Astellas Pharma Inc

TSE:4503

Earnings Call Transcript 2022-Q2

[Kenji Yasukawa, executive]

Good afternoon, everyone. Yasukawa speaking. Thank you very much for joining our FY 2021 second quarter financial results announcement meeting out of your very busy schedule today.

Page 2 is a cautionary statement regarding forward-looking information. I'm not going to read the slide. Page 3 is the agenda for today. First, I will explain our FY 2021 second quarter financial results and revised forecast.

Page 4 shows our consolidated second quarter results and an overview of our revised forecast. Both revenue and profit increased in the second quarter. Sales of XTANDI and Strategic products increased as expected. SG&A costs are slightly above our full year forecast. Actually, our revenue increased and the profit decreased in the second quarter. R&D expenses also on track. The cost is slightly above our full year forecast. As a result, no change has been made to core basis full year result.

On a full basis, we reviewed a pancreatic adenocarcinoma development plan for zolbetuximab in the second quarter, which led to an increase in the fair value on contingent consideration for zolbetuximab we booked at the time of Ganymed acquisition.

As a result, we booked this fair value remeasurement of JPY 8.7 billion as other expense. This is not something we can assume at the beginning of the fiscal year and was not included in our forecast. So we decided to make a downward revisal for year forecast announced in July. I'll explain the details later in the pipeline section.

On Page 5, let me explain our second quarter results. Revenue reached JPY 651.7 billion, up 5.9% year-on-year. The progress against the full year forecast was 49.3%. Core operating profit was JPY 125.3 billion down 3.8% year-on-year. The progress was 46.4%. The bottom half of this page shows our full basis results. We booked JPY 38 billion as other expense in the second quarter. Operating profit increased to JPY 90.2 billion up 3.8% year-on-year. Profit was JPY 71.6 billion down by 1.7% year-on-year.

Page 6 is an additional explanation about year-on-year revenue comparison. For XTANDI, the volume increase has continued since the previous fiscal year. Sales of Strategic products such as XOSPATA, PADCEV and Evrenzo also rose as expected to increase the revenue by JPY 51.8 billion year-on-year.

Lexiscan sales negatively impacted by COVID-19 in the first quarter of FY 2020 returned to increase our sales by JPY 10.8 billion year-on-year. On the other hand, sales decreased for mature products such as Celecox, Lipitor and Eligard due to termination of sales and distribution as well as transfer of products, so revenue declined by JPY 25.9 billion year-on-year for these products combined. In addition to the positive ForEx impact, revenue increased in the second quarter, also due to the growth of XTANDI and Strategic products, in line with our initial assumptions. We are getting out of the revenue declining trend up to FY 2020 and are now returning to the growth trend.

Next, Page 7 shows the second quarter sales of our main products. XTANDI global sales increased steadily as expected to reach JPY 267.6 billion, up by JPY 42.1 billion or 19% year-on-year, driven by the growth mainly in U.S. and EU. In Europe, sales increased for the additional indication of M1 HSPC we obtained in April this year. Reimbursement for this indication started in U.K., Germany, Spain, Switzerland, The Netherlands and Croatia. In March this year, reimbursement started in China where hospital adoption is increasing and demand is growing higher than expected. Reflecting the situation after the second quarter, we made a slight revision of our initial forecast.

Next, XOSPATA sales increased to JPY 16.5 billion, up by JPY 5.5 billion or 50% year-on-year, in line with our forecast. In addition to U.S. and EU, there has also been sales contribution from China where it was launched in April this year. New prescriptions have been increasing steadily. We have made a good start with steady progress since the launch in China.

As for PADCEV, promotion revenue in the United States was JPY 9.1 billion, up by JPY 3.1 billion or 52% year-on-year. An additional indication approved in July this year on top of the existing indications also contributed to sales expansion. Right after the approval of the additional indications, NCCN updated its guidelines, which many physicians are referring to when they designed their prescription. and NCCN recommended the use of PADCEV for cis-ineligible mUC second-line therapy. Its progress against the forecast may look a little low, but revenue contribution is expected more in the second half due to the continuous growth in the United States and the launch in Japan and EU expected in the second quarter. We have made an upward revision slightly to JPY 20.7 billion.

Evrenzo sales in Japan was JPY 1.4 billion. Along with the HIF-PHI market expansion, sales in Japan are increasing steadily. We're expecting further sales increase in the future, and we are aiming to achieve a full year forecast.

Evrenzo was launched in Europe in September this year. It's now available in Germany, U.K. and Austria. As the launch timing was delayed by a little over 1 month compared to initial forecast, we slightly made a downward revision of our full year forecast.

Mirabegron global sales increased to JPY 84.4 billion, up JPY 4.4 billion or 6% year-on-year, driven by sales mainly in Japan and the established markets. Due to lower-than-expected OAB market growth in the United States, its progress against the forecast is slow but global sales are in line with our forecast.

Page 8 shows year-on-year comparison and progress against our full year forecast for cost items. SG&A costs in total rose by -- actually, cost ratio decreased by 0.3 percentage point year-on-year due to changes in product mix. SG&A costs in total rose by 11.7% compared to the previous year. SG&A expenses, excluding XTANDI U.S. co-promotion fees increased by JPY 18.1 billion or 10% year-on-year. One factor behind was positive ForEx impact of JPY 8.4 billion.

