Astellas Pharma Inc

TSE:4503

Earnings Call Transcript 2022-Q4

[Hiromitsu Ikeda, Corporate Head, Advocacy and Relations]

Thank you very much for your participation on Astellas Earning Call for FY'22 Financial Results Ended March 31. I'm Ikeda, Corporate Advocacy & Relations. I'm serving as the moderator for here today. This meeting is going to be provided with the Zoom webinar and also live streaming. So you can attend this another way.

After the presentation, we will have Q&A session but questions accepted only by Zoom webinar but not from live streaming. The participants for here today is Naoki Okamura, Representative Director, President and CEO; Yoshitsugu Shitaka, she is CSO or Chief Scientific Officer; CMO, Chief Medical Officer, Tadaaki Taniguchi; CCO, our Chief Commercial Officer, Claus Zieler.

So in total, we have four participants here from our end. Including Q&A, this session will be held with simultaneous translation in Japanese and in English. Accuracy of interpretation cannot be guaranteed by ourselves. Those attending from Zoom webinar, please select the favorable language from the Zoom screen. When you select the original language, then you can listen to the original sounds without translation.

And today's presentation is going to be made based upon the presentation materials on our website. This material or presentation by representatives for the Company and answers and statements by representatives for the Company in the Q&A session includes forward-looking statements based on assumptions and beliefs in light of the information currently available to management and 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 representations of advertisement regarding the efficacy and effectiveness of these compounds.

Now Okamura san please start the presentation.

[Naoki Okamura, Representative Director, President and CEO]

Hello, everyone. I'm Okamura from Astellas Pharma Inc. Thank you very much for joining our FY 2022 financial results announcement meeting on a very busy schedule today. This is a cautionary statement regarding forward looking information. As this was explained by Ikeda earlier, I'm going to skip this page.

Page 3. Today, before explaining the details of the financial results, I'd like to explain FY 2022 review as a whole and FY 2023 initiatives for achieving corporate strategic plan, CSP2021 and prospects for FY 2024 and beyond. FY 2022 core basis results are almost in line with our expectations, but slightly behind our full year forecast. These were the results of our aggressive efforts to tackle the stretch full year forecast. In development, we achieved important milestones with products we expect to become major growth drivers for the future, such as fezolinetant, PADCEV and zolbetuximab.

In a focus area approach, our active creation efforts have borne fruit. And targeted protein degradation was selected as a new primary focus. On the other hand, each project aimed for PoC. But unfortunately, no PoC was obtained in these projects. We take these results seriously, turn them in planning opportunities to be leveraged for FY 2023 initiatives so that we can ensure growth towards achieving CSP2021.

FY 2023 is the turning point for CSP2021. We will continuously keep a strong commitment to the achievement of our targets. We position FY 2023 as the turning point to ensure growth for FY 2024 and beyond. As important initiatives in FY 2023, we can highlight the four items shown on this page. First, regarding fezolinetant, we have high expectations for it as a blockbuster.

We will make proactive investment with higher priority in order to realize rapid market penetration and sales expansion after launch. As for PADCEV, we're hoping that metastatic urothelial cancer first line will be a major growth driver. We are expecting sales expansion in the United States and also progress in development for global submission. With regards to zolbetuximab, we will proceed with global submission and in parallel, make the investment for market penetration after launch. Fourth, we will enforce sales expansion with new products and new indications.

And at the same time, we actively promote investments to optimize the cost structure for the future. To improve operating profit margin in FY 2024 and beyond, we will thoroughly pursue operational excellence. As a result, we are forecasting a similar level of the core operating profit margin in FY 2023 compared to the previous year. When these investments initiatives they are fruit, we think we can achieve about 25% core operating profit margin in FY 2024 and 30% in FY 2025, our target in CSP2021. Now I want to explain the details on the next page.

Page 4 is the agenda for today. I will start with FY 2022 consolidated financial results. Page 5, revenue and profit increased in FY 2022. Revenue increased 17% year-on-year. It was almost in line with our expectations, but slightly behind our full year forecast.

XTANDI, XOSPATA and PADCEV expanded in line with the full year forecast. I will explain the product details later on Page 7. Next on cost items. Cost of sales ratio was as expected. SG&A expenses were on track and decreased year-on-year when ForEx impact was excluded.

R&D expenses were on track. As a result, core operating profit increased by 17% year-on-year. Unlike the revenue, it was almost in line with our expectations, but slightly behind our full year forecast. On Page 6, I will explain FY 2022 financial results. Revenue increased to ¥1,518.6 billion, up by 17.2% year-on-year, achieving 99.3% of the full year forecast.

Core operating profit was ¥286.9 billion, up by 17.2% year-on-year. The achievement of our full year forecast was 98.9%. You can see the ForEx impact on the right-hand side of the table. Revenue and profit increased even when ForEx impact was excluded. The bottom half of this page shows a full basis results, provided that full basis profit forecast is the revised forecast announced on April 11, 2023.

In the right bottom of the table, we included other expenses booked in the fourth quarter. As we decided to file our submission, we booked ¥38.6 billion a fair value increase of contingent consideration for zolbetuximab.

The other day, we made a press release about the expected booking of about ¥58 billion impairment losses and other expenses in the fourth quarter. We examine the numbers in detail, booked ¥60.3 billion including impairment losses of ¥47.1 billion due to the review of future sales forecast for Evrenzo. So other expenses reached ¥157.5 billion in the fourth quarter. Operating profit was ¥133 billion, down by 14.6% year-on-year, achieving 97.1% of our full year forecast. Profit decreased to ¥98.7 billion, down 20.4% year-on-year, achieving 94% of our full year forecast.

Please turn to Page 7. I will explain FY 2022 results for major products. First, XTANDI. Global sales grew to ¥661.1 billion in FY 2022, up by 24% year-on-year. Even when ForEx impact was excluded, it was nearly double digit growth.

The results were almost in line with our expectations, but slightly behind our full year forecast. By region, U.S. was behind, which became a factor for the underachievement of global sales. Levels of patient assistance program or PAP ratio and the share of Zytiga generic competitors remained high, which affected our sales. On the other hand, despite the challenging environment, XTANDI continues to maintain the overwhelmingly leading position in the branded market across all indications.

In Europe, we achieved a full year forecast, which was substantially revised upward in the second quarter as mainly in Germany and Italy, M1 CSPC prescription increased and demand substantially increased by 20% year-on-year. In the midterm plan five years ago, we announced a peak sales forecast of ¥400 billion to ¥500 billion, but XTANDI substantially exceeded those expectations and grew to a product exceeding ¥600 billion in sales. As for purposes, global sales expanded significantly to ¥44.4 billion, up by 104% year-on-year, driven by Europe and Japan in particular. The results were almost in line with our expectations, but slightly behind our full year forecast.

