Daiichi Sankyo Co Ltd

TSE:4568

Earnings Call Transcript 2023-Q2

[Sunao Manabe, executive]

[Manabe speaking.] Thank you very much for joining Daiichi Sankyo's financial results presentation out of your very busy schedule today. I'm going to explain FY 2022 second quarter financial results we announced at 1 p.m. on Monday, October 31, Japan Time, based on the presentation materials.

Please turn to Page 3. Today, I'm going to cover FY 2022 second quarter consolidated financial results, FY 2022 forecast and business update in that order. Then Wataru Takasaki, R&D Division Head, will explain our R&D update. We will entertain your questions at the end.

Please turn to Page 4. This is an overview of FY 2022 second quarter consolidated results. Revenue increased by JPY 77.8 billion or 14.7% year-on-year to reach JPY 607.8 billion.

Cost of sales decreased by JPY 13.2 billion from the previous year. SG&A expenses rose by JPY 44 billion, and R&D expenditure increased by JPY 44.8 billion year-on-year. As a result, core operating profit increased to JPY 84.8 billion, up by JPY 2.1 billion or 2.5% year-on-year. Operating profit, including temporary gains and losses increased to JPY 95.6 billion, up JPY 10.8 billion or 12.8% year-on-year. Profit attributable to owners of the company was JPY 58.3 billion, down by JPY 4.2 billion or 6.7% due to an increase in income taxes, et cetera. As for the actual currency rates, the U.S. dollar was JPY 133.98. The yen depreciated by JPY 24.18 against the dollar year-on-year. The euro was JPY 138.72. The yen depreciated by JPY 7.83 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 77.8 billion year-on-year. I'd like to explain each breakdown by major business unit. First, in Japan business, sales increased for direct oral anticoagulant LIXIANA, pain treatment Tarlige and vaccine business.

As I will explain later, gains on sales of products in U.S. and EU also contributed to Japan business responsible for the rights to these products, but sales decreased for a proton pump inhibitor Nexium, with the end of joint sales promotion in September last year. So Japan business revenue decreased by JPY 19.9 billion.

Next, let me explain our overseas business units. ForEx impact is excluded here. In oncology business, sales decreased for products transferred in August this year, but sales of anticancer agent, ENHERTU, grew in the United States and Europe, so revenue increased by JPY 26.9 billion.

As for American region, sales decreased for iron deficiency anemia treatment, Injectafer, but sales increased for iron deficiency anemia treatment, Venofer, and generic injectables. As we will explain later, products of HBT, which we acquired in August, also contributed as well. So American region revenue increased by JPY 0.2 billion.

Revenue for EU Specialty business increased by JPY 4.1 billion due to an increase in LIXIANA sales. As for ENHERTU and Dato-DXd upfront payment, et cetera, related to a strategic alliance, revenue we recognized increased by JPY 17.1 billion. We booked a total of JPY 15.7 billion as regulatory milestone related to the approval of ENHERTU for U.S. and EU HER2-positive breast cancer second line, U.S. HER2 low breast cancer post chemotherapy and U.S. HER2 mutant NSCLC second line.

ForEx impact increased our revenue by a total of JPY 43.4 billion. Page 6 shows positive and negative factors for core operating profit. Let me explain the profit increase of JPY 2.1 billion by item. As I explained earlier, revenue increased by JPY 77.8 billion, including the increase of JPY 43.4 billion due to ForEx impact.

Next, I will explain cost of sales and expense items, excluding ForEx impact. Cost of sales decreased by JPY 22.8 billion. Revenue increased, but COGS ratio improved by changes in product mix and sales increased for our in-house products such as LIXIANA and ENHERTU.

SG&A expenses increased by JPY 25 billion due to an increase in ENHERTU-related profit sharing with AstraZeneca, et cetera. R&D expenditure rose by JPY 28.6 billion because of an increase in R&D investments for the 3 ADCs. Costs increased due to ForEx impact by a total of JPY 44.8 billion. Core operating profit increased by JPY 3.5 billion, excluding ForEx impact.

Next, Page 7 shows positive and negative factors for profit attributable to owners of the company. As I explained earlier, core operating profit increased by JPY 2.1 billion, including ForEx impact. Temporary income and expenses increased our profit by JPY 8.7 billion from the previous fiscal year. In FY 2021, we booked JPY 2.1 billion temporary income as gains related to sale of Osaka logistics center to Taiyo Pharma Tech. In FY 2022, we booked JPY 6 billion gains related to sales of subsidiary in China and JPY 3.2 billion gain on reversal related to the closure of Plexxikon. Financial income expenses, et cetera, decreased profit by JPY 5.6 billion year-on-year due to deterioration in ForEx gains and losses, et cetera.

