Daiichi Sankyo Company, Limited
Q3 2022 Earnings Call Transcript

Published:

  • Operator:
    Thank you very much for waiting. We now would like to start Daiichi Sankyo's Conference Call on Fiscal year 2021 Third Quarter Financial Results. We are recording this session today. Thank you for your understanding. Please start the meeting.
  • Hiroyuki Okuzawa:
    Okuzawa speaking, thank you very much for joining Daiichi Sankyo's financial results announcement meeting out of your very busy schedule today. I'm going to explain our FY 2021 third quarter financial results we announced at 1
  • Wataru Takasaki:
    Today I'm going to give you an R&D update. First 3ADC update. Page 18 shows ENHERTU DESTINY-Breast03 efficacy data we presented at ESMO last year. ENHERTU demonstrated unparalleled improvement in PFS compared to T-DM1 in patients with HER2+ metastatic breast cancer. Please turn to page 19. We presented DESTINY-Breast03 sub-analysis data of patients with stable brain metastasis at San Antonio Breast Cancer Symposium last year. Lift panel shows PFS in patients with HER2+ breast cancer with stable brain metastasis. ENHERTU showed greater efficacy compared to T-DM1 with PFS 15 months for ENHERTU versus three months for T-DM1. The right panel shows data on intracranial response in brain metastasis lesions. Complete response was 2.8% with T-DM1 versus 27.8% with ENHERTU. ENHERTU showed greater intracranial anti-tumor response in brain met lesions compared to the T-DM1. Page 20 shows other updates for ENHERTU. As for HER2+ metastatic breast cancer in the second-line settings, we filed a submission in Japan, U.S., and Europe based on DESTINY-Breast03 data. Our filing was accepted by PMDA and EMA in December last year. And by FDA in January this year. We were granted priority review designation in the United States with PDUFA date of May 17. Also simultaneous filings are ongoing in multiple countries under Project Orbis, such as Brazil, Australia and Canada. Regarding neoadjuvant therapy, we initiated DESTINY-Breast11 study for patients with early breast cancer in November last year. For HER2+ metastatic gastric cancer second-line treatment, our filing was accepted in Europe based on the data of DESTINY-Gastric01 and 02 studies. In HER2 mutated NSCLC, we initiated DESTINY-Lung04 study in the first-line settings in December last year. So for ENHERTU regulatory filings on new clinical studies are ongoing in multiple tumor types. Page 21 is Dato-DXd breast cancer update. As a potentially best-in-class TROP2 directed ADC development in breast cancer is ongoing in triple negative breast cancer and HR+ breast cancer. Following a ESMO Breast last year, we presented Phase I TNBC cohort data at San Antonio Breast Cancer Symposium last year. Dato-DXd showed encouraging efficacy with ORR at 34% in all 44 heavily pretreated patients with TNBC and 52% in 27 patients without prior Topo I inhibitor-based ADC treatment. Now, we are planning Phase III study in TNBC. We initiated TROPION-Breast01 study in November last year for patients with HR+ and HER2- negative breast cancer. Page 22 is HER3-DXd lung cancer update. In December last year, FDA granted breakthrough therapy designation for the treatment of patients with metastatic EGFR mutated NSCLC with disease progression on or after treatment with a third generation EGFR TKI and platinum based therapies. On the right, you can find Phase I data presented at ASCO 2021. Clinically meaningful efficacy was confirmed across multiple mechanisms of resistance to EGFR TKI's. We were granted first breakthrough therapy designation by FDA for HER3-DXd and the seventh for Daiichi Sankyo. We initiated registration of Phase II HERTHENA-Lung01 study in this patient population from February last year registration plan will be determined by close communication with FDA. Many of the patients with EGFR mutated NSCLC have resistance to the current treatment options. So, new treatment approaches are necessary. We are hoping that HER3-DXd will be a promising treatment option for these patients. The following slides from slide 23 describes an Alpha update, please see slide 24. We talked about the development plan for DS-5670 during the financial results presentation for the second quarter. But in light of the current situation, we changed the development plan and decided to give top priority to the development of booster vaccination. In non-clinical studies, DS-5670 has been shown to induce neutralizing activity against the Omicron variant and booster vaccination has been confirmed to enhance neutralizing activity against the Omicron variant. In January of this year, we started the Phase I, II and III studies for booster shots to be offered in calendar year 2022. Initially, we were supposed to start the Phase III study for a naive subjects in Africa, et cetera within this fiscal year. However, due to the worldwide spread of infection with