Astellas Pharma Inc. (4503) Earnings Call Transcript & Summary

[Interpreted] Yasukawa speaking. Good morning. Thank you very much for participating in our financial presentation for FY 2019. As was explained, please regard to early documents while you listen to my presentation. I will mention the page number during my presentation. Please turn to Page 2. This is a cautionary statement regarding forward-looking information as usual, so I'd like to skip. Page 3. Before going into the contents of the results, let me explain our efforts against the spread of COVID-19. Stable supply of drugs, quality control, compliance with rules and regulations, safety management and information provision must be continued. To do so under the business continuity plan, those instructed by the company are continuing to carry out our essential business under strict measures to prevent infections. In principle, we are refraining from sales activities. In all regions globally, we continue to provide and gather necessary information in accordance with the rules of each medical institution. Regarding product supply, we work with outsourced manufacturers and suppliers of raw materials. And we maintain the appropriate inventory level of raw materials and finished products. So we think there is no problem in our product supply for the time being. In our clinical studies, ensuring patient safety and alleviating strain on health care settings is also an important mission for us. In EU, U.S. and Japan, we are suspending enrollment of new patients. On the other hand, in China and South Korea, we decided to resume our studies. So regarding the -- when we look at the situation of the institutions and the COVID-19 infections, we'd like to resume enrollment of the studies. Patients already enrolled into the study should not be dropped out, so we are working to minimize efforts to reduce the -- we are trying to minimize the dropouts. We're considering enable blood drawing and safety monitoring at home, so we've not yet visit the patients' homes. Page 4. We are implementing initiatives in response to requests from relevant bodies and relief activities. In Japan, we are providing compounds to cooperate in the basic screen plan for drugs for coronavirus diseases by MHLW and National Institute of Infectious Diseases. And we are also responding to requests from EFPIA and the Innovative Medicines Initiative to cooperate in activities aimed at developing drugs for the novel virus. Furthermore, we are receiving various proposals to use our products and compounds under development to treat COVID-19 infections. We are evaluating discussing these proposals rapidly. Regarding relief activities, we are making donations in regions where infections are spreading, such as China, U.S., Italy and Spain. And also our employees who are medically qualified, if they wish to participate in volunteer activities, are authorized to take paid leave. Page 5, please. From here on, I'd like to explain our financial results for fiscal 2019. Page 6. Consolidated financial results in our fiscal 2019 are summarized here. Revenue reached JPY 1.3008 trillion down 0.4% year-on-year. Core operating profit was JPY 277.8 billion, down 0.3% year-on-year. Excluding ForEx impact, revenue increased by 2.4% and core operating profit increased by 4.3% year-on-year. The bottom half of the slide shows our full basis results. Operating profit was JPY 244 billion, the same level as the previous fiscal year. At the bottom of the table, you can find early FY '19 profit, which declined by 12.1% to JPY 195.4 billion. Page 7. This page shows the FY '19 result overview summarized in comparison to FY '18 results. In FY '19, as we explained from the beginning of the term, due to LOE for Vesicare in EU and Europe -- EU and United States, Tarceva in the United States, and termination of Symbicort bio products in Japan, sales declined substantially. On the other hand, sales of main products, XTANDI and mirabegron; our new products, XOSPATA and EVENITY, increased steadily. So excluding ForEx impact, we were able to offset sales decrease to achieve increased revenue. As for expenses, SG&A costs increased substantially because of sales expansion for XTANDI in the United States because of the increase in the co-promotional fees. R&D expenditures also rose. Development costs for key late-stage projects increased. And also we have R&D expenditure for Audentes, which was added from the fourth quarter. We increased our investments into primary focus. As a result, it increased by JPY 15.5 billion. Amortization of intangible assets declined substantially because of the completion of amortization with LOE for Tarceva in the United States. Full basis results. Operating profit was the same level as the previous fiscal year. FY '19 profit declined. In the fourth quarter, we booked other expenses as is shown on the slide, including the liquidation of unvested stock options, et cetera, of Audentes and impairment losses of intangible assets due to renegotiation of contracts with Cytokinetics. Due to a one-off factor of the lower tax rate in the previous fiscal year in Belgium, but FY '19, it was a usual rate, like 20%. Next, Page 8. This page shows the comparison of the actual results and the forecast. At the beginning of the term, we thought that a decrease by LOE for Vesicare and Tarceva and termination of some products in Japan could not be completely offset. So in comparison to FY 2019 (sic) [ 2018 ], we had a forecast for substantial decrease in revenue and profit. For main products, where we can expect growth, we focused resource allocation and maximized growth opportunities. XTANDI and EVENITY had sales increase earlier than expected. We are able to capture growth expected for the next fiscal year and beyond. For XTANDI, in FY '19, our strategy was to fully leverage mega clinical study data to promote the use in earlier stages in the United States. The volume increased more than expected. In Europe, in main countries, first-line prescriptions within the approved indications increased steadily. In the international region, we had additional indications and expansion of reimbursement in Russia and Brazil, so the results exceeded our expectations. And due to the data of ENZAMET study, which is an investigator initiative study announced at ASCO, the benefit of using XTANDI earlier was understood better by urologists and oncologists, and there was a huge contribution. This turned out to be effective earlier than we thought. Regarding EVENITY, since the launch in March in 2019, due to new MOA once-a-month dosing and convenience in the use, and also doctors who conducted BMD testing felt the efficacy received high assessment, and there was a quick uptake. Market penetration was realized earlier than we initially assumed. Unexpected factors include transfer of products to Daiichi Sankyo and demand increase due to events beyond our control, and sales exceeded our forecast because of these factors. And the impact of generics on Vesicare and Tarceva in the United States and Micardis and Prograf in Japan was milder than expected. Because of these factors, both revenue and profit had landing to exceed our