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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
My name is Hiroshi Nomura. I'm the President and CEO of Sumitomo Dainippon Pharma. Thank you for joining the financial briefing for the fourth quarter of fiscal year 2021. I appreciate your interest in and your understanding for the company.
I would like to start my presentation. First is the financial results for FY 2020. We closed the year with JPY 516 billion in revenues, JPY 69.6 billion in core operating profit, JPY 71.2 billion in operating profit and JPY 56.2 billion in net profit attributable to owners of the parent.
Revenues increased by JPY 33.2 billion from the previous year. In the appendix, you see more details. Japan revenues increased by JPY 12.8 billion, primarily driven by Equa/EquMet. The revenues in North America increased by JPY 19.2 billion, primarily for LATUDA. As a result, gross profit increased.
SG&A expenses increased. If you look at the call-out on the right-hand side, about JPY 40 billion increase came from Sumitovant due to hiring for relugolix and vibegron and marketing and promotional expenses. Meanwhile, Sunovion did not spend as much due to COVID-19 pandemic. So the net increase of SG&A was JPY 21.8 billion from the previous fiscal year.
R&D expenses were almost the same as last year. Core operating profit slightly decreased from the previous year by JPY 2.4 billion.
Let me explain changes in fair value of contingent consideration. We recorded JPY 22.5 billion this year due to impairment losses from napabucasin and alvocidib, as we already announced to you. As a result, reversal of contingent consideration occurred. Last year was unique because we recorded more impairment losses and reversed contingent consideration accordingly. Compared to last fiscal year, the changes were less this year. Other nonrecurring items were JPY 20.8 billion. This includes gain from sales of fixed assets and the impairment losses for napabucasin and alvocidib. As a result of these, operating profit was JPY 71.2 billion, down by JPY 12 billion from the previous fiscal year. However, net profit increased to JPY 56.2 billion due to the tax expenses reduction and losses for noncontrolling interest.
On the right column, you see the previous forecast. Revenues were almost the same as the forecast. Gross profit increased slightly due to the ForEx impact. SG&A expenses are almost in line with the forecast, whereas R&D expenses were slightly lower. Core operating profit was increased by JPY 6.6 billion. Changes in fair value of contingent consideration and other nonrecurring items were slightly different from the forecast. We thought we would record impairment losses for TP-0903 and the estimated reversal of fair value of contingent consideration. I explained about that when I presented the forecast previously.
Later, the big AML program for hematologic malignancies demonstrated positive results. As a result, the decision was made not to record impairment loss for TP-0903 for the fiscal year. That's why you see a gap here.
Please go to the next slide. This slide summarizes what I just said. Please review it for your reference.
Next slide, please. I will explain financial forecast for fiscal year 2021. Revenues will be JPY 578 billion, and core operating profit will be JPY 64 billion. Operating profit will be JPY 61 billion, and net profit attributable to owners of the parent will be JPY 41 billion. Because we have one subsidiary company that's publicly traded, it's not appropriate to present forecast of such company. And so this is as far as we can disclose at this point.
So the revenues are expected to increase by JPY 62 billion, as you can see on the right-hand side, the increase will come primarily from North America segment. LATUDA will increase. ORGOVYX and GEMTESA from Sumitovant will also contribute to the increases as well as relugolix combination that's been submitted for the treatment of uterine fibroids. We are also expecting licensing milestone revenues from collaboration with Pfizer as deferred revenues over several years. We have also included milestone payment for new alliance opportunity. As it says here, possible new alliance will be explained later when I present the revised midterm business plan. We will be actively involved in alliance opportunities with third parties, and this is one of the deals that's likely to happen soon. The probability is high. So we recognize it in the P&L.
SG&A expenses will increase slightly -- significantly by JPY 51.2 billion. If you look at the right-hand side, regarding the expenses related to Sumitovant, SG&A will increase by JPY 49.5 billion. The promotional activities will be in full swing and also amortization of intangible assets will also increase. We have included JPY 21.6 billion in amortization of intangible assets from the previous year.
The R&D expenses will almost -- were almost the same as FY '22. Core operating profit will be down by JPY 5.6 billion. We are not expecting significant items in fair value of contingent consideration and other nonrecurring items. As a result of these, both operating profit and net profit attributable to owners of the parent will decrease. So that's financial forecast.
Next slide, please. This slide summarizes what I just meant over. If you look at the change table at the bottom, revenues will be down for Japan segment due to NHI price revision. SG&A will increase for Imeglimin launch. And we did not spend as much in fiscal year 2020 due to the pandemic. I already explained about North America segment. As for other regions, the revenues are down slightly. That's because of the special circumstances in FY 2020, where we had to make special shipment. We don't expect that to happen this year.
