Astellas Pharma Inc

TSE:4503

Earnings Call Analysis

Revenue up 26%; Strong Performance from XTANDI and Strategic Brands

Astellas Pharma's Q1 FY 2024 results show revenue increased by 26% year-on-year to JPY 473.1 billion, driven by strong performance in the US. XTANDI sales rose by 29%, contributing significantly. Strategic brands like PADCEV and IZERVAY saw exponential growth, increasing overall strategic brand sales to JPY 75 billion, a threefold increase. Core operating profit also increased by 20.5%, reaching JPY 88.3 billion. Despite the foreign exchange impacts, both revenue and profit grew substantially. The company remains focused on efficient cost management and ROI-driven investments, expecting continued growth throughout the fiscal year.

A Strong Start to FY 2024

Astellas Pharma has begun FY 2024 with a solid performance, achieving a 26% year-on-year increase in revenue, reaching JPY 473.1 billion. This growth was driven primarily by XTANDI, which saw global sales increase by 29% to JPY 224.2 billion. This strong performance was particularly evident in the United States, where market expansion and the additional indication for M0 CSPC resulted in higher-than-expected sales. Revenue contributions from other strategic brands were equally impressive, with PADCEV, IZERVAY, and VEOZAH achieving significant growth.

XTANDI’s Remarkable Growth

XTANDI has been a standout performer, boasting a year-on-year sales increase of JPY 50.2 billion. Notably, even when adjusted for foreign exchange impacts, XTANDI reported a growth of around 16%. The penetration of the additional M0 CSPC indication, which was approved in November of the previous fiscal year, has been a significant contributor to this surge. XTANDI's performance highlights its robust market position and the successful integration of new clinical data.

Strategic Brands Gaining Momentum

Strategic brands like PADCEV, IZERVAY, and VEOZAH also posted robust results, with their combined sales tripling year-on-year to JPY 75 billion. PADCEV led the charge with a 152% increase in sales, reaching JPY 38.4 billion. IZERVAY also exceeded expectations, with first-quarter sales of JPY 12.7 billion following the J-code implementation. VEOZAH achieved steady growth, aligning with its initial forecast of JPY 6.6 billion in sales.

Operational Efficiency and Profit Margins

Astellas Pharma focused on strategic investments in SG&A and R&D to support future growth, implementing time-cost management with a focus on ROI. The company reported a core operating profit increase of 20.5% year-on-year to JPY 88.3 billion. The effective cost management contributed to a decrease in the SG&A to revenue ratio by 2.3 percentage points compared to the previous year, reflecting optimized expenditures despite increased promotional activities for its strategic brands.

Future Growth and Market Penetration

Looking ahead, Astellas Pharma is optimistic about further penetrating the U.S. market with PADCEV and expanding its presence in ex-U.S. regions. The company anticipates further approvals in established markets, including Europe and China, which could significantly augment sales. With strategic brands expected to collectively generate around JPY 300 billion in FY 2024 and JPY 500 billion in the following year, Astellas Pharma is well-positioned for sustained growth.

Challenges and Mitigations

While positive trends were noted across its product line, the company is mindful of potential challenges, such as the impact of Medicare Part D on XTANDI sales from the fourth quarter onward. The anticipated entry of additional generics in the market also presents a competitive threat, particularly for established brands like XTANDI and PADCEV. Astellas Pharma’s proactive measures in price management and strategic investment in high ROI initiatives are expected to counter these challenges effectively.

Clinical Advancements and Regulatory Milestones

On the regulatory front, Astellas Pharma has achieved several key milestones, including the approval of XTANDI for M1 CSPC in China and the positive opinion from CHMP for PADCEV's additional indication. The company is also addressing regulatory queries for IZERVAY in Europe, aiming for an approval decision within the second half of the year. These advancements underscore Astellas Pharma’s commitment to expanding its therapeutic footprint and enhancing shareholder value.

Market Feedback and Strategic Adjustments

Physician and patient feedback for products like VEOZAH has been positive, particularly regarding its quick efficacy and improved insurance coverage. This feedback has been crucial for fine-tuning market strategies and ensuring continued growth. As part of its strategic adjustments, Astellas Pharma is optimizing its direct-to-consumer efforts to focus on high-ROI initiatives while reducing spending on less effective campaigns.

Investment in Innovation

Astellas Pharma continues to invest heavily in R&D, with a year-on-year increase of 34.4% in expenses. This commitment to innovation aims to strengthen the company's primary focus areas and develop a robust pipeline for sustainable growth. Ongoing initiatives in clinical trials and new product launches, such as VYLOY's successful introduction in Japan, highlight the company’s dynamic approach to expanding its market offerings.

Conclusion and Investor Outlook

Overall, Astellas Pharma has laid a strong foundation for FY 2024 with impressive initial results. The company’s strategic focus on high-growth brands, careful cost management, and investment in future product development sets a positive outlook for investors. Challenges remain, but the company's proactive strategies and robust market position suggest a promising trajectory for continued growth and value creation.

Earnings Call Transcript 2025-Q1

[Hiromitsu "Hiro" Ikeda, executive]

Everyone, thank you so much for your participation in this financial results ended June 30 financial call. I'm going to observe as the moderator here for today. I'm Ikeda from Chief Communications and IR operator. Today, we are going to give you the presentation first that is followed by a Q&A session. The presentation material is on the website. Including Q&A, Japanese-English simultaneous translation is available. For the translation, the accuracy of that is not going to be guaranteed by Astellas. The language can be selected from our webinar screen. If you select Original, then you can hear the original voice without the interpretation service.

This material or presentation by representatives for the company and answers and the statement 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 management and are subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information of pharmaceuticals, including compounds under development. But this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these [ operations ] from more approved uses in any fashion nor provide medical advice of any kind. Participants, Atsushi Kitamura, CFO; CMO, Tadaaki Taniguchi; CCO, Chief Commercial Officer, Claus Zieler. These 3 are participants from our end. Now I would like to start the presentation. Kitamura-san, please start.

