Daiichi Sankyo Company, Limited
Q4 2020 Earnings Call Transcript

Published: 28 Apr 2021

Sunao Manabe:

Thank you very much for joining Daiichi Sankyo's Financial Results Announcement Meeting despite your very busy schedule today. I'm going to explain our fiscal year 2020 financial results we announced at 1 PM on Tuesday, April 27, Japan Time based on our presentation materials. Please turn to Page 3. Today I'm going to cover FY 2020 consolidated financial results, FY 2021 forecast and business update in that order. Then Wataru Takasaki, R&D Division Head will give R&D update and actions against COVID-19 update. We will entertain your questions at the end.
Wataru Takasaki:

Today, I'd like to give you our R&D update. First, I'm going to talk about the major progress in FY 2020. Please turn to Page 28. I'd like to use two pages to explain the major progress of Enhertu. First about breast cancer. In HER2 positive breast cancer, we started two studies. First, we initiated DESTINY-Breast05 study targeting high risk, early breast cancer. This is the post neoadjuvant Phase 3 study in HER2 positive breast cancer patients with invasive residual disease who are at high risk of recurrence. Secondly, we also started DESTINY-Breast07 study as the fundamental study for development in earlier treatment lines. This is a Phase 1b/2 study targeting the first and the second line treatments. We are going to confirm the efficacy of Enhertu in combination with various anti-cancer agents. In HER2 low breast cancer, we started DESTINY-Breast06 and 08 studies aiming at earlier treatment lines. DESTINY-Breast06 is a Phase 3 study in chemo naive patients with progression after endocrine therapy. DESTINY-Breast08 is a Phase 1b study to confirm the efficacy of Enhertu in combination with various cancer treatments in chemo naive and post-chemo patients. In HER2 negative breast cancer, the newly added Enhertu cohort in AstraZeneca-led ongoing BEGONIA study, which is a Phase 1b/2 study for triple negative breast cancer with or TNBC in the first line sittings. We started five studies including earlier treatments lies in breast cancer regardless of the HER2 expression level. Page 29 shows the progress of Enhertu development in tumor types other than breast cancer. First in gastric cancer, we initiated DESTINY-Gastric03 study as a fundamental study for development in earlier treatment lines. This is a Phase 1b/2 study in HER2 positive gastric cancer in the first and the second line settings to confirm the efficacy of Enhertu in combination with various cancer treatments. In NSCLC, DESTINY-Lung01 study is now underway with a dose of 6.4 milligram per kilo and we started DESTINY-Lung02 study for further evaluation of 5.4 milligram per kilo dose. Also, we newly added Enhertu cohort in AstraZeneca-led ongoing HUDSON study as well. This is a Phase 2 study for the second line settings and beyond. We will confirm the efficacy of Enhertu in combination with durvalumab. As for other cancer, we started DESTINY-CRC02 study in HER2 positive colorectal cancer in the third line settings for further data accumulation and confirmation of the optimal dose. We also initiated two baskets' studies, DESTINY-PanTumor01 and 02 studies for further expansion of cancer types. DESTINY-PanTumor 01 study targets HER2 mutated cancers. While DESTINY-PanTumor02 study targets HER2 expressing cancers. So we started 6 studies in broad cancer types other than breast cancer, also aiming for earlier treatment lines. Page 30 shows the major progress of Dato-DXd. In NSCLC, without actionable mutation, we started TROPION-Lung01 study for the second and the third line settings. This is the first pivotal study for Dato-DXd. We also started TROPION-Lung02 and 04 studies aiming for earlier treatment lines. These are Phase 1 combination studies with pembrolizumab and durvalumab respectively. Starting these studies is a significant progress was. In NSCLC, with actionable mutation, we also started global Phase 2 TROPION-Lung05 study as well. We are proceeding with development, not only in lung cancer, but also in HER2 negative breast cancer. In TROPION-PanTumor01 study, we added two breast cancer cohorts to TNBC and HR or hormone receptor positive breast cancer. We completed patient enrollment in the TNBC cohort. We are planning to present the TNBC cohort data at ESMO Breast in May. So we have made significant progress in the development of Dato-DXd in NSCLC and TNBC also aiming for earlier treatment lines. Page 31 shows the major progress of HER3-DXd. We started HERTHENA-Lung01 study, the first pivotal study for HER3-DXd which is a significant progress was. This is a global Phase 2 registrational study for EGFR mutated NSCLC in the third line settings. We also started preparation for Phase 1 study in combination with osimertinib aiming for earlier treatment lines in the same tumor type. We're going to start this study shortly. HER3 expression could rise as a mechanism of resistance to osimertinib. But more potent efficacy is expected in the first line settings by suppressing the resistance through the combination therapy. In