Eisai Co., Ltd.
Q3 2022 Earnings Call Transcript

Published: 3 Feb 2022

[Operator:]

It is now time. We would like to begin Financial Results Presentation for the Third Quarter Fiscal 2021 by Eisai Company Limited. This session is live streamed. We apologies that this is only live streaming in telephone conference only. Those of you who are participating via telephone line, please download the presentation material from the website and click to move the slide forward. First part, financial part will be presented by Dr. Yanagi, CFO; and the second part, operational part, it will be presented by Mr. Ivan Cheung, President of Neurology Business Group; and Dr. Owa, President of Oncology Business Group. Ivan Cheung will be presenting in English, if you are listening to Japanese channel, you will be listening to Japanese interpretation. If you are listening to English channel, you will be hearing Mr. Cheung himself. Now without further ado, I would like Dr. Yanagi to start the presentation.

[Dr. Ryohei Yanagi:]

Thank you very much. This is Yanagi speaking, CFO. I would like to present the third quarter of fiscal 2021 consolidated statement of income. Please turn to page two. The expansion of partnership model and global brands, double-digit growth in revenue and profits is continued. First topline revenue, revenue was ¥565.3 billion. This was 13% increase year-on-year. Double-digit increase was achieved. The drug price revision in Japan in the generic of Lyrica impacted. However, these were more than offset by strong growth of Lenvima, one of the global brand. There was also ¥45 million of upfront payment on MORAb-202. Other business revenue includes the licensing related revenue, excluding this increase was 4% year-on-year. Lenvima has low cost of sales and Lenvima is growing and licensing revenue also solid recorded. Cost of sales as a result was 22% in comparison to global standard, the figure is a favorable figure. As a result, gross profit was ¥441.2 billion, which was growth of 17% double-digit growth from the previous year same period. This 17% increase within that margin, the increase of expense is contained at 14%. As a result, we were able to achieve significant increase in both revenue and profit. As for the breakdown of expenses, R&D expense was ¥123.3 billion. This was a double-digit growth at 14% year-on-year and this is 21.8% of the sales, mainly on Lenvima and global brands. We are investing resources proactively, including partners reimbursement on a gross basis, R&D expenses was ¥175.9 billion yen, which was 31.1% of the sales. In comparison to other global pharmaceutical companies, we are one of the companies that is very proactive in making R&D investments. As for SG&A expenses, this was increase of 20% at ¥255.9 billion. As a percentage of sales it may look somewhat abnormal at ¥45.3 billion -- 45.3%, but this is also including share profit of Lenvima paid to Merck and it’s positive expense, if that is deducted. Actual SG&A expenses ¥190.4 billion, which is 33.7% of the sales which is in the global range and excluding share of profit, SG&A expenses grew 16%. This also includes other health-related items. Other income and expenses include divestiture of right for Zonegran operating profit as a result was ¥74.6 billion, about 30% growth year-on-year. Op margin is above the 13%. For your reference for the nine months ROE is 11.2%, equity spread exceeding 3% was ensured creating value. As for the balance sheet, we are still net cash positive, effectively debt free at -- more than ¥1,200 trillion in a cash, net DER is negative 0.26 times, equity ratio is 62.9%. For future investment and for shareholder return, we have sound financial position to achieve both at the same time. Now please turn to page three. This is the breakdown of revenue migration. Left box at the very top is the revenues for the nine months from last year at ¥498.3 billion and below this chart is -- for this fiscal year for the nine months revenue was ¥565.3 billion, which was a growth of ¥67 billion. Excluding licensing, Pharmaceutical business total was growing at 4%. On the right side, we have breakdown of the increase global brands, total of four global brands exceeded ¥200 billion -- ¥205.7 billion. This is increase of ¥51.9 billion from the previous year. Lenvima grew strongly to ¥3.8 billion, correction, ¥141.1 billion growth. It grew by ¥37.4 billion and it’s more than offset the impact of generics of Lyrica. Other business options are listed below. MORAb-202 related BMS upfront payment $450 million is included here. As for Lenvima related milestone in calendar year, sales target is achieved and milestone for that is recorded, ¥200 million was from last year and this fiscal year it is ¥300 million, an increase of ¥100 million. With that revenue grew by ¥67 billion. Next slide please. This is page four, showing the breakdown of operating profit migration. Please turn to left box at the very top is operating profit from last year for the nine months. Operating profit was ¥57.7 billion and below that for fiscal 2021 from April to December is the nine months operating profit for this fiscal year was ¥74.6 billion plus ¥16.9 billion, ¥7 billion positive FX effect was observed. In the Pharmaceutical business growth was 6%. In our core business, the Pharmaceutical business we were able to increase both revenue and profit. Right-side show factors for increase and decrease, revenue had already been explained on the previous page. Regarding R&D expenses, Lenvima R&D costs increased by ¥2.8 billion, but there was a regulatory milestone before approval of RCC in the U.S. of ¥75 million is included. Therefore, on a net basis for Lenvima more than ¥10 billion is invested and we are also proactively investing in lecanemab. On the other hand, turning to SG&A expenses as explained earlier, there are costs related to other health and there is also Lenvima profit sharing, which also is included in SG&A expenses. Last year’s profit sharing was ¥47 billion and for this fiscal year, profit sharing was ¥65.6 billion, as Lenvima revenue grew profit sharing increased by ¥18.6 billion. At left bottom, for your information, R&D expense breakdown is given, from partners we have reimbursements in last year, it was ¥46.8 billion and this fiscal year ¥52.6 billion, ¥123.3 billion is R&D expenses on the profit and loss accounting wise. But on gross basis ¥175.9 billion is invested in R&D. With a partnership model we are able to spend 1.5 times the R&D expenses on P&L and with the growth of global brands, we are able to increase both revenue and profit. That is just profits and loss statements. That concludes my presentation on the results from the first nine moments of this fiscal year. Next on Neurology business, Ivan Cheung will present.