Next slide, please. This is a self-explanatory slide. The impact of NHI price reduction will be JPY 7 billion. We did not add Imeglimin to the list here because we are only expecting small revenues in the first year. This year, we'll focus on LATUDA and LONASEN Tape as well as the TRERIEF franchise.
This slide shows North America and China segment. If you look at the right-hand side in billions of yen, LATUDA will be JPY 220 billion, up by about JPY 14 billion from fiscal year 2020. APTIOM will also grow. BROVANA will decrease because the exclusivity will end in June, and generics will enter the market. Others include revenues from Myovant and Urovant as well as deferred revenues for upfront payment from Pfizer. Revenues from upfront payment or new alliances are also included here.
Next slide, please. Next is research and development updates. The slide is a list of development pipeline. The blue column shows psychiatry and neurology area. DSP-0038 is a molecule created using AI together with for the treatment of Alzheimer's disease psychosis, Phase I study was initiated. For oncology, DSP-0390 is in Phase I. It Inhibits cholesterol that is expected to show anti-cancer activities. For Phase II, TP-0903 is in Phase II for the treatment of AML, as I said before. We are seeing some positive results, and we are very much excited about that. For Phase III programs, development of SEP-363856 for Japan and China study. DSP-7888 for the treatment of glioblastoma started Phase III in the United States.
As we announced to you, BLA was resubmitted for RVT-802, and we are expecting approval this fiscal year. Relugolix was filed in EU for the indication of prostate cancer.
Next, please. This slide summarizes what I just said. So I'll skip here. This slide summarizes key events and targets to be achieved in FY 2021. We'll come back to the slide at the end of the year to see how much progress we made.
Next slide, please. The Slide 14 shows product launch target. We're expecting to launch RVT-802 in fiscal year 2021. In FY 2022, relugolix will be launched in the U.S. for the treatment of endometriosis. We are running clinical trial for mobile app to manage type 2 diabetes. We hope to launch that in FY 2022. As for FY 2023, iPS-derived cellular medicine will be launched for the treatment of Parkinson's disease. We are running clinical trial right now. For FY 2024, DSP-7888, that's currently in Phase III will be launched for the treatment of glioblastoma. In FY 2025, a treatment of AMD, age-related macular degeneration, will be launched. Below the table here, it says planning to launch multiple frontier business items, starting from FY 2023, such as blood sampling device and a device that helps restore motor functions.
Next, please. So far, I have presented the financial results for FY 2020 and financial forecast for FY 2021. Now I would like to present revised midterm business plan 2022, highlighting some of the changes. The current midterm business plan was published in April 2019. LATUDA litigation was ongoing then. We treated the plan in April 2018, and we published a plan after litigation was closed. The exclusivity of LATUDA was going to end in February 2023. And we expected many changes to happen, both internally and externally. We have to establish a growth driver for post LATUDA period and achieve a flexible and efficient organization. So we focused on those areas.
The key growth driver was napabucasin in the midterm plan, and we presented the plan to you. However, in July 2019, a decision was made to discontinue development of napabucasin for pancreatic cancer after interim analysis. So napabucasin lost its driving course for growth. We were looking for CNS assets through merger and acquisition for the midterm, but we didn't find the right candidates to acquire or the cost of acquisition was too high. And it was not realistic for us. We kept looking and then found an opportunity for strategic alliance with Roivant Sciences. Although their assets were not in our focused therapeutic areas, they were promising late stage pipeline. So we shifted gear then. Napabucasin was no longer serving as a key growth driver.
And we found the next growth engine, relugolix and vibegron. The basic principles and strategies remain the same. It's the tactics part that changed. So currently, we are working to maximize the product value of relugolix and vibegron and to advance R&D activities for post relugolix and vibegron growth for the medium to long term by completing the late-stage pipeline and promoting the new programs that will be transitioning to the clinical phase. Well, LATUDA hit loss of exclusivity, the P&L will be affected substantially. So we are working to reinforce business infrastructure and strengthen the company.
Next slide, please, I'll skip this slide. These things do not change. This slide has no change either, but it looks like for 2033 hasn't changed. We will be a global specialized player.
Next slide. There are no changes on this slide. So let's move on. This slide shows significant events during the midterm, both positive and negative. Not all to the products did not meet our expectations, as you can see on this slide.
