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

Thank you for waiting, everybody. We'll now start Daiichi Sankyo's and HER2 Business Briefing. This is Ken Asakura from Corporate Communications, and I will be the moderator today. First, about the language for this event. We will present in Japanese and in English. Simultaneous interpretation is provided, so please click the interpretation icon at the bottom of the screen and select either English, Japanese or off. When off is selected, you will hear the original sound. We will show English version of the presentation slides on the Zoom screen and will show Japanese version of the slides on the live streaming screen. Both English and Japanese presentation slides have been uploaded to IR Presentation Material page of Investors section on our corporate website, so please view or download as needed. Our presenters for today are Dr. Sunao Manabe, our President and CEO; and Mr. Ken Keller, our Head of Oncology Business Unit. Manabe-san will provide opening remarks, and then Ken will present. We will take questions after the 2 presentations. Please note that this event will be recorded. With that, let's start the event. Manabe-san, please.

[Interpreted] Manabe speaking. Thank you very much for joining Daiichi Sankyo's and HER2 Business Briefing today. I'm going to talk about the positioning of oncology business in a 5-year business plan and major achievements for ENHERTU in FY 2022. Please turn to Page 3. This page shows the positioning of the 5-year business plan for sustainable growth of the group. During this midterm business plan period between FY 2021 and 2025, we will achieve our FY 2025 goal to be a global pharma innovator with competitive advantage in oncology, and we shift to further growth towards our 2030 vision. Page 4 shows strategic pillars for the 5-year business plan. The most important strategic pillar out of these is the first one, to maximize the 3 ADCs. In particular, maximizing the product value of ENHERTU through our strategic alliance with AstraZeneca is the most important premise for us to achieve our FY 2025 goal in the 5-year business plan. From April, we will be in the third year of the 5-year business plan. Our initiatives to maximize the product value of ENHERTU for the past 2 years are making steady progress, more than we expected. We are really satisfied with the achievement by now. Page 5 shows major achievements for ENHERTU in FY 2022. We are making steady progress in maximizing the product value of ENHERTU based on approval of new indications and strong market penetration. Today I'd like to talk about 3 major achievements in FY 2022. First, we obtained approval to transform the course of HER2+ breast cancer second line. DESTINY-Breast03 study showed unparalleled improvement in PFS compared to the standard of care T-DM1 [indiscernible]. Based on the study results, ENHERTU was approved for HER2+ breast cancer second line in the United States. And we started promotion in May 2022. ENHERTU has already established leadership in HER2+ breast cancer in the second-line settings and beyond in the U.S. market. We're expanding market to other countries and regions right now. Secondly, ENHERTU is pioneering HER2 low breast cancer as a new clinically meaningful patient segment. Based on DESTINY-Breast04 study, which showed potential to transform treatment for HER2 low breast cancer patient, it was approved for HER2 low breast cancer previously treated with chemotherapy in the United States, and we started promotion in August 2022. It is known that previously untargetable HER2 low breast cancer patients account for about half of all breast cancer patients. In other words, the number is about twice as much compared to HER2+ positive breast cancer. Being able to provide a treatment option to more breast cancer patient is one of the major achievements in FY 2022. Now there is a rapid uptake for this indication, and we already achieved #1 new patient share in the U.S. market. We are accelerating market expansion to other countries and regions as well. Thirdly, we're also making steady progress in initiatives to expand leadership across other HER2 targetable tumors. In August 2022, ENHERTU was approved for HER2 mutant NSCLC second line and beyond in the United States when we started promotion. With this ENHERTU is approved for the third cancer type following breast cancer and gastric cancer. We will continue to aim for approval of earlier treatment lines in these 3 tumor types and expand indications also to other cancer types to maximize the product value of ENHERTU. As I mentioned today, the value of ENHERTU been substantially enhanced over the past year. So we are increasingly confident about achieving our FY 2025 goal in the 5-year business plan. We will continue to take on challenges so that we can provide a product sooner to patients who need new treatment options. That's all for me. I'm now handing over to Ken Keller.

