Astellas Pharma Inc

TSE:4503

Earnings Call Transcript 2019-Q2

[Kenji Yasukawa, executive]

Good afternoon, ladies and gentlemen. I'm Kenji Yasukawa of Astellas Pharma. Thank you very much for participating today. First, I'd like to give you an overview of our financial results, and we'll take your questions later.

Next slide, please. This is a cautionary statement regarding forward-looking information. This is my agenda today. In May, we announced the MTP strategic plan. And so there are 3 goals for MTP. So we'd like to explain accordingly.

Page 4. This page shows our second quarter financial results on core basis. The red column shows the results in the second quarter. Net sales reached JPY 647.1 billion, up 1.1% year-on-year. Core operating profit, the third line from the bottom, rose 13.1% to JPY 154.2 billion. The bottom line is the core operating profit -- or rather, or core EPS, was JPY 63.92, up 23.2% year-on-year. Core operating profit, the progress was 58.9% year-on-year. On the right, you can see the change when foreign exchange was included. Net sales increased 0.6% and core operating profit increased 10% from the previous year.

Let me explain the details on the next page. This page shows the year-on-year sales analysis. XTANDI and mirabegron, new products grew steadily. On the other hand, due to the impact from NHI growth price revision and the substantial decrease in sales of long listed drugs such as Micardis Japan, net sales increased despite sales decrease in Japan. As for ForEx, the yen depreciated against the euro, which served as a factor to increase our net sales.

Next page. Page 6 shows year-on-year core operating profit analysis. As I said on the previous page, net sales increased. And also, there was a product exchange and gross ratio declined as a result. Now gross profit increased. SG&A cost increased just slightly because XTANDI U.S. copromotion fees increased. And we promoted efficient spending and optimal resource allocation. And this became a factor to decrease profits. And the expenditure decreased due to the wind-down of research operations at Agensys and the decrease in development costs for discontinued projects. On the other hand, I'll explain the details later, but expenses increased as key late-stage development projects raised in our strategic plan made progress in line with the plan. Our new area -- our new modality investment has also increased. As a result, on the expenditure compared to the previous year decreased slightly to push up the profits. Forex was also a positive factor to push up the profits a bit. Core operating profit was JPY 154.2 billion.

Next, on a full year basis, please look at the red column from up to down. JPY 32 billion was the other expenses. And operating profits increased by 32% to JPY 126.8 billion. Profit for the term was 26.4% increase to JPY 103.9 billion.

Next page. Sales growth of 3 main products. The top line, XTANDI, 16.9% increase year-on-year was achieved. In the middle, OAB products, we have 2 products here: mirabegron increased 19.1%; VESIcare, minus 3.8% decrease. This is a figure in line with our strategy. Year-on-year, 19.0% increase for mirabegron, but we couldn't achieve our target. Because we had a very aggressive plan, there was a change in the drug price and the adjustment of the inventory so progress was slow for the last 6 months. As for Prograf, at the bottom, in Asia and Oceania, the business has been steady so that was an upside compared to the plan in terms of the progress.

Next, Page 9. XTANDI sales by region. On this page, in U.S. and EMEA, this is based on local currencies. In all regions, XTANDI sales increased steadily compared to the previous year. In the Americas, record quarterly sales were achieved. In July in the United States, we have gained an additional indication M0 CRPC. It's too early to comment on sales trends in detail, but we confirmed trends of increasing prescriptions after approval as we have watched. And from the results of market research, we have been able to confirm high intention to prescribe. The ratio of prescription by urologists have been increasing. We also obtained the same indications and approval in Europe this month as well. We'd like to leverage possible study results for higher penetration among new patient segments.

Next, Page 10. This shows quarterly sales trends for OAB products in urology. Against the plan, we were a little short of the plan, but mirabegron sales reached 60%. VESIcare accounts for 40%. Mirabegron, efficacy and tolerability are well balanced. By penetrating this, we'd like to aim for the expansion of the share in each market.

Page 11. This page shows our revised full year forecast for fiscal year 2018 on a core basis. As I have explained, the first half results as well as trends, based on this, and therefore, this year, we announced the initial forecast and we are making an upward revision of initial forecast for net sales, operating profit and profit for the year. For net sales, we are making an upward revision by JPY 22 billion to JPY 1,300,000,000,000. Sales of products, such as XTANDI, are expected to grow more than the initial forecast. And the expenditure is expected to increase JPY 2 billion from the initial forecast to JPY 216 billion, including ForEx impact. As a result, regarding core operating profit, we are making an upward revision of JPY 8 billion from the initial forecast to JPY 270 billion. Core profits for the year is revised upward by JPY 11 billion to JPY 221 billion. Our full year forecast is based on the assumption that NHI drop price will be revised in October 2019 due to the planned consumption tax increase in October 2019.

Next, Page 12. This page shows our revised forecast for fiscal year 2018 on a full basis. Net sales and operating profit, in between these 2 lines there are other expenses. As of April, we didn't decide to implement certain events or we couldn't estimate the amount for certain events. We just have to deem these figures. Operating profit initial forecast was 276 point -- JPY 265 billion, but it's now JPY 234 billion. And the net profit is now expected to be JPY 995 billion from JPY 203 billion. So if we can achieve operating profit of JPY 213.3 billion and operating profit of -- net profits of JPY 164.7 billion, we can increase the profits by 9.7% and 18.4%, respectively. And the profits for the year is going to be JPY 195 billion.