Next, please. On the left of Slide 21, you see chronological events from FY 2019 to 2021. Napabucasin Phase III study for pancreatic cancer discontinued in July 2019. We entered into strategic alliance with Roivant Sciences in October the same year. You also see dasotraline at the bottom as well as napabucasin not meeting primary endpoint for colorectal cancer in FY 2020, followed by a decision to discontinue napabucasin pipeline. On the top, you see how we gained access to late-stage assets through strategic alliance in October 2019. This late-stage pipeline successfully gained approval and launched. Looking back, when napabucasin Phase III studies for pancreatic cancer discontinued, the decision was made on a timely manner to enter into a strategic alliance with Roivant. The midterm plan was revised downward due to a slow growth of new products, as you can see in B. And measures are taken in Japan, China and U.S. to reduce drug cost. We have yet to see the impact for international reference pricing because it's still a possibility at this time. Once it's introduced, it will affect us greatly.
Next slide. Slide 22 shows the effect of strategic alliance with Roivant. I explained what we gained through the alliance in multiple occasions. So I'll skip here.
Slide 23 shows the pipeline we acquired. The left side shows small molecules, such as relugolix and vibegron and rodatristat. Rodatristat is promising because it can be a disease-modifying agent, and we are diligently working to develop the asset. The right-hand side in the light blue box shows RVT-802 for tissue-based medicine and MVT-602 for oligopeptide as well as ALTA-2530, that's recombinant protein. SP-101/102, a gene therapy and URO-902 is also a gene therapy. We have now access to new technologies and modalities outside small molecules. The new modalities will be instrumental technologies for future research as well as those programs listed here.
This slide shows digital innovation. The initial midterm plan also focused on digital transformation. Through alliances with Roivant, the speed of digital transformation accelerated even further. We entered into the agreement in 2019. In the last fiscal year, we learned about digital innovation and DrugOme, so that we can implement them in the group companies. And we hope to achieve the maximum benefit of digital innovation in DrugOme in R&D and commercial, where the impact will be the biggest. It will help accelerate our business and improve efficiency as well as increasing probability of success. So we are very much focused on digital innovation this year.
Next slide, please. The slide shows initiatives for medium- to long-term growth. It's based on establishing growth engine and strengthen management foundation. We reconstituted these topics for 2022.
Next, please. So the first is regarding strengthening management foundation. The initiative is to bring structural reform to enhance company's efficiency. We must be ready for post LATUDA period as well as environmental changes in the pharma business, especially the increasing pressure to reduce drug costs, as I mentioned before. One of the initiatives includes global scale partnership, so we can increase the pie. In case of Myovant, relugolix, we partnered with Pfizer to achieve bigger pie than what we could have done as a standalone operation. We think we can achieve the same for other businesses. We're also considering partnership in R&D areas to reduce the risk of development and the cost of development. Partnership will probably enable us to develop 2 indications together, whereas we would only be able to develop one indication if we did alone. We expect the year 2023 to be difficult for P&L due to the loss of exclusivity for LATUDA. As a result, we must reduce R&D budget to some extent, and we allocate resources. The commercial structure and back-office services must be reorganized for products that lost exclusivity. And even after we lost exclusivity, the brand name is still available, and revenues will not go down to 0 overnight. The product still has financial value that we can probably sell them to interested parties. We can also consider selling some of the lower privately R&D assets through licensing out or divestitures.
On the bottom of the slide, you see geographical information. In North America, currently, Sunovion and SDPA exist under Sumitomo Danicopan Pharma America. Sumitovant is separate from that, and they have 5 drug companies underneath. So we have 2 so-called holding companies operating in the current structure. Each should consider how to create synergies.
Regarding Japan, the challenge is how we can secure profit when drug prices are increased every year. For China and Asia, very important to create business operations that generate sustainable profit. The same goes to Europe.
Slide 27 talks about corporate culture and talent development. In the midterm business plan, we are advancing the concept called CHANTO to carry things through to the end. We launched projects to install the concept of CHANTO throughout Sumitomo group of companies, including the companies outside Japan. CHANTO is often used by adults when we are talking to children. That's not how we use this Sumitomo -- within Sumitomo. It means each one of the employees must accept more challenging goals and think about how we are able to achieve those goals and think about what are the tools we need or how we should organize the team to achieve them and execute the plan and generate results through perseverance. So that's the idea of CHANTO.
We're also promoting agility or agile. As we -- as you see on this slide, CHANTO and agile are not conflicting ideas. If you want to act on CHANTO, you need agility to respond to changing the environment quickly and flexibly. On the right, you see a picture of climbing a mountain. As a matter of fact, you cannot always expect the perfect weather, the weather changes. And if that's the case, you need to be prepared for that. As we promote CHANTO, we must prepare ourselves for changing the environment, so that we can all achieve target. On this end, we must make sure to provide a workplace where all employees are happy to work in, so that they can deliver the best performance and demonstrate full potential. That is why we are committed to talent development, and we are training next-generation leaders.
