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Sumitomo Pharma Co Ltd
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I would like to report on the first quarter results for FY 2022 and the current status of clinical development. Let's start with Page 3.
This slide shows a summary of our first quarter financial results. Figures are shown on the core IFRS basis. Revenues totaled JPY 159.9 billion, an increase of JPY 28.7 billion from the same period last year. Sales in Japan segment declined due to the impact of the NHI drug price revision. On the other hand, sales in North America, China and other regions segment increased due to the impact of foreign exchange translation and the recording of onetime revenues. Selling, general and administrative expenses and R&D expenses also increased due to the effect of foreign currency exchange.
Core operating profit increased JPY 4.9 billion year-on-year to JPY 13.4 billion, largely due to the increase in gross profit from higher sales. Nonrecurring items, such as changes in the fair value of contingent consideration, did not change significantly in the previous and current fiscal years.
Operating profit increased year-on-year by JPY 6.3 billion to JPY 14.6 billion. Income before tax increased year-on-year by JPY 38.7 billion to JPY 46.6 billion. This was due to a large foreign exchange gain resulting from the yen's depreciation at the end of the quarter. As a result, income attributable to owners of the parent also increased significantly, rising JPY 26.3 billion to JPY 31.1 billion.
In terms of progress towards the full year forecast, although sales revenue and profit markers in the first quarter have progressed slightly ahead of the schedule, there has been no significant change from our assumptions. The full year forecast has not been revised at this time. We maintain our exchange rate assumption of JPY 125 to the $1.
Page 4 shows sales revenue for the Japan segment. Revenue decreased JPY 5 billion from the same period last year to JPY 33.7 billion. Although sales of LATUDA increased, overall segment sales declined due to the NHI price revision and the impact of the transfer of sales of REPLAGAL. Progress against the full year forecast was 25.9%, progress as expected in the segment as a whole.
Page 5 shows revenue from the North America and China segments. The North America segment reported sales of JPY 95.2 billion on a yen basis, an increase of JPY 23.8 billion from the same period last year. Sales in LATUDA amounted to JPY 62.5 billion, an increase of 21.7%. In dollar terms, revenues increased by $13 million or 2.7%. Although progress against the annual plan appears to be strong, we believe that progress is on schedule as we enter the loss of exclusivity in the second half of the fiscal year.
Sales of BROVANA, whose exclusivity period ended last June, declined by JPY 3.8 billion. In the Sumitovant-related business, sales of ORGOVYX, MYFEMBREE and GEMTESA combined totaled JPY 9.6 billion, a year-on-year increase of JPY 7.5 billion. The upfront payment associated with the exclusive license agreement with Accord Healthcare for the sale of ORGOVYX in Europe is included in Others segment.
In the China segment, MEROPEN continued to grow with sales of JPY 11.6 billion, up 36.4%. Progress towards the full year forecast is at 42.1%. MEROPEN has been selected for volume-based procurement in 2022. This will be implemented in October, a few months later than expected. The delay in implementation results in an upside to the fiscal year 2022 results compared with the forecast.
Page 6 represents the marketing status of ORGOVYX. ORGOVYX has been prescribed to approximately 18,000 patients since its launch. Approximately 3,500 patients received the drug in the first quarter of FY 2022. Approximately 80% of all prescriptions are dispensed at dispensing clinics and teaching hospitals. There is extensive coverage with 81% commercial and 99% Medicare Part D. Gross to net has been in the low to mid-40% range.
Page 7 represents the marketing status of MYFEMBREE. MYFEMBREE has been prescribed to approximately 5,800 patients since its launch, with approximately 2,400 patients receiving doses in the first quarter of FY 2022. The number of prescriptions for GnRH antagonist drugs for uterine fibroids has increased by a factor of approximately 2.8x since the launch of MYFEMBREE. We continue to have extensive coverage with 94% of commercial.
Prescriptions of MYFEMBREE are trending upwards with a 51% share of total prescriptions and 57% share of new-to-brand prescriptions in GnRH antagonist for uterine fibroids in June 2022.