initial forecast. On a full basis, other expenses we booked in the fourth quarter, such as impairment loss, was not reflected in the forecast, so operating profit and FY '19 profit was lower than our forecast. Next, Page 9. Sales of main products. XTANDI sales grew steadily in all regions to reach JPY 400 billion. As I explained on the previous page, it exceeded the forecast to increase by 20% year-on-year. XOSPATA sales reached JPY 14.3 billion, up JPY 11.7 billion year-on-year. In the third quarter, it was launched in Europe as well. It will make full-scale contribution to business results from now, but we have seen steady initial uptake. PADCEV was launched in the United States in December 2019. Core promotion revenue was JPY 1.8 billion. There was a high level of interest among oncologists. New prescriptions are increasing. Mirabegron sales reached JPY 161.6 billion, up 10% year-on-year. It continues to grow globally. New products in Japan had sales of JPY 61.2 billion, up JPY 35 billion year-on-year. EVENITY, in particular, had sales increase by JPY 23 billion year-on-year. It made a great contribution to sales growth. Next, Slide 10. Accounting treatment of business combination with Audentes we acquired. This is still a provisional treatment at this moment, and this is subject to change, but let me explain our accounting treatment as of now. Based on the assessment of fair value as of the business combination date, we booked intangible assets of $2.62 billion and goodwill of $391 million. Intangible assets include: in-process R&D of $1.851 billion related to pipeline, including AT132. Amortization will start after the launch of each product. We also booked $769 million as technology assets related to AAV platform and manufacturing by Audentes. Amortization already started from FY '19. The amortization period has not been determined yet, but we're assuming 15-year amortization. We booked $11 million as amortization of intangible assets in FY '19. If there is any change in our accounting treatment, we will give you an update when we announce our financial results. Next, Slide 11. From here on, let me explain our FY 2020 forecast. We are announcing FY 2020 forecast, which does not include the impact of COVID-19. Our revenue will be JPY 1.282 trillion, down 1.4% year-on-year according to our forecast. We are expecting R&D expenditure to be JPY 239 billion. As a result, core operating profit will be JPY 257 billion, down 7.5% year-on-year. The bottom half of the page is our full basis forecast. Operating profit will be JPY 252 billion, up 3.3% year-on-year in our forecast. Next, Page 12. Overview of FY 2020 forecast. This is about the background. FY 2020 is the final year under our strategic plan. 2019, we're expecting that we can achieve our targets in the strategic plan. Main products, such as XTANDI will continue to grow. Our new product [indiscernible] sales will contribute on a full year basis. Sales declined for Vesicare, EU; Symbicort in Japan and KM bio product, and that impact will continue. And in FY '20, there is going to be LOE for Celecox, MYCAMINE and Funguard. And there is termination of sales and distribution for Micardis, and we're expecting a decline in our sales. We will offset these factors to secure the same level of revenue as FY 2019. R&D expenditure, we will have Audentes expenses to be incurred on a full year basis. And we will increase our investments into primary focus, such as immuno-oncology. Regarding SG&A costs, we're expecting an increase in investment into new products and growth in products and co-promotional fees for XTANDI in the United States. So FY 2020 core operating profit margin is going to be 20% according to our forecast. Page 13. I explained the overview of our forecast on the previous page. This Page 13 explains the analysis of core operating profit. Excluding one-off items in FY 2019, growth of new products and growing products and the pursuit of cost efficiency offset sales decrease in other products and increase in strategic investments. FY '19 results include earlier capture of future growth for XTANDI and EVENITY, but still, we're expecting operating profit to increase. In comparison to our strategic plan, which is not taken into consideration on this slide, but as we explained on Page 8, the impact of generics was milder than expected. When we developed the strategic plan, as a result of a big impact in FY '19, reduction will shrink in FY '20 in our forecast. But actually, the impact of generics on many LOE products, such as Vesicare, was milder than our assumptions in strategic plan in FY '19, therefore, there was an upside in our business results, as I mentioned before. So generic impact yet to come will occur later in FY 2020. And so in comparison to the assumptions in the strategic plan, there can be some variance, which I explained right now. Next, Page 14. Let me explain the impact of COVID-19 on our financial results. In FY '19, sales increased due to inventory buildup, and cost decrease due to reduced sales promotion activities occurred, but we think there was no major impact on our consolidated results. In FY '20, we developed the forecast in February and March. When we developed our plan, what is going to be the potential impact, it's difficult to assess properly. There can be a potential impact on market penetration of new product soon after the launch, review by regulatory authorities of development compounds in the filing stage, clinical development and GMP product, manufacturing time line and one-off costs to deal with crisis management. Usually, we review our forecast in October a half year later. But this year, at the end of the first quarter, based on the latest situation, we will review our forecast once again. Next Page 15. Let me explain main growth drivers in FY 2020. On Page 15, XTANDI and mirabegron are explained. Regarding XTANDI, under our strategic plan, we expected FY '17 to '20 CAGR to be at the high single-digit level. But according to current forecast, it's going to be 16% growth. Good performance from FY '19 will be maintained, and we will aim for an increase in the volume by 20% in the United States. In Europe and international region, all countries will reimburse this drug, and we expect the prescription increase, and we are expecting sales to grow due to additional indications. In China, where it was launched in March, we are aiming for the inclusion in the National Reimbursement Drug List, NRDL. Sales are expected to be JPY 459.3 billion in FY '20, up JPY 59.3 billion year-on-year. We're expecting sales increase in all regions continuously. Next, on mirabegron. Under our strategic plan, FY '17 to '20 CAGR forecast was at the lower 10% level. Thanks to market expansion through disease awareness activities and further penetration of product features, we were able to exceed the forecast, and we are expecting sales increase globally. We expect sales to grow to JPY 172.5 billion, up JPY 10.9 billion year-on-year. Page 16. XOSPATA. The current indication is the relapsed or refractory AML. In addition to that, for additional indications, we are conducting Phase III studies in earlier stages of AML. At the end of 