Eisai Co Ltd

TSE:4523

Earnings Call Transcript 2019-Q1

[Unknown Executive]

Thank you very much for taking your time despite your very busy schedule and despite during a hot weather to attend the presentation meeting. It is time we would like to begin Financial Results Presentation for the First Quarter Fiscal 2018 of Eisai Co., Ltd.

I would like to ask you to check that all of the materials are in front of you. First please find a deck of slides that will be used in the presentation today and past reports and reference materials. If any of the document is missing, please raise your hand.

I would now like to introduce the officers in attendance today. Senior Vice President, Chief Financial Officer, Chief IR Officer, Ryohei Yanagi; Senior Vice President, President of Neurology Business Group, Ivan Cheung; Deputy Chief Clinical Officer, Neurology Business Group, Masanori Tsuno; Senior Vice President, President Oncology Business Group, Terushige Iike; Vice President, Chief Medical Operation Officer, Oncology Business Group, Takashi Owa.

Presentation today will be made by Mr. Yanagi to cover the first part, and operation part presentation will be made by Mr. Cheung; Mr. Tsuno; Mr. Iike; and Mr. Owa.

Without further ado, I would like to ask Mr. Yanagi to begin.

[Ryohei Yanagi, executive]

Thank you and I'd like to take the floor to explain the financial section. First I'd like to give you the report on the Q1 FY 2018 P&L on a consolidated basis. Revenue was JPY 153.3 billion, up 8% year-on-year. There were impacts of drug price revision in Japan and a decrease in ALOXI revenue due to generic in the United States, which were absorbed by progress of a business development and global -- 4 global brands.

The JPY 6.3 billion increase in -- with the 30% increase from a year earlier in the 4 global brands including adult LENVIMA and so forth. And the business mix was improved, cost of sales ratio lowered to 31.3%, and the gross profit was increased by 14% with a double-digit growth. And due to the financial discipline of controlling expenses within the increase in gross profit, operating profit increased 36% year-on-year, increased significantly.

As for the line items in expenses, firstly R&D expenses were JPY 34.1 billion and in the ratio in the sales was slightly decreased from year-on-year and R&D expenses grew slightly with 3%. But this is after the subtraction of the reimbursement from partner for sharing of the cost. There was a contribution of about JPY 11.1 billion from a partner, and gross R&D expenses accounted for the increase to over 22% year-on-year. But due to the partnership model, we have been able to continue the growth in the expenses to this level.

SG&A expenses were JPY 50.6 billion, which was increased by double-digit growth rate with 14% with 4 global brands, and we made a proactive investment into the marketing, the growth drivers such as China and Asia. And also regarding the -- there was the payment of several billions of yen of profit sharing with Merck, which is related to the LENVIMA deal which is also included in S&A, therefore this increase was a result of proactive spending.

And I'd like to talk about the LENVIMA deal structure. JPY 11.9 billion was booked fully by Eisai in terms of sales concerning LENVIMA. And in terms of subtracting cost of sales and SG&A expenses, that is to say operating profit before R&D expenses, are evenly shared between Eisai and Merck.

The payment of shared profit to Merck is made. That payment amount is included in the SG&A expenses.

With this, operating profit was JPY 20.6 billion, up 36% year-on-year. The bottom line also increased significantly similarly. ROE during the quarter was 8.3% in the first quarter, exceeding the shareholder cost of 8% and then generating the positive equity spread and a free cash flow JPY 10.7 billion due to the global rollout of cash convergence cycle, CCC.

And from the partnership between Nichi-Iko and Elmed Eisai, we also received JPY 3.4 billion in cash from this partnership, and this accounting for about 1/4 of the annual dividend payment of JPY 42.9 billion. Balance sheet net DER was minus 0.25. We are maintaining over JPY 150 billion in net cash position. We are providing the investment proactively into the R&D and also maintaining the stable dividend. We have been able to increase in both revenue and a profit and also maintain a proactive investment in R&D throughout the quarter.

On this waterfall chart, I'd like to review the breakdown of revenue migration. Revenue in quarter Q1 of last year was JPY 141.9 billion, adding JPY 4.6 billion from overseas growth of global brand. In Japan, there was about JPY 5 billion impact by the drug price revision. However, through the business development projects and we made a internal effort at Eisai Japan to overcome the impact of drug price revision and achieving a large increase in revenue in core businesses, adding JPY 9.4 billion. And China and Asia have continued to grow over 20%, therefore adding JPY 4.1 billion in revenue.

