4503.T4503.T
LOADING
|||
Hiromitsu Ikeda: Thank you very much for joining our FY 2024 Financial Results Announcement Meeting by Astellas Pharma Inc. out of your very busy schedule today. I'm delighted to serve as a moderator. I'm Ikeda, Chief Communications and IR Officer. Thank you for your time. Today after presentation, we move on to Q&A session. Presentation will be made based on the material posted on our website under the IR Meeting Section. We have simultaneous translation between Japanese and English including Q&A. We cannot guarantee the accuracy of the translation. Thank you for understanding. You can choose the language from the menu on the Zoom webinar screen. If you select the original language, you can listen to the original sound without going through the translation. Disclaimer for today, this material or representation by representatives for the company, and their answers and statement in the Q&A session includes forward-looking statements based on assumptions and beliefs in light of the information currently available to management and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations, promote and approved use in any fashion or provide medical advice of any kind. Let me introduce the participants; Naoki Okamura, Representative Director, President and CEO; Chief Research and Development Officer, Tadaaki Taniguchi; Chief Commercial and Medical Affairs Officer, Claus Zieler; and Chief Financial Officer, Atsushi Kitamura. We have four executives. We would like to have the presentation. Okamura-san, please.
Naoki Okamura: Ikeda-san, thank you very much. Hello, everyone. I'm Naoki Okamura from Astellas Pharma Inc. Thank you very much for joining our FY 2024 financial results announcement meeting out of your very busy schedule today. This is a cautionary statement regarding forward-looking information, as this was explained by Ikeda earlier, I'm not going to read this page. Page 3 is the agenda for today. Starting from the next page, I will explain these topics in this order. On Page 4, I will give you highlights of FY 2024 financial results. In FY 2024, revenue and core operating profit reached a record high since the establishment of Astellas. Revenue increased significantly year-on-year by 19%. Sales of Strategic Brands as a whole expanded to over ¥340 billion in total, with growth of about ¥180 billion year-on-year. As for SG&A expenses excluding US extended co-promotional fees driven by sustainable merging transformation or SMT, our initiatives to pursue companywide cost optimization, we achieved our cost optimization target of about ¥40 billion and SG&A ratio improved by 3.1 percentage points year-on-year. Core operating profit increased significantly year-on-year by 42% driven by the growth of Strategic Brands, as well as the continuation of SMT cost optimization. Core operating profit margin went up by 3.3 percentage points year-on-year to reach 20.5%. On Page 5, I'll explain FY 2024 financial results. Revenue reached ¥1.912 trillion, up by 19.2% year-on-year. Core operating profit rose to ¥392.4 billion, up by 41.7% year-on-year. Both, revenue and core operating profit exceeded our full year forecast. The Forex impact is shown on the right hand side of the table. There was a positive impact on revenue by ¥68.1 billion, and on core operating profit by ¥15.1 billion. The bottom half of this page shows our full basis results. In the right bottom of the table we included other expenses booked in FY 2024. This was explained when we announced the third quarter year-to-date results, so I will skip the details today. In the end, profit was ¥41 billion, up by 68.8% year-on-year. Profit increased to ¥50.7 billion, up by 197.7% year-on-year. On Page 6, I've explain FY 2024 financial results of our main products. Sales of Strategic Brands, our future growth drivers, namely PADCEV, IZERVAY, VEOZAH, VYLOY and XOSPATA more than doubled to approach ¥340 billion in total, with a growth of ¥180 billion or 110% year-on-year. Due to high profitability of these brands, they're not just contributed to revenue but also played a major role in driving the overall profit growth on a consolidated basis as well. Let me also explain individual Strategic Brands. I've explained the details of PADCEV, IZERVAY and VEOZAH later in FY 2025 outlook section including our sales forecast and the progress status. Global sales of PADCEV increased to ¥164.1 billion, up by ¥78.7 billion or 92% year-on-year, realizing nearly two-fold growth. Sales expanded in all regions where its launched. The number of first-line metastatic urothelial cancer approval countries has been increasing steadily with rapid market penetration after approval. IZERVAY was launched in the United States just about one and a half years ago, but it sales expanded to ¥58.3 billion. IZERVAY was launched about 6 months later than the competitive product but it has established its positioning as the first-line treatment for new patient starts since FY 2024 second quarter. After November last year, it’s growth temporarily slowed down due to the impact of CRL, complete response letter, for label update submission. But in February the label update was approved, and we have been able to confirm signs of the prescription expansion trend recovery since. Global sales of VEOZAH expanded to ¥33.8 billion. In addition to its growth in the United States, the number of countries were its launched and established in international markets has steadily expanded contributing to sales growth. Globally VEOZAH has already been approved in 43 countries and launched in 24 countries. As for VYLOY, starting with the launch in Japan in June last year, the number of approval countries has increased steadily. Global sales reached ¥12.2 billion; higher than expected rates of quoting 18.2 [ph] testing drove strong performance with uptake exceeding expectations. Regarding XOSPATA, global sales increased to ¥68 billion, up by ¥12.9 billion or 23% year-on-year. Sales expanded steadily in all regions where it's marketed. XOSPATA is maintaining a high market share in the current indication of relapse to reflectory AML [ph]. As for XTANDI, global sales increased to ¥912.3 billion, up by ¥161.8 billion or 22% year-on-year. In all markets led by the United States, sales expanded. We believe global sales are reaching projected peak level. Impact from U.S. Medicare Part D redesign was mostly within our assumptions. Sales landed in line with our full year forecast. On Page 7, let me explain FY 2024 SMT achievements. Through SMT initiatives, we achieved cost optimization target of ¥40 billion in FY 2024. As a result, SG&A ratio excluding U.S. extended core promotional fees improved to 30.9%, down by 3.1 percentage points year-on-year. On the left side of this page, you can find our specific initiatives towards cost optimization and the achievements shown in four categories. First; in order to build critical in-house capability to reduce outsourcing, we promoted in-house clinical trials, etcetera, which were previously outsourced. This led to the optimization of about ¥5 billion year-on-year. Number two; as for further efficiency of global operations, we made progress mainly in the use of digital and AI tools with which we enhanced companywide efficiency and optimized costs by about ¥6 billion year-on-year. Third; in order to optimize setting expenses with ROI focus, we achieved cost optimization of about ¥27 billion in total. This includes ¥15 billion cost optimization by making progress in the global organization restructuring, about ¥10 billion by reducing mature products related expenses, and about ¥2 billion by sharing sales promotion materials globally. In addition, we will promote continuous companywide cost optimization as well. We were able to allocate these resources generated by SMT to gross investments for strategic plans and primary focus. SMT is a source of future investments and we will continue to work on this in FY 2025 and beyond. We're expecting ¥120 billion to ¥150 billion recurring annual benefit in FY 2027. We will continue to promote each of these initiatives and ensure cost management with disciplines. On Page 8, I will explain core operating profit growth drivers in FY 2024. FY 2024 core operating profit increased significantly, up by ¥115.5 billion year-on-year. This graph shows year-on-year comparison of main factors affecting core operating profit shown on the horizontal axis. Starting from the left, expansion of highly profitable strategic plans made our contribution to profit growth the most. Next, expansion of U.S. extended sales shown in our yellow bar also contributed also. Also, half of the U.S. sales is booked as co-promotional fee, so all the sales growth has not necessarily been directly linked to profit contribution. Next, a bar in blue shows cost reduction and gross investments. Part of the resources generated by SMT cost optimization were allocated to gross investments for