2019, it was launched in Japan and the United States and also in established markets. We started selling the product in Austria, U.K. and Germany as well. In FY 2020, it's going to make a full year contribution to the results. In the international region, in March, it was approved in South Korea and Australia. We also filed in China as well. We're expecting the launch in the near future in these countries as well. It was recommended as Category 1 by NCCN Guidelines. So by promoting or the penetration further among hematologists and oncologists, we are expecting sales to be JPY 23.2 billion in FY 2020, up JPY 8.9 billion year-on-year. Next, PADCEV. Under the Accelerated Approval Program in the United States, it was approved in patients previously treated with platinum and PD-1 and PDL-1 inhibitors. It was launched in December 2019. For additional indication, we are conducting clinical studies in first to early-stage metastatic urothelial cancer, including first-line therapies and other tumor types. This was added to NCCN Guidelines soon after the approval, Evrenzo in Japan. This was launched in November 2019 as a treatment of renal anemia in patients on dialysis in Japan. We also filed in January 2020 for nondialysis as well. There was a reimbursement fee revision in April. Outside of the hospital prescription is now possible. So some institutions had to take time for in-hospital adoption, but prescription is now possible, so we're expecting sales to increase. Now Slide 17. New local products in Japan, this is the forecast of the sales. As you find in the middle of the slide, the total sales of new products in Japan are expected to increase by 26% in FY '20 year-on-year. We see steady progress against the target value of JPY 100 billion or more in the first half of 2020. Now Slide 18, progress towards the Strategic Plan 2018 guidance. The second year of the strategic plan started in 2018 has ended, and efforts to each strategic goals are progressing smoothly, and some of them have achieved more than expected. We have made investments that were not included in the initial plan for sustainable growth. In the later stage, I'm going to give you the summarize information about the asset -- outside asset recently acquired. We did the additional investment not planned in the planning. And also further asset acquisition, we are expecting additional investment. And we'll -- with now these factors included, it is expected that the target for FY '20 that was originally posted in the strategic plan will be achieved. In terms of numbers, it is the level of initial guidance, but we believe that we are making great strides towards our vision by further strengthening our business foundation and proactively investing in the future. Page 20. So here is a summary of our focus of activities in China. Development of key late-stage products in China made a steady progress in FY '19. Multiple development programs are in the late stage with the 4 oncology products, such as XTANDI and fezolinetant, with a large market potential. In March FY '20, XTANDI was launched for M1 CRPC indications. It has been planned and put on the market without major delay due to the spread of new coronavirus infection. In March of the same year, an application for approval of gilteritinib for the indication of relapse and refractory AML has been submitted. To accelerate the development and the launch of these multiple programs, we have invested sufficient resources in 2019 to strengthen the development and the regulatory functions of China. As I have explained so far, if all the late-stage development products are succeeded as planned, we believe that the overall sales of Chinese business will reach JPY 200 billion in the latter half of the 2020. Slide 21 shows the progress of 6 post-POC projects in FY '19. The center-right column shows the development phase for each project depending on the indication. F means filed, a means approved. The products that have achieved milestones, such as application approval or phase transfer within FY '19 is marked with an asterisk, and the right-most column shows the contents of that milestone. For all these 6 post-POC projects, we have been able to achieve many milestones, which is considered to be quite important within FY '19. Slide 22 shows the key post-POC projects status updates. The progress since the last announcement in January this year is underlined. In addition to the existing 6 key post-POC projects, I would like to introduce the current status of the gene therapy lead program, AT132, acquired by the acquisition of Audentes in January this year. Upper left, this is about enzalutamide. Favorable OS data were obtained in the Phase III PROSPER study of M0 CRPC. Details of the data are scheduled to be announced at the ASCO at the end of this month. Upper middle, you can find the gilteritinib relapsed or refractory AML is already approved and marketed in Japan, the United States and Europe; and in March this year, also apply to China. Upper right, enfortumab vedotin. It received the Breakthrough Therapy designation from FDA in February for the combination of enfortumab vedotin and pembrolizumab as the first-line treatment of previously nontreated metastatic urothelial carcinoma. For first-line indication, Phase III has also begun with the first subject dosed in April. In addition, a Phase II study was started for solid tumors other than urothelial cancer. Bottom right, you can find the fezolinetant. Following the western countries, Phase III trials have begun in Asia as well. Bottom row, added is AT132, this gene therapy program also introduced in the conference call regarding the acquisition of Audentes in December last year. The indication is X-linked myotubular myopathy. This is a rare neuromuscular disease caused by a functional defect mutation in the MTM1 gene. A pivotal expansion cohort in the clinical registration study of AT132 is currently ongoing. Now Slide 23. This is the progress in focus area approach. As the progress of the focus area approach, which is 1 of the 3 strategic goals of the Strategic Plan 2018, the main events in FY '19 are classified by product category and business development category depending on biology in this list. With the acquisition of Audentes, you can find the new one at the very bottom. That is genetic regulation. The multiple items are added other than the genetic therapy, but also the business-related multiple acquisition and partnership taking place. Let me introduce the recent events since the last financial results announcement. First, immuno-oncology. We have the collaboration agreement with CytomX. This is briefly explained in the next slide. Mitochondria biology as a business development-related event, we acquired Nanna, a British company. Nanna is the U.K. bio venture company focused on drug discovery research for aging-related disease with high unmet medical needs, including mitochondria-related diseases. Nanna's unique DNA-encoded compound library technology can create a compound library with a variety of chemical structure more than it could be done with conventional technology. And furthermore, it makes it possible to screen chemical compounds