Astellas Pharma Inc. ($4503)

Thank you very much for your attendance in this 20 -- fiscal 2025 earnings call by Astellas, Inc. I am Kato, Chief Communications and IR Officer, I would like to serve as a moderator for today. Following our presentation today, 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 should be forwarded throughout the event, including the Q&A session. Please note that we cannot guarantee the accuracy of it. [Operator Instructions]. This is some note from us. This material or presentation and answers and the statement in the Q&A session includes forward-looking statements based on assumptions and beliefs in light of the information currently available to management and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any advertisements nor provide medical advice of any kind. Now let me introduce you the participants from Astellas here today. Naoki Okamura, President and CEO; Clinical Research and Development Officer, Tadaaki Taniguchi; Chief Commercial and Medical Affairs officer; Claus Zieler; CFO, Atsushi Kitamura. So this four attending this meeting. Now I would like to start the presentation. Okamura-san the floor is yours.

Hello, everyone. I am Naoki Okamura from Astellas Pharma Inc. Thank you very much for joining our FY 2025 financial results announcement meeting or to a very busy schedule today. This is a cautionary statement regarding forward-looking information. As this was explained by Kato earlier, I'm not going to read this page. Page 3 is the agenda for today. First, I start with FY 2021 financial results. On Page 4, I will give you an overview of FY 2025 results. Revenue reached over JPY 2.1 trillion and core operating profit exceeded JPY 550 billion, both achieved record high results. significant growth of strategic brands by over JPY 140 billion year-on-year has driven double-digit revenue growth. As for SG&A expenses, thanks to the robust progress of what we call SMT, sustainable margin transformation, a company-wide cost optimization initiative SG&A ratio improved by 2.3 percentage points year-on-year. Driven by strategic brands growth, and robust cost management through SMT, core operating profit rose significantly, up by 42% year-on-year. Core operating profit margin increased by 5.5 percentage points year-on-year to reach 26%. Our pipeline also progressed substantially. But see made a significant progress in MIBC, muscle invasive bladder cancer development. Following POC achievement by City aggressive PDAC, Pancreatic ductal adenocarcinoma in FY 2024, a total of three POCs were achieved in FY 2025, namely CT deaggressive for NSCLC, ASP2138 and ASP7317. For CTD aggressive Phase III study was initiated for PDAC in the first-line settings. Promising external assets, ASP 546C VIR-5500 were licensed in and our pipeline expansion made progress. On Page 5, I will explain FY 2025 financial results. gross revenue, core operating profit and full operating profit, we broke records to hit all-time high since the founding of status. Let me explain main items. Revenue exceeded the JPY 2 trillion mark for the first time to reach JPY 2.132 billion, up by 11.9% year-on-year, achieving the double-digit growth for 2 consecutive years. Core operating profit substantially exceeded the JPY 500 billion mark to reach JPY 555.7 billion, significantly increasing by 41.6% year-on-year. The bottom half of this page shows full basis results. Operating profit was JPY 382.6 billion, and profit was JPY 291.6 billion, both rose significantly year-on-year. On Page 6, I will explain FY 2021 financial results of our main brands. Sales of all brands increased across the board with strategic brand sales combined, strongly growing by over JPY 140 billion in total year-on-year. First, sales of five strategic brands, namely PADCEV, [indiscernible], Vaidoi, Vosa and Zospata reached JPY 480 billion in total. Substantially up by JPY 143.9 billion or 43% year-on-year. Parts and viral in particular, drove the strong growth, increasing by more than JPY 50 billion, respectively. Strategic brands have high profitability and their growth made a great contribution to the FY 2025 consolidated revenue and profit increase as a whole. Next, I will explain individual strategic brands and XTANDI. PADCEV, sales increased to JPY 221.2 billion, up by JPY 57.1 billion or 35% year-on-year. Global sales growth was driven by strong first-line MUC penetration continuously. Sales expanded in all regions. In addition, any momentum for CIS ineligible MIBC approved in November last year in the United States also contributed greatly to sales expansion. As for Asava, sales rose to JPY 77.6 billion, up by JPY 19.3 billion or 33% year-on-year. New patient starts, which are important metrics steadily leased. In the recent fourth quarter between January and March, demand grew more than 10% quarter-on-quarter. Treatment rate for complement inhibitors as a whole, including the competitors product rose to about 20%. Market penetration made steady progress. With regards to Vitol, sales reached JPY 63.1 billion, substantially up by JPY 50.9 billion year-on-year, significantly exceeding our initial expectations market penetration progressed extremely well across all regions, high coding '18 testing rates contributed greatly to strong performance. VOSA and Zospata sales rose steadily, respectively. Extend sales increased to JPY 96.8 billion, up by JPY 48.5 billion or 5% year-on-year, reaching projected peak sales levels 13 years after launch. Page 7 is about cost items. With SMT initiative we realized cost optimization of about JPY 25 billion in FY 2025 for SG&A expenses, R&D expenditure and cost of sales combined. Partly due to the SMT effect excluding U.S. expanded co-promotion fees, SG&A cost ratio improved by 2.3 percentage points year-on-year. Let me explain a specific breakdown of SG&A cost and R&D expenditure. Expenses, excluding ForEx impact, rose by 2.6% year-on-year. while increased our revenue by more than 10%, we are able to manage SG&A expenses at the level almost similar to the previous year. Investment toward further growth of strategic brands was increased by about JPY 10 billion year-on-year. On the other hand, as an SMP progress, we realize cost optimization of about JPY 11 billion. through steady progress in continuous global organizational restructuring, reduction of mature products related expenses and streamlining IT infrastructures, et cetera. As a result, while fully executing investments for strategic brands, we were able to offset the increase through SMT cost optimization according to assessment. R&D expenditure, excluding Ford impact, decreased by 3.8% year-on-year. While clinical development costs for pipeline such as aggressive SB-546C increased by about JPY 5 billion. We made progress in outsourcing cost reduction through in-sourcing development capabilities, including clinical trials, et cetera, under SMT, which led to cost optimization of about JPY 10 billion we were able to fully offset the cost increase factors. In addition, with the completion of large clinical studies, development costs for strategic brands decreased by about JPY 5 billion. Page 8 shows life cycle management or strategic brands. Let me explain main achievements in FY 2025. Update since the last financial results announcement are shown in blue, including the achievements in April 2026. Strong development progress was made towards maximization of our strategic brands value, notably for passive. I will explain the latest status of Pat on the next page. Regarding VOSA, in Phase II study in China, primary endpoint was met in April this year. Based on the study results, we are planning to file a submission in China. On Page 9, I will explain the latest status of passive development in IBC. In addition to development in the perioperative settings we have worked on so far, we also started development for bladder sparing MIBC to potentially maximize passive impact. As for this eligible MIBC, shown on the left, we presented the latest data from EV 304 study at ASCO GU in February. As is shown in the figure, perioperative Pasad pembrolizumab significantly improved EFS, event-free survival, the primary endpoint compared to neoadjuvant chemotherapy. Also, OS overall survival and QCP, PCR pathological complete response improved significantly as well. Based on the study results, we took procedures for an additional indication globally. Regulatory applications were accepted in Europe in March. In the United States in April this year, in U.S. we were granted priority review designation with PDUFA date set for the 17th of August 2026. Next, let me explain the right-hand side, development for bladder sparing MIBC as an opportunity to further growth. It is known that about 30% of MIBC patients are ineligible for or refuse radical cystectomy or RC. These patients will not be eligible for EV 303 or EV 304 studies, there are high unmet medical needs for treatment option that delays our voice RC and preserves the bladder. Based on the extremely favorable data obtained consistently from clinical studies in MIBC by now, we initiated development of PADCEV for blood sparing MIBC. EV 209 is a single-arm Phase II study initiated in April. The study enrolls MIBC patients who are eligible for, but select not to undergo RC to evaluate the efficacy and safety of pace and pembrolizumab combination. [indiscernible] is administered in 9 cycles, the same duration of treatment with MIBC studies so far. Primary endpoint are clinical complete response, CR bladder intact event-free survival, be EFS at 2 years. In addition, EV-309 as a registration of Phase III study is under preparation in parallel. We are planning to start the study in the first half of FY 2026. Also in China, regulatory application is in preparation based on EV 303 and EV 304 studies. [indiscernible] treatment and China are not factored in to our current peak sales forecast for parts. So if successful, there can be further upside potential. On Page 10, regarding focus area approach, I will explain main achievements in FY 2025. achievements made in April 2026 are also included in here. Over the past 1 year, our pipeline made a significant progress and expansion with 3 POCs achieved 1 Phase III study initiated 3 clinical entries and 2 promising external assets in licensed. 