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Unknown Executive: Thank you very much for attending the briefing session by Eisai Company Limited. We will now begin financial results and business update session by Eisai Company Limited for Q2 fiscal 2025. Today, this is held in hybrid format combining in-person attendance and virtual attendance. For those attending in person, we have distributed flash report financial results and deck of slide presentation. Those of you who are participating virtually, please download these materials from the website. The presenter today is Mr. Haruo Naito, Representative Corporate Officer and Chief Executive Officer. Mr. Naito, CEO, please.
Haruo Naito: Let me begin our presentation for the first half of FY 2025. So let me look at the results for the first half. As you see at the very first bullet point, inorganic business of us. Pharmaceutical business has shown steady growth in profits as well. Most of the profits are from the frontline business, which is Pharmaceutical business and we could achieve increase in both revenue and profits. I believe that that is the most important point that I wanted to share with you today. And regarding our forecast for the full year results, I believe that there are various opinions. So when we see the stock price trend after announcement, I was disappointed. However, I believe that there are some requirements for the second half that is written in the second bullet point. Anti-Tau antibody and narcolepsy treatment, these are the 2 next generation neurology area promising projects of Eisai into which we are making investment of resources into this because clinical trials and studies are now reaching the peak. And on top of that, there are structural reforms in Europe and in line with such structural reforms, there will be various expenses to be incurred. Therefore, we do not intend to revise the full year forecast. So we did not make any revisions to the full year forecast. In the red box, revenue was JPY 400 billion. Compared to the previous year given the stronger yen trend, we could achieve about 4% increase in revenue year-on-year. And as I said earlier, in the next line Pharmaceutical business revenue JPY 393.3 billion is shown here. And most of the JPY 400 billion in revenue was generated from our organic business. Cost of sales, given the impacts of domestic drug price revision and changes in the product mix, were offset and the cost of sales was managed within the planned range. Gross profit was increased by about 3.0 percentage points from a year earlier. R&D expenses accounted for 18.9% of the revenue. Therefore, R&D expenses were managed under 20% of the revenue. We were able to manage these expenses as such. One of the reasons for this was the clinical study expenses for LEQEMBI have peaked out, which have started to show decline and in the previous year, there were some restructuring including the headcount reduction. Therefore, R&D expenses ratio to the revenue was controlled within 20%. Now for SG&A expenses increased by 3.6%. As you see below this line, Lenvima grew very steadily. Therefore, expenses regarding shared profit of Lenvima paid to Merck increased and SG&A related to R&D. We are still in the phase of increasing the resource investment into the LEQEMBI. Therefore, operating profit was JPY 34.4 billion, which has shown the significant increase of 23.6% from the previous year. And operating profit estimated for the full year is reported to be JPY 54.5 billion and most of which is going to be generated from Pharmaceutical business. So in other words, the profit structure of Eisai has shifted to be more dependent on the organic business in order to increase and record profits and we have started such a transformation of our profit structure during this first half in this fiscal year. The Pharmaceutical business is grown by 3 global brand products. LEQEMBI, which has grown 153% year-on-year. We believe that this was a significant growth. It's about 2.5x the size recorded last year and details of this will be explained later. And for Lenvima, in main markets for us in the United States, there was a negative impact of Inflation Reduction Act. There were some suppression caused by this act, but this negative impact was offset and for all the cancer types we were able to grow Lenvima business. Therefore, Lenvima has been able to maintain its growth so far. And Dayvigo as well, the impact of drug price reduction in Japan was offset and 15% growth was shown. Now looking at the breakdown of changes in operating profit, JPY 27.8 billion last year. Gross profit increased JPY 9.1 billion. R&D expenses, because of the reasons I mentioned earlier, was controlled better by JPY 6.2 billion. SG&A expenses increased JPY 7.1 billion thus reducing the operating profit. And other income and expenses include some changes from the previous year, therefore, recorded minus JPY 1.7 billion. And we recorded JPY 34.4 billion operating profit, which was 8.6% operating profit margin. Today, I would like to focus on LEQEMBI, but I prepared just 1 sheet of the slide for Lenvima. Since its launch, 10 years have passed and it has been approved in 81 countries and marketed in those countries and already we have been able to contribute to 580,000 patients in the world and it has been indicated for 7 indications in 5 cancer types. And due to the favorable court decision and settlement agreements to resolve litigation of the high-purity patients in the U.S., generic versions of Lenvima will not be launched until July 1, 2030. As you see, JPY 166.5 billion was the total revenue. But you can see in this pie chart, sales by cancer type is shown here and the largest revenue is generated from the indication of RCC, which has been the driver of growth. For RCC, there are 2 studies which have been conducted together with Merck, LITESPARK-011 study and LITESPARK-012. With these 2 studies, the top one is for second line of RCC, Lenvima with belzutifan, Merck's anticancer treatment combined with Lenvima and the primary endpoint was the extension of a progression-free survival. This primary endpoint was already met. And together with regulatory authorities, including FDA, discussions for preparation of the potential submission have begun. And the bottom one is the first-line trial for RCC and this is based upon the assessment variation of the treatment pembrolizumab, KEYTRUDA was added to the above mentioned combination and with the same regimen conducted in the first-line study for RCC. And compared to that, favorable results were obtained and ESMO was the place where the results were published. And these studies are ongoing steadily in this expansion of the label based upon this base RCC indication. So we believe that this is going to be very positive factors for further driving the revenue. LEQEMBI has been recently approved in Canada. Therefore, LEQEMBI has been approved in 51 countries and territories. So the requirements to be the truly global product have been met through building such a foundation. For us, we understand that Alzheimer's Disease is a progressive disease and may be potentially fatal disease. Therefore, removal of Abeta plaque is confirmed through amyloid beta PET, but it is not the end