ALOXI revenue, the business has shifted almost 86% to generics, therefore there was a decrease in revenue of ALOXI by JPY 9 billion in the United States. However, due to the divestiture of Prialt and then the revenue for the quarter was JPY 153.3 billion, up JPY 11.4 billion year-on-year.

And next, this waterfall chart provides the breakdown of operating profit migration. OP in Q1 of last year was JPY 15.1 billion. In parallel with the growth in revenue, significant increase well above JPY 10 billion in total was achieved. JPY 12.8 billion was achieved by global brands, Japan, China and Asia businesses. On the other hand, R&D expenses is slightly increased by JPY 0.9 billion, but decreasing ALOXI profit and the increase of payment due to profit sharing with Merck and OP for the quarter was JPY 20.6 billion, increase by JPY 5.4 billion year-on-year.

Here you see the R&D expenses breakdown is given on the right-hand side. As I said, R&D cost-sharing by partner was about JPY 11.1 billion. Adding this amount, the real order R&D expenses was JPY 45.2 billion, increase by JPY 8.7 billion. This was the over 20% growth -- 24% growth over the previous year.

In addition to the reimbursement from Biogen and Purdue in cost-sharing R&D expenditures and this has been booked already. However, from this fiscal year onward, the contribution from Merck as in the form of reimbursement of share the cost concerning LENVIMA will started to arise and to be booked.

Cost of R&D expenses are shared by Eisai and Merck. And cost-sharing by Merck will be reimbursed to Eisai.

And furthermore, regarding the Eisai's own share of costs in R&D, as you may remember, at the end of March this year, there were R&D cost advances of $450 million were received in cash. Therefore Eisai is reversing from that amount advances. Therefore, during the Q1, Eisai's net expenditure concerning LENVIMA projects during the quarter was almost 0. So as such, due to the partnership mettle, we have made proactive investment into R&D activities, however, we have been able to achieve increase in profit.

Next. This is my last slide. Full year forecast for full year 2018 has stayed unchanged. Revenue will be JPY 632 billion, up 5% year-on-year. R&D expenses will seem to increase 5% year-on-year, but as I said earlier, real-term investment in R&D will increase by double digits because of the partnership model and SG&A -- gross profit will increase by 12% and SG&A expenses will increase by 16%, mainly due to the cost sharing by the Merck, which is included in the SG&A, and operating profit will be JPY 86 billion, which is 11% double-digit growth from year earlier. And profit for the year bottom line will be also growing 11% year-on-year.

ROE will be 9.5%, very close to double-digit ROE in 2020, which we aim at under EWAY, and we are making steady growth towards achieving that goal with a positive equity spread of 1.5% is geared, therefore we would like to continue to generate shareholder values. Dividend of JPY 150 is translated to a payout ratio of 75% with DOE 7% or 8% and with a net cash position given optimal dividend policy based on optimal capital structure, we are confident that we will be able to maintain stable dividend while making proactive investment.

Furthermore, these numbers being the forecast for full year, during Q1, so-called reimbursement -- the onetime payment from Merck is not accounted for, but we expect that such payments like milestones, sales milestone, develop milestones or other mile -- onetime payments, will arise from Q2 onward and with the high probability of receiving such payments with probability of success. Therefore, we are very confident to meet this forecast for this fiscal year.

Through partnership model, we will continue to make proactive investments in R&D, at the same time ensuring revenue and a profit increase in order to continuously enhance long-term and sustainable shareholder value.

With this, I would like to conclude my financial section.

[Unknown Executive]

First, I would like to share with you the results of Phase II study of BAN2401, which were presented at AAIC last week. In this study 856 patients with early AD were enrolled and were -- they were treated for 18 months. I believe you have been already informed through press release and the presentations at AAIC. In this study, target endpoints were met and successfully demonstrating disease-modifying effect of BAN2401 for Alzheimer's disease.

In amyloid imaging, amyloid PET imaging Centiloid scale, a method to a standardize data, was used for analysis. And on the score ranging from 0 to 100, reduction by as many as 70 units on the average, significant reduction was confirmed at 18 months in top-dose arm versus placebo arm. Furthermore, 81% of patients in top-dose arm were converted from amyloid positive to negative, suggesting that BAN2401 has disease-modifying effect on AD through clearing amyloid beta aggregate in the brain. It not only demonstrated improvement on imaging, but also achieved 30% less decline on ADCOMS in clinical symptoms for top-dose arm versus placebo arm with significant difference.

