Daiichi Sankyo Co Ltd

TSE:4568

Earnings Call Transcript 2022-Q1

[Operator]

Thank you very much for waiting. Now we'd like to start Daiichi Sankyo's conference call on the financial results of the first quarter of fiscal year 2021.

We are recording this session today. Thank you for your understanding. Please start the meeting.

[Hiroyuki Okuzawa, executive]

Okuzawa speaking. I succeeded my predecessor Sai to serve as CFO. Thank you very much for joining Daiichi Sankyo's results announcement meeting despite your very busy schedule today.

I'm going to explain our FY 2021 first quarter financial results we announced at 1 p.m. on Friday, July 30, Japan time, based on our presentation materials. Please turn to Page 3. Today, I'm going to cover FY 2021 first quarter consolidated financial results and business update in that order. Then Wataru Takasaki, R&D Division Head, will give you our R&D update. We will entertain your questions at the end.

Please turn to Page 4. This is an overview of FY 2021 first quarter results. Starting from FY 2021, as an indicator of ordinary profitability, core operating profit is disclosed, which excludes temporary gains and losses, other revenue and other expenses from operating income. Temporary gains and losses related to sales of fixed assets, restructuring, et cetera, and other nontemporary and material gains and losses are included in the temporary gains and losses. Temporary gains and losses are excluded for cost of sales, SG&A expenses, our R&D expenses shown on this page.

Consolidated revenue increased to JPY 264.1 billion, up JPY 27.1 billion or 11.4% year-on-year. Cost of sales increased by JPY 2.9 billion. SG&A expenses rose by JPY 9.4 billion and R&D expenditure increased by JPY 5.2 billion compared to the previous year. As a result, core operating profit was JPY 43.7 billion, up JPY 9.6 billion or 28.2% year-on-year.

Other revenue increased by JPY 2 billion compared to the previous year. As a result, operating profit, including temporary gains and losses, increased to JPY 45.8 billion, up by JPY 11.6 billion or 34.1% year-on-year. Profit attributable to owners of the company was JPY 35.2 billion, up JPY 3.4 billion or 10.6%.

As for the actual currency rates, the U.S. dollar was JPY 109.49 yen. The yen depreciated by JPY 1.87 against the dollar year-on-year. The euro was JPY 131.95. The yen depreciated by JPY 13.48 against the euro.

Please turn to Page 5. From here, let me explain positive and negative factors for revenue compared to the previous year. Revenue increased by JPY 27.1 billion year-on-year. I would like to explain its breakdown by major business unit.

We reviewed our global management structure as of April 1. In response, the names of some business units, et cetera, have been changed and shown here accordingly. Revenue from Japan business includes revenues from innovative pharmaceuticals, generics, vaccines, and health care OTC business.

Oncology business revenue includes revenue from Daiichi Sankyo, Inc. in the United States and oncology business at Daiichi Sankyo Europe. EU specialty business revenue includes revenue from Daiichi Sankyo Europe, excluding its oncology business. No change has been made for American regent in the United States and ASCA, in charge of Asia, South and Central American regions.

First, in Japan business, sales of Alzheimer's type dementia treatment, Memary, decreased with the launch of generics in June last year. Vaccine business revenue decreased due to the transfer of Rotarix distribution business to GlaxoSmithKline in June last year, but sales increased for direct oral anticoagulant, Lixiana; pain treatment, Tarlige; and anticancer agent, Enhertu. In addition, Daiichi Sankyo Espha and Daiichi Sankyo Healthcare product contributed as well. So Japan business revenue increased by JPY 0.8 billion.

Next, let me explain our overseas business units. ForEx impact is excluded here. In Oncology Business, sales of hypertension treatment, Olmesartan, decreased, but anticancer agent, Enhertu, grew in the United States. And it was also launched in Europe in February this year, so revenue increased by JPY 2.7 billion.

Revenue for American regent in the United States increased by JPY 11.9 billion as iron deficiency anemia treatment, Injectafer, sales, which declined due to the impact of COVID-19 in the same period last year, made a recovery. Revenue for EU specialty business increased by JPY 1.7 billion due to an increase in Lixiana sales in spite of a decrease in gain on sales from transferring long-listed products.

As for Enhertu and Dato-DXd upfront payment and regulatory milestone related to a strategic alliance, revenue increased by JPY 1.8 billion due to factors such as the deferred revenue booking of Dato-DXd upfront payment starting from the second quarter of the previous fiscal year. ForEx impact increased our revenue by a total of JPY 6.6 billion.