affecting intracellular targets, which is impossible with the current technology. This technology can be applied to various assays. And it may be possible to achieve screening targeting specific disease biology by using patient-derived cells. By acquiring this capability, Astellas has significantly strengthened its early drug discovery research, and we hope new therapies to response to unmet medical needs, including not only mitochondria-related disease but also aging and immuno metabolism will be generated. In addition, regarding gene therapy, the second program from Audentes, AT845, went into the Phase I with the indication of Pompe disease, which is a rare neuromuscular disease. Slide 24. This is about the CytomX technology. You cannot find the Probody concept, that is the unique technology of the CytomX. This figure shows general antibody image. So the 2 antigen-binding sites of the antibody are the same color, but this partnership agreement is a bispecific antibody. So in fact, these 2 arms are different. First, I would like you to understand the biggest feature of Probody is masking peptide. The left figure shows the normal tissue, which has a masking peptide, which lives on the antigen-binding site of the antibody to limit the binding of antibodies to normal tissue. On the other hand, in the right figure, in the microenvironment of the cancer tissue, a substrate that connects the antibody with the masking peptide is clipped by protease as the masking peptide link is removed from antibody. Then the antibody activities and it becomes -- then the antibody activates and becomes able to bind to the target on the cancer cells. In this concept, the binding of antibody to normal cell is minimized and selectively binds to cancer cells to reduce toxicity, resulting in better safety and efficacy expected. We expect that this partnership with CytomX regarding the bispecific antibody will further expand immuno-oncology platform of Astellas. Page 25. This is the progress of the cancer immunity pipeline. The figure of the cancer immunity cycle of adaptive immunity and innate immunity shown in the R&D meeting in December last year is shown here once again. So the underlined and the yellow highlight in the pipelines have been added since the R&D meeting last December. Going forward, we will continue to strengthen and expand the pipeline for the next-generation immuno-oncology therapy targeting the entire cancer immune cycle and focus on creating innovative medicines that respond to unmet medical needs of patients. Slide 26, COVID impact on clinical development, which is summarized within this slide. As I touched on the beginning of this session, while this pandemic continued, the patient safety and reducing the burden on the medical system are our top priority. Usually, in the beginning of the fiscal year, we announce the fiscal financial results, and as major events planned for this fiscal year, milestones such as study data of important clinical trials, approval and applications are introduced. However, given the end of the pandemic not seen yet and ever-changing situation, it is difficult to assess the impact of the situation on these important milestones at this time. We are going to appropriately assess the progress of clinical trials and the impact of pandemic, some key milestone time lines and presenting any changes, if necessary, in a timely manner through financial statements and ClinicalTrials.gov. Slide 27. From here, I would like to explain you about Rx business. In this fiscal year, Rx+ story was established as a strategic direction for Rx+ business creation, and we shifted from the opportunity research stage to a business strategy aimed at establishing a strong business foundation. We see good progress in commercialization of each program. Today, I'm going to explain exercise support application, which has progressed since the third quarter financial results presentation. Slide 28. As of October 2018, Astellas has started joint development of apps for smartphone to support for those who need continuous exercise with BANDAI NAMCO Entertainment to provide a science-based exercise program. So this is the -- a part of the approach of the gamification. With the agreements signed this time, the 2 companies will move to the next step toward commercialization of exercise therapy support apps based on the results gained so far. This contract does 2 things: One is the medical and health research about the usefulness of the exercise design, which is considered effective. We aim to provide a science-based exercise program and generate such evidence through medical and health research. The other is app improvements. We are aiming for continuous access and support as our other goal. To achieve this, it is necessary to improve the user experience and easeness of use as well as user interface. In this contract, we jointly work for the improvement of this exercise program used in upcoming medical and health research for planned test self in the future. Slide 29 covers about the climate change mitigation measures. Greenhouse gas emission reduction -- well, whether we believe that environment efforts are also important for sustainable growth. Greenhouse gas emission reduction target for the climate change of Astellas is that by 2030, globally, greenhouse gas emissions from its own business activities is reduced by 30%. And we've done the activities already in various factories. For example, the Kerry factory in Ireland is achieving the emission reduction with the introduction of power generation facilities, wood chip biomass boilers, solar panels, electricity derived from renewable energy. We achieved almost 0 emission. Thanks to this from the Minister of Environment, we've received the best building awards. Also from this April, we switched all power consumed to hydroelectric power at 3 domestic sites. This is expected to reduce greenhouse gas emissions from the 3 business sites by 31 kilotons. This is equivalent to 15% of FY '15 emissions, which is the target base. Thus, it will greatly affect the achievement of the plan. We will continue to strengthen our efforts for this climate change. Page 30. Now this is about the capital allocation. Page 31 shows the chart that I always refer to. Now that uncertainty is increasing in society, we have no intention to change the conventional policy shown in the upper row of the slide. Business investment for growth is top priority. As shown in the bottom left of the slide in FY '19 was acquired and partnership with Audentes and so on. We will continue to pursue business development opportunities in line with our strategy. Dividends will increase steadily and sustainably based on medium to long-term profit growth. The company has aimed to increase the dividend every year in our strategic plan. The dividend for FY '20 is expected to increase by JPY 2 to JPY 42. The policy regarding share buyback has not changed. It will be implemented flexibly in the future. But so far, there is no plan of share buyback. We will continue to work to improve shareholder returns and capital efficiency. This is all the explanation I would like -- I wanted to make here today. Thank you.

