Astellas Pharma Inc. ($4503)

Thank you for taking time out of your busy schedules to join us today for Astellas R&D Day. I am Kato, Chief Communications and IR Officer, and I'll be serving as a moderator today. It is a pleasure to have you here. Following our presentation, we will move on to the Q&A session. The presentation will be based on the presentation materials available on our website. Simultaneous interpretation in Japanese and English will be provided throughout the event, including the Q&A session. Please note that we cannot guarantee the accuracy of the simultaneous interpretation. [Operator Instructions] Please note the following. This material or presentation and answers and statement for the company in the Q&A session by representatives includes forward-looking statements based on assumptions and beliefs in light of the information currently available and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including the product under development, but it is not intended to make any representations or advertisement of these preparations. The data we are going to introduce today is based upon the contents presented at the conference meeting. Let me introduce today's speakers, the presenters are Naoki Okamura, CEO. And Tadaaki Taniguchi, CRDO, Chief R&D Officer. Now presentation is started.

Good morning, everyone. I am Okamura from Astellas Pharma. Thank you very much for taking the time to join us for this briefing today. First of all, Astellas has a very clear vision. It is on the forefront of health care change to turn innovative science into value for patients. At Astellas, we defined this value in bold by placing the outcomes that are truly matter to patients in the numerator and the cost to the health care system of delivering those outcomes in the denominator. This approach serves as a guiding principle for decision-making across the entire company, including our R&D strategy. Please go to the Page 5. We adopt a research and development strategy known as the focus area approach with the goal of delivering meaningful outcome scenarios with high unmet medical needs. The focus area approach consists of three core elements: biology, modality and technology & disease. We begin by understanding the biology of the disease and its impact on patient lives. Next, we select the optimal modality or technology that aligns with the characteristics of the biology and apply it to the patients who are most likely to benefit. When these three elements are firmly linked to form a solid triangle, we define this as our primary focus. By providing around vertices of this triangle, we believe we can generate multiple valuable programs from a single scientific foundation. Page 6. We concentrated our R&D resources on areas where we possesses deep scientific expertise and have the highest potential to deliver value to patients. We currently have 4 primary focus: immuno-oncology, targeted protein degradation, blindness and regeneration and genetic regulation. For each primary focus, we have designated flagship programs aiming at proof of concept of PoC [ judgment ] by the end of FY 2025 and have been advancing development with a high priority. Of this, we have achieved a PoC for 3 assets, ASP2137, ASP7317 and [indiscernible] previously referred to as ASP3082. Page 7. By making disciplined decisions regarding our portfolio and accelerating high-quality science, we have driven the creation of tangible value for patients. As shown in the slide, we have made significant progress over the 5-year period of our CSB 2021. First, we have accelerated our pipeline. Over the past 5 years, we have achieved 12 Phase II first subject dose or FSD for new molecule entities and initiated one new Phase III trial. We have certainly increased our speed and execution capabilities across the entire development process, including achieving a total of 4 PoC from 3 assets. Next, we strengthened our portfolio discipline. We decided to terminate 21 clinical stage programs. And as a result, we reallocated resources to assess with a higher expected value and lower risk. This has significantly improved the quality of our entire pipeline. And also, we built a foundation for sustainable productivity. We transformed our R&D organization into a patient centric into [ any model ] invested in key capabilities and introduced new ways of working to achieve more consistent results. This series of achievements clearly demonstrates the strength of our focus area approach. This approach will also form the foundation of Astellas' R&D strategy in our next midterm business plan scheduled to be released on May 26. Page 8. We are implementing initiatives to overcome short-term challenges, including a loss of exclusivity of XTANDI and return to growth. First, we are focusing on maximizing the sales of our strategic brands to mitigate the impact of revenue decline following the loss of of XTANDI and to pave the way for future growth. At the same time, we are focusing on accelerating development to build our pipeline to market as quickly as possible. Furthermore, by advancing these efforts and robust operational efficiency and financial discipline, we are building a profitable business structure while addressing current challenges. Through these approaches, we will continue to invest in long-term growth while addressing short-term challenges, thereby maintaining and strengthening our momentum. Page 9. As part of this strategy, we have introduced a new end-to-end model along the patient access and have been driving organizational transformation. Under this new operational model, we view research, development and commercialization and life cycle management as an integrated whole, consistently focusing on improving productivity and creating value. By strengthening collaboration across functions, we are able to advance programs more efficiently from the early stages of drug discovery through late-stage development, enabling clearer and a faster decision-making. Page 10. Through our disciplined strategy, we are building a robust pipeline while focusing on areas where we possess [indiscernible] expertise, we are also leveraging the capabilities of external innovation partners to create meaningful value for patients. In each therapeutic area, we have built a deep pipeline comprising not only our strategic brands already on the market and our primary focus flagship programs, but also follow-on programs externally acquired programs and even early stage research programs that support next-generation innovation, thereby forming multiple franchises. Good examples include the prostate cancer franchise, multi-modality therapies targeting Claudin 18.2 and the acquisition of IZERVAY, which is indicated for geographic atrophy in age-related macular generation, [ GA, NA and D ] [indiscernible] the way for retina pigment epithelial cell based therapies. These efforts have created a balance of sustainable portfolio that will reliably delivers a short-term progress while continuously generating future innovation. Next, Taniguchi will provide a detailed explanation of our R&D initiatives. Taniguchi-san, please?