We also had investments in systems associated with globalization and an increase in sales promotion expenses for the launch of Strategic products and their growth right after the market launch, which increased SG&A cost by about JPY 8 billion. The progress against our full year forecast is 50%, a little higher than usual years and slightly above our internal plan up to the second quarter.

R&D expenditure increased by 6.6% year-on-year. Compared to the previous fiscal year, development cost increased for zolbetuximab, and we expanded our order-related investments. On the other hand, development costs decreased for fezolinetant with the completion of Phase III study patient enrollment. We are in line with our full year forecast.

On Page 9, I'd like to explain key points about the revision of our full year forecast. As I explained on Page 7, strategic products are progressing on track. No change has been made to our revenue. As for cost, as was mentioned on the previous page, SG&A expenses were above our full year forecast in the first half, but will be within the range of assumptions on a full year basis. We have checked the progress of our budget every quarter. And this fiscal year, we are reinforcing these initiatives. We also decided to take away the unused budget from each department on a quarterly basis for thorough budget control by finance division.

Also, along with the transformation of our product portfolio, we are implementing multiple organizational reform projects globally. By trying to optimize personnel, we are expecting a decrease in personnel costs. So in the end, we think we can achieve our full year forecast.

And the expenditure is on track. As a result, no changes have been made to the core operating profit. In the past, the budget formulated at the beginning of the fiscal year was conservative, and it was taken for granted to make an upward revision in the second quarter. We have reviewed such a stance over the few years. And we have been able to set very ambitious targets from the beginning of this fiscal year.

In the first year towards achieving our CSP, Corporate Strategic Plan 2021, we will aim to achieve our goals set ambitiously against the initial forecast. We're aiming for 100% achievement. As was explained on Page 4, on a full basis, we booked as other expense, the fair value remeasurement on contingent consideration for zolbetuximab. Reflecting these expenses, we made a downward revision of our full year forecast.

On Page 10, as I explained so far, the second quarter core basis results are in line with our full year forecast as no changes have been made to the core basis, full year forecast announced in April. On the other hand, we are expecting full basis operating profit of JPY 218 billion and profit of JPY 174 billion, each down by JPY 9 billion compared to the previous forecast announced in July.

Page 11. From here on, I'm going to explain our initiatives for sustainable growth.

On Page 12, let me explain the progress of key events expected in FY 2021, which we shared at the beginning of the fiscal year. What in red indicate updates since the last financial results announcement. Enfortumab vedotin or PADCEV was approved in Japan in September. As for the progress of approval in EU, it took time to respond to the inquiries from the regulatory authorities. So as is described in the footnote c in the left bottom, it's now under review based on standard time line instead of accelerated assessment.

As for the approval timing, we are still expecting approval by the end of this fiscal year. Roxadustat was approved in EU in August. With regards to fezolinetant, 52-week data became available in October from one of the Phase III pivotal studies, SKYLIGHT 1.

Now Page 13. Here, I would like to explain about important updates of the events other than those shown at the beginning of the fiscal year. First, from the top. The results of ARCHES study for XTANDI is going to be explained in the next page. And AT132 at the bottom is going to be explained in Page 17.

The second row, PADCEV, a completed cohort K enrollment in the EV-103 study in October as scheduled. The study is evaluating combination therapy with pembrolizumab as first-line treatment for patients with cisplatin refractory mUC. And we are aiming for accelerated approval in the United States in 2022. We expect that the expansion of indications for first-line treatment in the United States will be a major growth driver for this product.

Next is zolbetuximab. We have revised the protocol for our Phase 2 study in patients with pancreatic adenocarcinoma. And the number of subjects were increased from 141 to 369. The data pulled and aggregated in a blinded manner is monitored at any time. It was found that the [indiscernible] originally assumed and the treatment duration was longer. And based upon the recent latest data on standard therapies in the control arm, we also found that the medium OS assumption was needed to be adjusted.

We amended the study protocol to take into account these changes and assumptions and increase the number of the subjects so that the study is more likely to support the approval by the regulatory authority on its own. Based on these changes in acceleration and program time line and the expanded Phase II study, which may support regulatory approval, we conducted reevaluation of contingent payment. As a result, we recognized [indiscernible] increasing the fair amount of the contingent payments, as mentioned, which is reflected as expenses in our full basis quarter 2 operating profit.

Next is the roxadustat. We obtained top line results from a Phase II study of chemotherapy-induced anemia in August. We are currently analyzing the details of the study data. And after considering the situations, including the commercial value, we will decide the future direction.

And fezolinetant, apart from the Phase IIIa study conducted to get the track approval. Phase IIIb, the DAYLIGHT study is scheduled to be started for the purpose of current data that is clinical meaning and helpful to obtain insurance reimbursement other than the items required by the authorities to obtain an approval by December.

Page 14. This slide presents overall survival data from the ARCHES trial of enzalutamide presented at the ESMO in September. Following the previous ENZAMET study, the ARCHES study also showed the enzalutamide administration significant labor along the OS in patients with M1 CSPC. The mortality risk was significantly reduced by 34% in the combination arm of androgen deprivation therapy with enzalutamide compared with the androgen deprivation therapy or ADT plus placebo.

Now Page 15. This page is a list of the results of Phase III clinical trials of enzalutamide obtained so far by disease stage. Enzalutamide has accumulated abundant usefulness data in a wide range of patients from the late stage to the early stage of prostate cancer and has shown a consistent survival effect. In addition, the administration period of treatment duration exceeded 40 months in the ARCHES study. And confirmed that the administration period is longer in clinical trials targeting the earlier-stage prostate cancer.

