4507.T4507.T
LOADING
|||
Yoshimasa Kyokawa: Thank you all very much for joining us today despite your busy schedules. My name is Kyokawa, Vice of President of Corporate Communications Department of SHIONOGI. We are starting SHIONOGI & Co., Ltd.’s financial results briefing for the first quarter of fiscal 2025. First of all, I would like to introduce today's speakers. John Keller, Director of the Board, Senior Vice President, R&D Supervisory Unit.
John A. Keller: I am Keller. Thank you.
Yoshimasa Kyokawa: Toshinobu Iwasaki, Senior Executive Officer, Senior Vice President, Healthcare Business Supervisory Unit.
Toshinobu Iwasaki: Senior Executive Officer & Senior VP of Healthcare Business Supervisory Unit My name is Iwasaki. Thank you.
Yoshimasa Kyokawa: Next, Takeshi Uehara, Corporate Officer, Senior Vice President, Drug Development and Regulatory Science Division.
Takeki Uehara: Corporate Officer and Senior VP of Drug Development & Regulatory Science Division This is Uehara. Thank you.
Yoshimasa Kyokawa: Next, Masako Kudou, Executive Officer, Head of Business Strategy Division.
Masako Kudou: Corporate Officer & Senior VP of Corporate Strategy Division I am Kudou. Thank you.
Yoshimasa Kyokawa: And finally, Takuji Fujiwara, Accounting and Finance Manager.
Takuji Fujiwara: I’m Fujiwara. Thank you.
Yoshimasa Kyokawa: Now, let me explain the flow of the briefing session today. First, Fujiwara will give an overview of the first quarter financial results for FY2025. Next, John Keller will explain the progress of the HIV business and the significance of M&A with the JT Group pharmaceutical business. Uehara will then explain the progress of the development pipelines. We will also take time for questions and answers at the end of the session. The meeting is scheduled to end at 17:30. Please note that simultaneous interpretation capability will be available for today's briefing. If you wish to use simultaneous interpretation, please select your favorite language from the globe icon at the bottom of the screen, either Japanese or English. Let’s begin. Mr. Fujiwara, please go ahead.
Takuji Fujiwara: So, Fujiwara will begin by presenting the highlights of the first quarter on page 4. The first quarter saw steady progress on important initiatives, both financial and non-financial. On the financial side, revenue and all profit metrics increased from the previous year. On the non-financial side, the tender offer for Torii Pharmaceutical was completed and progress was made toward merger and acquisition of the pharmaceutical business of JT Group. In addition, we are making progress in our development pipelines, which will drive growth in the medium to long term, including the filing of Ensitrelvir in Europe and the US. I will continue on page 5 with an overview of the first quarter financial results. On page 5, we present the details of consolidated financial results. For the first quarter of FY2025, revenue is JPY99.8 billion, an increase of JPY2.2 billion from the same period last year. Operating profit was JPY35.1 billion, up JPY7 billion from the previous year. Profit before tax was JPY46.3 billion, an increase of JPY9.8 billion from the previous year. Profit attributable to owners of parent was JPY39.4 billion, an increase of JPY8.7 billion versus the previous year. EBITDA was JPY40.6 billion, an increase of JPY7 billion from the previous year. We were able to achieve YoY increases in both revenue and all profit categories. I will explain this in detail from next page onward. Page 6, the Consolidated Statement of Profit or Loss. As for revenue, while domestic and overseas business declined YoY, the HIV business grew strongly. As for expenses, cost of sales was JPY12.3 billion, down JPY2.1 billion from the same period last year. The main factors were changes in the mix of segments and products, with an increase in royalty income offset by a decrease in sales of products with relatively high cost ratios. SG&A expenses were JPY26.3 billion, an increase of JPY1.2 billion from the previous year, due to an increase in sales-related expenses in the U.S. business. Research and development expenses totaled JPY24.9 billion, a decrease of JPY4.5 billion from the same period last year. As for R&D, this area was affected by the multiple large-scale clinical trials conducted in the previous fiscal year, and investments to nurture growth drivers are progressing as planned. Financial income and costs landed at JPY11.2 billion due to higher dividend income from ViiV as a result of strong sales in the HIV franchise. Each of the profit categories, all of them, increased significantly from the same period of the previous year. Next on page 7 is an explanation of revenue by business segment. Domestic prescription drug sales totaled JPY14.1 billion, down JPY1.3 billion from the previous year. The decrease was mainly due to sales of drugs for acute respiratory virus infections. As for the overseas subsidiaries/exports segment, it amounted to JPY14.2 billion, down JPY0.7 billion from the same period last year. While sales in the China business declined, sales of Fetroja and Fetcroja remained firm at JPY5.9 billion in the U.S. and JPY3.4 billion in Europe, thanks to expansion into new markets and increased sales in existing markets. As for contract manufacturing, JPY4.5 billion, an increase of JPY0.9 billion from the previous year, due to an increase in supply of active pharmaceutical ingredients to ViiV and Roche. Royalty income was JPY63.9 billion, an increase of JPY2.9 billion from the previous year, mainly due to 2 factors. The first factor is ViiV's strong sales of its HIV franchise, and the second is Roche's