Astellas Pharma Inc. (ALPMY) reported a surpassing of its full-year revenue forecast for FY 2023, according to CEO Naoki Okamura during the company's recent earnings call. The Japanese pharmaceutical giant saw a 5.6% increase in revenue to JPY 1,603.7 billion.
Despite the revenue growth, the company's core operating profit experienced a significant decrease of 35.6% to JPY 184.6 billion, largely impacted by the acquisition of Iveric Bio. Sales growth was driven by key products including XTANDI, PADCEV, XOSPATA, VEOZAH, and IZERVAY.
The company also shared updates on its pipeline, including clinical trials and strategic plans for upcoming fiscal years.
Key Takeaways
- Astellas Pharma's full-year revenue increased by 5.6% to JPY 1,603.7 billion.
- Core operating profit dropped by 35.6% to JPY 184.6 billion due to costs associated with the Iveric Bio acquisition.
- Growth drivers included sales of XTANDI, PADCEV, XOSPATA, VEOZAH, and IZERVAY.
- Clinical trials for ASP2016, ASP2802, and ASP4396 have begun.
- The company revised its peak sales forecast for VEOZAH to JPY 150-250 billion.
- Full-scale sales expansion for VEOZAH and IZERVAY is expected in FY '24.
- Astellas Pharma aims for a core operating margin of 15.2% in FY '24.
Company Outlook
- Full-year forecast for FY '24 includes a revenue target of JPY 1.650 trillion.
- Core operating income is expected to reach JPY 250 billion.
- Dividend forecast revised to JPY 74 per share.
- Strategic products' sales are anticipated to double to JPY 300 billion in FY '24 and triple to JPY 500 billion in FY '25.
- The company aims to achieve over 80% commercial lives for VEOZAH by the end of FY '24.
Bearish Highlights
- Lower-than-expected uptake of VEOZAH and the potential impact from Medicare Part D redesign.
- Termination of the ASP2074 and ASP0367 projects based on clinical study data.
Bullish Highlights
- Positive progress in Phase I dose escalation monotherapy cohorts for ASP1570 and ASP3082.
- Achievements in the EV-302 study for PADCEV and strategic acquisitions.
Misses
- The company acknowledged challenges in meeting performance goals and the slower-than-expected demand for VEOZAH.
Q&A Highlights
- Claus Zieler discussed the need for continued promotion of VEOZAH despite a slower market response.
- The company is adapting its spending mix for DTC efforts based on real-time data.
- New data from the EV-202 study will be disclosed at ASCO, with various cancer types expected to be included.
Astellas Pharma Inc. remains optimistic about its strategic products and pipeline, focusing on sustainable growth and profitability in the face of challenges such as the upcoming patent expiration of XTANDI.
The company is also prioritizing the education of healthcare professionals about their products and improving market access to ensure patient affordability. Despite the setbacks, Astellas Pharma is confident in its ability to adapt and achieve its long-term financial and strategic objectives.
Full transcript - Astellas Pharma Inc (ALPMY) Q4 2023:
Hiromitsu Ikeda: Thank you very much for joining our FY 2023 earnings call, despite your busy schedule. I'm Chief Communications and IR Officer, Ikeda. I would like to serve as the moderator for today. Today, I will make a presentation that is followed by a Q&A session. The material is available on our website. In line with that, we are going to give you the presentation. Including, in the Q&A, the simultaneous translation of Japanese and English is provided. The accuracy of the translation is not going to be guaranteed by us. As for the language from the Zoom (NASDAQ:ZM) webinar screen, on the menu you can find the language. When you select the original language, in the case you can listen to it without using the translation service. And for the material or presentation and answers and the statement by representatives for the Company in the Q&A includes forward-looking statements based on assumptions and beliefs in light of the information currently available to manage and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any presentations or advertisement regarding the efficacy or effectiveness of these preparations. The participants for here today is CEO -- excuse me, Representative Director, President and CEO, Naoki Okamura; CScO, Chief Scientific Officer, Yoshitsugu Shitaka; Chief Medical Officer, CMO, Tadaaki Taniguchi; Chief Commercial Officer, CCO, Claus Zieler; Chief Financial Officer, CFO, Atsushi Kitamura. We have five here as representatives from the Company. Now Okamura-san, please start your presentation.
Naoki Okamura: Hello, everyone. I'm Naoki Okamura from Astellas Pharma Inc. Thank you very much for joining our FY 2023 financial results announcement meeting out of your very busy schedule today. This is a cautionary statement regarding forward-looking information. As this was explained by Ikeda earlier, I'm not going to read this page. Page 3 is the agenda for today. Starting from the next page, I will explain these topics in this order. On Page 4, I will give you an overview of FY 2023 financial results. Revenue increased year-on-year and exceeded our full year forecast revised in the third quarter. XTANDI sales increased by about JPY90 billion year-on-year, contributing to the achievement of our full year forecast. Sales of PADCEV, XOSPATA, VEOZAH, and IZERVAY combined, increased by about JPY70 billion year-on-year, contributing greatly to sales expansion as growth drivers. SG&A costs increased year-on-year, mainly due to the impact of the Iveric Bio acquisition and investments in growth drivers. We achieved efficient cost management through timely assessment of resources. R&D expenditure was on track. Core operating profit decreased year-on-year, mainly due to the impact of Iveric Bio acquisition. On the other hand, core operating profit exceeded the full year forecast revised in the third quarter. On Page 5, I will explain FY 2023 financial results. Revenue increased to JPY1,603.7 billion, up 5.6% year-on-year. We achieved 102.7% of a full year forecast. Core operating profit was JPY184.6 billion, down by 35.6% year-on-year. We achieved 112.6% of our full year forecast. You can see the ForEx impact on the right-hand side of the table. There was a positive impact on revenue by JPY96.3 billion and on core operating profit by JPY19.1 billion. The bottom half of this page shows the full basis results. In the right bottom of the table, we included other expenses booked in the fourth quarter. We booked JPY56.3 billion impairment loss for intangible assets of AT808 and EVRENZO. In addition, we booked JPY8 billion due to fair value increase of contingent consideration for zolbetuximab. As a result, operating profit was JPY25.5 billion, down by 80.8% year-on-year. Profit decreased to JPY17 billion, down 82.7% year-on-year. On Page 6, I will explain FY 2023 financial results of our main products. First about XTANDI. Sales expanded in all regions despite more than 10 years on the market. Global sales increased to JPY750.5 billion, up by about JPY90 billion or 14% year-on-year. Even excluding ForEx impact, XTANDI achieved about 6% growth year-on-year. In the United States, which is the biggest market, based on EMBARK study results, M0 CSPC additional indication was approved in November last year. We have been able to confirm the penetration of this additional indication and the ripple effect on other indications as well. Volume, excluding the so-called PAP, patient assistance program, grew steadily by 4% year-on-year. PADCEV global sales increased to JPY85.4 billion, up by 92% year-on-year, realizing nearly twofold growth. Performance was in line with our full year forecast, which was revised significantly upward by nearly JPY20 billion in the second quarter. In the United States, the market penetration of the first-line indication was a major driver. Demand more than doubled year-on-year. Also, NCCN Guidelines, which many physicians are referring to when they decide prescription, were updated last month. The level of recommendation for PADCEV as a first-line treatment of mUC was upgraded from Category 2 to the highest recommendation level Category 1. Globally, as a whole, the number of launched country is increasing steadily. In FY 2023, PADCEV was launched in additional 14 countries. The number of launched countries has expanded to 36 in total by now. Regarding XOSPATA, global sales increased to JPY55.1 billion, up 18% year-on-year. Sales expanded in all regions, in line with the full year forecast revised upward in the second quarter. Sales of VEOZAH reached JPY7.3 billion, progressing in line with the forecast revised in the third quarter. Commercial lives covered, payer coverage, an important KPI for market access expanded to 50% as