Now Page 16. This slide introduces the result of the SKYLIGHT 2 study, which was one of the fezolinetant Phase III studies that was presented at the NAMS in September. In terms of efficacy, both 30 and 45 milligrams significantly improved the frequency and severity of moderate-to-severe VMS, or vasomotor symptoms, at week 4 and 12 compared to the placebo arm. In addition, improvement in VMS frequency and severity was observed as early as 1 week after administration, and this effect was maintained throughout the 12-week placebo control period. There were no apparent safety signals of concern for other dose.

The 52-week data from the SKYLIGHT 1 trial obtained in October also supports long-term use of fezolinetant. Comprehensive safety assessment results will be obtained upon the completion of analysis of 3 -- Phase III trials, including the SKYLIGHT 4 trial.

Now Page 17. This shows the latest status of AT132. A serious adverse event occurred in the ASPIRO study, which was resumed in July, and we received the clinical hold letter from FDA. We plan to carry out follow-up analysis mainly based on autopsy findings until December to investigate -- by December to investigate the causes. Based on the data obtained here, expert advice and a parallel nonclinical scientifical research, we plan to begin interactions with the regulatory agencies in early 2022. After consultations with the regulatory agencies, the path forward of AT132 will be decided.

Unlike the indication, description in the CSP, BLA will be delayed beyond 2022. Since a lot is still unclear at this moment, we plan to hold an R&D meeting in March next year to systematically explain the latest status of AT132 at that time as well as the overall gene therapy.

Now Page 18. I would like to talk about the progress, our primary focus using the table shared at the time of CSP 2021 announcement. As for oncolytic viruses in immuno-oncology area, the timing of POC confirmation for ASP9801, which is the lead program, and this has shifted from FY 2021 to 2022 to '23. In the Phase I trial, which was divided into 2 parts, if initial dose escalation parts obtained clear data, even the publication is limited, we consider it is possible to determine POC. So in the CSP original target, timing was dated as FY 2021. The dose escalation result obtained this time supposed to move on to the next dose escalation part or recommended the Phase II dose expansion part, but the data is insufficient to determine POC. So we decided to make the judgment of POC in the dose expansion part. However, the entire study is proceeding as planned, and expectations for an oncolytic virus platform have not changed. We will continue to explain in a timely manner when there is progress in this.

Next, Page 19 shows the current status of the primary focus area projects on the clinical stage. The underlying part is the progress from the previous initial announcement. A lot of progress has been seen in multiple immuno-oncology projects. For the project ASP7517 of artificial adjuvant vector cells, or aAVC, clinical trials for refractory acute myeloid leukemia, or AML; and MDS, myelodysplastic syndrome, entered into Phase II. And their first subject, first treatment was started in October.

As has been introduced already, the oncolytic first project, ASP9801, has transitioned from the dose escalation part to the dose expansion part in a Phase I study. In ASP1128 of mitochondrial biology, patient enrollment was discontinued based on the results of the futility interim analysis in the Phase IIa study.

Next, Slide 20. This page summarizes Rx program such as the events that are expected to be achieved this year and are introduced at the beginning of the fiscal year and others. Fit-eNce, a service that provides an exercise program based on scientific evidence has already started pilot marketing. But in September, we have started offering Fit-eNce Home, a service that has been improved so that you can exercise at home.

Slide 21. Here, I would like to introduce the alliance with Nitto Denko and M. Heart had regarding the ECG testing service. The EG Holter, developed by Nitto Denko, is a single-use possible, compact and cordless electrocardiograph. Under this alliance, Nitto Denko manufacturers, EG Holter. Astellas will conduct pilot sales and then we will consider subsequent nationwide expansion of the sales.

By adding the convenience of EG Holter to the efficient and highly accurate data analysis of MYHOLTER II, then the electrocardiogram or ECG analysis service using AI, and that was jointly developed with M. Heart, we hope ECG will become widely spread and will lead to patient benefits such as early detection of AF.

Now Page 22, that's about the sustainability. As part of our efforts to improve sustainability, we have started to use environmentally friendly biomass-based plastics made from plant-derived raw materials for PTP sheets for pharmaceutical packaging. It is the very first time in the world that the biomass plastic is used for PTP sheets for pharmaceutical packaging. The blister package is made of biomass-based plastic, polyethylene derived from sugarcane as 50% of its raw material. And this package is environmentally friendly just to go in line with concept of carbon-neutral, in which the emission and absorption of greenhouse gas is balanced.

Commercial production of this PTP sheet started for Irribow tablets in the middle of this month. We will consider switching from conventional packages to these new sheets for other products in the future. In the CSP 2021, strengthening efforts to improve sustainability is set as one of the strategic goals. As the CSP announcement in May, we were now able to take enough time to explain Astellas' approach to sustainability and specifically ESG initiative. So in February next year, we are planning to hold a briefing session regarding sustainability.

Page 23. This summarizes the progress made in the second quarter in line with the CSP 2021. First, about revenue and pipeline value, left top. Sales of XTANDI and revenue of Strategic products are growing, as expected, against the ambitious targets set as the first year of the CSP 2021. In addition, we have steadily achieved the important milestones related to pipeline set at the beginning of the fiscal year as planned.

