Chugai Pharmaceutical Co., Ltd. ($4519)

Thank you very much for taking time out of your very busy schedules to attend our first quarter FY 2026 earnings call. My name is Miyata from Corporate Communication and IR Department, and I'll be serving as the moderator today. Thank you for your kind attention. The session will be conducted via Zoom webinar. We will proceed according with the agenda shown on Page 3 of the presentation materials. The briefing will be conducted in Japanese, but we will have simultaneous interpretation in English also available. [Operator Instructions]. First, Dr. Okuda to provide an overview of the first quarter of FY 2026.

I am Okuda, President and CEO. I would like to give an overview of the first quarter of FY 2026. Please refer to Slide 5 in the material at hand. In first quarter FY 2026, both domestic and overseas product sales progressed steadily, resulting in both increase in revenue and profit. Growth was driven mainly by Hemlibra exports to Roche as well as increased NEMLUVIO exports and higher royalty income from Galderma. As a result, compared with the same period last year, revenue increased by 11.5%, operating profit by 17.1% and quarterly profit by 19.6%. As such, first quarter got off to a smooth start in line with our initial expectations. Details of the revenue will be covered on the next slide, Slide 6. This shows the year-on-year changes in revenue compared with the same period last year. Revenue grew by JPY 33.2 billion, up 11.5%. I will walk through the items from left to right. Domestically, despite the negative impact of the NHI drug price revision and generics penetration, mainstay products as well as the new products performed well, resulting in an increase of JPY 8.4 billion. Overseas, while export unit price declined, the increase from volume and foreign exchange effects more than offset this, resulting in an increase of JPY 23.4 billion. In particular, Hemlibra exports to Roche and NEMLUVIO exports to Galderma increased significantly, marking solid progress. Other revenues increased year-on-year, primarily due to higher royalty income related to NEMLUVIO despite a decrease in one-time income. Domestic sales, overseas sales and other revenue all increased achieving overall revenue growth. Please move on to the next slide. I would like to explain about the key progress made in the first quarter. Regarding NXT007, we plan to initiate 2 Phase III trials in the second quarter, aiming for a regulatory filing in 2028. Regarding emugrobart, which is GYM329, we have discontinued development for SMA and FSHD. On the other hand, based on the clinical results obtained, we believe this will not impact the development for obesity, where the target myostatin is highly prevalent. Therefore, we will proceed with the Phase II trial. As for Enspryng, we presented the results of the METEOROID study in MOGAD at the American Academy of Neurology in April. Further details will be provided later in Mr. Kusano's section. Regarding giredestrant, while numerical improvement in PFS was observed in the persevERA study for the first-line HR-positive breast cancer, the primary endpoint was not met. Consequently, we have discontinued development for the first-line setting. Meanwhile, based on the results of the evERA study and lidERA studies, which have already achieved their primary endpoints, we aim to file for the second to third line and adjuvant treatment for HR-positive breast cancer within 2026. For DONQ52, we have commenced an in-house Phase II study targeting celiac disease. Overall, progress remains on track toward achieving a record number of regulatory filings. Next is Page 8. I will discuss new product launches and indications. In February, we launched Elevidys, Japan's first gene therapy for DMD. We are truly pleased to be able to provide Elevidys patients with DMD, a hereditary muscular disease that has been difficult to treat. And in March, the combination therapy of Lunsumio and Polivy became the first in the world to receive approval in Japan for relapsed or refractory large B-cell lymphoma. We also launched a subcutaneous formulation for Lunsumio and obtained approval for an auto-injector formulation for Enspryng. And regarding out-licensed products, orforglipron, brand name Foundayo, was approved and launched in the U.S. as a treatment for obesity. Foundayo is the only once-daily oral GLP-1 receptor agonist that can be taken at any time without any restrictions of food or water intake. Applications for approval are currently pending in over 40 countries for obesity and type 2 diabetes, and we look forward to contributing to further to patients worldwide. For NEMLUVIO, we anticipate further growth, especially as Galderma has raised its peak sales projection to over USD 4 billion. Finally, I will explain the composition of the Board of Directors. We have launched a new management structure, having newly appointed Ms. Kinuko Mitani, a medical expert as an independent external director and a member of the Nominating Committee. To ensure prompt and decisive management decision-making, the Board maintains an appropriate balance of diversity, including expertise and gender as well as an optimal scale. We'll continue to strive for further enhancement of our corporate governance. That's all. Thank you.

