Astellas Pharma Inc

TSE:4503

Earnings Call Transcript 2021-Q3

[Unknown Executive]

Thank you very much for participating in the conference call organized by Astellas Pharma, Inc. today despite your very busy schedule today. I'm [ Fuji ], Head of Corporate Advocacy in relation. I'm delighted to service as emcee. We'd like to start the meeting on the FY 2020 third quarter financial results we announced at 12 noon today, Japan time.

During the meeting, please refer to the financial results documents posted on our website under IR section. Let me introduce the participants today. Corporate Executive Vice President, Chief Strategy Officer and Chief Financial Officer, Naoki Okamura. Okamura, nice to meet you. Chief Commercial Officer, Yukio Matsui. Matsui, thank you for your time. Development Project Management Head, Mike Kitagawa. Kitagawa, thank you very much for your time.

This material or presentation by representatives of the company and answer to some statements in the Q&A session include forward-looking statements based on assumptions and beliefs in light of the information currently available to management are subject to significant risks and uncertainties.

Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representation or advertisement nor provide medical advice of any kind.

This meeting will be held in Japanese and simultaneously translated into English by interpreters. Accuracy of interpretation cannot be guaranteed.

We'd like to begin with Okamura, please.

[Naoki Okamura, executive]

Once again, hello, everyone. Okamura speaking. Thank you very much for participating in the meeting by Astellas on the FY 2020 third quarter financial results.

We'd like to use the slides you have at hand to talk about the results and also the initiatives for sustainable growth.

Please turn to Page 2. This is a cautionary statement regarding forward-looking information. [ Fuji ] already read this, so I'd like to skip.

First of all, 2020 third quarter financial results will be explained from Page 4 and beyond. I'd like to give you an overview. First of all, both revenue and profits. In line with the full year forecast we announced in August. Revenue and core operating profit decreased year-on-year, but sales of growth drivers steadily increased. Therefore, business fundamentals are trending positively.

SG&A costs and R&D expenditures were spent where they should be used, so they are on track.

Based on the results of the third quarter, we are not changing our FY 2020 full year forecast. Let me explain the details.

Page 5. Let me explain the consolidated results. Revenue was JPY 940.9 billion, down 4.8% year-on-year. Core operating profit was JPY 203.7 billion, decreasing by 13.6% year-on-year.

The bottom half of the slide shows full basis figures. Operating profit was JPY 159.5 billion, down by 32.9% year-on-year. Quarterly profit was JPY 132.9 billion, down 30.1% from the previous year. Year-on-year, revenue and profit decreased. But as you can see on the right side of the page, we are progressing almost in line with our full year forecast.

Please turn to Page 6. Let me explain in more details about revenue. Main oncology products continued to demonstrate strong growth trend. XTANDI, good performance has been continuing since 2019. And products such as XOSPATA and PADCEV are contributing to an increase in sales. Total sales of these 3 oncology products rose by JPY 62.1 billion year-on-year. But consolidated revenue decreased by JPY 47.6 billion year-on-year.

As you can see in the bottom half of the page, including Vesicare and Celecox, sales of LOE products decreased by about JPY 42.7 billion, a substantial decrease; and also sales of in-licensing products in Japan, such as Symbicort and Micardis, with termination of sales and distribution Japan decreased by JPY 32.9 billion.

In addition, as we have reported to you before, particularly in the first quarter, there was a big impact by COVID-19 to decrease the sales. That's another factor to decrease our revenue.

Lexiscan U.S. had a decrease of sales by JPY 9.8 billion. Antibacterial, Geninax, had a sales decrease by JPY 4.3 billion. Due to restraint from in-person visits to hospitals and clinics, demand decreased. But the impact of COVID-19 is getting [ moderate ] from the second quarter and beyond. Lexiscan is trending in line with the original forecast.

Consolidated revenue decreased, but revenue up to the third quarter is in line with our full year forecast assumptions.

Page 7. Sorry for the text-rich page, but I'd like to talk about the individual or status of main products to give you some update. XTANDI global sales are making double-digit growth. It's on track up to the third quarter. In accordance with the plan, due to COVID-19 impact, new patient starts were less than expected in the United States. So it's slightly behind. But since we got the indication of M1 CSPC demand volume is increasing steadily.

In the future, focusing on the early-stage prostate cancer, we're expecting continuous growth.