Strategic Brands and primary focus. As others, there was some impact from U.S. near our background generics. Core operating profit in the end reached ¥394.2 billion. Core operating profit margin went up by 3.3 percentage points to 20.5%. From here I will give you FY 2024 pipeline update. On Page 10, I will explain main brands key events achieved in FY 2024. Updates since the last financial results announcement are shown in blue. For IZERVAY, we obtained label update approval in the United States in February, restriction on the duration of dosing was lifted enabling dosing of IZERVAY beyond 12 months. Also in Japan, based on the results of overseas clinical studies including other data, we filed a submission by using the conditional approval system in February. As other updates; for PADCEV we presented EV-302 study follow-up data in first-line metastatic urothelial cancer at ASCO GU in February. The updated data is included on Page 42 and 43 in the Appendix. With regards to VEOZAH for application of approval in China, we started Phase II study to evaluate efficacy and safety with 45 milligram which is the same as the approved dose in the United States and Europe. We achieved first subject, first treatment in February. In FY 2024, we achieved label indication and geographic expansion for IZERVAY, PADCEV and VYLOY, our important growth drivers. And we’re able to make substantial progress towards product value maximization. On Page 11 and 12, I will explain the update for ASB-3082 and 8845, which have made particular progress in the last 3 months among focused area approach programs. The current status of each of the other programs is summarized on Page 34 in the Appendix. First, I will explain the progress of ASB-3082, a flagship program of primary focused targeted protein degradation. ASB-3082 is a protein degrader targeting KRAS G12D mutant. KRAS G12D mutation is seen at a high rate in tumors such as PDAC, pancreatic ductal adenocarcinoma, NSCLC, non-small cell lung cancer, and COC, colorectal cancer. As a recent major progress, we achieved PoC in PDAC based on second and third line data from Phase I data. This is the first PoC achieved from primary focus, and we were very pleased to have been able to achieve an extremely important milestone. Based on these results, discussion is ongoing on how to proceed from now towards early implementation of registration or study in PDAC. We will let you know a specific plan once we make a decision. In Phase I study, assessment in other cohorts is also ongoing in parallel. In PDAC, we are assessing combination with chemotherapy in the first line settings as well. In NSCLC, assessment is ongoing in the second line settings and beyond. PoC judgment is anticipated for the first half of FY 2025. Also in CRC, assessment is ongoing in the second line settings and beyond. PoC judgment is anticipated for the second half of FY 2025. As for additional data presentation, we are aiming for the second half of FY 2025, once we decide on the timing we will let you know. With the achievement of PoC this time, we are increasingly confident, not only about the probability of success of ASB-3082, individually, but also about the potential of TPD, targeted protein degradation, as a platform. We are hoping that TPD will be an effective means to overcome limitations of traditional small molecules and address undruggable targets. Going forward, in addition to ASB-3082, we will further accelerate research and development of follow-on programs as well. From KRAS degrader targeting various KRAS mutants is in the IND preparation stage. We are aiming to start a clinical study within FY 2025. Also, we are conducting research targeting non-KRAS undruggable cancer related proteins as well. We will actively combine internal capabilities with external collaborations, and also work on the creation of new generation of potential protein degraders. On Page 12, I will explain 8845, our flagship program for primary focus genetic regulation. 8845 is a recombinant AAV8 designed to specifically and continuously express hGAA: Human acid alpha-glucosidase genes in muscle. It's under development for Pompe disease. Pompe disease is a rare disease caused by GAA gene mutation with progressive muscle weakness and respiratory failure as main symptoms. Currently as a standard-of-care, ERT, enzyme replacement therapy, is being used to administer deficient GAA enzyme formulations. ERT has various challenges such as the need for chronic repeated infusions once every 2 weeks, secondary disease progression after 2 to 3 years on ERT, and substantial economic burden associated with hospital visits and drug infusions. To address these challenges, gene therapy with 8845 is expected to offer long-term improvement of disease conditions with a single dosing. At present, Phase I/II FORTIS study is ongoing. We presented follow-up data on 6 participants at the Congress in February. Participants are patients with late onset Pompe disease receiving treatment with ERT. They can choose to discontinue ERT after 8845 administration. 5 out of the 6 participants in the study assessment chose to discontinue ERT. As is shown in the right diagram, we confirmed that even after ERT discontinuation, physical function endpoints such as forced vital capacity and 6-minute walk test have been maintained over 1 to 3 years, approximately. In addition, ARMT, Regenerative Medicine Advanced Therapy designation was granted by FDA in February. FDA grants ARMT designation if a regenerative medicine product demonstrates with preliminary clinical evidence the possibility to be able to meet unmet medical needs in serious diseases, if designated opportunities for priority review and accelerated approval will be offered for this study completed the enrollment of all participants. Towards PoC judgment in the second half of 2025, we are making progress in line with our plan. From here, I will explain FY 2025 outlook. Beyond Page 14 [ph], before explaining the outlook of FY 2025, I would like to explain the new organization launched on April 1. The new structure is not based on original function but rather on a patient access that will allow us to move forward with end-to-end activities from the early research stages through to marketing and lifecycle management. These roles are served by value creation, value in capital, value delivery and value enablement. Value creation integrates the divisions over research development, and primary focus leads and plays a role as an innovation engine to create value for patients. Taniguchi, who is here today, will serve us the function of overseeing this as a Chief Research and Development Officer. By the way, delivery integrates the commercial and medical affairs divisions who are maintaining the independence of each function, and aims to deliver value to patient through industry-leading customer engagement. The Chief Commercial and Medical Affairs Officer, Claus, who is here today, will oversee this. As well enablement, very specialized functions such as corporate and manufacturing, we’ll work closely with value creation and value delivery to support activities along the patient access in FY 25 under the structure -- under this structure where we will further strengthen our agile and cross-functional operations and quickly and efficiently promote projects, grants and other assets. On Page 15, I will explain the outlook for FY 2025. We expect continued stronger momentum in our Strategic Brands from FY 2024 driving over revenue and profit growth. In addition, we expect multiple data readouts from studies for life cycle management. And the focus area approach, we expect further PoC judgment following ASB-3082. We focused our revenue increase in FY 2025 due to the expansion of our Strategic Brands. Underlying growth excluding negative Forex impact is expanded to be 7%. SG&A expenses are expected to improve by 1.0 percentage point as we continue cost optimization through SMT. For R&D expenses, the investment will be expanded and primary focus will be the achieved PoC. Core P [ph] is focused to increase underlying growth, excluding Forex impact will be double digit growth of 11%. As for shareholder return, we are focusing dividend per share of ¥78, an increase of ¥4. In anticipation of future profit growth, we focus the dividend increase of ¥4, just like previous year. On Page 16, I explained our forecast for main Brands for FY 2025. We expect continued robust growth in our Strategic Brands in FY 2025 and focused of overall sales of ¥470 billion, an increase of ¥133.6 billion or 40% year-on-year. In underlying growth excluding Forex impact, sales will increase by 50% to the level close to ¥500 billion year-on-year. In particular, we expect IZERVAY, PADCEV and VYLOY to drive growth, and the details of these 3 products explained in the subsequent slides. Our focus for PADCEV for FY 2025 is ¥200 billion, an increase of ¥35.9 billion or 22% year-on-year, and