Thank you, Manabe-san. If you could go to the next slide. As Manabe-san mentioned, I'm the Head of our Oncology business unit. And today, I will share with you the progress that we've made within HER2, and I'll talk about the foundation that we built that we will leverage for our next oncology launches. Next slide, please. So we've made impressive progress since ENHERTU's first approval in December of 2019 and the start of the oncology business unit in April of 2021. We now have an established commercial footprint in 46 countries. And HER2 has expanded from its first indication in third line HER2+ metastatic breast cancer to now 4 indications. I'll show you that ENHERTU has achieved market share leadership in every indication launched in the United States and in every country where we have obtained access for that indication. Revenue in the calendar year 2022 exceeded $1 billion, and our momentum is accelerating, as demonstrated by the 258% year-over-year growth reported in the last quarter. Today, I'll walk you through some of those highlights and also point out a number of catalysts that we have in place to deliver continued growth in fiscal year 2023. Next slide, please. So our oncology business unit, shown on this slide, works collectively as one team, hand-in-hand with research, development, regulatory, safety, manufacturing and other teams across Daiichi Sankyo. Our aligned purpose is to improve the standard of care through our ADCs and help cancer patients with longer, better-quality lives, bringing new hopes and more time to patients across the globe. Our oncology leadership team is a diverse team. As you can see, it represents geographies across the globe. It couples external experience with top internal Daiichi Sankyo talents. This team has been in place since day 1 of the OBU establishment. And now I'll show you that we've been able to demonstrate our ability to deliver results with excellence. Next slide, please. So this is a road map of ENHERTU's kind of strategic plan. And you'll see it consists of 4 milestones that advance sequentially. Milestone #1 was to establish the foundation with the first third line approval in HER2+ metastatic breast cancer. Milestone #2 was to build market share leadership and displace Kadcyla, which had been the standard of care in the second-line setting for over a decade. Milestone #3 was to redefine the HER2 treatment landscape by having ENHERTU become the first drug to be approved to treat HER2 low metastatic breast cancer and HER2 mutant metastatic nonsmall cell lung cancer. And then the milestone #4 was to really advance ENHERTU to the earlier disease settings where we believe the outstanding efficacy of ENHERTU has the greatest potential to alter the course of treatment outcomes. And I'll walk you through how we're tracking according to our plan. Next slide, please. So last year, 2022, was a year built with catalyst momentum building moments for us. ENHERTU was approved for the use in second line HER2+ metastatic breast cancer in both the U.S. and Europe. In the U.S., we obtained approval in May and in Europe in July. ENHERTU was approved for use in the HER2 low metastatic breast cancer setting post chemotherapy. In both the U.S. and Europe, first drug and only drug to obtain this indication. ENHERTU was approved in the second-line HER2+ gastro cancer in Europe. It was previously approved back in January 2021 in the U.S. And ENHERTU was also approved for use in the HER2 mutant metastatic nonsmall cell lung cancer space in the United States. Impressively, ENHERTU has achieved market share leadership in every indication in every country that has obtained access. Now the United States is the first market to obtain approval and full access. So I thought it would be informative to share with you our U.S. performance. And we're confident that the U.S. adoption of ENHERTU is a very good proxy for what we'll see in other countries as they gain approval and access. So let's go to the next slide, please. So DB-03 was our pivotal trial to secure the second line HER2+ metastatic breast cancer approval. It was presented at ESMO in 2021, was presented by Dr. Javier Cortes. Unfortunately, it was a virtual meeting, so we couldn't be there to see the people's reactions live. It was published in the New England Journal of Medicine in March of 2022. And as I mentioned, it was approved in May of 2022. Now this trial demonstrated that ENHERTU delivered years versus months of progression-free survival. And progression-free survival was 4x greater with ENHERTU than with Kadcyla. And it improved it by 22 months overall. Also very impressively over here, we had an 80% overall response rate. And one of the key points that many investigators and now the entire oncology world was most impressed by is that 21% of women here had a complete response. And this is in the second line setting. That 21% is significantly higher than what the standard of care showed in the first-line setting. So it was really a very, very impressive result. And of course, incredibly important, it reduced the risk of deaths by 36%. So I can share with you that after this presentation, the feedback from the oncology community was that ENHERTU will very, very quickly become a new standard of care. So we launched this indication in May. And as the oncology community predicted, as shown on this slide on the right, ENHERTU has very quickly become a market share leader at 49% market share in fiscal Q3, which is October to December. Also, the oncology community's experience with ENHERTU, it's been inspiring to observe. I personally, and our team here, we have heard story after story after story of patients responding to ENHERTU and doing things with their family and friends that they thought was over for them. So it's just a wonderful, wonderful drug to work with, and it's a privilege to bring into the oncology community. I think very importantly, while the progress has been satisfying, there are still, still, as shown on this slide, 50% of patients who are not receiving ENHERTU at this time. And so while we've done our job well, we have a lot more work to do and a lot more patients that we can help. And that's really what our job is in 2023. Next slide, please. DG-01 and 2, that was our pivotal trial to obtain second line HER2+ advanced gastric cancer approval. This data was first presented in an oral presentation at ASCO in 2020. And then later on, as a late-breaking presentation at ESMO in 2021. It was published in the New England Journal of Medicine and approved in January of 2021 in the U.S. with breakthrough designation. This is the first and only HER2-directed treatment that has demonstrated over a year of overall survival in this patient setting. ENHERTU here demonstrated overall survival versus chemotherapy, reducing the risk of death by 41%. 3x as many patients achieved an overall response rate with ENHERTU, 51% versus 14% with standard chemotherapy. In the July-August time frame as shown on the right, ENHERTU achieved market share leadership, obtaining 46% overall market share. So similar to the second line HER2+ metastatic breast cancer indication, we've made excellent progress, but there are many, many more patients that we help in the future. And again, that's going to be our focus in the U.S. as we head into fiscal year 2023. Next slide please. So here is our data and our market share for our HER2 low post-chemotherapy approval. This was presented at ASCO in 2022 in the plenary session. It was presented by Dr. Modi from Memorial Sloan Kettering, where we had the privilege of witnessing the first standing ovation at ASCO in over a decade. When Dr. Modi finished, the room was quiet for a few seconds and then erupted. And I've never seen anything like that. And just seeing the joy in the oncologists and the patient advocacy eyes, knowing that they had now a new tool to bring to their patients was something I won't ever forget. It was published in the New England Journal in 2022, and we received approval in the summer of 2022. This data really stopped people in their tracks. [indiscernible] progression-free survival, 3x higher overall response rate. And it's the first and only HER2-directed therapy to bring a significant survival advantage to these patients. And overall survival, median survival is almost 24 months for our ENHERTU-treated patients and 17.5 months for patients receiving chemotherapy. On the right we have our market share. And you'll see that market share has grown very, very quickly. We launched this drug in just in 2 quarters. It became the market share leader at 43%. The reaction that we saw immediately after Dr. Modi's presentation of the audience instantly understanding that the treatment of breast cancer had been transformed forever, that has now become the standard of care in the United States for HER2 low. This is, as Manabe-san mentioned, a very large patient segment. Half the patients are HER2 low today. And it is ENHERTU's biggest growth opportunity. Today, the oncology community really worldwide understands that the treatment paradigm has been transformed. And it's no longer appropriate to think of patients as HER2 positive or HER2 negative. And the correct way to look at this is actually looking at HER2 expression as a spectrum. And so today, every metastatic breast cancer patient is evaluated and identified