Earnings Transcript for 4568.T - Q1 Fiscal Year 2023

Kentaro Asakura: [Foreign Language] Thank you very much for waiting. From now on, we would like to start Daiichi Sankyo FY2023 Q1 Financial Results Presentation. I serve as today's moderator. I am Asakura from the Corporate Communication. First about the language. Today, we are going to utilize both Japanese and English and we have a simultaneous interpretation. So please click the interpreter icon at the bottom of the Zoom and select from Japanese, English or off. If you select off, then you will hear the original voice. Zoom and live transmission, we will show the Japanese presentation materials and the Japanese and English presentation material can be downloaded from the corporate website IR Library, Financial Results Presentation Material. Today's presenter will be Executive Officer and CFO, Ogawa; Executive Officer, Head of R&D Unit, Takasaki and Head of Global R&D Takeshita. First, Ogawa and Takasaki will explain about FY2023 Q1 financial results and others, and we would like to entertain questions. Now today's meeting will be recorded. Then we would like to start. Ogawa-san, please.

Koji Ogawa: Ogawaski speaking. Thank you very much for joining Daiichi Sankyo's financial results presentation out of a very busy schedule today. I'm going to explain our FY2023 first quarter financial results we announced at 1 PM on Monday, July 31st JST based on our presentation materials. Please turn to page three. This is the agenda for today. We will cover FY2023 first quarter consolidated financial results, business update and R&D update in that order. R&D update will be explained by Wataru Takasaki, Head of Japan R&D. We will entertain your questions at the end. Please turn to page four. This is an overview of FY2023 first quarter consolidated results. Revenue increased by JPY70.5 billion or 25.2% year-on-year to reach JPY350.8 billion. Cost of sales increased by JPY18.9 billion from the previous year. SG&A expenses rose by JPY39.3 billion and R&D expenditure increased by JPY2.2 billion year-on-year. As a result, core operating profit increased by JPY10.1 billion or 29.4% year-on-year to reach JPY44.5 billion. Operating profit, including temporary gains and losses, increased to JPY44 billion, up JPY9.7 billion or 28.1% year-on-year. Profit attributable to owners of the company increased by JPY38.2 billion or 202.4% year-on-year to reach JPY57 billion. As for the actual currency rates, the US dollar was JPY137.37. The yen depreciated by JPY7.80 against the dollar year-on-year. The euro was JPY149.46. The yen depreciated by JPY11.36 against the euro. Please turn to page five. From here let me explain positive and negative factors for revenue compared to the previous year. Revenue increased by JPY70.5 billion year-on-year. I'd like to explain its breakdown by business unit. First, in Japan Business, revenue increased by JPY12.2 billion as sales increased for direct oral anticoagulant Lixiana, pain treatment Tarlige, anti-cancer agent Enhertu, antiplatelet agent Efient and Daiichi Sankyo Healthcare. Next, let me explain our overseas business units. Forex impact is excluded here. In oncology business, revenue increased by JPY39.1 billion due to the growth of Enhertu in the United States and Europe. As for American Regent, sales decreased for iron deficiency anemia treatment Injectafer, but sales increased for iron deficiency anemia treatment Venofer. So American Regent revenue increased by JPY0.8 billion. Revenue for EU Specialty Business increased by JPY1.2 billion as sales increased for Lixiana and hypercholesterolemia treatment Nilemdo/Nustendi. In ASCA business responsible for Asia, South and Central American region, revenue rose by JPY6.9 billion due to the growth of Enhertu centering on in Brazil. Forex impact increased our revenue by a total of JPY11.5 billion. Page six shows positive and negative factors for core operating profit. Let me explain the profit increase of JPY10.1 billion by item. As I explained earlier, revenue increased by JPY70.5 billion, including the increase of JPY11.5 billion due to Forex impact. Next, I will explain cost of sales and expense items excluding Forex impact. Cost of sales increased by JPY15.6 billion due to the revenue increase. SG&A expenses increased by JPY34.1 billion due to an increase in Enhertu related profit sharing with AstraZeneca et cetera. R&D expenditures remained flat year-on-year. Cost increased due to Forex impact by a total of JPY11.5 billion. Core operating profit increased by JPY10 billion excluding Forex impact. Next page seven shows positive and negative factors for profit attributable to owners of the company. As I explained earlier, core operating profit increased by JPY10.1 billion, including Forex impact. Financial income, expenses etcetera increased profit by JPY13 billion year-on-year due to improvement in Forex gains losses and investment securities, valuation gains losses as well as increase in interest income. Income taxes et cetera decreased by JPY15.4 billion year-on-year as we booked tax expenses by using the simplified method in our quarterly account settlement. Also, due to the impact of the tax effect accounting associated with the decision to transfer Daiichi Sankyo ESPHA, the first quarter income tax was minus JPY4.9 billion. As a result, profit attributable to owners of the company increased by JPY38.2 billion year-on-year to JPY57 billion. Page eight and nine show revenue increase or decrease in Japanese yen by business unit and major product in Japan. Earlier, on page five, I explained the