[Ivan Cheung:]

This is Ivan Cheung from Neurology Business Group. Let me first give an update on ADUHELM and then I will explain the tremendous progress being made with lecanemab. As you can see in the top blue box on slide five, our top priority for ADUHELM continues to be enhancing the AD Community’s understanding of ADUHELM clinical data. Our partner Biogen is on track to initiate the Phase IV post-marketing confirmatory study called ENVISION this year in May. And is in the final stage of publishing the Phase III data from EMERGE/ENGAGE. We are encouraged by Biogen’s action to reduce the price of ADUHELM based on feedback from stakeholders and we are pleased that the J-code is now in place for ADUHELM. The critical matter now is how to improve drug access to ADUHELM. And we urge CMS to reconsider his draft NCD with a proposed CED for monoclonal antibodies directed against amyloid by the April final decision, which I will go into more details on the next slide about Eisai position. In Japan with regard to the outcome by the first committee on new drugs to continue deliberation on the application of aducanumab, we are working closely with Biogen to actively engage with a PMDA to agree on the additional data requirements so that we can pursue the most expedited path going forward. In Europe with regard to the negative opinion adopted by the CHMP, the re-examination process has been initiated. Next slide, slide six please. On January 11th, CMS released the draft NCD with a proposed CED that applies categorically to all monoclonal antibodies directed against amyloid and recommend restrictive coverage to only patients in randomized controlled trials approved by CMS or supported by NIH. Eisai strongly opposes this draft NCD for a number of reasons, as you can see on the right-hand side in the green box. First, we are greatly concerned that this action severely limits and delays access to FDA approved therapies and directly calls into question the FDA’s role in determining safety and efficacy of new drugs. Second, the proposed CED exacerbate health inequities by restricting coverage to only individuals willing and able to enroll in randomized controlled trials in selected medical facilities. Third, application of CED for investigational therapies that are not approved by the F -- not yet approved by the FDA prejudges clinical trial data and labeling, and the assumption that drugs in this class are identical is wrong and unscientific. Last but not least, is unacceptable to the AD Community, why AD treatments are the only ones being discriminated against with such restrictive CED, unlike other diseases such as cancers and HIV. We strongly encourage CMS to reconsider his proposed decision on this NCD. During the 30-day open comment period, Eisai will make a formal response. CMS final decision is expected to be issued by April 11th. And if we look at the case of lecanemab, we deeply believe that CED is not reasonable, necessary or appropriate based on Study 201 data, low rate of area and the anticipated data readout from Clarity AD confirmatory trial later this year. With that, let’s go to slide seven. Now let me turn to lecanemab and I am very excited to report that we have made significant progress in the rolling BLA submission under the accelerated approval pathway. We remain very much on track to complete this BLA by the beginning of fiscal year 2022 in order to enable potential approval within calendar year 2022. Both the non-clinical module and the clinical module were already submitted to the FDA and we are having ongoing interactions with the FDA regarding these submitted modules. The clinical module is primarily based on clinical biomarker and safety data from Study 201-Core and OLE. And as shown in the yellow box, we saw uniquely differentiated data in terms of amyloid clearance or just three months of treatment all the way to 18 months and low rate of ARIA-E. In addition, blinded safe information from the confirmatory Phase III trial Clarity AD were included in the clinical modules submitted to the FDA and will be updated for the FDA during the upcoming Day 120 Safety Update. We are confident about the size of our safety database submitted for this PLA based on our interaction with the FDA. Meanwhile, in preparation for potential approval and launch before the end of this calendar year, we are working intensely on additional publications from Study 201 and mechanism of action and health economics value of lecanemab for the AD Community. Looking further ahead, we continue to aim for primary endpoint readout from Clarity AD by the end of September this year, in order to enable submission for full approval to the FDA within fiscal year 2022, which I will explain in the next slide. Slide eight please. I am equally excited to report a tremendous progress from Clarity AD, our confirmatory Phase III trial for lecanemab to support full approval in the United States