the Omicron variant, we decided to carry on discussing with the authority regarding the Phase III study plan so that we'll be able to initiate the study in the first half of FY 2022. The dose setting Phase II study started in November last year, and we will continue to discuss with the authority regarding the study design, countries and study timing et cetera of the Phase III study. Slide 25, shows the study design of the booster vaccination. A Phase I, II and III study will be conducted on those who have completed two doses of either community or Spikevax. After confirming the dose an active controlled non-inferiority study will be conducted to compare against Comirnaty and Spikevax. As a primary endpoint, we will verify the geometric mean fold rise of neutralizing activity in blood four weeks after administration of the investigational drug. Please see slide 26. We presented the Valemetostat data at the American Society of Hematology held in December last year. The registration of Phase II study for relapsed and refractory Adult T cell leukemia and lymphoma showed good efficacy with an ORR of 48%. Based on the results of the study, it was designated as an orphan drug in Japan in November last year and was filed for an NDA in the following month of December. Slide 27 includes other updates on Alpha. Regarding an update on quizartinib in November of last year, we obtained data from the QuANTUM-First study for the first-line treatment of acute myeloid leukemia with the FLT3-ITD mutation and achieved a primary endpoint. Based on this data, we are planning for a regulatory filing and a presentation at the Society of Hematology in FY 2022. Next DS-7011 is an Anti-TLR7 antibody and has been adopted by AMED CiCLE. Systemic lupus erythematosus is an intractable auto-immune disease that causes inflammation and damage to various organs throughout the body and the Phase I study for this disease is scheduled to begin soon. Next is about the news flow of this fiscal year. Slide 29 shows key milestones, including key data readouts, and the prospect of initiating a pivotal trial. In addition to the upcoming presentations at the ASCO Genitourinary Cancer Symposium in February. This part show in orange is the update from the one shown in the second quarter financial results. At the ASCO Genitourinary Cancer Symposium, we will present data from the urothelial carcinoma cohort of the ENHERTU plus nivolumab study and the prostate cancer sub analysis data from the Phase I and II study of DS-7300. Data for the DESTINY-Breast04 study are expected to be available in this quarter as planned. ENHERTU is the first and only treatment option targeting HER2 for patients with advanced HER2 low breast cancer. So we are very excited about the results. Slide 31 and after are the appendix. We have listed our milestones and pipelines on those slides. So please take a look at them later. That is all from my presentation.
  • Operator:
    From here on, we are going to entertain your questions. Thank you. We are starting our Q&A session now. First, Mr. Wakao from JPMorgan Securities, please.
  • Seiji Wakao:
    Wakao from JPMorgan Securities, thank you for your time. Thank you. First, I'd like to ask you to elaborate on quid related payment you explained today. This was mentioned in a section on ENHERTU, I might have missed but it was not clear to me. Could you explain once again please.
  • Hiroyuki Okuzawa:
    Thank you for your question about ENHERTU quid related payment. When we cannot sign an agreement, where AstraZeneca gives us rights to commercialize or develop their products, compounds under development and technologies, we can receive this payment from AstraZeneca. This is what we included within our ENHERTU strategic collaboration agreement framework. As we couldn't conclude an agreement by due date, we received this payment in December last year. This means one of the line extension study plans for ENHERTU is gone. For example, I still don't understand fully any impact on the potential of ENHERTU, this is not related to ENHERTU itself. This is one of the economic conditions we included within the entire framework for strategic collaboration negotiations.
  • Seiji Wakao:
    Okay, now I understand there is no change in the potential of ENHERTU. Thank you.
  • Hiroyuki Okuzawa:
    Correct.
  • Seiji Wakao:
    Thank you. Secondly, about your plan for ENHERTU in FY 2021, first your sales forecast for Japan was revised downward by ¥3.4 billion, you mentioned in the presentation that the actual product usage was different from your assumptions. Could you elaborate on this, please? What about the situation in Europe and U.S., particularly in the United States as of the second quarter, you suggested there can be some room for an upside, but you didn't make any revision. This time, were you expecting an upside but none or there can be an upside from now on. Please explain.