Income taxes, et cetera, increased by JPY 9.5 billion year-on-year due to an increase in pretax profit. Also, tax rate increased as we book tax expenses by using the simplified method in our quarterly account settlement. As a result, profit attributable to owners of the company decreased by JPY 4.2 billion year-on-year to JPY 58.3 billion.

Page 8 and 9 show revenue increase or decrease in Japanese yen by business unit and major product in Japan. Earlier on Page 5, I explained the situation of each unit by excluding the ForEx impact, but here, we are showing the results, including the ForEx impact.

Next, let me explain our FY 2022 forecast. Please turn to Page 11. As for revenue, we are expecting sales increase mainly from ENHERTU as well as increase by ForEx impact. So we are making an upward revision of our revenue forecast announced in April by JPY 100 billion to JPY 1.250 trillion. Regarding cost of sales, we are reflecting cost increase associated with revenue increase as well as increase by ForEx impact. While factoring in the improvement of COGS ratio by changes in the product mix, we are expecting an increase by JPY 10 billion.

SG&A expense is expected to rise by JPY 58 billion based on an increase in profit sharing with AstraZeneca due to sales expansion of ENHERTU as well as an increase by ForEx impact. As for R&D expenses, we are forecasting an increase by JPY 17 billion, expecting an increase in cost sharing with AstraZeneca due to acceleration of the development of ENHERTU as well as an increase by ForEx impact.

So we are making an upward revision of our core operating profit forecast by JPY 15 billion to JPY 120 billion. In FY 2022 second quarter, we booked gains related to sales of subsidiary in China, et cetera, as temporary income, so our operating profit forecast is revised upward by JPY 25 billion to JPY 130 billion. In response to the upward revision of operating profit and pretax profit forecast, we are making an upward revision of our forecast of profit attributable to owners of the company by JPY 17 billion to JPY 100 billion.

Our currency rate assumptions for the third and the fourth quarter is JPY 140 against the U.S. dollar and JPY 140 against the euro. We expect that the yen's depreciation will have a ForEx impact to increase our revenue by about JPY 30 billion and decrease our core operating profit by about JPY 17 billion vis-a-vis our original forecast announced in April.

Next, I will talk about our business update. Page 13 shows a breakdown of ENHERTU revenue. FY 2022, second quarter year-to-date product sales increased to JPY 79.5 billion, up by JPY 52.8 billion year-on-year due to growth in U.S., Europe and other regions. I will explain the performance in each region later.

FY 2022 second quarter year-to-date regulatory milestone payment increased to JPY 16.8 billion, up by JPY 15.7 billion year-on-year. With the approval of U.S. HER2-positive breast cancer second line in May this year, EU HER2-positive breast cancer second line in July, U.S. HER2 low breast cancer post-chemotherapy in August, U.S. HER2 mutant NSCLC second line in August, we booked a total of JPY 16.8 billion regulatory milestone.

FY 2022 second quarter year-to-date ENHERTU revenue including upfront and regulatory milestone payments totaled JPY 101.9 billion, increasing by JPY 69.1 billion year-on-year. Based on the good performance in the United States and Europe, we are making an upward revision of our FY 2022 forecast we announced in April by JPY 81.8 billion to JPY 241.7 billion, which includes JPY 14 billion regulatory milestone expected to be achieved in the current fiscal year.

Slide 14 shows ENHERTU sales growth in the U.S. since its launch in the fourth quarter of FY 2019 on a quarterly basis. Steady market penetration and the addition of new indications have led to steady growth in product sales. In particular, the addition of new indications in the first and second quarters of FY 2022 has resulted in global revenue growth of more than 50% from the first quarter to nearly JPY 50 billion in the second quarter of FY 2022.

From Slide 15, I will use 2 slides to explain the sales status of ENHERTU in each region. The first is the sales status of ENHERTU in the United States and Europe. Due to steady market penetration and the addition of new indications, sales of ENHERTU in the U.S. and Europe are growing steadily. In the U.S. Product sales for the first half of FY 2022 totaled JPY 55.3 billion or $413 million. Due to strong sales, we have revised our forecast announced in April to JPY 137 billion or $1 billion target for FY 2022, an increase of JPY 53.9 billion from the forecast announced in April.

