Sumitomo Dainippon Pharma Aktie

We will now begin Sumitomo Pharma's financial results briefing for Q1 FY 2026. I would like to introduce today's speakers, Sakai, Representative Director and Executive Vice President; Nakagawa, Member, Board of Directors and Managing Executive Officer; Sato, Managing Executive Officer; and Wakemi, Executive Officer. Sakai will now provide an overview of the financial results for Q1 FY 2026 and the current status of clinical development. Mr. Sakai, please proceed.

This is Sakai from Sumitomo Pharma. Thank you for joining us today. First, we would like to express our sincere sympathy to all those affected by the Reiwa 8 Kumamoto earthquake that occurred on July 28, 2026, and we sincerely pray for the swiftest possible recovery of the affected areas.

I will now begin my presentation on our financial results for Q1 FY 2026. For Q1 FY 2026, revenue was JPY 129.5 billion. Core operating profit was JPY 18.1 billion, and net profit for the quarter was JPY 17.0 billion. Revenue increased by JPY 21.5 billion compared to the same period last year, including the impact of foreign exchange rate fluctuations. Although we were impacted by the sale of certain businesses in our Asian operations last year and the expiration of exclusive distribution agreements for some products, increased sales of ORGOVYX and GEMTESA in the U.S. offset that decline, enabling us to achieve revenue growth.

Despite this JPY 21.5 billion increase, gross profit rose by only JPY 4.2 billion, partly due to the impact of the decline in earnings resulting from the divestiture of our Asian operations, as mentioned earlier. Selling, general and administrative expenses increased year-over-year due to higher sales promotion expenses in North America, while research and development expenses rose due to the acceleration of clinical trials in the oncology field and the advancement of development in the neuropsychiatric field, among other factors.

As a result, as I mentioned earlier, core operating profit was JPY 18.1 billion, a decrease of JPY 2.2 billion compared to the same period last year. Financial income and costs improved primarily due to a favorable change in foreign exchange gains and losses, and net profit for the quarter increased by JPY 5.8 billion to JPY 17 billion. Although core operating profit decreased compared to the same period last year, we believe we have gotten off to a solid start in relation to our plan for the current fiscal year.

Next, I will explain the situation in North America, Sales in the United States totaled JPY 94.3 billion, representing an increase of JPY 24.4 billion, including the impact of exchange rate fluctuations. As you can see, sales of ORGOVYX and GEMTESA have increased. I would like to explain the current status of ORGOVYX and GEMTESA. First, as shown by the figure in the upper right corner, ORGOVYX' performance was largely in line with the initial plan.

Please take a look at the bar chart. Although sales temporarily declined in Q4 FY 2025 due to seasonal factors, they rebounded in Q1 with both sales and volume increasing compared to the previous year. Also, although this is not mentioned here on a calendar year basis, we have already recorded approximately USD 570 million in revenue through June, and we believe we are on track to reach the USD 1 billion milestone.

Next up is GEMTESA, as shown in the upper right corner, the actual results exceeded the plan by 16%. Although sales volume was generally in line with projections, the payer mix had a positive impact, and thanks to higher prices, we exceeded our plan. As with ORGOVYX, sales declined temporarily in Q4 FY 2025 due to seasonal factors, but recovered in Q1, resulting in a year-over-year increase of nearly 30%. Next is the Japan segment. Revenue for the Japan segment was JPY 22.2 billion, an increase of JPY 1 billion compared to the same period last year. As you can see, the main factor behind the revenue increase was the recognition of sales resulting from the launch of our in-house sales of [ XEPLION ] and XEPLION TRI.

On the other hand, revenue from Equa and EquMet decreased by JPY 4.2 billion because its exclusive sales period expired last year and sales were discontinued in December. Here is the gross profit by region. In the U.S. and Japan, changes in gross profit were in line with the sales figures explained earlier. In other regions, gross profit declined significantly due to the sale at the end of July last year of the Asia segment's operations, which had been included in this category until last year.

I'd like to discuss one topic related to domestic sales. As announced in our press release on June 19, we have obtained additional approval for Wegovy subcutaneous injection for which we have a promotional partnership with Novo Nordisk Pharma as a treatment for obesity, as a treatment for metabolic dysfunction-associated steatohepatitis, MASH, without cirrhosis. In the field of MASH, we are now able to offer Japan's first treatment option.

I would like to provide an update on the progress of our research and development. You are currently viewing a list of our main product lines. As for changes made since the announcement of our financial results in May, we have updated the development status of DSP-1083, which is intended for the treatment of Parkinson's disease and is listed in the middle of the page from in preparation to ongoing.

I will now explain the main topics in clinical development starting in May. Clinical development is generally proceeding as planned. For AMCHEPRY, we have completed the necessary procedures, including the signing of a contract with Kyoto University Hospital regarding our Phase IV trial and have begun enrolling participants. In addition, AMCHEPRY was recognized for its achievements in drug discovery and received the 10th Bioindustry Grand Prize.

Regarding Enzomenib in the oncology field, we have completed enrollment of the cases required for the interim analysis of the pivotal Phase II trial for acute leukemia with KMT2A rearrangements. We have begun enrolling patients with NPM1-mutated acute myeloid leukemia. We presented data from a combination therapy trial for nuvisertib at the European Hematology Association Congress and the first clinical data for SMP-3124 at the American Society of Clinical Oncology Annual Meeting.

I'll explain the details on the next page. First, AMCHEPRY, preparations for the Phase IV trial of AMCHEPRY are proceeding smoothly and following the completion of various procedures and manufacturing, we plan to perform the first transplant this fall. We also plan to perform approximately 10 transplants in FY 2027 and approximately 10 to 20 transplants in FY 2028. Kyoto University Hospital began enrolling participants this July.

Going forward, we will continue to prepare the necessary infrastructure at the facility scheduled to host the program in the Kanto, Kansai, Chubu and Tohoku regions. On our website, we provide information tailored to both patients and health care professionals. Today's presentation material is also available on our website in PDF format. You can view various information by clicking the here link.

Let's move on to the topic of cancer. The pivotal portion of the Phase II monotherapy trial of enzomenib is proceeding as planned in the 2 patient populations, those with KMT2A rearrangements and those with NPM1 mutations as described. For the KMT2A rearrangements, we have completed patient enrollment for the interim analysis, and we aim to submit regulatory applications in Japan and the United States around Q3 FY 2026 based on the results of the interim analysis. With regard to the NPM1 mutation, we plan to complete patient enrollment for the interim analysis by Q4 FY 2026.

The next topic is nuvisertib. In the nuvisertib and momelotinib combination trial presented at the European Hematology Association Congress, we obtained favorable data demonstrating efficacy and safety. The combination therapy was shown to improve systemic symptom scores and spleen volume, indicating a signal of efficacy in myelofibrosis. In terms of safety, no dose-limiting toxicity was observed, and the treatment was found to be well tolerated.

Next, I'd like to move on to the topic of liposomes. Our company's strength lies in our unique drug discovery platform, which integrates compound design with liposome-based drug delivery system technology. For liposomes composed of a lipid bilayer, as shown on the left, there are implementation examples such as SMP-3124 shown in the upper right, in which a compound is encapsulated within the membrane and DSP-0546 shown by the image below, in which a compound is localized within the membrane. Liposome formulation makes it possible to control drug efficacy and pharmacokinetics. Specifically, SMP-3124 is expected to widen the safety margin, while DSP-0546 is expected to induce a strong immune response.

Next up is the SMP-3124. At the American Society of Clinical Oncology 2026 Conference held in June, we presented our first-ever clinical data. We have obtained results that support the concept of liposome formulation that we previously introduced, and we are currently conducting dose optimization trials for ovarian cancer and other indications where signs of efficacy have been observed.

Next up is vaccine adjuvants. Our company possesses proprietary toll-like receptor 7 adjuvant technology and is developing DSP-0546E and DSP-0546LP. The products listed on the right utilizes the liposome formulation, I mentioned earlier. Recognizing the adjuvant market, which is expected to grow as a business opportunity, we have established a new vaccine and adjuvant business development office to strengthen our commercialization capabilities. Through open innovation and external partnerships, we aim to commercialize our vaccine adjuvants.

Finally, here is the schedule of major events planned for FY 2026. Please take a look at Q1. Regarding the Phase II trial of enzomenib as a monotherapy for KMT2A rearrangements, we completed enrollment for the interim analysis as planned during Q1. Also, regarding the NPM1 mutation, as I mentioned earlier, we have begun enrolling patients for the Phase II trial as planned. Although this has been a brief explanation, that concludes my remarks. We would appreciate it if you could ask us any questions you may have.

We would now like to move on to the Q&A session with analysts and investors. The question-and-answer session will end at 17:15. Mr. Wakao of JPMorgan Securities.

This is Wakao from JPMorgan. First, you mentioned the Q1 results, the full year outlook and the resumption of dividend payments if this fiscal year's targets are met. Could you please elaborate on that? In your explanation, you mentioned that actual results exceeded the company's internal projections. If this situation continues into Q2, is it likely that the full year forecast will be revised in the Q2 earnings report? Will a dividend resumption be announced in connection with that?

Thank you for your question. Mr. Wakao, as I explained, we believe the start of Q1 is proceeding smoothly compared to our plans. That said, since only 3 months have passed, I believe it is too early to revise our full year outlook at this stage. Since various factors could affect the situation, we will refrain from commenting on the full year outlook at this time. As you pointed out, I believe we got off to a very good start in Q1.

As I mentioned earlier, I feel that achieving ORGOVYX' milestones has become more certain over the past 3 months. Therefore, as you mentioned, I believe we will be able to discuss shareholder returns and dividends when we release our interim financial results. Thank you.

The second point concerns GEMTESA. I think GEMTESA's Q1 results were very strong. You mentioned that sales volume is growing steadily, the payer mix has improved and prices are. I'd especially like to know about the prices. I assume the gross to net ratio has improved as a result of the improvements to the payer mix, but I'd like to know a little more about the reasons behind that improvement. Also, is this going to last? Could you tell us if levels are likely to remain similar starting in Q2?

As you said, the gross-to-net ratio improved more than we had anticipated in Q1. I believe we need to assess the situation a little further to determine whether this will continue indefinitely. As you are probably aware, GEMTESA has been removed from the coverage plans of some payers. However, I believe that in the long run, the coverage rate will increase. At this stage, I think it might be a bit too optimistic to assume that we can maintain the Q1 gross-to-net ratio going forward. Dr. Nakagawa, please let us know if you have any additional comments.

This is Nakagawa in charge of U.S. operations. As Mr. Sakai just mentioned, there have been some changes to the listings in GEMTESA's formulary. In 2025, this has been outside the coverage for many payers, but it has been steadily returning since January or April 2026 and coverage has improved. In that context, since there were a relatively large number of patients, what we might call non-formulary patients who purchased this out-of-pocket rather than using insurance, the G2N ratio, so to speak, or pricing showed a slight improvement this quarter.

This is the mechanism for this period. However, as coverage expands gradually, I believe the number of such patients will gradually decrease. Therefore, the results from Q1 will not carry over into Q4. Rather, this effect will gradually fade away. However, since sales volume is expected to continue growing, we are hopeful that for the full fiscal year, we will meet our budget or perhaps even slightly exceed it. However, given that there are still some uncertainties, we are maintaining our annual forecast at this time.

I understand well. At the beginning of the period, I was quite surprised that the gross-to-net price had been lowered. So I was actually a little surprised that it went up this time. However, when I heard that there were many non-formulary patients, I understood.

Finally, regarding the slides on enzomenib presented today, I believe it was mentioned that with respect to KMT2A, a submission would be made if the interim analysis data were favorable. This chart contains various expressions such as criteria met and not met. How should I interpret the terms criteria not met, final analysis and criteria met listed below? Are you simply trying to say that a scenario like this is possible?

This is Sato from R&D. When conducting an interim analysis, we strictly define the criteria for both the final analysis and the interim analysis and consult with the regulatory authorities. However, we do not disclose the criteria themselves. Therefore, as a general rule, you can submit an application if the criteria are met in the interim analysis. If the criteria are not met, we will conduct a final analysis and decide whether to submit the application based on the results. We illustrated that process.

I understand. I understood that the slide contained general information. Regarding the interim analysis of KMT2A, the criteria for the interim analysis are based on the data obtained so far, so the bar isn't set unusually high. Is it? I understood that if the data from this interim analysis was favorable, things would move forward toward a partnership with your partner next year. Does that mean conversely that if the criteria aren't met in the interim analysis, the partnering process will also be delayed.

I believe that if we can continue to achieve the results we've reported so far in the interim analysis, we'll be able to submit the application, and that's the basis for our target schedule. However, as I mentioned earlier, even if the criteria are not met at this stage, there is, of course, a possibility that satisfactory results will be obtained in the final analysis. I think how far the partnership discussions will go depends on the information that can be disclosed.

I understand. That said, your company's stance to date that you will actively pursue partnerships if the interim analysis data is favorable, hasn't changed, has it?

It hasn't changed.

Next, we'd like to hear from Mr. Lee of Morgan Stanley MUFG Securities.

This is Lee from Morgan Stanley. I'd also like to start by asking about the full year financial results. With ORGOVYX' sales milestones coming up in H2, I too felt that you've made excellent progress and gotten off to a great start. Like Mr. Wakao, I also felt that there was a possibility you might exceed your plan for the full fiscal year. However, Mr. Sakai commented that there are fluctuating factors and the fact that only 3 months have passed. Does your company currently view any particular factors as risks?

Well, I personally do not believe the risk is particularly high at this point, depending on the most severe scenario, the impact of U.S. policy could potentially begin to materialize in the 2027 calendar year, which corresponds to Q4 of our fiscal year. I said that with that in mind. However, at this point, I personally do not consider that to be such a significant risk factor.

I understand that you are making a conservative estimate. I am looking at Page 24 of the document. This time, your company has provided its forecast for H1 cumulative total for the first 6 months. Just to be sure, let me confirm this. If you subtract Q1 from the cumulative forecast for H1, it appears that Q2 will show a Q-o-Q decline. This is merely the plan at the start of the fiscal year. And as I mentioned at the beginning, since performance in Q1 has been very strong, I understand that there is a possibility that Q2 results could exceed the cumulative forecast for H1. Is this line of thinking correct?

Although I probably shouldn't say this given that we've already made this information public, our H1 plan was calculated based on an exchange rate of JPY 155. And since we cannot change our full year forecast at this stage, we are using the same basis. The actual exchange rate for Q1 averaged around JPY 160. And as you probably realize, this will likely result in an accounting discrepancy in Q2, which when factored in, will result in a negative figure.

In addition, we currently expect that selling, general and administrative expenses as well as research and development expenses will be slightly higher in Q2 than in Q1. As for sales, as mentioned earlier, we did not formulate this plan on the assumption that GEMTESA's strong pricing performance in Q1 would continue at the same level. So I suppose you could certainly call this conservative.

As for individual products, and this is a minor point, I think the performance of products like MYFEMBREE and RETHYMIC in addition to GEMTESA was also solid when viewed in dollar terms. Is this just a fluke? Or is this your true ability?

Our analysis indicates that MYFEMBREE's strong performance is due to temporary factors. To add to what said about RETHYMIC, there was a surge in patients at the very beginning of the year. However, we have not revised our annual patient volume forecast. We expect patient numbers to even out over the course of the year.

I understand. Finally, I'd like to ask Ms. Sato a question about R&D. This is about enzomenib. I understand that an update for KMT2A is scheduled for this fiscal year. You said that patient enrollment for the interim analysis of the NPM1 mutation would be completed by Q4. Can we expect to see the interim data around next summer? If the data is favorable, will you proceed with the approval application using this data just as you did with KMT2A?

That is correct. For the interim analysis, we will use the data from 6 months after the last participant among those included in the interim analysis. This data is from 6 months after the completion of patient enrollment for the interim analysis. Since the analysis takes a little time, it will take a little over 6 months. That is generally correct.

As you are aware, if the results of the interim analysis are favorable, we plan to submit the application afterward.

I understand. Looking at the clinical trial information, I see that the HORIZON 1 trial is being conducted even for first-line treatment in newly diagnosed patients and the primary completion date is set for June 30 of next year. If the data is good, I think we can look forward to events like next year's ASH. What do you think? This is the last question.

Regarding first-line therapy, we are also moving forward with the initial data from the Phase I study on combination therapy for first-line treatment. I believe we will make some progress on that data as well during this fiscal year, and I expect we'll be able to provide some explanation at next year's ASH meeting.

Next, we'd like to hear from Mr. Wada of SMBC Nikko Securities.

This is Wada from SMBC Nikko Securities. Could I ask you 2 questions about the development pipeline? The first one is nuvisertib. I think the data on Page 15 is from when the press release was issued in June. Compared to the R&D briefing in February, I think the number of cases has probably increased by about 6. I would like to ask for your interpretation of this data. It states that no dose-limiting toxicity was observed. The number has increased from 18 to 26 cases, but are those 6 additional cases high-dose cases?

As you move forward with development, if you are able to set the dosage at a higher level, I believe you will see even stronger data on efficacy than what has been presented so far. Could you also tell us about the rationale behind the dose escalation?

Thank you for your question. Regarding the data on combination therapy with [indiscernible] that we presented at the February R&D briefing, although we did not go into detail, the data were based on administration while the patient was fasting, that is on an empty stomach. What we've explained today is known as postprandial administration, and the data presented here was collected after the subjects had eaten a meal. I apologize for not providing sufficient details. Therefore, these figures were compiled using a different method than last time.

Overall, the trend is the same as when we explained it in February. In terms of the overall score, the TSS is working well and the size of the spleen has improved significantly. On the other hand, side effects such as nausea and diarrhea, commonly referred to as gastrointestinal symptoms have been less frequent this time than last time. I think the post-meal data will show slightly lower doses. As a result, adverse events related to the digestive system have been decreasing. Although the overall trend remains the same, I believe the drug continues to demonstrate good efficacy and its side effect profile has improved. We will continue in this vein, adding a few more cases and determine the specific dosage for Phase III.

I understand. Regarding efficacy, has a dose-dependent effect been observed?

We are currently accumulating data to confirm dose dependency. So it is difficult to say at this point at which specific dose that effect is observed.

I got it. One more point. I think investors have fairly high expectations for the development of a platform for liposome nanoparticles, which is discussed on the next page. At this point, how much do you actually know about which types of cancer and which drugs are compatible? Could you please give us some general information? For example, when it comes to vaccine adjuvants, I think you'll see a wide variety of modalities emerge such as protein-based formulations.

Could you also explain the restrictions on molecular weight and other factors?

As you mentioned in your question, I understand that you'd like to get a better sense of what platforming entails. First, regarding 3124, which we are developing in the field of oncology, we are approaching this as a drug delivery system, DDS, in which we encapsulate the compound within a lipid bilayer, a spherical membrane composed of lipids with the aim of expanding the margin between safety and efficacy for compounds where development has been difficult to advance using existing methods due to safety concerns and the trade-off between efficacy and safety.

The SMP-3124 is the first model to incorporate this concept. While we are considering follow-up products based on a similar concept, we will evaluate on a case-by-case basis exactly how large the compounds can be. Do you have any other questions?

No, I understand now.

We would like to take the final question from the analysts and investors during the Q&A session. Mr. Wakao, please.

I'd like to ask just one thing. I understand that when you refer to the risk starting in January 2027, you are talking about the implementation of the GLOBE and GUARD models. The GUARD requirements imposed on Medicare Part D. Is that correct?

Also, you mentioned that you don't view this as much of a risk. What are the reasons behind that? Is it perhaps because the policy debate hasn't really progressed very far yet? Is it perhaps because there isn't much of a price difference between overseas and the U.S. even if that were actually implemented?

What I had in mind was GUARD. You're absolutely right. I said that as a personal opinion. First of all, even if it is implemented, it won't take effect until January of this fiscal year at the earliest. So I don't think it will have much of an impact. Furthermore, based on information indicating that there has been significant opposition to this policy as evidenced by public comments and other sources, I believe it will likely take some time before it is enacted into law.

Next, we would like to move on to the question-and-answer session with the press. The event will end at 17:45. We've received a question from [ Mr. Shuji ] from NHK. Now I'd like to read the question. Regarding the use of IPS cells for Parkinson's disease, when do you expect the first case from the post-marketing surveillance to be? Also, could you please tell us about the progress of the clinical trials in the U.S. aimed at obtaining FDA approval?

Thank you for your question. As Mr. Sakai explained, regarding the first case in the Phase IV trial for AMCHEPRY, preparations such as the contract with Kyoto University progressed last week, and we have just begun the process of enrolling subjects. Next, we will proceed with manufacturing the product and making preparations at Kyoto University.

At this point, we are making arrangements and preparations so that the first dose can be administered this October. As for development in the United States, we intend to continue focusing on this. Thank you for your question, Mr. [ Mr. Shuji ].

Next, we'd like to hear from [ Mr. Ishi ] of [indiscernible].

This is [ Ishi ] from [indiscernible]. First, I'd like to ask Executive Vice President, Sakai, for his thoughts on the start of FY 2026.

Thank you for your question. As I mentioned at the beginning of my presentation, I believe we've gotten off to a solid start in Q1. Things are going well. How do you feel about that? Is there anything else you'd like to add? Are you asking about our financial performance or something like that?

Yes.

Now that the new fiscal year has begun, there will be various changes. Regarding our start to Q1, for example, I mentioned the milestone revenue from ORGOVYX in my earlier explanation. I believe that how Q1 gets off to a start is extremely important for forecasting the future. In that sense, it was really great that we got off to a smooth start on the sales front.

I'd like to hear about the future outlook and expectations regarding Wegovy's first domestic sales campaign in the MASH sector.

I would prefer to refrain from commenting on financial performance and related matters. In addition to the existing obesity treatment market, we recognize that this will lead to the expansion of new market opportunities. As this is the first drug of its kind to be approved in Japan, we hope to contribute to expanding treatment options in this field. At the same time, we believe this will also lead to an expansion of the scope of our information sharing activities, and we intend to focus our efforts on this aspect as well. Thank you very much.

Thank you very much, [ Mr. Ishi ]. Do you have any other questions? Ms. Miguel. Thank you for submitting your question via chat. I will now read this aloud. Was the transplant at Kyoto University Hospital the first one? A total of 35 post-marketing surveillance studies will be conducted, but the schedule shown here covers about 30 of them. Could you please give me an overview of the overall schedule again?

Regarding the first point, as you mentioned, the transplant at Kyoto University is the first of its kind. Preparations for the first transplant are underway at Kyoto University. You asked for an overview of the planned 35 cases in total. As shown here, the number of cases will range from 10 to 20 through FY 2028 for a total of just over 30 cases. Building on that, we are working toward our goal of completing 35 transplants by H1 FY 2029. Ms. Miguel, does this answer your question?

We really appreciate you confirming this.

Do you have any other questions? [ Mr. Yoshimizu ] of [indiscernible].

Following the previous question, I would like to ask, the number of facilities is listed below the case studies. Is that all? Or will it go up even further to 35? Please tell us what the outlook is.

Regarding post-marketing clinical trials, given that the transplant procedure itself is technically very challenging and that PET is a specialized imaging method, we plan to conduct these trials at a total of 7 facilities, Kyoto University, as shown here and 6 additional institutions.

I understand. So everything is going according to plan.

Yes. Everything is proceeding as scheduled.

I understand. Regarding the liposome nanoparticle platform, which was also the subject of a question from an analyst earlier, are you making progress in exploring follow-up products for vaccine adjuvants?

I'd like to explain once again the process of turning our technology into a platform as shown on Page 16. It is a very common concept to create a ball-like structure using a lipid bilayer, specifically a liposome composed of a lipid bilayer on the left. In response to this, we consider how we want to maneuver the liposomes within the body using concepts such as incorporating the compound into the interior of the liposome, placing it within the lipid bilayer that forms the liposome, placing it on the outside or attaching it to the edge and then mix the compound with the liposomes to create the final product.

Furthermore, we will synthesize the compound not just at the experimental level, but at a standard and volume suitable for clinical trials or manufacturing. We will use this know-how to build a platform. Regarding the adjuvant you asked about, as stated on our vaccine page, we are currently using liposomes, which are created by incorporating a toll-like receptor 7 agonist we refer to as DSP-0546 into a lipid membrane in our universal influenza vaccine.

In addition, there are emulsion formulations that are not double layered but consists of a mixture. We plan to use these 2 types to move forward with our work on vaccine adjuvants.

I understand. It really helps me organize my thoughts.

Do you have any other questions? I will now read aloud a question from [ Mr. Abe ] of Kyoto News. I'd like to ask 3 questions about AMCHEPRY. First, on what date in July did Kyoto University Hospital begin enrolling participants. Second, is the first transplant scheduled for some time in October? Third, regarding the 7 facilities participating in Phase IV, do you plan to disclose the names of all of them by the end of December 2026?

First, Kyoto University Hospital began accepting applications on July 24, last Friday. Second, as you are aware, the first transplant is scheduled for October. Third, you asked whether we plan to announce all facilities by the end of December. We are currently coordinating various details with the facilities we are preparing to partner with. And if everything goes according to plan, we hope to announce the names of the remaining 6 facilities by the end of the year. However, if coordination with each hospital is delayed, the timing may change. Thank you for your question.

[ Mr. Abe ], do you have any other questions? Finally, we would like to take questions not only from the reporters here, but also from analysts and investors.

Since there are no further questions, we will now conclude the Q&A session. This concludes Sumitomo Pharma's earnings briefing for Q1 FY 2026. Thank you very much for joining us today.

Thank you for participating in the financial results briefing for FY 2025 of Sumitomo Pharma today. I am Kimura, Representative Director, President and CEO. I will explain the summary of the FY 2025 financial results. As announced at 1:00 p.m., we are showing the business results for FY 2025 on a core basis.

As shown here, revenue was JPY 453.3 billion, an increase of JPY 54.5 billion or 13.7% year-over-year. On the other hand, gross profit was JPY 256.9 Billion, An Increase Of JPY 11.2 Billion year-over-year. Regarding SG&A expenses, we are controlling them well through structural reforms, so they were JPY 159.3 billion, down JPY 8.4 billion year-over-year and R&D expenses were also controlled, decreasing by JPY 4.5 billion to JPY 43.9 billion. Although this was almost according to the budget, there was more than 30% of the budget remaining at the time of the Q3 results. So we, on the management side, expected that we would have some unused budget. On the other hand, as we have introduced for some time, we have made the research, development and technology research headquarters R&D into one department and are operating it efficiently.

Cooperation in that area went well, and we were able to proceed with R&D by using the budget properly. As a result, the budget spent was slightly more than expected at the time of the Q3 results announcement at the end of January. Also, as you know, last year, there was a gain on the transfer of the China and Asia business of JPY 49 billion.

So including that core operating profit was JPY 105.9 billion, an increase of JPY 62.8 billion year-over-year. On the other hand, net profit attributable to owners of the parent came in at JPY 106.9 billion, an increase of JPY 83.2 billion year-over-year.

In addition, although I skipped the explanation just now, both operating profit and net profit attributable to owners of the parent were the highest ever for the company.

Next slide, please. Regarding the revenue of major products, I will explain for both the U.S. and Japan. Please look at the center. In the U.S. Revenue was JPY 337.9 billion in FY 2025. This is an increase of JPY 86.1 billion or 34.2% year-over-year.

Last year, there was the LOE or the end of the exclusivity period for APTIOM. So sales of the main product, APTIOM decreased significantly, but ORGOVYX more than made up for that, increasing by JPY 71.9 billion to JPY 155 billion, and GEMTESA increased by JPY 30.2 billion to JPY 96 billion.

Furthermore, in the area of onetime payment income written in small letters, a sales milestone for ORGOVYX was received with USD 100 million for achieving the USD 500 million milestone. And in total, revenue was JPY 337.9 billion, which was a result well above expectations.

Next slide, please. On the other hand, the revenue in Japan is shown here it was JPY 92.4 billion, a decrease of JPY 7.5 billion year-over-year. In Japan as well, during this fiscal year, the exclusive sales period for the main product, EquMet ended, leading to a significant decrease in sales.

In response to this, sales growth of TWYMEEG, the introduction of XEPLION and XEPLION TRI as well as the sales of LATUDA and LONASEN Tape, which we are focusing on progressed steadily. However, due in part to the JPY 1.4 billion impact of drug price revisions, we did not reach the previous year's level.

