Astellas Pharma Inc

TSE:4503

Earnings Call Transcript 2021-Q1

[Unknown Executive]

[Interpreted] Thank you very much for waiting. We are going to begin. Thank you very much for joining this conference call hosted by Astellas Pharma Inc. despite your very busy schedule. I'm [ Fujii ] from Corporate Advocacy and Relation. I'm delighted to serve as emcee today. We are starting this meeting to explain our financial year 2020 first quarter financial results we announced at noon today. We are going to explain based on materials posted in the IR Library Business Results section on our website, so please refer to the documents.

Let me introduce the participants first. CSTO and CFO, Naoki Okamura. Okamura, thank you for your time. CCO, Yukio Matsui. Matsui, thank you for joining. Development Division, Global Head of Project Management, Minetake Kitagawa.

[Mike Kitagawa, executive]

[Interpreted] Kitagawa speaking. Thank you for your time.

[Unknown Executive]

[Interpreted] This material or presentation by representatives for the company and answers and statements by representatives for the company in the Q&A session includes forward-looking statements based on assumptions and beliefs in light of the information currently available to the management subject to significant risks and uncertainties.

Actual financial results may differ materially depending on a number of factors. This contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations, promote unapproved uses in any fashion nor provide medical advice of any kind. And this meeting, we are simultaneously translated into English by interpreters. Accuracy of interpretation cannot be guaranteed.

Mr. Okamura, please start.

[Naoki Okamura, executive]

[Interpreted] Thank you very much. Thank you, once again. Okamura, CSTO and CFO. Thank you very much for joining despite your very busy schedule.

This is a conference call for us to explain the financial results for the first quarter of FY 2020. I'd like to explain our financial results and initiatives for sustainable growth and capital allocation.

Slide 2 is the cautionary statement regarding forward-looking information. The content is similar to the ones explained by [ Fujii ] so I'd like to go to Page 4.

First of all, I'd like to give you an overview of the FY 2020 first quarter results based on a year-on-year comparison. Sales of growth drivers increased steadily, and our business fundamentals were solid. In particular, sales of XTANDI and new product PADCEV are exceeding our expectations greatly. So continuous growth of main products offset most of the sales decrease from the termination of sales and distribution in Japan and LOE. However, there was a negative impact on our financial results in the first quarter from the spread of COVID-19 infections. So unfortunately, revenue and core operating profit decreased overall year-on-year. Let me explain the details from now on.

Please turn to Page 5. This shows the first quarter consolidated results. Revenue was [ at ] JPY 307 billion, down 8.1% year-on-year. Core operating profit was JPY 63.4 billion, down 25.2% year-on-year. The bottom half of the slide show our full basis result. Operating profit was JPY 60.8 billion, down 21.1% year-on-year. Profit for the first quarter was JPY 50.4 billion, down 13.9% year-on-year.

Page 6 shows year-on-year comparison of revenue. I'd like to explain by main factor. As for XTANDI, it has continued to perform well since FY 2019. New products, such as XOSPATA and PADCEV, also contributed to sales increase. Sales of main products increased by JPY 28.1 billion in total year-on-year.

On the other hand, as you can see in the middle of this page, sales decreased substantially by JPY 28.8 billion year-on-year due to LOE of Vesicare EU, termination of sales and distribution in Japan for Symbicort and KM Bio product in July 2019 and Micardis in March 2020. But most of these sales decreases were offset by the growth of main products. However, as is shown at the bottom of the slide, the first quarter was significantly affected by COVID-19.

For XTANDI and Prograf in EU, to be ready for the spread of infections, customers increased their inventory by building up the inventory at the end of the previous fiscal year. In reaction, there was a negative impact on revenue by about JPY 8 billion. And due to the nature of therapeutic areas and products for OAB product, Lexiscan and EVENITY in Japan, demand declined for product, which should be used by the patients to come to the hospitals because of the reduced in-person visits to clinics and hospitals. Because of these 2 factors, there was a negative impact of about JPY 23 billion in total in the first quarter according to analysis.

Next, Page 7 shows sales of main products based on a year-on-year comparison. XTANDI sales grew steadily on a global basis to JPY 112 billion, up JPY 16 billion year-on-year. This was the record high for the quarterly sales. Particularly in the United States, volume increased more than 30% year-on-year. In the metastatic CSPC, which was approved in December last year as an additional indication, the volume exceeded the initial expectations in terms of the growth.