Next, focus area approach in the lower left. For AT132, we are currently considering multiple scenarios for resuming clinical trials. And we will provide information in a timely manner in the future. In addition, clinical trials of immuno-oncology have progressed.

Next, on the upper right, it's about core operating income. We are continuously reviewing the allocation of management resources to improve the core operating margin, and SG&A expenses are likely to exceed slightly higher than expected. We will continue the budget control of each quarter and through the year base, and we are aiming at the lending as expected in full year.

We have a -- summary, we have confirmed a growth trend, as expected, according to the target for the first year the CSP 2021. We will now revise the full year focus for both revenue and the core operating income, and we will continue our efforts to achieve the targets set in the CSP so that we can achieve sales and profit growth for the full year of FY 2021.

Page 24. This is the last slide. We have summarized the schedule of future IR events. In addition to the gene therapy R&D meeting, I already explained and also sustainability briefing session, introduced earlier, we plan to hold an R&D meeting in December this year to explain the reorganization of a research organization announced in the recent press release. We would like to continue to hold the briefing sessions on themes of high interest in the stock market. If you have any request, please contact the IR staff. That's from my explanation. Thank you very much. Now we'd like to take your questions.

[Operator]

[Operator Instructions] Mr. Yamaguchi from Citigroup Securities.

[Hidemaru Yamaguchi, analyst]

Hello, can you hear me? I'm Yamaguchi from Citigroup.

[Unknown Executive]

Yes, we can hear you.

[Hidemaru Yamaguchi, analyst]

Should we ask just 1 question or 2? Any limit?

[Unknown Executive]

Not really.

[Hidemaru Yamaguchi, analyst]

Okay. Understood. I would be brief. Fezolinetant is the topic of my question. SKYLIGHT 1, 2, as you explained before, you're having a good development of flow. As for SKYLIGHT 4, next fiscal year or the beginning of next year, the data is going to become available, but the target -- you have finished dosing the patients almost. So right now, any comments you can make vividly now, if possible, please?

[Unknown Executive]

As for the serious adverse reactions, we are checking in a blinded fashion. But for the time being, we don't -- we haven't detected significant signals. Bernie, any additional comments from you?

[Bernhardt Zeiher, executive]

Yes. Thank you for the question. I think the only thing I would add is that we also have a safety monitoring board, and they continue to monitor safety events in addition to our blinded review, and they've identified no issues that would require us to modify the study or stop it. And so again, I think the safety profile on a blinded basis seems to be very consistent with what we've seen in SKYLIGHT 1 and 2.

[Hidemaru Yamaguchi, analyst]

Next question. This might be difficult for you to make a direct comment, but it's about your competition. The XTANDI competition generic Zytiga is available. And the Zytiga plus PARP result is better, and that was announced by the company in Europe. So direct head-to-head comparison with that -- with XTANDI, it may be a bit awkward. However, what do you think about this situation as a potential risk for XTANDI? Do you have any particular comment about this?

[Yukio Matsui, executive]

Thank you for the question. Matsui speaking. Let me share with you what I can tell you -- we can tell you now. So that clinical trial that was conducted. And as a result of the interim analysis, PFS was to be -- reported to be favorable. That's what we were recognized. However, the detailed data has yet to be announced. So ASCO, GU or the coming Congress is where that the detail will be probably announced, so after that, I would like think.

But in oncology, not only PFS, but OS overall survival improvement, that is going to be a very critical factor. In that sense, what I have heard so far is there is an improvement in PFS according to the interim analysis. Therefore, I would like to keep our eyes on it continuously so that we can get the further information. That's one thing we can say. And on top of that, according to our recognition, Pfizer is also developing the product with the same type of mechanism. And there, combination with XTANDI is also under the study. That's what we heard.

So first of all, we would like to wait for full readout of the data to think about the impact on to XTANDI and the countermeasure if necessary. But on top of that, Pfizer is also conducting the study as well. That's our recognition. That's all.

[Operator]

Daiwa Securities, Mr. Hashiguchi please.

[Kazuaki Hashiguchi, analyst]

Hashiguchi, speaking. My first question is about AT132. On Page 17, you are explaining the situation. Analysis has not been performed fully yet, as I understood. But the remaining intangible asset assessment, what is the situation right now? As of now, according to our analysis, do you still have the remaining value as you're recognizing or such assessment has not been performed yet? What is the situation?

[Unknown Executive]

Thank you for your question. Okamura, would you like to respond?

[Naoki Okamura, executive]

As of now, AT132, future development plan, what is going to be the sample size, empty capsid and capsid with transgene. We have to change the ratio. A variety of elements have not been put into place yet fully. So as of now, as you can see on the balance sheet, the value of the intangible assets as is will remain. Based on this assumption, once the future direction is determined, we'd like to reevaluate again. That's all from me.

[Kazuaki Hashiguchi, analyst]

Point 2 is about fezolinetant. DAYLIGHT study introduced in Page 13. And the refractory for the hormone supplement therapy, what's the definition of that? And on top of that, unsuitable for hormone therapy. And with this regards, what will be the impact on to the level?

[Unknown Executive]

Thank you very much. Who will be the hormone refractory or unsuitable for HRT. Could you make an explanation about the definition of this? Bernie?

[Bernhardt Zeiher, executive]

Yes, thank you for the question. So the trial is designed for patients who might otherwise be unsuitable for hormone replacement therapy. And that could be, for example, if they have a history of breast cancer or a family history of breast cancer or they've had thrombotic episodes such as deep venous thrombosis or it could be also that they -- the individual will not take hormone replacement therapy because they make a choice.