From here, I'd like to explain the progress of our pipeline. Page 14. In this page, I would like to introduce you the program progress as the previous announcement on July, in other words, in this quarter. We've received the improvement for 4 products. The linaclotide is approved for chronic constipation in Japan. And also, blinatumomab was also approved for ALL. And gilteritinib and enzalutamide will receive the approvals. For the -- for those last 2, I'm going to talk about later in the details. And we've done the NDA for 2 projects, Repatha in Japan or evolocumab. That is for another indication of certain intolerance to hypercholesterolemia. And in Japan, roxadustat, we've done our very first NDA.

The next page, where I'm going to talk about this into more details. On stage changes or improvement, the ASP1650, which used to be an asset of Ganymed, started a Phase II. This is for the testicle cancer. And also in Boston, there's a potential with them. We've done some collaborative research. And the third immuno-oncology project or the third R&D project has got started in Phase I. And the 3 projects were excluded from our pipeline list because of the business factors or if this was not confirmed.

Here, I'd like to talk about the details of enzalutamide. Last week, October 23, approval was granted by the European Commission for the high-risk M0 or no metastatic CRPC. And in the European countries now on, gradually, it will be reimbursed. And not only that, we would like to do the launching activities. The contribution to the ourselves is going to take place is going for next year and afterwards. And further, earlier-posted cancer life cycle management, the study is also ongoing. ARCHES, EMBARK. There are these 2 studies. First of all, the metastatic data HSPC or, in other words, M1 HSPC study is conducted for as the ARCHES study. Based upon the already available data was revisited, the analysis plan. And according to the number necessary for the analysis in terms of the event is reduced. Therefore, the study is going to be completed 1.5 years earlier. So in the first quarter for this fiscal year, or on January to March of 2019, the readout will be available.

Next one is EMBARK study. This as well the necessary number of the events for the analysis is revisited. So the announced plan was updated and the study is now expected to be finished 1 year earlier.

Next page is about gilteritinib. This was approved in Japan for 3 mutated relapsed or refractory AML in September 2018 under the Sakigake. Frankly, we are negotiating about the NHI pricing with the authority. In the United States, based upon the ADMIRAL study, we've done the filing and we believe that we can get the approval in the very near future. Not only the data used for the filing, in order to get the OS data, the study has been also ongoing, and that data or the readout is available now. So this will be presented at future medical conference.

Page 17 is about roxadustat. This chart is quite busy, but vertically, you can find global and Japan. And horizontally, you can find the dialysis and non-dialysis. So you can find the 4 different segments here. The left bottom, there are 4 studies for the dialysis patients. Based upon this, in September, this product was filed in Japan for anemia associated with CKD in dialysis. And progress from the previous announcement, that is the left block, that is global dialysis, was, again, the readout from PYRENEES study. Further right, global non-dialysis, that is our study. Again, readout is available and the press release was issued already. The right bottom, that's Japan and non-dialysis patients, CL-303140 (sic) [ CL-0314 ] study, this as well the readout is available. Here, I'm not going to talk about to the further details for each study, but overall, we could say that the result of the readout is expected as a company. The fixed Phase III programs supporting for filing and the reimbursement in EU have been conducted. And when all these readouts become available, then we would like to introduce you the outcome.

Next one is fezolinetant. This is for the menopausal-related vasomotor symptoms. And Phase IIb study results, or top line result, became available in October. Thankfully, PK/PD analyses is ongoing, therefore, today, I'm not going to talk about the details. In the next financial announcement, this PK/PD result is going to be available. So there, I'd like to go into details. And also, the interface -- the meeting has been ongoing with the authority, and also currently, been working for the preparation to go into the next phase.

Page 19. The remaining major programs update. The left top, enfortumab vedotin. This is for the metastatic epithelial cancer. For this, the checkpoint inhibitor pretreated patients are the subjects in the Phase II study. The platinum-pretreated cohort 1 patients for the study is ongoing smoothly. And the next fiscal year, first half, the data readout will be available. Of course, it depends on the results, however, if it is available in the United States based upon this Phase II study, we are going to do the NDA.

Second, IMAB362, or zolbetuximab. This is for gastric cancer or gastroesophageal junction adenocarcinoma. 2 Phase III studies for the first line and the second line have started. The third one, and also on top of that second line, the Phase II has got started. IMAB027 or ASP1650, this is what we've acquired from Ganymed as well. The POC study for the testicular cancer is going to be started in the first half of next year. We are working for the preparation. The target is to Claudin-6, whose expression frequency is as high as 93% in testicular tumor. On the right, CK107, this result was released, especially SMA data. And thus, for the progress of this, we are currently working on the discussion with a partner company. And in the first half, in ALS, the result will be available. And has been mentioned, that when the 4 Phase II study result become available, we would like to decide our final approach.

So the last topic is about reldesemtiv.

Next one. This is the list of events expecting within this 1 year. As has been mentioned, enzalutamide ARCHER study readout will be available. Likewise, that for the bottom, this, as has been mentioned, enfortumab vedotin out of the Phase II study, the enfortumab treated cohort 1 study, readout will be available. And the remaining Phase III studies, the readout also will be available for roxadustat. So based upon this, will do plan the NDA as well as we will receive the regulatory decisions. This I talked about in May as well. In the coming couple of years, the prioritized projects. There's 6 of them. And some of them are going to go into the phase of submission. And in May, I have announced the midterm plan and so far, everything is ongoing in line with this midterm plan.