The current indications are as shown in this slide, but new indications were added in the second quarter namely breast cancer with low HER2 expression previously treated with chemotherapy and second-line treatment of HER2-mutated lung cancer. Market share growth in each indication is also steady. With the new patient share of HER2-positive breast cancer second-line treatment, which we started promoting in May, growing to the 40% range consolidating our leading position. The most recent new patient share for the third-line treatment of HER2-positive breast cancer was in the 30% range, still maintaining the top position in the market.

Although we are not yet able to provide specific market share figures for HER2 low breast cancer patients previously treated with chemotherapy, which we began promoting in August, we are rapidly expanding prescriptions in the target market. Major progress in the second quarter includes the start of promotions in August to gain approval for chemotherapy pretreated HER2 low expression breast cancer and HER2 mutant NSCLC second-line treatment. We feel that the product strength of ENHERTU is steadily being accepted by prescribing physicians. Sales in Europe are also on track with product sales in the first half of FY 2022 totaling JPY 13.7 billion or $102 million. We have revised our April forecast for FY 2022 to JPY 30.1 billion or $220 million in response to strong sales.

In addition to the third-line treatment of HER2-positive breast cancer, the second-line treatment of HER2-positive breast cancer was added to the current indications in July this year. New patient share in the countries where the product has been launched is also steadily increasing. And the most recent new patient share in the third-line treatment of HER2-positive breast cancer remains the top share in the U.K., France and Germany. As a major progress in July this year, we obtained approval for the second-line treatment of HER2-positive breast cancer, and we have started promotion in some countries.

Slide 16 shows sales of ENHERTU in Japan and the ASCA region. Due to steady market penetration and expansion of the countries and regions where ENHERTU is launched, product sales of ENHERTU in Japan and ASCA are growing steadily. Product sales in Japan for the first half of FY 2022 totaled JPY 5.2 billion. We aim to increase the sales to JPY 16 billion in FY 2022 with the addition of the second line HER2-positive breast cancer indication scheduled for the second half of the year.

The market share of the new patients for each indication is steadily expanding, with the market share of the third-line treatment of HER2-positive breast cancer remaining in the 40% range and the third-line treatment of HER2-positive gastric cancer expanding to the 60% range, achieving the top share in each of these indications. Product sales in the ASCA region for the first half of FY 2022 totaled JPY 5.3 billion. Product sales in the ASCA region also include co-promotion revenues in Hong Kong, where AstraZeneca records sales.

In response to strong sales, we revised the forecast announced in April to JPY 12.1 billion for FY 2022. Sales are expanding in Brazil, Hong Kong and Taiwan, where the product was launched in April. We will continue our efforts to further penetrate the market in each region and expand a number of countries and regions where the product is launched as well as to obtain new indications in order to deliver ENHERTU to as many patients as possible in need of the drug.

On Slide 17, we are pleased to announce that we have won the Pharma Company of the Year award at the Pharma Intelligence Awards 2022. This is the first time that the Pharma Intelligence Awards 2022, the Japanese version of the Scrip Awards, which have been held in the U.K. for 17 years and are known worldwide, has honored our company as the Pharma Company of the Year. The Pharma Company of the Year award recognizes outstanding performance by a pharmaceutical company during the year 2021.

It's judged by the Scrip editorial staff based on various indications such as sales, profits and pipeline expansion. The award recognized our focus on oncology and the strength of our proprietary antibody drug conjugate, ADC, platform as well as ENHERTU's efficacy in breast cancer and its broad potential for the future.

Next is about LIXIANA. Slide 18 shows our market share in volume in each country. In relation to Japan, South Korea and Taiwan, LIXIANA is growing steadily in Belgium, Spain, Italy and other European countries. As a result, global sales revenue for the second quarter of FY 2022 was JPY 117.3 billion, an increase of JPY 18.1 billion year-on-year. For FY 2022, we forecast full year revenue of JPY 242.1 billion, an increase of JPY 36.4 billion year-on-year.

Slide 19 shows the market share of LIXIANA in Japan in billions of yen. Although the sales share of LIXIANA declined due to the reduction of the NHI reimbursement price in April 2020 as a result of the repricing for exceptional expansion, it has since increased its market share again, maintaining the top share at 41.4%. As a result, cumulative sales revenue for the second quarter of FY 2022 was JPY 50.7 billion, an increase of JPY 5.9 billion from the same period last year. For FY 2022, we forecast full year revenue of JPY 106.6 billion, an increase of JPY 14.1 billion year-on-year.

