Astellas Pharma Inc

TSE:4503

Earnings Call Transcript 2020-Q2

[Unknown Executive]

Good afternoon, ladies and gentlemen. Today, thank you very much for coming to our meeting for us to announce our second quarter financial results. So let me go into my presentation without any further ado.

Page 2 is a cautionary statement as Ogata explained, so let me skip.

Page 3. This is the agenda for today in my presentation.

Page 4. This slide gives you an overview of the consolidated results on a core basis. Revenues increased to JPY 650.5 billion, up 0.5% year-on-year. Core operating profit rose to JPY 168 billion, up 8.9% year-on-year. Core profit were JPY 135.9 billion, up 8.9% year-on-year. Core EPS rose by 12.8%. Next page, please.

This slide shows the year-on-year revenue analysis. The top JPY 647.1 billion, and the 4 lines beneath, as you can see there, sales of major products increased year-on-year. XTANDI, XOSPATA, mirabegron, global products, had increased sales; and EVENITY launched in March and new product in Japan contributed to increased sales.

On the other hand, in the United States, there is the LOE impact of VESIcare and Tarceva in the United States, and termination of sale and distribution of Symbicort and KM bio product in Japan. This led to lower revenues. And this is within the range of what we expected in the initial assumptions. And the yen appreciated higher than we expected, so there was a negative impact on revenues. Therefore, as you can see above, we had a lot of increase in revenues. So the negative factor has been offset, so revenues increased in the end.

Next page, please. This page shows the year-on-year comparison of core operating profits. Sales revenue increased, so gross profits also increased. SG&A costs, with the growth of XTANDI in the United States, co-promotion fees increased. Other than the co-promotion fees for XTANDI, if you look at SG&A costs, there were new product launch costs for XOSPATA and EVENITY, and prelaunch preparation cost for roxadustat and enfortumab vedotin. We invested for growth. So we have been able to invest in the areas where we need to invest as initially planned. On the other hand, there were one-off factors to reduce costs, which we didn't include in the initial assumptions. As you can see in the middle of the slide, there was a reversal of those allowance related to a domestic partner. This led to a negative factor for SG&A cost. SG&A costs as a whole were almost the same with the previous year. R&D expenditure, 6 key late-stage projects have been progressing as planned. The progress rate is about 50%. Development costs increased compared to the previous year. We are expanding the investment into new modalities and technologies based on the focus area approach, such as regenerative medicine, cell therapy and immuno-oncology. So core operating profits increased by 9% year-on-year.

This shows the full base -- the full basis results. Up to the second quarter, other income were JPY 7.2 billion. Other expenses were JPY 13 billion. In the first quarter, we booked the fair value remeasurements on contingent consideration we booked at the time of the Ogeda acquisition as other expenses. In the second quarter, there was no major noteworthy expense booking. And JPY 32 billion were incurred in the previous fiscal year. This loss is related to expenses and restructuring costs. And this year, compared to the previous year, had less such expenses. So the operating profit were JPY 162.2 billion, up JPY 27.9 billion (sic) [ 27.9% ]. And profit were JPY 128.5 billion, up 23.7% year-on-year. EPS rose by 28.1%.

From here, I'd like to talk about the status of individual mainstay products. First, from the top, XTANDI. In the second quarter, JPY 195 billion sales were achieved, up 19% year-on-year. There's a penetration in earlier stages of prostate cancer, so sales are expanding steadily in each region.

Next XOSPATA. In December last year, in Japan and the United States, this product was launched. Up to the second quarter, JPY 5.7 billion sales were achieved. In August, in the current indication, in the NCCN guidelines, XOSPATA has been recommended as a Category 1 product with the highest level of evidence level, and Phase III ADMIRAL study data was published in New England Journal of Medicine. With that, we are trying to promote the penetration of this product's features to hematologists and oncologists.

At the bottom, you find mirabegron. In the second quarter, JPY 78.8 billion sales were achieved, up 15% year-on-year. In each region globally, we are achieving a double-digit growth.

In order to increase disease awareness, we are continuing the disease awareness activities. Based on the MOA with mirabegron, we are trying to emphasize the great balance between efficacy and tolerability. We are establishing the positioning as a first-line therapy.

Next, XTANDI full year forecast, the data slide. Based on the trends up to the second quarter, we are revising upward the full year sales forecast of XTANDI. Initial forecast were JPY 364.2 billion, upwardly revised by JPY 19.7 billion to JPY 383.9 billion. We're expecting a 15% growth year-on-year. You can see the level of revision for each region on the right-hand side of the slide. U.S., established markets, international we made an upward revision.

In the United States, with the indication of M0 CRPC we're exceeding the initial sanctions and the new prescriptions are expanding, particularly the volume growth exceeded the initial forecast at hospitals and public medical institutions. In the established market, in each region, we are exceeding the initial assumption that prescriptions are expanding. Particularly in Germany, prescription is expanding in M0 CRPC. In Spain and Italy, M0 CRPC volume is expanding.

In the international markets, we obtained the indication of M0 CRPC in Brazil, Colombia. And South and Central America and Russia, the volume is exceeding the assumptions and expanding. In the United States and established markets, positive factors in the first half are expected to continue in the second half according to our forecast. As for the ForEx rate, we're expecting the yen to appreciate. So globally, we had an upward revision of about JPY 20 billion. In spring last year, we announced a JPY 400 billion to JPY 500 billion peak sales range for XTANDI, and we are going to reach this range in very soon. For the future, in the Chinese market, we're expecting sales as well. This is going to be a new driver for us.

Next page. This is about new products that are in the Japanese market. On the right bottom, you can find 8 new products in Japan. The total sales of new products were JPY 27.8 billion in the second quarter. EVENITY was not launched at this time of the year previously -- in the previous year. This is the main factor for increasing sales. It has a dual effect to promote bone formation and suppress bone resorption, and its unique MOA and convenience are highly valuated. In the second half, this tendency is expected to continue. So in FY '19, we're expecting JPY 45 billion initially. But based on the trends, up until now, we made an upward revision. We're expecting JPY 60 billion sales.