So from here, I would like to talk about the second and third strategic goals we've announced in May. Page 23. In this 3 months, we were able to gain the assets of the advanced genetic treatment program. In August, we acquired Quethera in the U.K. This is the gene therapy for the -- written again, we're going to sell the same preclinical models. This is to improve the survival of such cells in a gene therapy program with a unique mechanism of actions through an independent of intraocular pressure, has the potential to be an option of a refractory glaucoma. So this is the novel therapy for refractory glaucoma and high risk of blindness. Then, we've come to option agreement with the Gene Therapy Research Institution for the genetic treatment of sporadic ALS. The sporadic ALS, the mechanism of the onset has been studied in various stage. And out of those, the main cascade is ADR -- ADAR2 and decrease of activity is now the forecast for their development. The aim is to prevent the multi-neuron death. In other words, degeneration and deficit and stop the progress of the symptom. That is the target. And currently, this is part of objectives in preclinical phase and Astellas owns an exclusive right of future license negotiation for this therapy.

Page 24. In this couple of years, we are focusing on a new modality and multiple developmental projects utilizing new a modality and technology are ongoing in steadfast manner. In line with that, we would like to prepare our manufacturing side. And this slide shows the outline of such plan. On the left top, in Toyama. A Center for Active Ingredient for Biopharmaceuticals will be established. Several antibody projects, such as IMAB362 are now in the late phase of development. Manufacturer of antibodies for using both the CTM and a commercial product is possible. Additionally, this whole production site can support other modalities, such as cell therapy. Left bottom. Center for Multimodality clinical trial materials is under construction in Tsukuba. And we would like to be flexible for early-stage projects, and we would like to facilitate research activities. On the right, that is AIRM, transfer and renovation. ASP7317 Phase III is started. So for the late-phases study or the earlier-phase the commercial sale production sites is necessary. Therefore, we've started the construction of this facility in the United States. So we are aiming at a completion of these 3 facilities in 2019 and 2020. And in total, for these 3 capital investment plan is JPY 30 billion.

24 (sic) [ 25 ]. That is the update of the strategic target. RX+ is the name of the projects and there are 2 of them, which made great progress. First one is image-guided precision surgery. So this is the program to develop a surgeon-friendly surgery method in which imaging agent and detection device are used so that the surgeons can easily detect the position of lesions and organs. ASP5354 IND was opened. And as we announced the other day with BANDAI NAMCO Entertainment, we came to the agreement for joint development. This is to jointly develop smartphone exercise support app utilizing 3D motion technologies. The aim is to provide scientifically supported exercise program. Toward the right, this is a very business line, but you can find the -- still has been pursuing initiatives to build connections and networks with technology and knowledge from various fields. We've established an U.S. subsidiary called Astellas RX+ business accelerator to promote RX+ business. And the current major activity is may -- a venture capital management. In digital health. Focused RX+ venture fund was established with Astellas as a single limited partner. And in the field of medical device, we've initiated collaboration with a new venture capital. We are reinforcing our investment activities. Also, we've organized and support matching events with academic institutions and startups, just like the seminar held together with Tokyo Institute of Technology in this July.

This is the last page for me. This is the announcement. This year, December 13, we are going to have R&D meeting focusing on these cell therapy. In 2016, Ocata -- then Ocata current arm was acquired, and we're cutting to the field of service therapy. In 2018, we acquired Universal Cells. Also, we consider that cell therapy is very important modality for focused approach. We are going to -- or we have already expanded investment in this field, so the progress status is going to be presented to you. And we are planning to invite our members in this meeting as well. I would like to encourage you to be here. That's all for me. Thank you very much.

[Operator]

We now would like to go to Q&A session. First, we'd like to take questions from the audience in this room. If you have a question, please raise your hand. Please mention your affiliation and your name as well. The person in front.

[Hidemaru Yamaguchi, analyst]

Yamaguchi from Citi. My first question is about XTANDI. The current status it's growing. So on a quarter-on-quarter, it's a single-digit growth. The market environment -- what is the market environment right now? What about the inventory, the price and tech has an impact? Could you briefly explain?

[Yukio Matsui, executive]

Matsui speaking. First of all, as for the inventory or people who ask about P-A-P, or PAP. So regarding PAP, there's no big change compared to before. As for the inventory. In some regions, in Germany, for example, the inventory decreased a bit. But overall, there's almost no big, big change in the inventory level. Gradually, they're using earlier stages for Johnson & Johnson and also for us, thanks to the activities by these 2 companies is gradually expanding. So there's no big change in assumptions. Nothing unexpected has happened.

[Hidemaru Yamaguchi, analyst]

As for fezolinetant and roxadustat in nondialysis patients in Japan. Top line results are now available, but you haven't said anything about it. But you say you are preparing for Phase III, so it seems to be going well. There seems to be no failure. But the top line results are now available, but you're not publishing yet. Why? You will announce later Phase II program?

[Unknown Executive]

I don't know whether you remember the protocol. There is a comparison lines in arms once a day and twice a day. We have different doses. And it's a vascular disease. So risk-benefit must be carefully monitored to select PK/PD analysis results must be the basis before announcing the results. So please wait for a moment.

[Hidemaru Yamaguchi, analyst]

Roxadustat nondialysis study results?

[Unknown Executive]

What about it?

[Hidemaru Yamaguchi, analyst]

Do you have the results already? Nondialysis patient study?

[Unknown Executive]

Yes. We have the results in one study.

[Hidemaru Yamaguchi, analyst]

Was that published? Did you announce the results?

[Unknown Executive]

Not yet. As Yasukawa mentioned earlier, in total, including Europe, I think we thought it's better to show a total picture, including everything. So please wait until the appropriate timing. Thank you for your understanding.

[Hidemaru Yamaguchi, analyst]

Roxadustat, what is the target profile?