Good morning. I am Taniguchi, CRDO. I will now provide a detailed explanation of our R&D initiatives. For those living with serious diseases, science holds the potential to significantly transform their lives. However, many patients still have limited treatment options. Addressing these unmet medical needs is a major driving force behind our R&D strategy. Next slide, please. Page 12. Astellas has a proven track record of continuously developing innovative medicines and delivering them to patients. The innovative treatments developed by Astellas across multiple therapeutic areas are being used by patients in many countries around the world. Building on our experience accumulated to date, we continue to work towards access to medicines to work toward expanding access to medicines and further improving treatment outcomes while broadening our focus to earlier and more extensive stages of disease. Page 13. In fact, our efforts today have fundamentally transformed patients' expectations for treatment. In the oncology field, recent Phase III study results have further solidified the position of PADCEV in [indiscernible] cancer and EV-303 and 304 study. Regarding XTANDI, the Phase III IMPACT study demonstrated that it significantly delays disease progression in earlier-stage prostate cancer. In gastric cancer combination data from [indiscernible] study support its clinical potential with the checkpoint inhibitor. In ophthalmology, [indiscernible] has demonstrated the ability to [ impact ] the progression of geographic atrophy and in women's health. VEOZAH offers a new nonhormonal treatment option for vasomotor symptoms or VMS. This result demonstrates the ongoing success of Astellas' R&D efforts and consistently translating innovation into value for patients across multiple disease areas. Page 14. I will explain PADCEV and [indiscernible] as an example. In February ASCO GU, we presented the latest data from EV-304 trial, [indiscernible] targeting patients with cisplatin eligible mussel invasive blader cancer or MIBC. The perioperative [indiscernible] significantly improved the primary endpoint, event-free survival, EFS compared to neoadjuvant chemotherapy. In addition, significant improvements were observant overall survival, OS and a pathological complete response PCR. These results further confirm the benefits of PADCEV in the perioperative treatment of MIBC. Please go to the next slide. Page 15. This slide illustrates progress across the full development spectrum. Our broad pipeline ranges from strategic brands that continue to expand their impact through life cycle management to a diverse range of early-stage development programs that will contribute to future growth. By focusing on the life cycle management of strategic brands in areas such as oncology, ophthalmology and women's health, we are maximizing value while further strengthening our leadership in each field. At the same time, we are steadily building our pipeline that will underpin our future growth through our primary focus flagship program and several follow-on programs. Next slide, please. Page 16. In order to address the challenges ahead of us with XTANDI's loss of exclusivity, we need to build a resilient portfolio that will support our mid- to long-term growth. From 2024 to 2026, we fundamentally transformed our R&D organization and governance structure and achieved productivity gains by strengthening the foundation necessary for sustained success. Building on this newly established foundation from 2027 to 2029, we will set clear priorities, generate more high-quality development programs and further enrich our pipeline. As a result, from 2030 to 2034, we will be able to significantly improve R&D productivity by accelerating the development of higher-value products. Next slide, please. Now I would like to share more about transformation of our R&D organization. Next slide, please, Page 18. Since 2024, we have taken bold measures to increase productivity and efficiency in R&D. And these measures are already delivering tangible benefits. Regarding internal and external collaboration by introducing end-to-end operation model and agile working practices mentioned by Okamura, we have reduced handover processes between departments, enabling teams to advance projects more quickly. Furthermore, by collaborating with right partners, we have been able to create a broader range of values through initiatives to accelerate the pipeline, we have shorter development cycle times and enhanced necessary capabilities. We are also actively investing in talent, striving to enhance the skills of R&D teams and expertise of early development stage. In development, we have established a system capable of conducting our own research or clinical trials, reducing cost and accelerate in clinical trial speed and quality improvement. I will explain the details later on. Furthermore, by actively promoting the use of data, including the proactive utilization, real-world data and integration of R&D database and AI-driven simulation and modeling, we are working to speed up decision-making and strengthen evidence base. These initiatives form a cohesive strategy collectively and continuously improving speed, quality and efficiency of our R&D. Next slide, please. Page 19. I will explain how we prioritize our portfolio. We continuously review all programs from preclinical stage to life cycle management based on each probability of success and value. For programs assessed as having both a low probability of success and low value located in the bottom left of the diagram, we make strategic decisions such as lowering their priority or stopping them. This allows us to allocate resources to promising programs in the bottom right, thereby accelerating their development. As development progresses, we expect the probability of success to increase shifting those programs to the top right quadrant and enhancing the overall value of the pipeline. Next slide, please. Page 20. We are reducing the time from clinical trial execution to submission and approval through transforming clinical operations. Specifically, through in-house development of key capabilities ranging from protocol development and clinical trial conduct data analysis and study reports preparation. We aim to strengthen direct communication with trial sites, thereby improving the quality of protocols, accelerating patient enrollment and expediting data analysis and study report preparation. As a result of this transformation, in clinical trials, the achievement of milestones such as site selection and first dosing has been accelerated. In the regulatory submission process, the time from submission or acceptance has been significantly reduced. Furthermore, by improving the quality of our submission, we have shortened the time from submission to approval. And in FY 2025, we obtained 8 approvals for our strategic brands in major markets. Furthermore, these benefits is not just a onetime event but can lead to ongoing improvement in our capabilities, such as strengthening relationship with our trial site, in physicians, conducting patient-centered trials and AI-driven automation as explained in the next slide. Next slide, please. Page 21. We are investing in cutting-edge technologies, including AI and robotics to accelerate our digital transformation proactively. For example, in drug discovery research, we aim to accelerate the development of biopharmaceuticals and improve productivity, not only through NVIDIA's AI-powered supercomputing for small molecule drug design that has already been implemented, but also by introducing AI-enabled protein station for research automation and AI-driven gene therapy will lead to precise oven targeting, reduce toxicity and enhanced treatment. These tools will help us test hypothesis faster and prioritize the strongest programs, accelerating research, reproducibility and speed. In development, leveraging study designer, [indiscernible] AI-native platform will enable us to efficiently design more sophisticated patient-centric clinical trials. In future, we aim to further improve trial efficiency through initiatives such as clinical trial monitoring using AI agent. Next slide, please. Page 22. We are driving cutting-edge research and building a long-term pipeline. Our research consolidated 8 divisions to 3 centers of excellence, namely oncology research, cell and gene therapy research and innovation labs. Cell and gene research and innovation labs, expecting they will be our core enablers for our mid- to long-term R&D strategy. By integrating expertise of each research center, we can develop optimum treatment based on the pioneering scientific findings, while fully understanding patients' needs and their conditions. Furthermore, these centers act as hubs for collaboration in and outside of the company, leaving cutting-edge science while working closely with partners in academia and biotech sector. Next slide, please. Page 23, we are strategically building an ecosystem strategic ecosystem in collaboration with a wide range of partners, incorporating outstanding external technologies and expertise through partnership with biotech companies such as [indiscernible] biotechnology as well as world leading academia, such as Mass general Brigham, MGB, we are combining our deep expertise in primary focus with cutting-edge external innovation to drive progress in R&D... As an example of a partnership with academia, Astellas is the only pharmaceutical company partnering with Mass General Brigham, MGB. Through close collaborative research program, we are building early-stage pipeline and translational medicine accelerating the creation of new therapies in oncology, rare disease, and ophthalmology. By sharing a long-term vision with our strategic partners and collaborating openly and flexibly, we are strengthening and accelerating innovation. Next slide, please. Page 24. We have built reliable manufacturing and supply capabilities to provide consistent support for R&D innovation from the early development through commercialization. We have established a global manufacturing and