[Atsushi Kitamura, executive]

Hello, everyone. I'm Atsushi Kitamura from Astellas Pharma Inc. Thank you very much for joining our FY 2024 first quarter financial results announcement meeting out of a very busy schedule today. This is a cautionary statement regarding forward-looking information. As this was explained by Ikeda earlier, I'm not going to read this page. Page 3 is the agenda for today. Starting from the next page, I will explain these topics in this order. On Page 4, I will give you an overview of FY 2024 first quarter financial results.

First, overall, we have made a solid start towards achieving the FY 2024 initial forecast. In the first quarter, revenue increased by 26% year-on-year. XTANDI contributed to overall revenue growth, driven especially by the United States. Sales of strategic brands as a whole expanded to JPY 75 billion in total, increasing 3x year-on-year with a robust growth of about additional JPY 50 billion. SG&A and R&D expenses were invested as planned for future growth. In parallel, we executed time-cost management with a focus on ROI. Core operating profit increased year-on-year with significant contributions from the expansion of XTANDI and strategic brands.

On Page 5, I will explain FY 2024 first quarter financial results. Revenue reached JPY 473.1 billion, up by 26.2% year-on-year. Core operating profit rose to JPY 88.3 billion, up by 20.5% year-on-year. Even excluding ForEx impact, revenue and profit increased. The bottom half of this page shows a full basis results. In the right bottom of the table, we included other expenses booked in the first quarter. We booked JPY 5.5 billion because of fair value increase of contingent consideration for zolbetuximab mainly due to ForEx impact. As a result, operating profit was JPY 50.7 billion, up by 10.6% year-on-year. Profit increased to JPY 37.6 billion, up by 13.5% year-on-year.

On Page 6, I will explain FY 2024 first quarter results of XTANDI and strategic brands. First, about XTANDI. Global sales increased to JPY 224.2 billion, up by JPY 50.2 billion or 29% year-on-year. Even excluding ForEx impact, XTANDI achieved about 16% growth. Global sales off to a strong start driven by higher-than-expected U.S. performance, in particular.

In the United States, which has contributed the most to the overall sales expansion, in addition to the growth of the market as a whole, the penetration of the additional indication of M0 CSPC approved in November last year based on EMBARK study and its ripple effect on other indications have made great contributions. So demand exceeded expectations. In ex-U.S. regions, demand was as expected or exceeded expectations. Sales of strategic brands supporting the future growth, namely PADCEV, IZERVAY, VEOZAH, VYLOY and XOSPATA expanded to JPY 75 billion in total, increasing 3x year-on-year with a robust growth of additional JPY 50 billion approximately. PADCEV global sales increased to JPY 38.4 billion, up by JPY 23.2 billion, expanding substantially with a growth of 152%. As for IZERVAY, first quarter sales were JPY 12.7 billion, exceeding expectations. Demand growth was stronger than expected, following [ J-code ] in April. In particular, increased confidence in the safety profile has also contributed to sales expansion. .

Global sales of VEOZAH reached JPY 6.6 billion, making a steady growth in line with the initial forecast. Overall initiatives have progressed as planned such as payer coverage and DTC efforts. PADCEV, IZERVAY and VEOZAH will be explained later in detail. VYLOY was launched successfully in Japan in June. In just 2 weeks after its launch, we accessed vast majority of target physicians. Information provision to physicians is making steady progress. There is a solid progress in available accounts for VYLOY, including 18.2 testing penetration. We will focus on the penetration also in the second quarter and beyond. In the United States, established markets, international markets and China, we are anticipating approval sequentially from the second quarter onwards. We are expecting sales contribution after approval.

Regarding XOSPATA, global sales increased to JPY 17.3 billion, up by 33% year-on-year. Sales expanded in all regions. Continued steady growth is expected from the second quarter onwards as well. On Page 7, I will explain business update for PADCEV and VEOZAH. PADCEV achieved robust sales growth in all regions, driven by the United States and established markets in particular. Sales grew by JPY 8.6 billion, just in 3 months from the previous quarter. Quarterly growth rate is also making a solid progress. In the United States, sales increased by about $100 million year-on-year on a local currency basis, growing at 128%. Thanks to the penetration of EV-302 study data with extremely favorable results presented at ESMO last year, first line share expanded and contributed to sales growth. New patient share in the first-line settings is over 50%. We believe it's establishing its position as a standard of care.

In ex-U.S. regions, demand grew strongly in the second month settings and beyond. Especially, Established Markets had a strong growth rate of 178% on a local currency basis. Outside of the United States, launched countries increased to 38, with reimbursement initiated in 17 countries. Regarding the additional first-line indication in Europe, CHMP adopted the positive opinion in July. And approval is expected by October. Also in Japan, we are anticipating approval within the third quarter. We are expecting contribution to sales after the respective approval. In addition, in China, approval of the indication in the second line settings and beyond is anticipated by the end of the second quarter. If approved, it's going to be a new launch in China.

For PADCEV, as countries with first-line approval, our new launched countries are increasing outside of the United States. In addition to the growth in the United States, we're expecting further sales expansion. With regards to VEOZAH, global sales grew steadily, mainly in the United States. In the 3 months from the previous quarter, global sales increased by JPY 2.9 billion, with a linear growth in line with the initial forecast. In the United States, payer coverage expanded as expected from 50% as of the end of March to over 60% as of the end of June. HCPs' perception of VEOZAH market access is gradually improving, thanks to the promotion of education activities with direct information provision by field sales force and digital channels.

As for DTC efforts, as was shown at the beginning of the year, initiatives with low ROI are being reduced to stock so that we can invest with a focus on high ROI initiatives. We are trying to optimize DTC at any time. We believe we can aim to achieve profit early by continuing to promote initiatives with a focus on ROI. Partly due to the effectiveness of our DTC efforts, we are observing enhanced patient activation of slow. According to market research results, we were able to confirm that the proportion of women who reported high intent to ask HCPs about VEOZAH has risen. Outside the United States, launched countries increased to 13, and we are expecting contribution to sales growth going forward. For VEOZAH, we are anticipating continued premium growth from the second quarter onwards by promoting payer coverage on DTC steadily, mainly in the United States.