[Unknown Executive]

It's not just the increase of the red blood cells. Doctors should be able to target the site for injection. Safety is also important. But repeat and blood pressure impact, we'd like to explain comprehensively. Instead of talking about the results from a single study, we'd like to look at all the results to see whether it's within our target profile for your better understanding.

[Hidemaru Yamaguchi, analyst]

And this is something general, but regarding the gene therapy. I think there are more deals. You have different projects. And cell therapy is also included as a modality. Are you going to go into the gene therapy area more into the future? Is my understanding correct?

[Unknown Executive]

We have such deals and projects recently, but it's not the only target. The regenerative medicine, including gene therapy, cell therapy is our target. We have 2 recently, but it doesn't mean that it's going to just continue just in this area. But just by chance, we have 2 consecutive deals recently.

[Unknown Executive]

The person in the front row, please.

[Atsushi Seki, analyst]

UBS. My name is Seki. There are 3 questions. First, roxadustat. Follow-up question. You mentioned the overall picture, but the pooled analysis, MSV superiority; of course, non-inferiority. So given if superiority, result is available not as quite important for work status, that I believe? So first question is do you have confidence about that? And the second, full analysis. It will take longer term. So around what is your time schedule to disclosing the -- to disclose the top line result?

[Unknown Executive]

Kitagawa is going to answer for that.

[Mike Kitagawa, executive]

You're right. Pooled analysis is also what we are considering. And probably that sometime in the next year, it's going to be determining the 6 studies and also pooled analysis result are going to be available. So the next year -- within next year. I don't know exactly when, but some time point in the next year. There are 6 of these 3 studies ongoing and there are remaining 3. And the top line result readout of that -- those will be available within this year.

[Atsushi Seki, analyst]

And the second point is XTANDI. You has a competitor, abiraterone. And last week, I think Johnson & Johnson made some legal perspective update in abiraterone generic, we don't know when it will be available, but suppose generic becomes available, how do you see about the impact of that into XTANDI? Do you think there's nothing to do with that? Or do you think that has some impact onto the pricing of XTANDI?

[Unknown Executive]

Well, first of all, generics, as you know, for -- I think it might have an impact into the same brand or same original product. However, even though -- or if the product is within a therapeutic area alone, in that case, impact is limited. And no metastatic, or M0, is also the indication that we have. And also, the Zytiga, on the other hand, does not have indication for that disease segment. So that is quite an important -- a big differentiation point among the health care providers. So in that perspective, I see that there would not be such a big impact. But this is just one of the factors in terms of the price pressure. So there might be a certain level of the impact, but basically, because their product is different, therefore, impact-wise, we believe that it's not going to be the meaningful impact. Thank you very much. Let's have a question.

[Atsushi Seki, analyst]

Last question from me. It's about the profit for the next fiscal year. LOE will take place, therefore, the profit reduced a little bit in -- according to the midterm plan. In order to offset this reduce, are you going to do, for example, the dermatology business that's within the core, but in order to reduce the impact of the reduction of profit next year, are you going to same type of compensatory approach?

[Unknown Executive]

Let me answer to that. Next year, in order to offset the decrease of the profit, we're going to do something not strategic that would not take place. We are looking at their past track record and we might be able to identify some options of the strategies, then we will continue that approach in that sense. Thank you very much. Any other questions? The person in front.

[Akinori Ueda, analyst]

Ueda from Goldman Sachs. I also have 3 questions. First of all, about XTANDI. There is more penetration among urologists. What's the degree of penetration right now? Since July, there's an additional indication. Is there any change in this? Could you comment on this?

[Unknown Executive]

Matsui, would you like to comment?

[Yukio Matsui, executive]

First of all, the so-called ATU survey, to confirm the awareness among physicians, we did this internally. And for sure, in August and September, particularly among urologists, the product awareness has substantially improved. And also, Rx prescription based on brands, among urologists, there's also an increase among them. And so that's something we confirmed concerning the prescription. And also, NCCN or AN, in August, since July, there were guidelines, including our product. So particularly in the United States, awareness and expectations are arising.

[Akinori Ueda, analyst]

The ratio of urologists' prescription, do you have any numbers you can share?

[Unknown Executive]

As we have reported from before, XTANDI prescription, 24% is by urologists quarter-on-quarter basis; 1% increase among urologists, in terms of the total prescription.

[Akinori Ueda, analyst]

Next, on roxadustat. As Seki asked the question earlier, cardiovascular event data. Once you have the data, you're fighting for dialysis indication. Is there going to be any impact on the approval for dialysis indication in Japan?

[Unknown Executive]

Of course. It depends on data. And if there is any request from the regulatory authorities, we will submit data to discuss.

[Akinori Ueda, analyst]

In this sense, is there going to be any impact?

[Unknown Executive]

In that sense, yes. But once we have the data, we need to consult with the regulatory authorities.

[Akinori Ueda, analyst]

Next on cell therapy and investments into this area. When you're having a meeting in December, you're going to explain the details. As of now, you are going to invest into manufacturing as well. What's the background for your decision? And in Japan and in the United States, you now will have basis. So what's the positioning of Japan and the United States? What different roles will be played by different regions?