Next, I'd like to introduce our investments in our U.S. business. Please see Slide 20. In August of this year, American Regent acquired HBT Inc. HBT, based in California, U.S.A., is a company with advanced technologies and is engaged in the research, development, manufacturing and marketing of generic injectable drugs, mainly in the field of oncology. Currently, HBT is marketing an authorized generic of the anti-cancer drug ABRAXANE, which is supplied by Bristol-Myers Squibb. In addition, HBT's proprietary generic ABRAXANE, which is paclitaxel, received FDA approval in July of this year and is scheduled for launch in the fourth quarter of this fiscal year. Other R&D items include generic injectable aripiprazole and bupivacaine.

American region's mid- to long-term growth will require further expansion of its iron deficiency anemia treatments as well as enhancement of its generic injectable product portfolio. The objective is to further strengthen the generic injectable pipeline particularly in oncology by combining HBT's advanced formulation technologies with paclitaxel's contribution to sales revenue and profit.

The upfront payment of $225 million or JPY 30 billion has already been paid. Other milestones and royalty payments are scheduled to be made upon the launch of the R&D items, aripiprazole and bupivacaine.

On Slide 21, I will discuss other initiatives in each region. The transformation to a profit structure centered on new drugs is progressively -- progressing steadily. In the U.S., we completed the transfer of 8 products, including BENICAR, a drug for hypertension treatment, and recorded a gain of $22 million or JPY 3.2 billion on a transfer in the first half of the year. We plan to record a gain of $15 million in the second half of the year and $20 million in FY 2024 for a total gain on transfer of $57 million. In Europe, the transfer of the antiplatelet agent, EFIENT, progressed and a gain of EUR 18.7 million or JPY 2.7 billion was recorded in the first half.

The remainder will be recorded upon completion of the transfer in Turkey and the total gain from the transfer is expected to be EUR 20.5 million. In ASCA, the transfer of the antibacterial agent, Cravit, and its subsidiaries in China was completed; and the full amount of EUR 6 billion was recorded in the first half of the year.

On Slide 22, I'll give you a major update on our patient disputes. First, I'd like to discuss our dispute with Seagen regarding our ADCs. In August of this year, an arbitral tribunal ruled against Seagen's claims in its entirety. The arbitration decision rejected Seagen's claims, and we will retain our intellectual property rights to the disputed ADC technology and continue to develop and commercialize our ADC products as we have planned.

On the other hand, in July of this year, the U.S. Federal District Court ruled that our ENHERTU infringes Seagen's U.S. patents. The court has not yet ruled on the payment of royalties on future sales of ENHERTU during the term of the Seagen's patent, which expires in 2024. We believe that the Court of Appeals will likely find Seagen's U.S. patents invalid, and we will continue to consider all legal options to protect our rights.

Next, regarding the dispute with Novartis regarding the Plexxikon patent. Plexxikon had filed a lawsuit in the U.S. Federal District Court in 2017, alleging that the Novartis BRAF inhibitor, TAFINLAR, infringes on a U.S. patent owned by Plexxikon. In September of this year, the Federal District Court issued a decision upholding Plexxikon's claim. In response, Novartis appealed the District Court decision in October of this year.

Slide 23 presents the revised annual dividend forecast. ENHERTU, the most important pillar of our fifth mid-term business plan, is expanding its sales more than expected. And in conjunction with the upward revision of the full year forecast for this fiscal year, we have decided to bring forward by 1 year the dividend increase that we had assumed for FY 2023 and beyond and to increase the dividend in line with profit growth from this fiscal year. Specifically, the annual dividend forecast per share will be revised upward from JPY 27 to JPY 30. Going forward, we will continue to improve capital efficiency and further enhancement of shareholders' returns, aiming to achieve a DOE of 8% or higher in FY 2025, which is a KPI of the fifth mid-term business plan.

Next, R&D update. I'd like to hand over to R&D Division Head, Wataru Takasaki.

[Wataru Takasaki, executive]

[Wataru Takasaki speaking.] Today, I'm going to talk about our R&D update. First, an update on our 3 ADCs. Page 26 is ENHERTU breast cancer update. Based on the encouraging results from DESTINY-Breast04 study we presented at ASCO in June, we were able to pioneer HER2 low breast cancer as a new clinically meaningful patient segment and demonstrate that ENHERTU has the potential to become a standard of care. In August, ENHERTU was approved in the United States for HER2 low breast cancer previously treated with chemotherapy. Approval was granted swiftly after 11 days from filing acceptance under FDA's Breakthrough Therapy Designation, priority review and the real-time oncology review program. ENHERTU has become the first HER2-directed therapy to demonstrate survival benefit in patients with HER2 low breast cancer, which accounts for about 50% of the entire breast cancer. FDA approved companion diagnostics in October.