situation of each unit by excluding the Forex impact. But here we are showing the results, including the Forex impact. Next, I would like to give a business update. Slide 11 shows the breakdown of Enhertu revenue. In the first quarter of FY2023, product sales increased JPY50.4 billion year-on-year to JPY81.7 billion due to growth in the US, Europe and other regions. The sales situation in each country and region will be explained later. Regulatory milestone payment in the first quarter of fiscal 2023 was JPY2.1 billion, down by JPY1.3 billion compared to the regulatory milestone achieved last year, which was booked as sales revenue for the equivalent amount during the period since the contract signage till the achievement of the milestone. As a result Enhertu revenue including upfront payments with related payment and development and sales milestone payments increased by JPY49.2 billion to JPY86.6 billion in the first quarter of FY2023. For the full year of FY2023, we forecast the revenue to be at JPY368.6 billion, an increase of JPY110.2 billion year-on-year. No change from the April figures. From slide 12 for two slides, the sales performance of Enhertu in each country and region will be explained. First situation in the US and Europe. Sales in the US were JPY51.6 billion, up by JPY31.5 billion or $375 million from the same period last year. The current indications are as shown here. So market shares for each indication are also favorable. The share of new patients with second line HER2+ breast cancer is about 50%, maintaining the top share. Post-chemo breast cancer with HER2 low also showed a strong growth, maintaining its number one position with new patient share growing further to nearly 60%. HER2+ gastric cancer in second line also maintained its number one position with approximately 50% of new patients share to mutant NSCLC second line treatment maintained its top position with approximately 60% of new patients share. Europe shows a steady performance. Product sales in the first quarter of FY2023 were up JPY11.1 billion to JPY17.8 billion or $130 million. The new patient share in each marketed country and region is also expanding steadily. The new patient share with HER2+ breast cancer in second line treatment is approximately 60% in France and the upper 40% range in Germany and in the 50% in Spain, maintaining the top positions. In addition, in France and Germany, the share of new patients with HER2 low breast cancer treated with chemotherapy grew to mid-40% range and the mid 30% range, respectively, achieving the top position. As for other progresses with the product launch in Italy in July, we have achieved launches in five major countries in Europe. Slide 13 shows the sales status of Enhertu in Japan and the ASCA region. In Japan, the product sales for the first quarter of fiscal year 2023 were JPY4.4 billion, up by JPY1.9 billion from the same period of previous year. The current indications are as shown here. The share of new patient in each indication is steadily increasing and in the second line treatment of HER2+ breast cancer, it increased to the mid-30% range, capturing the top share. HER2 low treated with chemotherapy also saw a steady uptake. The share of HER2+ gastric cancer in the third line grew to the 60% level, solidifying its number one position. The product sales of the first quarter in the ASCA region increased by JPY5.8 billion year-on-year standing at JPY8.0 billion. The product sales in the ASCA include revenues from co-promotion in Hong Kong and other markets by AstraZeneca. Sales in the region have been favourable with significant revenue growth mainly in Brazil. As for other progresses, the product was launched in China in June for the second line treatment of HER2+ breast cancer, and in July, it was approved for the treatment of breast cancer in HER2 low patients previously treated with chemotherapy and the promotion activities have started in China, as in the case in the United States and Europe. The product will be co-promoted with AstraZeneca, but AstraZeneca will recognize the product sales and we will record 50% of gross profit as co-promotion revenue. We will continue to work for further market penetration and expansion of the countries regions as well as to obtain new indications so as to that -- so that we can deliver Enhertu as many patients as possible who need it. In slide 14, I will present our initiatives related to profit growth for current business and products in Japan. In October of 2019, we launched the anti-cancer agent VANFLYTA for the indication of relapsed or refractory FLT3-ITD mutation positive acute myeloid leukemia or AML. And in May this year we obtained a partial change approval for the AML first line therapy, including untreated patients in addition to the relapsed or refractory patients. In May, we also launched OD tablets, a new formulation of the pain treatment Tarlige, which has been marketed since 2019. We will further enhance our contribution to patients by strengthening our product portfolio. In May, we concluded a stock transfer agreement with Daiichi Sankyo ESPHA Company Limited as part of our transformation into a profit structure focused on patented drugs. Transferee is a Qol Holdings and the transfer price is JPY25 billion. On October 1st, 2023, 30% of the shares held by the company and on April 1st, 2024, 21% will be transferred. The execution date of the share transfer of the remaining 49% will be determined through separate discussions. I now hand over to Mr. Takasaki, General Manager of R&D Division, who will give you an update on R&D.

