Earnings Transcript for 4519.T - Q1 Fiscal Year 2024

Kae Miyata: My name is Miyata. I will be facilitating today’s session. And this session is held using a Zoom webinar platform. As Page 3 of the presentation material speaks, we would like to go through today’s preceding as per agenda. Today’s presentations are made in Japanese. However, we do have English simultaneous interpretation service available. Please make sure you select the luggage of your preference by clicking on the bookmark on your screen. For those who wish to listen to Japanese, please select Japanese. For those who wish to listen in English, please select English. And please make sure that you click on mute original audio. This way you can only listen to the language of your choice. We will take questions after the presentation. We plan to spend about 30 minutes for Q&A session. During the presentation session, you are all muted. Now, I would like to invite Okuda to give us the review of the first quarter result of 2024.

Osamu Okuda: My name is Okuda speaking. I am the Representative and CEO. I would like to explain about the result of the first quarter of 2024. Please refer to the Slide #5. The first quarter made a strong start for the core business as being expected. Revenue dropped by 24.1% in one year. This was because last year in the same period, we have had a supply of Ronapreve to the government of ¥81.2 billion. Net income and operating profit, although, despite the revenue dropped only 3.1%, respectively. This was because we do not have the income coming from Ronapreve anymore, product mix improved. OP margin was 43.1%, which was high. As you can tell, the core business domestically and globally made a good start on a full year basis. We are aiming to achieve the record high number for both operating profit and net income. Moving on to the next slide. And it shows our global product performance. As for the Hemlibra, we see gross momentum for the overseas local sales and in this fiscal year, we expect that export revenue will grow on a full year basis. Domestic market, due to the NHI price revision last year, revenue was flat. However, we are gaining share. Now for Actemra, export was negative. This was due to the timing of the shipment. Overseas local sales due to some impact of biosimilars, dropped slightly. But this was within our expectation. And we do not change our full year forecast for export. Alecensa export was negative to the previous year. However, this was due to the shipment timing. And we do not change the export full year guidance. In the U.S., NSCLC indication has been added. And we have a good expectation on future growth. Japan, Europe, we are expecting to receive approval. For Enspryng, we see strong growth domestically and globally. The result of gMG was unfortunately below our expectation. However, Enspryng has several ongoing studies targeting, for example, at TED. And we have a big hope on the success of those ongoing studies. Starting this April, we have new management team. As you see, we have 10 team members with supervisory responsibility. They are going to utilize their expertise, knowledge, and experience. We are going to exchange various opinions in order to achieve TOP I 2030, this team is going to lead the business management. With this, I would like to conclude my presentation.

Kae Miyata: Next, I would like to invite Kusano to explain about the development pipeline.