Regulatory submission is making steady progress in other countries and regions. In addition to the filing acceptance in Japan and Europe in June, filing was accepted in China in August. Aiming to provide new treatment options to more breast cancer patients in HER2 low breast cancer, we are implementing studies in chemotherapy-naive patients as well as studies to evaluate combination therapies with other anticancer agents.

Please turn to Page 27. ENHERTU is transforming the treatment of breast cancer patients with the approval for HER2 low breast cancer and establishing leadership in HER2-directed therapies. Development to expand this leadership position to other tumor types is also making steady progress.

I would like to give you an update on lung cancer. In August, ENHERTU was approved in the United States for HER2 mutant NSCLC in the second-line settings and beyond.

This is the third tumor type approved for ENHERTU following breast cancer and gastric cancer. This indication was approved under Breakthrough Therapy Designation, priority review and accelerated approval process based on the results of DESTINY-Lung02 interim analysis as well as DESTINY-Lung01 study. The approved dose is 5.4 milligram per kilo.

Along with the approval of ENHERTU for NSCLC, FDA approved 2 types of companion diagnostics as well. In September, in Japan, ENHERTU was granted orphan drug designation for unresectable, advanced or recurrent HER2 mutant NSCLC. Filing is planned in Japan and Europe in the second half of the current fiscal year.

Aiming to obtain approval for early treatment of HER2 mutant NSCLC and expand the countries and regions with approval, DESTINY-Lung04 study is ongoing globally in the first-line settings right now. In August, in China, we initiated DESTINY-Lung05 study in the second-line setting and beyond.

On Page 28, I would like to show you DESTINY-Lung02 study interim analysis data we presented at ESMO last month. This is an excerpt of data, which shows that ENHERTU 5.4 milligram per kilo can be the first HER2-directed therapy for treatment of patients with HER2 mutant NSCLC and which also supported FDA approval. Let me explain some details of the study and the data. DESTINY-Lung02 study is a comparative study of 5.4 milligram per kilo and 6.4 milligram per kilo ENHERTU in patients with previously treated HER2 mutant NSCLC. ORR was 53.8% with 5.4 milligram per kilo and 42.9% with 6.4 milligram per kilo at the time of the interim analysis. And ORR was 57.7% with 5.4 milligram per kilo. After additional 90-day follow-up response analysis, no new safety concerns were identified.

Based on the balance between efficacy and safety, 5.4 milligram per kilo was judged to be the optimal dose. We are now accelerating our development to expand countries and regions with NSCLC approval and obtain the indication for early treatment so that we can deliver ENHERTU to more patients.

From Page 29, I will talk about Dato-DXd update. At WCLC 2022 in August, we presented TROPION-Lung02 study data for the first time. This is a study evaluating the efficacy and safety of Dato-DXd plus pembrolizumab doublet or Dato-DXd plus pembrolizumab plus platinum chemotherapy triplet for relapsed and advanced NSCLC without actionable genomic alterations regardless of PD-L1 expression level.

Each cohort consists of dose confirmatory and dose expansion studies. First-line patients with no prior therapy are enrolled in cohorts 3 through 6 dose expansion studies. Primary endpoint is safety and tolerability. Secondary endpoints, ORR, DoR, duration of therapy, PFS, OS are also evaluated.

Next, on Page 30, I'm showing you the interim analysis data from this study. Encouraging interim analysis data in terms of efficacy and safety was obtained overall and for previously untreated first-line patients.

ORR was 62% for doublet and 50% for triplet, respectively, in first-line patients; and responses were observed across all levels of PD-L1 expression. Overall safety was consistent with Dato-DXd monotherapy, and no grade 4 or 5 ILD events were adjudicated as drug related. We are now conducting Phase III TROPION-Lung08 study to evaluate the efficacy and safety of Dato-DXd plus pembrolizumab combination therapy for PD-L1 50% or higher first-line NSCLC without actionable genomic alterations. TROPION-Lung02 interim analysis data suggests efficacy in patients with PD-L1 under 50%, so we plan to initiate a new study shown on the next page.

Please turn to Page 31. Let me explain TROPION-Lung07 study we are planning to initiate. This is a new Phase III study to evaluate the combination of Dato-DXd and pembrolizumab in first-line patients with PD-L1 under 50% non-squamous NSCLC without actionable genomic alterations. We are planning to initiate this study in the second half of the current fiscal year. This is a comparative study with 3 arms: Dato-DXd plus pembrolizumab doublet, Dato-DXd plus pembrolizumab plus platinum chemotherapy triplet, and pembrolizumab plus pemetrexed plus platinum chemotherapy as a control arm.