In China, we launched XTANDI in March last year. In November, we obtained the additional indication of M0 CRPC in November. Also, for M1 CRPC indication, listing on the NRDL was decided. So from March this year, reimbursement is going to start, we're expecting a further increase in new prescriptions.

Next, XOSPATA. It's now marketed in 17 countries around the world. In addition to the United States, in FY '20, sales in Europe are expanding. Reimbursement has started already in U.K. and Germany. Against the forecast, sales in U.S. are exceeding the plan. XOSPATA administration duration was almost 7 months recently, slightly above our assumptions in the uses. So it's expanding steadily.

Next PADCEV. Thanks to early market penetration, it has made a very good start in the first year after the launch. Thanks to the positive clinical study data readout, the interest and evaluations among oncologists is getting higher. New prescriptions are increasing steadily. In the current indications, we are obtaining a very high market share.

Evrenzo. In November last year, we obtained an additional indication in Japan not only for patients on dialysis, but also for predialysis patients with CKD-associated anemia the drug cannot used by now. One year after the launch, restrictions of the 2-week administration period were lifted since December last year. So facilities adopting the drug are steadily increasing in numbers. So we are expecting this is going to be a future growth driver.

mirabegron sales slightly increased because of the COVID-19, but it was almost in line with the plan. In China, like XTANDI, listing on NRDL was decided. Reimbursement is going to start from March this year, so we are hoping that new prescriptions are going to increase in the future.

The last point here is new products in Japan and sales of EVENITY and Suglat family have been affected by COVID-19, but still they are contributing to an expansion of sales.

As for key products in Japan by using the digital channels, we will penetrate the product messages.

Next, Page 8. Let me explain the cost items in more detail. First, COGS ratio, mainly due to changes in the product mix, the COGS ratio decreased by 2.5 percentage points year-on-year. Factors for decreasing sales are explained, LOE and termination of sales and distribution. Along with that, sales of in-licensing products in Japan was relatively high COGS ratio decreased and the product mix decreased the COGS ratio.

SGA costs increased by 2.7% year-on-year. But XTANDI U.S. co-promotion fees increased by JPY 13.9 billion. In the previous fiscal year, we had JPY 8.2 billion reversal of loss allowance, which was a one-off cost reduction. In reaction, in the third quarter, costs increased. Excluding these 2 impacts, the SG&A cost decreased by more than 4% year-on-year.

Next, R&D expenditure. R&D spending increased by 5.7% year-on-year. For fezolinetant, patient enrollment progressed steadily for Phase III studies, resulting in an increase in development costs. Audentes, which were added from the third quarter, R&D expenditure reached JPY 14.4 billion. These are the main factors for the increase.

We are trying to promote cost optimization and also we are investing into initiatives to maximize the value of main products, key late-stage projects [ and ] primary focus. We have been able to allocate management resources where we should spend our money. So we are on track in terms of the cost according to our plan overall.

So this is the end of the financial slides, but both revenue and expenses are in line. With our full year forecast up to the third quarter, we expect the remaining 3 months to be in line with the full year forecast. So we are not changing the full year forecast we announced in August, including both core and full base figures.

From here, I'd like to talk about initiatives for sustainable growth. I'm sorry, here, I would like to sip water. Thank you.

Thank you for waiting. Slide 10. The [indiscernible] of key post POC projects, sorry, this is quite a busy slide. The update since Q2 FY 2020 financial results announcement in October 2020 is underlined. Under the upper left, enzalutamide, in China, approval was obtained in November last year for the additional indication of M0 CRPC. On the other hand, in Europe, an application of additional indication of M1 CSPC was submitted 2 years ago, but the inspection by the authorities has been delayed due to COVID-19 and it is considered difficult to obtain approval within this year, unfortunately.

Left, second from the top gilteritinib, we filed relapsed or refractory AML indication or R/R AML indication in China last March. Since it was granted as priority review and was also listed in the overseas new drugs urgently needed in a clinical setting VIP list, it is expected to obtain approval within this year. In addition, gilteritinib is approved as the first AML treatment in the Hainan Boao Lecheng International Medical Tourism Pilot Zone, a major special medical zone of Boao in Hainan to accelerate access to drugs not approved and with a high unmet meets in China. The administration to patient was started in the Boao district in November 2020.