Tsukasa Kusano: I am Kusano from Project & Lifecycle Management. I would like to explain about the development pipeline. Please refer to Page 9 of the presentation. This is the list of the topics for the first quarter for approved and filed except for the sales efforts. It’s a public knowledge-based sNDA filing. The information has already been published. For Piasky, this is the 5th global product. This is targeting at the PNH and approved in Japan, China, and reviews going on in Europe and America. This is subcutaneous dosing once in 4 weeks. This brings great convenience. We would like to contribute to the patient around the world. Alecensa, this was approved in U.S. this year in April for the indication of ALK-positive early-stage NSCLC. ALK-positive early stage NSC, well, this is the very first adjuvant therapy for that indication. There is no other ALK inhibitor for this same indication. We are bringing in new therapy to the patient. The review is going on in Japan and Europe. Nemolizumab is targeting at the prurigo nodularis and atopic dermatitis. And our filing was submitted this year in February in Europe and U.S. Please move on to Page 10. In terms of the initiation of study, we have three Roche products. RG6299, ASO Factor B, will be explained later on. SRP-9001 is targeting at non-ambulatory duchenne muscular dystrophy. We started global Phase 3 study. Glofitamab is targeting at previously untreated large B-cell lymphoma, global Phase 3 study was initiated. Readout has already been published. In the Enspryng gMG global Phase 3 study, we have achieved the primary endpoint. However, the result was below our expectation. As a reference, we have detailed information on the study on Slide 17. Based on this time’s result, we’ve discontinued the development. This time’s study result does not impact risk-benefit profile of long-term use of Enspryng for NMOSD, MOGAD, AIE, TED. We have other ongoing development efforts for Enspryng, so that we can offer new value to the global patients. And below that line, we have already published the information. Nemolizumab was presented in the society. And zilebesiran, where we signed the licensing agreement with Roche will be explained later on. Please move on to Page 11. The major R&D event in 2024, it’s summarized here and already been explained in the earlier earnings, but we have highlighted the progress this time. Please turn to Slide 12. For nemolizumab at AAD annual meeting, the long-term data for atopic dermatitis and prurigo nodularis was published. On the left hand side is atopic dermatitis Phase 3 test study results. The improvement of itchiness at week 16 with nemolizumab continued till week 48. As you see in the purple line, even when the dosing interval is extended from once every 4 weeks to once every 8 weeks, the efficacy was maintained. On the right hand side is Phase 3 study for prurigo nodularis. With the dosing of nemolizumab, the percentage of patients who saw improvements in itchiness for 52 weeks has increased. And in close to 90% of the patients, the itchiness was eliminated or almost eliminated. As you see in the blue line, for patients switching from placebo to nemolizumab, a similar result was seen. In each study, as you see in #1 and #2, we saw improvement in skin lesions and sleep disorders. In each study for the safety, the results were the same as we have seen in the past. For both diseases in the United States and Europe, the submission was accepted in February of this year and in the United States for prurigo nodularis. Priority review designation was made. Please turn to the next page, which is for ASO Factor B. ASO Factor B is an uptake in selectively by hepatic cells. And it is a nucleic acid drug that inhibits a complement B factor production. The target disease is IgA nephropathy. We see deposition of complement and IgA at the glomeruli. Hematuria and proteinuria are seen persistently. As you can see on the left hand side, ASO Factor B is up-taking into the cell, and this Factor B will be released from N-acetylgalactosamine, and the protein that will cause the disease and messenger RNA that produces that protein will bind complementarily and create a double change. And afterwards, this double chain with the specific enzyme will be degraded. So on the right hand side is a mechanism of the onset of IgA nephropathy. With complement B factor, the second path of a complement will be activated. And with ASO Factor B, a complement B production will be inhibited, and the pathway activation will be suppressed. It will suppress the progression of IgA nephropathy. And next is the license-in contract concluded with Roche, which is RNAi zilebesiran. RNAi is a mechanism that exists in the human body, and it interferes with messenger RNA, which transmits such proteins of – which transmits proteins of DNA. And the RNA treatment drugs utilizes this mechanism. This is a new modality. The RNA inhibitor of treatment drug, siRNA moves to the hepatocell, and it will create or produce a complex with the protein necessary for RNA interference. This complex will bind to the small interfering RNA and this messenger RNA will be degraded. In the next page is the RNAi treatment drug which is being developed for hypertension. As you see on the left hand side, zilebesiran is at the most upstream portion of the renin-angiotensin-aldosterone stream which is related to blood pressure regulation. It inhibits persistently the synthesis of AGT. As you see on the right hand side in the Phase 2 study overseas, if for hypertensive patients who saw lack of efficacy with standard of care, with the use of zilebesiran. From 3 months after the start of treatment, compared to placebo, there was a significant decrease in blood pressure. The safety profile was good with no adverse events leading to death or discontinuation. For hypertensive patients with uncontrolled blood pressure, the cardiovascular event risk will go up, and there is unmet medical needs. With the new modality value will be provided to our patients. We are working with Roche [L&I] [ph] on this. These are the main project markets. At the top, you see the domestic sales. On the left hand side is Chugai products. On the right hand side is Roche. At the bottom, you see the products that are being developed, or the ones that are being developed in multiple projects. So these are in-house products overseas sales. And therefore, Hemlibra and Alecensa, which we introduced to you last year, are not included. Before Roche products that were disclosed this year in February, the reasons for changes are shown. For Enspryng, the gMG was deleted, but for CHF 1 billion positive potential shows high promising results. It is not included in the chart, but for Hemlibra. The domestic environment is very difficult, and further growth in the market is expected. For Alecensa NSCLC adjuvant treatment, additional indication, increasing sales is expected. This is a submission schedule. The right stars are for new indications, and the blue is the change in submission year. With the progress of the test, the submission year was changed for some. Please refer to the following slides for your reference.