Next from Kusano, we will ask him to provide FY 2026 Q1 overview of development pipeline.

Thank you very much. I am Head of Project Lifecycle Management unit. Please refer to Slide 11 in the materials. These are the topics for Q1. I will go through them from the top. There's 1 launch, Elevidys, a micro dystrophin gene therapy has been launched as the first regenerative medicine product in Japan for DMD approvals. Enspryng has received approval for a new dosage form auto-injector, which we back to improve convenience for the patients. Foundayo, once-daily oral GLP-1 receptor agonist that can be taken without restrictions on food or fluid intake is our in-house innovation. Our licensee, Eli Lilly has received approval in the United States for obesity and has begun commercialization. Lunsumio and the Polivy combination therapy has also received approval as indication extension for relapsed or refractory large B-cell lymphoma. There's one filing. We have submitted a regulatory application for the ocular implant for ranibizumab, i.e., filing for ranibizumab formulation dedicated to ocular implant delivery is also planned within the year. Four studies have started. Inavolisib has initiated Phase III studies for 2 types of PIK3CA mutation breast cancer, respectively. CT-388 is a long-acting GLP-1/GIP receptor agonist. And the Phase III study was initiated for obesity without type 2 diabetes. In our in-house DONQ52 started Phase II study for celiac disease. There are 4 pipeline removals. Enspryng has been removed from the pipeline following Roche's decision to discontinue the Phase II clinical trial for DMT for strategic reasons. GYM329 in light of the results of the MANATEE study, development for spinal muscular atrophy has been discontinued and based on the result of MANOEUVRE study, development of FSHD has been discontinued. Tecentriq, based on the results of IMbrave251 study, development for hepatocellular carcinoma, second line has been discontinued. Giredestrant, based on the result of persevERA study, development for first-line hormone receptor positive breast cancer has been discontinued. Moving on to the second page of the topics. First readouts, Foundayo's ACHIEVE-4 study is a trial evaluating the risk of cardiovascular events in patients with type 2 diabetes at high cardiovascular risk. The results demonstrated non-inferiority versus insulin glargine, meeting the primary endpoint. Our licensee, Eli Lilly plans to submit a filing for Foundayo for type 2 diabetes by the end of the second quarter under Commissioner's National Priority Voucher or CNPV. Regarding Congress publications, I will provide further details on NXT007 and Enspryng later in this presentation. For NEMLUVIO, results from a Phase II study in children aged 2 to 11 with atopic dermatitis were presented at the American Academy of Dermatology. Favorable skin clearance and itch control similar to adults and adolescents were confirmed in the pediatric population as well. Regarding orphan drug designation, glofitamab has received the designation for large B-cell lymphoma. We exercised an option right under joint research agreement concluded in 2025 and obtained a license for Araris Biotech's proprietary ADC-linked payload technology or AraLinQ. We aim to combine this with our antibody engineering capabilities to create innovative ADC. I now will turn to key milestones for 2026. The underlying and involved fronts reflect changes since the previous earnings announcement, and I have described them already so far. Preparation for Phase III studies for NXT007 are well underway. Next, I will present the results from Part C of the Phase I/II next-stage study for NXT007, which were announced at the European Hematology Association Congress in February. This is the first set of data for patients with hemophilia A, both with and without inhibitors, who switched from emicizumab to NXT007 with a loading dose and no washout period. Consistent with Part B, which targeted emicizumab naive patients, the result demonstrated favorable tolerability when switching from emicizumab to NXT007 without a washout period. In the high-dose cohort, blood concentrations reached levels expected to provide coagulation of Factor VIII activity equivalent to normal levels and no bleeds requiring treatment were observed. The fact that favorable tolerability was demonstrated when switching from emicizumab to NXT007 without a washout period is a significant finding for advancing safety assessments during the switching process. We are developing NXT007 with the ambitious goal of achieving coagulation potential equivalent to that of people without hemophilia. Working closely with Roche, we are steadily preparing for the 3 Phase III clinical trials scheduled to begin this year, and we remain committed to delivering this treatment to patients as soon as possible. Next slide, please. I will present the study results for Enspryng, which targeted adult and adolescent patients with relapsing MOGAD. And in the global Phase III clinical trial for MOGAD, satralizumab significantly reduced the risk of new MOGAD relapse achieving the primary endpoint. It was -- it demonstrated that it reduced the risk of relapse by 68% compared to placebo in the time to first relapse. Regarding safety, consistent with the data already established in the approved NMOSD indication, no new safety concerns were identified and favorable tolerability was confirmed. Currently, there are no existing therapies approved for MOGAD. With no established standard of care, there are high expectations for this study as it is the first to verify efficacy in a prospective randomized controlled trial. Furthermore, for this indication, we have obtained orphan drug and SAKIGAKE designations in Japan, and we plan to file for approval within this year. We look forward to delivering this new treatment options to patients as soon as possible. These data were presented at the American Academy of Neurology Annual Meeting held last week. In recognition of this significance and high impact, it was selected as a presentation topic for the pre-AAN press conference. Next slide, please. I will discuss our upcoming filing schedule. Projects marked with a light blue star are newly added. While those with a green star indicate a change in the scheduled filing here. And in this update, we have also subdivided projects previously disclosed as 2028 and beyond into 2028 and '29 and beyond. For NXT007, we plan to file for hemophilia A in 2028. Regarding inavolisib for which new 2 Phase III trials have been initiated, we also plan to file in '28 for each. Additionally, for enicepatide, we expect to file in 2029 or later. The subsequent slides are attached as reference. Please refer to them as necessary. This concludes my presentation.

