Astellas Pharma Inc

TSE:4503

Earnings Call Transcript 2019-Q1

[Chikashi Takeda, executive]

Ladies and gentlemen, good afternoon. This is Takeda, CFO of Astellas Pharmaceuticals. Thank you very much for participating in the first quarter business results telephone conference. So taking about 20 to 25 minutes, I would like to make a presentation about our performance and the progress in the pipeline and initiatives towards sustainable growth.

So Slide #2. This is the cautionary statement that Mr. Ogata already explained. Slide 3, this is today's content. There are 4 topics that I would like the cover.

Please go to Slide 4. I would like to make a presentation with this slide. This slide is the outline of the core basis consolidated financial results. Net sales was JPY 329.1 billion, up 2% year-over-year. Core operating profit was JPY 84 billion, 29% increase from last year. So this is on a core basis, but the EPS increased by 42%. I think we are able to have a smooth start. Our major products grew as expected. In addition, we were able to see initiatives, such as managerial resource optimization and shareholders' return policy that we have continued to focus on has started to show effects.

So let's go to Slide #5. This is year-on-year comparison of sales using a waterfall analysis. XTANDI sales grew in all markets. OAB products sales grew with mirabegron continuing to show high growth. There was a negative impact coming from the past NHI price revisions and sales of long-listed products such as Micardis sales degreasing. However, this was offset by sales increase of major growth products and might marginally the U.S. favorable ForEx. As a result, sales grew by JPY 6.5 billion or 2% to reach JPY 329.1 billion.

Slide #6. This slide shows the core operating profit analysis. So on top of the major -- growth of the major growth products and because of the product mix because this is different from last year, this has contributed to the lower cost of goods ratio. As a result, the gross profit increased. As for SG&A, although co-promotion cost for XTANDI in the United States increased, through efficient spending and optimal resource allocation, it was basically the same level as last year. R&D spending decreased year-over-year. There was an increase of investments in new opportunities, such as regenerative medicine and cell therapy. The spending decreased due to the wind down of Agensys research operations in 2017. As a result, overall R&D expenses decreased. So core operating profit was JPY 18.9 billion (sic) [ JPY 84 billion ], up by JPY 84 billion (sic) [ JPY 18.9 billion ] or 29% increase.

Going to page -- Slide #7. This is the full basis IFRS rule-based operating profit, net profit numbers. This quarter, we booked JPY 24.7 billion of other expenses. Going to the breakdown of this. Since settlement in principle has been reached with the U.S. Department of Justice on U.S. patient assistance foundation government investigation disclosed in the Japanese 10-K for fiscal year 2017, the litigation-related costs have been booked in the first quarter. That is part of the JPY 24.7 billion. Other costs is the reorganization of domestic group companies. In May, we have talked about this, and restructuring costs were booked related to this, and there were discontinuations of development projects, and there were impairment losses due to this. So net against other income, the total amount of the cost were JPY 20.5 billion. This will be the same level as last year. As a result, operating profit increased by JPY 20 billion or 2.6% (sic) [ 46.0% ], to JPY 63.5 billion. Profit for the period increased by JPY 12.1 billion or 28.5% to reach JPY 54.6 billion. On the full basis EPS, so reflecting the share buybacks that we have executed from July 2017 and afterwards, this grew more than the growth of the profit and increased by 34.6%.

Going to Slide #8. These are the sales of our major products. Including Prograf, the all 3 major products saw an increase in sales. XTANDI grew by 19.6%. So the OAB products in total increased 14.5%, specifically mirabegron sales increased by 26%. Prograf has showed solid results. For instance, in China, there are increased transplantation cases. Due to this, we saw a stable growth that was in line with the volume growth.

In the following 2 slides, I will explain about the sales of XTANDI and OAB products in more detail. Going to Slide #9. This is the sales of XTANDI by region. All regions saw a double-digit growth. And Japan, American and EMEA booked record high sales for the quarter. The situation is different among countries, but this is a reflection of the increase of prescriptions for prechemo metastatic castration-resistant prostate cancer. The impact of patient support programs in the U.S. that had become active from the second half of 2016 has more or less tapered off. We have been able to confirm volume growth translating to sales growth in this quarter. As you all know, with the nonmetastatic CRPC indication was added and approved in the U.S. and review is -- we have filed and the review is ongoing in the EU. Going forward, we will still have disseminate XTANDI to earlier-stage patients and pursue to maximize the value of this drug as a flagship product that will support our mid- to long-term growth.