of a treatment and the neurodegeneration process will continue and the cognitive decline will continue. That has been shown by data. Therefore, for this kind of disease, the early initiation of treatment and maintenance of treatment should be continued and that is the key to treat such disease. That is the key point that we have been continuing to have in our mind and I believe that this has expanded the basis for this treatment. As you see, the administration methods are shown at the bottom. During the first 18 months after initiation treatment was started, the IV once every 2 weeks are provided and after that, maintenance treatment period will be started. In the past, there was only 1 option to dose through IV once a month. But this time, LEQEMBI IQLIK self-administration method is approved and launched with a great option of once a week dosing. Therefore, it has made maintenance treatment much easier through the launch of LEQEMBI IQLIK. Now value proposition by LEQEMBI is being enhanced. Regarding administration period and dosing, as I said earlier, in the genre of maintenance treatment that has been cultivated by LEQEMBI. And when it comes to safety, particularly incidence of ARIA, based upon the real-world data in the United States and also Japan's all case surveillance, including over 10,000 patients. Based upon such a large scale data, the incidence of ARIA and the severity or seriousness of ARIA are all within expectation described in label. So we did not belittle the importance of ARIA. However, based upon this safety data, we believe that ARIA can be manageable. That has been confirmed. And now if you turn to efficacy aspect. Above all, Clarity AD has been conducted during the open-label extension study for 4 years and CDRSB difference against placebo over 48 months and this is the difference from the reference of ADNI and CDR difference has been expanded to 3x or 4x. So toxic substance is shown to being removed through disease-modifying effect of this drug in your brain. That has been shown by this data and AIC was the place the U.S. real data, 2-year real-world data was shown and 8.8 out of 10 was shown in terms of satisfaction score and 87% of the patients were continuing LEQEMBI treatment and 84% of patients had not progressed to the next stage of the disease. Such very quite robust data results were obtained from this real-world evidence. And in the daily lives, how cognitive function has been maintained or improved. Humanized message was utilized in order to show that in an easy-to-understand manner in explanation to patients. Now you can see here the first half results in revenue of LEQEMBI. Please look at the very bottom line. JPY 41.1 billion was recorded as the global revenue, which was 153% of the result recorded in the previous year. As we have been reporting to you, in China due to the geopolitical risk, the stockpiling for the period until the end of this calendar year. By the end of December, distributors have purchased to secure the inventory up until the end of calendar year. Therefore, JPY 7.7 billion was recorded in Q1. And in parenthesis, you can see the actual demand excluding such stockpiling by distributors in China are recorded and JPY 2.7 billion was recorded in the Q2 and the JPY 5.1 billion in the total first half. So considering all this, JPY 38.3 billion was recorded based upon the China's actual demand basis. Even with this 135%, very high growth ratio was recorded from a year earlier. In all regions, high growth were recorded exceeding plans for all regions. And JPY 76.5 billion has been shown here as the forecast for full year and our progress to date against this forecast exceeded 50%. Therefore, we are deepening our confidence in achieving this full year forecast. Now turning to LEQEMBI IQLIK. I have brought this with me here. This was the first ever commercial unit produced. This is the real thing, real product, very valuable products. I would like to decorate this in frame or box in my office. So this is the memorable and commemorative first-ever products and this was launched on October 6 this year. And what are the benefits for patients? First, the patients or care partners are able to administer at their home within approximately 15 seconds or so on the average and they don't have to drive or visit the infusion centers in person. We believe that this will be a great benefit for them. For medical institutions, on the other hand, they don't have to do a lot of monitoring or preparation for IV infusion, securing [ chairs ] or monitoring by nurses or health care providers involved in the administration. These medical resources can be reduced. This will be a significant saving and they will be able to expand the capacity to accept new patients. At the time of launch, we started the LEQEMBI Companion program. LEQEMBI IQLIK is to be covered under Medicare Part D. The reimbursement shall be conducted by private insurer. Although they are still under the supervision of CMS, but private insurers will be in charge of reimbursement and private insurers have set the cycle of formulary introduction at 15 months. Therefore, in January 2027, the formal formulary will be putting this LEQEMBI IQLIK on their list and there is a program called the Medical Exception Process in the meantime until the IQLIK will be put on the formulary. So under this Medical Exception Process, the reimbursement can be allowed and this has been used widely in the United States and this process will be applied to LEQEMBI IQLIK as well. Information and support related to this process are provided by our area reimbursement managers and nurse educators are providing in-person or online support to patients for dosing and providing demo kits for dosing training. This is the demo kits. And 4 weeks have passed since launch and IQLIK initial delivery has been conducted at 34 facilities in the U.S. and demo kits for administration training were provided to 341 facilities and they have started preparations for use. And Medical Exception Process, under which I believe that most of the patients have applied for this and we anticipate a smooth reimbursement process to be conducted under this process. So as regards to the reimbursement for LEQEMBI IQLIK, we do not have any concerns and we believe that the reimbursement process will be smoothly conducted. Regarding initiation treatment for IQLIK: during the first 18 months and submission for this initiation treatment has been started in the United States and a rolling submission process has been utilized. And the last such submission will be conducted in December this year. And we were expecting to receive priority review status if that is approved and then in 6 months approval may be provided in first quarter of FY 2026 for both for initiation treatment and maintenance treatment. For both periods of treatment, LEQEMBI IQLIK may be utilized before dosing. So that is approaching. And in Japan, we are prioritizing the submission for the initiation treatment for SC-AI. This will be conducted by the end of this December. On the right hand side, you can see that this IQLIK has been selected by TIME Magazine as one of the best inventions of 2025. Now another topic I would like to talk about is the confirmatory tests using