238 in immuno-oncology achieved POC in gastric and GEJ Gastro is for geojunction adenocarcinoma. Preparation is now underway for rapid initiation of Phase III study. Furthermore, as a follow-on program, we licensed in, we are IR500 from Bur Biotechnology, ASP-2998 made clinical entry to expand our portfolio. [indiscernible] targeted [indiscernible] achieved multiple important progresses in PDAC, where POC was achieved at the end of FY 2024. Phase III study was initiated in the first-line settings. Furthermore, POC was achieved also in NSCLC Phase III study is now under collaboration. In addition, ASB-5834, pancreas [indiscernible] also made the clinical entry pipeline expansion is making steady progress. As for 845 in genetic regulation, additional analysis is ongoing for POC judgment. 957 also made the clinical entry. New programs, including ASP-2998 in immuno-oncology will be explained in detail on the next page. ASP7317 in blinders and regeneration achieved in patients with severe vision impairment due to GA, geographic atrophy. The next study plan is now under discussion with the regulatory authorities. Also, we licensed in 56 from EverPoint to further solidify our leadership position in the clothing 18.2 space. On Page 11, I will explain new clinical programs. next-generation innovative programs have advanced into clinical development. ASP-2998 is a program where which leverages a platform called immunostimulatory ODC or IADC generated from joint research with Sutro. Trop2 directed monoclonal antibody is conjugated with 2 payloads, cytodoxis topoisomerase 1 inhibitor and immunomodulator STING agonist. In nonclinical studies in mouse model, superior efficacy was demonstrated versus the existing TROP2 directed ADCs. From now on, efficacy and safety will be confirmed in human in clinical studies. 957 has been created as a gene therapy for XLMTM X-linked myotubular myopathy, like AT132. It uses a novel muscle-targeted AAV capsid. High muscle specificity and reduced liver targeting was demonstrated in nonclinical studies. This enables clinical study initiation at the dose level, about 100-fold lower compared to AT132. With the progress of ASBE-2957, we decided on a strategic hold for AT132. Moving forward, we will focus on the development of ASB-2957 as a gene therapy for XLMTM. ASP 2246 is a program to aim for recovery from motor dysfunction associated with ischemic stroke by using an approach called direct reprogramming. Messenger one, including human Neuro-D1 is encapsulated in Novo LNP lipid nanoparticles to enhance efficiency of delivery into cells. Messenger RNA, including human neuron promotes conversion of brain astrocytes into neurons and induces neuronal regeneration in a nonclinical study using the monkey model, improved motor dysfunction was demonstrated with intracerebral infusion of ASB-2246, Phase I/II study enrollment has been intimated by now. First subject dose is anticipated for the first quarter of FY 2026, you can find nonclinical study data of these programs summarized on Page 37 in the appendix. So please refer to it. From here, I will explain FY 2026 outlook. On Page 13, I will explain an overview of FY 2026 outlook. In FY 2026, our performance is forecasted to reach record high results. Revenue is expected to expand over JPY 2.2 trillion. By growth of strategic brands by over JPY 130 billion year-on-year, according to forecast. Due to the significant growth we're expecting revenue increase, regarding cost items, we will continue some initiative to achieve about JPY 40 billion cost optimization. SG&A ratio is expected to improve by 2.3 percentage points year-on-year. We plan to increase investment in R&D in line with the growing number of new Phase III trials. COP is expected to increase by 12% to over JPY 600 billion, and the core OP margin is projected to rise to 27.9%. In our pipeline regarding Parse for MBC, we plan to conduct multiple filings and regulatory decisions as well as initiate new Phase III trials. We also plan to initiate the Phase III trials for CT aggressive and ASP 2138. Regarding shareholder returns, we focus dividend per share at JPY 80, up JPY 2. On Page 14, I will explain the full year focus for FY 2026. For FY 2026, we anticipate revenue of over JPY 2.2 trillion and a core OP of JPY 600 billion, suppressing the record high achieved in FY 2025. First, for ForEx rates, we are assuming JPY 150 to USD 180 to euro for FY '26. We forecast revenue of JPY 2.22 trillion, an increase of JPY 80.8 billion year-on-year. Although we anticipate a decline in sales of XTANDI, we expect to secure overall revenue growth driven by a strong performance of strategic brands. We forecast SG&A expenses of JPY 800 billion, down JPY 60.3 billion year-on-year. Of this amount, extended co-promotion expenses in the U.S. are expected to decrease in line with the decline in its sales. Excluding copromotion expenses, SG&A is projected to be JPY 584 billion, down JPY 28.1 billion year-on-year. The cost optimization through SMT is estimated to about. The majority of this relates to SG&A optimization is expected to contribute to the reduction in SG&A. R&D expenses are projected to be JPY 355 billion, up year-on-year. This increase is primarily due to the high clinical development costs, including in stations of the Phase III studies. To further solidify our mid- to long-term growth, we will accelerate investment in promising pipeline candidates such as CT deagressive [indiscernible] 500 in addition to the life cycle management of PADCEV. As development progress, we expect to continue investing at this level or higher. As a result, the focus is core OP of JPY 620 billion, up JPY 64.3 billion year-on-year, representing double-digit growth of 12%, and we anticipate the growth in our strategic brands and the cost optimization through the SMT will contribute significantly to this profit increase. We expect the [indiscernible] margin to be 27.9%, up 2 percentage points year-on-year. Next is a full basis operating profit as a major adjustment item mix is coded from the core basis, we anticipate amortization of intangible assets of about JPY 140 billion. Additionally, we have factored in about JPY 80 billion in other expenses, this includes impairment loss risk of about JPY 40 billion and costs associated with organizational restructuring. As a result, we focused operating profit of JPY 395 billion, an ease of JPY 12.4 billion year-on-year. Page 15, the explanation, the outlook for our main brands of FY 2026. The strategic brands will continue to drive growth in consolidated revenue profit with the particular contributions expected from [indiscernible]. We anticipate top-digit growth for each of these brands with total sales expected to exceed the JPY 600 billion mark and reaching JPY 610 billion. on an increase of about JPY 130 billion or 27%. But we expect continued strong growth driven by further market penetration of first-line in particular, we anticipate growth in [indiscernible] also grossing -- in the U.S., in addition to the full year contribution from cisplatin ineligible MIBC, we anticipate sales contributions from the cisplatin eligible MIB indication for which the filing was recently accepted starting diligent fiscal year. As [indiscernible] expected to see steady sales growth, building on the sales infrastructure expanded last fiscal year, we will further strengthen promotional activities and through DTC initiatives. We will aim to expand the complement inhibitor market and increase the number of new patients. but we anticipate a continued solid growth across all regions, driven by a further increase in testing rates and expansion of the patient base and market share. We expect steady growth for both [indiscernible]. Extended the negative impact of price reduction associated with the IRA, which takes effect in January '27 in the U.S. is expected to become apparent study in the fourth quarter. In addition, combined with the impact of patent expiration in certain countries, global sales are expected to decrease by about JPY 50 billion year-on-year. Please note that starting in fiscal year 2026, we have discontinued the disclosure of sales focus for individual products. We believe it is important to grow our five strategic brand as of 1 hole and we hope to engage in dialogue focused on third made to long-term growth trajectory rather than being preoccupied with the short-term fluctuations in individual products. Regarding Stand and mirabegron, we anticipate