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Ari Fujishiro: [Interpreted] We are going to start Daiichi Sankyo's FY 2026 First Quarter Financial Results Presentation. I'm delighted to serve as MC today. I'm Ari Fujishiro from the Investor Relations and Shareholder Relations Department. First, about the language. In this briefing session, we are going to use Japanese and English. Simultaneous translation is available. [Operator Instructions] On Zoom screen and during live streaming, we will show a presentation material in Japanese. We have posted a presentation in both Japanese and English on our corporate website under IR library, financial results presentation material. Please download the files if necessary. Today, 3 members are in attendance: Senior Executive Officer, CFO, Tomohiro Kodama; Corporate Officer, Head of Development Function, Akihiro Inoguchi; and Director, Head of Oncology Business Unit, Ken Keller. First, Kodama will explain the correction of FY 2025 consolidated financial results. And then Kodama and Inoguchi will explain the overview of FY 2026 first quarter results, et cetera. Then we will entertain your questions at the end. Please note that this meeting is being recorded. Thank you for your understanding. We are now starting the presentation. Kodama-san, please.
Tomohiro Kodama: [Interpreted] Kodama speaking. Thank you very much for joining Daiichi Sankyo's financial results presentation out of your very busy schedule today. I'm going to explain the correction of FY 2025 consolidated financial results and the announcement of FY 2026 first quarter consolidated financial results based on our presentation materials. Please turn to Page 3. Today, we are going to explain the correction of FY 2025 financial results, the announcement of FY 2026 first quarter financial results, FY 2026 forecast, business update and R&D update in that order. R&D update will be explained by Akihiro Inoguchi, Head of Development Function. We will entertain your questions at the end. Please turn to Page 4. We submitted the correction of part of the consolidated financial results for the period ending in March 2026 to the Tokyo Stock Exchange today on the 31st of July 2026. This slide shows the correction we made. First, let me explain the background leading to the correction. After announcing the Daiichi report for the period ending in March 2026 in the fourth week of July 2026, during the process to analyze FY 2026 first quarter financial results, we found unclear variance in the SG&A expense figures. We immediately investigated the cause and confirmed putting errors in accounts payable for suppliers. So we disclosed the correction of the relevant payables and related items. This is attributable to individual processing errors. We judge that this would not undermine the effectiveness of internal control for financial reporting as a whole. The statements of PL and financial status are here as was announced in the timely disclosure. Now we are checking the content for the -- to be corrected in the security reports we submitted on June 19, 2026. Once this is finalized, we will submit immediately. Please turn to Page 5. Page 5 shows our main KPIs under the 5-year business plan. You can find the results after the correction. We'd like to express our sincere apology for causing inconvenience and concern to shareholders and investors. We are discussing measures to prevent the recurrence, and we will continue to make efforts to strengthen our internal control. Next, I'd like to move on to explain the FY 2026 first quarter results. Please turn to Page 7. This is a summary of FY 2026 first quarter results and FY 2026 forecast update. In the first quarter, there was a significant increase in our revenue led by our mainstay products, Enhertu's and Datroway's product sales growth. So we have been able to make a very good start in FY 2026. On the other hand, operating profit decreased due to restructuring expenses related to EU Specialty Business Unit, et cetera. But excluding that impact, core operating profit increased. As for FY 2026 forecast, we are revising our revenue forecast upward to JPY 2.340 trillion due to the yen's depreciation and stronger-than-expected product sales of Enhertu in the United States. Due to the reversal of provision for losses related to cancellation of Odawara site investments, operating profit forecast is revised upward to JPY 320 billion. Please turn to Page 8. This is an overview of FY 2026 first quarter consolidated results. Revenue increased by JPY 100.1 billion or 21.1% year-on-year to reach JPY 574.7 billion. Cost of sales increased by JPY 38.5 billion from the previous year. SG&A expenses rose by JPY 45.9 billion, and R&D expenditure increased by JPY 9.5 billion year-on-year. We booked CMO compensation fee of JPY 1 billion as foreign exchange rate fluctuations. As a result, core operating profit increased by JPY 6.3 billion or 