supply network with manufacturing sites in Japan, the U.S., Ireland and China and through strategic partnerships with CDMOs. We have made strategic investments in our own manufacturing capabilities, including our cell and gene therapy manufacturing sites in the U.S. to enable we to ensure we are equipped to handle the diverse and complex modalities emerging from primary focus. By combining this manufacturing infrastructure with our regulatory expertise, we deliver high-quality manufacturing and supply at every scale throughout development. Next slide, please. Next, I will outline the progress of our pipeline with each primary focus area. Next slide, please. Page 26. Our primary focus, targeted protein degradation, we are working to target proteins that have historically been considered undruggable with the ambition to transform treatment options for patients. Our flagship asset, setidegrasib is a potential first-in-class targeted protein degrader for solid tumors with KRAS G12D mutations, which had long been considered undruggable. KRAS G12D mutation is found in approximately 40% of PDAC, pancreatic ductal adenocarcinoma and approximately 5% of NSCLC, non-small cell lung cancers. Alongside our flagship program, we are advancing a follow-on asset, ASP5834 pan-KRAS targeted protein degrader, designed to address multiple KRAS alterations reflecting the expandability of the program -- platform. The progression of both the flagship and follow-on asset illustrates how this platform can be expanded beyond the single target, supporting our ambition to extend to additional cancers and potentially other diseases over time. I will explain latest development status on setidegrasib using a few slides. Next slide, please. Page 27. Setidegrasib has achieved PoC in pancreatic ductal adenocarcinoma or PDAC and non-small cell lung cancer, NSCLC, both of which have significant unmet medical needs. And it's currently being developed in parallel across multiple cancer types. For PDAC, we have initiated enrolling patients in a Phase III trial for first-line treatment and primary analysis is anticipated in FY '29. We have also achieved [indiscernible] and are currently preparing to initiate a Phase III study with second and later lines. Primary analysis for this is also anticipated in FY '28. In addition, data generation is in progress in other cancer types with the KRAS G12 mutations. Regarding colorectal cancer, based on the clinical data availability that we have decided not to pursue late stage development. Page 28, I will now revisit the data on setidegrasib in PDAC that we presented at the ASCO GI meeting in January, as mentioned earlier. Our Phase I study of KRAS G12D positive PDAC, the combination of setidegrasib and modified [indiscernible] as first-line therapy demonstrated antitumor activity and a manageable safety profile. Among the 12 patients, whose efficacy could be assessed, the objective response rate, ORR, was 58.3% and the disease control rate, DCR was 83.3%. Infusion reactions were reported in 72.2% of patients. However these were primarily low-grade, occurred mostly at the first dose and were manageable with the standard supportive care. There were no treatment discontinuation due to these reactions. Based on these results, we have initiated patient enrollment for a Phase III trial evaluating the combination of setidegrasib or modified [indiscernible] as first-line therapy for PDAC patients. Page 29. Here, I present clinical data on setidegrasib in patients with advanced or metastatic NSCLC with KRAS G12D mutation. This data was presented at the European Lung Cancer Congress last week and simultaneously on the same day published in the New England Journal of Medicine. In a cohort of 32 patients receiving second or third-line treatment, the ORR was 37.5%. And as shown in the figure on the right, the medium progression-free survival or PFS was at 11.2 months. No new safety signals were identified. Based on these results, we are preparing to initiate a Phase III trial of setidegrasib monotherapy in advanced or metastatic NSCLC patients. Next slide, please. Page 30. Next, I will explain our primary focus on immuno-oncology. Immunotherapy has significantly advanced cancer treatment that many patients still do not achieve sufficient efficacy, leaving a significant unmet medical needs. In its primary focus, we aim to achieve high therapeutic efficacy by leveraging diverse modalities that target both the immune system and the tumor microenvironment. Specifically, we are utilizing next-generation platforms such as [indiscernible] engagers, ADCs and [ mitospecific ] antibodies to achieve more effective and sustained treatment outcomes for difficult-to-treat cancers. I'll provide a detailed interaction to our flagship program, ASP2138 on the next slide. Next, please. Page 31. ASP2138 is a potential first-in-class bispecific antibody designated to activate T cells and damage cancer cells by binding Claudin 18.2 expressing cells to CD3 positive T cells. Claudin 18.2 is expressed in gastric cancer and PDAC, which represent areas of high unmet medical needs. We have already achieved a PoC in gastric cancer and are preparing to initiate a Phase III trial targeting first-line treatment for patients with low to moderate Claudin 18.2 expressing gastric cancer who are not eligible for VYLOY. Primary analysis is anticipated in FY 2029. Next, please. Page 32. Our partnership with Vir Biotechnology is an example of how we are leveraging insights gained in the [indiscernible] cancer field to connect our cancer immunotherapy with actual clinical development. Under this strategic partnership, we are advancing the development of VIR-5500, which targets a [ novomediated ] mechanism. VIR-5500 is designed to incorporate proprietary masking technology that keeps the T cell engager masked until it reaches the tumor microenvironment, thereby reducing its effect on normal cells and minimizing side effects. Currently, a Phase I study is underway as a monotherapy and initial antitumor activity and a favorable safety profile have been demonstrated in patients with the metastatic castration-resistant posted cancer or mCRPC with the treatment. Findings shared at ASCO GU show target engagement and immune activation with manageable safety and those is evaluated today. It was announced in February. These results support the continuation of development and provide the crucial data to inform future those selection and development strategies. Next slide, please. Page 33. Under primary focus, gene therapy, we aim to make AAV gene therapy, which modulates genetic causes of diseases are more accessible to more patients. Gene therapy holds the potential to treat and address genetic diseases at their source, for which many patients worldwide are eagerly awaiting new treatments. However, the development of gene therapy presents various challenges in terms of drug discovery, development and manufacturing. To address this series of challenges, Astellas has been building internal expertise in R&D and manufacturing, while also collaborating with external partners to establish a platform. Our flagship program is AT845, an AAV gene replacement therapy for Pompe disease. The final PoC decision is pending as we review additional analysis of data. Furthermore, we are advancing follow-on programs for neuromuscular and neurodegenerative diseases and also working on next-generation approaches such as MTM1 gene replacement for X-linked myotubular myopathy, XLMTM using a novel AAV [ cast ] speed. Next slide. Page 34. Next, we turn to primary focus, blindness and regeneration. Here, we are addressing diseases that lead to irreversible vision loss and those representing a significant unmet need. Our flagship program, ASP7317 is a pluripotent stem cell-derived retinal pigment epithelial cell designed to replace damaged cells in patients with geographic atrophy, secondary to age-related macular degeneration. We have now achieved proof-of-concept, PoC in patients with severe visual impairment making a significant milestone. Additional Phase Ib safety and efficacy data are planned to be presented at the ARVO 2026, Association for Research in Vision and Ophthalmology in May. Details will be communicated there. Alongside ASP7317, we are also progressing ASP2020, a follow on allogenic cell therapy for [ Stargard ] type muscular dystrophies, reflecting the broader applicability of this regenerative platform. Next slide, please. Now I will use a few slides to explain direction of our research and development organization for sustaining long-term value creation. Next slide, please. Slide 36. We anticipate that the R&D transformation and pipeline progress outlined thus far will form the foundation for sustained growth throughout the 2020s until 2029. Looking ahead to the early 2030s, we aim to significantly improve productivity to reach the top tier of the industry, building a pipeline of high-value added products and accelerate R&D. Next, please. Page 37. We outlined our initiatives focused on growth in the 2030s. Firstly, accelerate the development of our flagship programs and our life cycle management initiatives. Next to expand the pipeline of follow-on programs, we will continuously improve program success rates and decision-making based on data and continuously improve entire R&D productivity. Furthermore, looking ahead, we aim to advance [ NMEs ] into late development stage by 2034. Page 39, Astellas is undertaking fundamental transformation of its R&D organization with the aim of rising R&D productivity to the top tier in the industry and we are strengthening our pipeline by pursuing higher quality science through an end-to-end operating model and prioritize investment in modalities and platforms that differentiate our portfolio. Furthermore, by building a robust drug discovery platform, we will generate multiple high-quality assets, thereby maximizing -- maximize pipeline value and accelerate R&D. We will continue to deliver sustainable growth and meaningful outcome for the patients and the value. This concludes my presentation. Thank you.