planned as of the end of March. On the other hand, HCP's perception of VEOZAH's access and affordability remains low, which is a barrier to prescription. I will talk about our future initiatives on outlook when I explain FY 2024 forecast. IZERVAY is growing at a speed faster than our expectations. Sales reached JPY12.1 billion, exceeding the full year forecast we announced after the launch in September last year. Accelerated momentum continues, and vial demand doubled from the third quarter to the fourth quarter. We estimate market share in the fourth quarter period to be about 25%. This is calculated based on the reported shipment volume data, as well as multiple market research. Given the fact that our competitive product was launched about six months earlier, we think this is a great achievement. More than 50,000 vials have been shipped since launched, and IZERVAY is now available in about 1,000 retina accounts. Post-marketing safety profile is reported to be consistent with the results of the clinical study so far. The number of physicians highly evaluating the safety profile of IZERVAY is increasing steadily. Sales of PADCEV, XOSPATA, VEOZAH, and IZERVAY, as mid- to long-term growth drivers, increased by about JPY70 billion in total year-on-year. We're expecting further growth into the future as well. On Page 7, I will explain cost items. Cost of sales ratio was 18.2%, improving by 0.7 percentage point year-on-year, mainly due to changes in product mix and was on track. SG&A cost, excluding U.S. XTANDI co-promotion fees, increased by 19.9% year-on-year. When ForEx impact was excluded, the year-on-year increase was 12.8% to about JPY58 billion. As main factors behind, SG&A costs increased by about JPY31 billion year-on-year. Due to the impact of Iveric Bio acquisition, VEOZAH-related sales promotion costs rose by about JPY40 billion year-on-year. On the other hand, sales promotion costs related to mature products such as mirabegron, decreased by about JPY8 billion year-on-year. We achieved efficient cost management through timing assessment of resources. R&D expenditure increased by 6.5% year-on-year, mainly due to ForEx impact and Iveric Bio acquisition. We were on track in our spending. From here on, I will explain our initiatives for sustainable growth. On Page 9, you can find an overview of major quarterly updates related to R&D. I will explain the details of XTANDI, strategic products and focus area approach on the following slides. In Rx+ program, we initiated a pivotal study for regulatory submission in Japan for BlueStar, digital therapeutics for diabetes. On Page 10, I will explain key events achieved in FY 2023 for XTANDI and strategic products. As an achievement in April, XTANDI was approved in Europe for the additional indication of M0 CSPC with biochemical recurrence at high risk of metastases based on the EMBARK study. As for PADCEV, our submission in China was accepted in March for the additional indication of first-line locally advanced or metastatic urothelial cancer based on EV-302 study. VYLOY was approved in Japan in March for Claudin18.2 positive, unresectable, advanced or recurrent gastric cancer. As for IZERVAY, our submission for label update was accepted in the United States based on a 24-month data from the GATHER2 study. As other updates, we achieved first subject first treatment in Phase III studies of VEOZAH, STARLIGHT 2 pivotal study for JNDA in Japan, and STARLIGHT 3 long-term safety study in Q4. Also, towards a new additional indication, we decided to perform a Phase III study for induced VMS in breast cancer patients on adjuvant endocrine therapy. We will give you an update after the specifics of the study are decided. In FY 2023, we achieved many important milestones, such as approval of VYLOY, VEOZAH, and IZERVAY, as well as approval of additional indications for XTANDI based on EMBARK study and PADCEV based on EV-302 study. We have made a lot of progress towards growth in FY 2024 onwards. On page 11, I will explain the update for the past three months with regards to the progress of focus area approach projects in clinical trial. Primary focus projects, ASP2016 in genetic regulation, ASP2802 in immuno-oncology, and ASP4396 in targeted protein degradation, newly entered the clinical trial stage. I will explain the details of these projects on the following page. As for ASP1570, the first project described here for primary focus immuno-oncology and ASP3082 in targeted protein degradation, Phase I dose escalation monotherapy cohort is ongoing. For both, no major issues including safety has been observed by now. The study of recommended dose is ongoing. The initiation of dose expansion cohort as the next step is expected in the first half of FY 2024. As for ASP2138, the second from the top in immuno-oncology, dose expansion cohort has been initiated based on the data obtained from the Phase I dose escalation monotherapy cohort. We have not made any decision about data presentation plan at Congress and other forums for any of these yet. Once we make a decision, we will share that with you. As for ASP2074, the third from the top in immuno-oncology, we decided to terminate the project based on the clinical study data obtained by now. Regarding ASP0367 in primary focus mitochondria, we decided to terminate this program based on the clinical study data obtained by now. In this primary focus, multiple programs have been generated, but unfortunately, in any of these programs, we have not been able to demonstrate benefit in clinical study results. Based on these circumstances, we decided to dissolve primary focus mitochondria. So far, we have obtained knowledge and experiences through drug discovery in mitochondria-related areas and new drug development for rare diseases. We will leverage this as important learnings and insights for evaluating disease areas where we will perform R&D in the future. On Page 12, I will explain new clinical programs. ASP2016 is a recombinant AAV8 encoding human frataxin gene. This drug was created for cardiomyopathy as a target disease within AT808 gene therapy R&D program for various symptoms of Friedreich ataxia patients. Friedreich ataxia is a hereditary disease caused by frataxin gene mutation. Currently, there is no curative treatment. More than 50% of the patients developed cardiomyopathy, which is a leading cause of death. ASP2016 was granted Fast Track designation by U.S. FDA in March 2024. We are hoping that a single dose will result in the long-term expression of frataxin in the heart to improve the disease conditions. ASP2802 was created with Xyphos Technology. This convertible CAR-T therapy has entered the clinical trial stage for the first time. It is comprised of autologous T cells and MicAbody directed to CD20. MicAbody is a fusion protein which uses a tumor antigen recognizing antibody and an immune cell-binding ligand protein. According to the convertible CAR system, activity can be controlled with a MicAbody dose, so benefits such as less long-term toxicity and prolonged response are expected. ASP2802, the first convertible CAR program, uses autologous cells harvested from patients. We are hoping that these clinical studies will also inform the development of future allogenic off-the-shelf programs. ASP4396 is a protein degrader targeting KRAS G12D mutant like ASP3082. The target protein is the same with ASP3082, but the E3 ligase binder is different. With ASP4396, we achieved first subject, first treatment in Phase I study in April 2024, just 50 days after the acceptance of IND by FDA. Generally speaking, it takes about three months, so we achieved a much earlier timeline. By proceeding with the clinical study and accumulating data in parallel with ASP3082, we are hoping that the development of targeted protein degradation platform will be enhanced. On Page 13, I would like to review the progress of corporate strategic plan. CSP2021 so far, in line with the three performance goals. As for performance goal one, we achieved extremely promising results in EV-302 study for PADCEV above our expectations, and we feel more confident about the significant growth in the first-line settings. On the other hand, VEOZAH uptake is below our original assumptions. In addition, as an external environment factor, Medicare Part D redesign will start from January 2025 as one of the measures by the so-called IRA, Inflation Reduction Act, in the United States, which was not included in our original assumptions. This is expected to impact XTANDI sales in the United States in the future. As a measure to secure revenue, we acquired Iveric Bio and our new growth driver, IZERVAY, which is growing at a speed higher than our expectations. Also, we are working on product value