Thus, in this study, we succeeded in slowing the progress of AD through significant reduction of amyloid beta in the brain and demonstrated disease-modifying effect based on amyloid hypothesis. These results can be a great hope for AD treatment. We are going to explore with regulatory agencies for active future programs so that we can deliver such hope to patients with dementia as soon as possible. Regarding implications of the -- results of this study, I'd like to give the floor to Tsuno San to explain.

[Masanori Tsuno, executive]

I am in charge of clinical research, my name is Tsuno. Since the results were presented at AAIC, we have seen a lot of reactions with -- coming from all over the world. Many people are interested in the design of the study, particularly about the imbalance in patient background due to the restriction of randomization of ApoE4 carriers to the highest dose arm and its impact. We have already explained that such imbalance does not affect the comparative analysis against the placebo, but I would like to explain this again.

Following a regulatory request, at the interim points during the study, the allocation of ApoE4 carriers to the highest dose arm was restricted. As a result 71% of patients in placebo arm were ApoE4 carriers while 30% were so in the highest dose arm. In double-blind studies, in balancing background factors like this among arms is usually adjusted for analysis, utilizing the specific method for adjustment.

Here, we used mixed model repeated measures or MMRM, a standard method for analysis. Please have the next slide. In this MMRM, how much impact of ApoE4 status may have on the progress of the disease is firstly analyzed and estimated. Comparison between treatment arms, placebo arms and the highest dose arm is implemented based on the adjusted estimation of the result. Assuming the proportion of ApoE4 carriers in BAN2401 10 milligram per kilogram biweekly arm and a placebo arm are evenly constant.

Since the analysis method stated above is used in the study in balance in the ApoE4 carrier would not have impact on the analysis for study results and ApoE4 is known to be the factor for increasing the risk of the onset of the disease. But however there is -- it is said that there is little or no impact on the disease progression or ApoE4 status itself is assumed to not affect the disease progression. And even if there is an impact on disease progression through MMRM methodology, the imbalance in the patient background are adjusted so as not to bias the result.

As a result, the percentage of ApoE4 carrier imbalance we assume will not affect the comparative analysis. Subgroup analysis and additional analysis will be carried out and those results are scheduled to be presented at international conferences, including CTAD.

Another point on which we received many questions -- many comments from the world is, 30% slowing of progression in terms of ADCOMS, clearly in Phase III study of disease modifier drug of Alzheimer's disease, clinically -- as clinically meaningful [ effect size ] 20% to 25% slowdown is used to design Phase III and at 20% to 25% slow down of clinically meaningful effect size, study -- sample size is determined assuming the statistical power to show that.

And we were able to obtain 30% effect size and ADCOMS' change from baseline is shown. Black is placebo and green is BAN2401 highest dose arm. As you can see, disease progression is substantially slowed down and the slope in BAN2401 is less steeper than placebo and slowdown of 30% was shown at 18 months and this will be continuously observed.

Disease modifier effect is to be sustained over time and is expected to increase over time and that's -- ultimately it is expected to slow down the progression of disease stage. In top those arm in 81% of the patient’s brain amyloid was converted to negative status and those patients after converting to a negative brain amyloid if they continue with BAN2401 treatment, these patients will not be diagnosed as Alzheimer's disease in the future. Amyloid is the basic fundamental pathology of Alzheimer's disease and amyloid has been write off in these patients. Please think about the life spans of those patients who have converted negative in brain amyloid.

We can expect a greater disease -- greater effective slowing down the disease progression over time into the future. That is the impact of treatment with BAN2401. And I would like to ask -- I hope that this major potential impact is clarified through this presentation.

This slide shows pipeline that we are proud of as Neurology Business Group. In dementia BACE inhibitor elenbecestat for that drug to Phase III studies, MISSION AD1, MISSION AD2 are steadily progressing. And based on positive Phase II study results that were announced at AAIC, we will accelerate enrollment of patients and expect to finish enrollment in Phase III studies within this fiscal year. And in July for aducanumab, 2 Phase III studies EMERGE and ENGAGE are finished patient enrollment according to the schedule.

Next orexin receptor antagonist lemborexant in June at Japanese Academy of Sleep that academy positive results of 304 study were presented. 304 study showed superiority against comparator zolpidem. It was the first ever Phase III study to show superiority against zolpidem. Together with the results from 303 study, we plan to file submission before the end of this fiscal year. Regarding PDE9 inhibitor E2027 in the second quarter Phase II-III study first patient in was achieved for Lewy body dementia. Internally developed anti-tau, antibody E2804 is expected to go into Phase I before the end of this fiscal year. E2814 development policies will be accelerated going forward.