Next slide. Slide 28 talks about building growth engine. Our growth strategy is centered around relugolix and GEMTESA for the time being. We will continue to promote LATUDA the rest of the exclusivity period and launch LATUDA in Japan, China and Asia. Regarding KYNMOBI, the launch uptake was a little slow, so we need to bring it back on track. And diabetes is a big franchise in Japan. So success of Imeglimin will solidify our commitment and success in this therapeutic area.
This is a slide on relugolix. So I'll skip.
And next is a slide about GEMTESA. I would like to go to the next.
So Slide 31 shows our asset after relugolix and vibegron. So here it says utilization of external resources more and advanced global study for assets like SEP-363856, SEP-4199 and rodatristat. We consider them the next growth pipeline.
Next slide, please. Next, I would like to explain research-based programs. According to the statistics, the probability of clinical success is 15% for Sumitomo. So we are doing better than the industry average. We want to improve the success even more by using biomarkers in clinical studies. As you can see on the right, we are conducting high-tech research while adopting project system from idea generation to clinics as well as virtual one-team system to stimulate cross-sectional collaboration. So from both technology and people perspectives, we are promoting research activities. In the past 3 years, we are pleased to expand early-stage pipeline by as many as 12 candidates, and our research activities continue to happen actively in psychiatry and neurology. We're excited to further develop these programs once they transition to clinical base.
Next is regarding initiatives and practical application of new therapies by developing modality. So we are applying iPS technologies in clinical setting. We are now adding cellular drugs gene therapy, protein drugs, lipid nanoparticles and perhaps nucleic acid medicine. We used to focus on small molecules, but now we are adding those modalities, so that we can conduct new and unique research. The same goes to oncology, which I will explain later.
Next, I would like to discuss frontier business development. Frontier business development focuses on therapeutic areas we specialize in, that provides nonpharmaceutical solutions for patients and caregivers. I will not explain the details here, but some of the examples we are working on are as follows: virtual reality products to alleviate social anxiety disorder in the U.S.; digital devices to relieve BPSD, behavioral and psychological symptoms of dementia, together with Aikomi; medical devices to help support physical activities together with MELTIN; mobile application for management of type 2 diabetes with Save Medical, clinical trial is ongoing for that; and innovative blood sampling solution for lifestyle diseases, jointly working with Drawbridge Health. We are promoting research and development in these areas. These are publicly announced programs. We also have other interesting projects in frontier business development. We are working on a number of projects while also prioritizing them.
Next, please. For oncology, the question is what happens after napabucasin because the studies didn't meet the primary endpoints. So as you can see on this slide, we focus on 8 development programs, such as DSP-7888. What we are doing is to test on small number of patients to better understand efficacy and safety and then develop programs that are more likely to succeed. For early programs, the expectations are the same, identify the value of the asset as early as possible.
With regards to discovery research, we focus on new modalities and technologies to achieve competitive edge drug discovery. We are also looking for collaboration and outlicensing opportunities for research and development, as I mentioned earlier, when I talked about partnership.
Next slide, please. So there are 8 programs for oncology, starting with DSP-7888. That's in Phase III. We are diligently working on that. The other 7 programs will be tested on a small number of patients as early as possible to confirm efficacy and safety first. So we are taking small steps.
Next, please. The slide summarizes our efforts in research activities. We are exploring target using DrugOme and AI technologies. So we are applying new technologies to achieve drug discovery based on distinctive pharmacological concept. One example is DSP-7888, that's peptide vaccine. And the new concept, ADC, AiADC, that we are doing more research on now. We are also actively seeking external input for TP-0903. The study is led by LLS leukemia and lymphoma society for Beat AML. TP-3654 and TP-0184 are identified together with academia.
Next slide, please. Next, I would like to talk about future outlook. So the original financial goals are on the left and the revised ones are in the middle. The outlook for FY 2025 on the right is just for your reference. So the revenues between the original midterm plan versus the revised are the same. However, core operating profit decreased significantly by half.
Please go to the next slide. As you can see here, we included about JPY 90 billion for napabucasin revenues initially. That's gone now. For China and Japan, we are exposed to drug cost reductions and centralized purchasing. For North America, we would like to maximize relugolix and vibegron and other assets, so that we can achieve the initial revenue goals of JPY 600 billion. As for core operating profit, how do we offset the loss of napabucasin of JPY 50 billion and North America down by JPY 10 billion? For 2022, because amortization burden is high for Sumitovant, it will be difficult for them to break even. So contributions to profit will be small from Sumitovant. So that's where we are.