maximization through active life cycle management with indication expansion, including MIBC, muscle-invasive bladder cancer, for PADCEV and pancreatic adenocarcinoma for VYLOY. Regarding performance goal two, pipeline value, we started targeting protein degradation as a new primary focus, and multiple promising projects have been generated. On the other hand, POC has not been obtained yet in focus area projects so far. We are hoping that programs such as Potenza, aAVC, and FX-322 would be launched early and contributed to revenue in 2030 as they were relatively as fast projects as of 2021, but we decided to terminate these programs as we could not obtain clinical study results showing benefit. In R&D, we are implementing a major reform of the organizational structure and operation, further strengthening the focused resource allocation to prioritize projects and working on the acceleration of POC judgment. Also, through the acquisition of Propella Therapeutics, we added to our pipeline, PRL-02, a next generation androgen biosynthesis inhibitor, in order to be able to make up for the termination on the delay of early-stage development projects. As for performance goal three, core operating profit margin, we were able to control cost to a certain extent, but we recognize it was not enough to offset investments in newly launched products. Lexiscan generics have been launched earlier than expected, and we cannot rule out the possibility of mirabegron generic launches at risk. This is resulting in a major impact on our core operating profit. From now on, we will review the allocation of our management resources in a timely fashion and implement more stringent cost control while securing investment for future growth. We will focus on optimized operations through digital as well. From here, I would like to explain about FY 2024 forecast and CSP2021 outlook. Slide 15. Before the FY 2024 forecast, I will explain the background of making the plan. Looking back at FY 2023, because of the entry of generic of Lexiscan, the increase of expenses due to the acquisition of Iveric Bio, the lower-than-expected progress of VEOZAH, as well as the booking of impairment losses and others, we have made multiple downward revisions on both the core and full basis, and the management takes very seriously the fact that we were unable to meet the expectations of the investors as a result. Therefore, we have analyzed the various scenarios for our FY '24 forecast and formulated a more balanced plan that is both ambitious and achievable, taking into account risks and opportunities. For the FY '24 forecast, so we've done a lot of different scenario analysis. And taking into account risks and opportunities, we formulated a more balanced plan that is both ambitious and achievable. First, we updated our sales outlook for VEOZAH. As a result, we have been revising our peak sales forecast. And the next, we factored in the impact of generic entry of mirabegron in the U.S. As we were aware that generic companies were already moving toward a market launch. We believe that the formulation patent for mirabegron is still valid and we will continue to focus on the dispute. On the other hand, we expect the impact of the entry of generic mirabegron in the U.S. revenue to be offset by the full-fledged growth of strategic products. In addition, we announced in the press release today that the definition of core basis has been changed to more adequately reflect the profitability from core business. On a full basis, we factored in other expenses such as impairment loss in our initial forecast to reduce the impact of unexpected downward revisions during the period. There are no specific indications of impairment at this time, and the estimate is based on the other expenses recorded in the past and the balance of intangible assets. I will explain the details in the following slides. Page 16. I will explain our outlook for oncology products in FY '24. First of all, XTANDI. We expect XTANDI sales for FY '24 to be JPY757 billion, an increase of JPY6.6 billion year-on-year. Global sales are expected to be at the same level as FY '23 with ex-U.S. offsetting the impact of the U.S. IRA. While we expect growth in M0 CSPC prescriptions in the U.S., we anticipate a decline in the sales due to the three-month negative impact of IRA Medicare Part D redesign scheduled to be effective in January 2025. That is around $50 million to $70 million impact. Outside the U.S., we expect sales to continue to grow mainly due to the growth of M1 CSPC, metastatic castration-sensitive prostate cancer. PADCEV for FY '24 is projected to be JPY151.2 billion, a significant increase of JPY65.9 billion year-on-year. We expect progressive strong quarterly growth throughout the fiscal year. In the U.S., we expect that first-line indications will make a full contribution from the beginning to the end of the fiscal year. We also expect logistic effects from the NCCN Guidelines updated in March, as I mentioned earlier, and aim to position it as a new standard of care in first-line treatment. Outside of the U.S., we anticipate the potential approval of an additional indication for first-line therapy based on the EV-302 trial in Japan, the established markets, and international markets by the end of the year, and sales are expected to accelerate in each region once approved. Continued launch and reimbursement of second line, and afterwards, around the world, is expected. XOSPATA's focus for FY '24 is JPY60 billion, an increase of JPY4.9 billion year-on-year. We expect continued growth in existing markets centered on growth in the established markets. In the international market, we expect an increase in launched countries and reimbursement, which we expect will contribute to sales. VYLOY, which was approved in Japan last month, is factored in as a few billion yen in FY '24 forecast. In the first year of the launch, we will focus on the penetration of the Claudin18.2 testing, a new biomarker, so we expect a full-scale contribution to sales from FY '25 onwards. In Japan, we expect to launch in June. In the U.S. established markets, international markets in China, the approvals are assumed to be in Q2 and onward, and we expect a contribution to global sales. In addition, pages 24 through 27 of the appendix provide a summary of the FY '23 results and FY '24 forecast for each major product so you can easily compare them. Slide 17 is our focus for VEOZAH and IZERVAY for FY '24 and beyond. We expect the linear demand growth of VEOZAH throughout the year, with a forecast of JPY28.3 billion in FY '24, an increase of JPY21 billion year-on-year. We aim for over 80% of commercial lives, a key KPI, by the end of FY '24. Physician perception of market access is related to both the quantity and quality of access. And once negative perceptions are formed, it takes time to improve. While progress on access has steadily improved since third quarter of 2023, perceptions have yet to improve and it remains a barrier to prescribe the drug. Market research analysis indicates that a significant increase in coverage will improve perception, so we will continue to make maximum efforts to expand coverage throughout the fiscal year. We'll also work to improve patient and HCP activation through necessary investments, including DTC. On the other hand, we will continue to optimize SG&A as needed while keeping ROI in mind. In addition to our FY '24 forecast, we have updated our peak sales forecast. Based on the learnings and data obtained since the launch in May last year, as well as the latest market research, we have revised our initial assumptions and lowered our peak sales forecast from the previous range of JPY300 billion to JPY500 billion to the range of JPY150 billion to JPY250 billion. The original assumptions were based on prelaunch market research, but we've updated assumptions based on the findings and data obtained after the launch. Downward revision is mainly due to changes in assumptions for access and price sensitivity, treatment rate, and NK class share. For access, price, and safety, we have made more stringent assumptions to reflect the reality of plan type and patient sensitivity to price. The treatment rate focus has been revised downward to reflect the actual treatment rate in the VMS market as a whole, not just for VEOZAH. We have also changed our outlook for the share of the NK class in the VMS market that we expect to gain. Although, we have lowered our peak sales forecast, we still expect a potential of more than JPY150 billion, and we continue to see this as an important growth driver. We will take necessary actions to achieve new peak sales. IZERVAY's focus for FY '24 is JPY46.4 billion, an increase of JPY34.3 billion