Page 6 shows positive and negative factors for our core operating profit. Let me explain the profit increase of JPY 9.6 billion by item.

As I explained earlier, revenue increased by JPY 27.1 billion, including the increase of JPY 6.6 billion due to ForEx impact. Next I will explain cost of sales and expense items by excluding ForEx impact. Cost of sales was up just by JPY 2.8 billion, revenue increased, but COGS ratio improved, along with changes in the product mix, as sales increased for in-house products such as Lixiana and Enhertu.

SG&A expenses increased by JPY 7.1 billion due to an increase in Enhertu-related profit sharing with AstraZeneca, et cetera. R&D expenditure rose by JPY 4 billion because of an increase in R&D investments for the 3 ADCs, et cetera. Costs increased by JPY 3.6 billion in total due to ForEx impact. Core operating profit increased by JPY 6.6 billion, excluding ForEx impact.

Next, I will use Slide 7 to explain the profit increase and decrease in this quarter. As I explained before, the core operating profit increased by JPY 9.6 billion, which includes the impact of foreign exchange. Other revenue and expenses were influenced by an increase of JPY 2 billion compared to the same period of the previous year due to the recording of a gain of JPY 2.1 billion on the transfer of the Osaka logistics center to Taiyo Pharma Tech in June this year.

Financial income and expenses were affected by a decrease of JPY 6 billion compared to the same period of the previous year due to the recording of JPY 4.7 billion in financial income resulted from the decrease in contingent consideration when acquiring quizartinib last year.

The income taxes increased by JPY 2.3 billion compared to the same period of the previous year, due to an increase in profit before income taxes. As a result, the net income attributable to the parent company ended in JPY 35.2 billion, which is an increase of JPY 3.4 billion year-on-year.

Slides 8 and 9 show changes in revenues by business unit and by major domestic product on a yen basis. In previous Slide 5, I explained the situation of each unit, excluding the foreign exchange impact. But these slides show the actual results with the foreign exchange impact included.

I will discuss the business update next. Please look at Slide 11. Slide 11 shows the breakdown of the revenue of Enhertu. In the first quarter of 2021, the total revenue, including the product sales, the upfront payment and the time of contract and the development milestones increased by JPY 8.1 billion year-on-year resulted in JPY 16 billion.

The full year forecast is JPY 73.1 billion, which is JPY 11 billion lower the forecast announced in April. The product sales will be JPY 61 billion, which is JPY 8.4 billion lower than the forecast announced in April. The United States accounts for most of these changes, and there are no changes for Japan. The sales situation in the United States will be explained in the next slide.

Regarding the development milestones, it was assumed that the indication for the second-line treatment of HER2 mutant lung cancer will be obtained in March 2022 in the United States, but the current approval date is a little later in FY '22. So the revenue is expected to be JPY 2.2 billion, which is JPY 2.6 billion lower than the forecast announced in April.

At this time, we have changed the expected approval timing based on the expected period required for consultation with the authority regarding the latest submission. However, this does not mean that there has been an event that imposes a negative impact on the product value.

I'm continuing to Slide 12. Enhertu's product sales are steadily increasing due to the penetration in the launched countries and the expansion of the launched markets. First of all, regarding the situation in the United States, growth in the target market is favorable.

According to market research, the share of new patients in the targeted market for breast cancer is in the high 30% range, which is the top. This is the level as planned in the fifth midterm management plan, and we believe that Enhertu's product strength has been accepted as we expected.

In particular, the share of the [ membrane ] metastases group, which accounts for 70% to 80% of the target market for breast cancer, is over 40%, and we are aiming to acquire a share of over 50% by the end of this fiscal year. In addition, the number of the outlets purchasing is also moving as planned. Also, the field activities have returned to the levels close to those before COVID-19, making it easier to implement the various measures planned with AstraZeneca effectively.

One of the differences from our initial assumptions is the total number of vials used per patient in the treatment of breast cancer with Enhertu, which is a background of the change in the U.S. product sales forecast throughout the year.

There are 2 reasons for the difference in the total number of vials. The first reason has to do with the dosing period. At this point, the actual dosing period is about 90% of the initial assumption based on clinical trial data. And it has become clear that the assumption we initially made was a little too long.