Next slide, please. This is an explanation of the results for FY 2025. Next, I will explain the business forecast for FY 2026. As you know, our company had very harsh results in the fiscal year ended March 2024. Since then, we have implemented fundamental structural reforms, specifically proceeding with rationalization, selection and concentration of businesses and reviewing R&D investment strategies.

Then exactly 1 year ago, as a pharmaceutical company rooted in research and development, we announced a 3-year plan with several management goals to rebuild our value creation cycle. Fortunately, we achieved that plan in 1 year. In response to that, in early March of this year, we announced a new 3-year management policy, Boost 2028, to become a company that can provide value from that new value creation.

In this, we aim for sales growth of the main products, ORGOVYX and GEMTESA, the fastest launch of 2 oncology products, the cultivation of next-generation growth engines and since our financial base had significantly deteriorated after the very difficult fiscal year ended March 2024, we conducted a public offering last month to strengthen our financial base.

Next slide, please. Following the very challenging results in the fiscal year ended March 2024, our equity ratio temporarily dropped to the 10% range. There were also financial constraints, and we had to have the parent company provide debt guarantees for our loans. And for subordinated bonds, we had to replace them with capital-like funds. These issues and tasks remained. By conducting the aforementioned public offering and achieving the record high profit explained at the beginning, our equity ratio has returned to a very healthy level of around 45% at present.

At the same time, we implemented refinancing for loans and have refinanced into loans without debt guarantees. In addition, regarding the subordinated bonds through this capital increase, the capital like funding for the replacement has been recognized, so the previous tasks have disappeared.

With this financial reorganization, we believe we have moved from the reconstruction phase to the growth phase. Our future investment policy is shown below. We controlled R&D investment at JPY 44 billion in FY 2025. But as research and development are progressing smoothly, we plan to increase it by JPY 7 billion to JPY 51 billion this year.

We have a plan to invest JPY 180 billion over 3 years, including FY 2026. Regarding regenerative medicine, since RACTHERA and S-RACMO are in the form of joint ventures, funds will be in the form of investment and loans, but including capital investment and investment and loans, we plan JPY 12 billion in FY 2026. Another point is that for the past 3 years, we have continued to pay no dividends.

We aim to resume dividends as soon as possible. At this point, partly because the capital increase was just recently conducted, the amount and timing of the dividend resumption are undecided. However, we intend to proceed so as to meet the expectations of our shareholders as soon as possible.

Next slide, please. Another point in our structural reform is that revenue recognition was previously disclosed by regional segment, such as Japan, the U.S. or China and Asia, according to the respective legal entity in charge. On the other hand, at present, [All IP] for main products is transferred to Japan, and we have shifted to a form where the global business is controlled from within Japan and the business operation itself is conducted globally.

Based on this, we have reorganized into a single segment for the Pharmaceutical business. At the same time, we will disclose and explain the business for each market where our sales are generated, such as Japan, the U.S., Asia or Europe.

We intend to change from this year to inform every one of the business situation by region. For example, in the case of Japan, there are naturally sales in the Japanese market, but there are also exports from Japan to overseas, specifically to the Asian region or to North America and Europe.

Similar things happen in North America as well. We decided to change the format to aggregate such areas into a market called others.

Next slide, please. This shows the business forecast for FY 2026 on a core basis. Revenue is expected to be JPY 540 billion, an increase of JPY 86.7 billion compared to FY 2025. Gross profit is expected to be JPY 295 billion, an increase of JPY 38.1 billion, while continuing to firmly control SG&A expenses. We plan to increase R&D expenses by JPY 71 billion to JPY 51 billion. As a result, it will be JPY 91 billion, a decrease of JPY 14.9 billion compared to the previous year, FY 2025. At first glance, this looks like a decrease in profit. But in reality, as I mentioned last year, we recorded JPY 49 billion from the transfer of the China and Asia business.

So excluding that, it will be an increase in profit. I will explain a little more on the next slide. Operating profit is forecast at JPY 90 billion and net profit attributable to owners of the parent is forecast at JPY 77 billion.

Next slide, please. This diagram explains the core operating profit in more detail. I think you remember that in the fiscal year ended March 2024, there was a deficit of JPY 130 billion at the core operating profit level. On the other hand, as I explained in the results for FY 2025, we recorded a record high of JPY 105.9 billion.

I am sorry to repeat this many times, but excluding the JPY 49 billion gain from the transfer of the Asia business and JPY 8.2 billion in profit obtained from the Asia business as well as the contribution of main products whose exclusive sales periods ended in FY 2025 as the product mix changed in both Japan and the U.S., this part is our current strength as of the end of FY 2025.

In contrast, profits from existing businesses such as ORGOVYX and GEMTESA will grow. So our strength will improve to this level in the fiscal year ending March 2027. 3 years ago, it was minus JPY 130 billion, and I would like you to understand that our business structure reform is progressing very rapidly.

On the other hand, there is JPY 30.7 billion for sales milestones and deferred revenue for ORGOVYX. And with pluses and minuses in R&D expenses and others, it comes to JPY 91 billion. I would like you to understand that we are not simply comparing this and that.

Next slide, please. I will explain the revenue of major products in the U.S. and Japan. We forecast that ORGOVYX will exceed JPY 200 billion and reach JPY 209.9 billion. This is an increase of JPY 54.9 billion compared to the previous year. Also, GEMTESA is expected to exceed JPY 100 billion with an increase of JPY 10.3 billion year-over-year. On the other hand, there is a large increase of JPY 28.7 billion in the other section.

This is because there is a contract where a sales milestone of USD 325 million will be received if ORGOVYX sales reach USD 1 billion in a calendar year. In our sales forecast, we expect to hit this in the autumn, probably Q3, so a large figure appears in the other section. With that, we forecast revenue of JPY 406.4 billion, an increase of JPY 84.6 billion year-over-year.

Next slide, please. I will explain the status of the main products in more detail. First is ORGOVYX. It is a treatment for prostate cancer. For the FY 2025 results, the initial budget forecast was USD 710 million, but the actual results significantly exceeded that at USD 1,029 million. Also, compared to the previous year, very strong sales were achieved, almost doubling.

Even now, the number of new patients in this March reached a record high, and it continues to trend strongly. We forecast sales of USD 1,350 million. Currently, urology is our main battlefield, and it is being adopted by many urologists. On the other hand, for oncology doctors or specialized hospitals, there is a drug with a similar efficacy called Leuprolide, which is an injectable and that is still mainly used.

We know that the overall market for that is larger. Our ORGOVYX is an oral drug and its features are that it is very easy to use and has few side effects. We want to proceed with promotion to tell doctors and patients that they do not need injections. However, Medicare, the U.S. insurance system has been revised and the out-of-pocket costs for patients have decreased significantly. But this is not necessarily well known, so we plan to continue promotion for that as well.

Next slide, please. Moving on, we have GEMTESA. This is a drug for overactive bladder. The initial forecast was USD 572 million. But the actual result was USD 637 million, exceeding the estimated budget by 11%. Compared to the previous year, it grew by 48%, which was also very strong. We believe this is because the ease of use and excellence of our GEMTESA in the beta 3 market for overactive bladder is becoming well known. On the other hand, as I will explain on the next slide, because there were some temporary factors last year, the increase for this year FY 2025 compared to FY 2026 will be in the single digits.

In this context, we want to promote clinical differentiation and also firmly promote the indication for overactive bladder associated with Benign Prostatic Hyperplasia, which is for male patients as an indication that only this drug has.

Next slide, please. I mentioned that there were some temporary factors. Last year, as I mentioned several times in financial results announcements, we continued business and sales by deciding to maintain prices firmly even if it meant temporarily reducing insurance coverage. Usually, this would lead to a decrease in usage.

However, there were many patients and doctors who strongly wanted to use GEMTESA even without coverage. As a result, we were able to ship large quantities and at very high prices, which combined to achieve high growth from USD 431 million to USD 637 million. This year, insurance coverage has returned, so the volume will increase sufficiently, but there will be negative factors in revenue due to rebates and other issues.

If you compare both, it looks like the growth rate has slowed down. But if you look at the overall trend, I think you can see the whole picture. One way to show this is the trend of prescriptions by year, and we expect that prescription shipments will increase by more than 30% from FY 2025 to FY 2026. In the 2030s, we want to grow it to a scale of JPY 150 billion in revenue.

Next slide, please. As I mentioned earlier, this shows the revenue and gross profit by segment. Japan has revenue of JPY 87.6 billion and gross profit of JPY 35.5 billion. North America has JPY 406.4 billion and JPY 253.7 billion. Others have JPY 46 billion and JPY 5.8 billion.

The total is JPY 540 billion, as explained in the FY 2026 budget. On the other hand, comparing with FY 2025, North America is performing very well. But for the Japan business, although revenue will grow, gross profit will decrease slightly due to the product mix. In addition, the China and Asia business is affected by the transformation of the business structure.

Next slide, please. I'll move on to R&D. The entire picture is shown here, and I will explain each topic.

Next slide, please. The main R&D topics from January to May of this year are summarized here. First, in the psychiatry and neurology area, AMCHEPRY, an Allogeneic iPS cell-derived dopamine neuro progenitor cell, received approval for manufacture and marketing on March 6.

Also, the drug price was decided today by the Central Social Insurance Medical Council and insurance reimbursement has been approved. Regarding the iPS cell-derived retinal sheet 3077, it received Orphan Drug Designation in March. Clinical trials are progressing in the U.S. For Lurasidone, an application for a partial change was made for the addition of pediatric dosage and administration. If this is approved, the drug price will increase and will not decrease in the future, which we are looking forward to. As for new items, the administration for the Phase Ib trial of 0051 for tremor due to Parkinson's disease and DSP-0378 has also started.

Next slide, please. In the oncology area, for Enzomenib, a Phase I trial of combination therapy with Venetoclax and Azacitidine for newly diagnosed acute leukemia has started. For Nuvisertib, interim analysis data of combination therapy with momelotinib will be announced at the EHA to be held in June, and the abstract was released on May 12. Another point, which I will explain later, is that very good data is coming out for the universal influenza vaccine.

Next slide, please. Regarding AMCHEPRY, which is a topic for drug price listing today, since it is a conditional and time-limited approval, we will now conduct post-marketing clinical trials, commonly known as Phase IV. Preparations for the trial are currently underway. We have promised to transplant a total of 35 patients, follow-up with each patient for 2 years and apply for full approval within 7 years. Since the follow-up period alone is 2 years, it is a very tight schedule, but we want to do our best to reach the application even 1 year earlier.

Next slide, please. Another new drug is 0551, which is also for Parkinson's disease. In the case of Parkinson's disease, along with motor dysfunction, there is what is called tremor, where the patient hand shakes when they try to stop their body.

We are considering a mechanism to adjust the neural circuits in the brain that cause tremor by acting on multiple ion channels, and we have started a clinical trial of 0551 for such tremor in Parkinson's disease.

Next slide, please. The other is the universal influenza vaccine. As you know, the influenza virus changes constantly, so the vaccine from last year might not work this year. Influenza viruses are broadly divided into groups 1 and 2.

For example, there are several types within H5. Our study showed that when immunized with a certain H1 antigen and our adjuvant, antibodies against H5 were produced along with antibodies against H1, demonstrating high universality in clinical data. By the way, this H5 is avian influenza. If an avian influenza pandemic were to occur, using our vaccine would mean we could prepare the vaccine before the virus appears.

Next slide, please. Main events scheduled for FY 2026 are shown here. As an R&D-oriented pharmaceutical company, we are about to start a new journey. That said, in terms of approvals, there are not that many for a company of our size. So this is a new way we have devised to show what milestones exist in each fiscal year.

Especially this year, in addition to AMCHEPRY, for the 2 oncology products, Enzomenib and Nuvisertib, we intend to restart activities to find new partners using the achievement of milestones shown here as a trigger. Then that concludes my explanation.

Dr. Kimura, thank you. We would now like to move on to the Q&A session with analysts and investors. The Q&A session will last until 4:00 p.m. . [Operator Instructions]. First, Mr. Stephen Barker from Jefferies.

I am Stephen Barker from Jefferies. I would like to ask about the outlook for the gross profit margin for this fiscal year. In the fiscal year that ended, 56.7% was achieved, but I believe the outlook for this fiscal year is 54.6%, a 2.1 percentage point deterioration.

However, looking at the product mix, especially with the milestone revenues for ORGOVYX, I think the product mix is rather improving. Why is it expected to deteriorate so much?

Yes. Thank you for the question. I will give a brief explanation and Dr. Nakagawa, who is in charge of North America business, is here, so he will also explain in detail.

As you mentioned, our main products, ORGOVYX and GEMTESA are growing steadily. However, as explained, while the main products grow this year or rather last fiscal year, there were products that reached LOE in the middle of the year, specially APTIOM was a product with a very high profit margin.

So moving from such items to products with relatively lower profit margins is one factor. In response to the current situation in Iran, although nothing has happened yet, there are signs that costs will increase in the future. We have factored in JPY 4 billion for Japan and the U.S. for JPY 4 billion in total into the cost of sales.

I recognize that it looks as if the gross profit margin has decreased more than it actually has. Dr. Nakagawa, do you have anything to add?

Yes, i will add a little. In addition to what Dr. Kimura said, we are factoring in the sales increase of ORGOVYX significantly. However, as we have explained before, this is in a co-promotion with Pfizer and regarding profits and costs, they are split 50-50.

The cost of sales for ORGOVYX is not necessarily low. So since the cost of sales is high, it is one factor that relatively moves the gross profit margin in a lower direction.

Thank you. The second question, in addition to the attractive JPY 55 million drug price for the Parkinson treatment AMCHEPRY, how much is it expected to contribute to revenue this fiscal year?

Yes. Thank you for the question. Can you show Page 31 of the supplementary materials? Today, a price of JPY 55 million, including consumption tax, so over JPY 50 million was assigned, and it was decided around noon today that the drug price listing will be on May 20. The future procedures are shown here.

The drug price has finally been listed. From now on, we will conduct Phase IV using this. At each hospital, there will be an IRB hospital ethics application and product contracts as well as deliberations for the adoption of the product at each hospital and university.

We think it will be this autumn when it actually becomes available for sale and late autumn at that. We think that for this calendar year, doing one transplant case would be the most we can do. This will be conducted strictly as Phase IV, so it will not be at all hospitals.

We want to conduct it where the system of doctors and hospitals is firmly in place. We are currently making preparations with 7 facilities in mind.

Next, Mr. Yamaguchi from Citigroup Global Markets.

I am Yamaguchi from Citigroup Global Markets. I would like to ask a follow-up to the question from Mr. Stephen. Regarding the JPY 4 billion for costs, including the situation in Iran for Japan and the U.S., I thought I heard you say it was for Japan and the U.S. Is this JPY 4 billion in total for Japan and the U.S. or JPY 4 billion each? I could not hear that part well. I'm sorry, but please confirm.

I'm sorry for the ambiguous way of speaking. We have JPY 2 billion each for Japan and the U.S. for a total of JPY 4 billion in the budget. There is not much basis for this figure itself, but I hope you understand that it is a figure we included thinking it would be sufficient to handle the situation.

Thank you. This is a repeat, but you said it was an estimate. Do you mean that you will look at that much for this period if various things come up, such as rising oil prices or logistics costs?

Yes, exactly as you said.

I understand. The second point is about Enzomenib. I think it was written that the interim analysis for Phase II would be in Q3. Regarding negotiations with partners, you said you started once and then stopped. What is the current status? For example, are you moving with the aim of completing it within the fiscal year? Or will you take a little more time to decide on a partner? Could you tell us the current status of these activities?

We believe that by showing the data from this interim analysis, the value of Enzomenib will be understood. So we intend to resume introductory activities once there is a prospect for this data. In that sense, please understand that apart from general information exchange, activities to partner for Enzomenib are currently suspended.

Thank you. Is the other one still stopped? Nuvisertib?

Nuvisertib, yes. The clinical trial itself for this is progressing smoothly. However, we are waiting for the end number to accumulate for the combination trial with momelotinib so that everyone can understand the efficacy and safety. We expect such data to come out at almost the same timing, so activities will start moving again from around Q3 as shown here.

Regarding the timing of the contract conclusion, we are not thinking rigidly of it being within FY 2026, and we have factored in the possibility that it might slide into the beginning of FY 2027.

Next, Mr. Wakao from JPMorgan Securities.

Yes. I am Wakao from JPMorgan. First, regarding the question about the partnership for Yamaguchi just now. Can I understand that your explanation, Dr. Kimura, has not changed particularly from the previous timing? Previously, there was talk that it would be at the end of this fiscal year from January to March of next year or in some cases, it might slide to April to June. Is the thinking unchanged?

That is right. It is as planned. This time, we have made a table of future R&D events on Page 24, and I explained based on this, but the plan itself has not changed.

Second, I apologize as it is something I always ask, but please tell us your evaluation of the 1 3-month figures for ORGOVYX that just ended and the assumptions for this fiscal year's plan.

for this 1 3-month that ended, as you said, it landed roughly as planned, I think. But basically, I want to know whether these figures had, for example, inventory buildup in 10 to 12 of 2025 and a reaction from that.

And also, please tell us about your assumptions for this fiscal year. Prescription trends continue to progress steadily, I believe. And regarding gross to net 2, you told us there is no major change this fiscal year, so volume increase should connect directly to revenue. So I think it could come out a bit higher. So I would appreciate your explanation.

Thank you. On whether it might go a bit higher, we too hope it goes higher. But as we have been saying for these 2 years or so, regarding budgets or performance forecasts, rather than putting out numbers we wish for, we have a policy of putting out numbers that we can take responsibility for properly, which might be influencing the difference in recognition with Mr. Wakao perhaps, but we are absolutely not lowering them intentionally.

In terms of assumptions, last fiscal year and the year before last, due to IRA impact, patient burden changed significantly. So there was a qualitative difference, but FY 2025 and FY 2026 have continuity. So I think it will become numbers very much in line with our forecast.

On the other hand, since it doubled from FY 2024 to FY 2025 and the insurance situation is quite different. If you read that aggressively, it becomes a bit tough for us, too, in the current situation. Dr. Nakagawa, anything to add?

Yes, what Dr. Kimura just said covers it almost entirely, but we too strongly want to leverage the steady momentum so far and stretch further, but forecasts remain realistic, and we intend to tackle exceeding them by as much as possible.

Yes. I do not think double but felt it a bit low. The second point is GEMTESA. As you explained, the volume will grow, but the price will decrease. So the revenue for this period is USD 686 million. On the other hand, you are aiming for about USD 1 billion. To reach that, you would need to grow revenue to some extent. For example, since the price has decreased, will you not take aggressive strategies such as raising the price or increasing the volume a little more? With this plan for this period, if you simply increase it by USD 50 million each year, you will eventually reach USD 1 billion. However, as it is one of the main products, I thought you should work on it more aggressively.

So I would like to know about the plan for this period.

Yes. Thank you. This is a matter of strategic thinking. As I have explained repeatedly, we are currently managing SG&A expenses very strictly. In the case of GEMTESA, we have learned from experience that it is promotion sensitive. In other words, we know that sales will grow if we put effort into promotion.

On the other hand, the financial base has been significantly strengthened by this capital increase. So although we have not decided yet, as Mr. Wakao just mentioned, we want to consider strategically strengthening promotion to increase sales as one option in our future medium-term plan. We intend to take measures after doing a more detailed market forecast.

I am sorry. Let me add a little from Nakagawa regarding the question just now. Regarding the first point, the price, you mentioned that we could raise it a little more. As you know, with the IRA, the discount rate will increase every year from now on. Also, considering that generic Mirabegron will likely become full scale from now on, I think it will be difficult to bring the price up.

As Dr. Kimura said, we want to rack our brains to think about how to increase volume. That is all from me.

Thank you. Regarding the generic of Mirabegron, Astellas has settled with generic manufacturers, so I think the number will increase. Am I correct in understanding that the assumption of volume increase is after factoring that in? The scale of JPY 150 billion in the 2030s that we presented in Boost 2028 is a figure that includes all of what you just pointed out.

Yes. Thank you. Finally, please tell us about shareholder returns on the eighth slide. I think the expectation of the stock market is a resumption of dividends after this capital increase. In that context, cash flow and equity ratio are written as judgment factors here.

Could you be more specific about what conditions would lead to a dividend resumption? Could you tell us, including the timing? That is all from me.

Yes, I am Kimura. Regarding this, we are considering it by thinking about these things comprehensively. We believe it is already time to specifically consider resuming dividends. However, if the current assumptions were to collapse significantly, we cannot just resume once and then stop again. So we want to take a little more time to think. Please understand our intention from the fact that we wrote undecided where we had always said no dividend. I understand.

So I can understand that the possibility during this period is also constantly being considered, right? That is right. We also want to consider resuming dividends at an appropriate timing since it is just after the capital increase, it is undecided.

Next, Mr. Wada from SMBC Nikko Securities.

I am Wada from SMBC Nikko Securities. I would like to ask about the impact of the segment change on Page 9. My understanding is that cost control has been conducted by region so far. I want to ask if the thinking behind cost control will change.

Sakai is here, so he will explain.

I am Sakai. Thank you for your question. The thinking behind cost control remains the same as before. Changing the segment does not mean we will change anything significantly. However, the cooperation between Japan and the U.S. has become very close.

So in that sense, we are presenting this segment in a form where we control costs as a whole. I understand well.

Next is about Enzomenib and Nuvisertib. Regarding Enzomenib, looking at Page 24, I think we can see a certain trigger with the top line results of this Phase II interim analysis. For Nuvisertib, will there be any data disclosed to us at the timing of around Q3?

Yes. There is a large academic conference in Q3, so we will present it there. Regarding the partnering I mentioned earlier, we intend to talk with the latest information, including information that can be disclosed under a CDA in more detail.

Thank you. Finally, at the top of this diagram, initial POC is written for 0378, so I think patient data will come out, although it might be a very small number of cases. Similarly, 40551 on Page 22. The result determination timing for Phase I is written Q2.

Is this data from patients? Or will it be safety or PK data for healthy individuals?

Ms. Sato will explain this. Ms. Sato, please explain.

I am Sato. As you asked, Q2 of FY 2027 is written in the middle. We have just started single and multiple dose administration to healthy adults, and this is the timing for those results. In addition to pharmacokinetics and safety, I think we will also obtain data to confirm brain penetration. well. Mr. Wada thank you very much.

Now with 9 minutes remaining, we have 2 people waiting, so I would like to provide quick answers.

Next, Lee from Morgan Stanley MUFG Securities.

Yes. This is Lee from Morgan Stanley. This is a bit of an extension of Mr. Wakao's question on shareholder returns. Regarding the resumption of dividends, it changed from no dividend to undecided. Reading Page 8, there are equity ratio and cash flow. And in my mind, I think the outlook for cash flow is important for your company.

The trigger would be that after the partnership for 2 new drugs, the outlook for cash flow and R&D spending will become much easier to formulate. Does this thinking seem wrong? Do you think it will not take that much time? Please let me follow up on this one point.

It is difficult, but we have not factored in any fees for partnerships into this year budget at all. I hope you understand that it means whether cash flow will come out as we expect in areas other than that.

I understand. Thank you. Please tell us one point about the new drugs. For SMP-3124, a checkpoint kinase 1 inhibitor, Phase I/II data for ovarian cancer or solid tumors will be released at ASCO in late May or early June. Regarding this development strategy, are you thinking of it on the premise of a partnership? Or will you do it yourself to the end? Please tell us about the development strategy here.

Yes. We have not decided on a development strategy yet. But if 3124 comes along smoothly while Enzomenib is running, we think our own resources might be a bit insufficient to maximize it. We will decide separately based on the situation at that time.

I understand. You plan to decide the Phase II dose by Q4. So can I understand that it is progressing smoothly at this point?

Yes. In terms of data coming out now and the enrollment situation, you can understand that it is progressing very smoothly.

I understand. Finally, regarding ORGOVYX, the composition of matter patent is scheduled to expire in January 2029. And in some parts of the market, there are some concerns about generic entry amid the current high growth of ORGOVYX. There is a view that generics could enter as early as FY 2029.

On the other hand, your company is in ANDA litigation with other companies and recently in Boost 2028 in March, you set a goal of JPY 250 billion for ORGOVYX sales in the 2030s. Therefore, it seems to me that your company does not see generic entry in 2029 or 2030 as a concern.

Could you tell us about your thinking on this again?

Yes. Thank you. Just as you mentioned, in the U.S., after 5 years and the litigation occurs for everything, and we fight in litigation with generics over how much exclusivity we can secure. Both ORGOVYX and GEMTESA have entered that phase.

As you said, the composition of matter patent is January 2029, but besides that, our group of patents is listed in the FDA orange book. The results of analysis involving experts show that our patents are very strong, and we do not expect at all to reach LOE after January 2029.

Now sorry to have kept you waiting. Mr. Hashiguchi from Daiwa Securities.

I am Hashiguchi. I have 2 questions. First, you mentioned that you would strengthen promotion to oncologists, whereas it had been focused on urologists. Could you tell us the difficulty in achieving penetration among oncologists that was not there with urologists? I think one point is that they have no resistance to injectables, but is there any difference in terms of economic benefits for medical institutions?

Yes, I will explain briefly and then ask Dr. Nakagawa to add more. Exactly as you said, competing drugs are injectables. So there is a difference in what you call medical fees in Japan compared to oral drugs where you just issue a prescription. Oncology doctors consider a series of operations or treatments such as shrinking the cancer with ADT hormone ablation therapy using ORGOVYX and then surgically removing it. In that context, injectables are not so much of a problem.

On the other hand, for patients, they prefer oral drugs that have fewer side effects and work well. Our policy is to appeal to the latter. If there is a more detailed supplement, please provide it.

Yes. First, as a major trend, many patients seen by urologists are those with relatively early-stage prostate cancer. On the other hand, the segment you call oncologists sees patients at a relatively more advanced stage.

Therefore, ADT is used basically, but for patients with more advanced disease, they also use various additional anticancer drugs. For oncologists, the choice of such other drugs is rather their interest, the center of their focus. Naturally, there was talk of economic incentives, but even with those drugs, they have such rewards.

Relatively, the positioning of ADT, ORGOVYX and Leuprorelin is low, which is a bit of a weak point in our explanation. Dr. Kimura also mentioned that we believe ORGOVYX has superiority over Leuprorelin, which is used as a base. So we are working hard to develop that area now.

Thank you. The second question is the thinking on the number of target patients for AMCHEPRY in the future. On the slide on Page 21, you show an image of the blue circle becoming larger. In today's Central Social Insurance Medical Council materials, the expected number of patients for administration in the 10 year is written as 133.

My understanding is that this peak forecast at the time of drug price calculation is predicted from the current approval content and does not consider future indications expansion or changes in approval content. However, in this case, does this 133 people assume the expansion to the far right of Page 21? Or is it an intermediate stage? Could you tell us about this relationship?

Yes, I will explain. The blue area shown in the material on Page 21 assumes the period from the application for conditional and time-limited approval to the approval. We are also thinking that the number of patients we will administer during the conditional and time-limited approval will be around 100. Then after approval is obtained, it will be 10 years later. So 3 years later, the current drug price is calculated on the premise of 133 people, as you mentioned.

However, if safety or efficacy can be firmly demonstrated during this period, the target patients will expand and it will become a treatment method used by more patients. We aim for that. However, based on current data, please understand that it will be around this level.

That's all from me. Mr. Hashiguchi, thank you very much. As those are all the questions, we will end the Q&A session with analysts and investors. Thank you very much.

Now the following Q&A -- now the following will be a Q&A session for the analysts and investors may leave. Thank you for your patience.

We would like to move on to the Q&A session for the press. The Q&A session will end at around 4:30 p.m. [Operator Instructions] Let's start with the person in front who is the fastest.

I'm [indiscernible] from Toyo Keizai. I have 2 questions to confirm regarding the figures. On Page 11 of the materials, there is the increase or decrease in core operating profit. It says that the sales milestone for ORGOVYX for this period will be about JPY 51 billion when converted to JPY.

Combined with that, the figure for the increase or decrease in deferred revenue is [indiscernible]. What does this refer to? It might have already come out, but please explain again.