and the basis for submission for approval in Japan and Europe within fiscal year 2022. As you can see in the yellow box on this slide, this trial successfully completed enrollment of 1,795 subjects in March last year and more than 620 patients have already been transferred to the open-label extension, OLE study, representing about 95% of the eligible patients from the Core study. The lower than expected discontinuation rate in the Core study and the strong participation rate in the OLE study indicate high level of engagement from patients and their caregivers for this particular trial with lecanemab even during the period of the COVID pandemic. In addition, we are very encouraged that ongoing reviews of Clarity AD by our independent DSMB have not identified differences in the safety profile of lecanemab, including ARIA from what were seen in Study 201. Furthermore, we are very proud that approximately 25% of the total U.S. enrollment in Clarity AD consists of African/Americans and Latinx people living with early AD, which mirrors the diversity in the U.S. Medicare population. Turning to China, a country with a large rising AD population, I am glad to report that we completed enrollment for the additional cohorts of subjects required for registration there during the previous quarter. And last but not least, we are on track to incorporate less frequent IV dosing regimen guided by blood biomarkers and subcutaneous formulation into the OLE study of Clarity AD later on this year. To get there, though, within this quarter, we will first introduce less frequent IV dosing regimen into the OLE phase for Study 201 and we will complete the Phase I study of our subcutaneous formulation. Over as you can see, we continue to be confident about the outcome from Clarity AD and very much look forward to a data read out in September. Next slide, slide nine please. We have a clear vision that the specific role for lecanemab in this new AD-DMT era is to create the simplest patient journey. As shown in the pink box on the left, we ambitious simpler diagnostic pathway through digital cognitive tests such as Cognigram in the comfort of people’s homes and simple blood test for amyloid confirmation. Moving to the green box in the middle, we envision a simpler treatment process, because lecanemab is the only anti-amyloid beta antibody that requires no titration and the upcoming availability of a subcutaneous formulation to allow self injection. Moving to the yellow box on the right, we envision a simpler monitoring system, driven by lecanemab’s favorable safety profile, such as low rate of ARIA and because of our extensive works with blood-based biomarkers to guide when to reduce frequency of dosing and when to stop dosing for lecanemab. Although, not all these elements will be available by the initial launch in the U.S. under the accelerated approval pathway, we very much look forward to putting this together the simplest patient journey together that is only made possible with lecanemab by the time of full approvals across major markets. Next slide, slide 10 please. This is my last slide and it summarizes why we believe lecanemab will emerge as the most comprehensive therapy in a new D -- AD-DMT era. A conviction in lecanemab is rooted in four pillars. Number one is the early AD indication which we believe lecanemab has a uniquely differentiated profile and could potentially be the first therapy to receive full approvals across major markets. Number two is the preclinical AD indication, which we believe lecanemab could be first to market. Number three is lecanemab’s patient-friendly dosing approaches. And number four is lecanemab’s positioned as a backbone therapy in combination regimen. I already explained about number one and number three, so let me update number two adenoma four further. In preclinical AD as shown in the upper right box, our Phase III AHEAD 3-45 study trial in collaboration with ACTC is enrolling well in over 100 sites globally. This cutting edge trial has what we believe the most modern biomarker characterization for the A3 population versus the A4, 5 population and also dosing paradigm tailored to the A3 population versus the A4, 5 population. With regard to the combination regimen, as shown in the lower left box, we believe lecanemab potentially has the best profile in terms of both efficacy and safety, as well as dosing approaches to become the backbone therapy in combination regimen. Lecanemab was selected as the base anti-amyloid therapy in DIAN-TU Nex -- in the DIAN-TU Tau NexGen Phase II/III study for DIAD subjects, which is now actively enrolling into both the symptomatic tango spread cohort and the asymptomatic tau accumulation cohort. We are continuing to evaluate other proposals to potentially combine lecanemab with other novel agents to further combat this devastating disease. This concludes my presentation. Thank you very much for your kind attention.