BBM in the United States. There has been a significant advancement during the past 6 months. In July, AIC was held in Toronto, Canada. Alzheimer's Association of the U.S. put forth BBM Clinical Practice Guideline. And BBM tests with 90% or higher sensitivity and specificity can be recommended for confirmatory amyloid beta diagnosis. That has been proposed and published through this guideline. And Fujirebio's BBM was approved before this. Based upon the composite score, this BBM was granted the IVD clearance and this achieved the above criteria of 90% or higher sensitivity and specificity. Under this practice guideline, Fujirebio's BBM is now allowed to be used as confirmatory diagnosis. LabCorp and Quest Diagnostics or other leading clinical laboratory companies in the U.S. have introduced this as a test item. Therefore, confirmatory testing has been started utilizing this BBM. C2N as well, based upon different methodology, submitted FDA regulatory filing for BBM. And CMS for Medicare, a new national payment rate of $128 per test for BBM has been decided and it will be applied as effective from January 2026. That has been already announced. We believe that this will drive the use of BBM further as a tailwind. Currently, already for amyloid beta confirmatory tests, about 10% of such tests are estimated to be conducted utilizing BBM. Outside of the box, triage test. Roche BBM using pTau-181 was granted IVD clearance. This is particularly for PCP, primary care physicians, who may use this for triage. Now I am showing rather complicated diagram I'm afraid, but I would like to use this for explanation. What I would like to say is by introduction of BBM test, amyloid beta test particularly confirmatory test, and how the number of such tests and the number of positive cases will change up until FY 2027. Rather based upon the robust data, we would like to present our estimates. First of all, please look at the bottom blue line, solid line. This shows the number of amyloid beta confirmatory tests based on BBM. This shows the trend of increase in the number of such tests. If you look at FY 2025, as I said earlier, about 10% of the confirmatory tests is being conducted using BBM. And then over '26 and particularly after 2026 with higher likelihood, the BBM-based confirmatory tests are expected to increase. And next, please look at the orange solid line. This shows the number of amyloid beta confirmatory tests using PET and CSF only. So during FY 2024, PET and CSF were the only approaches for the amyloid beta confirmatory test. So this shows the trend of number of such tests based upon the conventional methods. And once the BBM confirmatory tests are launched and then orange line, the curve will be less steep. And the purple solid line shows the number of amyloid beta confirmatory tests of all 3 methods: PET, CSF and BBM. The total number of confirmatory tests are shown. And above that, if you look at the red solid line, preclinical triage utilizing the ones like Roche's BBM. And the total number of BBM tests is shown here for both triage and confirmatory tests and this has shown an exponential increase. Based upon this, if you look at the pink bar first, the pale pink bar shows the amyloid beta the confirmatory test. The total number shows for 2024 only PET and CSF were used and in 2025, the BBM is added and going forward, the number will increase. And the pink arrow shows the number of amyloid beta positive cases, which is expected to be increasing. And the number of confirmatory test as well as the positivity rate are also considered to be increasing. And the positivity rate was 50% in 2024. But in 2027, it's expected to be reaching 80% as positivity rate. Why? In triage or prescreening, BBM will be used and the PET CSF positivity rate will be between 50% to 70%. And then that is the 1 step to increase the positivity rate. And BBM confirmatory test becomes available and then for example PCPs will be able to utilize this for diagnosing and ordering the test and the results of the test will return it to them and their proficiency will be enhanced. Before ordering the confirmatory test for BBM, the confirmatory test precision for the cognitive function test will be increased. So their proficiency level will be enhanced based upon this and the positivity rate is expected to reach 80% or so. So amyloid beta cases will increase significantly and actually, there has been quite a high correlationship between this numbers and growth rate of LEQEMBI. I believe that this is another evidence to show that LEQEMBI is expected to grow further towards FY '27. The other day we've presented that there are 3 options for modified AD continuum that only Eisai can deliver. I would just like to share with you once again the gist of this. First, with the current LEQEMBI, suppression of cognitive decline after AD onset. The biggest characteristic here is long-term administration. We have 48-month long-term data. Efficacy was demonstrated and expansion of efficacy was demonstrated. Why is that possible? It is shown in the third bullet point. There is low immunogenicity neutralizing antibody incidence of lecanemab. This allows for long-term administration. Because of this advantage due to property, it is possible to suppress cognitive decline after AD onset. And before MCI, the earliest stage, preclinical AD or stage is tested in the trial. As shown in the middle, the biggest characteristic of our trial is shown in the second bullet point. Pure preclinical AD patients are selected. Global CDR is 0 not 0.5, but 0. Abeta accumulation is measured with Abeta PET, it is greater than 40 centiloid. This is preclinical AD as determined under the guidelines. These patients are selected in this trial. That is showing the precision and accuracy of a preclinical AD trial. This duration of a preclinical AD stage is very long. So low immunogenicity and neutralizing antibody incidence can be utilized for long-term administration. And the final bullet point, data endpoint is PACC5. Preclinical AD clinical conditions or symptoms are most precisely reflected in PACC5. Such endpoint is used. And this is also based on the guidelines determined by FDA and EMA. And therefore, this is very legitimate. For regulatory purposes, we have conducted a Phase III study. That is the characteristic of AHEAD 3-45 Study. And finally, combination with etalanetug. This goes without saying that there are 2 major pathologies of Abeta and Tau. We are able to approach both. This is a treatment that is epoch making in that sense. We are aiming to maintain cognitive function after AD onset. This cannot be done by anyone in the world. No one can come near us. This is the unique option that is available from Eisai. Etalanetug has obtained clinical proof of mechanism with DIAD population. 