[Interpreted] That's all from our company. Next, we'd like to entertain your questions. [Operator Instructions]

[Foreign Language] [Operator Instructions]

[Interpreted] [Operator Instructions] Our CMO, Bernie Zeiher, is attending. If Bernie is going to answer your question, it's going to be consecutive translation. So that those on the Japanese line can listen to him directly. So in both channels, after the English answer, there is going to be the voice of the interpreters for the translation into Japanese. Now the operator is checking. So please wait for a while.

[Operator Instructions]

[Interpreted] We have received many questions, and the operator is continuing to confirm. So please wait for some more time. Thank you.

[Interpreted] The first question, Citigroup, Mr. Yamaguchi.

[Interpreted] I'm Yamaguchi from Citigroup. My first question. The next midterm business plan and your philosophy behind. In the midterm business plan, there were ups and downs in the numbers. But overall, it was in line with your assumptions overall. In the next midterm business plan, it's going to be announced next fiscal year, I think. New drug development is going to be the situation to increase your competitiveness, generally speaking. Is my understanding correct? I'd like to confirm.

[Interpreted] Thank you for your question. Yasukawa speaking. We are not thinking of changing the business overall. As before, science-based primary focus will be built one by one and flagship compound there should make steady progress. That is going to be the core. RX+ will also be implemented as well. As we said from before, generic OTC, authorized generics.

[Interpreted] You're not thinking of shifting in that direction? So in order to cover the loss of exclusivity, for these 3 years, you've been fighting against that. But that situation will be changed?

[Interpreted] Yasukawa speaking. These 3 years, last year, this year, as you have learned from our explanation, we experienced the peak of the change of the pipelines. From that perspective, well, in the past, we used the word of the patent cliff. But the next fiscal year and afterwards, that negative impact will be -- isn't. So XOSPATA and enfortumab vedotin, those are going to be fully contributed as new products. And the -- we've been seeing the 6 post-POC products or programs remaining as fezolinetant and zolbetuximab. Those submissions are also within the scope of the business.

[Interpreted] My second question is about PADCEV. Sales, about half vis-à-vis Seattle Genetics. You don't have a full year forecast because of relationship with Seattle Genetics. Are you expecting a strong growth? And Breakthrough Therapy designation was granted. So is it possible for earlier filings before the end of the studies? Can we assume such a scenario? So those are my 2 questions.

[Interpreted] It's a compound soon after the launch, and we have a partner, so we would like to refrain from disclosing the numbers. Thank you for your understanding. During the current fiscal year, in other countries, we cannot expect approval yet. In FY '20, it's going to be growth just in the United States we can expect. Regarding other indications and the possibility of early approval, we'd like to pursue such possibility one by one.