Going to Page 10. So this graph shows the sales trend by quarter of OAB products after the launch of mirabegron. So the pink line is total; the second line is VESIcare; mirabegron, you can see that it is steadily increasing. From fiscal year 2019, we will start to see the exclusive period of VESIcare to end starting from the United States. Taking this into account, some 4 to 5 years ago, we have shifted our marketing resources to mirabegron, and we have targeted sales expansion of mirabegron and the overall sales growth of OAB products. As you can see through this graph, we have been able to confirm the results of this strategy.

In the U.S., combination therapy with VESIcare and mirabegron has been approved. This means that patients where VESIcare was unable to show sufficient effects can now use mirabegron in addition. So [indiscernible] on the good balance of efficacy and tolerability of the mirabegron and the [ reaching ] of the combination therapy in the U.S. We'll further accelerate the shifting to mirabegron.

Turning to Page 11. So even in Japan, where the business condition is tough, we will renew our efforts to grow in Japan. We have explained that in Strategic Plan 2018 presentation in May. So the growth driver, one of the core products would be the Suglat family. In this quarter, we launched SUJANU, which combines a selective DPP-4 inhibitor and selective SGLT2 inhibitor. Although we have to take into account that the [indiscernible] situation in the first year of the launch, the Suglat family sales was JPY 4.9 billion, a substantial increase from the previous year. We'll continue to focus on managerial resources in this product as one of our growth drivers. So the Repatha, Linzess, Suglat family, which we have already launched. In addition, we on the lower right-hand side of this slide, we already have drugs that have been -- already been approved or start to market or pending. They are the notable drugs in the pipeline. On top of that -- so there were 6 key products. We'll concentrate on these drugs, along with the global 6 key later-stage products so that we can grow in the Japanese market.

In this next slide, Slide #13 -- let's go to Slide #13. This is the progress of our pipeline. Slide #13. I will talk about the projects that have proceeded in the stages after our last earnings announcement on April 26 this year. During this period of time, we got new 4 approvals. In the U.S., the following were approved: so solifenacin and mirabegron, combination therapy; tacrolimus, granule formulation pediatric use; enzalutamide for nonmetastatic CRPC. In Japan, Fidaxomicin was approved. So we have applied or filed for JAK inhibitor peficitinib in Japan under the indication of rheumatoid arthritis.

So ASP1948, which we are codeveloping with Potenza and MucoRice-CTB, which we are co-developing with The Institute of Medical Science of The University of Tokyo, this entered Phase I. We decided to discontinue 2 projects which were in Phase II.

Going to Page 14 and onwards. So in the midterm management plan, we have talked about the 6 later-stage products that we want to focus on. And the following slides will -- for each compound, we have 1 slide prepared to talk about it. On Page 14 is enzalutamide. So this will be a clinical [indiscernible] indication for -- to include early-stage prostate cancer. So this will be the additional indication for M0 CRPC has been approved in the U.S., and we -- in Europe, the review is ongoing. So in terms of the PROSPER study, these results have been announced on the June 2018 issue of the New England Journal of Medicine. So on top of the recent indications, we are aiming to expand the indication to more early-stage prostate cancers, like ARCHES, EMBARK, these 2 Phase III studies are going forward smoothly and both studies have completed patient enrollment.

Now Slide 15. This is about the development progress of gilteritinib. It is known that the prognosis of AML, acute myeloid leukemia, with a FLT3 mutation is poor and the recurrence accelerates the disease progression. That is why no treatment has been sought for. We did JNDA for the indication of relapsed or refractory AML with a FLT3 mutation, which is the highest unmet medical need and a Sakigake designation this March in Japan. Likewise, we filed NDA in the United States in this March and have received the notification of their acceptance of the filing and the fast track designation for priority review with the PDUFA date on November 29, 2018. On top of relapsed or refractory AML, the development of other types of AML has been ongoing steadily.

Please look at Slide 16. Let me explain about the latest developments that is enfortumab vedotin or EV for cancer. This month, we started enrollment of the patients with a prior checkpoint inhibitor or CPI treatment for the Phase III trial. In the Phase II trial currently ongoing, we have 2 cohorts depending on platinum-pretreated or naïve. Patients enrollment of cohort 1, the platinum-pretreated arm has completed. And the top line readout is going to be available around the first half of 2019. The cohort 2 enrollment has been ongoing quite well. We are aiming at filing a U.S. NDA with this Phase II study result.