Page 8 summarizes the marketing status of GEMTESA and the licensing agreement signed in Europe. GEMTESA's marketing status is progressing well against the FY 2022 plan, with 38,100 monthly prescriptions in June 2022. Coverage has not expanded since March 2022, but we anticipate we will approach peak coverage during FY 2022.
In July 2022, we signed an exclusive European marketing license agreement with Pierre Fabre of France for vibegron, a treatment for overactive bladder. Urovant will receive up to $75 million in total upfront and milestone payments plus royalties as considerations for this agreement.
Page 9 shows operating results by segment. In the Japan segment, core segment income decreased JPY 5.2 billion to JPY 1.6 billion due to lower sales and higher SG&A expenses. In the North America segment, core segment profit increased by JPY 4.9 billion to JPY 23.1 billion. The increase in gross profit due to higher sales exceeded the increase in Sumitovant Group expenses and the increase in SG&A expenses due to currency exchange.
In the China segment, the figure increased by JPY 1.1 billion due to higher sales. The Other Regions segment reported an increase in both revenue and income due to the significant impact of onetime revenues from out-licensing.
Please see Page 11. Next, an explanation of the development status. This table lists the development status of our development items. There are no changes from May of this year. We are preparing to start clinical studies in the U.S. for ulotaront in what would be its second indication, as adjunctive therapy for major depressive disorder. In addition, discussions with Otsuka Pharmaceutical are ongoing regarding the third indication.
Please see Page 12. Regarding the product launch target of the Frontier business, we plan to launch the MELTz Hand Rehabilitation System as a medical device in August of this year. After the product is launched for sales, we aim to accumulate evidence in clinical studies. We will then aim for approval and launch of the product as a new or improved medical device in FY 2025.
This concludes my presentation.
Sakai from Credit Suisse. Regarding ulotaront, I think you mentioned last time that the readout or rather the data retrieval was a bit delayed due to the situation in Ukraine and Russia. In the Otsuka Pharmaceutical conference call that ended a little while ago, there was a statement that there has been no change in the outlook for sales and market launch in FY 2025. Can you give us an update from your point of view?
Regarding your question, Otsuka Pharmaceutical and our company have different fiscal years. Therefore, in terms of our company's fiscal year, we are aiming for launch in FY 2024.
I see. So the difference is between a January start and April start.
That's right.
Next, I would like to ask about this first quarter financial statement. As a whole, given the first quarter results, are there any plans to review cost containment and so forth? Depending on performance from Q2 to Q4, it would really help if you could give me a quick summary of that since I didn't hear the first part.
Thank you for your question. Please see Page 3 for an overview. On the far right, you will see our forecast for FY 2022 and our progress towards that goal.
Progress towards the full year forecast for sales is 29.1%, while for core operating profit, the figure is 44.6%. First, on the sales side, there were 2 onetime revenue items. The contract with Jazz Pharmaceutical for DSP-0187 and the agreement to commercialize ORGOVYX in Europe have a combined total of $100 million in upfront revenues.
Also, the rate of progress has been high due to the impact of foreign exchange conversion and the depreciation of the yen. Therefore, core operating profit is high, but because this is due in part to onetime revenues, we have chosen not to revise our full year forecast at this point.
I see. Was this $100 million already included in the plan?
The $50 million with Jazz was included. In the European part of the ORGOVYX business, a onetime lump sum payment of $50 million was recorded, but the plan was a bit conservative. It was assumed that the payment would be deferred and recognized as revenue over a number of years. So this is a slightly positive factor.
Okay. I'm sorry to be persistent. Is it correct to say that the $50 million for ORGOVYX is the final payment for this fiscal year?
Yes, that's right.