And the reason this is being done, it's less about specifically the label and more for reimbursement in Europe because this population is more likely to be the one for reimbursement in Europe. So this trial is critical to demonstrate efficacy in this population where hormone replacement therapy would not be used.

[Kenji Yasukawa, executive]

Yasukawa speaking. So vasomotor symptom severity and now only for the frequency, mood, depression, anxiety, sexual wellbeing and also the sleep are the items to be collected as data. So this is not the description in the package insert or labeling. But once that is available, it's going to a very good push for the promotion. And depending on the results, what kind of impact or influence it will have, that is going to be different. So I'm not going to tell you any number.

[Operator]

Nomura Securities, Mr. Kohtani, please.

[Motoya Kohtani, analyst]

Kohtani from Nomura Securities. Can you hear me?

[Unknown Executive]

Yes, we can hear you.

[Motoya Kohtani, analyst]

First question is simple. SKYLIGHT 1 study, the data was obtained in October. When can we see the details of the results?

[Unknown Executive]

Bernie, SKYLIGHT 1 presentation at Congress. Do we have a plan already about SKYLIGHT 1?

[Bernhardt Zeiher, executive]

Yes. It is planned for an upcoming Congress. We can't disclose exactly when just because it has to be accepted for presentation at that meeting. So we are looking at future scientific meetings to submit that data.

[Motoya Kohtani, analyst]

The data of SKYLIGHT 1 and 2 would be seen because of a similar profile. Is my understanding correct?

[Unknown Executive]

Yes, your understanding is correct in terms of the results.

[Motoya Kohtani, analyst]

The second zolbetuximab, the Phase II study, the number of the patient is expanded and based upon that, you try to do the submission. But as of now, it's in the phase of the blind so which has a longer survival. That's unknown. And May 2019 is SFT. So it's been long since then. So -- but however, that might be the efficacy of -- the placebo is also continuing. So why did you change the fair value measurement on contingent and also nab-paclitaxel and gemcitabine combination factor study is also available. Looking at the result, the longest combination therapy, the overall survival is [indiscernible] months. So currently, the result is exceeding that?

[Unknown Executive]

Bernie, based upon the data available for you could you say something that is available -- possible for you to explain here?

[Bernhardt Zeiher, executive]

Yes, the question. As you said, we did review blinded data. These are still relatively small numbers. It is longer than we would have normally expected. What we don't know is that driven by longer in the -- just the standard of care or whether it's driven by additional benefit from the zolbetuximab in addition to standard of care. The driver really to expand the trial is -- as when we first started the study, I think it was before COVID hit. It was really -- we thought we could actually conduct it a little faster. And if it were very positive, that single smaller study could potentially serve for something like an accelerated approval.

Now with the impact of COVID and wanting to really ensure that we maximize the life cycle of zolbetuximab and seeing some of that the trial at least is not having a short survival or treatment duration, we went and thought that expanding the trial really increases the likelihood that we would have a registration quality study. So that was really a key driver.

Within the study protocol, we will have interim analysis to make sure that it's not meeting futility criteria, but the goal really ultimately would be to ensure that we have adequate data to be able to file for an approval on the basis of this single trial.

[Unknown Executive]

As for the fair value measurements on contingent payment, let me make a comment about this. So the contingent payment, well, within the contract, it is said that once something is a hit and the payment is placed, so the total amount is already fixed. And the fair value of contingent payment, well, there is the payment under the condition. And if the probability of the payment is generated, then you think about the current value. So the payment for each is decided according to the event so if that event becomes bigger, which means the timing of the payment becomes earlier or the probability of the payment becomes higher. So either of that is 2.

And this time, Phase II is expanded and that could be used as a pivotal. And also on top of that, there's a situation that the authority doesn't approve that as a pivotal. So you have to do the Phase III study later on. So there are various scenarios available. And based upon that, the fair value went up. So others are considered, therefore, as other expenses. Please consider it in this way.

[Motoya Kohtani, analyst]

It's not clear, standard care, and this is combined and high possibility of benefit in the combination. Is that the reason why?

[Unknown Executive]

Maybe Bernie should have answered to this question, but allow me to answer. We are not assuming that, but we are considering a variety of possibilities. And overall, the study is getting longer or prolonged. So that might be a signal, but it's under blinded, so we cannot tell. At any rate, it's getting longer. If possible, instead of just letting it go as is, by increasing the detection power in Phase II, we wonder whether we can get the accelerated approval. After considering such scenarios, this is what happening. That's my understanding.

[Motoya Kohtani, analyst]

Understood.

[Unknown Executive]

Bernie, do you have any comments to respond?

[Bernhardt Zeiher, executive]

No. I think you summarized it well. We don't want to assume that there's efficacy yet. I mean, because, again, it is -- we are looking at it in a blinded way. And also you don't know because the patients are selected. It's a clinical trial setting, and it's a setting where we've selected patients who expressed Claudin 18.1 -- 18.2. So whether those have any impact on survival, we don't know. So we are not making strong assumptions that there's efficacy. It's really more about trying to increase the likelihood that if there is efficacy, that we can actually have strong enough data to support regulatory approvals in a more timely fashion.