there will be significantly affected by factors such as patent situations in the future. So as an exception, we are disclosing their sales forecast for your better understanding of our assumptions and outlook going forward through timely and appropriate information disclosure and communication, we will continue to strive to enhance our mid- to long-term corporate value by engaging a constructive dialogue with investors. Page 16 about the second management of the strategic brands, I will explain the major events expected in FY '26, we are expecting multiple regular events across strategic brands. For PADCEV, we expect regulatory decisions on the EU and Japanese filing based on AB3003 study for cisplatin ineligible first and second halves of the fiscal year, respectively. In addition, we expect the Japanese filing based on the AV 304 study for is eligible MRBs in the first quarter with regulatory decisions for the U.S. and EU submissions anticipated in the second quarter and the second half of the fiscal year, respectively. Furthermore, plan to file in China based on both the EV303 and 304 studies in the first quarter. We also plan to initiate the Phase III EV309 study for blood disparing therapy in the first half of the fiscal year. As a way, we plan to file in China in the first quarter. There are currently no appropriate treatments in China for geographic atrophy and serious condition and following constructive discussions with the authorities. We plan to follow based on data from overseas clinical trials. [indiscernible], we expect study data RADAR from the STARLIGHT-3 trial, which evaluates long-term safety in Japanese women to become available in the first quarter, and we plan to file in Japan in the second quarter based on those results. We also plan to file in China in the third quarter. On Page 17, this is an outline of the key pipeline events expected in FY '26. We plan to initiate Phase III trials for SB-2138 in first-line gastric cancer and cited aggressive in second line or later non-small cell lung cancer in the first half of the fiscal year. We are also considering announcing additional data for each of these studies within the current fiscal year. Details will be provided once the announcement is officially conformed. Although this is an event that has already been unshaped, we initiated a global Phase Ib/II study of ASP 546 led by Astellas in April. 7317, we will present additional data from Phase Ib trial at AVO Association for Research and Vision and Ophthalmology in May. AT845, we are currently conducting additional analysis of POC judgment and expect to reach a decision in the first half of the fiscal year. Finally, I would like to review corporate strategic plan for our SSP 2021. On Page 19, I will explain the transformation of our organizational culture and operating model that we undertook during the CSP 22 in one period. as a foundation to continuously generate innovations, we have implemented various initiatives related to human resources and organization structure and have embedded them across the company. In fostering organizational culture, we established organizational health goals at the start of the CSP 2021 and advancing efforts company-wide. As reported in the purpose sustainability meetings, we have achieved many results directly linked to our business over the past fiscal years. past 5 years excuse me. Furthermore, in April 2025, we simplified and consolidated our culture foundation to define organizational base and behavior. By ensuring that every employee act based on a clear shared understanding, we aim to strengthen collaboration and create and deliver greater value to patients more quickly. We have also significantly transformed our operating models. Under the new structure launched in Peru '25, we shifted a top-level management focus from a region or function to patient access and introduce an end-to-end business model. with empowering cost action teams organized around programs and brands and strongly promoting at ways of working, we have enabled a clear and rapid so making thereby improving productivity and efficiency. Page 20, the review of the performance goes in SSP 2021. Overall, we believe we have succeeded in establishing a foundation to overcome extended exclusivity and deliver sustainable growth beyond it, which was our original objective. Regarding Performance Goal, on revenue, thanks to our newly launched products such as [indiscernible] acceleration of life cycle management centered on PADCEV, the total sales of the strategic brands and exceeded JPY 1.4 trillion. Performance go to pipeline value. We faced a situation where programs already underway at the start of SSP2021 did not progress as anticipated. However, as explained at the R&D Day in March, we thoroughly focused on our strengthening discipline, improving productivity through the transformation of our R&D organization. And by accelerating the development of priority programs, we achieved significant progress and expansion of the pipeline, including the achievement of a total of full -- about performance goals to core operating margin, while we made investment associated with the launch of [indiscernible] products, the SMT initiative progressed well, achieving cumulative cost optimization of JPY 65 billion over 2 years. As a result, the core OP margin for FY '25 reached 26%, up 4 percentage points compared to FY 2020. Page 21 to ensure the reliable execution of CSB2281, we see 3 enterprise priorities closely linked to our performance goals and launched full-scale implementation in FY 2020 for growth strategy aims to maximize the potential of strategic brands, broad ambition aims to increase pipeline value and sustainable margin transformation aims for company-wide cost optimization. The following slides will explain the result of each. Page 22, I will explain the result of maximizing the potential of strategic brands. In addition to [indiscernible] on the market at the start of CSP 2021, we successfully launched [indiscernible] the period of CSP 2021, establishing a diverse high-margin portfolio of strategic brands. Furthermore, we obtained approvals for PADCEV as first-line treatment for MUC, and for the additional indication of MIBC, which serves the key growth drivers, thereby further strengthening our growth foundation. As a result, our strategic brands expanded robustly, achieving a remarkable growth of 10 poles over 5 years. Since the majority of strategic brands are fully owned and are high margin brands, they have strongly elevated as well as overall revenue and profit growth during the SP 2021 period. The solid track record of build over the past 5 years has further increased the certainty of our future growth. We will carry this growth momentum forward into the next corporate strategic plan. On Page 23, I will explain the increase of pipeline value. We accelerated the development of flagship programs in each primary focus area and achieved a full POC from 3 assets. Furthermore, we strategically and systematically generated follow-on programs and incorporate external innovation based on our focus area approach, thereby expanding our pipeline. As a result, we have established a franchise in multiple orthopedic areas such as prostate cancer coding 18.2 targeted therapies and retinal diseases where we have cultivated strength through the development and sales of main products thereby building a foundation for sustainable growth. Page 24, I will explain the outcome of the -- since launching the SMT in FY '24, we have achieved cumulative cost optimization of JPY 65 billion over 2 years. Furthermore, cost optimization measures for FY '26 and '27 have already been identified and we are now at the stage of ensuring their reliable execution. We are fully on track to achieve total cost optimization target of JPY 150 billion. In addition, the SG&A ratio improved by a total of more than 5 percentage points over the 2-year period from FY '24 to '25, and we are gaining clear traction toward improving profitability. Moving forward, we will continue to advance cost optimization through SMT to establish a highly profitable financial structure. Page 25, I will explain the revenue and corp growth over CSP 2021 period. Revenue expanded 1.7 fold over the 5 years, driven by the strong growth of strategic brands. Core OP expanded 2.2 folds over 5 years, driven not only by the revenue growth, but also by significant contributions from cost optimization through SMG starting in FY '24. The core margin also improved significantly. Page 26, today's key takeaways. Our strategic brands delivered exceptional growth raise in confidence for future expansion. Furthermore, we have established a robust pipeline and build foundation was supposed to extend the loss of exclusivity growth. Additionally, through SMT cost optimization, we have made significant progress toward resilient the cost structure. Over the 5-year period of CSP 2021, we are now fully prepared to overcome the extenders and loss of exclusivity and to continue to grow. And our next broad strategic plan. We aim to demonstrate how we will achieve sustainable growth by building on the foundation we have established to date. At the end, I would like to remind you of the briefing session of our CSP 2026. It will be held on May '26, and we hope you will be able to attend. That concludes my presentation. Thank you for your attention.