Iwaaki Taniguchi: This is Taniguchi speaking. I am a CFO of the company. Now, I would like to explain about the quarter based first quarter result. The revenue dropped by ¥75.3 billion year-on-year, and it was ¥236.9 billion, operating profit dropped by ¥3.3 billion, and it was ¥102.1 billion. The major reason for that drop was because last year in the first quarter, we had revenue of COVID-19 treatment, the Ronapreve, which we do not have anymore. So, except for the Ronapreve impact, the revenue actually increased. Now, out of the revenue, the product sales was ¥204.5 billion, dropped by 29.8%, which is ¥87 billion. Domestically, revenue dropped by ¥89.5 billion, including Ronapreve, but if we exclude Ronapreve, the drop range was ¥8.3 billion, a reason being the Gx penetration of the NHI price revision. Overseas, Hemlibra doing well, up by ¥2.5 billion year-on-year, growth of 2.5%. The other revenue, so increasing Hemlibra royalty income and one-time income, and increased by 57% year-on-year, which is up by ¥32.5 billion. The cost of sales ratio was high with Ronapreve, but we don’t have this anymore. So, the cost-to-sales ratio improved by 16.3 point and became 35.5%. Expense side, we improved the efficiency, SG&A increased only by ¥200 million. R&D expense under the RED Shift strategy, drug discovery and early development project progress quite well, and R&D expense increased by ¥5.1 billion. As a result, operating profit was ¥102 billion OP margin, 43.1% up by 9.3% and income tax decreased and income was ¥76 billion dropped by 3.1%. This is the change in product sales. Domestic oncology area revenue dropped by 6.5% equivalent to ¥3.9 billion. Due to the impact of Gx generates penetration, Avastin revenue dropped. And for the growth of fiscal sales exceeded the drop of Perjeta and Herceptin. For the specialty revenue dropped by 64.6%, which is ¥85.7 billion. But the Ronapreve ¥81.2 billion and Tamiflu ¥4 billion of revenue dropped impacted quite largely except for those two, the revenue was in part with the previous year’s level. The NHI drug price revision impact we saw, however, Vabysmo, Enspryng sales grew nicely, overseas grew by 2.5%. Actemra is seeing the impact of biosimilar, however, Hemlibra and Enspryng grew its export sales. Moving on to the next page, this shows the change in operating profit. From left you see the growth profit. This was dropped by ¥8.7 billion. As you can see, we had a negative impact from NHI price decrease and export unit price. However, we made some, we complemented that with the increase of export. However, we were not fully able to absorb that. As for the impact of sales volume, the magnitude of this range was relatively low. That’s because of the impact from the Ronapreve. And this is the change of the operating profit. And this is the quarterly change in cost and the profit. So this shows basically the quarterly trend. To your left, you see the first quarter last year. The size of the bar is quite big, but this is due to the Ronapreve sales. But since then, the profit level has been normalized. There are some changes in the timing of export. Sales recognition timing, as a result of RAAS, that’s quarterly profit can move. Next page shows the structure of revenue by quarter-on-quarter basis. In 2023 first quarter, we recognized the sales of Ronapreve to the government. And as a result, the domestic product sales was boosted and overseas product sales. I would like to explain about this later in more details, but revenue dropped in Actemra, but somewhat compensated by Hemlibra. Next page. And it shows the progress against the full-year guidance published at the beginning of the year. Last year, due to the impact of Ronapreve, first quarter number is looking quite high. And this year first quarter, for both sales and expense items, they are trending in our expectation – as per our expectation. The first quarter domestic product sales is impacted by the lesser number of business days, meaning that sales volume tends to be low in the first quarter compared to the other quarters. And overseas product