we expect strong and continuous growth. IZERVAY is focused at ¥105 billion, a significant increase of ¥46.7 billion or 80% year-on-year. Following the U.S. level update, there are signs of an upward trend, and we expect strong growth in the future. VEOZAH is expected to make a steady growth -- global growth with a focus of ¥50 billion, an increase of ¥16.2 billion or 48% year-on-year. In the U.S. and other launched markets, we anticipate the number of launch countries will increase in establishing international markets which are expected to make our sales contribution. VYLOY is focusing significant sales growth of ¥40 billion year-on-year, an increase of ¥27.8 billion. We expect expansion in the U.S. and Japan, as well as post-launch sales contribution in China. XOSPATA is expected to grow to ¥75 billion, an increase of ¥7 billion or 10% year-on-year, and we anticipate stable and continued growth in existing indications. Future growth drivers include additional indications for newly diagnosed AML, acute myeloid leukemia, for which we expect to receive top line results in the first half of FY 2026, and expect sales contribution after approval. Finally, for XTANDI our FY 2025 focus is the ¥868 billion, 5% increase year-on-year. In the U.S. although the negative impact of the Medicare Part D redesign is expected, our outlook is to partially be offset by the volume increase due to improved access through a reduced patient out-of-pocket payment resulting in only a significant, slight -- rather slight decrease on a dollar basis. On the other hand, we expect continued growth in markets outside the U.S. and this growth will offset the negative impact in the U.S.; that's on an underlying basis excluding the Forex impact, global sales will be at a similar level as in FY 2024. Page 17, business update and outlook for PADCEV and VYLOY. First, PADCEV is expected to reach the ¥200 billion. The first line MUC [ph] continues to be the largest growth driver, with the first line approved countries expanding to 21 as of April. And we anticipate further approval and reimbursement progress in FY 2025. All regions will contribute to sales expansion, especially Japan, China; and the international market are expected to scale toward impactful sales level. For the U.S., the growth is expected to be moderate in FY 2025 compared to other regions reflecting already high first line market share close to 55%. Growth opportunities in FY 2026 and beyond include an additional indication for MIBC, muscle-invasive bladder cancer. We expect the readout from the interim analysis by the end of this year, and if the results are favorable, we will proceed to NDA submission. Once approved, we expect that it will help PADCEV grow further. Next, VYLOY. We expect significant sales growth with further growth in the U.S. and Japan, and contributions from the expansion of launch countries. Since its launch in Japan last June, the number of approved countries has expanded to 43, and 15 of which the product was already launched. The regional expansion has been extremely successful so far, and a further increase of launched countries will be expected in FY 25. In China, which has a large gastric cancer market alone which is anticipated in the first quarter, and we are expecting post-launch sales contribution. We are working to increase the testing rate of 18.2 [ph] globally to expand market share, and VYLOY is expected to be a key growth driver for sales expansion, with an expectation of its full scale contribution to sales. Page 18, IZERVAY business update and outlook. In dollar basis its representing underlying growth. The FY 25 focus is $750 million, an increase of 96% year-on-year, nearly doubling. In FY 2024, there was a temporarily demand slowdown from November of last year to February of this year due to the impact of the CRL or complete response letter. But since much after the revision, that trend has returned upward. IZERVAY is already widely adapted by retinal treatment setting, and it has established itself as the first line in newly diagnosed GA, geographic atrophy. And after temporary decline in new patient share to the low 50% range last December due to the CLL, but it recovered to about 60% in February. Currently, more than 2,000 retinal accounts [ph] have adopted the drug, and more than 50,000 patients have been treated with IZERVAY since its launch. The post-market and safety profile remains consistent with the clinical trials results, and has been well received by physicians. In addition, we are beginning to see signs of improved diagnosis and treatment rates as a result of our DTC efforts, and we expect further market expansion in FY 2025. Although FY 2025 has just begun, we believe we are off to a good start for strong future growth as we saw signs of growth momentum in March, as well as April. While last fiscal year was an upfront investment phase for future growth, we expect to move into full-fledged profit generating phase in FY 25 through further sales growth, as well as optimization of IZERVAY to achieve high profitability and appropriate expenses level. We are currently planning an IR event focusing on the progress of the U.S. business and its future prospects, and are considering holding it in the first half of the fiscal year where we will provide further details when they are finalized. On Page 19, we use an image to explain the perfect contribution of Strategic products, now Strategic Brands. The pink and grey, both represent the total sales and related expenses of the Strategic Brands respectively, while the lighter and the darker bars represent the COGS and SG&A respectively. Sales are expected to grow significantly with the continued growth of PADCEV and XOSPATA, as well as the full scale growth of VEOZAH and IZERVAY launched in FY 2023, and VYLOY in FY 2024. As for expenses, while COGS [ph] is expected to increase in line with sales growth, SG&A is planning to be maintained at a certain level with the cost optimization through SMT. Profit contribution from Strategic Brands were limited in FY 23 but full scale profit contributions began in FY 24. Rapid growth is expected in the future and from FY 25 onward, we expect the sales expansion of Strategic products to directly contribute to profit growth. Page 20, key events expected in FY 25 for Strategic Brands are described. For IZERVAY, we expect the Phase II study readout for Stargardt disease in the second quarter. A MHOW decision on the jNDA [ph] is expected in the third quarter. As for PADCEV, the Phase II AV-202 study targeting very solid tumors other than urothelial carcinoma; the readout of the first line head and neck cancer cohort is expected to be available in the second quarter. We also expect to have interim analysis data from both, the Phase III EV-303 and EV-304 studies in muscle-invasive bladder cancer in the second and third quarters. If the data is favorable, we plan to proceed with the submission for an additional indication based on this result. In addition, data from the Phase I IV-104 study in NMIBC, non-muscle invasive bladder cancer is expected in the third quarter. For VYLOY, data from the final analysis of the Phase II [ph] study in pancreatic ductal adenocarcinoma is expected in the second quarter. In the fiscal 2025 we expect to see data from a number of clinical trials for expanded indications which we hope will be successful and lead to accelerated growth of our key Strategic Brands. Page 21 is the future outlook for our forecast area approach. As we have reported, we plan to make PoC judgment in each of our primary focused flagship programs by the end of FY 25. ASB-3082 achieved PoC decision in pancreatic ductal adenocarcinoma at the end of FY 2024. And then in 2025, we expect to make PoC judgment in non-small cell lung cancer in the first half of the year, NSCRC in the second half of the year. Other programs remain unchanged from the plans so far, ASP2138 is expected to achieve PoC adjustment at first half of the fiscal year and 8845 and ASP7317 the second half. ASP7317 will make a presentation, including early data from the ongoing Phase Ib trial at the Retinal Therapeutics Innovation Summit in May. We will then move into the conversion phase depending on the results of the PoC judgment. We will prioritize allocation of management resources to the primary focus that have successfully achieved the PoC, and we’ll accelerate R&D for the flagship and follow-on programs to increase pipeline value. We expect the multiple programs generated from our focused area approach to focus and contribute to post-extended LOE [ph] sales and generate the sustainable growth. Page 22 is the -- our full year focus for FY 2025. Revenue projected will be ¥1.930 trillion, and increase of ¥17.7 billion year-on-year. On top of those sales, a decline of [indiscernible] in mirabegron; Forex negative impact is expected but thanks to the strong growth of the Strategic Brands, we expect revenue