[Unknown Executive]

First, regarding the manufacturing of our investments, we purchased Ocata and we had been using their facilities. But we have clinical studies and we cannot make it in time for the initial manufacturing. That was clear. So as I said before, we are going to establish plant for cell therapy. We have been considering this from before. So this time, we have to start now, otherwise, we will not be in time. So that's why we decided to implement this idea. Regarding cell therapy, it must be turned into product for delivery to patients, and also to hospitals during the surgery. To do so cells must be differentiated. We have to culture and differentiate the cells at a factory or plant. Unlike usual product, it will not last for a long time. So in the final formulation we have deliver this to the institutions as soon as possible. So the frozen cells would be returned to the final formulation. So there are 2 steps overall. We started the cell differentiation and cell culture plant. For the plant that it's going to be smaller, it can be outsourced so it -- we will see the needs. And once we get the approval, we would like to ensure distribution to have a good structure after approval. As for your second question, regenerative medicine using your cells, research is done in Boston. In Japan, with several universities, we have collaboration programs to have different -- do projects. In Japan we have joint research with academia only.

[Unknown Analyst]

I am editor. My name is [ Ida Kata ]. I have 2 major questions. First, [ bio API ] production, you are going to establish the facilities. And you are going to establish 2 facilities for the purpose of the bio -- pharmaceuticals. And what's the reason of that? And also what kind of products are you planning to produce there?

[Unknown Executive]

As is mentioned, IMAB is one candidate to be manufactured in new facility, because we are going to establish the facility, we will make it in a very inflexible manner. So in the future, other antibodies might be planned to be manufactured there. I think there's an option. There will be the option to produce them in overseas.

[Unknown Analyst]

But are you intentionally trying to produce them in Japan? You mean in overseas we're going to have their own facility active ingredient manufacturing?

[Unknown Executive]

Well, for the technology, we have the main function in Japan. So considering the current organizational system, we thought it is better to have facility in Japan.

[Unknown Analyst]

And the next question is Rx+ business. Under the present [ IAS ] cover, I think this is one of the key projects that you are working on. And what progress and the process you are thinking about, and what will be available in the market, and what point of time? And what level of the profit you are aiming at -- or revenue you are aiming at?

[Unknown Executive]

Well, overall, there are several groups, under this scheme, the surgery, in order to avoid the risk, that's one thing. This is to improve the safety of the patients or to improve the convenience of the physicians. And not the treatment but the diagnosis itself is going to be more precise and quicker. And as has been shown, at the very end, that is completely not the pharmaceutical products. So there are those 3 patterns, and each has its own partner company to work with, so I cannot to give you the specific timing at this point of time. So when everything is clear, including the patent exclusivity, I would like to announce that one by one.

[Unknown Analyst]

And the business contribution timing?

[Unknown Executive]

Well, because we go -- we are going to go into the very novel new area for us, therefore, unlike the conventional pharmaceutical products, we cannot tell you the -- some specific time line like Phase I would happen here and after that, therefore, Phase II would take this and that timing. So whenever we come to the confidence, then that is going to be the timing of that, and I'm going to share with you the information about that.

[Unknown Executive]

After one more question, then we would like to go to the telephone.

[Unknown Analyst]

[ Niko Kuyu, Shingu Newspaper ]. In Spring when you announced your strategic plan, focus area approach was also announced. As of now, what are the achievements? The productivity in R&D has increased by how much? How do you assess? Can I have comments from Mr. Yasukawa, please?

[Kenji Yasukawa, executive]

Internally, every quarter, what's the status of the company? We have a structure to look at it. Since this year, we want to do this more quantitatively rather than qualitatively. So we have some indicators. We started monitoring and 6 months have passed how much the company has shifted the FA strategy. And how we are going to change, you know, with the space we have assumed. We began monitoring, 6 months have passed, but we have not been able to say anything in particular, it's too early. But we started monitoring using some indicators. As for FA strategy, R&D productivity has increased or not? What are the tangible results? To such a question, as I showed on my side, the third product in the cancer immune product has -- went into clinical. We explained the details in December, cell therapy clinical programs are going to start. Gene therapy, we have some progress as well in that area. FA strategy is progressing as well. That's my understanding.

[Unknown Analyst]

Focus area approach? I'd like to ask more questions. In specific therapeutic areas, instead of -- and just focusing on them, drug discovery or external collaboration, are also seen in a well-balanced manner to work on drug discovery. Or the wording may not be correct, but you just try to cherry pick what's good only. So to establish a good balance, to achieve results, what the president himself is paying attention to? Or anything are you instructing your subordinates?

[Unknown Executive]

GCL strategy, we you have shifted a lot from that. Using focus is going to be fine. We often receive such a question. But as for FA strategy, using our core technology or modality to -- and get more assets one after another. In the previous approach, particularly in the small molecule, if one fails, we would have to start from scratch. But we'd like to take a different approach. In cell therapy, Ocata was acquired, and they focus on cell differentiation from the stem cell to develop a lot of things. Their experts are well-versed in this area. And we wanted to do cell therapy a lot. 7317 is the retina cell generation we are working on, and it's going to be explained in December. And various cells can be developed, we are taking a challenge on this and we are achieving some success, DNA vaccines. If you change the antigen inside, you can have the antibody against the various allergens. If we take a challenge and one thing, if that's successful, we will have multiple products. So that's something we'd like to focus on going forward. As you know, in this world, the probability of success is low, as you know. So we have to have many things where we were able to take a challenge on. In the past, we just focused on urology or transplantation, in the past, but then we would narrow the entry point just by ourselves. And we accumulate -- we try to accumulate successful experiences and there's an indication to such an approach. That was the trigger for us to change our focus. We'd like to have a broader entry point, and we'd like to take a challenge on new technologies and modalities. If it's successful, we can get many more assets, one after another. That's our philosophy. That's the basis. Did I answer your question?

[Unknown Analyst]

Yes. One more thing. You announced that about JPY 30 billion is going to be spent to build new facilities in Japan and in the United States, other than small molecule, regarding new modalities, CMC, or clinical trial materials you are doing by yourself, and in principle, you're not going to use outsourcing. Is my understanding correct?