sales, the exports to Roche due to the production and exporting schedule can move by product on a quarterly basis. But just like domestic sales, the number in the first quarter tends to be low compared to the other quarters from April and beyond. Regarding Hemlibra royalty, the rate increases against full-year cumulative sales, meaning that we have a tiered structure, meaning that the royalty tends to go up toward the end of the year. And for the expenses, the expenses is expected to fall under our full-year expectation, and based on those situations, in general, things are moving as per our expectation, as per our full-year guidelines announced at the beginning of the year. So to the next page, to more details, by product progress against the full year of forecast of sales, there are some variations, but roughly speaking, things are progressing as expected. Like Vabysmo, there are products where the progress seems to be slow. However, overall, we are expecting an increase in sales. So for the full-year estimate, there will be basically no change. Next is the impact of the foreign exchange rate. So the content is different from last year. By a quarter, the assumed rate and the actual rate are shown on the right hand side. So for exports to Roche and royalty from Roche, and purchases that will have an impact on cost, actually for 80%, it is hitched by Forex contracts. But for the remaining 20%, the position is open. So spot rate exchange rate will be used. So this portion will be the Forex exposure. First, the assumed rate for Q1, plus ¥1.1 billion on an operating profit basis was shown basically on the sales side. The hedging assumption at the beginning of the year and the actual foreign currency denominated a transaction was different. So actually the yen was lower than expected. The assumed rate is different depending on the quarter, but for foreign exchange contracts it will be done for the full year. So the actual hedging transaction and the annual average rate will be slightly different. So for the comparison against the previous year, if you look at the far left-hand side, the Forex rate has been a week yen since last year. This is positive for the revenue, but it is negative for the expenses for net position. On an operating profit basis, we saw a Forex-based profit contribution of ¥17.7 billion compared to the previous year. So far, I talked about the profit and loss statement, but from the next page on I will talk about the balance sheet, total asset, ¥1,897.8 billion compared to the end of last year, minus ¥34.7 billion. As of end of the year, the accounts were received and because of that, the numbers went down. But net owned capital has increased because of owned profits. So shareholder’s equity ratio has increased 2.4 percentage points to 86.5%. And for net cash since end of last year we’ve seen increase of ¥25.6 billion, and as of the end of March ¥764.6 billion. So here we look at the net cash changes. Corporate taxes and dividend are paid after the assets, but still ¥25.6 billion positive is what we see here. The next page is about the situation of investments. In January, when we announced our results with the numbers and there isn’t significant change. For an important point for manufacturing, at the bottom, Ukima factory, UK3; bio-API production building is already in operation and ¥20.3 billion including investments for improvements of facilities included for R&D. Singapore CPR will be expanded and the facilities are to be moved and with it a SGD 60 million investment is expected, and for the medium-term environmental targets ¥109.5 billion for capital expenditure is expected. The next slide, the final slide is a non-core adjustment. The depreciation and amortization ¥400 million for intangible assets and for others ¥400 million for a restructuring. The old research center moved, and after the movement costs are incurred and for a restructuring cost that currently ERP project is ongoing and with the project a temporary business rebuilding expenses are incurred. That is all from my side. We are looking forward for questions.