Next in epilepsy area regarding Fycompa in the first quarter JPY 4.5 billion revenue was achieved. This was 41% growth over the previous year, a major growth. Regarding Fycompa LCM, in Japan monotherapy treatment Phase III study is ongoing steadily, smoothly and we expect to file submission before the end of this fiscal year.

Pediatric indication PDUFA action date in the United States is September 28 this year. Or Novel synopses function modulator E2730, E-2-7-3-0, in the first quarter we started preparation of Phase II. Regarding BELVIQ in the United States, large-scale CVOT study was completed and we were able to obtain overall positive results. Going forward, our biggest focus will be the earlier mentioned BAN2401 and to accelerate development of BAN2401.

With that I would like to end report from Neurology Business Group.

[Terushige Iike, executive]

In oncology business I would like to make reports mainly focusing on LENVIMA and also Japan. Last March in hepatocellular carcinoma in Japan we obtained approval as the first approval in the world and in the past 4 months we have focused on promotional activities. That is in order to have LENVIMA prescribed to appropriate patients through medical rep activity and through [ KOL ] seminars we thoroughly disseminated this information.

As a result, from early on we have received high response not only for progressive disease patients, but TACE refractive patients in early stage are also being indicated. TACE is transcatheter arterial chemoembolization. Even despite multiple TACE, some patients do not respond and even those patients are now indicated for. And in the past 4 months about 2,800 patients were prescribed with LENVIMA. And especially as a first line prescription is increasing at the pace that is twice as much as our internal plan. And revenue is 92% above the plan. And Japan is showing 2.9x as much growth as the previous year.

On July 14, at HCC-related study session, there was a report of use of LENVIMA in more than 10 patients and ORR was very high at 40% to 46%. This is a Phase III REFLECT study. And from that study Japanese population is selected and 46.9% was -- or are in Japanese population and that result is produced in clinical practice -- in actual clinical practice. This is the first line in hepatocellular carcinoma in about 10 years.

Patients review the images together with the physicians and they see tumor shrinkage. And Alpha Folate protein marker, tumor markers are reducing dramatically and patients themselves feel stronger motivation in their treatment. That is the feedback that we're receiving. And we are about to bring about revolutionary change in hepatocellular carcinoma treatment.

LENVIMA KEYTRUDA combination therapy will be presented by Mr. Owa.

[Takashi Owa, executive]

I would like to discuss clinical data on LENVIMA KEYTRUDA combination. This slide shows 4 different cancer types. This is a waterfall plot of combination of LENVIMA and KEYTRUDA. As I review this slide together with you I'm struck that across cancer types this combination therapy has potent antitumor effect. To discuss in more detail regarding endometrial carcinoma first, irrespective of PD-L1 status and irrespective of microsatellite instability, strong antitumor effect is observed.

In renal cell carcinoma irrespective of prior therapy history and irrespective of PD-L1 status broadly tumor shrinkage effect is observed. In head and neck cancer, one of the carcinogen background factor is reported to be human papillomavirus irrespective of viral infection status in most of the patients tumor shrinkage was confirmed.

Lastly hepatocellular carcinoma. Disease background of this carcinoma is very complex and hepatitis C virus and alcoholic backgrounds irrespective of these factors a very strong tumor shrinkage effect was observed. How to interpret this data? First indication population with a combination we may be able to expand indication by a large margin. That possibility is suggested.

As one example of that, the other day regarding endometrial carcinoma FDA gave a definition of breakthrough therapy. We reported on that earlier and this breakthrough therapy designation is also given for renal cell carcinoma and LENVIMA combination therapy was also earlier given this designation for renal cell carcinoma. So LENVIMA and KEYTRUDA combination, late-stage development will be pursued continuously and we would like to continue to make contribution to patients together with Merck.

Next LENVIMA-KEYTRUDA combination if compared against monotherapy of each drug according to reported data so far, the message is very simple. The combination has clinical effect that is above the monotherapy and this effect seems to be synergistic effect, not additive effect. I would like to address each cancer type in more detail.