In the first quarter, we got the approval of the indication of prostate cancer with distant metastasis in Japan in the first quarter. So we will continue to fully leverage the launched clinical study data to penetrate its use in early stage.

XOSPATA sales was JPY 5.6 billion, up JPY 3.2 billion year-on-year. In addition to U.S. and Japan, also in EU, starting with Austria, U.K. and Germany, it was launched, contributing to sales. Currently, it's being sold in 14 countries around the world.

In December 2019, we launched PADCEV in the United States. Co-promotion revenue was 30 -- excuse me, JPY 3 billion. There's a high level of interest among oncologists. New prescriptions are increasing at a pace exceeding our initial expectations. There is a positive uptake. Based on the feedback from the physicians, in the indication which was approved, we assume we have been able to get the high market share in the patient population as a target for the treatment by PADCEV.

Mirabegron sales was JPY 40.4 billion, up 1% year-on-year. In the United States, double-digit growth is continuing, but as I said, due to the impact of COVID-19, global sales remained flat. Sales of new products in Japan was JPY 18.2 billion, up JPY 5.4 billion year-on-year.

EVENITY sales, in particular, increased by JPY 3.4 billion year-on-year. Despite the impact of COVID-19, it contributed to sales growth.

Next, Page 8 shows cost items based on a year-on-year comparison. The COGS ratio declined 1.7 percentage point year-on-year. XTANDI and other global products grew, but sales of in-licensing products in Japan with relatively high COGS ratio declined. And due to these changes in the product mix, the COGS ratio declined.

SG&A cost rose 2.8% year-on-year. Except for XTANDI, co-promotion fees, which increased with sales increase in the United States, SG&A costs declined by 4.8%. Sales promotion expenses and travel costs declined due to the impact of COVID-19.

R&D expenditure increased 7.1% year-on-year. Main factors behind were fezolinetant development cost increase and R&D expenditure increase at Audentes. Like SG&A costs, there was a decrease in the development costs due to impact of COVID-19.

From Page 9, I'd like to give you an overview of FY 2020 revised full year forecast. Unfortunately, revenue and core operating profit forecast was revised downward. Based on the actual results up to the first quarter, we reflected the latest business outlook. As I explained earlier, main products in oncology area are continuing growth trend, so we revised the sales forecast upward. We also reflected the impact of COVID-19, which was not factored in, in our initial forecast. We made a downward revision for revenue and cost forecast. As a result, our revised revenue forecast is JPY 1,256.5 billion, down JPY 25.5 billion from the initial forecast. And the expenditure is expected to reach JPY 233.5 billion. Core operating profit is going to reach JPY 251 billion. We're expecting a decrease by JPY 6 billion from the initial assumptions. But even when the impact of COVID-19 is included, we are aiming for core OPM of 20% we committed in our Strategic Plan 2018.

I'd like to explain the details on the next page, Page 10. I'd like to explain the variance from our initial forecast for revenue and core operating profit by factor. In the middle of the slide, we reflected the latest business update. Revenue forecast is revised upward by JPY 13 billion. We raised the sales forecast for XTANDI and PADCEV in the United States, which are performing well. Core operating profit forecast is revised upward by JPY 8.5 billion. We will continue to efficiently manage expenses and further promote global procurement efficiencies.

As is shown at the bottom of the page, COVID-19 is having the negative impact on revenue by JPY 35 billion. Main factors are reaction to the inventory buildup in the EU and demand decrease due to reduced visits to hospitals and clinics by patients and a delay in the adoption and uptake of new products due to self-restraint on sales activities. And due to a delay in the GCP inspection, there's going to be a delay in the -- getting the approval for M1 CSPC for XTANDI in Europe. That was also reflected.

Core operating profit forecast was revised downward by JPY 13 billion, and we're expecting a decrease in gross profit due to revenue decrease, and we also expect cost decrease due to the delay in clinical studies and activity restrictions.

We are keeping our ForEx assumption at JPY 110 for the U.S. dollar and JPY 120 for the euro for the second quarter and beyond, but the yen appreciated a little in the first quarter, so there's going to be a negative impact for the revenue and core operating profit compared to the initial full year forecast, so we are making downward revisions overall. But excluding the impact of COVID-19, we are going to exceed our initial forecast.