addition to NSCLC, we are developing also in CRC. We started global Phase 2 study in the third line settings. So for HER3-DXd, we have made significant progress in the development of EGFR mutated NSCLC and also made progress in CRC and other cancer types. Page 32 is a summary of major presentations on our 3ADCs at four major international conferences. In 2020, the number of presentations exceeded that of FY 2019, reflecting the progress of the 3ADC development. Please turn to Page 33. Every year, our ASCO identifies areas of priority with high unmet medical needs and select drugs which have made progress in those areas as the advance of the year. This year. ASCO focused on GI cancer, where chemo therapies are standards of care. Enhertu DESTINY-Gastric01 and DESTINY-CRC01 study data was selected as the ASCO 2021 advance of the year, as the data suggested that it can be an effective drug for patients with HER2 positive metastatic gastric cancer and CRC. We already obtained approval of the gastric cancer indication based on the DESTINY-Gastric01 study. We are also becoming more confident about development in CRC for the future as well. Please see Slide 34. Enhertu received the Prime Minister's Award at the 9th Technology Management and Innovation Awards sponsored by the Japan Techno-Economics Society. The following five points are highly recognized for the award. The first is the creation of Enhertu by utilizing the knowledge and experience of drug discovery over many years. The second is the acceleration of R&D by building a management system that enables quick decision making. The third is that we worked with academia and medical institutions to promptly create data that meets international regulatory approval standards. The fourth is that by actively utilizing the new pharmaceutical jurisprudence, we sought measures to quickly deliver the product to patients. The fifth is that, we have developed a manufacturing method to minimize quality risks. We are extremely excited about this award, was given in recognition of the value of Enhertu as well as the ingenuity challenges, teamwork and technological innovation of all members of the Daiichi Sankyo Group. Slide 35 shows the major progress of the alpha products. Regarding oncology, DS-1647, which is a virus for cancer treatment was submitted for approval in Japan. We started Phase 1 studies of 2 DXd-ADC products, namely DS-6157 and DS-6000, as well as the cancer immune antibody, DS-1055. For specialty medicine, we made submission for additional indications for atrial fibrillation in the very elderly in Lixiana and ischemic stroke in Efient. We also obtained the results of the Phase 3 study for central neuropathic pain with Tarlige and the Phase 1 and 2 studies for Duchenne Muscular Dystrophy with DS-5141. So, we believe that the development of various modality has progressed and that it has become a good stepping stone to build a pillar of further growth after 3ADCs which has been a strategic pillar of the five-year business plan. Slide 36 and after are related to ASCO. Slide 37 is an update on the results of ASCO's abstract adoption. Enhertu's DESTINY-CRC01 trial and HER3-DXds, NSCLC Phase 1 trial have been scheduled to be oral presentations. The results of the NSCLC cohorts of Enhertu's BEGONIA and DESTINY-Gastric01 studies in that Dato-DXd Phase 1 study will be presented in posters. Slide 38 is an announcement of our IR events related to ASCO. Dr. Manabe and Dr. Takeshita, who was newly appointed as a Global R&D Head. We'll update the data announced at ASCO and our pipelines. We plan to hold 2 briefings for Japanese and overseas investors with the same content. It will be the first opportunity for Dr. Takeshita to speak to you, so please look forward to it. Slide 40 mainly describes this year's new flow, please check it later. Slide 42 shows an update on our initiatives for COVID-19. First, the development of vaccines and therapeutic agents. We are participating in basic research supported by AMED and are developing the messenger RNA vaccine DS-5670 using our unique and novel nucleic acid delivery technology. Last month, we started the Phase 1 and 2 studies. Regarding the messenger RNA vaccine, we'd like to utilize that in addition to COVID-19 to enhance our pipelines. Regarding the Nafamostat inhalation formulation, DS-2319, which is being jointly researched and developed by the University of Tokyo, RIKEN and Nichi-Iko. We will utilize the development experience of Inavir to carry out formulation research, non-clinical research and clinical development. We conducted formulation research and non-clinical studies and started the Phase 1 study last month. Next is the manufacturing and supply of vaccines. AstraZeneca's COVID-19 vaccine AZD1222 has been supplied with undiluted solution from AstraZeneca and Daiichi Sankyo Biotech started contract manufacturing from last month. Slide 44 and beyond our appendix, we have posted a list of milestones and pipelines, so please check this one later as well. That concludes my presentation. We're going to take your questions from here. Let's get started.
Operator:

Mr. Yamaguchi from Citigroup Securities, please.
Hidemaru Yamaguchi:

Yamaguchi from Citigroup Securities. My first question is a little detailed question. DESTINY-Breast02, 03 and 04 studies are three major milestone studies. Last year during the R&D meeting, you mentioned the timing may shift slightly before and after, but all data could be available in the July-September period. Looking at the current milestones, 02 study timeline is extended by one year and 04 by two quarters, it seems. I'd like to ask you the reason for changing your forecast and timeline? Is there any possibility of another revision in the future? This is my first question.
Wataru Takasaki:

Both 02 and 04 studies are event-driven studies. Because of the accuracy of a forecast, we made when the number of observed events were small. We reviewed our forecast again under this timeline based on the latest situation which was presented to you today. The studies themselves are making steady progress. Depending on when events will occur, the schedule can change. We reviewed again under this timeline. That's all from me.
Hidemaru Yamaguchi:

Thank you. 02 study in a sense is similar to 01 study, there is a delay in the occurrence of events, resulting in the extension of the study timeline by one year or half a year. Correct?
Wataru Takasaki:

Right.
Hidemaru Yamaguchi:

Understood. Secondly, I'd like to ask you about FY 2021 Enhertu's sales forecast particularly in the United States. In FY 2020, it was likely behind the original forecast due to the impact of COVID-19 and the impact of tucatinib according to your memory. This year, you're forecasting a very good performance. Could you please comment on the factors behind the underachievement in FY 2020 assumptions for your forecast of a good performance this year? And how to address the factors behind the shortfall in FY 2021?
Sunao Manabe:

It's quite difficult to forecast sales in the first year. And we presented the numbers today. As you pointed out, the impact of COVID-19, the impact of tucatinib reinforcing our marketing capabilities further were considered comprehensively to make the forecast we presented today.
Hidemaru Yamaguchi:

So it's based on the forecast last year, you're assuming that these factors will be addressed. Correct? The expansion of indications is also included?
Sunao Manabe:

Yes, that's right.
Hidemaru Yamaguchi:

Understood. Thirdly, regarding DS-5670, you just started the clinical study recently. We don't know what is going to happen from now. But given the situation of vaccines in Japan, you may want to hurry up in your development. If you have an outlook for the next milestones and development data regarding DS-5670, could you share that with us?
Wataru Takasaki:

We just started Phase 1/2 study last month. We cannot explain the long timeline up to approval here. As for approval. We will have rounds of meetings with PMDA to discuss what kind of study we should designed to deal with variance for example. Depending on the spread of COVID-19 infections, we should be conducted a study, including such issues we are consulting with PMDA whenever necessary to proceed with a plan. While we're developing our future plans, we started Phase 1 study. As for the timeline, we cannot disclose as of now.
Hidemaru Yamaguchi:

Understood, that's all for me. Thank you very much.
Operator:

Next, Mr. Hashiguchi from Daiwa Securities.
Kazuaki Hashiguchi:

Hashiguchi speaking. Thank you for your time. First, I want to ask you about Dato-DXd development plan on Page 30. In HER2 negative breast cancer, you newly added the hormone receptor positive cohort. I think this is a segment where through the early development is making a lot of progress? Can I understand that you're making this decision as a result of your confidence about TNBC in the studies so far? Or should I interpret that you're still pursuing various possibilities at this stage?
Wataru Takasaki:

The newly added two cohorts TNBC an HR positive you mentioned. We have quite positive data in TNBC. We think we are approaching the timing to share that data with you. In total, including that portion we are still searching for strategy at this stage.
Kazuaki Hashiguchi:

At the bottom of this page, there is a mention that you are also aiming for earlier treatment lines. I wonder to what extent this expression is applicable just to NSCLC or also to TNBC?
Wataru Takasaki:

Combo studies are also listed here with which studies we will be aiming for earlier treatment lines. We need to discuss further. In FY 2021, we will focus on NSCLC. While we also take a challenging on earlier treatment lines, that's what we mean by expression, aiming for earlier treatment lines.
Kazuaki Hashiguchi:

So just NSCLC for the time being according to discretion, correct?
Wataru Takasaki:

Yes, that's what we would like to focus on this year.
Kazuaki Hashiguchi:

Regarding TNBC, for which you said you have quite positive data right now. How does the TNBC for FY 2021 and beyond?
Wataru Takasaki:

Just a moment please. We are going to present the data at ESMO Breast in May. You can check that data.
Kazuaki Hashiguchi:

Okay, understood. One more question. Regarding Page 16 on FY 2021 forecasts for Enhertu's regulatory milestone payment. The last one in this table is NSCLC. When you obtain the approval of both HER2 positive and HER2 mutant, JPY 2.6 billion payment will be made or literarily the approval of either HER2 positive or HER2 mutant will lead to JPY 2.6 billion? How do you see the probability of approval of each right now? Can I have your comment, please?
Wataru Takasaki:

Regarding the forecast on Page 16, the approval of either of the two indications will lead to this much payment.
Kazuaki Hashiguchi:

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

Next, Mr. Wakao from JP Morgan Securities.
Seiji Wakao:

Wakao from JP Morgan speaking. Thank you for your time. First about your R&D expenditure. You're forecasting JPY 266 billion for FY 2021. When you announced your new five-year business plan, you mentioned JPY 1.5 trillion for the five years. I want to ask you how R&D expenditure will increase in the next fiscal year and beyond? Can I assume that you're going to increase your R&D expenditure in accordance with your revenue? In terms of the results, this year is going to be the bottom in spite of an increase in R&D expenditure you can expect revenue and also profit growth as well. Can I understand this way?
Sunao Manabe:

When we announced our new five-year business plan, we mentioned JPY 1.5 trillion for the five years. If you calculate simply, it's going to be JPY 300 billion each year. When we have more development projects, R&D expenditure will also rise accordingly. We made a forecast for the five-year period, the amount may rise gradually from FY 2021. But if you depend on the project at that time, so I hope you look at JPY 1.5 trillion as the total amount.
Seiji Wakao:

Understood, thank you. Also regarding Dato-DXd data you're going to present at ASCO, what is the timing of the data cutoff? And how much data can we see in terms of the sample size for 4 and 6 milligram per kilo doses? The data cutoff for the presentation at WCLC was September 2020 with a sample size of 40 subjects. If I remember correctly, how has this changed? This is my second question.
Wataru Takasaki:

This is going to be a late-breaking session and the abstract will be made public on the 8th of May. So I cannot answer right now. You mentioned the sample size of 40. We will have data after the cutoff from the subjects who were enrolled. I cannot talk about the sample size today. But we are planning to present data we have been able to collect by now. So I hope you can check that data.
Seiji Wakao:

Thank you. Lastly, there is a delay in the timing of data becoming available from Destiny-Breast04 study. Due to this delayed timing, the timing to start other HER2 low clinical studies may also be delayed. Should we assume such a possibility? You're not showing your development plan for earlier treatment lines. So we don't know yet. But due to the delay here, any possible impact on other lines? This is my last question.
Wataru Takasaki:

As before, this is also event-driven. So the forecast was slightly revised. Still the study is making steady progress, there is going to be no impact on other HER2 low studies in our view.
Seiji Wakao:

Then studies you're assuming will start as you have planned, correct?
Wataru Takasaki:

Yes, you can understand that way.
Seiji Wakao:

Well understood. That's all for me. Thank you very much.
Operator:

Next, Mr. Ueda from Goldman Sachs Securities.
Akinori Ueda:

Ueda from Goldman Sachs Securities. First, I'd like to ask you about your assumptions for expenses. Regarding your assumptions for SG&A cost in this plan, expenses are going to increase mainly due to the growth of Enhertu according to your explanation. Is there any increase in reaction to the impact of COVID-19 last year? Is there any change in the mix or the composition of SG&A cost items due to COVID-19? I can imagine a decrease in travel and entertainment costs and more investments in the use of online for example. Something qualitative is fine. Could you explain the change, if any?
Hiroyuki Okuzawa:

First compared to the previous year, any increase in SGA cost in reaction this fiscal year. On this matter as you mentioned, an increase in profit sharing with AstraZeneca is the main factor behind an increase in SG&A cost. We are not assuming any other reactionary increase, in particular. As you mentioned, expenses such as travel and transportation costs decreased a lot, last year due to restrictions on activities under COVID-19, we have kept on our mind that basis to develop the SG&A cost plan for this fiscal year.
Akinori Ueda:

Thank you. Then can I understand that the contents are changing? The level or pre-COVID-19 ordinary spending has come down a little. But expenses are increasing along with new growth. That's why profit sharing with AstraZeneca is coming to the fore.
Hiroyuki Okuzawa:

You can understand that way.
Akinori Ueda:

Thank you. Secondly, I'd like to ask you about your mRNA vaccine platform. For mRNA vaccine I think it's important to continue an accumulative basic research. Regarding Moderna's mRNA vaccine, they're making various improvements by enhancing mRNA stability, improving transcription efficiency and optimizing nanoparticles. How have you been able to develop your vaccine technology by leveraging what kind of basic research you have done internally? What is your competitive edge? Could you tell us the background of your development and the features of your technology?
Wataru Takasaki:

We have vaccine research laboratories. We are taking the challenge on the so called, innovative vaccines. On top of LNP messenger RNA, we have various exploratory stage vaccine modalities, particularly in our LNP messenger RNA in the LNP, lipid nanoparticle portion, which is very important for the delivery. What we are using is cationic with a high level of safety. Also, we have accumulated a lot of knowhow about the combination of LNP and messenger RNA and its optimization. In that sense, we are very confident about this platform. As I mentioned verbally during my presentation earlier, we are hoping to leverage this platform not only for COVID-19, but also for others as well. I think this modality will continue to expand as a core platform for Daiichi Sankyo.
Akinori Ueda:

That's all for me. Thank you very much.
Operator:

Next, Mr. Sakai from Credit Suisse.
Fumiyoshi Sakai:

Sakai from Credit Suisse. I want to ask about just one thing. Regarding Breast02 study, I have two questions. This is a third line study. So there should be no impact from the enrollment of early cancer patients. But due to COVID-19, the overall screening rate is declining. The enrollment of cancer patients in clinical studies may be behind overall. Dr. Manabe responded to this question during the new business plan exploratory meeting. But listening to Dr. Takasaki's explanation, I thought there may be some impact. I'd like to ask again for confirmation? This is my first question. Regarding 02 study, due to the third line settings, progression-free survival will not be so long in the control arm like just five or six months. I understand this is an event-driven study. If the results are positive, the study could be stopped in my view. Data is anticipated by the second quarter of 2021 according to the disclosure in the presentation material. But now it's going to be delayed substantially until next year. I wonder if the results are positive by comparing PFS, the study could have been stopped. This is a hypothetical question. Is my understanding correct? For my better understanding, please respond.
Wataru Takasaki:

Enrollment is already over in 02 study. So COVID-19 did not affect the speed of enrollment. I know as this is an event-driven study. The study is ongoing as patients are in good conditions. Including an interim analysis could be one possible idea. But rather than that, we'd like to complete the study in a robust fashion until the end to perform an analysis. That's why we are extending our timeline. 03 study is also event-driven with long PFS and OS so we are including an interim analysis there. But no interim analysis will be performed in 02 study with enrolled patients in good conditions. The timeline is extended a bit, but we'd like to file a submission with robust data.
Fumiyoshi Sakai:

Simply put, PFS is being prolonged overall, right?
Wataru Takasaki:

We will disclose the data in the future. So we cannot comment right now. But that's what we are predicting.
Fumiyoshi Sakai:

Understood. So, there is no delay in the recruitment?
Wataru Takasaki:

Correct.
Fumiyoshi Sakai:

Sorry for the overlapping questions. Understood, thank you very much.
Operator:

I'd like to move to the next question. It's Mr. Muraoka from Morgan Stanley, MUFG Securities. Please go ahead.
Shinichiro Muraoka:

Hello. This is Muraoka from Morgan Stanley. About the sales of Enhertu in the fourth quarter, it still looks weak even after the subtraction. Japan is not increasing enough and the US is not increasing that much either in my impression. There might be some reasons to this, but please explain the part in plain language. And in that flow for this year, you have JPY 69.4 billion, for example, it will stay slow between April and June, but it'll increase from July through September or there will be a solid growth in every quarter, et cetera. If you can share the image you have that'll be helpful.
Sunao Manabe:

It's extremely difficult to forecast. For japan, we didn't set out forecast too high initially. But we increased that later. After all, it didn't reach the level we set up. Since we have ILD with all patients surveillance in Japan, we have been extra careful in that regard. For the US, we are seeing a certain degree of an impact of COVID-19 as well as that we haven't been able to make any prediction yet. The forecast has been falling short and has been adjusted upward and downward. We are working to improve the prediction accuracy.
Shinichiro Muraoka:

As for the US, I think it's JPY $73 million during the January-March period. This fiscal year is $480 million. Does it mean that it will present a linear growth every quarter? Or is it going to fluctuate in its gross? What image should we have?
Sunao Manabe:

Since we want to improve and provide an accurate forecast, we anticipate a linear growth when we developed the forecast.
Shinichiro Muraoka:

Understood, thank you. I have another question. The question is about how this is reflected on the P&L, about AstraZeneca's vaccine vials on your P&L, where are they positioned? And what is the impact? Well, I guess the impact is pretty small. But can you tell me what will happen here after?
Sunao Manabe:

You can think that it has almost no impact. Because of the current circumstances, we have been neglecting the profit or the sales in this initiative. So you may consider that the impact is minimal.
Shinichiro Muraoka:

Understood, thank you. And let me ask you one last question. It's about Espha or about generics. In the past few weeks, it seems that there has been a sudden increase of news coverage on the regulatory authority pressuring the company to restructure. How do you see it now? And what do you think of it? What do you think of the regulatory intention? I should have asked this question during the midterm plan, but I appreciate it if you can tell me now.
Sunao Manabe:

Well, since our Espha is currently focusing on authorized generics AGs of course, in the current situation, in terms of quality, I guess the AGs have been drawing a lot of attention. The way the company handles the situation is different from any other pure generics. However, generally speaking, it did encounter a lot of quality issues which brought some noise in the pharmaceutical industry. We have been keeping some distance in considering the issue at this moment.
Shinichiro Muraoka:

Understood. Thank you. That's all from me.
Operator:

I'd like to move to the next question. Mr. from BofA Securities. Please go ahead.
Unidentified Participant:

Hello, can you hear me?
Sunao Manabe:

Yes, I can hear you.
Unidentified Participant:

Thank you. It seems that we have already exhausted most of our questions. But let me ask you one question about DS-1062. It's about the development strategy for biomarkers for lung cancer. If I remember correctly, you have told us that there is a possible biomarker that can screen patients responsive to DS-1062. About this issue, is there any information you can disclose at the timing of ASCO this year or WCLC in the second half of this year? Or at usual ESMO? I appreciate it if you can share your current outlook, if any. That's all.
Wataru Takasaki:

Sure. This is Takasaki and I'll respond to this question. Including the expression of truck two, we are diligently considering the exploration of biomarkers. The clinical trials that are currently undergoing are conducted on an all-comer basis. Since the tests are done thoroughly. We would like to decide on the usability of those biomarkers based on the accumulated data in the near future, say within this year.
Unidentified Participant:

Are we able to present an update on this matter at an academic conference?
Wataru Takasaki:

All our researchers have been working very hard. And once we get the data, we will be able to present them to you. But nothing has been decided yet. Understood?
Unidentified Participant:

Yes, yes. I have additional question. I believe you will present the data of DS-1062 for lung cancer at ASCO and in the second half of this year. With the updates we obtained from what was presented during the conference in February this year, what progress should we expect going forward?
Wataru Takasaki:

Yes, during the ESMO Breast in May, we will show you the data related to TNBC. Although we are planning to show the data a few times this year, there are some conferences where we can and cannot disclose the data. For example, I believe we can present our data at ASCO and WCLC. However, as I mentioned before, we haven't decided if we can include the data of biomarkers. You can look forward to our presentations at those conferences.
Unidentified Participant:

Understood. That's all from me. Thank you.
Operator:

I'd like to move to the next question. Mr. Mizuno from Tokio Marine Asset Management. Please go ahead.
Yo Mizuno:

Hello, can you hear me?
Sunao Manabe:

Yes, I can.
Yo Mizuno:

Thank you. I have a few questions. My first question has to do with the recent sales of Enhertu as a third line treatment in the US. It's a competitive environment with Pfizer, especially under this COVID-19 situation. When we think of the patients with an ILD risk, I hear some people say that they want to hold back from the treatment every now and then. So we are seeing that impact. But once the results from DESTINY-Lung02 study becomes available, and once we get evidence that there is a clear difference in OS, compared to tucatinib. I suppose that may turn the tide. Is that the way we should think? Could you explain the latest situation?
Sunao Manabe:

Yes, tucatinib or TUKYSA has been used in the third line breast cancer patients with brain metastases, whereas our product has been used in patients with known brain metastases. However, if you look at the third line in total, Enhertu has the highest share of usage. As you mentioned, when additional data become available, we believe that the share will be even higher. We now have great expectations on that.
Yo Mizuno:

Yes, thank you very much for that. Now, here's my second question. I'd like to confirm my understanding on some updated pipeline information displayed in the document. DESTINY-Breast09 is the third line Phase 3 confirmatory, is that correct? Also, about TROPION-PanTumor01. You've listed many cancer types on the table this time, but do they have a certain level of evidence and are they promising to some extent? Or are they simply explanatory? Can you explain?
Wataru Takasaki:

Yes. The first one is Breast09. For 09 it's for patients with HER2 positive - metastatic first line breast cancer and the Phase 3 study is either on monotherapy or on combination therapy with patritumab in comparison with the standard of care. So I believe your understanding is correct. And your second question is about PanTumor?
Yo Mizuno:

Yes, PanTumor. The previous documents didn't have the cancer types in detail. But this time you have PanTumor01 for colorectal cancer, bladder cancer, et cetera. You've listed a variety of usage. I'm curious as to if you had some progress here?
Wataru Takasaki:

Yes, it's true that we are still in an explanatory phase. Since it's just started, we will select the breast cancer type from those. We still need to discuss if we will do all of them. But we can take a wider scope first and select the best cancer type eventually. That's our strategy.
Yo Mizuno:

Okay, thank you. My third question, which is the last question is about quizartinib. The first line top line data will be available in Q3, but will it make it to the presentation at ASH you might not be able to say one way or the other. In addition to that, for recurrent and refractory AML, you receive a CRL in the US, according to the document, you will look at the results of the first line to consider the scoring. By taking that into account, can we expect any major progress with quizartinib? Or is it dependent upon the results? Can you comment on this?
Wataru Takasaki:

To give you a short answer, it depends on the results.
Yo Mizuno:

Okay, but you are not dropping your hope yet. Correct?
Wataru Takasaki:

Correct. We think it depends on the results. So you might need to wait for a while.
Yo Mizuno:

Okay, understood. Thank you. That's all for me.
Operator:

I'm moving on to the next question. It's Mr. Steven Liu from CLSA Securities.
Steven Liu:

I'm Steven Liu CLSA Securities. I'll ask questions on behalf of Tony Ren. Mr. Yamaguchi and Mr. Sakai have asked these questions already. But DESTINY-Breast04 is now scheduled in Q3. And it's been extended by half a year. You also mentioned that it was extended due to the way the event schedule was made. Did you have any specific reason to extend Breast04? That's my first question.
Wataru Takasaki:

Nothing in particular, as I mentioned earlier, it's event-driven. So we changed the schedule a little bit.
Steven Liu:

Okay. Now it's Page 8 of the explanatory meeting document about the increase of DTA. Can you tell me how this will impact the next year?
Hiroyuki Okuzawa:

Sure. This is Okuda, I'll answer this question. FY 2020 is listed here for the recognition of this DTA. This includes the net losses carried forward in the past and in the future. Therefore, it means that there is nothing applicable to the next year and after.
Steven Liu:

So there'll be no impact on the next year. But this year's tax was reduced by the increased DTA in the previous year. Is that correct?
Hiroyuki Okuzawa:

Yes, that's correct.
Steven Liu:

Okay, thank you. That's all from me.
Operator:

I'm moving to the next question. It's Mr. Takagi from Nikkei Newspaper. Please go ahead.
Naomi Takagi:

Hello, can you hear me?
Sunao Manabe:

Yes, I can hear you.
Naomi Takagi:

Okay. I have a few questions. My first question is about FY 2020 ending in March. Based on the results, what was the degree of impact COVID-19 brought to the sales and the profit? Are you able to quantify the impact?
Hiroyuki Okuzawa:

Sure, this is Okuda, I'll answer this question. As for the revenue, it's about JPY 35 billion of decrease. On the other hand, the SG&A expenses are also decreased due to their restricted activities. So the operating profit has been hardly affected by this. That is the general overview.
Naomi Takagi:

Thank you. Similarly, what is your view on this year?
Hiroyuki Okuzawa:

Okay. With regards to this year since we had to engage with our activities in the spread of COVID-19 infection last year, we try to employ a variety of creative ways to move forward. We have set up our sales plan and sales promotion plan by building upon this experience. Unless there is any major changes to this situation, as it has been announced to you, we believe that we will be able to achieve our business plan. Even if the environment changes, and there will be a negative impact on the revenue, we will make an adjustment to the SG&A expenses again, similar to the previous year. So there should be hardly any impact on the revenue.
Naomi Takagi:

Okay, thank you. Also, I have just one more question. I guess someone was asking this question previously, but due to Nichi-Iko's and Kobayashi Kako's problems. I think there have been many alternative productions for generics here and there at Daiichi Sankyo or Daiichi Sankyo Espha, do you also see any transition to alternative productions in the area of mass production of long-listed products, for example?
Sunao Manabe:

We have not been affected by this so far.
Naomi Takagi:

So there's not really anything that you will start as an alternative production. Nothing along that line?
Sunao Manabe:

Correct, correct.
Naomi Takagi:

Understood, thank you. That's all from me.
Operator:

I'm moving to the next question. It's Mr. . Please go ahead.
Unidentified Participant:

Hello. This is .
Sunao Manabe:

Yes, go ahead.
Unidentified Participant:

Okay. I'm sorry. But I also have a question regarding generics in Japan. With regards to Kobayashi Kako, which has been already mentioned in the previous questions. I believe Daiichi Sankyo Espha has a partnership with them. And it seems that they have fallen into an unbelievable situation. Do they have any plan to reconsidering the partnership? Or will they continue the status quo? What's their stance on their matter?
Sunao Manabe:

Well, there has been an impact on some part. But for reconsideration of the contract, I'd like to refrain from answering this question because there are individual circumstances.
Unidentified Participant:

Okay, but can you tell us what you mean by an impact on some part to the extent you're allowed to discuss?
Sunao Manabe:

Well, by that, I mean, the sales has decreased on our end as well.
Unidentified Participant:

Okay, understood. Thank you. Sorry, but I have one more question related to this issue. Regarding entecavir for hepatitis B, since their submission was canceled, your product has been subject to voluntary recall due to the incomplete data in the submission documents. I don't know what agreement you have with them, but are you going to claim any damages from them or any possibility of development to that direction?
Sunao Manabe:

I'd like to refrain from commenting on that matter.
Unidentified Participant:

Understood. Sorry about the question. That's all from me. Thank you.
Operator:

We have already reached the scheduled ending time. With that we conclude Daiichi Sankyo's financial results presentation. Thank you for your attendance today.

Daiichi Sankyo Company, Limited Q4 2020 Earnings Call Transcript

Other Daiichi Sankyo Company, Limited earnings call transcripts:

Daiichi Sankyo Company, Limited
Q4 2020 Earnings Call Transcript