Wataru Takasaki: Takasaki speaking. I'm going to talk about R&D update. First an update on 5ADCs -- 5DXd- ADCs. Page 17 shows our R&D strategy. Due to higher potential of DS-7300 and DS-6000 as a growth driver candidates following the 3ADCs. We have changed our R&D strategy from 3 and Alpha to 5DXd- ADCs and Next Wave since April 2023. So we plan to actively spend R&D expenditure also for promising pipelines in addition to the 3ADCs to promote sustainable growth. From the next slide, I will explain the progress of the 5DXd- ADCs. Please turn to page 18. Regarding Enhertu, we have built evidence first in breast cancer and expanded indications to various other tumor types as well. This page shows the results of Phase 2 DESTINY-CRC02 study in HER2+ Metastatic CRC, which we presented at ASCO this year. In this study, we evaluated two doses, 5.4 mg per kilo and 6.4 mg per kilo. Promising efficacy was confirmed with ORR of 37.8%, with 5.4 mg per kilo and 27.5% with 6.4 mg per kilo. Safety was comparable to the known profile. There was no ILD case of grade three or above in the 5.4 mg per kg arm. The efficacy and safety profile of both cohorts favors the 5.4 mg per kilo dose. So 5.4 mg per kilo was selected as the optimal dose. Also, antitumor activity was observed in patients with and without RAS mutation at the 5.4 mg per kilo dose. Please turn to page 19. Let me explain the interim analysis results of another Enhertu study DESTINY-Pan Tumor 02 in HER2 expressing solid tumors. We presented the results at ASCO this year. Enhertu was studied in advanced solid tumors in the second line settings and beyond where HER2 directed therapies are not yet available such as cervical, endometrial, ovarian and biliary tract cancers. ORR our primary endpoint was 37.1% in all patients and 61.3% in patients with IHC 3+. Clinically meaningful activity was confirmed in both groups. Efficacy was sustained with median DoR of 11.8 months in all patients and 22.1 months in patients with IHC 3+. Safety was comparable to the known profile. As for ILD, one grade three event and one grade five event were observed, but the rest were grade 1 or 2. As is shown on page 20, top line results from the primary analysis of DESTINY-Pan Tumor 02 study were obtained in July 2023. Like the interim analysis Enhertu continued to show durable responses for ORR and DoR for both PFS and OS as secondary endpoints. Clinically meaningful results were demonstrated. No new safety signals were identified. All grade ILD was generally consistent with prior clinical trials. The details of the data will be presented at an upcoming medical meeting in the future. Based on this data, discussions with health authorities are ongoing. On page 21, I will explain the progress of Dato-DXd. TROPION-Lung02 is a Phase 1B study to evaluate the doublet combination of Dato-DXd and Pembrolizumab and the triplet with additional platinum chemotherapy in NSCLC patients in the first line settings as well as the second line settings and beyond. At ASCO this year, we presented the data shown on this page. ORR in all patients was 38% in the doublet arm and 49% in the triplet arm. In the first line patients, the doublet and the triplet arms demonstrated encouraging antitumor activity of 50% and 57% respectively. On the other hand, as of now, the incidence of ILD was higher than Dato-DXd's other studies, but most of the events were predominantly grade 1 or 2. Currently, no new safety signals were identified and the trend of the events was comparable to the known safety profile of Dato-DXd. The efficacy and safety data is still preliminary, so we will continue to implement the study carefully and accumulate the data. Next, on page 22, I will explain the progress of TROPION-Lung01 study. This is a Phase 3 study to evaluate the efficacy and safety of Dato-DXd compared to docetaxel the current standard of care in about 600 previously treated advanced or metastatic NSCLC second line or third line patients with or without actionable genomic alteration. We disclosed primary endpoint PFS final analysis data and OS interim analysis data in July this year. The Dato-DXd arm demonstrated statistically significant improvement in PFS compared to the docetaxel arm. As for OS the other primary endpoint, the Dato-DXd arm demonstrated the trend of an initial improvement compared to the docetaxel arm, but did not show a statistically significant improvement in the interim analysis. We will continue to implement the study and evaluate