6.2% year-on-year to reach JPY 107.3 billion. Operating profit, including noncore income and expenses decreased by JPY 11.6 billion or 12% year-on-year to JPY 85.1 billion. Profit attributable to owners of the company decreased by JPY 16.9 billion year-on-year to reach JPY 68.6 billion. As for the actual currency rates, the yen depreciated by JPY 14.89 against the U.S. dollar and by JPY 21.57 against the euro year-on-year. Please turn to Page 9. From here, let me explain positive and negative factors for revenue compared to the previous year. Revenue increased by JPY 100.1 billion year-on-year. I will explain its breakdown by business unit. First, Japan business unit. Sales increased for anticancer agents, Enhertu and Datroway and pain treatment, Tarlige, but sales of direct oral anticoagulant Lixiana declined due to nearly 20% price cut in FY 2026 NHI drug price revision. So Japan business revenue decreased by JPY 700 million in total. Next, let me explain our overseas business units. Here, ForEx impact is excluded. In oncology business, sales of Enhertu and Datroway rose by JPY 35.8 billion and JPY 11.9 billion, respectively, due to their strong growth in the United States, in particular, so revenue increased by JPY 47.8 billion in total. As for American region, revenue declined by JPY 11 billion due to revenue decrease for iron deficiency anemia treatment, Venofer and Injectafer and generic injectables. Revenue for EU Specialty Business increased by JPY 2.2 billion as sales grew for hypercholesterolemia treatments, Nilemdo/Nustendi. In ASCA business responsible for Asia, South and Central American regions, revenue rose by JPY 4.7 billion due to the growth of Enhertu in the respective countries. As for upfront payment and regulatory sales milestone, et cetera, related to alliance with AstraZeneca and US Merck, we booked as revenue, regulatory milestone payments associated with the approval of Enhertu for breast cancer, neoadjuvant and adjuvant therapies in the United States and solid tumors in Europe and the approval of Datroway for triple-negative breast cancer in the United States. So revenue increased by JPY 15.2 billion. ForEx impact increased our revenue by JPY 41.9 billion in total. Slide 10 shows the factors behind the change in operating profit. As explained earlier, revenue increased JPY 100.1 billion, including the impact of foreign exchange. Next, let me explain cost of sales and expenses. Regarding cost of sales, other cost of sales increased due to higher costs associated with the increase in revenue and the recording of an inventory-related valuation loss. Adding the foreign exchange impact of the CMO compensation, cost of sales increased by a total of JPY 38.5 billion. SG&A expenses increased JPY 45.9 billion, mainly due to an increase in the profit share paid to AstraZeneca. R&D expenses increased JPY 9.5 billion due to the impact of yen depreciation and increase in R&D investment associated with the development progress of the 5DXd ADCs and other programs. Noncore expenses increased by a total of JPY 17.2 billion, reflecting an increase due to EU Specialty Business Unit, restructuring expenses and others offset by a decrease due to the reversal of the provision related to the cancellation of investment at Odawara Plant. The ForEx impact on expenses was an increase of JPY 12.7 billion in cost of sales JPY 10.9 billion in SG&A expenses and JPY 8.6 billion in R&D expenses for a total of JPY 32.2 billion, including the impact of ForEx. Operating profit decreased by JPY 11.6 billion. Regarding our efforts toward achieving operational excellence, which underpins the strategy of the sixth 5-year business plan, we are advancing company-wide identification of areas with room for improvement centered on the use of AI and optimization of procurement and outsourcing costs, and we will implement measures sequentially, starting with the highest priority areas. Next, I will explain the change in profit attributable to the owners of the company. As explained earlier, operating profit decreased JPY 11.6 billion. Financial income and expenses had a negative impact of JPY 2.5 billion. Income taxes increased JPY 2.8 billion due to a higher effective tax rate compared year-on-year. As a result, profit attributable to owners of the company decreased JPY 16.9 billion year-on-year to JPY 68.6 billion. Next, I will discuss the revision of the FY 2026 consolidated earnings forecast. Please turn to Slide 13. The foreign exchange rate assumptions from the second quarter onward are JPY 155 to the U.S. dollar and JPY 180 to the euro. The impact of the yen's depreciation since the forecast announced in May is estimated to be an increase of approximately JPY 40 billion in revenue and approximately JPY 2 billion in operating profit. Compared with the forecast announced in May, revenue reflects a revision to the Enhertu sales plan for the ASCA business unit, offset by the impact