year-on-year, and we expect full-scale sales expansion. The J-Code coverage was started on schedule on April 1, and we expect to update the label by the end of the fiscal year. We are confident in our ability to grow as we are already seeing signs of an increasing prescribing trend, not only from existing prescribers, but also from physicians who began prescribing after waiting for J-Code coverage to become available. In addition to our regular sales promotion activities, we will continue to conduct disease awareness campaigns aimed at expanding the market and increasing awareness of the IZERVAY brand. We expect quarterly sales growth throughout the fiscal year, and we are targeting a total patient share of about 40% by the end of FY '24. Finally, the future outlook. We are focusing, as expected, toward our focus of JPY100 billion or more for FY '25, which we announced in our second quarter results. We expect sales to significantly outpace expenses, and we look forward to a full-fledged contribution to profits in the future. Page 18, I would like to explain some of the key events we expect in FY '24 for XTANDI and other strategic products. For XTANDI, we expect a decision from the Chinese regulatory authorities in third quarter on its application for an additional indication for M1 CSPC based on the China ARCHES study. Regarding PADCEV, we expect regulatory decisions in second quarter for the second line and beyond metastatic urothelial carcinoma based on EV-203 in China, and in third quarter for first-line metastatic urothelial carcinoma in Japan and Europe. VYLOY is on track to respond to the complete response letter received from the U.S. FDA in January and plans to resubmit the application in first quarter. If accepted, our decision is expected in second quarter or third quarter, depending on the classification of the application as determined by the FDA. The regulatory decisions in other regions are expected in second half of FY '24 in Europe and in fourth quarter in China. We currently expect top-line results from the Phase II study in pancreatic adenocarcinoma to be available in fourth quarter as of now. If that data is favorable, we plan to proceed with the application of an additional indication based on the results. IZERVAY has a target date of November 19 as PDUFA target in the U.S. In Europe, we currently expect a decision from the authorities in second half of FY '24. The timeline may change depending on the comments from the regulatory authorities and we will provide updates as appropriate. On page 19, I will explain the outlook for POC judgment under the focus area approach. In the lead programs in each primary focus, for programs such as AT845 for genetic regulation, ASP2138 for immuno-oncology, ASP7317 for blindness and regeneration, and targeted protein degradation ASP3082, will advance to the POC review stage by the end of FY2025. We expect that the success of these lead programs in obtaining a POC will enhance expectation for success of follow-on programs, utilizing the same platform, and bring the concept of the focus area approach closer to reality, which is to generate promising new drugs continuously. To accelerate the program creation and a POC decision, R&D has made significant reform to its organization and operational model for development projects with proactive delegation to teams to enable faster decision-making. In addition, we are reviewing the use of external resources and strengthen our internal capabilities to more effectively and efficiently promote the development and new modalities in disease areas in which we have little experience. In addition to these measures, we will further strengthen resource allocation to priority projects and focus on POC decision. Page 20, I will explain the change in the definition of core basis. In addition to the old adjustments, amortization of intangible assets, gain on divestiture of intangible assets, and share of profit or loss of investments accounted for using equity methodology, have been newly excluded as the new adjustment items from the old core definition starting FY '24. This is because the acquisition of Iveric Bio has resulted in a significant increase in amortization of intangible assets, which makes it difficult to adequately represent profitability under the old definition. We believe that the new definition of core basis will more appropriately show the Company's profitability and ensure comparability with the global pharmaceutical companies. For reference, the lower part of the slide shows the change in core operating income, reflecting the new definition. Now, you can see that the acquisition of Iveric Bio has significantly increased the amount of amortization of intangible assets and the ratio to revenues compared to FY '23. Page 21. Now, I will explain our full-year forecast for FY '24. The focus for revenue is JPY1.650 trillion, an increase of JPY46.3 billion year-on-year. The impact of the entry of generic mirabegron in the U.S. has been included in the assumptions for the full-year focus of revenue. The decrease in sales of mirabegron is expected to be offset by sales growth of PADCEV, VEOZAH, and IZERVAY, which are expected to increase by JPY120 billion year-on-year. SG&A expenses are expected to be JPY757 billion. SG&A, excluding co-promotion expenses for XTANDI in the U.S., is expected to be JPY568 billion, an increase of JPY22.8 billion year-on-year. The main reason for this increase is the necessary investments in growth drivers, such as PADCEV, VYLOY, VEOZAH, and IZERVAY, which are expected to increase by about JPY35 billion year-on-year. On the other hand, we continue to reduce the expenses of mature products, which is expected to decrease by about JPY9 billion year-on-year. In addition, we expect to realize cost reductions of about JPY10 billion as a result of global organizational restructuring implemented in FY '23, including a review of sales structure in Japan. R&D expenses are expected to be JPY317 billion, an increase of JPY22.8 billion year-on-year. We will continue to invest those strengths in primary focus and R&D functions in general. On the other hand, we will also review our portfolio to reduce costs. We will strictly prioritize allocation of management resources, and investment in growth areas while thoroughly reviewing expenses that will not contribute to future growth and value enhancement. As a result, core operating income is expected to be JPY250 billion, a decrease of JPY26.9 billion year-on-year. And our core operating margin is expected to be 15.2%, a decrease of 2.1 percentage points from the previous year. Although the impact of generic mirabegron in the U.S. will be factored in, we will prioritize expenses thoroughly and minimize the decrease in core operating margins. The lower part of the slide shows a forecast on a full basis. Operating income is projected to be JPY48 billion year-on-year. We expect amortization of intangible assets of JPY140 billion to be a major adjustment item that is excluded from the core basis. In addition, we have factored in other expenses up JPY60 billion, including the risk of impairment losses. We focused a dividend of JPY74 per share for FY '24, an increase of JPY4 per share. We have revised our previous dividend increase range in light of slower than expected profit growth. But we remain confident about future profit growth and have increased our dividend forecast to JPY4 per share. On page 22, I would like to explain the CSP2021. In light of the progress made so far on the three performance targets outlined in the CSP, we believe that it will be difficult to achieve the targets for FY '25. On the other hand, the original theme of CSP2021 is to build a structure that can overcome the patent expiration of XTANDI, and we believe that it is extremely important to firmly establish such a structure during the remaining period. In terms of revenue, the main growth drivers are PADCEV, IZERVAY, VEOZAH, and VYLOY. We expect total sales of strategic products to nearly double to JPY300 billion in FY '24. In FY '25, we expect this figure to triple to JPY500 billion. We expect profits to grow along with this sales growth, with the core OP margin expected to rise from 15.2% in the FY '24 forecast to the low 20% range in FY '25. We believe that the initiatives and milestones shown on the right side of this slide will be particularly important for the future growth of our priority strategic products. We will continue to pursue a core OP margin of 30% as our goal by steadily advancing these initiatives. If we succeed in acquiring a POC for primary focus program by the end of FY '25, we expect to build a pipeline that will enable sustainable growth. Thank you very much. That's all from me.