Regarding deferred revenue, for example, if you look at Page 12, it says deferred revenue at the bottom. When we contracted with Pfizer, we received about JPY 50 billion as a onetime payment. In terms of accounting, we have the cash, but it is to be recorded little by little over the contract period. So we were recording about JPY 8.8 billion annually. The period for deferred recording ends this December. So JPY 8.8 billion last year will decrease to JPY 6.5 billion this year. And it will become 0 from next year onwards.

Please understand that this decreased amount is included as the increase or decrease in deferred revenue. Also, since we received a USD 100 million milestone in FY 2025 compared with FY 2025, the current figure of [indiscernible] is after subtracting that amount.

Also, it might be a bit early, but for this period, in comparison with the previous period, there is the disappearance of the gain on the transfer of the Asia business and this milestone part. When considering the results for FY 2027, if there is any thinking that serves as a premise for your forecast, please introduce or guide us within the range of what is known.

Yes. What can be said now is that, first, the basis will be the further growth of ORGOVYX, GEMTESA and existing products. If we have a partnership in oncology, which was discussed in several questions earlier, if that enters in 2027, there is a possibility that a figure like some kind of upfront will come in.

Also, for ORGOVYX, I cannot mention the amount or timing, but such sales milestones are still set. We are thinking of increasing sales so that those will also come in some year. Those are the major points.

Ms. Inami. Then the person next to you who is fast, please.

I am [ Yoshimizu ] from Iyaku Keizai. I have 2 questions. First, since you have some financial leeway now, I think you might be considering introductions. Please tell us about your thinking on that.

Yes. It is, as you said, that compared to before, things have become much more solid or rather the situation has become normal. Currently, products in oncology and regenerative medicine are close to being launched or are facing a temporary launch under conditional and time-limited approval. We want to concentrate on finishing those firmly. Eventually, like any pharmaceutical company, we will consider reinforcing our pipeline through introductions or partnerships. But for now, we want to concentrate on finishing our own products firmly.

I understand if you were to reinforce the pipeline, would it be in the same field or would it be something completely unrelated? What would be your thinking for introductions?

At present, we are not thinking specifically at all, but the most logical partner for introduction would be one where there is some kind of synergy such as being able to utilize our development capabilities or sales capabilities and system. Again, we are not thinking specifically now, and I just stated our basic thinking.

I understand. Second, you mentioned JPY 2 billion and JPY 2 billion for Iran-related costs earlier. For example, Kirin this morning mentioned that packaging would become more expensive and talked about various things. What areas do you expect will increase the most?

We have received requests from various suppliers to raise prices, including for fuel costs, but we do not think it will be anything major, so we included it just in case. We do not expect it to exceed that at all now.

Then the man in the jacket in the first row, please go ahead.

I am [ Hagiwara ] from MBS. Questions have come out several times earlier, but regarding AMCHEPRY, I believe it was approved at the meeting of the advisory body of the Ministry of Health, Labor and Welfare today. Could you give us your frank reaction to AMCHEPRY being the first product using iPS cells to be covered by insurance in the world? Also, how do you expect it to be used by patients and society in the future?

Thank you. Regarding AMCHEPRY, in the sense that it has now become possible to sell it in earnest with the drug price and insurance listing, as you know, iPS cell technology is a unique Japanese technology discovered by Professor Yamanaka of Kyoto University. With government subsidies and in reaching this point, we have consulted with university professors, various companies and government officials.

I feel that we have finally reached this point. However, as was discussed at the Central Social Insurance Medical Council today, there has not yet been an example of moving from conditional and time-limited approval to full approval. So we believe it is our responsibility to firmly conduct this Phase IV and move to full approval while at the same time, demonstrating efficacy and safety more firmly. We are happy, but to be honest, we are also tightening our resolve.

Then the person with glasses in the first row of the back row.

I am [ Goto ] from The Asahi Shimbun. It is about AMCHEPRY. In your past press conferences, Dr. Kimura, you have also said that you hope for a high drug price given that it is a breakthrough treatment. Considering recent U.S. drug price policies, what did you frankly think about this drug price?

Also, since you use existing iPS cells that have been stockpiled and the clinical trials were physician-led, I have an image that the burden on the company for development costs is quite small. Despite that, it is quite expensive. Could you tell us again the reason why it is expensive?

Yes. Regarding the drug price itself, we are actually incurring very high costs. Along with recovering past investments, running costs are very high. In that context, we have been asking for a higher drug price. However, due to various circumstances, the drug price announced today has been set. In that sense, it is a bit regrettable for us. But as a manufacturer, once the target value is decided, it is our strength and responsibility to finish it in a form that generates profit. With this target value decided, we intend to finish it into a business that can generate profit firmly.

On the other hand, there were various discussions, including whether to set a drug price during a conditional and time-limited approval. We are relieved that a drug price was clearly presented and that it will be listed for insurance. Regarding the U.S. and other countries in the future, I think the Japanese drug price will become a kind of standard or a sense of the market.

We want to make efforts so that we can sufficiently get by with that. I am very grateful that a drug price was set today, I am sorry, I forgot one thing. Although it was a physician-led clinical trial conducted at Kyoto University. For the clinical trial conducted at Kyoto University, we provided what is now AMCHEPRY at our own cost. I cannot say in detail, but we pay for the Kyoto University clinical trial costs as consideration for using the data.

Please understand that development costs were by no means 0 because public funds were used and at the corporate level, development costs were firmly incurred.

When you say it is a bit regrettable, do you mean that if you were to be greedy, you wanted an even higher drug price?

It is not about being greedy, but based on the current cost structure, it is clearly a deficit. We tried to explain that and get understanding, but the Ministry of Health, Labor and Welfare was strict and it became the current price.

Then the person right at the back.

I am Sakata from Yakuji Nippo. I would also like to ask about AMCHEPRY. Regarding the post-marketing clinical trial Phase IV, there has indeed been no case that reached full approval. Regarding the implementation plan for this trial, the facilities, the number of cases, evaluation items and so on, you have made a plan. Is this a plan that you have discussed with the PMDA and reached an agreement that if you produce results with this, efficacy can be firmly confirmed rather than just estimated?

Yes. We believe that if we implement the current plan, we can firmly explain the efficacy and safety. The Ministry of Health, Labor and Welfare and PMDA have said that if such data comes out, they will grant full approval. However, in an environment where the number of facilities and patients increase, whether we can actually produce such data is something we are confident about. But if there is any laxity, a clinical trial will not go well. So we want to proceed firmly. Ms. Sato, do you have anything to add?

Thank you. As Dr. Kimura said, in the screening process, we spent a lot of time consulting with the PMDA about what kind of efficacy would be needed to confirm it, and we formulated the plan. We will work hard to obtain the planned trial results.

Then the person in front, please go ahead.

I am [ Kozaki ] from Kokusai Iyakuhin Joho. Some results for the universal influenza vaccine have been reported. I would like President Kimura to explain the feeling and future development or the schedule.

Thank you. First, the results are, as I explained, and the data I showed earlier demonstrated the possibility of a vaccine that works against a very wide range of influenza viruses, even mutant viruses that do not exist in the world yet. As the next step, as shown on Page 24, we can conduct human infection studies.

This is a study where healthy people are injected with the influenza virus and are infected with influenza. This is difficult to do in Japan, but in Europe, such studies can be conducted under a firm protocol. We want to conduct that and prove that it can actually prevent infection or reduce severity as currently, we only have data that the antibody titer increased. We want to enter that trial as soon as possible.

At the same time, since it is a vaccine, and as you know, vaccines are different from regular medicines, and there are only a limited number of companies that are good at vaccines. We would like to make it widely available through partnership or out-licensing. We have received interest, inquiries and requests for lectures from specialized institutions overseas or rather in the U.S.

In terms of the schedule, is it still as soon as possible?

Yes. As written on Page 24, during this fiscal year, we will start the trial I mentioned, which will likely be in Europe. The results will come out relatively quickly. With those results or if it is a specialist, they can understand the significance just by looking at the data, so we will talk to those who can understand. We think the results of this human infection studies will be the biggest trigger data.

Then the person at the front, please go ahead.

I am Takeuchi from Nikkei. I have 2 questions. First, regarding the judgment on resuming dividends this fiscal year, you said it was undecided and that you would especially emphasize cash flow. In that context, while there are ORGOVYX milestones and growth of 2 U.S. products this period, I think there are also increases in R&D expenses and repayment of loans. In forecasting cash flow for this period, what are the major factors that could cause upside or downside risks? I do not think there are many major factors.

Regarding loans, we have reached a level where we will be practically debt-free within this fiscal year. Naturally, if revenue drops more than expected due to something we cannot predict now, it will affect cash flow. But currently, the cash flow is very good, and I think operating cash flow will likely exceed JPY 100 billion.

Was that cash flow including milestones and such?

Yes. The milestone for achieving USD 1 billion that I explained today is included in that cash flow.

Regarding being debt-free, does that mean after adding and subtracting, including the possession of cash?

It is the operating cash flow for this fiscal year. We have already received nearly JPY 100 billion in cash through the public offering, but that is separate.

The question was about whether debt will practically become 0, right? That is a concept where it is netted with deposits.

Thank you. Second, regarding the U.S. MFN policy at present, I think there is no major impact on your company from the U.S. government design. However, could you tell us what kind of risks you are considering for the future?

Yes. We are monitoring and constantly considering this very closely. Dr. Nakagawa is the lead. So he will explain.

Yes. Thank you. Currently, what is coming from the government is about imposing tariffs on pharmaceuticals. I think this is for reasons of U.S. national security. As someone doing business in the U.S., providing pharmaceuticals stably to U.S. patients is naturally our first objective. In that sense, the intention is the same.

To achieve this, it is not just a matter of making things in the U.S. We believe we must also stabilize the business by securing stable profits and provide pharmaceuticals to patients stably. In that sense, we are also considering the optimal supply chain.

Regarding tariffs, based on the information out now, considering our current supply chain and the import and export situation this year, we think it will be within a manageable range. It is impossible to read at this point what further policy changes there might be. So those are not necessarily fully factored into today's figures.

Now we have 2 people participating at the venue and online. Let's have questions in order starting from the person in front.

I am [ Abe ] from Kyodo News. I would like to ask about the table on Page 21 for AMCHEPRY. Earlier, you mentioned about 100 people until the application for full approval. As shown here, is it the case that until 2029, it will only be patients for the Phase IV trial. And after that, you expect to do about 65. Please tell us if you have a range of years.

Yes, it is exactly as you said. First, for the 35 transplant administrations until 2029, we want to prioritize the Phase IV patients since completing those administrations will be the trigger for approval. Our first goal is to achieve that as soon as possible. Once that is over, it will be possible to administer to a slightly wider range of patients outside of clinical trials since it is already approved. So the circle has become a little larger.

Regarding the number of facilities, is the image that it will be 7 facilities until FY 2029, and then you will increase them sequentially?

That is right. We will definitely proceed with clinical trials at 7 facilities until FY 2029. After that, the capacity within those 7 facilities will naturally increase. And if there are other good facilities besides those, we want to increase them sequentially. But as there is still time until full approval, we want to place more emphasis on proceeding firmly.

Then to the person on the window side of the front row.

I am Ando from Nikkei. I would like to ask about AMCHEPRY. Earlier, you mentioned in your remarks that at the current NHI price, it is clearly a deficit based on the current cost structure. If the hope was close to JPY 100 million, the price becomes almost half. I cannot quite see how you will cover that by reducing development costs. For example, will you delay capital investment for the future? Or is there some clever way?

It is not clever, but we have an intended way, which is to proceed with more mechanization and various other things. We have already started work on those, so we want to finish it in a form where we can firmly make a profit and recover investment with the JPY 55 million we received under the conditional and time-limited approval.

I understand. Do you have plan B prepared for such a possibility? And are you proceeding with that?

Well, yes. As a manufacturer, reducing costs was a basic task we had from the beginning. We are constantly making efforts to reduce costs and at the same time, reduce lot-to-lot variation. So we are thinking of achieving it as an extension of that.

Thank you. Another point is in the same regenerative medicine area, could you tell us the progress of the corporate trial for retinal pigment epithelial tears?

We have transplanted into the first patient and are firmly observing that patient. Since it is originally a very rare disease, and we have set strict entry criteria, we are currently looking for the next suitable patient.

About when would that be the next one?

I don't know when it will be, but we have built a network of several large hospitals in Japan and are ready to do it as soon as a patient is found.

Sorry to have kept you waiting. Please go ahead.

Thank you. I am [ Iwase ] from the Science Department of Yomiuri Shimbun. I have 2 major points. First, I would like to ask about AMCHEPRY. The drug price for AMCHEPRY was decided today at the Central Social Insurance Medical Council. I would like to ask about future quality control and manufacturing improvements and measures as a product. If it is iPS-derived cells, I think the risk of tumor genesis is an issue.

How will you take measures against the risk of tumor genesis? I believe there were points in the screening report about looking at tumor genesis using immunodeficient mice, but how are you taking measures for safety as a product in the future?

Yes. The risk of tumor genesis has been talked about ever since iPS cells were first created. However, one reason that was said was because originally in the process of making iPS cells, what are commonly called oncogenes were introduced and it was said that this might lead to new mutations.

Currently, they are not made that way. And based on the accumulation of various data, I personally recognize that the risk of canceration remains in people's minds because such words circulated from the beginning. No such situation has emerged from nonclinical safety trials or from clinical trials so far. We understand that this approval was granted because it is safe. However, once such an idea has spread widely, it remains a reality.

So we think evidence that such things do not happen will increase as it is used widely in the future, we do not expect it at all, but we will monitor patients firmly so that we can take action if anything happens. Even in the Central Social Insurance Medical Council in the optimization of use promotion guidelines, there was a point about observing patients for a long time with MRI.

Will you conduct patient surveys or inspections to see if there is any canceration in the product itself?

Of course, that includes monitoring the entire health condition. To repeat, the risk of canceration was mentioned by some doctors 10 years ago, but now there are almost no people in this field who think about it. However, it is also true that such ideas remain here and there. In any case, we will monitor the health condition of patients firmly.

One last question. Within the range you can answer, could you tell us which the 7 medical institutions are?

Patient expectations are very high and the 7 facilities are already preparing in various ways. But I would like to refrain from stating which facilities they are. It is at the discretion of each medical institution and some might announce it when it actually starts. That will be the judgment of the other party.

It is the scheduled time, but if time permits, 3 reporters are waiting online, so I would like to call them in order. Mr. Ishii from Iyakutsushinsha. Sorry to have kept you waiting.

I am Ishii from Iyakutsushinsha. I would like to ask in which part you intend to utilize the benefits of strengthening the financial base.

Yes. Thank you. First, if I were to describe our situation until last month as a pharmaceutical company, equity was very low. At the same time, for loans, there were loans remaining that banks would not have lent unless Sumitomo Chemical, the parent company, provided debt guarantees. Also, we had issued JPY 120 billion in subordinated bonds, but for redeeming subordinated bonds, there was a restriction that it must be done with capital-like funds.

Capital-like funds meant that even if we earned money through business activities, we could not pay them back. But by the public offering and the refinancing, those 2 were completely resolved. Also, nearly JPY 100 billion in cash has come in. So in that sense, we were able to significantly strengthen our financial base, and I hope you understand that the situation is completely different from a month ago.

I understand. What is the current amount of interest-bearing debt?

In terms of the amount of loan debt now, I think the net would be about JPY 80 billion on hand after the capital increase. Mr. Sakai is looking into it right now, is it JPY 80 billion?

The balance of loans at the end of the period is JPY 217.2 billion, but there is a fair amount of cash and deposits. So practically, it is about JPY 170 billion in net interest-bearing debt. Since we raised JPY 98 billion, I think you can consider the current net loan balance as that portion subtracted.

Can I understand that this will practically become 0 debt within this fiscal year?

Yes. It does not mean that the loans will practically disappear, but I hope you understand that net cash will practically become positive.

Now I will call the remaining 2 people. Ms. Sabokura from the Chemical Daily.

I am Tsubokura from The Chemical Daily. I have 2 questions. First, you have factored in JPY 12 billion for capital investment and investment and loans this period. What kind of investment is needed for the production quality control system and such described in the materials?

Also, you mentioned that you have started working on the automation of AMCHEPRY manufacturing. Will investments related to the development of manufacturing methods for multiple patients per lot scheduled for the next 3 years or so also be included in this JPY 12 billion.

Yes. As you know, our regenerative medicine is in the form of a joint venture with Sumitomo Chemical. Production is handled by S-RACMO and R&D by RACTHERA, both joint ventures. They use money for various capital investments and to proceed with R&D. Sumitomo Pharma, SMP invests in or lends money to them. We show this in the form of capital investment and investment and loans.

Within this JPY 12 billion for this fiscal year, improvements to the AMCHEPRY production method and reinforcement of production facilities that I mentioned earlier are included.

On the other hand, for existing pharmaceutical factories, we also have things like promoting digitization and updating equipment. For this fiscal year, we plan for a little over JPY 6 billion in capital investment for SMP itself.

I understand. So you are thinking about half and half for Sumitomo Pharma and the regenerative cell medicine business?

Roughly speaking, the current plan is half for investment in loans to S-RACMO and RACTHERA and half for capital investment for pharma itself.

I understand. One more point. Could you give us any comments on the progress of the U.S. clinical trial for dopamine neuro progenitor cells or the plan for FY 2026?

In the U.S., which has the most patients and is a market for pharmaceuticals almost 10x that of Japan, we are proceeding with clinical trials aiming for early launch. There is no major milestone this year, so we are proceeding. How about that?

So I can understand that patient enrollment and such are progressing smoothly. Personally, I want to accelerate it further. And with that desire to accelerate, I think it is still insufficient.

Now Ms. [ Nakada ] from Yomiuri Shimbun.

I am [ Nakada ] from Yomiuri Shimbun. This might be related to the previous question. I think AMCHEPRY manufacturing will be handled at the regenerative cell medicine manufacturing plant in Suita City, Osaka. Also, shares were issued in April and JPY 10 billion is to be allocated to RACTHERA and S-RACMO by the end of March 2029. Is this with a view to reinforcing the cell production line at the facility?

Also, if you have specific plans for what kind of manufacturing system you aim for and by when, please tell us.

Regarding the second question, as shown in the diagram earlier, we received approval this time on the basis of moving to full approval within the 7-year period. During that period, we will enroll patients very strictly. But at the same time, we expect approval in the U.S. at almost the same timing. So we are proceeding with reinforcing the production scale around 2027 to 2028 so that more patients can receive transplants at that time.

We are also thinking of further increasing the production scale in the early 2030s. The JPY 10 billion plus we are thinking of now will be allocated to both R&D expenses and equipment investment. Sumitomo Chemical is also now putting even more money than us into the regenerative cell medicine business. So as a group, we will proceed together. Please understand that we are not proceeding with just this amount.

We have exceeded the scheduled time by 10 minutes, but thank you very much to all of you for participating. Since there are no other questions, we will end the Q&A session.

With that, we will end the Sumitomo Pharma FY 2025 Financial Results Briefing. Thank you very much for participating.

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

I'm Kimura, President and CEO. Thank you very much for your participation to our meeting today. As you are all aware, after a significant downturn in performance in FY 2023, we undertook drastic structural reforms and achieved a V-shaped recovery in performance in FY 2024. In Reboot 2027, announced in May of last year, we positioned the period from 2025 to 2027 as a time when important milestones such as stabilization of the revenue base through sales expansion of 3 core products and commercialization of regenerative medicine, cell therapy, and oncology will be concentrated, and we have been working on business operations to rebuild the value creation cycle.

As a result, as announced earlier, core operating profit is expected to reach a record high of JPY 107 billion in FY 2025. The financial targets of Reboot 2027, which were targeted to be achieved by FY 2027, are expected to be achieved ahead of schedule. In order to accelerate growth from the V-shaped recovery while continuing disciplined cost management, we have formulated Boost 2028 - Accelerating Strong Sumitomo Pharma as our growth strategy for the period from FY 2026 to 2028. The strategy is to accelerate the growth of Sumitomo Pharma from FY 2026 to FY 2028.

In addition, as we announced earlier, we are considering a public offering and have registered the issue in order to strengthen our financial base and secure the necessary funds for investment in growth.

Below is a description of Boost 2028.

This is today's content. First, we will review Reboot 2027 and then will explain about Boost 2028. The following is a review of Reboot 2027. First, as I mentioned at the beginning of the presentation, we have achieved our financial targets ahead of schedule. In addition, the Ministry of Health, Labor and Welfare has announced that it expects to approve a drug for the treatment of Parkinson's disease derived from iPS cells, which is one of the 3 areas we mentioned as part of our efforts to create value as an R&D-oriented pharma.

Many news reports use the name AMCHEPRY, but the name AMCHEPRY itself is also subject to approval, so I will speak here today under the generic name raguneprocel. Both are exactly the same. In addition, clinical trials are progressing smoothly for the 2 oncology products. In addition, as we released the other day, good data has been obtained for the universal influenza vaccine.

We will explain the financial targets first. Core operating profits in FY 2025 will be JPY 107 billion, a record high core operating profits. Other than that, we are on track to meet the financial targets of Reboot 2027 ahead of schedule, as we show here. As indicated in the slide about sales of the 3 key products, core operating profit excluding one-time factors, free cash flow, and interest-bearing debt of the financial targets for Reboot 2027, sales of the 3 key products are expected to be JPY 260 billion, and core operating profit is JPY 43 billion after excluding JPY 49 billion of information provided by China and other Asian businesses. Free cash flow is expected to be about JPY 47 billion, and the balance of interest-bearing debt is expected to be JPY 220 billion, but since there is also cash, net debt is JPY 190 billion.

First, let me explain specific results, focusing on sales. As I mentioned, sales of the 3 key products totaled JPY 260 billion, a 64% increase compared to FY 2024. ORGOVYX has shown growth of approximately 90%, with revenue of USD 1 billion. GEMTESA has grown to USD 600 million in revenue, a 45% increase over the previous year. MYFEMBREE does not show a significant sale, but as we have repeatedly stated, it generates profit individually this year.

In Japan, we have been actively pursuing promotional alliances and have succeeded in forming promotional alliances for Ozempic subcutaneous injection and Wegovy subcutaneous injection. In addition, we have restructured our Asian business and transferred 60% of our shares to Marubeni Pharma Corporation. Earnings from the Asia business transfer amounted to JPY 49 billion.

Next, I would like to discuss the results of research and development. From the right, clinical trials for 2 cancer drugs, enzomenib and nuvisertib, are progressing well, mainly in the United States. As for us, we have slightly delayed our schedule, as we will make decisions on partnerships or in-house development to maximize value after the Value Inflection Point is completed, as described as VIP. Going to the middle, in Japan, we've progressed to the point where we can receive approval for raguneprocel, allogeneic iPS cell-derived dopaminergic neural progenitor cells. In addition, as I will explain later, the universal influenza vaccine that we have been working on in Europe has also made good progress in research and development over the year, with data on antibody cross-reactivity being available.

A list of major development pipelines is shown here. Many of them are what I have just explained, so I would like to move on.

As such, while Reboot 2027 was a 3-year plan, we achieved nearly all of its objectives within just one year. Consequently, we have formulated Boost 2028, a plan to accelerate Sumitomo Pharma's growth, as we reorganize our future management strategy. I will now explain this plan. In Reboot, we have set forth a policy of financial discipline and activities as an R&D-oriented pharma, with the goal of rebuilding the value creation cycle. Boost, on the other hand, aims to enter a new phase, from value creation to value delivery. The major policy is to expand the foundation for re-growth while maintaining financial discipline, and for the basic strategy of R&D, we intend to promote it. Next, in order to fully implement our growth strategy, we are considering formulating a new medium-term business plan as soon as the direction of the 2 oncology products is set.

Our vision is to be a global specialized player. We aim to be a globally active pharmaceutical company, albeit in a specific and limited area. As indicated in Reboot, we will continue our policy of making the Company a company that can turn in a strong circle, which we call the value creation cycle, a cycle of research and development, sales, profit generation, and reinvestment in new strategies.

We would like to further elaborate the content of Boost. First is the growth of existing products. The next step is to commercialize approved products that are in the clinical stage. The other is to create even more new things from R&D that will become future growth engines. We are considering these 3 phases. The first step is to accelerate the growth trend. We are now expanding sales of our very good products. This will mean moving forward so that more people can make good use of them. First of all, ORGOVYX is rapidly expanding its sales due to the revision of IRAs in the United States. However, the market share of our products in the ADT, androgen deprivation therapy, market is still 14%, and we believe that there is still room for further expansion, and we are aiming to achieve sales of JPY 250 billion in the 2030s. Our strategy is to promote our product, ORGOVYX, as the only oral drug that is very easy to use and has few side effects, and to promote the fact that co-payments are greatly reduced by IRAs, thereby promoting sales growth.

Regarding GEMTESA, we believe that the market for beta-3 agonists itself will continue to grow, although we are aware that competing generic products are on the market. By promoting the benefits of our products, we hope to reach a scale of JPY 150 billion by the 2030s. We currently estimate our market share to be approximately 11%. Our goal is to significantly increase this share and aim for JPY 150 billion by the 2030s. Anticholinergics are widely used for overactive bladder, but beta-3 drugs are also easier to use. In addition, GEMTESA has many advantages over other beta-3 drugs, including less blood pressure elevation, or faster effect, and no drug interactions. In addition, we would like to further expand the indication and use of this drug for male patients with overactive bladder associated with prostatic hypertrophy, which is a male disease, since it is the only beta-3 agonist available.

We will explain about our R&D next. Our goal in R&D is to be quick to deliver results to as many people as possible. We are now going to show you our new revenue plan, which is just an image though. Currently, sales of our 3 main products, especially ORGOVYX and GEMTESA, are expanding significantly in North America, and with the launch of enzomenib and nuvisertib, we expect the oncology field to expand significantly in the future. We are also looking forward to a large expansion and growth in the field of regenerative and cellular medicine in the 2030s.

I will explain more specifically. The business potential of the 2 cancer products is shown here. As I have said repeatedly, we consider acute leukemia as the target disease for enzomenib. In terms of selective menin inhibitors, we are well aware that competition in this field is very tough, but we believe that our enzomenib is best-in-class and offers the best treatment option due to its superior efficacy and high safety profile. We are currently in the process of pivotal study for KMT2A-rearragnged and would like to expand indications to include the combination with venetoclax and azacitidine.

With the launch of the single-agent product in FY 2027, followed by the continued launch of the combination therapy, we also expect to be able to expand our sales forecast to more than JPY 100 billion, with a maximum sales forecast of nearly JPY 200 billion. As for nuvisertib, it is a drug for myelofibrosis. It features a novel mechanism of action as a selective inhibitor of PIM1 kinase.

In the clinical data to date, the data show excellent drug efficacy and high safety. We believe that JAK inhibitors will become the standard therapy in this area in the future, and we would like to foster our product as the first-line drug that can be used in combination with JAK inhibitors. 20 Currently, Phase I/II trials are in progress, and we have announced at various meetings that the data are coming in smoothly. If all goes well, we believe that we can launch it in FY 2028. We are currently studying various options in order to make this a product with projected sales of over JPY 100 billion. In the development of these 2 oncology products, our first priority is to ensure that they are launched on the market.

In addition, we are now making efforts to make this an even larger business by seeking partners who can contribute to maximizing the value. In addition to Japan and the US, our clinical trial sites in Europe and Asia are steadily expanding, and we intend to vigorously promote clinical development on a global basis in the field of oncology, where is highly competitive. The first is the development of future growth engines. Here, we hope to continuously create value and also achieve a paradigm shift in healthcare. I would like to explain more specifically.

Here is a brief summary of our R&D policy. We would like to focus on hematopoietic oncology or neurodegeneration, which have high unmet needs and where SMP can take advantage of its strengths, including neuro-rare diseases, and aim to create a series of breakthrough therapies with a development strategy that emphasizes obtaining objective efficacy signals in patients at an early stage. Here, we have reorganized the modalities we are aiming for.

As I will show you, we would like to focus on 2 modalities, small molecules and iPS cell-derived products. However, a review of newly launched products in the U.S. shows that half of them are still small molecules, and we believe that we can demonstrate our strength in this area, which is at the center of pharmaceuticals and drug discovery.