of yen depreciation, sales expansion led by Enhertu in the U.S. and expanded sales of Nilemdo/Nustendi in the EU Specialty Unit and is revised upward by JPY 60 billion from the May forecast to JPY 2.34 trillion. Cost of sales is expected to increase by JPY 20 billion, reflecting the upward revision to the revenue forecast, higher cost due to foreign exchange and the recording of an inventory-related valuation loss. SG&A expenses are expected to increase by JPY 40 billion due to the impact of ForEx and an increase in the profit share associated with higher Enhertu sales. R&D expenses, although affected by an increase due to foreign exchange are maintained at JPY 500 billion, the same as the May forecast, reflecting the timing shift of certain expenses and the refinement of medical affairs expenses. As a result, core operating profit is maintained at JPY 360 billion, the same as the May forecast. Operating profit is set at JPY 320 billion, reflecting unexpected full year decrease of JPY 5 billion in noncore expense, resulting from the recording in the first quarter of the reversal of the provision related to the cancellation of investment at the Odawara Plant as a reduction in noncore expenses. Profit before income tax is set at JPY 334 billion, reflecting the revision to operating profit. Profit attributable to owners of the parent is set at JPY 251 billion reflecting an anticipated revision to the deductible amount of R&D expenses for tax purposes. Next, I will discuss the business update in Slide 15. The slide shows the sales status of Enhertu. Global product sales in the fiscal quarter FY 2026 increased JPY 64 billion year-on-year to JPY 219.2 billion. In the U.S., we obtained 2 new indications simultaneously in May, neoadjuvant and adjuvant treatment of HER2-positive breast cancer. In terms of sales growth, in addition to maintaining the #1 new patient share in existing indications such as breast cancer, gastric cancer and lung cancer in major countries and regions. As we have to date, new patient share is steadily expanding in first-line treatment of HER2-positive breast cancer in the U.S. with more than 1 in 3 eligible patients now receiving treatment with Enhertu. In addition, since beginning promotion as the only anti-HER2 ADC treatment for multiple HER2-positive solid tumors, prescriptions have steadily expanded due to very high unmet need, and this has come to drive sales growth in the U.S. The solid tumor indication received approval in Japan this past March and is steadily gaining market penetration. It also received approval in Europe in June this year, where promotion has begun. For some of the cancer types, including among the multiple HER2-positive solid tumors, multiple Phase III trials are currently ongoing, and we expect these to contribute to future sales growth of Enhertu. Regarding the NCCN guidelines, Enhertu has been newly listed for neoadjuvant treatment of HER2-positive breast cancer. Next, I will discuss Datroway. Please turn to Slide 16. Global product sales in the fiscal quarter of FY '26 increased JPY 15.3 billion year-on-year to JPY 20.6 billion. Since launch, approximately 7,000 patients globally have been treated cumulatively and market penetration is progressing steadily. New indications include hormone receptor positive HER2-negative breast cancer in Brazil in March, first-line treatment for triple-negative breast cancer as the first anti-TROP2 ADC treatment for this indication in the U.S. and Brazil in May. And this past week, approval for EGFR-mutated NSCLC in Brazil, where promotion has begun. In addition, as announced in today's news press release, we have received approval for the first-line triple-negative breast cancer in Europe. Sales continue to expand steadily in the existing indications of hormone receptor positive, HER2-negative breast cancer and EGFR-mutated NSCLC. And in particular, Datroway maintains the #1 patient share in third line and later EGFR-mutated NSCLC, driving sales growth in the U.S. For triple-negative breast cancer, for which a promotion began in the U.S. in May, we have already confirmed an increase in new patient prescriptions. In this first quarter, Enhertu and Datroway together obtained 3 new indications, all of which are for breast cancer. So we are now able to offer treatment options across a broad range of treatment lines from early stage to metastatic disease. And in the metastatic setting, we can offer treatment options to more than 90% of patients, and we are confident that this has further strengthened our leadership in the breast cancer field. We will continue to pursue further market penetration in existing regions and expand into new launch countries regions while pursuing new indications in order to deliver Enhertu and Datroway to as many patients as possible who need them. This concludes the business update. I will now hand over to Inoguchi, Head of R&D Division for the R&D update.