Slide 17. This is also about enfortumab vedotin. I would like to share with you the Phase I study data which was published at the ASCO 2018 this June. The results of patients' stratification analysis of ORR or overall response rate is favorable as 41% for all patients, 40% for the prior OR CPI-treated patients and 43% for CPI-naïve patients. Also, EV was well tolerated. That was proven within this study. In this study not only urothelial carcinoma, ovary cancer and NSCLC patients are enrolled so that we could seek for the line extension.

Now please look at Slide 18. This is about IMAB362. That is the developmental codename. From the last time, we decided to call it as zolbetuximab. This is about zolbetuximab development of gastric and gastroesophageal junction adenocarcinoma. We have 2 Phase III programs so that this drug will be the first line for this class. SPOTLIGHT study, the combination study with the FOLFOX6, which is mainly used within countries has started. In the second half of this year, GLOW study. It's a combination study with CAPOX, which mainly used in Asian countries will be static. Also our Phase II study, ILUSTRO, has started to verify accuracy and safety of zolbetuximab monotherapy.

Slide 19. This is the current progress of roxadustat for anemia-associated with CKD. We started in filing and a reimbursement in EU, 6 studies for dialysis and nondialysis patients are ongoing. As for the new progress since the last financial results announcement, out of the 6 studies, Himalayas and SIERRAS studies completed their enrollment. The data readout of these 6 studies are planned in 2018. In Japan, there are 6 studies ongoing for dialysis and nondialysis patients. The favorable readout are available from 4 studies targeting dialysis patients, and JNDA is current within 2018. Two studies for our nondialysis patients are ongoing steadily.

Slide 20. Please look at the slide. This is about fezolinetant. This is under the development for MR-VMS or menopause-related vasomotor symptoms or hot flash. Currently, Phase IIb study has been underway to verify optimal dosage and administration for this disease, and top line readout is expected to be in the third quarter of 2018.

Slide 21 is about the progress of reldesemtiv for muscular disease. The Phase II study results in SMA, or spinal muscular atrophy, were presented at Cure SMA conference in June 2018. Currently, we're working on the detailed evaluation for the data from this study, including each individual case data.

You can find other ongoing studies than SMA on the right side of this slide. ALS, amyotrophic lateral sclerosis, Phase II study requires more recruitment time than planned. So the top line result is now planned in the first half of 2019. COPD Phase II enrollment has completed earlier than planned, and top line readout is planned in the third quarter of 2018.

Slide 22. This is a list of the expected key pipeline events in FY 2018. The projects with grayout indicates the achieved milestones since the last announcement. As usual, we will always update the progress when appropriate.

Slide 23. This shows the expected filing post compounds with the potential growth drivers with the prioritization of 6 late-phase development compounds I explained today. We will invest in various activities up until the submission and even further after that. That was about the pipelines of new compounds. From Page 24, I would like to explain the initiatives for sustainable growth.

Slide 25 is about our initiative to pursue operational excellence. In May, we have made the announcement, and we're having 4 aspects in the strategic plan as our pillars. Without sticking to the [indiscernible], we will continue zero-based review of all activities from various aspects. In EMEA, we've already started the optimization of the organization and the structure as we're reviewing R&D and finance functions and the sales and marketing organization. In Japan as well, as been announced in May as well, not only back office units, but also R&D and sales and marketing business units are decided to be restructured. We are going to continue our effort to improve operational quality and efficiency and to establish optimal cost structure.

Slide 26. That is [indiscernible] the continuation work for Access to Health. We would like to go -- walk on the -- our innovation generation. Through that, we are sticking to realize Access to Health. And for that purpose, appropriate theme are explore and incorporate into our activation. MucoRice-CTB is rice-based overall vaccine, which expresses antigen protein to our rice the endogenous storage protein. Through the oral administration, immune cells in intestinal membrane is efficiently activated, and it can be stored in transport in room temperatures, just like rice in Africa and [ Southeast Asians ] the temperature is high and aware that the cholera is likely to take place, so these characteristics is quite beneficial for those areas. So in this quarter, the aiming at the progression of cholera diarrhea we have studied the Phase I study.