On Page 8, I will explain business update for IZERVAY in the United States. IZERVAY performance exceeded expectations, with sales expansion particularly driven by the J-code and safety profile. Sales increased to $82 million, up by $35 million or 73% in just 3 months from the previous quarter. It's growing at a speed higher than expected. Demand following effective [ J-code ] in April exceeded expectations, igniting multiple new accounts. As of the end of June, IZERVAY is available in over 1,200 retina accounts. Market share in the previous quarter was about 25%. But based on market research, market share is estimated to have expanded to about 35% in the first quarter between April and June. Given the fact that the competitor product was launched about 6 months earlier, we think that the number of new patients is increasing steadily.

As for ASRS, the American Society of Retina Specialists, it's the world's largest epidemic society organization for retina specialists. This annual meeting was held last month in Stockholm. The society surveyed more than 1,000 specialists on their selection of treatment. The survey results that were made public sold a higher utilization of IZERVAY only over the competitor product only in clinical practice. Achieving these results in a third-party survey is further deepening our confidence in the competitiveness of IZERVAY. By the end of June, over 85,000 vials have been shipped since launch. Furthermore, in July, the number of vials increased steadily and surpassed the milestone of 100,000 vials last week. Post-marketing safety profile remains consistent with clinical trial results. No new safety signals were observed. This offers higher confidence to prescribers to select IZERVAY according to market research results.

As for future expectations, the first quarter made the good progress, raising prospects for outperforming the initial forecast. On the other hand, we need to recognize that this is just the progress in the 3 months. We will consider reviewing our forecast based on the future progress and the latest outlook. We are expecting label update by the third quarter. Based on the 2-year clinical study data, which includes 24 months efficacy, safety and every other month dosing data. IZERVAY has continued to make good progress since launch in the United States in September last year. We're expecting further sales expansion as a growth driver going forward as well.

Page 9, I will explain the cost items. As shown in the top row of the table, the cost of sales ratio to revenue is 19.3%. This is 0.9 percentage points increase year-on-year because of one-off factors, including provision for U.S. mirabegron imagery disposal due to generic entry and the royalty payment adjustment. The SG&A expenses, excluding U.S. extend core promotion fee, increased 17.5% year-on-year. Excluding the ForEx impact, it increased to 6.6% or about JPY 8 billion. This is mainly due to a year-on-year increase of about JPY 12 billion in promotional expenses for strategic brands, mainly IZERVAY and VEOZAH. The acquisition of Iveric Bio are now being completed at the year-on-year time point, and therefore, the costs related to IZERVAY had not been booked, which leads to this increase.

On the other hand, mature products related expenses such as mirabegron decreased by about JPY 4 billion year-on-year. And the global organizational restructuring in 2023 resulted in a decrease of SG&A expenses about JPY 2 billion year-on-year. While investing as planned for future growth, we also revisited investments with a focus on ROI and managed expenses in a timely manner. As a result, during part of the shift to the growth phase, the SG&A to revenue ratio decreased by 2.3 percentage points year-on-year. R&D expenses increased 34.4% year-on-year. Excluding the ForEx impact, it increased by 23.6% or about JPY 15 billion. Also mainly due to investments to strengthen the primary focus and R&D functions, it increased about JPY 7 billion year-on-year. The booking of onetime code of open cost payments is another factor of this increase. This impact has already been factored in our initial forecast and our R&D expenses have been as expected.

I'll now explain the new initiatives for sustainable growth. The progress of key expected events in FY 2024 with respect to XTANDI and the strategic brands are described here on Page 11. The update since the last financial results announcement is indicated in blue. XTANDI was approved in China in June for the additional indication of M1 CSPC metastatic castration sensitive prostate cancer based on the China ARCHES study. As for PADCEV, for the additional indication of first-line locally advanced or metastatic urothelial carcinoma, the CHMP adapted the positive opinion based on the EV-302 study that is in July. [ Milo ] will be explained on the next slide.

There has been no major update on IZERVAY in the past 3 months, and the regulatory review of the U.S. level updates and the application in EU is still ongoing. For the EU regulatory submission, we received our J-180 list of questions from the CHMP in the first quarter following the standard time line. We will continue to communicate with the authorities for the approval and will update you with the results when we receive the CHMP's opinion.

Page 12. I will explain the latest status of VYLOY. We are actively pursuing life cycle management initiatives to maximize the value of VYLOY as a first-in-class anticlotting 18.2 antibody. First, we are progressing toward the global launch of VYLOY for geographic expansion. In Japan, VYLOY was launched on June 12. In the U.S., we submitted the application after receiving the complete response letter from the FDA in January. The submission was acknowledged on May 30, and the PDUFA date was set at November 9.

Regarding EU, the positive CHMP opinion was adapted on July 26, and the approval is expected by October. In China, the review of the dose is still ongoing and the regulatory decision is anticipated in the fourth quarter. Left bottom of the slide, the Phase II registration study for the pancreatic adenocarcinoma is ongoing. The patient enrollment was completed in March earlier than expected, and the top line result is anticipated in the fourth quarter.

As shown in the lower right-hand corner of the slide, we have also decided to conduct a new Phase III trial in combination with the CPI or immune checkpoint inhibitors and chemotherapy. In this study for the first-line treatment of gastric cancer in patients with a HER2-negative clouding 18.2 positive [ CPS01 ] or higher, the efficacy and safety of zolbetuximab or placebo in combination with immune checkpoint inhibitors and chemotherapy will be evaluated. The study is scheduled to start in the first half of calendar year 2025. VYLOY is currently approved for the combination with chemotherapy in cloud in 18.2 positive gastric cancer. In addition to this, we expect to make further contributions to the treatment of gastric cancer with high unmet medical needs by offering a combination with an immune checkpoint inhibitor as a new treatment option for patients with a high CPS.

Page 13. Next is progress in focus area approach. Projects in the clinical trial stage with updates since the last financial announcement are shown in blue. First, ASP1570 immuno-oncology is the primary focus. An application of the poster presentation in September was accepted by ESMO for the post representation with early data, including part of the ongoing Phase I study. ASP2138 was granted with orphan drug designation for pancreatic cancer from the FDA in June. For ASP1002, we published the information that this is a bispecific antibody targeting cloud in 4 and [ CD137 ]. Cloud info is known to be highly expressed in various types of cancer. CD137 is expressed on the surface of activated T cells. We hypothesized that ASP1002 will enhance the antitumor response of T cells by binding CD137 positive T cells to cloud info positive cancer cells.