Akihiro Inoguchi: [Interpreted] Inoguchi speaking, I am going to talk about R&D update. Please turn to Page 18. First, I will explain our research policy under the sixth 5-year business plan. We define breakthrough generating technology or BGT, as Daiichi Sankyo's proprietary innovative technology to deliver more innovative medicines to patients faster. DXd ADC is our first BGT. Under the fifth 5-year business plan, we positioned 5 DXd ADCs, Enhertu, Datroway, HER3-DXd, I-DXd and R-DXd as important assets and focused on their development. Including DS-3939 and DS-3790, we have 7 DXd-ADCs. Also during the sixth 5-year business plan period, these assets will continue to drive our growth. On the other hand, during the fifth 5-year business plan, out of the development candidates, which we call, Next Wave, we also identified what could be the core technologies in the future. Based on our science and technology in the coming 5 years, we will identify multiple technology platforms, which could become next BGTs, and we will nurture them into innovative drugs with which we can contribute to patients. We will use future financial results presentations and other occasions to share the progress. So please count on us. Next, I will give you an update on each product. From Page 19, I will use 2 pages to report the progress of Enhertu. In May this year, as an indication expansion to HER2-positive early breast cancer, Enhertu obtained 2 approvals in the neoadjuvant and adjuvant settings in the United States. In the neoadjuvant setting, based on DESTINY-Breast11 study data, 4 cycles of Enhertu followed by 4 cycles of THP, taxane, trastuzumab and pertuzumab can be administered to patients with HER2-positive Stage II or Stage III breast cancer. In China, the same indication was approved in March this year. In the adjuvant settings, based on Breast05 study data, 14 cycles of Enhertu can be administered to breast cancer patients with residual invasive disease following neoadjuvant chemotherapy, including anti-HER2 therapy. Based on these approvals in the United States, for HER2-positive breast cancer, we can offer Enhertu as a treatment option to cover treatment lines from early stage to metastatic stage. We are very pleased to be able to contribute to more patients with HER2-positive breast cancer. Page 20 shows regulatory updates for Enhertu in a tumor-agnostic indication. Based on the results of DESTINY-PanTumor02 and other studies, approval was granted in June this year for HER2-positive solid tumors in Europe. Accordingly, we obtained tumor-agnostic approval across the 3 major markets in Japan, U.S. and Europe. Also in China, based on the results of DESTINY-PanTumor03 as a bridging study, et cetera, the application is now under review. From Page 21, I will explain the progress of Datroway. According to TROPION-Breast02 study data, Datroway improved median PFS by 5.3 months and median OS by 5 months compared to chemotherapy and demonstrated the statistically significant clinically meaningful benefit. Based on the study results in May this year in the United States, Datroway was approved for patients with first-line metastatic or unresectable TNBC who are not candidate for PD-1/PD-L1 inhibitor therapy. As an update, as Kodama mentioned in the business update, the same indication was also approved in Europe as well. Regulatory submissions for the same indication are now under review in Japan and China. On Page 22, I will share new Phase III studies. TROPION-Urothelial04 is an adjuvant study for MIUC, muscle-invasive urothelial carcinoma post surgery to investigate Datroway plus rilvegostomig compared to standard of care. In the first-line urothelial carcinoma cohort of the preceding TROPION-PanTumor03 study, Datroway plus rilvegostomig delivered favorable results, an ORR of 68.2% and 12-month PFS rate of 73.5%. We will continue the study so that this combination therapy as a treatment option can contribute to address high unmet medical needs in urothelial carcinoma. Slide 23 introduces a new project entering Phase I trials. DS1025 is a novel ADC that targets CD25 positive regulatory T cells, activating antitumor immunity by eliminating regulatory T cells within the tumor. It applies DXd ADC technology to an anti-CD25 antibody and carries a cytotoxic payload optimized for immuno-oncology. In preclinical studies, we have confirmed a reduction in intratumoral regulatory T cells, activation of cytotoxic T cells and antitumor efficacy. We plan to begin a first-in-human trial in solid tumors in the first half of this fiscal year. Slide 24 shows the progress on our Next Wave products. MIMRIT, an MMR vaccine for the prevention of measles, mumps and rubella received approval in Japan this May. VANFLYTA received approval in China this past June for first-line treatment of FLT3-ITD mutated AML. Finally, the news flow going forward. Please turn to Slide 25. For Enhertu's DESTINY-Breast09 trial, we expect to receive regulatory decisions in Europe in the first half of this fiscal year. For I-DXd, we expect to receive a regulatory decision from the U.S. FDA on the IDeate-Lung01 trial in the second half of this fiscal year. Regarding the expected timing for obtaining key data in the near future, the expected timing for Enhertu's DESTINY-Lung04 trial and Datroway's TROPION-Lung15 and AVANZAR trials remains unchanged from before. On the other hand, the expected timing for TROPION-Lung07 data is now FY 2027. As for major planned conference presentations, at ESMO, we plan to present the first data from the melanoma cohort of the HERTHENA-PanTumor01 trial, an update on the IDeate-Lung01 trial, an update on the Phase II dose optimization part of the REJOICE-Ovarian01 study and data from the bevacizumab combination cohort of the dose escalation part of the REJOICE-Ovarian02 study. Slide 26 onwards is appendix, so please review it at your leisure time. That concludes my presentation. Thank you.