Now page 27 and 28. I would like to explain about -- rather in 27 and 28 about the capital allocation. Our approach of capital allocation is described at the top of this slide, which has now been changed from the conventional policy we have and applying dividend increase FY '18 and aiming at continuous dividend increase for the coming 3 years, up until 2020. Acquisition of own shares are ongoing from July 1 to September 20, with upper limit of 60 million shares and JPY 100 billion. Our first and foremost mission is adding value from business investment. The continued shareholder return is another important mission. And when we have excess cash, we will selectively execute share buyback.

That was rather a very quick presentation. This is the end of my presentation. Thank you.

[Unknown Executive]

So this ends our presentation. Taking about 30 minutes, we would like to go into Q&A session.

[Operator]

[Operator Instructions] From Citigroup, Mr. Yamaguchi has a question.

[Hidemaru Yamaguchi, analyst]

Yamaguchi from Citi. I have some questions. First of all, XTANDI U.S. business. So year-on-year, you have been increasing the sales by 20%, and I think we have 3 quarters in a row that we had been in the sales growth for 3 quarters in a row, and I think it's strong. If you look at the market condition, I think basically, the -- in terms of the share in the market or in terms of the volume at the end market and the relationship between the sales, your sales, would you please describe in more detail about the situation of the U.S. for XTANDI?

[Chikashi Takeda, executive]

Yes. Thank you. So in terms of the latitude, Zytiga, so they do have the indications that we do not have. So it's very difficult to make head-to-head comparison between these 2. So within our scope of indication, basically, we do not think internally that we are getting pressure from Zytiga. But from external data, it seems that it's become more difficult to make a comparison.

[Hidemaru Yamaguchi, analyst]

So in terms of prices, volume, how is that trending?

[Chikashi Takeda, executive]

Well, in terms of volume, quarter-on-quarter, I think we saw a 7% growth and the sales grew 8%. So maybe this is not a direct answer to your question, but volume has basically correlated to the growth of the sales.

[Hidemaru Yamaguchi, analyst]

Understood. Well, in terms of the litigation, so this is the [ loans that ] we have talked about in the full basis and talked about the patient assistant program. So according to the media, I think basically this has been reported. So I would like this -- you to explain about that. And through this litigation, is there any -- no impacts on the patient assistant program in the United States through this issue?

[Chikashi Takeda, executive]

Yes, we have made reserves amount of that. So with the Department of Justice in the United States, so we made donations -- the U.S. subsidiary, this will be linked to the settlement that we had made to -- with the investigation the Department of Justice has conducted to the donations that we have made to these organizations. We have various investigations, various discussions. But at this timing, including the amount and for the major conditions, we have agreed in principle. So accounting wise, there is a rational reason for us to make reserve. So $100 million is what we have booked.

[Hidemaru Yamaguchi, analyst]

F

Understood. Lastly, this is a more general question. So in the price policy of the United States, so the Trump -- President Trump is attacking directly here. I think some companies are raising or decreasing or some -- I think majority of companies are decreasing it. This -- I think basically we have a feel that there is a difference in -- change in the trend or pricing in the United States. But have you made any announcement about your price policies in the United States?

[Chikashi Takeda, executive]

Well, in terms of this trend, of course, with the local staff and with -- the head, of course, will, of course, be involved, and we will be confirming the situation. And we have discussed and reviewed the situation, but to this -- up to now [ growth digit ] sales hasn't been disclosed. So we have not gone to a situation that is reflected into a main scenario. But of course, we will continue to observe the situation.

[Operator]

Next, UBS, Mr. Seki.

[Atsushi Seki, analyst]

Seki from UBS. DOJ settlement, the amount is $100 million you reserved. That is what is pointed out. But the end of March and also the June, it seems there's a difference and also they are current -- this is also moving. Is that related or not related?

[Chikashi Takeda, executive]

From this fiscal year, this might be the, I call it, the detailed matter. International standard IFRS 15 that is firstly applied. So we have to follow that rule for this accounting process.

[Atsushi Seki, analyst]

And this reserve used for this purpose?

[Chikashi Takeda, executive]

Well, that is something we used as a reserve. But now it is included within the other debt. So it should require less into others. So the categorization is -- it was necessary to be changed. So based upon that, we processed this amount. And as a result, there's a bit of the increase and a decrease.