This is [indiscernible] Astellas presentation. Now I would like to entertain your questions. [Operator Instructions] First question is from Citigroup Securities, Yamaguchi-san.

The confirmation, 7317. In the past the data of improving [indiscernible] has been shown. And you've been saying PoC judgment and judgment. And this time, you mentioned that a PoC is achieved. So this is very first time that you mentioned that PoC is achieved. Is that understanding right?

Yes, you're right.

The second question, the ASP3082 lung cancer data is introduced. Cross-trial comparison does not have meaning, and there is no significance in early stage. However, with a simple comparison, ORR [indiscernible] compared to revolution, what is happening? How do you view about this? For the PDAC, that data was really good. But from your perspective, this comparison is -- has it been expected, good, unfavorable? Would you make a comment?

The data shown for setidegrasib this time as has been shown, ORR is 37.5%. So first of all, existing product therapy. In other words, comparison with the chemotherapy is the right way to be done. That is [ 7.5% ] of ORR compared to the chemotherapy such as [indiscernible], this response rate is extremely high. In EFS, [indiscernible] while, it's open level, this might be adjusted for referential, but 11.2 months. So [indiscernible] that we refer to that was around 4 months of PFS reported. So compared to that, it's more than twofold of PFS extension. That's the data we have. So with this, we are getting into Phase III. We are going to make appropriate studies designed for Phase III. That's what we are planning [indiscernible].

Page 19. You showed the chart of the portfolio review and especially 1 and 2 and 3, you made a comment about those. It might be difficult for you to talk about the details, but this 1 -- that is a strategic deprioritization. That means in the beginning, you didn't expect that the situation was changed. But what are the major reasons of this deprioritization? From the beginning, possible value is not really clear or the competitive superiority is lost. Could you share with us?

Basically, these are including the very early stages, not even in a clinical stage. So targeted product profile are not necessarily completely fixed and such kind of projects are included in here. So based upon that as an assumption, the condition, please listen to my explanation from here. As you know, in a preclinical study, there are various things that we have to prove, and we will go through the studies and there are things that this is okay. This is not okay at all. And although there are something in the between. For those, we are going to do some additional studies to identify and make a decision if we can go for that or discontinue that.