In the United States, despite steady growth in actual demand, revenue from clinical orders was below expectations, resulting in the underachievement of the forecast. On the other hand, both Japan and Europe achieved the full year forecast, which was substantially revised upward in the second quarter. In Europe, launched countries increased to 21 and reimbursement was obtained in seven countries. In Japan, new prescriptions exceeded our expectations, contributing to sales expansion. Regarding XOSPATA, global sales increased and achieved full year forecast.

Sales expanded in all regions, performing in line with expectations, particularly in U.S., Europe and Japan, high market share was achieved in the current indications. As for Evrenzo, progress was significantly behind our full year forecast. We booked impairment losses and the sales trend was much lower than expected. Intensifying competition continues to be a factor behind in Japan. In Europe, the situation still continues where we have not been able to differentiate from the existing standards of care.

In the fourth quarter, we obtained reimbursement in multiple countries, including Italy, which we hope will contribute to sales in FY 2023. Next, on Page 8, I will explain cost items. Cost of sales increased by 14% year-on-year, along with the revenue increase. COGS ratio was down by 0.5 percentage point year-on-year to 19%, in line with our expectations. SG&A cost, excluding XTANDI U.S.

co-promotion fees, increased by 11.1% year-on-year, but when ForEx impact was excluded, SG&A expenses decreased by 1.3% or ¥5.1 billion year-on-year, the ratio to revenue decreased by 1.6 percentage points year-on-year to 29.9%. The achievement rate was 99.7%, with spending in line with our full year forecast.

Personnel cost fell by about ¥8 billion year-on-year with global optimization of commercial-related personnel. We are trying to reduce sales promotion costs related to mature products such as mirabegron, which decreased our costs by about ¥8 billion year-on-year. On the other hand, we are making active investments for new product launch readiness for PADCEV and fezolinetant. Sales promotion expenses rose by about ¥12 billion year-on-year. As a result, we are able to reduce costs as expected and necessary investments were made actively.

SG&A costs were controlled in line with our initial assumptions throughout the year. R&D expenditure increased by 12.2% year-on-year, about 1.1% when ForEx impact was excluded. There was an impact from the booking of onetime expense of ¥13.7 billion for using a priority review voucher in the first quarter for the application of fezolinetant. And this cost is excluded R&D expenditure decreased year-on-year. The achievement rate was 99.3% in line with our full year forecast, including the expense for using a priority review voucher.

. From here on, I will explain our initiatives for sustainable growth. Turning to Page 10. I will explain key events we achieved in FY 2022 for XTANDI and strategic products. Progress in the past three months is shown in red.

Regarding XTANDI, we obtained positive top line results from both Phase III EMBARK study in M0 CSPC and Phase III China ARCHES study in M1 CSPC Chinese participants. I will explain the details related to EMBARK study on the next stage. This is an achievement in FY 2023, but with PADCEV, we obtained accelerated approval from U.S. FDA in April for the additional indication of locally advanced or metastatic urothelial cancer and cisplatin-ineligible patients in the first-line settings. In China, our filing for previously treated metastatic urothelial cancer was accepted in March.

As for fezolinetant, we received a notification from U.S. FDA that the review period would be extended by three months to secure time to complete their review. The new PDUFA date is set for May 22.

Regarding AT132, we submitted a series of responses to clinical hold by FDA by -- in March. We are discussing with regulatory authorities continuously. As other updates, we published Phase III study results for zolbetuximab and fezolinetant, respectively, in the prestigious medical journal Lancet. Fezolinetant, we obtained positive top line results in Japanese Phase IIb study, STARLIGHT study. We will discuss the future development and submission plan with the regulatory authorities.

With regards to XOSPATA, we obtained positive top line results for Phase III MORPHO study for maintenance therapy after hematopoietic stem cell transplantation in March. But unfortunately, we couldn't achieve primary end point. We will analyze the data in detail and then consider the future plan. In FY 2022 as a whole, we are able to achieve all important events in light of the initially announced plan except for the delay in obtaining topline results due to the delay in accumulating events in EMBARK study. On Page 11, I will explain an overview of EMBARK study and related updates.

In this study, M0 CSPC patients with high risk of biochemical recurrence received placebo plus leuprolide, enzalutamide plus leuprolide or enzalutamide monotherapy. If PSA is not detected 37 weeks after the initiation of the treatment, participants will suspend treatment until their PSA rises again. Regarding the primary endpoint of MFS, the enzalutamide combination group demonstrated a statistically significant improvement compared to the placebo group. Furthermore, in OS, a key secondary endpoint, a positive trend was observed. OS data is not yet mature, so we will continue monitoring for final analysis.

Also, for other secondary endpoints shown in the right middle on the slide, statistically significant improvement was also demonstrated. The results in detail will be presented at AUA 2023 on the 29th of April U.S. time. Based on the study results, we are planning to file a submission targeting mid-2023 in the United States. Also in Europe, we will have discussions with the regulatory authorities, targeting our submission in the second half of FY 2023.

Also, we updated sales forecast by incorporating the sales trend so far, the newly decided submission plan in Europe and the recent ForEx rate trend. We issued guidance to forecast potential peak sales of ¥600 billion to ¥700 billion, and made an upward revision to ¥700 billion or higher. We estimate the contribution of M0 CSPC indication to be ¥40 billion to ¥50 billion. We will update the peak sales forecast for other strategic products at an appropriate timing. From Page 12, I will explain the progress in our focus area approach.

Project in clinical trial stage with updates in the last three months are shown in red. AT845 in primary focus, genetic regulation will be explained on a later slide. In immuno-oncology, ASP7517 and ASP0739 artificial adjuvant vector cells aAVC and ASP9801 intratumoral oncolytic virus were terminated based on the clinical study data of genes so far. Bispecific immune cell engager, ASP2074 and ASP1002 achieved the first subject dosing in March as planned. In mitochondria PS, ASP8731 for sickle cell disease was terminated based on the data of things so far.

In targeted protein degradation, ASP3082 was granted fast track designation by FDA in February for existing treatment-resistant pancreatic adenocarcinoma with KRAS G12D mutation. We are hoping that this will lead to the acceleration of the project. The right-hand side of the table shows the number of projects aiming for PoC determination by the end of FY 2025. As of now, we have 16 projects due to termination after PoC in the clinical study stage as well as the project termination in the research stage as well as delay. It's clear that no PoC was obtained in primary focused projects, but we will continue to create projects in research stage and aim for PoC in clinical or study stage so that we can obtain PoC.

On Page 13, regarding AT845, I will introduce you the data from FORTIS study that was recently presented. At the time of data evaluation, four subjects received AT845 were being followed up. Three of the four subjects chose to discontinue standard therapy that is enzyme replacement therapy, or ERT, following administration of AT845. ERT is currently the only approved treatment for Pompe disease, but it requires a chronic treatment delivered in biweekly infusions. So we hope AT845 will replace it with a single dose.