A - Hiromitsu Ikeda: Okamura san, thank you very much. That's all as our explanation from our company. We now would like to entertain questions from the audience. If you have a question, please press the raise hand button at the bottom of your Zoom screen. If you're joining from your smartphone, if you tap details, the Raise Hand button will be shown, so please press it. The emcee will name you one by one. If your name is called, please unmute yourself on your screen. Please mention your name and your affiliation before asking questions. Thank you for waiting. First, Mr. Yamaguchi from Citigroup Securities, please.
Hidemaru Yamaguchi: Yamaguchi from Citigroup. I have a few questions. First, regarding CSP, you reviewed your assumptions as you explained in your presentation, FY 2025, the same -- remain the same, but the numbers are a bit challenging. But numbers -- are you reviewing the assumptions for the numbers? The final numbers will be revisited once again? Is there any such possibility?
Naoki Okamura: Thank you for your question. What do you mean by revisit?
Hidemaru Yamaguchi: I wonder how I should interpret the current numbers in assumptions, which you can -- you think you can achieve?
Naoki Okamura: CSP 2021, we set performance goals in CSP 2021. The performance goals themselves, we have no intention to change. This was developed three years ago, so instead of changing through rolling, we'd like to keep the goals as is. And for the goals, what is going to be a landing, that's what I presented today. In that sense, in FY 2024, we have an annual plan already. In FY 2025, basically, based on the plan for FY 2024, we added scenario planning to show these numbers for you. When we have an annual planning for FY 2025, we cannot rule out the possibility that the assumptions have changed, but these are the numbers we have confidence about which we are presenting today. I hope I answered your questions.
Hidemaru Yamaguchi: The second question is about IZERVAY sales forecast. You explained the sales forecast. If I understand what you explained, J-Code was approved effective the 1st of April, which increased demand. And also label update, PDUFA date is November 19, when the volume will increase further. In terms of the impact, it can be a big product. What would be the biggest -- what would be the most impactful element?
Naoki Okamura: Thank you for your question. Where should I start? First of all, permanent J-Code has a big impact, I think. Reimbursement procedures will be easier for physicians and HCPs. If they are not accustomed to such a procedure, they -- some of them are maybe waiting until the procedure is simplified. We can expand the customer base. So, in that sense, it's very important. On the other hand, for each patient, how much the drug can be utilized? In that sense there's going to be a normal restriction about the usage period for 12 months. This is a drug you have to use on a chronic basis, so I think that's also important. And regarding the numbers in FY 2024, it's not reflected so much, but not just in the United States, but also in other countries, we'd like to launch IZERVAY in those markets as well. So, we'd like to expand the number of countries as well. So, these are three elements that are very important instead of saying, which is the most important. We would like to implement those three at the same time.
Hidemaru Yamaguchi: And about mirabegron? It's a sensitive question. It's difficult for me to ask you, but still, it's included in the sales forecast. According to press release last week, the district court recommends denying your motion. According to generic manufacturers, I heard that the injunction in the appeals court worked. So, on this point, as far as you can share, could you give us your comments?
Naoki Okamura: Yes, you're right as a fact, but the injunction by the appeals court, it's hold temporary. How long it's going to be effective, it's not so clear. So it's an injunction. Compared to what we call injunction in general, the duration is very limited.
Hiromitsu Ikeda: Morgan Stanley (NYSE:MS) MUFG Securities, Mr. Muraoka.
Shinichiro Muraoka: Muraoka from Morgan Stanley speaking. Would you show up Slide 22? That is core OP margin based upon the new definition is going to be the low 20%. That is where you are going to return to in the next fiscal year. Would you please explain the journey towards that a bit more into details with these five products make a growth, then OP margin is going to be improved automatically? I think that's a simple story. But from the account status, I believe there is a certain distance. So, would you please explain a bit more about this?
Naoki Okamura: Thank you for the question, Muraoka-san. What you said is exactly what we are thinking.
Shinichiro Muraoka: I see. In that sense, PADCEV and IZERVAY, those are likely to grow greatly, so are you depending on that, those two-product sales expansion?
Naoki Okamura: Well, that is likely to be the sales expansion that is likely to hit the bottom line. I don't know if that is the right way to say.
Shinichiro Muraoka: Okay. Then, when it comes to VEOZAH, after this revisiting in FY '25, is it coming up with the profit or still waiting for the profit from VEOZAH in FY '25?
Naoki Okamura: It is not appropriate to disclose the detailed number to you here today. But at least it has to go to the nearly breakeven point, personally speaking. But of course, sales alone or the revenue itself, we cannot control, but we can control the cost. Therefore, even in the middle of the fiscal year, we always would like to refer to the KPIs so that we can flexibly adjust the sales mix. That is going to be the foundation that we have currently. So around FY '25, I hope that this achieves the status of coming up with the profit.
Shinichiro Muraoka: Now about the dividend. Within this one-to-two weeks, among the investors, we discussed and also, we received a lot of questions about the dividend. And you came up with a number of JPY74. And in some page, certain picture, but depending on that in the next fiscal year, the profit grew -- will grow. So, this time, the every JPY10 basis, therefore, from next fiscal year, another JPY10 is likely to be added on according to the picture that you are drawing. So, the JPY500 billion for the major product, and core OP margin in the low 20 percentage, then the convention level of the increase is something you think you could achieve? Is that okay to consider it that way?
Naoki Okamura: Thank you very much for your question. Of course, I would like to continue the increase of the dividend and also would like to increase that range as well. But on the other hand, as you know, XTANDI patent expiration is going to start from FY '27 and afterwards. Therefore, this year JPY10, next year to next year JPY10, next year reduction, that's something we would like to avoid. We look at the profit and situation from mid- to long term. And based upon that, we would like to decide the amount of the dividend every year. So, FY '25, '26, what would happen is something I would rather refrain myself from commenting. But as I've mentioned, capital allocation perspective, the stable increase of the dividend is our basic direction. So, it's not the frequent increase or decrease depending on the level of the profit, so that we can avoid such a situation we would like to always have -- do that in a planned manner.
Shinichiro Muraoka: If there is a stable profitability, then according to this current situation of your company, JPY4 is appropriate level?
Naoki Okamura: Yes, that's right.
Shinichiro Muraoka: Now about VEOZAH. Affordability was mentioned in your slide, I'd like to confirm. In a year or two, there would be competitors lowering the price to secure the coverage. Is there any possibility to take such a strategy? Sorry, I may not be catching up? Is such a scenario possible? Is it highly likely or not likely? Could you explain?
Naoki Okamura: Yes. Regarding the affordability, what to do with list price, what about the gross to net, that's one thing. But what we'd like to say here is that what is going to be the co-payment of the patients. We are talking about the absolute amount original assumptions were made initially. We are assuming a small amount of co-payment as an assumption for the patients who use this drug, but that's not really the case. In reality, prescription was given, they go to a pharmacy. It's available, but co-pay is high, so patients may say, no, thank you. There are such patients. How we can decrease the out-of-pocket payment by the patients. We have to consider it. Lowering the list price itself or increasing the gross to net, there can be a variety of ways. But for us, we shouldn't hurry too much increasing gross to net to rebate. Then in the long term the value of the product would be undermined. We don't want to do this. We'd like to think of a smarter way of taking a variety of actions. That's all.