FY 2026 Q1 consolidated financial review provided by CFO, Taniguchi.

Hello. I will discuss the financial results for the first quarter of FY 2026. I'm Taniguchi, CFO. Let me start by sharing the P&L. The first quarter revenue came to JPY 321.7 billion, up JPY 33.2 billion or 11.5% year-on-year. Core operating profit also increased by JPY 23.8 billion or plus 17.1% to JPY 163.3 billion. I will now walk you through the details in sequence, starting with the revenue product sales. Product sales were JPY 291.6 billion, up JPY 31.9 billion or 12.3% year-on-year. Looking at by region, domestic sales came to JPY 111.4 billion, up JPY 8.4 billion or 8.2% year-on-year. New products and mainstream products performed well, fully absorbing the impacts of the NHI drug price revision and generic drug penetration. Overseas, exports of mainstay products to Roche continued to perform strongly, reaching JPY 180.1 billion, up JPY 23.4 billion or 14.9% year-on-year. Hemlibra and NEMLUVIO have increased. Also royalty, this part increased quite a bit. One-time slightly come down, but the royalty income from Galderma related to NEMLUVIO increased and on a whole, it was positive. Moving on to cost items. Cost of sales was JPY 92.3 billion, an increase of JPY 4.8 billion or 5.5% increase year-on-year. Now this increase in absolute terms reflects the growth in product sales themselves. The cost of sales ratio declined by 2.0% points year-on-year to 31.7%, which reflects the increase in Hemlibra with a slightly low cost of sales. So that in the background has had some effect. R&D expenses increased by JPY 1.2 billion year-on-year to JPY 41.9 billion, driven by investments in drug discovery and early-stage development and advancement of development projects. SG&A expenses, there was a significant increase in new product-related promotional expenses in the first quarter for Lunsumio and Elevidys and others. In addition, enterprise taxes and accruals for bonuses linked to profit levels also increased. The enterprise taxes is local tax, resulting in a year-on-year increase of JPY 3.9 billion to JPY 24.9 billion. From the second quarter onwards, however, SG&A is expected to trend lower year-on-year and at the year-end is projected to be around JPY 1.2 billion below prior year, in line with our published forecast. As a result, operating profit increased by JPY 23.8 billion year-on-year to JPY 163.3 billion, and the operating margin rose by 2.4 percentage points year-on-year to 52.8%. Net income after tax was JPY 118.6 billion, an increase of JPY 19.4 billion or 19.6% increase. This is the breakdown of changes in product sales. Domestic oncology sales was JPY 55.7 billion, up JPY 2.6 billion or 4.9% year-on-year. The key factors increased of Polivy following approval of the combination therapy with Lunsumio in March, a steady growth of mainstay product, Phesgo, which more than offset the decline in Perjeta and the strong launch of new product, Lunsumio. So those were the positive drivers. And on the other hand, Avastin continued to decline due to NHI drug price revision and generics. Specialty area, JPY 55.7 billion, up JPY 5.8 billion or 11.8% year-on-year. In addition to mainstay products, Hemlibra and Vabysmo, a new product, PiaSky also recorded steady sales growth. Overseas product sales were JPY 180.1 billion, up JPY 23.4 billion or 14.9% year-on-year. Significant increase by Hemlibra. This is the quarterly trends in P&L items due to revenue recognition timing differences arising from export timing, the trends to some quarter-to-quarter ups and downs. Overseas sales as well, volume growth significantly exceeded the decline in export unit prices, and this was further supplemented by a positive foreign exchange impact contributing to the increase. So that led to the total amount of increase, JPY 23.8 billion breakdown. I would like to be very brief. So this is the quarter-based change in profits. There are ups and downs, but compared to first quarter last year, we have a positive operating profit, and