Next slide, please. The numbers are presented so far are estimated based on probability of success. The programs on this slide, on the other hand, do not include probability. The slide gives you the idea of launch timing and revenue curves. And the key here is how we address the year fiscal year 2023.
The remaining slides are regarding change of trade name and relocation of Tokyo head office. We issued press release to inform you already, so I will not explain today.
This is the end of my presentation. Thank you for your attention.
Hashiguchi from Daiwa Securities. I have a few questions, please. First is regarding alliance with another company. In your presentation, Mr. Nomura, you said you were working on the deal, like the one you have with Pfizer to support relugolix. On Slide 31, you talked about utilizing external resources. There are 3 assets listed here on the left-hand side. Are you working on a deal for these programs? You also explained about a new alliance opportunity that you already incorporated in this year's forecast. Is this related to these 3 assets as well? That's my first question.
Thank you. Alliance opportunities are not limited to these 3 programs. As I said in my oncology slide, the same idea is applied to oncology area as well. I cannot discuss the details today, but we are close to reaching an agreement, and we should be able to make an announcement soon. So if you could wait for a little longer, I'll share more information.
Okay. As far as I can remember, you entered into a collaboration agreement for ORGOVYX once you had more confidence in getting FDA approval. These assets on Slide 31 are very important assets for you. Would it be a possibility to form an alliance in the development phase?
Like I said, alliance opportunities are not limited to the assets on Slide 31. Anyhow, in an effort to improve business structure and operational efficiency, I discussed structural reform on Slide 26, and I talked about promoting partnership on a global basis to reduce risks. The risks include development risks and development costs that we hope to reduce through partnering.
I see. My next question is on Slide 20 regarding the progress of the midterm. Negative events on the right include development discontinuation. That's understandable due to the nature of pharmaceutical development. However, a lot of downward revisions were made for revenue forecast. On the other hand, I don't see any upward revision in the positive events as a result of achieving higher sales. So I'm beginning to think that the assets you have on the left will reach -- will not reach the sales target after transitioning to the commercial phase, and eventually, these will end up to the right-hand side. What do you think are the challenges you had when it comes to creating sales and marketing plan? And how you intend to create the current and future sales plan?
We did not achieve revenue target for Lonhala, Magnair, KYNMOBI and LONASEN Tape. With regards to KYNMOBI or LONASEN Tape, we were promoting under the COVID-19 pandemic, which made it difficult to interact with prescribers. LONASEN Tape, in particular, is prescribed at psychiatric hospitals and clinics, and access to those institutions were challenging. Likewise, KYNMOBI is a new product, and the inability to have face-to-face interactions with doctors were drawback for us. We don't believe the sales and marketing plan had issues. It was the external environment that was not favorable for us. That's what happened. In FY 2021, we are working on raising awareness of KYNMOBI and LONASEN Tape among prescribers, so that they can start prescribing. That's going to be a key point this year.
Regarding Lonhala, Magnair, we revised the plan downwards due to the issues with device durability. The issue is not the drug. We are -- we were working diligently to obtain Medicare Part B classification, and the device must be durable for 3 years to qualify Part B. The device did not meet the criteria of 3-year durability. So it changed to Part D. So the external influences worked against us compared to other COPD treatment. Again, it was not because of our marketing strategy, it was because we couldn't get Medicare Part B for the device.
Now the question is for sales plan for new products. Well, we investigate our market conditions thoroughly and understand competition. And I mean the target should not be too easy to achieve. It should be challenging enough, so that we can all work towards those challenging goals. It was regrettable. The revenues did not achieve the plan. But we learned opportunities for improvement and new ideas. So the downward revision is not always a negative event. Of course, we are working diligently to achieve sales targets, and we will continue to do so.
One more question, please. On Slide 14, SEP-4199 and TP-0903 are not listed on the product target -- launch target. Are you starting Phase III for SEP-4199 next year? And also Nomura-san, you said TP-0903 generated very positive result at this stage. Then you should be able to launch it within this time frame given the indication.
I'm going to ask Mr. Kimura to take your question.
Yes. As we said, Nomura said, we have a lot of expectations for 0903. But to transition from the current stage to the launch takes more time because it is still transitioning to Phase I and II now. We will then decide if we can take actions to accelerate development later before showing it on the table here.
