Astellas Pharma Inc

TSE:4503

Earnings Call Transcript 2022-Q3

[Naoki Okamura, executive]

Good afternoon, everyone. Naoki Okamura from Astellas Pharma Inc. speaking. Thank you very much joining our FY 2021 third quarter financial results announcement meeting out of your very busy schedule today.

Page 2 is a cautionary statement regarding forward-looking information. As this was explained by Fuji earlier, I'm not going to read this slide.

Page 3 is the agenda for today. First, I will explain our FY 2021 third quarter financial results. This is an overview of the third quarter results. Revenue and profit increased in the third quarter. Revenue increased by 6% year-on-year in line with our full year forecast revised in October. Core operating profit increased by 8% year-on-year and is above our full year forecast slightly. Sales of XTANDI and strategic products increased more than 20% year-on-year as expected. SG&A expenses are slightly above our full year forecast. R&D expenses are on track.

Starting from the third quarter, we have a new account on P&L, I will explain the details later, but this is the so good gain on divestiture of intangible assets, where we booked JPY 24.1 billion. Its main breakdown is described at the bottom of this page. There are 3 items here. In general, this account includes gain on sales of rights of in-market products or pipeline assets. For us, in the case of legacy products, we may sell the future rights to those products to somebody else. We received upfront payment for the future revenue. So this was recognized as revenue before. But as a result of our discussion with our auditors, this should be taken as transactions for gain on divestiture of intangible assets. So it should be booked not as revenue, whether it's on a balance sheet or not. Through R&D or sales and marketing, we create our intangible assets. And we are selling this to a third party. This is part of the core business. So before a core operating profit, we have 1 additional line to set this new account.

As I said, because of this flow, what was booked as revenue is excluded from revenue to be included in the line beneath. But at the same time, if we continue to hold intangible assets and the right given through licensing agreements, or we may give marketing rights in a certain country, then this is booked as revenue as before. This is a business using intangible assets, so we will continue to recognize these transactions as revenue.

Details are described on Page 22 in the appendix. So please refer to that slide at your leisure. As a result, core basis profit is above our full year forecast. Full basis operating profit increased year-on-year, rising above our full year forecast. Regarding the last one line here, in the third quarter, we booked JPY 15.8 billion severance expenses due to early retirement incentive program in Japan. 650 employees applied for early retirement program.

Next, on Page 5, let me explain our third quarter results. Revenue increased to JPY 192.3 billion, up by 5.5% year-on-year. The progress against the full year forecast was 75% shown on the right. Core operating profit was JPY 220 billion, up by 8% year-on-year. The progress against the full year forecast was 81.5% as is shown on the right. The bottom half of this page shows our full basis results. In the third quarter, we booked JPY 54.9 billion as other expense. Operating profit increased to minus JPY 69.4 billion, up 6.2% year-on-year. Profit was JPY 132.5 billion, down by 0.3% year-on-year, almost flat for us.

Page 6 is an additional explanation about the year-on-year revenue comparison. This is a slide we always show. XTANDI our Strategic products, which are expected to contribute to our future growth, continue to grow from the previous fiscal year with 4 products combined. Revenue increased by JPY 83.6 billion year-on-year. It's not one of the strategic products, but Lexiscan sales negatively impacted by COVID-19 in the first quarter of FY 2020 returned increasing by JPY 12.8 billion year-on-year. On the other hand, sales decreased for mature products due to termination of sales and distribution as well as transfer of products.

As you can see here, for Celecox, Lipitor and Eligard, revenue decreased by JPY 34.7 billion year-on-year in total for these 3 products. As a result, revenue increased driven by the growth of XTANDI and strategic products as well as by positive ForEx impact. Growth of XTANDI and strategic products was almost in line with our initial assumption.

Page 7, please. On Page 7, I will explain the third quarter results of our main products. As for XTANDI, global sales increased as expected to JPY 411.6 billion, up by JPY 68.9 billion or 20% year-on-year. It's a product with over JPY 400 billion sales but continues to make a strong growth. Sales rose mainly in the United States and Europe.

In Europe, sales expanded for M1 HSPC additionally approved in April last year. For this indication, because of the broader patient population, pricing pressure continued to rise in main countries in Europe, but reimbursement has started. Strong sales growth continues also in Japan and China. XOSPATA sales increased to JPY 25.7 billion, up JPY 8.1 billion or 46% year-on-year almost in line with our forecast. In addition to U.S. and EU, sales in China, where it was launched in April last year also contributing. New prescriptions have been increasing steadily. We have been making steady progress since the launch in China as expected. Recently, in the international markets, we obtained approval also in Russia, Saudi Arabia and Turkey, where we expect sales contribution in the future.

As for PADCEV, co-promotional revenue in the United States was JPY 14 billion. By adding the revenue in Japan, where it was launched in November 2021, PADCEV revenue increased to JPY 14.6 billion, up by JPY 5.2 billion or 56% year-on-year. In addition to the existing indication, the second line additional indication approved in July last year is also contributing to revenue increase. We have made a good start in Japan better than expected. New prescriptions and initial uptake are rising steadily. The progress against the full year forecast may look a little low at 70%, but continuous growth in the United States and further revenue contribution in Japan are expected, so we believe our full year forecast is achievable.