[Dr. Ryohei Yanagi:]

Now with regard to the Oncology business, Dr. Owa would like to present. Now Owa would like to report to you on Oncology business.

[Dr. Takashi Owa:]

But, first of all, with regard to the Lenvima sales revenue, please take a look at the left-hand side bar graph FY 2021 of the third quarter ¥141.1 billion global sales was achieved, which is 36% year-on-year growth. So Japan originated blockbuster of Lenvima has been achieving the very powerful growth. When you look at the sales in Americas region in December and previous year, the sales was ¥62.2 billion, which grew to ¥82.6 billion, up by ¥20.4 billion, driving the overall growth. As for China is centered around the HCC indication achieved the 84% of the growth year-on-year and also for EMEA, as well as Latin America and the Europe, as well as in Latin America and Asia 40% of the increase was achieved and so for the important contributions of Lenvima to the patients is the approval for this Lenvima in combination with the KEYTRUDA and here you see 82 produce that are currently ongoing, one is the advance endometrial carcinoma. And there is SPST [ph] that is following the prior systemic therapy in the U.S., in Europe, as well as in Japan last year in July, November and December the approval was granted. And in response to this in January of this year, The People closed the Phase III, the 309 Study was published the New England Journal of Medicine. And in Asia and Latin America based upon this pivotal study, we are currently in the submission phase and also for China, the Phase III is the LEAP-001 study. The first line study is currently ongoing, so the second line is the advanced RCC for the first line. In the United States the -- as well as in Europe the approved was granted in August and November. Currently in Japan, this is currently under review by the health authorities actually, tomorrow and for the later, of course, this is going to be reported in the special the new drug committee to be organized tomorrow. And also as in Latin America, in January the -- it granted the approval in Taiwan and also in another country that is under review. So with the contribution for Lenvima and other indications in the -- for the calendar year, we expect -- we achieved 100 -- $1,400 million of the sales for Lenvima and achieved the sales milestone and have received the $300 million of milestone payments and for other milestones, I can report to you that we are pretty much on track. And the next slide, so as you know that in order to maximize the patient contribution in oncology field, we really need to capture the position as the standard-of-care and so for Lenvima to really achieve the leading positions and we are aiming all of these cancer indication. One is the hepatocellular cancer. So, this unresectable the HCC patients would be the target and this is going to be the Lenvima and monotherapy to be followed by a case. This is the conversion therapies being looked at in this study and which was approved before in January the 20th at ASCOGI meeting. And as you can see that the results for this is highest 94.6% and the complete response rate was 66%. Very high level of the response rate was reported and also Lenvima in combination with KEYTRUDA and further in combination with TACE and also MK-1308 that is Lenvima and also the second Lenvima sort of fix combination therapy is being studies. So, first of all, before RCC, and after getting the approval in the United States in January last year, the first line market share has been expanded rapidly. And also in Europe and the EAU, as well as at ESMO Lenvima or dyspraxia with KEYTRUDA the combination therapies are now newly recommended for the first line. And also just to offer inhibitor that is both with them and also ENGAGE with generic A combination therapies. Again, they are all currently being studied in Phase III studies. And the third indication is endometrial cancer. Now, U.S. NCCN guideline is being recommended in the second line. So Category 1 the evidence for in combination with KEYTRUDA and also in Japan including dMMR mismatch repair enzyme deficient patients, that is, for all comer the basis that privilege granted and also the first line, LEAP-001 study, patient enrollment has been completed and so the study is progressing and ready to come up with the topline results. Here on this slide and you see the four of the LEAP studies that have already completed last patient in. So, one is the LEAP-002 for HCC the first line and also 006 LEAP studies in the non-small cell lung cancer and also LEAP-001 study in endometrial cancer and also LEAP-0033 study in melanoma studies and they are all looking at the PFS or the overall survival as a primary endpoint. That is to say that this study design can really replace the current first line therapies and so after achieving the last patient in and there was no judgment of futility that given and it is progressing very rapidly. And that is to say that there was no judgment that this would not be able to achieve their primary endpoint. So this shows how hopeful these studies are. And as for this final the readout is reported in clinicaltrials.com the LEAP-002 study is expected to come out in July this year and also to your interest, and in April, and the report is expected OC. But also we are expecting some interim analysis for some of the studies. So based upon the disclosure rules, once we get the positive results from these studies, we would like to keep you informed. So from 2022, the very important LEAP studies data are expected to come out one after another, and therefore, I think, that we are ready to make a very strong step forward into the future. So in this slide, the oncology pipeline, so following the Lenvima/KEYTRUDA combination therapy is indicated, the key to that is that through this Lenvima/KEYTRUDA combinations of studies we have been able to collect the various clinical data and we have been able to better understand the mechanism of resistance to IO therapy and we would like to learn with that, especially the CBP data concerning the pathways so FGF pathways has been very much drawing attention. So the first one is E7386, this is a medium molecules. CBP beta-catenin inhibitors. They inhibiting the protein interactions and Eisai chemistry is really putting all their efforts into this oral agent and already the clinical POC has been established. When is that the clear -- the tumor shrinkage effect has been demonstrated from the various carcinomas and also very important pharmacodynamic the biomarkers changes have been identified from the genes, as well as from serum. The gene biomarker is AXIN2 the biomarker. The protein is FGF2 the biomarkers. Based upon these biomarkers, for Lenvima in combination with E7386 or the KEYTRUDA in combination with E7386, two of these Phase Ib studies are currently being carried out for some of the carcinoma. The next aspect is E7090. That is the novel type-V binding FGFR1, 2, 3 inhibitor. With regards to E7090, the clinical POC has been confirmed in Phase I study. So very clear that tumor shrinkage effect has been obtained. So six of the FGFR2 positive biliary tract carcinoma patients and five FGFR was reported. And also another important pharmodynamic biomarker is FGF23 in dihydroxy vitamin D and phosphate, and the clear elevation of these biomarkers, serum biomarkers have been confirmed. So based upon this, so FGFR2 is the positive biliary tract cancer, so pivotal study is currently ongoing and also fulvestrant and exemestane in combination with E7090 is being carried out for the patients who are ER positive in the HER2-negative breast cancer patients. This is my last slide and here we are discussing the update of MORAb-202. MORAb-202 is the very Eisai ADC, the antibody drug conjugate. So, for this MORAb-202 the antibody part is Eisai created with farletuzumab and there is the target antigen is the Folate receptor alpha and this is like for lineage dependent cancer like, serious cancer, as this is a variant, so endometrial therapy -- peritoneal cancer, we see the high level of expression of Folate receptor alpha, and of course, the approved drug is eribulin. So eribulin has a very unique bystander effect. And based upon this combined profile, this can demonstrate a certain effect, that is to say in the form of ADCs, it is internalized into the cancer cells and with the enzyme, the liquors would be drinking this and then eribulin would be accumulated at very high level having this type of toxic effect and then from the death, a tumor cells it will be efficiently released and then for the cancer microenvironment, especially this mesenchymal cancer-related fibroblasts does have a very strong suppressive effect. So it does have a very unique bystander effect and so it was this kind of very superb drug profile. We have entered into this strategic partnership with BMS and based upon this alliance partnership, we are currently discussing with BMS, so that we can start a pivotal study in 2022. As for the MORAb-202, the patients who have been heavily pretreated, especially ovarian, endometrial and HER2-negative breast and non-small cell lung cancer patients, we have been able to demonstrate a very clear and a tumor effect in order to optimize the efficacy and safety as to the right dosing regimen and that we would like to get ready to move into the global pivotal study for this compound. Thank you. Next up with regard to the full year the financial forecast, I would like to ask Dr. Yanagi to present.