As you know, we are close to the world's first approval for raguneprocel, and we would like to continue development in the U.S. and subsequent products based on this track record. In the area of oncology, as shown on the right, we will focU.S. on hematopoietic tumors, and will proceed with clearly targeted drugs while confirming their efficacy in clinical trials. I am also considering to effectively utilize biomarkers in the CNS area, as I mentioned before, with a focU.S. on neurodegeneration. We believe that the recent scientific progress in this field has been very significant, and by utilizing biomarkers there, we will be able to proceed with a firm confirmation of the initial potential.

As shown below, we are also thinking of vaccine adjuvants in the future, which I will explain later. First, in the oncology area, both enzomenib and nuvisertib are compounds that are academia-origin and have been created through co-creation between academia and the company. Our basic strategy is to further accelerate research by making good use of such a foundation, and our first step is to launch these 2 products as soon as possible to maximize their value. Following this, we changed our R&D organization to a Japan-U.S. integrated institution almost a year ago, and we are considering promoting translations between clinical and non-clinical areas, as well as promoting translations in both directions.

The next product after these 2 products is SMP-3124, and the results of clinical trials for 3124 are gradually coming in. This is a liposome formulation. Our original technology is to change a compound that has been confirmed to be effective but has not been successfully developed due to some problem into a new molecule in a form that can be controlled so that it can be more easily encapsulated in liposomes or so that the speed of release can be controlled, and to create a new formulation that can be separated into a new and safe formulation with a long patent term. Since 3124 seems to be working well, we would like to follow it up with a single technology platform. Since we are focusing on hematopoietic tumors, we are developing a new menin inhibitor in order to establish a continuoU.S. pipeline for hematopoietic tumors.

Here, we will outline the process for the CNS. As I mentioned earlier, science is making progress, especially in neurodegenerative diseases. Our basic strategy is to take an approach that makes good use of biomarkers so that we can identify and develop the potential of early-stage products at an early stage.

A more detailed picture is shown below on the right. In the past, in the neurological field, we focused on clinical endpoints and conducted large validation studies during the development phase to see the response to the endpoints, but we have learned that the investment risk in that case is very high. The new policy now is to do a good signal detection test for efficacy. This is not necessarily an endpoint, but we have included one step in the development process to verify that the drug is working as expected in that patient. This is based on the advances in science, our ability to create brain-penetrant small molecules, translational evaluation technologies, and collaboration with academia, all of which have been greatly strengthened. We have many promising pipelines, although we will not go into detail about individual products. We would also like to make good use of biomarkers.

From here, the policy for regenerative medicine and cell therapy is shown. Our regenerative medicine and cell therapy will increasingly focU.S. on iPS cell-derived products. Unlike conventional pharmaceuticals, however, the administration method differs significantly, these products are first transplanted via surgery. On the other hand, the ability to restore lost function is what is fundamentally different. We are looking forward to providing value to our patients here. Of course, there are issues to be addressed, such as how to accumulate treatment results and how to establish this as a business, but we are considering moving forward while working to resolve these issues with a focU.S. on raguneprocel.

We reorganized our regenerative medicine activities almost a year ago, with four companies, including RACTHERA, S-RACMO, and Sumitomo Chemical, working together to promote these efforts. RACTHERA will focU.S. on technologies platform and business execution, Sumitomo Pharma will handle pharmaceutical issues from clinical development to regulatory affairs and sales, S-RACMO will manage production, and Sumitomo Chemical will contribute advanced analytical technologies, quality control, and engineering. We aim to drive business forward as a unified group by pooling our strengths in these areas.

Next topic is universal influenza vaccine. As we announced in our press release last week, clinical data has emerged showing that the universal influenza vaccine itself, or our proprietary technology, adjuvant, is very effective. In the middle is the molecular phylogenetic tree of influenza A virus. The numbered variants are the subtypes, for example, H1, but even within that, there are new variants of H1 that appear every year. PrevioU.S. vaccines become ineffective as soon as a new variant emerges. Our clinical trial results show that when immunized with this H1 subtype, antibodies emerged that also react to the adjacent branch, the H5 subtype, as indicated in the graph on the right. This suggests that while this H5 subtype is the same type as avian influenza, it may also react to avian influenza and future influenza variants. We therefore wish to further confirm its efficacy in humans.

Lastly, I would like to explain the P&L management and financial KPIs. First is P&L management. To date, the company has been reducing personnel and expenses, restructuring and selling businesses, with a focU.S. on contingency planning for business crises and profit-and-loss management through fundamental structural reforms. This means that we have been very selective and focused on our research and development programs.

Going forward, while securing final profits and strengthening our financial base are our major prerequisites, we intend to move forward with the goal of achieving growth. This means maximizing the potential of ORGOVYX and GEMTESA, launching the 2 oncology products as fast as possible, expanding value, and further developing the next generation of revenue base.

Next, we have presented our capital allocation policy here. Our future funding sources will be NOPAT before R&D expense deductions, after-tax operating profit, and the external financing we plan to secure this time. We intend to allocate JPY 180 billion over the next 3 years to growth investments and R&D expenses, approximately JPY 50 billion to capital expenditures, and JPY 200 billion to repay subordinated term loan bonds. We have not indicated the amount or timing of shareholder returns at this time, but we hope to resume shareholder returns as soon as possible.

Regarding R&D, while the fastest possible market launch and value maximization of our 2 cancer products remain our first priority, we will also consider cultivating the next-generation revenue base. While maintaining disciplined control, our fundamental policy is to gradually accelerate growth investments. In regard to capital investment, we would like to strengthen our regenerative medicine and cell therapy business by reinforcing the existing businesses or through investments and loans in RACTHERA and S-RACMO, and at the same time, we would like to consider introducing projects for the domestic market. In addition, we would like to raise funds to strengthen our financial base by repaying interest-bearing debt and to expand our business mobility, and to proceed with aggressive investment.

The financial KPIs are shown here. The KPI we presented for Reboot, shown on the left side, was almost achieved in the current fiscal year, as I explained earlier. As KPIs for Boost 2028, we would like to achieve sales of more than JPY 350 billion for ORGOVYX and GEMTESA in FY 2028, and for profit and loss management, we would like to secure ROE of more than 10% during the period. In order to achieve financial stability, we will also aim to bring the equity ratio to above 50% as soon as possible, while at the same time returning to a positive net cash position. As I mentioned earlier, we would like to spend a cumulative total of JPY 180 billion through FY 2026 for R&D, although we will take ROE into consideration. We are also well aware that our shareholders expect U.S. to resume dividend payments. Based on Boost's progress, we hope to resume dividend payments as soon as possible.

Lastly, I would like to explain the governance transformation. The Company established a new management structure in June of FY 2024. In June last year, we transitioned to a company with an Audit and Supervisory Committee to improve the effectiveness of the supervisory function and to enhance medium- to long-term strategic discussions. In the Boost project, we are accelerating discussions on comprehensive growth strategies at the board level to enhance corporate value, while also maintaining strong financial discipline to ensure the certainty of our management restructuring. This shift reflects our focU.S. on moving from value creation to value delivery. We would like to unite the entire company as One Diverse Team to promote Sumitomo Pharma's management.

Thank you very much. We will now move to the Q&A session with analysts and investors. The Q&A session will run until 6:50 p.m.

First, Mr. Wakao from JPMorgan Securities, please go ahead.

Wakao from JPMorgan. Thank you. My first question is, why did you choose this timing to review your targets, update your earnings forecast, and announce a public offering? You didn't go into much detail just now on the public offering, so could you also explain the background behind the decision to raise funds at this time?

Up to this point, based on your explanation, it seemed that cash flow had been improving, particularly driven by ORGOVYX, and that financially the Company was moving in a healthier direction. So I hadn't really expected a public offering at this stage. I'd appreciate your thoughts on that as well.

First, let me explain why we announced Boost 2028 at this time. As I mentioned earlier, we announced Reboot in May of last year and worked company-wide under that new management policy. As a result, we have essentially achieved our targets in just one year. Given that, we felt it was time to move into a new growth phase, and so we announced Boost as our 3-year policy for FY 2026 through FY 2028. In doing so, we also wanted to show that the Company's management has become healthier, including being able to meaningfully revise this year's earnings outlook upward. That was part of the context for announcing Boost now.

As for why we are considering a public offering at this time, you're right that our earnings recovery has been progressing very smoothly. However, looking ahead, we believe it is essential to further strengthen our management structure for future growth, and to do that, reinforcing our financial base is critical. As you know, we still carry debt, including subordinated bonds. We wanted to put a clear path in place regarding those obligations.

In addition, as released today by the rating agencies, this capital increase is expected to help stabilize our credit rating, and we have also confirmed that it can be treated as refinancing securities. That makes it easier for U.S. to pursue our medium- to long-term strategy. On that basis, we decided to proceed with the capital increase. That said whether we actually carry out the offering, and exactly when, will be determined based on market and other relevant conditions. I hope that answers your question.

Yes, that's very clear. My second question is about capital allocation. You mentioned JPY 180 billion in R&D expenses over 3 years. From a P&L perspective, how should we think about that? Is it simply JPY 180 billion divided by 3, so roughly JPY 60 billion per year?

No, we are not planning to jump straight to JPY 60 billion per year. The basic idea is to increase it gradually. At the same time, we intend to secure an ROE of 10%, so each year we will determine the appropriate level of R&D investment while taking that into account. Under our current plan, we believe that by expanding the budget steadily and without strain year by year, we can achieve meaningful R&D outcomes within the total of JPY 180 billion over the 3 years.

Also, at the recent Q3 briefing, I think you said that next fiscal year, FY 2026, R&D expense would increase by about 10% versus FY 2025. Is that not the case? Is that going to change as well?

Yes, it could change somewhat, but we haven't finalized the budget yet, so I can't give you an exact number. That said, I think it's fair to understand that it won't suddenly jump to JPY 60 billion.

Understood. On the other hand, since it's a 3-year period, I was thinking there's a possibility it could get quite large, like over JPY 60 billion in FY 2028. But with the current R&D spend in the JPY 40 billion range, you can take enzomenib through to a partnership, and the same for nuvisertib. So I had assumed you could execute the plan you've been talking about with the current level of development spending. So if you're increasing it this much, what are you investing in, exactly? And it also makes me wonder whether, for enzomenib and nuvisertib, your development strategy, how you're spending money, has changed quite a bit. How should we think about this?

I think your question is probably, "Have you started thinking mainly about doing this inhouse?" But that's not the case at all. For the 2 oncology assets, we are still thinking squarely with partnering as the core approach. On the other hand, there are products in CNS that we think are very promising, but we haven't really been able to invest much there. And for regenerative and cell therapy, we've finally reached the point where approval looks likely, but that would still be conditional and time-limited approval. The real, big battle is the U.S. market. And even in oncology, for the 2 products I mentioned earlier, we think we can handle FY 2026 in-house just fine over this next year. But looking ahead, we also anticipate a sharp expansion in investment, possibly even if we do have a partner. So, to be ready for that, we want to further build up R&D spending. That's why we're showing JPY 180 billion over 3 years.

Understood. And you said that once partnering for those 2 assets is decided, you'll formulate a new mid-term business plan. But I feel like, up to now, you haven't given a very clear answer on the timing for partnering on the 2 oncology assets. As of today, do you have a target timing, like within FY 2026?

First, let me clarify one point. It's not once the partnership is finalized, then we do the midterm plan. What we mean is, once the direction becomes clear, what kind of partnership we're going to pursue, then we want to move into formulating the mid-term plan. So I'd like to make that subtle correction. As for the partnership itself, what we're calling the value inflection point may slip a bit into FY 2026 or early FY 2027, but we think it will come around that timing. Data will accumulate gradually, and once we have data that potential partners can be comfortable with, we plan to resume partnering efforts. So I think the timing will be roughly as I just described.

Understood. So, because the data will come out at the end of FY 2026 or the beginning of FY 2027, it would be after that?

Yes. We think discussions can move forward in parallel, so we see the end of FY 2026 through early FY 2027 as the window for partnering. But part of the reason for this capital strengthening is so you don't need to think about it rigidly as, it must be done by this exact date. That's how I'd frame it.

Next, Mr. Muraoka from Morgan Stanley MUFG Securities, please go ahead.

Thank you. Muraoka from Morgan Stanley. Thank you. Regarding the shelf registration for the new shares, of course, the actual issuance hasn't been finalized yet, but on this point, if we assume 60 million shares, Sumitomo Chemical's ownership would be diluted to around 43%, at least on paper. I understand the repayment of the hybrid bonds and so on. And if ORGOVYX and GEMTESA continue to perform well, then I understand the rationale for the capital increase. But looking further ahead, a few years after the issuance, if the stake falls to 43%, would you view that as somewhat weakening the relationship? In that case, would you be thinking about something like a buyback on a longer time horizon? Or do you consider that level of dilution to be a stable point? I'd like to understand how you're thinking about this.

I think that ultimately comes down to Sumitomo Chemical's intentions as well. As stated in today's release, although their ownership ratio would decline, they intend to maintain consolidation. From our perspective, we don't believe the current relationship would change in any way.

You mentioned Sumitomo Chemical's intentions, but when I asked, hypothetically, if performance improves, would you consider a buyback, that would be a decision made by Sumitomo Pharma, right?

Yes, it would be Sumitomo Pharma's decision as well, but it also involves Sumitomo Chemical. As for whether we would need to conduct such a buyback, meaning a share repurchase, we are not considering anything specific at this time.

Sorry to press on this, but from Sumitomo Pharma's perspective, is a roughly 43% ownership level appropriate and comfortable? Or would you prefer to strengthen the relationship and move it back higher? How does it look from your side?

From Sumitomo Pharma's standpoint, whether it's 52% or 43%, nothing changes in substance. As long as consolidation is maintained and given that we've actually strengthened our collaboration with Sumitomo Chemical, particularly in regenerative medicine, since last year, even if the ownership ratio were to decline, we would not feel any concern or discomfort at all.

Understood. One more question, on ORGOVYX. I believe you indicated somewhere a scale of JPY 250 billion in the 2030s. If I divide that by JPY 150 to the U.S. dollar, that's about USD 2.25 billion. Given the five-step milestone structure, that seems to imply you wouldn't quite reach the final USD 2.5 billion tier. Is that the assumption? Or, because of potential IRA-related price cuts around 2029, do you think you might reach USD 2.5 billion before that, but in the 2030s the figure would look like this? How should we think about the growth trajectory, will it be a straight line, or somewhat uneven? What's your current view?

It's not an exact calculation, but as sales expand, there are pricing policy issues in North America. In the US, systems have been introduced whereby if sales grow too large, pricing can be reduced. So we do factor in the possibility that sales could decline at some point.

Just to confirm, so you believe it is possible to reach the fifth and final USD 2.5 billion milestone, but ultimately you're showing JPY 250 billion as the steady-state figure?

The sales target shown here does not include milestones. At this point, the Boost plan does not assume a significant contribution from milestones. As I mentioned at the Q3 briefing, we believe we can achieve a new milestone next fiscal year, but beyond that, we're not in a position to comment, either on the amount or the timing of future milestones. I apologize for that.

Next, Mr. Yamaguchi from Citigroup Securities, please go ahead.

Yamaguchi from Citi. Thank you. My first question is about the figures in the mid-term plan. You've provided several numbers, and perhaps one could back into it with some calculations, but in terms of NOPAT or core operating margin, if I'm not mistaken, it started at around 10% and is now roughly 16%. What level are you aiming for going forward? Is there any guidance you can provide?

As I mentioned earlier, we are managing the business with ROE as a key metric, and we will consider costs and expenses within that framework. At this point, we would prefer not to provide more granular numerical details. However, when we formulate the next mid-term business plan, which I've mentioned several times today, I believe we'll be able to present more specific figures.

So this is more of a bridge for now, is that fair to say?

Yes. In fact, Reboot itself was also a kind of bridge. But since we achieved its targets in just one year, we've effectively created a new bridge.

I see. That makes sense. Understood. Regarding iPS-related business, I'm not sure whether it's because you don't hold a major stake, or because the review process is at a fairly critical stage, but in the past you indicated figures like JPY 100 billion globally including Japan, and potentially more over the mid to long term. Is that not included here this time? Just to confirm.

Over this 3-year period, we don't think it's the right timing to expect significant sales. It will likely be conditional and time-limited approval. In that case, we would need to obtain full approval within a few years, and during that time, sales would be conducted in a manner somewhat similar to a clinical trial, we sometimes refer to it internally as Phase IV. So the revenue contribution would be quite limited. That said, as shown in the chart, we do expect significant growth in the future. We're thinking the major ramp up would come around 2030. So it's simply that it doesn't factor meaningfully into Boost at this stage.

I see. It's just that for other products you showed fairly concrete numbers, JPY 250 billion, JPY 150 billion, and for the vaccine as well you showed JPY 200 billion, so I was wondering why it wasn't presented in the same way. But I understand based on your explanation.

We haven't lowered our expectations.

Understood. Thank you. Also, regarding the JPY 200 billion for the vaccine, this is global, correct? Not just influenza in Japan? Because JPY 200 billion would exceed the entire Japanese influenza vaccine market, so I was wondering how that estimate was derived.

Yes, that is global. In vaccines, even more so than oncology, this is an area where we don't have strong capabilities on our own. So we would likely consider partnering at some point.

So after partnering, if things go well, it could exceed JPY 200 billion at peak, that's the kind of potential you're referring to?

Next, Mr. Wada from SMBC Nikko Securities, please go ahead.

Wada from SMBC Nikko Securities. Thank you. First, I'd like to ask about costs. You showed a slide on earnings management on page 28, and I think I have a general sense of R&D expenses based on your earlier answers. But how should we think about SG&A expenses? Looking at the situation, since for the existing products and for enzomenib and nuvisertib you're pursuing a partnering model for development, my impression is that SG&A wouldn't need to increase that much. Could you share your view on that?

Your understanding is correct. We haven't provided detailed figures this time, but for SG&A, while there will naturally be some increase in line with sales growth for currently marketed products, we are basically thinking in terms of maintaining the current level. Within the period through FY 2028, the 3 oncology products would not represent a major SG&A burden, and by that time we expect to have partners involved as well.

Thank you. Next, regarding the assumptions behind peak sales. For the 2 oncology assets, you've indicated over JPY 100 billion for enzomenib, and then an additional JPY 100 billion through indication expansion. Is the current JPY 100 billion assumption based on both relapsed/refractory monotherapy and first-line combination therapy combined?

Yes, that's correct. In addition, based on our conference presentations and external feedback, we've received several suggestions that there may be other potential indications. We are currently conducting research in those areas as well, so in total we believe it could potentially exceed JPY 200 billion.

Thank you. Regarding nuvisertib, for the under consideration indication expansion, can you comment at all on what that might involve?

I can't go into detail at this point, but we are looking to expand indications within myelofibrosis, and at the same time, we're also exploring the possibility that it could be extended beyond myelofibrosis. We'll share more when the timing is appropriate.

Thank you. Lastly, on regenerative and cell therapy. I believe you're currently advancing iPS cell development in the US, in Phase I. Are you planning to pursue a development partnership there? Given that BlueRock appears to be ahead in the US, possibly already in Phase III, it seems like you may need to accelerate development. Could you comment on your development strategy?

As you mentioned, BlueRock is ahead in the US. However, in Japan we are on track to obtain approval, albeit conditional and time-limited approval. For cell products, it's not just efficacy and safety. CMC, meaning manufacturing processes and quality control, is a major issue. Within the conditional and time-limited approval framework, we believe we can clear those hurdles. So while being behind in clinical development is certainly an important factor for long-term business success, we don't believe it is necessarily critical. We think we can catch up. Therefore, in the US, with the funds secured through this capital increase, our basic stance for now is to continue development in-house.

Next, Mr. Hashiguchi from Daiwa Securities, please go ahead.

Hashiguchi here. Thank you. First, how does this capital increase change what you will do over the next 3 years? For example, regarding the capital allocation shown on page 29, especially the growth investment portion, could you explain concretely how the amounts would differ with and without the capital increase? My sense is that the bigger meaning might be enhancing business sustainability over the next 3 years, even in the event of unforeseen circumstances, and that perhaps the figures on page 29 themselves wouldn't change that much. That's why I'm asking.

Thank you for the question. I understand that we haven't shown what the numbers would look like without the capital increase, and in that sense I apologize. But we have structured everything on the assumption that the capital increase will take place, so we're not in a position to present alternative figures. However, if you look at this year's R&D expense, which is in the JPY 40 billion to JPY 45 billion range, multiplying that by 3 years doesn't get you anywhere near JPY 180 billion. I think that makes the point. As I mentioned earlier, in the area we call CNS, we are conducting research but have significantly limited development investment. With this capital increase, we would be able to activate that area. So from a future growth investment standpoint, that's a very meaningful shift. Also, for the 2 oncology products, having this capital increase means we can continue development without slowing down while we secure a solid partner. Qualitatively, that's a very significant point.

Thank you. Second, on page 29 under capital expenditures and investments, you mention strengthening investment in the regenerative and cell therapy business. Are you considering the possibility of changing your equity stake?

At this point, nothing has been decided. In terms of how we inject R&D funds into RACTHERA, some of that is structured as capital contributions, which is why we describe it as investment and financing. So while I'm not ruling out the possibility you mentioned, there is currently no specific plan in place, nor are we targeting anything concrete.

Thank you. Finally, on page six, regarding the 2 oncology assets, you explained that at the VIP stage you would decide between partnering and in-house development. In the Q&A that followed, you emphasized that partnering is the core approach. But under what circumstances would you realistically choose in-house development? What would have to happen for that to become a possibility at this stage?

As I've said repeatedly, our basic approach is to pursue partnering in order to accelerate development and maximize value. At the same time, as we've explained before, we are not considering a simple license-out. Any partner will have its own development strategy, and if we cannot reach agreement on the framework we're seeking, meaning a combination of commercial and development collaboration, or if timing becomes an issue and things are likely to be delayed, then being prepared to proceed with in-house development gives U.S. leverage to secure a better partner on better terms. That's the context of that comment. Fundamentally, our axis is partnering.

Thank you. So even if sales and profits exceed expectations and your R&D budget could increase further, you're not really considering in-house development at this point, is that correct?

Yes, that's correct. As you know, in oncology we do not currently have a fully established late-stage development or commercial infrastructure. We are well aware of that. To maximize the business, we believe a strong partner is preferable.

Mr. Wakao from JPMorgan Securities, please go ahead.

Wakao from JPMorgan. A few follow-ups, please. First, regarding accelerating development, you've already presented data for enzomenib and nuvisertib, so we understand they appear promising. The universal vaccine is also starting to generate data, which is encouraging. But for other pipeline assets, for example, 3124, when do you expect data to come out? If there's anything expected during FY 2026, could you share that?

We can't disclose data until it's sufficiently consolidated, but for 3124, data has been gradually accumulating on our end. I believe there will be an opportunity sometime next fiscal year to present it in a reasonably consolidated form.

Understood. Thank you. Second, regarding ORGOVYX peak sales in the 2030s, could you provide a bit more detail on the assumptions behind that number? Relative to the current market share, what level of share are you assuming at peak? If IRA-driven price reductions are factored in, it's not straightforward to assume that revenue growth simply equals share expansion. Could you elaborate on the assumptions?

If I go into too much detail, particularly in the US, it could be interpreted as a commitment, so I'll refrain from that. However, we have incorporated into our mid- to long-term projections factors such as reduced burden under the IRA small manufacturer provisions and potential price renegotiations.

Understood. One more question, regarding this year's revision. You mentioned that GEMTESA is exceeding the initial plan in terms of sales. How about ORGOVYX? Based on progress through Q3, I would have thought ORGOVYX might also exceed your U.S. dollar-based plan. What's your view?

For ORGOVYX, it is not exceeding the plan, but sales are progressing in line with our expectations.

So, given that cumulative progress through Q3 has been strong, does that mean the Q4 sales will decline sequentially from Q3? We had a similar discussion last year, and in the end it didn't really decline that much. So will it decline this time? Just to confirm.

In Q3, December sales were particularly strong, and inventory built up. We viewed that as some pull-forward. And as you know, Medicare resets in January, so every year our North America business typically weakens in Q4. Taking that into account, it's in line with our plan.

So we should assume there's essentially no upside risk?

You can assume it will come in as planned. By plan, I mean the figures we've previously communicated.

USD 1,020 million, correct?

Yes.

Understood. In that case, Q4 will dip, which feels a bit counterintuitive, but we'll look at the actual results. Thank you.

Just to add, this doesn't mean ORGOVYX is losing momentum long term. We view this as purely seasonal.

Next, Mr. Muraoka from Morgan Stanley MUFG Securities, please go ahead.

Thank you. This is my second question, Muraoka from Morgan Stanley. Actually, I was thinking along the same lines as Mr. Wakao. My impression was that ORGOVYX in Q1 to Q3 didn't look weak exactly, but at least not showing much upside. Your explanation makes sense, inventory swing and the Medicare reset; I understand that. But at the end of January, during the Q3 call, I think you mentioned that at some point growth would begin to lap itself, as we get past the one-year mark. Should we assume that effect is starting to show to some extent? Or is it more a case of, no, growth can still continue strongly? If you could give U.S. a sense of the tone or color around that, it would help.

Speaking just in terms of color, last year, comparing FY 2025 to FY 2024, the lowering of the IRA out-of-pocket cap was a strong tailwind for ORGOVYX. Between FY 2025 and FY 2026, there isn't a comparable structural change at the base level. So I think you should view this as a more normal growth phase.

Even if it's normal, we're not talking about, say, less than 20% year-over-year, but still maintaining a certain level of momentum, that kind of image is fair, right?

We'll provide more detailed numbers when we present next fiscal year's budget, but I don't think it will deviate significantly from the kind of figures you're suggesting.

Understood. Thank you. One more question, sorry to keep pressing on the parent company topic, but regarding Sumitomo Chemical's debt guarantee. At the end of January, I recall there was an exchange along the lines of, "Will you resume dividends?" and the response was, well, there's also the debt guarantee issue, and so on. If the new share issuance is successfully completed and roughly JPY 140 billion in capital is raised, should we think of that timing as essentially coinciding with the removal of the debt guarantee?

Yes, just as you said, we are in discussions with our main bank to remove the debt guarantee at the time of the public offering.

In that case, early resumption of dividends, would that timing become a fairly likely point at which the necessary conditions are in place?

Dividends are a very sensitive matter, so I can't comment specifically. But you can understand that one of the constraints that had been in place regarding dividend resumption would be removed. Beyond that, we will consider the overall situation in deciding when to resume dividends. As I've said, we take the issue of dividend reinstatement very seriously and would like to do so as soon as possible.

If there are no further questions, we will conclude the Q&A session for analysts and investors. We will now move to the Q&A session for members of the press. Analysts and investors may leave at this time. Thank you for your patience. We will now begin the Q&A session for the press. This session will run until 7:20 p.m.

First, Mr. Okada from Yakuji Nippo, please go ahead.

Thank you. Okada from Yakuji Nippo. Regarding the financial KPIs in Boost 2028, items such as core operating profit, free cash flow, and interestbearing debt that were part of Reboot 2027, those appear to have been changed or reorganized. Should we understand that the targets under Reboot will be achieved in 2027 and that performance will further improve in 2028?

First, the positioning of Reboot and Boost is different. Reboot was about how to recover from a management crisis. Boost is about moving into a growth phase going forward. So the positioning is different, and we have reorganized the KPIs accordingly. The ones we are presenting now should be viewed as the new KPIs. As for 2027, we will have largely achieved the Reboot targets within this fiscal year. From here on, we will aim for the KPIs under Boost. For example, with ROE, we intend to manage the business with a benchmark of 10% or higher throughout the period. As for sales and R&D expenses, you should think of them as gradually increasing over the 3-year period. Sales are presented as a target figure rather than a 3-year cumulative number but striving toward that target will serve as one of our key management indicators.

Understood. Thank you. Regarding MYFEMBREE, are there any sales targets for the 2030s or other figures you can share?

As shown in the graph, MYFEMBREE is not expected to be a particularly large product, on the order of JPY 10 billion plus. We don't expect it to grow significantly from here. However, we're not in a position to provide specific numbers at this time.