OS in the final analysis. In this study, no new safety signals were identified. The trend was similar to the results of other Dato studies. Grade 5 ILD events were observed, but the majority of the reported ILD events were grade 1 or 2, generally consistent with prior clinical studies. Right now, we are sharing the details and proceeding to follow the study data with the regulatory authorities. Slide 23 shows the progress of the HERTHENA-Lung01 study for HER3-DXd. At the FY2022 Q4 earnings call, we reported that the HER3-DXd 5.6 mg per kg arm showed efficacy in patients with metastatic or locally advanced EGFR mutated NSCLC and that no new safety concerns were identified. Details of this data will be reported at the September WCLC. We are preparing for a regulatory submission in the US in the second half of this fiscal year. In HER3-DXd Phase 3 HERTHENA-Lung02 study for the second line treatment of NSCLC with EGFR mutations and a Phase 1B study evaluating the efficacy of HER3-DXd in combination with Osimertinib are ongoing. Slide 24 provides other progress on 5DXd- ADCs. First of all, Enhertu. In June, we initiated a combination study with DS-1103 an anti-SIRPα antibody. Also this month, based on data from the DESTINY-Breast04 trial, the drug was approved in China for the treatment of breast cancer with low HER2 expression in patients previously treated with chemotherapy. In April, DS-7300 received the rare drug designation from the US FDA for the treatment of SCLC. From slide 25, I will provide an update on Next Wave and slide 26 introduces a new DXd-ADC that is scheduled to enter clinical trials. DS-3939 is an ADC developed by combining the anti-TA-MUC1 antibody in-licensed from the Glycotope GmbH with our DXd-ADC technology and has DAR of 8. The target TA-MUC1 is a transmembrane Mucin 1 that is overexpressed in the various types of cancer. The first-in-human Phase 1/2 study is planned to be initiated in the second quarter of this fiscal year. Please see slide 27. I would like to introduce another new project. DS-1471 is an antibody targeting CD147. CD147 forms complexes with other factors and while it is involved in the embryogenesis and wound feeling in normal tissues. It also plays an important role in cancer cell survival. DS-1471 down regulate this complex, thereby inducing cellular stress response and apoptotic cancer cell death. Phase 1 trial is scheduled to begin in the second half of this fiscal year. Slide 28 shows other progress of Next Wave. VANFLYTA was approved for the first line treatment of FLT3-ITD mutation positive AML and acquired approvals in May this year in Japan and in July in the United States. EZHARMIA, the top line results of the Phase 2 study in patients with relapsed or refractory PTCL were obtained in June. The results will be presented at a future society meeting. DS-5670 COVID-19 mRNA vaccine is undergoing boost vaccination study for omicron strain. In May, a Phase 3 study started in healthy volunteers aged 12 years and older as well as Phase 2/3 study for children aged between 5 to 11 years. DS-7011, an anti-TLR7 antibody for the treatment of systemic lupus erythematosus or SLE. A Phase 1B/2 study was initiated this month. Finally DS-2325, which is being developed for Netherton syndrome received rare pediatric disease designation from the US FDA in May. Slide 29 and onwards show the future News Flow. Slide 30, first, upcoming conference presentations, expected approvals and key data availability at the WCLC in September in addition to the HERTHENA-Lung01 trial data mentioned earlier that primarily analysis data from the DESTINY-Lung02 study targeting NSCLC with HER2 mutation and interim data from the TROPION-Lung04 study in first line and later for the NSCLC with actionable genomic alteration will be presented. The booster vaccination of DS-5670 original strain is expected to be approved in the second quarter of this fiscal year. The DESTINY-Breast06 of Enhertu study in chemotherapy naive hormone receptor positive and HER2 low breast and TROPION-Breast01 study of Dato-DXd were previously expected to be available in the first half of the current fiscal year, but it is likely that the data will be available in the second half of the year. The change in timeline is due to the event driven nature of the study and the studies per se are progressing well. Slide 31 and the rest of the appendix, please refer to it later for a list of milestones and pipelines. And that is all with my presentation.