[Interpreted] Understood. One last question. Share buyback, you are not going to do this. That's what you mentioned. But does that means you are not going to do that throughout this fiscal year? Or you're not going to do this just this month?

[Interpreted] There is no such case will happen in the near future. Throughout this fiscal year, we have to think, depending on the situation.

[Interpreted] Next, Daiwa Securities, Mr. Hashiguchi, please.

[Interpreted] Hashiguchi speaking. The impact of COVID-19, I have a few questions. First, regarding your revenue or sales as of now, could you share the impact on your mind? XTANDI net price mainly in the United States, what is the impact? What about progress? Surgeries are being postponed. And what about the possible impact, EVENITY? Once a month of cutaneous injection. Patients may want to reduce the visit frequency. What is the impact on that product? Could you explain?

[Interpreted] Yasukawa speaking. Thank you for your question. Regarding this question, Matsui, would you like to respond?

[Interpreted] Matsui speaking. Let me comment from my side. First, the number of transplantations is decreasing. The growingness related sales and revenues are being affected. Regarding this, the number of transplants, we have not captured the numbers in all countries. But in January, February and March, and particularly February and March, looking at China, there was a substantial decrease. But as you may know, progress to growing this business regarding the transplantation, it's annuity-based for more than 90%. In the previous fiscal year and before, those who are using from before are continuing to use this. The portion of the impact on new patient is not so big in the short term. And the number of transplants is declining on a one-off basis, but those patients do not need transplantation. That's not really the case. In that sense, how to recover from the small number? We have to closely watch together with the situation of COVID-19. As we gave you the guidance, we'd like to examine the details once again in June and share the information with you. Regarding your question about XTANDI, at the beginning, impact on XTANDI sales. Unemployment is going up to increase pat. That may be your question. We'd like to examine the situation further from now on. For the time being, we don't confirm any major trend. For the time being, there can be a variety of factors in reality. Application for pat -- patients may not be able to come and visit. But because of cancer, you may have to use the drugs. So including this, sorry, we're not being able to fully respond to your question. We'd like to examine the details from now on.

[Interpreted] What about the other elements, which could be affected?

[Interpreted] For the time being, patients cannot come to the hospital for the time being, not just in the United States, but in some other countries as well. This was confirmed. This is oncology drugs. You cannot discontinue in the middle. So instead of a monthly prescription, there is some longer-term prescription in some cases. It's going to be offset on a yearly basis. I don't know whether it's going to be a major impact, but what we have to consider for the future is the indications under filing, what is going to be the impact on the review. Including this point, at the end of June, we'd like to review so that we can share some information with you. Did I answer your question.

[Interpreted] I hope so. What about EVENITY, regarding EVENITY once-a-month prescription?

[Interpreted] Could you repeat your question? Sorry, what was your question?

[Interpreted] Once-a-month subcutaneous injection is given. Patients may want to minimize the number of visits. They may want to switch to orally administered drugs at home. Any such tendency?

[Interpreted] Patients on EVENITY, because of the indication as well have -- are at high risk of factors, they cannot be treated with other agents. Because of COVID-19, are they going to switch to other agents? Such risk is so more. New patients who cannot come to hospitals may exist. But are those already taking the drug going to switch to other agents because of COVID-19? That's not part of assumptions right now.

[Interpreted] Now about the impact into clinical trials. If there's some significant cases, would you please introduce us? For example, Page 22, those are quite important, the post-POC projects, key post-POC projects, especially. My impression is that many of them have completed for the entry. Zolbetuximab Phase III, the -- you are still in the middle of the entry. But for the oncology, there is a nuance of the description that should be studied as early as possible, so there might be no such great impact. But in matters to your members, do you see some impact might take place?

[Interpreted] Yasukawa speaking. So your question is clinical trials that might be greatly impacted. And if there are such studies and programs, please explain about that. Then Bernie, could -- we would like to ask Bernie to explain about this or response about this?

Yes. Thank you for the question. Maybe I'll just talk about each program separately. So enzalutamide is the easiest in that the studies, especially the EMBARK study, is fully enrolled. It is now an event-driven study. So it will not be impacted by COVID. I'll stop and let the translation. [Foreign Language] So for gilteritinib, the study did pause enrollment. However, given that acute myeloid leukemia is such a critical illness, we would expect that as sites are able to reopen and conduct the studies, that the impact would not be a major impact. [Foreign Language] For enfortumab vedotin, there -- the key study is a large 1,000-patient study that is comparing enfortumab vedotin plus pembrolizumab to chemotherapy to a combination of enfortumab vedotin, pembrolizumab and chemotherapy. That study was in the start-up phase right as COVID was also impacting. It will have a slower start-up and so -- but at this point, we don't know the full impact. But because it occurred during the start-up phase, it will slow the start-up of that study. [Foreign Language] For zolbetuximab, the Phase III study, there will be some slowing because the COVID will have an impact on sites that are open and actively recruiting. But what it will do is mostly be a slowing because China, Korea, Taiwan are opening back up, and we anticipate within the next month or 2 that we should be able to start reopening in U.S. and Europe. So there will be a slowing that occurred, but we actually think, because it is an oncology indication, that it will resume and begin to recruit well within the next 1 to 2 months. [Foreign Language] For roxadustat, the anemia trials -- anemia associated with chronic kidney disease trials are fully enrolled, so there should be no impact. [Foreign Language] And then for fezolinetant, there will be some slowing of the enrollment because we had to pause enrollment. A major focus for us has been to try to maintain the patients in the trial. Once you recruit them, if you lose them, it -- the missing data can be very damaging to the trial. So we focus tremendous effort on making sure we maintain patients in the trial, and we believe we've been, thus far, successful in doing so. [Foreign Language] And just to continue on fezolinetant. Now that China and Korea, Taiwan are opening, we should be able to initiate the Phase III studies. Those had been on hold or paused until COVID had declined in those countries. [Foreign Language] And then finally, for AT132, the pivotal expansion cohort is fully enrolled. There are still some patients to be dosed, so those have been delayed until COVID has passed. So there will be some impact, but we think it will be modest. [Foreign Language]