The second reason is the number of vials used for dosing every 3 weeks. It has found that the current actual number of vials is about 90% of what we initially assumed, and the average weight of the patient is a little lighter than what we assumed.

The assumptions of the dosing period and average body weight differ depending on the indication, and the timing of added -- adding indications in the future will change depending on the time line of clinical trials, et cetera. But at this time, there is no change in the Enhertu's plan in the fifth midterm plan. Enhertu is the market leader in the third line treatment segment for HER2-positive breast cancer in the United States, as we planned.

Growth in the gastric cancer segment is also favorable. We expect to see multiple data comparing Enhertu with other anticancer drugs during this term, so I'm looking forward to them as well. Although we have changed some assumptions for sales forecast for the current indications for breast cancer, our view of the efficacy and safety of Enhertu remains unchanged, and we remain highly confident in achieving Enhertu's plan for the fifth midterm plan.

In Europe, Enhertu was launched in Austria in the fourth quarter of last year. But this year, it was also launched in the U.K. In addition, it was -- it has been fully launched in France, and we will continue to penetrate the market in Europe. In Japan as well, the share of patients and the number of outlets purchasing are steadily increasing along with the sales volume. With the continued focus on safety, penetration in the gastric cancer segment is also favorable, and we believe that the product sales in gastric cancer will reach the level close to that of breast cancer within this fiscal year.

Slide 13 introduces our new products in Japan. In June 2021, we obtained a marketing approval for Delytact injection, a virus G47 delta product for cancer treatment, which was jointly developed by Professor Todo of the Institute of Medical Science at the University of Tokyo. Delytact injection is the world's first virus for the treatment of cancer and is indicated for malignant glioma.

G47 delta is a type 1 herpes simplex virus for the third-generation treatment of cancer, with an artificial triple mutation designed to be able to proliferate only in cancer cells created by Professor Todo, et al. The generic name is teserpaturev.

Indications for malignant glioma refer to Grades III and IV of the primary brain tumors, which are highly malignant. And the estimated number of new patients in Japan is approximately 2,800 per year. We obtained the marketing approval, mainly based on the results of the domestic Phase II study conducted by Professor Todo in patients with glioblastoma. This approval is conditional and time-limited, requiring verification of the efficacy and the safety within 7 years of all patients treated with the product.

The following slides will discuss our R&D updates. Dr. Takasaki, our Head of the R&D Division, will take over from here.

[Wataru Takasaki, executive]

Takasaki speaking. Today, I'd like to give you our R&D update.

First, I'm going to explain our 3 ADCs update. Please turn to Page 16. I'd like to talk about Enhertu by tumor type. As for breast cancer, top line results of an interim analysis from DESTINY-Breast03 study anticipated in the second quarter as originally planned. We started DESTINY-Breast09 study in the first-line settings in June.

At ASCO 2021, we presented the interim results of BEGONIA study and the subgroup analysis data of DESTINY-Breast01 study in patients with brain metastasis. Arm 6 was added to AstraZeneca-led ongoing BEGONIA study to evaluate the combination effect of Enhertu and durvalumab in HER2 low/ER/PR negative breast cancer. Confirmed ORR was 66.7% according to the preliminary data, so we have high expectations for the future development.

According to the brain met subgroup analysis in DESTINY-Breast01 study, durable response was observed in stable, treated brain metastases. Active brain metastases are now being evaluated in multiple studies, such as DESTINY-Breast07 and DESTINY-Breast12.

On Page 17, I would like to talk about Enhertu in gastric cancer. Top line results were obtained in June from DESTINY-Gastric02 study in U.S. and Europe for HER2-positive gastric cancer in the second-line settings. Filing strategy is currently under discussion with the regulatory authorities for submission in the second half of fiscal 2021 in Europe.

We started DESTINY-Gastric04 study in June, also in the second-line settings. DESTINY-Gastric02 is a single-arm study to evaluate ORR as the primary end point. While DESTINY-Gastric04 is a comparative study against the standard of care, the combination of ramucirumab and paclitaxel to evaluate OS as a primary endpoint. DESTINY-Gastric04 study data will be required for filing in Japan.

On Page 18, let me explain Enhertu in NSCLC and CRC.

DESTINY-Lung01 is a study in HER2 mutated and HER2 overexpressing NSCLC. Top line results were obtained in June. For HER2-mutated NSCLC, breakthrough therapy designation was already granted in the United States. We are planning to discuss our filing strategy with health authorities from now. As for HER2 overexpressing NSCLC, future development strategy is now under discussion based on this study data.