Evrenzo sales were JPY 2.1 billion. Sales in Japan are increasing steadily year-on-year, along with the entire HIF-PHI market expansion, but as you know, behind our full year forecast due to the impact of intensifying competition is slightly behind our full year forecast. In the established market, Evrenzo was launched in September last year, is now available in Germany, U.K., the Netherlands, Austria, Nordic countries, et cetera. After the launch, sales are behind our full year forecast due to substantially slower-than-expected market penetration. It's soon after the launch, and we think this is substantially behind our full year forecast.

It's still soon after the launch, and we're examining the background right now. There have been restrictions on sales promotion activities as the launch time due to COVID-19. In addition, this is for a disease area with relatively stable established standards of care, namely ESA with many doctors being careful about prescribing new drugs according to our current analysis.

Mirabegron sales rose to JPY 126.9 billion, up JPY 4.6 billion or 4% year-on-year. The progress against our full year forecast was 72%, and global sales are behind our forecast, particularly in U.S., which accounts for about half of the global sales. Sales are behind the full year forecast due to lower-than-expected U.S. OAB market growth and pricing pressure is increasing year after year.

Page 8 shows year-on-year comparison and progress against the full year forecast for cost items. COGS ratio shown in the middle of this page, decreased by 0.4 percentage point year-on-year due to changes in product mix. Due to the impact of the yen's depreciation against the U.S. dollar at the end of the third quarter, ForEx impact on elimination of unrealized gain increased the COGS ratio by 0.2 percentage points. SG&A expenses increased by 11.9% year-on-year. SG&A cost, excluding U.S. XTANDI co-promotional fee increased by JPY 24.9 billion or 9.1% year-on-year.

Cost increased by JPY 16.5 billion due to ForEx impact. In addition, in our actual business, there was an increase in investments in digital transformation as well as sales promotion expenses for new product launch readiness and post-launch growth for strategic products. This led to a cost increase of about JPY 8.5 billion in total. As for cost decreasing factors, we are implementing multiple organization reform projects globally aligned with the transformation of our product portfolio and we are continuously trying to optimize our personnel. Due to these initiatives, cost decreased by about JPY 5 billion by the end of the third quarter. As a result, the progress against our full year forecast was 75.1%, a little higher than usual years and slightly above our internal plan up to the third quarter.

R&D expenses increased by 5.2% year-on-year. Compared to the previous fiscal year, development costs increased for zolbetuximab, and we expanded investments related to iota we acquired in the middle of the previous fiscal year. On the other hand, development costs for fezolinetant decreased with the completion of Phase III study patient enrollment. Overall, we are in line with our full year forecast.

On Page 9, I'd like to explain SG&A cost decreasing factors. I mentioned on the previous page, and the commercial organization reforms, including its financial impact. Right now, the internal and external environment surrounding our business has been changing rapidly and substantially. In addition to changes in our product portfolio, namely shift to specialty products, there have been changes in contact methods due to the spread of COVID-19 and expansion of virtual engagement and digital communication. To deal with these changes in the business environment, we are promoting our commercial organizational reforms globally. We are enhancing omnichannel activities and we will shift to product dedicated model in Japan from area-based model. Also, we have been reducing resources for mature products and focusing on strategic products. After addressing these environmental changes, we revisited the optimal number of personnel over that time, mainly in Japan, Europe, U.S., China, South Korea, et cetera, thus far in the current fiscal year, these initiatives resulted in a decrease of about 1,000 personnel.

Economically, we're expecting annual cost reduction of about JPY 18 billion. At the same time, we're also trying to strengthen the capabilities of our commercial organization and enhance the business efficiency. We're expecting cost reduction benefits also from these operational initiatives in the future.

On Page 10, let me explain our FY 2021 full year outlook. XTANDI and Strategic products are driving our revenue continuously. So year-on-year revenue increase is on track vis-a-vis our full year forecast. So we're expecting continuous growth for the future as well. SG&A expenses are slightly above our full year forecast, but we will continue to ensure thorough budget control and take away unused budget from each department for control by finance division on a quarterly basis. As was mentioned earlier, in the fourth quarter, we will see further cost reductions from global personnel optimization. So we are aiming for a landing of SG&A expenses in line with the full year forecast.

R&D expenditure is on track in line with our full year forecast. As for the newly created account, gain on divestiture of intangible assets I explained at the beginning, there were 3 items shown. Gain on transfer of product to Cheplapharm for JPY 12.3 billion was already factored in to a full year forecast. But at that time, we didn't have this account it was included in the revenue for JPY 12.3 billion, hitting the bottom line. But this time, it's not recognized as revenue. So minus JPY 10 billion for the revenue for the bottom line, it's going to be neutral. On the other hand, there are 2 other items. They were not included in our full year forecast. So this has been in addition to increase the bottom line.

As a result, core operating profit is expected to exceed our full year forecast. The core basis profit, full basis profit is also expected to slightly exceed our full year forecast due to these factors. As a result, no changes have been made to our full year forecast announced in October, including core basis and full basis figures.

Slide 11, I will now explain our initiatives for sustainable growth.