With regard to 4199, we are currently creating a development plan to prepare for the Phase III study. Because the indication will be in the psychiatry disease area, it will take more than 2 to 3 years. The list goes as far as FY 2025 here, but we are creating a plan, so that we can launch soon after 2025.
Yamaguchi from Citi. My first question is about the financial forecast for FY 2021. The revenues in North America, others will be up by JPY 60-some billion, and that includes Sumitovant sales and revenues from possible new alliance. What is the ratio between the 2, just to give us the idea, please?
Roughly speaking, we included a great deal of value for the new alliance.
Would you say over half is for Alliance?
I cannot disclose the details.
My next 2 questions are regarding the revised midterm business plan. Last time, you showed us the earnings trajectory and looks like you will hit bottom in FY '23 and '24 after LATUDA loss of exclusivity. I just want to understand how deep is the bottom when the LATUDA hits loss of exclusivity and Myovant product will offset the loss? What are you estimating for core operating profit?
Well, you are aware of the revenues following LATUDA loss of exclusivity. So core operating profit will be very challenging.
And meanwhile, you are showing JPY 120 billion for core operating profit in FY 2025, that's quite an increase from hitting the bottom. Please explain the difference between FY 2022 and '25? That's 856 and Sumitovant? I want to understand the biggest contributors for profit increases between 2025 and -- 2022 and '25.
Sumitovant contribution is the biggest. And also, we will launch SEP-856 in FY 2023, but the biggest contribution will come from Sumitovant.
My last question is on SEP-856. 2 questions here. What would be the second and the third commercially viable indications if you're already determined after schizophrenia? And I believe the 2 Phase studies -- 2 Phase III studies will probably read out this fiscal year. Are all the studies making progress even with pandemic? Will you be able to complete all studies for FDA submission and asset -- assess the value of the asset?
Mr. Kimura will take your question.
Regarding the second and the third indication for SEP-856, it's one of the most frequently asked questions, and we were -- we have not answered -- yes, however, internally, we made decisions on the second and the third indication. We should be able to let you now soon. We are not ready to make a comment today.
And I could not hear the second question very well, I'm afraid.
I was asking about the readout for SEP-856 Phase III studies. I think you have 2 primary completion dates this year. Is there a possibility you missed the date?
The studies are ongoing and making progress. But as you know, the impact of the COVID-19 pandemic has affected some parts of the studies. We are closely monitoring the time line, but we don't know how long is the delay at this point.
Oda from Morgan Stanley. I have a few questions, please. First is about new possible alliance in your presentation. You mentioned milestone revenues. In other words, just to confirm, are you expecting revenues and profit in FY 2021? If milestone income is included in FY '21 budget, the North America revenues in FY '22 on Slide 40, it looks like guessing from napabucasin, JPY 120 billion will be new sales. And the revenue from new alliance is not included. That's my understanding. Is this correct?
The new milestone for new alliance was analyzed or past development as well as future. A lot of analysis was performed. So that upfront versus deferred milestones will be recognized properly. For FY 2021, the upfront is higher, but in later years, it's not that high. The accounting treatment will be finalized after agreement is signed, and there could be some small differences. But overall, the first year will be higher, but second years and later years will be less.
My second question is regarding North America others revenues. The other analyst was asking the same question earlier. So North America others were JPY 20 billion in FY 2020 and will increase to JPY 88.2 billion in FY 2021. That's a significant increase. Earlier, you said upfront payment is high, but let's just assume half of JPY 68.2 billion will be the upfront revenues. But still revenues for 2 new products, ORGOVYX and GEMTESA as well as relugolix for uterine fibroids, 3 products in total, I think you estimated quite high sales as well. So my question is, can you really achieve this revenue forecast? When I look at the performance of ORGOVYX in the last 3 months, the revenue was JPY 400 million, which makes it harder to expect JPY 30 billion in revenue. Please give us some insight about the forecast, taking into account the recent uptake for ORGOVYX and GEMTESA?
Earlier, a question was asked whether the forecast would be revised downward for new products. But well, we started promoting the new product. Similar questions were asked when we had Sumitovant meeting in March. Leuprolide is one of the competitors for us, and the injection is administered at doctors' office. Prescribers want to see incentives to switch from Lupron to ORGOVYX economically, and they must see and feel ORGOVYX is a better choice and maybe look at head-to-head data as well, and the treatment has to be economically justified. So we have to address agreements with doctors one at a time, which takes time, especially at the beginning. So the beginning was a bit challenging, but I was told things are going well. Just because the revenues were about JPY 300 million from January through March, it doesn't mean the remaining 3 quarters will be the same. That's my understanding. Perhaps it would help to discuss the matter by showing more details, but we cannot do that today. So you might be thinking the target is too high. But I think the forecasts are achievable.