[Motoya Kohtani, analyst]

The Advisory Committee Meeting of gene therapy, it took place at the beginning of the September. And to the future, two conditions are going to be placed. High level of the dose to the power of 10, to the power of 14 is now approved. And those who have the liver problem, the gene therapy is not accepted. So considering these restrictions, is there any impact onto the AT132 or other products? Why there are 3 death cases 14 weeks after the first administration the -- that took place and there was no immune involvement? There was no immunity or immune response. Why that leads to the congestion of bile? There is no well explanation about that. Do you have any good explanation about this?

[Unknown Executive]

That is the scientific thing. Did you get the question, Bernie? And could you answer this?

[Bernhardt Zeiher, executive]

Well, let me -- I think you've characterized it well that there is a different problem that we've been seeing with these boys with XLMTM as opposed to other gene therapies. As you said, at the advisory committee, there are reports of liver toxicity that's more immune-related and responds to steroids and tends to resolve without a problem. What we observed with XLMTM is different. As you said, there's not -- we're not seeing immune cells in the liver. It does not respond to steroids and is associated with cholestasis, very high bilirubin levels and the progressive toxicity that we've seen.

Our belief and something we're still investigating is that this is unique to XLMTM and likely a component of the underlying disease. We've worked with some outside investigators and identified that, in fact, the underlying disease of XLMTM is associated with cholestasis. And it seems when these children get viral illnesses, they can have very marked increases in their liver enzymes and even bilirubin elevations. And so we think this is really more of a -- in the setting of XLMTM, they're more susceptible to this cholestatic problem. And when you give them a large dose of the viral vector, that, that is triggering the cholestatic event.

Now what we need to determine is through our scientific investigation, is it all children with XLMTM; or could you treat them when they're younger; or are there other markers that might predict which children might have this problem. And also part of the other investigation which I think was -- as I mentioned earlier, was is there a contribution even of the empty vector, the empty capsids. And do we need to actually refine the drug product to reduce the amount of empty capsids or -- and basically, what is the contribution of that.

We do not believe that this is something that's common to other diseases that we may treat, for example, Pompe disease, which is our next program, but it would be a potential issue with diseases where there is an underlying liver problem. So I think this is, again, an unique situation with XLMTM and something that we're continuing to actively investigate, and we're happy to give you a further update on that at the time of our R&D meeting in March.

[Operator]

Mr. Sakai from Credit Suisse Securities.

[Fumiyoshi Sakai, analyst]

Sakai from Credit Suisse Securities. I have 2 questions, zolbetuximab and AT132, I have follow-up questions on those. First, zolbetuximab, the fair value was remeasured in pancreatic cancer. Gastric cancer and esophageal cancer, you have Phase III. Did you also review these plans or the competitive environment is beginning to change significantly? So for the future -- so this review is going to be reflected in your plan? And that's my first question.

You are making a downward revision, but because of the enhanced value payment will come earlier, that's why you're looking. So this is not a bad thing. Having said so, can you absorb this much amount with your efforts in the company? And what do you think? This is my first question.

[Unknown Executive]

In the first half, gastric cancer Phase III studies, SPOTLIGHT, are ongoing. Right now, we do not have a plan to review the value. Number two, on a full basis, it's about a full basis figure absorbing such a figure. There is no such item. JPY 8.7 billion has been booked in the second quarter. As usual, full basis figures in which month, which year, clinical studies are going to fail, we cannot -- improved efficacy, we cannot expect or predict that at the beginning of the fiscal year. So we'd like to review whenever there is an event. There is no change in that stance. Phase III schedule is not going to change, right, as the main event.

For gastric cancer, you're talking about, right? Enrollment is almost on track. This is an event-driven study. If the drug is effective, more than expected, the event accumulation will be delayed so we cannot mention specifically which month or which year, but we'd like to continue to watch the situation.

[Fumiyoshi Sakai, analyst]

Understood. Rather than AT132, you got acquired from Audentes, AV, adeno-associated virus? Well, that is the mortality AT132. So this adeno virus getting into the cell, and they have been doing some vicious activity. So AV technology itself, the trust to it or the safety to AV itself, have you done any analysis or verification about that?

[Unknown Executive]

As has been explained by Bernie, the deaths and we look at the details, and for all those of 4 cases, if the findings are the same or the case 4 is completely different. Well, if we learn about that, we can learn if the toxicity is general or patient-specific. So I would like to look at the autopsy pathology of the case 4 that is going to be available at the end of the year. And in line with that, preclinical is ongoing. So based upon the results next year March, we are going to make the comprehensive explanation.

For the technology, we also think that there might be the room of the improvement, just like Bernie mentioned. For example, the empty virus capsule, those are still included. So with reducing that, the total amount of the virus goes into the bodies will be reduced. So immune-related issue may be also minimized. So technology modification is also something we would like to consider.

[Fumiyoshi Sakai, analyst]

Understood. So this part is included an intangible by AV technology? Is intangible within the acquisition of Audentes? I believe you did the calculation of the asset, and that is where that AV is included?

[Unknown Executive]

Yes, you're right.

[Operator]

Morgan Stanley, Mr. Muraoka.

[Shinichiro Muraoka, analyst]

Muraoka from Morgan Stanley. When you announced your midterm business plan, there are 5 or 6 submission plans in the next fiscal year. I'm talking about the list. As of now, if you have a rough picture, what is going to be the order sequence of dose maybe softly, if possible? Fezolinetant results will become available at the beginning of the year, which will come next zolbetuximab, XOSPATA and then PADCEV, XTANDI. Maybe in my view, what is going to be the sequence, which we can expect? Any clues on this?