and categorized as HER2 positive, HER2 low or HER2 0 with ENHERTU being the standard of care for second-line HER2+ metastatic breast cancer and the HER2 low post-chemotherapy setting. And so the immediate reaction that physicians saw is now translating to this drug being given to thousands and thousands of patients in the United States and very soon across the world for this indication. Next slide. DL01 and 02, that was our pivotal trial for obtaining the second line HER2-mutant metastatic nonsmall cell lung cancer indication. This was originally presented at ESMO in a late-breaking session. It was published in the New England Journal of Medicine, and it was approved in August of 2022 with breakthrough designation. This is a smaller segment of patients than HER2 positive and HER2 low. But it's a group of patients that desperately needed new options and new hope. Here, ENHERTU is the first-approved treatment for HER2 mutants, second line nonsmall cell lung cancer. The majority of patients treated with ENHERTU achieved a robust response, 54% overall response rate and a 90% disease control rate. Most patients treated with ENHERTU did achieve a substantial tumor shrinkage regardless of prior therapy. And many, many of these patients received numerous prior therapies. And what you see is ENHERTU rapidly becoming the market share leader, achieving 69% share in really just 1 quarter. We believe that the speed of adoption here reflects, number one, the super high-met need in this patient group. And also importantly, the growing confidence that the entire oncology community feels about ENHERTU's efficacy and, very importantly, the growing comforts and confidence that the oncology community has in managing ENHERTU's side effects and toxicities. And I'll talk about that in just a little bit. And so what you'll notice is every new indication, the speed of uptake is increasing. And we believe it's because the growing understanding of what this drug means to patients, the experience doctors are having with the drug in their own hands and their growing confidence that, okay, they can manage these side effects and do it well. Next slide, please. So here, I just -- I wanted to touch on Europe. You'll see in the second-line metastatic breast cancer indication setting, in France and Germany, 2 of the biggest markets, this is where we've more recently obtained full access. So it's now available to these patients. And you'll see that there's been a very, very rapid uptake with France at 45% and Germany at 38%. This is tracking in terms of speed, even ahead of the original U.S. approvals and uptake. And as we obtained access, as we will in the rest of Europe in 2023, we are very confident that we will see a similar very, very rapid adoption. Next slide, please. So here's a look at our global net sales. Net sales have exceeded JPY 60 billion per quarter. Overall, a 25% increase sequentially quarter-over-quarter. That's driven by the U.S. at 26% and a similar growth rate in Europe. And what's really impressive about Europe is, again, they just got the second line approval and we're getting access [indiscernible] country. And so we'll see that nice ramp up as they secure access throughout calendar year 2023. And in Q3, we reported a 268% year-over-year growth in that quarter. I want to point out that while the U.S. is the biggest contributor followed by Europe, both Japan and our ASCA region are also growing impressively. Next slide, please. Now on this slide, I wanted to share with you where the adoption is by indication. And what you see is that HER2 positive metastatic breast cancer is kind of the biggest segment. The fastest-growing segment is HER2 low. As we look out into the future, we will see HER2 low catching up and surpassing the HER2+ segment in terms of size, again because 50% of metastatic breast cancer are HER2 low, about 20% are HER2+. We've already experienced significant growth in the HER2 low segment. Q3 quarter-over-quarter, about 90%. And even in the triple negative segment, and to understand how that is in HER2 low patients, those patients can be either hormone-receptor positive or negative, regardless of positive or negative we're seeing very nice growth within HER2 in both of those patient settings. Year-to-date revenue in the HER2 low segment is $149.7 million. Also notably, quarter-over-quarter growth continues in the second-line HER2+ setting as well as our HER2-mutant nonsmall cell lung cancer side. Next slide. So I thought it would be informative to share with you some of the things that we're learning. And today, we truly are in a launch, grow and learn cycle, and that's going to continue for the foreseeable future. We feel it's very important that we identify and learn from a few key drivers of our momentum so that we can moralize those learnings and embed them into the future launches in other regions and countries. Also to ensure that those capabilities are applied to our future antibody drug conjugate launch plans. So when we evaluate the momentum that we have today, we feel it's driven by 4 things. And number one, obviously starts with standard of care change in clinical data and a few other things. And that's what I'm going to talk about. The few other things are number one, having these data presented at impactful meetings; number two, having these data published in prestigious medical journals. And number three, having the clinical data being appropriately represented in the influential oncology guidelines in both the U.S. and Europe and doing all of this in a very quick, efficient and tiny fashion. Number wo, our momentum is also driven by our commitment to educating every ENHERTU prescriber and caregiver and patient about the importance of early identification and appropriate management of ILD. This is a toxicity that we observed in our clinical program. Now in preparation for the approval of ENHERTU, we educated the oncology community on what HER2 low was, and this is number three, and what this new paradigm meant for patients, as well as raising awareness of its prevalence. And that was a very important aspect. We did that even prior to the launch so that when the DB-04 HER2 low indication was approved, people were ready. Doctors could identify their patients quickly and thereby the adoption was quite fast. Number four is more future-looking. As ENHERTU's clinical trials have read out and consistently exceeded the oncology community's expectations, the confidence and excitement about the potential of our ongoing clinical programs has really been elevated. And this excitement has the oncology community enthused and eager to participate in our trials. And they are very hopeful of what these trials may mean for their patients. So today, ENHERTU has a growing positive halo around it because of the clinical trial results and because of what the oncologists are seeing with this drug in their own hands in their own patients. So this is creating even more momentum. We have a lot of wind at our back right now for all of those reasons. Next slide. What I'd like to do is now just get on those 4 points and really share with you kind of what drove our momentum and specifically what we did and what we're going to attempt to duplicate in the future for all of our drugs. So with ENHERTU, all 5 pivotal trials were presented at ASCO, ESMO or the San Antonio Breast Cancer Meeting, the majority of them in either the plenary or presidential sessions where the entire oncology world was gathered. And that's where our people look for the latest and greatest information. Number two, all of these data, all of these indications, pivotal studies were published in the most prestigious medical journal there is, the New England General of Medicine. And I personally cannot recall of any drug where all of its indications have been published in the New England Journal of Medicine, not to mention doing it in literally 2.5 years. Then the clinical data was appropriately represented in the influential guidelines, the NCCN guidelines, ESMO guidelines with Category 1 and 2 recommendations. And so this slide is really a pictorial of the execution of our research, development and medical affairs teams, both globally and in the regions. And in addition to this, the ESMO practice guidelines were also in a very timely way updated to include ENHERTU with very similar strong recommendations. Next slide. So here I want to talk to you a little bit about interstitial lung disease and what we have learned or education we did and the impact we believe it's had. In our clinical trials, the overall incidents, I just -- I missed my slide here, I'm sorry. So what you see on this slide here is the growing confidence that we have, that physicians have in understanding and identifying and managing ILD. And you'll see back in Q3 of '19 was at 36% in terms of doctors' rating at 6 or 7, and now that's up to 62%. And you'll see in terms of managing ILD, it's also grown from 32% to 47% on a 7-point rating, and this is 6 or 7. And so over time because of the educational efforts that we've done in the field, physicians are becoming more and more confident. And as a result, the adoption of ENHERTU is actually accelerating. Next slide. What you see here is something that we saw early in our clinical trial program. And what this shows is that the overall incidence of ILD in our breast cancer clinical trial program was 15.5%. 