The first patient dose of ASP1012 was achieved in May. ASP3082 is a targeted protein degradation based on that update and a monotherapy dose escalation cohort of the Phase I study, a dose expansion cohort was started. A presentation on the initial data from the Phase I study. It was accepted for oral presentation at ESMO. We are considering holding a brief session on the presented data after the conference. We will inform you of the details as soon as they are finalized. ASP5502, our primary focused candidate for immunohomeostatis, has entered a clinical trial phase -- clinical development phase. ASP5502 is a low molecule weight sting inhibitor that is expected to improve the symptoms of chronic autoimmune diseases by modulating the immune response pathway involving sting. We plan to conduct clinical trials first for primary [ Sjogren's ] syndrome.

The last slide on Page 14 summarizes our progress in the first quarter of FY '24. As shown on the left side of the slide, our strategic brands grew strongly, notably driven by PADCEV and IZERVAY. We also achieved several regulatory milestones for PADCEV and VYLOY. The focus area approach program also progressed, with early clinical data from ASP3082 and ASP157 all accepted for presentation at ESMO. We will continue to accumulate data to catch POCs and build a pipeline that will allow us for sustainable growth. As shown in the figure on the right, we expect total sales of strategic brands to grow to approximately JPY 300 billion in FY '24 and JPY 500 billion in FY '25. The first quarter, total sales increased by about JPY 50 billion year-on-year to JPY 75 billion, and we are making steady progress while achieving this goal. Overall, the first quarter was a quarter in which strategic brands moved into a growth phase and the focus area program made progress toward the judgment of POC. We are off to a solid start toward achieving our full year focus set at the beginning of the fiscal year. We will continue to make steady progress in the second quarter and beyond with a focus on achieving our goals. That is all from me. Thank you very much for your attention.

[Hiromitsu "Hiro" Ikeda, executive]

That's all for our presentation. We are going to entertain your questions. [Operator Instructions] So anyone with questions? Mr. Yamaguchi from Citigroup Securities.

[Hidemaru Yamaguchi, analyst]

Yamaguchi from Citigroup. Can you hear me?

[Hiromitsu "Hiro" Ikeda, executive]

Yes, we can hear you.

[Hidemaru Yamaguchi, analyst]

I have 3 questions. First, the results. The revenue in the first quarter, XTANDI, IZERVAY, as of now, exceeded the forecast. Regarding these 2 products, there can be an upside exceeding the expectations. Is my understanding correct for these products?

[Hiromitsu "Hiro" Ikeda, executive]

Yamaguchi-san, thank you very much. Kitamura would like to respond.

[Atsushi Kitamura, executive]

First of all, if you look at the results of the first quarter, XTANDI and IZERVAY progressed very strongly higher than expected. Yes, that's true. And going forward, listening to your presentation, there's going to be no element for all the sales to deploy, but IRA may affect XTANDI. Regarding XTANDI, Medicare Part D could have an impact from the fourth quarter. We are expecting some decline according to original assumption, that is already factored into our plan. IZERVAY would not have any factors for decline, right? It's growing very strongly right now. So how far it can go, in the second quarter and beyond, we'd like to examine the details so that we can report to you.

[Hidemaru Yamaguchi, analyst]

Understood. My second question is about IZERVAY. I understand it may be difficult for you to comment, but this is a great opportunity. So in Europe, day 180 list of questions was sent to you. After you respond, then there's going to be the remaining 30 days to be addressed. But on your side, whether you have submitted your questions or responses or not? So it's just the timing to wait for the response to the European authorities. What's the current situation for the potential nuance?

[Unknown Executive]

Regarding the IZERVAY approval in Europe, of course, we can share some, and there is something we cannot share, but CMO can comment.

[Tadaaki Taniguchi, executive]

So I'd like to talk about the growing status of our submission in Europe. Based on the standard time line in the first quarter from CHMP, we received a list of day 180 questions. Currently, the company, our team is addressing this towards an early approval, we are making utmost efforts towards that goal. Right now, there is no change from before. In Europe, the final decision would be in the second half of this year. So we will do our best. We are doing our best to promote development. So later this year, okay. It may be difficult for you to comment whether you have submitted your responses or not. Today, we'd like to refrain from commenting on that today.

[Hidemaru Yamaguchi, analyst]

Thank you very much. That's all for me.

[Hiromitsu "Hiro" Ikeda, executive]

Thank you very much. Next, Mr. Wakao from JPMorgan Securities, please. Mr. Wakao, could you unmute yourself?

[Seiji Wakao, analyst]

Wakao speaking. I also would like to ask you questions about IZERVAY. It's doing very well on a $400 million or more on a full year basis. So it can be great according to my impression. Feedback from physicians was explained, but I'd like to know more details. The key is that there is no new safety signals. Confidence has been enhanced, resulting in the selection of IZERVAY, not SYFOVRE. No new safety signals lingual served, and they are selecting IZERVAY because SYFOVRE had issues initially. So there is a negative image, but for IZERVAY, there's almost no issue or problem. So that is leading to their confidence. Is my understanding correct? I'd like to know the meaning here more deeply.

[Atsushi Kitamura, executive]

Thank you for the question. That is about the safety profile of IZERVAY, I believe. I'm going to make an answer for that. And if it is a necessary, Claus and Taniguchi are going to follow up. First of all, towards the end of June, 85,000 vials, at the end of July, 100,000 vials that we've already achieved for the shipment. New information about the safety profile, that is now taking place, retina inflammation, for example. Well, there is a one-off label usage of the drug that's we've recognized, but that is the only one. So there was no new safety related information came up. So the data we gained from the clinical trial is also possible to be clearly applied to the real world as well according to the kind of situation. And also the specialists also recognize the benefit of this drug. That's why they make the -- such a favorable comment of this product in the Society Congress. Is there any supplement additional comment, Claus?

[Claus Zieler, executive]

Yes. Can you hear me?

[Seiji Wakao, analyst]

Yes.

[Claus Zieler, executive]

Yes. Thank you, [indiscernible], and thank you for your question. There are really 2 factors driving IZERVAY growth. One, as you're aware, we got the J code, the permanent J code in April. And we clearly see a jump as a result of that essentially that reimbursement modality coming into place. But the other factor is exactly as you and Atsushi said, it's the confidence in the medication based on the volume that has now been used in the market. So with 100,000 vials shipped as of the end of July and a consistent safety profile with label, the confidence of the retina specialist community is quite strong. And we see that in the survey results that Atsushi mentioned.