On the other hand, several Phase III trials are underway for early-stage AML. But one of them, the LACEWING trial for patients who are treatment-naive and intensive chemotherapy ineligible, found that the OS extension, which is an endpoint, is unlikely to be achieved as a result of the planned interim analysis. Therefore, new patient enrollment was discontinued from the viewpoint of futility.

Center top, enfortumab vedotin. We planned the submission for the indication of pretreated mUC in the United States, Europe and Japan within this year. Since it has been approved as accelerated approval in the United States, this time, it will be the submission of confirmatory study results and additional sBLA full line extension. Also the data for the studies of EV-301 and EV-201 cohort 2 based upon which these submissions are made will be announced at ASCO GU next month.

In China, IND process is being promoted to start clinical trials.

For the indication of MIBC, muscle invasive bladder cancer, a Phase III study in cis-ineligible patient has already started. And furthermore, Phase III KEYNOTE-B15 study in cisplatin-eligible patients will be started within this year.

The second from the top on the right, roxadustat. In November last year, as I've mentioned, it was approved for nondialysis patients in Japan.

On the right, the third from the top, fezolinetant. I will explain the progress of the U.S.-Europe Phase III study in detail on the next slide for this product.

At the very bottom, AT132. Due to a serious adverse event found in the clinical trial, it was put on clinical hold by FDA. But in December of last year, Astellas has received a notice of clinical holder release from FDA. Currently, we are working to restart the trial. At the same time, we plan to discuss path forward toward global registration filing, including data packages with the authorities of each country.

With Slide 11, I would like to talk about the current status of Phase III trials of fezolinetant. These Phase III trials in the United States and Europe are on track and I would like to introduce the current status of each trial. First, for the 2 pivotal trials, the design and progress are shown in the left half of the slide.

In the SKYLIGHT 2 trial, we obtained top line results for a 12-week double-blind period. Both 30 milligrams and 45 milligrams doses met the co-primary endpoints, namely, frequency and the severity of VMS at both week 4 and 12. No new safety signals of concern were found. Therefore, as originally planned, we started the study for another 40 weeks mainly to evaluate long-term safety.

The SKYLIGHT 1. Trial was slightly delayed from the SKYLIGHT 1 due to the temporary suspension caused by COVID-19, but it achieved LSLV, last subject last visit, in a 12-week double-blind period and top line results are scheduled to be obtained within this year.

For the long-term safety study, SKYLIGHT 4, on the right side, the study design progress are shown. The study was suspended due to the COVID-19 and the number of subjects increased due to the change of the primary endpoint. The progress was favorable after the study resumed and enrollment was completed last year. So last subject last visit will be about 1 year later.

This may be a repetition, but submissions in the U.S. and Europe will be based on the results of 52-week long-term administration from these 3 Phase III trials.

Page 12, focus area approach progress. First, immuno-oncology program. As I mentioned briefly at the R&D meeting last month, I would like to introduce 2 new progress and primary focus, immuno-oncology. The first is on the left, this is the partnership with KaliVir of the United States regarding intravenously administered oncolytic virus. KaliVir's program VET2-L2, it's vaccinia virus based oncolytic virus with a leptin-IL-2 fusion protein. Since it can be delivered intravenously to tumor cells throughout the body, it eliminates the need for complicated procedures of the direct intra-tumor administration, enabling access to a broader cancer patient population. VET2-L2 is in the preclinical stage and a second program following it is also included in the partnership agreements.

The second is the right side, that's the progress of program using the artificial adjuvant vector sell, aAVC platform, which is being jointly promoted with RIKEN. The second program of aAVC, ASP0739, goes into clinical phase. ASP0739 targets the NY-ESO-1 antigen, which is highly expressed in malignant solid tumors. The first clinical trial, a Phase I/II trial in advanced solid tumors, this is scheduled to begin in the middle of the next year.

And meanwhile for the aAVC late program, ASP7517, which targets the WT1 antigen, it's the addition to ongoing AML and MDS studies. Phase I/II trials for advanced solid tumor is planned to begin early next year.

Next, Page 13, Rx+ program progress. Theranostics is a word made in combination of therapeutics and diagnostics. This is a concept to treat a patient while diagnosing the location and condition of lesions in individual patients and determining the suitability of the treatment for each patient. This time, we started -- joined the research on the molecular-targeted radiation therapy with Actinium, which has nuclear medicine technology.

We have summarized what we are aiming for with this theranostics in the 3 bullets at the top of the slide.