sales of its anti-influenza drug, Xofluza, which expanded as a result of the flu epidemic in China and the U.S., leading to higher royalty income. As a result, overall revenue increased by JPY99.8 billion. On page 8, we present a summary of results for Q1 and future outlooks. We have organized them in terms of top-line and cost management. First, on the left side, first quarter results included sales of the HIV franchise by ViiV, as well as expanded sales of Fetroja and Fetcroja in Europe and the United States. In addition, we were able to make the necessary investments to nurture growth drivers as planned, while practicing cost management in line with revenue. On the right, as the future outlooks, we expect the growth of HIV franchise, cefiderocor, Fetroja, and Fetcroja to continue in the second quarter. We also anticipate an increase in revenues of Xocova due to the COVID-19 epidemic and will promote efforts to improve treatment rates. Furthermore, we intend to strengthen cost management in anticipation of M&A and accelerate aggressive R&D investment based on our priorities. We expect to achieve the first half forecast by achieving further growth in these top-lines and appropriate cost management. This is the end of the explanation of the financial summary from me.
John A. Keller: Thank you very much. I would like to begin my explanation on page 10. Long-acting Cabenuva, Apretude, and Dovato, oral 2 drugs regimens, are experiencing accelerated growth. And it is driving the growth of HIV as a whole. Dovato also continues to grow. And strong growth patterns lead to overall HIV growth. And regarding S-365598. In ViiV, it is called VH184. It is a third-generation integrase inhibitor. It has already shown strong antiviral activity. And this is being developed in various LA formulation formats. It is being developed as a once-every-two-months self-administered formulation method and as a once-every-six-months ULA. And we will be able to provide the results by the end of this year. The results are superior to those of existing integrase inhibitors. And in various states of development, we are in the process of testing its durability in continuous injectable form. And with various geopolitical changes, resistance may become a larger issue, and a threat, as a component of integrase inhibitors. Therefore, we believe that 598 has excellent antiviral activity as a compound in the medium to long term, and that it has great potential as an LA, and in this sense, its merits in terms of supply are very important. And here is the outlook for the future. First, we will continue with M&A. HIV's business is experiencing very impressive growth. We assume that this will continue to grow well beyond 2030. This will lead to further growth and development of LA formulations. We will continue to develop additional, newer format, more potent LA formulations. Therefore, together with the JT Group, we intend to strengthen our ability to create our own products. We are looking forward to pushing the pipelines forward and to more in-house drug discovery. It now accounts for 69% of the total. And we hope to continue this kind of strong drug discovery in the future. We would also like to become the leading company in the world that can discover proprietary drugs with small molecule compound. We will also strengthen domestic sales. We will create synergies between Torii and ourselves in our sales activities. With the capabilities of 2 companies, we plan to increase our sales performance in the country. Now I would like to explain a little more. As for drug discovery through the cooperation of these 2 companies, JT has the ability to identify targets, as shown on the right side. Then, using AI techniques, and again they can identify the structure. On the left, and by combining this with our efforts, we will strive to strengthen quality of life diseases in particular. In addition, as I mentioned earlier, the chemical synthesis team. We believe that the combination of our team and JT's will strengthen our capabilities in this low-compound area with additional and very rare resources. Knowledgeable resources are not readily available elsewhere in the world. And the JT team has the ability to characterize. Then, when multiplied by our own capabilities, the candidates can be firmly identified, and then characterization and specialization of a wide range of aspects can be done. We would like to use my knowledge of pharmacokinetics, pharmacology, and toxicology to increase the probability of success in future development, using a multifaceted approach. Now, domestic business and sales. Torii Pharmaceuticals is scheduled to become a wholly owned subsidiary of the Company on September 1. The co-promotion is then initiated. This will cover Xocova, Xofluza, and Corectim. We plan to gradually expand the range of products subject to such co-promotion. We are committed to bringing the products of both companies to even more patients. With this co-promotion, SHIONOGI will begin to promote Corectim, focusing on the field of internal medicine, where we have strengths. Torii Pharmaceuticals will also begin promoting Xofluza and Xocova. In particular, we will focus on otolaryngology and dermatology, where Torii Pharmaceuticals has strengths, as well as the treatment of COVID and influenza in regions and during seasons when infectious diseases are prevalent. We believe that expanding the number of information recipients regarding Xocova and Xofluza will be helpful to many patients. We believe that synergies in sales activities that leverage the strengths of both companies will further accelerate the growth of our domestic business.