First, endometrial carcinoma. Objective response rate and PFS, progression-free survival data are data that I would like to call your attention to. ORR is close to 40% for the combination therapy and PFS median is 7.4 months. According -- in comparison to reported data for each monotherapy there are higher and it's better than additive result. So synergistic effect is suggested for RCC, ORR and PFS are shown. Regarding ORR it's about 70%, 18 months PFS. And these are better than each monotherapy and better than additive results. And disease control rate is more than 90%. In all of these measurements ORR, DCR, PFS, these are the results we have. And in comparison to nivolumab and ipilimumab, for all of these items they have shown a better result and approval was received earlier in the United States.

Regarding head and neck cancer, the second line therapy or in later therapy, data was obtained, but we do not have such data for LENVIMA monotherapy, so here keynote data for KEYTRUDA is shown. ORR combination is 40%, PFS is 8 months. Regarding KEYTRUDA monotherapy in comparison to recorded data, it is twice as much or 4x as much remarkable clinical result and effects are shown.

Lastly, as for hepatocellular carcinoma, ORR is 40% or above and progression-free survival is 9.7 months. LENVIMA alone or KEYTRUDA alone results are exceeded by a combination therapy stages, earlier stage in this study, so we do not have definitive results yet, but best response and progressive disease patient that was determined to be progressive disease, but 0 in combination therapy and this is remarkable in comparison to monotherapy. In almost all patients there was no PD. So in that sense not additive but synergistic effect is suggested.

In these 4 cancer types, we will continue with our development and accelerate development and together with Merck will pursue late-stage development. For other cancer types, we would also like to develop and at the earliest possible stage would like report the outcome to you.

In oncology area, this is the pipeline that we have. We have these 3 keywords as the basis for the pipeline. First is tumor microenvironment. There are 2 major platforms related to tumor microenvironment. First is as Mr. Owa explained LENVIMA and PD1 antibody combination. [ DKI ] and PD1 antibody combination is showing synergistic effect and the mechanism is now being elucidated and in this area we're pleased that we are the frontrunner in the world and that is reflected in the pipeline.

Second platform is having eribulin or halichondrin platform. Using that platform we have these 2 themes; MORAb-202 which is an ADC; and halichondrin derivatives. These are being developed. And the second keyword is cancer evolution. Cancer cell genetic mutation will change over time and they will also be changed as a result of radiotherapy and pharmacotherapy. To approach this cancer evolution targeting hormone-positive breast cancer we have ESR1 inhibitor in the pipeline and those that act on Wnt signal and spicing factor.

Thirdly the keyword is precision medicine which is an approach against cancer driver gene. FGFR4; FGFR1, 2, 3; EZH2, these are targeted in the development. Depending on the assets, we may continue to internally develop or depending on the assets we may partner with the best partner and through these projects we would like to continue to make efforts to cure cancer. Thank you for your kind attention.

[Unknown Executive]

We would now like to open the floor for questions. First, in this hall we would like to entertain questions. Before -- question in the front row.

[Atsushi Seki, analyst]

My name is Seki. I am from UBS Securities. Thank you for your presentation and congratulation on the data from -- Phase II study of BAN2401. My first question is about MMRM. You explained about the MMRM method for making adjustments. I'm not well-versed in statistical analysis, so I'm not sure whether I am asking a relevant question, but when -- without the adjustment by MMRM, how much is the improvement of the ADCOMS score? Do you think that would be -- would have been different from 30% difference?

[Unknown Executive]

Primary endpoint. Well, first, the adjusted analysis it's done in the top line results which is available now, but regarding other analysis which we are going to make, we do not obtain -- we do not have that results yet.

[Atsushi Seki, analyst]

My second question is about the ApoE4 carrier patients. The allocation of such patients to the higher extra dose arm was restricted. And in Phase III study, do you think that this restriction may be lifted? Do you think it will be possible?

[Unknown Executive]

We believe it will be possible. In early course of the study when experience was not accumulated as related to ARIA, in order to protect the subjects, regulatory authority requested such restriction. But when we conduct the Phase III study, we do not believe the same restriction will be applied.

[Unknown Executive]

Next question.

[Kazuaki Hashiguchi, analyst]

Hashiguchi from Daiwa Securities. I have a few questions. First, Slide 9, BAN2401 long-term effects are to be sustained over long term. Can we expect such data to be published soon on 2401? Is administration continuing beyond 18 months? And elenbecestat Phase II study, you have also shown 18 month data. Drug administration has been finished or is treatment continuing beyond 18 months?

[Unknown Executive]

Regarding Phase II, that was finished. Treatment was finished. Administration was finished. Now -- but long-term extension study is now being planned.