Slide 11 shows the outlook for the second quarter and beyond. And I'm going to explain the variance from the initial forecast by period. As I touched on the actual results, revenue was greatly affected by COVID-19 in the first quarter. Particularly during this period, sales declined substantially in reaction to the inventory buildup at the end of the previous fiscal year. That impact is going to even settle in the second quarter and beyond. And demand, which declined due to reduced in-person visits to clinics and hospitals, will gradually recover, and impact of COVID-19 on sales are going to be moderate according to expectations. Main products in oncology area are growing steadily, so we expect smaller downward revision of revenue in the remaining 9 months.

We expect a cost decrease due to the impact of COVID-19, but it's not enough to offset the revenue decrease. In order to secure profit as much as possible under these circumstances, we will promote further cost efficiency to more than offset the revenue decrease. So we revised -- our revised core operating profit forecast is going to exceed our initial forecast by JPY 2.5 billion in the second quarter and beyond.

Slide 13, I'd like to explain our initiatives for sustainable growth. Thank you. Page 13. This is about the key post-POC projects status updates since FY 2019 financial results announcement in May this year as underlined. Top left, you can find enzalutamide, a Phase III PROSPER study OS data for M0 CRPC was published in New England Journal of Medicine, and it was presented at ASCO 2020 in June. And also, we filed in the U.S. in May 2020 and EU in June 2020 for label update to include the OS data.

Now M1 CSPC. For this, this drug was approved in Japan in May 2024 for prostate cancer with the distant metastasis. It was filed in EU in July 2019, but the decision of the authority is likely to be delayed due to the COVID-19.

Now in the mid of the second row, roxadustat. This is for anemia associated with CKD, and finally, we've filed in Europe. And this filing is for both on dialysis and non-dialysis dependent.

And at very bottom, you can find AT132. This is XLMTM linked to myotubular myopathy. Clinical study is ongoing, and the clinical study for registration put on clinical hold by FDA due to recently observed serious side adverse events. So the details are going to be now explained from here.

First, Slide 14, this is enzalutamide, a Phase III study data by disease stage. The stage, it shows the earlier toward the left, and toward the right are the stages advanced. And you can find tick marks of the data that is already obtained. As you know, on the very right, this is the last -- latest -- late stage, a very end of stage of M1 CRPC post the chemo, and this is where that we received the approval, first of all. And after that, in the stage, the manner we are moving to the left, that is an earlier stage.

So M0 CRPC PROSPER study data now available, which is highlighted in yellow here. And the OS data, second from the bottom, regardless the stage, consistently and data shows the extended survival. And also at the very bottom, you can find the duration of treatment. The earliest stage, it is the longer the duration of therapy is.

Based upon this, enzalutamide, a superior efficacy and a safety is suggested for a wider range of the patients from early stage to late stage. So currently, the clinical trials for the earlier stage is ongoing. But with this, we are expecting that the potential of enzalutamide is going to be further widened.

Slide 15 is MAA submission looks about roxadustat. We've filed in the EU for the treatment of anemia in adult patients with the CKD, both DD or NDD based on the data of 8 Phase III global studies, as you see in this slide, involving more than 9,000 patients. This drug is proved to be efficacious in increasing and maintaining the target hemoglobin levels with the reduced use of intravenous iron in the Phase III programs. The safety profiles feel as same as the dose of serving the patients with this disease. The pooled safety analysis showed the non-inferiority of roxadustat in both MACE and MACE+ to ESA in DD-CKD and to placebo in NDD-CKD. Roxadustat was proven and launched in the Japanese market for the dialysis-dependent patient, and we have already filed for the non-dialysis dependent. In Europe as well, we are highly expecting that this is going to be a new option of the treatment for the anemia with the CKD.

Slide 16 shows the current status of AT132. AT132 is the leader program for the gene therapy that is a acquired from Audentes, so which is M&A this January. The clinical study for registration in XLMTM patients put on clinical hold by FDA due to recently observed risk adverse events. And you can find the dosage and number of subjects enrolled for each cohort in this slide. 3 of 17 patients who received AT132 at the 3 x 10 to the power of 14 vector gram/kilogram dose have developed progressive liver dysfunction. 2 of these 3 patients, unfortunately, have died.

Notable features among these 3 patients -- excuse me, the preliminary findings indicate that immediate cause of death was sepsis. Notable features among these 3 patients include older age, heavier weight, evidence of a preexisting hepatobiliary disease.

Among the 6 patients who received the AT132 at 1 x 10 to the power of 14 vector gram per kilogram, including 4 with the previous history of hepatobiliary disease, none have developed serious adverse events despite being years out from treatment. We are working on a robust investigation and communications with the regulatory authorities to release this clinical hold as early as possible.