Operator: [Interpreted] From here on, we are moving on to a Q&A session. You can ask questions either in Japanese or English. [Operator Instructions] Mr. Yamaguchi from Citigroup Securities, please.
Hidemaru Yamaguchi: [Interpreted] Can you hear me?
Operator: [Interpreted] Yes, we can hear you.
Hidemaru Yamaguchi: [Interpreted] Yamaguchi from Citigroup Securities. My first question goes to Kodama-san. Regarding the change of your results forecast, sales revenue are increasing and inventory assets related processing was also included. Could you elaborate on this point? The details on the value or the amount? This is just for Q1. So could you explain this portion, please?
Tomohiro Kodama: [Interpreted] Thank you for your question. Regarding the revision of our forecast and inventory assets and also the valuation loss included in the COGS. Thank you for your question. As you know, in the Q1, this is being booked. These are the main items. Regarding the multiple products, we had some errors in the manufacturing and some which did not meet specifications, we had valuation losses for these products and also the losses for disposal. This is the upper side of the JPY 1 billion level as a size.
Hidemaru Yamaguchi: [Interpreted] Understood. My second question is to Keller-san. I-DXd, I think the October 10 was a PDUFA. And of course, until then, you don't know whether it's approved. But if it's approved, I think we'll be starting for the first time, co-promotion with Merck. Could you share with us -- give us some comments, what is the preparation status now?
Joseph Kenneth Keller: Thank you for your question. So correct, the PDUFA date is in October. The first indication will be for small cell lung cancer. This is a group of patients with a very high unmet need. The work that we're doing with Merck today is to work and educate the key opinion leaders, those physicians who really set the guidelines for how to treat small cell lung cancer. And based on what we're hearing, the -- those physicians are very excited to have a new drug in their hands. We believe they will embrace this drug quickly. And so we hope to bring this drug to these physicians and the patients as soon as possible. But right now, we're working to really educate the key opinion leaders about the mechanism of action, the clinical trial and how best to use this drug. Thank you.
Operator: [Interpreted] Next, UBS Securities, Mr. Sakai, please.
Fumiyoshi Sakai: [Interpreted] Sakai from UBS. My first question goes to Kodama-san. The correction of the results in the past, why in May, you didn't identify this issue in the analysis. But why in the fourth week of July? So I have doubt about the effectiveness of internal control. Why you process this as an individual event. And there is a decrease of expenses by JPY 29 billion. In the current quarter, and you increased the SG&A by JPY 15 billion to JPY 535 billion. So usually, when you develop the budget, you compare to the previous year. Why there is an increase by JPY 200 billion in this line? Is this really the operational excellence? I'd like to ask you.
Tomohiro Kodama: [Interpreted] Sakai-san, thank you for your question. Regarding the correction of the FY 2025 financial results, the process to identify this problem is as follows. Last week, we were analyzing the results for the first quarter of FY 2026, and we are analyzing the increase or decrease compared to the previous fiscal year. There was some decrease in expenses, which we couldn't fully explain. So we investigated that figure to identify this problem. Why not in the fourth quarter? Why we are not able to identify this issue in the fourth quarter. We also feel that way. So this is a lesson we learned. Based on the size of our expenses and the mistake this time and also the amount for the item was quite large with the error. So unfortunately, in our analysis, we couldn't discover this problem. So there were various figures being included or excluded, and we couldn't identify this in reality.