GEMTESA was just launched in April, so I don't know the situation, but is the launch uptake good?
As far as I know, GEMTESA is also doing very well. Perhaps we should show more numbers because we took Urovant private, and it is no longer a publicly traded company. But in light of competition, it's not a good idea to show detailed numbers strategically. That's why we are not showing forecast. But I was told, GEMTESA is making good progress.
My last question is regarding FY 2023 when LATUDA goes off patent. In your presentation, you said you were considering generating revenues through selling products post loss of exclusivity or selling R&D assets to external parties. The sales will drop significantly post LATUDA period, and there is a possibility that you post a profit loss in FY '23. Are you working on divestiture, so that you would not end up in a loss? Or would you accept an operating loss temporarily?
As you pointed out, there is a possibility of an operating loss. However, we don't think it's acceptable. We operate by raising capital from shareholders. Operating loss means we did not manage the capital effectively from shareholders. We don't think it cannot be helped. We are making every effort to avoid an operating loss. But there is a possibility of our core operating loss. As you said, selling post exclusivity period product is an option, such as LUNESTA, XOPENEX, PROBANA. Divestiture is an option because we have a lot of long list of products in our portfolio.
Wakao from JPMorgan. My first question is on Slide 39. You told us earlier about what could contribute the most to core operating profit in FY 2025. I would like to understand how you're planning to achieve JPY 750 billion in revenue, please?
In FY '22, the revenues will be JPY 600 billion followed LATUDA loss of exclusivity, so revenues will drop by JPY 200 billion for LATUDA North America. How are you going to generate JPY 350 billion? The indication for SEP-363856 is schizophrenia, which is not a big market. So I'm thinking most of revenues will be offset by Sumitovant product, maybe JPY 300 billion generated by Sumitovant companies. I would like to know the breakdown of revenue for Sumitovant, such as milestone revenues and revenues from promotions, such as revenues by region, such as North America and Europe.
In FY 2025, the revenues driver will be Sumitovant product. Relugolix will contribute more than vibegron. That's what we are estimating for FY '25. And did you also ask about revenue forecast outside the U.S.?
Yes. I think you will receive royalty income for Europe. So I want to know about that. Do you think the revenues in North America account for the majority?
Yes. North America sales are the biggest piece.
I see. My second question is your efforts to achieve operational excellence and structural reform that you explained in your presentation. I was under the impression that you will be cutting SG&A expenses to a certain degree. To what extent will you reduce expenses? This year's forecast for SG&A, I believe, is JPY 263 billion. How will the forecast change, excluding payment to Pfizer from Sumitovant? I think you already reduced expenses for Japan business. And for North America, it will be difficult to reduce SG&A because of SEP-856, even though 856 will be less for LATUDA. To what extent do you believe you'll be able to control SG&A, please?
SG&A expenses will not increase, starting from FY 2022. That's how I see it. LATUDA expenses will decrease, which will absorb the increased spending from Sumitovant. So I don't anticipate increases for SG&A. The forecast this year appears to be an increase due to amortization of intangible assets. However, SG&A will not continue to increase in the future. As I explained in my midterm plan presentation, we'll be standing in accordance with the business scale. We will spend on Sumitovant to some degree because we must ensure success. But other than that, expenses will be reduced. As I said before, there are 2 holding companies in North America today. We should be able to allocate resources more appropriately after identifying ways to create synergies. So that's one thing. Our goal is to operate by generating synergies without increasing expenses. That's how we want to operate and how we intend to reduce cost.
My last question is this. When you presented the midterm plan before, you mentioned investing in merger and acquisition on a scale of JPY 300 billion to JPY 600 billion. I think you spent about JPY 400 billion for Roivant deal, which takes you with JPY 200 billion remaining. You didn't mention additional merger and acquisition opportunities in your presentation today. Are you're not considering further investment opportunities at this point? Are you planning on improving what you already have?
Thank you for your question. We already spent the JPY 300 billion. Later, we took Roivant private and acquired part of Roivant shares. So we already spent just shy of JPY 400 billion, as you pointed out. So the question is, are we going to embark on another large-scale M&A after this? Even if we did that, we don't have resources for acquiring and integrating a new company while making sure Sumitovant grow. We would need a lot more resources to do both. We don't have that kind of resources. As I said in my midterm presentation, we would like to focus on building Sumitovant as a growth driver. After we've done that, another M&A opportunity will be considered. So we are not planning on a larger scale M&A at this point. However, a small-size M&A could take place to acquire small seize or infrastructure technologies, but not large-scale M&A.