Yamaguchi from Citigroup. I just want to follow up on what you just said. So subtracting the onetime factor of JPY 10 billion from the core operating profit of JPY 13.4 billion leaves us with JPY 3.4 billion. But multiplying it by 4 and adding JPY 10 billion, it seems to me that we are now short of JPY 30 billion. I wonder if there are a few expenses or other items that are throwing off the calculations. The JPY 13.4 billion multiplied by 4, of course, doesn't work. But if you subtract JPY 10 billion, you get JPY 3.4 billion. How about that?
Yes, this is also on Page 3. In the fiscal year 2020 (sic) [ 2022 ] section of Other income and expenses, the JPY 21 billion figure is included. This has not occurred yet. Regarding this, as I mentioned in May, we are thinking of selling a priority review voucher or selling assets. We are -- we have not yet implemented anything in the first quarter. We hope you understand that this area, if implemented, will be a positive factor.
Understood. I would just like to confirm one thing. Jazz was included, but the $50 million for ORGOVYX was only partially included. Part of that $50 million, maybe $30 million or $40 million, is in there as savings. Is that correct?
Yes, that's right.
And has the timing of ulotaront readout been finalized yet?
As for the readout, including the subsequent work, our goal to launch in FY 2024 has not changed. The status remains unchanged.
I see. So the timing of the readout hasn't changed. That seems a bit unusual.
Regarding the readout timing, the situation in Ukraine is having a slight influence. However, we already have a site up and running in a different country. So we feel there is a fair chance of catching up there. The current plan is to shorten the readout period to ensure we keep to the market launch timetable.
Wakao from JPMorgan Securities. The first question is about the onetime revenues you just described. You said that you have not implemented yet. But I do recall talk offsetting the priority review voucher in the first quarter. Has anything changed in this respect? Can this really be sold?
Yes. Regarding the priority review voucher, if we sell, we think we can sell it for around JPY 10 billion. There is a market for these and they are sold in order. The order for ours have not come up yet. However, we are already thinking about where to sell the voucher. So please be assured that we are able to sell this priority review voucher.
So we can assume that there won't be a big delay.
That's right.
I would like to ask about the progress of MYFEMBREE. I still feel like somehow the sales pace is not that large. Looking at the number of patients, I think it is so small in terms of sales. From your company's point of view, do you expect that the sales will accelerate once you obtain approval, not only for uterine fibroids but also for endometriosis?
Yes. As you have just mentioned, the GnRH mechanism that MYFEMBREE uses has not yet fully penetrated the market. Since we have the leading market share in this field, we know that we have to further develop the market in the future.
In this context, there are 2 major areas that have not been fully extended, exactly as you mentioned: one is long-term prescriptions, and long-term prescriptions will be approved; second is securing indications for both endometriosis and uterine fibroids. We hope that more women will be able to benefit from this drug.
We are also working to educate physicians. The PDUFA date for endometriosis is coming up soon, and we are looking forward to the results.
Understood. I think the PDUFA date is next week on August 6. What happens if your company's approval is not granted as expected and the treatment is indicated only for uterine fibroids? When its long-term prescription become available, as you have just explained, even if the other indication is not approved, is it correct to think that a certain level of sales can be expected over time, even for uterine fibroids alone?
Of course, we can expect a certain level of sales. For our part, even if the endometriosis indication is not approved at this time, we have enough data. Although there will be delays, we believe that we will be able to obtain approval.
Muraoka from Morgan Stanley. I would like to ask you about GEMTESA that you put out to Pierre Fabre in Europe is $75 million, including milestone. Will this be a lump sum upfront in the second quarter? Or will this be deferred? Also, is this included in the forecast?
Kashima will take your question.
We will record the lump sum in the second quarter of FY 2022. However, the amount will not be the full $75 million. So we should think of it as 1/3 or 1/4 of 75 million or something like that, maybe a little less, but roughly in the range of single-digit mediums.
I see. Understood. Also, I'm not sure how to ask this question. I would like to ask about Trulicity. I think that the performance of Trulicity is strong. Regarding the second-generation drug from Eli Lilly Japan, Tirzepatide, I thought your company was going to acquire the business, but it looked like Mitsubishi Tanabe took it.