In the cycle of diagnosis, treatment and a follow-up, a target-specific radioisotope diagnostics and therapeutics are simultaneously developed. By doing so, it becomes possible to directly connect the result of diagnostic imaging to the treatment.

With this, personalized medicine becomes possible for each patient. Since it has a different mechanism of action from existing standard therapies, it can provide new treatment options for patients who are resistant to existing therapies.

Third, high-sensitivity and high-precision diagnostic imaging makes it possible to detect a small metastasis of cancer cells that are not detected or overlooked by conventional modality. Thus, subsequent treatments can lead to prevention of cancer recurrence and repeated surgery.

Astellas is conducting preclinical studies on diagnostics candidates for theranostics .

Regarding therapeutics, we aim to create development candidates for molecular-targeted radio therapeutic agents through joint research with Actinium. In 2019, we formulated Rx+ story as a strategic direction to indicated areas to focus on in Rx+ creation and the focus business area, Sphere, to realize it. The development of theranostics is one of the efforts of Sphere that is maximizing patient outcomes by improving surgical and diagnostic accuracy. And as a solution for personalizing medical care and smarter hospitals, we are expecting to maximize the value of patients through this.

Slide 14, sustainability. Let me report about that. We recognize that global environmental issues such as climate change are important themes for ensuring the sustainability of society, and by extension, the sustainability of our Astellas. The middle part of the slide summarizes our approach to environmental issues so far.

Our greenhouse gas reduction targets based on our environmental action plan have been approved by the Science Based Target initiative. To achieve that goal, we have reduced greenhouse gas emissions to almost 0 at our Kerry plant in Ireland and we have promoted the use of renewable energy, mainly at manufacturing and research facilities around the world. Sustainability will be one of the strategic goals in the next strategic plan to be announced in May.

Responding to environmental issues is at the core of this and the support for the TCFD recommendations announce in December last year is an important factor. By agreeing to the TCFD proposed at this time, further information disclosure will be required. Astellas has endeavored to disclose detailed information centered around KPIs related to climate change. Of the disclosure items recommended by TCFD, we are proud that the disclosure of metrics and targets, governance and risk management is already at a certain level.

On the other hand, we recognize that information on strategies that aid scenario analysis, information on the impact of climate change risks and opportunities on our business has still room for further disclosure. Through efforts to raise the level of information disclosure, engagement with stakeholders will be strengthened and the effectiveness of corporate climate change measures will increase. As a result, we believe that the global environment efforts of entire world will be enhanced.

At Astellas, we will strengthen our efforts as one of the important management issues and will promote the enhancement of information disclosure that will be required in the future under the strong commitment of management.

Slide 15, this is the last slide. Introducing the schedule of further announcement making. Announcement of financial results for 2020 is scheduled for April 27, Tuesday. A briefing session on the new corporate strategic plan will be held on May 26, Wednesday. So please put it in your calendar. That's all for me. Thank you very much for your attention.

[Unknown Executive]

That's all the explanation from the company side. We now would like to take questions from the audience. [Operator Instructions]

[Unknown Executive]

[Operator Instructions] The first question is from Citigroup Securities, Mr. Yamaguchi.

[Hidemaru Yamaguchi, analyst]

Yamaguchi speaking from Citigroup. Can you hear me?

[Unknown Executive]

Yes. We can hear clearly. Thanks.

[Hidemaru Yamaguchi, analyst]

My first question is about fezolinetant. There was an update this time. But what kind of data will become available? I know the timing of the submissions. But as for the efficacy, externally disclosure or congress disclosure or presentation is being planned separately?

[Naoki Okamura, executive]

Thank you for your question. Of course, we'd like to meet your expectations as much as possible, but in principle, separating the data to disclose separately could be misleading in essence. So in principle, we'd like to make a real balanced disclosure as an opportunity for disclosure. Congress meetings and publication would be the way we are going to use in principle.

Then safety data. Until you have the safety data, it doesn't mean that there's going to be nothing. But through attending society meetings sometime this year, [ 1, 2 data ] could become available. We will continue to discuss the most optimal way of disclosure.

[Hidemaru Yamaguchi, analyst]

In China, enzalutamide and also mirabegron that you talked about, I would like to hear your general ways of thinking, the number of patients, access, drug price balanced with the perspective, I think you can say different things. But your sales -- global sales for enzalutamide and mirabegron, compared to that, what is likely to be the percentage of the sales from China possible to be targeted or achieved.