you can see the background why this is the case. This is about the revenue, quarterly trend. Again, export not necessarily gives us the same amount each month. So that leads to some variability. But if you compare first quarter with first quarter, this is what we have. Overseas, domestic, we are seeing a well-balanced increase in all of those segments. So as of the first quarter, what has been the progress so far against the initial plan? Both revenue, profit compared to last year, the progress rate are relatively higher. Normally, the progress tends to be low in the first quarter. However, it's trending above last year's level. Next page talks about per segment, per product progress. And we are showing you the progress as of last first quarter. Across different products, the progress have been trending above last year's level. Next shows the impact of FX. Last year's exchange rate and this year's exchange rate shows JPY 10 difference. And because of this JPY 10 weaker yen, we had impact of JPY 11.6 billion in terms of revenue and JPY 9.8 billion in terms of OP, both positive. Next, moving on to the balance sheet. First of all, total assets since the end of last December, it went up by JPY 203 billion and achieved JPY 2,265.1 billion. And we had a payment of tax and the payment of the special dividend. And in terms of the working capital, we've had the collection of the AR in the first quarter as a result of total asset reduced. However, in terms of the net asset, as it sits here, it decreased by JPY 118 billion to JPY 1,907 billion. And the rate of decrease in net asset was smaller compared to that of total asset and the equity ratio attributable to owners of the parent rose to 84.2%. In terms of operating cash flow, it was JPY 203.3 billion. However, we had a payment of the corporate tax and the payment of the special dividend. And it was actually negative. And next is the adjustment of core and noncore. So adjustment items would include the recognition of intangible asset in accordance with the licensing in. And also, we have some depreciation cost and business reconstruction restructuring cost would include the replacement of ERP in SAP. So upgrading the operational platform requires JPY 4 billion. And next page, list up the CapEx that are already approved internally, and it shows plans going forward. With this, I would like to conclude my part. Thank you very much.

We will now move on to the QA session. For QA, Takano, who is the Head of Sales Division, will also join. [Operator Instructions]. So we will now begin taking questions. [Operator Instructions] From Citigroup, Yamaguchi-san.

I am Yamaguchi with Citigroup. My first question is to Taniguchi-san. You have talked about the overall progress of the entire Q1 based on -- in comparison to your forecast, the impression is that the news were all good. Am I right to understand that the current situation is better than you had expected? Or is right on track?

Yes, short response, we were right on track, and we had expected this. But of course, there are fluctuations. Hemlibra, for example, did well -- considerably well overseas. From that point of view, there are good news. We are not however in the position of making any changes to published forecast.

Second question has to do with NEMLUVIO. Export volume as well as royalty payment, both are doing well. You are not giving specific numbers. So we will have to just guess. [indiscernible] also is above a [ content ]. So locally, speaking for Q1, this was better than what you had expected? Or was it what you had expected?

We say this is what we had expected because we always plan conservatively from a rational point of view. But looking at Q1 track records, it's within the range that we had expected. So if you were conservative this seems more -- well, we cannot really say anything definitive unless we see the situation beyond the second quarter, but it wasn't bad. Okay. It wasn't bad for the first quarter.

Next from JPMorgan Securities, Mr. Wakao, please.