Hiromitsu Ikeda: Next, Goldman Sachs (NYSE:GS) Securities, Mr. Ueda.
Akinori Ueda: Ueda from Goldman Sachs Securities. First of all, I'd like to ask your question about the process to develop your plan. When you announced the results before, you are going to review the process to develop your plan, specifically, how did you change? You said you want to be ambitious, but you also paid attention to something achievable? What has been changed compared to last fiscal year. What is the difference in the probability of achieving your plan?
Naoki Okamura: Thank you for your question. I'd like to explain and where necessary Kitamura, sitting next to me, can add comments as well. First of all, when FY 2024, annual plan or budget is being developed, our biggest challenge was that we need to develop a plan which can be delivered for sure. Of course, it must be ambitious, otherwise, the organization would be less motivated. We will use ambitious numbers. But still, it could not be achieved. That should not happen. We would perform a scenario analysis in advance. We referred to bottom-up, but in the end, as corporate as a whole, we will take risks here and here, and in other years, we would not take risks. We incorporate such a process in the early annual plan for FY 2024. And also, it's easy to talk about prioritization, but doing this for sure is something tough, because we see people, things, but there are three priorities internally. And accordingly, at various places, we determine the priorities. Some may have to endure, and we may have to give up in some areas, so we may have to postpone. But we want to allocate human resources and money to what requires such resource allocations. That's the current status. As I said on Page 15, mirabegron generics entry, financially speaking, we need to factor in such a potential risk. We don't have any sign, but intangible assets are always on the balance sheet. For what reason project terminate, there would be impairment loss. So, we have to pay attention to those areas, and that's how we are planning this time. Kitamura-san, anything to add?
Atsushi Kitamura: Thank you. As Okamura said, yes, I agree, but I'd like to add 2 points. Regarding scenario, in principle, it's quite severe. Will it be a worst-case scenario? And to overcome that, what should be done? There can be good scenarios and bad scenarios as well. Based on very conservative scenarios, we develop a cost planning. Regarding priorities, which was mentioned earlier, we had very tough prioritization. On the other hand, not just creating numbers in the plan, but we have to think about how to do the operations. It's about the actual processes. Specifically, when do we need to make what commitments by then, what do we know and how to do this? Such a process was discussed in detail by the top management, so we'd like to deliver these numbers for sure. That's all for me.
Akinori Ueda: Second, this may be related to the operation, just like you mentioned. The forecast for SG&A, this fiscal year, including JPY35 billion for the strategic products, relatively, the amount is larger. Maybe you invest in advance for those products. But next fiscal year and after was to think about outlook, what would be this distribution, the percentage? And at this time, once again, is it okay that the current investment is advanced treatment?
Naoki Okamura: Okay. For this as well, I'll answer and Kitamura-san will follow. As I've mentioned at the very end slide, core OP, based upon the new definition, that is 30% for the pharmaceutical companies like our position and the direction, is the appropriate amount to aim at. From there, we are going to back calculate for the cost of goods and so and so. Then automatically you come up with the SG&A level to achieve the 30%. So, with this as a goal, overall, within this range, so that we can operate our business, we would like to establish the structure of the system. So, we would like to have a more muscular like structure with this target.
Atsushi Kitamura: What is quite important, as you see on this slide, in FY '25, for these strategic products, we come up with the sales of more than JPY500 billion. This is critical. So, in order to realize this necessary investment is definitely executed. And at the same time, just Okamura mentioned, there will be the increase, so where should be decrease? That will be the other SG&A and other expenses, for example, including the digitalization, we can reduce certain costs, so we would like to do that. At the same time, FY '25, there are more than 20 months until then. So, we are going to do the short-term investment for this fiscal year and 2025, that is going to be the midterm improvement. So, the time access will be different, but we are doing so in a simultaneous manner.
Hiromitsu Ikeda: Next, UBS Securities, Ms. Haruta.
Kasumi Haruta: Haruta from UBS. First question, that's about XTANDI U.S. forecast. That's a question for me. In the guidance this time, FY '25 January to March, there will be the negative impact, but the remaining calendar year of '25, that impact will continue. But for '26 -- well, in the 2025, the drug price is reduced and from there to what extent demand will improve? And based upon that, you come up with a focus for 2026, 2027 in IRA if you will be included within the list, then further price decreased by about 30%. So, for the coming three years, is it okay to expect the coming three years in that way? Would you please explain that?
Naoki Okamura: Well, the journey or the route to think about what's coming, I think what you mentioned is quite right. But is there anything else needed to be added, Claus, if you have any, would you please make a comment?
Claus Zieler: The only thing I would add is that we are very encouraged by the volume growth that we are seeing. I mean, we have been on the market for more than 10 years, and we're growing 4% in paid demand. And that has even strengthened in the last quarter with the publication and the approval of the EMBARK indication. So, there is demand in the market. And yes, we have an environment which over time, will be unfavorable on the price front. But the volume prospects, I think, continue to be very good in terms of long-term growth.
Kasumi Haruta: Understood. The second point, that's about VEOZAH. About the doctors, HCP's intention for the treatment, that's what I'd like to know. There's a market itself, because of the hormonal therapy. But now VMS recognition as a disease to be treated amongst the HCPs is lowered, and there is no activation by HCPs for the treatment. What is the current status with that regard? That's what I want to learn. Rather than the enthusiasm for the treatment itself, the coverage of the insurance that itself is a more stronger factor for the bottleneck. That's the question.
Naoki Okamura: I'd like to comment a bit. And then I'd like to ask Claus to make additional comments after. Yes, you are partly right. VMS in the education process were in educating the clinical information. They may not have studied much, but opened the practice. Oh, we noticed that's the situation. So, sales force must ensure disease education even to physicians as well, HCPs. And also, in a peer-to-peer fashion using the network, this should also be done as well. On the other hand, regarding the coverage, if you perform market research, they have intention to prescribe. They are willing to prescribe. But what kind of patients should come and how they should explain to prescribe, that's a missing link. So, sales force and medical reps have to fill this gap. The coverage gap, coverage issue, what we are concerned about is that doctors are willing to prescribe their patients coming to them. And prescription could be written under those circumstances. But because there is going to be no reimbursement, some doctors would not prescribe. They wrote a prescription, but the patients bring it to pharmacy, but it's too expensive, so they may say, no, thank you, because of no insurance coverage. They were told to take the advanced procedures. So, it's too cumbersome. There are doctors who would like to prescribe their patients, but still, it's not linked to the actual prescription. I think that the area where we'd like to see a faster progress. Doctors themselves must be -- we need education to them because they didn't learn in medical school so much about this. And as our customers, when we want the doctor to prescribe drugs still they don't write a prescription, so we have two dilemmas. Claus?
Claus Zieler: Yes. What Naoki just described is exactly right. So, the one factor is the perception from HCPs that we know from our market research, that they think the coverage is not broad enough for them to prescribe. And it takes time to overcome perceptions in any market, right? Now we are making good progress on the payer front. We always said we would reach 50% coverage by the end of FY '23, we have delivered on that. We are now aiming for more than 80% coverage by the end of FY '24. I think we're going to be very nicely tracking on that. And over time, we will be able to convince HCPs that coverage is not broad enough for them to prescribe freely. And that is the sales force job, just as Naoki just said. And at the same time, we are building a new class, right? So, we have to educate doctors of the advantages versus the SSRIs or HIT treatments that they are used to prescribe in the past. So, those are the two factors, exactly like Noaki said.