[Unknown Executive]

Thank you. COO Matsui is going to answer that question.

[Yukio Matsui, executive]

Mr. Yamaguchi, thank you for your question. I'm Matsui, CCO, and now it's about mirabegron. In December, it was approved. And from March, the reimbursement is going to be executed. But in China, OAB market is still under development, the market itself. Overall, the monetary value-wise, it is less than JPY 10 billion. And Vesicare, as solifenacin, it's listed in NRDL list. So it's going to be expanded further in China. But as I've already mentioned, with that much of the population, current market is just around JPY 3 billion size. So that it can be expanded to the [indiscernible] Western countries, it will take longer.

XTANDI , as you might know, currently, well, Zytiga -- actually, Zytiga was launched a couple of years ago and now it's reimbursed. And in China already, for the Zytiga, generics are available. So with the accelerated speed, the new drugs will be available. So the modality of the treatment is changed from the chemotherapy and currently prostate cancer market is expected to be around JPY 70 billion, but this is expanding in a very accelerated speed. And from March, reimbursement will be started, and in such situation, Zytiga, abiraterone differentiation is what we would like to realize to expand the market, and at the same time, I would like to increase the market share. In the current context -- in this context, the new ones, I think you can assume or expect the size and overseas to a certain extent.

[Unknown Executive]

Next, Daiwa Securities, Mr. Hashiguchi, please.

[Kazuaki Hashiguchi, analyst]

Hashiguchi from Daiwa Securities. I have a few questions. First, AT132 filing timing, is it possible to file submission just based on the currently available data or you need to wait for the new data to become available? We are going to discuss with medical authorities. So you have not been able to capture the way you're thinking by the authorities, but what's your view right now?

[Naoki Okamura, executive]

Thank you for your question. First of all, clinical hold, so we had to stop the -- suspend ASPIRO study, we had to enroll 3 patients based on the original protocol for the ASPIRO study. The reason for the -- based on the events as a reason for the clinical hold for these 3 patients, instead of the high dose we planned, the low dose will be dosed instead. Clinical hold is now lifted. So as soon as we can get the approval by this site RD, we can dose the drug to the patients. According to the original plan, we will dose the 3 patients and 48-week data will be used to file our submission. That was our plan. So we will go through IRB process and those in the remaining 3 patients we will get 48-week data and then file our submission.

Then you can estimate and imagine what is going to be the timing of our submission? The question is, with these 3 patients, is this going to be a sufficient clinical package for submission. We need to negotiate and discuss with the regulatory authorities. Three subjects are going to be sufficient. It doesn't mean that we are not searching for another option. We may have to increase the sample size, particularly in the low-dose group. The sample size may not be sufficient for the review. The authorities may say so, how to dose those patients. Well, we are developing a plan. But towards spring this year, we will start dosing the remaining 3 subjects and based on the 48-week data we are going to file. That's our assumption for the future.

Whether we have to increase the sample size or 48 weeks, we may told would be insufficient. So it's up to the discussions with the authorities. So whether 48-week data with 3 weeks would be sufficient or not, you have to wait for this 48-week data with 3 patients. From spring to summer this year, we will discuss with the regulatory authorities.

[Kazuaki Hashiguchi, analyst]

The second question is about theranostics. My understanding might not enough, but other companies are saying same type of the concept. So targeted radiation therapy, Novartis as well is doing something similar. But as of now, what's the differentiation factor of your company from others? Or what's the Astellas like approach that you think? What's the difference, if there is a similar outside?

[Naoki Okamura, executive]

Thank you very much for your question. As of now, against what kind of differentiation factors we have is something we cannot tell you. We don't have anything specific now. The theranostics focus -- the diagnosis and alpha array radiotherapy is what we thought about. It's thought about this, because we have the technologies of making antibody-specific cancer antigen, the antibody or not full length, but the fragmented antibody is identified. And PET diagnosis, although it is now commercialized, but in a research institute, we use a lot of that as part of our technology and I believe our capability is really high. In that sense, nonfull-length rather fragment antibody-making technology and combining that with the PET technology, it is likely to be established as a diagnostics.

And with that, with changing the types of nuclear for alpha and to the cancer cells that is clear to bind is going to be the target for alpha ray. With that, we believe that it's going to be good theranostics. That's the background. And how it can be materialized is going to be the future challenges. So my -- this is in between explanation.