Regarding CRC, we presented DESTINY-CRC01 study final results at ASCO in June. Promising efficacy profile was observed in HER2 positive cohort. Safety profile is consistent with the non-safety profile. We will continue to ensure required careful monitoring and prompt intervention for ILD.

Page 19 is about Dato-DXd. We presented interim results of TROPION-PanTumor01 study TNBC cohort at ESMO Breast in May. Although these were initial results, promising efficacy and the manageable safety profile were demonstrated in heavily treated patients with metastatic TNBC. So we have high expectations for the future TNBC development.

At ASCO in June, we presented interim results of NSCLC cohort from the same study. Promising efficacy and manageable safety profile were demonstrated in patients with advanced or metastatic NSCLC. We are implementing TROPION-Lung01 study, our Phase III study we started in February this year, using the dose of 6-milligram per kilo.

Page 20 is about HER3-DXd. In June, we started Phase I study in combination with osimertinib in EGFR-mutated NSCLC. At ASCO in June, we presented interim results of Phase I monotherapy EGFR-mutated NSCLC cohort. Promising efficacy was demonstrated in patients with diverse mechanisms of EGFR TKI resistance. Manageable safety profile and low rate of discontinuations due to adverse events were demonstrated.

Next, I'd like to talk about our Alpha update. Page 22 is about DS-5670. DS-5670 is a messenger RNA vaccine. DS original cationic lipid is applied. It is expected to be effective against variants as well by targeting Receptor Binding Domain instead of full spike protein of SARS-Cov-2.

We are participating in the fundamental research initiatives supported by AMED. We initiated Phase I/II study in March this year and completed subject enrollment. After Phase I/II study, we are planning to initiate active-controlled, non-inferiority confirmatory study this year, enrolling several thousand subjects. We are aiming for submission for approval and commercialization within calendar year 2022 when all regulatory requirements are satisfied.

I will discuss DS-3201 and EZH1/2 inhibitor from Slide 23. At the European Hematology Association held in June this year, we presented the interim results of the Phase I trial for non-Hodgkin's lymphoma. The Phase I trial consists of a dose escalation part and a dose expansion part, which enrolls patients with adult T-cell leukemia lymphoma ATL and peripheral T cell lymphoma, PTCL.

Slide 24 shows the results of efficacy. Each of the relapse and refractory PTCL and ATL with limited treatment options showed an ORR of 50% or higher and tended to persist in efficacy.

Slide 25 shows the most common adverse events. The most common adverse events include thrombocytopenia. Grade III or higher platelet count reduction and thrombocytopenia have been confirmed in 13 and 2 cases, respectively. Due to these adverse events, 6 patients discontinued or reduced their dose, but none discontinued. In general, proper monitoring and management of adverse events demonstrated the tolerability with this product.

Slide 26 shows the DS-3201 ATL and PTCL development plan. We have obtained the top line results of the registrational Phase II study for ATL this month, and are preparing for a filing in Japan in the second half of this year. In addition, we started the registrational Phase II study for PTCL in June. As for PTCL DS-3201, has been designated as a product subject to the SAKIGAKE destination in Japan.

Slide 27 talks about other alpha products. For oncology, we started Phase I trial of the Menin-MLL binding inhibitor, DS-1594, and the Phase II trial of pexidartinib in April.

For specialty medicine, we started Phase I trial of DS-6016 in April for fibrodysplasia ossificans progressiva. For Tarlige, we submitted a partial change for indications for central neuropathic pain in May. We also started Phase I trial of VN-0200 and RS virus vaccine in June.

As for the nafamostat inhalation product, the development was discontinued as a result of examining the data of the nonclinical study and Phase I study conducted on DS-2319. Development of DS-2741 for atopic dermatitis was discontinued as a result of examining the data from the Phase I study.

Slide 29 talks about WCLC and ESMO in September this year. At WCLC, we plan to make up many oral presentation of data from the NSCLC cohort of Phase I study of Dato-DXd. At ESMO, we plan to release data on the HER2 G mutation cohort of the DESTINY-Lung01 study and update the OS data of the DESTINY-Breast01 study of Enhertu.

Regarding Dato-DXd, we plan to introduce data from the Phase I NSCLC cohort that was sub-analyzed in patients with actionable gene mutations. For DS-7300, we plan to make an oral presentation on the dose escalation data from the Phase I study.