So the remaining JPY 200 billion will be spent on the small acquisition deals?
Yes.
Small scale?
In other words, we will not spend JPY 200 billion altogether at one-time on one deal. That's what I'm saying.
Barker from Jefferies. Roivant Sciences will go public through stack deal. You currently own about 10% share of Roivant, I believe. Please tell me the exact percent of shares now and after going public that you would hold?
It's 12%, both before and after going public. There's no change.
Do you think the assessment of shares you have will change after Roivant going public?
By going public, I'm sure the valuation will change. Now they are privately owned company and valuation is done as a private company every quarter. After they go public, shares will be traded. So valuation methodology will be different for the shares we have.
So that would change the value on balance sheet? Will it be affecting P&L?
No, not on P&L. It will probably affect comprehensive income, but not net profit attributable to owners of the parent.
I see. The other question I have is regarding R&D. The clinical trial for AMD was expected to start at the end of last year -- at the end of the fiscal year. I believe you will initiate that trial this year. When are you planning on starting AMD study?
Mr. Kimura will take your question.
Thank you for your question regarding regenerative medicine trial for AMD, age-related macular degeneration. The timing of initiating clinical trial will be in this fiscal year, but more towards the end of the fiscal year. In other words, after calendar year 2021.
So why is it taking a lot of time to start a study?
We have to build no clinical data enough to start a clinical trial. In this process, there have been a slight delay. That's what we explained to you before. Today, we have all the preclinical data we need. We are working on details before we start clinical studies. As you know, in the area of regenerative medicine, we must design trials to every details such as the types of patients they enroll and how to keep them treatment and how to read out data. And it takes time.
Sakai from Crédit Suisse. I have some clarifying questions on Slide 40. Some might say there is no point in asking about what's already happened and what's already presented here. But anyway I want to ask you, initially, you forecasted JPY 90 billion again for napabucasin. I think that was forecast only for colorectal cancer indication. And if you look at the core operating profit, were you expecting this matter of profit? And with that, if you look at Slide 41, Mr. Nomura, you said, probability of success is not adjusted for these early-stage assets. In other words, probability of success is 100%. I don't agree with the way you make plans here. I'm just having a hard time understanding how you create plans. And regarding FY 2023, the chart on Slide 41 is just an image, and it doesn't even show fiscal years. Is this an image just to show where you are heading? Is this correct understanding?
Thank you for your question. The JPY 90 billion for napabucasin was for both colorectal and pancreatic cancer. When I presented the midterm business plan earlier, I said pancreatic cancer study did not meet its primary endpoint, and the revenues will be less than half with colorectal cancer indication. So JPY 90 billion for both.
I presented revised midterm plan for FY '25 outlook. All of these targets are calculated with probability of success. So all development programs were calculated with probability, except for relugolix and vibegron because they are already approved.
And Slide 41, we did not multiply by probability of success on these programs because it would dilute the contributions of new products. This slide shows these many contributions from new products, and it's a visual representation of that. There's no other meanings. All the numbers you see are based on probability of success. In the previous midterm plan, there are questions about our approach. And this time, we did not multiply by probability. That's why.
I have one more question. If you could go back to Slide 39. You're showing JPY 600 billion in revenues and JPY 60 billion for core operating profit in FY 2022 and outlook for FY 2025. Is JPY 750 billion of revenues and JPY 120 billion in core operating profit, are you expecting still a great deal of sales milestone payment from Pfizer being in FY '23, '24 and '25? If so, how much are you estimating, if you could tell me? And also, regarding regain relugolix, GEMTESA, amortization of intangible assets will hit core operating profit, which constrains profit from FY '22 through '25. How much amortization are you forecasting each year?
Regarding JPY 750 billion in revenues in FY 2025, I cannot say how much will be for Pfizer. The increase will mostly come from Sumitovant, plus some contributions from SEP-856. According to the agreement we have in place, we received $650 million, of which $450 million will be returned, $500 million will be recorded in P&L for 6 years, as was disclosed in Form 10-Q and milestone payment at each range. Those are the basis for FY 2025.
Regarding amortization, JPY 27 billion in amortization for intangible assets are included in the forecast. I hope that answers your question.
Is that included in 2021 or '22?
The equal amount is included every year. Just to quantify, the amount I said is for 1 year, JPY 27 billion for the full year and will be recorded every year. This year is not JPY 27 billion because of the approval timing. So this year will be less than JPY 27 billion.
This is the end of the financial briefing. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]