[Unknown Executive]

Sorry, in the middle, the telecommunication line was not stable. So the -- are you talking about the sequence of the launch?

[Shinichiro Muraoka, analyst]

Not really about the launch, but the readout of the clinical studies and the timing of the clinical study readout and the sequence or the order in the coming 1 year.

[Unknown Executive]

Understood. Fezolinetant, as we said from before, from the end of this year to the beginning of next year, SKYLIGHT 4 results will become available. Then in spring, overall safety, overall efficacy analysis results necessary for submission will be done. Then safety data you're interested in, we could be announced based on that.

And XOSPATA, PADCEV life cycle management and zolbetuximab Phase III study, which was talked about earlier, these are all ongoing, but they are event-driven studies. So in a pinpoint fashion, which will come first, in which month we cannot tell you right now. Event accumulation will be monitored. In around which month we can do, anything once we know that, we will have an earning call occasions or other forums to explain to you and share the information.

[Shinichiro Muraoka, analyst]

Understood. XTANDI, EMBARK in the first half or the second half, is it difficult to give guidance right now. Can you hear me?

[Unknown Executive]

EMBARK. We are monitoring the status. We cannot mention which month and which year yet.

[Shinichiro Muraoka, analyst]

Likewise, another event, the 3772 pneumococcal pneumonia vaccine, I think because Prevnar 20 is now available. So we cannot go slowly about this. I would like to eagerly hear about the partnering about this. Is there any news about this?

[Unknown Executive]

When the time comes, I'm going to tell you.

[Shinichiro Muraoka, analyst]

Understood. The last question, progress. The reduction of the forecast is quite large in EU. International, there's great reduction? Is that tentative or this might also impactful or will continue toward the next fiscal year as well?

[Yukio Matsui, executive]

Matsui speaking. This time, Prograf, you see that the focus is reduced. One of the reason for that is that in the Middle East area, the existing patients partly due to the COVID-19 passed away, unfortunately. That is impacting overall. There is a great difference depending on the region. But basically, China, international, still continuously the increase of the transplant is expected. Therefore, the sales is expected. But in established market or Japan, in such markets, there's impact of generic. And also price pressure is another factor of the impact. So we see a gradual reduction. So far in this couple of years, there's a gradual little by little reduction. So we see -- we forecast that this trend would continue.

[Operator]

Mr. Ueda from Goldman Sachs Securities.

[Akinori Ueda, analyst]

Ueda from Goldman Sachs Securities. First, about XTANDI, I have a question to you. In EU and Europe, I'd like to know the trends. In the United States, it's growing steadily. But is it the real growth? What about the price or the inventory status? Any impact from that? And in Europe, and just looking at the second quarter compared to the first quarter, it may be a bit sluggish. And full year forecast has been reduced. So I wonder what is happening right now. Could you please explain?

[Unknown Executive]

Thank you for your question. I'd like to respond. First, in the United States, price and the inventory, we are not facing an exceptional situations. M1 HSPC, ARCHES data has been obtained additionally, and early stage cancer prescription increase is expected. And also duration of therapy would be longer than the actual demand is going up. Because of these factors in the United States, in principle, as far as we see, it's not a special factor. But as the real demand, it's growing on a real demand basis.

Next, in Europe, as Dr. Yasukawa, president said, in his explanation. M1 HSPC approval after the approval or, in some countries, CRPC M zero pricing negotiations or negotiation for reimbursement are still going on. In some countries, because of COVID-19 impact, the health care costs and insurance costs are strained and negotiations are facing difficulties. Even if there is agreement, the price may be lower than we anticipated in the end. And this is having an impact on the results up to the second quarter, and we're expecting such impact in the latter half of the fiscal year as well.

But in the shorter term, there would be some negative impact. But if we get new indications, the number of patients will increase. So in the mid- to long term, the negative -- price negative factor would be offset by the volume and demand, we can expect further growth.

In particular, specifically, you were talking about Q1 and Q2 comparison. A major factor is as follows: At the end of Q1, the first quarter in June, in France, M1 HSPC was approved. Then from the French authority from the 1st of July, new label package products only should be distributed. We received such an instruction. At the end of June, the inventory we had in the company, not to make them obsolete, we distributed this into the market.

So Q1 sales, in France, because of the France, a little less than JPY 3 billion. There was an excessive shipment because of this. And that was included in Q1, resulting in increase, and that is already absorbed after the second quarter. So there is some variance between the 2 quarters. That's all for me.

[Akinori Ueda, analyst]

The second AT132 is next question. On Page 17, you showed the schedule, but the negotiation in the beginning of 2022, you have then interaction with the authority. Then you have the R&D meeting in March. At the time, the direction of the development is identified and what will be the plan afterwards. And also AAV, empty vector is mentioned and technology to reduce that, that is going to be developed in your company? Or do you also think about the licensing or introduce such kind of technology from outside?

[Unknown Executive]

Well, thank you for the questions about the schedule. The meeting with the authority, we applied but the schedule is not set as we planned or we favored. And with the round 1, if the discussion is completed or not is unknown. So March 9, the situation is clear or not, we cannot guarantee. But at a certain time point, we considered this better to explain you the situation. Rather than waiting for the final decision, we set up the meeting in -- on March 9. And at the time, we can tell you whatever we know around that time. That's our intention. The second, so far, we are working internally for the development of such technologies.