In spring last year, we said that with the new -- 8 new products in Japan, we're aiming for sales of more than JPY 100 billion. We are approaching this range, so we are becoming more confident to achieve this goal.

This is the last slide before talking about the revision and other points we considered. On top, if you look at the top bullet point, Page 8 to 10, we used to explain XTANDI, mirabegron, EVENITY and other new products in Japan are exceeding the initial forecast on a full year basis. And there are one-off positive factors we didn't include in the initial forecast. The transfer of 3 products in Asia to Daiichi Sankyo. This is going to be booked in the second half. And also, there was an upward revision for Prograf in the United States. Because of the shortage of the generics, regional Prograf demand has been rising. In the second half, the situation is expected to continue.

Next, expenses. As I said at the beginning, there was the reversal of loss allowance related to a domestic partner in the second quarter. Compared to the first half, there are several factors leading to decreasing sales in the second half. LOE impact of VESIcare and Tarceva more in the second half. Termination of sales and distribution for Symbicort and KM bio products, we will see the impact more in the second half and into a price revision in October 2019, and lower sales prior to NHI price revision in April 2020. And also, including the ForEx impact, we are revising our forecast on a full year basis.

Next page, please. First, from the revenues. We made an upward revision by JPY 32 billion to JPY 1.256 trillion. Expenses, including R&D expenditures, were also reviewed. Core operating profits are revised upward by JPY 24 billion from the initial forecast, and we are expecting JPY 264 billion. Core profit is expected to be JPY 214 billion, up JPY 20 billion. Full base operating profit would be JPY 263 billion, profit would be JPY 210 billion.

Next, I'd like to talk about our initiatives for sustainable growth, Page 14. Let me explain our initiatives in China we are focusing on right now. There are 4 oncology in development products, including XTANDI and fezolinetant with a big market potential. There are several development programs in China in late-stage right now. In order to promote the development of these programs without any delay, we will spend sufficient resources. We're expecting approval of XTANDI within FY '19. In the late 2020s, we are expecting the growth to reach JPY 30 billion or so. The conditions for this, we should be able to get reimbursement, and the ongoing studies should be all successful. So these are the conditions to be met. And also, all late-stage projects should be successful. Then in the late 2020s in China as a whole, we can aim for JPY 200 billion sales in China.

This is the progress of the 6 post-POC projects. I'll explain the details on the next pages. Sorry for the busy slide. The underlined portion, the update since the results announcement in July, top left, enzalutamide. Let me start with there. M1 HSPC indication was filed in Japan, U.S. and Europe. In the United States, this is designated for priority review. PDUFA date has been set for December this year. Regarding China, in October, we submitted sNDA for M0 CRPC additionally. And also regarding the indication M1 HSPC, we started Phase III study. In the middle, in the top column, gilteritinib. After Japan and the United States, in Europe, we got approval in October in Europe.

Upper right, enfortumab vedotin, I will explain the details later on. So let me skip here. Next, in the bottom row, the left side, zolbetuximab, the 2 Phase III studies and enrollment is making good progress. In the middle, roxadustat. In September, in Japan, we obtained approval for the indication of renal anemia in patients on dialysis. Right now, we are negotiating the drug price. Additional indication of chemotherapy-induced anemia in cancer with treatment in Phase II study. In right bottom, fezolinetant. We started Phase III in U.S. and Europe in patients with menopause-related vasomotor symptoms. We are starting on the enrollment in summer for long-term administration. So we made a very good start. Also in China to start Phase III study, we submitted IND to the authorities in China.

So here, I would like to talk about the updates of the development of enfortumab vedotin for mUC, metastatic UC. So in this slide, you can find the treatment status of metastatic urothelial cancer, and also, you can find the targeted patient subpopulation and the clinical trials currently ongoing for this product. On the right up, you can find the platinum and PD-1/L1 inhibitor pretreated mUC patient study result. In other words, for these patients, there is no currently approved treatment. Phase II study EV-201 cohort, one data is used. In the end of July this was filed, and this time, priority review status was granted by FDA, and 2020 March is set as the PDUFA date.

On the -- toward the left, you can find the first line therapy status. This is the first Phase EV-103 study for the treatment line patients in the enfortumab vedotin and the pembrolizumab combination cohort data was announced at ESMO that took place last month in Barcelona. From the next pages, I'm going to talk about that.

The high ORR was observed in 32 patients out of 45, which accounts for 71% in enfortumab vedotin plus pembrolizumab cohorts in cisplatin-ineligible patients with locally advanced or metastatic UC.

Next slide is showing the reduction rate of the tumor size. Basically, this is the baseline changes of the tumor size. And horizontally, you can find the individual patient's data. And from the right to left, this is lined up in the order of high tumor reduction. 93% of the patients experienced the reduction of tumor size. Toward the bottom, those with the dots, those are the patients or the cases, in total 32, in whom the ORR was observed. The yellow indicates the -- well, this color indicates the PD-L1 expression level. The PD-L1 expression is lower than even the treatment, exacerbation will take place. But in the combination of enfortumab vedotin, regardless the expression level of PD-L1, efficacy was observed.

Next page, please. From here, you can find the summary of the safety data, grade 3 and above adverse events, increase of the alopecia, skin rash, and also peripheral neuropathy were observed, but all of those are expected. In this study, or before this study, 201 study took place. That is enfortumab vedotin monotherapy treatment. So this side effect profile is equivalent to a combination. Therefore, with the combination, new side effects or further enhancement of toxicity were not observed at all. Based upon this data, together with the partner, we are currently considering the programs for the Phase III study. And when time allows. I'm very happy to introduce that to you.