202 Study with sporadic AD is enrolling patients steadily. Biomarker is used mainly for optimal dose and target population, biomarker evaluation is used mainly. This is a study design, which is quite epoch making in that sense and first data readout is expected in fiscal 2027. As for preclinical, data readout from Phase III is scheduled for fiscal 2028. Preclinical AD, what is preclinical AD? This shows the summary concept. Early AD is shown on the left, prevalence is 240 million people. That is the estimated prevalence. A large number of people are estimated to have early AD. Preclinical AD and in order to calculate people who are eligible for AD-DMT, we use a Phase III study criteria and number of patients eligible for AD-DMT is estimated to be 2.3 million people. What I'm trying to say is that we also have a very large potential market in preclinical AD. It is quite near us. In addition to early AD, there is a huge market potential of preclinical AD, which is right in front of us. Now nationwide in the United States, National Education Program is being held, 1,000 people participated. Shown on this photograph, the left 2 are patient and family, they are smiling; and 3 people on the right side are U.S. leading AD experts. We have a very large volume of data and they were confirmed once again. We also have IQLIK, a breakthrough administration method. These were discussed in this program with many people responding actively. On the right side, this is a medical program. This is on the concept of smoldering Alzheimer's disease. AD continues to smolder. Plaque removal is not the end of the story. Toxic species continue to increase. Continuous treatment, therefore, is necessary and such campaign is continued. Another major initiative is targeting PCPs, primary care physicians. Primary care physicians are very important. Many MCI patients first visit PCPs and there should be correct diagnosis and speedy referral to the specialists in order for treatment to start. So in the second half, PCP specializing representatives are assigned. 3,500 targeted PCPs are the primary targets. The key message is shown as an example on the right side. This is the cover of the brochure. Early referral can mean early intervention with LEQEMBI. Early referral to specialists and that would mean early intervention with LEQEMBI. That is the message. And therefore, PCPs will have to be able to quite accurately diagnose MCIs and refer patients to nearby IDNs, which is a group of clinics with a number of specialists. There should be quick referral to such institutions. We would like to help PCPs by establishing a standard procedure for referral and IQLIK and BBM developments will also be a strong tailwind. For similar purpose to promote treatment, we have a targeted DTC TV campaign. This is not a normal TV campaign, but it's targeted. Who are the targets? Early AD diagnosed patients. These patients are not taking the next steps such as the tests or informed consent. That is understood to be the case. So targeted DTC TV campaigns were conducted. We were able to see good results in the first half. We will double the effort so that there will be next steps taken by the patients to move on to informed consent and actual infusion. This campaign has already started. In other markets, we are also seeing good progress. In Japan initial introduction, there are 800 initial treatment facilities and there are 1,600 follow-up facilities. 800 initial treatment facilities will be treating for the initial 6 months. And as shown in the middle of this, we have done TV campaigns to increase awareness of the disease. About 1 in 3 of Japanese population is aware of MCI now, what MCI is as a disease. Such disease awareness initiative campaigns effects are shown. This is wonderful. And 330,000 have visited specialists and close to 30,000 have received Abeta tests. The speed of referral from PCPs to specialists has also increased by about fourfold. On the right side, LEQEMBI in China. Yin Fa Tong through collaboration with JD Health is a digital platform for promoting visits to clinicians and diagnosis and follow-up. Yin Fa Tong is now used by 620,000 people and cumulative consultation number is 26,000. Digital means it is used to build the pathway and much progress is seen. And next bullet point is extremely important. In China, currently we are focusing on self-pay market. Towards the market with self-pay patients, we are promoting. But for true expansion, it is important to be listed on the NRDL. The Chinese government recently decided to leverage private commercial insurance for innovative drugs. Such a new scheme is being introduced or proposed by Chinese government. We would like to respond to this and in China, we would like to improve our access to very huge market in China. As for Europe: LEQEMBI in Europe. In Germany and in Austria, we were able to launch very smoothly. In Germany, the drug is reimbursed at discretionary price. In Europe, commercial and medical activities. The first bullet point it mentions CAP, controlled access program, is obligated in all European countries by the authority. And what needs to be done here is that prescribing doctors and prescribing facilities have to satisfy certain conditions as prescribed under CAP. So satisfying doctors and facilities need to be registered and LEQEMBI can be prescribed in these registered facilities. That is the scheme. 350 facilities, 420 doctors are registered in case of Germany. Number of facilities registered and number of doctors registered, there is no limit for LEQEMBI. There has to be prior registration for certain products. In that sense, large clinics and specialists are starting to prescribe smoothly. And I have 3 more slides before I end. Eisai's mission in AD is to make AD diagnosis and treatment familiar for patients and encouraging them their standardization and widespread adoption. IQLIK and BBM are the potential 2 innovations to achieve this. This example was seen in rheumatoid arthritis. BBMs appeared, major disease-modifying drugs instead of IVs were made available, SC-AI formulation emerged leading to a major transformation. So this could be repeated. We see great potential in both early AD and preclinical AD. With that, I would like to conclude and thank you very much for your kind attention.
Unknown Executive: We will now move on to Q&A session. We will be entertaining questions from analysts and investors before entertaining questions from the members of the media. If you have question, please give us your name and affiliation before your question. If you have a question, please raise your hand.
Hidemaru Yamaguchi: My name is Yamaguchi. I'm Citi. I have a question about the performance and the actual results as you explained at the outset, but there are still others. And if you include that number in the revenue generated from other businesses than Pharmaceutical business and I believe that if you add that number, then there will be further upside to the second half. But inclusive of that considering the restructuring in Europe and also R&D so the upside will be used for those expenditures. But inclusive of that potential upside, there are still uncertainties. That's why you have kept your full year forecast unchanged.
Haruo Naito: The first one, the onetime is going to be offset by onetime factors. So actual revenue from organic business or profits, JPY 54.5 billion. That is the number that we believe that we are going to approach.
Hidemaru Yamaguchi: So JPY 54.5 billion is the number that you are going to keep as it is.
Haruo Naito: But under this number, the most will be brought about by the organic business. I see. Then the shortage not depending on the onetime factors.