Slide 12. Progress highlights of XTANDI and Strategic products. I would like to explain the progress of the key events planned for this fiscal year, which was announced at the beginning of the fiscal year. Items achieved by the time of the last fiscal announcement are shown in the black on the very right side and updates for this quarter since then are shown in the red.

As for the progress in this quarter, the European CHMP adapted the positive opinion for marketing authorization for enfortumab vedotin or PADCEV in December last year. Based on this positive opinion, the European Commission or EC will make the final decision on whether to approve or not.

After receiving the positive opinion, the EC approval process was underway. But due to additional inquiries from the CHMP related to severe skin reaction observed in patients using the French compassionate use system, a system that allows access to unapproved drugs, which is quite unique to France. So the CHMP gave us the additional inquiries. And in order for the response preparation, the EC decision making process is currently posed. We will inform you of the impact on the review period as soon as we know the progress. If you look at the [indiscernible] that's about the remaining major or key events for this fiscal year. That includes the filing for gilteritinib in China for the treatment of relapsed and refractory AML and the acquisition of data from SKYLIGHT 4 study for fezolinetant. Both of these are expected to be completed by the end of the fiscal year.

Slide 13 . I would like to discuss other important updates that have occurred since the last announcement that they mention at the beginning of the period. We've filed applications in the U.S. and Europe for enzalutamide or extended the previously reported OS data in M1 CSPC to the packages set in December '21 '22. The details of gilteritinib is because it's quite detailed, I'm going to show it in the Slide 14. Development of enfortumab vedotin or PADCEV in earlier stages, then the currently untreated metastatic urothelial carcinoma is also progressing. Muscle-invasive bladder cancer, MIBC data from EV-103 cohort H study in this patient population will be presented at ASCO in February. This will be the first published data for MIBC. The clinical trial in nonmuscle-invasive bladder cancer, or NMIBC is on schedule. And the first subject first treatment was achieved in Phase I in January.

For fezolinetant, the SKYLIGHT 4 trial achieved the last subject last visit in January, and the safety analysis is expected to be completed by March. We will provide top line results in our press release or so as soon as they are available. As for other ongoing clinical trials, preparations for the Phase IIIb DAYLIGHT study and the Japanese Phase II STARLIGHT study stage are progressing as planned, and the first subject first treatment was achieved in November last year. In addition, the Phase III MOONLIGHT 1 study in Asia completed its 12-week double-blind and dosing period in January to evaluate efficacy and is currently undergoing analysis.

Slide 14, that's about the development status about gilteritinib. In acute myeloid leukemia with high unmet needs, in addition to the already approved indication for relapsed refractory AML, clinical trials are underway to expand the indication to the early -- for the earlier stage. Regarding the MORPHO study, which is being conducted for maintenance therapy after hematopoietic stem cell transplantation that is right bottom, red square, we announced at the time of the announcement of the CSP2021 that the planned filing would be in fiscal 2022. But due to the delay in the accumulation of events, it has been changed to fiscal 2023. In addition, we have studied preparations for a Phase I study of a 3-drug combination of gilteritinib with venetoclax and azacitidine for patients who are newly diagnosed and high intensity chemotherapy-ineligible.

The patient population is the same as that of the previous LACEWING study. And we believe that one of the factors that prevented the expected efficacy in the LACEWING study was the limited efficacy of azacitidine alone in FLT3 mutated clones. Now that the standard treatment regimen has been updated and the combination of venetoclax azacitidine is widely used, the effect on muted clones has increased. On the other hand, the combination of venetoclax and azacitidine seems to have limited efficacy in FLT3 mutated clones so we expect the addition of gilteritinib to have a strong effect on both FLT3 mutated and unmutated clones.

The high clinical efficacy of the combination of FLT3 inhibitors and DNA methylation inhibitors, such as venetoclax and azacitidine has been reported in 3 small but different studies suggesting that it may be a superior treatment to the 2 drug combination.

Slide 15, advances in the focus area approach. I will explain that with using the table used in the announcement of the CSP2021. Information is increasing. So every time that we show you, the slide is getting busier and busier, but we thought it is better to use the same slide as is shown in the very beginning to make it clear. But if this is too confusing, let us know. In the gene regulation of genetic regulation and primary focus, one of the projects in the research stage has been unfortunately delayed and the PoC identification of PoC timing has been set for FY 2026 or later. So outside of this scope of the chart.

Now the immuno-oncology, there are 3 updates for this. Regarding the checkpoint, the clinical trial of the lead project, ASP1948, unfortunately failed to achieve PoC. Second, with respect to artificial adjuvant vector cells, or aAVC, due to the delay in the enrollment of the lead project ASP7517 in the clinical trial, the expected timing of PoC has been shifted from FY '21 to FY '22 to '23, that's the column in the middle. In the area of specific -- bispecific immune cell engager that lead project ASP2138, has moved to the clinical stage. Details are shown in the following slide.

As a result of reviewing the details of the clinical trial plan based on the latest situation and data, we have shifted the expected timing of PoC from FY '22 to '23 to FY '24 to '25. Meaning from middle to the very right in this chart. As explained in the announcement of the CSP2021, one of the major goals for the next 5 years is to generate late-stage development products from the focus area approach projects. Some of them, such as ASP1948 will be discontinued as a result of PoC assessment while others such as ASP2138, will be newly entered into clinical stage. We are not quite sure how long we are continuously using this chart. But we will continue to definitely assess the PoC of each project and disclose the progress in a timely manner.