Takeki Uehara: Corporate Officer and Senior VP of Drug Development & Regulatory Science Division I would like to talk about the progress of the pipelines. First of all, as I mentioned at the beginning of this presentation, Xocova and Ensitrelvir have been submitted for approval in the U.S. and Europe, respectively. Specifically, in the U.S., we have completed the application for the indication of prophylaxis, and in Europe, we have completed the application for the indication of treatment and prophylaxis. In Japan, the application for prophylaxis has already been completed as I mentioned in the previous meeting, and as an update for this fiscal year, we have filed an application for additional dosage and administration for pediatric treatment. As you can see, the global development of Ensitrelvir is progressing well, and the development of S-892216, a next-generation inhibitor of 3CL protease, is also progressing well. As I have already mentioned, we have received a grant from BARDA in the U.S. to develop this compound, and its antiviral activity is about 20 times higher than that of existing drugs, including Xocova. Furthermore, there are cases where Xocova cannot be taken due to drug interactions, as well as for pregnant women or those who may be pregnant. Therefore, we are currently developing a drug that does not have such profile concerns. First, for the oral formulation, we are conducting phase II trials in Japan and the U.S., and we are steadily accumulating the cases. We have also initiated the Phase I study of a long-acting formulation of a persistent formulation for post-exposure prophylaxis and pre-exposure prophylaxis. This is an oral antiviral drug with a novel mechanism of action that is being developed for the treatment of RS virus infection. We have already talked about the completion of the challenge study in our press releases, and we have also finished the presentation at the international conference, and the data is shown on this slide. The periodic change, the AUC of viral RNA quantified by PCR is shown on the left. As you have seen, in the placebo group, the virus proliferated and persisted in healthy adults after virus inoculation. In contrast, 2 doses of 30 mg and 300 mg of the drug demonstrated dose-dependent antiviral effects clearly. This is, of course, a statistically significant reduction, and when we calculate the virus AUC, it is approximately 89% compared to the placebo. This is the largest reduction in viral RNA compared to other agents reported in the literature to date, and as shown on the right side of the graph, we have also confirmed results that suppress the onset of symptoms by suppressing viral increase, which leads to PoC. Based on these results, we are now in the process of starting Phase 2b, a clinical trial in actual clinical practice. Here is the Phase 2b test design. We have selected 2 doses based on the challenge study I mentioned earlier, and we will conduct a global double-blind placebo-controlled study. Since the drug is intended for adult patients with risk factors, we are currently enrolling such patients and starting a study to obtain data on antiviral efficacy, efficacy symptom scores, and safety after repeated dosing and have been in the process of starting trials to obtain those data. Now, we have also made significant progress on our vaccine portfolio. To date, COVID-19 vaccines, COVGOZE, targeting the original strain, have been approved for initial administration and initial immunization. In order to use the product in actual clinical practice, it is necessary to obtain indications for additional immunization and boosting administration of the mutant strain in particular. We have completed a Phase 3 study of S-268024 for JN.1 strain. The results of this trial will be shown in detail on the next slide, but we were able to confirm a favorable safety profile and, as the primary endpoint, non-inferiority to Nuvaxovit, was surely confirmed. Based on these results, we plan to proceed with the application for approval of a new boosting indication for Covid. In addition, we are currently preparing for the implementation of the Phase 1 study for a universal vaccine, S-567123. Here are the results of the comparative test with neutralizing antibody of the antigen vaccine against the JN.1 antibody for the additional immunization in the Phase 3 trial that I mentioned earlier. As shown in the slide on the right, 024, our vaccine, indicated by the red bar, showed clear non-inferiority and statistical superiority to Nuvaxovid 28 days after vaccination. In terms of safety, we have newly obtained results that confirm a favorable safety profile similar to the data obtained to date. While we have focused mainly on the pipelines update on Covid infections, we are also making good progress on quality of life diseases that have a high societal impact. For Naldemedine, we have successfully completed a Phase 3 study for opioid-induced constipation and have submitted an application for approval in China. We have also completed patient enrollment for the additional biological study of Redasemtide. The Phase 2 study of S0606001 for Pompe disease, which is a global study, has started. S-898270 is also expected to improve cognitive function in Alzheimer's disease, and we have started phase 1 trials. Furthermore, we have introduced Sulthiame, a new candidate drug for sleep apnea syndrome, to SAS, a joint venture established with Apnimed, and are currently preparing to proceed with clinical trials for this drug as well. This is all from myself.