That's all as our presentation. We now would like to entertain questions from the audience. [Operator Instructions]. Thank you very much for your understanding and cooperation. So we'd like to take questions. First, Citigroup Securities, Mr. Yamaguchi, please.

Yamaguchi from Citigroup. My first question is as follows, as you explained during the presentation, for strategic brands, in particular, you would share some forecast for some of the products, but not for strategic brands. So external parties cannot see the forecast. It may be seen as restating. But how you're going to -- what are you going to do about the individual trends of each product? The disclosure of individual product information is not going to happen. What's the reason why could you explain once again?

The results will be explained for each product, as we have been doing up until now. But in the process of the growth of new products, there are uncertainties for each product. There is an increase or decrease for individual products. Focusing on such a fluctuation is not very constructive in our view. So based on that, what kind of action we are going to take and how that's going to be reflected onto the actual results. That's something we won't analysts and investors to see. So this product expected to have this much revenue or sales in this particular region rather than having such discussions. What -- you're hoping to discuss the situation of 5 strategic brands as a whole. So in the mid- to long term, we are going to capture the development and the growth of the products. So. It may not be the right expression, but you can demonstrate your capabilities. So I'm looking forward to future interactions. So once again, you -- on the May '26 at 4:00 p.m., you're going to explain the next CSP. So you're not going to talk about individual products very much. So between 4:00 and 5:30 p.m., are you going to share the presentation materials on the same day or the previous day, if you change how we can prepare. So after the closure of the market, we are planning -- preparing to disclose the documents after the close of the market like at 3:00 like today. Thank you very much.

Next, JPMorgan Securities, Mr. Wakao, please.

Wakao from JPMorgan speaking. I have a question about Xtend and the five strategic brands, the results in the fourth quarter and also the outlook for the current fiscal year. As for XTANDI, you can just talk about the actual results. Fourth quarter was a little bit weak in the United States. I'd like to know why. My strategic brands, PADCEV was doing very well. So what's going to happen this year, particularly in MIBC. How we should look at the situation. I'd like to hear your view. And Asavas well, the plan was not achieved, but in principle, it's going to grow continuously in the current fiscal year. I'd like to know more details.