The study showed that major functional outcomes such as FVC or forced vital capacity and the six-minute walk test have been stable after withdrawal from ERT for up to 51 weeks in the longest evaluated subjects. The clinical hold was lifted in February, and the activities are now underway with the aim of resuming dosing in the second quarter. The plan is to determine the PoC, along with the data from subjects who will be administered after the resumption.

On Page 14, we summarize the main progress made in FY '22 with regard to the Rx+ program. Progress made in the last three months is shown in red. Partnership agreement was signed with Roche Diabetes Care Japan or Roche DC, Japan for BlueStar our digital therapeutics or diabetes patients. In addition to tracking blood glucose data of diabetes patients using blood glucose monitoring system of Roche DC Japan, BlueStar is combined with it, aiming to provide a new solution to support disease management. In Japan, the Company plans to begin clinical trials in FY '23 with the aim for approval as a combined medical product.

ASP5354 has entered into an exclusive U.S. commercialization agreement with the Stryker, a medical device company with a strength in surgical visualization technology. Through this partnership, Stryker will assist in the visualization of the ureter during surgery by providing a video system optimized for ASP5354 and Stryker will promote awareness and use of the system in clinical practice through collaboration on sales managing and surgical training with them. Next, let me talk about focus and the key expected events in FY'23. Page 16.

Revenue is forecasted to be the same level as previous fiscal year in FY'23. As a premise for the full year revenue forecast, we have factored in the impact of the most recently confirmative shipment of generic Lexiscan products. The decrease in sales of Lexiscan is expected to be offset mainly by the launch of fezolinetant and the sales contribution from the additional indication of PADCEV for the first-line treatment in the U.S. The product forecast for '23 is explained in detail on Page 18. Now let me explain the expenses or cost items.

We expect SG&A expenses to increase year-on-year, and this will be a year of investment to ensure growth in FY '24 and beyond. We're well expanding investments mainly in fezolinetant and zolbetuximab. In addition, in order to achieve a core margin of 30% in FY'25, as stated in our CSP2021, we will continuously pursue operational excellences. We have been working for scrutinization to optimize cost structure to FY'24 and '25. Specific projects and initiatives are still under consideration, excuse me, but we will provide details as we move forward.

We expect R&D expenses to decrease year-on-year. We will expand investment in primary focus. On the other hand, we anticipate a decrease in development expenses for key strategic products. As a result, we expect Core OP to remain at the same level as previous fiscal year. In anticipation of -- and the long-term growth in FY'24 and beyond, we are forecasting a ¥10 dividend increase to ¥70 per share for FY'23.

On Page 13 -- 17, I will explain the performance focus for FY'23. Revenue is projected to be ¥1,520, an increase of 0.1% year on year. Yen is expected to appreciate against the U.S. dollar compared to the previous fiscal year, which will have a negative impact on our performance, but we expect to observe the impact and achieve the same level of sales revenue. SG&A expenses are expected to be ¥661 billion, an increase of 4.9% year-on-year.

Excluding core promotion expenses for XTANDI in the U.S., SG&A expenses are expected to be ¥485 billion, an increase of 6.6% year-on-year. R&D expenses amounted to ¥251 billion, down 9.1% year-on-year. As a result, core operating income is expected to be ¥290 billion, up 1.1% year-on-year as with revenue, we expect to be able to absorb the negative impact of foreign exchange rates. The lower part of the slide shows the -- our full basis forecast. Operating profit is projected to be ¥288 billion.

In FY'23, we have included in other expenses, an increase of about ¥2 billion in fair value increase and contingent consideration of fezolinetant and zolbetuximab. Page 18 is the focus for major products in FY'23. First, XTANDI, the focus for '23 is ¥669.9 billion, an increase of ¥8.8 billion year-on-year. Excluding the impact of ForEx, this would be an increase of 5% over the previous year. In the U.S., although we continue to expect the impact of [indiscernible] and does [indiscernible] recent data shows an upward trend in the number of new patients and expect an increase of new patients further.

We also expect to receive approval for an additional indication for M0 CSPC in FY'23. Although the contribution to sales in the fiscal year in this fiscal year will be limited, we expect synergistic effects on existing indication by activating promotion activities. In Japan, we expect sales to expand, mainly driven by the growth of M1 CSPC.

In China, reimbursement for the additional indication of M0 CRPC started in March 2023, which is expected to contribute to sales. On the other hand, sales growth in Europe is expected to be moderate because although driven by an increase in prescriptions of M0 CRPC with volume growth in the single-digit range, it will be offset by the negative impact of an increasingly competitive environment and price pressure. PADCEV's forecast of FY'23 is ¥66.7 billion, an increase of ¥22.3 billion year-on-year. Excluding the impact of ForEx, this represents an increase of 54% over the previous fiscal year. In the U.S.

expect a substantial sales growth driven by the additional indication, which was approved this month. We have already gained a high market share in second and third line treatment and we expect first-line treatment to be a growth driver going forward. We also received information today that NCCN guidelines, which are mainly physicians refer to when making prescription decisions, have been updated to recommend the use of PADCEV's first-line treatment for mUC based on the result of the EV-103 trial. We look forward to its contribution for our future. In Europe, we expect further growth by obtaining reimbursement in big markets such as Germany, France, Italy and Spain.

In Japan, we expect continued growth as we see further market penetration in the current indications. The regional focus of XTANDI and PADCEV are shown on Page 32 and 33. The forecast for XOSPATA for FY '23 is ¥49.3 billion, an increase of ¥2.7 billion over the previous fiscal year. In the huge markets, such as the U.S. and the Europe, we expect to continue growth through market penetration of FLT3 testing in the market.

In the international market, we expect an increase in the number of countries where FLT3 will be launched and reimbursed and we expect sales to grow. Finally, for fezolinetant, which is expected to be approved in the near future, we have factored in ¥40 billion to ¥50 billion in FY'23 forecast. Naturally, this figure includes the impact of the three-month extension of PDUFA date. The impact of the three-month extension does not simply mean that 1/4 of the original projected sales of FY'23 will be reduced. We expect a certain period of time from the launch of product till reimbursement, so we are projecting a linear growth in each quarter.

In other words, we estimate that sales will be reduced by about half from our original focus of FY'23. Because the last three months, that is when we expect the greatest contribution to sales, will postpone to the next fiscal year. Last year, we gave the guidance that we could expect mid-double-digit billion yen in the first year, but please understand that we would have expected even higher than ¥40 billion, ¥50 billion if the project had been approved in February as planned. We would appreciate if you could wait until the approval for further details and assumptions. We plan to hold a briefing after the approval to provide guidance on specific amounts focus and strategies to achieve them.