Yoshimasa Kyokawa: Thank you very much. We are moving on to the question-and-answer session. If you have any questions, please click on the raise your hand button shown on the screen. When you have finished speaking, please click the raise your hand button again to lower your hand. When nominated, please state your company name and your name before your question. Now, first, Mr. Yamaguchi from Citi, please.
Hidemaru Yamaguchi: This is Yamaguchi from Citigroup Global Markets. Thank you. First, I would like to ask you 2 questions about HIV. One is whether or not there is any impact on the business environment, where your competitor, Gilead, has launched PrEP, a once- every-six-months product, and other is about the business environment in the U.S. Also, we don't know what will happen in the future, but there are going to be various reforms in drug price reductions and insurance coverage, and I wonder if there will be any impact on the HIV market, including PrEP. First, I would like to ask about these 2 points.
John A. Keller: Thank you for your question. First of all, regarding the once-every-six-months drug from Gilead, it is of course important to remember that there are 2 sides to the HIV market. Treatment, and then PrEP, i.e., prevention. PrEP constitutes 10% and treatment 90%. We are also paying attention to the launch of this once-every-six-months drug, but this is only for prophylaxis. It is used in a context of salvage as a treatment for patients who have not been successful with all regimens. Therefore, since it is a long-acting drug and not a treatment, we do not think that any of these products will become the backbone of long-acting treatments. Therefore, we do not believe that our 598184 is their rival for comparison. This once-every-six-months Gilead product, though, is a compound, with a slightly different aspect. As for the performance of the product, it should be able to handle 63% of patients [inaudible], and there is also the issue of DDI. Therefore, there is a competition taking place, but I think the competition is in the area of prevention. This constitutes 10% of the market. I would like to start with the issue of funding and then move on to other issues such as potential drug prices and changes in the U.S. environment. As for funding such as Medicaid and OBBB, we do not expect to see a significant impact at this point. I’m talking about treatment. But what we don't know yet as an open question is that it may expand to Medicaid coverage and prevention. This means that injectables may also be included. It has not been cleared at this time. We do not know if that is really possible. The current market for prevention has been depending on the insurance as employees provided by companies. The government's Medicaid does not cover prevention much. So, there may be an impact on the expansion of the prevention market. Currently, 90% is allocated to treatment in the U.S. Therefore, it may have a significant impact in the United States. By expanding prevention rather than treatment. However, at this point, Medicaid has not had a significant impact on treatment in practical terms. Then there is MFN and things like that, which are difficult to predict. Of course, we are also keeping a close eye on the issue of individual trade deals and tariffs. There are these sort of issues. We believe this is a situation we will have to wait and see.
Hidemaru Yamaguchi: Thank you very much. Just another question, in brief. As for Xocova, I understand that you have applied in the U.S. Has this application been accepted? Or if you are considering PDUFA, etc., could you please let us know?
Takeki Uehara: Corporate Officer and Senior VP of Drug Development & Regulatory Science Division Currently, we have submitted all the data packages from SHIONOGI, and the FDA has just received them. We will receive another letter from the FDA after 60 days confirmation. We will make another announcement as soon as we know more about PDUFA, etc.
Hidemaru Yamaguchi: Thank you. That is all.
Yoshimasa Kyokawa: Thank you very much. Mr. Ueda from Goldman Sachs, please go ahead.
Akinori Ueda: This is Ueda from Goldman Sachs. I would first like to ask you about your assessment of progress against the plan. I think that the gross profit margin is higher than both the same period last year and the first half plan; however, I am wondering if this can be explained solely by the product mix, and I also feel that R&D expenses are progressing slowly. Could you please explain how you are controlling this, taking into consideration Xocova's sales and other factors?