The adoption of abstracts for the late breaking session will be confirmed after August 17. We are planning an IR event after WCLC and ESMO, which will be held on the morning of September 22, Japan time. Following the ASCO highlights, Dr. Takeshita, who is the R&D Global Head, will be on stage.

Slide 31 shows the news flow for this year. In addition to the WCLC and ESMO presentation topics to be announced, as I introduced previously, the news flow describes key milestones such as this year's regulatory decisions, planned regulatory submissions and key data readouts. The parts shown in orange are additions to the ASCO highlights.

Slide 32 is followed by an appendix, which lists our milestones and pipelines. Please have a look at them later. That is all for my presentation.

From here on, we would like to entertain your questions. Thank you.

[Operator]

[Operator Instructions] First Mr. Hashiguchi from Daiwa Securities.

[Kazuaki Hashiguchi, analyst]

Hashiguchi from Daiwa Securities. I have a question about Enhertu sales in the United States. The total number of vials used was lower than you expected due to a smaller dose used per kilo, due to concerns about adverse events. You explained that the difference compared to your forecast would not affect your outlook for Enhertu sales in your midterm business plan.

I understand there will be no impact of the average dosing period, as it can be considered differently for different indications. We don't have to worry about similar situation in other indications for the future due to the dose used per kilo being different from your assumptions?

[Hiroyuki Okuzawa, executive]

Thank you for your question. You're suggesting in your question that the decrease in the dose used per kilo may be a factor behind the decrease in the total number of vials. We don't think so. As we said, if you compare the conditions of the patients in the real-world clinical setting and our assumptions at the time of clinical studies, difference occurred between the 2 items. We have regarded this as an important variable in the development of our sales forecast. And we changed our assumptions about this variable.

[Kazuaki Hashiguchi, analyst]

What about the impact on sales for additional indications in the future?

[Hiroyuki Okuzawa, executive]

We will consider this in each segment as we will have additional indications, including various tumor types and various lines of treatment. So in principle, it's going to be completely separate.

[Operator]

Next, Mr. Arai from BofA Securities.

[Tatsuyuki Arai, analyst]

Arai from BofA Securities speaking. This is a follow-up additional question to the previous one. Why did you make a downward revision of Enhertu sales plan in the first quarter? I believe that the issues of the patient's lean body weight and the dosing period were already known when the fourth quarter results were announced. And there was an option to adjust your assumptions when you developed your initial plan. So why have you revised your forecast in the first quarter instead of changing your forecast in the fourth quarter? I'd like to know the reason why.

[Hiroyuki Okuzawa, executive]

You're asking about the timing of the revision to Enhertu sales. We decided to revise after carefully reviewing the actual usage in the real-world clinical settings. Internally, in April, the newly established oncology business unit, an organization to reinforce our oncology initiatives, under the leadership of Ken Keller, we examined these numbers again, which are reflected at this time.

[Tatsuyuki Arai, analyst]

Understood. I have an additional question about Enhertu data. You obtained top line results of DESTINY-Gastric02 and Lung01 studies in June. Were the results positive or negative? Could you please disclose, if possible?

As for Gastric02 study, filing is planned in Europe in the second half of FY 2021. So I have an impression that you have gained positive results. But regarding Lung01 study, the timing of approval is going to be slightly delayed. So I'm a little bit worried. Could you disclose any information, if possible?

[Hiroyuki Okuzawa, executive]

Takasaki would like to respond.

[Wataru Takasaki, executive]

You are asking about DESTINY-Gastric02 and DESTINY-Lung01 study data. We cannot mention the details here, but you can understand that we obtained data based on which we think we can start discussions with the regulatory authorities from now and develop our strategies without any problem. Sorry, we cannot disclose the details.

[Operator]

Next, Mr. Muraoka from Morgan Stanley.

[Shinichiro Muraoka, analyst]

Muraoka speaking. First, about the financial results. You didn't change your full year forecast of JPY 70 billion core operating profit. It is a pity Enhertu sales forecast was revised. If the situation continues at this pace, there can be a substantial upside for both revenue and profit, and your full year forecast could be achieved in 6 months. American region is also performing well. Could you please explain the background why you decided to keep your full year forecast without any change?

[Hiroyuki Okuzawa, executive]

You're asking why we are keeping the same forecast? As you have just mentioned, top line results are increasing very much. In particular, there has been a strong growth of existing products, such as our overseas business, Injectafer and Lixiana in Europe. So for these products, we are hoping to continue our sales and marketing efforts to sustain the growth here.