[Atsushi Seki, analyst]

I see. That is quite informative. Second question that about XTANDI in the United States. This quarter, your businesses are quite stable and growing. That is wonderful. But the impact of inventory that is happening even now and also the off-line usage, of course, you have the assumption -- we have assumption that you are not going to promote the off-line usage but PROSPER test result was really good. So there might be the possibility that your drug, it is used for that indication. Even for Zytiga with this based upon latitude, I think [ passage of ] line usage was done. That is a comment from J&J. So that's the question. And related to Yamaguchi-san's question, if the pricing increase became -- become difficult in the United States, 3-year the late 1-digit growth even might not be impacted. I would like to receive your conforming comment with that regards.

[Chikashi Takeda, executive]

First of all about the inventory, this fiscal year, the previous fiscal year for the inventory status is not really impacting on to the numbers. That's in the status. And as for PROSPER, in July, our indication was approved. And from here, of course, prepared sales force have been now visiting or making a call to the physicians. Of course, it's being just 10 days since then. So there no specific reflection into the number or the number.

[Atsushi Seki, analyst]

So this April to June period, PROSPER information is already used for the promotion activities. Do you know that?

[Chikashi Takeda, executive]

No, not really.

[Atsushi Seki, analyst]

And also the impact of nonpossibility of price increase into midterm plan.

[Chikashi Takeda, executive]

Well, of course, we have to do some assimilation for this. But as of now, we don't have any specific information and also not only with this, we might encounter other risks. For example, also when it comes to 3-year plan, still we have a certain time. So that's we believe long enough to introduce the countermeasures. That's what we are going to think.

[Atsushi Seki, analyst]

And also just a simple question, 2 questions. One is reldesemtiv. The Cure SMA, you've disclosed some information. I have a look at that. And what about the following step? Are you going to pursue for the higher concentration level? Or what is going to be your next steps with regards to the development of reldesemtiv?

[Unknown Executive]

[indiscernible] is answering to this question. So data is just presented at Cure SMA, including the individual case, the detailed information is under the analysis together with the company -- partner company. So with searching for various activities or the possibilities we are doing what we need to do now.

[Atsushi Seki, analyst]

And also what about the business development activities performance recently? That is because Ganymed or IMAB that happened? And also the other day Aquinox in a Phase III. The result was not really good. So it seems to me that, that kind of situation is being continuously happening. So are you going to change your approach for that? Or what are you thinking about it now?

[Chikashi Takeda, executive]

Well, the development, of course, face various challenges. And one of the worst case is the discontinuation of the studies or development and regardless the -- and pharmaceutical companies will know that it's likely that could happen. But as for the events of our experience, you might have such kind of impression about our approaches but continuously, cross-functionally, we have a team. We have the top talents across functionally. So we've input our research in that way, and we are evaluating what we decided. And this approach is going to be continued. And of course, if there is a lesson learned that would be incorporated so that we can identify another opportunity. That's all what we can say.

[Operator]

It's from Daiwa Securities, Hashiguchi-san.

[Kazuaki Hashiguchi, analyst]

This is Hashiguchi speaking. So there are 2 pipelines. One is about the [indiscernible] and for the timing of the submission. The Phase III study data when it becomes available, then you would do the submission? The Phase II study result is disclosed at this time, and a primary endpoint for that is ORR. And depending on that result, together with the first study and with only the Phase II study accelerated approval is what you are trying to seek for? Is there such a scenario in your mind as well?

[Chikashi Takeda, executive]

Phase III, 2 Phase III studies are about to be studied. And based upon that result, we are trying to do NDA. That's the current strategy.

[Kazuaki Hashiguchi, analyst]

Second is about peficitinib. Looking at this Phase III data, or these studies already disclosed somewhere? If not yet, I would like to know when you are planning to disclose that information.

[Chikashi Takeda, executive]

Peficitinib, there are 2 Phase III studies will be reported in the major congress of the society.

[Kazuaki Hashiguchi, analyst]

Are you disclosing when that will be?

[Chikashi Takeda, executive]

Well, within this year. Somewhere, some conference -- congress.

[Kazuaki Hashiguchi, analyst]

After the disclosure of the data, I think you should have a discussion that the products already available compared to the potential that might not be really favorable, but do you have the feeling that it can be the game changer? Or do you think for the time being, current status is likely to be continued? How do you feel about that?

[Chikashi Takeda, executive]

With regards to comparison with other company's product, I cannot make any comment. But the available Phase III result is viable enough to do the NDA. As for the details, please refer to the information presented at the Congress and make your own judgment. Thank you.