Takuji Fujiwara: Fujiwara will answer this question. The first is gross profit, especially the cost portion. Specifically, this refers to areas of Chinese business where the cost ratio was relatively high, and last year, some of the sales that were exported were Lusutrombopag, which generated significant revenue. These segments have a relatively high cost ratio. So, at this point, we are analyzing the actual gross profit progress as a result of this mix of segments and products. The second point is the progress of R&D. At this point, we are not exercising any particular control over this matter. As I mentioned briefly in my explanation, we were conducting Phase 3 trials of Ensitrelvir and Phase 2 trials of 309309 during the same period last year. We don’t have that trial anymore this year, so the current R&D expenses appear to be lower than those of the previous year. Again, we are not in a situation where we are actively saving money in R&D. That is all.
Akinori Ueda: Thank you very much. I would like to ask a follow-up question about the cost. Compared to the current first half plan, I assume that the cost ratio will increase from the second quarter onwards. Is that correct? Could you tell us if there are any positive aspects to the plan?
Takuji Fujiwara: At this point, we believe that the second quarter will proceed as originally planned, so there is a possibility of a slight increase. In addition, we have allocated the budget for this area in anticipation of the integration of Torii Pharma after September.
Akinori Ueda: Thank you very much. The second point, I would like to know about the Cabenuva trend. I would like to know what you think of the recent presentation at the IAS 2025 conference and its impact on your future performance. In your presentation the other day, you reported that the number of patients wishing to switch from Dovato to Cabenuva is very high, but looking at the current sales figures, I have the impression that Cabenuva has not yet penetrated the market to that extent. What are the implications of these announcements for Cabenuva's future sales outlook? Could you also tell us what is needed to accelerate sales in the future?
John A. Keller: Thank you very much for your questions. Obviously, depending on the data, most of the patients who use LA injectables prefer them, and most of the patients continue to use them. Therefore, I believe that this demonstrates that it is a more attractive opportunity for both doctors and patients, even for those who have been hesitant about LA until now, for most patients. And Cabenuva continues to grow. Stable and growing. And in the U.S., 70% switch from other regimens. Not only from our own regimen. And in this portfolio, LA is continuously expanding. It is also expanding in the market. And existing projections predict that one-third of HIV cases will be LA by 2031. And we believe it can be accomplished. And we predict that it will even exceed it.
Akinori Ueda: Thank you very much. That’s all from me.
Yoshimasa Kyokawa: Thank you very much. Now, let's continue with Mr. Wakao from JPMorgan Securities. Thank you.
Seiji Wakao: I’m Wakao from JPMorgan. Thank you. There are a couple of questions, the first is regarding the question from Mr. Yamaguchi. I think you explained that the impact of Medicaid is limited. Let me understand that in more detail. If anything, the Medicaid budget reduction seems rather large this time around, so I was wondering if there is a negative impact on this HIV market in the long term, if not in the short term, as the HIV treatment budget is reduced. In your explanation, you also mentioned that Medicaid coverage will expand with regard to prevention and so on, and I was not quite sure what the factors are and what will happen in the end, so could you please tell me more clearly? That is my first question.
John A. Keller: Thank you. With regard to Medicaid treatment, both the overall budget and the approach to the medical budget, HIV treatment is considered to be a protected area. When budget pressures arise, each individual state's decision, and then the budget, must be broken down. Therefore, it is difficult to say that this is the case as a whole, but as a whole, I do not think that insurance policies for HIV treatment are moving negatively. I believe that the tone, at least in tone, will remain consistent and that the tone will continue to be to maintain treatment for HIV patients. However, as far as prevention is concerned, other forecasts indicate that the market for prevention has increased 3 to 4 times. In other markets. Therefore, we assume that the prevention market will double in the next 5 years or so. This expansion, however, will require solid support from the US government and expanded Medicaid coverage for injectable medications. 90% of the prevention market, one-third of that is already receiving prevention, but one-third of that is covered by company insurance. But the remaining one-third will need to be covered by Medicaid or other means. One-third is covered by insurance provided by companies. So I think that part will be covered. As for recommendations on the part of Medicaid, the assumption was that it would expand under the Biden administration. There was a projection to expand coverage toward Medicaid, but that part of the projection is now uncertain.