70% had grade 1 or grade 2 events. Next slide. It's really important to note that ILD and pneumonitis, it wasn't recognized early in our development program, right? And so it wasn't required, and we weren't educating patients in terms of the management and identification of ILD. In December of 2019, we made an adjustment and we started an educational campaign aimed at effective early identification and optimal management. The goal was to prevent high-grade ILD. And what you see on this slide, especially if you look at 2020, after implementing this education, we saw markedly lower ILD events. And so with this information, we duplicated this in the real world. And as I mentioned in the previous slide, the confidence that the oncology community has that they can identify patients, take the appropriate measures and manage ILD, the confidence is growing and getting stronger. And that is one of the biggest drivers of the momentum that we have today. Next slide. And so here, what we have is our HER2 low adoption. So for 20 years, the oncology community segmenting their patients to HER2 positive or negative. ENHERTU has completely change this paradigm by demonstrating standard-of-care-changing efficacy in patients that were previously categorized as negative, right? These patients had lower expression levels, IHC 1 and IHC 2+ is negative. As I mentioned earlier, in this population, ENHERTU double progression-free survival, and reduce the risk of deaths by 36%. And what we did is through comprehensive educational efforts by our medical affairs teams, prior to the approval of ENHERTU, we were able to help oncologists understand that HER2 expression was a spectrum. It wasn't positive or negative. And they were able to really identify these HER2 low patients very, very quickly. And again, this is one of the key momentum drivers that we put into place. Next slide. So in summary, for 2022, it was a year of catalyst moments. We've got a lot of momentum. Multiple presidential and plenary session presentations, a standing ovation, 4 new indications, multiple New England Journal of Medicine publications. ENHERTU is now #1 in market share in every launch indication in the United States and in every launch country where we've obtained access. Revenue surpassed $1 billion in the calendar year. And we've got very nice momentum as we reported 258% year-over-year growth. So we're in a very, very good position to start fiscal 2023. And what I'd like to do now is share with you some of our plans. Next slide. So in 2023 we will work to optimize adoption of ENHERTU. And its recent new indications are to change the standard of care and become #1 market share in each indication across the globe. In the United States, continued growth will come from the expansion of our market leadership in the second-line setting and in the HER2 low setting, cementing our position as the new standard of care. Now as I shared with you earlier, despite the rapid adoption and progress we made, there's much more opportunity ahead of us than behind us. Our market share in the second line in the HER2 low setting is about 50% today, meaning out of 2 patients are not receiving ENHERTU, the indisputable new standard of care at the right time, the time where they can receive optimal benefit. And so that's our biggest focus in the U.S. in '23. And there also remains opportunity to increase market share in the nonsmall cell lung cancer setting and in the metastatic gastric setting as well. Turning to Europe. Accelerating growth will come from the full launch across Europe in the second-line HER2+ metastatic breast cancer setting. In 2022, most countries had not obtained full access yet. We made excellent progress. And in 2023, we expect all countries to have successfully secured access. So that's going to create tremendous growth in Europe. We will launch the HER2 low metastatic breast cancer indications in most countries by the end of fiscal year 2023, and we will launch the HER2-mutant nonsmall cell lung cancer approval as well. ENHERTU was very recently, just last month, approved in China in the second-line HER2+ metastatic breast cancer setting, and we're working to launch this later this year. For Japan, growth will come from expansion of our second-line HER2+ metastatic breast cancer market leadership. It will come from the launch of HER2 low, where ENHERTU will quickly become the new standard of care and also the launch of HER2 mutants and continued growth in small cell lung cancer approval. So that's a picture of where our growth will come from in 2023. In each region, we've got very, very good momentum and a lot of catalysts ahead for us. Next slide. I wanted to put this slide up and share with you just to emphasize that breast cancer is ENHERTU's growth opportunity. And it's important to recognize that ENHERTU has demonstrated indisputably to be the new standard of care for 70% of the metastatic breast cancer patients. There is no drug that has this opportunity to help as many patients. And this will be our growth driver in all regions in 2023, metastatic breast cancer. Next slide, please. So today we've also got kind of our next catalyst that we're working on. Our development program for ENHERTU, it has the potential to create more standard-of-care-changing opportunities. So far what you'll see in dark orange, those are our current indications. Our future indications, the trials that we're conducting today, DESTINY-Breast06, that is our second HER2 low study. And this is a study that is being done to test the merits and the efficacy of ENHERTU to displace chemotherapy post-endocrine therapy. DB-04 is after chemotherapy. And we expect top line results from this study later this year. DESTINY-Breast09 is our first-line study in metastatic breast cancer, right? And here we're comparing it to the standard of care. Then we have our adjuvant and neoadjuvant studies DESTINY-Breast05. And these are the studies where cure is the goal, right? In the metastatic setting, our hope is that we can turn months of progression-free survival into years. In DESTINY-Breast05, our hope is that the efficacy of ENHERTU can turn years into lifetimes into cures. And so that's what our goal is for our ENHERTU program. Next slide. While ENHERTU is the foundation for our oncology franchise, it's also going to create important opportunities that we can leverage across our portfolio. The synergy is greatest in the metastatic breast cancer space. As shown on this slide, our DATO-DXD ongoing trials, TROPION-Breast01, 02 and 03. If these trials are successful, it's going to really round out our breast cancer portfolio and Daiichi Sankyo will be among the most prominent oncology companies in helping breast cancer patients worldwide. We're conducting other trials in breast cancer with our other ADCs. Many of them are being tested post ENHERTU as shown in the gray area here. So we've got a portfolio that we are hopeful will make Daiichi Sankyo the preimminent company in the breast cancer space. Next slide, please. We are also creating a similar story in lung cancer, but here DATO-DXD is the foundation of growth. ENHERTU, with its metastatic nonsmall cell lung cancer indication and our HER3 ADC program in lung cancer, they'll synergize very, very nicely with our large DATO-DXD program in lung cancer. And then behind these drugs, we have DS-7300, which has already demonstrated very promising benefits in small cell lung cancer patients. So very similar to the breast cancer space with DATO-DXD, ENHERTU, HER3 DXD and DS-7300, our hope is to really make Daiichi Sankyo a company that can help hundreds of thousands of lung cancer patients across the globe and really be one of the companies in all of oncology. Next slide. So going back ENHERTU, we made excellent progress [indiscernible]. We still have big opportunities with our current indications. So there's lots of growth ahead of us. And our ongoing development plan has the potential to expand ENHERTU's use in both the first-line metastatic setting with D-B09 and in the earlier stage settings, neoadjuvant and adjuvant. Success in these programs, as shown on this slide, would more than triple the number of patients that we would bring new hope and more time to. So while there's tremendous growth in our current indications, if successful, we're going to help a lot of patients in the future. Next slide. So to summarize, we began just a few years ago with the belief that we could transform treatment and outcomes for patients with HER2-targeted tumors and become the #1 drug of choice. We're on track to do this. And our confidence, momentum and expectations continue to grow. As I've shared with you, we achieved third line and second line market share leadership in the HER2 breast cancer setting. We achieved market share leadership in the gastric setting. We achieved market share leadership in the HER2 low setting. And we have other studies that we hope in the future to change the standard of care and even bring more cure to patients in our early-stage programs. So I just want to say there's lots of major opportunities to grow from where we are today and in the future. And I just want to thank you very much for being on this call and listening to our oncology business briefing story. And I look forward to answering any of your questions.