  • Hiroyuki Okuzawa:
    Thank you for your question about the status of ENHERTU product sales. First, ENHERTU was launched in Japan six months after the United States. The usage in the real world clinical settings has started since and various information has been accumulated. As was the case with United States, based on the limited data at the time of the clinical studies, we developed our initial plan for Japan. Then the product has been used in the real world clinical settings and we examine the actual situation compared to the plan based on the information at the time of the clinical studies, we identified some gaps in the actual product usage. You can understand the situation is almost the same with the United States. That was a factor behind the downward revision of our forecast. As for the United States, ENHERTU has been making very steady progress and achieve the top new patient share in HER2+ breast cancer in the third-line settings at the 40% level. I mentioned patients with or without brain met regions earlier, this share is rising to the upper 40% level in patients without brain met and the upper 30% level in patients with brain met regions. ENHERTU has been making very steady progress. In the United States, ENHERTU is now included in the NCCN guidelines, which is leading to a positive effect. ENHERTU is classified as a preferred regimen for second-line treatment. This is before the approval of the second-line indication. If your product is included in the NCCN guidelines in the United States even before the approval of an indication, it may be reimbursed by payers in some cases. So, we are beginning to see some positive effect. But with regards to a full-year forecast, we have not reached the stage to make an upward revision yet. In Europe, ENHERTU is progressing even better than U.S. ENHERTU is supported by small clinical practice guideline. So, we are enjoying a lot of positive impact.
  • Seiji Wakao:
    Understood. The situation in Japan is the same with U.S. In principle, the sales forecast is revised downward for the third-line settings and beyond, there will be no impact on the forecast for the second one usage. Is my understanding correct?
  • Hiroyuki Okuzawa:
    Exactly.
  • Seiji Wakao:
    Understood, in HER2 low breast answer, DB-04 readout will be available by March. Could you let us know the timing like February or March if possible. Also, about DB-06 in chemo naive patients, I think the timing of primary completion has been postponed before it was by the end of this year by December this year but now it's June 2023. Please explain the factors behind, is this a positive signal, I suppose the case with DB-04. Events are not occurring as expected and the treatment is efficacious with a positive signal or enrollment is just behind due to COVID-19?
  • Hiroyuki Okuzawa:
    Thank you for your great expectations on DB-04 study. But we can just say that the data will become available in the current quarter by March. We cannot disclose the details. As for DB-016, it's an event driven study, so the timing of the analysis will depend on the status of event accumulation. In that sense, we're progressing this way without any particular delay based on the general methods of proceeding with a study.
  • Seiji Wakao:
    Very clear, that's all from me. Thank you very much.
  • Operator:
    Next, Mr. Hashiguchi from Daiwa Securities, please.
  • Kazuaki Hashiguchi:
    Hashiguchi from Daiwa Securities, thank you for your time. I have a question about ENHERTU quid related payment. I'm looking at your 2019 press release, when you announced your strategic collaboration for ENHERTU. It says that contingent payments include $3.8 billion for achievement of future regulatory milestones and other contingencies. Quid related payment is included as part of this $3.8 billion for achievement of future regulatory milestones and other contingencies. Is my understanding, correct?
  • Hiroyuki Okuzawa:
    Yes, you're right. This time the rights to a certain product or maybe multiple products were not exercised resulting in this payment you received.
  • Kazuaki Hashiguchi:
    Do some products still remain where you may possibly acquire the rights?
  • Hiroyuki Okuzawa:
    The negotiation period is already over. And we concluded that there will be no such product. So the answer is no.
  • Kazuaki Hashiguchi:
    Thank you. One more question, about expenses associated with your decision to winddown Plexxikon business? You mentioned reorganization expenses are expected to be recognized in the fourth quarter according to Page 1 of the reference data, temporary expenses are not included in your full-year forecast, does this mean Plexxikon related expenses are going to be minor or they're not included in your forecast and can possibly be your downside in the future?
  • Hiroyuki Okuzawa:
    Regarding Plexxikon related wind down or reorganization expenses, we are still in the estimation stage right now. But we don't think it's going to be a big amount. That's why it was not included in our forecast this time.
  • Kazuaki Hashiguchi:
    That's all for me. Thank you very much.