Yes, I am Wakao speaking from JPMorgan. Regarding the export sales, I have a question. Hemlibra, NEMLUVIO for those 2 products. The reason why these 2 are doing better than your expectation? Is it because the sales is trending well in the market, especially for Hemlibra, you are expecting a single-digit growth. And if the actual sales is strong, I think your plan is to -- is going to be overshot. But how should I look at it?

Thank you very much for your question. The first quarter every year showed some purchasing pattern. But this purchasing pattern is quite confusing every year in the first quarter. So is this out outperforming trend going to continue for the rest of the year. If I tell you so I may sound too optimistic. So we say low single digit as our expectation, and this remains unchanged. In that case, from second quarter onward, we may see some ups and downs. And if single-digit growth expectation is not becoming the reality, and we expect outperformance. I think we need to look at this thing from Roche perspective and Chugai's perspective. I can't talk about Roche's number in my own position, but Chugai's export business wise, export can vary. But we do have visibility into coming 6 months. So based on such the actual results from second quarter onward will be somewhat quite similar to our current forecast.

Thank you. My second question is regarding GYM329. In your presentation, you said SMA, FSHD development didn't work out. But for obesity, you said that there will be no impact. Can you give us more color on that. And Scholar Rock’s apitegromab, their trial is going well for obesity indication. So what is the difference in your compound against the Scholar Rock’s apitegromab? Is it coming from the difference in inhibition activity?

Thank you very much for your question. Kusano would like to respond to your question. Now development on obesity. Is it going to be okay? SMA, FSHD 2 trials in Phase II when we look at their result. Reduction of myostatin has already been confirmed and the increase of muscular mass and improvement of motor function, we couldn't show consistent results, and we were not sure about the efficacy. Now for FSHD and SMA those like neuromuscular disease, when it comes to that increase in muscle mass does not directly linked to the improvement of the motor function improvement, that's a difficult point. And myostatin volume itself tends to be lower in the patient compared to the healthy people. So -- we -- and that's why it's said to be very difficult to prove the efficacy of the drug in such target audience. And now when it comes to obesity, it's a chronic metabolic disease. So the damage on nerve and damage on muscle, we don't believe that will lead to this disease. So -- and incretin, which is a combination drug will induce the reduction in energy consumption. GYM329, maintenance of muscle or increase of muscle would expect or would lead to the increase of the energy consumption. So we are not looking into the improvement of motor function of muscle. So we believe this obesity trial has probability of success. And regarding Scholar Rock's compound, this increase in muscle volume and improvement of motor function are not really linked directly in this type of disease. And GYM329 in Phase III trial -- this is a Phase II trial different from Scholar Rock, and patient background is also different. So we can't make a head-to-head comparison and primary endpoint and assessment for the motor function is different between us and theirs.

From the UBS Securities [indiscernible].

This is [indiscernible]. Thank you very much for that information. My first question has to do with what Taniguchi-san said. This is [indiscernible] royalty, but this seems to have had a major impact. When are you going to announce this as a separate line item?

Of course, we will be following different criteria, also there are criteria led by auditors, and we will follow their timing. So I'm not going to give you details. I believe that, however, this year is not the best timing. METEOROID standard is 5% or 10%? No, we're not disclosing that.

The second question is to Dr. Okuda. This has to do with how you intend to use cash, especially late phase pipeline your own discovered products from the outside appears to be somewhere in a transition, which means that other companies do try to introduce licensing products to fill the gap. I do understand that you are very actively pursuing this, but maybe you should announce this more.

This is Okuda speaking. Thank you for your question. How we intend to use the cash at hand within Chugai Pharmaceutical Company, we position this as a very important strategic decision. First of all, our innovative pharmaceutical development capability, we would like to very actively invest in acquiring that kind of capacity. So that's one. And in addition to developing innovative drugs, we want to also invest in delivery of that. For example, what you have just mentioned, late phase development products or those close to launch. So product candidate introduction both to market is something that we are thinking about. Now in addition to R&D investment, there could be other CapEx for enhancing our production, and there could be investments in order to maintain ecological aspects and also return to shareholders. So those 3, we want to make sure are in balance as we make the most proper decisions. Opportunistic decisions means, I believe, thinking about every possible avenue from a strategic point of view. Thank you.

Next is from Morgan Stanley, MUFG Securities, Mr. Muraoka, please.