increase. Excluding the Forex impact, underlying sales are expected to be ¥2.036 trillion, a 7% increase and continue to expand steadily. In the litigation over the formulation patent of mirabegron in the U.S., we have recently received a ruling in favor of the validity of our patent. The lawsuit is still ongoing, but in light of the ruling we have assumed that no other generic products will enter the market for a certain period of time. SG&A is expected to be ¥805 billion, a decrease of ¥38 billion year-on-year. Of this amount, co-promotion expenses for extending in the U.S. is expected to shrink in line with the decline of sales; therefore the impact on profit will be partially mitigated. SG&A excluding co-promotion fee is expected to be ¥576 billion, a decrease of ¥14.5 billion year-on-year. Cost of optimization of about ¥20 billion is expected through SMT and the expenses are expected to be ¥342 billion, an increase of ¥14.3 billion year-on-year. Investments will be focused on lifecycle management of Strategic Brands and primary focus achieved PoC. As a result, we expect Co-OP [ph] to be ¥410 billion, an increase of ¥17.6 billion year-on-year, and a co-operating motion [ph] to be 21.2%, up 0.7 percentage points over the previous year. On an underlying basis excluding the Forex impact, the growth will be ¥435 billion, double digit growth of 11%. In consideration of potential business risks, we have factored in the impact of U.S. tariffs and others to a certain extent in Co-OP [ph]. The lower on the slide shows a full basis focused OP is projected to be ¥160 billion, an increase of ¥119 billion year-on-year. The main adjustment item excluded from the core basis is of amortization of intangible assets which is anticipated to be about ¥140 billion. In addition, we have worked it in other expenses of about ¥110 billion. This includes impairment loss risk of over ¥60 billion which is the same level as in the previous year initial focus, as well as expenses related to reorganization and Forex losses. Page 3, today's summary. In FY 2024 we achieved a record high revenue and a core OP. We expect further growth in FY 2025 with a double digit profit growth in an underlying basis. Our strategic plans expanded strongly in FY 2024. In FY 2025, we expect them to grow further and into a full scale profit contribution phase. And the primary focus we achieved our first PoC with ASB-3082, a targeted protein degradation. In FY 2025 we will accelerate the development of ASB-3082 and subsequent programs. In addition, we will continuously charge PoC in other primary focus. In SMT, based on the positive results achieved in FY 2024 we will pursue further cost optimization. Continuing the momentum of FY 2024, in FY 2025 we will aim to further increase the value of the pipeline which will be the foundation for further profitable and sustainable growth. That's all from me. Thank you very much for your attention.
A - Hiromitsu Ikeda: Okamura-san, thank you very much. That's all as well our presentation. We now like to entertain questions from the audience. [Operator Instructions] First, Mr. Yamaguchi from Citigroup Securities, please.
Hidemaru Yamaguchi: Yamaguchi from Citigroup Securities. First, I have a question about your forecast. You factored in a certain level of risks with regards to tariffs. What kind of risks were included? How much? You incorporated the risks of tariffs; you were the first company to do so. You have errand [ph] and other specific situations. How did you think and how much was included in your forecast, what you're planning to do; could you briefly explain?
Naoki Okamura: Thank you for your question. We incorporated these factors but it's still very rough calculation results only. This is very uncertain and with lots of uncertainties; so how should I explain. Forecasting the actual impact is currently very difficult. We are not doing business just on our own; we have business partners with whom we collaborate. We have to understand the potential impact, we have to discuss the necessary measures; and we can't implement those measures when necessary. How much for what is not going to be mentioned. We don't have a granularity of information we can share today based on our analysis.
Hidemaru Yamaguchi: Next about IZERVAY. Your forecast for IZERVAY prescriptions, because of CRL kind of stopped, and then there is a growth trend after that; so you are assuming 80% growth. And some think that's achievable, others think it's not going to be achievable. Your competitor may have a higher penetration rate by now. So based on your feelings, this is your company's forecast; looking at the trends patients who were kind of away or coming back were they waiting? You had again a growth trend. Could you please explain the current status in more detail?
Naoki Okamura: Thank you for your question. In 2024, in the first half, I should say the market penetration started. There is a slope of growth, unfortunately -- temporarily because of CRL, it kind of stopped, or there was a slowdown to decline. But in February, we go to the approval. One month later, if you look at the data in March, there was a declining trend, and then there is a growth trend again according to a judgment. So after April, it's going to continue the growth like the slope in the first half last year, according to our outlook. If you look at the size of the market, this is mentioned a lot; some time ago there was no treatment option for this disease, so patients under diagnosed. If there is no treatment even if there is a diagnosis nothing can be done; so diagnosis did not make a lot of progress before. Retina specialists -- patients were already seen retina specialists, then the usage will be promoted rapidly. But if patients are seen by AI doctors in the community or patients who haven't seen even such doctors yet, they will be referred to specialists going to be a challenge. So we would use the disease and we are increasing, continuing the disease earnings campaign [ph]. And just accessing the retina specialist would not be enough, patients may not be able to come to specialists; so our customer engagement have to be considered for the better. Sorry, I spoke too much. Claus may something to add. Claus, please.
Claus Zieler: Yes. Let me perhaps explain a little bit what we think happened during the CRL period. As you mentioned, our growth trajectory before the complete response letter was extremely strong, and we know we had 60% new patient capture at the time that the CRL was issued. That then the new patient capture was one factor that we started stagnating because that dropped; it never dropped below 50% but it dropped from the 60% down probably to 52% of new patient capture. Now that we have the label, as of February, it very quickly resumed. So we know we are now already at 59% which is why we can say that we are the number one prescribed agent in the United States since Q2 of last year. So, one factor clearly was the acquisition of new patients which simply slowed down after the CRL was issued because doctors were just uncertain of the label that we were going to get. The second factor, and you alluded to that, was that patients who were on drug; doctors did not know exactly what to do. Remember, we launched a year and a half ago, and we had a label initially for 12 months. That means doctors came to us with a question, what do I do with patients once they reach 12 months? Will the payer reimburse after 12 months if it's off label? Now in real life, we don't know of any case where payers refused payment but it created uncertainty for doctors, so they started sort of postponing the injection. At first it was just a delay. And then we saw some switches happening. But we also saw simply people waiting, just waiting until the label came. You know also that we resubmitted very quickly; and that to some doctors gave confidence back. So they were -- they were willing to wait with the injection until the label came through. And then some other doctors simply continued to inject. And as I said, the payers continue to pay. So you see different behaviors in sub-segments of the market. But if you add all of that up, a little bit of patient drop from 60% to 52% in new patient capture, a little bit of delay, a tiny amount of switching; if you add all of that up, that is what you see on this curve as a stagnating zigzag line. Now comes the good news. As of March, and I just checked the April numbers to -- you know, month-to-date; we are seeing a very strong rebound. So patients are coming back, doctors are resuming the injection, and we are very much on the same tangent, if you want, as we were before the CRL. So if you want the whole curve, we believe has simply shifted out overtime we have, if you want last four months of growth rate where we -- we had a flat curve, but we are now back on-track. We believe that IZERVAY will continue to be the market leader that it was before the CRM.