Seiji Wakao: [inaudible] The second question is about drugs for the treatment of RS virus infections. I would like to know the time points that show a statistically significant reduction in virus load and a significant difference in the secondary evaluation items on the right when we look at the data. I see the secondary endpoint, the symptom score, as being the primary endpoint when we eventually do phase 3, but I would like to know if that is correct, and if so, which date of data would be the key. Also, how will you handle vaccines? I think the strategy was probably originally intended for the unvaccinated, but I would like to know how that is expected in the current plan, since RS virus vaccination will probably expand from here in the U.S. as well.
Takeki Uehara: Corporate Officer and Senior VP of Drug Development & Regulatory Science Division Thank you for your details First of all, we have specified the analysis of the pre-specified statistics in terms of AUC. Therefore, we are conducting statistical analysis of the area between areas and the overall transition. However, if you look at the data, there is a clear division at every point, so although I have not marked each one as significant, I believe there will be a significant difference. As for the actual primary endpoint, this will depend on the results of Phase 2, so please do not let me get into that at this time. Specifically, we developed Xocova, as well as Xofluza, with the endpoint of symptom disappearance. In this context, we believe that it is particularly important to focus on preventing severe cases of RS infections, and we are therefore registering individuals with risk factors. In this context, we would like to proceed with Phase 3 trials using severe endpoints, such as hospitalization and mortality, if trials can be conducted on a scale that is realistic in terms of the severity of the endpoints. In this sense, even when looking worldwide, there is significant debate, including among regulatory authorities, regarding what criteria should be used to determine Phase 3 primary endpoints for acute respiratory infections. Therefore, we plan to decide on the Phase 3 design based on data from evolving symptoms and the results of Phase 2b. Our current thinking is that the inclusion or exclusion of vaccination depends on the results of the larger Phase 3 strategy.
Seiji Wakao: I understand very well. Finally, please tell us about Quviviq's progress. Although sales will expand in the second half of the year [inaudible], I wonder if the 4-6 results are very low compared to the JPY1.2 billion in the first half of the year. That is all.
Toshinobu Iwasaki: Senior Executive Officer & Senior VP of Healthcare Business Supervisory Unit Iwasaki will answer your question. We had originally planned to use the drug in both psychiatry and internal medicine, but the hurdle of a 2-week prescription in the internal medicine field was higher than we had expected, so we have fallen short of our goal. However, the drug has been highly evaluated by doctors who have introduced it, including its effectiveness in helping people fall asleep, and once a patient has used it once, prescriptions are being expanded, including switching from other drugs. Therefore, based on the lifting of the use restriction in November, we now expect to achieve this goal through a 2-pronged strategy of increasing the number of cases of adoption and increasing the number of prescriptions at medical institutions that have used the drug.
Seiji Wakao: I understand. Then I understand that the first half forecast may not be achieved, but after the prescription restrictions are removed, you will do your best to make up the difference in the second half and thereafter. Is that correct?
Toshinobu Iwasaki: Senior Executive Officer & Senior VP of Healthcare Business Supervisory Unit Yes, that’s right.
Seiji Wakao: I understand. Thank you. That is all.
Yoshimasa Kyokawa: Thank you very much. Next up will be Mr. Muraoka from Morgan Stanley MUFG Securities. Please go ahead.
Shinichiro Muraoka: Thank you. This is Muraoka from Morgan Stanley. Regarding the drug for sleep apnea, Apnimed recently announced that they had a successful Phase 3 with their drug, a combination drug called AD109, which is like a combination drug of muscarine and NRTI. One question is whether that drug does not infringe your company's rights, and the other is whether your company's 002, which you are showing on the slide, was a combination of your 918 and the mystery drug X. Is this mystery drug X actually the AD109 that Apnimed was successful with this time, or is it not? This is a question. The purpose of this question is if you have a chance to successfully make use of Apnimed's good results, I would like to know.
John A. Keller: You are quite right. 109 is outside our scope. Therefore, while we would like to congratulate Apnimed, the combination of 918 and X within the joint venture's assets is targeting a subset of that. And AD109 is broader, but 918X covers a subset of it. And it is intended for patients whose heartbeats do not work, whose other treatments do not work, and whose treatment must be specialized. Sulthiame is different from 109. And while it may be an add-on, we have a close relationship with Apnimed, so the 109 is outside of our rights and has a different mechanism than our assets.