A - Kae Miyata: Now we would like to move on to the Q&A session. Takano, the Head of Sales will be joining the Q&A session. In order to respond to as many questions as possible please make sure that you ask only one question, one person/one question, please. Your questions will be posted on our website later on. So now we would like to take questions. At the bottom of the webinar screen, you will see the raise hand button. If you have a question, please click on this button. And as you see your hand being raised, the Secretariat will unmute you. Please make sure you state your name and affiliation. [Operator Instructions] From Morgan Stanley MUFG, Muraoka-san, please.

Shinichiro Muraoka: Hello, I am Muraoka speaking from Morgan Stanley. Can you hear me?

Osamu Okuda: Yes.

Shinichiro Muraoka: Thank you. I would like to ask you questions regarding pipeline. Maybe you will tell me to ask this question to [Indiscernible]. But this year in March, July, oral product Amycretin showed a good result and data, also doesn’t seem to be so efficacious. That’s what international investors says. But I don’t necessarily agree with them. But oral drugs data when you compare those with your own data, what do you think is the point of advantage of your products against the other competitive products being developed?

Osamu Okuda: Muraoka-san, well, thank you very much for your question. We have licensed out this compound to the Eli Lilly. And for Type 2 diabetes, there are six studies going on. And then the three studies going on for obesity, we have started the dosing. The detailed question should be directed to Eli Lilly. I’m afraid that I have to tell you that we cannot comment on this compound.

Shinichiro Muraoka: What about the competitors’ data? Were you surprised to see their data? Or was their data within your expectation?

Osamu Okuda: Thank you for your question. Once again, we cannot comment on the competitors’ drugs. We are not in a position to make any comment. So please allow me to refrain from responding to your question.

Shinichiro Muraoka: So maybe I’m going to receive the same ask again, GYM329. I would like to ask about the thinking behind this study. The muscles will be increased rather than decreased. So weight reduction test. So, the curve of weight reduction compared to GLP1, is the curve very different from GLP1? Is that your assumption at the moment? Or does it start to decline very suddenly or rapidly? So for the Phase 1 results to come out, what should be expecting if you can briefly talk about that?

Osamu Okuda: Now, thank you very much to Mr. Muraoka for your question. For obesity, GLP1 is attracting attention. Using it with incretin seems to be a possible option for treatment. Incretin does cause a reduction of weight, but with fat, muscles also are decreased. GYM329, as you know are increases muscles. So if it is used with incretin, the muscles can come down, but that muscle may be recovered. As a result, if fat alone will be reduced, it will have a positive impact on health and daily life of the patient. However, at what speed will the muscles come back? We have not seen the data yet, and therefore, we cannot comment.

Shinichiro Muraoka: So currently, you are in Phase 1b. Now, this is monotherapy. So the message is don’t worry if the weight is not come down that much are now with the increase in muscles the weight might go up that may be a concern, but it is very difficult to identify how much expectations we should have for this drug. So can you share with us the image you have with this drug?

Osamu Okuda: Thank you very much. This is a Roche Lead Phase 1 study and the purpose of this study is to look at PK/PD and safety. So with regards to the content after we get the data if there is something that we can share we would like to look at it, but currently it is a Roche Lead Study and therefore at this moment we are not in a position to make any comments we would like to refrain from making any comments.

Shinichiro Muraoka: Thank you very much. I would like to wait for the results to come out.

Kae Miyata: Thank you. Next from JPMorgan, we have Mr. Seiji Wakao.

Seiji Wakao: This is Wakao speaking from JPMorgan. Nice to talk to you today. First question is related to Hemlibra sales in the U.S. Can you comment on that, please? Based on your presentation, international and Europe, the sales has been expanding. However, you didn’t really comment on the sales in the U.S. When I look at the Roche number this time, YoY minus 1%. So, I wonder how you see the future of the U.S. performance as far as I remember YoY. U.S. has never really shown this kind of YoY trend. And the prescription, I guess, is growing. So, I was surprised to see this number. Volume, price, can you comment on any change on volume and price, if there are any?

Iwaaki Taniguchi: This is Taniguchi speaking. Thank you for your question. The information was disclosed just today. So, we don’t have any additional information for international, Europe, it’s still growing. But for U.S., minus 1%, probably there are some seasonality impact. But I don’t think it’s appropriate to make comment based on our guess and speculation. We do not disclose share, but we understand that share is still growing. So, we are not really worried.

Seiji Wakao: Thank you very much. So even when we look at U.S. performance only, there are no major change from your previous thinking, right. Thank you. The second point, the Enspryng gMG results, so what is your take on the results? So this project will be discontinued, but why do you think you were not able to meet the expectations? You didn’t have a Phase 2 study and because of that, is that the reason for not being successful? Or if you look at the current data, it seems like the placebo is quite strong and maybe that had an impact or is it simply that for both the Enspryng and placebo, the results were too strong, can you tell us why this was not successful? For Phase 3, in your case, you have always been successful, so you were not able to be successful this time, why is that? So I’m not sure if this is the first, but actually I was surprised that you were not able to meet the expectations, so can you tell us about the background?