On the other hand, regarding our expenses, partly due to our usual spending pattern, we will make progress in our spending as we proceed from quarter-to-quarter on a full year basis. We have taken that into our account. Therefore, we are hoping that the top line growth of existing products, in particular, will more than offset the revision for Enhertu. At the same time, as we are still in the first quarter, we decided to be a little conservative in our estimation.

[Shinichiro Muraoka, analyst]

Okay. In other words, you would review the numbers again at the end second quarter and make an upward revision, et cetera, where necessary, correct?

[Hiroyuki Okuzawa, executive]

Exactly. We will do our best so that we can make a good report for the second quarter.

[Shinichiro Muraoka, analyst]

Understood. Next, about your DS-5670 COVID-19 vaccine. You said you're aiming for submission within 2022. But what about your rough outlook for production capacity? Before, I remember Dr. Manabe told us not to expect too much about the production capacity. How much capacity? Maybe in digits, what's your image?

[Hiroyuki Okuzawa, executive]

We are not disclosing our production capacity for DS-5670. Thank you for your understanding.

[Shinichiro Muraoka, analyst]

Understood. Just one more question. I think you had arbitration with Seagen in June. I'm talking about the litigation at [ P tab ] who couldn't challenge the patent successfully. Yesterday or this morning, Seagen was saying that the certain conclusion will be reached by the end of this year. Is there anything you can say from your side in this case? Instead of just letting the other parties say what it wants to say, I'd like you to send your message from your side as well. Is there anything you can comment on this?

[Hiroyuki Okuzawa, executive]

You're asking about a conflict with Seagen. There was an arbitration hearing but future proceedings are not within our control, so we'd like to refrain from commenting.

[Shinichiro Muraoka, analyst]

It may be difficult to make further comments, correct?

[Hiroyuki Okuzawa, executive]

Sorry, we'd like to refrain from commenting as this is about lawsuits.

[Operator]

Next, Mr. Ueda from Goldman Sachs Securities.

[Akinori Ueda, analyst]

Ueda from Goldman Sachs Securities. First, I have a question about Enhertu. I was able to understand your explanation about the difference from your assumptions in terms of the dose used for the mean body weight of the patients. But what are possible factors behind the dosing period shorter than you expected? Could you explain a little more?

[Hiroyuki Okuzawa, executive]

You're asking about the dosing period? 1 of the 2 factors behind the revision of Enhertu sales. As we mentioned earlier, this is as a result of a comparison and verification of the dosing period in the real world's clinical settings against our initial assumptions based on the clinical study results.

The number of patients increases from hundreds in the clinical studies to thousands in the real world settings. Patients' conditions can also be different accordingly. Those situations were reviewed after a year as we explained as background factors.

[Akinori Ueda, analyst]

Understood. Secondly, about DS-5670 COVID-19 vaccine. I'd like to hear your view that it is expected to be effective against variants. I think if you use full spike protein as an antigen, the production of various neutralizing antibodies could be expected. I hear that as for the Delta variant, there are mutations even within the receptor binding domain. Could you please explain your logic that your vaccine is expected to be effective against variants as it's targeting the receptor binding domain instead of full spike protein?

[Hiroyuki Okuzawa, executive]

Takasaki would like to respond.

[Wataru Takasaki, executive]

We are trying to use the receptor binding domain as an antigen on how much its sequence can be preserved among mutations is a key. In that sense, we must talk in a data-driven fashion.

In our internal preclinical stage, we have had quite promising data in our view. Our logic is that the sequence of the domain is being preserved, and that was observed in a preclinical data in our hands.

[Akinori Ueda, analyst]

Understood. Are you planning to disclose more detailed data about the vaccine platform and key points of your differentiation? Are you considering opportunities of disclosure at a certain time point?

[Hiroyuki Okuzawa, executive]

What we can say here is that we are selecting the optimal combination of lipid nanoparticle and messenger RNA. In that respect, we are selecting the best one in terms of efficacy and safety as a result. And where to code, as you mentioned, is also unique.

In that sense, we believe that we can turn our LNP messenger RNA technology into a platform. So we think that's our strength and a point of differentiation.

[Akinori Ueda, analyst]

Understood. My third and last question. I'd like to know the current development status of DS-5141 for muscular dystrophy. You disclosed top line data of Phase I/II study in January. What about the current status? Also around when can we expect updates as a next step? According to your reference data, this time, there is a mention that 48-week top line data was announced in June. Could you explain its current status?