Fumiyoshi Sakai: And one more question is to compare to the previous fiscal year, the increase in the current fiscal year. So it seems that there's an increase by JPY 100 billion because of JPY 535 billion.
Tomohiro Kodama: [Interpreted] After revision, JPY 434.2 billion after revision, JPY 432.2 billion, which line is this figure in the supplementary material, quarterly data? Let me check the figure. This is on Page 50 in the supplementary material, and this is the quarterly data. You're talking about Page 15, right? Allow me to check the figures, and we will try to explain to you. Sorry for that.
Fumiyoshi Sakai: [Interpreted] My second question goes to Inoguchi-san, TL07 study top line results is postponed to be available in FY 2027. Previously, it was available -- supposed to be available in the second half of FY '26. Could you give us more details what's going on?
Akihiro Inoguchi: [Interpreted] Thank you for your question. Regarding the TL07 top line available timing, I'd like to explain the background reasons. Regarding this study, in the primary endpoint, biomarkers are going to be used. And as we incorporate this biomarker, we revisited the schedule. And then we found that the top line results will be available in the next fiscal year. That is the process. Thank you very much.
Operator: [Interpreted] Next, Goldman Sachs Securities, Mr. Ueda, please.
Akinori Ueda: [Interpreted] Ueda from Goldman Sachs Securities. My first question, regarding the COGS, ADC forecast and outlook is being revised. So I have a question. At Odawara site, you canceled investments, and there is a reversal of the cost. And what about the CMO compensation fees? In the first quarter, it was not emerging so much. So what is going to be a schedule for this? And what about the possibility of potential fluctuations about the reversal of provision for losses related to cancellation of Odawara site investments.
Tomohiro Kodama: [Interpreted] So regarding the COGS, the reversal of provision for losses related to cancellation of Odawara site investment, you'd like to know the reason why and also the future outlook of our CMO compensation fees. First, the reversal of provision of losses related to cancellation of Odawara site investments at the end of last fiscal year, in our outlook back then, we booked a provision, but we had discussions with suppliers. And also based on that, we booked the reversal of provision of losses related to Odawara site investment cancellation. We refined the figures after the discussions. That's the background. Next, CMO compensation fee provision. JPY 1 billion is being booked. We booked in the previous fiscal year, the provision because of the ForEx fluctuation, that's now factored in. And JPY 80 billion is the guidance for FY 2026. This year -- later this year, from the end of this year to the beginning of next year, in FY 2028, manufacturing orders will be coming firm. So the amount is going to be finalized in that process. So regarding the booking, it's going to be in the third quarter or beyond according to our current outlook. Regarding the amount, JPY 80 billion is the guidance, and there is no element to change this forecast.
Akinori Ueda: [Interpreted] Second question also goes to, I think, Kodama-san. Regarding the SG&A expenses outlook. In your plan, other than profit share, regarding the other SG&A expenses, there is a strategic investment expenditures mentioned. And as of the first quarter, how much is this? And in the full year basis, what will be the size of the amount? And in the next year and onward, I don't think that it will be continuing. Therefore, do you consider -- or is it okay for us to consider this as just onetime expense?
Tomohiro Kodama: [Interpreted] Thank you for your question. SG&A expenses in the consolidated earnings forecast, and that is regarding the strategic and human resource-related investment. Regarding the contents, the question was asked. Regarding DX and IT within the operational excellence, we state the effective use of AI and also within the recent environment of talent, the human capital we have been investing more into our employees, and we are also investing in terms of education toward the reskilling of our people personnel to be engaged in highly advanced work. And in the future, with AI investment and operational excellences, we would like to generate the benefit. But in this fiscal year, we started to make the investments in advance. And I believe that this kind of investment will be necessary on a continued basis. But at the same time, we need to enhance efficiency and saving the cost. Therefore, in the future, we would like to see an offset. So currently, it is conducted as advanced investment. And we don't plan to expand this in the scale from the next year onward, but this will not be ending in this fiscal year only. And our target is to produce the effect from this next fiscal year and onward.
Operator: [Interpreted] Next, JPMorgan Securities, Mr. Wakao, please.