[Operator]

We have from Nomura Securities, Kohtani-san.

[Motoya Kohtani, analyst]

This is Kohtani from Nomura Securities. So first about the DOJ litigation of XTANDI, and I think this is very difficult for you to explain about this. But I would like you to -- I would like to ask a more detailed question. But I think it goes to the special advisory board in 2014 for the OIG -- OAG. And in terms of the patient assistance association, so given donation to that, is that -- is not a problem. But if it's too limited, it would be equivalent to kickback. So this is my hypothesis. So if you go to the kind of metastatic CPRC, then there's only 2, so it's like a very gray area that you're entering. So I think that's the reason why you were facing this litigation. So in terms of patient assistance -- assistant organization, can you donate again? So basically 15% of the people that are coming from this association, can this basically be translated to sales? And are you foreseeing just to reflect any sales going forward?

[Chikashi Takeda, executive]

So going -- to answer your last point first, so copay foundation and what we have been conducting in terms of the PA piece, so there's no clear link to this. Maybe there'd be some impact. But from our point of view. This seemed -- we do not recognize there's a clear link between these 2. So this incident, if -- at the end of this incident and the change of the PAP and in terms of how this can be related to our sales or not, we have not planned for this, and we don't think that to reflect. So the PA foundation for the prostate cancer, so a change for the -- supporting. So you listed the metastasis prostate cancer, but right now it's prostate cancer overall. So you have not been -- well, it's not related to whether you donate or not. So basically that is a change. So basically if you can continue to support them, maybe they can prescribe that to sales in the future.

[Motoya Kohtani, analyst]

But at this point, you can't comment. Is that correct?

[Chikashi Takeda, executive]

Yes, that's what we have said.

[Motoya Kohtani, analyst]

My second question is that for the competitors. And if you look at the new level of your XTANDI, so the [indiscernible] are different. So they say that falling is 16%, and the -- so [indiscernible], but you are listing 10% and 8%, and I think basically, it seems to be better. XTANDI has better accumulated safety data. So if it's -- even if it's M0, I think basically you'd be quiet have a competitive edge, but what do you think about this?

[Chikashi Takeda, executive]

So I think basically, not looking at specific data, but XTANDI has had a very long track record in the market and have been appreciated by the patients for a long period of time. So including those, and I hope that going forward we will be able to have a better positioning against our competitors so that we can see a increase of the prescriptions.

[Motoya Kohtani, analyst]

Going back to the reldesemtiv, Cure SMA data is exploratory data. There were many endpoints there, and 2 of them show the improvement. But how much is exercise function skill that is, of course, the one that is approved? However, that is for the infancy as such. So it's not related to this one. But the 6-minute walking distance and a max respiratory pressure, those alone are sufficient markers for SMA. What other measures are likely to be appropriate for evaluating this disease?

[Chikashi Takeda, executive]

Thank you very much for your question. As of now, currently -- again this is exploratory study. So various parameters are under the scrutinization. And there, out of those, which one is most likely to the big event official for SMA? Which one is the most clinical significant, including those we are working under discussions. So this parameter, this endpoint, at least good enough. There is no such conclusion. We are studying various -- all parameters, and based upon that, we would like to seek for the next step.

[Motoya Kohtani, analyst]

Another question. COPD, well, this drag diaphragm, it can be expanded so the breathing becomes easier with [ this track ]. That's why you are doing a COPD study. And 4 Phase I, Phase II studies are ongoing. And what is the position in COPD or other drugs within this overall program? ALS is going to be one of the majors, I think. Well, there are very similar muscular diseases and muscle-related diseases. We are conducting various steps of our exploratory studies, and each data moderate out is going to be available within this year. So based upon that, we would like to identify the most appropriate ways to go.

[Operator]

Morgan Stanley Securities, Muraoka-san.

[Shinichiro Muraoka, analyst]

I'm Muraoka, Morgan Stanley Securities. So my first question is about the COGS ratio for the first quarter. So year-over-year, you improved by 3%. So I think it's mixed with unrealized gains, of course, but for the full year, COGS ratio assumption, compared to that, the first quarter seems to be even better. Are there any other reasons? Or the improvement is going to continue for the second quarter onwards?