[Hiroyuki Okuzawa, executive]

I forgot the date, but in June, we presented the data at a conference to show how much dystrophin protein and its expression increased. Based on that data, we're discussing with the regulatory authorities right now. We are discussing how to interpret the data with what kind of a strategy to deliver this other drug to patients. When we clear a milestone, we'd like to share it with you.

[Operator]

I'd like to move to the next question. It's Mr. Yamaguchi from Citigroup Securities.

[Hidemaru Yamaguchi, analyst]

Yes. This is Yamaguchi from Citi. Excuse me for the same question, but I'd like to ask you one more thing about the overall change in the slight downward revision of Enhertu.

I heard that there was a change in the dosing period, but I think the DOR was about 20 months? If you know, please tell me how many months it was originally? And how many months has it been changed to? I guess you know it, so please tell me if you can disclose it, including that if it is over 1 year or not.

[Hiroyuki Okuzawa, executive]

I believe your question is about the factors behind the sales revision of Enhertu. As for the dosing period, there is a difference of about 90% between the initial assumption and the verification result in actual clinical practice.

Since I didn't mention the actual period, I'd like to refrain from answering that question.

[Hidemaru Yamaguchi, analyst]

Sure. I have one more question regarding the number of target patients. You mentioned that it's on the top position with 30% of new shares, and it's 40% if there is no brain metastasis or it can be as high as 50%. Have you raised your assumptions in this change? Or is it the same? And the dosing duration and the number of vials are the only parts having an effect on the reduced overall sales?

[Hiroyuki Okuzawa, executive]

Thank you for that. You're absolutely right. The changes from our initial assumptions are those 2 points of the dosing duration and the number of vials in one cycle. Regarding the share of the number of patients, the original assumption has been actually realized.

[Hidemaru Yamaguchi, analyst]

Understood. And here is my second question. You mentioned that the timing of the Lung submission and the timing of approval are slightly delayed. This is about Enhertu. There were both mutations and overexpression. And it's only about the mutation part. It means the indication expansion of the breakthrough part is expected to be delayed for a little while, correct?

[Hiroyuki Okuzawa, executive]

Yes, your understanding is correct.

[Hidemaru Yamaguchi, analyst]

Okay. Then what are the factors? Are you asked to add something more to it? I have an impression that the data worked very well after getting the breakthrough. Are you asked to provide additional data? Or are you asked to submit other stuff related to overexpression, for example?

[Hiroyuki Okuzawa, executive]

Let me tell you the current status. We are currently in discussions with the authority as to whether or not the data is acceptable. The reason why this is delayed because this study is an uncontrolled study, and we are still debating how it should be interpreted.

[Hidemaru Yamaguchi, analyst]

Understood. Lastly, about DS-5670 for COVID. I understand that the comparison will be on the efficacy and the side effects. Obviously, the non-inferiority in this study will be hard to compare, right? It's not going to be about good or bad or winning or losing in efficacy?

[Hiroyuki Okuzawa, executive]

Your understanding is correct.

[Operator]

I'd like to move to the next question. It's Mr. Sakai from Credit Suisse Securities.

[Fumiyoshi Sakai, analyst]

This is Sakai from Credit Suisse. About the last question. It's okay to confirm non-inferiority, but it says active controlled. If it's active controlled, I don't know if it's going to be Pfizer or Moderna.

The vaccine that has been in use needs to be brought in for the scale of thousands of subjects. If you try to do this, I think it will affect not only your company but also the vaccine development by other companies. Regarding this area, there is a condition attached here, which says, when all regulatory requirements are satisfied. So I assume that your negotiations are still underway? Can you first tell us what level of the current situation in this area has reached?

[Hiroyuki Okuzawa, executive]

Yes. Thank you for your question. I think it depends a lot on the status of COVID when this DS-5670 is launched. So when it comes to testing thousands of patients who have never been infected, I think it will be quite difficult, as you said.

In that sense, we are currently considering overseas studies in parallel. On the other hand, the boost study or I don't think I want to rule out the possibility of enrolling the patients who have been vaccinated once or who have history of the infection. Taking that into account, we are planning a strategy while observing the situation of infection, and we are proceeding in consultation with the regulatory authorities.

[Fumiyoshi Sakai, analyst]

Do you mean that you are considering the third vaccination in the active control arm?