But we -- I also see that anecdotally when I talk to doctors. So there's a is a very clear signal from the retina community saying, you have had no additional safety signals. Your volume is now at a level where we think this is a relevant data point that we take into consideration when we make our choice of drug.

[Seiji Wakao, analyst]

Compared to SYFOVRE, the confidence or trust of this drug is enhanced. Is that what you mean? Because there are only 2 drugs available for this class. You are talking about IZERVAY -- are you are comparing IZERVAY with SYFOVRE when you talk about the increase of the trust?

[Claus Zieler, executive]

To talk about my competitors. So that -- I'll leave that to [ Palace ] to do that for them. I can only tell you that when we ask doctors, of course, doctors compare. And we have several data points. We have data points from chart reviews. We have data points from the survey that Atsushi mentioned, which indicate to us that when we asked the question in new patients, which drug do you choose, when we ask doctors that, we believe the data points show that we have a majority of patients being put on IZERVAY. So I think that's a very strong statement of confidence in our product.

[Seiji Wakao, analyst]

Okay. Target share is already close to the 40% of the target as of the end of this fiscal year. But considering this trend, to what extent this market share is going up, you expect?

[Unknown Executive]

Thank you for the question. We see the strong growth of IZERVAY, which is a fact. To what extent we can grow, that is what we can learn in the second quarter. And afterwards, and we would like to update you around that time.

[Seiji Wakao, analyst]

Understood. Other one, mirabegron. Looking at your number and looking at the prescription trend, the generic is not really increased in a prescription. The first quarter sales so far is better than you expected basically, I believe? What is the current status of mirabegron sales? So why the generic is not so much increased for the usage?

[Atsushi Kitamura, executive]

Mirabegron generics and their impact originally compared to our assumptions, the decline is smarter. That's the fact. If there were litigations, including suspension, we took a variety of actions. And as of now, generic manufacturers or 2 of them have just entered the market. In that sense, we were expecting a decline, and there is some impact already, but the decline compared to our initial assumptions is smarter. That's the fact. Claus, any additional comments from your side?

[Claus Zieler, executive]

Thank you, Atsushi. You have to imagine the entry of generics in 2 stages. One, as Atsushi said, we have 2 generics on the market right now. That creates a certain level of competition. But we also know that a number of additional generics have filed with the FDA. And when they get approval, and you know approval times for generics are usually 90 days, right? So when they get approval, you will have a number of additional competitors entering the market, and that really affects the dynamics of the market. So we are expecting that to happen in the next quarter.

[Hiromitsu "Hiro" Ikeda, executive]

Next, Goldman Sachs Securities, Mr. Ueda, please.

[Akinori Ueda, analyst]

Ueda from Goldman Sachs Securities. My first question is about XTANDI. I have a question on the XTANDI trend. Just looking at the numbers, there seems to be an acceleration once again. Now there is an additional indication. Is that the only factor? The additional indication or the inventory level -- and the price, is there any special factors behind?

[Atsushi Kitamura, executive]

Mr. Ueda, thank you for your question. Why XTANDI is performing well. As you pointed out, there are 2 major factors behind. First, the entire market is growing. That's 1 thing. And also, in addition, because of EMBARK study, last year in November, we got early indication and XTANDI grew a lot since. For other cases, there is -- there can be ripple effects. And overall, it's increasing. It's not about onetime inventory adjustment, but rather, this is a major trend of which is happening right now. Additional comment, please.

[Claus Zieler, executive]

Thank you for the question. Exactly right. Atsushi said there are 2 major factors. So I think I told you in the Q4 call last quarter, I told you that the volume growth of this market is quite significant. So we're seeing a 16% volume growth in the market as a whole, which given the maturity of the market, it's quite -- quite exceptional to have a market growing at that clip with the class of products being more than 10 years on the market. So that's 1 factor. So we have a strong underlying growth rate in the market. But XTANDI with the EMBARK data is really keeping its share, which again, we've been -- we launched 2012, and there are generic options for [ abiraterone ] available on this market. So again, this is quite a remarkable performance of XTANDI within this market to be so competitive, and that is due to the EMBARK data. So those are the 2 factors driving the XTANDI performance.

[Akinori Ueda, analyst]

My second question is about VEOZAH trend. In particular, doctors who have used VEOZAH as well as the feedback from patients, I'd like to hear safety, efficacy and the onset of efficacy and the convenience, that kind of feedback you have received. I'm sure you have accumulated such feedback from physicians. Insurance payer coverage is not sufficient according to physicians before. The coverage is expanding and increasing. So the assessment or perception is changing.

[Unknown Executive]

Thank you very much. VEOZAH and the actual feedback from HCPs, right? We'd like to ask Claus to explain Claus, please?

[Claus Zieler, executive]

Yes. So the feedback from doctors and from patients is very positive because the drug works according to this feedback and the drug works quickly, and it does alleviate the symptoms it is designed to treat. So in that context, we have very good feedback from both the patient side and the HCP side on VEOZAH. As we described before, the major hurdle that HCPs have told us in market research has been a struggle with the coverage. Now that is -- as you know, the coverage is improving from 50% from end of last quarter to more than 60%, which is very much in line with our projections. And HCP feedback is also starting to improve. It's not a category jump. It's not dramatic, but we can see in the market that HCPs are starting to recognize that, oh, yes, coverage is improving. And we do get more writers and we do get more pull-through when our sales force sits down with the physicians and especially with the physicians' staff to explain which payer now has coverage and how to fill out the forms and go about that. So I think we're making good progress there, and we are on track to achieve the 80% coverage and then get into that recognition in the market at the end of the year.

[Akinori Ueda, analyst]

Thank you very much. I understand. That's all from me. Thank you.

[Hiromitsu "Hiro" Ikeda, executive]

Next, UBS. Mr. Haruta, please, Haruta from UBS.