This slide shows the number of the urothelial cancer population per year. Out of 56,000 metastatic UC, those are subjected to the medical treatment as first line is totaled 49,000 in [ J ], 7 total. When we announced our strategic plan last year, the expected peak sales of enfortumab was going to be around JPY 50 billion to JPY 100 billion. But at the time, first line number was not included. We consider only about the second line and afterwards patients. Including our first-line treatment patients, the number of the patient is doubled. And also, we can expect longer duration of the therapy. However, in that case, that would be the higher pressure onto the pricing in many countries. Concerning all those factors, currently for the potential sales sizes at peak is under the scrutinization. Currently, so far, JPY 100 billion to JPY 200 billion range is what we would be expecting to be increased.

So next is the roxadustat, the development status in Japan. As has been mentioned, in September, we received the approval for renal anemia in patients on dialysis into September. The price is currently under the discussion. We are expecting the product is going to be launched in this November. The product name is Evrenzo. The MOA of this drug is different from that of current standard of care such as ESA. Rather, it improves anemia with the activation of HIF, or hypoxia-inducible factor, which received a Nobel Award in physiology and medicine. For those on non-dialysis, based upon the currently ongoing clinical trial results, we are thinking about the supplemental NDA submission in Japan.

From here, I would like to talk about focus area approach. This slide shows the immuno-oncology pipeline that is the one of the Astellas primary focus. So for this immuno-oncology pipeline, details is going to be explained in the R&D meeting expected to be held in this December, 10th of December. So please expect on that. And today, however, out of this, I would like to make a bit of the expression about aAVC, or artificial adjuvant vector cell. This is the new and potential cancer platform that we consider. So there's a high expectation on that. And with RIKEN, we came up with the license agreement for the joint research. On the right bottom, you can find the schematics of the mechanism of activation of aAVC. aAVC is established using allogeneic cells by carrying the following: target tumor antigens, CD1d and alpha-GalCer. This alpha GalCer is alpha-Galactosylceramide. This is a type of sphingolipid. With the administration of aAVC, the alpha-Galactosylceramide over the aAVC activate the natural killer T cell. This activated natural killer T cell attack the cancer cells. That is innate immunity. An activated natural killer T cell not only attacks cancer cells, but also aAVC cells as well. And after that, within aAVC, cancer antigen is released, and the released cancer antigen is presented at the dendritic cell, and there, those are fragmented and expressed over the dendritic cell surface, and that is recognized by T cell. And those are matured as the antigen-specific killer T cell that attacks the targeted cancer cells. This is adaptive immunity.

And also, some of the antigen-specific cytotoxic T cell differentiating long-lived memory T cells. When tumors relapse, the memories T cells will become antigen-specific cytotoxic T cells and attack the tumor cells. So long-term effect as part of the adaptive immunity is something we are expecting. The flagship compound here is ASP7517, and this is aAVC loading going 1 -- WT1, a tumor antigen highly expressed in AML. And currently, Phase I study in -- Phase I/II study in AML and MDS has got started. With the -- exchanging the cancer antigen, other cancer can be also targeted. And in reality, multiple aAVC program where that -- other than WT1 are loaded under the preclinical study or research phases.

This is another focus approach. This is ASP1128 category, so within the mitochondria biology. Mitobridge is the company who has the specialty in here. After some of the joint research for a couple of years, we acquired Mitobridge. And with this, we can now conduct the multiple programs for the kidney as well as the muscles. So mitochondria biology is one of our 4 primary focus. This ASP1128 is a selective PPAR-delta modulator. As you can find at the left bottom, DNA transcription is modified with the administration of this. And those 3 physiological and 2 pathological activities will take place. So for example, the beta oxidation improvement, mitochondria biogenesis, glucose oxidization, reduction of inflammation, reduction of fibrosis. So this is something we can utilize for the clinical setting. And based upon that, we selected AKI, or acute kidney injury. This is the very much of the disease that leads to the increased morbidity and mortality. And AKI occurs in up to 30% of cardiac surgery patients and 2% to 6% of these cases require dialysis. And no approved therapy is available for either preventing or treating AKI. Currently, the Phase II clinical trial was conducted, targeting the -- those under the CABG or the valve treatment. And with this, we currently are able to discuss with the FDA because this is designated as a fast track, therefore, we believe that we can conduct the very swift development.

And those -- although it's not written here, today, we published the press release that is about the agreement with the Pandion in the United States. Primary focus that we have is 4, as follows: cancer immunity, mitochondria, regenerative medicine and ASIM, or antigen-specific immunomodulation. And we came up with the agreement of -- with Pandion with regards to the technology or ASIM. And this exclusive collaboration utilize Pantheon's platform to discover novel tissues specific immunomodulators for type 1 diabetes and other autoimmune disease targeting pancreas. This is still such basis, so I cannot tell you the details. But at the appropriate timing, we would like to update you.

So these are the key events expected within this fiscal year, and we would like you to keep your eyes on our progress on this.

We'll be using the following 2 slides, I would like to introduce you the update of Rx+ program. In the second quarter, Rx+ business commercialization is considered. And for that purpose, there were 2 collaboration was agreed. First of all, Health Mock Lab, a virtual framework for industry academia collaboration with the Oklahoma City University and Tokyo University of the Arts, that has already launched. As part of the Rx+ program, we are also aiming to create and commercialize new digital healthcare solutions. And this digital healthcare solution has different approach from the medicines. Therefore, the problems not easily solved by the medicine can be solved. But there is the problem of the continuation of the usage. That is considered as [ net ] new. So in order to solve that, we are expecting the function of gamification. With -- using the technology of gamification, we would like to introduce a new healthcare solution, which can be continued with pleasure. So this kind of a healthcare solution idea is continue to be generated and commercialized. That is the capability we are expecting.