Seiji Wakao: [Interpreted] Wakao from JPMorgan speaking. My first question, on Page 13, I have a question to Kodama-san. As Yamagi-san said, the valuation loss for inventory assets, which products are tied to this? And what about the amount? And also the corporate tax revision of the tax deduction for R&D expenses. The profit was -- forecast was right upward up to the operating profit. But because of this, there is a downward revision. So I'd like to know the background.
Tomohiro Kodama: [Interpreted] Thank you for your question. First, about the valuation loss for inventory assets, you'd like to know the breakdown by product. And number two is corporate tax. The tax rate is worsening. And why negative? And you'd like to know the reason why. First, the inventory assets. Regarding the products, it's not being disclosed. We have our own manufacturing, but also we are using CMO to manufacture on our own. Some noncompliance to quality occurred. That's why we are booking valuation losses. It's the upper side of the 2 digit in yen. Second question is about corporate tax. Regarding the R&D expense deduction, there are different things under different tax systems in different countries. We have this mainly in Japan and the United States. In the group, Daiichi Sankyo Japan, DSI in our group, the corporate tax, the size of the profit for individual companies would determine the slot to be able to be eligible for R&D deduction. Comparing this fiscal year and the previous fiscal year, the profit in Japan and if you look at the size of profit in Japan, because of intercompany transactions, it's smaller slightly. Because of this, the profit mix would result in the less deductions. On this point, when we explained we couldn't incorporate this fully in our full year forecast and where we will have profits during the fiscal year, and there is a slight difference compared to the initial forecast. That's why this is occurring. Sorry, it may be difficult to understand.
Seiji Wakao: [Interpreted] I have a follow-up question. Talking about the inventory assets, I understand that you do not identify each specific item, but is it ADC-related ones? Because last year, I think there was also a valuation loss recorded regarding ADC-related assets. Therefore, I am concerned whether or not there is any structural-related issues going on.
Tomohiro Kodama: [Interpreted] Well, ADC is included, although it's not everything. But partly, it includes the items relating to ADC.
Seiji Wakao: [Interpreted] My second question is to Inoguchi-san, AVANZAR study. Within this year, I think we will see some results. And originally, my understanding is that the PFS final analysis will be planned and the intermediate the analysis will be conducted. And then after that, waiting for the final analysis results, you, together with AstraZeneca, will try to make a filing for approval. And if the OS at the final analysis timing, that endpoint is met, that will be fine. But probably it's not matured yet at that timing. Therefore, with PFS data only, do you think that -- are you confident that you'll be able to make filing for approval given the current environmental changes? I have a slight question whether or not it is possible to make filing for approval with only PFS data.
Akihiro Inoguchi: [Interpreted] Thank you for your question. Regarding AVANZAR study data, regarding the data assessment, I think the question was made. As you know, PFS is one of the endpoints, and we are planning to get the study results. That's unchanged. And depending upon the OS data readout, I think we will make a comprehensive decision. But without having OS data, wouldn't it be working? I think we cannot make any comments on that particular point at this point in time. Basically, we look at PFS and OS data from a comprehensive viewpoint and consulting with the authorities, we will discuss whether or not we will be able to move on to the filing for approval.
Operator: [Interpreted] Next, Morgan Stanley, MUFG Securities. Mr. Muraoka, please.
Shinichiro Muraoka: [Interpreted] Muraoka from Morgan Stanley speaking. First, I have a question to Kodama-san. For revenues and sales per product, you revised the sales forecast for Enhertu. In ASCA region, there is a decrease by JPY 13 billion for Enhertu in ASCA. Given the ForEx rate, there is a substantial decrease in ASCA region as a whole, revenue declined. What's happening there? I couldn't understand fully. The first quarter results are not too bad. What is going to happen into the future?
Tomohiro Kodama: [Interpreted] Thank you for your question. Enhertu sales forecast in the ASCA region is now revised downward, and you would like to know more about it. In ASCA region, China, Brazil, are the main countries in terms of sales. In China, competition is intensifying. Local ADCs just sold in China, and we have to compete, and there is such a competition and the impact was larger than we anticipated. As for Brazil, there are various factors. A particularly big factor behind is as follows: there is a treatment network and hospital network where Enhertu is prescribed a lot. That hospital network itself had a worsening financial situation, it seems and treatment is not making a lot of progress. Purchasing the products for treatment are now becoming stagnant, as I'm hearing. And how much this impact is going to be prolonged, it's difficult to predict. But looking at the current situation, we are factoring in this impact on a full year basis. So these are the 2 major reasons.