Hiromitsu Ikeda: Next, Mr. Hashiguchi from Daiwa Securities.
Kazuaki Hashiguchi: Hashiguchi speaking. On Page 22, you talked about XTANDI LOE and you are going to establish a structure to overcome XTANDI LOE. What's your definition? What kind of a situation would mean a sufficient structure to overcome XTANDI LOE? When you announced CSP2021, I am seeing the slides. Once again, according to the forecast, as the trend sales and core operating profits in 2023, I think it's going to be a higher level. But you are changing the definition of the core operating profit. Products which you think are going to grow XTANDI. According to the new definition, the profit structure is going to be different. There may be operating profit for some of the products and not for other products. So, I'd like you to elaborate on what you're talking about in this regard?
Naoki Okamura: I am not quite sure what I should answer. Could you please repeat your question once again?
Kazuaki Hashiguchi: Well, let me ask you in a different way. When JAK was announced in FY '21, the JPY500 billion of the sales increase of FY '25 for the strategic products, then you can overcome the loss of the exclusivity of the XTANDI and you can come up with the long-term growth. Like just like Okamura-san mentioned today for focus project, currently there's a bit of a delay in that situation. With what you can declare that you now prepare to overcome XTANDI LOE as of FY '25? As you see it on the Slide 22 strategic products and also with those sales increase, XTANDI issue can be overcome or the new definition-wise, profit is exceeding the current level. So, when do you declare that you were able to overcome the issue of the exclusivity of XTANDI? That's the question.
Naoki Okamura: Understood. So well, first of all, the sustainable or continuous growth that we think, well, of course, these are the drugs, so the LOE or the patent issue, they always come. So there will be the year of discontinuity. And I believe I discussed this a lot with Hashiguchi-san in the past, but there is almost no case that the profit comes out during the vacuum period. So, what we are aiming at is the current extended the sales is about JPY700 billion. And there, we come up with a profit. And that profit, if that is raised from other products, in other words, XTANDI is gone, but we have the other products as alternative replacement, then as of FY '21, because at the time -- well, at the time, we didn't have IZERVA. But there were six compounds and AT132 was added. But anyhow, with those key products or strategy products, profitability structure is although different from XTANDI. So, it's not really about the revenue or the sales, rather operating profit that is gained from the XTANDI can be replaced or offset. That is the status we would like to achieve. And at the same time, based upon that, from the primary forecast, if we have some other products potential, then with the replacement of the XTANDI, we have another potential product from our primary focus that will lead to the further growth. That's what we are thinking. However, the strategic products status is different from the time of FY '21. And also, primary focused potential products are not near, but rather a bit far future. And if we can see that is we highly expect ended up with a failure in the clinical trial. So, in order to offset such situation, we came up with IZERVA with acquiring Iveric. Did you get it? I just wonder if that is a logical explanation.
Kazuaki Hashiguchi: But with the IZERVA available, so according to your explanation, operating profit is -- it can be replaced. But you are thinking about the replacement of operating profit based upon this new definition, right?
Naoki Okamura: Right. Rather than the accounting-wise profit, I always think the situation based upon cash flow. So, for me, IZERVA from the cash flow perspective, regardless the definition of core operating profit, is the same thing. But from the investors' perspective, based upon the current core OP definition, you don't understand actually what is happening. We hear that a lot. That's why this time we decided to change the definition of core OP.
Kazuaki Hashiguchi: Another point for me, that's about of zolbetuximab or VYLOY in Japan, maybe. In Japan, initially, you focus on the penetration of the testing, that's why you come up with that number for the sales of this year. But Claudin18.2 recognition among HCPs here in Japan is expected to higher compared to Western countries. And if you come up with a forecast here in Japan, in Western countries, after getting the approval, it seems that the -- our sales growth will be relatively slower. Is it okay to see in that way?
Naoki Okamura: Thank you for your question. In the HCP community from the Japanese physicians perspective, how to think about Claudin18.2. I'd like to have a comment from Taniguchi. And what about the plan by the commercial team, together with the medical affairs in collaboration, how to roll out VYLOY in Japan? That is going to be explained by Claus. First, Taniguchi, please.
Tadaaki Taniguchi: Okay. I'd like to talk about Claudin18.2 awareness. From the medical affairs perspective, the awareness is getting higher. Gastric cancer prevalence is high in Japan. There are many cases in our country and Japanese doctors are eager to learn and study. So, a new market with high sensitivity, they are dealing with this. At the GI physicians meeting, we have a booth and many doctors visit our booth at an exhibition. From that perspective, still, it's very important for them to test. In gastric cancer, HER2 and PD-1 testing were generally done, and Claudin18.2 testing, hopefully, would be done by the doctors to begin with. So, we'd like to penetrate the testing. That's very important for the success of VYLOY, as we wrote here. Claus, please?
Claus Zieler: So, we are very encouraged by the fact that the guidelines have already included in Japan, the VYLOY -- Claudin18.2 testing together with the HER testing. So that gives us a very good basis to communicate to doctors that both tests should be done at the same time when the patient presents. So, I do think that in Japan, we actually have a very good environment in terms of getting doctors to understand, be aware and then also order the Claudin18.2 tests.
Hiromitsu Ikeda: Next, JPMorgan (NYSE:JPM) Securities, Mr. Wakao.
Seiji Wakao: Wakao from JPMorgan Securities. First Hashiguchi-san asked the question, I'd like to know more about the same topic CSP2021, XTANDI LOE. You talked about the structure to overcome XTANDI LOE. If you have such a structure, if you cannot establish such a structure, what measure are you going to take? FY 2025 strategic product, sales of JPY500 billion, that's next fiscal year, I think the possibility or the probability is quite high. But based on the definition, there can be some challenges. So strategic products may not go as expected. Then IZERVA, something like an acquisition of like IZERVA may happen. It may be difficult to acquire those products, but there may be an acquisition of late-stage compounds, which you may consider. And regarding focus area, you need to adjust POC. If you cannot achieve POC, another focus area would be tried one after another. Should I understand that way? Regarding the focus area, do you have a plan or a way to make further improvements?
Naoki Okamura: Thank you for your question. Regarding your first question, for us, in principle, innovations to create a company, if possible products close to completion in the late-stage phase or companies, we don't want to acquire them. But as you said, things may not proceed as we expect. We say we want to generate innovation, so we just shouldn't wait. We decided to acquire IZERVA this time, as you pointed out. If you look at our balance sheet, next year it's impossible to acquire a company of JPY500 billion worth. Iveric Bio acquisition was done for the coming few years, acquiring a big product or a company could be difficult. So, R&D people sitting right to me must work very hard. Siting on the left of me is Claus. So, we have -- we delivered strategic products to the market. So Claus-san, you have to work hard. Of course, I see you that way. Regarding the focus area, focus area is our way of thinking about R&D. You wanted to talk about Primary Focus, right, Primary Focus. Within one primary focus, biology, modality and disease exist by making small changes one by one. This is what we call a pivot by moving on the triangles little by little. Mitochondria is now dissolved. We may terminate a certain primary focus and creating different primary focus somewhere else. There's flexibility here. That's the good thing about the focus area approach. Then more specifically by 2024, I expect it to gain the POC. But if that would not happen, what should we do? That's also what I'm interested in. So, I would like to hear it. So, let's start with the clinical phase. So first of all, Taniguchi, then after that, Shitaka, higher than that level, what you're thinking is something we would like to hear.