Next one is the joint research and development agreement with the Iota Biosciences, Inc. This is the ultrasmall implantable medical devices. And this is implantable devices that can be implanted into the clear sight of the mechanism action. Therefore, efficacy is quite clear. And also, the systemic side effects sometimes observed with the medicine can be expected to be smaller. But for the implantation, it usually requires an invasive procedure. But this Iota Bioscience, specific components can be generated. Therefore, the -- even for the implantation, the -- it is minimally invasive. And also, in some cases, it can be also minimally explanted.

This is where that we are expecting the treatment for the body with the electric signals. And we are going to consider the detailed specification so that we can come up with a plan of the pre-clinical trial. And also we want to consider and which actually is their usefulness there.

Next is the capital allocation. There was no changes about the policy priorities to the investment for the business growth area. And we introduced to you the new agreement with Pantheon and also iOS. And we are always looking forward to such kind of new opportunities of the investment. And we are expecting the dividend of JPY 40, that is a JPY 2 increase, although we are in the forecast of the profit decrease. And as has been announced today, we are going to do another share buybacks that is limited to the JPY 50 billion, 32 million shares. Duration of the acquisition is from November 1 to 31st of January. We are going to continue to work for the improvement of the capital efficiency and shareholder returns.

This is the last slide. As has been mentioned, we are going to plan to have our NDA meeting, focusing on the immuno-oncology on the 10th of December. The -- we acquired Potenza, which came up with the many development candidates for immuno-oncology; and also like Tottori University and other potential asset is going to be introduced there. So we expect as many participants will be there as possible. That's all. Thank you very much.

[Unknown Executive]

Thank you very much. We now would like to take questions from the audience. If you have a question, please raise your hand. We will name you. The participant in the second row, please.

[Hidemaru Yamaguchi, analyst]

I'm Yamaguchi from Citigroup. Sorry for detailed question to begin with roxadustat. Drug price. It's outside of the rounding. Can you go out of the rounding? Is it going to be within the rounding? It seems that you cannot answer this question, but still allow me to ask this.

[Unknown Executive]

[indiscernible]. We know there are such discussions. Roxadustat is a new therapy becoming available, so discussions are occurring. So we know that. And [indiscernible] specifics are going to be discussed, and it's about the bundled payments, and we cannot comment further than that.

[Hidemaru Yamaguchi, analyst]

My second question. XTANDI is doing well. You made an upward revision. For the future, PROSPER had a lot of impact this time. And after this, in December, you have ARCH, ARCHES and EMBARK, one after another. You have shown us numbers from before, but what is the impact of PROSPER right now? And EMBARK and ARCHES will also will come. What is going to be the impact on the target population? What is going to be the size. Could you explain?

[Unknown Executive]

In total, as Yasukawa explained earlier, JPY 400 billion to JPY 500 billion is the range this product is aiming for in the United States. The number of patients we are assuming, we don't have an accurate figure, but according to assumptions, there's a certain number we have on the mind. M0 patients, 30,000 patients. That's our understanding. M1 HSPC, a little more than 30,000 or 35,000 patients according to our understanding. So it's in the stage of the regulatory discussions, so we don't know clearly, but we'd like to establish our positioning there, so that it would contribute to our sales. That's our expectations.

And In ESMO -- sorry, XTANDI. Of course, the -- price-wise, the increase in the U.S. is the biggest. But percentage-wise, there is growth in international market like Latin America and the Middle East. And there, the growth rate was miss -- expected. So rather than thinking about just the specific types of the patients, the treatment itself is not really predated. There are many cases where the prostate cancer is discovered in the later phase. The United States or the Western European countries are different. Therefore, we need to also take the different approach for the market development for such new markets.

[Hidemaru Yamaguchi, analyst]

Now for enfortumab vedotin, you are thinking about the line change. But as discussed in the conference call, I think you've done the development for the other cancer types in the past. Are you thinking about the development for other cancer types?

[Unknown Executive]

Yes, we just started the trials.

[Hidemaru Yamaguchi, analyst]

What specifically have you started?

[Unknown Executive]

You're talking about enfortumab vedotin, right?

[Hidemaru Yamaguchi, analyst]

Yes.

[Unknown Executive]

For that, currently, there are several placements that is ongoing for some of the cancer types or tumor types. Active full expressed cancers, for those, or how we should pursue the development, that is under the consideration together with the partners.

[Hidemaru Yamaguchi, analyst]

Let me ask you once again, cost reduction. Next fiscal year is a midterm, and probably this year -- will JPY 20 billion -- JPY 20 billion including cost, that is going to be surfaced in the next fiscal year. But the overall environment has been changing. Cost reduction effort, that is not really mentioned. But throughout the next fiscal year, on track, you are toward the target of reduction of JPY 20 billion?

[Unknown Executive]

In the beginning, we came up with a number of JPY 30 billion. And this April, at the financial announcement, this fiscal year, we mentioned that we can achieve about 40% of that. And with that progress level, we are going as it's been planned. So that our target, original target, JPY 30 billion cost reduction, we believe we can achieve that target.

The number I mentioned a little while ago, if I refer to the material, immunotherapy, [ see ] new patient in the United States, 20,000 and 1 HPC, 38,000. That is the number of the new patients expected in the United States.

[Unknown Executive]

Next question? Person in the fourth row.

[Akinori Ueda, analyst]

Goldman Sachs, my name is Ueda. First, I'd like to ask you questions about XTANDI, this time in the United States. On a local currency basis, regarding the growth, it's based on the actual demand or any impact of the inventory or the stock. Could you talk about the quarterly trends? And the business is good, particularly because of M0 as a focus. Any other factors behind the good business? Could you comment on this?

[Unknown Executive]

Thank you for your question. First of all, particularly the inventory or special purchasing patterns, did we have such factors? We haven't recognized such factors in the United States. So we think this is based on the actual demand. Then PROSPER data was published. And other than that, what were the factors behind? We have PROSPER. The company as a whole is trying to introduce the benefits of the PROSPER data. And on top of that, we are not promoting this, but at academic society activities this year at ESMO, [ uni ], and also at ASCO, Internet data and ARCHES data were published or announced or presented. And XTANDI, there seems to be some trust or confidence in the XTANDI as a brand. We are not promoting, but overall, a sense of trust and confidence in this product has been enhanced. That is working positively for us according to understanding.