Hidemaru Yamaguchi: Understood. On Page 11, I was interested in this diagram. I have 1 question. The total number of tests increased and hitting rate or positivity rate. So these are the 2 functions and how these 2 are going to play out? Could you please give us the dynamics?
Haruo Naito: For your question, Mr. Toyosaki is going to respond.
Hideki Toyosaki: I am in charge of medical affairs in the United States. My name is Toyosaki. In FY 2024, we have taken this data from the claims data. And for FY 2025 this year, similarly based upon the claims data, amyloid beta tests and number of BBM tests and the positivity rates that has been already confirmed to be increasing. This trend of increase is one thing and on top of that, as has been explained in presentation with the spread of BBM, there are several positive events. First of all, clinical practice guideline was published and based upon certain criteria, there has been a recommendation to use BBM as the confirmatory test. Fujirebio's BBM has been granted the clearance. Therefore, there are requirements that have been met by the BBM. And LabCorp and Quest and leading laboratory companies have added this in their menu of the testing. And in January next year, the CMS national payment rate will be applied and about $130 per test will be applied throughout the country and BBM reimbursement will be consistently applied. These events are being conducted and happening in the United States one after another. So considering this, first of all, the use of BBM as confirmatory test will significantly increase. And for PCP, the triage BBM tests have been granted from Roche. Therefore, not only for neurologists, but also for PCP, the test of BBM as a triage will be increasing. And in 2027, we believe that there will be such an increase in the number of BBM-based tests.
Seiji Wakao: I'm Wakao from JPMorgan. First question is about returning to ROE of 8% for next year. That is the target and could you elaborate on this? Up to second quarter, the actual business is performing very well. So ROE of 8% level to be achieved, I believe you are making positive progress. So how do you see the situation currently? Having said so, in the next fiscal year, would you require sales from other businesses? Pharmaceutical business is performing very strongly. So with major products, do you expect to be able to achieve 8% return on equity?
Haruo Naito: That question will be addressed by Mr. Iike.
Terushige Iike: Thank you very much for your question. This is Iike speaking. Last fiscal year and the fiscal year before that in the so-called other businesses, operating profit was about JPY 40 billion. And we wanted to wean ourselves from relying on that and so that is what we are seeing in this fiscal year. In this fiscal year, as CEO mentioned, especially in the second half we are planning to make expenditure in structural reform mainly in Europe. There were more reliance on onetime factors in the past 2 fiscal years. But without relying on these onetime factors, we want to achieve the figure as we informed in guidance. LEQEMBI in the past and up to this fiscal year is still incurring loss as a single product, but the margin of loss has been reduced substantially since last fiscal year and there will be a continuation of positive trend. And therefore, in terms of operating margin, we expect a significant increase and we would like to be able to meet the expectations of shareholders for ROE. And beyond that, we would like to return to double-digit figure and we are on the way to achieving. We are in the process of achieving this as we see the situation. Another point, this was not discussed much, but China. In China, we have LEQEMBI and Dayvigo and Urece, this is the gout treatment drug. We have these 3 products in China, NRDL listing or stage before that, coverage by commercial insurance. If this can be achieved, there is a potential for rapid expansion. In the past in China, Lenvima was the driving force pushing up the company-wide performance. So we would also like to continue to make much efforts in China market so that it can be a factor for growth.
Seiji Wakao: I have 1 more question. On Page 9, SC coverage is shown quite extensively. Based on the presentation today, LEQEMBI IQLIK; in terms of sales increase, it may be after January 2027 that sales increase will be observed from LEQEMBI IQLIK. Is that correct? And initial dosing indication may be approved in the first quarter next year? And from January 2027, do you expect to book sales for that indication as well?
Haruo Naito: Medical Exception Process we believe will be applied to about 80% to 90% of the patients. In January 2027, listing of official formulary is expected. But before waiting until then, high probability we believe that patients will be able to be reimbursed for the insurance. Between Eisai and insurer, we will have to agree on this or negotiate. So Medical Exception Process, it says exception, but it's not exceptional. Regularly this scheme is utilized. I believe your concern is that we may have to wait until then to see large sales, but that is not the case. Please follow up, Mr. Haruna.
Katsuya Haruna: Thank you very much for your question. I'm Haruna responsible for U.S. business. I would like to add to what CEO said. Commercial insurers, patients and HCPs are giving us very positive feedback. As for insurance reimbursements, earlier CEO Naito mentioned, in January 2027 it may be listed in formulary. But before waiting until then, through this process we believe that it can be made more widely available. Easy example to understand is IV reimbursement rate and the current SC level is similar. Therefore, we do not see this as a bottleneck at all. The initial treatment in next year, if that is achieved, I believe that will be a major game changer. With the launch of IQLIK, long-term treatment will become easier and that is also a major benefit. For patients, it is a huge benefit.
Kazuaki Hashiguchi: My name is Hashiguchi from Daiwa Securities. Regarding your forecast for the results. At the beginning of the fiscal year, onetime expenses were not included, but onetime revenue was included. But regarding the progress for first half, the cost of sales ratio was lower than planned. In my reading and R&D expenses compared to full year forecast, the progress seems to be slower. These trends are expected to continue into the second half. And even without onetime revenue, you will be able to get closer to JPY 54.5 billion in operating profit excluding onetime factors.
Haruo Naito: R&D expenses, whether these expenses will be contained with this level, we are not sure yet. But as I said earlier, we are going to put resources into the forecast projects and we are sure that we needed to continue to invest resources into these main themes. The more efficient expenditure of R&D expenses should be secured. As Mr. Hashiguchi mentioned, that is almost the same scenario we have in our mind.