[Chikashi Takeda, executive]

So Micardis is specifically for this quarter. So these sales declined substantially. So that translated to incremental of the COGS ratio. If you look at the full year basis, so it is not the situation for this quarter is going to be -- will continue. I think, basically, we will be basically more or less in line with what we have anticipated. Yes. If you compare it to last year, yes, Micardis impact seems to be large for this quarter. So no other items reflected to this. There are various elements, but the biggest impact was coming from Micardis.

[Shinichiro Muraoka, analyst]

Understood. Another point I want to ask is that going back to your situation about XTANDI, well, maybe not a question but my comment. So in the past couple of months, so the IMS weekly prescription numbers is quite different from the actual situation. So is there any hope that this will normalize in the near future? Or should we not expect that? Can I get some guidance from you?

[Chikashi Takeda, executive]

So there are some of these things that we do not know, but this is external data. So from our point of view, it is not much that we can say from our side.

[Shinichiro Muraoka, analyst]

Well, so it's not the case that you are trying to stop it or...

[Chikashi Takeda, executive]

No.

[Operator]

Crédit Suisse Securities, Mr. Sakai.

[Fumiyoshi Sakai, analyst]

Sakai speaking. There are 2 questions. The first one, the first quarter, so Takeda-san, you say this is good results, but how good was it actually?

[Chikashi Takeda, executive]

So at a glance, comparing it to last year, it -- well, maybe a overachievement but maybe better than expectation. So -- but if you consider going into the second quarter, well, last year -- well, this is on the core basis, the various situations they have to consider. I think the second quarter, we saw a core basis sales and operating profit is declined last year but if you look at the first quarter and the second quarter for this year that is, that will be an overachievement of the last year, if things go as -- at this pace right now.

[Fumiyoshi Sakai, analyst]

So you are not giving your guidances for the interim. And still we are in the first quarter, and you haven't made any revisions for this full year, of course, so based on the results of the first quarter, so what do you -- can you explain the context of this? Well, the reason I think I ask is that based on this year, next year as you have -- next year we're going to have a patent cliff, so I would like to understand what's going to happen based on what's happening this year.

[Chikashi Takeda, executive]

Yes. Thank you for your question. So first of all, I said that we have a smooth start in terms of the numbers, if -- it's an year-on-year comparison, but the growth rate was quite high. But if you go break it down more in detail, it's very simple. The major growth products, XTANDI, mirabegron, has grown as expected. And going forward, we think that this will continue to grow as expected. So based on -- with that in mind, I say that we had a smooth start for the first quarter. So currently, but on the other hand, we still -- are still 3 months into this new fiscal year. There may be some unknown risks and some unprecedented things that may happen. We have to consider that. But for the major -- main products, we will observe them carefully and monitor them. For instance, if we want to change our outlook at appropriate timing, we will announce that. But currently, basically, it is in line with our forecast. Well, restart has been good, but target is to achieve our targets that we have announced.

[Fumiyoshi Sakai, analyst]

Understood. Next is about the pipeline, fezolinetant, Page 20 as described. And from the third quarter, top line result is going to be available, that's what it said. At the midterm plan announcement, the peak sales was very good number with high expectation, and the 2021 is the targeted submission timing. That's what it said. This Phase II study is going to be used for the pivotal study. Of course, it's decided after you look at the result, but this drug has this nature. Therefore, shortening the Phase III study might be another possibility. So as several factor, do we need to look at that? Well, I see our next coming new drug event that it seems to me the fezolinetant is that. So I would like to get more information with that regards.

[Chikashi Takeda, executive]

Thank you very much for your question. So this July to September time, our Phase IIb data is going to be available. Then after that ordinary packages are used in 2021 and afterwards we are going to do submission. Of course, as early as possible, we would like to work for the NDA. However, unlike anticancer drug, there was no specific fast track for this kind of drug. Of course, it's depending on the Phase II result, but the related authorities we need to do the timely consultation. Then after that, we would like to decide the timing for Phase III and also NDA.

[Fumiyoshi Sakai, analyst]

Then in that case, you need to have a larger sample size. You need a relatively larger number of the sample size. Is that right understanding?

[Chikashi Takeda, executive]

I think that's depending on the result of IIb. With this study result, what would be the effect size and, including that I think the size and the length of Phase III studies going to be decided. So the sample size, big or small, that, we cannot make a comment at this moment in time.

[Operator]

So now the time is up, we would like to end the Q&A session. Back to the floor, please.

[Chikashi Takeda, executive]

Thank you very much for participating in our conference call.

[Operator]

So thank you very much, and for your continued support.