Thank you very much. Make the summarized the comment briefly. And because Claus is here, the rest is going to be explained by him. As has been mentioned, XTANDI in the first quarter, the business is a bit weak and we did our own analysis, and of course, they counter measures for that plan to be executed. But as you know, for XTANDI, in 2027 January, in line with the IRA, the place is going to be revised. So in the history of XTANDI, it's going to be the year of the reduction. And that impact was already explained within my presentation. And just like you mentioned, in FY '25, the track record is the PACEV monetary value-wise, their growth level is outstanding and by law -- that has just launched in the market. So growth rate is over our expectation. And what is going to be happening for -- in FY '26, we are not going to share with the individual situation. So I don't know if it is right to talk about it. However, for PADCEV first line, other than the United States, it's going to grow further. And the U.S. market as a trigger for MIBC market as well, we expect that the sales is going to contribute it. And [indiscernible] as well, 2025 is a little bit on a resting situation. However, in this couple of months looking at the track record of the time period. Still, there is a room of the growth. That's why we didn't revise sales forecast. It has to grow further. So we are having such a very expectation [indiscernible] do you have any additional comment?

Yes, just briefly to the 3 brands you asked about XTANDI [indiscernible]. So I think the fourth quarter is indeed a little bit weaker. But we see the entire market being weaker in the ARPI. So I think it's probably a mix of market effect and turbulent competitive and market dynamics for XTANDI in that particular quarter. But we've grown very, very well over the year, and we've now reached the peak sales for XTANDI. So I think that's very strong contribution to our growth rate. Let me turn to PADCEV because PADCEV, I think we need to distinguish between U.S. growth where we have the 303, so the CIS-ineligible MIBC indication already approved. And on approval, as always, with pads we see the market responding very, very quickly and uptake goes up. However, please let me also remind you that uptake usually plateaus after about 6 months. So we are expecting that also to happen. So U.S. growth is very strong right now, but we do expect the plateau to come in end of Q1 or Q2, whereas Europe and the other ex U.S. countries do not have MIBC in any noticeable fashion in FY '26. Here, we expect a strong growth to be driven by reimbursement come through on the first-line metastatic indication. So you get a very different dynamic in the 2 parts of the world. But overall, I think PADCEV will continue its strong growth trajectory. Now let me talk about iServe. You do remember about a year ago when the foundation funding dried up the entire market, the new patient starts for the entire market, both in geographic atrophy but also in wet AMD went down significantly. And it has affected sort of the base from which we have regrown as Naoki said, we have regrown from that lower base since then. But we've done it in a very consistent and very successful fashion. It's about 11% quarter-on-quarter that we've grown since that rebasing. And I also would like to draw the comparison to other products in the intravitreal space. So if you look at, let's say, EYLEA, the [indiscernible], they've actually all decreased in sales EYLEA by 27%, [indiscernible] 10%, SIFOVRI by 4%. And we actually have grown more than 30%. So I think in a very difficult market environment, Either way has really produced a very, very impressive performance of consistently growing from that lower base. And we do expect that to continue as the complement inhibitor class also grows.

Thank you very much for the detail. As a follow-up, MIBC has a good market penetration, but it could reach a plateau quickly, that's understandable. As for 304 to get the approval, so a similar thing can happen. Is that factored in into the forecast? If the uptake is so fast. Overall, there can be a further increase by PADCEV.

So we do expect the 304 approval by the PDUFA date, as stated previously. So that would indeed then produce another uplift on PADCEV.

Thank you very much. My second question. In the past 5 years, XTANDI Cliff is to be exceeded, and you have a platform to increase your product. You have improved pipeline as well. And I have a question to you. Large-sized M&A possibility. How much leverage are you going to use? I think that's in the appendix. But in principle, according to the pipeline, which is shared with us, you would exceed XTANDI cliff to grow? Is that the assumption? Is my understanding correct? Depending on the status of the products under development, you may need an M&A deal as a base case scenario, you would use your own pipeline to grow. Can I understand that way?

Thank you for your question. Up until now, we said a few times by now. This is an illustrative XTANDI figure XTANDI will decline, strategic products will increase, we would have programs from focus area approach to be added in a chart like this. In 2026, Peak is expected for sales. Then we have -- during the course of CSP 2026, revenue may decline. And then we go back to growth trend once again. And your view and our view may not be so different. Then if there's going to be a dip, a large M&A deal is going to be used to prevent the dip to minimize the dip or to make it flat. If that's your question, we're not going to do such an M&A? That's my response. This is the so-called risk UBD to rescue from us from the dip will decline. We have no intention to do such a thing because such a deal would have an increasing price because everybody wants such an asset or a transaction. After we get something, if there is a small room for us to get the value, it's not going to a very good cash flow for deal. This is just the exchange for cash. So there aren't many elements to force us to do something like this. If you don't do a rescue deal, then -- are we going to pause BD, you may interpret that way in an extreme fashion. But as we have been doing before, our franchises and the existing primary focuses to be reinforced by technologies and attractive assets, we are going to pursue such opportunities very actively. Everybody talks about very easily. But in the world of pharma, sharing the risks with the owners, there are many ways to do so back end licensing agreement is one way or milestone payments. To be linked with regulatory outcome by doing so, A huge amount of payment is made at the beginning, but nothing happens. We can prevent such a situation. Of course, we are making such efforts. Still, having said so, how attractive our pipeline is right now because of this world, failures could occur. So 2030 and beyond the gross we want to achieve could not be envisioned. In that case, we should be able to use flexibility. So under camera, we try to repay the debt as soon as possible gross leverage ratio, EBIT on time up to 1.5x as we declared, we think we already sufficiently within this range. If necessary, large-size BD can be done because we have such extra financial capabilities, EBITDA is growing bigger than before. So the money we earn would be returned to shareholders partially. But also, we'd like to make R&D investments for future growth. And also various investments will be made by using such a money for the details. On the 26th of May, we will announce our CSP 2026. We'll try to you talk about our plan as much as possible, and you can ask further questions during that meeting. But that's all the information I can share today.

Thank you. Next, UBS Securities, [indiscernible] please.