Kazuaki Hashiguchi: Another question is about etalanetug Study 202. Data readout is expected in fiscal year 2027 and clinicaltrial.gov shows the primary completion date is December 2026. And so this shows that the progress has been slower than expectation. But do you think this is different from what you say here from the primary completion date and what kind of events do you foresee for fiscal year '26 and '27?
Haruo Naito: Mr. [ Horea ] is going to respond to your question.
Unknown Executive: I am in charge of translational science. My name is Horea. Let me respond to your question. Regarding Study 202, the completion of the study as described in clinical.gov is scheduled to be at the end of December 2026. But after that, the samples will be analyzed and the results of the biomarkers will be summarized and inclusive of the statistical analysis and readout from the trial is expected in the first half of fiscal year 2027. Thank you for your question.
Unknown Executive: Are there any other questions? Yes.
Fumiyoshi Sakai: I am Sakai from UBS. About Medical Exception Process. In the past, SC formulation when it was near launch, Medicare Part D to Medical Part B switch was mentioned. By cutting our process, sales can be booked earlier. More clinics will be using SC, more institutions will be using SC. Is that what you are saying? And as for Medical Exception Process, is this introduced in practice? Can you cite some actual example?
Haruo Naito: IQLIK was to be applied to Medicare Part D. It will be applied to Medicare Part D. Did I mention switch from Medical Part B to Part D? From Part D to Part B, did I really mention that? I trust Mr. Sakai so I may have mentioned that. But Medicare Part D will be applied. That is the category of the product. So please understand that Part D will be applied. And as for Medical Exception Process, details will be given.
Katsuya Haruna: This is Haruna speaking. First, about maintenance treatment of IQLIK, IV LEQEMBI will be Part B and from Part B IV, they will be switched to IQLIK which is applied Part D and that switch is actually occurring. When you are switching to Part D, Medical Exception Process is used for insurance reimbursement. And to add a little more, LEQEMBI IQLIK is already being prescribed and patients are receiving IQLIK treatment already. Is this common practice? MAP is very common for MS or diabetes Medicare Part D drugs, anticancer drug is not included. But in most drugs when new drugs are launched, this process takes place and many use this process. Neurologists, we conducted a market research of neurologists before the launch of IQLIK and more than 80% of neurologists have used MAP process before. We are also providing information, but physicians are already familiar with this process. And by providing ample information, reimbursement is taking place very smoothly.
Fumiyoshi Sakai: I also have a question on reimbursement in China listing on NRDL. What is the timing that you expect to be listed and how will you apply? I understand that there is stockpiling of inventory, but what is the timing for NRDL listing?
Haruo Naito: Ms. Sasaki will respond.
Sayoko Sasaki: Thank you, Mr. Sakai, for that question. I am Sasaki responsible for China business listing on NRDL. And as I introduced on the slide for innovative drug, Chinese government is introducing a way to increase access by leveraging commercial insurance usage. We are considering the market environment, including competitive landscape and expansion of the use of BBM. And when we decide that we are able to use this, we would like to make use. In self-pay market, we will achieve growth and by utilizing such program, we believe we can accelerate the growth. NRDL and related initiatives, these are announced by the authorities in China. We cannot say the timing on our part. So I hope Mr. Sakai will also pay close attention to announcements by Chinese authorities.
Fumiyoshi Sakai: Understood. But price will be lowered so how should we understand the offsetting impact?
Haruo Naito: This is preaching to the converted, but sales equal price multiplied by number of units sold. So naturally that will have to be taken into consideration. Otherwise, we will be scolded by investors.
Unknown Executive: We would like to receive questions from participants online.
Operator: Mr. Tony Ren from Macquarie Securities.
Tony Ren: Tony from Macquarie. Can you guys hear me clearly?
Unknown Executive: Yes, we can hear you.
Tony Ren: Perfect. So first one, a simple one. So it appears that your gross profit margin declined a little bit. On Slide #1, that is attributed to product mix and the drug price revision. Just wanted to see if you could provide a little bit more color on the extent of the price revision and the degree of product mix change.
Haruo Naito: For your question, Mr. Iike is going to respond.
Terushige Iike: Thank you very much for your question. This is Iike speaking. I would like to respond to your question. As you commented, there was a drug price revision in Japan and due to this in terms of ratio, that was the biggest factor in terms of percentage of contribution to the decline in the gross profit. And the biggest product for us, Lenvima, there was a Medicare Part D redesign in the United States. The gross to net has been lower to what it was in the past. And it is also related to the growth of LEQEMBI. But in terms of ratio, these 2 had the larger portions in the contribution to the lowering of the gross profit. So that's why I mentioned the product mix.
Tony Ren: Okay. How should we think about gross profit margin going forward in the second half of this year and possibly into next fiscal year?
Haruo Naito: Mr. Iike is going to respond to your question.
Terushige Iike: For this fiscal year, as we have already reported to you, we believe that the gross profit margin is going to be controlled within the guidance. Towards next fiscal year, it will depend on the product mix, but we do not believe that there will be significant change and we will be able to control as we do.
Tony Ren: Okay. And if I may, also just want to go back to ask about the Medicare Part D Medical Exception Process here because if we have to wait until January 2027, that does appear to be quite far away. So out of the -- we understand the current approval rate is pretty high. Just want to quantify that. So out of 100 patients or doctors applying for the Medical Exception Process, what percentage of them will be successful today? Would that be something like 50% or more like 70% or even higher?
Haruo Naito: For your question, Mr. Haruna is going to respond.
Katsuya Haruna: Thank you very much for your question. First, generally speaking about -- well, it may depend on what data you refer to, but 70% or 80% is the current success rate. But it's only 4 weeks since it was launched. Therefore, there will be some fluctuations in data, but we have observed already over 90% success rate. So we have seen steady progress. And going forward, we expect to see increased number of patients over longer term and then the data may be fluctuating. But as an early signal now, we believe that we are very confident in providing this products or drug to patients.