Slide 16. This shows the current status of projects in the clinical trial stage for each primary focus. Just like other slides, well, we have achieved some in the fiscal year, but if that was before the previous financial announcement that was described in black, and let us indicate the progress made since the previous financial announcement. In genetic regulation, we completed the dosing of Cohort 2 in the Phase I study of AT845 for Pompe disease. And the interim data from this trial will be presented at the WORLDSymposium this month. In immuno-oncology, we have made progress in several projects. In addition to those mentioned in the previous slide, we have achieved dosing of the first patients in Phase I trials for 2 aAVC projects, ASP7517 and other cancer antigen type ASP0739 in solid tumors and ASP1570, small molecule.

Slide 17. I will explain -- additional explanation about ASP2138.

ASP2138 is the first program with the mechanism of a bispecific immune cell engager and it is a bispecific antibody targeting Claudin 18.2 and CD3. Claudin 18.2 is the same target as the zolbetuximab. What's the difference here is because this is a bispecific 1 arm is binding to Claudin 18.2 and the other is CD3. And this antibody binds these 2 to make them close in distance and co-cytotoxic effects on cancer cells. This antibody was developed in collaboration with Xencor, utilizing their platform technology. As a successor project to zolbetuximab, we expect to achieve high efficacy.

We are currently preparing to initiate a global Phase I study in patients with gastric adenocarcinoma, gastroesophageal junction adenocarcinoma and pancreatic adenocarcinoma, the same indications as zolbetuximab. The immuno-oncology, I repeatedly mentioned there might be a bit of the delay. But for 2138, the preparation for the clinical trials are underway in Japan, leading the situation.

Currently, in the U.S., due to the impact of COVID-19, it is generally difficult to enroll patients and conduct clinical trials. Under these circumstances for ASP2138, Astellas was able to strategically prepare for the early start of the clinical trials by utilizing its capabilities in network in Japan, which Astellas has cultivated. We would like to make the most of this advantage in other projects as well in order to accelerate clinical trials.

Focus area approach. Well, Dr. Yasukawa often say that the success leads to another success. So the concept of this is that the success bonds another success. We'll continue to work on the creation of following programs followed by specific antibodies following the lead project.

Slide 18, that is the progress of the Rx+ program.

The progress up to the results achieved up to the last financial announcement are shown in the black and updates for this quarter since then are shown in red. So in November last year, we gained the top line results from the Phase II study of ASP5354 and safety and efficacy of this compound was confirmed and it supports progress to Phase III trials. So this result is planned to be presented at the stages in March 2022.

Slide 19. In line with the CSP2021, the progress is summarized here. First, the left-top revenue and pipeline value. Sales of XTANDI and other Strategic products are on track to meet the ambitious targets set for the fiscal -- rather first year of CSP2021. In addition, the development of strategic products to maximize product value is progressing as planned. As stated at the bottom of the slide, at the very last bullet point, we have settled our dispute in the U.S. with some of the patent infringement litigation defendants.

At the time of disclosure May 2021, CSP2021, we did not forecast the generic entry of Lexiscan in the U.S. in CSP2021 period. Since we have patents covering our Lexiscan product that expire February 2027. However, based on the recent situation, we now expect a generic entry of Lexiscan within the CSP2021 period meaning up to 2025.

Although we cannot disclose the detail of timing, we currently predict generic entry of Lexiscan later in the CSP2021 period. Also, the litigation against other defendants is still ongoing, we do not comment on ongoing litigation. We will thoroughly review our midterm forecast for revenue and profit in the future based on the litigation process. If something needed to be reported, we would report it in a timely manner.

Now a focus area projects shown in the lower left corner. Clinical trials have progressed in the generic regulation -- genetic regulation and immuno-oncology projects. And ASP2138, a new project, born from a research has advanced to the clinical stage. On the upper right core OP, we are continuously doing the allocation of management resources with the aim of improving the core OP margin. Although SG&A expenses are slightly higher than expected, we will pursue higher quality and more efficient operations and continue to thoroughly manage the budget on a quarterly basis, aiming to achieve the expected results for the full year.

As a novel summary in the first year of the CSP2021, in which we're ambitious set targets, we are making progress as expected. We'll continue to implement the strategy set forth in the CSP, so that we can achieve increased sales and profits as planned for the full year for FY '21. Although not shown in this slide, we have decided to conduct a share buyback as announced in the press release today. We plan to acquire 29 million shares with an upper limit of JPY 50 billion from February 3 to March 24. We will continue our efforts to improve capital efficiency and shareholder returns.

This is the last slide. This slide summarizes the schedule of future IR events. On February 28, we will hold the sustainability meeting. That is a strategy target #4 in CSP. That is about the sustainability. We will explain our approach to it and specific ESG initiatives. In addition, we will hold on R&D meeting on March 9, probably you are looking forward to it. And there, I didn't -- although I did not mention AT132, our genetic regulation program in today's presentation, but we plan to explain the latest status of AT132 at that moment as well as the entire genetic regulation systematically during the R&D meeting in March. That's all for me. Thank you for your attention.