Iwaaki Taniguchi: Thank you very much for your question. Just one point before I answer that question, 100% success for ourselves, that is in case of first indication, we have always been able to meet the primary end point. With the expansion of indications, there are some failure cases in the past. Now, for the results that we see now, so gMG Phase 3 study, if you look at the primary endpoints, the activities of daily life of patients are looked at. From the start of treatment to week 24, we look at the average change. The Enspryng group versus placebo, statistically there was a difference. However, between Roche and ourselves, we have predetermined and assumed results and were not able to meet that endpoint. We’ve looked at various subgroup analyses, but with Enspryng, large clinical benefits may be seen with some patients that was our expectation, but consistently we saw similar results. So as you know, a multiple by products are already being launched, so a meaningful benefit may not be able to be provided to the patients in addition to those, so we decided not to make an application in Japan and that is Russia’s decision is the same. The cause is difficult to identify. And so other companies have done clinical trials and it’s very difficult to do a direct comparison, but a primary endpoint is activities of daily life and that was slightly different from other companies’ clinical trials. And as you know Interleukin 6 is controlled with Enspryng in the upstream. So it stopped at an early stage in the observation period was 24 weeks. Maybe, if we observe for a bit longer, a better result was seen. This is just imagination. So at least with this study, statistically, there was a difference, but we were not able to go beyond what we had assumed in the beginning.

Seiji Wakao: Thank you very much. That is all from my side.

Kae Miyata: Next from Citigroup Securities, we have Yamaguchi-san, please.

Hidemaru Yamaguchi: Yes, this is Yamaguchi speaking. Can you hear me?

Osamu Okuda: Yes.

Hidemaru Yamaguchi: Thank you. My first question is related to the analysis operating income. You talked about the decrease of the export unit price. I think this was due to Alecensa. But do you have any breakdown by product?

Iwaaki Taniguchi: Hi, this is Taniguchi speaking. Thank you for your question. Details are not disclosed, but Actemra has big volume. Hemlibra, the percentage of international is growing. The pricing is different from EU and U.S. So these are two major change factors.

Hidemaru Yamaguchi: Sorry, Alecensa, is that because of the biosimilar?

Iwaaki Taniguchi: No, Actemra and Hemlibra.

Hidemaru Yamaguchi: Right. Understood.

Iwaaki Taniguchi: So Actemra’s review said that was the impact of biosimilars. So there was not much impact on Russia’s disclosed numbers, but we export beforehand and we are starting to see some impact there.

Hidemaru Yamaguchi: Thank you very much. The second question, market sales update, so with the revision of value, I wasn’t able to understand this disclosure policy change too.

Iwaaki Taniguchi: Sorry. This is Taniguchi speaking. So, last year at this timing, a similar slide was presented. And since then, we did some alignment with Roche. So, a common template or format is to be used to be decided. Basically, for global peak sales, as you see here, more than ¥1 billion. This kind of template will be used on a global basis, so we’ve aligned ourselves. For domestic sales, this is the sales in Japan, so over ¥5 billion or ¥10 billion is the threshold we have. So we’ve talked with Roche so that we can show the numbers in a unified way like this.

Hidemaru Yamaguchi: And for Hemlibra and for Alecensa; so Hemlibra, I think you talked about competitor, but I think the numbers were somewhere between 4,000 to 8,000. And I think you now have an early line product. Did you always have those early line products from the beginning, or have you started to include those?

Iwaaki Taniguchi: This is Taniguchi speaking again for Hemlibra. It is very difficult to show an outlook, so starting this time we are not showing those numbers. For Alecensa, on this slide, more than ¥30 billion in Japan is the number that is shown. This is different from an adjuvant discussion. So somewhere between ¥500 million to ¥1 billion is the number that we are assuming. But we would like to discuss that with Roche. So, Alecensa, you don’t have the number, but it’s a positive. That’s for adjuvant, yes.

Hidemaru Yamaguchi: Thank you very much.

Kae Miyata: Next is Hashiguchi-san, from Daiwa Securities, please.