[Dr. Ryohei Yanagi:]

Once again, the Yanagi, the CFO, would like to go over the consolidated financial forecast, please refer to the slide 16. Here you see the FY 2021 the financial forecast. So, with the continued growth of Lenvima and also the continued investment into AD-DMT in financially disciplined manner would continue. So the sales revenue is ¥730 billion, which is 13% of the growth from the previous year. So including the license income and also with this growth of Lenvima, we have seen these product mix improvements and so we would expect the level of parallel to Q3 and also because very low cost of sales that can be achieved. Then as a result, the gross margin would achieve the double-digit increase. And so with this 113% of the gross into sales revenues and we can expect a very good operating income and the gross margin increase is going above and so operating income is expected to be ¥78 billion, which is a 50% higher than in the previous year. So there is no change to the forecast from the previous announcement. And ROE in this period is 8.4%, creating the positive equity credit spreads and with the strong balance sheet, we are confident we can continue with the dividend of ¥160 with this good positive financial discipline. Now lastly, I’d like to go over the last page, page 17 and I’d like to share or discuss you as my concluding remarks. You have already heard from the presentation from Neurology and Oncology business from Ivan Cheung, as well as Dr. Owa and so for their respective businesses, we have witnessed the very steady growth and the pipeline is becoming ever more enriched. On top of that and I have tried to explain some of the financial numbers, but we have had the first nine months are very favorable performance and also there is a very favorable the forecast for the full year FY 2021. So, based upon the strong balance sheet, we judge a very solid the financial fitness. So based upon that and we would like to continue with the mid- to long-term proactive investment into the future under this conditions. When we look at the current share price, I must say that, unfortunately, this is very much associated from the intrinsic value of our company and it is pretty much towards agreed [ph]. However, under this COVID-19 pandemic, which is really becoming a major social issues around the world. However, in the field of dementia that we are working on, again, almost in line with this COVID-19 pandemic and this reports most major challenges for us and we are really working for this very serious challenge that is in front of us. As Ivan Cheung mentioned, we have complete confidence into lecanemab that we have in this field and we have discussed the scientific aspect, strategic aspects and regulatory aspects related to this project. But at the same time, this social goodness based upon the corporate activities is something that we want to pursue. But from this perspective ESG, we believe that ESG, lecanemab is something that we can really contribute to the patients, not only that it can really alleviate the concerns and the burden for the caregivers and their family members and also when you think about the access to medicines. And again, for the emerging markets that really represent the predominant population of the world, and for all of these aspects, we believe that we can bring about the tremendous goodness to them. So we think that we can create the great societal impact. So this is pretty much in line with ESG is very and also this is going to bring about the mid- to long-term corporate value creations and so there’s a great potential of lecanemab that we expecting. And also based upon that, we believe that the current share price is showing some additional associations from this interesting value of -- that we can bring about. So we want to continue with, first, we would like to achieve the milestones one after another, and then, we would like to be fulfill our accountability, and through that, we would like to continue with the efforts to achieve the mid- to long-term corporate values and sincerely hope that you will also extend the major long-term support to our company. With this, I would like to conclude this financial presentation. Thank you very much.

[Operator:]

[Operator Instructions] First question is coming from Mr. Yamaguchi, Citigroup Securities. Yamaguchi, Citigroup Securities, please.

[Hidemaru Yamaguchi:]

Can you hear me? Hello. Thank you. Can you hear me? This is Yamaguchi.

[Dr. Ryohei Yanagi:]

Yes. We can. Please go ahead.

[Hidemaru Yamaguchi:]

Thank you very much. I have two simple questions. The first is about the progress in the financial performance and full year forecasts. Dr. Yanagi, CFO, presented various aspects. After Q3, progress has been strong. I think in the company’s forecast in comparison to original forecast milestones might have seen upsides. As for full year forecasts, after Q3 performance was strong. But why is there no reflection of that in the full year forecast and full year forecast is unchanged.

[Unidentified Company Representative:]

Thank you for your question. Dr. Yanagi will respond. Mr. Yamaguchi, thank you very much for your question. This is Yanagi, CFO. As you rightly mentioned, full year forecast, our operating profit forecast is ¥78 billion and for the nine months ¥74.6 billion is the amount of the operating profit and progress rate has been very high as you pointed out. And as Mr. Yamaguchi pointed out, in comparison to the business plan of the company, performance is on outperformance -- on outperforming a strong performance. But this time we have decided not to make up for it revision on the full year forecast. Continuously for Lenvima and AD-DMT in a disciplined fashion investments will continue. In the fourth quarter, there are some uncertainties in terms of market environment. In consideration of the factors, this time, we concluded that the change will not be a material one. So because of the principle of materiality, although, we expect some upside, we decided to keep the forecast unchanged. There are also very proactive investment and micro condition changes, but confidently with confidence we would like to achieve these numbers, the full year forecast. With Biogen under collaboration ADUHELM is pursued and expenses are absorbed and we are achieving these strong results. And as it is noted in the press report with our general model we have A Pharma which is a joint venture and structural reform has been absorbed, that impact has been absorbed. We are taking all of these into consideration and you might consider this somewhat conservative, but we have kept the forecasts for your forecast unchanged, which we are able -- which we believe we are able to achieve in confidently.

[Hidemaru Yamaguchi:]

Secondly, I have a question regarding timing, in Ivan’s presentation about lecanemab regarding accelerated approval timing, in the beginning of fiscal 2022, was the wording that was used. According to the guidance so far, the guidance was before June 2022. So it may be in the same April to June quarter 2022. But between April to June 2022, you plan to file submission and that remains unchanged or is it brought forward closer to April? Is it -- is there possibility that filing might be somewhat earlier closer to April?

[Unidentified Company Representative:]

That question will be addressed by Ivan Cheung. Mr. Cheung.

[Dr. Ryohei Yanagi:]

Ivan, can you hear us? Please wait for a moment. Oh! Yes. I can hear you. Okay.

[Ivan Cheung:]

Okay. Thank you very much for the question. Compared to the last time when we made the statement about completing the BLA within the first half of this calendar year. As I mentioned earlier, we have made significant progress with this rolling BLA, which gave us more confidence to complete this BLA earlier and hence the beginning part of the first quarter of fiscal year 2022 is our updated target. Thank you.