In line with this, we've been discussing about the upcoming development policy of AT132. At the time of the acquiring Audentes explanation meeting last December, we were -- mentioned that we're expecting the approval timing, and/or submission timing in the United States is going to be in mid of 2020 at the earliest, but we are planning to update the filing time lines once path forward is determined. For this type of actions and also, if there are any changes about the policy of the development, we are going to update you. The Astellas remains committed to AT132 and the XLMTM patient community to overcome this disease -- rare disease without treatment options.

Slide 17, 18 shows the COVID-19 impact on clinical development. In the -- we've communicated that the new clinical studies, our patients recruitment would be suspended due to COVID-19 pandemic in the countries or areas where a number of the infected still increased. That was what we mentioned last meeting in May. But we have started to reactivate the clinical studies in the countries such as U.S., EU and Japan, following the benefit risk assessment of each study. But delay in the time line has been cause in some of the studies.

We continue taking mitigation measures to maintain and enroll the patients while ensuring patient safety and reducing the burden to health care systems, including telemedicine visits, home health care visits for blood draws and other assessments, use of local laboratories and delivery of investigational product directly to patients' homes.

Slide 18 now shows the list of the projects likely to be impacted due to the COVID-19. These are about the major project-specific impacts. Enzalutamide is on the very top. This was submitted in Europe last July for M1 CSPC. However, it is delayed because the EMA's GCP inspection was postponed due to COVID-19. Regulatory decision originally expected in early FY 2020, but currently in late FY 2020 at the earliest.

For others, clinical trials are ongoing, some of the projects. But because of the expansion of COVID, there is the suspension or slowdown of the enrollments, and the time line is impacted. For example, the zolbetuximab, the third from the bottom, Phase III trial is ongoing, but the 3 to 6 months recovery period will be needed for screening and enrollment activities to return back to pre-COVID-19 levels.

The fezolinetant at the very bottom. The SKYLIGHT 4, the Phase III long-term administered studies, sample size increased, addressing the FDA feedback on the primary endpoint. And also take into consideration potential COVID-19 impact on end-of-study biopsy completion rates.

We continue to reassess all the clinical study time lines, depending the fluid the COVID-19 situation and timely updating them on ClinicalTrials.gov and/or at the future earnings as needed.

Slide 19 shows the key events expected in FY 2020. For this, COVID-19 impact is already taken into consideration. Enzalutamide M1 CSPC, the authority's decision, as has been described at the very top, is expected to be delayed, FY 2020 at the earliest.

With the Slide 20, I'd like to talk about the ASP8062 for Opioid Use Disorder or OUD. This was reported last month in a press release. NIH awards were granted to fund early clinical studies of ASP8062 GABA B PAM to investigate the potential novel therapeutic approach to address the opioid crisis. This is one of the initiatives by NIH to scientifically address the opioid crisis, which is the very big problem in the United States.

The most wanted pharmacological mechanisms by NIDA includes the GABA B PAM. Based on the existing data shows GABA B receptors involvement with reducing self-administration and drug-seeking behavior across several substances of abuse. This NIH grant application was based on the supportive preclinical data utilizing ASP8062 in various models of substance of abuse.

Currently, 2 Phase I studies are ongoing for this project. Astellas, for the most pending health issues, we are going to make use of our strength and technology. And we are pressing for the collaborative partnership in the areas of the greatest need. Now into the future as well, we've been aiming at the access improvement of the health care with the long-term commitment.

Now Slide 21 is Rx+ program. This is about the Fit-eNce, that is an exercises supporting service. Fitness and science, these 2 was gathered to come up with Fit-eNce. For Type 2 diabetic patients, exercise is well-known to be quite useful. However, so far, we have no exercise program evidenced scientifically its usefulness. Therefore, Astellas, together with Yokohama City and Yokohama City University, we've developed the exercise program executable and manageable by the private fitness club. And this was evidenced as its usefulness for Type 2 diabetic patients. And we plan to begin sales of this exercise program and exercise support service called the Fit-eNce as the first program of Rx program in the limited regions. This is now on the exercise menu, but the service to support the exercise execution. This is for the outpatients. And in the beforehand, the -- [ for the ] hospitals, confirmation process is taking place. And based upon that, the exercise control system and the exercise program itself is provided. This model is unprecedented.