Shinichiro Muraoka: Thank you. One more thing, regarding the question I asked earlier about the RSV 395, the graph on page 19, and the Phase 2b design, it is clear that the difference is greater than the placebo, though. When looking at 30 mg and 300 mg, it seems that 30 mg is more effective considering the AUC, and it also seems that the high dose and low dose in Phase 2b are not 30 and 300. How should we organize this information and proceed?
Takeki Uehara: Corporate Officer and Senior VP of Drug Development & Regulatory Science Division Thank you. The AUC itself is larger for 300. So the visible result shows the dose dependency. Since the challenge study was conducted with a limited number of cases, the baseline values inevitably differed slightly between groups, making comparisons between groups a little difficult. The kinetics of the decline in the green virus, as you can see, clearly show that higher doses reduce the virus earlier. Based on this finding, we have set the dose at 300 and are currently proceeding to Phase 2b. The dosage itself is not disclosed, but the base is 300 mg.
Shinichiro Muraoka: I understand. Thank you very much. Lastly, as someone asked earlier, I think the sales of Xocova, or acute respiratory infections, for the July-September period will be hard to reach JPY30 billion. In that case, can we assume that today's message is that the achievement of the plan for the first half of the year is in view because the final adjustment can be made at the cost?
Takuji Fujiwara: Fujiwarawill answer your question. First, regarding Xocova, as of the end of July, we are hearing that infections are gradually spreading, and in line with this, our sales figures are also rising daily. We are currently monitoring the situation and believe that there is no significant difference that would warrant a change in our forecast at this point. As you pointed out, in the unlikely event that sales are affected, we would like to proceed with cost control while keeping a close eye on the situation.
Shinichiro Muraoka: I understand. Thank you, that’s all.
Yoshimasa Kyokawa: Thank you very much. Next, Mr. Sakai of UBS Securities. Thank you.
Fumiyoshi Sakai: This is Sakai from UBS Securities. Returning to Mr. Keller's comment, which was mentioned in the opening question. You mentioned about HIV, funding and geopolitical risk in the US, by issues. I understand that this is also important, but now the issue of resistant bacteria becomes very important. I felt a huge jump or disconnect between these 2 issues but in what context did you talk about this, including confirming it one more time? Sorry, I would like to ask because I did not have a good command of English. This is the first and primary point. Then was it page 38? The chart that you have presented here shows that after 2023, the treatment market will be stable at GBP20 billion. As the patent expires, and thereby also the entry of generics. Including that, if you express the flat expectations as stability? My personal impression is that the PrEP market will not be a growth driver, as President Teshirogi said, but given that the usage rate is around 90% in the US, I think ViiV is doing quite well in the US market, including DTC. Even with that kind of thinking, do you still believe that it will still remain at this level? Let me confirm this point.
John A. Keller: Thank you. Thank you for the opportunity to comment again. Regarding the resistance. At this point in time I am talking about developing countries like the existing Africa. At this point, the situation is still sporadic. It is rare. So, it is not a threat now, this tolerance is not a threat. In Western countries, it is not a threat. But many patients, say 25 million people, are receiving integrase inhibitors. Then again, there are people in developing countries who are also receiving prescriptions. So many patients are using integrase inhibitors, even in the Global South. If resistance does occur, this is quite possible with dolutegravir or cabotegravir. As for the geopolitical talk, it is a US funding issue. This will have an impact on how much of these drugs will be allocated to the Global South. There is no change in the patent, but there is a question of how much of the drug can be delivered to patients in Africa, for example. In Africa, many governments are unable to fill the gap themselves. So it is not possible to set up a distribution network and deliver medicines to patients. So they need a refunding of the US AID and a refunding of PEPFAR. It may be reintroduced, but that would require hiring people again to create the network. In that sense, African patients are receiving the medicine, or sometimes not prescribed, or administered, or not administered. In such a situation, resistant bacteria will emerge. This increases the likelihood of bacterial resistance developing. The situation of using or not using drugs means that resistance is more likely to occur and the risk increases. This is not to say that this is an immediate problem. We are currently working on Phase 2 of our pharmaceuticals, and I mentioned that we need to consider such resistance as a potential medium- to long-term risk due to the geopolitical situation. Then we think of viruses.
Fumiyoshi Sakai: You are talking about USAID.