[Akinori Ueda, analyst]

Additional question on XTANDI. What's the ratio of the prescription by urologists right now?

[Unknown Executive]

By urologists, compared to the previous quarter, there is a further increase urology doctors. 4,000 doctors in the United States are prescribing this. We confirm this. Percentage-wise, it hasn't changed much, around 26%, according to a report from the United States.

[Akinori Ueda, analyst]

The second question is about China.

Greater China. The trend is increased revenue. I think there is no big change about that. But you explained about the development and also enhancement of the regulatory affairs-related matters. So at the timing of the pipeline products are launched, they are going to accelerate your activities there?

[Unknown Executive]

Well, mainly this year, yes, we are focusing on the activities for the development and also regulatory affairs. But after that, external affairs is also needed to be enhanced in terms of the function to have. Sales-wise, we're looking at the progress. We are going to think how we are going to do.

[Akinori Ueda, analyst]

So this JPY 200 billion as the target set as this, do you have any specific landmark events you are thinking about to accelerate your activities?

[Unknown Executive]

Well, the first one is XTANDI, of course. And the second, considering the nature of the Chinese market, big turning point is IMAB, our gastric cancer drug. Success or failure, that's going to be a very big turning point for us.

[Akinori Ueda, analyst]

The last question, Rx+ program is a question -- so you pointed out a gamification as well as medical devices. As a pharmaceutical company, you -- what kind of value do you think you could provide for this kind of modality?

[Unknown Executive]

Thank you very much. First of all, gamification. Gamification itself, well, if it's a patient or a pre-disease patients, whatever the case is, so that there are things, so the treatment can be continued, we can make use of the gamification or gaming. Because usually, you stop after 3 days, but with the game types of the fun, you might be able to continue. Well, at this point in our business, we can learn about the types of the patients and also the pathology and also where should be changed. So considering that, we developed the drugs. Therefore, that kind of approach can be made use of for the medical device development as well. Iota collaboration for that as well, we are saying the same thing. They have technologies, but where those technology can be used or how the safety and efficacy can be proven? Because iota is a smaller technology company, therefore, Astellas' strengths can be made useful in that area.

The person in the third row, please?

[Shinichiro Muraoka, analyst]

I'm Muraoka from Morgan Stanley. About XTANDI, I want to ask more questions. The second quarter, 27%. You said this is the -- based on the actual demand in the first quarter, 18%, 6 point for the enterprise and actually it's 12%. And this time, it's 27% vis-à-vis 12% so you have that much increase. Based on the volume, it's growing. That's our understanding. So this momentum is going to continue in October-December period and beyond.

You said 27% for the volume, right?

[Unknown Executive]

Quarter-on-quarter, 13%, I think. I said year-on-year, 22 -- or 21, rather. 21, sorry. Basically, in the second half, the volume I think is going to continue to grow. But as you know, in the fourth quarter, as usual, Medicare and other coverage gap issues, a rebate would be incurred every year. In the fourth quarter every year, it's not going to grow on a value basis. And that's an event we are factoring in and forecasting. So based on this, we had the revision of our sales forecast.

[Shinichiro Muraoka, analyst]

HSBC approval positive impact for January-March have been factored in?

[Unknown Executive]

Yes, we factored this in, but as I said -- we said before, at the end of the year, we're expecting this at the end of the year, so 3 months. So as of now, we are not expecting great expectations here. And mirabegron? Mirabegron is what we are paying more attention to. In Japan, it has just started.

[Shinichiro Muraoka, analyst]

But in the U.S. market, mirabegron, within the remaining life cycle, mirabegron, how much impact and how do you see it in terms of the competition?

[Unknown Executive]

Mirabegron approval would be in 2020 or 2021, so more than a year to go. In that sense, beta-3, a new drug for beta-3 to expand, so it did work positively for us in that respect because of beta-3. But are we going to lose our market share substantially because of this? Given the current circumstances in Japan, we don't think it's going to be a major negative factor for us as of now.

[Shinichiro Muraoka, analyst]

The last question on roxadustat in Japan. Japanese level, if you look at carefully, the thrombotic risk is highlighted. Marketing-wise, is it likely to be a big negative factor or the doctors are not really so much -- paying so much of the attention onto it?

[Unknown Executive]

As pharmaceutical company, of course, safety and the communication about the safety is one of the most important things, so we earnestly communicate that. With having the wording then switch from Isa and new approach, there might be the negative impact, but that is already taken into the forecast that we have currently.

[Unknown Executive]

Person in the second row, please?

[Motoya Kohtani, analyst]

I'm Kohtani from Nomura Securities. First question, which page was it? I don't remember, one-off expense items. Page 11, I think. Could you explain again the size of each. If it's difficult to explain that way, how much in total? Could you explain? That's my first question.

[Unknown Executive]

Yes. Here, transfer of 3 products in Asian region to Daiichi Sankyo. Just a moment, please. JPY 9.6 billion. Upward revision of U.S. Prograf, it's difficult to quantify this because regionally, generics had a shortage in the U.S. market. And another manufacturer was trying to fill it out as well as other generic manufacturers. If this -- still there is a shortage, Prograf would be used. Volume-wise, we have certain assumptions, but in which segment this is going to be used, it's difficult to forecast. In terms of pricing, there are uncertainties. At any rate, the current forecast or outlook, around JPY 6 billion, in our view, approximately on expenses. 2016, we had a domestic partner. Based on the agreement, we paid expenses on their behalf, and it could become accounts receivables, that's why we had an allowance we booked. And looking at this situation of the business on the financial status of the partner, we reversed all the loss allowance amount. And JPY 8 billion has been the reversal of loss allowance amount.

