscal year. After that, we would like to work on maximizing value, including Urovant Sciences. Although we currently hold a majority stake in Myovant, it is operating independently, and we expect that there will be room for growth in this area.
I understand. Long-term dosing data on MYFEMBREE was attached to the document in January 2023. We have been informed for some time that this would also be a catalyst for growth. And I believe the situation is as planned. As for MYFEMBREE in particular, is it correct to say the sales will grow at a rapid pace from there?
We would very much like to see that happen, but please understand that we are not in a situation where we can guarantee a sudden growth.
I understand. But you say that these strategies themselves have not changed.
Yes, that's right. We will be making our future earnings mainly from MYFEMBREE, GEMTESA and ORGOVYX.
I would like to add one point. The approval was granted in January 2023, but it states that the 2-year restriction on dosing will not be changed. So does that mean it would be a negative factor for your company's forecast?
We do not see the impact on sales as being significant. Thank you very much. I would like to end the conference call. Thank you very much for joining us today.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]