Kazuaki Hashiguchi: This is Hashiguchi speaking. My first question is related to zilebesiran target of licensing. The segment-wise is oncology and specialty, and I think sales has been categorized as such. Zilebesiran is targeting at hypertension, so it’s not associated with oncology and specialty, but amongst the hypertension, unlike ARB, this is like a special pharmaceutical. That’s how you position zilebesiran, or is there a different concept of licensing? With this licensing, are you going to change your sales structure, if that is the case? What is your approach to the product licensing going forward? Is there going to be any change?

Tsukasa Kusano: Hashiguchi-san, thank you very much for your question. This is Kusano speaking. First of all, the reason why we licensed in zilebesiran this time was because regardless of the therapeutic area, we are trying to capture unmet medical needs. We would like to offer innovative pharmaceuticals, and this time we have licensed in zilebesiran from Roche, poor control with the conventional drugs, and high cerebrovascular patients’ unmet needs that we thought can be met by this new modality drug, and that’s why we have decided to license in zilebesiran this time. And in terms of the sales structure, as you know, Roche group will be actively licensing in diabetes drugs, so cardiovascular or metabolic diseases oftentimes are associated with many complications, so we expect big synergy. Roche, Chugai, our target drugs are the one who see high unmet needs, yet conventional drugs cannot address those unmet needs. So we are basically focusing on the promotion of the specialty area in hospitals. And sales headquarters and MA, and drug safety functions will work together.

Kazuaki Hashiguchi: Depending on how the clinical development goes, is there potential of replacing existing drugs? And if so, will you be teaming up companies that are strong in those areas for sales? Or, at this moment, there is almost no possibility or you haven’t thought about that.

Tsukasa Kusano: Thank you very much for your question. At this moment, we are not thinking about the possibility, but later on when we see the data we would like to consider what is best.

Kazuaki Hashiguchi: Thank you very much on the second point. This is related to the previous question about the answer you gave to a previous question. The export unit price is coming down was a question and you talked about the volume in your answer. After the biosimilar is launched, the impact on volume was seen beforehand, but the impact on unit price is not seen yet. It will be seen at a later stage. Is that correct?

Tsukasa Kusano: The unit price impact, when the biosimilars are more widely used, we will see more impact. Yes, that is correct.

Kazuaki Hashiguchi: After you see an impact on Roche’s sales price, there will be an impact on the sales price from Chugai to Roche. Is that correct? So [Roche-Chugai’s] [ph] sales price will not come down. In expectation of Roche’s price is coming down. Is that correct?

Iwaaki Taniguchi: This is Taniguchi speaking. The price strategy of Roche or biosimilar launch, it depends on the market penetration. So I cannot say that there is a correlation at this point in time. Thank you very much.

Kae Miyata: Thank you. Next is from AllianceBernstein Securities, Sogi-san, please.

Miki Sogi: Yes, with regard to the overseas sales, Actemra, Alecensa, with regard to those two drugs. Well, for Actemra, the penetration of biosimilar is expected. That’s why the Roche order started to decline compared to last year as a result of receipt sales is dropping. That’s how I interpret. But for Actemra, the Roche taking down inventory, would that be the case? And for Alecensa, Alecensa is not really impacted by biosimilar or generics, but in the international market, if sales grow, unit price drops, that I understand. But with that factor alone, can you explain about the downward impact?

Iwaaki Taniguchi: For Actemra, a penetration of biosimilar is very difficult for us to grasp accurately, and if biosimilar penetration goes up, and then our brand export will drop. But at this point of time, it’s difficult for us to forecast. Our forecast is set in a conservative manner, assuming that biosimilar penetration will happen early, but if biosimilar penetration comes in slower than our expectation, and then we don’t need to see that drop in export sales so much, okay? And Alecensa, I talked about Hemlibra earlier, but Hemlibra outside of Japan, not in EU and U.S., as we sell more to the international market, then the unit price tends to drop. So, I think your question was about Alecensa. Yes, I was talking about Alecensa. So, Alecensa is not really impacted by generics entry, but compared to last year, export dropped by 16% this time. And this is your company’s export full-year guidance. It’s almost the same as last year’s actual. I wonder what is behind this. For Alecensa, when we export Alecensa, we export in a certain lot in a bulk. So based on the inventory situation, export volume can change every time. So Roche global sales and our export volume are not aligned fully. So depending on the inventory situation, our shipment timing and shipment volume are adjusted. So sometimes our export sales doesn’t look big; but for Alecensa, we have an expectation on adjuvant therapy, so sales can grow into the future. So export sales can grow into the future. But when we look at this year on a single year basis, it may not be necessarily the case.