[Operator]

[Operator Instructions]

Mr. Yamaguchi from Citi Group.

[Hidemaru Yamaguchi, analyst]

SG&A expenses. The actual numbers, according to the comments, it's going to be slightly above compared to Q1 and Q2. Concerning Q3, we forecast you have a gain on sales, your initiative to reduce SG&A costs. I understand there are many factors behind, do you have a plan to reduce the SG&A costs in the second quarter -- second half. There is slightly above your forecast in the third quarter. But is it within a controllable range or not? I couldn't fully understand. That's my first question.

[Naoki Okamura, executive]

Thank you for your question. Sorry for unclear explanation. We have core operating profit. That's not the only target for us. As we said in the CSP2021 SG&A expenses are going to be flat in absolute terms according to our target. So SGA cost plan, we would like to have a lending according to our initial plan. That's our goal and target.

We have prior investments. Near the beginning of the fiscal year, we will have effect later. Regarding the commercial organization reforms I mentioned today, we have the benefits in the middle of the fiscal year, and we will have the full benefit in the fourth quarter. So we think we can make it in the end.

If you take a closer look at the financial results of Astellas, in the fourth quarter, we tended to have more costs in the fourth quarter. To prevent this from happening again, the annual budget is approved. If we cannot use all the amount in the first, second and the third quarter, if there is a remaining budget, I don't think that's the case, but we were able to use the money flexibly. But now on a quarterly basis, starting from this fiscal year, we have a budget. If you don't use the budget unless there are exceptions to use the money in the next quarter, you cannot use that money forever. We have to see whether this initiative is going to work or not, please judge later.

And as for share buyback, that's based upon your conventional policy, but at this time, you decided to do the share buyback. Because you have excessive funds, so you decided to do this? Your understanding is right. Our basic policies are always the same. In order for the growth, we invest for the business. That's always a priority. And dividend is continuously provided and the increased level is higher than the past. And Audentes related borrowing is returned and -- according to the plan. And we have the sufficient cash and the case going to return to the shareholders. That's completely based upon our basic policy.

[Operator]

Mr. Hashiguchi from Daiwa Securities.

[Kazuaki Hashiguchi, analyst]

Mr. Hashiguchi from Daiwa Securities. My first question is on Page 7, mirabegron. Pricing pressure increasing in the United States. I'd like to know the background. There are competitive products with the same mechanism. So is this a specific phenomenon for mirabegron? Or this has gone on across a category of similar products. And you have this effect adjusting in the third quarter and the price will change. And we should be concerned about continuing declining trend for the future as well.

[Naoki Okamura, executive]

Thank you for your question. Matsui would you like to respond.

[Yukio Matsui, executive]

First of all, about mirabegron, regarding the pricing pressure on it, as you know, last year, in March or April, a drug with a similar or the same mechanism of action was launched by another company in the United States. To deal with this, a contract with each payer is being reviewed to ensure access so that drug should be available as a first-line therapy. This is what we have done.

Compared to last year, there seems to be a decline here. As for the volume it's growing, but pricing-wise, to ensure access, discount was expanded. That's one reason. As for your second question, continuously, do we see a declining trend continuously for the future? Continuous decline substantially in the future is not expected for now, but we have competition and we have to see what's going on in the market. So we will monitor the trends of the market and the competitors to deal with the situation flexibly. That's all for me.

[Kazuaki Hashiguchi, analyst]

Second question, Page 15, focus area approach progress slide. C&D compared to before, the way of the color of the arrows are different. And now A and B, the coloring is the same. No change about it. But thinking about the current situation, what's the color-coding here, A, means at the very left, that goes toward the very right. But for B, 1951 status, if that status is reflected, what will be the color for that arrow?

[Naoki Okamura, executive]

A is the genetic regulation or gene regulation. So there's a bit of the delay, but the gene regulation mechanism itself, meaning the missed genes are going to be replaced. It's not something like that for example, excellent skipping, for example, that is available already in the market as a technology in that way genes to be regulated. Such biology is used in some of the projects and Audentes have the following projects as well. Considering them, as related to the compound, there's a bit of the delay, but the following comings. That's why the color of the arrow is the same. And B, 1948 will be discontinued, but the color is the same, which means the remaining programs, probably 1951 beta agonistic antibody within FY '21, the PoC timing would come for that as well.

[Kazuaki Hashiguchi, analyst]

Sorry, the explanation may not be so clear, but the color has not changed, meaning that there is no difference. So A and B, both are colored in this way with a reflection of the current status. That understanding is right.

Last question, zolbetuximab Phase III result. When it will be available? Completion date of the clinical trial spotlight this month and growth 10 September. So that timing will be still valid?

[Mike Kitagawa, executive]

Let me answer to that. Kitagawa is going to answer that question. Of course, we have to think about event rate, and based upon that final readout take place. So depending on the timing, the schedule might be ahead or the later.

The clinical trial -- the goal of completion date is something you can refer to currently, the data other than that is not disclosed at this moment.

[Kazuaki Hashiguchi, analyst]

Primary endpoint?