[indiscernible] my name. Thank you very much for your explanation. First, the cession is about dividend. This time, JPY 80 increased JPY 2. In the past 2x, the increase is every JPY 4, but this time, JPY 2 increase. I believe that you had a lot of discussions about this situation. I believe the discussion was quite difficult. But you have 4 and this time, too. I think that itself includes some message. Now about the CSB but this JPY 2 increase, what's your intention? What's the message?

Kitamura is going to explain.

Thank you for your question. I'm Kitamura, CFO. First of all, this dividend. As Okamura explained, investment for the growth and also return to the shareholders, those are continued. That is our policy for capital allocation. There was no change whatsoever on net. For dividend, a single -- rather than single year performance, mid- to long-term performance, cash flow forecast against that or based upon that, the stable dividend is provided. That is our decision. So JPY 2 per year and the performance was good. So dividend is increased. It's not something like that. We have a sustainable plan. At this time, to yen, in the past 4 increase, well, whether I'm talking about a single year, again, mid to long term, perspective is necessary. And based upon that, we decided to increase. For details around the end of May, when we make a presentation at next CSP, we would like to give further explanation. Currently, margin is good cash flow is good. Financial performance is strong. And just like Oka mentioned, when we do something and are fully prepared. So we'd like to be flexible to think about capital allocation.

That's all. The second question is about pipeline. Last week, ACR took place and [indiscernible] competitors' data, Revolution Medicines good data was shared not only data, but also 55, the nonclinical, but data was also good. Based upon such data, your franchise [indiscernible] project, your ways to look at is not different.

The area is still the therapeutic area was investing I am going to make an answer, first of all, and followed by Taniguchi. We consider that KRAS is quite an important target. Their success means that [indiscernible] is definitely target that we should more focus on. So their success is proving it. The difference of mechanism of action. But first of all, that data is a very early phase. So us the benefit due to the difference of mechanism of action is available in our product. So at the very end, when the late phase of data becomes available, and that is the time we can say which wins lose. I think as has been mentioned, thanks to their success that became our confidence of targeting the Karas.

Thank you. Taniguchi speaking. As has been explained by Okamura leverage [indiscernible] medicine data Paras inhibitor by revolution and that data is disclosed. And this is really good data we have the Kras target project. So the Kras itself is quite promising. That's what we've learned, including PDAC, NC and NSCLC is suggested to be a really good target for the treatment. Stress that we have, the first line of PDAC Phase III has just started. Regarding this indication, we are ahead compared to revolution medicine. And our CRAs, GTV targeting set aggressive not only efficacy but safety as well, the approvable result is available. So it is easier to combine with chemotherapy that is coming to standard of medicine. In the case of PDAC in severe patients, it's difficult to administer the drugs already. So IV infusion, CTD aggressive can be used for such patients as well. That's our expectation as for the data -- we disclosed some of the data already. And based on our data as well, [indiscernible] target, is going to be important into the future for important PDAC and lung cancer targets.

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

I'm Ueda from Goldman Sachs Securities. My first question your initiatives in SMT, I'd like to know more details. For billion yen, reduction is going to be incorporated into our plan for the current fiscal year. What kind of items are going to be the major ones? In 2027, your measures as was shown here, some are already identified. So what you're planning to do, specifically, if there is -- is there anything you have already decided? What about the certainty of these measures are to be implemented as we said?

We are going to do something which is already identified, so we will just work on it. But still in areas like this, if we do something like this, we may not be able to realize the effect as we planned or it may take more time as we were planning. So the value could be diluted. So there can be such risks. Now that everything is already identified, so we just need to do and work on that. No. And we have to pursue further opportunities for SMT continuously. Kitamura-san can talk about the further details as far as we can share.

In 2026, we are expecting additional JPY 40 billion. by FY 2025, we work on various measures. And we try to invest the benefits there. Specifically, as you know, we have global operations. in order to increase the productivity in FY 2025, we made huge investments, creating new bases. To concentrate operations there to come up with a scale and implemented automation. We took such major action, and we'd like to harvest the effectiveness there. So it will generate a certain level of huge benefits and creating necessary capabilities in-house. That's also one of the measures we are working on. And also, capabilities integration, including integration with vendors are also ongoing. So sales promotion-related back office or material development. And there can be a lot of synergy, so we are going to harvest the results. So those are the main things we are considering for FY 2026. What about 2027. We will explain in the future, SMT is not a single year initiative, but it's a multiyear initiative in the first year. We worked on lower hanging fruits easier to realize to prepare for the mid- to longer term in 2027. That is going to be the final year. So action, which requires a longer time, and we are going to harvest the results from our longer-term projects such as supply chain. And legacy projects with longer lead time would be realized in 2027. That's what we are expecting.

Understood. My second question, in the United States, I'd like to ask you about the business environment in the States. Pharmaceutical duties and MFN, are you -- do you have anything you can share in terms of the negotiation with the U.S. government and also MFN and the tariff? How do you see the potential risks in your plan? Is that going to be fully manageable in your plan? So I'd like to ask you this question. Thank you.

Thank you for your question. Needless to say, receiving a letter based on that negotiation with the authorities, by some companies, you know those company names and what was the result? We heard such a rumor. And the first round seems to come to an end. So we haven't received a letter from the U.S. government. But still we don't -- we try to open a channel to discuss with the government authorities. And looking at the components of the agreement, we can learn what kind of factors incorporated. And for each factor, what we cannot do. Those are, of course, we already considered and discussed. Tariff, there are some rumors, so stores ongoing but we don't know any specific fix. So we have prepared ourselves, but that's not really quantified so that it could be incorporated into the corporate strategic plan. Of course, we do a certain level of risk analysis. We have coming products from a focus area approach. And once they come to the market, our kind of price environment, we will face around that time. For that purpose, we have to have a very sensitive antenna from marketing access perspective, what can we do and what kind of preparation we need to do those all under the consideration. This might be the repetition regulations and rules. Those are not something we can set by ourselves. The rules and regulations are decided by somebody else and we basically have to follow that. And within -- in order to that we do whatever we can do in a maximum way. And it was likely to be changed. And if there are some countermeasures conceivable, then we would do so. So that's probably the only way we can do for this type of issue. Is this a big problem? Yes, it is likely to be -- likely to become a big problem. But nothing can be studied just being move make action only with partial information because we have patients, we -- the patients around the world we cannot make a decision. We think about only U.S. patients and not ignoring other countries, patients. We always would like to think about delivering value. in a uniform manner through other world. I think that's probably what we can do. Did I answer your question?