So based upon the scientific research, as you see on the right bottom, this program reduced significantly HbA1c for the diabetic patients. However, appropriately continuing exercise is quite difficult. So this is not just the exercise program, but also the status of the exercise therapy is shared with the doctors and trainers so that the support can be given. With this exercise program can be conducted in appropriate manner, so this is the overall system as a service to be provided to continue the exercise, which is scientifically evidenced.

This is Page 23 now about capital allocation. So our conventional policy hasn't been changed at all. As it's been long said, the priority is investment of a strategic business growth. On the right top, on the slide, in a couple of years is -- with working on the M&A. But in accordance with the strategy, we are going to continue business development opportunities [ persuasion ].

On the middle of the slide, our dividend is going to be based upon the mid- and long-term growth, and therefore, it has increased continuously.

At the very end, you can find our share buybacks, that is not changed at all. On the write-down, you see we are going to expect the demand of the business investment, and we are always flexibly working on the share buybacks and maintaining the certain level of the cash. So if we have an excess of cash, we are going to be always flexible for the share buybacks. Shareholders' returns and capital efficiencies are always what we are pressing for.

Thank you.

[Unknown Executive]

[Interpreted] Now we are going to take your questions. After the receipt of your operation for a question, the operator will ask you your name and your affiliation. You're requested to wait for a moment. In the meantime, thank you for your understanding.

[Operator]

[Operator Instructions]

[Unknown Executive]

[Interpreted] Now the operator is checking, so please wait for a while. Now the operator is checking the names and the companies of those who would like to ask a question.

You can ask a question and do the operation while other questions are being asked and answered. But you need to interact with the operator, and you would not be able to hear what's going on in the meeting. In order to hear the entire Q&A session, please request for a question at this timing. Thank you.

We are going to start the Q&A session soon, so please wait for a moment.

[Operator]

[Interpreted] Thank you very much for waiting. The first question is from Mr. Yamaguchi from Citigroup. Mr. Yamaguchi, please.

[Hidemaru Yamaguchi, analyst]

[Interpreted] Yamaguchi from Citigroup. Can you hear me?

[Unknown Executive]

[Interpreted] Hello, I can hear you well.

[Hidemaru Yamaguchi, analyst]

[Interpreted] My first question is about Slide 11, your revised forecast by period. This was very easy to understand. Thank you for showing this. I have a first question. There's a lot of impact on the first quarter. Overall, in Q2, Q3 and Q4, OAB and other products might have been affected a lot on an individual basis. And are you assuming that there's going to be a gradual recovery? Or a tough situation is going to continue, and you're going to work hard with other main products? What's your view on this?

[Unknown Executive]

[Interpreted] Thank you for your question. In principle, for the product with a decrease in the first quarter, for the second quarter and beyond, we are going to approach our initial forecast. That's how we developed this forecast. Matsui, sitting next to me, may make a tougher comment, but we are assuming that there can be an overshoot.

[Hidemaru Yamaguchi, analyst]

[Interpreted] Understood. And also the inventory build. I think you mentioned the previous -- but the Prograf, yes, I understand that because of the nature, inventory build will take place. But for XTANDI and other such builders taking place, other companies not much mentioned about this inventory build. But you are saying that is because of Prograf, the product's nature or European market is the factor of this. What's the current status and the coming status of inventory build?

[Unknown Executive]

[Interpreted] Well, it's around JPY 8 billion. That's what we see. But basically, indispensable drug is considered to be necessary to be secured in its motivation. So Prograf and XTANDI in Europe, they are indispensable drugs that you need -- definitely need to always have an inventory. That's why this inventory building is taking place.

[Hidemaru Yamaguchi, analyst]

[Interpreted] R&D expenditures, AT132 biggest information was shared, that was understood. But -- and depending on the communication with FDA, 1 x 10 to the 14th vector genome per kilo does not have any problem, although there was some issue with 3 x 10 to the 14th vector genome per kilo. So you're going to discuss based on this with 1 x 10 to the 14th.

[Unknown Executive]

[Interpreted] Basically, yes. In the letter from FDA about clinical hold, in comparison to 3 x 10 to the 14th vector genome per kilo, FDA is saying that we should discuss the benefit risk for 1 x 10 to the 14th vector genome per kilo. So what are we explaining and what FDA is existing for are in line.

[Hidemaru Yamaguchi, analyst]

[Interpreted] 8060 (sic) [ 8062 ] opioid, OUD, this is last question from me. So from NIH, the grant was given for the development, but what about the speed of the development? You would like to accelerate probably the speed so that it can go in the hands of the patients as well as possible. Do you have any direction for that?