[Kazuaki Hashiguchi, analyst]

Evrenzo, you have a high expectation for future growth driver. Looking at the current results, do you have any numbers you can share with us?

[Naoki Okamura, executive]

The number is still small. So we are not disclosing in the documents, but it's going to be included in the documents we are going to disclose.

And then you can imagine what is the size of the business for this drug. In Japan, we first went with -- only with indication for patients on dialysis. But now with the additional indication, the patient population is going to increase and we can compete at the same level with the competitors and the restrictions of the admission period were listed compared to earlier than the competitors. So our oncology reps have to demonstrate their capabilities.

So now in Europe, as you know, we already had the 2 indications in Europe before the launch -- after the launch to compete. So the situation is different from Japan. But for dialysis patients, in Japan, the target customers are not familiar to us during the visit, but that's not really the case in Europe, according to my understanding. In Europe, in one sense or another, we can compete more fairly.

[Unknown Executive]

[Operator Instructions] Next question. Credit Suisse Securities, Mr. Sakai.

[Fumiyoshi Sakai, analyst]

This is Sakai speaking. I was about to forget what I am supposed to ask, but there are 3 questions. First of all, fezolinetant. So the III study is completed, then at the time, you are going to submit. The SKYLIGHT 4, last subject last visit, I think [ obviously ] it's going to be the 20 -- FY '22. So the submission is going to be after that?

[Naoki Okamura, executive]

Yes, that's right.

[Fumiyoshi Sakai, analyst]

And the IMAB, zolbetuximab that you didn't talk about, the adenocarcinoma of the stomach is where it's likely to be the first-line treatment. So from the time of the acquiring the company -- or the product, it seems that the current progress looks like a slowdown. Sorry, this might be a qualitative question, but would you please answer to that.

[Naoki Okamura, executive]

Well, of course, that is the situation of other companies. But as of now, zolbetuximab value, we do not think that the value is degrade-ted compared to the time that we acquired because the mechanism is quite unique and also biomarker, of course, you have to do something a bit creative that compared to other companies' existing drugs, I don't think that differentiation is impossible. So the data is disclosed in the ClinicalTrials.gov. So no change in that. Your understanding is correct.

[Fumiyoshi Sakai, analyst]

Lastly, MTP, mid-term business plan, is it going to be a 5-year plan?

[Naoki Okamura, executive]

For the coming 3 years, we have Lexiscan, mirabegron LOE in the United States. It's going to be a challenging period.

[Fumiyoshi Sakai, analyst]

So what is going to be the duration of the CSP? And what is going to be the way of disclosure? It may be a bit strange to ask about this question, but we can have an image. You showed the schedule of the disclosure or presentation today. So is there anything you have decided as of now?

[Naoki Okamura, executive]

As for the duration to be covered when we talk about the numbers, 5 years from now we cannot say with accuracy. So the CSP duration was set at 3 years. But on the other hand, life science business, considering the situation of the life science business, just capturing the 3 years, there can be a gap. You have to look into the room through a small space of the doors. It could be difficult to tell and have a clearer understanding. The longer the period of the strategic plan or MTP, the better for this business. But we have to find a good balance vis-à-vis the accuracy and precision. So we are setting the 5-year period.

For the numerical guidance, 5-year numbers probably will be explained this time. Something conventional or usual -- compared to the usual strategic plan, we think we are developing a more in-depth plan than usual ones. So we'd like to ask for some time so that we can announce a plan, which will satisfy you.

[Fumiyoshi Sakai, analyst]

Understood. So I will be waiting for the timing [indiscernible].

[Unknown Executive]

Next, Nomura Securities, Mr. Kohtani. Mr. Kohtani, please.

[Motoya Kohtani, analyst]

Kohtani from Nomura, can you hear me?

[Unknown Executive]

Yes, I can hear you well.

[Motoya Kohtani, analyst]

Gilteritinib, LACEWING, I think there are 2 cohorts, 15 safety and randomized cohort. For randomized baseline, that is as of June 2019, that was presented in ASH, age 77 equal to or above, quite severe patient accounting for 40%.