[Motoya Kohtani, analyst]

What about the China, JPY 200 billion toward the end of 2020? So how now the format be impacted? And China XTANDI, I don't know when it will be the expiry of the patent. Probably just like other areas, it's going to be like a 2029 that is going to be expired so just to really wonder, XTANDI grows but patent expired and IMAB comes in, there would be the fluctuation about the business result? Or do you think it's going to be a linear growth?

[Unknown Executive]

Well, first of all, Harnal 4 plus 7 impact is most strongly received by this product. So in these terms, rather than maintain this business with so much of the -- resource rather, or maybe VESIcare, but to make a market expansion is where we put more resource. So that resource allocation has already got started. Prograf and Advagraf, that is also the -- likely to be impacted. But just like other areas for this drug, there is a very subtle impact onto the [indiscernible] concentration. So the business is unlikely to be reduced drastically, just like the case of Harnal. So current driving products are going to be reducing sales gradually. However, on the other hand, XTANDI and other -- these products like you see on the screen, if they are proved according to our -- in line with our expectation and also future main products mainly for the oncology segment. And RDA is revisited once in 2 years. Oncology product is reviewed once in a year. Therefore, in good timing, if the list addition for [ MRDA ] is taking place, and that is a really favorable timing for us. Then just like Yasukawa mentioned, for example, zolbetuximab, epidemiology-wise, because in China, there is relatively many gastric cancer patients, that also contribute to the push up of this JPY 200 billion. That's how we are expecting today.

Peak forecast for each product is now going to be disclosed within this meeting today. 28 to 30 is going to be the timing of the product sales hits the peak. Of course, we need to do the negotiations with the Chinese authority, what kind of studies are necessary? How long it will take for conducting those requested studies? And also the approval review process that is also not fixed so there's uncertainty there as well. So the data is going to be disclosed at appropriate timing. So, so far, it's -- that's all that we can tell.

[Motoya Kohtani, analyst]

What about the Chinese patent situation, XTANDI? Just like other areas that patent is going to be expired in China as well?

[Unknown Executive]

On the same timing on other areas, well, 2026 is the timing of the expiration of the XTANDI patent. And you see on Page 24, we explained at the end, this is a very interesting idea. And according to what to do is a hot topic in immuno-oncology, but I have a concern, you see, if I search, I find information about RIKEN researchers and nothing else. If you just do this in Japan alone, I wonder, but also in the United States, this kind of a research is ongoing. Are there similar ideas like -- including virus in the -- antigens in the virus to have active -- the double activation in other regions as well? This is not a virus. But this is a cell from the kidney. So that's a correction. And how many similar technologies? We are not in a stage to comment on this. So we will also study more so that we can respond to your question in the future.

Here, we'd like to entertain questions from another site. Then we will take a question from the audience first and then take a question from those who are participating through the teleconference.

[Fumiyoshi Sakai, analyst]

I'm Sakai from Crédit Suisse. Regarding new products, I have 2 questions. On roxadustat in China, the questions. EVENITY, in the initial shipment, there was no impact. Steadily, you're growing up to the second quarter. In Japan, patients at high-risk of structure was the indication. I thought you are making a careful start, but collaboration with Amgen would be -- is successful. That's one factor. Could you explain what is happening specifically in the Japanese osteoporosis market? Could you explain?

[Unknown Executive]

As you say, this is exceeding our initial assumptions, and we are penetrating in the market at a rapid pace.

[Fumiyoshi Sakai, analyst]

The target patient population, who should use the product? Have they changed?

[Unknown Executive]

No, they haven't changed, according to understanding. As you pointed out, patients at high-risk of fractures and also, as you know, there was a warning wording, which was added. As a pharmaceutical company, Astellas, what we try to do first is to communicate the risks appropriately to the doctors. Still, if the doctors think it's necessary, they should use the product to the patients. This is what we are trying to ensure, but still there is a dual effect and the convenience once monthly. The convenience of this product when we make a sales forecast, as you pointed out, we placed importance on safety first, so it must be used in the appropriate patients. We are expecting a slow uptake. But regarding the profile of this drug, the speed was faster than we expected. The target total patient population hasn't changed, but the degree of penetration was faster than we assumed in the prescription. That's our understanding of the current status.

[Fumiyoshi Sakai, analyst]

Gilteritinib, ADMIRAL study result, I haven't read all of that yet, but the top line-wise against the service, it is effective and also OS is good. So I think the result was really good. Based upon such a result, what do you think about the current potential of this drug? Do you think the potential will be further improved or increased or such kind of result is already expected to calculate the Epic sales? I know that much of Phase III is ongoing and probability of success is also increased, I believe. What you think?

[Unknown Executive]

Thank you for your question. Relapse refractory. So in the area of the salvage, yes, the result is what we've expected. And so therefore, the previous level is within our expectation but the bigger market is a usage before that the relapse refractory level. And the clinical trial there is still ongoing. So the result is not available yet. And other companies are also developing in that area as well. So as of now, for total potential, we do not think the current information is now sufficient enough to change the expectation, I think, kind of level is already observed level.

[Fumiyoshi Sakai, analyst]

[ Stages ] start in China, AstraZeneca has -- the right was transferred to AstraZeneca, I know that. But so many patients are enrolled in the study, and the result is good. That is my understanding. But within this, your greater China strategy. What do you think about the product right in China? Do you think with the FibroGen, do you still have the room to negotiate about the product right in China. What's your current relationship with that company?

[Unknown Executive]

Well, that -- with that product? Well, there is no plan currently to renegotiate about the product right with AstraZeneca and FibroGen as well.

Now operator, please?

[Operator]

Any questions from the conference call participants? We want to entertain questions from via the teleconference. [Operator Instructions]

I think there's no one who wants to ask a question, so back to the meeting room.

[Unknown Executive]

Anyone with a question? A person in the second row, please.