Hello. I am Muraoka from Morgan Stanley, MUFG. I have a question regarding nemo. 3 months ago, I was in a -- I was looking at the initial guidance number 3 months ago. And I have a question to Mr. Taniguchi, the increase in export and the royalty income coming from non-Roche partners and Galderma Y-o-Y, JPY 20 billion revenue increase. If I take all those numbers and do this math, royalty rate, 11% to 12% and the supply of product, 30% to 35% and it seems like the condition of this business is almost comparable to the business with Roche and it sounds really nice. Am I missing out something or am I correct?

Thank you very much, Mr. Muraoka for your question. Now we cannot disclose details. However, arms at -- well with the arm's and length principle in the license agreement with Roche and contract with Galderma and the others, basically, our contracts are based on the arm's and length principle in a very fair manner and license transaction has been almost like standardized in this pharmaceutical industry. And we've licensed this out in late stage. And in terms of the rate, it's a tiered structure. So towards the end of the year, normally revenue tends to go up and license income also tends to go up. And that's all I can tell you. In terms of the product supply, when I do my math, I get 30% to 35% as a number, but it was just -- it has just been launched. So the inventory in Galderma was not actively piled up. Am I correct to understand that export has been progressing a little excessively? Well, it depends on Galderma's policy. We have a commitment period specified in the contract. We call it firm order. And we basically follow this firm order. So I can't comment on the inventory in our policy.

I have a question on [indiscernible], I don't think you can answer, but 1,200 prescriptions in week 1 compared to this fiscal year's plan. How do you think of this? I know this is too early question to ask, but how do you interpret this number?

I think this is a good result. But I would like to understand how you see the result of progress so far. Of course, we do have internal budget. We have assumption as well and it's just been launched. So, I don't think it is appropriate to mention any interpretation of ours. When things go on and progress, we may be able to make some comment. But so far, the available data or numbers are quite limited.

From Macquarie Capital, Tony Ren-san.

Congratulations. Very strong first quarter. My first question is for Kusano-san. So congrats that you are starting the DONQ52 trial -- a Phase II trial in celiac disease. Is this Phase II trial registrational? Can it be used for regulatory approval? Assuming it is not, can you explain to us your current thinking of the Phase III programs for regulatory approval? How many trials are you thinking? How large are these trials? And what are the endpoints you have in mind for this disease where we don't have current approved drugs. Thank you.

Mr. Tony Ren, thank you very much for your question related to DONQ52. Yes, we have started our Phase II study. This is for active celiac disease, randomized, double-blind, placebo-controlled study. And so yes, we believe that this is a pivotal study that can be used for filing. This is looking at the GI tract improvement and also celiac disease. This is looking at the reduction in symptoms. We are thinking about enrolling 90-plus patients, and we have to make sure that we get good data. For studies beyond that, we will have to wait until the outcome of the Phase II, to think about what we want to do for the subsequent program. So I would keep from talking about that right now.

Okay. Thank you. So the Phase II trial is registrational?

This, of course, is Phase II. So it's not that this is going to be -- become part of the dossier. What we're saying is we would like to look at the outcome of the Phase II to think about the program going forward.

Okay. Understood. The next question is for Taniguchi-san. So this is about Eli Lilly -- the royalty associated with Eli Lilly's Foundayo. So this launch, everyone is paying a lot of attention to. Could you just remind us when will you receive -- has Eli Lilly indicated to you when they will pay you the Foundayo royalty? Would that be -- would that be on a quarterly basis? Whether it would be a 1 quarter lag, so in other words, they will pay you the first quarter royalty in the second quarter?

Thank you very much for the question. Details of the contract, I cannot disclose, but of course, we understand that the approval came on the 6th of April. So for the first quarter, of course, it's not posted. Now -- we, of course, calculate based on our own estimate. And so when they start receiving payments that is going to be reflected in our books, too.

Next Is from Daiwa Securities, Mr. Hashiguchi, please.

Hello, this is Hashiguchi. My first question is related to Elevidys. On 22nd -- 20th of February is the launch date. And your full year guidance is targeting at JPY 12 billion, how do you see the progress so far? Initially, you had taken safety measures. There are many things that you need to do before the actual launch, but what is the feedback from the Healthcare Institute and the patients so far?