John A. Keller: That’s right. USAID and PEPFAR funding, which has resumed, are involved in the distribution of HIV drugs in the Global South. About your second question. Sorry for all the talk about percentages. We talked that 90% of this treatment, 90% of the total market, is treatment and 10% is PrEP. We believe that treatment will grow steadily. This is as a long-term trend. And we believe that one-third will be long-acting. In 2027, 2028, and 2029, the current market size is USD30 billion, of which one- third corresponds to current sales. So, if we consider only the LA market, there is a possibility that we can maintain it. The company believes that it is possible to maintain this level of sales and royalties in the treatment market alone until 2030 and beyond. There may be some ups and downs, but I think there is a possibility that LA will increase by more than 30%; however, long-acting products are currently performing very well, so at this point, I do not expect integrase drugs from other sources to appear before 2030. Therefore, we are talking about a part of the market, but, however, we do not expect the long-acting injectable category, or anything else, to come into the market.
Fumiyoshi Sakai: I would like to ask one last point briefly. I don't know how to put it, but what was the final amount of cash outlay used for the Torii and JT acquisitions? Speaker We acquired shares through TOB for about JPY70 billion.
Fumiyoshi Sakai: So this means you were able to capture the cash that Torii has, right? If so, JPY70 billion would be cash out, which is net, is that correct? Speaker At this point, we have not yet completed the carve-out acquisition from JT. This will be completed by Torii's acquisition of its own shares from JT, and the funds have not yet been mobilized yet. At this point, we have JPY70 billion in cash out in the form of shares purchased from the market.
Fumiyoshi Sakai: Okay, the payment to JT, I believe this was explained at the briefing, but has it not changed? Speaker It is scheduled for December 1.
Fumiyoshi Sakai: I see. Thank you. Speaker My apologies, I made a mistake. It is scheduled for September 1.
Fumiyoshi Sakai: So the transaction will take place on September 1, is that correct? Speaker Torii will buy back its own shares from JT and eventually become a wholly owned subsidiary. My apologies.
Fumiyoshi Sakai: I see. Thank you.
Yoshimasa Kyokawa: Thank you very much. Since the scheduled time is approaching, we will conclude the session with the next question. Continuing on, Ms. Sogi of Bernstein, please.
Miki Sogi: Thank you. I would like to ask about long-acting drugs. I understand that long acting is only your company's Cabenuva as far as treatments, so when you say that this is a third of the total treatments, I understand that this is a very good situation for your company. On the other hand, as Gilead, they don't have their own long-acting treatments, so I think the competition there is quite remarkable. In such a case, your company's current assumption is that if the long acting treatment is one-third of the total treatment, where would you assume that the long acting treatment would come from? Does that mean that you will be using from your company's ViiV medicine or that you can win over the Gilead as well?
John A. Keller: So far, 70% of Cabenuva's growth in the US has come from other regimens. It comes from the regimen of Gilead. And then there is the rest of the 70%, which varies. Older J&J, Merck, etc. are being replaced with LA in the area of HIV. So this pattern will continue. And global market share, U.S. market share is growing faster than Gilead's. We have shown about 3 times the growth of Gilead in this close quarter. Meanwhile, Gilead is also growing. And I think this is a replacement of an old regimen. It is a replacement of the old regimen of other companies. Therefore, there is still room for conversion. And as a result of the study, LA will be further grown by the very large number of patients who prefer LA. In other words, the more understanding between doctors and patients, the more LA will grow. I also believe that the focus groups and other activities for each patient are growing even more.
Miki Sogi: Thank you. One more thing regarding 892216. I think that sales of Xocova may be difficult due to various factors such as the actual case number of infections, but I wonder if sales of Xocova will have an impact on whether or not to proceed with the development of 892216 in the future.
Unidentified Company Representative: No, there is no impact. At least as for long acting, we have received funding from BARDA, so the current sales of Xocova in Japan will not have any impact on it. In this context, we do not plan to develop the product only for post-exposure prophylaxis or pre-exposure prophylaxis, so we will proceed with the development of 216 without relying on Xocova sales.
Miki Sogi: Thank you.
John A. Keller: To return to my previous question, in capturing the potential of LA, we are not just staying with the status quo. Cabenuva every 4 months, then every 2 months, then every 4 months and so on. And 598 combinations will be launched in multiple formats. Therefore, I would like to add that we will not stop at the Cabenuva bimonthly, but we will continue to develop the LA.
Yoshimasa Kyokawa: Thank you very much. It’s a little past the scheduled time, and this concludes the briefing for the first quarter of fiscal year 2025 financial results of SHIONOGI. Thank you very much for attending today. [END]