[Unknown Executive]

Of course. Like virotherapy, where gene therapy using virus, others may have very advanced technologies, then we can use their resources or their power. With ventures in academia, we have a lot of collaborations recently. So initial production technologies may be available there, and the opportunity for us to use them. Even if it's in early stage, it doesn't mean that we are going to do everything just by ourselves.

[Unknown Executive]

Now we would like to entertain questions from the telephone. Now operator, would you please start.

[Operator]

Now we would like to entertain your questions. [Operator Instructions] There are no questions from telephone side.

[Unknown Executive]

So our microphone is back to the floor. Thank you very much. The person over there.

[Unknown Analyst]

My name is [ Cameo ]. In May 22, I believe, you announced about the soliciting other employees, who would like to go on the early retirement program and 600 is the planned number. And what about the current schedule or status or the safe 600 is satisfied or not?

[Unknown Executive]

As for the overall size, well we are still waiting for the applicants for that, it hasn't been fixed yet. Therefore, as long as we come to the fixed data or information about that, we are going to approach it.

[Unknown Analyst]

Another point, the number of the medical reps in Japan. You have 2,400 in Japan, that is the largest in this industry. But concerning the current market environment, product lineups, pipelines, what number do you think would be appropriate? Or what's the -- your target of the number of the medical reps?

[Unknown Executive]

Matsui is going to answer your question.

[Yukio Matsui, executive]

2,400 is the number we've announced, and current Astellas, that is an AABP, or toward Astellas Amgen, we have the number of the employees consigned and the current number of them are -- is 2,100. And impact of early retirement program would have certain level of the impact. And how this number is going to be changed overall, I cannot tell you the number now. But as pointed out, portfolio and the ways of the promotions, we consider all those factors so that we can establish the optimal organizational structure. Thank you.

[Kazuaki Hashiguchi, analyst]

Hashiguchi from Daiwa Securities. If you can answer quickly. I have 2 questions about the individual product. First, OAB. In the United States, in April, Betanis and mirabegron combination was approved. If you look at the sales situation, there seems to be not much impact. So regarding this impact, it's not so clear from outside, for the future, or is this going to be more tangible or visible into the future? Mirabegron, in this category, was a very important product for you. There are competitor products with similar MoA, one is approved in Japan, and that drug development is continuing in the United States and Europe. The company getting the approval said safety is a differentiating factor. And they seem to be very confident. So regarding the future competitive environment, how do you see this? That's my first question.

[Unknown Executive]

Matsui is going to comment.

[Yukio Matsui, executive]

First of all, you talked about the combination therapy. At the end of April, it was approved. And we started promotion activities gradually after approval. At the end of August or in September, patient research outcome -- for patient outcome data, we have been starting promotion of such data. The value of combination -- we'd like to deliver this to patients who need combination therapy.

[Kazuaki Hashiguchi, analyst]

And patient who need combination therapy, how many in the total market?

[Unknown Executive]

Not dozens of percentage of patients. So to patients in need, we try to deliver our data appropriately, to deliver the innovation and the value of the combination therapy to the patients.

[Unknown Executive]

The [ begron ] or mirabegron is something you are talking about. It's data 3, that's what we understand. But it's a competitor's product. So we'd like to refrain from commenting on this. But as you know, Astellas Pharma in the field OAB, has VESIcare care globally, and mirabegron history for a long time. We have trust and confidence from the physicians for this product as a whole. So we'd like to continue promoting this with confidence.

[Kazuaki Hashiguchi, analyst]

Next about Linzess. You had a revision to your forecast and sales have been reduced by half. The assessment by physicians seems to be quite good, according to my understanding. But there are some drugs with a similar indication. What's not going well? And what about your future prospect?

[Unknown Executive]

Again, Matsui would like to comment.

[Yukio Matsui, executive]

As you said, compared to initial forecast, sales are not growing so much. First, before it was -- before the additional indication, and the abdominal pain, or the abdominal discomfort, focusing on the -- such symptoms, we're trying to promote the product. Regarding the line extension or additional indication for the efficacy in constipation or defecation, we have not been able to emphasize this. In addition to the improvement of symptoms, the efficacy against the defecation is something we wanted to communicate to the physicians. And also as you know, when we had the additional indication, precautions for use is also mentioned from the perspective of proper use. We think it's very important for us, Astellas, so we wanted to communicate this to the physicians, and there can be differentiating points under the efficacy, which we'd like to communicate so that we can expand further. Unfortunately, regarding this year, it's not going to -- the forecast is declining. But we have a strong passion about this product, so we'd like to reinforce the points we have emphasized so that we can expand into the future. Thank you very much. Anything else?

[Fumiyoshi Sakai, analyst]

Crédit Suisse. My name is Sakai. About XTANDI. What is the main duration of administration in the U.S.? And PROSPER, you haven't really answered about that yet, but is it okay to take that outcome into consideration in the perspective of the labeling as well? What's your view about that?

[Unknown Executive]

Well, so far whenever we've explained, we explained something around that. We mentioned the number 10 to 11 months just for the reference information. But as has been pointed out, with usage of this drug in an earlier phase, duration of administration are changed or, of course, that has impact on to the patients who are supposed to use this drug in a later phase. So we are now revisiting this number. So what I could say currently is that for each set, for example in the case of PROSPER study, the duration of administration is 33 months, PREVAIL 17.5 months, AFFIRM 8.3 months. So, of course, these are clinical trials, so in a real-world, the duration might be shorter. But all of these durations, therefore, currently the mean is revisited. So it's not the right timing to comment about that here.