Tadaaki Taniguchi: Let me speak first. It's about the clinical development. First, AT845, this is for Pompe; and ASP2138, this is oncology; and 7317 this is the AMD (NASDAQ:AMD) geographical atrophy; and the 3082, this is a KRAS degrader. So, these four, we would like to get the POC decision by the end of 2025. So at least these four, of course, other than those, we have other programs that we may be able to decide the POC in this period of time. But new products or early developed products or products in earlier development phase those are also something we would like to focus on. Shitaka is going to talk about after me. But from the research, we get something and we want to have it into the clinical phase so that we can increase the probability of gaining POC. That's what we are trying to do. On top of that, as it has been shown in the Slide 22, for example, PADCEV LCM or line extension, that is also something we are thinking about and already head and neck cancer, the new study is taking place. Other than that, for VYLOY there is the pancreatic cancer. But for the gastric cancer rather -- other than pancreatic cancer, we would like to expand the indication so that we can find other value. So those are considered for LCM. So early-phase, late-phase, LCM go together. And with that, we can come up with a higher level of pipeline value. That's what we think and that's why we are doing our best for that.
Yoshitsugu Shitaka: Now, Shitaka will make explanation. Just like Okamura mentioned I would like to transform innovation for the value of the patients, and that's the driver for our growth. Now primary focus will be turned over, as has been mentioned this time, and we will find another opportunity of the science innovation. That's one way that we can do. And also within the primary focus, different -- several platforms verify one after another based upon the hypothesis that we have. For example, immuno-oncology. And unfortunately, Potenza and aAVC couldn't come up with the evidence to verify our hypothesis, but some is already in the dose escalation study. But we have 2130 and so and within immuno-oncology, the different factors are utilized, and we have something else that we can expect for the next phase. And also, the targeted protein degrader, the situation is the same. The KRAS is the first so that we can launch the product. So, the mutated types are now in the clinical phases. And degrader, not depending on the mutation, KRAS degrader that is also identified for the clinical phase. Non-KRAS oncology and immuno-oncology, where we would like to make use of. We change PF or within a PF or primary focus, we can verify the different platforms. We can do other ways. But which of our cases, we would like to transform the innovation to the value so that we can grow further. That's what we are aiming at.
Hiromitsu Ikeda: Next, AllianceBernstein (NYSE:AB), Sogi-san. Ms. Sogi.
Miki Sogi: I have a question about PADCEV and VEOZAH. First, about PADCEV, in 2024 forecast, JPY145 against the dollar. Based on that assumption, FY 2024 sales forecast may be very aggressive according to my impression. First line, market share, what's your assumption about market share to come up with these numbers?
Naoki Okamura: Thank you for your question. Straight to Claus.
Claus Zieler: So, I expected you to be surprised by our PADCEV forecast because we are extremely confident on that. You will remember that in Q2, we took up the PADCEV forecast significantly. And we have delivered on that. We're actually a little bit over delivered on that. And we think that trend will continue. Our market research shows a very typical market share in terms of new patients. About half of the new patients would go on PADCEV-pembro first-line combination. We now have three guidelines -- three guidelines in the world recommending PADCEV-pembro as the standard of care. That's the ESMO guideline. That's the European Association of Urology guidelines and the American NCCN Guideline we're also Category 1. I think we are upending this market. We are changing this market completely. And it is very clear from our feedback, from HCPs, from medical societies that they see PADCEV and pembro as the first option for patients with bladder cancer. And that is giving us that confidence. And I think our track record since Q2 proves us right so far. So I would ask you to be confident also in the FY '24 forecast.
Miki Sogi: So, does that mean that you're assuming the PADCEV achieved 50% market share during the first year of the new indication in the first-line?
Claus Zieler: So, in the U.S., for instance, where we have first-line on the market, we already have more than 50% market share.
Miki Sogi: That's very impressive. The second question is regarding VEOZAH. Probably this is also a question to Claus. So, thank you for explaining some of the challenges coming from the payer coverage. I also believe that another key challenge is probably the lower than expected the demand from the patients. So I believe that the quite insignificant DTC to mobilize those patients is quite important for this product. But first of all, I'd just like to understand, is that in the right understanding? And also the second question is, in order to do that, what is this year's budget for the promotion fee for VEOZAH? And also, if there is any change your planning to make for the promotion approach based on what you have learned so far?
Claus Zieler: Okay. That's at least half a dozen questions in one, but I'll try to take them. You are absolutely right that our initial assumption we expected an exponential response curve from the DTC and that is -- that has not happened. And the more we study this market, the more we believe that we are progressing it in a linear fashion. We've also modeled that versus some analogs. It just seems to be a market that progresses linearly. And that has also proven true in the fourth quarter. We've increased demand by about 60% in the fourth quarter. And we see that demand creation being slower than initially expected, but being steady going into the future. So yes, it does take DTC spend to activate that. Yes, that will have to continue for some time. I mean, please remember we're still within the first 12 months of launch, right? I mean we haven't even completed the first year of launch. So yes, we will continue on the DTC spending to activate consumers. And we'll be updating you next -- in the next call when we have some fresh market research on how we have affected awareness of HCPs, but also of consumers of the brand, which, if you remember, in December was still only at 25% on the consumer part. So yes, DTC will be necessary to continue to activate patients, but no, it's not exponential. It's more a linear progression.
Miki Sogi: My question is how much you are planning to spend for VEOZAH promotion this year? And also, I mean, if there is any new learnings that have you gathered so far that will be applied to how to promote this product?
Claus Zieler: So, I'm not going to give you the number you're asking for in terms of the promotional spend. I can tell you that we're -- as I think Naoki said in his presentation, we have monthly KPIs where we look whether we hit the KPIs and then we modulate the spending accordingly, yes. To your second question, yes, we are learning very quickly and we are adapting the spending mix. So, as you are aware, DTC is not just TV spend, right? It's TV spend, it's digital spend, it's Google (NASDAQ:GOOGL) choices. There are various categories of spend in that spending mix and we are learning and adapting that spending mix as we get real-time data. And that is going on right now. So I do think our spending will be more effective in the future because of that learning curve that we're progressing on.
Hiromitsu Ikeda: We are already after the expected finishing time. But one more question. Mr. Tsuzuki from Mizuho Securities.
Shinya Tsuzuki: ASCO, I believe the title is already disclosed. EV-202, the new data is going to be announced there. Is this understanding right?
Naoki Okamura: Taniguchi-san, please?
Tadaaki Taniguchi: EV-202 study, last year for head and neck cancer, the data was disclosed and announced and abstract is now disclosed today. Other cancer types, for example, breast cancer, lung cancer, esophageal cancer, such data of 202 study is planned to be announced.
Hiromitsu Ikeda: Thank you very much. Now time is up. With this, I would like to close today's earnings calls. Thank you very much for your participation.
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