Safety cohort details. So within 3 months of administration, 3 out of 15 died. And azacitidine is a comparator, which is the standard of care. So overall, it seems that the study hurdle is really high. However, venetoclax, that is comparator. And the OS is extended in the treatment-naive patients, which is equivalent to this baseline, it's almost the same. Looking at the details, it is most similar to LACEWING study.

The difference is this mutation that is only 22% of the patients. And further analysis, the mutation is quite limited, but OS is extended. So LACEWING study and [ VRI ] steady compared to these two. Regardless of the Phase III, the treatment-naive patients is sufficient if they are treated venetoclax.

Here's a question. If Phase III mutation is only the difference, so I just wonder that really differentiate the prognosis? Gilteritinib, looking at the perspective, I think it is not really bright. That's the question.

[Unknown Executive]

Kitagawa will answer to that question.

[Mike Kitagawa, executive]

Kitagawa is going to answer properly part of your questions. So LACEWING data, well, details, including what you mentioned is under the analysis in detail, including that -- this population. Intensive chemotherapy in eligible patient population, how we can conduct the development for such patients is under the consideration. So first, the kind of data is observed.

Then venetoclax comparison. What's the difference? What's the difference from the conventional studies are to be observed.

For III, mutation percentage is also one factor for the consideration.

So based upon that, we would like to decide about the future direction. But as of now, other segments, PrECOG and other conducting similar things, but their impact is less, I believe.

[Motoya Kohtani, analyst]

[ PRT ] is overlapping with [ most of the ] study. What do you think?

[Naoki Okamura, executive]

High-intensive chemotherapy-eligible patient population, the population is similar. As for the potential impact there, LACEWING data will be checked and we have to discuss further. As of now, we are not expecting a major impact.

[Motoya Kohtani, analyst]

Understood. Next question. Can you answer this question? I'm not sure. Audentes studies, [ NCT-042341 ], Nationwide Children's Hospital, top gene hospital in U.S. for DMD gene therapy study. I noticed recently, in October last year, the initial results were reported. 3x10^13 (sic) [ 3x10^14 ] western blot 6% or more full length dystrophin expression was observed or detected in the 9-year old patient. It can be who full length dystrophin instead of micro-dystrophin, it can be interesting, the first in the world. Audentes study, it was a collaborator Kevin Flanagan, Nicolas Wein joined the study. So exon skipping gene therapy POC confirmatory study, I think, AT720 (sic) [ AT702 ] study will proceed based on this.

[Naoki Okamura, executive]

Sorry. I'm not in charge of development, so I cannot respond to the details, but perhaps we are collaborating technology-wise, but what we are trying to develop, DMD, exon keeping, there are several projects, which have been initiated. I think the constructs are different. Sorry, I haven't studied much, so I haven't seen that paper. So I cannot comment here on the spot about DMD exon skipping construct, which can be used as something in common targeting different exons to change. That's our assumption in the program as we proceed. So after some time, we can share more details.

[Motoya Kohtani, analyst]

The third -- last question, zolbetuximab study. So first, the study. That was the study you've done in the past to come up with the OS and the review about that. But if you look at this, more than half is from the clinical sites in Russia and Ukraine. Of course, at the time of the acquiring, the data integrity was studied, I believe. Is there any case that the result is tilted depending on the regions?

[Unknown Executive]

Shitaka will answer to that question.

[Yoshitsugu Shitaka, executive]

As of now, region was that, well, there's nothing we can disclose. However, overall, the regional differences, well, that is going to be -- that was studied and that we came into Phase III. And first and standard chemo is different currently. So ultimately, this confirmatory study -- 2 confirmatory studies we are currently conducting. With that, we would like to establish evidence for submission.

[Unknown Executive]

Next person. Sato-san from Schroders.

[Madoka Sato, analyst]

Sato speaking. I have 2 questions. First, AT132. Before at some meeting, Dr. Yasukawa talked about the reduction of the adverse event ratio by improving the formulation, fine-tuning of the formulation.

So what is the progress of that work? Clinical hold is now lifted. The 3 patients will be dosed with a low dose. And are you going to use the order formulation for those 3 subjects? That's my first question.

[Naoki Okamura, executive]

Probably you may be misunderstanding. AT132, to improve the formulation, we are not doing such work. So the next 3 subjects to be dosed with a low dose, we are going to use the same product or the same formulation.

[Madoka Sato, analyst]

Understood. Another question, the amount of the fund as the operating fund necessary, is there anything that changed for the future? You may think about the share buyback at that time, what would be the trigger? That's what I want to know. So I asked you this question.