[Seiji Wakao, analyst]

Mitsubishi UFJ Morgan Stanley. My name is Wakao. First, I'd like to ask you a question about XTANDI. XTANDI is doing very well. They're competitive products as well so the impact of competitive products, I'd like to hear your views. Darolutamide from Bayer, for example, BBB penetration, so that's seen as -- toxicity is less according to them. Is this going to be a competition for XTANDI? Or BBB penetration is not a concern in the clinical setting? So you think it's not going to penetrate so much? What do you think of the competition?

[Unknown Executive]

In the United States, it was approved in July or August. Just a few months have passed since the approval in the U.S. So we are still watching the situation. If you look at the drug profile, the points you have mentioned could be what we don't -- we may not have. But if you look at our data and our history, regarding the drug, we think there's a difference in the -- just on the confidence into the product. So we'd like to monitor how this is going to be used in the clinical settings, but we don't think that it's going to be a major threat to our product as of now.

[Seiji Wakao, analyst]

XTANDI, the idea, when they're administered, the CNS brain toxicity is not a big concern upon administration? Or is this actually an issue?

[Unknown Executive]

XTANDI side effects, when you use XTANDI, the biggest concern or question is fatigue. BBB penetration leading to CNS adverse events, it's not a major issue, at least as far as I know.

[Seiji Wakao, analyst]

I see. My second question, roxadustat. Roxadustat, the original or the potential of the developer in the beginning is not only for the nondialysis but the dialysis patients can enjoy the benefit of this drug. For nondialysis, we might be able to dig up the further new patients. Concerning those and also concern the formulation and also the data, the non-dialysis phase might be the higher -- highly potential for this drug. Is that what you think as well? Or those on dialysis with the currently available data you think there are factors that this drug is going to be widely used for that kind of patient as well?

[Unknown Executive]

Well, at least in Japan, as you know, indication this time is the -- those -- in EMEA patients on dialysis and non-dialysis going to be next year and afterwards. Therefore, here, we would like to establish the positioning of this drug for the patients on dialysis. But as you mentioned this drug, this is the oral medicine. This compared to ESA, this is one of the biggest benefit. So in that perspective, we think that there's a potential in non-dialysis as well. While the number of the patient was currently the dialysis patient who requires the treatment of renal anemia is around 290,000 in Japan once again. And nondialysis, 370,000 or 380,000 and duration of the treatment. And considering all those factors, in total, at least in Japan, probably the number of the patients is a big increase -- a bit increased in non-dialysis phase or area just a little bit. So there is the possibility or potential for further expansion of the usage in nondialysis that is highly likely.

[Seiji Wakao, analyst]

7517, aAVC acquisition next, I want to ask you. WT1 is a target. And WT1 in the past, it was sort of trendy -- trend, but it is not really, so there's -- why WT1 now. Probably RIKEN has started with that, but why WT1 now? And you've tried this with the various antigen, but the most appropriate antigen, what is it? Or whatever antigen is adaptable or some size restrictions or the [ release ] up is better or encapsulation is better. There is. So there might be the appropriation action type. Do you have any idea about that?

[Unknown Executive]

Well, currently, this is under the research still, so which is good. It's not something we can tell because we don't have data so we want you to wait for that information. However, the areas -- or the cancers were that the 5 years level is low or treatment is not available, that is where we would like to make use of this technology. And I cannot tell you the history why WT1 is the first. I would rather refrain from making a comment about this.

[Tatsuyuki Arai, analyst]

From Merrill Lynch, my name is Arai. I have 3 questions. First, the overall question. In 2018, you announced your strategic plan. What you are trying to do, have you been making progress? There's a better visibility of growth, enfortumab vedotin, growth story in China, fezolinetant, and there are various evaluations. But still, the patent expiry with XTANDI, now you have a possibility in sight to overcome that issue with your pipeline? Or do you need to have a new drug or purchase from outside to overcome the patent expiry of XTANDI? What's the current outlook?

[Unknown Executive]

2019 is going to be the bottom year. As we have been continuing to say, since a few years ago, VESIcare, Tarceva, LOE, we know that. And also, 6 key late-stage projects. Do they have not contributed to the company as a whole significantly, yes. So 2019 can be the toughest year for us. Actually, in spring, according to the initial forecast: sales, 6.3% decrease; core operating profit, 13.8% decrease, as we have been saying. But today, we made a revision. Compared to last year: revenues, minus 3.9%, minus 2.5% for the core operating profits; and foreign exchange rate, the yen is appreciating. If there's no change in the currency rates, then revenues, minus 1.7%. Core operating profit, minus 2.7% as you can tell based on the calculations. So we made a first. We said that this is going to be the year of the patent cliff, but we have less comanagement of XTANDI. We worked very hard to tackle. VESIcare, mirabegron, we try to promote switching. And the group of only products in Japan, we try to launch them as soon as possible. So these 3 things we have been trying to do. And also there are one-off factors, several of them. So the value of the patent cliff should be as shallow as possible, and it must be as short as possible, and we have been able to do this. Starting for next year, we have roxadustat and enfortumab vedotin and contributing -- we'll be continuing to -- we'll start to contribute to the United States. So the scenario we have drawn can be realized.

In the late 2020s, XTANDI patent will be expired. What's going to happen without XTANDI? 7317 cell therapy or immuno-oncology, we're going to explain in December, some may develop and grow. It's going to be a necessary condition for the very long-term growth.

[Tatsuyuki Arai, analyst]

My second question ASP1127, which received the fast track designation. Most specifically, what's the number of the patient in the United States? Is there any number that can be useful for the potential evaluation? Would you please share that with us? And also time line for the development. Phase 2 is going to finish probably mid of the next year. When do you think that is going to be available for us in order to get the approval? Is it necessary to do up until Phase III study? Please explain as current development strategy.

[Unknown Executive]

Fast track designation that is quite impactful. The reason why I said because thanks to that with FDA, we can have a smooth communication, timely communication. But for AKI, in the past, there is no successful products in the past for the development. So what's the endpoint? What's the level of the information necessary or the data necessarily for the approval. Those are the very first question we have. Therefore, if early approval is possible, what will be the size of Phase III? Those are still unknown. Therefore, when is it going to contribute to the management side that we cannot tell you.