  • Hiroyuki Okuzawa:
    Thank you very much.
  • Operator:
    Next Mr. Yamaguchi from Citigroup Securities, please.
  • Hidemaru Yamaguchi:
    Yamaguchi from Citigroup, can you hear me?
  • Hiroyuki Okuzawa:
    Yes, we can hear you.
  • Hidemaru Yamaguchi:
    Again on quid related payment, this is not related to ENHERTU. But this is the so called quid pro quo agreement where you had the right to get other products, but you didn't exercise your rights. Is my understanding, correct?
  • Hiroyuki Okuzawa:
    Yes, your understanding is correct. We didn't specify any particular product or technology to negotiate. But within a certain negotiation period, we had the opportunity to evaluate a variety of things to see if we could sign an agreement or not. This is what we have tried to do. Within the negotiation period, we assumed, we didn't find anything we wanted to licensing in particular.
  • Hidemaru Yamaguchi:
    Understood. You received the proportional payment for the third quarter and the remaining amount will be paid proportionally correct?
  • Hiroyuki Okuzawa:
    Yes, you're right.
  • Hidemaru Yamaguchi:
    Understood, thank you. Secondly, about the divestiture of long-listed products in the United States, the amount is not so big, but these assets will no longer be on your PL statement from FY 2022 or product supply seems to continue, so the assets will leave your PL in stages. What about impact on your PL statement in the United States, is the financial information on such transactions included somewhere?
  • Hiroyuki Okuzawa:
    In principle, as you said these assets will disappear from our PL as there will be no more sales and marketing activities by us. On the other hand, as consideration of this divestiture, gain from transfer of these assets will be booked in FY 2022. So there will be no impact on FY 2021 results.
  • Hidemaru Yamaguchi:
    So booking will be made in FY 2022, right?
  • Hiroyuki Okuzawa:
    Yes, you're right.
  • Hidemaru Yamaguchi:
    Understood. Lastly, let me also ask this just in case regarding your arbitration with Seagen, is there anything you can comment?
  • Hiroyuki Okuzawa:
    On this matter, we will disclose when there is an important update. So please wait till then.
  • Hidemaru Yamaguchi:
    It's between January and March based on the current outlook, correct?
  • Hiroyuki Okuzawa:
    Yes, according to the current outlook.
  • Hidemaru Yamaguchi:
    That's all from me. Thank you very much.
  • Hiroyuki Okuzawa:
    Thank you very much.
  • Operator:
    Let's go to the next question. Mr. Muraoka from Morgan Stanley Securities. Please go ahead.
  • Shinichiro Muraoka:
    Hello, this is Muraoka from Morgan Stanley. Thank you for taking my question. Sorry to go back to the question of the arbitration with Seagen. But let me just confirm my understanding. I think it was about last Fall when the small meeting was held between President Manabe and the analysts. President Manabe spoke with such nuances that regardless of the outcome of the arbitration and the decision made by the District Court in Texas in April, it's not that easy to end and it's not a matter of reconciliation. Do I understand it correctly that your position hasn't changed since then?
  • Hiroyuki Okuzawa:
    Thank you for your question. As you mentioned, there are currently two disputes running in parallel. One is an arbitration proceeding for intellectual property rights related to our ADC technology. And the other is an infringement proceeding regarding Seagen's patent, which is called Texas infringement proceeding. Regarding the arbitration, as I mentioned earlier, we are waiting for the results. And if there is any important progress, we will disclose it accordingly. The other one, which is the Texas patent infringement proceeding has recently undergone a procedure called mediation, in which a settlement negotiation was held. But this has been unsuccessful. So the next step is a jury trial in a Texas court, and the deadline has been set for April 4 this year. We are currently going through various procedures to prepare for it.
  • Shinichiro Muraoka:
    Thank you. So do I understand the nuance correctly that this is not a matter that can be settled so quickly?
  • Hiroyuki Okuzawa:
    Well, at least with regard to arbitration, we have reached the point where we are finally waiting for the arbitrators decision. So in that says it will not be too long.
  • Shinichiro Muraoka:
    And I think you've said it correctly. Understood. Thank you. Also, this is about the timing and it's difficult. But as for DB04 which you didn't specifically mentioned previously, this is not listed on the event table either. But we will be in time for ASCO in June, or the submission will not make it. How should I take it?