Primary endpoint is PFS and OS. We will also evaluate ORR, DoR, et cetera, as secondary endpoints. The status of Dato-DXd Phase III development in NSCLC is shown in the left bottom for your reference.

Taking advantage of the broad expression of TROP-2, which is Dato-DXd's target, we are accelerating the development in tumor types other than lung and breast cancer, where Phase III studies are ongoing. As part of such efforts, in September, we initiated TROPION-PanTumor03 study, which is a Phase II exploratory study in multiple types of solid cancer.

Slide 32 shows the newly initiated clinical studies for HER3-DXd. As shown on the lower left, since last February, we have been conducting the HERTHENA-Lung01 study, a Phase II study for submission for the third-line treatment of NSCLC with EGFR mutation. In addition, the HERTHENA-Lung02 study for second-line treatment after tyrosine-kinase inhibitor treatment was newly initiated in August. This is a 2-arm comparative study of HER3-DXd alone or in combination with pemetrexed and a platinum-based agent. The primary endpoint is PSF and OS, ORR, et cetera, will be confirmed as secondary endpoints. Slide 33 and after are an update on Alphas.

Please see Slide 34. First of all, I'd like to present the progress of DS-7300, one of the rising stars of the project, which we expect to be the next growth driver after 3 ADCs.

Over the next 2 slides, I will present the interim analysis data from the Phase I/II study of DS-7300, which was presented at ESMO in September. The study investigates a variety of cancer types, including small cell lung cancer, SCLC; castration-resistant prostate cancer, mCRPC; squamous cell NSCLC; esophageal squamous cell carcinoma. An interim analysis showed early efficacy in patients with a variety of cancer types who had received multiple prior treatments. The confirmed ORR for all eligible patients regardless of cancer type was 28%. Safety trends were consistent with previous reports, and no new concerns were identified.

The next slide, Slide 35, shows data on antitumor efficacy by cancer type. The confirmed ORR was 53% for SCLC, 28% for mCRPC, 40% for squamous cell NSCLC and 18% for esophageal squamous cell carcinoma. A Phase II study is already underway in SCLC since June of this year; and based on the data from this study, we are accelerating development in SCLC. In addition, we will continue development in other types of cancer with the aim of providing a new treatment option for patients with multiple types of cancer for whom treatment options are limited.

Continuing to Slide 36, which shows the progress of DS-5670, the COVID-19 vaccine. First, I'd like to discuss the development of a booster vaccine. We plan to obtain the top line results of Part II of the Phase I/II/III study, which aims to verify the non-inferiority of DS-5670 to be approved COVID-19 messenger RNA vaccine in the third quarter of this fiscal year.

Partial data has already been submitted to the PMDA since September of this year using the pre-assessment consultation system. And as soon as the results of this study are finalized, we plan to submit an application for approval in FY 2022. We have also started consultation with the PMDA on a development plan for a bivalent vaccine compatible with the Omicron variant in order to advance its development.

Next, I'd like to discuss the progress of the development of the primary vaccination. In September of this year, we initiated Phase III study in adults in Japan. We will continue our efforts to commercialize domestically produced messenger RNA vaccines and to establish manufacturing technology for them aiming for a rapid response to emerging and reemerging infectious diseases in the future.

Slide 37 presents the trial process and approval status of other Alphas. In September, valemetostat, an EZH1/2 inhibitor was approved in Japan for the treatment of adult T-cell leukemia lymphoma. In August, the applications for quizartinib for the primary treatment of acute myeloma leukemia with FLT3-ITD mutation were accepted for review in Europe and Japan and in October in the United States. Approval is expected in the next fiscal year. A Phase II study of VN-0200, an RSV vaccine, was also initiated in Japan in October for healthy elderly subjects.

Next is the announcement of the R&D Day. As noted on Slide 39, we will hold another R&D Day in December this year. The time and date is December 13 from 7:30 to 9:00 a.m. Japan Time. Manabe and Takeshita will be speaking, and the event will be held virtually. Please join us and watch the program.

From Slide 40 is the news flow for upcoming events.

Please see Slide 41. At the San Antonio Breast Cancer Symposium starting December 6, local time, we will report ENHERTU's efficacy and safety updates, including OS from the DESTINY-Breast03 study. For Dato-DXd, we will present the first data from the TROPION-PanTumor01 study in hormone receptor positive HER2-negative breast cancer. Additionally, we will update the TNBC data.

We will also update our data on BEGONIA study, a combination study with durvalumab for the primary treatment of TNBC. Other information includes expected future approvals, planned regulatory filings, expected availability of key data and expected timing of pivotal study initiation. Please note that the time lines shown are current estimates and are subject to change.