Next, number of securities, Matsubara-san, please.

Matsubara from Nomura speaking. I have two questions as well. The first one is a question related to Ueda-san, a follow-up question about SMT. You might say that please wait up until 2026 announcement. There are some areas you can do the cost reduction. In FY '27 afterwards, cost reduction through SMT is possible to be expected?

Thank you very much. Partly, this is a personal opinion. First of all, cost optimization and journey of that. That is going to be continued. If you were to ask me, have you completed that? Well, that's one way to look at it. But at the same time, technology has been advancing day by day. And my personal perspective, cost optimization never ends. However, cost cut is not only the way, not only pursuing the numbers just in front of us. What is important is to continue to deal with that from a mid- to long-term perspective. For that purpose, you need a certain mechanism. And when you say cost you tend to talk about on the input, but maximizing output is also important. The bigger value is going to be delivered to the patients as well as possible. With doing that, we need to increase the productivity your question we're going to do this FY '27 afterwards, of course, we will do that. What about approaches? Well, we have a conventional approaches. That is based upon the sustainable margin transformation or SMT with a full year plan and execute those plans and the PTC is tied around. So it will continue the same thing. Well, I myself, this approach so has to be evolved. So rather than doing the same type of SMT for the next 4 years, rather we are going to accelerate that. So that we can broadly work on this. And such details are going to be further explained -- possible to explain at the time of CSP presentation.

I'm looking forward to that. My second question is about USAA. In Partha study, primary endpoint was not achieved. Peak sales assumption is JPY 100 billion to JPY 200 billion, no change. So what's your view on the peak sales?

Thank you for your question. Unfortunately, primary endpoint was not met. Regarding this indication for us, in principle, we are not going to pursue this indication globally anymore. As for the change in the sales forecast, and what is going to be happening into the future, [indiscernible] is going to add.

Yes. I mean, FESPA is on a stable growth path. It's not a very fast growth path, but it's a stable growth path. So we do expect that to continue. And even in the PACE study, there are some elements which are actually quite interesting for doctors to study our reputation for Sosparta or Giturinib as a FLT3 inhibitor is very much intact even with a lot of first-line competition coming into this market. We expect this agent to continue on that slow single-digit growth path that we've had in the past.

Then for the future in subgroup with gene mutations, administering this to those patients in combination with chemotherapy, primary end point was not met, but this super could be utilized in different types of patients. Is my understanding correct? Can you decide anything to add from you?

Okay. May I? So [indiscernible] study, primary endpoint was not met. And analysis is now underway. Of course, subgroup analysis are included as well from various angles analysis is being performed. As soon as we get the results, we're hoping to share with you. And in which segments we are going to go for or not going for. We are hoping to have such an opportunity so that we can explain.

Next, Morgan Stanley, MUFG Securities, Mr. Muraoka.

Thank you very much. Morgan Stanley, Muraoka speaking. Most of the topics already covered, but XTANDI. Quarterly results quarterly figures, hopefully, we will explain today, it doesn't make sense to talk about the details of each product. But my question is, according to your forecast for FY '26, in the initial 9 months, it may flat or increase. But in the fourth quarter, there can be a big decrease year-on-year. Is that your image? Perhaps if you can share certain image, I'd like to hear.

Thank you. First of all, XTANDI as a whole, Discussing the figures for XTANDI as a whole, we -- it can be dangerous. So we have to discuss U.S. and ex-U.S. separately. As for U.S., as you said in the fourth quarter, I will kick in. So how much is a different question, but it's clear that it's going to be in the negative column. In other countries outside of the United States, there was the pace of growth up until now, it's going to slow, needless to say, because more than 10 years of basic the launch, if it's going to grow at the same pace as before. No, that's not going to happen. But we have EMBARK data and other data we can use. So we still have room in the market where we can grow or we should grow. That's my basic principle. Claus, anything to add?

No. Only to add that, of course, ex U.S., the patent the exclusivity is much longer '28 in Europe. But in Japan, in Australia, in Russia and some other markets, we have quite a long patent life. So this is not just 1 patent exclusivity that we lose. It's really country by country over many, many years, about over 4 years in total. So that's the only thing I wanted to add.

Thank you very much. One more question to you. Core OP margin has been discussed quite often by now. I may ask your question about CSP. So I hesitate a bit. But operating profit margin is something you are very particular about in pursuing. If that's the case, how you're going to work on this. It's difficult to imagine because of the cliff. How you're going to achieve where are you going to achieve this? This can be a decline and then you go up again. So what's your philosophy and how much you want to be particular about this?

In a word, please looking forward to May 26, but I would like to make a some comment here just a little bit before that day. I think in the past, I mentioned about it, we add the size of a pharmaceutical company. And with the innovation, we try to contribute to the society. This is our style. And as such, biopharma company, cost of goods to 25%, A25 and the cost is reduced a little bit and might be CUSA lipid and vice versa might happen. But anyhow, adding up this to 50% is the level that we would like to manage. So before the deduction of R&D, the profit is 50%. Out of that, the 20% of sales is allocated to R&D because that leads to the continuous delivery of innovation. My way of thinking. Based upon that, we come up with a number of 30%. The sales is reduced. So you cannot do in that way. I understand you would say in that way, but further details are going to be described on May 26.

Understood. One brief question. [indiscernible], the actual January to March, $180 million. It's increased in that -- to that extent, what's the background of that? I just got a little bit confused.

I can explain about this but Kitamura can explain in a thorough matter. First of all, you asked me a metric with the generic companies, we come to the settlement. In line with that, Other settlements took place. And partially, the royalty aspects agreed, including the royalty as well in the fourth quarter. And afterwards, some adjustment is applied. That is the situation, and that will continue. So please look at the number of mirabetric that as a precondition. Some others on time factor also added a lease to the increase in the fourth quarter. Rather than onetime, fuses speaking, the transaction not included until the third quarter is now included and agreed patent period. During that period, this will continue. That's the way to look at -- so [indiscernible] number is disclosed. And as you know, the number is not that low. That's because of the inclusion of loyalty adjustment. Thank you.