Understood. Thank you. Lastly, regarding headcount going forward, do you have any targets or direction on staffing?

We currently have around 3,100 employees on a consolidated basis. In some areas, workloads are becoming quite tight, so we may consider modest increases. However, to be candid, we are not planning to significantly expand the overall size of the workforce. Detailed workforce planning will be addressed in the new mid-term business plan.

Next, Mr. Ishii from Iyakutsushinsha, please go ahead.

[ Ishii from Iyakutsushinsha ]. First, on R&D expense, do you have any targets looking further out, for example for 2030 or a bit beyond?

I'm sorry, but at this point we have not set specific targets for R&D expense for 2030 or the early 2030s.

Understood. Next, on the CNS area, could you be a bit more specific about what kinds of diseases you're referring to?

We're looking at several diseases. For example, Parkinson's, which we're also pursuing through regenerative medicine. And epilepsy-related, related isn't quite the right word, but rare diseases around epilepsy as well. Some of those are concrete targets where we are currently advancing clinical development.

Understood. And then, you mentioned the restructuring of the Asia business. Could you explain in more detail what form that is taking, and how you're thinking about it?

The restructuring of the Asia business has already been completed. What we used to call our China, or Asia-Pacific, business, including Thailand, Singapore, and Malaysia, has been carved out into a separate company. That company has been reorganized so that Marubeni holds 60% and we hold 40%, and the business will be led by Marubeni. On the other hand, that region is primarily a business centered on the antibiotic Meropen, and we will continue to supply Meropen.

Next, Ms. Kimura from Nikkei BP, please go ahead.

Thank you. Kimura from Nikkei BP, Nikkei Biotechnology. First, regarding the upward revision this time, would you characterize this as having moved past the so-called Latuda cliff? How do you view that?

In terms of sales, we believe we have moved past the Latuda cliff. Our revenue scale is now nearly comparable to the period when Latuda was still contributing. On the other hand, the Latuda cliff, meaning the large loss recorded in FY 2023, did leave damage on our financial position, and that impact still remains. With this public offering, we intend to clean that up or rather restore our financial footing. Once that is completed, we believe we can truly say we have overcome the Latuda cliff and are back on a genuine regrowth trajectory.

Thank you. On the new share issuance, you touched on this earlier, but is it correct to understand that the main objectives of this capital increase are the 2 oncology assets, CNS, and also addressing the deficit from FY 2023? Just to confirm.

Strengthening our financial base is one key objective. That includes addressing the residual impact from the losses. At the same time, for growth investment, future development investment, it's not limited to oncology. We intend to firmly advance R&D in CNS, infectioU.S. diseases, and regenerative and cell therapy. We're not assuming anything particularly large-scale, but we also want to retain flexibility for in-licensing or capital expenditures as needed.

So rather than placing a heavy emphasis on one specific area, the idea is to deploy the funds broadly?

Yes, that's correct.

Thank you. This overlaps somewhat, but regarding why now, earlier you mentioned that it makes it easier to formulate medium- to long-term strategy. Could you elaborate a bit more on why you judged that this timing is optimal?

At present, we do not have a conventional mid-term business plan. We have been managing the Company under Reboot, which we announced last year. Since we achieved that 3-year plan in just one year, this is the timing when a new plan is required. That is why we announced Boost. In doing so, we believed that unless we incorporated financial base strengthening, including enhancing R&D spending, into the overall strategy, Boost would not fulfill its intended purpose. In other words, the public offering is one of the assumptions underpinning Boost. If not at this timing, our medium-term plan would effectively be left in an opaquestate. I hope you understand that context.

Next, Ms. Takeuchi from The Nikkei, please go ahead.

Takeuchi from the Nikkei. I'd like to ask about how we should view Boost 2028. You mentioned that the next formal mid-term business plan would be formulated once the direction of partnering for the 2 oncology assets is decided. Should we expect that to be announced at a timing that overlaps with Boost 2028? And at that point, would you set new KPIs?

I can't specify the exact timing today, but I believe we would formulate the new mid-term business plan at a timing that overlaps with Boost. Let me also add a bit to what I mentioned earlier. As I said, we needed a new management policy. One of the key issues at that time was strengthening our financial base. Through discussions with varioU.S. stakeholders, we confirmed that if this capital increase is successfully completed, it can be positioned as refinancing securities for our outstanding bonds. And as I explained earlier, it would also allow U.S. to resolve the parent company's debt guarantee. I'd like to add that those conditions aligned at this timing.

Thank you. Regarding the conditions for resuming dividends, you previously cited the debt guarantee as one of the conditions. By the time you announce the next mid-term plan, would dividends already have been reinstated?

The timing of the mid-term plan and dividend resumption are not necessarily linked. We would like to resume dividends as soon as possible, and we also want to formulate the mid-term plan properly. They could coincide, or they might not. I'm sorry that's not a very clear answer, but we want to move forward on both as quickly as we can.

Understood. One more point, regarding how you present earnings guidance. Since performance deteriorated, particularly for the 3 U.S. products, you've tended to issue relatively conservative forecasts, and this fiscal year you've revised guidance upward 3 times. Are there any changes in how you're thinking about providing guidance going forward?

During the very difficult period, when we repeatedly fell short of our forecasts, we received considerable criticism, and we take that very seriously. We are not intentionally guiding low, but we do intend to continue providing conservative forecasts.

Next, Mr. Horiguchi from the Nikkan Yakugyo, please go ahead.

Horiguchi from the Nikkan Yakugyo. Previously, I believe you indicated that expanding the diabetes pipeline was a challenge. In Boost 2028, however, the focU.S. appears to be on CNS and oncology. Does this mean that strategic expansion of the diabetes pipeline is not included? And has your focU.S. area shifted more toward CNS and oncology? Could you elaborate on that?

Thank you. As I may have mentioned during the Q3 results briefing, historically one of our major challenges has been the mismatch between our R&D focU.S. areas and our commercial focU.S. areas. In Japan in particular, diabetes remains one of our key commercial focU.S. areas. On the other hand, in R&D we are concentrating on oncology, regenerative medicine, and CNS. That said, we have a very strong commercial platform in diabetes in Japan. So if there are opportunities that would complement that strength, or that would be well-supported by that infrastructure, we would not rule out sales partnerships or in-licensing in diabetes or related areas from the outset. If it makes good business sense, we would certainly consider it.

Thank you. One more question. Earlier you mentioned that in terms of revenue, you believe you've moved past the Latuda cliff. With this public offering, what specific financial issues would need to be resolved for you to say you have fully overcome the Latuda cliff? Could you elaborate?

There are a few elements. First, as shown in the financial KPIs, our equity ratio is still at a level that is somewhat low for a pharmaceutical company. Moving closer to around 50% would be one benchmark. While our P&L figures, such as sales, are very strong, on the financial side we still have issues such as subordinated bonds and the parent company's debt guarantee. Those did not exist when Latuda was at its peak. Resolving those issues would be one of the conditions for saying that we have fully recovered.

Next, Mr. Tomiyama from the Yomiuri Shimbun, please go ahead.

Tomiyama from the Yomiuri Shimbun. Regarding raguneprocel, you mentioned in your remarks the challenge of how to establish it as a viable business. Specifically, could you explain what the key challenges are to making it sustainable as a business?

Thank you. First, although this is not entirely within our control, unless sales rise sufficiently and the product generates profit, it cannot be sustained as a business. In that sense, one key point is working to secure an appropriate drug price. With a typical oral or injectable drug, once it's launched, if it's good, it can be adopted broadly. This product, while physically small in size, is a transplant therapy. That means we also need to build out the hospital-side acceptance framework, or perhaps more accurately, the treatment delivery system. Only when that infrastructure is established and begins functioning efficiently can it be used by many patients, and from the Company's perspective, become a viable business. The latter part I mentioned is something we are experiencing for the first time, and there are still significant challenges. In parallel, we also need to move from conditional and time-limited approval to full approval. So while this is a major milestone, it also comes with new challenges.

A related question, do you expect the drug price to be calculated based on cost? And given that this is a cell-based product, manufacturing cost control seems like an important issue. Could you comment on those 2 points?

It's difficult to comment definitively at this stage, but our assumption is that the drug price would be calculated based on cost. That said, discussions are still ahead. As for manufacturing costs, that is within our control. We are examining varioU.S. ways to reduce costs, such as increasing production scale and further promoting automation. We believe we have established the necessary technologies to move in that direction.

Next, Mr. Sakaguchi from Iyaku Keizai Sha, please go ahead.

Sakaguchi from Iyaku Keizai Sha. Thank you. Just one question. You said Reboot was achieved in one year. Would it be fair to say that this was partly because sales exceeded expectations, and partly because you may have gone a bit too far with structural reforms?

I wouldn't say we went too far, but it's true that sales exceeded our initial assumptions, and the structural reforms delivered solid results. That's true not only in terms of expenses, but also because the remaining employees in both Japan and the U.S. have been working very efficiently. I think that's been a major factor.

Earlier, you mentioned that in the next mid-term plan you may consider increasing headcount. In that sense, would it be fair to say that staffing was reduced quite significantly?

Let me be clear, we are not considering any significant increase in headcount. When we implemented voluntary retirement programs, reductions were based on individual applications. As a result, in some departments staffing declined more than expected, while in others it did not decline as much as anticipated. We have, of course, reallocated personnel where possible, but not everyone can perform every role. So in certain departments we still face shortages, and we intend to reinforce those areas appropriately. At the same time, as new oncology and regenerative or cell therapy products are launched, new types of work will arise, and we expect additional personnel will be needed in those areas.

Next, Mr. Sakata from Yakuji Nippo, please go ahead.

Sakata from Yakuji Nippo. Just one question. Under Boost, when you reach FY 2028, how do you envision the domestic business? Currently, domestic sales are just under JPY 100 billion. What will that look like at the end of the period?

By that time, new oncology products should have been launched, and for regenerative and cell therapy, such as Parkinson's with raguneprocel, we should be approaching full approval. However, in terms of the actual product mix, I don't think it will change dramatically. Even if oncology products are launched, sales would not yet be very large. So in terms of overall revenue scale, I would expect it to be roughly around the current level, just under JPY 100 billion, perhaps around JPY 100 billion. This is more of a general sense, as it's not the right timing to disclose detailed segment-level forecasts.

Next, Mr. Kuriyama from Yakuji Nippo, please go ahead.

Kuriyama from Yakuji Nippo. As I think about the key to success for this 3-year plan, and for the full-fledged mid-term business plan that will follow this bridge plan, it seems that overseas sales of ORGOVYX and GEMTESA are, barring some fluctuations, relatively predictable in terms of growth. On the other hand, whether the 2 oncology assets succeed as expected appears to be a major variable. Depending on whether they succeed or not, the nature of the plan itself could change significantly. How do you view that?

Thank you for the question. This relates to the previoU.S. question as well. During the Boost period, from FY 2026 to FY 2028, our fundamental product portfolio will not change significantly. Over the past 3 years, we had a number of products each year facing LOE or loss of exclusivity, or contract terminations, which created a complex situation with both positives and negatives. Over the next 3 years, however, the situation will be much more stable. In that sense, whether the 2 oncology products that are expected to drive growth beyond this period, as well as our regenerative and cell therapy programs, progress smoothly will be a very important factor. However, through FY 2028, we view this as a period that we can forecast with a high degree of certainty, and one in which we can deliver results that do not depend on the 2 oncology products.

Thank you. Looking beyond that, I understand you want to bring the 2 oncology partnerships to a successful conclusion. Around when should we expect sufficient clarity on their value and partnership direction, and therefore be able to see the next mid-term plan take shape?

In terms of oncology partnerships, the timing will likely be around when the next set of consolidated data becomes available, so roughly in H2 of FY 2026 through early FY 2027. As for the mid-term plan, we do not intend to wait until the contracts for the 2 oncology assets are fully finalized, or until a final decision on in-house development is made in the unlikely event of that scenario. Rather, once the direction becomes clear, we would begin formulating the plan. So please understand that it does not necessarily mean we would only begin in 2027.

Thank you. Are there any other questions?

If there are no further questions, we will conclude the Q&A session. This concludes the Boost 2028 - Accelerating Strong Sumitomo Pharma briefing session. Thank you very much for your participation today.

We will now begin the R&D meeting of Sumitomo Pharma Company Limited. Thank you very much for joining us today. First, I will explain our R&D progress, basic policy and two major oncology products using the presentation material available on our website, followed by a question-and-answer session. The end time is scheduled for 15:40.

In attendance today are Mr. Kimura, Representative Director, President and CEO, Mr. Sakai, Representative Director, Executive Vice President; Ms. Sato, Managing Executive Officer; and Mr. Murata, Global Strategy Oncology Lead.

First, Mr. Kimura will say a few words.

Thank you very much for attending our R&D presentation today. I would like to say a few words at the opening of the meeting. Last Friday, the 13th, the agenda for the Regenerative Medicine Products and Biologics Technology Subcommittee of the Pharmaceutical Affairs Council of the Ministry of Health, Labor and Welfare, scheduled to meet on February 19, was announced. Non-autologous iPS cell-derived dopamine neural progenitor cells for which we have applied for approval were also on the agenda. Since the product name AMCHEPRY is to approved by the subcommittee, we had not disclosed it before. But on the 13th, we disclosed that this is our product. The subcommittee will discuss the approval of AMCHEPRY, and then a final decision will be made by the Minister of Health, Labor and Welfare at a later date. We will keep you informed of any developments in this regard.

Now let's move on to today's presentation. First, Sato will explain our R&D progress and basic policy. Ms. Sato, please proceed.

Thank you very much. My name is Sato, and I am in charge of R&D. Thank you. See Page 4. Last May, we published Reboot 2027. With this, we have declared that in parallel with the continuation of fundamental structural reforms, we will work to rebuild our foundation as an R&D-oriented firm and pave the way for revival by rebuilding a value creation cycle based on our own innovations. Here is the status of achievement of R&D milestones aimed for FY '25. Murata, will explain the progress in the oncology area later. In the area of regenerative medicine and cell therapy, as Kimura just mentioned, the Regenerative Medicine and Cell Technology subcommittee is scheduled to deliberate on our product this week. In the area of infectious diseases, we are currently conducting Phase I trials of a universal influenza vaccine. We reported last fall that an interim analysis confirmed that the new adjuvant was well tolerated and that antibody titers increased, suggesting the efficacy of the vaccine. We are continuing to analyze cross-reactivity and viral activity to confirm universality.

Here is our pipeline list. We have shown you about regenerative medicine for Parkinson's disease. You are aware that we are conducting a confirmatory and application study on enzomenib. Other than that, there are no late-stage development items, but rather a pipeline of early-stage development products and how to move this forward is an urgent and important issue for our company. We describe our basic R&D strategy here. We would like to turn the value creation cycle around by discovering new value through in-house drug discovery research, creating value through clinical development and maximizing value. Our basic strategy is to maximize and accelerate opportunities by selecting and focusing on our core disease areas of oncology and CNS, with our strengths in small to mid- molecular drugs and iPS-derived cells as our modality axis. We will implement an agile exit strategy with a strong emphasis on acquiring patient signals early, with a firm focus on identifying the value tipping point.

However, I just mentioned that the core disease areas are oncology and CNS. We recognize that both of these areas have a large number of patients, that unmet medical needs continue to be high, and that the use of small molecule drugs and regenerative cells is advancing in these areas. We recognize our strength in the design, synthesis, and development of small to mid-molecular drugs and our ability to handle highly challenging target molecules. On the right side, we have shown the results of obtaining priority review designation from the FDA since 2012.

Five items are listed here, items for which we have acquired the designation. They are all low to medium molecular weight. We recognize that this number is one of the highest among domestic pharmaceutical companies. In oncology and CNS, there are many targets that have been difficult to target with traditional modalities. We believe that we will be able to take advantage of our technological capabilities through the functionalization of small molecule drugs and the use of iPS cells, a cutting-edge modality. In addition, as we have shown here, we have several substantial translational technologies that we believe will allow us to proceed with development with a high degree of certainty of clinical success.

We will further expand and augment our oncology R&D pipeline with existing pipelines such as ORGOVYX, enzomenib, and nuvisertib. We would then like to establish a CNS research pipeline with continuity while monitoring the progress of development of raguneprocel. Here is some information from the Policy Research Institute's newsletter about the competitiveness of synthetic small molecule drug discovery. We chose Japan and the U.S. as the countries of creation. The vertical axis shows the number of approved products globally, and the breakdown by modality is shown by time period.

What this shows is that Japan's synthetic small molecule drug discovery capabilities are declining as a result of shifting its focus to new modalities.

Although new modalities such as antibodies have been introduced, the current number of approved drugs does not significantly compensate for this. Meanwhile, synthetic small molecules, shown in black, continue to be approved in the United States. The number of approved synthetic small-molecule drugs has been maintained while the number of new modalities has increased. We recognize that the information supports the possibility that synthetic low-molecular-weight drugs may continue.

Here you see our expansion strategy in the field of oncology. Tier 1 is "leverage our in-house products." We are working to ensure the continuity in the field of prostate cancer franchise as a next-generation drug creation starting from ORGOVYX. Tier 2 is "leverage our in-house pipeline." We will continue to expand our hematopoietic malignancy pipeline by utilizing the knowledge and information obtained through the promotion of enzomenib and nuvisertib development and indication expansion activities.

Tier 3 is "leverage our in-house technology platform here, liposomal nanomedicine technology. We intend to build a pipeline utilizing this technology while continuing to validate the technical basis of the SMP-3124 technology and the targets of the encapsulated compounds. Here is a brief history of the creation of enzomenib. We have discovered drug targets through co-creation with academia. Enzomenib was created by combining the discovery of new target binding sites, the ability to design compounds that bind efficiently, and the ability of organic synthesis to actually create compounds that can be industrialized.

In addition, in anticipation of fierce competition, we have created this compound by promoting drug discovery activities that emphasize high pharmacological efficacy and avoidance of cardiotoxicity. This is our drug discovery strategy for acute myeloid leukemia AML. We are currently developing enzomenib for KMT2A reconstitution and NPM1 mutation. Next-generation menin inhibitors are intended for patients who do not respond to existing menin inhibitors or who relapse. We are also working on the discovery of another compound that can cover a different mutation than enzomenib. Ultimately, we hope to build a pipeline group that will cover about 70% of the total.

SMP-3124. In this regard, we discovered a drug target through co-creation with academia, and found that CHK1 inhibitors are the optimal target for ovarian cancer. Development of existing prior CHK1 inhibitors has stalled. Focusing on the fact that the lack of efficacy is not the reason for this, but rather the narrow safety zone, we have developed the concept of using liposomal nanomedicine technology to ensure a safe zone through sustained release and drug accumulation effects on cancer tissue. In addition, we found this compound based on the concept of designing and synthesizing an encapsulated compound suitable for the physical properties of liposome formulations.

We are currently confirming this concept in a Phase I study. I would like to move on to the drug discovery strategy in the CNS area. In the CNS area, drug development leading to treatment is stagnant, and medical needs remain over the long term. We recognize the high degree of difficulty in drug discovery and the high barriers to entry for other companies. We would like to steadily develop drug discovery by utilizing our long and abundant experience, as well as the assets and strengths we possess.

Tier 1 is a group of products that are expected to have a high probability of clinical success. These are compounds that have unique actions that are clearly supported by their therapeutic effects and that differentiate them from existing drugs. We would like to proceed to confirm the effectiveness concisely by utilizing objective indicators. We will soon begin clinical development of DSP-0378, a drug for rare epilepsy, and a drug candidate for improving motor symptoms of Parkinson's disease.

Tier 2 is for disease-modifying drugs for neurodegenerative diseases. This is an area where pathophysiology is being elucidated, and it is becoming possible to identify drug targets to be addressed. We are in the process of creating several disease-modifying drug candidates, mainly for Parkinson's disease.

Tier 3 is a group of drugs for the treatment of psychiatric symptoms associated with neurological disorders. The experience and assets accumulated in LATUDA and ulotaront will be used for neurodegenerative diseases. We would like to detect efficacy signals early by utilizing biomarkers in diseases with homogeneous backgrounds. These are all at very young development stages, and our urgent task and goal is to focus on early clinical development and generate late-stage development items. Here is the history of the discovery of DSP-0378. Our experience with the older antiepileptic drug EXCEGRAN, as well as other development experience, has provided us with a library of compounds suitable for this classification, from which we found the starting compound for this agent.

We have also identified optimal compounds and points of action for refractory epilepsy through clinically relevant phenotypic screening and multiple pharmacological evaluation systems. It acts on targeted GABAA receptors with clinically proven efficacy. We confirmed that this has a unique action that is different from existing drugs and also identified translational biomarkers. We are currently in the process of initiating a study to look at efficacy signals while confirming safety for patients. Based on the above, the world's first practical application of iPS cell-derived products will be approved at the end of this fiscal year, with a time limit on the condition that it be in Japan. We hope to steadily proceed with Phase IV testing based on this.

In addition, we will steadily advance the development of two oncology products, enzomenib and nuvisertib, on which we are focusing our efforts, in order to bring them to the market as valuable drugs.

In the first half of the 2030s, we will continue development so that we can launch the iPS cell-PD program in the U.S., as well as DSP-0378, which I explained earlier, and a drug that improves the symptoms of Parkinson's disease. We will continue to make steady progress in the next generation of oncology and CNS products, as well as in the expansion of our regenerative and cellular medicine business, and make a strong contribution to the rebuilding of the value creation cycle of our group.

That's all from me. Thank you very much.

Thank you very much, Ms. Sato. Next, Murata will explain about the 2 major oncology developments. Mr. Murata, please proceed.

Thank you very much. Sato has just introduced the expansion strategy for the cancer strategy. Today, I would like to introduce our efforts to obtain and expand the indications for enzomenib and nuvisertib in Tier 2, "Leverage our in-house pipeline."As for data for enzomenib and nuvisertib, we are mainly using data presented at the American Society of Hematology meeting last December. So perhaps some of you have already heard about its contents. I would like to take this opportunity to explain again how we perceive the data and to present the possibilities of these two drugs.

The first is enzomenib. The mechanism of action is selective menin inhibition. The development phase is currently in Phase II. The planned indication is acute leukemia. Among them, we believe that patients with acute leukemia, such as those with specific genetic mutations called KMT2A rearrangements and NPM1 mutations, will be targeted.

First, let me briefly introduce the diseases those cover. We have summarized it here under the title Disease Background of Acute Myeloid Leukemia. The cause of this disease is that hematopoietic stem cells in the bone marrow contain progenitor cells that differentiate into myeloid cells, which become cancerous when accompanied by some genetic mutation, leading to leukemia. As the name "acute" implies, this is an intractable disease that progresses very quickly and has a very poor prognosis if it relapses. Although the number of new patients is small 21,000 in the US and 8,000 in Japan, once the disease develops, about 50% of patients will have recurrence, and the 5-year survival rate is about 30%, making it a disease with a very poor prognosis.

So the medical need for this is very high.

This is a summary of what treatments are currently being offered and how they are producing clinical results. Basically, the treatment for acute leukemia, developed about 40 years ago, is to thoroughly tap the leukemia cells with a powerful anticancer drug. The treatment strategy is to achieve remission through this process, followed by bone marrow transplantation to restore normal hematopoietic function. On the other hand, because powerful anticancer drugs are sometimes used, it is estimated that 5% to 10% of patients die as a result of treatment, and there is a high unmet need for patients who cannot tolerate strong anticancer drugs.

Safer treatments may also be desired by patients who can tolerate strong anticancer drugs. Listed to the right are the genetic mutations that cause acute leukemia. Since there is some overlap, the total is more than 100%. Several agents that act on some genetic mutations have been developed since around the 2010s and have been in clinical use since around 2015. IDH1/2 and FLT3 have been approved and used since the mid-2010s, but response rates for these treatments are also only 20% to 30%. Although approved drugs for patients with NPM1 mutations and KMT2A reconstructions the bottom line have emerged in recent years, our analysis indicates that the level of treatment satisfaction is not high. So we believe that the medical need for this continues to exist.

Our initial strategy for enzomenib is to target the first indication based on the results of single-agent efficacy and safety studies in patients with relapsed or refractory disease. After that, we would like to have enzomenib used to treat the entire leukemia. We would like to work on obtaining a three-drug combination indication for induction of remission therapy in patients with first-episode disease, particularly combining enzomenib with the two-drug combination of venetoclax/azacitidine.

We also hope that enzomenib can be used for maintenance therapy leading up to bone marrow transplantation or continuing treatment to prolong the prognosis by maintaining the disease in remission for a longer period of time.

This page shows the mechanism of action of enzomenib. Among the genetic mutations that cause leukemia, KMT2A-rearranged leukemia of menin is a mutation that fuses the molecule KMT2A with menin. In patients with this mutation, the structural activation of the gene cluster listed here causes the progenitor cells that would otherwise differentiate to stop differentiating and start proliferating, resulting in leukemogenesis. Similarly in the NPM1 mutant form, NPM1 mutations in this area activate this function and lead to leukemia. The mechanism of action of enzomenib is to disengage this interaction between menin and KMT2A, thereby stopping the aberrant transcription program and normalizing the leukemia.

From here, I would like to introduce the clinical results. The first is the results of a trial of monotherapy for relapsed or refractory leukemia.

The first part of the Phase I study is dose escalation, which is intended to evaluate what dose can be safely administered to a particular patient. After that, we will conduct a comparative study to determine the recommended dosage based on the Project Optimus guideline issued by the FDA. The recommended dose is determined by comparing three doses of 200 milligrams, 300 milligrams, and 400 milligrams per twice daily dose. The efficacy will then be evaluated in a Phase II study. As I said at the beginning, the Phase II study is for patients with KMT2A rearrangements and patients with NPM1 mutations.

First, the results of the evaluation for safety, the objective of Phase I, are shown here. The left-hand side summarizes adverse events with an incidence rate of 20% or greater, and the safety evaluation population includes all patients who participated in the study. There were 116 eligible patients as of last year's October 4 cutoff. On the right are the adverse events that were observed and determined to be related to enzomenib. Only those with an incidence of 5% or more were picked up. The overall frequency of adverse events themselves is low, and no toxicities that could lead to dose-limiting toxicity have been observed in this dose-escalation study.

Fortunately, there have been no cases of treatment-related deaths or discontinuation of treatment due to toxicity. Therefore, we believe that enzomenib can be safely administered and is well tolerated. As Sato mentioned a little earlier in her explanation, we have also devised a way to avoid cardiotoxicity in designing this agent, and we have confirmed that the frequency of cardiotoxicity appearing is also very low.

Next are the results of single-agent efficacy. On the left are the results of the KMT2A rearrangement test. The results of the study to determine the recommended dose as of the October 4 cutoff date were available, and 300 milligrams twice daily has been determined as the recommended dose. So the results we are showing you here are the results of a test at that capacity. The response that will be evaluated as clinically significant for this trial is the Overall Response Rate at the top of the list. In short, in addition to the indicator of whether or not cancer cells are being reduced, what is really meaningful to the patient is what is called the Composite CR rate. This is an indicator that assesses whether leukemia cells are completely gone, together with whether normal hematopoiesis has been restored afterwards.

My apologies, CR + CRh rate below that.

The result is 40%. We consider the 40% result among patients with a very poor prognosis of KMT2A rearrangement, especially in patients with relapsed or refractory disease, to be a very encouraging result for us. Another thing I would like to tell you is the duration of CR/CRh. This is a measure of how long the status can be maintained after leukemia cells are gone. Although the number of cases is still small, we have confirmed that we have been able to maintain that status for about a year. On the other hand, for the NPM1 mutation, we are still in the process of comparing three doses as of the October 4 cutoff. Among them, CR + CRh rate is about 50% to 37%, and duration of CR/CRh is 5.7 months, although the evaluation period is short.

We think this one is also promising to some extent.

Based on these results, we believe that a single agent will provide a reasonable response. Currently, the efficacy is being tested in a Phase II study.

There is one more enzomenib data I would like to present. These are the results of a Phase I study of a three-drug combination of venetoclax and azacitidine plus enzomenib in patients with relapsed or refractory leukemia as a prelude to testing future indications in patients with first-episode AML. This study is divided into part one and part two. In part one, the dose of enzomenib will be increased from 140 milligrams to 300 milligrams to see how well it is tolerated.