Hiromitsu Ikeda: Next, JPMorgan Securities, Mr. Wakao, please.
Seiji Wakao: First, it's about the patients; it's not about the co-detective [ph] question. But you are trying to make the supply chain for the products, and especially the positioning of Ireland. You export from Ireland to United States, and the percentage of those products in the U.S. sales and those produced in Ireland? Those are traded with the person near to the cost of the production. So just the little bit of the mark-up is added for the export or loyalty is also added on top of that? That's what I want to know. And also each company, especially looking at the Western companies, the increase of inventory is currently what other Western companies are doing. Do you do the same thing? And also, you have -- do not have manufacturing site in the United States. Are you -- is there any possibility that you are going to establish manufacturing site in the United States?
Naoki Okamura: Thank you for your question. First of all, unfortunately, supply chain per product in detail is not disclosed. So we'd like to refrain from answering the question today. I think I can say this, the Ireland factory we have right now is planned for small molecules. So what's coming out of the Irish plant is the compounds are based on the small molecule technology.
Seiji Wakao: In principle, what's the relationship with the cost of goods sold and how this is traded in transactions?
Naoki Okamura: This is corporate secret, so we cannot disclose.
Seiji Wakao: Where is the IP? Including IP royalty, do we need to discuss including IP. So what do you think?
Naoki Okamura: So, where do we have the IP, and the countries with IP and other countries and affiliates. What is the economic condition between them? That's very confidential information for us, so I cannot respond to that question. And you said that we don't have manufacturing sites in the United States, but for gene therapy and cell therapies we have GMP manufacturing facility in the United States. In reality, and because of the current circumstances, building factory in the United States, it takes time, many years to build a factory, and it takes further many years to transfer the technology; so it's not to be a very effective method. If it's to a certain degree, CDMO in the United States could be utilized. According to some, that could be one possible option, but still it's not an industry to transfer the technology very easily. Once it's clear that what is going to happen to be in time, touching on the supplying chain is not going to be a realistic solution.
Seiji Wakao: So what about the inventory build-up right now?
Naoki Okamura: It depends on the situations or it depends on the features of the product we take necessary measures.
Seiji Wakao: Understood. Thank you very much. My second question about the ASB-3082, you're able to achieve a PoC, which is great. But what kind of data do you have I don't know. To support your long-term growth, I think that's an important aspect. What kind of data have you achieved? Maybe, what about the data in PDAC, pancreatic ductal adenocarcinoma? You have competitive products. So you have been able to capture data which is competitive?
Naoki Okamura: Let me briefly explain, then Taniguchi is going to take over. Of course, in order to judge PoC we have the criteria even before or the start of the studies. In that criteria, for example, TPD specific, MOA in humans have been reproduced; we have such parameters and various tumor types and the treatment results. We have several parameters, not only the ones which are being used but including the competitive products and the development. We set the criteria that we need this much for example, then we check against the actual results to judge PoC; so it's not postdoc [ph] because of the data, we don't decide what to do after looking at the data as you understand. Next, Taniguchi please.
Tadaaki Taniguchi: Next from me, ASB-3082 in pancreatic adenocarcinoma, PoC; let me explain. As you know, in the pancreas -- pancreatic cancer, second line and the third line treatments, only chemotherapy has been approved for the second and the third line settings. And efficacy is said to be less than 10% for the second line therapy, so tumor shrinkage could not be seen with the third line treatment right now. So unmet medical needs are very high in this segment, therefore we have been able to collect very good data here so we can move on to the next phase. That's our decision. As you know, last year in autumn at ISMO [ph] 3082 initial data was presented; so you can check that for your reference. And regarding the data presentation, it will depend on the future situations. But later this year in the second half, perhaps at the Congress, we want the abstract to be accepted. Once there is a decision we'd like to share that with you. Thank you very much.
Seiji Wakao: Some are under the development. So my questions is what do you think about that? So you look at that, and I want to consider but that's my understanding. The last one, mirabegron; the litigation of the patent in my understanding is that, in September that decision will be made. Is this understanding right? And if you win this litigation, then the patent will be the till March of 2030. Is this understanding right?
Naoki Okamura: Well, first of all, the status of the litigation; let me state it -- sort it out. First of all, our formulation patent is decided to be in effective and based upon the two generic manufacturers joined the market then -- but we complained about this addition making to the Bill Code [ph], and this was returned to the first court and litigation, and at the end they came up with the decision that our patent is valid. And currently there are two generic manufacturers and their products infringing our formulation patent or not, or the combined patent or not, that is a different decision and litigation. So 2026, we -- this is going to be decided by the court there; so there is no consideration and the decision is made about the infringement of the patent so far. So at least we are saying that our formulation patent is viable without waiting for the decision about that. With that risk other generic manufacturers might not getting into the market. I don't think that the percentage is not that high, and the two companies -- generic companies currently, ultimately, if they may receive the decision that is the violation of the patent, then they have to pay of the business -- from the business that they've gained during -- before that decision-making. So that possibility is not really high, so all-in-all based upon those factors we came up with this forecast.
Hiromitsu Ikeda: Now, Mr. Ueda from Goldman Sachs Securities.
Akinori Ueda: First question is about the status of XTANDI, January to March volume, and also the price trend and for the plan, especially in the United States, what is the current precondition assumption? For the price perspective, Medicare redesign that leads to the increase of the burden from the manufacturer that leads to the negative impact; that is within just the 20% range of the burden from the manufacturer, or that is expanding outside of the Medicare or is there any increase of the volume? Would you please share with us your track record and also the way of thinking so that I do not speak something not necessary.
Naoki Okamura: I would like to ask Claus to make an explanation about this.
Claus Zieler: Yes, thank you for the question. I mean it -- I just want to emphasize we've had an impressive year with XTANDI, both in the United States and outside of the United States, with double digit growth in essentially every region. Now in the United States, which is your question; yes, we have had the gross to net impact from the IRA Medicare redesign as of January 1, 2025, so that decreases, essentially our net price. But with the volume increase of 27% last year, that has -- and that volume increase over 12 months versus a gross to net impact of only one quarter, that is really what you see as a net effect in -- for XTANDI in the United States. Now the volume growth will continue, maybe not at the same rate because the embark data that we published now almost a year and a half ago, that's when we got the approval; that, of course, will not drive growth forever. But we do foresee a significant growth in the mid-teen level on a volume basis in the United States, also in FY 25. Did that answer your question?
Akinori Ueda: Thank you very much. I have a follow up question. What was your assumption in the plan?
Claus Zieler: For FY 2024, let me just confirm what your question is.
Akinori Ueda: FY 25 plan and assumptions.