[Kazuaki Hashiguchi, analyst]

What about elenbecestat? Is it in a similar situation?

[Unknown Executive]

Yes.

[Kazuaki Hashiguchi, analyst]

I see. Now, in combination therapy development possibilities were mentioned from some time ago and Phase II study is successful with BAN2401, so it may be possible to move on to combination therapy. What is the development time line as I believe that base inhibitor and combination of Phase II study is started by Eli Lilly in view of this combination of competitor situation, I think you have to start sooner.

[Unknown Executive]

You are correct. It's very clear now BAN2401 aducanumab, elenbecestat, these are all very encouraging and interesting asset for both Eisai and Biogen going forward. And you are correct, this must be an important topic for Eisai and Biogen to consider going forward and you are correct, there are many possibilities. Are we talking about just combining them together, for example, an antibody and a BACE inhibitor or are we talking about some kind of pulsing or sequential type therapy. There are many -- we are having many discussions with key opinion leaders right now on what the possibilities are and of course, it's a bit premature to give a definitive answer, but there is obviously one possibility for example, you use a very strong antibody like what you see here from BAN2401 in terms of the ability to clean out the amyloid in the brain initially and then maybe this is more like a induction therapy. And then as a maintenance therapy, a BACE inhibitor may come into play. So that's one possibility. Another possibility as you mentioned, that's what Eli Lilly has started already. Combine them together from the get-go, so we have to evaluate what the best option is going forward, but you are right, now there are lot of interest in the scientific community to work with Eisai to pursue these opportunities.

[Kazuaki Hashiguchi, analyst]

Lastly about LENVIMA and KEYTRUDA combination development, I would like to ask about your position. Earlier Mr. Owa presented and I thought that the nuance was somewhat different from past presentations. Please correct me if I'm wrong. You've shown 4 cancer types and you said that development will be accelerated for these 4 cancer types and you will also pursue other cancer types, and it sounded to me that it was different regarding these 4 cancer types and other cancer types. What is your priority?

[Unknown Executive]

Probably I did not explain fully. With Merck we are also pursuing other cancer types. As we reported before, lung cancer, melanoma and bladder cancer, epithelial cancer of urinary tract. In comparison to these -- in comparison to the 4 cancer types, it's not that these cancer types are given lower priority with Merck. For all of these cancer types, we are discussing clinical trial protocol design and for most of the cancer types, in terms of priority, they are given the same priority, but if you look at disclosed information in clinical.gov, endometrial cancer clinical trial is already starting -- Biogen -- correction, Eisai however is already moving ahead with this cancer type even before starting partnership work. But for other cancer types, they will be given all the same priority and we would like to be able to publish trial design for all of these cancer types from this year to the next year. It's not that we are prioritizing certain cancer types over the others.

[Unknown Executive]

Any other questions?

[Yo Mizuno, analyst]

My name is Mizuno. I am from Tokio Marine Asset Management. Well, this may be a flattering question. [ In the system ] BAN2401, you have 2 promising projects with BACE inhibitor and amyloid beta antibody. With these areas, almost -- competitors have failed. So what do you think has been the difference? Is it because of the design of the trial and their compound and also their difference in understanding of pathophysiology. Well, I mean not only with amyloid, but also anti-tau, well, in the development of the Alzheimer's disease treatment, do you think that your success that has been made will be reproducible going forward? What has been the differentiation between you and others?

[Unknown Executive]

Regarding the antibodies, first, antibody itself, where and how you will observe the aggregation of the amyloid beta to which antibody has to bind, that is first bind. Our antibody protofibril, soluble protofibril is the main target and the more aggregated ones and the higher order structure is recognized for binding. Therefore, aggregate what types? Particularly very strong and binding specifically to the soluble materials and in clinical trials how we can select the appropriate dose in our testing because without administering a sufficient dose, we will not be able to expect such efficacy. In the past examples in ARIA was concerned their full dose was contained to low level in other clinical trials, but as a result of this study ARIA instance was not high and PET SUVr reduction was very significant with sufficient dose. That is the key point. I think that these are the 2 differentiations. BACE inhibitor, selectivity to BACE 1 is the key because of the chemical structure. This is due to the lessons learned, BACE I and BACE II. The significance and difference between the 2 have been clarified and due to the chemical structure off-target side effects like the hepatic disturbances which brought about theater to several competitors, compounds, but we haven't seen any such events. So this is due to the chemical structure and also as a profile, I think selectivity is the key. Then the compound itself, the understanding of the compound does matter, and in the clinical setting or in the [ euro ] world in the clinical scale, so you were able to predict what will happen in the clinical setting or clinical side. I would like to defer to Mr. Kimura who is the chief creation officer, nodding, so I think we agree with you.