[Mike Kitagawa, executive]

Primary endpoint report would lead to a press release for 1 of the 2 studies. Once we have the results through appropriate media or including conferences, we will be in the direction to disclose the information.

[Operator]

Mr. Sakai from Credit Suisse Securities.

[Fumiyoshi Sakai, analyst]

Sakai from Credit Suisse. I have 3 questions briefly. As for personnel optimization, not by country, but 1,000 in total for multiple countries or regions. How many in Japan? I think -- this is the sales rep's optimization efforts have been completed.

For the time being, according to Mr. Okamura, there can be a continuous review, but how much have you completed? If you can comment on that, that would be highly appreciated. That's my first question.

[Naoki Okamura, executive]

Thank you for your question. Out of 1,000 personnel reduction, Japan accounts for about half, 650 applied I mentioned. About 500 of them belong to sales and marketing. If I say too much, Matsui may be offended, but -- this will not lead to a completion. So we have to review all the time. That's essential. Partly because of COVID-19 pandemic, there is an acceleration of our review, but we do not intend to end here. I think Matsui can agree to this.

[Yukio Matsui, executive]

I think, I would.

[Fumiyoshi Sakai, analyst]

Understood. So 2138, Claudin 18. Zolbetuximab, and as following project for that position ASP2138. So this is a bispecific and another target is the CD3. So the focus currently is the GI. So GI cancer is the target. But for the future, solid tumors and other organs, also in the scope of your development, do you have any idea about that?

[Naoki Okamura, executive]

I don't have every information with me, so I cannot tell you the details. But generally speaking, the way of thinking here is that because this is a bispecific antibody and for the solid tumor, we would like to try the T-cell engager engaging. So if you move the parameters all at once, then you don't know what is the cause and what is the result. So for us, first, we target first the Claudin 18.2 because zolbetuximab worked for that. So we selected that one. And this is likely to be effective for GI cancer. That's why this is selected. And if this bispecific antibody engage T cells and the result is better than zolbetuximab that's something we would like to verify.

That's the very starting point of this research and development. And if alone bispecific works well, then from that we can do whatever is likely to be possible. So we can think about other tumor types. We can think about other tumor antigen to be replaced or to be added. So we would like to do this as a staged manner. In order for the of proof of principle, once thing clear is fixed and after that, with the bispecific and the CD3 is added with that, T cell is really engaged. In order to try that, we are currently working on the current process.

[Fumiyoshi Sakai, analyst]

I see. So Claudin 18.2 because you have zolbetuximab already. And if this makes success, then you can come and realize the followings. And after that, you think about CD3 and its potential, right?

[Naoki Okamura, executive]

So Claudin 18.2, this is a cancer antigen that is already known. So for gastric and gastroesophageal junction adenocarcinoma, and the pancreatic adenocarcinoma, for those, Claudin 18.2 will be probably okay. So CD3 is added. If that works well, then CD3 is fixed. And then the branch of the cancer antigen will be changed and 18.2 plus CD3 combinations with this other cancer types might be viable. So in that way, we would like to expand and develop our programs.

[Fumiyoshi Sakai, analyst]

One last question, Prograf, which was not talked about much. You may wonder why I ask this question. As you know, transplant was a topic in the United States. Prograf is shrinking in the U.S. So there may be no impact of xenograft. But JPY 180 billion size and IP has not been predicted for this size. Regarding the current status, RA in Japan. For the rest, it's used for transplantation. This franchise may be important to achieve your CSP targets. Could you explain the current status based on this?

[Naoki Okamura, executive]

Thank you for your question. I wonder how to respond to this big question. As you said, [indiscernible] was reached and more than 10 years have passed. But patients and physicians have a deep brand stick. So this product is used. As for xenotransplant, there were some individual news coverage. Since 20, 30 years ago, xenotransplant have been tried a few times, as I remember, one case of transplant using xenotransplant was done. So I am aware of that. So reengagement is not considered by Astellas for now, but this is used a lot. And there are patients who depend on our product. So we'd like to ensure a stable supply for them to use our product. Minimally required information provision will continue supporting the academic societies that is going to continue so that this drug is going to be used for a long time. We'd like to make such efforts.

Because of one case report of xenotransplant, we are not considering reengagement here.

[Fumiyoshi Sakai, analyst]

Because of the xenotransplant topic, I look at it. You have sales mainly in Europe?

[Naoki Okamura, executive]

Right. Europe is a big market. In Europe, from the regulatory authorities, in principle, as we said, neurotherapeutic window drug so to speak. Even if it's the same Tacrolimus, there is a slight difference affecting the upper blood concentration and also the PK and the transplantation results. And that's a concern. Many doctors and patients raising such potential risks to the regulatory authorities, and there are many European countries issuing guidance. Because of that, even after patent expiry, still, this drug is still being used. But because of the situation, it's already reached LOE. So pricing pressure is continuing every year. So there is a decline every year. In spite of the usage a lot, we cannot maintain the price and the price is declining a little by little as we are aware.

[Operator]

Goldman Sachs, Mr. Ueda please.