[Hidemaru Yamaguchi:]

Thank you very much. That is all. Thank you.

[Operator:]

Next question, Mr. Kohtani from Nomura Securities, please.

[Motoya Kohtani:]

This is Kohtani, Nomura. Can you hear me?

[Dr. Ryohei Yanagi:]

Yes.

[Motoya Kohtani:]

I have two questions. First is lessons learned from ADUHELM. In January, NCD -- draft NCD was announced by CMS and it’s like a second FDA. I don’t think CMS has authority to make such decisions, and what have led to these very complex issues? Personally, I think that there are three problems with ADUHELM. First is one study succeeded, but one study failed. And most of the people were not able to understand the picture fully. And the second is the pricing of ADUHELM is -- price was to be halved in December, that have been the starting price. And the third is, researchers, experts, almost no researcher expert is supporting ADUHELM, with the Clarity study complete, perfect data are expected and secondly, appropriate pricing is -- should have been the starting price. And the third is in peer-reviewed journal, papers have to be published. Unless there are papers, expert researchers have no basis to make judgment on. And it may be difficult for you to answer, but regarding ADUHELM, there have been a series of confusions. And what are the lessons are learned and what can you apply as lessons learned in lecanemab’s development? On the three points I raised in and on other points, could you share your view with us? And regarding safety profile, you have mentioned that safety profile is expected to be same as 201, which means that ARIA-E incidence is about 10%?

[Unidentified Company Representative:]

The question will be once again addressed by Ivan Cheung.

[Ivan Cheung:]

Thank you very much for your question. And I believe you have two questions. On the first question, thank you for your advice. Much appreciate it. I think, firstly, we should understand that the circumstance for lecanemab is a bit different from the circumstance of ADUHELM. As you may remember, the accelerated approval of ADUHELM basically, became public at the date of approval. The AD community was not prepared for the accelerated approval outcome. For lecanemab, from day one last year when we initiated the rolling BLA, it is well known that this will be an accelerated approval. So I think that’s the first major difference. And the second major difference is the Phase 3 confirmatory trial readout is only several months away, later on this year. So, these are the two major differences in the circumstances. And I am saying this because one important point, as you pointed out, is the public’s transparent understanding of the clinical data and the regulatory situation. And for lecanemab, as you pointed out, with regard to the publication, the accelerated approval application for lecanemab is based on Study 201, and the results of Study 201 was already published almost a year ago in a peer-reviewed journal for the public to go through all the data. So that’s the first point. And the second point, I agree with you that how to ensure the most optimal and appropriate access to as many eligible patients as possible is critically important in this space of Alzheimer’s disease. And for lecanemab, I would say that we are confident, how we are going to do that and get it right. Third point, I would point now, I mentioned on my slide nine earlier, for lecanemab, because of its differentiated profile, we have this vision and we believe it’s our responsibility in Eisai, and it’s lecanemab’s specific responsibility to create the simplest patient journey for this new AD-DMT era. We believe this is critically important for the society. Now, to your second question on ARIA-E in Clarity AD, what I can say is, in Clarity AD, we have independent safety monitoring board and mechanism in place, where we check the timing, frequency, and severity of side effects. And if there is any deviation compared to what we saw in Study 201, then such a reporting must occur to the FDA. And so far that hasn’t occurred and that’s why we remain confident that the safety profile of lecanemab, including ARIA remain consistent of what we saw in Study 201 and we are very encouraged by the situation. Thank you.

[Motoya Kohtani:]

Thank you, but a last point. And I would like to ask about the Lenvima sales in the United States. And when you look at the Q3, it is increasing by as much as ¥10 billion in the United States and I think that the first line share is really increasing. So to what extent the share of the first line is really expanding and that kind of information would be very helpful because this is a highly competitive area. So for the HCC, the LEAP-002 study, there is a preceding compound, we do have the benchmark to compare with that. And so the most latest share conditions and also how to distinguish from the competitive regimen. And also for the HCC cabozantinib and Opdivo combinations, the COSMIC study’s results have already come out last year and they were not able to show the benefit. And also you are using in combination with KEYTRUDA and so it was inferior to sorafenib. And so COSMIC -132 was 312 was not positive studies, but what do you think about your current conditions?

[Unidentified Company Representative:]

Thank you very much. Owa would like to respond to your questions.

[Dr. Takashi Owa:]

As to the progress in the United States, as you have pointed out, the growth of the HCC is very significant. As for the specific market share numbers, I do not have the specific number with me. So I cannot share that with you. But if you can refer to the number of script versus the previous year, that is by the end of the calendar year December. And when you look at the new script, there is a two-fold of increase. So, there is a market increase in the number of script. In terms of the share, as you know that in the field of RCC, the TKI class INLYTA is really the market leader and also immune checkpoint therapies, the Opdivo and KEYTRUDA competing with each other, but our strategy is that INLYTA in the TKI field, that’s the kind of positions that we would like to overcome, but we don’t know the exact number, but definitely the Lenvima market share is growing and coming closer to the target. When you look at the number of script issued, so this is my first response to your questions about RCC. And as for the HCC cabozantinib and nivolumab’s combination, COSMIC study and also LEAP-002 study to be compared, so as for the cabozantinib and Lenvima. And from my perspective, I believe that they are completely different compounds in TKI, especially for the HCC FGFR pathways is extremely important for -- in terms of the tumorigenicity as well as the cancer prolifcations and this for the cabozantinib does not inhibit FGFRs, but we believe that lenvatinib can really achieve the distinction there. And also for the lenvatinib REFLECT study’s non-inferiority result. So antitumor effect of lenvatinib in the real world setting, we believe that we have been able to demonstrate very strong effect for lenvatinib. So the Lenvima and KEYTRUDA combination therapy, we believe can be the standard of care in this field because of the very long the overall survival extension. So again, this is published data, but the July of this year, the final analysis is expected to come, and currently, we have not really corrected the information in the clinicaltrial.com. So again, we expect that very long overall survival data is expected, just we have seen with RCC. Thank you.