On Page 19, I will explain the cost items for FY'23. Excluding co-promotion fee for XTANDI in the U.S., SG&A expenses are expected to be ¥485 billion, an increase of ¥30.2 billion year-on-year. As explained on Page 18, we expect fezolinetant sales of ¥40 billion to ¥50 billion in FY'23. Although the PDUFA date has been extended by three months, we have set the highest priority on fezolinetant in FY'23. In order to achieve rapid market penetration and further sales expansion in FY '24 and beyond, and we will continue to make proactive investment in additional investment.

In addition to this, we will also make investments in anticipation of the launch of zolbetuximab. We expect investment in these two products to increase by approximately ¥50 billion year-on-year. On the other hand, we will continue to reduce cost for mature products and expect a decrease of approximately ¥8 billion year-on-year. SG&A expenses will increase in FY'23 due to the proactive investment in fezolinetant, but at the same time, we will aim to optimize cost structure. Although we cannot give specific details or sense of skills at this time, we will the achievement of a core OP margin of 30% in FY'25, by making sure of this approach contributing to FY'24 onwards.

R&D expenses are expected to be ¥251 billion, a decrease of ¥25.1 billion year-on-year. Investment primary focus will continue to increase. We expect an increase of approximately ¥8 billion year-on-year mainly due to expanded investment in target cell, protein degrader and gene therapy. On the other hand, a onetime expense for a priority review voucher of ¥13.7 billion for fezolinetant will be a factor for the decrease compared to the previous fiscal year. In addition, development cost for fezolinetant and zolbetuximab is expected to decrease by approximately ¥6 billion year-on-year.

We will invest proactively for further growth, and we'll continue to review the cost now contributing the improvement of competitive [indiscernible] value. This year will be the year of further growth and optimization of cost structure of FY'24. Page 20 is the key events we expect to see in XTANDI and the key strategic products in FY'23. XTANDI, we plan to file for additional indication for M0 CSPC based on EMBARK study. In U.S.

between June, August and Europe in second half FY'23, also filing for additional indication of M1 CSPC in China around August or October based on China ARCHES study. [indiscernible] line results from Phase III EV-302 study are expected to be available in September to November. The target indication for this is the first line of [indiscernible] eligible mUC and if the result comes in on schedule and the data positive, we expected to be able to file in the fourth quarter. The global submission for zolbetuximab for the treatment of gastric and GEJ adenocarcinoma is expected in the first quarter in the U.S. and Europe and in the second quarter in Japan and China.

Fezolinetant, decision on the approval is expected by May 22 PDUFA date. In Europe, we expect a decision from the regulatory authorities between November and January next year. Page 21 here are the main events expected in FY'23 for the primary focus projects. A total of four projects from genetic regulation and immuno-oncology targeted protein are expected to enter the Phase I stage. The details of each will be explained at the time when they go into the Phase I stage.

And the projects that have already entered the clinical study phase, initial data for the monotherapy dose escalation part of the Phase I studies are expected for the [indiscernible] data inhibitor by specific antibodies ASP2138 and the KRAS G12D mutant degrader ASP3082. For AT845 and ASP7317, the first dose are expected to be administered after resumption of clinical trials. Although we do not have any projects planned to achieve or obtain PoC in FY'23, we expect to obtain initial clinical data for several projects, which we hope will lead us to PoC in FY'24 and beyond. Page 22. I will explain our new promotion system for R&D projects.

R&D operating model, in other words, newly introduced in April with the aim of accelerating the PoC acquisition. The R&D meeting held about a year ago, we explained that we have reorganized our research organization structure from a traditional function-based hierarchical structure to purpose-based and agile organizations. As a result of the new primary focuses and the projects are being actively created by the research organization, so actual results have begin to emerge. This time, we have expanded its concept to include clinical development and shifted the focus of activities toward the function and access to the objective access, the primary focused project access and organized to enable agile decision-making through empowerment. The leadership team from each primary focus consisting of a percentage for each function established is establishing and make strategic planning for each primary focus.

Furthermore, manages budget and oversight and prioritize projects from research to clinical phases.

Day-to-day decision-making for project is delegated to each project team. Also organizational structure was reformed in which layers between each project lead and CXO in charge was reduced. At the Company wide level we have established a new meeting body called Kachi committee, which is the governance body, each headed by the CXO in charge and [in office meeting] body we have so far. The Kachi is responsible for prioritizing among the primary focuses and digital making focusing key development milestones. First thing the empowerment to each project, the primary focus needs to decrease the timing of visiting our corporate wide government body.

And the system is designed to enable rapid decision-making on a project by project basis. This will accelerate the decision about PoC in the future.

We reiterated that we remain committed to achieving CSP2021, and we proactively invest in promoter initiatives for the future in FY'23, making it a turning point to ensure growth from FY'24 onwards. We'll commit to achieve a core OP margin of 30% and promote to build up a portfolio of late-stage development products through a new R&D operating model to ensure a sustainable growth after the loss of exclusivity of XTANDI. Page 24, this is the last slide for me. This is about upcoming events. We expect fezolinetant will be approved in very near future, and we plan to hold an information sharing meeting after approval.

The detail will be informed when time comes. We hope you will be able to attend. Thank you very much. This is all from me. Thank you for your attention.

[Hiromitsu Ikeda, Corporate Head, Advocacy and Relations]

That's all from us as a presentation. We are now going to take your questions. You can ask questions only through Zoom webinar. You cannot send your questions through live streaming. [Operator Instructions] Today, we have Claus, CCO, in this room.

As I said at the beginning, from the Zoom screen menu, you can select the original language. You can listen to the original voice without going through simultaneous interpretation. If you want, you can change even at this timing. So we're going to take your questions.

Thank you for waiting. The first question is from Mr. Yamaguchi from Citi Group.

[Hidemaru Yamaguchi, Citi Group]

Fezolinetant, I have a question. You're going to explain the details into the future, but I'd like to ask you a few questions as of now. So I'd like to ask you three months delay. This is due to a process issue. It's not about because of the questions about the drug itself.

Is my understanding correct?

[Naoki Okamura, Representative Director, President and CEO]

Yes, your understanding is correct. We were not told to submit any particular new data, but the data we submitted is to be reviewed by FDA, and they need more time. So predetermined three-month extension was communicated to us.

[Hidemaru Yamaguchi, Citi Group]

Understood. The second question, it's about the sales you made explanation and this ¥10 billion, ¥100 billion in between of that. according to your explanation or we have that number. And with this three months delay, as a result, you reduce it. And that result is between ¥40 billion to ¥50 billion.

I believe that was your explanation. Is my interpretation right?

[Naoki Okamura, Representative Director, President and CEO]

Yes, that is right.