And also the targeted patient is going -- likely to be quite large. But in your project, what's your image for POC? Do you think this is a highly likely post being a promising product for you?

[Unknown Executive]

[Interpreted] Not only GABA B but PAM, this mode of action is a research for various projects. And out of those, we came up with some options likely to be realized products, and this is one of those focus area approach, is what we've been focusing on and emphasize on our organization. In that perspective, unfortunately, this 8062 is not really that focused approach. So the contribution of this product into our performance, rather than that perspective, this is a mode of action we've been long researching. And if this can be made use of, then we would like to cooperate as much as possible. That's the stance that currently we are thinking.

But this is outcome of our research. We've done so many of those, but this was approved by NIH world-leading researchers, and this is what we can be proud of.

[Operator]

[Interpreted] Next, Mr. Hashiguchi from Daiwa Securities, Mr. Hashiguchi, please.

[Kazuaki Hashiguchi, analyst]

[Interpreted] Hashiguchi speaking. My first question is about AT132 clinical studies put on clinical hold and the impact on the intangible assets. On Page 25, you are showing that this was reflected onto the revised forecast. So can I understand that there's going to be no impairment loss booking? Or because of the degree of the delay or the action to be taken, there can be a possibility of the booking of the impairment loss in to the future.

[Unknown Executive]

[Interpreted] Thank you for your question. Because of the same timing of the announcement, they're maybe misleading, so I'd like to explain clearly. The change in the company combination accounting -- sorry for a long answer, but please bear with me.

When we acquire a company, purchase price allocation is made. We would like to look at the value of the product we acquired. Individual IP and the product and technology, by allocating this individually, in a certain period of time, we try to amortize. So this is a financially sound method we try to use. By keeping certain numbers on BS without any impairment loss, we try to minimize the goodwill as much as possible.

Regarding the acquisition of Audentes, we judged the value. One bucket is on Audentes as superior gene therapy company. It has a network and with academia and startups. We thought that there would be a lot of collaboration one after another, and the new value is going to be created. That's the synergy we were expecting.

Initially, when we announced in May, the purchase price allocation announced in May, as a technology asset, not as goodwill, was identified. We want to amortize this over 15 years. We're reporting based on this assumption to you, but with accountants and our finance and tax divisions discussed.

At the time of the acquisition, the value from the future partnership identifying the technology asset could not be accepted according to the discussions. So from the technology asset, this was changed to goodwill. That's why in the accounting treatment of business combination with Audentes, it has been revised. So it is not related at all with the clinical hold for AT132.

For AT132, this is a program approaching the filings. So in-process R&D is a classification for this item. With the clinical hold, certified public accountants are saying that this could be booked as impairment. Whilst there can be a change in the filing timing, but the value of the program has not been undermined. That's what we are confident about. So we didn't decide -- we decided not to implement the booking of the impairment loss in R&D program. What could happen into the future, we cannot predict fully. But we cannot guarantee there's going to be no impairment loss. But as Astellas, as a company in its position, as before, we try to deliver AT132 to patients. We try to generate the necessary value. That's the current assumptions we have.

That's all from me.

[Kazuaki Hashiguchi, analyst]

[Interpreted] Understood quite well. Next question is zolbetuximab Phase III study. The progress is delayed. Looking at the Page 18, it seems to me that the delay is larger compared to others. That's my impression. If that is so, what are the factors that make this big a delay? This is not only the COVID-19, but the gastric cancer, the competition is quite fierce. So there is the competition about the enrollment of the patients. So probably, you might have some problem about the recruitment. What do you think?

[Unknown Executive]

[Interpreted] Kitagawa-san is going to explain about this.

[Mike Kitagawa, executive]

[Interpreted] Kitagawa speaking. The difference from others, zolbetuximab, that is IV. So the hospital visit is definitely necessary. That's one difference, but there is no delay due to the competition with other companies.

From May, the enrollment is suspended. So that is the big factor here. Therefore, the competition with other companies or the impact of other companies' studies are not really the factors of this delay.

[Operator]

[Interpreted] Next, Mr. Sakai from Crédit Suisse Securities, Mr. Sakai, please.