[Operator Instructions] First question is from Muraoka-san from Morgan Stanley.

[Interpreted] Good afternoon. I am Muraoka from Morgan Stanley. I would like to ask you questions in Japanese. Do you hear me okay? Okay. My first question is, and it's Page 14. HER2 low penetration chart is shown on Slide #14. If I look at this, IV chemotherapy replacement has already been completed. So low-hanging fruits have already been captured. That's how I read it. So ENHERTU HER2 low growth going forward, I do understand that 50% of the patients are still out there, but long duration of the use of ENHERTU can also be a good contribution to the further growth of ENHERTU in HER2 low cancer? Is that the case?

You are correct, and there's one nuance in the data that I'd like to share with you. So when you're looking at Page 14 and it says Q3 '22, you see in purple there, that's the basically the ET therapy. What happens sometimes today, and it's not a rare or unique event. Patients will start on estrogen therapy. And they usually get a second one. And when they progress, doctors are really reluctant to give chemotherapy today because it's not very effective. So many times they actually give a third estrogen therapy [indiscernible] therapy. After we obtain approval, if the study is positive with D-B06, that will show physicians that they have a better choice than the chemotherapy that they're trying to avoid and give a third and even a fourth ET therapy. And so I think if that trial is successful, what you'll see is ET therapy stopping after like a second switch and not getting a third or a fourth one. And so there will be growth there as well as growth in terms of the length of time that people are on the drug. Does that make sense?

[Interpreted] It's very clear. My second question, 2023, you are preparing for growth in 2023. ENHERTU portion was clearly understood. I'd like to ask you about what comes next after ENHERTU. 1 year later at the end of this year, and then 1 year later from the end of this year. HER3 data to product launches will be in sight perhaps. HER3 data launches, for those launches, what kind of preparations are you making? And which areas are you paying attention to or being careful about? Ken-san, please.

Yes. Thank you very much. So what we will do is we will have the top line results for DL01, which is DATO-DXD, later this year, as well as the HER3 program. And we're taking the learnings that I mentioned. They're all DXDs, and so we don't know what the toxicity profile will be for them. But if ILD is toxicity, we will be able to manage it. We're ready. We've learned a lot from ENHERTU. And so I think that will help us quite a bit. I think the second key is, in today's world, information spreads very, very quickly. The oncology universe today is half in person and half virtual. And so we will take our ability in terms of medical affairs to ensure that these data are presented at the right meetings. Hopefully, the data is so profound that we will have interest from prestigious journals as well. And we'll work with our investigator community to make sure that we help them educate their peers very, very quickly. When I look at where we are today, there's so much synergy with what we have in ENHERTU. Our reimbursement and payer teams, we've gone through that with ENHERTU. We will simply be better for DATO-DXD and HER3. Our investigator community really is so excited. I mentioned about the halo of ENHERTU. I should have said it differently. There is a halo of the DXD program, which they are very positive, and it extends the DATO and HER3 as well. So I think there's just a tremendous amount of synergy. And with DATO-DXD, especially. Lung cancer will be the first indication. But down the line, it does have applications in breast cancer, as I showed you. And that will just fall right into our medical affairs and commercial infrastructure. So we will learn from growth all time.