[Unknown Executive]

Any other question?

[Shinichiro Muraoka, analyst]

Muraoka from Morgan Stanley. Regarding the performance, I would like to clarify future events and one time things. First, Mr. Yanagi, in your part Lipacreon and other onetime events occurred in the first quarter. Other than those related to Merck, onetime events, are they more or less included in the first quarter that were included in the budget?

[Ryohei Yanagi, executive]

[Indiscernible] related -- Merck partnership related received other than those are one time received. There is nothing in particular that I can add in addition to what I've mentioned in the presentation, but as real option depending on the changing performance and changing negotiation with our counterparts, we may accelerate or we may select and focus on. So business development team is always looking into this and is always looking for promising way globally, so I cannot say that there will be no such event going forward, but what we can say definitely, there are no such definitive events that I can refer to today, but in view of real option and the status of the negotiation, we will be flexible and expenses, the budget, it's like the business development. Net cash position is JPY 150 billion, so based on the positive we have ample funding, so anytime we are ready to fire our weapons.

[Shinichiro Muraoka, analyst]

Regarding milestone related to Merck. I do understand that this was not included in the first quarter and if it's 3 months behind as scheduled and then after approval, it will be included in the second quarter that is my estimate and in the third quarter, European approval milestone may be received. And in the fourth quarter $324 million will be received, is that the correct understanding?

[Ryohei Yanagi, executive]

I would like to refrain from commenting on precise timing. However, I don't think it will be very much different from what you have in mind. And in Merck 10-K JPY 325 million option exercise onetime payment is disclosed, so the amount is JPY 325 million, development milestone HCC approval and reimbursement in Europe, amount and timing I would like to refrain from commenting on those. But in the United States, we believe approval is imminent, as you may be aware of. And a large amount receipt is -- we expect will be quite soon. And as for sales milestone, the first threshold is $500 million global sales, that is disclosed in the past. And LENVIMA forecast is JPY 580 million -- JPY 58.5 billion, so it is the time that this is hit and usually it will be the quarters in the second half of the year. That is what we can estimate.

[Unknown Executive]

Other question? The person in the second row please have the floor.

[Motoya Kohtani, analyst]

My name is Kohtani from Nomura Securities. I have several questions. First, regarding ApoE4. Probably it won't affect the analysis, but I want to confirm, this is very difficult question. MMRM, in what method in how MMRM is meant to make a modeling, to make adjustment through the imbalance and randomly or fixed model, well, there may be some random cases included in simulation that is how I assume regarding how MMRM is used for analysis. Could you please elaborate on how analysis is done?

[Unknown Executive]

It's very complicated. I mean, the confounding factors include the diseases stage and Alzheimer disease, use of the current AD treatments and the baseline values. There are various important parameters, included in the confounding factors and the confounding is tested for analysis. So in order to explain properly I think I would need a lot of time to explain this fully, but in simply put, suppose that there are 100 patients in placebo arm and 100 patients in active arm, suppose that incidence of stroke is to be compared between the arms, then 70% of placebo arm patients were hypertensive. In active arms, only 30% were hypertensive. Of course the hypertensive patients with a higher incidence of stroke, then you have to make correction or adjustments for that. Otherwise it will affect the comparison of the efficaciousness of the drugs. So with the hypertensive blood, how much higher risk they have in terms of incidence of the stroke, then comparing that and if -- suppose that the 70% patients are included in both arms who are hypertensive and then for each parameter we have to calculate and make adjustments for each. That is how this algorithm works. Well, with this -- a short timeframe, I am not able to fully explain, but do you understand this?

[Motoya Kohtani, analyst]

Sorry for difficult question, but thank you very much. From a different perspective, ApoE4, I think the day before your presentation at the international conference, Dr. [ Bu ], who is the authority in the world, made a presentation on ApoE4, heterozygous 4x and homozygous 12x as high as the risk. And the onset of the disease maybe faster -- earlier. However, this ApoE4 does not affect the progression of the disease after manifestation.