In part two, we will hold the base at 300 milligrams and check the response carefully. In terms of the drug interactions of Venetoclax, part one is to check the safety of the three drugs while making sure that the duration of concomitant use of the azole antifungal agents does not overlap, and part two is to evaluate the efficacy and safety of the three drugs in combination while the azole is used in combination. We are doing this stepwise while taking safety into consideration. The next page also shows the safety results. The results of this evaluation are not for all patients, but for 40 patients who were administered in combination.

In both cases, adverse events related to either enzomenib or venetoclax/azacitidine occurred to the extent shown. There have been no additional adverse events with enzomenib beyond the adverse events seen with venetoclax/azacitidine, nor have there been any treatment-related deaths or events that would lead to discontinuation of the drug. It has been confirmed that the three drugs can be administered in combination.

Next is its effectiveness. See CR rate as before. About half of the patients at all doses show a response of elimination of leukemia. While some patients were relapsed or refractory and relapsed on aenetoclax/azacitidine, 50% of patients showed response, which we believe confirms a very high response rate. This is a great encouragement to us. Based on this trial, we are now preparing to proceed to front-line and first-episode patient trials. These are the descriptions of enzomenib. To summarize what I have explained so far, we recognize that in the area of acute leukemia, although therapeutic agents corresponding to genetic mutations have been sequentially approved, the level of treatment satisfaction remains insufficient.

In this context, we are beginning to confirm that enzomenib has efficacy and tolerability as a single agent in patients with certain genetic mutations, as well as efficacy and safety in combination with venetoclax/azacitidine. Therefore, we strongly believe that enzomenib has the potential to be a best-in-class menin inhibitor. We will accelerate the validation Phase II study and aim to obtain approval in Japan and the U.S. for relapsed or refractory acute leukemia. Furthermore, as I mentioned earlier, we would like to promote enzomenib by expanding its indication in the treatment of first-episode acute leukemia in combination with venetoclax/azacitidine, and by pursuing further development opportunities, such as expansion into diseases other than acute leukemia, where the menin molecule is associated with cancer.

These are the explanation of enzomenib. I would like to move on to nuvisertib. Its mechanism of action is inhibition of a kinase called PIM1. This is currently in Phase I/II study. The planned indication is a blood disorder called myelofibrosis.

First, let me explain what myelofibrosis is. This is another disease that occurs in the bone marrow. In the hematopoietic stem cells in the bone marrow, another genetic mutation occurs, primarily a mutation in JAK2, which results in an increase in immature blood cells, and the bone marrow itself becomes fibrotic with a large amount of collagen.

The result is extramedullary hematopoiesis in the liver and spleen outside of the bone marrow because normal hematopoiesis cannot occur in the bone marrow, a tissue very important for hematopoiesis. This can result in symptoms such as swelling of the liver and spleen, an increase in immature blood cells and a decrease in normal blood cells, anemia, inability to stop bleeding when bleeding, and susceptibility to infection.

The number of new cases of this disease is very small: 2,200 new cases per year in the United States and about 600 in Japan. However, symptoms can be difficult to recognize, and about 20% of patients have no symptoms at the time of diagnosis. This is a disease that is difficult to detect, such that some may find out they have the disease when they are diagnosed with anemia during a physical examination.

Treatment involves improving anemia through blood transfusions and other means, as we will briefly discuss later. However, some patients gradually become refractory and eventually develop leukemia. Based on this epidemiological data, the prognosis in the United States is 4 to 6 years after the diagnosis is confirmed, while in Japan it is 3 to 6 years.

The current main treatment for myelofibrosis is ruxolitinib, an inhibitor of JAK, the gene responsible for the disease, which was approved around 2010. For a long time, no drug other than ruxolitinib had been approved, and despite its hematologic toxicity and other side effects, there was no other option but to use ruxolitinib. Recently, however, another JAK inhibitor has been approved, and there are now a few more treatment options. However, there is no therapeutic drug with a mechanism of action other than JAK, and JAK inhibitors are difficult to use in anemic patients, so we believe there is an unmet need in this area. We believe that our nuvisertib has value as a complementary treatment.

Nuvisertib, as I mentioned at the beginning, is an inhibitor of PIM1. PIM1 is a protein located downstream of the JAK signaling pathway that is responsible for the development of myelofibrosis. The JAK signal is divided into several branches, one of which leads to fibrosis, and PIM1 is a factor that is particularly closely related to fibrosis.

This has been confirmed in nonclinical knockout mouse experiments and other studies. What is expected from PIM1 inhibitors is work to selectively stop fibrosis, rather than the broad inhibitory effects that emerge with JAK inhibitors.

In addition to JAK, other factors that affect PIM1 include inflammation-related signals such as NF-kB. Mechanistically, it is also expected to have effects that cannot be obtained with JAK inhibitors.

On the right are the results of the clinical efficacy of a single agent, as presented at the American Society of Hematology meeting. On the left is the effect of the reduction of the spleen. One of the symptoms of patients with myelofibrosis is an enlarged spleen. This is an assessment of how small it would be with a single agent.

We have confirmed that for patients above a certain level, the reduction of the spleen can be observed with a single agent. The right side shows the extent to which the various symptoms associated with myelofibrosis, which I mentioned earlier, have improved. Scores have improved by more than 50% in many patients, and the effectiveness in improving clinical symptoms has been recognized.

In this context, we also considered maximizing the features of nuvisertib. We are conducting a Phase I/II study in patients with relapsed or refractory myelofibrosis in combination with momelotinib, a JAK inhibitor that is relatively easy to use for platelet depletion, to see if the combination could take advantage of our agent's characteristics. In Phase I, the approved momelotinib volume of 200 milligrams will be combined with nuvisertib in doses ranging from 240 to 720 milligrams twice daily to ensure safety and tolerability. In addition, secondary endpoints will include the effect on the spleen, systemic symptom scores, and overall survival.

First, regarding safety, this is data from 18 patients that can be administered and evaluated. Although one patient is showing symptoms of DLT, we believe that it is basically well tolerated. The adverse events observed were relatively mild, either grade one or grade two, and we do not foresee any problems with the combination with momelotinib.

These are the results of a test to confirm whether the product could be administered over a long period of time. The horizontal axis is the administration period. The majority of patients are able to receive the drug up to around 24 weeks, with a discontinuation rate of 28%.

A Phase III study, the MOMENTUM study of monotherapy with momelotinib alone, did not show a higher discontinuation rate than this study, which also confirmed that the safety of the combination is not compromised. This is an evaluation of the effectiveness of the product under combined use.

The left figure shows the improvement of total symptoms and the right figure shows the effect on the size of the spleen. Various red markings are written on it. Patients in this study are those who have relapsed. Patients who responded once to a JAK inhibitor and relapsed, or who did not respond in the first place, or who were unable to receive the drug due to side effects, are being invited to participate in this trial.

We believe that the combination of the two drugs has shown excellent efficacy in improving total symptoms and reducing the size of the spleen. Here is a more detailed view of the scores over time and what kind of scores are changing. What we can tell you is that the major scores improved relatively quickly and that it has been sustained for a long time. Improvements in total symptom scores are not merely small numerical improvements, but improvements in a wide range of items to the level of scores that a healthy person would show, as indicated by the horizontal bar. We recognize that by using the combination of the two, we can see the effect of improving not only one point, but the whole.

Here are data showing the effect of momelotinib combination on improving anemia. We have been able to confirm that hemoglobin levels and platelet levels have remained stable without any decrease due to the combination. In addition, three patients had dramatic improvement in their anemia symptoms, such that patients who had needed blood transfusions no longer needed them. Even with the six patients here, we were able to cut the frequency of blood transfusions into less than half. The improvement in anemia is also very significant for the patient's quality of life. Improvement effects have been observed in these areas, and we believe nuvisertib is promising as an adjunctive therapy.

I will summarize the above. There is no drug approved in the world as a PIM1 inhibitor. If we can move forward with this trial and get it approved, we may be able to demonstrate the potential of this drug to become a first-in-class drug. I believe that we will be able to make a very significant contribution to patients with myelofibrosis by providing them with a treatment option that has a different mechanism of action. As for nuvisertib, as I mentioned earlier, we are in the process of confirming its tolerability and efficacy as a single agent or in combination with momelotinib. Based on these data, we plan to start a validation Phase III trial this fiscal year to provide the basis for an application for approval, with the aim of bringing the product to market as soon as possible.

Since we were talking about myelofibrosis as a disease, fibrosis was the key to the mechanism of action. We believe that we will be able to target diseases other than myelofibrosis. We intend to maximize the value of the novel mechanism of action in accordance with the biology of PIM1. This is the last slide. As our strategy for expansion in the oncology field, today I have introduced Tier 2, "Leverage our in-house pipeline." There are also Tier 1 and Tier 3 activities. We look forward to continuing to make solid progress in oncology R&D. Thank you very much.

Thank you very much, Mr. Murata. [Operator Instructions]. First Mr. Muraoka of Morgan Stanley MUFG Securities.

I am Muraoka from Morgan Stanley. First, let me ask about Enzomenib. Sorry, I don't have a basic understanding. So let me ask a basic question. I kind of understand the concept of combination therapy, mainly in combination with Venetoclax and Azacytidine. Should you not aim to use it in combination with 7+3 regimen? Or is it not a good match?

We expect 7+3 regimen will continue to be used by patients as a high-intensity chemotherapy. So I think it is necessary to continue to examine what kind of effect can be further expected when enzomenib is used in combination with 7+3 regimen.

In other words, you are also going to continue the study of enzomenib in combination with 7+3 regimen, right?

This slide appears to be intended that you are focusing the combination therapy with venetoclax and azacytidine. I will add some background. The doctors are doing a lot of testing to see how much benefit the combination of venetoclax and azacytidine has for patients compared to the 7+3 regimen. Some of the results were also presented at last year's American Society of Hematology Meeting. As evidence accumulates, we expect that venetoclax and azacytidine may become the overall standard of care. However, this is not something that will suddenly change. The 7+3 regimen, of course, has its risks, but it has been well established for over 40 years, and I do not expect it to go away anytime soon. In this context, we believe it is necessary to examine how enzomenib can be used, present data and if it can be used, promote it as well.

Thank you. One more thing about nuvisertib. This may be a bit of a business-oriented question, even though it is an R&D meeting. I think many people are probably wondering if GSK is the future partner when the combination with Momelotinib is going so well. Considering that Jakavi is the standard of care and its patent expires in 2028 to 2029, you may not be able to fully exploit the potential of this drug if you only do the momelotinib combination. You may have to be aware of the ruxolitinib combination as well. But if you were to work with GSK, I imagine that would not be the case. Is this a skewed view?

We are currently confirming the tolerability of the combination with ruxolitinib in a Phase I study. We would like to consider how to proceed with the verification after accumulating more data on how it can be used in combination with ruxolitinib.

Regarding partners, GSK is not the only one.

Sorry, it was not a good idea to ask the question whether you would decide on GSK or not. Is it wrong to think that when ruxolitinib becomes generic in 2028 or 2029 or so, the combination with ruxolitinib must be verified to exploit nuvisertib full potential.

I think you make a very astute point. For many years, ruxolitinib has been used as the golden standard, and clinical doctors have a great deal of experience with the drug. It is a really commonly used drug, so I think it is very important to know if it can be used in combination with such drugs.

On the other hand, as shown in the slide, ruxolitinib has the problem that it cannot be used in patients with low platelet counts due to hematologic toxicity. Considering that this disease itself is a disease that causes anemia and low platelet counts, I am hopeful that momelotinib, which is widely available, may become the standard in the future. Against this background, we were among the first to combine the drug with momelotinib. We do not deny the possibility of ruxolitinib, but for the first time we were able to show data on its use in combination with momelotinib, and we thought it was very valuable, so we presented it at the American Society of Hematology meeting.

One more thing about Tier 1 of the oncology expansion strategy on Page 10. I am not sure what you mean by ensure continuity in the prostate cancer franchise as an extension of ORGOVYX. I don't see many drugs in the area of prostate cancer in your pipeline list. What do you mean?

The pipeline table certainly includes products with the clinical entries. What we mean here is that we are working with the intention of bringing a pipeline to the world that will succeed ORGOVYX while it is still in business period. In our normal presentations, we do not explain much about compounds that have not yet entered clinical trials because there are still some uncertainties. This time, we have gone a step further and explained that we are engaged in such activities.

Thank you. In other words, we can expect to hear some interesting stories in the future in the area of prostate cancer, a solid cancer at a briefing.

Yes. We would like to proceed so that we can do so.

Mr. Wakao from JPMorgan Securities. Please proceed.

My name is Wakao from JPMorgan. The first is about enzomenib. I would like to know your company's view on the concurrent data presented at ASH. I would like to know your assessment of whether this data with comparisons to competing products in terms of safety, et cetera, makes them a competitive advantage?

I think the monotherapy data put out so far has been very good compared to ziftomenib. On the other hand, regarding the relapse or refractory data for enzomenib and the venetoclax and azacytidine data, it is difficult to make an apples-to-apples comparison because the number of cases is not very large, but I think the efficacy is on the same level as ziftomenib.

On the other hand, if I understand correctly, there has been QTC interval prolongation, and I am concerned about safety issues. What is your company's current assessment of this data regarding this combination therapy?

Thank you for your question.

It is difficult to make an apples-to-apples comparison of the combined data. Since the patients in our combination study were relapsed or refractory patients, it was originally difficult to see a response, and we had to combine the three drugs venetoclax/azacitidine and enzomenib. In this context, the CR rate is about 50%. Right now, both NPM1 and KMT2A collectively are at 50%. Without accumulating a little more data on each patient, I think it is difficult to answer definitively how much difference there is. At this point, we do not believe it is significantly inferior to other companies. We are also hopeful that depending on future data, we may have a good enough chance of winning, or even a solid competitive edge.

Regarding the concern about cardiotoxicity, I think it is necessary to carefully evaluate the data, since they are recurrent patients. The target patients for the final combination with venetoclax/azacitidine are assumed to be patients with first-episode of the disease. We would like to examine how well it is tolerated in patients with first-episode disease in the future, and we would like to determine this very carefully.

I believe the other company's product for ziftomenib did not cause QTc interval prolongation in the venetoclax and azacitidine data in a similar patient population. For your company, QTc interval prolongation was seen, is this considered an inferior area compared to other companies?

First, it was finally determined that the QTc interval prolongation that occurred was not a grade 3 or higher event and was not related to enzomenib. However, the event of QTc interval prolongation itself has actually been confirmed, and we have reported this in our presentation. However, we do not believe that QTc interval prolongation is significantly increased by enzomenib.

I understand that you continue to anticipate that this may be the best-in-class in terms of safety. Secondly, I would like to know about nuvisertib. The monotherapy data does not tell us much about the efficacy of monotherapy because the time points for nuvisertib are difficult to compare to data for other drugs. On the other hand, with regard to the combined use, I can see the sense in using them together because I can see a strong kind of add-on effect. Is this drug not so much best-in-class in monotherapy, but is it a drug whose mechanism is different from others so that its value becomes apparent when used in combination?

I took your question to mean how we evaluate the results of the single agent. Since we are testing on relapsed or refractory patients, we by no means believe that it is the improvement of total symptoms or the reduction of the spleen that is bad. We are very excited about the potential of this drug as a single agent, or rather, we believe it has solid potential. To illustrate its position as a development strategy, we have introduced today its use in combination with momelotinib. We believe that this is a chance, as we accept that the added benefit of combining the two products and the combined effect of the two products is being recognized. There continues to be an unmet medical need for patients who have relapsed, even with a single agent, or who have used ruxolitinib as well as other JAK inhibitors and no longer have treatment options. We are interested in the possibility of having it used as a single agent in such places, and this is also under consideration at this time.

I understand, I'm not sure about the monotherapy data because the time points are different from the others. Does your company feel that monotherapy is showing solid results and that data is accumulating to show that monotherapy can compete adequately?

Yes. That is correct.

I understand. Another thing is that you are now accumulating more data to increase the value of your partnership activities. What kind of data, if accumulated, would contribute to increasing the value of each drug? Since data on the combination with Enzomenib is still scarce, I think it will become more valuable as data on the combination accumulates and can demonstrate the potential of the first line. If anything, nuvisertib would be more valuable as a combination drug if more data were accumulated on its use in combination with momelotinib. I think that it is important to accumulate such data.

You are almost right. Regarding Enzomenib, we cannot share the results of the Phase II study with KMT2A as a single agent until the results are finalized. We believe that it is the time when the results will be compiled or when the data for the combination of first-ever AML will be available. In the case of nuvasertib, as you mentioned, I think it is the time to accumulate more data on the combination with momelotinib or to decide on or start the specific design of the Phase III trial.

I would like to know one more thing. I feel that this drug works well for KMT2A. Is this easy to work for it mechanistically? I believe the other drugs did not respond well to KMT2A. What is the reason for the good response of this drug?

The research team has been working on the issue of what is mechanistically different. As you mentioned, we believe that the CR rate for patients with KMT2A rearrangements is very high compared to the results of drugs of other companies. One is that it is being administered well, probably due to tolerability issues and so on. Specifically in terms of pharmacological mechanism, for example, it is not yet known where in the KMT2A molecule it attaches to so that this works well.

Mr. Hashiguchi of Daiwa Securities.

I am Hashiguchi of Daiwa Securities. Ms. Sato and Mr. Murata, I would like to ask each of you a question from the perspective of what pace and how substantial we can expect the pipeline to become in the future. How does the current state of management, which constrains to some extent the resources that can be devoted to each project, affect the state of this pipeline and project efforts? If such restrictions are eased in the future as sales and profits increase, I would like to know what kind of initiatives you would like to increase in the future.

In his presentation, Mr. Sato mentioned that there is a large early-stage pipeline but no late-stage ones. If development progresses smoothly in the future, what kind of projects would you like to increase? If you proceed to the later stages of the project, you could license out it completely and move on to the next project. On page 16, there is only a small mention of commercialization by partners, which I felt was not given much emphasis. Is it possible to further increase the pipeline by advancing items at the later stages when items come up from the preclinical stage? I would be interested to hear from you in terms of resources and how many projects are accumulating.

Maintenance is very important, especially for enzomenib, considering the symptoms. What I would like to ask Mr. Murata is when and how you will start this development. I think that the combination with venetoclax and azacitidine alone may not always meet the needs of patients with different backgrounds and treatment histories. I would like to hear more about the pace at which you intend to expand the development of concomitant use with other existing drugs.

I will answer your question. As you know, we have made significant reductions in R&D expenditures in FY '23, FY '24 and FY '25. In FY '26, we plan to increase R&D expenditures to a certain extent compared to the current fiscal year. But this does not mean that there will be an abundance of funds. What will this look like in the future? In the field of CNS as well as in oncology, there are a lot of pipelines in the late stages of research and several are being developed that will be ready for clinical trials in FY '26 and FY '27. We want to do as much as possible to move them into the clinic and advance their initial development.

We would like to consider the following process for those of these that have been confirmed safe in early development and for which patient signals have been obtained. Another question was asked if we are licensing out? We have not made a definite decision on that at this time. First of all, as for the CNS in particular, we will have to confirm certain safety and efficacy signals before we can consider what to do. Of course, out-licensing is an option, but I believe that we have all kinds of options, including joint development and proceeding on our own. The decision will be made through internal consultation, taking into consideration factors such as our overall pipeline situation and development budget at the time.

I think the first question about enzomenib is how to develop maintenance. We have patients who are currently participating in Phase I of our relapsed or refractory trials, dose escalation trials and dose optimization trials who are being transitioned to transplantation. This is a patient who reached CR after treatment was completed and was transitioned to transplantation when the opportunity arose. Some of those patients continue to cooperate with us in the administration of enzomenib. In this context, the study of how to set the dosage during maintenance has already started now.

In addition, many academic professors are very interested in our work as a result of our presentations at the American Society of Hematology and the European Society of Hematology last year, and we have been approached by such professors. We will also work to accumulate evidence while using that network of academia. We have also partnered with the National Cancer Institute in the U.S. and are working with U.S. research institutions to find out what kind of diseases enzomenib can be used for. We expect that a very variety of opportunities will emerge in the future.

Do you have a similar approach to the development of combination therapies other than the combination with venetoclax and azacytidine?

Yes, we do. Specifically, we have received requests from several professors to work with us on combination studies of certain agents within enzomenib. We feel that we are getting a good response from people who are interested in our products. We would like to use such a network in combination with other than venetoclax and azacitidine to successfully accumulate evidence and expand opportunities for future development.

Mr. Wada of SMBC Nikko Securities.

This is Wada from SMBC Nikko Securities. I would like to ask about the platform nature of SMP-3124 for liposome formulations and the possibility of horizontal development. I know that there are already several drugs approved for liposomes, but is there some aspect of your liposome technology that differentiates it from the technology of other companies? I am aware that you are now doing Phase I/II for various types of cancer. I would like to ask about the possibility of having to change the design for each cancer type or about possible bottlenecks in horizontal development?

Thank you for your question. The first point is about the uniqueness of our company as we increase our pipeline in the future. Indeed, we also use existing liposomal nano-medicines. We have a great deal of expertise in the area of how to make liposomes when making individual items, and we believe that our technology is very unique. For SMP-3124, for example, there are no plans at this time to change the design for each cancer type.

Regarding this Phase I/II data, the initial data on safety and other aspects will be available in December 2028. But is there any possibility that the results will be available earlier than that?

We will be presenting the data a little before 2028 in a conference presentation. However, we will be presenting at another solid tumor conference, not at a hematology conference. There is not one that has been adopted and decided at this time.

There being no other questions, we will conclude the Q&A session with analysts and investors. [Operator Instructions]. Next, we would like to turn to the question-and-answer session from the press. [Operator Instructions].

This is Tomiyama from Yomiuri Shimbun. I would like to ask you three questions related to AMCHEPRY, which President Kimura mentioned at the beginning of this presentation. Managing Executive Officer Sato explained that the practical application in FY '25, which is mentioned in the document, is to obtain approval with conditions and deadlines. I am sure we will be able to confirm this again based on the results of the 19th. What are your current goals for the market launch?

Thank you for your question. I can't talk too much about the future, since only the schedule for the review was just announced, but we are confident that the approval will go smoothly as we expect and that it will probably be conditional and time limited. The definition of market launch is difficult to define, but we consider it to be when its NHI price is determined. In that sense, I believe we can do it in H1 of FY '26, which starts in April. We can't control that ourselves.

Do you mean around H1?

It is between 1Q and 2Q [indiscernible]. It is our internal outlook.

The second point is also a question based on the assumption that if approved, what do you envision the impact and tailwind on the FDA's review in the U.S. if you receive approval from the Japanese regulatory authorities with conditions and deadlines?

The clinical trial has started and is running now, and we have to wait the review in the U.S. a little more. I think the conditional and term limited approval itself will provide psychological support, but more than that, the clinical data will probably build up, including safety data, and they will understand that. However, the clinical usage itself or the details are not the same in the U.S. and Japan. So I think it will be treated as reference data. We are going to do our best to explain this to the U.S. authorities.

On the third and final point, I think the name of the product AMCHEPRY is unfamiliar to me or perhaps a coin term. What is the origin of this name?

As I explained at the beginning, we understood that the product name is also subject to the approval review. So until now, we have only disclosed the generic name. We released the name of the product we envisioned in a hurry on Friday seeing the situation. As you say, this is a coin term. There is an English word ameliorate, which means to improve. There is an Egyptian Sungod named CHEPRI, which means rebirth or the rebirth of the sun. We decided to combine these two words to name our drug AMCHEPRY because it is appropriate for our drug, the dopamine progenitor cell mechanism we are aiming for and the expected efficacy of our drug.

The next person, please.

Thank you. My name is Shimizu from Sankei Shimbun. I too would like to ask in relation to AMCHEPRY. I believe that your company's regenerative and cellular business is targeting sales revenue of approximately JPY 350 billion in the late 2030s. If the drug is approved, how do you plan to ensure stable production and spread the drug? I believe that the situation will be different from the case of oral medicines. Please tell us how you plan to achieve the approximately JPY 350 billion.

We are now working on a project for ophthalmology products as well as Parkinson's. This JPY 350 billion is an accumulation of such things, and the figure includes not only Japan, but also the United States. In promoting the use of the product, there is, first of all, a supply side problem. Can we supply enough? Especially for Parkinson's, we are ahead of our competitors and the technology is well established. We still need to prepare the equipment and are gradually adding more at S-RACMO, but there are no technical concerns.

On the other hand, since it is a surgical procedure, we need to explore a little more about how to transfer it to medical institutions. The technology is established, but spreading that same technology to Japan and the U.S. is quite different from promoting ordinary pharmaceutical products. Thank you very much.

The person in the front seat, please.

I am Misumi from Nikkei Shimbun. Thank you very much. I am sorry that our questions are concentrated to AMCHEPRY, but first, and I don't know if you can answer this, but can you tell us how confident you are for approval?

We have experience with various approval applications. It would be presumptuous to say that we are confident, but we did the best we could. Now we are just waiting for the results of the subcommittee's discussions. Of course, we are confident, but we don't know. Now we are waiting quietly.

I believe that there have been a number of products that have received conditional approval but did not receive full approval. In order to dispel such things, I think it will be necessary to accumulate post-sales data and collect good data. Also, hypothetically speaking, if you were to receive a conditional and time-limited approval, could you tell us what you would do to achieve this?

We do not know the real reason for the results so far. We believe it is necessary to conduct a Phase IV trial, which is similar to a clinical trial with the cooperation of hospitals and patients in order to obtain solid data, and we are steadily making preparations for this.

Finally, we recently received news that Takeda has ended its program with CiRA after 10 years. I thought this was headwind news for iPS therapy. Please let me know how you take this.

In terms of the whole effort around iPS, that was a bit disappointing news. However, two drugs of ours and Qualipse's are now in the process of being reviewed for approval. If these are successfully approved, I think it will be a big boost. I am not too surprised about the Takeda case, as we have been talking about it for some time now.

The next person, please.

My name is Okada from YAKUJINIPPO. First, I will ask about the two cancer products. As for nuvisertib, you will be working on Phase III, and as for enzomenib, you will accelerate Phase II, which is currently being implemented. Do you have already accumulated some data on enzomenib?

Murata will explain. One thing that was left out in the previous explanation is that this is Phase II, but this is a pivotal study, and we can apply for approval with it. I would like to add that explanation was left out.

As Kimura just added, the FDA has issued guidelines for acute myeloid leukemia. In this, a path is allowed for certain populations with particularly poor prognosis in relapsed or refractory patients, where the results of the Phase II trial will be used to apply for approval. Therefore, we are aiming to file an application in the U.S. with the results of the Phase II trial.

Could you give us an overview of the nuvisertib Phase III trial, including the region and whether it is a single agent or a combination as far as you can tell at this point?

We are actually already working on various things for the Phase III trial. Although it is a Phase I or II trial, it has now started in a very large number of facilities in various countries. We would like to have those facilities involved from the Phase I and II stages to lubricate Phase III, which will proceed later. It is also very important to familiarize them with nuvisertib administration and clinical trials. So we have been starting up for 1 year or 2 now, and we are actually working with them on Phase I and II trials. One idea for the design of the Phase III trial is to use it in combination with momelotinib, which I mentioned earlier. One more thing as discussed, we are continuing to look into the possibility of single agents. We hope to proceed with a good combination of these trials.

Last question. Regarding the whole thing on Page 16, after the launch of the 2 oncology products, there is the launch of the CNS pipeline. Do you envision the launch of CNS next to iPS cells and cancer?

We wrote the second half symbolically. We have written 3 CNS pipelines after enzomenib and nuvisertib are scheduled for launch in 2027 and 2028. We believe that depending on progress, the approval and launch date of SMP-3124 may be even earlier. We believe this depends on which data we are gathering we proceed with.

I am Ishii from Iyakukeizai. What are your prospects for expanding SMP-3124 to the types of cancers with unmet medical needs that you mentioned?

The first place we are thinking about from the creation process and the data we are getting is platinum-resistant ovarian cancer. The Phase I trial is designed to cover a wide range of solid tumors, and I believe that we will proceed with the cancer types for which the efficacy can be confirmed by actual data.

Do you have any specific candidates as of yet?