As has been Taniguchi repeatedly saying, the discipline is important here. If discipline is not strong enough, you try to hang on the project so that the project can survive as long as possible. But this time, completely, we review such simple discipline. If such factors are not satisfied, we should make a decision of discontinuation. We actually execute that approach. And for each project, the important factors are different, and that is different depending on the target disease. If the modality is new, we think -- we thought in the beginning, it was really good, but it was -- [ once that development ] -- the efficacy is not really expected. So we have roughly 6 factors for the project evaluation. And if 5 criteria out of those are not satisfied rather than dragging the development on that, you make about a decision to discontinue so that you can allocate the valuable asset to the more potential asset. That's described here. Did I answer your question?

So you have done that for 2024, and that is going to be continued. So you expect a further improvement in efficiency?

Yes, that's right.

Let's move on to the next. JPMorgan Securities. Wakao-san, please?

JP Morgan, Wakao-san speaking. My first question is also about the setidegrasib. NSCLC, PFS is really good. And so just like Taniguchi-san mentioned, it's not inhibition, but the degradation is suggesting the continuous efficacy, and it happened, it was really surprising. This might be the same question. But setidegrasib, how do you view about the possibility of being the best in class within NSCLC? I believe that it is clear, it's going to be the first in class. But for revolution [indiscernible], compared to [indiscernible], their PFS data is not available yet. So we cannot make the head-to-head comparison, but we would like to know how you view about that. And another question is about PDAC. Second-line, third-line pipeline, always 10.3 months data is available published in New England Journal of medicine. For this, second line- third-line comparator is not available in a revolution. So how do you evaluate this data? Compared to chemotherapy, it is superior, which is clear. But against the coming next generation types, how do you view?

Thank you very much. Wakao-san is correct in comparison to revolution, we are paying close attention with interest. But as you correctly mentioned, KRAS G12D is their target for those pharmaceuticals data is not much available. So head-to-head comparison is rather difficult. So the pan-KRAS oral inhibitor. What is the situation, vis-a-vis that is the area that we are paying attention to. So the differences, in particular, in lung cancer. As we look at the data available on ORR, not much difference between the two. Versus chemotherapy, it's much better. But according to the publicly available data of them ORR, are not big difference between the two and as for PFS, duration of the effect, their data is rather limited. So what is the situation in comparison that? That is not so sure, but our hypothesis that is KRAS G12D to decomposing the KRAS protein itself is a strategy. And our hypothesis is being proven meaning that the durability of the effect is maintained very significantly. That is our impression. So for the integrator, and the KRAS suppressor inhibitor, if you make comparison, people often talk about the following. As for inhibitor, the resistance occur. That is the issue. And how they are going to [ overcap ] them. It's something that we don't know. But the different mutation of KRAS. So a different pathway may appear that is regarded as a challenge versus our KRAS-targeted degrader. We decompose, degrade protein [ themselves ]. So the refractoriness or resistance is less likely to occur in our modality. Therefore, so we are going to accumulate in particular, Phase III data moving forward. First and foremost, for non-small cell lung cancer. Setidegrasib would have a potential to become best-in-class. That is what we want to pay attention to. This is the first one, PDAC and pancreatic ductal cancer carcinoma. So in that cancer, there was no drug that reported to be efficacious in second-line, third-line and setidegrasib and Revolution Medicines medication inhibitor data were reported this time. And more than expected, we got the feeling that it is more effective than we expected. In comparison to second-line, third-line with the combination of chemotherapy, higher efficacy is already shown. So in the pancreatic ductal cancer development strategy, focusing on first-line is likely to be a path or is the current path. So far in the pancreatic cancer, currently, as you know, other than chemotherapy, there is no medication which shows efficacy so far. So it's very promising. Our compound is very promising. But given the current landscape, so combination of setidegrasib and chemotherapy could be the main line of first-line of pancreatic cancer. With that in mind, we want to design the study, and we want to conduct enrollment of the study that we have already started screening.

Thank you. That is very informative. Second, on Page 8, in the midterm explanatory meeting, I believe you are going to explain it more in detail, but after the XTANDI LOE, the growth, you have strategic brands and the pipeline. As for your pipeline, so the project range that you have highlighted this time will constitute the main value of the pipeline, and you often talked about discipline this time. And beyond FY '27 [indiscernible] margin, 30% is going to be sustainably generated. So as we have the late-stage subsequent development, are we able to maintain [ OP ] 30%?

This is not the precise diagram, this is just an illustrative chart. With this assumption, I would like to explain, as Dr. Taniguchi mentioned, life cycle management of strategic brands is included in center in red. So the light pink pipeline in this chart. According to Dr. Taniguchi's explanation, underwrite from primary focus or depending on the situation, they, the ones that we may acquire, we have already acquired from outside. So those constitute this pink pipeline. And as you mentioned, from tomorrow, we will enter into FY '26. And from FY '26, those which we obtain PoC will move into late stage developments. As you mentioned, there will be a high amount of R&D expenses that we will incur. Therefore, we have several meaning of discipline when we say displaying. One, even if things are advanced, we want to prioritize, and we inject our capital resources and prioritized ones. And it is important to create new things one after another, but after you give it a try, if it doesn't work, we want to give it up, meaning that we don't want to linger on for a long time. That is another meeting of this plan. So we want to transform advancement of science to value patients. That is our vision. So we don't want to sacrifice R&D. So we want to improve work efficiency in other areas. So we want to invest in R&D while securing profit. That is our mindset in building our next midterm plan or CSP. And depending on the illustration, we don't do this to reduce the ratio of R&D expense in sales. But depending on some projects, we want to reduce the R&D expense so that we don't want to sacrifice our future growth. There is some room for us to consider that. That's all.

[indiscernible] margin 30%, that is continuously, we are going [indiscernible]. Is this understanding right?

So far, as we mentioned, by FY 2027, we achieved 30%. And afterwards, we are going to maintain that. That's what we currently we are thinking.

Next, BofA Securities. Mamegano-san, please.