[Akinori Ueda, analyst]

Mr. Ueda from Goldman Sachs Securities. First question, that's about extended U.S. status. So quarterly basis, this quarter, that -- there's not much of the growth inventory, the pricing and action situation was the current growth level. And also, in order to achieve the target, so if there is a further decrease in the fourth quarter, it's going to be difficult to achieve the target, but what do you think about your progress towards the target?

[Naoki Okamura, executive]

Thank you for the question. XTANDI. Well, first of all, Q3, there is not much of the growth. When we sit and there is an impact of inventory just like you pointed out, but also gross to net, meaning about the discount is the issue in the third quarter what has been already existing was recognized and posted this time this quarter. That has a great impact into the result of this third quarter. So the monetary sales-wise it's most flat or seemingly it's a bit minus, negative level. That's the actual situation.

But overall, volume -- in actual volume is a bit of the increase, not a great increase, but there is a bit of the increase. And thinking about the fourth quarter, just like you pointed out, the coverage gap for the donut hole is going to be paid and that amount is going to be larger. And we know that's happing. But at the same time, we have several activities ongoing. One of them is about the growth to net from different angles. We are going to conduct several projects in order to reduce gross to net, the global team, U.S. team, together with them, we consider a lot, and we execute the plan. So we expect the impact of this would happen in the fourth quarter, although currently, there's a bit of a delay. But in the fourth quarter, we would like to catch up the ultimate goal. This is a stretched goal, so we may not be able to achieve that. But so far, we believe that we can marginally achieve it anyhow. That's all.

[Akinori Ueda, analyst]

Secondly, OAB in the United States. There was a mention of the pricing pressure earlier. Due to the impact of COVID-19, any factors for the recovery next fiscal year and beyond? Could you explain?

[Naoki Okamura, executive]

First of all, if you look at the entire OAB market, as you said, because of COVID-19, patients' visits and prescriptions were lower slightly than expected. But our share in the OAB market is rising. You have access the IQVIA data, I'm sure.

Myrbetriq U.S. share is 24%. We have reached up to that level, marking a record high. The OAB market in the next fiscal year and beyond, how it's going to grow, as 1 factor COVID-19 impact. Now the Omicron variant is prevalent, how it's going to be stabilized and how patients can make visit. We're expecting a positive recovery. That's our expectations. And also, as for the competition, there are 2 companies. One more company is trying to increase awareness of the OAB market and beta-3 drugs. Through such awareness activities, the market itself is going to grow according to how we see. We may not expect a big growth, but as for the market for patients and the volume is going to grow, pricing pressure as was explained does exist. So slight increase or remaining flat in the U.S. according to our outlook.

[Akinori Ueda, analyst]

Last question. That's about Page 12. The compassionate use situation in France, that's about the skin reaction. In other indications, will be there any impact, we don't need to worry about that. How do we -- should we view about this situation?

[Mike Kitagawa, executive]

Kitagawa is going to answer that. First of all, as Astellas, of course, always the safety of the patient is a priority. So for this situation, well, there's an approach from the French authority. And to that with the collaboration with the authority, necessary information is duly provided. This is skin reaction, by the way. Well, actually, Nectin-4 that is expressed in the skin as well and mode of action-wise, regardless of indication, there is a possibility of such a skin reaction. So U.S. and Japan packagings such and warnings or box warnings says about the appropriate warnings.

Because in these 2 countries, this drug is approved. And also appropriate user guideline and side effect management leaflets are available and also we are promoting for the appropriate prescription. If this skin reaction happens, those adjustment is suggested. So in that way, we are trying to secure the safety of the patients. Regarding this event this time, as being mentioned, there is a warning available through the package insert. But we are going to continue to reinforce that. So the considered risks and benefit. Well, there is no change about the already existing risk and benefit. That's our approach.

[Operator]

JPMorgan Securities, Mr. Wakao, please.

[Seiji Wakao, analyst]

Wakao from JPMorgan. I have 2 questions. First, SG&A expenses. Next fiscal year, the level of SG&A costs compared to the third quarter, is it going to be more easily controlled. For the third quarter, if there is an upside of the SG&A cost, next time, I'm going to maintain at that level with an upside or SG&A costs to be flat in absolute terms according to your target. So are you going to maintain that level? Or are you going to aim for a lower level? You have investments into digital transformation and after restrictions on COVID-19 affected activities, it may be more easily controlled So could you explain from that perspective?

[Naoki Okamura, executive]

First of all, if you change your targets and goals every time, it doesn't serve as a target. I am not thinking about setting the 2022 targets after looking at the 2021 results. So the basis of SG&A absolute levels, hopefully would be maintained as flat as possible, which we used in setting the CSP2021. Of course, it's going to be easier for the control, that's my wish. But in FY '22, if you look at the development catalysts, we had to prepare for commercialization in many projects in the next fiscal year. So how do I explain.

We announced our CSP, in the initial year, if you have unused budget, your budget would be -- remaining budget could be away. In that sense, it's going to be easier a bit. But this may be an element of a headache for Matsui, but we cannot say it's going to be fine so easily in FY 2022, in my view. Having said so, just cost reduction in the entire company as a direction. If that's the case, we may tend it to be passive. We may not be able to do what we need to do, so rather where we have to use our money, we should spend money. That's what I say. If you want to use your money somewhere, there is a capacity of each one of you, so it cannot be everything. If you want to use your money somewhere, you have to prioritize and focus. Otherwise, you can't do it.