Other than that, we are still considering. Originally, there were a number of prior products for the CHK1 inhibitor. Although the mechanism was expected to be effective, unfortunately, they have not been developed successfully due to safety issues. We believe there is a wide range of potential.

The person in the front, please.

My name is Hashimoto from Nikkei BP. I am not talking about individual items, but would like to ask about the research structure. Over the past few years, there has been considerable downsizing and reorganization in the United States. Are overseas research sites still maintained at the same size or have they shrunk considerably?

The restructuring process in North America is quite complicated. 7 companies were reduced to one in the summer of 2023. At that time, we decided to do some of the things we were doing as they were, although we restructured some of them, so we had a large number of employees. Then when the U.S. operations were largely reorganized at the end of FY '23, we downsized the late-stage development team, primarily in CNS. Meanwhile, the organization in charge of oncology is consolidating as progress is made on these 2 products.

In the U.S., there are activities for products such as Rhythmic, GEMTESA, et cetera. So there is a certain level of organization.

I think there were quite a few Sepracor-derived developments, but have you stopped all of them?

Sepracor, or ulotaront, the late CNS that was done at the former Sunovion, was licensed to Otsuka, and the development of SEP-4199, which was at a late stage, was discontinued. We have stopped the items of Phase I at that time and are now in the process of developing the next strategy by dividing them into Tier 01, 02, and 03, as I explained earlier.

Although there were many items that were discontinued, you mentioned earlier that more early items are to come. Do you have no idea about reviving something that had been discontinued?

We do have some suspended items that will be revived. Also, we are thinking of advancing what has been created mainly by Japanese research organizations.

Is what is about to emerge originated in Japanese research organizations? Are there not many resources left for foreign ones?

We have a CNS development organization, but our research organization is mostly downsized. So I think they will come up from Japan.

[Operator Instructions] The next person, please.

My name is Sakaguchi from Iyakukeizaisha. Regarding AMCHEPRY, how large do you actually expect its sales to be in the future?

At this point in time, we have about 4 patients, but the number of patients multiplied by the drug price is the scale of sales. The amount of sales will not be disclosed. There are 300,000 patients in Japan. In the United States, the number of patients is 700,000 or 1 million. This is a kind of transplant medicine. It depends on how many of them are applicable. We expect that given the effectiveness and invasiveness of the treatment, it will be applicable to a significant number of people. I believe we can make sales of over JPY 1 billion on a global basis.

Are you saying that you expect the product to be as good as ORGOVYX?

ORGOVYX may be a bit larger, I cannot say. We want to make our products available to as many people as possible.

The next person, please.

I'm Kinjo from NHK. I would like also to ask about AMCHEPRY. You mentioned earlier about post-marketing surveillance, like Phase IV, like a clinical trial. How many cases would the protocol consist of, and would it be done as a single or double? I believe those will naturally be included in the agenda of review. You may not be able to be more specific at this point, but what do you envision? Do you have plans to announce that at some point?

There is a post-marketing surveillance for any ordinary drug. But in the case of approval with conditions and time limits, a study to prove efficacy is required. So I think we will conduct something almost like a clinical trial. We will not know what kind of patients it will target and how large it will be until it is approved. So I will refrain from answering for now.

The next person, please.

I am Kuriyama from Yakuji Nippo. I too would like to ask about AMCHEPRY. I understand that the review process in Japan is about to begin, and since this is a new area of medicine, there may be many points to consider in the deliberation process. What do you anticipate will be the focus of deliberations on the part of the applicant? Could you tell us what you think as the application side?

AMCHEPRY is what our industry calls a disease modifier. In short, it is a drug that treats the disease itself, not merely alleviates symptoms or stops the progression of the disease. What kind of index to use to evaluate its efficacy is totally different from that of ordinary Parkinson's disease drugs. That is one point. This is, of course, a cellular product. So what are the possibilities regarding their quality control and others. Also, it will depend on what kind of guidelines the authorities come up with for clinical settings that involve surgical procedures and need to be set up at the hospital side.

I would like to move to the web. Mr. Yokoyama, please.

I would like to ask about enzomenib. Last year's presentation at ASH showed data on the combination of venetoclax and Azacytidine for relapsed or refractory patients. However, in the presentation, data from untreated patients on venetoclax and menin inhibitors were given, and I understood that this was designed for the patients with first episode. However, in the recent announcement, only about 1/3 of the respondents were over 65 years old and only one Asian. I understood that you would still have to wait for the data. In your future development, do you intend to focus on unfit patients or on those who are not suitable for strong chemotherapy or who are not transplantable? And do you intend to use it in combination with venetoclax and azacitidine in first episode patients? What is your design?

Thank you for your question. The design will be developed in consultation with the FDA and PMDA authorities with Phase III trials envisioned and input obtained. For now, we assume that unfit patients for whom venetoclax and azacytidine is indicated will be the first eligible patients.

What about age? AML is generally a disease of the elderly, but this time only one-third of the patients were included. I became curious about that.

Since this one is for relapsed or refractory patients, the age group inevitably does not overlap with the age group of so-called first episode patients. How to set the age range for first-time cases is exactly the point of discussion, and we are discussing this with the authorities.

Thank you very much. Since there seem to be no other questions, we will now conclude the question-and-answer session. This concludes the R&D briefing. Thank you very much for joining us today.

As it is now time, we would like to begin the Sumitomo Pharma Company Limited Q3 Financial Results Briefing for FY 2025. Thank you very much for joining us today despite your busy schedules. I am Toru Kimura, Representative Director, President and CEO. I would like to explain our Q3 FY 2025 financial results.

First, please turn to Page 3. Here, we present our business performance for Q3 FY 2025 on a core basis. As you can see, revenue amounted to JPY 347.7 billion, gross profit was JPY 202.6 billion. Core operating profit was JPY 109.4 billion, and net profit attributable to owners of the parent was JPY 107.7 billion. Compared with the same period last year, revenue increased by JPY 54.6 billion, while core operating profit increased by JPY 87.9 billion year-over-year.

On the cost side, selling, general and administrative expenses were restrained by JPY 8 billion and R&D expenses by JPY 7.5 billion. As a result, profit attributable to owners of the parent increased by JPY 86.5 billion to JPY 107.7 billion.

At our Q2 financial results announcement on October 31, we revised our full year performance forecast. Even relative to that revised forecast, we achieved an overperformance with core operating profit reaching an achievement rate of 112.8%. We had previously believed that H2 of the fiscal year would represent the bottom of our profit and loss profile, but the Q3 results exceeded our expectations, and we interpret this as steady progress in profit improvement.

At the same time, we believe that foreign exchange effects and inventory buildup beyond our initial assumptions also contributed in part to these results. Traditionally, for our company, Q4 tends to see insurance resets in North America and a concentration of expenses. For that reason, we have left our full year performance forecast unchanged. While we expect the final full year results to exceed the October forecast by a comfortable margin, we also believe there is a possibility that operating profit in Q4 may come in slightly below the Q3 level. We are now showing revenue from our major products in North America.

If you look at the center of the slide, ORGOVYX recorded JPY 115.6 billion, MYFEMBREE, JPY 10.9 billion; and GEMTESA JPY 72.3 billion for a total of JPY 257.5 billion, representing an increase of JPY 78.1 billion year-over-year. As indicated by the year-over-year changes shown for each of the major products, ORGOVYX was nearly double and GEMTESA increased by 67.5%, meaning that performance has been very strong compared with the full year forecast we announced on October 31. Although 3 quarters of the fiscal year has already passed, progress remains extremely strong.

From here, I will explain each of the 3 major products one by one. For ORGOVYX, compared with our internal plan for Q3, the actual results I have just described represent an achievement rate of 105%, exceeding the plan by USD 35 million and amounting to 205% compared with the same period last year. Both volume and price are progressing smoothly.

At the same time, we recognize that there was a modest inventory buildup during Q3. As shown in the topics below, since January of last year, the number of new patients has increased significantly in 2025. Contributing factors include the lowering of the out-of-pocket maximum, which has made it easier for Medicare patients to use the drug as well as the fact that in this therapeutic area, treatment had previously relied on injectable drugs, whereas our ORGOVYX is an oral formulation. In addition, the appeal of product value, such as the rapid onset of efficacy has increasingly gained traction. In December, both the number of new patients and volumes reached record highs.

Next is MYFEMBREE. Q3 performance came in at USD 73 million, exceeding our plan by USD 7 million and resulting in an achievement rate of 110%. Both volume and price trended largely in line with our expectations. We ended our sales partnership with Pfizer in January of last year and transitioned to in-house sales. Under those circumstances, we have implemented measures to improve sales efficiency in combination with GEMTESA. At the same time, while promotion by competing products has been scaled back and the GnRH market has softened, we were still able to firmly maintain volumes.

In addition, through online promotion and the use of co-pay cards, that is discount cards for patients, we are encouraging patients to continue using the product for several months, during which they can clearly experience its benefits. As a result, beginning this fiscal year, the product on a stand-alone basis is contributing to profits. This qualitative change represents one of the key topics for this year.

Next is GEMTESA. Against a Q3 plan of USD 453 million, actual performance reached USD 486 million, exceeding the plan by USD 33 million for an achievement rate of 107%. This represents an increase of roughly 70% year-over-year. As the beta 3 market within overactive bladder treatments continues to expand, we have steadily increased volumes and achieved our plan. In addition, the proportion of payer channels with higher discount rates was lower than expected, which served as a positive factor for pricing.

Here as well, the clinical superiority of our product has become more widely recognized and with the reduction in patients out-of-pocket maximums under the IRA system, which were lowered starting in calendar year 2025, the number of Medicare patients has increased. As a result, December volumes also reached a record high for this product. New prescriptions are growing faster than those of competing products, and we are also gradually advancing awareness activities for a new indication, overactive bladder associated with benign prostatic hyperplasia.

Next, we present revenue from our major products in Japan. The total came to JPY 69.2 billion, representing a decrease of JPY 9.3 billion year-over-year. This is largely attributable to the expiration of the exclusive sales period for Equa and EquMet shown in the center of the slide and the fact that sales of these products themselves ended in December. On the other hand, compared with the forecast we presented on October 31, the achievement rate stands at 74.8%, and we believe you can understand that overall performance has been solid and is progressing in line with our plan.

On this page, we show business performance by segment on a core basis compared with the previous year. In Japan, as I have just explained, revenue declined, but selling, general and administrative expenses also decreased. And as a result, core segment profit increased by JPY 2.2 billion. In North America, as mentioned earlier, revenue has been very strong, resulting in an increase of JPY 36.9 billion in core segment profit. Including the shortfall in R&D expenses at the core operating profit level, this translates into an increase of JPY 87.9 billion year-over-year.

Next, I would like to explain the R&D highlights. This slide shows the overall picture. And as there have been no changes here, the next page presents the main topics for Q3. In the neuropsychiatric field, within regenerative and cell therapies, iPS cell-derived dopaminergic neural precursor cells received designation in Japan from the Ministry of Health, Labor and Welfare as a regenerative medical product for rare diseases. We submitted the application for approval on August 5 last year, and we recognize that discussions with the PMDA have been proceeding smoothly and that the review process is advancing.

In oncology, for both enzomenib and nuvisertib, the American Society of Hematology Meeting was held in December, and we have presented some of the latest data there.

I will explain the details on the next slide. First, with regard to enzomenib, we are presenting data on monotherapy for relapsed or refractory acute leukemia, focusing separately on KMT2A rearrangements and NPM1 mutations. For KMT2A, while a pivotal trial is currently underway, as indicated by the term confirmatory part, the results from the preceding study are summarized here. The CR+CRh rate was 40%, the duration of CR or CRh was 12.5 months and the median overall survival was 11.8 months, all of which represent very strong data.

In addition, with respect to safety, which is a key characteristic of enzomenib, as shown below, there were no treatment-related deaths and both differentiation syndrome and QD prolongation occurred at very low rates. Furthermore, there have been no cases leading to treatment discontinuation, and this trend has been maintained. For NPM1 mutations, we are currently conducting dose finding to determine the recommended dose in the confirmatory part for patients with relapsed or refractory acute myeloid leukemia harboring NPM1 mutations.

As shown below, data are available for 200 milligrams BID 300 milligrams BID and 400 milligrams BID. As indicated here, the CR plus CRh rate ranges from 37.5% to 50%, representing a very high response rate. To reiterate, and as we have stated previously, the accumulation of safety data continues to demonstrate that this is a menin inhibitor with a very high safety profile.

Next, still with enzomenib, we are also presenting data on combination therapy for relapsed or refractory acute myeloid leukemia. Here, data have been compiled for relapsed or refractory patients with KMT2A rearrangements or NPM1 mutations treated in combination with venetoclax and azacitidine. No dose-limiting toxicities have been observed and a combination effect is suggested. As you can see on the far right, the overall response rate in the total population was 77% with a composite complete remission rate of 50%. Among patients who had not previously received a menin inhibitor, the results were even stronger with a response rate of 85% and a composite complete remission rate of 62%. Here again, to reiterate, data continue to show that the safety profile is very favorable.

Finally, turning to nuvisertib. We have also begun to generate data on its use in combination with the weak inhibitor momelotinib for relapsed or refractory myelofibrosis, and these data have been presented at academic conferences. We hope you will understand that efficacy and safety data supporting the development of nuvisertib in combination with momelotinib have been accumulating.

First, on the far left of the graph, we show the proportion of patients achieving a reduction in spleen size of 25% or more, referred to as SVR25, which stands at 50% at week 24. On the other hand, improvements in TSS, the total symptom score are also shown, including the time course. A strong effect is observed immediately after initiation of dosing. Each line represents an individual patient, and at week 24, TSS50 is 45%, indicating that a large number of patients are experiencing substantial benefits. Alongside this, we also show improvements in hemoglobin levels.

One of the drawbacks often cited for weak inhibitors is bone marrow toxicity. Momelotinib, however, is characterized by a very low incidence of such toxicity. And even when combined with nuvisertib, improvements in bone marrow hemoglobin levels have been sustained. From this, we believe you can see that bone marrow toxicity is not emerging.

That concludes the information I wish to present today, and I would appreciate your questions.

We will now move on to the Q&A session with analysts and investors. First, we would like to invite Mr. Muraoka from Morgan Stanley MUFG Securities.

This is Muraoka from Morgan Stanley. I'd like to reconfirm President Kimura's interview that appeared in the media regarding oncology partnering enzomenib and nuvisertib, you're not fixated on completing this by March. Given that the ASH data felt strong and if you're thinking in terms of value enhancement first, you're not necessarily committed to doing it within the next fiscal year either or maybe even the year after that, once a bit more data are in would be fine. Is that roughly the time frame you're now thinking about? I'd appreciate your thoughts on that.

Mr. Muraoka, thank you for the question. As you summarized, originally, we were anticipating that R&D expenses would become quite tight. So we were thinking we needed to make something happen within this fiscal year. However, as I've just shown, we are starting to see good data emerge. And at the same time, we now have a bit more financial leeway. Under these circumstances, we believe that having a proper discussion after accumulating solid data would allow us to partner under better terms.

We very much want to pursue partnering, but our current goal is to delay it by about 1 year and aim to move forward with partnering in the next fiscal year, FY 2026.

If we're talking about next fiscal year and considering that negotiations themselves take time, will there be further data for value enhancement coming out over the next 6 to 9 months or so?

We have studies underway that have not yet been disclosed. And as you can see from the currently published figures, the patient numbers in each study are still quite small. So we would like to properly accumulate that data before entering into discussions.

Up to now, with the data we have, we've already been introduced to and have generated interest from a number of companies. However, in order to arrive at what we consider the best possible partnership, we believe it would be better to proceed after accumulating more data. That is why we have changed our policy at this point.

Let me reframe the question slightly. The performance is extremely strong, clearly impressive. If this level of performance continues, should we think there's a possibility that, say, 6 months from now, you might shift your stance and say, we'll do one asset on our own and partner just one or something along those lines?

I wouldn't say that there is absolutely no possibility, but at this point, we are thinking of partnering both assets.

That said, our clinical trials are progressing smoothly. We have been somewhat concerned about conducting them on our own. But at least at this stage, things are moving forward without issue. So we want to think carefully about this. Fundamentally, our intention is to pursue partnering for both assets. On the other hand, we are not currently considering a pure license out approach.

Understood. One more question. Regarding the Japan business on Slide 8, the other category shows actual results of JPY 17.7 billion, down JPY 0.5 billion year-over-year. I believe co-promotion of Ozempic started in July and Wegovy in November. But based on what we see here, the impact doesn't appear to be showing up yet. Should we expect this to grow into something visible in terms of scale going forward? Or is it likely to remain limited for a while? How should we think about this?

The figures are actually already included here, but due to considerations involving our partner, we have decided not to disclose the fee income. On the other hand, Zepelin has been sold by us since January. So from here on, the figures themselves will start to be booked as sales. So with GLP-1 drugs for diabetes and obesity, is it simply that they're not visible because there are also declining items offsetting them? Or are they genuinely small in scale?

You can think of it as not being visible because there are also items that are declining. At the same time, we haven't been at it very long yet. So in terms of absolute amount, the impact is not that large. Basically, it is fee income.

By the way, overseas, Wegovy in pill form has already been launched. If possible, and depending on the partner, would it be fair to think that your company would like to participate in co-promotion for that as well?

That really depends on the partner. But for now, please understand that we are not considering that as a company. So for the time being, it's injection products only understood.

Next, we will move on to Mr. Wakao from JPMorgan Securities.

This is Wakao from JPMorgan. I have a few questions. First, I'd like to ask about ORGOVYX. You explained the recent trend through December, but I'd like to confirm whether there have been any changes in the very near-term trend. Also, my understanding is that the data for ORGOVYX are fundamentally better than for leuprorelin, so patients are steadily switching over or rather you're capturing new patients. If this situation continues, then essentially everything other than ORGOVYX would be leuprorelin. So it wouldn't be surprising if ORGOVYX's share continued to rise further. One could even imagine a scenario where all patients end up using ORGOVYX. In that context, what kind of peak share are you currently envisioning? I feel it may be time to start having this kind of discussion. So I'd appreciate your thoughts.

Thank you for the question. Regarding whether the current trend will continue over the long term, we do believe the present trend will persist. That said, as I mentioned earlier, in this fiscal year, we saw a significant jump due to the impact of the IRA. There was a sharp jump in calendar year 2025, but from calendar year 2026 onward, growth should normalize. Even so, we understand that growth will remain robust. As for peak share, we have, of course, considered various possibilities, but we do not believe that ORGOVYX will take all of leuprorelin's share. For that reason, we would like to refrain from commenting on peak share at this point.

Then who are the patients who are still using leuprorelin now? The data seem better for ORGOVYX. And in terms of price, especially from the patient burden perspective, that burden also seems to have become smaller. How should we think about that?

Since Mr. Nakagawa, who is responsible for North America, is here, I'll ask him to step in and explain.

This is Nakagawa in charge of the North America business. I'll respond. As Kimura just mentioned, we are not disclosing peak share. As you pointed out, of course, if we could achieve a 100% share, that would be welcome. However, in reality, there are patients who prefer injectable formulations or in particular, long-acting injections with longer dosing intervals such as once every 3 months. Taking those preferences into account, it is probably not very realistic to expect everyone to switch over.

Regarding your initial question about the near-term situation, the U.S. business does have a bit of seasonality. What would correspond to Q4 in the Japanese fiscal year tends to be somewhat weaker. However, there has been absolutely no change in the broader trend. As Kimura said, while we do not expect another jump like the one seen around 2025, we do expect prescriptions to continue increasing steadily going forward.

Understood. Also, regarding ORGOVYX and GEMTESA, I assume it is your premise that they will eventually become subject to price negotiations under the IRA. In that case, since ORGOVYX is growing within Medicare, I think there is a fairly high possibility that at some point, revenues could drop sharply. Are there any strategies you are currently considering to offset that kind of decline?

We recognize that IRA-related negotiations are still several years away. On the other hand, for both products, we believe that we have already built a sufficiently solid commercial base. We have just started thinking about how to carry that forward effectively. We would like to find a way to somehow connect this current momentum to what comes next. Would that be through in-house products or through in-licensing. At this point, we are beginning to think in terms of our own R&D. We are not concretely considering in-licensing right now, although depending on circumstances, it could be something we consider in the future. But at present, we are not considering it at all.

Understood. My second question is about the partnerships for nuvisertib and enzomenib, which we discussed earlier. With the ASH data updates for nuvisertib and enzomenib, how have potential license out partners been evaluating them? Are things moving in a more positive direction? Or has there been no real change?

Fundamentally, I think the response has been positive. That said, for enzomenib, we had already shared some monotherapy data previously. So what was new this time was the combination with venetoclax and azacitidine. For nuvisertib, the combination with momelotinib was new. Even so, the impression from potential partners is that they would like to see somewhat more robust patient numbers. Overall, I would say the impression is very good, but they want to see things a bit more clearly. If I were to summarize it broadly, that would be the sense.

I see. So in the end, while extending the timing of the partnership can be framed in a positive way, on the other hand, it also feels like there's a somewhat negative nuance that the data are still insufficient. My understanding is that this interpretation isn't wrong. Is it?

I think that depends on the terms. If we were willing to compromise, we could probably enter into a partnership now because the assets are viewed as very interesting. However, as you know, these are products that will support our future, so we want to maximize the value we can obtain. In that sense, we are accepting the risk of delaying things by close to a year and continuing development on our own. By doing so, we believe we can generate better data and connect that to a partnership on better terms.

As for development speed, is it fair to understand that at least at the current pace, even if you proceed independently, there will be no delay.

Yes. As you know, in oncology, there comes a phase where many clinical trials need to be run in parallel. At that stage, we may be somewhat constrained if we are on our own. However, at the current stage, we are able to move forward with sufficient speed, and we believe that will carry us through to around next fiscal year.

Next, we will move on to Mr. Wada from SMBC Nikko Securities.

This is Wada from SMBC Nikko Securities. First, I'd like to ask about performance. You've already touched on this, but there was a comment that operating profit in Q4 might dip slightly. Could you help us organize the factors that could lead to a decline when looking at Q4 on a stand-alone basis?

This will overlap with what I said earlier, but first, based on our analysis of Q3, we believe that there was an inventory buildup of around USD 20 million included in the results. Second, since our business is centered on North America, in North America, there is an insurance reset at the start of the new year in January. When that happens, patient out-of-pocket costs temporarily increase again, which tends to suppress the emergence of new patients. Third, and this may be somewhat specific to our company, but historically, we have seen a tendency for expenses, SG&A and R&D expenses, in particular, to be concentrated in Q4. Taking all of that into account is what underlies the analysis I mentioned earlier.

Sakai-san, do you have anything to add?

Thank you for the question. This is Sakai. As Kimura explained at the beginning, we have not changed our revised forecast, so I will speak based on that premise. As Kimura also noted, if you run the numbers, you can see that the burden of R&D expenses in Q4 is currently being assumed to be quite heavy.

So as Kimura explained, broadly speaking, one factor is that distribution inventories increased in Q3, sales exceeded underlying demand. In Q4, while demand itself remains solid, shipments may decline as a kind of pullback from that. The other factor is that under our current assumptions, a certain level of R&D expenses will be incurred in Q4. In broad terms, those are the 2 main reasons why we are not viewing Q4 overly optimistically.

My other question is about the pipeline, specifically in enzomenib. On January 6, Amgen acquired Dark Blue Therapeutics. Dark Blue Therapeutics is developing an MLL protein degrader, and it seems likely that this was the main focus of the acquisition, which was for around JPY 120 billion. So while I understand that there is strong interest in your menin inhibitor as well, how do you view the difference between a degrader and an inhibitor? Does the difference in mechanism of action broaden the patient population? Do safety or efficacy profiles change? How should we think about that?

I'm sorry, but at this point, we have not been able to conduct a scientific comparison within our own research. So it's difficult for us to analyze this in detail. On the other hand, since the mechanisms of action are completely different, we do think there may be some kind of differentiation or segmentation possible. Degraders are a very new concept. So as they are used more broadly, certain issues may also emerge. But that is simply a general observation.

Next, we will move on to Mr. Hashiguchi from Daiwa Securities.

This is Hashiguchi. I have a question based on the content of a media article from about 2 weeks ago, which said it was based on comments from President Kimura. It stated that you have a policy of increasing R&D expenses in stages. And in quotation marks, it said that you are first considering an increase of around 10%. I'd like to ask whether that is something you actually said.

And also, when you say 10%, the amount changes quite a bit depending on whether that's 10% off the expected full year landing for this fiscal year or 10% off the currently disclosed forecast. Earlier, you mentioned that you are now in a position to spend more money. So could you comment a bit more on how much you think you can spend next fiscal year at this point?

I would appreciate it if you could understand that my true intent was not necessarily captured perfectly in the wording. As for R&D expenses, we are still in the process of preparing the budget, so I cannot provide precise or strict figures. However, in terms of sensitivity, we are currently working on a budget that assumes an increase of around 10% or slightly more than 10% compared with this year's budget base.

In that sense, I'd like to ask about your true intent, specifically regarding the resumption of dividends. The article states that you plan to formulate a medium-term management plan next fiscal year and within that, present to the market a target time line for resuming dividends. If the medium-term plan is developed next fiscal year, I imagine the actual announcement would be around next spring, roughly a year from now. If the timing for dividend resumption is only clarified at that point, then it seems that in the near term, say, at the end of this fiscal year or the start of next fiscal year, you would not yet be in a position to express such a view. Is that understanding incorrect?

That is actually the point where the article deviated the most from my true intent. What I wanted to convey was that while we are fully aware of expectations for dividend resumption given that we have been non-dividend paying for some time, considering our current situation, we also have challenges such as growth investment and strengthening our financial base. Within that balance, we want to carefully consider the amount and timing of dividend resumption. Separately, since we have largely achieved the numerical targets of our reboot plan, we are thinking of formulating a new medium-term management plan with new targets next fiscal year. Those 2 points were combined, which resulted in the wording you saw.

Given that when it comes to the timing of showing your thinking on dividend resumption, would you say that such a moment is likely to come relatively soon or not likely in the near term?

I will say that we do not intend to link it directly to the formulation of the medium-term plan.

Mr. Wakao from JPMorgan Securities has raised his hand again. So please go ahead.

Sorry, this is my second time. Is that all right?

That's fine.

This is more of a confirmation. And since it hasn't come up yet, I wanted to ask regarding the Parkinson's IPS program, is it reasonable to view the likelihood of approval within the fiscal year as fairly high?

As for that, the approval itself is, of course, subject to review by the PMDA, including external experts. From our perspective, however, we believe communication with the PMDA has been proceeding very smoothly. We don't know the exact timing of approval, but internally, we are making preparations so that starting in April next fiscal year, we will be ready to respond immediately if approval is granted. At this point, all we can really do is leave it to them.

Understood. So in terms of your sense of how things are going, there's been no change from before, and it still feels like approval by the end of March is reasonably achievable.

Yes. Unfortunately, it's not that the sense of confidence has increased compared with before, but it is also true that no major issues have emerged either.

And there's nothing in particular being requested from the authorities at this stage?

Naturally, various requests come up in the course of communication, but we believe we have been able to respond adequately. We believe we have responded. That's very clear.

Thank you very much. As there are no further questions, we will conclude the Q&A session for analysts and investors. From this point on, we will move to the Q&A session with members of the press, so analysts and investors are free to leave. Thank you for waiting. We will now begin the Q&A session with members of the press. This session will run until 6:15 p.m.

First, we would like to invite [ Mr. Okada ] from [ Yakuji Nippo ].

This is Okada from Yakuji Nippo. I have a question about enzomenib and nuvisertib. Earlier, you mentioned that you might push back the timing of partnering somewhat. I believe there was also a discussion of approval application timing with FY 2026 or FY 2027 being mentioned. Have there been any changes around that timing?

Thank you for the question. Since this is oncology, we will be filing approval applications for various indications. For the very first one, enzomenib as monotherapy, we are proceeding with the aim of obtaining approval in 2027. This is a few months later than our original plan, but fundamentally, we are operating on schedule. There may be some slight instances where things cross fiscal years. But from where we stand, progress is smooth.

And how about nuvisertib.

For nuvisertib as well, at this point, it is progressing according to plan.