[Operator]

JPMorgan, Mr. Wakao, please.

[Seiji Wakao, analyst]

Wakao from JPMorgan speaking. I have 2 questions briefly. First, about mirabegron. In the United States, the market growth is slowing. In the second quarter, if I look at the results, individual products are doing well, in some cases, but mirabegron in U.S. was rather weak. You made a downward revision. Will the market growth in the United States be smaller than expected. Could you elaborate on this point? [indiscernible] so the market has been activated. But could you explain the factors for the current situation? That's my first question.

[Unknown Executive]

Thank you for your question. I'd like to respond. First of all, the overall market in the United States is going to be explained. According to a recent report, in Europe, where the market as a whole, according to IQVIA data, is growing. It's in the recovery stage since April. But unfortunately, in the United States, it's still remaining flat. Compared to before, the patients have not been coming to the office for treatment or prescription yet. According to the data, as we recognize, under these circumstances, as you pointed out, usually, there can be a concern.

In April, there was a launch by another company. So what is going to be the potential impact? This is about another company. So we are not going to comment much, but it's within our assumptions. As far as we know, the market share is very limited yet in its usage. Our share is a little slower than planned, but it's still growing steadily. Probably you're asking this question because of the following reason. Year-on-year -- not only on a year-on-year basis, but on a quarterly basis, comparing quarter 1 and quarter 2, you may be wondering why and you were asking this question in my view.

On this point, Medicare coverage gap is having an impact here. As you know, Medicare Part D, the so-called donut hole exists. Like XTANDI, with a high job price, there can be a lot of impact in the first quarter on a calendar year basis. Compared to XTANDI, mirabegron with a lower price. There's contribution showed for the donut hole $3,000, that is appearing in the second half, gross to net is expanding in the second quarter compared to the first quarter. That's why Q1 is negative compared to the first quarter. The volume is not declining quarter-to-quarter basis. But gross to net, the timing of the discount payment is the reason why the so-called donut hole or coverage gap in the third and fourth quarters. In the fourth quarter, the year will change, but a certain threshold will be exceeded. So there's going to be a recovery later in the year. That's how we see the situation. That's all for me.

[Seiji Wakao, analyst]

The last question, XTANDI. There was a question at the beginning, that's a PARP inhibitor Zytiga combination. Well, the current available data according to my understanding is the castration-resistant prostate cancer with metastasis. And currently, you're thinking about the expansion of the indication and the sales incurred from more from the new indications. And currently, castration refractory prostate, what's the sales portion in overall sales of this product? If it's possible, please tell me.

[Unknown Executive]

For the question, indication-wise sales, unfortunately, we are not disclosing so this time I would like to rather refrain myself from making a comment.

[Seiji Wakao, analyst]

On the other hand, the sales here, is it better to understand that the sales there is still certain volume? Because in the upper stream, if the sales increases, CRPC sales might be reduced. So PARP inhibitor that might be available in the future. However, the impact of that might not be so great for your product. That's what I thought. What do you think about this?

[Unknown Executive]

Well, roughly speaking, I think it's about half of overall portion. So as I've already mentioned, the impact will be different depending on the types of the data. So as of this moment, we cannot make a further comment.

[Operator]

BofA Securities, Mr. Arai, please.

[Tatsuyuki Arai, analyst]

Arai from BofA Securities. One question, SG&A costs, you are above your forecast. The plan in the first half was not disclosed but specifically against the budget, how much you're progressing above your forecast? I'd like to know the situation. Usually, towards the second half, midyear costs are going to go up according to the tendency usual years, may have certain expenses or what about expenses you have just this year. Controlling the budget and trying to optimize personal, why you have a different tendency compared to usual years? Could you explain the background? That's all for me.

[Unknown Executive]

Thank you for your question. As we said, just looking at expenses, it's more into the second half, and to be more precise, more in the fourth quarter. In managing the SG&A expenses, towards the end, we tend to spend a lot. We wanted to review this way from before. By the end of the second quarter, compared to initial plan or forecast, we are progressing above or ahead. Compared to 50% of the initial forecast, we are a little above compared to that.

On the other hand, after the second quarter, ForEx impact existed because of the yen's depreciation. As Yasukawa said, during the course of CSP, pursuing the benefits, we should make investments from now such investments are also being made. Fezolinetant, PADCEV to come, we need prior investments in advance. Investments for the launch were necessary as well. So in 2021 fiscal year, in the first and the second quarters, these may be very specific to this fiscal year in these quarters.

In the third and the fourth quarter, nothing like that at all. It will not be gone completely. But for the early spending of the money, we will begin to see benefits gradually. It's not just spending our money. We may spend a bit, but there would be benefits from what we spent in the first half.

[Tatsuyuki Arai, analyst]

And the balance-wise, the benefits will be higher than the investments. When this will be overturned in terms of the balance?

[Unknown Executive]

As Yasukawa said, very detailed budget control is not what we want to do. But still, because of the situation, if it's planned initially, but is not spent, then it should be -- instead of moving this to the next quarter, it should be used when it should be used to meaningful between finance and business, there should be discussions. And the money, which is not used should be returned to the central to allocate the money to other sections or departments where the money is needed. Did I respond to your question?

[Tatsuyuki Arai, analyst]

Yes, very clear. That's all for me.

[Unknown Executive]

Thank you very much. With this, we would like to close this session. Thank you very much for your participation.

[Unknown Executive]

Thank you. Thank you very much.