I was wondering if given your company's relationship with Eli Lilly Japan, you might have had some priority status in the negotiation. Even though the profit margin was a little low, the amount of profit was large, could you please explain the background or rather the reason why this was not taken successfully?
We don't have anything to say about the background or rather on Eli Lilly Japan's decision here, but it was a little disappointing.
Is this a product that your company has already gone all out to get?
Our company has a very strong sales force in the diabetes area, and we have a very good track record. I think we would have been a natural choice for this treatment. Again, this was Eli Lilly Japan's consideration, and we have nothing to say about it.
Finally, regarding voucher, please explain a little bit about the sales of PRV because I'm afraid I don't know much about this.
As mentioned earlier in the Q&A, the sale of the voucher is being done in order, and your company's turn has not yet come.
Sorry, I didn't realize this was how it worked. It would be reassuring if we knew, for example, how many companies have already sold this year and how many more to go before your company?
Voucher, as you said, are not issued in large numbers. They come out in order. It's strange to say that vendors that handle vouchers or rather the voucher market has its own rules, but it's not a formal rule. Vouchers are sold in order. Otherwise, it would end up being price competition between vouchers. That's my understanding.
So you don't know how many vouchers are ahead of your companies in the queue?
Apparently, it's not that far off.
By the way, if you sell the voucher, will you issue a press release?
We have not decided yet.
You are undecided whether to announce it or not?
We are undecided whether to announce it or not.
Hashiguchi from Daiwa Securities. I have a few questions. The first is about ulotaront's clinical studies for adjunctive therapy for major depressive disorder. Is this planned from the beginning to be a Phase III study like the one that will be the basis of the application? Or will it be done once an exploratory study has been conducted to establish dosage and administration first? What is your outlook at this time?
Well, Otsuka Pharmaceutical will take the lead in announcing the expansion of the indications to include adjunctive therapy for MDD. Therefore, I'm not sure how much we can say. I can say that there are 2 studies, although I do not know whether they will be a Phase II/III or Phase III studies.
Is it correct to sat that 1 of those 2 will begin in the near future?
Yes, that's my understanding.
The second question I have is about initial sales of RETHYMIC. It seems to me that your results for the first quarter have not progressed in line with your full year forecast. I would like to know your outlook for the full year. What are your thoughts? And what are your current plans for the development of this treatment outside the U.S.?
As for RETHYMIC, I am aware that the number of transplant cases have not grown that much yet. We are aiming to support 15 to 20 transplants per year in this year, and we are working to have this level of support ready for this year.
Is it correct to say that the preparation are underway to accumulate the number of cases in accordance with the plan, the JPY 6 billion that you have indicated?
Yes, that's right. The start of the production has been delayed slightly, the production system have not yet been fully established as we initially expected. But we have heard from the site that they will be able to catch up in the near future.
What about overseas or rather outside the U.S.
Yes, there are patients outside the U.S. So we would like to expand that scope. There are 2 issues, one is obtaining approval in each country. The other is that since the product is a biomedical product, there are logistical questions such as whether or not the product can withstand a long transportation time.
Finally, I would like to know how the failure to obtain the marketing rights to tirzepatide affects your company's strategy. I would like to know about the competitive environment in the diabetes field and how you think it will affect your products? Also, how it will affect your strategy to maintain the #1 sales force in Japan in the diabetes field and to continue to focus on maintaining and strengthening your sales force there?
In terms of the drug's mechanism of action, it will compete with Trulicity. So we would like to develop a strategy for the future, depending on how well it is accepted in the market.
Sakai from Credit Suisse again. Continuing on the discussion about diabetes, I understand that TWYMEEG has only been launched in Japan. It has been launched recently and long-term prescriptions are not yet available. So I think sales started off slowly. Am I correct to say that your company owns 100% of the rights to this? How do you plan to expand overseas in the future?
This product was introduced from Poxel, and we have the rights for Japan and some countries in Southeast Asia.
Okay. So your company is looking at sales at the regional level.
Indeed.
Understood. Thank you very much.