[Hiroyuki Okuzawa, executive]

Regarding the boost shot, we haven't figured out the details yet. But depending on the patient situation, I think we have no choice but offering such a strategy.

[Fumiyoshi Sakai, analyst]

Understood. I have 2 more questions. The first is simply about Enhertu. The real-world data and so on were mainly about the United States. Does that mean that the assumption in Japan or assumption in Europe may change in the future? Or is it still at the level that it doesn't have as much impact as in the West? Please explain.

[Hiroyuki Okuzawa, executive]

Sorry, it's about the dose duration and the dose by weight.

[Fumiyoshi Sakai, analyst]

And this is about Enhertu, correct?

[Hiroyuki Okuzawa, executive]

Yes, that's right.

[Fumiyoshi Sakai, analyst]

Regarding this point, we have just reported on the situation in the United States. So I understand that what will happen in Japan or Europe at this point is a completely different story that may or may not happen. Is that your answer?

[Hiroyuki Okuzawa, executive]

I mean my position is neutral.

[Fumiyoshi Sakai, analyst]

Understood. My last question is about Nexium. If I remember correctly, the sales rights will be returned to AstraZeneca after October. But I think there are various problems, such as the supply shortage that is currently occurring in generics. Since you also have Daiichi Sankyo Espha, is it possible that Nexium will affect its business performance after October, including the introduction of generics or AG? Tell me what you think.

[Hiroyuki Okuzawa, executive]

I understand this questions about Nexium. As you pointed out, we would like to express our gratitude to everyone who has supported Nexium so far toward the transfer of sales in September and we will continue to strive to achieve the figures in our plan.

RAG and things like that still completely blank after October. Since I didn't discuss that matter, I'd like to refrain from answering that question.

[Operator]

Since we are pressed with time, the next question will be the last question. It's Mr. Wakao from JPMorgan.

[Seiji Wakao, analyst]

This is Wakao from JPMorgan. My first question is about Enhertu. I understand the reason for this amendment well, but I think there was a talk about the influence of tucatinib at the time of the final settlement. But according to today's story, I didn't get an impression that there is any specific change about the competitive landscape. Has there been any change in terms of this competitive situation? I wonder if your share has increased or if the impact is progressing as expected? Please tell me about that point first.

[Hiroyuki Okuzawa, executive]

This is a question about the status of Enhertu. As I mentioned, the share of new patients in the target market is in the high 30% range. And we have established a position as a market leader as it was originally expected.

Furthermore, in the arm without brain metastasis, which occupies about 80% of our target market, it exceeds 40% and we recognize that these initial assumptions have been proven in the real-world clinical practice. We are more and more confident in our plans.

[Seiji Wakao, analyst]

I understand. The second question is about Injectafer's revised plan, which seems a bit conservative with the first quarter being JPY 14.9 billion and the revised forecast being JPY 51.5 billion. Is this because there was a factor that caused the Injectafer to temporarily generate large sales from April to June? Or is it simply made conservatively? This is a question about Injectafer.

[Hiroyuki Okuzawa, executive]

The first quarter is very strong. Not only is it significantly higher than the previous year, but it is also higher than the same period last year, which is very encouraging. On the other hand, as we are still on the way to recovery from COVID-19, there may be some kind of transient and intensive factors involved in the returns of the patients.

Regarding this point, I think that we will carefully check the movement of the next quarter. Consequently, the ability of Injectafer for this term will become clear during the first half of the year.

[Seiji Wakao, analyst]

Understood. Lastly, regarding COVID-19 vaccine. In a non-inferiority study with an active control in the scale of several thousand people, do you think you will be able to see any differences from the existing drugs for the variants?

[Hiroyuki Okuzawa, executive]

It's a non-inferiority study in the first place, so it doesn't seem to demonstrate such differences. What efficacy against the variants do you expect to see from this study?

[Wataru Takasaki, executive]

I'm Takasaki, and I'd like to answer this question. Organizing a study of thousands of people is rather a matter of being compliant with the guidelines or the guidance for safety.

In terms of efficacy, this messenger RNA has been validated by Pfizer and Moderna, which are proceeding in this area to some extent. So on the whole, I believe non-inferiority can be properly verified if it is studied with thousands of people.

[Operator]

Now our time is up, and I declare the session closed. Thank you for participating today. That concludes today's meeting. Thank you very much for your attendance today.

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