Daiichi Sankyo Company, Limited (4568) Earnings Call Transcript & Summary

All right. Good afternoon, everyone, and welcome to the conference. My name is Naomi Kumagai, Japan pharma analyst at JPMorgan. It's my great pleasure to introduce Mr. Manabe, President and CEO of Daiichi Sankyo. After the presentation, the breakout will be in Yorkshire. Over to you.

Good afternoon. Thank you all for being here today. I would like also thank to JPMorgan for giving this opportunity. This is my first presentation, this JPMorgan Health Care Conference. Let me introduce myself briefly. I started my career at Daiichi Sankyo as a toxicologist in 1978. I spent the first 30 years at Daiichi Sankyo in R&D. During this time, I was directly involved in developing several global projects, including pravastatin, olmesartan and edoxaban. Since moving to the headquarter, joining to the senior Daiichi Sankyo team, I have been responsible for a wide range of functions, including HR, CSR, corporate strategy and medical affairs. I have been -- no -- after serving for 2 years as COO, I was appointed CEO in June last year. Today, I will start with a quick overview of Daiichi Sankyo. Then I will take you through Daiichi Sankyo's R&D focus. And finally, I will cover upcoming events and news. I'll first provide an overview of Daiichi Sankyo. Daiichi Sankyo is one of the top pharmaceutical company in Japan. We project revenue of JPY 955 billion, about $9 billion, for fiscal 2019 ending March 31, 2020. Our business is generating operating profit of over JPY 100 billion. Japan represents 61.7% of revenue. North America and Europe account for 16% and 9.8%, respectively. Here, our major products in Japan, several of them are leaders in their categories, helping Daiichi Sankyo maintain the #1 position in Japan for prescription drug sales for the last 3 consecutive years. Our share price was almost triple over the past 3 years and have significantly outperformed the benchmark of Nikkei average. I believe this growth is driven by our strong oncology pipeline, which I will discuss later. Next, I will touch briefly on key products in our portfolio. I will begin with edoxaban. The direct oral anticoagulant is our top product now. We have expanded Japanese domestic market share to 37.4% since its launch in fiscal 2014. It is now the category leader in Japan, despite being the fourth direct oral anticoagulant to market in Japan. That is due to the excellent balance between efficacy and safety. It requires only once-a-day dosage. Daiichi Sankyo is increasing its global market share for edoxaban, achieving steady growth in South Korea and Taiwan and launching edoxaban in China in August 2019. Demand is also robust in European markets such as Germany. In August 2019, we launched TURALIO in the U.S., the first and only FDA-approved prescription medicine to treat adult patients who have symptomatic tenosynovial giant cell tumor. As you can see here, this patient tumor shrunk dramatically since beginning treatment with TURALIO. I would now turn to our current R&D focus area, the highlight of my presentation today. Before diving into the specifics of our R&D, let me explain my missions as CEO. My first mission is to realize our 2025 Vision by delivering of antibody drug conjugate or ADC assets to as many patients as possible as fast as we can. My second and the longer-term mission is to steer the company to create assets that drive sustainable growth beyond our current ADCs. Today, I will focus on my first mission. To fulfill my first mission, I am to enhance our global development and commercial capabilities. I will prioritize enhancing our capability in the U.S., which is the most important market for the growth of our oncology business. We will focus R&D investment on 3 ADCs. They are DS-8201, DS-1062 and U3-1402. Also, we will nearly invest more than JPY 100 billion in CMC and manufacturing to prepare for rising demand. This investment will drive Daiichi Sankyo towards our 2025 Vision and help us become the world's #1 ADC company. Our ADC assets such as DS-8201 are the direct result of our focus on science and technology and our driver for innovation. Our ADC franchise is still expanding. We now have 7 ADC assets, and our ADCs commonly feature 7 major innovations on 2 critical component, payload and linker. We have named our reshaped R&D focus 3 and Alpha. The 3 stands for our 3 ADCs, DS-8201, DS-1062 and U3-1402. The Alpha refer to possible future ADC assets and others are shown in this slide. Our clear R&D focus is now on these 3 ADCs. I will begin with DS-8201. As you may know, the FDA granted accelerated approval to DS-8201 on December 20 last year to treat adult patients with unresectable or metastatic HER2+ breast cancer who have received 2 or more prior anti-HER2-based regimens in the metastatic -- metastatis -- metastatic setting. The approval was more than 4 months ahead of the FDA's PDUFA date. We are proud to deliver DS-8201 to patients in just 4 years after initiating our first-in-human trial in September 2015. On January 6, we launched DS-8201 with the brand name of ENHERTU in the U.S. We are very pleased that ENHERTU is now available in the United States. It offers physicians and you, specifically engineered HER2-derived directed ADC with demonstrated durable efficacy that can change the way patients are treated. Here, we have plotted the best change in tumor size. The data of this slide was presented at San Antonio Breast Cancer Symposium December 2019. The confirmed overall response rate was 60.9%. 