A - Kentaro Asakura: Now we'd like to go into Q&A session. Let me explain how you can ask questions. If you have a question, please press the raise hand button at the bottom of the Zoom screen. I will name you one by one. When your name is called, please unmute yourself and ask your question. If you are done please press the lower hand button and mute yourself again. Anyone with a question, please? First Mr. Muraoka from Morgan Stanley Securities please. Hello? Muraoka from Morgan Stanley, can you hear me?

Shinichiro Muraoka: Yes, we can hear you. Thank you very much. Dato TROPION-Lung01, you are moving toward fighting. So there is a full possibility that you can get the approval. The details will be presented at an academic society meeting. So we have to wait. There's going to be a major academic society meeting in October so we can hear the results before the second quarter results announcement.

Ken Takeshita: Yes, Ken Takeshita here, Head of R&D and I can take this question. We have not yet announced the plans for when the data will be announced, shown at a conference. But once we have those plans, then we'll be ready to announce it to you at a later date. Thank you.

Shinichiro Muraoka: Understood. Thank you very much. Like the DB06. With regard to the data in the past in HER2, well, the event is not accumulated. However, when you look into it and I think that the investigate -- the drug is better than the control and we are expecting the same. But Mr. Takeshita, Mr. Takasaki do you expect the same.

Ken Takeshita: These are event driven clinical trials. I think it's these events are subject to influence by many, many, many factors. So it is a bit tricky to read into what the clinical trial data might be based on this change in our timelines.

Shinichiro Muraoka: Understood. Thank you. Lastly, regarding the transfer of Daiichi Sankyo ESPHA, when it was decided, looking at the press release, the operating profit was around JPY10 billion. It was very profitable. I was surprised. Annualized profit is going to decline by JPY10 billion because of the sales of this company.

Koji Ogawa: May I respond to that question? Ogawa speaking regarding ESPHA. The current way of transactions will continue for some time. Then we will book the sales until March 2024. In 2024 and beyond, no decision has been made. In the longer term, profit will decrease by JPY10 billion or so. Is my understanding correct roughly speaking or because of some transactions, it's not going to be a big decline.

Shinichiro Muraoka: Great. From 2024 and beyond how to book the profit is still to be confirmed?

Koji Ogawa: So nothing has been decided yet.

Shinichiro Muraoka: Understood. That's all from me. Thank you very much.

Kentaro Asakura: Now we would like to move on to the next from the JPMorgan Securities, Mr. Wakao, please.

Seiji Wakao: Yes, Seiji Wakao from the JPMorgan. About the TROPION-Lung01 results. There are three questions that I would like to pose. The first question being, well, the AstraZeneca explanation meeting is where I attended yesterday. And it seems that they had a very strong, aggressive behavior. And I think because of that, US share price has gone up. And I would like to confirm whether the data reading is the same as AstraZeneca. AstraZeneca has a self confidence of the data. And in addition to that, with regard to the sales safety profile, the risk benefit is well balanced. That is what they said. But on this point, do you think the same thing? Do you agree?