Slide 42 onwards is the appendix. Please check back later for a list of milestones and pipeline.

That is all for my presentation. We will now take your questions. Thank you very much for your cooperation.

[Operator]

[Operator Instructions] First, Mr. Yamaguchi from Citigroup Securities.

[Hidemaru Yamaguchi, analyst]

I have 2 questions. First about the trend of new indications of ENHERTU. Sales of HER2 low and NSCLC have already started. You talked about rapid penetration but did not mention market share. Could you please comment on the pace of penetration, if possible? This is my first question.

[Sunao Manabe, executive]

[Manabe would like to respond.] These indications have been approved just recently. It has been making a good start. Other than that, we cannot show you specific numbers yet. We would appreciate it if you could wait for some more time. Companion diagnostics have been approved later.

[Hidemaru Yamaguchi, analyst]

Do you think there are no issues in identifying eligible patients?

[Unknown Executive]

No problem. We use the conventional ones during the studies and now have additional ones. We are proceeding without any issue.

[Hidemaru Yamaguchi, analyst]

Okay. Understood. Secondly, I'd like to ask you about your mid-term business plan. Your mid-term business plan is in progress towards FY 2025 or 2026. You have made an upward revision of ENHERTU sales forecast, and performance is great. If there is any possibility of revising your mid-term business plan targets, around when that timing is going to be? I think you're exceeding the mid-term business plan targets at 0.5 point. Could you comment on this, please?

[Unknown Executive]

As it's performing very well, we are discussing how much we can expect in our forecast, including sales in FY 2025 and how much revision we can make. We cannot comment on the timing, but if we can make an upward revision, we'd like to communicate that to you as soon as possible.

[Hidemaru Yamaguchi, analyst]

In other words, you are actively discussing right now, correct? Although you cannot comment on the timing.

[Unknown Executive]

That's right.

[Operator]

Next, Mr. Wakao from JPMorgan Securities.

[Seiji Wakao, analyst]

Wakao from JPMorgan Securities speaking. I also have 2 questions, first about ENHERTU. Regarding the second quarter sales in the United States, you mentioned that you cannot disclose the numbers for the new indications. In the United States, in the second quarter, the second-line indication approved in May has been performing well to increase your sales and HER2 low will contribute in the second half. Is this the correct understanding?

[Unknown Executive]

We think HER2 low is also making a good start, but we don't have clear cut numbers yet, so what you said is fine. Then there is some uncertainty about HER2 low.

[Seiji Wakao, analyst]

Is there any possibility of an upside as well?

[Unknown Executive]

That is suggested by the current trends. We don't think there will be further upside beyond the current curve.

[Seiji Wakao, analyst]

Secondly, you will organize an R&D meeting in December this year as well. Timing-wise, I believe there will be a review of the San Antonio data. Are there any other topics you are planning to cover?

[Wataru Takasaki, executive]

[Takasaki would like to respond.] We will focus on the progress of our 3 ADCs in our presentation. In addition, we would like to talk about Alpha as well. We will explain what we call disease strategies. As we receive a lot of comments and questions from you about our strategies for each indication, such as breast and lung cancer, we'd like to address those topics as well.

[Operator]

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

[Shinichiro Muraoka, analyst]

Muraoka from Morgan Stanley speaking. Regarding your philosophy behind your mid-term business plan, the timing of a possible revision could be around the end of April next year when you announce the fourth quarter results. I just imagined by myself. My question is not about the timing but about your target of more than JPY 600 billion oncology revenue, you can even add more than JPY 100 billion on top.

Furthermore, Dato-DXd third-line results will be available by then. You can increase Dato's probability success further. There's a question, how much Dato will be included by FY 2025. How much can you raise from JPY 600 billion oncology revenue target? This question may be too direct. But can we expect a lot more than this level?

[Unknown Executive]

Yes, we also like to make our forecast with a lot more. But sorry, could you wait for some more time, as we would like to disclose information with as much accuracy as possible on our end. We are hoping that we can meet your expectations.

[Shinichiro Muraoka, analyst]

This is related to your mid-term business plan. You mentioned JPY 300 billion investments in your 3 ADCs when you presented your MTP before. I'm sure it will be fine, but we don't have to think about the risk of ENHERTU supply shortage. We don't have to think that demand is rising that much. Sales are increasing more than we expected including CMC. We need to address the situation, and we are making necessary arrangements. No need to worry, correct?

[Unknown Executive]

Well, yes, we will do our best somehow for now.