Well, you have to use -- you can spend your money, but you have to save somewhere else. Based on this theory, this is what I tell the organization you can spend. But if you ignore saving, some people may try to do so, then that can be a factor for an upside. How much we can ensure, discipline is going to be a key. So what would happen in the fourth quarter is going to be net mark. Otherwise, if it doesn't work, what additional measures we need to take in the FY 2022. Sorry for my long answer to your question.

[Seiji Wakao, analyst]

I understood it quite well . The next question is AT845 February WORLDSymposium, the interim data is going to be announced. What kind of data would that be?

According to clinicaltrial.gov, endpoint is safety, alpha-GalCer does expression level and also activity level, but the data you are planning to announce this time, those are about the safety for these endpoints expression activity observed. I don't know if that's a PoC, but the initial phase of -- the initial level of the efficacy suggestible data is going to be announced. And also regarding 845, cap side vector encapsulation rate, such a formulation designing, that's not necessary to be particularly considered for this 845?

[Naoki Okamura, executive]

Is going to answer that question. This AT845 what kind of announcement would make primary announcement of the safety of course. But for the efficacy, we believe we can announce some sort of data. And the latter half, I'm not a scientist, but I would like to make an effort to answer that question.

In a V, the truly necessary transgene is applied. Well, when we make something, there is a bag and put something inside and you make a product, you tend to think in that way. But for AAV, there is cells of gene and with the cells, so they make the parts randomly. And they combined together and the gene constructs are encapsulated. So that's the construct of AAV. So that process cannot be changed. Of course, we can do something on the primer centers have different ideas. But with the increase of the accuracy of the manual work, full ratio increases, that was not applied for this case. So there are something made in a random manner and we select fully completed, and that is purified. So that kind of engineering will be the direction that we would go for.

Overall, currently, when it comes to genetic treatment or gene treatment, full MT ratio is considered and a ratio of the full construct should be increased. That's what the authority says, and that's an initiative currently for the interest as a whole. For example, AT132 because there is no alternative options. So rather than using up a lot of time there, effective treatment should be available. So that's a request. However, when it comes to Pompe disease, I don't know if it is really the -- or rather putting aside of this a good or not. That is the option that we continue to do it products continue to be used. So in that case, the accuracy or the preciseness of the product is quite important. So full MT ratio when it is considered the proportion of the flu should be higher. But when it comes to the threshold for that, there is no standard set goal in industry, in academia as well. But overall, the requirement towards that is going to be quite high. That's why we need to prepare for that. That's what we think.

I'm looking forward to the future R&D meeting.

[Operator]

Mr. Muraoka from Morgan Stanley Securities.

[Shinichiro Muraoka, analyst]

Muraoka from Morgan Stanley. First, Lexiscan, generics. I understand fully that there isn't much you can explain. But you mentioned later in the CSP2021 period. So I imagine it's going to be 2024 or 2025. How generics are going to be launched on day 1 many products to replace the product or 80% or 90% or by limiting the volume, it's going to replace in a milder fashion. What's your image? Based on the current information, how should we look at this based on the current information.

[Naoki Okamura, executive]

There are so many things we cannot answer, so I cannot respond. In principle, we settled our dispute with some dependence. At a certain timing, generics will be launched at a certain timing. Based on this assumption, it's not through Paragraph 4, but some got the approval for generics, then how they're going to behave is also a question. So it's difficult to make the right assumptions in my view. But generally speaking, very unique and special products or very unique and special channels or very special customers, a very special or unique patients may exist. But otherwise, once there is going to be lift, there would be generics all at once in the U.S. generic business. So one day earlier compared to competitors that difference is going to be a main source of profit for such generic business. According to my understanding, that's how I see. So those companies which you look at the situation around to consider their behavior, in my view. I'm not generating a factor. So I'm not in a position to comment on their strategy. That's all.

[Shinichiro Muraoka, analyst]

That's refresh your information for me. And this gain on divestiture of intangible asset. Well, in the current vague business plan in the next fiscal year, to a certain extent, this type of gain would happen in some noncore business or noncore products. Okamura-san, do you have some such ideas or there isn't likely?

[Naoki Okamura, executive]

Thank you for the question. Rather than if it's in a mind or not. But basically, Fortis for commercial units, where they put the resource and sales and profit is worth in putting the resource. That's the beginning of the thinking or it becomes a legacy product, sales is reduced. The price reduced, but the volume is maintained. And for that cost of manufacturing increase, it would be the programmatic or marketing authorization will be maintained and safety information has continued to be collected. The cost to maintain the rights of the sales. So considering all these factors, we decide what to be done. If we say that please get this product then there has to be the contract but otherwise, this contract is not going to be established. So there are such factors involved. Needless to say, such factors, I mentioned, we set up the criteria for such factors and discuss about the different products.

So of course, I see some picture. But from when with whom we start the discussion in what way of the transactions will be started. Such kind of a specific picture is not drawn yet. So that is no clear our view is available that is available to be explained to you. That's all.

[Operator]

That's all the questions we have received. With this, we'd like to close today's meeting. Thank you very much for joining today.