[Kasumi Haruta, analyst]

I can hear you. First question is about -- when do you think -- when are you targeting to achieve breakeven? According to the past example, JPY 50 billion sales timing is what you suggested about the time of the breakeven. But still in the face of the expansion of the recognition of this drug and still in the timing of investment that you've focused on ROI, you mentioned. But with this point, what kind of view do you have? Would you please share your focus within this 1 or 2 years?

[Unknown Executive]

Mr. Haruta, thank you very much. First, it's about VEOZAH. We have a strong confidence in it. The end of last year, we did some revision and revised the peak sales, that is what we are aiming to achieve. And we'll do our best for that. And the purpose is not shrinking investment. Cost benefit is also what we are aiming at when we can achieve breakeven, please wait a little bit more. Currently, ROI analysis is ongoing based upon the -- our new approaches. And based upon that, we will look at the second half plan. So PDCA is always ongoing for us. So a little later, we can show you probably the timing of the breakeven as well. So we need to do a little -- we need to have a little more time for the further analysis. This might be the repetition. Our purpose is not reducing the spending on investment, VEOZAH sales. In order to achieve that as early as possible, we are going to wisely use our money. So we need a little more time to evaluate this.

[Kasumi Haruta, analyst]

Understood. And that cost benefit -- for example, what kind of indicators are you referring to?

[Unknown Executive]

Well, VEOZAH [indiscernible] is look into the details, what would be the key parameters. So for that purpose, we set up various parameters, and we are having the additive activities, and with the activities leads to the increase of KPI. That kind of approaches, which is quite standardized, I believe, currently, what we are doing.

[Kasumi Haruta, analyst]

Understood. Second question is about IZERVAY. The number of vials and also the sales with a simple calculation if I do, then gross to net. It's not so much discounted, I feel, but appropriate price maintenance is important. But since the launch, how do you view about the gross to net changes? What's the trend of that? And for further expand of the market share, this growth to net focus, do you have any?

[Unknown Executive]

Thank you very much for your question. First of all, IZERVAY pricing strategy, that is not going to be disclosed. That's a principle for us. So I rather would like to refrain myself from talking about the details. It's not something like that we are selling it with a large amount of the discount. As has been mentioned by Claus, the current expansion is the effective J code -- effectiveness of J code and the safety profile data. And also because this is a new treatment. So the educational activities, that is also the fact as well this growth.

[Kasumi Haruta, analyst]

So we can assume the appropriate pricing. Yes. That's all for me.

[Hiromitsu "Hiro" Ikeda, executive]

Next, Morgan Stanley. MUFG Securities and Mr. Muraoka, please.

[Shinichiro Muraoka, analyst]

Muraoka from Morgan Stanley. Thank you very much. Almost all the questions I wanted to ask were already asked. Regarding XTANDI, the growth, it was not growing much. The volume was growing, but the unit price is a tough element according to my memory before. But the growth mode switch is turned on by now.

[Atsushi Kitamura, executive]

Muraoka-san, thank you very much. Basically, yes. As we mentioned and explained from before, the entire market is growing, and also there is a new indication, and there is a ripple effect according to what we are seeing. Claus any additional comments and detail?

[Unknown Executive]

Do you have any other comment, including some detail?

[Claus Zieler, executive]

Yes. So thanks, Atsushi. I think we've talked about this before, that the volume -- the volume evolution is extremely strong and extremely positive for us. That was true in the Q4 of last fiscal year, and it continues to be true in Q1 of this year. Where we do see pricing effects coming is in Q4. So from -- with the Medicare revisions that kick in on the first of January 25, then we will see pricing impact. And those have been factored into our forecast. So there's going to be, hopefully, no surprises there. The volume is slightly stronger than what we anticipated. So we are benefiting in the good phase now. As you say, the growth phase is turned on. And the pricing impact that we talked about are not relevant yet because they are coming in the future.

[Shinichiro Muraoka, analyst]

Thank you very much. And also, this may be a question too early to be asked. But regarding this performance momentum, if that is going to continue, there can be a variety of revisions or review in the second quarter. Regarding the dividend, you were increasing by JPY 10 every year before. But this year, it was just a JPY 4 increase because of the situation you are facing, according to my understanding. But JPY 10 increase every year for the dividend, is that beginning to be in your sight? Or am I jumping too much to the future?

[Unknown Executive]

Thank you very much for your question. Shareholder return is a very important element. It's 1 of the important elements in the capital allocations. And short-term profit increase or decrease is not a determinant. Within the CSP in the longer range of time line, we want to give a stable dividend payment. So because of the good performance in the first quarter, so quickly, an increase in dividend? No, that is not going to happen. In principle, we'd like to have a good performance in the current fiscal year, and we'd like to sustain our growth beyond the current fiscal year. We'd like to create such a mechanism, and we need to discuss the shareholder return.

[Shinichiro Muraoka, analyst]

Understood. Thank you very much. And that's all for me.

[Hiromitsu "Hiro" Ikeda, executive]

Next, Daiwa Securities, Mr. Hashiguchi, please.

[Kazuaki Hashiguchi, analyst]

Hashiguchi speaking. Thank you very much. I have a question about focus area approach. ASP3082 and 1570, you're going to present data at ESMO. POC judgment has been made. Do you have such data to enable the POC judgment? Or it will take some more time until POC judgment? But as of now, you have some data you have in your hand to be presented?

[Unknown Executive]

As Hashiguchi-san, thank you very much for your question. We are going to present the data. Phase I clinical study data is partly included in the presentation. But -- is that equivalent to POC, the time line is slightly different. So we are going to explain just briefly. Thank you. Well, ESMO is going to take place in September. And there 3082, that is [ Kerastador ] degrader and also 1570 DGK inhibitor. These 2 study results will be presented. The study results, well, in other words, this is very first occasion to announce the clinical data. And what's going to be announced? Well, first of all, Phase I dose escalating study results will be the center of the presentation and other collected data will be also shared as well. And needless to say, in a parallel manner, expansion cohort study will be conducted with the aiming at POC. So the plan that we shared with you last time is what we are currently following, and things are going without any bumps.

[Kazuaki Hashiguchi, analyst]

In my understanding, the original concept of focus area is that with the lead product, positive sign is observed. Then within the same primary focus, the following pipeline will be further accelerated for the [ opera ] activities. But including the expansion cohort, you need to gain more information to do that. And also the protein degradate. About 2 years ago, there is a R&D briefing session took place, and you mentioned there are some follow-ups. 1570, do you have the multiple candidates waiting after this 1570?