Claus Zieler: The assumption on a volume basis for FY 25 in the United States is a growth or in the mid-teen. So, middle of -- middle between 10 and 20, yes, the mid-teen range of growth on a volume basis. Of course, we are now carrying the gross to net impact that started January 1 over a 12-month period; so that impact we will not be able to dodge. So that's why you see on a net basis in revenue, you will see a flat picture in the United States. And on top of that you have an FX effect, because, as you know, the dollar is weakening versus the yen; so that will have a slight decrease in yen basis from the United States in FY 25. So those are the three factors; mid-teen volume growth in the United States, growth to net impact that started January 1 carrying all the way through the fiscal year, and then the FX rate from the dollar to the yen.
Akinori Ueda: Thank you very much. Secondly, capital allocation; your current way of thinking is my second question. As of now the big sales forecast of your Strategic Brands has been kept at the same level compared to a year ago. The need for a business investments and for your budget, you haven't changed your way of thinking. And for yen dividend increase can continue into the future? There is decreased transparency in the business environment, any impact on your capital allocation policy?
Naoki Okamura: Thank you for your question. From me, I'd like to talk about the capital allocation policy. There is no basic change in our capital allocation policy; that's my comment. But from before, our top priority is the growth of our business and then our return to shareholders; the cash flow profit for the future must be considered and in a sustainable fashion, we'd like to increase the dividend payment. So if there is excess cash, of course, as a means to return to shareholders, we would have a share buyback. So these are the three stages in our policy that has not changed by now. On the other hand, for Strategic Brands, we look at the growth of the Strategic Brands. Should we have another business development project? Of course, we are always watching, in that sense, Iveric Bio was acquired. In a sense, all our Strategic Brands at the time, the potential of those and in order for us to grow continuously and sustainably into the future, we needed firepower. In addition to that, we decided that we need to acquire Iveric Bio; and there can be a similar decision into the future. But in reality, if you look at the actual balance sheet, there is a lot of debt at the time of the acquisition of Iveric Bio. We don't have a lot of capabilities to borrow so much, so it's difficult to think that there's going to be a very big deal in the near future, as you can tell. Kitamura-san, anything to add?
Atsushi Kitamura: Thank you very much. As Okamura mentioned, we think the most important thing is to have a sustainable growth. And we would make growth investments; that's the top priority. After the acquisition of Iveric Bio, we have debt. So as a challenge, how to create our balance sheet to realize this? That's a very important point. Last year or two years ago, at the end of FY 2023, after the acquisition of Iveric Bio, interest-bearing debts and EBITDA growth to leverage ratio was 3.4x, but at the end of last year, it was down to 2.2x. So, we'd like to strengthen our balance sheet to decrease the leverage which we should aim for when necessary. If there is a potential big deal, we should be ready. So first, we'd like to strengthen our balance sheet which we focus on right now. That's all for me.
Hiromitsu Ikeda: Thank you. Next, Morgan Stanley MUFG Securities, Mr. Muraoka, please.
Shinichiro Muraoka: Capital allocation, that is raised by Ueda-san, and this is a follow-up. 3 months ago at the time of third quarter announcement, the late phase new drug acquiring is under your consideration. I believe you talked about that. Relating to that, and also this capital allocation matter; I would like you to make explanation with incorporating those 2 factors together. What kind of image do we need to -- is it better for us to have as a size of what you are trying to do?
Naoki Okamura: Thank you very much. It seems to me that there is some misunderstanding here. So let me work on that first of all. The third quarter, it was not me that I made the presentation, but the term of the third quarter announcement; what we are thinking is now going to be explained with my words. So far the new primary focus is made or existing primary focus is added with the technology and assets so that primary focus can be stronger. That kind of business development deals are relatively larger in terms of the numbers, but in the past we have VEOZAH and VYLOY, those are relatively risked assets. But afterwards, if you look at our business development activities, relatively advanced technology assets and technologies are trying to be captured, and the size is not that big. And those who are coming with a couple of -- as a couple of deals, and now we have 4 primary focuses, and flagship comes to the timing of the clinical PoC judgment. So it's not something that we are continuously expanding, but for primary focus we try to converge that based upon the PoC judgment. So suppose there is the -- some deal of the business development, early stage, innovative, something advanced, rather than that the project that is day risk to a certain extent. But of course, it's difficult to achieve their contribution next year, 2 years later; so probably the early of 2030s something is likely to contribute to our profit. That's the things that we are trying to identify. That's what we wanted to say at the time of the third quarter. On the other hand, the risks and the late phase development projects and contributing to our growth. Then in that case, that is likely to be quite expensive, and that kind of asset is quite limited in number. And if we want to do such a deal, it's going to be quite a competitive situation. So considering that, just like Kitamura explained a little while ago; we would like to prepare our stamina first of all. And when such kind of deal becomes available, so that we can compete with our competitors; we would like to have a sufficient capability. So we like to focus on preparing for that. For example, next month, there is a very good deal -- a promising deal for us, but that we cannot acquire that with getting the borrowings in any case; so we cannot go for that because of current capability. So we have to prepare ourselves so that we can acquire the deal that we really want to do. That's something currently Kitamura is working for the preparation. So the policy-wise, not only but the late phase but considering that currently our financial capability, those on late phase and the competitive and very expensive, can we try to acquire that tomorrow? In reality, we cannot do that; that is the current status.
Shinichiro Muraoka: Understand. Thank you very much. PADCEV growth is stagnant, and you are going to selling that outside to make your cash?
Naoki Okamura: I thought you are thinking about something greater like that, but it's not so. The deal what we are saying is not such a bold deal, the PADCEV, that is what we develop and with our hands we would like to continue to provide that products to our -- to the patient, that's our mission, that we think.
Hiromitsu Ikeda: Thank you very much. Mr. Muraoka. Next, Nomura Securities, Mr. Matsubara, please. Mr. Matsubara from Nomura Securities, can you hear me?
Hiroyuki Matsubara: Yes. Thank you very much. First, I have a question about IZERVAY. GA area increase, suppression is important by dosing, but in terms of the visual acuity, overtime it would worsen; so some patients may decide to postpone dosing. In order to expand the market for the patients in the latter case, how are you going to appeal to such patients? What's your strategy?
Naoki Okamura: Thank you for your question. The details will be explained by Taniguchi. But what I can explain from my side is as follows; patients with GA would lose the visual acuity in the center. In the visual acuity exam, they would have a disease condition which is not very good for the visual acuity test. Without the progression of the onset, they should receive the treatments; that's the ideal state of IZERVAY treatment. In my view, to do so, as we mentioned in the Q&A; disease awareness is important, even if other in early stage, they should be seen by doctors. And the doctors should think there are signs of GA, so they should be seen by specialist; such a route should be established. I think that's going to be important. More scientifically, clinically, Taniguchi is going to explain such aspects.
Tadaaki Taniguchi: Thank you very much. How much patients visual acuity is worsening, how much they should continue the treatment when their visual acuity is worsening. As Okamura explained, IZERVAY -- it’s effectiveness and efficacy, if you look at the other two data, you can tell its efficacy. In principle, GA progression can be prevented or suppressed. In the longer term, progression can be stopped or suppressed, which is important. In the longer term. The impact of the visual acuity, hopefully can be seen, but unfortunately, at the center of the field of vision it’s very difficult to measure right now; so that cannot be done. For patients, still, there are central visual acuity, it would worsen overtime which is a very big problem in their daily life. So for the portion with a GA, if that area's growth should be suppressed with treatment clinically, that's very meaningful to prevent the progression of the GA area. As far as I see the data, if they can continue treatment, the longer the better; the speed of the progression of GA can be suppressed. In the end, it's going to be the discussion and the decision to be made between the patient and their physicians. The longer the progression can be suppressed, the bigger clinical benefit.