[Interpreted] One more thing. HER3, is this going to be developed by yourself? I do believe so. And you have no worries of developing it on your own? Ken-san.

I think Manabe-san should take it.

[Interpreted] So yes, as Ken-san has already mentioned, ENHERTU and DXD, we have been developing these with AstraZeneca. So that's been codevelopment. And we've learned a lot throughout and those lessons learned. And also, cost-wise, including 2 co-development programs. And there are a lot of expertise which can be used elsewhere. So we do believe that we have enough capability to develop HER3 on our own.

Next question is from Wakao-san from JPMorgan.

[Interpreted] Wakao from JPMorgan. I'd like to ask you about the EU market HER2 low market penetration. Page 16 in the Japanese version, regarding the second line, there was a rapid expansion according to this page. The factors behind the rapid growth and expansion. And also for the HER2 low, can we expect a rapid expansion for HER2 low as well. From January this year, you started promotion for HER2 low. So like the second line, the situation could be similar. Then maybe 2 quarters or 3 quarters later, there's going to be a rapid expansion in terms of the market penetration in my view. What do you think? Ken-san, please?

Yes. So Slide 16 is showing the second-line HER2+ metastatic breast cancer uptake just to clarify that. But yes, I would agree with your statement. We really do believe, based on everything that we've seen, the rapid uptake that we've seen in the U.S. for HER2 low, that will be very, very similar in Europe. My experience in Europe is once the drug is approved and you get access, right? And we're working on access right now. Once you obtain that access, the ramp-up is every bit, if not a little accelerated compared to the U.S. So we're confident in what will happen in Europe in 2023.

[Interpreted] My second question. And it's towards the end, Page 31. And this is looking at the number of patients expected in the future in the United States, HER2 low and also metastatic breast cancer. There are 2 categories. And metastatic breast cancer, including HER2+. So if you think about the number of patients, in the future the target number of patients approved in HER2 low we'll have more patients going forward. Am I correct? And here it says early breast cancer. And this early breast cancer, is this HER2 low or HER2+? I wouldn't know that from this chart. So HER2 low looks too small for the future looking at this chart. So can you tell me how to interpret this chart?

So the HER2 population there, it's -- the HER2 low is twice as big as the HER2 positive. And so I'm trying to think why that's not bigger. But the fact is HER2 is twice as big as HER2 positive. So let me look at this chart. There must be something I'm not seeing. The early-stage breast cancer, that is really based on our neoadjuvants and adjuvant programs, which are just the HER2+ patients, not HER2 low. We are doing earlier studies in the early-stage HER2 low setting. And if those studies are positive, and they warrant us doing pivotal studies in the early stage HER2 low, then this chart would get even bigger.

[Interpreted] Wakao-san did you understand that?

[Interpreted] Yes, fully. Lastly, about your midterm business plan. Initially, Manabe-san mentioned that you're increasingly confident about the achievement of the MTP. Regarding the achievement, given the current situation, it's highly probable. And you're making an upward revision for your MTP. But according to your comments today, revision timing could be deferred into the future. When I ask a question in a meeting like this, you do say you're still under consideration, but according to the comments today it may not be in the short term. Regarding the revision of your midterm business plan, any comments from you?

[Interpreted] We are discussing this right now. Regarding the current situation, as Ken-san presented, it's performing very well. So as you know, in 2025 FY, JPY 1.2 billion or more for revenues, we think we may be able to make an upward revision. We are considering that possibility. After discussions, we'd like to announce.

[Interpreted] Okay. HER2 low is now in sight. So it's easier for you to develop a plan. The untransparency of the plan is getting lower. I think you are close to completing this. Are you approaching the completion? I think the precision is getting higher, so please wait for a moment.

Next question is from Yamaguchi-san from Citigroup.

So this is Yamaguchi from Citi. First question is that you gave us some very good ramping up in the old indication in HER2. But at the same time, it is reaching around 50% and there are a lot of share that you can take in the near future. Can you give me some reason from the marketing perspective what is the reason for not to take shares for those things? First of all, is the lack of academic knowledge or price, access, or of course controlling the side effect, ILD stuff? Can you give me which really prevent you not to take share at the moment, which you are going to say [indiscernible] in the near future?

Thank you for the question. So the dynamic in the U.S., so 50% share in the second-line setting. What happens in the U.S. when a doctor does not use ENHERTU in the second line, just about all of those patients get it in the third line, right? And so unfortunately, there is drop off between second and third line, right? Many patients die, unfortunately, they die. And so without a doubt, it is the best option for patients to receive it in that second-line setting and not wait. Why do physicians, some physicians wait in the U.S. Some of them are just very, very cautious and laggards. The drug has been approved for a relatively short period of time. I think those are the physicians that want to see their peers use the drug for a while. And as they see how their peers go, then they'll move it up from third line to second line. Other than the cautiousness, today the awareness of the data is very, very high. The confidence, as I mentioned, in identifying an ILD is growing. When we look at patients who are at high risk for ILD and those kind of things, we believe there's about 10% to 15% of patients that should never really receive ENHERTU, right? So we're moving from that 50% to probably 80%, 85% would be the top. But really, it's about cautiousness, human nature for some doctors. But there's nothing that I see that is a barrier from us continuing to grow.

So just a follow-up on that one. So it is fair to say that the third-line share used to be pretty high, but now it goes down because then you go to the second line. So can you give me what's happening on the third line on the ENHERTU issue [indiscernible].

Yes, I don't have that in front of me, but your intuition is correct. As our second line grows, the third line is dropping slightly. One way that we look at it is over their course of treatment, what percent of patients receive ENHERTU. And in the United States, it's a very, very high number, is well over 80%. And so they are getting it. But they're getting it -- for doctors that are cautious, they are getting it later. Or there are some patients, that I mentioned, that shouldn't get this drug because of preexisting conditions. But that's really what's happening.