[Unknown Executive]

Let me answer to that as well. Regarding the focus area approach, just like you mentioned, we first have 1 product. That is the first product. And we see some potential of the efficacy, then same class drugs will be continuously developed. That is our strategy. For the protein degrader or -- and otherwise, 3082, as you see it here, 4396, the next generation is continuously worked for the development. And there are many in the clinical phase. So within a couple of years, they are expected to get into clinical developmental phase.

For DGK inhibitor -- this is the general type of small molecule drug and it is currently because this is a lower molecule -- low molecule weight compounds, and we do not have followings. So first, we focus on 1570 to identify the efficacy level amongst multiple cancer types of some cancer types, and we'll think about the future based upon that.

[Kazuaki Hashiguchi, analyst]

I understood it clearly. That's all for me.

[Hiromitsu "Hiro" Ikeda, executive]

Next, Mitsubishi UFJ, Mr. [ Hyogo ], please.

[Unknown Analyst]

Thank you very much for this presentation today. Mr. Kitamura-san, you talked about ROI. Now you assume it as the CFO of the company and for their budgeting and cost management, do you identify any challenges within this period of time? Did you realize something? And for the ROI, how it's managed. It's okay that you can mention only the possible comment, but would you please share your thinking?

[Atsushi Kitamura, executive]

Thank you very much, Mr. [ Hyogo ]. As CFO, how the cost is managed, how ROI is followed, I think that's basically your question. It's not something that we didn't have such kind of approach from the beginning in our company. We've been working on that. However, there are some points that we need to improve. Of course, in this industry, there is always uncertainty. So coming up with a different scenario. What happened -- what would you -- what would we do with what happened? So that kind of scenarios are prepared. It's not something that this is the thing. So we budget in this way or that. Rather, we come up with several slides and we expand that kind of options of the scenario so that we can, think, with a wide scope second.

If we talk about disciplines, we are reducing cost. And instead of coming to the bottom line, it may be used somewhere else to be even in the end. There were such cases. So we'd like to ensure with management. So that's 1 improvement. And we, as was mentioned for VEOZAH, we will monitor KPIs. And based on all the progress, we run the PDCA cycle. So we want to enhance visibility as well as the attention of management. This is something everybody takes for granted, but we are reinforcing such areas. So cost reduction, not just spending for VEOZAH, but cost reduction programs do exist. And whether we did a good job or not, if you did, is that reflected on to the bottom line? From the budgeting phase, we create a mechanism, and we are implementing this right now. Then PDCA cycle for VEOZAH is -- PDCA cycle is accelerated and managed well. Yes. You're reducing cost -- you're reducing costs, and I'm expecting that you would achieve great results.

[Hiromitsu "Hiro" Ikeda, executive]

Thank you very much. Next. Sanford C. Bernstein, Mr. Sogi, please?

[Miki Sogi, analyst]

I have a few questions. First, about XTANDI. As you mentioned, it's a mature market, but the entire market is growing right now. What's the reason behind? And the market growth will continue into the future. Is that what you can expect? And XTANDI, 16% growth. Based on the growth, is it driven by the market growth? And also XTANDI's share progress continuation because of EMBARK data. So 16%, what's the breakdown of the 16% based on that idea?

[Unknown Executive]

Rather than my feeling, I think it's better to ask Claus. So first, we'd like to ask Claus to comment.

[Claus Zieler, executive]

Thank you Sogi-san. So yes, the market growth is strong. It's actually been strong for some time on a volume basis. What we are now seeing is a combination of the strong market growth and our EMBARK data really making a difference in the market. I'll give you an example. We see in the United States, 5% more HCPs writing for XTANDI than before. So we're getting traction with that scientific data that we published last year with the approval of this additional indication that we got in -- at the end of last calendar year. And it is making a difference in the market. We hear that anecdotally, and I think it is contributing to the fact that not only the market is growing, but XTANDI can grow with the market. We have a very strong positioning in spite, as I said before, of generic other -- generic molecules being available in this market. So it's a fight between -- the -- do you want to give the most affordable molecule to a patient or do you want to give what a doctor perceives to be the molecule with the most extensive data sets and convincing science to a patient? And that's where we are really making a difference with the EMBARK data set.

[Miki Sogi, analyst]

No, that's clear. I'm actually really curious to see -- I'm sorry, if I need asking the kind of repetitive question, but what is really driving the open market expansion? It's something that you were saying that is that happening over time? Is it because some patients who were not underdiagnosed here, the COVID and somehow those people are coming out? Or is there anything that can explain the underlying marketing expansion?

[Claus Zieler, executive]

Yes. Thank you, Sogi-san. So the maybe COVID has some implications, I would have to go back, but COVID has more lift, and now we're back to normal. The underlying market dynamics is that you still have a lot of doctors treating with traditional ATT, right? So if you look at the part of the market that uses ADT versus ATT plus the NHT class, there's still room for growth. I mean -- and there's still tremendous room for growth, and that is what's happening. So it's the NHT class that is just becoming relevant into doctors' minds as a meaningful addition treatment addition to therapy. And because the ADT mono is still such a large part of scripts today, that's where the NHT growth is coming from. Yes. And as I said, it is the NHT class growth, that's what we refer to as market growth.

[Miki Sogi, analyst]

Yes, yes. No. It's actually -- I'm just really impressed that because of the maturity of the drug, that kind of shift has already happened, but it's still continuing. So it's great.

[Claus Zieler, executive]

It's still continuing. Exactly.

[Miki Sogi, analyst]

Yes. That's great. And then I have some additional question around the PADCEV. I was really impressed by the strong growth in Europe, especially. And especially in Europe, the first line of the indication has not been approved yet. So can we expect even further acceleration of growth in Europe with the first-line approval?

[Claus Zieler, executive]

So we continue to be very, very optimistic on the growth of PADCEV. And I think you've captured the situation well. We are on the verge of the first line now driving demand in the European and then in other ex-U.S. geographies. We've been benefiting from that, of course, in the U.S. But I do want to manage expectations a little bit in the sense that what we've consistently seen in PADCEV is a very steep ramp up because the data is so convincing. A very, very strict penetration curve. But then when you get to sort of the peak share that is realistic in the market, you have a very sharp leveling off. So we expect that to happen in the U.S. We don't know exactly when. But in the next 6 months, that will happen.