Tony Ren: Okay. 90% is a very good number. Thank you very much.
Operator: Ms. Sogi, Sanford Bernstein, please.
Miki Sogi: First question, I believe you have heard from the people in the field. The other day we were able to speak with early adopter doctors. And clearly amongst the patients, early stage patients when they are given LEQEMBI or Kisunla, stronger efficacy, higher efficacy is observed. And the doctor said that the doctor is treating more MCI patients. So clearly efficacious or clear responding patient segment is becoming clear. I think this is very important for the adoption of the drug. Real-world evidence indicating such data, is Eisai collecting such data? Regarding early treatments, do you plan to run campaigns?
Haruo Naito: Mr. Toyosaki will respond. And regarding Japan, Mr. Yusa will respond.
Hideki Toyosaki: Thank you very much for your question. I would like to mention 2 things. The first is, as you rightly mentioned, early treatment. Early start of the treatment and early diagnosis and early treatment and maintaining through maintenance treatment. Such treatment will offer the optimal outcome to our patients. That is our belief. As for clinical studies in CLARITY AD trial, irrespective of Tau level, pathologically very early stage patients, low Tau patients or Tau level negative patients are included in the study. In this population when we look at Tau substudy results over 4 years, more than half of the patients were able to maintain their stage or have shown improvement. I believe that is one of the uniqueness of lecanemab. And therefore, early treatment and patients who received early treatment can expect to maintain the disease condition over long term. So long-term continuation of the treatment is the focus. Currently, in the United States in 9 institutions and we will increase the number of institutions, but we are in the process of collecting real-world evidence. Interim analysis will be presented in summer this year at AAIC and we will continue to collect the data and we plan to present the final analysis data next year. So I hope you will look forward to that data. That is the situation in the United States.
Toshihiko Yusa: Thank you for your question regarding Japan. I'm Yusa responsible for Japan business responding. As for data creation in Japan, as you know, all patient study and registry survey are underway. And as you pointed out MMS score, what level of patients are responding in what way. Such data is collected and Phase IV is also planned in Japan. Earlier stage patients in campaign, whether campaign was planned was also a question. We are conducting TV commercials focusing on MCI in DTC. This was explained by CEO Naito earlier in November last year and May this year. And in August this year, we have run these 3 campaigns. So this has led to increased awareness of MCI.
Haruo Naito: Ms. Sogi, you've also mentioned that when LEQEMBI is started early and MMSE, the higher the score of MMSE, the greater the efficacy is and ability to maintain MMSE and CDR scores. That is what we are also told from the physicians. And as for LEQEMBI, 29 to 30 score of MMSE, only LEQEMBI is indicated for this segment of patients. So in particular, we are looking at this very early stage MCI patients and we would like to lead to early diagnosis and early treatment of this segment of patients.
Miki Sogi: Another question. On the other hand, in the United States, Kisunla and LEQEMBI are included in formulary in some of the clinics. Both are available. Patients are increasing. There is an infusion capacity issue. With the same capacity, double the number of patients can be treated with Kisunla. I hear that oftentimes institutions are using Kisunla for that purpose. The number of accounts, there can be only accounts – Kisunla only accounts and accounts with both LEQEMBI and Kisunla and it may be due to the balance of these numbers. But until spreading dose starts in the accounts with both LEQEMBI and Kisunla, one may be preferred over the other. But as far as the trajectory is concerned, before IQLIK is used more widely, is there a potential for slowdown for LEQEMBI? But of course market overall may be growing so I hope that there will be no slowdown. What is your expectation?
Haruo Naito: That question will be addressed by Mr. Haruna.
Katsuya Haruna: Thank you for your question. This is Haruna responding. First, about the U.S. market overall. Regarding market share, LEQEMBI has the majority of the market share in particular amongst IDNs where there are neurology specialists, we have received very high marks. LEQEMBI's value and positioning are not affected we believe. And as you rightly pointed out, on the other hand, the competitor, Kisunla is once monthly treatment. Treatment may be discontinued after 12 months to 18 months and some medical institutions may prefer this. We are fully aware of that. What is important is that LEQEMBI has a solid position in the market and it's growing and Kisunla is used by those who prefer once-monthly dosing and that is also growing as a new market. So overall, AD market is growing. AD market on a quarter-by-quarter basis continues to grow at double-digit pace. So we have seen this substantial growth. If I may focus more on LEQEMBI. LEQEMBI growth has not stopped and we do not believe it will stop. It will accelerate. Looking more closely, LEQEMBI prescribing physicians, more than 50% of AD treating doctors are prescribing only LEQEMBI. Majority of prescribers are prescribing LEQEMBI only according to the data. So we believe LEQEMBI has established a very solid position. When I visit health care providers, certainly there are some who say that they prefer once monthly dosing and some patients and health care professionals prefer discontinuation after 12 to 18 months, but treatment effect was observed through the course of LEQEMBI treatment. And there are patients who are given Kisunla who are struggling to decide whether it is truly good to discontinue treatment and we have seen increased number of inquiries into Eisai because of that. IQLIK launch: without IQLIK launch, it's not that the position of LEQEMBI will change. We have a very strong potential and we expect continuous growth. We are confident that growth will continue, and we hope to be able to demonstrate that with actual fact going forward.