Next, Macquarie Capital Securities, Tony Ren-san, please

Yes. Okay. Perfect. Yes. Thank you for taking my questions. I have two. So the first one is about your intangible assets on Slide 35. And you commented that you had some impairments for your gene therapy it appears to me that the value for some very successful products, such as VLO and Ezawa have also decreased a little bit. Could you comment, is it because of impairment? Or is it because of normal amortization. So that's my first question.

I think -- thank you for your question. I think the intangible asset is a combination of amortization, especially that is more like move to the sales rate in the market. Product-related intense veracity is now crushed by from the import R&D to the sales rate as us. And sales right, yes, there will be amounts over years. So it's kind of very heady transactions. Now the impairment loss are somewhat bigger in the import because the in-process R&D amount it says it is and up until the product will qualify to take, if we fail to qualify the market, we need to right of close the asset 100%. Now we didn't have -- we did have the impairment also recorded in one study, that is the gene therapy product asset, but we have the new asset in the [indiscernible] trial. So we shift our focus on 10 to the 29 as already mentioned. So see the definite move in intangible assets. But over all, this time, we make the progress so that we shift to the focus on one project to new project -- and also the amortization start and move as a weak plant because of product is in market. I hope I answered your questions. SP-4

Yes, it's very clear. as. My second question is about your clinical collaboration partner, [indiscernible], so obviously, Eli Lilly acquired Colonia, you have been cooperating with Colonia over CAR-T in Vivo CAR T cell therapy since 20 -- since early 2024. So it's about 2 years now. Have you -- have you guys considered acquiring Colonia, was it because you did not want to compete against the Eli Lilly -- or was it because CAR-T or blood cancer is not part of your key priorities? And how does your collaboration with grower change after the [indiscernible] acquisition?

Thank you for the question. Probably that question should be answered in a very scientific aspect. So I would like Tadaki to answer those.

So thank you. Our Caronia collaboration is actually have on the project. And as you mentioned, that in vivo Cat platform, we work together in a preclinical the program. our decision is that we're not pursuing that project moving forward to the father. So we terminated that project. And so -- that's where we are now. And so I don't think we have any impact that the lead is going to be upward Caronia. But of course, we have still connection with them, but we don't have any sign project working with them now.

Okay. Did you guys have the discussion over possibly acquiring [indiscernible]?

No, obviously, we haven't -- we have no intention to do that.

Next, Sanford Bernstein, Ms. Sogi, please.

Thank you. First, about Keras, I have a question to you. Revelation medicines [indiscernible]. Phase III results were announced for a second line plus PDAC, as for the first line, they have PDAC program, monotherapy combination. And your TD aggressive KRAS G12D and competitor is going to be earlier. Because of the KRAS for revolution medicine, this one may be more effective or similarly effective KRASG12D specific target is your product. So this can be a disadvantage for your product. [indiscernible] versus Kras, G2D specific. In terms of efficacy, what kind of scenario are you hoping to see.

It's too early to say specifics to explain the differences. But Taniguchi is going to explain as much as he can.

Thank you very much for your question. [indiscernible], it's [indiscernible]. So it's not just limited to KRAS, but us own inhibitor more broadly. Because of this, the target patient population is broader according to understanding. Maybe because of that, we don't know clearly, but I saw their data -- for example, skin-related adverse events and GI-related adverse events seem to be high in the incidence according to our impression. In -- when this is brought to the clinic, what's going to happen? Regarding our stay aggressive, not just efficacy but safety relatively speaking, is also favorable according to understanding. So we just started PDAC first-line study chemotherapy combination is going to be the main regimen in the study. We are planning to execute. When I discuss with the doctors, the appearance might be different from doctor to doctor, but in the targeted population by the drug and drug with broader coverage, which one to use first. As far as we have heard from the doctors more targeted product is the one they would like to use. So such a response is more frequent. So once the Phase I data is going to be available. They would decide.

One more question. [indiscernible] stock to targeting IHC that is a new type of ADC. Regarding the [indiscernible] the cancer cells, selectively, it is clicked or outside, especially regarding STING agonist, outside of the cancer cells, when it's released, it comes into the cancer cells for the action. Is it already confirmed? And also, these linkers cleaved only within the cancer cells. For that, I think that has to be the patient selection strategy considering their drop 2 ADC development so far. With this regard, what is your strategy?

Taniguchi is going to explain.

Thank you very much. That is a very scientific question. 2998 has been mentioned, STING agonist and also Topo used a dual payload targeting TROP2, this is such [indiscernible], and if that it is closed around the target, the design is in the way according to my understanding. One of the characteristics of this drug is top 2 target, not only ADC, but because of the existence of Sting, there are tumor or tumor microenvironment then activity is promoted to enhance the antitumor action. That is the concept of the design. Looking at the preclinical data. But compared to the conventional ADC targeting top efficacy is superior. So that is where we have higher expectation. And what is the focus of [indiscernible]. If we learn about that, we can share that with you. But so far, I don't remember the data. So I take it back. I bring back and if I identify some information, I would like to share that.

there are some more waiting for asking questions, but because of the time. Next is the last question. Nikkei Newspaper, Usaki-san.

Usaki from Nikkei newspaper. Can you hear me? This may be a little bit different question. the current Middle East situation. I just wonder if that has an impact into your business? Not the previous time, but for this time? Does it have any impact?

Thank you for your question. Well, the middle is the countries where we have footprint and having operations. Of course, the employee safety is a priority. At the same time, it's the area of the war because it's the area of wall, there are patients who are still requiring our products. So we definitely would like to make sure the delivery of the products to them. The Strait of Hormuz is now closed. And because of the various type of the oil-related materials are delayed in terms of the delivery. And with that impact, perspective. So far, we can say that there is no big impact on us, and we are not thinking that will have a bigger impact. But our product is one of the component of all of the medicine or health care. And as mentioned, if there are some more problems that happen for the materials. For example, the infusion back issue or cylinder for the injections. If there were some problems in [indiscernible] of the supply of those there might be the question or problems in card. So we always would like to continue to pay attention. And as [indiscernible] mentioned, the topic of the U.S. administration, we are not going to be reactive for each individual events. Of course, we do our preparation. We do not consider that the business is going to be over a sudden better or the worse, which is one thing. So we would like to be prepared all the time.

Thank you for many questions. Time has come. So with this, we'd like to close today's meeting here. Thank you very much for joining us once again. [Statements in English on this transcript were spoken by an interpreter present on the live call.]