[Fumiyoshi Sakai, analyst]

Relating XTANDI, there are 2 more questions. First of all, when it comes to XTANDI, I tend to focus on the U.S. market. But what about EU market? The -- profitwise, I think it's impactful, but at this time, although it's quite small, you made the downward revision. But what kind of promotional activities you are going to do in the EU and now into the future, especially with the adding this positive result?

[Unknown Executive]

Thank you for your question. Well for EU, this fiscal year, compared to other regions, the growth level is not as high, and there's a very special situation for that. EU -- one of the EU5, Italy, their clawback payment is requested and we are currently negotiating about that with the government. And total amount of this clawback is large in its impact, so provision is added. That is the specific reason or the impactful factor in European business of XTANDI. And although it might be small over -- in overall, however, when it comes to Germany, that is the biggest market in Europe, the inventory is lower than usual. So though in short term, quarter-wise, those are impactful. And future for the PROSPER, that is your other question, as has been mentioned by [ Yasukawa ], this was approved next -- last week. But then like United States, when it comes to the Europe for each country, we have to do the price negotiation. Because of that, in Germany, at least for one year, our current price is the -- for the reimbursement, so we will register the promotional activities with using PROSPER data. However, when it comes to other countries, first, we have to do the reimbursement negotiation. And after that, we will start the full-fledged marketing activities. So compared to other countries that start-up might be gradual. However, continuously not only PROSPER, but also including the currently already available data at each country, focusing on the patient journey, we are going to reinforce the patient-wise approach, promotional activities.

[Fumiyoshi Sakai, analyst]

You covered most of my questions. And a last question from me. So new modality, regenerative medicine, you are getting into these days, and that is quite understandable. But when it comes to the price, what kind of assumption do you have? Or is it possible for us to take that into the model? Is that the medicine or health care activities? Or that is now fixed in Japan? In the case of the United States, that is the out-of-pocket therapy. So of course, there is no reimbursement. So the new program such as Rx+ concerning the net present value for the future, how have you taken the new approach into the consideration? Is there any referential information? Or of course, if you could explain something in December meeting, that would be useful. But we need some tips, because, for example, in the United States, CAR-T, how is it going to be reimbursed? That is not decided, like in the case of Novartis. So overall, what's your perspective about this?

[Unknown Executive]

Well, for us, what things coming to, is the retinal cell therapy, first. The patients at risk of the blindness, with this new approach, we might be able to secure their vision. So health care economy-wise, how we could do the contribution, because if the vision is lost then they lose the productivity, or if the care is necessary to be given for the blind people, then you might be able to offer this. So concerning those, we are going to do the price negotiation with the authority. Cell therapy, you inject the cell, and the -- for first submission, probably available data is just a 4-year or 5-year data.

[Fumiyoshi Sakai, analyst]

And how long those injected cells engrafted are survived in the body of the patients?

[Unknown Executive]

We don't know. Without such a clear-cut efficacy, the price is going to be decided.

[Fumiyoshi Sakai, analyst]

So for example, as long as efficacy continues, then every as paid or once you pay and the efficacy is gone, and for the next administration, the cells are injected with free of charge, depending on the diseases, the different models can be applied.

[Unknown Executive]

So price setting, I cannot tell you here. But in Japan, as well, and the EU, China, no countries have experience on this. Therefore, we would like to have a communication with the authority as early as possible. So you do the submission, negotiation, approval and initial pricing. That kind of conventional approach now works as early as possible, we'd like to open the channel with the authority so that we can do the negotiation from -- based upon the different scheme from the current one.

[Unknown Executive]

A person over there.

[Shinichiro Muraoka, analyst]

Muraoka from Morgan Stanley. Sorry to ask questions about XTANDI once again. I'm talking about the United States. In the second quarter, and plus 20% growth, but urologist ratio is increasing by 1 percentage point to 24%. So out of the year-on-year growth of 20%, PROSPER portion is less than 1% perhaps. Is my understanding correct or not?

As you know, by stage -- prescription by stage, how much is it?

[Unknown Executive]

Sorry, we don't have any viable data with confidence, so we cannot say anything definitive here. And so the duration, as you know, one quarter hasn't really passed, so we cannot comment just based on our assumptions. A leader may take time according to J&J. So basically, it's the same philosophy or thinking. Leader -- the same with a leader in M0, penetration, in M0 is going to take time according to J&J. Right. For us, we have speed. We are expecting ourselves, the same with a leader, I cannot comment.

[Shinichiro Muraoka, analyst]

Okay. And XTANDI in the United States in the second half? According to the revised forecast, if I calculate year-on-year, plus 2%, 3% according to the assumptions. You talked about the pricing risk. The price and the volume, how do you see this? Could you give me the breakdown?

[Unknown Executive]

I don't have an accurate breakdown which can be shared or published. But as you know, fourth quarter gross to net every year expands as the timing. So that is also factored in. And as you know, the so-called donut hole issue, this in the United States Medicare Part B from January 2019, the manufacturers' assigned rebate portion is going to be increase according to the expectations. So gross to net is going to expand overall. So please understand that this can be a major factor.

[Shinichiro Muraoka, analyst]

And also fezolinetant Phase II/b issue. PK/PD must be seen under many different doses in the studies. I hope that this is wrong, but you look at different doses, but those response was not so clear. So you're wondering, which one to focus on? You might have had such results or you find it difficult to interpret, I hope that's not really the case?