[Hidemaru Yamaguchi, Citi Group]

Then in media also, just like you mentioned, [indiscernible] is likely to be happening. Therefore, the impact on to the sales is larger. But for other sales, would have been increased, but the SG&A that is 50 billion against the -- ¥50 billion year-on-year. What do you think about it? With this delay of three months, is there a further increase or decrease on this?

[Naoki Okamura, Representative Director, President and CEO]

Thank you for the question. Well, this three-month delay of the sales, that cannot make it possible to reduce the initial investment for SG&A. Therefore, the same level of the investment will be necessary. And on top of that, this three months delay means that the peak that we can achieve might be reduced. But in order to avoid such kind of feeling, rather I would like to get into the market as early as possible for catch-up.

So at the time of the full year, this level of the SG&A will be necessary. Suppose there is such a number, rather in FY'23 budget, we book further larger amount compared to that. Having said that, we haven't decided we are going to use it all from the beginning because this is a new treatment therapeutic area for us. And SG&A resource mix probably might be different from the past. Not only MR, but other digital channels will be introduced for the communication of the information.

So looking at the situation, we would like to do some detailed adjustment.

[Hidemaru Yamaguchi, Citi Group]

For the insurance, with regards to fezolinetant, there may be many patients with private insurance because of their age. In spite of the three-month delay, negotiation with the payers have to start before approval. So feedback -- it may take some time in terms of the timing, but insurance related feedback from the payers, anything you can comment right now?

[Naoki Okamura, Representative Director, President and CEO]

Regarding such details, we are going to explain such details at a meeting we are going to hold after the approval.

[Hidemaru Yamaguchi, Citi Group]

Understood. So it's not related to the financial results announcement, but Okamura is now CEO and CFO, wearing two hats right now. Regarding the new CFO, what's the situation right now?

[Unidentified Company Repesentative]

Thank you for your question. It's vacant, as you know well. CFO, we have an external posting to search for candidate. Of course, we also have our own list, and from outside, some are approaching us. How should I explain?

More than 10 candidates have been identified by now. So if possible, in 2023, by the time when we announced the first quarter results, I hope that a CFO will join us. That's the sense of speed in my view.

[Operator]

Next, Daiwa Securities, Mr. Hashiguchi, please.

[Kazuaki Hashiguchi, Daiwa Securities]

Toward the end of your presentation, the CSP2021 achievement is something that you mentioned that you commit to. And according to the Page 23 slide, in such target, well, OP margin, 30%, that is only the number described here. And the original performance target, I think there are mainly three of them. XTANDI and key strategic products are still exceeding [¥1.7 trillion] and ¥50 billion in 2025. And afterwards in a focus area and as such, there are other targets who are established.

But on this slide, it seems that you have less emphasis on the other targets and the core OP is still your sole target this time? I would like to hear the current progress for other targets than this core OP. How do you think about it? How do you feel about it?

[Unidentified Company Repesentative]

Mr. Hashiguchi have a good understanding about the CSP2021 performance goal. This 30% is the number three, and we are not giving up the number one and number two target.

But on this slide, the context here is fezolinetant, PADCEV and zolbetuximab growth is where we are going to invest for FY '23. And because of that, core OP rate in 2023, it will be ended up with 19%. But with the coming two years, the target number three, 30% core OP, is committed to be achieved. So this is just focusing on the number three target on the slide. The sales is smaller and core OP 30% alone is achieved.

In that case, the absolute value of the profit is going to be smaller. So the performance target of number one and number two are still -- we are committed to. Because this is the end of a fiscal year earnings call, that's why you focused on the target number three. That's all.

[Kazuaki Hashiguchi, Daiwa Securities]

Focus area approach outlook is something I'd like to ask you about. One or two may be successful. In the end, then ¥500 billion in the end would be in your sight sufficiently. But when you developed your CSP, at that time, there can be a variety of scenarios. Based on the simulation, the median amount could be ¥500 billion.

But based on the progress by now, the median value, it may be declining. Is it better to think that way? Your focus area approach in around 2030, how much revenue you can generate? What about the probability of achieving such scenario? I'd like to hear your view, Okamura-san.

[Naoki Okamura, Representative Director, President and CEO]

If you show Slide 12, it's difficult for me to explain. But as you remember, our internal performance goal number two is 2025, at the end of that year, pipeline value we internally calculate is the definition. But from those from outside in society, there is no way to calculate this. We say we have this much value being accumulated, but you cannot examine the details, so what did we do? The [indiscernible] simulation was performed, and the pipeline in FY '23, what is the -- how much revenue it can generate.

We calculate the power as an example for 2030. What I want to say here is that revenue in FY 2030, if there is a one-year delay, the revenue will decline that much. The revenue will fall much. But in terms of the value, it may not be affected so much. In that sense, FY 2030 revenue, I will explain there -- I wonder whether it was a good idea or not, but instead of the sales amount in FY 2030, the pipeline value in 2025 after the sum of the net present value after adjusting the probability.

But we don't have POC, you may say so. Yes, you're right. But by being able to obtain POC, the value of the project will go up a lot. What we try to do with focus area approach is the primary focus. [indiscernible] project would be generated out of there, and also multiple projects will come out one after another.

[indiscernible] would be in the clinical study, others may not go into the clinical studies. But once it's successful, we'd be able to be aggressive in subsequent follow-up projects. So if we can get and obtain one POC, that project value would go up. The subsequent project value would also follow. What about the FY 2030 revenue? ¥500 billion could be a difficult goal. Sometimes I feel that way, but 2025 pipeline value from that perspective, it's not impossible in my view.

[Kazuaki Hashiguchi, Daiwa Securities]

Now in CSP, the SG&A is being maintained as absolute value, and there will be increase in this fiscal year. But the next fiscal year or even after that, for us, what kind of perspective should we have?

[Unidentified Company Repesentative]

Well, this fiscal year, fezolinetant sales might not contribute so much, but we have to spend our money for SG&A. We have to set the preparation for zolbetuximab. That's why we have to experience the increase of the cost, and because of that, we are thinking about not investing others. That is not the case for FY '24 and '25. So that we can improve our profit and loss structure, we would like to do some methods if that is available so that we can invest in that area as well.

We are -- would like to take a certain portion. That's why I come up with this number of the core OP of 90%.

Of course, we couldn't find such other method, then the profitability would go up. So SG&A maintains the absolute level, same level. That doesn't mean that we have the same level every year. But as the landing point of FY '25, well, the sales increases but absolute value of the SG&A, it would be suppressed so that we can increase the core OP rate. That's the way of the calculation, so you don't need to worry much.

We showing -- we have experienced the effect of this SG&A control, and we started to learn that how we can well control the SG&A.

[Operator]

Next, Morgan Stanley MUFG Securities, Mr. Muraoka, please.