Got it. Quickly on the second question. You mentioned that the European adoption sometimes is quicker than the U.S., which is a little bit surprising to me given the slowness of some of the adoption in the European market in general. So can you give me the reason? Without saying about access. But with without access, I would be surprised if the EU penetration is higher. Is this because of everybody knows what's happening in the U.S. or something changed in the Europe? Or there is no much kind of information gap anymore between U.S. and Europe?

So just to clarify. So once approved, it does take longer in Europe to get access with many like, for example, Italy today doesn't have access to ENHERTU in the second line. It was cleared a long time ago. But once they get access, in my experience and most others', the European oncologists, they adhere to the guidelines much more stringently than U.S. physicians. U.S. physicians, they have the freedom with the payers to really treat patients kind of the way they want. And so we do get the laggards there. In Europe, they do follow guidelines more stringently. And so with a drug like already that is already in the ESMO guidelines, right, once we get access, that's why you have a quicker ramp up. And I also think you are correct. In this case, the history of ENHERTU and the exposure and experience of the U.S., I'm sure that is making people more confident even before they ever really touch the drug with their own hands.

Okay. Finally, I think that the company showed some HER2 nonbreast, nongastric, nonlung data at the early stage. So I feel like this is going to be a tumor-agnostic treatment in the future in a sense that you don't need to talk about the organ anymore. If it's HER2, you can use it, like MSR high type of things. So do you see, from the market perspective, the future -- or the potential of those, the potential HER2 agnostic indication in the future?

So as you just mentioned, we had a press release just a few weeks ago, AstraZeneca, a partner of ours. And we announced that the study was positive. We didn't go through the data. We'll be presenting that at an upcoming meeting. In that study, if I'm correct, we really looked at a number of different tumor types. We looked at biliary tract, we looked at bladder cancer, endometrial, cervical, ovarian cancer, even pancreatic cancer. And I think when that data is shared with the oncology community, I think people will be impressed. What we're doing now is formulating our plans to talk to the different regulators and plan what we do with that data. HER2 expression in these tumor-types, most of these or all of these are lower than what you see in breast cancer. But when you look at all those patients, the unmet need is very, very high, and the number of patients we can help is not insignificant. So more to come on that one in the future.

Next question is from Hashiguchi-san from Daiwa Securities. Hashiguchi-san, please.

[Interpreted] I am Hashiguchi from Daiwa Securities. Very nice to meet you. HER2 low breast cancer development is what I wanted to ask you about. Page 28. Right now, ET-resistant patients are at the center of the clinical program for HER2 low. But as you can see, an indicator with the arrows, you will go to the bigger target population of ET-sensitive patients. And this ET-sensitive patients clinical trial Phase III, when would that start? And as of now, what kind of a patient with what kind of a background would be targeted with what kind of administration method to develop ENHERTU for such patients?

[Interpreted] I, Manabe, would like to first answer this question. As you can see, we have those arrows. So we will be expanding our clinical programs towards these arrows. And we are discussing with AstraZeneca for the clinical program. So this is still under discussion right now. So once we know what we can announce, we'll be able to disclose such information. So what would be the timing of such disclosure of the information after you have a sort of discussion with AstraZeneca. Well, we are still under discussion right now. So when we can make that announcement, we don't know that yet. So please give us some time.

Next question is from Mamegano-san from BofA Securities.

[Interpreted] BOA Securities, Mamegano speaking. Regarding the ENHERTU penetration, you are making steady progress. I have a question to you. Regarding the duration of treatment, I'd like to ask you a question about the duration of therapy, HER2 positive and HER2 low, for each. What is the length of treatment you're assuming right now? HER2 low penetration, if I look at it, the longer the duration of therapy, more than HER2+, you can expect higher sales perhaps. So I'd like to know about it.

[Interpreted] Ken-san, please.

So I don't have the real-world data that I think you're asking for. What I can share with you though is the responses and duration of response that we reported in the clinical trials. And as you know, progression-free survival in the D-B03, which is the second line, is up to -- it's well over 2 years, right, well over 2 years. We're hearing physicians say that their experience in the real world is every bit as good as the clinical trial. They're very, very happy with it. Most patients haven't been on the drug for 2 years yet. But right now, the responses and the duration is consistent, we believe, with the clinical trials. In HER2 low, we would expect those patients to be on the drug for a lesser period of time compared to HER2 positive, simply based on the results of the HER2 low study. But again, real-world experience so far, we're very pleased and the doctors are very pleased. The drug is behaving in their own hands as they would expect from the clinical trials. So very, very positive about that.

Next question is from Sogi-san from Sanford Bernstein.

This is Miki Sogi speaking from Sanford C. Bernstein. I have 2 questions regarding ENHERTU and 1 question for HER3 DXD. So first, the ENHERTU. So I understand that you guys are expanding the indications in HER2+ earlier setting, namely the first line and as well as adjuvant and nonadjuvant. And also for HER2 low for chemo naive population. So I understand that in those indications, you are expecting that ENHERTU will become the standard of care, just like you guys are seeing in the current indications. What would be the challenge to accomplish that in earlier line? Obviously early on line the efficacy safety of the bar is higher. And also, I think pricing might be an issue if the ENHERTU is to be added on top of the existing PERJETA, the Herceptin chemo resident. So that's first question. Second question is just briefly after China approval, what is your plan for NRDL negotiation and listing time line? And for HER3 DXD, this is also a brief question, are you still expecting the top line readout actually this month from the pivotal Phase II study?

[Interpreted] So to answer the first question, as you have pointed out, we are going to move to the earlier lines. We'd like to get indications for the earlier lines and in R&D study results with the turnout to be expected or not, we don't know. So there can be some risks. But in terms of the pricing challenges, Ken-san, would you like to answer that question?