[Unknown Executive]

That's not the case. We had Phase IIa, and it was comparable. We have reproduced both data. But as we said, the protocol was very complicated. We have lots of data and dose-finding studies, so that's the key. Safety data, exposure level, based on this, we have to judge carefully. And then announce the results to you. So next year, in January, by then, we don't know in what format, but in one way or another, we are hoping to share the results with you.

[Unknown Executive]

The person far to the back.

[Motoya Kohtani, analyst]

Kohtani from Nomura Securities. I have a couple of questions. First, this is a very basic question. For example, Page 19, is what I'm looking at. Enfortumab vedotin, there is -- there are several products described but on top of those, you are many of first-in-class or something closer to the -- compared to other companies as well, you are very close -- you have many first-in-class. That's because you have capacity to incorporate the risk or to take the risks? Or why is it difficult for us to look at from the perspective analysis? You're licensing products and you established assay internally? It was very difficult to see clearly, what's ongoing here. Do you have any special specific process to enjoy such a capacity?

[Unknown Executive]

Well, I don't know how other companies process very well, so I don't know if we have a specialized process or not. But 2014 and afterwards, as has been mentioned, we've stopped the GCL. We wanted to identify some biology that is quite new and attractive. In that case, yes, we produced something ourselves or academia ventures are produced to a certain extent, and we just [ brushed the map ] or we licensed in, something completely -- something that is completed. So there are several cases. So some special or specific know-how to look at the reproducibility of what happened outside. Well, so we believe that we don't have something particular with that regards. If we feel risky or not sure, in that case, of course, we do retesting internally or we've done some contractor agreements. But -- for licensing, but in the middle we discontinued that for some cases. You pointed out we might be the first liner or first-in-class, but that's basically what we are aiming at. Unlike the low molecule, or small molecule products, in that case, we do the development. And for that compound, if there is a certain level of that defects, then you can compensate that with the second and third programs. When it comes to the gene therapy regenerative medicine, I think that kind of approach would not be viable or feasible. Therefore, we -- when we become first liner, we would like to take risks. Well, then, XTANDI. Well, has the [ L data ] that is M0 competitor. But they say that 50-50 when it comes to the prescribers, [ urol ] As well as the oncology. Well, there's smaller -- they started with a smaller.

[Motoya Kohtani, analyst]

But in the case of the Pfizer, is there any hurdle for the urologist?

[Unknown Executive]

Well, we don't see it that way. Astellas -- Pfizer, they have other urology products, so there was no impression that the -- they are behind. Further indications for both companies, both products, they are last resort, especially in the case of United States. First, with the oncologist and they're depending on the indications, urologist study to use this product in an earlier phase, and that number is increasing. So for urologist, those 2 companies not very good at in doing the business, or I don't see it in that way. Roxadustat, FibroGen in August conference call, they said in the beginning of 2019, they do the data analysis of [ 9000 ]. I think that they are doing -- talking about the same study. [ Pooled ], the data is quite important for roxadustat. And the -- one time before you didn't talk about the peak sales, but after finishing this, are you going to show us the peak sales forecast?

[Unknown Executive]

Yes. It is true that we didn't disclose that number in May, because at the time, we didn't come to the agreement with the FibroGen. The result of the pooled analysis, we are looking forward to it, of course. And also, there are 5 types of the patients and forecast price, there are various factors that we have to come to the agreement, otherwise we cannot do the joint announcement. After the pooled analysis, if we can do the joint analysis, that will be great. But we are not quite sure. Fezolinetant, the peak sales is 200 billion or 300 billion. And POC was established based upon my assumption. And then looking at the various data. This is very new. And neurokinin B is administered, and hot flash happened. And this drug can inhibit that. So what I think is that efficacy onset is quite quick. That is a question. And in 2018, that is the conference in Ogeda representative is participating and that the data of PCO (sic) [ POC ] is announced there. The estrogen level of the female went up, but that was reduced greatly. And this is a disease to [ have the overall disease ]. So are you going to do the announced development of this?

[Unknown Executive]

Well, that is a disease to have the pustules within the ovary. Well, so far, the data of the one week compared to the placebo, the hot flash, frequency was separate significantly and same is applied for the severity. And so the onset of the action is quite quick as you mentioned. For other indications, of course, the concerned mechanism, including the dose we've already announced, we are going to do the further scrutinization on the data and work on the developmental plan further. Thank you very much.

[Unknown Executive]

This is going to be the last question.

[Unknown Analyst]

[ Su Kota ] from Nikkei Bio. On focus area approach, I'd like to confirm once again, Mr. Yasukawa said it's too early to talk about the results. Just after 6 months, you take one modality to pursue more achievements one after another. So we understand it takes time. But as of now if your strategy is making good progress, do you feel that? I'd like to confirm that with you.

[Unknown Executive]

FA strategy is not targeting one thing. So by block, whether it's good or not, we make such judgment. Cell therapy is one block. 7317 has entered clinical and other cell differentiating -- differentiation process is also making progress. So I think this is going well. As for the cancer immunotherapies, we have 3 assays from Potenza which entered clinical program. So it's also going well. We have more to come. Because of the relationship we see, partners, we cannot talk about it. We have several of them. So relating to the good DNA vaccines, we made the announcement for cedar pollen, we couldn't get the efficacy we expected. So we'd like to wait and see the results from the studies in the United States of peanuts, Cytokinetics muscular diseases, we have some negative data. So it can be a single mode of action for a small molecule compound. So we will make a judgment on this. We have several in early stage. It's not really FA, but explanatory chunks of things. So depending on the progress, we'd like to share the information with you for the future.

[Unknown Executive]

It's now time. And with this, we'd like to close to meeting today. Thank you for coming, despite your very busy schedule. Thank you very much.