[Shinichiro Muraoka, Morgan Stanley MUFG Securities]

Morgan Stanley's Muraoka speaking. I also have a question about fezolinetant. I understand we need to wait for the meeting, but I'd like to ask you about how we should think about it. First quarter, there is almost going to be no sale or revenue. But in the second quarter and beyond, in principle, there's going to be in your growth of sales over 12 months of ¥40 billion to ¥50 billion.

Is that the right image? Or somewhere, including the insurance coverage, there's going to be a turning point to have a ¥40 billion, ¥50 billion in the end? Could you give me a clue?

[Unidentified Company Repesentative]

Regarding the detailed numbers and also how we will develop a relationship with the payers, that is going to be explained at the meeting after approval in more detail and more accurately.

[Shinichiro Muraoka, Morgan Stanley MUFG Securities]

When you say linear, what is going to be the size of the three months delay? What about the size of the impact?

[Unidentified Company Repesentative]

That's a metaphor. When I say, why don't you use math. On a full year basis, there's going to be a linear growth of sales in the first quarter, one triangle or [3, 5, 7 -- 1, 3, 5, 7], and 16 triangles on our full year. If there's going to be a three months delay, the seven triangles would come to the next quarter. So seven out of 16 will be gone, so it's almost half.

So this is a metaphor. The sales that we developed from the day one towards 31st of March, I'm not saying that there's going to be a linear growth.

Then somewhere, there's going to be an inflection point to grow more towards the end. I may be repeating myself, but for the detailed plan, that is going to be explained at the meeting after approval.

[Shinichiro Muraoka, Morgan Stanley MUFG Securities]

Another point in the plan, [Lexiscan 270] is the sales plan and the generic is launched, according to your explanation. So what about them, in this case, the downside risk? Is it necessary to consider about that? What should be the precondition in this case? Could you give some guidance?

[Unidentified Company Repesentative]

Well, this is about the United States. So once generic becomes available, the market is dominated by the generic. That is the general situation, but we have several of our own reasons. So we would not go down to complete zero, rather, we believe that we can continue a certain level of the sales. That is a poor condition.

That's why this number. If -- of course, there might be a certain level of the downside risk. But to certain extend with using our own inside, we come up with this number. Claus Zieler is here, so if he has additional comment, we are very happy to hear that. What about you, Claus?

[Claus Zieler, Chief Commercial Officer]

You explained it very well. We have multiple generics on the U.S. market. We have confirmed their shipment, and it is now a question of confirming that the penetration of the generics will be in accordance to our estimate. So of course, there can always be deviations from those estimates in -- as time goes by.

[Shinichiro Muraoka, Morgan Stanley MUFG Securities]

The results of this year, I'm afraid of any shortage. But in your background, you are expecting a decrease in revenue but actually, it was increasing. Is that because of the competition on the unit price again, or ForEx?

[Unidentified Company Repesentative]

We may need to examine the details but based on my gut feeling, it may be because of the ForEx.

[Shinichiro Muraoka, Morgan Stanley MUFG Securities]

I see. So any particular reason?

[Unidentified Company Repesentative]

Once again, we will check again. And the corporate advocacy will contact you again at a later date after confirming the details.

[Operator]

Next, Goldman Sachs Securities, Mr. Ueda, please.

[Akinori Ueda, Goldman Sachs Securities]

I'm Ueda from Goldman Sachs Securities. First, I'd like to ask you a question about assumptions about PADCEV. In the United States, first line was approved and it's now included in the guidelines recently. Looking at the numbers in your plan, it's going to -- may not be accelerated so much.

The denominator is getting larger, I understand that, but what's your assumption? Are you having a conservative look? Or what is going to be the speed of market penetration for the first line? If you can answer these questions, that would be highly appreciated.

[Claus Zieler, Chief Commercial Officer]

Yes. So the growth of PADCEV is, of course, driven by the approval in first-line in the United States that we obtained in the beginning of April. That is a substantial increase of the available patient pool in the United States, and our share assumption would be over 20% of that first-line patient pool in the United States. And on the basis of that trajectory, we have built a model that would add more than 100 million to PADCEV in the U.S.

[Akinori Ueda, Goldman Sachs Securities]

Now second question, -- and that is about the premise of the plan. So the plan for this fiscal year, how do you see about the cost ratio. And if there are some factors that might worsen the ratio of the cost, would you please explain about it?

[Unidentified Company Repesentative]

As for the presentation of the certain factors, it was in the cost of the sales ratio. Let me answer that later on.

[Akinori Ueda, Goldman Sachs Securities]

Okay. Then in the meantime, let me ask you, this is again about the premise of the plan. Funguard, Mycamine profit for the transfer. So for a core basis, are there are any tentative or transient factor because of this?

[Unidentified Company Repesentative]

Mycamine, ¥9 billion. That is what I was definitely saying. And on -- about the -- a question about the sales cost ratio, well basically, the products mix will be changed. But roughly speaking, this cost of sales ratio as for the ratio basis is going to be the stable level.

[Operator]

Next, Mitsubishi UFJ, Morgan Stanley Securities, Miss Kumagai, please.

[Naomi Kumagai, Mitsubishi UFJ, Morgan Stanley Securities]

Kumagai speaking. First question about SG&A cost, ¥50 billion plus, most of this is related to fezolinetant. After approval, there can be a more detailed guidance. What kind of items are included in here? Anything you can tell us?

[Unidentified Company Repesentative]

To the session that we will have after approval, if I may ask you to wait until then.

[Naomi Kumagai, Mitsubishi UFJ, Morgan Stanley Securities]

Understood. AT845, looking at the six-minute walk test, there seems there is no improvement. But is it good enough because it's maintained for AT845? There seems to be no dose dependence, but could you explain how to interpret this?

[Unidentified Company Repesentative]

Taniguchi, Chief Medical Officer, is going to explain.

[Tadaaki Taniguchi, Chief Medical Officer]

First of all, six-minute walk test. There's an arrow, as you can see here. The standard of care is the ERT, enzyme replacement therapy, which is discontinued in three subjects. Even without ERT, the walking distance has not changed. So in that sense, it's a clinically meaningful data.

For these patients, T2W, they come to hospitals for IV infusion to receive ERT because they have troubles with their bodily conditions. It would cause a lot of trouble for them. Just one gene therapy administration to maintain the function, that's very meaningful and significant for them. At this Academic Society meeting, this data drew a lot of attention. As for the dose, dose response must be closely looked at from now on.

Needless to say that all doses, for the time being, we see a certain level of response and effectiveness, including safety. We have to take that into account to determine the optimal clinical dose.

[Naomi Kumagai, Mitsubishi UFJ, Morgan Stanley Securities]

Understood. And immuno-oncology program, three projects are discontinued. That is because you want to reallocate the results for the remaining projects. So how do you view about the immuno-oncology projects now?