Haruo Naito: If I may add to that. As Mr. Haruna mentioned, donanemab is it eroding rock solid market of LEQEMBI? We do not think so. Very solidly established, LEQEMBI market is not affected. There are patients who may wish to discontinue treatment after 12 to 18 months and there may be such health care providers as well. And initial treatment can be given with a monthly dosing, that may be preferred by some patients and health care providers. That is a market that is newly created as donanemab market. So donanemab is achieving growth by creating that donanemab market. But we have a very solidly established market. This market includes IDNs who are the core health care providers in the United States. I will not mention the names, but universities with well-established medical schools have their group and they apply the same standard and provide the same treatment. Such integrated IDN network provider treatment and AD treatment is conducted in these core IDNs. We believe that our share is about 80 versus 20. We have a very solid share with LEQEMBI in IDNs. As for AIC, ambulatory infusion centers and group practices, these are also important health care providers in the market in the United States. Here Kisunla advantage may be seen relatively more so in comparison to IDN. But it is not at all the case that we have less than 50% share versus the competitor. That is not occurring looking at the data. What I am trying to say is that with Kisunla, will our core market be eroded? That is not at all the case. And Kisunla is creating its own market. That is occurring naturally. As we have presented today, initial treatment indication for IQLIK may be approved as early as in the first quarter of 2026. So once monthly IV infusion or weekly auto-injection at home will be the options. And when that becomes a reality, which will be chosen by patients and health care providers. And looking at that, we have to make utmost efforts. As for the possibility to end treatment after 12 to 18 months and we are taking the opposite approach. Our antibody has property that allows for long-term administration because immunogenicity is low and neutralizing antibody incidence is low and because of that, long-term administration is possible. As for the 48-month data that I've mentioned before, toxic Abeta oligomer continues to be removed with long-term administration and CDRSB effect size becomes larger as a result. That is demonstrated and the reference is Adoni data. These are predefined patients. Before the start of Phase III, Adoni patients are selected in baseline. So the study is not biased. It is quite transparent and we have selected a reference, which allows for high quality comparison. This disease is a progressive disease. It continues to progress. Under Abeta PET after confirmation of plaque removal, can treatment be ended? Is that the right concept? Our position is that for AD, the right option is continuous treatment, which is the right option. I believe sooner or later patients and health care providers will make a decision.
Unknown Executive: We would like to receive questions from the media. If you have any question, please raise your hand.
Hinako Banno: My name is Banno. I am from Nikkei Newspaper. Regarding the situation in United States, I have a question about tariffs. I don't think there have been any recent movements for tariffs. But based upon the currently available conditions, what impact do you foresee for your business? And I believe that in China, you are stockpiling or increasing the inventory level. But to what extent or by when do you think you have secured the inventory level?
Haruo Naito: For your question, Mr. Iike is going to respond.
Terushige Iike: Thank you very much for your question. In terms of systems, we have not seen any secure or certain things. Given this situation, as we have indicated, the inventory -- I'm sorry, Mr. Yasuno, please. Could you please respond to the question? Because you are here traveling all the way from the U.S.
Tatsuyuki Yasuno: I am in charge of the United States. My name is Yasuno. As you know, the tariffs for the pharmaceutical products are out of the scope of reciprocal tariffs according to the Section 232 of the U.S. Trade Expansion Act. And there has been an investigation being conducted in order to make decision whether there are any impacts on the national security. Based upon this, the Executive Order from President Trump has not been issued yet. And using the SNS, President Trump mentioned that he intends to impose 100% tariff rate on to the pharmaceutical products. Other than that, there has been no announcement. So there are lots of uncertainties. Therefore, for us, we have not been able to calculate what impact we foresee because of this on our business yet. But on the other hand, as Mr. Ike mentioned, going forward the pharmaceutical products to be imported into the United States to prepare for the potential tariff, we are conducting various measures such as inventory management and supply chain measures. Regarding the pharmaceutical products, which are necessary for the U.S. market, up until far into the next fiscal year, we have secured inventory. Therefore, for the time being, we do not think that we will be impacted by tariffs.
Hinako Banno: I have another question. This is a question I'd like to ask CEO. Regarding MFN Pfizer and AstraZeneca, other leading companies have reached agreement with the U.S. government. How this rule is going to be implemented is not known yet. For you, how big this can be a threat for you? How serious threat do you think this can be for your business?
Haruo Naito: I think in countries of OECD whose GDP per capita is at 60% or higher than that of the U.S. is going to be the criteria. I mean the minimum price should be in those countries to be applied to the U.S. market. But it will depend on whether this is going to be the listed price. And this will be based upon -- reimbursement will be based upon the cost effectiveness and this will be forced by the government agencies. Therefore, there is no room for discretion by companies. Unless you accept that price reimbursement, you are not allowed to deliver your products to patients in need. The mission for pharmaceutical companies is to deliver stably their pharmaceutical products to patients who need them. That is the fundamental mission for us. We have to deliver that mission. If it's going to be listed price and then the price level set by ourselves will be -- has been deployed throughout the EU and LEQEMBI is priced as that in the U.S. price. In Asia as well, the price of LEQEMBI is at the same level or even higher than that in the United States. So which price level will be referred to, it's going to be very important. For that, very severe decision-making may be necessary. That caused our concern. Mr. Yasuno, do you have anything to add?
Tatsuyuki Yasuno: Yes, I am in charge of U.S. business. My name is Yasuno. As our CEO mentioned, that is the stance of the company. What is happening in the U.S. now? I believe you know the situation there. President Trump have sent the direct letters to 17 companies, out of which 3 companies have reached some kind of agreement that has been announced. According to the speculation, by the end of this week, 2 other companies may be announcing their agreements with the government. That is the information we received from our DC team in Washington, D.C. So those 17 companies which received the letters from the President Trump or U.S. government have started discussion with the U.S. government. But on the other hand, U.S. Association of Pharma Companies, PhRMA, before adopting this middleman or PDN or 340B reform. These are considered to be challenges. That is what PhRMA is explaining in its advocacy activities. We of course are closely watching what is happening day by day. Through such monitoring, we would like to prepare ourselves.
Unknown Executive: It is now time. We would like to end the earnings call by Eisai. Thank you very much for your time. Thank you for your kind attendance. [Statements in English on this transcript were spoken by an interpreter present on the live call.]