[Interpreted] Crédit Suisse, Mr. Sakai.

[Interpreted] Sakai speaking. There are 2 questions here. First, R&D. It seems to me there's a tendency of increase. You have focus area. Probably, the investment is made more. Audentes R&D annually, it's around JPY 10 billion according to the explanation. If so there is about JPY 400 million increase in other areas. So pipeline-wise, I don't think there will be the increase in here. But looking at the breakdowns of R&D, which part experienced the increase? For example, how much will be brought into the focus? Or for our research and development, what's the proportion of your investment? Could you give us your response?

[Interpreted] Yasukawa speaking. Thank you for your question. R&D cost, you would like to hear the breakdowns about that. I think that is your question. Now Okamura is going to answer you.

[Interpreted] Okamura speaking. I'm checking the detailed number here, and I'm not sure to what extent I can explain you. But just like Yasukawa mentioned, basically, primary focus, the 5 areas. The -- in there, the cost is increased as has been expected. In that sense, although it's not called as a primary focus, but some are part of the focus area approach. And as such, projects are on the increase, some not included within the focus area approach. Of course, some tests have been completed, and also from the decision-making's perspective, they are carried out just like planned. And if you look at FY '20 forecast, R&D percentage is higher against the revenue, and you might worry that this may continue. But the basic of the forecast of this FY '20, just like Dr. Yasukawa mentioned, in this March was that all the divisions, we did due consideration and we came to the agreement of the numbers with each division. And that number is the foundation here. In that time, it was immediately after the acquisition of Audentes, and the reduction of the Audentes R&D cost is not our intention. But also R&D has a plan of the clinical trials and delay. Some of those is difficult to be discussed around that time. So to put it in a simple way, the proportion now of the Audentes is directly added upon. However, we've been saying that we look at the impact of COVID in the first quarter, but COVID is not just one factor. We have to look at the overall review about the situation. And based upon that, depending on the priority, there might be some to be reduced. In a year-on-year basis or every year basis, Audentes is going to be the part of Astellas gradually. So including Audentes as well, we would like to look at the R&D ratio against revenue and including the Audentes just part of our cost or the investment. So it's going to be going in that way.

[Interpreted] So Audentes. So that proportion is directly added upon, and that's the way you calculate it? Sorry, it was difficult to hear you. So proportion of Audentes, that's about JPY 10 billion. And at that proportion, is it just that simply added upon. Is this interpretation right?

[Interpreted] The increase is mostly due to the Audentes. You can consider that in that way.

[Interpreted] Page 24, CytomX. Sorry, I didn't take a look closely on this page. CytomX. This is a technology platform from you or your business partner. Perhaps you have to have antibodies somewhere. This technology platform, including the wide range of existing antibodies can be applied broadly. I heard this time masking peptide for the first time. Is this exclusive?

[Interpreted] CytomX technology platform scalability and also on the scope of the rights we acquired. Okamura, would you like to respond.

[Interpreted] Okamura speaking. First of all, Probody is a technology platform. It's not just for us. Amgen and CytomX are already working together in collaboration. We decided to form alliance with them for certain cancer antigen. The volume is already determined in advance. A certain cancer antigen, the other cyto T-cell binding bispecific antibody is going to be created under the agreement we entered into. The technology itself is not exclusive just for us, but we agreed on the cancer antigen, for that item, exclusive agreement.

[Interpreted] And cancer antigen, how many are there?

[Interpreted] That cannot be disclosed, sorry.

[Interpreted] Nomura Securities, Mr. Kohtani.

[Interpreted] Kohtani from Nomura. Can you hear me?

[Interpreted] Yes. Please start.

[Interpreted] First question, this might be a tough question for you. It's zolbetuximab. So peak is like JPY 100 billion to JPY 200 billion. And in China, at what, the second half, there's a contribution of JPY 2 billion. I think it's quite promising. However, the environment of the gastric cancer is quite a tough of [indiscernible] and also enhance -- and KEYTRUDA. There was no restriction, although the study is quite limited, and there is a completion of about 70%. And you come up with this number. Do you still have confidence? And the Phase II study, April 28, it was announced to be postponed to October. With this study, what are you expecting? Cohort 1a and 2 are there. 1a is monotherapy or single dose or around -- was [ 9% ] in the previous study, so there is not really promising. But cohort 2, mFOLFOX6, so this is what is probably used in the United States, so the positioning of this study as well. So if ORR is good, then you can directly get into their submission? Or you just would like to confirm the setting? What's the positioning of this study?