[Fumiyoshi Sakai, analyst]

[Interpreted] Sakai speaking. First of all, I'd like to ask Okamura-san regarding your revised forecast. Why did you revise? The impact of COVID-19 is difficult to predict. So at the end of the first quarter, you wanted to revise your forecast, if necessary. And that's what you mentioned in May, and accordingly, you made the revised forecast. Otherwise, you may not have made a revision. So the operating profit downward revision is 2% of the total. You can work hard in your business activities and management to cover this. So what's your overall policy to decide to make a revised forecast? That's my first question.

[Naoki Okamura, executive]

[Interpreted] Sakai-san, thank you for your question. When we announced our results in May, 2020 forecast was explained. I think I said this before. With various divisions, we have annual budget meetings to discuss. Without any positive or negative factors, we disclosed our forecast from the company, sharing with you -- those who implement the budget, the numbers agreed with them are being shown to you.

In early March, we spent a week to discuss the details. At that time, the impact of COVID-19 was very difficult to predict. In that case, if we make a first -- to factor in the impact of COVID-19, revenue will be down, or we need a longer time line, but we need cost. So globally, it should be consistent. And based on such assumptions, we should have a scenario planning. And this time, we're announcing these results, and we captured the situation of COVID-19 globally to look at the numbers. That was our assumption at the beginning.

As Sakai-san is saying, regarding this range, or the level, it's not relative to the criteria for the announcement. If we work hard, we may be able to cover this variance. But with various divisions, we discuss these numbers, which are being shared with you, if it's going to be JPY 0.1 billion or JPY 0.2 billion, it's easy to cover the shortage.

No, that's not really the case. FY 2020, as you may still remember, loss of exclusivity and termination on sales and distribution, before, it was half in FY '19, but it's going to be the impact on a full year basis for FY '20. We have to cover this with new products, and we have the impact of COVID-19.

So there's 3 stages here. So impact in each stage must be identified. This is the impact of COVID-19. This is what we have to cover with sales activities. And this is what we have to reduce our cost, and in the end, core operating profit to decline by JPY 6 billion. It's not a rough calculation, our 2% figure did not come first. So we are very confident in sharing this number because this is based on the very accurate analysis.

[Fumiyoshi Sakai, analyst]

[Interpreted] So against the second quarter and afterwards situation, depending on those, you might be able to achieve the initial focus. That's what you're saying.

[Naoki Okamura, executive]

[Interpreted] Well, the negative factors already took place cannot be reversed. The negative factors in the first quarter has to be admitted and accepted. But how we can bring back to the original situation or the operating system, we have forecasted initially. We can realize it in a much earlier phase, or we can push that forward. For those, we're already thinking about the factors. And if they make a success, then in some situation, we might be able to come up with the number that is exceeding the initial plan.

[Fumiyoshi Sakai, analyst]

[Interpreted] The next one is fezolinetant. I felt a bit of concerned about your last comment. This highlights 4 study, impacting onto biopsy, it seems that you mentioned. Is this understanding right? That is about the biopsy completion rate that you are talking about, and this Phase III study readout is expected to be next year. So this situation also has impact on to that schedule so well. And also enzalutamide inspection, which site are you referring to when you say this EMA inspection, GCP inspection?

[Unknown Executive]

[Interpreted] Kitagawa-san is going to answer this.

[Mike Kitagawa, executive]

[Interpreted] This is a GCP inspection. So this is not the factory or the plant. No, this is about the study data. This is actually a study related GCP inspection.

[Fumiyoshi Sakai, analyst]

[Interpreted] Oh, I understand. And in fezolinetant, the number of the subject has increased.

[Unknown Executive]

[Interpreted] Because of the situation of the previous drug, for Fezolinetant, we definitely have to secure the safety to get the approval. So FDA came up with a comment. The basic of their comment is to look at the status of end material. And also, before that, the current evidence is not sufficient. That's why we have to increase the number of the subjects about 600. And with this for FY 2020, JPY 5 billion is added due to that. But on the other hand, the fezolinetant enrollment after the suspension is better than we've expected, and also the market expectation to this drug or physicians' expectation are on this drug is a quite high, I believe, which is quite a rare case.

Of course, time line, we don't know what's going to happen to COVID now and toward the future, so I cannot tell you the details, but we would like to follow the current available time line as much as possible.

And Kitagawa-san might give you some additional comments.

[Mike Kitagawa, executive]

[Interpreted] Thank you. Just like Okamura-san mentioned, HRT, hormone replacement therapy, became -- for that FDA come up with the guidance of the development, and they come up with the very specific guidance. So the primary endpoints have to include the safety. And there, because of that situation, we had to increase the number of the subject. But after reopening the study, the enrollment is quite smooth, more than we have expected. So the delay is a minimum, and we believe that our development plan is going to be in that way. So the endometriosis impact is observed for all the studies, yes, for the SKYLIGHT, yes, endometriosis, situation is going to be observed. Thank you very much.