So the pricing issues are different country by country as you know. In the United States, of our studies are successful in the early lines of treatment, I think the U.S. will embrace the drug, and it will be something that's available to patients very quickly. In Europe, it's country by country, and you are correct. The factors that will go into the negotiations country by country in Europe are the size of the population, early-stage breast cancer gets bigger and bigger. It will look at what our drug is on top of? Or is it [indiscernible] therapy and different study there as well. And as you know, every indication, in most countries in Europe, you renegotiate your price, right. So your price kind of only goes down in Europe. I do believe that with the substantial benefits that we've shown so far within HER2, knock on wood, we show those kind of benefits in the earlier-stage setting. And there, you're talking about cure. I think we would find -- I'm very confident we would find a way to bring this to patients all across Europe as well. Your last question on China and the NRLD. We're working with our partners, AstraZeneca, right now on the second line approval, which was just last week. And hopefully we can obtain that this year.

[Interpreted] You talked about ILD management, because of the earlier line higher safety level, we will require perhaps, as Ken-san explained today, ILD control and management, we do have experiences, so we can address the issues, if any? And also, first 3 question, this is a business update on ENHERTU, we didn't prepare for a lot of presentations. But when we have top line readout, we will make a public announcement. And the development strategy would be developed accordingly, and then we'd like to share that with you.

Next question is from Miura-san from Jefferies.

[Interpreted] Miura from Jefferies Securities. I have 2 questions. First of all, D-B06 study. In the middle of this year, the study results will become available. Next, in the middle of the next year, then the target patient population number D-B03 compared to D-B04, like 13,200, 8,000 more than 04, then it's going to be 2.6x more patients. Compared to this, if you look at the existing chemotherapies after ET, PFS is around 13 months. So based on this, there can be a further extension of PFS. Regarding the market opportunities as a whole, D-B04 compared to D-B04, the market can be 3x higher or bigger. Is my understanding correct?

So I'm not familiar with the exact numbers that you quoted, but your logic in terms of the number of patients being increased and patients staying on it longer, the logic and the rationale that we spoke about, I agree with that completely. The numbers, I wasn't sure exactly what, but your logic is very, very tight. That's exactly how we think about it.

[Interpreted] On top of that, and D-B04 PFS extended by 5 months compared to [ SOC ]. So likewise, in DESTINY-Breast06, 5 months or more improvement can be expected for PFS. Ken-san.

We're hopeful. I mean, every trial that we've tested in HER2 has exceeded our expectation. So I hope it does behave that way from patients.

[Interpreted] My second question. The other day, Pfizer announced the acquisition of Seagen. Not just ENHERTU but as an ADC it is commenting that it's very attractive, one, because it can replace chemotherapies and also it can used in various tumor types. So there are a lot of opportunities. The second reason is that ADC biosimilars are difficult to be developed. Therefore, as we think, 15-year lifecycle is the conventional one, but it can be extended for further usage. In that sense, it's a very attractive according to their comment. Regarding the ADC platform, its attractiveness, what's your view on the attraction of our ADC platform? Could you comment on this?

[Interpreted] This is a question to Ken-san.

When I think about it, when we think about the DXD technology, as you mentioned, it's a platform technology, it's already yielded in HER2 near future. Hopefully, yields the HER3 ADC, DATO-DXD 7300, 6000. These are all from our DXD platforms. And so I think it must be one of the most attractive platforms in all of oncology. And what we want to do is bring these drugs to patients as fast as possible, run these clinical trials efficiently and learn so we do it faster and better for every single one of those 5.

Next question will be the last question. Next question will be from Tony Ren-san from Macquarie Capital.

Congratulations on the very strong results. Just a couple of quick ones from me. So Ken mentioned the quantitative assay for measuring the continuous range of HER2 over-expression. Could you give us an update on that, where we stand? I know that Dr. Modi has spoken about this in the past. Also, in your HER2 low market share, you guys are a little over 40% right now. Where do you think this can go to? Would 80% be reasonable in your estimate? And the last one is, if you go to Page 30 on the lung cancer development map, it appears that you guys switched the priority and you guys now put nonactionable genetic mutation trials ahead of the AGA. So I just want to understand that to see if my understanding is correct.

Ken-san, please.

So I think you mentioned something that maybe Ken Takeshita, our Head of Medical talked about in the quantitative analysis. If that question was based on Ken's comments, I'm not familiar with that. But maybe we can go back to that one, I'll answer the next one. When we look at the HER2 low population metastatic breast cancer setting, and we look at the current indication, outside of patients that have some preexisting challenges that would make them not a candidate for ENHERTU which again is maybe 10%, 15% of patients, there's not a reason why these patients would not be better off receiving ENHERTU. Our study doubled progression-free survival versus what is really used today, the statement of care in chemo. And I think our challenge is to just keep building confidence with doctors. And I think as those doctors who are a little bit slow today, we're using it maybe third line and fourth line. When they see their peers and they see the positive experience, they will move forward. And hopefully with D-B06, we displace chemotherapy. In terms of the numbers of patients, I don't think 70% is unreasonable at all. 70%, 75%. My boss currently wants it higher, but I think 3 out of 4 patients, this is a drug that can really help [indiscernible].

And the lung cancer actionable genetic mutation, looks like you guys moved the nondriver mutation trials up and you moved the actionable genetic mutation trials down. Is that correct?

Yes. I think the illustration is causing confusion. I do apologize for that. With our DATO program, we expect the readouts for both the nonAGA, and we added a cohort of AGA patients as well. They'll read out at the same time. So nothing's changed in our thinking. I apologize for the confusion there.

We have now reached our ending time. And we will now conclude Daiichi Sankyo's and HER2 Business Briefing. Thank you very much for joining today.

[Interpreted] Thank you very much. [Foreign Language].

Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]