Hiroyuki Matsubara: Understood. Thank you. Additionally, I have another question. Regarding the 60% from February, as the new patient starts share, the trend is expanding according to the response to the earlier question. Now in March, or by now, the new patient start share is increasing further?
Claus Zieler: So as I said, our lowest point was 52%; our latest data point is already back up at 59%, and we'll gather more data and confirm in the next quarter. But honestly, there's no reason to believe that we should not stay at that 60% level as we did before the QRL. I think the real question is not so much on our market share, because we're market leader and we’ll stay market leader in this market. The real question is, how do we now expand this market, and how do we invest in DTC and in the right educational activities to make patients aware and make doctors aware of the opportunity this agent delivers to slow the progression of geographic atrophy; so expanding the market is our main focus at this point.
Hiroyuki Matsubara: Thank you very much. Second, sorry if I missed the information, that is VYLOY-PDAC. So 2025 second quarter analysis, and after the result become available around what time point do you think you are going to do the NDA?
Naoki Okamura: Well, VYLOY-PDAC, in accordance with the protocol, the study is ongoing, and the second quarter, the final analysis readout is planned to be available. Needless to say, for this as well, it's an event driven study, so there might be a bit of the delay or difference from the decided or the expected timeline. And looking at the result, we make the decision for the NDA timing. If the result is a positive in the case, as well as possible, we would like to do the NDA submission as early as possible. And like the case of 3082, therefore the pancreatic cancer, the current treatment is limited. So Claudine 18.2 [ph] antibody and also combination with the chemotherapy, that is the study for the pancreatic cancer; and as soon as the result is available we would like to go for further.
Hiroyuki Matsubara: The best case is that in the second quarter the result is available, if there's a possibility that you are going to do NDA within this fiscal year, the end of fiscal year?
Naoki Okamura: Yes, of course, we are aiming at that.
Hiromitsu Ikeda: Thank you, Mr. Matsubara. Next, Sanford C. Bernstein, Ms. Sogi, please.
Miki Sogi: Thank you very much. First of all, question is about the guidance for the next year. Other expenses; you incorporate certain numbers and there, there is no ones for the impairment likely to be included. So there is expectation that the one-time expenses for the reorganization might be included. It is this understanding right? And if that is a right for HR cost, the positive impact will continue in FY 26 and afterwards. Is this way of that understanding is appropriate? That's the question.
Naoki Okamura: Thank you for the question. Are you talking about the ¥110 billion breakdown?
Miki Sogi: Yes. And also the HR cost impact FY 26 and afterwards.
Naoki Okamura: First of all, FY 2024 we took the same approach. And within this 2025, this project is likely to fail. We never expect the failure but we see that it's likely to fail, and that impairment is included. It's not that way, but we look at the past trend and also current intangible asset absolute value is used as a factor for the consideration. We have this level of buffer, and then furthermore, of the impairment would now take place. So that's a ¥60 billion of the ballpark figure that was included in FY 24 as well. So, ¥110 billion minus ¥60 billion; so ¥50 billion is others. And that breakdown is going to be explained by Kitamura.
Atsushi Kitamura: The breakdown of the remaining ¥50 billion, that is not disclosed. But I just liked you pointed out. There is a population changes -- operation changes, that leads to the organizational changes, and our asset increases its value; so fair trade value and also their Forex changes that are the same type of decision shall happen in the past. So at certain level the estimate is included.
Miki Sogi: And also the bigger changes of the operation and the benefit of that?
Atsushi Kitamura: Well, this is reflected into SMT as well. What we have done last year is something that is sort of like a low hanging fruit, but what we are trying to do now requires a certain period of time, because that includes a certain level of the big transformation. So benefit is likely to be next year and afterwards, just like you pointed out.
Miki Sogi: Thank you. Another question is on gene therapy, 8845. Within the muscular cells, the genes there are going to be treated with this treatment. But generally speaking, when it comes to gene therapy, like the myocyte, that has -- that is abundant in number but efficacy on that is very difficult from gene therapy. But with this 8845 for Pompe disease, you're trying to develop this product. Is there any different approach for this 8845 compared to the conventional gene therapy? For the muscle disease gene therapy, what kind of challenges are you thinking and how do you feel about the development for this field?
Naoki Okamura: For Pompe disease, 8845; any difference compared to other gene therapies? There isn't a big difference compared to others but as you know, Pompe disease is a progressive disease. The physical function will decline, including the vital capacity and respiratory function. It's a very serious disease. And as we showed you data earlier, including forced vital capacity, 6-minute walking test; based on these endpoints, patients with Pompe disease, most of them are receiving ERT, enzyme replacement therapy. Even if they discontinue ERT, the efficacy of this compound can continue upto -- according to the follow-up data, for -- upto 3 years. And this is going to be a big benefit for the patient's, ERT requires infusions once every 2 weeks. Pompe disease patients have difficulty in their physical conditions but they have to go to the hospitals once every two weeks which is very difficult for them to do so. With gene therapy, just with a single dose and single treatment efficacy can be sustained, and as long as that's going to be demonstrated there's going to be a big benefit for the patients. We have previous data as well, PD marker and the increase in the GAA was also seen. The sample size is small, so we cannot say anything definitive yet but if you look at the data as a whole, FDA granted us with ARMT designation. So with U.S. FDA and the health authorities in the respective countries, we will consult with them to promote the development at the fastest possible pace.
Miki Sogi: Understood. Thank you very much. I have another question to you. Listening to your explanation gene therapies, just a single treatment is going to be enough to replace the mutated or deficient genes. After that treatment ERT treatment would continue after gene therapy? Any such possibility to continue ERT after gene therapy?
Naoki Okamura: Regarding that question, we cannot rule out that possibility. But if you look at patients and their family members and patients advocacy groups, and also physicians, according to them, the biggest burden is the ERT. And so ERT, if you continue the treatment, sometime it's difficult to enjoy the efficacy anymore. There can be a secondary disease progression; so there's going to be a burden for the patients, not just physical burden, but economic burden would also be seen. So ideally speaking, a single treatment with gene therapy can be administered, and then they can be freed from the burden of ERT. That is going to be the most ideal, and would bring a big benefit for the patients and their family members.
Hiromitsu Ikeda: Ms. Sogi, thank you very much. Next, Daiwa Securities, Mr. Hashiguchi, please.
Kazuaki Hashiguchi: First question is about a Strategic Brands and contribution to profit on Page 19. I don't ask you a question for the future in FY 2026 and beyond; this fiscal year SGA cost in yen will decrease a bit, excluding our Forex impact, it's going to remain flat according to my understanding. It may depend on the situation of sales and revenues, as is mentioned on Page 20, how much you can expand? The indications is going to be important. When we think of the opportunities to expand indications for the future, just increasing SG&A cost would not happen. In my view, for the future SG&A costs would remain flat, at most. Rather you would like to reduce the cost to regain the profits to harvest the profits. Correct?