[Unidentified Company Repesentative]

Regarding immuno-oncology, within this primary focus area, we put further focus on this. And again, these three projects that discontinued as it was decided because they met the discontinuation criteria that was set from the beginning. So the study results met the discontinuation criteria, that's why we decided to discontinue. And this type of decision-making is quite difficult, but we've introduced this criteria for the discontinuation and we just follow that so that we can reallocate the resources for the more promising area.

Especially for immuno-oncology, 2138, needless to say, bispecific antibody, is in the middle Phase I study. And there are other two bispecific antibody projects went into the Phase I study. So we can expect further for this area.

[Operator]

Next, JPMorgan Securities, Mr. Wakao, please.

[Seiji Wakao, JPMorgan Securities]

Wakao from JPMorgan. First, as was mentioned by others for their questions, SG&A cost to be returned to the FY 2021 level. It was like ¥41 billion -- rather, ¥410 billion. There is a difference of ¥75 billion compared to ¥485 billion. Fezolinetant expenses you're going to use this fiscal year going to fluctuate, so ¥50 billion may not be necessary as of 2025.

And you're going to reduce the cost to reach a ¥410 billion. We have ¥410 billion, the ForEx rate and 2023 ForEx rate can be very different. So even if we say it's the same amount in terms of the absolute value, but the ForEx is going to yen's depreciation. It's very difficult to make them comparable at the same level.

In terms of the operational structure, sales amount would be in various currencies. After distribution, the sales in various currencies and there are also expenses in various currencies. If there's going to be any inflation because of the currencies, there's going to be inflation in cost as well. The second one is related to the already-asked questions. It's about the performance of the primary focus.

We mentioned this will lead to the sustainable growth. But as of now, the purchasing, acquiring those on the later stage is not something you are thinking about. But would there be a certain timing where that you need to do certain sort of the acquisition of such from outside considering the patent [indiscernible], then you have to think about something like that. But also you have the primary focus, so you need to think about the certain time issue. So do you have any time limit for working for the primary focus?

[Unidentified Company Repesentative]

That's a really good question. That is the question relating to the success of the CSP2021. And this focus area approach, the way of coming up the innovation, is also relating to your question.

So now we have CSP2021, not thinking about others. We just pursue for CSP2021 to do the activities that was decided in 2021 April. That is not the cost that we are doing. Of course, the change of the environment taken into consideration, for example, XTANDI U.S. is materialized.

Lexscan is available, however, generic came into the market earlier than ever expected. We have to deal with such factors, and it is true that the POC is not really obtained and it's been expected in primary focus area.

Of course, we have to work hard internally. But depending on the situations, we would like to introducing something outside of the Company. So we have such a variety of things on our list so that we face the timing where we have to get something from outside, we have the preparation done, ongoing here. It's not something that a certain point of time, we are going to do M&A. But if something come up, then in that case, we will let you know.

[Operator]

Next, Credit Suisse Securities, Mr. [Kosaka], please. Sorry, Ms. Haruta. Haruta from Credit Suisse, please.

[Kasumi Haruta, Credit Suisse Securities]

First question about XTANDI. Peak sales, ¥700 billion or more. You made an upward revision. Peak sales trend for the future, how should we think about it? Within this year in the United States, Inflation Control Act, your drug may be subject to the price reduction list, then there can be a possibility of the price reduction from 2024 towards LOE.

Peak sales was to emerge, but because of the IRA, Inflation Reaction Act, what's your assumptions? What's your view on this?

[Unidentified Company Repesentative]

Regarding this issue, it's very complicated. It contains a lot of complexities. First of all, the ForEx rates are changing. We talked about ¥500 billion to ¥600 billion range. We already reached the ¥600 billion.

Are we going to say that there's going to be normal growth? No. We are saying that it's going to grow even further into the future. That's one thing. EMBARK data is approved, so there is a possibility of an upside.

As an addition, that's why you are changing to ¥700 billion as a guidance. The impact of IRA, needless to say, U.S. commercial people are mainly developing a variety of scenarios and doing a variety of analysis. But to think about what kind of ways can mitigate the risks, what should be the priority, and from when they are going to do this? Are they doing such an analysis?

As you pointed out, XTANDI, products like XTANDI, of the site, it may be on the list. We are including that possibility in our assumption. But on the other hand, whether it's going to be included in the list or not, we don't know yet until that time comes. If it's listed, what is going to be the price negotiation? After that, it's very unclear right now.

What kind of price the authorities are going to propose and offer? We don't know yet. Regarding the proposed price, what kind of opportunities would be given to us to protest that? What kind of data can you do? And how much can we push back to achieve a success? We don't know yet. So we shouldn't speculate.

We shouldn't share our views right now, rather, maybe you can wait for some more. Once we know more facts, we should explain in more profitly. I think that would be better. That's all for me.

[Kasumi Haruta, Credit Suisse Securities]

I understand your situation. Thank you for explaining the details. Understood.

Second question, primary focus, decision making. You have established a new operating model. But what was the decision-making problem in the past? But with this new way, how it will be improved? But for the agile decision making, this primary focus is those on the face for the gain in POC.

So in this agile decision-making, in what way you will do the clever decision-making?

[Unidentified Company Repesentative]

Well, for this operating model, that Taniguchi took the initiative, so he's going to explain that.

[Tadaaki Taniguchi, Chief Medical Officer]

Let me explain about it. As you see it in here, what's changed greatly is this governance. Governance is consolidated into one. So far, we had governance and R&D and we have governance for the corporate-wide. So there are two, but it was consolidated as a [catch] committee.

In that way, more agile and appropriate decision is possible to be done. And also, there are necessary members there always. So including us, the appropriate CXO or chief executive members will be the members for the right decision-making, then we can commit to the project, budget and also time line.

The second point is this PF leadership team you see. So far, this PF leadership team was not officially established. Well, at each level, there is a team and for each portfolio, primary focus portfolio was looked at. But this time, it is going to be delegated to this leadership for the budgeting as well. And also, prioritization in the therapeutic areas will be also done by these teams.

And including the future investment and also new strategies will be considered by this leadership team.

Underneath, there is the project lead that is above PF lead. And under that, there is a project lead, and we then have lower layers. So day-to-day decision-making can be done on each team level, which leads to the accelerated decision-making. So at the same time, to this project lead, the certain level of the delegation is done. So with that roles and responsibility of those leaders will be clarified, that leads to the agile and appropriate decision-making and also appropriate investment.

And also, of course, we have the functional access as well, and that focuses on the center of excellence in particular therapeutic areas, and the capability levels belong to those areas would go up. So this is a complete metrics model that we came up with.

[Operator]

Sorry, I read your name incorrectly. Sorry for that. Next, Mr. Kohtani from Nomura Securities.