Thank you for giving me this opportunity. BofA Securities, Mamegano is my name. I have two questions. First is about the prioritization. In a company, there are several points of their valuations. And based upon that you prioritize your projects. And I'm referring to Page 6. There are 4 primary focus that you have and the rearrangement of this primary focus and also the -- are you going to make major changes? That's the question that I have. That's because there are -- currently have some oncology update, and I believe you are progressing quite well. Therefore, are you going to focus more on oncology? Are you getting into the gene therapy? Or you are going to add additional primary focus here? That is the first question from me.

Probably, as you know, this focus area approach, we name as a focus area approach and officially communicate to you that is -- that happened around 2015 and '16. And [indiscernible] from them, we see some changes and a permanent focus as well. For example, we had primary focus, 4 of them at the very first there are antigen-specific immune qualification. That is the primary focus that we have and aiming at the allergy treatment, certain specific modality is utilized there. And based upon the clinical trials, we decided to discontinue that primary focus. And this gene therapy, there was no included primary focus, but rather a candidate, but now it is official within this primary focus. And recently, we have mitochondria. That is another primary focus, but we couldn't come up with the expected result or efficacy. That's why we discontinued that as well. So the primary focus is not something that we continue to stick to those once decided. But rather from those primary focus, if I expect multiple expected assets was continuing available or not, based upon that, we just make a decision about the primary focus. For [indiscernible] 4 primary focus, I think there's still the expandability. But as Taniguchi explained, with the refund link to our lab, the science is getting newer and newer and how we connect those with drug is our work. So the biology is sufficient and robust and modality is appropriate and also clinical, it is proven. So we have this triangle. And it's not just one, we -- if we come up with the several items as a primary focus with pivoting around these triangles. And based upon we decided to prioritize, deprioritize and so on.

Next is about the specific project that is setidegrasib. PDAC first-line Phase III studies started, I believe, the base treatment is [indiscernible] and those are quite intensive chemo. So even with this chemo, [indiscernible] achieved to a certain extent. And the evolution [indiscernible] is the comparator. Now [indiscernible] base is probably is a comparator to see the efficacy. But here, you pick up a G12D alone as mutation, meaning that you have confidence in the efficacy. Do you think with the current approach, you can show the clear advantage in efficacy?

PDAC, first-line, as has been explained, the combination with chemo is the center of our strategy. And the selection of chemo is [indiscernible] are selected because those are mainly utilized in Western countries. Revolution Phase III study if we look at, [indiscernible] chemo and monotherapy in combination with chemotherapy. So they have 3 arms within the study design. That's what we've heard. So fundamentally, there might be a bit of a difference because their product is a pan KRAS, and ours is targeting only KRAS G12D. That accounts -- the G12D mutation that accounts for about 40% of the PDAC. So that is our focus. And the second, that's been explained already. In the treatment of PDAC, the biggest issue is the continuation of sustainability of the efficacy. Needless to say that at the same time, with the deep regression of the tumor, how long you can extend or sustain the efficacy. That is the key. Looking at the past PDAC study, in the beginning initial phase, efficacy is higher [indiscernible]. However, looking at the sustainability of the efficacy, meaning that there is no impact on to the extension of OS. Therefore, for the PDAC the continuation of equity, especially impacting on the OS. That is the most important key factor that we need to pursue to. So based upon that, we decided there is steady design. Revolution takes a different strategy. Therefore, ultimately, I think we can see if we make a head-to-head comparison.

Are there any other questions? Next question from Nomura Securities, Mr. Matsubara, please.

Matsubara from Nomura Securities. Thank you. 3082 is my question. Good results was shown. Congratulations. I would like to ask about an adverse event. With the administration, infusion-related reaction, 63% stopped the administration in a few cases, [indiscernible] or neutrophil reduction was observed. So will that be the hindrance of development? As for infusion, every time of the administration, infusion-related adverse events may have reduced. So can you comment on those?

As for adverse events, we are focusing very much. And as was asked earlier, the selection of combination therapy, the chemotherapy that we select. They are a very potent chemotherapy. So because of that, hematology-related adverse events, including nausea and vomiting, gastrointestinal AEs observed. However, as for setidegrasib, we showed you mono data earlier. But in practice, the major [ AE ] was not observed, it's LTE increase was shown in some of the cases. But there are not many cases that have stopped administration as a result of LTE increase. And as for first-line PDAC treatment, first, whether we are able to show effect or not accounts. And will there be a continuation of effect? These two keys are crucially important in pancreatic cancer treatment. And we also have to think about managing AE. So we have to strike a balance between the two. So chemotherapy related adverse events or setidegrasib AEs, there are such AEs, but continuous treatment is possible in our regimen. For example, due to AE, if we are not able to administer setidegrasib, that is not the case. We don't have such case.

So 7317, PoC was achieved. Congratulations for launch, development is really underway. And how do you differentiate with the [indiscernible]? So right type [indiscernible] and the severe type 7317, can you tell us how you [indiscernible] with [indiscernible] and 7317?

As for [indiscernible], as you know, [ C5 MRI Optima ]. So in the past, GATHER 1, GATHER 2 study, I think you understand the situation. So in the IMD, progression of geographic atrophy was inhibited. Such data was clearly shown. So [indiscernible] as condition deteriorates, and it doesn't improve. That is a condition. So stopping the progress of the disease is clinically very significant. That is the reason why we have developed [indiscernible]. In comparison to [indiscernible], 7317 though the number of patients was very limited, we showed some data in the past. So the maximum visual acuity was likely to be improved. So we saw such tendency. So with a very different efficacy endpoint, we are going to assess the efficacy. As for [indiscernible], second point, [indiscernible] suppression of the disease progression -- so when the visual acuity is impaired, it's rather difficult to use. So the early to moderate patients would likely to receive [indiscernible] moving forward as well. In comparison to that, as for 7317, it's a cell therapy and the patients for PoC this time, the visual acuity [indiscernible] was very significant, meaning that the severe visual impairment, the patients were the target for PoC assessment. So we are going into Phase III from now on. But as for the target patients, those patients with advanced visual impairment, meaning severe geographic atrophy patients would likely to be enrolled. So what will be the overlap between [indiscernible] and 7317? We don't see much overlap, meaning that -- so early or mild -- moderate visual impairment [indiscernible] but when condition exacerbates, with 7317 improvement of visual impairment can be tried.