I am Takano. I'm the Head of Sales, and I would like to respond to your question. Elevidys been launched. And in the pediatric society of neurology, and we have been working closely, and we are always focusing on the safety. This month we are expecting the treatment start on several cases, but we've been basically focusing on the safety measures but we have been receiving a lot of strong inquiries so far. And we are now looking into the detailed feedback from the clinical practice. And -- so including NHI drug pricing and we believe the sales and performance will progress smoothly.

Okay. Inavolisib is the second question. On Page 16, you said that 2028, there are 2 indications to be submitted for approval 112 -- 122 and 132 there are 2 Phase III studies and I think their result will be used. Japan's Phase I/II study and Western INAVO120 study are going to be bridged so that -- now the bureau registrant the patient targeted therapy may be filed earlier than planned? Or do you think the fastest possible timing for launch is still 2028?

Thank you very much Hashiguchi-san for your question regarding inavolisib. Partly, we are conducting a bridging the study and we do not disclose our plan for filing submission. Now endocrinology registrant and HER2-positive Phase III are initiated, and that's why we are disclosing the timing for the filing this time.

Although you haven't disclosed, however, you're pursuing the possibility of making filing based on the bridging study. Are you trying to bring forward the submission timing?

Well, although I cannot comment on the timing. However, our aim is to bring this medicine to the breast cancer patients as much or as soon as possible.

My question is to [indiscernible] about GYM329 and some other person have already asked this. Scholar Rock -- in SMA Phase III positive, of course, patient inclusion criteria and primary endpoints were different. Can you give more details about why those difference or how those differences in patient inclusion and endpoints have led to differences in outcomes?

Thank you very much for asking the question. These are 2 separate -- 2 different studies. So it's difficult to compare them head-to-head. But for example, there are differences in primary endpoint, which is exercise tolerance. For example, Scholar Rock’s Phase III, you're looking at expanded Hammersmith enhanced functional assessment. In our study, we're looking at [ SFM30 ] exercise function assessment. There are differences in the motion as well as sensitivity and the scope of motor function. So it's difficult to compare them. In extended Hammersmith, focuses more on SMA, it's more of a large, for example, trunk mobilities like standing and walking and running, very -- major activities as needed for daily life. MFM32 is more across -- this is more dexterity using the fingers, that's important in day-to-day activities. This is used across myo-neurological conditions. So it's quite difficult to compare the outcome of these 2 studies.

Thank you. I understand, but what you have provided does tell us that these are very different assessment. Can you give us a background why you have chosen MFM32 as assessment scale?

Thank you for the question. Based on past data as well as our exchanges with key opinion leaders, we have, of course, assessed what is best.

I have another question about DONQ52. Now celiac disease. I am still learning about celiac disease, but it seems that compared between mild and severe there's considerable differences and conditions of patients. DONQ52, what types of patients are you targeting to develop your drug?

Thank you much for your DONQ52 questions. We will be looking at the outcome of studies to decide who to target. We will be looking at very highly active celiac disease to see improvement in gut situation.

We regret the time is drawing to a close. So the next question will be final. Mr. Ueda from Goldman Sachs Securities.

My name is Ueda from Goldman Sachs. I have just one question in terms of the GP margin trend, I would like to understand better. So in Q1, basically cost ratio for the product is within your expectation. And for the fourth quarter or on full year basis, it seems like this number is expected to go up. Is that because as of the first quarter, the progress of domestic products is slow, while percentage contribution coming from exports to outside of Japan is high? Or is there any other special factor? And I feel like your export business is trending quite well within a certain range. And if the trend goes on, I think your profitability will improve over time. Am I correct?

This is Taniguchi speaking. Hemlibra -- wait, what is the percentage of Hemlibra going forward? That's very important. It's more like how much decline do we see in Actemra. The export of Hemlibra is followed internally. And also, we have an assumption for coming 6 months. And based on the current schedule, cost ratio, our target is 34.9% toward the end of the year and probably this will be the most probable level.

This concludes the first quarter FY 2026 earnings briefing. For questions that we were unable to address due to time constraints please contact Corporate Communication and IR department. The telephone number and e-mail address are provided on the final slide of the presentation material. Thank you very much for taking time to join us today, taking time out of your very busy schedules. Thank you. This concludes the session. [Statements in English on this transcript were spoken by an interpreter present on the live call.]