[Shinichiro Muraoka, analyst]

One more question. In the pipeline, you mentioned that the RSV vaccine enters Phase II in Japan. How different is this from the existing ones, which I believe GSK has recently released? Is it something very interesting such as a messenger RNA vaccine? What is it like?

[Wataru Takasaki, executive]

This is Takasaki. I'll answer this question. Well, we are naturally thinking about differentiation, and we believe it's possible now. But we are not able to disclose specific feature due to our strategy. We will share them with you when we are ready to disclose them.

[Shinichiro Muraoka, analyst]

Can you tell me if it's a messenger RNA?

[Unknown Executive]

I'm sorry, but the judgment I have states that this cannot be disclosed due to a strategic reason. Please accept my apology.

[Operator]

I will move to the next question. It's Mr. Hashiguchi from Daiwa Securities.

[Kazuaki Hashiguchi, analyst]

This is Hashiguchi. Could you please disclose the breakdown of ENHERTU's U.S. sales of $1 billion by indication? Also, could you comment on which indications have changed and how they have changed compared to the previous forecast.

[Unknown Executive]

We have refrained from disclosing this information. As I mentioned, the market share today, ENHERTU has the highest market share for the third and second-line indications, respectively, and 30% to 40% as I introduced earlier. As for HER2, we are not in a position to give you the figures yet, so if you wait a little longer, I'll be able to disclose more information. I'm sorry.

[Kazuaki Hashiguchi, analyst]

Okay. The slide towards the end showed us the timing of the results of the Dato-DXd TROPION-Lung01 study, which is expected to be in the second half of this fiscal year. However, I believe Mr. Takasaki mentioned that this may change. Is there still a reasonable possibility that the study will not be in the second half of this fiscal year? Or is this just a general statement and the probability that it will be released at this time is increasing?

[Unknown Executive]

Of course, that comment is a general statement. I think we are -- you are referring to what was just explained in the news flow section. That was a general statement. As for this TN-01 study, it's event-driven, and there are still some uncertainties. But for now, we will share the results at that time as planned.

[Operator]

It's Ms. Kumagai from Mitsubishi UFJ Morgan Stanley Securities.

[Naomi Kumagai, analyst]

I'm Kumagai from Mitsubishi UFJ Morgan Stanley. Can you hear me?

[Unknown Executive]

Yes.

[Naomi Kumagai, analyst]

I have 2 questions for your brief answers. I'd like to reconfirm, first, if DS-5670 can be approved as a priority for booster vaccination. Another question is that I know there are not many naive patients in Japan. But can you tell me if enrollment will proceed successfully?

[Wataru Takasaki, executive]

Yes, 5670 -- this is Takasaki, and I'll answer. As for 5070 -- I'm sorry. It's about booster vaccination. As for the initial application for approval with booster vaccination, we will discuss it properly with PMDA, and we'll proceed in that direction. Also, naive patients are being enrolled in the program more smoothly than expected, and the enrollment is progressing according to a proper time line. I believe that both of these matters are progressing smoothly.

[Naomi Kumagai, analyst]

I understand very well. One more point regarding American regent. You have revised your full year plan. This is the increase in generic injectables minus Injectafer and Venofer. Can you tell me whether the increase is mostly due to the acquisition of HBT or whether it is also due to the increase in existing generic products? That's all from me.

[Hiroyuki Okuzawa, executive]

Okay. I am Okuzawa, and I will answer your question. American Regent is under regulations for both Injectafer and Venofer. They are namely step edits defined by insurance companies for high dose and low dose, respectively. Injectafer is currently in a situation in which Venofer makes up for the slight decline in Injectafer. On the other hand, the generic multi-source injectables are also making progress to partially cover the decline of Injectafer. And HBT's generic injectable lineup is being added to the Injectafer lineup.

[Operator]

Let's move to the next question, and this will be the last question of today. Mr. Sakai from Credit Suisse Securities.

[Fumiyoshi Sakai, analyst]

This is Sakai from Credit Suisse. Well, time is running out, so I'll ask only one question. It's about Lung07 on Page 31. You also mentioned Lung01 earlier, but regardless of the results of Lung01, you plan to start this Lung07 in the second half of this fiscal year. Do I understand it correctly?

[Unknown Executive]

Yes, that's correct. We intend to proceed as planned.

[Fumiyoshi Sakai, analyst]

Understood. You mean regardless of the results of Lung01, correct?

[Unknown Executive]

Yes, that's correct.

[Operator]

We have reached the closing time, and this is the end of the QA session with investors and analysts. Thank you all for your participation today. Thank you very much for your participation today.

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