[Operator:]

Next question is Akahane -- Mr. Akahane of Tokai Tokyo Securities.

[Takashi Akahane:]

Can you hear me?

[Dr. Ryohei Yanagi:]

Yes. Please start.

[Takashi Akahane:]

I have two questions. I have one question regarding ADUHELM and the second question is about the financial performance. Regarding aducanumab approval and insurance coverage, not about these, but strategically what you are doing in terms of lobbying activity et cetera. Looking at the appendix, the expense is ¥32.1 billion and up to the second quarter, it was ¥14 billion or so. So you are spending much on lobbying activities and educational outreach activities. What are your strategies in terms of lobbying activities? And outreach and education expense is growing, but what is the strategy?

[Unidentified Company Representative:]

Thank you very much for your question. The question will be addressed by Ivan Cheung.

[Ivan Cheung:]

Thank you very much for an important question. In the United States, both Biogen and Eisai for many years are very much involved in many projects with patient efficacy groups in terms of education, in terms of supporting communities. Those efforts are, of course, very much a big part of the activities for ADUHELM. And of course, critically important for both Eisai and Biogen to continue outreach to members of Congress, to the CMS, to really explain our perspectives and our position on why improving drug access to ADUHELM is so important for the Medicare beneficiaries in terms of an equitable and fair access to an FDA approved therapy, the first AD-DMT approved by the FDA. All these are extremely important activities that have been going on every day for the past many, many months. Thank you for your question.

[Takashi Akahane:]

Thank you very much. And the next question is about the performance -- financial performance. For these activities, ¥32.1 billion is spent, and in the fourth quarter last year, it was ¥3.5 billion and there is also milestone payment for 201 Study at ¥49.6 billion. And is that why you assume that in the fourth quarter revenue and profit will not grow so much or are you simply being conservative?

[Unidentified Company Representative:]

Thank you for your question. Mr. Masaka, Executive Officer will respond.

[Teruyuki Masaka:]

Mr. Akahane, thank you very much for your question. Simply put, the ¥78.5 billion operating profit forecast is as a result of the one-time expense and growth offsetting each other. Lenvima growth and -- strong growth is expected as positive factor. As for a negative factor to strengthen our business foundation we are incurring restructuring cost and strengthening foundation and there is also aducanumab related expenses. And taking all of these into account comprehensively, our forecast remains ¥78.5 billion for operating profit.

[Operator:]

So, next question is Mr. Hashiguchi from Daiwa Securities. Please.

[Kazuaki Hashiguchi:]

Thank you. I am Hashiguchi. I have two questions.

[Dr. Ryohei Yanagi:]

Yes. Go ahead.

[Kazuaki Hashiguchi:]

Your partner, the Biogen, with regard to the Daiwa Securities, these situations, they have indicated that they are going to work on the very significant structural reform, but you haven’t referred to that. Of course, I know that you have the lecanemab, but how should I understand the difference in the policy between the two companies? Do you have different perspective on lecanemab or the environment surrounding the area other than AD, would that be very different between the two companies? Or could you please explain the difference in terms of policies, differences between the two companies?

[Unidentified Company Representative:]

With regard to the questions, Dr. -- Mr. Ivan Cheung is going to respond.

[Ivan Cheung:]

Thank you very much for the question. In the United States, as you said, Biogen takes the lead on ADUHELM commercialization, and Eisai takes the lead on lecanemab commercialization. With regard to ADUHELM, majority of the people deployed for the launch belong to Biogen. And so the restructuring of the cost structure for ADUHELM going forward, in terms of people -- you mentioned restructuring. In terms of people, that is really what Biogen needs to work on from their perspective, not that much on the Eisai side. And that’s why we didn’t talk about that earlier. Now for lecanemab, we will be taking the lead. So we will be deploying majority Eisai people, Eisai talent to do that. And from a policy standpoint, we clearly understand the stages of the launch. First stage is the accelerated approval launch and then the second stage will be the full approval launch, which -- these two, we expect to happen pretty close, within a year. So this is our approach to the launch, which we believe is critically important. Once again, the three points I mentioned earlier in the previous question, one around the transparency and understanding of our clinical data, two about how to really improve drug access, and three, creating the simplest patient journey with lecanemab. These are the three key points we will be working on. Thank you.

[Kazuaki Hashiguchi:]

Thank you. One more question is about page eight, lower part of page eight. OLE study of lecanemab endpoints to be confirmed. Dosing frequency is to be reduced with the new dosing regimen according to this slide. In comparison to other anti-amyloid beta antibody, I believe lecanemab has shorter half life without sacrificing efficacy to reduce dosing frequency, I would assume, is not easy. Using blood biomarker is also mentioned. Could you elaborate on the use of blood biomarkers?

[Unidentified Company Representative:]

That question will be addressed by Ivan Cheung.