Ken Takeshita: Yes, there is a very close discussion and partnership between Daiichi Sankyo and AstraZeneca and we have extensively discussed the results. And I think it's very fair to say that from both sides we are in alignment with how we feel about the data.

Seiji Wakao: Thank you very much. Secondly OS final analysis data and how to handle that data. If you are to file with the current data OS is still in the interim analysis. If you are to file with that data in the end OS results must be submitted or the current data would be enough to file and get the approval.

Ken Takeshita: You are absolutely correct that at the current state with the interim analysis, the overall survival data is immature, but we have not announced our regulatory strategy about whether or not OS data is required or not. Once we are ready to disclose that information, then we will certainly relay that to all of you.

Seiji Wakao: Thank you very much. The last question. So with regard to the presentation material from you that the meaningful this phrase is included and also the encouraging this phrase is also utilized and then the TROPION-Lung01. Well, the cleaning clinic -- not clinical meaningful, but you mentioned encouraging. You used the word encouraging. So cleaning meaningful why these words were not utilized. And then also in the first place, looking at the data, I believe, is it okay to consider that you selected encouraging because it's a very good then cleaning are meaningful and then the encouraging is a little bit downgraded.

Ken Takeshita: Thank you very much for that question. I think it's very important to mention that TL101 is positive data. From a statistical perspective, that's very important to note, but the interpretation of the clinically meaningfulness is dependent on the totality of the data available for each for these studies and really the stakeholders expectations of what's considered meaningful from a risk benefit perspective. So I don't want to be in a situation where we're trying to here define what a clinical meaningful is from our perspective, because ultimately it's going to be a data driven decision based for all the stakeholders based on what we will be showing in terms of the data at a future conference and ultimately the regulatory agencies and also, of course, the final publication of the data.

Seiji Wakao: Then OS is now interim analysis data. There is no statistically significant difference. That's why you cannot use the wording. Clinical meaningful. The current PFS and the interim analysis OS is not complete data. That's why you didn't use that word in clinical meaningful.

Ken Takeshita: I expect your question on your part and it's difficult for me to confirm the details of our regulatory strategy and how we view our clinical data yet. And once we're ready to do that, we will certainly inform you of that.

Seiji Wakao: Thank you very much. That's all from me. Thank you.

Kentaro Asakura: We would like to move on to the next from the Citi Group Securities. Ms. Yamaguchi-san please.

Hidemaru Yamaguchi: Well, my name is Yamaguchi from Citi. Do you hear me? Yes, I can hear you. Well, my host went down, so I'm sorry if I missed your explanation, but the first HER3-DXd submission in the second half. I believe that it hasn't changed. So the top line is -- was available a while ago and so interactions with the regulatory body was already conducted. And if so, were there any feedbacks? So first whether there was any discussions with authority.

Ken Takeshita: Our interactions with the health authorities. And based on that, we are proceeding to with our plans to file this data for submission and approval.

Hidemaru Yamaguchi: So that means at the present moment, with the current data available, it is possible for you to submit. Thank you very much. As for TL1, no, I have a question, A few questions about Dato. Regarding Dato, you are preparing to file. That's the change of the status this time. Any interaction with the regulatory authorities. And then you're coming to the states as I asked earlier based on the currently available data. It's possible to file your submission and whether to submit OS data or not. That's not disclosed yet, correct.

Ken Takeshita: We have not informed you about whether or not data OS is or is not required for this submission. It's only that we're going to submit.

Hidemaru Yamaguchi: Thank you very much. Lastly about the performance per se. The Enhertu , the growth achievement is about 25% than the annual. Of course it is an upward of achievement. Maybe the effects has some kind of influence, but then it seems that the Enhertu will overachieve for full year. Is it okay to understand that way?

Koji Ogawa: Yes, for the full year assumption, we haven't changed our view and of course we would like to look at how it is going and if there is any big changes then accordingly we would like to give an update and let you know.

Hidemaru Yamaguchi: So how do you see it at this present moment with regard to the Enhertu?

Koji Ogawa: At the present moment. Well, figure wise. Well, we have already announced that. So that's the way. So overall like it has a steady and good going. So from the indication and from the perspective of region and country and growth in the country, it's in the positive direction.