[Naoki Okamura, executive]

Basically, our capital allocation policy hasn't been changed at all for this many years. We invest into the business growth, that's a priority, and afterwards, safe and also the continuous increase of the dividend. If there was excessive, then we are going to [ flexibly ] think about the share buybacks. But that's the order of the priority.

And there are 2. The first one, as you asked, operating -- working fund capital. I think, of course, we are currently working on the further efficiency. Therefore, rather than the context of the share buyback, rather our operation efficiency is what I would like to use as a context here. Currently, we are in the situation where we cannot tell you about the share buyback because when we acquired Audentes, we borrowed money and our borrowings. That is, of course, based upon our plan and to be returned or paid back. But cash flow, if that is more than what we borrowed and that is available from the good operation, rather than we are paying the borrowings before the schedule, we might be able to use that amount for additional investment. That [ now ] is likely to be possible. So if there is excessive cash, we are going to use it. For the paying back of our borrowings, that is not really so, and if the environment allows and much, then we might think about the share buyback.

[Unknown Executive]

Morgan Stanley MUFG Securities, Mr. Muraoka.

[Shinichiro Muraoka, analyst]

Morgan Stanley, Muraoka speaking, Can you hear me?

[Unknown Executive]

Yes. Very clear.

[Shinichiro Muraoka, analyst]

Regarding the results purposes and XTANDI U.S. sales, I'd like to confirm for both. For the last 3 months, I got the impression that the number was smaller than I thought [indiscernible] profit sharing if necessary. So this might be in the right size. But what's the reason for small number for -- on a quarter-on-quarter basis. XTANDI, if I subtract to achieve the annual plan, the fourth quarter sales must be bigger than the third quarter. Otherwise, it's going to be in short. You say you are on track. January, March, there's a donut hole, so I think it's going to be this frequent to have a bigger figure for fourth quarter. So I'd like to hear an assuring -- encouraging message.

CCO to is going to respond made, would be to comment.

[Unknown Executive]

CCO Matsui is going to respond. Matsui, would you like to comment.

[Yukio Matsui, executive]

First, XTANDI U.S. Quarter-on-quarter growth may not be so much according to your comments. As Okamura explained earlier, compared to other therapeutic areas, in oncology, the impact of COVID-19 is less. But still, in patient [ scripts ] or prescriptions, it's not just limited to our own products. But also the growth of new patient starts is less, although it is growing, that is affecting the slowdown. Every quarter, quarter end inventory level, in December -- as of December and as of September, it was within the margin of error, but that is also affecting. So we are not behind any competition. Rather, overall, amid COVID-19 impact, we are affected by the slowdown.

As you said, in the United States, the donut hole must be filled in the fourth quarter. Usually, the more rebates in the fourth quarter, usually, in that sense, it's going to be tough. But not only in the United States, but also in Japan and in Europe, despite COVID-19, we are making steady progress. In the U.S. only, it may be a bit challenging.

But XTANDI as a whole on a global basis, if you look at global sales, the numbers are strong. So we are bullish in our outlook.

I have a similar comment. Platinum and PD-1/PD-L1 indication is after those drugs. So in this therapeutic area, our share is quite high. Going forward, as you know well, PD-1, some of the PD-1, we will get to the indication of something like first-line maintenance therapy plus chemo. Some drugs got a certain indication recently. So our target patient population market and the number of patients will increase compared to before. So with the changes in the treatment regimens, the patient population will change. Getting the first indication positive is also going to grow as well. That's the comment for Matsui.

[Shinichiro Muraoka, analyst]

Next question is fezolinetant. As of now, I believe that there have been no details. But the 30 and 45 milligrams, they met the primary end point. In the past, you showed us Phase II data and daily dose at the time, I think it was 30 and 60 grams, so the data is closer to that. In other words, you were able to reproduce the data that is equivalent almost to the previous data.

[Unknown Executive]

Kitagawa is going to answer the question.

[Mike Kitagawa, executive]

The originally third criteria, which means because the design of the studies is based upon the data of Phase II. So we could say -- or you can think that we were able to achieve the equivalent efficacy.

[Unknown Executive]

Thank you very much. We didn't answer all the questions. But unfortunately, we are behind the schedule. So we would like to close today's session. Thank you very much for your participation.

[Operator]

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

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