So while Europe will continue to drive growth and then other geographies will continue to drive very strong growth with the second line and -- second line reimbursements and the first-line launches, the U.S. world can have a tendency to now level off in the next 6 months. We're very optimistic about this. And then Sogi-san, you will remember last quarter, I told you that. Yes, I told you we have very strong growth in PADCEV and I think maybe we've not been -- we feel we've not been recognized yet for that very strong growth of this fantastic treatment option.

[Miki Sogi, analyst]

No, it's amazing how it's growing. And also definitely the personal data is amazingly good. I definitely think so. At the end, now it's about the IZERVAY regulatory question in Europe. SYFOVRE do not have clinical efficacy data. That's why it's not approved in that market. So I think that is something common with IZERVAY data set as well. For this perspective, what's the current status of AMA negotiation? Or what kind of scenario are you consider currently?

[Unknown Executive]

Thank you for the question. IZERVAY, the European market status. I believe I've touched upon this a little bit. But as you know, needless to say, the European authority. You always look at efficacy, safety and also risk/benefit balance. They consider these factors and ultimately decide about the approval of this drug. That's what we think. Then about our with the Japanese Phase III, we confirmed the positive for both and as has been discussed.

In the case of the United States, GATHER1, GATHER2 study results safety data, equivalent or concert standard data is available now. Considering those information and data. And based upon that, European authority would make the decision about the approval. So in order to support that, we are going to submit the available data so that earlier approval is achieved.

[Hiromitsu "Hiro" Ikeda, executive]

Macquarie Capital. Mr. Tony Ren, please.

[Tony Ren, analyst]

From Macquarie. Just 2 from me. So 1 is, again, going back to IZERVAY European application. Is the EMA asking for an oral explanation and oral meeting? I believe that typically happens at day 210. So just want to see if that is happening? And then just also going back to PADCEV, very strong sales revenue. When was that -- so I think your first question is about the clinical profile. When I was at ESMO in Barcelona, there was some concern about the peripheral neuropathy and the skin toxicity. Now you've got a lot more experience with this EV-302 regimen. Just want to see how that is playing out in the GU oncology setting? And then the second question is probably for Claus. It's about the Medicare Part B inflation rebate, how that is affecting assets?

[Unknown Executive]

Thank you, Tony. That's your -- question is maybe 3 actually, the IZERVAY European status and also the past the EV-302 and also skin indications, those kinds, right?

[Tony Ren, analyst]

Correct.

[Unknown Executive]

So as to question, it will be covered by Tadaaki, medical officer. And last 1 will be Claus.

[Tadaaki Taniguchi, executive]

First, IZERVAY status in Europe, once again, as there was another question, I'd like to respond. As I explained earlier, IZERVAY submission in Europe, needless to say, we are submitting a document in writing in principle, where necessary from the regulatory authorities, they may request for a meeting in person. So we'd like to use both ways so that IZERVAY safety and efficacy data can be fully communicated to them. That's how we are proceeding.

What about the second question? About PADCEV, skin adverse events and peripheral neuropathy. That was answer to your question. Needless to say, the so-called GU bladder cancer treaters. Regarding these symptoms, they have never handled these adverse events before in reality. But second-line monotherapy is already approved and marketed. Medical affairs and commercial are providing information to the physicians to promote appropriate use in case of adverse event, what they should do. They are communicating how to manage adverse events so that the situation can be addressed appropriately. We have such education programs and providing necessary information. We are doing our best in these activities. For the time being, doctors are very interested in prescribing this drug, as we have heard. And safety management into the future will be important in continuing to use this drug. So we will continue to make utmost efforts to provide information to them.

[Claus Zieler, executive]

Let me add maybe to the PADCEV question. So both -- of course, both the in toxicity and the neuropathy are known adverse events. So this is nothing new. And the question of educating doctors on how to deal with them has been with us from the very, very start of the launch of PADCEV. So in that sense, this is not an unexpected discussion that you're witnessing at ESMO, Tony. It's the grappling with how do we do the best for patients. Because the efficacy of the treatment has been published and has been demonstrated and is recognized. And people are trying to understand how do we best grapple with the AEs. And that's a normal discussion. We don't see that affecting market penetration. We have -- I think I told you at the last quarter, that we had almost 50% of new patient share. We're now up to 54% to 56%, somewhere in that range of new patient share for PADCEV in the U.S. in first line.

So we're continuing to make fair progress, which speaks for an understanding in the community of how to handle this balance of efficacy and adverse events. So I don't think you should take the ESMO discussion as anything that affects the market performance of PADCEV and the acceptance of PADCEV to appropriate patients in the market. I think your last question, if you could just repeat it?

[Tony Ren, analyst]

Yes, it's about the Medicare Part B inflation rebate.

[Claus Zieler, executive]

Correct. Yes. So our last price increase on PADCEV was in March, and we factored the Part B legislation into that. So I don't anticipate major deviations and major corrections in terms of Part B for PADCEV in the future.

[Tony Ren, analyst]

Okay. If I may just very quickly, Claus, you said that the market share in frontline European cost in the U.S. is already 56%, right?

[Claus Zieler, executive]

Between 54 and 56, yes.

[Tony Ren, analyst]

So that's a pretty narrow range. And you said that it's going to peak out in the next 6 months. So when do you think the peak will be? 65 or something?

[Claus Zieler, executive]

That's the million-dollar question, Tony. I wish I knew the answer to that. We've been surprised by PADCEV in the past, and I don't want to fall into the trap of getting into a linear extrapolation. So we honestly don't have a very clear view of where the peak will be. We're essentially already where we thought we would be 6 months from now. And we're already there. So the upside is there. Whether that will continue, I don't know.

[Tony Ren, analyst]

Okay. Very good.

[Hiromitsu "Hiro" Ikeda, executive]

Thank you very much. I'm sure that you are waiting for the opportunity for asking questions, but it's the time -- time's up. So with this, we would like to close today's announcement. Thank you very much for your participation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]