[Operator]

[Interpreted] Next, Mitsubishi UFJ Morgan Stanley Securities, Mr. Wakao. Mr. Wakao, please.

[Seiji Wakao, analyst]

[Interpreted] Wakao from Mitsubishi UFJ. I have 2 questions. First, the impact of COVID-19. As you have explained, the impact of COVID-19 is already being felt. If there's going to be a downside, if there is going to be a bigger impact, what is going to be such a scenario? If there's going to be a downside or rather, there can be more elements for an upside instead of a downside. If there's going to be upside for individual products, what products would be affected positively with an upside?

[Unknown Executive]

[Interpreted] Wakao-san, thank you very much for your question. The impact is already over. I cannot say so, but we cannot reverse what happened negatively in the first quarter. In the second quarter and beyond, such a negative situation, we don't think it's going to continue for a long time because in our scenario planning, we are adopting right now the scenario that there can be several waves of COVID infections, but it's not something to bring about a breakdown of the health care system.

In Japan, U.S. or in other countries, if it's going to lead to a breakdown of the medical system or the collapse of the medical system, if that scenario is going to be realized, it could happen in the future quarters.

Regarding the products, Matsui is going to explain.

[Yukio Matsui, executive]

[Interpreted] Matsui speaking. If I may add a little on the potential risk, as Okamura explained, we're not expecting a collapse of the health care system. In principle, live with COVID is going to be realized in society at large. That's the assumption for budget formulation. If there's going to be a lockdown affecting the movement of the patients to that degree, then Lexiscan, OAB products might be affected a little.

On the other hand, as we have been explaining from before, XTANDI and PADCEV, XOSPATA, new products related to oncology are performing very strongly right now, not just the feedback and evaluations, but if you look at the actual trend, in the revised forecast, we talked about an upward revision and upside. We are seeing such a good performance for them. Under any circumstances, there can be a possibility of a further increase or upside.

In particular, regarding PADCEV. Additionally, we would have some more data by the end of the year. And depending on the positioning of other company's products, platinum and PD-1, PD-L1 and then a product could be used right now. If other products can be used earlier, then a product can be used by a larger number of patients. So our main products, we hope can target an upside, and there is such a possibility in our view. Thank you.

[Seiji Wakao, analyst]

[Interpreted] I have additional one question. [indiscernible] says the potential is likely to be quite large, but there's Seattle Genetics. They are the -- those expectation looking at the Seattle Genetics and those having -- looking at the Astellas, expectation on to PADCEV is different, I believe. The -- looking at the Seattle Genetics has a higher expectation on to PADCEV. If that is so, what's the difference between Seattle Genetics and Astellas?

And for the adjuvant OAB, not so invasive cancer, adjuvant and non-adjuvant, I think that's the factor difference. But what's the expectation on to it? The number of the cycle is larger, so fragrances are higher. And this is [ -- all of this ], so the number of the patient is increased, but the muscular invasive, if that is the case, I think you can narrow down the target. I do not know the potential at so -- at all. So would you please explain that?

So [ 50 billion to 100 billion ], is that your number? I don't quite remember it, but the PADCEV, what's your expectation on to this, including the number? Would you please explain that?

[Naoki Okamura, executive]

[Interpreted] Thank you for your question. Okamura speaking. So the U.S. equity research is looking at the Seattle Genetics, come up with a forecast for the PADCEV, and it's not necessarily strong. There are some smaller than us. So it seems to me that the more attention is collected, if you look at in a bullish way. But I don't think we are extremely conservative.

The expansion of the indication or line extension, if that is clear or more visual, then we can give you the detailed number. However, as you know, the number of the patient increases. The frequency of that administration increases. So all those 2 factors tend to increase. I think, and taken that into consideration, then 6 -- more than $6 billion sales might be expected. So it is -- number wise, it is expected that we can exceed that number. But as a company, can we clearly say that we can achieve this number? I think it's too much.

[Unknown Executive]

[Interpreted] There are other people who are still waiting, but unfortunately, time is up. So we'd like to close this meeting today. Thank you very much indeed for joining this call.

Thank you very much, everyone.

[Operator]

Thank you for your taking time, and that concludes today's conference call. You may now disconnect your lines.

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