11 patients achieved complete responses. That percentage is particularly noteworthy, because all patients were resistant or refractory to T-DM1 and had received a median 6 prior lines of metastatic disease therapy. Let's compare the data, although no head-to-head critical clinical trials have been conducted between these products. On the left of the slide is 18.5 months of progression-free survival for the established standard for first-line treatment of metastatic HER2 breast cancer. On the right, you see that progression-free survival with DS-8201 was an impressive 16.4 months after a median of 6 prior lines of treatment in the metastatic setting. We signed a global development and commercialization agreement with AstraZeneca in March 2019 to maximize the product value of DS-8201 and so that we can independently support the rest of our portfolio. The maximum financial consideration under this agreement is $6.9 billion. This collaboration should not only maximize the value of DS-8201, but also help us independently develop other ADCs and additional products down the track. To fully leveraging the value of our collaboration with AstraZeneca, we will maximize the value of DS-8201 with breadth and depth development expansions. We are now planning 43 studies in total, expanded from 10 studies before collaboration with AstraZeneca. We are committed to transforming treatment for HER2 tumor patients. Our obligation to patients is beyond what one company can achieve alone, and we are proud of this collaboration. In summary, we launched DS-8201 just 4 years after initiating our first human trial. DS-8201 represents, first and foremost, a significant technological breakthrough product. It was designed to achieve a breakthrough in treatment. It delivers unique practice-changing evidence. And we want to maximize the value of DS-8201 with breadth and depth expansions and fully leverage the value of our collaboration with AstraZeneca. DS-1062 is our TROP2 ADC and is our second most compelling asset. The preliminary efficacy data for lung heavily pretreated 60 non-small cell lung cancer patients through November 16, 2019, show the continued antitumor efficacy with a dose response and now with durability of response. Once Phase I progresses, we will set up pivotal monotherapy Phase II study in NSCLC, nonactionable mutation and the post IO as soon as feasible. Paralleling that effort, we may launch an EGFR mutant Phase II program if early EGFR mutant results are apparent. Finally, we will start a Phase I IO combo with key players, enabling first-line randomized study versus standard of care. The key takeaways for DS-1062 are that it has drug-to-be features owing to the efficacy, dose response, durability and tolerability data collected thus far. We aim for the swift and independent development of DS-1062. We will set up pivotal monotherapy Phase II study as soon as feasible consulting with FDA. We will also start a Phase I IO combo to enable an eventual first line. Now we move on to U3-1402, our HER3 ADC. We presented this data at the World Conference on Lung Cancer, WCLC, in September 2019. Here, we show the waterfall plot and interesting tumor control and response profile were observed regardless of the underlying mechanism of resistance to the prior TKI best line of treatment. This in vitro data suggests that U3-1402 shows a sustainable internalization rate for EGFR mutation lung cancer. This holds true for monotherapy, which is the black line, with a further increase and sustainment in combination with osimertinib, marked in the red line. This leads to our hypothesis that combination U3-1402 with osimertinib in humans will increase efficacy. In summary, early clinical result indicate that U3-1402 appeared effective in non-small cell lung cancer. For lung cancer, EGFR mutation patients, a clear monotherapy opportunity. We will also pursue a combination with osimertinib. For colorectal and prostate cancers, we will plan Phase 2 studies. This slide shows interstitial lung disease, or ILD, cases in DS-8201 studies. The data of this slide was presented at San Antonio Breast Cancer Symposium December 2019. 25 out of 184 patients reported adverse events that the ILD adjudication committee determined as direct related ILD. Amongst the patients were Grade 1 or 2 cases. 1 patient was Grade 3 case. There are 4 fatal cases. In early 2019, we started an intensified investigator Safe Use Campaign for ILD detection and management with DS-8201. No fatal cases have been reported since this campaign. We are pleased with the campaign outcome. I'll now cover upcoming events and news. Here are key events for the next 9 months we plan up to date and presentations relating to our 3 ADCs at the American Society of Clinical Oncology, ASCO 2020 and at WCLC 2020. Here in the news flow for DS-8201 for HER2+ breast cancer, our New Drug Application in Japan has been submitted and accepted. We're now awaiting approval. In the EU, we plan to submit a Marketing Authorization application in the first half of fiscal 2020. For other cancers, we anticipated top line result from our pivotal HER2 DESTINY-Gastric-01 study for HER2+ gastric cancer in Japan and South Korea in the fourth quarter of fiscal 2019. We have planned many presentations for ASCO 2020. For DS-1062, we intended -- we intend to present a Phase I expansion update at ASCO 2020. For U3-1402, we will present a Phase I expansion update at WCLC 2020. We are focusing on our 5-year business plan, which ends in fiscal 2020. We plan to develop and announce our next 5-year business plan in sprint 2021. Progress with our DS-1062 and U3-1402 projects in fiscal 2020 will shape the development of our next 5-year business plan. Consequently, we want to get all the required data for 3 ADCs in 2020. We will reestablish our mid- to long-term vision beyond 2025 to create a road map for sustainable growth. Here are the key takeaways before I finish my presentation. First, our current business is very solid, generating more than JPY 100 billion in operating profit. Second, we rapidly developed ADC assets, enabling us to aim for even greater growth in the near future. Finally, by delivering ADC assets to as many patients as possible, as fast as we can, I am confident we can realize our 2025 Vision. Well, thank you very much for your time and attention today.