Miki Sogi: Thank you very much. So if you do phasing in 1 year, you will come back to the major trend. But in the case of Alecensa, every year there will be a shift, not on a quarterly basis, but on an annual basis, well, the volume itself is not very large, so that can happen. Thank you very much. I have another question about Hemlibra royalty. Currently, the Swiss franc was very strong at the end of 2023. And now it has come down against the euro or dollar. And that situation is expected to continue, but our Hemlibra royalty forecast. So Swiss franc against the euro and U.S. dollar, what is your FX assumption of the Swiss francs? In other words, if the Swiss franc continues to be strong and if that is your assumption, currently, the Swiss franc has come down. So Hemlibra’s royalty that you will be receiving may go up, is that correct?

Iwaaki Taniguchi: The basis of royalty is global sales. A lot of those sales come in other currencies like U.S. dollars. So if you look at the currency relationship, so the non-Swiss franc currencies will be converted into Swiss francs and then you calculate. So if the Swiss franc becomes stronger against the yen, for example, it doesn’t necessarily mean that it is advantageous. Sorry, what I want to say is that the Swiss franc against when it becomes weaker compared to U.S. dollars and euros. Well, currently if the Swiss franc is too strong, U.S. dollar based European Hemlibra.

Miki Sogi: In Swiss francs will be discounted, so the royalty for you will be discounted on a calculation basis. So with a weaker Swiss franc, a Swiss franc based ex-Japan Hemlibra sales may be higher than you had expected, and Hemlibra royalty that you will be receiving may go up. Is that a possibility?

Iwaaki Taniguchi: It depends on the currency. And when the Swiss franc becomes a stronger against the Japanese yen, that is the possibility. But when you exchange from Swiss francs to Japan, it is hedged in the previous year in most cases. So in terms of difference with the planned rates, there is not much impact.

Miki Sogi: Thank you very much.

Kae Miyata: Next is from Goldman Sachs, Ueda-San.

Akinori Ueda: This is Ueda speaking from Goldman Sachs. First of all, with regard to Hemlibra new dosage form. This time, based on the Roche presentation, they talked about the new vial option and dosing kit. And, I guess, we need to wait until the presentation at the Society. But I think you’re receiving feedback from the clinical field. What kind of improvement can we expect? For example, a dosing adjustment per body weight or injection site reaction, would there be any improvement?

Junichi Takano: Thank you very much for your question. I am Takano from sales with regard to the dosage form, we cannot talk about the details, but here in Japan, we have a similar form. Going forward, including a new device, there has been some study into new device. Currently, used dosing kit are appreciated well by the physician.

Akinori Ueda: Next is about the NXT007 development status. At last year’s ISDH [ph], a healthy subject data was disclosed. And when will the patient par data be disclosed? And for this study, I think you increased the number of cases. So why did you increase the number of cases?

Tsukasa Kusano: Thank you very much, Ueda-san, for your question. This is Kusano speaking. So for detailed development plans, I am not able to talk about that. For Asia, including Japan, and in the United States, healthy subjects and hemophilia patients are included. Safety PK/PD and efficacy are being evaluated in the Phase 1 and 2 studies, which are ongoing. With regards to the results, at the moment, I would like to refrain from disclosing any information. And as you mentioned, we have added cohorts. So this is related to the development plan. So at this moment, we cannot disclose information. But once we have the results, I hope we can have an opportunity to introduce those results to you. Thank you very much.

Kae Miyata: We are afraid that time has already passed. So with this, we would like to conclude today’s session. With this, we would like to conclude conference on FY2024 Q1 financial result. There are some questions, unfortunately, we were not able to respond. For those of you whose questions are not answered, please let our team know. And this is the contact information. Once again, thank you very much for your participation, despite your busy schedule. And this is the end of the conference.