And then, well, Phase II study preparation is about to be started so readout is going to be available around 2020 -- the second half of 2020, according to the current plan.

[Tatsuyuki Arai, analyst]

Enfortumab vedotin, indication expansion potential, EV-101 study was performed. And other than urothelial cancer, you are developing in other indications as well. The clinical study data has been presented before or not? If you're going to present, if you have such a plan, when it's going to be presented? If you have such information could you share with us?

[Unknown Executive]

In other chemo tests, EV-101, enrollment was completed. Ovarian cancer, NSCLC are included as indications there. And the data, according to the information I have at hand, so the completion readout in the disclosure, 2020 -- late 2020, according to this information, including the data, connecting for expression unmet medical needs would be taken into consideration. And the next tumor types other than urothelial cancers, we are trying to pursue.

[Unknown Executive]

Person in the third row in the middle.

[Hiroshi Tanaka, analyst]

Tanaka from Mizuho Securities. Focus area approach. I have 2 questions. Today, you didn't mention this, but earlier, as the President said, 7317 in the R&D meeting last year, out of 150 cases, P Ib, 9 cases. Next year or the year after next, in spring, it's going to be over. What's the current status? And next year, at what timing you will have the results?

[Unknown Executive]

IP 7317 program, as you said, it has just started. First case, new cells are being used. And the first case was enrolled in April this year, we are making progress in the cohorts. But as of now, we don't have any sufficient information to change since the previous announcement. So as of now, the time line we published before, there's going to be some kind of readout according to our forecast right now.

[Hiroshi Tanaka, analyst]

9 cases have been already enrolled?

[Unknown Executive]

Not yet.

[Hiroshi Tanaka, analyst]

Understood. And my second question. In December, I should ask this question perhaps, but Potenza 3 immuno-oncology antibodies. If you look at the clinical study site, the sample size seems to be increasing. Tumor types may not be determined yet. I think you're going to determine from now on. But in December, can we hear such information in the December meeting? Depending on the program, we focus on certain tumor types where we may have a broader inclusion criteria to see a response to which kind of tumor types we're going to explain one by one in December.

[Unknown Analyst]

[ Michimasa Mochizuki ] is my name. My question is about Japanese market. Last year, you reduced the human resources, the number of the medical reps has also decreased. But you are growing in the Japanese market, including our new products. So now into the future, what do you think about the sales organization taken into consideration the launch of new products?

[Unknown Executive]

Thank you for your question. I just wonder how I can answer to your question. Well, I would like to hear from the President. What do you see about the Japanese market currently?

[Yoshitsugu Shitaka, executive]

Well then, from me first. Well, the human resource allocation was changed. As has been introduced to you already, we have the approach of optimization in line with the portfolio. That's the way we are changing the organization within the very tough competition. Our new products are communicated to the physicians. Thanks to the great effort of our medical reps. And in line with that, also our EPO-making products are well evaluated by the doctors, medical professionals. So that's the impression I have.

[Unknown Analyst]

Well then, do you think you are going to revisit the organization, sales organization?

[Yoshitsugu Shitaka, executive]

Our sales organization, this might be the repetition but because we have portfolio and also need to think about internal, external environments, depending on the necessity, we are going to change it. So the organization is always evolving.

[Unknown Analyst]

Going forward, roxadustat, and other new products will be launched, how do you look at the domestic market towards the second half of the fiscal year?

[Unknown Executive]

Right now, we have products, which are doing well. That condition -- situation is going to continue. In the second half, there's going to be a NHI drug price revision in April next year. So some people may wait to -- hesitate to purchase before the drug price revision.

[Unknown Analyst]

Roxadustat market penetration, how do you see this? I wanted to ask this.

[Unknown Executive]

This is a first-in-class drug. In that sense, there are doctors, many doctors who are interested in this. But on the other hand, there are many doctors who are still careful. As we have been saying, the drug price is still under negotiation with the regulatory authorities. Regarding the speed of penetration and the acceptance level and the drug price would also affect this point. In that sense, we do have our expectations, but we'd like to bring this innovation to the Japanese patients. We'd like to focus on that. And we'd like to focus on the appropriate information communication and also gamification at the end, including Japan and the United States, industry, academia and the -- industry, academia and government.

[Unknown Analyst]

What's your plan for the future Rx+?

[Unknown Executive]

Instead of the systemic progress, we have ideas from the time to time, so we try to make progress based on individual ideas, which is sporadic. We have our Rx promotion department. We developed the business department.

[Unknown Analyst]

But what kind of society we are aiming for and what kind of solution we should try to develop?

[Unknown Executive]

We are now discussing this point once again. So in the near future, we will have something more systemic, more organized. And we have to consider how to communicate this, what kind of things we are aiming for in the near future. We have shown you something very ambiguous, but there will be a day when we'd be able to send more clearer messages.

We are approaching the end of the meeting, so we will take one more question from the audience. Yes, a person in the third row, please.

[Yasuhiro Nakazawa, analyst]

Sorry, SMBC Nikko Securities. My name is Nakazawa. Just one simple question. This year, you changed your forecast. What about the cost ratio in your image? In the first half, cost ratio has been reduced, but considering the impact of the unrealized profit, it's rising. There are many in-licensing products in Japan. So what about the cost ratio compared to the previous fiscal year? Could you give us some clue how you see this?

[Unknown Executive]

In principle, as you said, product mix is changing a lot. So in terms of the cost of sales ratio, it's a factor to push them up. But overall, there is a slight decrease. I think that is going to be demanding compared to 37.5% in the previous year. Previous year, 22 point -- sorry, so it's going to be lower than that.

With this, we'd like to close this meeting. Thank you very much for coming despite your very busy schedule. Thank you very much.

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