[Motoya Kohtani, Nomura Securities]

Kohtani from Nomura Securities. First, fezolinetant. SKYLIGHT four study details was published in a paper in April. Looking at that paper, if you take a closer look, 45 million fezolinetant to the patients with the endometrial or adenocarcinoma, there's a thickness in one patient and one patient on placebo. FDA may be taking a close look at this data in the paper, but according to the paper, within the specialized range so there should be no problem.

But I'd like to confirm, with fezolinetant, in terms of safety, FDA has any particular concern about its safety? That's my first question.

[Unidentified Company Repesentative]

Taniguchi is going to explain.

[Tadaaki Taniguchi, Chief Medical Officer]

So first, regarding fezolinetant SPOTLIGHT study published in [asset], I'm sure you're talking about it. Thank you very much for explaining the details. Needless to say, FDA or any regulatory authorities would take a very close look at safety in addition to efficacy, no difference among different regulators. So safety portion, as you mentioned, regarding cancer cases, they're reviewing all these details.

Right now, review is now ongoing so we cannot share the details today. But the target date is May 22nd, and that's the PDUFA date, and review is making progress towards that date right now.

[Motoya Kohtani, Nomura Securities]

Understood. Second question. About the launch of fezolinetant, it will not be the linear launch, you might understanding us well. However, the number is higher than I've expected.

So my question is this mid three-digit is what [Oyasuka-san] mentioned as the focus. That is around October. And after that, [indiscernible] [dot com] and such kind of site is utilized for realization of access for the HCPs, and also the disease awareness activities for the patients are also taking place. So the launch factor is the reimbursement price and also the level of the awareness amongst the doctors, the price may not be that high, I expect. So you have the clear view about those factors, that's why you come up with this number.

That is my understanding, but is that right?

[Unidentified Company Repesentative]

Well, each individual factor, I rather not talk about it here. But naturally saying, ideally, February 22nd, the authority would have made a decision and seeking that -- looking at that timing, it came up with a number. So in that, I expect various factors are now clarified to a greater extent. That's why we came up with this number.

[Motoya Kohtani, Nomura Securities]

Understood quite well. 5354, congratulations for your collaboration with Stryker. Near infrared image visualization for surgical operation, that company was the first. It's more advanced as an ideal partner in my view.

This Phase III study design, I took a look. In Phase II, it's limited to just some procedures, but this is the overall abdominal procedures. This is a company for artificial hip device companies. There can be damage. Are they talking about that area as well?

This is my last question.

[Unidentified Company Repesentative]

Stryker, for near infrared image visualization, at least in the United States, it has an overwhelmingly a larger share compared to others. Even outside of the United States, they are very aggressive in other markets as well. So in that sense, we think they are an ideal partner for us.

The target procedures for the clinical studies, what is the scope? I don't have the established good data in front of me, so we will check and come back to you, or Taniguchi can explain.

[Tadaaki Taniguchi, Chief Medical Officer]

In the clinical studies, we have -- I'm sure you have seen the protocol, the pelvic as well as the abdominal surgeries and ureter can be visualized to prevent the damage to the ureter. That's the objective.

As an endpoint, visualization is mainly the important area. As an endpoint, that's what we agreed with the -- we need to agree with the regulatory authorities as we proceed. Regarding the hip joint, any mention about the artificial hip joint? No such discussions as of now. In principle, ureter damage can occur with hysterectomy.

Gynecological procedures, OB/GYN procedures or general surgical procedures and the intraoperative ureter damage is the bigger number of cases. So we should start with what's occurring more frequently, so that's what we'd like to focus on.

[Motoya Kohtani, Nomura Securities]

Understood.

[Operator]

We are coming to the time to close the session, so following will be the final question from [Nikkei] Newspaper, Mr. Yamada, please.

[Unidentified Analyst]

[Nikkei] Newspaper, Yamada is my name. A lot of questions already asked, so there is only just one question. Primary focus, there are no POC obtained yet for that. I have one question. So R&D organization is revisited and you are going to change the governance.

Governance is going to be changed, which -- and this leads to the agile decision-making, which is wonderful. The POC, again, not obtained to this extent. Does that because the governance alone is a problem? CSP2021 was established and it's been well since then.

So by looking back the management and also the development, what kind of challenges are you seeing in front?

[Unidentified Company Repesentative]

Well first of all, for me, I would like to talk about my own view. And after that, I would like to hear from Shitaka and Taniguchi. This is not only the matter of the governance, but the governance issue is -- has a certain weight, which means that we have to understand the status and the situation for the early and precise decision-making.

And for that paper's team, it's important, but what about the organization of the Astellas so far? It is a functional organization and there are many layers, and the people supposed to be in the decision-making process has the long distance to the level who has the authority of the decision-making.

In that organization, although you have a good discussion within a team, nothing can be decided because we have to bring it, escalate it back to the boss and then you have to bring it down back to the team once again. Then, decision come up with different opinions leading to the different decision-making.

That's why we thought the team should have the ownership and having a delegation to make it agile. So yes, the governance itself is changing in this way, but the impact of that is greater than you just consider as the organizational change. But Yamada-san, I think you are asking where, how we should find the candidate or how we can make use of the modality in the -- effectively?

I think in that case, Shitaka or Taniguchi can answer to you.

[Yoshitsugu Shitaka, Chief Scientific Officer]

Shitaka, in charge of the R&D. I would like to answer to you first.

Again, we have a focus area approach, our primary focus. And as you see on the Page 12, has a list of such projects that we have. We came up with a platform and we come up with the products one after another. From that is what we are aiming at. But unfortunately, within these two years, there's nothing we were able to prove from this platform.

But just like Taniguchi mention, bispecific platform or immuno-oncology cellular therapy platform, or gene therapy, or TPD, target protein degradator. We have such leader programs of the platform and those are in the phase of obtaining POC. In other words, we are on a critical phase now.

Then there, we can get the policy for a certain platform. So in that case, we can think about the next program and probability of success for them is likely to be increased greatly. In the past two years, the result is unfortunate that lead program for each program is facing the very critical point. That's my understanding.

[Tadaaki Taniguchi, Chief Medical Officer]

Shitaka made comments. As he said, the platforms are being reinforced in various projects towards R&D. They are proceeding towards R&D right now.

Then what about the clinical side? What we are focusing on right now is reinforcing the early development team. We have the patent, as you know. We had many in the late phase development. We used to focus on those for the past few years.

That's not wrong, and we think that's very important. But we have to be very serious to tackle the focus areas in early development. We need to accelerate, as you are suggesting. So we are changing the organization to that end, and new talent being hired and acquired from inside and from outside so that we can accelerate further. That's what we are thinking about.

[Unidentified Analyst]

We understand how serious you are. That's all from me.

[Operator]

Some of you still waiting to ask questions but the time is up, so we'd like to close this meeting here today. Thank you very much for joining this meeting today. Thank you very much.