Naoki Okamura: Overall, yes, that's the overall image. Indication expansion, we are not going to very far away place. So we don't need to create the sales force in a completely different field. If you look at the situation as a whole, we don't spend too many costs but it would contribute to our sales and revenues, and it would contribute to profit as well. And we can simplify in that way.
Kazuaki Hashiguchi: If you look at the individual aspect, if you invest more there can be higher return for some products and indications? Among the products we are not developing, there can be such indications or rather regarding the indications you have or indications you may be able to get in the near future?
Naoki Okamura: What’s under development or the current indications we have, if we invest more we can deliver them to more patients. If any, we are already doing so, if there is such a product and indication. Having said so, we don't have resources without any limitations. If we allocate resources, where to allocate such resources, that’s decided by Claus. Return-on-investment should be the highest and high unmet medical needs. We try to allocate resources there to deliver a value to the patients. That's my belief.
Kazuaki Hashiguchi: Thank you very much. Another question is about tariff. Supply chain details cannot be disclosed, I understand that. But in this performance forecast, how the tariff matter is incorporated or factored in the mentally value of the tariff impacts factored in? What's the level? What's the size? And currently, the reciprocal tariff that is hold at this moment alone is factored in or the raw materials and other materials where the tariff is applied is taken into consideration? Our pharmaceutical products or intermediates currently are considered tariff; do you have a certain level of the assumptions and that is already also included with this forecast?
Naoki Okamura: First of all, from overall perspective it's not only tariff but there are risks here and there. For example, foreign exchange, and also the pharmaceutical products related tariff or the -- in direct material related tariffs. So there are certain risks and monetary value wise, at this moment we cannot disclose specifically, but there are certain risk scenario is prepared so that we can decide the number. And there are two things so we can tell you here. First of all, overall framework is decided, and if that is needed to be reflected into the focus, in that case, of course, it will be done so and that will be communicated to you. And I think the second matter here is more important. For example, there are, in that sense, areas that we cannot control on our own. We do in a very appropriate manner in the areas that we can control. Then what can we do? Well, how we can incorporate the benefit of the cost reduction? So 2025 forecast, SMT benefit and effects -- favorable effect of that is incorporated, and what we are considering currently is to make it earlier to realize that earlier to a great extent, and a Claus is now calculating the number of the sales, and try to achieve that. So we all try to do the preparation for that kind of scenario. So there is where that we put our most effort currently.
Kazuaki Hashiguchi: Thank you. SMT ¥20 billion, as you said, how this -- as well, if things go better, this is likely to be -- this can be also bigger?
Naoki Okamura: Well, SMT itself, this is not the single year activities; we have the mid-term target for the actions. Of course, if we can realize earlier, we'll do it earlier; that's all depending on our ways of executions.
Hiromitsu Ikeda: Thank you very much. It's time, but just one last question. UBS Securities, Mr. Sakai, please.
Fumiyoshi Sakai: March 28, Pfizer, for the investors in the U.S. IRA Part D design presentation was done by Pfizer to investors and there XTANDI was talked about saying that this impact is really large; and probably all IR people have already has seen that materials. And there this year, 16% -- I don't know if that is a discount of the price, but the reduction impact is 16%; that's what they disclosed. And against that your current U.S. sales space is larger for this fiscal year. I think class summation, the 16% is a volume 20% minus for the price or the monetary value. What -- why there is this gap? What made this gap? That's the first question for me.
Claus Zieler: Let me clarify the three factors that I see for extending the U.S. If your volume grows in the mid-teens and you have a gross-to-net impact in about the same order of magnitude, you will stay largely flat, and that's what we expect for XTANDI in the U.S. in dollar basis. We expect the gross-to-net impact, which is negative, and the volume increase which is positive, to more or less cancel each other out. Then you have the FX impact, as I explained before, from the dollar to the yen.
Fumiyoshi Sakai: There shouldn't be no Forex impact. And talking about local currency in the U.S.
Claus Zieler: Yes. And then you have a flat curve.
Fumiyoshi Sakai: I'm sorry?
Claus Zieler: You have a flat evolution in the U.S. in dollar basis, because you're growing double digit in volume and you're taking a double digit hit in gross-to-net, and the two cancel out, more or less, not 100%, but more or less. So XTANDI in the U.S. in U.S. dollars is flat from 2024 to 2025.
Fumiyoshi Sakai: Oh, so that's why you discuss -- I mean, that's what you have factored in your focus this year in the U.S.
Claus Zieler: Correct.
Fumiyoshi Sakai: Okay, that's fine. Thank you. One more question. Sorry to run over. It's not related to the financial results. The structure has substantially changed this time. Research development primary focus is now under one organization; the management also changed hands accordingly. What's your objective? Any big change in the direction going forward? I'd like to hear from Okamura-san in your own words.
Naoki Okamura: In the CSP2018 before CSP2021, we defined the value Astellas would create the value and deliver the value we create. We said that we would work on this. We -- it doesn't mean that we haven't do this -- done this before; the 3 access [ph] pharmaceutical companies should have for management. Initially, we talked about regions to manage; then functional capabilities would be enhanced. We reinforced the functional access. What happened as a result between the functions, there was a silo. There should have been overlaps to work in a cross-functional team to make a decision together but we couldn't overcome the barriers between the two different functions in the past. So this time, those who create value -- the so-called innovation engine, according to the site are those who are in-charge of value creation, and the value being created would be delivered to customers and particularly patients. That's the customer engagement responsibility for other people, according to this rough classification, brands, technologies and pharma’s role. When you want to introduce yourself as a pharma, we -- I am a brand manager in Japan in charge of brand; region, product and function will be mentioned. So region was the first access, and then we switched to function access, and then from here on, brand, technology and project would be the first management access as event so that we can be agile. And when we say event access, it's difficult to communicate the meetings. We are pharma company, luckily, so this is what we call the patient access. So those who don't speak Japanese, we can talk about patient access in the same meeting. That's why we are calling this patient access. Going back to your question, as you know, before research we had a Chief Scientific Officer to look at research. After the clinical studies, Chief Medical Officer was to oversee that area; primary focus lead is the Chief Strategy Officer to be reporting to because of the strategy. And those who create and deliver value, we separate the two; those in research, those in development and those who develop strategy for primary focus. It's better for them to belong to the same organization, then we don't have unnecessary conflicts. Chief Research and Development Officer; these are the functions under that officer. Needless to say, the Chief Strategy Officer would not go there. CXO, looking at research, CXO looking at the situation after development; either of the two would be the Chief Research and Development Officer, so now we decided to give this responsibility to the Taniguchi.
Fumiyoshi Sakai: So productivity related benchmarks have been introduced. Is it directly linked to the reorganization setting? That aside, in clinical studies, when we execute clinical studies there are variety of parameters IND would be accepted and then first subject dosing, time to first subject dosing. For example, how many patients would be enrolled over how much period?
Naoki Okamura: We have a variety of parameters as the benchmark for the industry; so we refer to that to measure our performance. And if we cannot measure, we cannot improve. So using these KPIs to change to a higher quality operations; we have been making efforts this way all throughout. Thank you very much.
Hiromitsu Ikeda: Thank you very much. I'm sure that you still have questions that people who are waiting for asking questions, but it's time. So with this, we would like to close today's meeting. Everyone, thank you very much for you joining with us. Thank you.