[Unknown Executive]

Well, that is -- mean the age of the onset of Alzheimer's may be earlier. That means that may suggest that the progression of that is maybe also accelerated. So this is how I assume, but this may be again difficult question. Well, ApoE4 itself binds to amyloid in the brain and transport and clear amyloid from the brain. So the ApoE4 has weaker capability of doing that. With the weaker capability therefore, with patients with ApoE4 have tendency to have accumulated amyloid. And the amyloid cascade and tau will -- started to intervene. This -- the intervention of tau and then new royalty generation happens. After that perhaps [ clearance ], that effect of the clearance of amyloid may not carry much significance. So by onset ApoE4 may affect. However, after reaching that point, or when other mechanisms started to set in and then ApoE will not have much -- as much influence as it had before. But as you pointed out, there are mixed opinions with different papers, well, ApoE4 may accelerate a little bit the progression of the disease and that -- some people say that it doesn't change and the population base, the studies conducted may not be scientifically proven yet. But even if there are impacts of ApoE4, it has been already adjusted and Dr. [ Sperling ] in Boston had made a comment, second top doses 90% of patients -- over 90% of patients in second top dose were ApoE4 positive and then in the placebo it was only 70%. And if ApoE4 was affecting, AppoE4 positive was affecting and then why second top dose have demonstrated more efficaciousness, Dr. Sperling commented second top dose with ApoE4 or positive patients in 70%, but still efficaciousness stayed the same. So other than the comments that ApoE4 may affect the progression of the disease, but this is the data presented from different perspective.

[Motoya Kohtani, analyst]

Understood. Last question about amyloid beta reduced in the brain, that was very clear to me. However, the slowing, the cognitive decline, I don't think that the linkage between the two is necessarily not clear, so why not tau is involved, so therefore, this makes it more complex. So why the relationship between the two is not one to one, could you explain?

[Unknown Executive]

The accumulation of amyloid beta in brain has been for the first time cleared so much by this chart. In Centiloid scale 5.5 on the average. Centiloid 0 means a healthy young adult. So young healthy adults, so the Centiloid has been reduced to almost the same level as a healthy adult, such removal, clearance has been demonstrated. And also the data needs to be accumulated going forward. ADCOMS Phase III results will become available, so combining all such data we will study. And our antibody, as we said earlier, high order structure is recognized by antibodies. It's not track-specific, it's about the soluble protofibril to which it has a highest binding and binding efficacy effect for the protofibril is not observed with amyloid PET. As we made a presentation at AAIC, CFS amyloid beta 142 is elevated. Probably this is because of our antibody. Amyloid beta 142, some kind of a soluble aggregate to reach our antibodies bind and half-life is increased and then that is leaked out into CFS. So how it is affecting the efficacy of the disease progression. Removing the -- clearing the accumulated plaque in the brain to the level of a healthy adult and neutralizing and blocking the soluble protofibril, so how these 2 factors are counting in efficaciousness, we'd like to clarify this.

[Motoya Kohtani, analyst]

Sorry about this technical question. Why tau is also reduced? Tau was reduced as well, right? CFS tau. After the deaths of the neurons taus are leaked, so with the elevation of tau deaths of neurons are occurring. Other than this neuron [ narrow ] cell death, biomarkers showing the neuronal cell death are being analyzed and we like to combine such data for revaluation. The reduction of the tau is then the indicator of neuroprotective.

[Unknown Executive]

Any other questions? Next question please.

[Fumiyoshi Sakai, analyst]

Sakai from Crédit Suisse. In the interests of time, I have only 1 question, a very simple question. Last week I received presentation from Mr. Tsuno and there was a mention of a subgroup analysis ApoE4 negative/positive sub-analysis, that table was included. And MMRM was discussed today and it sounded as though sub-analysis is more or less finished. So what data will come out of sub-analysis going forward? Or are you suggesting that sub-analysis is finished? Is there any information that you can share with us?

[Unknown Executive]

I think so those are explained enough already. We are conducting the subgroup analysis right now. It's ongoing. We are looking forward to sharing those information soon at the right occasion and let us do the work. And again we look forward to sharing those information, but today I believe what Tsuno San really wanted to convey and I think he clearly conveyed is the robustness of the overall data that we presented last week in AAIC. We are very confident about the robustness of the data we presented last week.

[Fumiyoshi Sakai, analyst]

So I look forward to the publication of those data in the future.

[Unknown Executive]

Thank you very much. We went beyond time frankly. With this we would like to conclude financial results presentation session from the first quarter of fiscal 2018 of Eisai Co., Ltd. Thank you very much for coming today.