Next, UBS Securities. Sakai-san, please?

UBS, Sakai. Thank you for your explanation. Going back to Page 19, 2x2 chart that you showed earlier the portfolio management, you strike balance between art and science, and it's always a challenge in this industry, as I observe. Now up to -- unless you get PoC, I believe it is very difficult to understand the value of the program because you never know until you see PoC. So practically, program value and the probability of success probability in order to improve the volatility. How -- what kind of measures do you take?

Horizontally, this is value. That means the value when we make success. Usually, if it's early, it is costly beforehand and the sales increase and profit increases that toward the [ far ]. So with the discount, the value is lower and with the probability of the success is multiplied. But this is NPV with the success scenario. So we are going to study what's going to happen to the future. If everything is successful, then how high the value would be. Meaning the left bottom, even they make a success, we will not be able to expect higher value. That's why they should be deprioritized. Those [indiscernible] that we see equal something while it goes something in terms of the program value. If you apply that to all the primary forecast, then the oncology product go toward more right and if it is a rare disease because the targeted patients are limited in number, no matter how successful you are, you cannot come closer to the right side near to the oncology. So just like [indiscernible] mentioned, it's a word of art. And if the primary focus that should be survived or killed -- and for that decision making and if you apply the universal ways of evaluation, all the value of the rare disease is going to be reduced. So how to evaluate the primary focus? Well, according to this, something left is going to be discontinued, but the right side is going to be continued. For the primary focus, each of them are not necessarily evaluated in line with the exactly same access. That's the way we are working on kindly.

One thing, technically, that is already wholly explained by Okamura, improve the probability of -- the success and then improve the program value. Those are important. Then as R&D, what should we do? First, the clear drawing of the targeted product profile. With having that, you can specify the value further. You can have a tangible view of the value. And in order to achieve the design nonclinical and clinical studies. And as the result of that study is expected or assumed and if the result is in line with that assumption expectation or not, then you decide a priority of the programs. That's the approach we take in R&D. As has been described in Page 18, decision-making based upon the data. So we would like to foster a data-driven culture. So we clarify the TTT, the drug we want to make in the very beginning in order to achieve realize that. Such data is necessary. That's why you designed an [ on-clinical and a clinical ] trial. Of course, it's not always exactly much the expectation we had. And so we have to consider about the achievability of the target. So the criteria is clarified, then based upon that data is collected and make the judgment. So as Okamura mentioned, so that we can work in line with the strong discipline, we are trying to make the culture.

Now 3082 [indiscernible] rate respond -- the response of the duration. Those are not really ringing a bell for me. For example, mechanism of the resistance, it's not an inhibitor, but it's a [indiscernible]. So are there any change differences in terms of the biological perspective? And looking at the New England Journal of Medicine, so the [indiscernible] probably KRAS G12D degradation is 70.6% or so. I don't think it's not 100% of the degradation, how can you make a decision about this or make understanding about this?

Degrader resistance mechanism, that is under the study these days not yet published, but there are some by logical changes likely to cause the degradation is study or changes started to be understood. As soon as the data is ready to be published, we can share that. But as you know, inhibitor and the degrader, we have a strong impression that these two are quite different, extremely different because -- and also the resistance mechanisms are different. So the way to overcome such resistance are also different that we assume. So in clinical trials, in an early clinical trial with the combination, such idea is applied for this development. Regarding second question, that is a KRAS G12D. To what extent it should be degraded to show, demonstrate the efficacy. Regarding that question, as you see, according to the data we shared with you this time, 72%, 75%, protein degradation is observed in data. And if that is sufficient, if we refer to the basic data, the separation of KRAS pathway to that extent, because the tumor goes to the apoptosis and such kind of data is available. So this level of suppression or efficacy for the protein degradation, we believe that a sufficient tumor separation can be achieved. On top of that, sometimes it's difficult to achieve with the mono. So in order to [indiscernible] the efficacy, the chemotherapy combination is used and in line with that, KRAS is also suppressed. So they have the add-on effect or the synergistic effect. And that's the way it works. And the initial data shows that as well.

Last question simply, this was not about [indiscernible] so dual payload is attached perhaps was presented at ICR. Can you explain differentiation of [indiscernible] is available in some numbers.

2998. As you mentioned, at the end of April, at the [ AACR ]. First, the nonclinical data is likely to be presented. 2998 targeting TROP2, so-called dual payload ADC, that's 2998. What do we do with dual payload, [indiscernible] base ahead [indiscernible] is attached. So which will announce from now on. So as you are going to look at the ACR data, you will know, but targeting the in TROP2 ADC. If we compare with that, what will be the result of 2998 will be presented to you? And if you look at the result of that, you will, I think, understand why we developed this 2998. That's all from me.

Next, Morgan Stanley, MUFG Securities. Muraoka-san, please.

Morgan Stanley, Muraoka is my name. 7317, the maximum visual acuity improvement was obtained in severe patients. [indiscernible] I'm very much looking for the available data. As a next step, what will be the next step? Is my question too early to ask? [indiscernible] said, it's an extremely important success. So I thought you were able to skip significantly. But can you give us color to you what you said?

Muraoka-san, thank you for a good question. It's very difficult for me to answer to that question. But what we can tell is that the PoC study based on the data, we nurture the culture for decision-making. So clear PoC criteria is just determined in advance. And based on that predetermined criteria, we overcame. That is why we declared PoC. It's the first point. Second point, the I would like you to look at the ARVO data first and foremost. So I hope you will have high expectation to that data. As for future development, with the FDA U.S., we have already started interaction. And through this interaction with FDA, what kind of development strategy can we set up that is being considered within the company? Not only in the U.S., moving forward in Japan. Also in Europe. And in China, we will engage in worldwide development most probably. So we hope to engage in global development hopefully. But looking at the region and the countries, how development will be accepted in the early part of fiscal year '26. So we want to scrutinize those things.