Understood. Regarding the content of partnering, my understanding is that you are essentially envisioning partnerships closer to the final stages of development, including manufacturing and sales. Could you elaborate a bit more on what kind of partnership structure you have in mind?

Naturally, this depends on the counterparty. But from our perspective, we would like to look for a partner within a framework of joint development and joint commercialization.

So rather than an out-license, it would be limited to joint sales with your company remaining the marketing authorization holder?

That's correct.

Next, we will move on to [ Mr. Ishii ] from [ Iyaku Tsushinsha ].

This is Ishii from Iyaku Tsushinsha. I'd like to ask about your sales strategy for diabetes drugs in Japan and your outlook for the Japan business going forward.

From our perspective, we are working to expand sales of TWYMEEG, and we are also proceeding with the partnership for Ozempic, and we have METGLUCO as well. So we want to steadily grow sales in those areas. That said, the fact that we do not currently have a major new product is one source of concern, and we are now thinking about what to do with the Japan pipeline going forward.

Given that, what kind of shape do you see the future outlook for the Japan business taking?

Speaking in general terms, including the drug price revisions at the end of last year, costs are rising significantly amid inflation, while drug prices are being reduced. In addition, there is the MFN most favored nation policy that the Trump administration frequently refers to, where if there is a drug price lower than that in the U.S., they seek to align U.S. prices to that lower price. If that happens, the attractiveness of the Japanese market where drug prices are low will decline even further. That is something we are very concerned about.

Understood. Also, could you tell us the current balance of interest-bearing debt?

Strictly speaking, Sakai will confirm the exact figure, but I believe it was JPY 260 billion.

The balance sheet balance is JPY 259 billion. However, since we also have a certain level of cash and cash equivalents, if you take net debt into account, the level is roughly JPY 200 billion.

Next, we will move on to [ Mr. Yoshimizu ] from [ Iyaku Keizaisha ].

President Kimura, Mr. Sakai, Mr. Nakagawa Ms. Sato, Mr. Wakemi, thank you in advance for your continued cooperation this year. I have 2 questions. I'll ask them one by one. First, regarding the Japan business that has just been discussed, what areas do you think should be strengthened as the next core pillar? I'd like to hear your thoughts on that first.

For us, our primary goal is to firmly build up areas where we have our own products. First of all, if the IPS Parkinson's therapy is approved, we would like to expand that. We also intend to launch the 2 oncology products in Japan, so we would like to strengthen those areas. At the same time, we also want to continue selling well in our existing areas and enhance our presence.

Understood. So rather than, say, something like diabetes area as some other companies do, you're thinking primarily along product lines?

Yes, basically, it would be product driven. That said, as someone asked earlier, we do have a presence in diabetes. We have strong sales capabilities and have built very good relationships with physicians. So we also want to value and leverage that. However, we do not have an in-house diabetes pipeline, so how to address that will be an important strategic point going forward.

Understood. My second question is that after Hisamitsu conducted an MBO on January 3, a certain foreign news agency listed Sumitomo Pharma as a company that might pursue an MBO in the future. With issues such as parent subsidiary listings being discussed more and more, could you share your view on whether the current capital structure is appropriate?

I assume you're referring to an MBO or delisting.

Yes.

Given that our share price has been kept at a high level, I don't think delisting is a very realistic option at this point, and we ourselves are happy with the current situation.

You're happy with the current situation. As the issue of parent subsidiary listings is likely to be discussed even more strictly this year, how would you comment on that?

That is more an issue for Sumitomo Chemical. But as I mentioned earlier, we do not feel that our management freedom is being constrained by the fact that Sumitomo Chemical holds more than 50% of our shares. On the other hand, in regenerative medicine, our collaboration with Sumitomo Chemical has been working very well. So we believe we are benefiting from those advantages. That is our current view.

As there are no further questions, we will conclude the Q&A session. This concludes Sumitomo Pharma's Q3 financial results briefing for FY 2025. Thank you very much for joining us today.

I am Toru Kimura, Representative Director and President of Sumitomo Pharma. Thank you for joining us today for the presentation of the financial results for Q2 of FY 2025. I will then explain according to the materials.

First, please go to Page 3, the financial results for Q2 of FY 2025 on a core basis. As you can see, revenue was JPY 227.1 billion. Compared to the revised Q2 forecast announced in July, the increase is JPY 20.1 billion. Compared to last year, this represents an increase of JPY 46.4 billion.

On the other hand, SG&A expenses and R&D expenses have been well controlled, with SG&A expenses 0own JPY 4 billion and R&D expenses down JPY 4.5 billion from the figures announced in July. Compared to the previous fiscal year, the amount of these items was JPY 9.5 billion and JPY 7.6 billion, respectively, which is well controlled.

Since we have recorded a JPY 49 billion gain on the transfer of the China Asia business, the total core operating profit is JPY 96.1 billion. This is an increase of JPY 26.1 billion compared to the projected figure in July.

Operating profit was JPY 96.2 billion, followed by a reversal of deferred income tax liability for income tax expenses of JPY 6.1 billion, resulting in an interim net profit of JPY 98.9 billion. This is a JPY 42.9 billion increase. Both sales and profit were over the Q2 forecast announced in July, and we are issuing a press release today to announce the revised forecast.

I would like to continue with an overview of Q2 financial results. I will first explain the revenue of our main products, starting with the figures for North America. ORGOVYX is doing very well with JPY 69.1 billion. This is an increase of JPY 33.6 billion over last year or 95%. GEMTESA is also JPY 43.4 billion, which is an increase of JPY 18.1 billion or 72%. APTIOM had LOE, so the total amount was JPY 10.7 billion, a decrease of JPY 9.3 billion.

We had originally projected a milestone of $500 million in sales for ORGOVYX in Q3. But since sales have been strong, and we are now in Q2, we have included the milestone of $100 million or JPY 14.9 billion. In total, sales in North America were JPY 163 billion, a JPY 58.8 billion or 56.4% increase over the previous fiscal year.

I would like to continue by presenting the revenue from sales of our major products in Japan. First, Japan as a whole is down JPY 6 billion to JPY 46.9 billion. This is due to the fact that Equa/EquMet had their LOEs and after last year's LOE of TRERIEF, sales continued to increase, but then gradually decreased. This has had an impact on our business. On the other hand, the sales of TWYMEEG increased by 40.3% to JPY 5 billion. Compared to the initial forecast at the beginning of the fiscal year, 54.7%, as shown in the lower right-hand corner, indicates that we are making good progress.

The next page shows financial results by segment. As shown at the bottom of the slide, the difference between the results of Q2 of last year and this year's results, Japan sales decreased, but the results of business structure reforms are showing results and core segment profit increased by JPY 1.7 billion.

As mentioned earlier, sales in North America performing well alongside a JPY 58.8 billion increase in revenue, the results of structural reforms are also emerging here with effective control of SG&A expenses leading to a JPY 39.1 billion increase in core segment profit. Since the China Asia business was transferred to a joint venture with Marubeni Corporation in August, there are some challenges comparing numbers with regard to the figures for each year. Continuing on with the Q2 results, which were very strong, we have revised our financial forecast for the current fiscal year.

Please see Page 8. The forecast for revenue is JPY 429 billion, an increase of JPY 74 billion from the previous forecast. On the other hand, SG&A and R&D expenses were much lower in first half of the fiscal year, but are almost on par with the initial budget for the fiscal year. In others core basis, there is the JPY 49 billion gain from the transfer of the China Asia business that I mentioned earlier, and we are forecasting JPY 97 billion in core operating profit. This is an increase of JPY 41 billion over the initial figure.

Finally, we are forecasting JPY 92 billion in net profit attributable to owners of the parent, an increase of JPY 52 billion over the initial figure. Both core operating profit and net profit are the highest figures we have ever achieved.

The forecast for FY 2025 is shown below with figures for North America and revenue from sales of our main products. ORGOVYX is doing very well, and our revised forecast is JPY 147.9 billion in yen terms and $1,020 million in dollar terms, which means that we expect to reach sales of $1 billion. As for sales of MYFEMBREE, which will be explained later as well, they are in line with expectations.

GEMTESA is up JPY 2.4 billion to JPY 85.3 billion. Exports to Europe are also strong. So we have added exports, which are expected to increase by JPY 10.6 billion to JPY 49.3 billion for total sales in North America of JPY 313.6 billion. This is an increase of JPY 65.4 billion compared to the previous forecast figure.

Let me continue with a brief explanation of each product. ORGOVYX is doing very well, which is $473 million against the Q2 plan or 133% of the achievement rate. Compared to the previous fiscal year, this is almost double the amount of the previous year. In particular, if you look at the bottom right-hand side, we have broken down the contents and most products show good quantities. The fact that it is an oral drug, and it is very easy to take due to safety profile has become widespread. And at the same time, the maximum drug price has been capped at $2,000 by the IRA.

Next is MYFEMBREE. As I mentioned earlier, sales were almost in line with our forecast, up 10% year-on-year. But as you can see on the lower left, we terminated our sales collaboration with Pfizer in Q4 of last fiscal year, the beginning of this year. Since then, we have been selling the products independently, and we have been devising sales strategies even while reducing our sales force. Until now, Pfizer and our company have invested the same sales force to expand the market. But now we are working on this alone, and we are also reducing our sales expenses to 2/3 of what they would have been. As a result, although sales appear to have remained almost flat, there has been a very significant qualitative change in the way profits are generated from single products.

Next is GEMTESA. The achievement rate for Q2 of 2025 was 109%, which is 1.8x that of the same period of the previous year. So we are doing very well. As I explained last term, due to the drug price issue, we have been negotiating on Medicare Part D about removal of the list of certain payers, and we accepted to be removed from the list. This strategy has proven successful, yielding positive results in pricing.

Coverage that had previously dropped off is steadily returning. In terms of volume, while the beginning of this calendar year as well as last fiscal year's Q4 and Q1 fell below the previous year's levels, starting from this year's Q2, we have returned to record highs. Forecast by segment is shown here on a core basis, and the difference from the previous forecast is shown at the bottom of the page. Again, North America is doing very well, and Japan is also becoming more profitable.

Let me continue by explaining that we have been making a major effort since the 1st of October. Last fiscal year, while undertaking a very large-scale business restructuring, we also saw a decline in our product portfolio. Consequently, we implemented a regional sales structure domestically called the area system, assigning each MR a designated area and having them handle all of our products, CNS, diabetes and others. We have been operating under this system since December of last year.

On the other hand, since the beginning of this year, we have established sales alliances with XEPLION and XEPLION TRI for CNS and Ozempic and Wegovy for diabetes and obesity. So the number of products has increased, and we have reverted to the previous regional rep allocation system. The reps in the CNS area will mainly focus on 4 products shown here. And for diabetes, which also includes obesity, the reps here will now focus their sales activities on enhancing expertise around 6 products shown here.

We apologize for any inconvenience caused to hospital doctors and others by the change in our sales structure, but we intend to continue to compete with the same highly specialized sales capabilities as before.

Next, research and development. This is the overall table. Previously, we included a column for development regions, but since products are fundamentally globalized regardless of where development occurs, we have removed the development region column.

On the other hand, for regenerative medicine and cell therapy, each country has its own circumstances. So we have made a change to clarify state in which country the clinical trial is being conducted. There is one other major change, which will be explained on the next page.

Following are the major topics in clinical development. Topics since the first quarter announcement. First, in the psychiatry and neurology field, including regenerative medicine and cell therapy, we completed the regulatory submission for allogeneic iPS cell-derived dopaminergic neural progenitor cells on August 5 this year. Based on data from the investigator-initiated study by Kyoto University, we are currently working to obtain approval by the end of this year.

In oncology, enzomenib has already been administered as a single agent in a validation study and a pivotal study. In Japan, we have made great progress in completing the single-agent part of the pivotal study and agreeing on the design with PMDA. And we are in the process of presenting the Japanese data at the Annual Meeting of the Japanese Society of Hematology, as I will explain later.

On the other hand, TP-3654, nuvisertib, was also presented at the Japanese Society of Hematology as an encore presentation. As for other topics, we have received samples up to 4 weeks after the second dose of the universal influenza vaccine, and we are presenting some of the results of the post-treatment follow-up. This will also be explained with the illustration later.

This is the data on efficacy of enzomenib in Japanese population with cancer. The total number of the Japanese population are shown around the middle. And even when focusing solely on the Japanese population, the results obtained are nearly identical to the data in the far right of the overall population column.

This will be the last of my presentation. This shows the results of the universal influenza vaccine. First of all, as a result of the follow-up observation for 4 weeks after the second dose, no serious adverse events or deaths were observed and the most frequently observed adverse events were pain at the injection site and headache, which are the side effects that are frequently happening with vaccines.

On the other hand, as shown on the right, the data show that the titer of attacking antibodies increased as expected as the amount of adjuvant was increased. In the future, follow-up observation after 1 year is a matter, of course, and we will use this collected sample to determine the most crucial factor cross-reactivity, whether it reacts to a different type of virus than the antigen that was immunized with, or we are also looking forward to confirming whether antibody-dependent cytotoxicity or ADCC activity can be observed in vitro by the end of this year, and we hope to have such data by the end of the year.

That is all the explanation from me.

Wakao from JPMorgan. First, please tell us about the difference between your revised plan for second half of this fiscal year and second half of the previous plan. Fundamentally, we expect top line growth in the second half with previously scheduled milestones shifting from second half to the first half. However, looking at the profit side, the plan only projects about JPY 900 million in core operating profit for the second half. Can you please elaborate a bit more from the perspective of how this compares to the original plan?

Yes. Thank you for your question. That is precisely the case. The first half saw excellent results, and this momentum carried directly into the annual core operating profit and net income. This base is somewhat conservative due to the fact that first half saw the transfer of the China Asia business and the LOE of APTIOM, which were significant events.

On the other hand, as I explained earlier, the figures for the cost portion, SG&A and R&D expenses are almost the same as in the first half. We are also taking a conservative view of the situation, partly because of President Trump, but also because of the fact that there may still be instability.

However, as you know, the temporary factor will end in the first half of this year. And from second half of this year, the results will be the result of our current capabilities in a sense. Initially, we received comments suggesting we might post a loss in the second half, but based on the figures we are seeing now, we can achieve a solid profit. Through our efforts, we hope to exceed the JPY 900 million.

I understand that you have factored in various risks and are being conservative in your approach. But where exactly are you being conservative? Is it sales or expenses?

The point we are being most conservative is on the cost side. For example, we have explained that R&D expenses were JPY 4 billion short in first half of the fiscal year, but we are going to spend JPY 44 billion as planned for the fiscal year.

If so, we will accelerate our R&D activities only in the second half, and we are actually forecasting that. But as I said, we are somewhat conservative in our estimates as to whether the numbers will reach this level.

Sales figures remain exceptionally strong. But as you know, there are uncertainties such as the entry of generic versions of Mirabegron. Therefore, we are presenting figures that we are confident we can achieve.

I understand. Incidentally, regarding this R&D expenditure based on your current explanation, it seems the actual amount will likely fall short of the planned figure. Consequently, should any delays in development?

There was no delay in development, but there was a delay of a few months because we had to make some modifications to the protocol when we started the enzomenib validation test and pivotal phase. On the other hand, we have already started enrollment and administration, and we hope to catch up in the future.

The second question is about the trend of 3 key products. I understand that all of them are doing well, especially ORGOVYX. ORGOVYX, while it may be influenced by IRA, is clearly highly effective and safe when taking orally compared to existing drugs, as you mentioned. Therefore, I don't really anticipate its growth slowing down once the IRA effect runs its course. However, I wonder whether the current trend will continue steadily going forward. Could you tell us what you are thinking at this point?

If you look at the monthly sales by month, as you can see here, they have been rising since the turn of the year this year, around Q4 of 2024. I don't think this growth trend will accelerate dramatically going forward, but there is still plenty of potential. So I expect it to continue growing. Specifically, since we have Mr. Nakagawa handling North America, I will have him provide his comments.

Yes. Nakagawa speaking, in charge of North America. As you have just pointed out, I believe that ORGOVYX originally had very good product characteristics. Furthermore, with the cap on patients' out-of-pocket expenses being lowered, I believe this is creating a tailwind.

How long this trend will continue will depend on our sales efforts to make various doctors and patients aware of the power of our products. We are working with Pfizer to develop a sales strategy to ensure that this trend continue for as long as possible.

Can you tell us about your current patient share and how much you think you can increase your market share?

In terms of how far the peak will extend in the future and in terms of the peak in the overall market, the current trend is a little off our forecast, and we are now reassessing the situation. At present, we are not in a position to answer much about future peaks.

I understand. I think the patient share now is a little more than 10%, I believe.

In terms of the current situation, it amounts to over 10%, yes.

Finally, if you could briefly tell us about the status of the licensing activity for enzomenib and nuvisertib. Regarding the time frame within this fiscal year, is it correct to understand that there will be no change in the time line?

Kimura speaking, we are in the process of working on this project. And since we have a partner, we cannot go into details. But I hope you will understand that we are moving forward so that we can make a presentation to you by the end of the fiscal year.

I understand. Do you have any hints as to whether the goal by the end of the fiscal year is becoming tougher or more realistic?

Well, given that this involves contract negotiation and various factors such as unexpected delays at the very last minute can arise, but I cannot be overly optimistic. However, as I mentioned, our goal is to strive to report to everyone within this fiscal year. And I hope you understand that we are working hard towards that end.

I'm Stephen Barker from Jefferies. I would like to ask about sales and sales milestones for ORGOVYX. Based on my understanding, I believe the next milestone will be when you reach $1 billion in annual revenues. Since Q2 sales are already at $473 million, I expect you'll likely achieve that milestone sometime next fiscal year. I understand that the scale is $300 million. Is that correct?

I think it was $325 million, but we have not announced the sales forecast for the next fiscal year, but the sales for the current fiscal year have already exceeded USD 1 billion, and this is counted based on the calendar year. So although there is a slight deviation, we believe the probability of achieving next year's milestones is now very high.

Regarding enzomenib and nuvisertib, do you expect to present the data at ASH, the months after next?

Yes. All of these are oral presentations, and we will be happy to provide the data. We believe we can present data on nuvisertib for combination therapy.

I understand that you would like to license this out as well, but is your company going to hold the rights to co-development or joint marketing?

We do not generally anticipate licensing out either compound instead. We are seeking partners within the framework of joint development and joint sales with our company.

I understand.

Hashiguchi from Daiwa Securities. I would like to ask about expenses, including SG&A expenses and R&D expenses. Since you say conservative repeatedly, I'd like to understand more about how much more or less likely it is to increase in the second half compared to the first.

For example, while you held back spending a bit in the first half, you want to spend more in the second half, taking into account the strong performance of sales or as you mentioned earlier regarding ORGOVYX, there is still room for promotion to increase its penetration. In that sense, if you want to increase spending and invest more.

So if you have a clear idea of what you would like to increase, could you please introduce it to us? I imagine some of us might be thinking that just listening to the story that first half and the second half weren't any different at all. Regarding the areas where you consider to increase the spend, I thought it will be better to discuss them to somewhat compared to the first half, which is why I'm asking.

Yes. I will start my explanation first and then ask Mr. Sakai to add any additional information if there is any.

First of all, we are not considering anything special for the second half for both R&D and SG&A expenses. We are still in the process of restructuring. So our basic stance is to use expenses in a controlled and managed manner.

On the other hand, as I mentioned a little earlier, one of the reasons for the shortfall in R&D expenses is the slightly delayed start of the enzomenib pivotal study. Since we have opened nearly 100 sites, we have the budget, the money to accelerate the process. So we want to encourage the research development to accelerate the process. So we have left the numbers as they are.

Mr. Sakai, if you have anything to add?

Yes, Sakai speaking. Thank you so much for your question. Regarding SG&A expenses, since last year, we have been particularly cautious about expense execution. There are departments in charge, both in Japan and the U.S. have maintained considerable discipline in this regard. So there is a tendency for expense execution to lag somewhat.

I believe that during last year's interim results as well, the figures were lower in the second -- first half and increase in the second half. While I don't recall the exact numbers, I think second half figures were higher. We originally anticipated a slight increase in the expense execution during the latter half of the fiscal year. Although I won't mention them individually, there is a forecast that there will be special expenses for licenses only in the second half, for example.

Okay. So you are anticipating the possibility that additional costs may be incurred by the licensing that were not included in the first half?

That is what is happening in relation to sales.

Okay. One more point on Page 24, I'm now looking at the revised forecast for Japan business. There is JPY 34.7 billion for others, an increase of JPY 5.1 billion from the previous JPY 29.6 billion. And 2 reasons are written on the right side of this page. Can you give us a better picture of how much impact each of these had? And I would appreciate any hints as to whether there are no particular negative factors, or if these 2 items make up the breakdown of JPY 5.1 billion or which one is larger?

First of all, I cannot tell you about the figures based on the sales tie-up for Ozempic because we have promised not to disclose it at this time. But exports of MEROPEN to Pfizer and LATUDA to Latin America are doing well, which accounts for a large part of JPY 5.1 billion.

Okay. So would you say that the impact of this fiscal year is limited with regard to Ozempic?

I think the word limited should be well suited, but we are not able to disclose the figure itself at this time. So I hope you understand.

Wada, SMBC Nikko Securities. Although you have already described it in the presentation materials, regarding whether iPS cell approval in Japan is likely to happen within FY 2025, I would like to ask for your assessment specifically whether you have a clear view on the timing.

This is a matter for discussion with the regulatory authorities. So we cannot decide it on our own. However, as we have stated, we believe approval within this fiscal year is achievable. Accordingly, we are preparing our entire company structure with the assumption that sales will commence next fiscal year.

I recognize that there may be competing products globally. Could you please clarify your competitive advantages, development strategy and key differentiators against those competitors?

Did you say globally?

Yes.

Okay. So in the United States, clinical trials like the one using ES cells are ongoing. The clinical trial is being conducted by an affiliate of Bayer called BlueRock. And since that company is ahead of us in North America, we are now working to accelerate our clinical trials in North America.

On the other hand, in terms of superiority, many aspects of the products are very different, and head-to-head comparisons have not been made. The results of the preclinical trials were published in the form of papers in nature this past April. And they also yielded similar findings. It is not possible to say specifically that this one is inferior or superior to the other.

On a completely different note, and this is the last question for me. Regarding the framework for the enzomenib and nuvisertib collaboration, since your company is aiming for development partnership, I imagine you envision the R&D expenses being split 50-50. Is that understanding, correct?

I wanted to ask you about this. What I wanted to ask is about what would happen to the R&D expenses. For instance, if you are able to secure a development partnership early on and the partner were to push development very aggressively, could that lead to a substantial increase in R&D expenses?

Well, first of all, as you said, as a framework, whether it will be 50-50 or 40 to 60, that depends on the other party, but we are thinking of sharing it between both parties. On the other hand, if the development plan becomes too extreme, it could lead to the situation you just described.

Naturally, we would establish a joint development committee and negotiate the development plan together. While we are also formulating plans to maximize each party's interest, the increase will not be that extreme.

On the other hand, it is certain that costs will increase if we are to proceed with development within disciplined R&D budget. It becomes essential for us that the other party bear the increased portion. We are looking for a partner who can work well with us in that sense.

I understand.

Sakai from UBS. Mr. Kimura, I believe you mentioned that starting in FY 2026, your company's capabilities will be put to the test. That said, you also suggested the possibility of a milestone payment of $325 million next year upon achieving the threshold from Pfizer.

And regarding the remaining residual value of share transfer from Marubeni, I believe it amounts to approximately JPY 27 billion. My first question is whether it can be finalized in FY 2029.

Yes. We recognize that the milestone-based interim payments remain a significant factor for us going forward, and we do not operate solely on our actual abilities alone. So we kindly ask that this point not to be misunderstood.

Also for the China Asia business, cash of JPY 27 billion is expected in the future, and we have included all of it in our P&L this time. On the other hand, while the timing is set for 3 years from now, the contract allows for some flexibility in the timing. Therefore, I cannot specify the exact quarter of which year at this time. Please understand that the target date is 3 years from now.

So you're saying that this is deferred revenue or something? And is it recorded on an annual basis?

Well, it is very complicated. So I ask Mr. Sakai to answer this.

Yes, Sakai speaking. Thank you for your question. Although only 60% of the shares were transferred to consolidated financial statement purposes, the method used on the income statement calculates them 100%. This is the current practice under international accounting standards. So it is not a matter of deferral or anything like that.

Okay. So would it be correct to say that everything will be processed in the financial statements for the fiscal year ending March 31, 2026?

Basically, yes. Until we receive the second payment, there's a possibility that unrealized gains or losses may appear. So if you ask whether they will never appear at all, I cannot say they will never appear. However, please understand that fundamentally, the gains are recognized in the lump sum.

Okay. Another thing I was a little concerned about in 2029 is that I think the substance patent for ORGOVYX will expire in 2029. And if so, under the current rules, this will be the target of IRA, Part D. I think there's a possibility of being a target of reform for ORGOVYX. Since this is a gross to net, we cannot estimate how much it will impact your company's sales, but I don't believe it will result in increased revenue. Please allow me to confirm whether this perspective is correct. Since the price negotiations will start in the previous year, meaning 2028.

Okay. I will try to explain and then Mr. Nakagawa will provide the additional details.

We anticipate that the negotiation of that nature will come up around that time. On the other hand, regarding the timing of the impact, we believe it will be a little later than you just mentioned.

Mr. Nakagawa will explain the current sensitivity, including its magnitude.

Yes. Nakagawa speaking. I'm in charge of North America operations. First of all, in terms of the time period, I think the trigger is that the drug has been on the market for about 7 years rather than a patent. As you pointed out, we assume that this will be a target of negotiations, and we recognize that it will be a negative factor for certain level of sales. So we are positively considering how we can increase our market share by them and how we can overcome this obstacle.

Okay. So I'm a little concerned about the third milestone payment from Pfizer. I suppose that's the minimum you would want to secure. It is 2029 or 2028. So there is still a time frame for lack of a better word, a probationary period. Is that correct?

Regarding the conditions for the third milestone, we are unable to disclose them. So it is difficult for us to provide specific details. However, as you mentioned, our approach is to generate revenue as early as possible and secure as many milestones as feasible. That is how we are proceeding.

Muraoka from Morgan Stanley. I'm asking this question while I don't fully understand, I'm afraid. Regarding the relationship between the quarter's guidance and the partnership of enzomenib and nuvisertib, if partnering for these 2 drugs is finalized by March, this likely isn't included in the current revised forecast. If finalized, it would trigger a onetime gain leading to an upward revision. If both are finalized, it would trigger 2 upwards revisions in theory or formally, would it be possible?

Yes. Formally, as you understand, if we proceed with the contract based on current projections, an upfront payment should likely be forthcoming. However, we have not factored this in.

I understand. I'm just wondering what kind of partner you would like to work with. In other words, since you cannot afford to increase your dependence on Pfizer any further, I wonder if Pfizer is the one excluded no matter how advanced the cancer is. I apologize for this oddly preconceived question, but is that the right way to think about it?

In terms of our partnership strategy, we are not excluding Pfizer or anyone. Rather, we are considering the most suitable partner for maximizing the potential of each of the 2 cancer products.

I understand. I would like to ask about milestones for ORGOVYX in the next term, next April and beyond. I think the probability of achieving $1 billion is very, very high. But when creating forecast for the next period, should I only include it once? I feel given the current momentum that it will be safer to include it twice.

I'm saying this because though you have not mentioned it, if I think the 5 milestones of $500 million each are set, even if 2 come in next year, it wouldn't be surprising given the current momentum. Actually, I think it would be better to anticipate that way so as not to deviate from your company's guidance for the next fiscal year. Please let me know what you can within the scope of what you can disclose.

Well, there is nothing I can say at this point. We would like to prefer to get the milestones in the next fiscal year. But since we have not yet prepared sales forecast for the next fiscal year and cannot disclose the trigger for the next milestone, we are unable to provide any further details at this time. We hope you will create a forecast for a company that includes this information.

Well, I was just wanted to confirm and so as to avoid creating a negative surprise.

Well, unfortunately, I cannot say for certain at this time. One thing, $1 billion for the calendar year figure, I mentioned earlier, we now believe has a very high probability of occurring.

I understand.

This concludes the presentation of Sumitomo Pharma's financial results for Q2 of fiscal year 2025. Thank you very much for your participation today.

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