  • Hiroyuki Okuzawa:
    We haven't made any decision on presentations at academic conferences yet. Once decided, we will share it with you immediately.
  • Shinichiro Muraoka:
    Thank you also about quizartinib. I think I read it somewhere in the material that you have been successful for that first-line treatment of AML and you are preparing for the submission et cetera. But if I remember correctly, it also had a problem with QT, and you received a CRL a few years ago. Now do you have a prospect that the review by FDA will proceed smoothly this time?
  • Hiroyuki Okuzawa:
    Right. At the moment, we are thinking that there are no new concerns, especially regarding safety. And we have decided to proceed toward submission activities. So regarding your concerns, we don't think there will be any major obstacles.
  • Shinichiro Muraoka:
    Understood. That's all for my questions. Thank you.
  • Operator:
    Let's go to the next question. Mr. Ueda from Goldman Sachs Securities. Please go ahead.
  • Akinori Ueda:
    This is Ueda from Goldman Sachs Securities. First of all, I like to know the current status of ENHERTU. In your previous explanation, I think you commented that the concerns for ILD were diminished in clinical practice. Could you tell us a little more about the changes occurred there?
  • Hiroyuki Okuzawa:
    Sure. What I said was only based on my impression and feel in clinical practice. However, as the background, there are specific data of the DB03 study released recently. So I feel that there are sufficient grounds to believe that it has turned into a good impression.
  • Akinori Ueda:
    Thank you for that. As for my second question, I'd like to know about the COVID-19 vaccine. First, what kind of increase in antibody titer was confirmed in the Phase I study? And what level was that? Could you comment on that?
  • Hiroyuki Okuzawa:
    I believe this is about the very first Phase I study that we conducted. To this point, we'd like to put together all the knowledge we have accumulated and presented when an opportunity arise. However, we still do not disclose the content of the data at this point. On the other hand, the booster study has just started today in the form of Phase I, II and III, behind the scenes of this is that the data obtained so far have proven that the study deserves to be facilitated. Although we are not able to disclose the data in detail, I appreciate your understanding that this is the direction we have set.
  • Akinori Ueda:
    Thank you. As an additional question on this topic, do I understand it correctly that approval can be obtained if this booster study shows noninferiority under neutralizing antibodies?
  • Hiroyuki Okuzawa:
    Yes, we are discussing with the authority in that direction.
  • Akinori Ueda:
    Then does that mean that approval can be obtained even in the form of a single indication of booster only?
  • Hiroyuki Okuzawa:
    Yes, your understanding is correct.
  • Akinori Ueda:
    Thank you. Lastly, about the timing. And you mentioned previously that it will be within this year. However, the bar on Page 24 seems to be getting pretty long. What is your current disclosure on the duration of the booster study in the prospect for approval?
  • Hiroyuki Okuzawa:
    As I indicated in my presentation, we have obtained good evidence in non-clinical trials. So I think we will be able to obtain a solid confirmation from the clinical trials. Regarding Phase I, II and III in the booster study, it flows from the dose finding study to the active controlled noninferiority study. This program will flow smoothly and will be put into practice use in calendar year 2022. The outline image of the timeline has been fully in place. Although the bar is drawn long. It's practical use in the 2022 calendar year is properly in sight.
  • Akinori Ueda:
    Understood. Thank you. That's all for me.
  • Operator:
    Let's go to the next question. Mr. Sakai from Credit Suisse Securities. Please go ahead.
  • Fumiyoshi Sakai:
    Hello, this is Sakai from Credit Suisse. There's only one thing left. But I think I should congratulate you on the Breast03 studies publication on the NCCN guidelines. The guidelines say that it's a recommended regimen in category one. But the NCCN guidelines are written so much in detail that I've been having a hard time reading it. Anyhow, what are the implications of being recommended for category one?
  • Hiroyuki Okuzawa:
    Naturally, I suppose it has brought a good impact. And as for the other drugs listed here, please let me know the main was listed in the guidelines. Also, the NCCN guidelines have not been updated yet.
  • Fumiyoshi Sakai:
    I appreciate it. If you can let me know if I'm missing something here. I think the question is about the status of being listed in the NCCN guidelines and the status of other products?