Hidemaru Yamaguchi: Okay. Thank you very much.

Kentaro Asakura: Next Mr. Hashiguchi from Daiwa Securities please.

Kazuaki Hashiguchi: Hashiguchi speaking. Thank you very much. My first question is about TROPION-Lung01 and Dato DXd. In April, there was an update of your mid-term business plan compared to your assumptions there. How was the situation? Not good or not bad. Any gap?

Koji Ogawa: So as of now, we are not disclosing the information right now. We will review the data further, as Takishita mentioned. The status of we will check the status of our interactions and discussions with the regulatory authorities. And once we see the timing more clearly, we will give you an update on that. There is a progress, that's for sure. But how to judge the details of the progress. We are going to examine the details and we share with share it with you at a later timing. Thank you very much.

Kazuaki Hashiguchi: Another point that I would like to ask is with regard to the Enhertu DESTINY-Breast06 study, the top plan result acquisition was changed and what are the factors . Already the interim analysis was carried out and so the significant differences was expected. However, this time there was no significant differences. So you would like to wait until the next analysis. Is that a possibility?

Koji Ogawa: No, this is just a plan analysis that's already factored into the DB06 clinical trial. And as I said earlier, it is an event driven event time point for the analysis. And we're just waiting for those events to happen.

Kazuaki Hashiguchi: So the timing of the scheduled analysis has changed compared to your initial forecast, correct?

Koji Ogawa: Yes, it's a number of events. Yes, correct.

Kazuaki Hashiguchi: Yes. Thank you. That's all from me. Next?

Kentaro Asakura: So Mr. Sakai from the Credit Suisse Securities. Sakai from the Credit Suisse. Can you hear me?

Fumiyoshi Sakai: Yes, we can hear you.

Kentaro Asakura: Thank you.

Fumiyoshi Sakai: Well, Mr. Ogawa, you are a presenter as CFO, so I would like to ask a question to you about the DS shares by quarterly performance. Maybe there's no people who are investing based on this quarterly performance. But still I would like to ask for the past one two years when the Enhertu was launched, I think the volatility on a quarterly basis, so with not too against the full year, but it seems that there's a variety and fluctuations between the quarterly performances and then because it seems that the profit is recorded even despite the R&D product. So taking that into consideration. So vis-a-vis the quarterly performance like I'm not going to say that please give us a guidance, but I think maybe you have to do the expectation control like Lung01. Because of that, there was a volatility in the share price. So I think that everybody is very much interested in the news flow from your company. So as a CFO, what is your opinion?

Koji Ogawa: Well, thank you very much for your question. So that on quarterly basis we are announcing the performance, but then there is a high volatility. Yes, we do recognize that. So not only with regard to the contents of the announcement, but the top line results announcement as well as the data result is affecting the volatility. We do recognize that in order to mitigate that, whether to do the expectation control, yes, we do understand that it is very important and thank you very much for the precious advice and into the future. Well, within the IR activities we would like to communicate duly. And then also at the same time when we will be able to publicize, we would like to do so in order to minimize the level of volatility. And at the present moment, well, it's not that we have a certain countermeasure that we think of. However, as much as possible, we would like to give the information and we also would like to be aware of the timing to release the information.

Fumiyoshi Sakai: Okay. Thank you very. One more question about HER3.You will proceed to filing. As was mentioned in the previous question, it shouldn't be the play of the words. HER3 study results. Clinically meaningful is the expression you were using regarding 01 study. No such wording. So there was a big reaction from the market. What do you think? The study? We are not asking about whether the clinical study results were good or bad. This may be one of the expectation management. What do you think maybe this question may go to Takeshit-san perhaps.

Ken Takeshita: You know, I think, it's these two trials that you mentioned, the TL01 and HLO1 are very different studies with a different endpoints, different study design. So I think in both cases, the interpretation of the clinical data and whether it's clinically meaningful or not, again is dependent on how all of us view the totality of data. And when I say all of us, I'm not talking just about Daiichi Sankyo, but of course, the investigators, physicians and the regulatory agencies. So I think it's for these reasons, it's difficult to say why something is clinically meaningful in one situation, but in another, until we can all see the data ourselves and decide whether or not something is meaningful.