[Interpreted] Yasukawa speaking. So that's about the positioning of this study currently conducted with those study. What can be observed or received as a result? That's to be answered by Bernie. Do you think you can answer to this question, Bernie?

Yes, I can try to answer it. So the Phase II study has a couple of purposes. One was to evaluate whether there was activity in monotherapy that would suggest we could take an accelerated path that in that way. And we will not be pursuing the monotherapy direction. I'll stop for a second. [Foreign Language] The second cohort in the study is looking at a combination with FOLFOX. And that cohort is intended to actually fill some gaps in what was already part of the program. Prior to our licensing this antibody, it was only studied with a different chemotherapy. We need to assess any effect on pharmacokinetics and look for a number of biomarkers so this cohort will supplement the other Phase III data. [Foreign Language] Finally, we amended the protocol to include a combination with pembrolizumab because we believe there is some rationale to combine them, and we want to see, could they be used safely together. And do we see some signal of enhanced efficacy? [Foreign Language]

[Interpreted] So let me make a clarification. So the monotherapy, the result is already available. And also based upon that result, do you consider that you decided to discontinue. The question to Yasukawa-san is available as well.

[Interpreted] So Yasukawa. Let me answer you once again. For this gastric cancer, unmet medical needs is on the increase, and that is what we've been expected. And also as has been shown in the immuno oncology, with the super-synergistic partly, that shows a certain level of efficacy. But of course, there is no responder as well. That's our assumption. So still, we believe that there is a value on this project -- product remaining. For unmet medical needs, the size is always revisited.

[Interpreted] As for the monotherapy submission, so far, there was no plan for that that's my understanding. Is there any additional comment from the development side?

[Interpreted] Well, Kitagawa-san is going to introduce the plan of the development for monotherapy. Kitagawa, would you like to respond?

[Interpreted] As Bernie sent a message earlier regarding monotherapy, as of now, there is no plan of development for monotherapy right now.

[Interpreted] Understood. My second question, 8374, TIGIT antibody, this is a hot topic. Merck and Roche are competing. P1 study, 363 patients are enrolled. There may be a delay until next fiscal year. You're going to complete? What's the purpose of the study? This is just the dose escalation to enroll 663? I don't think so. For fighting for approval, OS, PFS is not included. And the target indication is solid tumor. In [ COC ], gastric cancer CRc, this is a clouded space. Just with ORR, it can be difficult to obtain approval. So what's the positioning of this?

[Interpreted] Yasukawa speaking. TIGIT antibody, 363 subjects are enrolled into the study. And what's the objective of the study with this size? What's the target tumor type we are targeting right now. Bernie is going to respond.

Yes. Thank you for the question. So as you noted, that the TIGIT space is changing rapidly, it sounds like with the Roche upcoming announcements at ASCO. Our study is a Phase I study that includes -- first, it included a monotherapy dose escalation and now is being looked at in combination with pembrolizumab. [Foreign Language] The primary purpose of the combination part of the study is to look at safety. And then if there are signals of efficacy, then there are expansion cohorts. And if we see a signal, we will need an additional study or a much larger expansion to pursue a registration. [Foreign Language] Yet because of the fact that the checkpoint inhibitor, like pembrolizumab, will have, patients will have a response. And so you're looking for a response above that. You will need, again, a separate study that will need to be fairly large. With the new data from Roche, I think we need to ourselves look at the strategy for TIGIT. Again, this is, as you mentioned, a competitive area. And we'll have to determine the direction and tumor type that would make the most sense for us to pursue. [Foreign Language]

[Interpreted] So does -- the ASP3772, this is the pneumococcal vaccine. And the structure is different, but coronavirus and also pneumococcal are difficult to be differentiated. So you might delay greatly for this study. Or you might restart the study. Or with this successful, you might be able to use this for the either vaccine. At [ max ], they've looked at those. It seems to me that they're working for Pseudomonas as well. So if we make a great success, it might be possible for you to use this for other types of vaccination as well.

[Interpreted] Yasukawa speaking. Scientifically, yes, we are focusing on that, paying attention onto that. If you see, the 3772 is effective. It can be used for other microbio builds as well. And the development of 3772, what's the impact that received from the COVID, that's going to be explained by development side.

[Interpreted] Then me. I'm going to answer to that. As has been pointed out, this 3772 clinical trial, while due to the COVID-19, temporarily, it is in the status of a hold. But just like Bernie mentioned a little while ago, country base -- country by country, we have a scenario of the reopening. The safety of the patients and burden of the medical experts need to be cautiously considered. But the primary reopening is oncology phase. Of course, there is a certain impact, but we would like to look at the situation accordingly for the reopening.

[Interpreted] It's time to close. We are receiving more questions, but sorry. With this, we try to close this explanatory meeting here. Thank you very much for your participation today. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]