Phase Ib, you show data in small amount. But my impression is that it's taken time significantly. The next step starts and when do you think we will be able to hear the answer for that? In '28, '29, Phase III results will be available. But this 7317 next step update will occur in the same timing or do you think it will take a longer time?

So as mentioned next fiscal year, which will start the next tomorrow. So first half of next fiscal year. We will complete the introduction with authorities. So in the latter part of next fiscal year, we should be able to talk about development plan.

Understood. So at that time, a program will be updated? 3082, colorectal cancer, second-line stoppage. Can you share with us the background of this? G12D was not -- was that the simple reason? Is that a different reason? So what is the background of making decision to stopping?

So setidegrasib, aggressive colorectal cancer. As you know, KRAS G12D -- the mutation is apparent in 15% of the colorectal cancer and colorectal cancer population. So in parallel to lung cancer and PDAC. In Phase I, we looked at the efficacy in CRC -- excuse me, colorectal cancers. So unlike PDAC and small cell lung cancer, the situation of colorectal cancer is a little different. And as soon as we are ready for data, we are going to present, but as of now, we have not shown efficacy that encourages us to go forward with colorectal cancer or with 3082 3098 so based on data, we made the decision.

Thank you very much. We have about 6 minutes, and we would like to -- because a lot of people raising hands and I would like to ask a lot of people to ask questions. So from here, we would like to ask you to ask just one question. Now [ Sawada-san ] from JPMorgan Asset Management, please.

So I would like whether -- would like to ask about the Claudin 18.2 and a periphery of that, which is not really mentioned within this meeting here today. The lowly expression of the Claudin 18.2 is the target for the development this time. But [indiscernible] result. That is a really good data but to [ position ] in other way, 2138 development on highly expressed patient is likely to be the similar result with the bylaw. That's why you decided in this way or [indiscernible] result, how have you evaluated? And how do you differentiate? Would you please mention something about here?

Regarding bylaw, Last cohort [indiscernible] came up with really good data. So Claudin highly expressed patients. and also CPS also highly evaluated. That's highly expressed. That's the target of the development currently. 42138 as the first indication because of our strategy to do the development for the higher unmet needs. So Claudin -- because Claudin high expressed is already developed for bylaw. So there are patients not indicated for bylaw that is a mid to low, low to mid expression that accounts for about 1/3 of the gastric cancer patients, we thought it is a favorable way to go for the development.

And for the Claudin, high expression, what should we do now toward the future. And also concerning the IV administration for [indiscernible] it has which is leading to the difficulty of management of the side effects. So for this 2138, even with the highly expressed patients, the sufficient efficacy, safety and also convenience and need to be observed. When it comes to subcutaneous that is useful. So concerning all these factors, we would like to consider if 2138 is needed to be developed for highly expensed patients as well?

No.

Next, Barker-san from Jefferies Securities.

Stephen barker from Jefferies Securities. So my question is about 2138 Phase III study. Claudin 18.2 million expression, the minimum threshold, how are you going to set that?

Thank you for the technical but important question. In particular, the middle question is rather easy, but Claudin, a lower expression. What is the degree of that? I think that was your question. According to the Phase I study that we have conducted and detailed analysis of that was made. In pathologists and -- we [ consulted ] to identify a cutoff to determine low expression or zero expression to designate between the two -- [ against ] this -- so categorization of a low expression cutoff value was set up. And by using that, we plan to start a Phase III study. the details we described in protocol, but we refrain from informing that yet.

So analysis per expression level will be possible and do you have a plan to secure the power for that?

Yes. In our protocol, at the central level, the expression will be confirmed and as for enrollment, as far as I'm informed, the site data will be also used based on the confirmation of expression. So in Phase III -- so middle to low expression was observed to see effect and cutoff value was confirmed and will be confirmed, and then we will file submission.

Now in the interest of time, we would like to make the next question as the final question. [indiscernible], please.

So in development, AI usage is my question. On Page 21, you show introduction of technology. So study design platform is described on the Page 21. And honestly, I'm surprised because in the area of development, of course, in the drug discovery also. But in development, the optimization of sites and acceleration of patient recruitment and patient management as well as data management, of course. And for the regulatory document preparation, it seems that AI is very useful in those areas. But as of now, what's shown on the slide is the approach that you are going to address at Astellas. And as for cost and time line, I believe there will be impact of AI. That's my view. But how much cost saving as well as a shortening of time line would you like to achieve? So in 2030 or 2035, as of that timing, what is your idea?

[indiscernible] AI-native study designer, that is quite interesting. There are AI agents, and they have a discussion of our platform on the design of the protocol and that [indiscernible] is generated. That is quite interesting. That's why we put it in this slide. But as is mentioned, for the development, usage of AI is just part of our day-to-day work. So I didn't explain about that. Two years ago, and since then, protocol informed consent and all such clinical trial documentation translation into each country's language that is quite cumbersome work, but with using AI translation, we were able to accelerate the speed. For example, for the translation from Japanese to English, it took two months, but with using AI, it can be completed within just a couple of days. Of course, the final confirmation is going to be done by human. So our technical language translated into easy to understand for the patients. So their large language model is utilized and that is completely utilized, but it's already part of our job. That's why I didn't focus on. And also CSO generation, each team already use AI for generation of the report. So general document creation is where that we use the AI, just our day-to-day work. AI agent is quite interesting. So this might be the response to the question of your second question. So toward the future cost reduction and also [ time and ] reduction, we can extremely expecting on AI in that term. So we are working on the complimentary validation work. And after that, when we are ready, we would like to share where we would go. Thank you very much.

Thank you very much for your participation and asking a lot of questions. Now time is up. So with this, we would like to close this R&D Day presentation. Thank you very much for your participation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]