Fumiyoshi Sakai: Okay. We understood. Thank you very much.

Kentaro Asakura: So next from the Sanford C Bernstein, Suki-san Please. So Suki from the Bernstein. Well in Enhertu and so the capital [indiscernible]. Well the Enhertu like the China, the Enhertu this year the approval is acquired. But what about the sales? I think is it okay to understand that you have a minimum sales or close to now. And then NRDL too listing is whether you are trying to get that and then do the negotiations. And I think it is okay to consider that unless you have the listing, there is not going to be any sales. Well, thank you very much for your question. In Enhertu in the first quarter?

Koji Ogawa: The sales as for us well is that the revenue from the co-promotion in China and we are working in China so it is going to be JPY0.9 billion or JPY900 million and it is recorded. NRDL, even though it is before that it is possible to record the sales. And then so actually we are actually working as the sales revenue from the co-promotion activities.

Unidentified Analyst: Sorry my question was not so clear, perhaps. Thank you very much. JPY0.9 billion. Thank you for your answer. As the revenue or sales level NRDL listing, it is part of a strategy to begin with. And before listing in the NRDL, JPY0.9 billion in China compared to the scale of Enhertu is a small amount. Is that going to be the amount or are you expecting for the future as well?

Koji Ogawa: Thank you for your question. NDL listing including the timing of inclusion. You are asking this question HER2+ breast cancer second line. It's already we already submitted include for -- inclusion in the NRDL. The timing of the inclusion in the NRDL We are not in a position to answer the question right now. HER2 low was approved in July, this year's NRDL negotiation cycle. The timing is out of the scope in terms of the timing, so it's going to be for the future timing for filing for NRDL listing. Did I answer your question?

Unidentified Analyst: Yes. No about the tax rate. So the tax rate you mentioned that compared to last year is low or the negative tax rate that is or into the future into the next quarter. How shall we forecast? Well, is there any guidance that we can look at?

Koji Ogawa: Thank you very much for your question. Well, at the time of the quality performance as the simple methodology like we were booked or recorded and theirs is a two factors which I would like to explain. So the first is the R&D and also that the expenses there was a very big tax deduction or the deduction from the tax and then it is for the stock transaction. And because of there was a deferred tax account and that is why there is a fact impact. And then also the latter that is about the stock transfer of the ESPHA and its the negative impact of the corporate tax is going to remain for the whole year. So originally in the 2023, at the time of the forecast of the performance, the tax rate was expected to be 15%. However, actually that it is going to be less than 15% taking into consideration this ESPHA. So the ESPHA influence will be within the range of 5% to 6%.

Unidentified Analyst: Okay. Thank you very much. As for R&D expenditure, the tax credit or deduction, it's part of the 15% rate you assumed initially. That's because of the shift of the timing. So it's included. Thank you very much.

Kentaro Asakura: Next, Yakedai, publisher. Ms. Hasegawa, please. Ms. Hasegawa, please can hear me?

Unidentified Analyst: Yes. There was a panel committee at MSW. They're going to discuss your vaccine for approval. If it's approved, what is their plan to purchase as the central government? Takasaki Would you like to respond to that?

Wataru Takasaki: This evening, there's going to be a deliberation at MHLW. As you know well, on our end, we will wait for the results of their discussions. And what we can say only right now is that we will wait for the results and address that for the purchase by the central government. An agreement or contract? Is there anything you're discussing with MHLW. MHLW is a closely discussing with us and what we have agreed upon between the two parties. We are not in a stage to disclose right now, so please wait for a future information. Now about this purchase of do you plan to really have a strong request from your company? Well, with regard to the not only with regard to the purchase, but at the present moment, the omicron, the vaccine for the bivalent at the present moment. Well, we would like to contribute to the welfare of the Japanese people. So from that aspect we are actually discussing. So we are not narrowing the focus in the discussions, but we have a very wide discussions with a wide focus with MHLW. Okay. Thank you very much.

Kentaro Asakura: It's now time to finish this meeting. We'd like to close this Financial Results Presentation Meeting. Thank you very much for your attendance.