[Ivan Cheung:]

Thank you. That was a great question. At the CPAT Congress last year in November, we presented the five-year trajectory of blood biomarkers both A beta 42 to 40 Ratio and p-tau 181. So the concept here is after the initial 18 months of treatment, your -- not only the brain amyloid level measured by PET, but also the blood biomarker levels are coming down to a level near amyloid negativity. So after 18 months, we don’t believe you have to keep giving the biweekly dosing to maintain the plateau level of -- in this case, the blood biomarkers. So the concept is in that 18 months maintenance stage to maintain the blood biomarker level at that low level. We don’t believe because of all the works that we have done so far in the PK-PD modeling, you don’t have to give biweekly. You can give a lower frequency, and actually as mentioned -- as written on slide 10, actually we also have the OLE Phase for Study 201. So we are going to be first testing this new less frequent dosing regimen in the Study 201 OLE, which is happening very soon within this quarter. We will test a couple of different less frequent dosing regimen. And based on that, we will pick one or more to go into the OLE phase for Clarity AD. So those are the steps, and to answer your question specifically, we have confidence based on all the work that we do, after 18 months, we don’t have to give biweekly for sure. Thank you.

[Kazuaki Hashiguchi:]

Thank you. That is all.

[Operator:]

The next question from Nikkei, Mr. Akama [ph]. Are you ready?

[Unidentified Analyst:]

Thank you. I am Akama from Nippon Keizai Newspaper [ph]. I have two questions. The first question is to Dr. Yanagi. So about the potential of lecanemab that you have emphasized at the very end of your presentation, and so far, the -- for the Lenvima cliff in year 2026, and including the potential of ADUHELM, I think that you have built up the story to go over this, but now ADUHELM is faced with this kind of situation. Now, of course, as a growth story, you have to really wait for the full fledged growth of Lenvima, but with the lecanemab growth on the standalone basis, would you be able to go over the offset that you would achieve or lecanemab would be able to go over the offset? This is the first part of my question.

[Unidentified Company Representative:]

So, thank you. Dr. Yanagi would like to respond to that question.

[Dr. Ryohei Yanagi:]

Thank you very much. Mr. Akama. So maybe since you have covered many different points and I think you are referring to somewhat of a bigger picture. So I probably have to respond to you from little bit of a bigger picture. And so my concluding remark was pretty much a sort of qualitative statement and I think your question is referring to that. That is to say that, of course, I referred to the big potential of lecanemab. So for the scientific aspect or DS marketing aspect, if you are looking for quantitative data, perhaps Ivan Cheung should be responding to you. But just in terms of story line, images, and then related to the latter half of your question, now when you think about the Lenvima patent cliff, and again, it has the kind of potential that would be able to overcome this offset from the Lenvima. And it’s not really apple to apple comparison, Lenvima including the social contributions and we are really expecting to achieve the very big sales with this compound, but of course, when it comes to lecanemab, again, it’s not even launched in the market and so the full -- the formal sales forecast is something that we have not disclosed. I’d like to refrain from making any comments on that. But when you think about the very innovative potential, so next generation AD-DMT is exactly the kind of solutions to the social challenges, which is further mount to the COVID-19 challenges and for the patients, for the family members, and the economy of the societies, and again, it can really have the enormous potential to overcome those great challenges. So of course, you cannot really make apple to apple comparisons, but from a little different dimensions. Again, the kind of things that you can never really take for granted for the combinational drugs and that much of upside is something that we are expecting from this product. And so that is really the point I was really trying to make in my concluding remarks. And as for this peak sales focus for lecanemab, if that is material after, then of course, I would like to refrain from responding to that. However, all of these unimaginable social challenges, that’s where we are really trying to bring the impact investment. And I think this is a compound that have that much of the great potential. That I would like to respond to your questions.

[Kenya Akama:]

Second question. This maybe perhaps to be addressed by Mr. Ivan Cheung. Lecanemab before the end of fiscal 2022, you plan to file submission in Japan, EU and US, but what about China? I believe study is making progress. Before the end of fiscal 2022, is it difficult to file submission in China? If so, what is the timing for China?

[Unidentified Company Representative:]

Ivan Cheung will answer.

[Ivan Cheung:]

Thank you very much. It’s a great question. As I explained earlier, we are very glad that we completed enrolment of the additional cohort in China in Clarity AD in the previous quarter. So this is an 18-month duration trial and that’s why submission in China -- submission for approval in China within fiscal year ‘22 will not be possible. Obviously, fiscal year ‘23 will be a very important target for us to see how we can take the earliest action in terms of a regulatory filing in China. We are still working on the pipeline, but please be assured that China is an extremely important market for lecanemab. And I believe Clarity AD is the first Phase 3 AD-DMT trial to complete enrollment in China. We are very proud of that. Thank you.

[Kenya Akama:]

Regarding study in China, is there a possibility that this may move along faster than ADUHELM?

[Ivan Cheung:]

With regard to ADUHELM, it’s public information that the EMERGE and ENGAGE Phase 3 program did not enrolled subjects in the country of China. And as a result, the Biogen team is continuing to have conversation with the Chinese authority on the path forward for ADUHELM in China, of course, seeking the most expedited and reasonable path forward. That is still not yet determined. And as a result, while we have a rather -- I would say, a rather clear timeline for lecanemab in China, the timeline for ADUHELM in China is still not certain. So unfortunately I am not able to answer your question. Thank you.

[Dr. Ryohei Yanagi:]

Thank you. Unfortunately, we have run out of the time. So we would like to end the Q&A session. And with this, we would like to conclude today’s financial presentation. I would like to thank you very much for joining with us for this session. I would like to ask for your continued support. Thank you.