  • Hiroyuki Okuzawa:
    My understanding is that it is definitely recommended at the highest level in the second-line of the recommended regimen.
  • Fumiyoshi Sakai:
    And your next question is about the status of other products. For example, in the case of the first line pertuzumab, trastuzumab, and docetaxel are categorized as one in the recommendations. How about the second-line?
  • Hiroyuki Okuzawa:
    Regarding the second-line, it is ENHERTU. Previously T-DM1 was included before ENHERTU, but now that ENHERTU has become category one of the recommendations T-DM1 has been changed to the category 2A of the recommendations.
  • Fumiyoshi Sakai:
    That means that the category has gone down?
  • Hiroyuki Okuzawa:
    Correct.
  • Fumiyoshi Sakai:
    I see where the guidelines themselves updated in November?
  • Hiroyuki Okuzawa:
    Yes, they were.
  • Fumiyoshi Sakai:
    Okay, I'll take a look at them later. As for the category in terms of its way of use, it's recommended as the one at the very top?
  • Hiroyuki Okuzawa:
    Yes, that's correct. Although it's still in the pre-approval stage, it's already at the top of the guidelines.
  • Fumiyoshi Sakai:
    Okay, thank you very much.
  • Hiroyuki Okuzawa:
    Thank you.
  • Operator:
    Let's go to the next question. Mr. Akama from Nikkei, Inc. Please go ahead.
  • Unidentified Analyst:
    Hello, I'm Akama from Nikkei, Inc. I have two questions. First of all, I'd like to ask Mr. Okuzawa about what the impact of the spread of Omicron has been? I think Injectafer has a much higher sales progress rate in the United States this year than the previous year. But can you tell me how it has been impacted? Also, on the positive side, please tell me if there is an increase in sales of Loxonin?
  • Hiroyuki Okuzawa:
    Yes, thank you. Regarding Injectafer in the United States. The society has been recovering quickly from COVID-19 this term. And even compared to other countries the situation was that patients had returned to the hospitals in the number of visits recovered in the first half of this fiscal year, which allowed us to achieve even higher sales performance than before. There was a positive effect that the results for the first half of this fiscal year were higher than the results for the first half of FY 2019 before the outbreak of COVID-19.
  • Unidentified Analyst:
    How about the impact of Omicron?
  • Hiroyuki Okuzawa:
    Right. Omicron is not recognized as a particularly negative factor. And sorry, I think the second question was about Loxonin situation in Japan. As for the current status, the results are almost the same as the previous year. There was a time when Loxonin had a slight increase related to side reactions after vaccination. But it has calmed down for now. So the result of Loxonin this term is about the same as that of the previous year.
  • Unidentified Analyst:
    Do you expect to see another increase of demand after the third booster shots?
  • Hiroyuki Okuzawa:
    Well, I can't really tell you one way or the other. But during the fifth wave, it's true that there were many situations where it was used for such side reactions. So there may be such a possibility for the current sixth wave.
  • Unidentified Analyst:
    Thank you. I have one more question. I would like to ask Mr. Takasaki. You mentioned that clinical trials for unvaccinated subjects were delayed. In fact, how is it delayed by the expansion of Omicron? Is it delayed because the CROs are stuck? Or is it delayed because you can't find naive subjects in the first place? And in fact, please tell me if it is unlikely that the clinical trial for naive subjects will end in calendar year 2022. What's the possibility?
  • Wataru Takasaki:
    Thank you for the question, Mr. Akama. I think there are two ways to go with the spread of Omicron. First, I think the number of naive patients is decreasing. The other is that due to the Omicron infection, there is a scheduling problem and a sense of tightness in medical institutions where clinical trials will be actually conducted. So, I think that the level of difficulty has increased a little due to these two factors. We have been talking with the regulatory authority about how to conduct the clinical trials. We are still not ready to tell you what and when we will be doing. But we'd like to start the clinical trial by following the booster study as closely as possible. I'm sorry that we don't have a clear timeline yet, but there is no change in our process of diligent discussions with the regulatory authority.
  • Unidentified Analyst:
    Thank you very much for your detailed answers.
  • Operator:
    We have reached the time to end the QA session. Thank you for your participation in today's session. This concludes today's meeting, and thank you all for your attendance.

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