Shinichiro Muraoka: [Interpreted] So can I assume that you were conservative in factoring this into your forecast? Or is this really a very difficult issue?
Tomohiro Kodama: [Interpreted] Well, it's difficult to say. Regarding Brazil, if the environment is going to change, it's going to increase. So in that sense, I hope we can be conservative. But honestly speaking, we cannot really know. In China, this may be a structural factor.
Shinichiro Muraoka: [Interpreted] Another question is to Inoguchi-san. R-DXd, this time at ESMO, REJOICE-Ovarian01 additional data will be presented. And with those data, then are you going to enter into the preparation of filing for approval? Because for R-DXd, we haven't heard much about your preparation for filing. So what's necessary for you to start preparation for filing?
Akihiro Inoguchi: [Interpreted] Thank you for your question. For R-DXd data, Phase II dose optimization part will be presented at ESMO. As you know, this Phase II study will be providing us the data that will be a key data for us to proceed our development moving forward. At the same time, regarding our filing strategy, that's under review now. Therefore, at the time that we'll be able to share, we would like to talk more about the details of our strategy.
Shinichiro Muraoka: [Interpreted] So is it better for us to wait until we will be able to hear from you the filing strategy?
Akihiro Inoguchi: [Interpreted] At this point in time, we are still reviewing, including the filing strategy.
Operator: [Interpreted] Next, Bernstein Securities, Ms. Sogi, please.
Miki Sogi: [Interpreted] First, I have a question to Kodama-san. Guidance update, SG&A expenses strategic investments are one of the factors for the rising costs. So cost for sales are increasing? Or is this because of the ForEx impact or you have to do more? And you booked a restructuring cost in Europe. This means the headcount is reduced in next fiscal year and beyond, there would be a good impact on your costs. This positive impact will emerge when? And what is going to be the size and the level on an annual basis?
Tomohiro Kodama: [Interpreted] Thank you for your question. The first question is other SG&A costs and the reason behind for the increase may include ForEx impact according to your view. And one more point is the restructuring in Europe. What about the impact on next fiscal year and beyond? And when we can see its effect? Regarding the SG&A expenses and the ForEx impact, thank you for your question. I couldn't explain that point earlier. There is the ForEx impact fully reflected here. There is an increase in reality. So both are the factors behind. Regarding your second point, restructuring in Europe and its impact. It's going to -- we will be beginning to see its effect later in the fiscal year. As for the size of the impact in value, we don't have anything clear at hand right now. So once it's clear, we will share with you. It's going to be fully seen next fiscal year and beyond. And cardiovascular business in Europe is going to shrink. And organization is being shrunken accordingly. Your understanding is correct. And we want to take measures earlier under these circumstances. That's why.
Miki Sogi: Another question is a question to Inoguchi-san, 07, 08 or TL07, 08. First about 07, it is a 3-arm study and Datroway KEYTRUDA plus platinum or doublet, Datroway plus KEYTRUDA. These are included as experimental arms. Therefore, regardless of the first-line PD-L status, this is going to be the largest indication, I think. And triplet and doublet, both regimens may be approved as a result of this TL07. Is this understanding correct?
Akihiro Inoguchi: [Interpreted] Thank you for your question. Regarding TL07, as you said, there are 2 arms, doublet and triplet. And it depends on the results. But if both showing good results, positive results, then both will be available for treatment in our view.
Miki Sogi: And regarding 08?
Akihiro Inoguchi: Regarding 08 study, TROP2-QCS patient stratification analysis is not a part of primary endpoint, but I think it is one of the key secondary endpoints. And what I think a bit strange is that you have once explained about it as to the reason of not including it in the primary endpoint because KEYTRUDA is quite effective in PD-L1 high population. But the efficacy of KEYTRUDA, regardless of that, as on top, I think that way is added. Therefore, evaluating the efficacy, I think whether or not that KEYTRUDA is effective at the baseline, I don't think it's much impacting. And if it's effective, then there will be even more difficult to gain any upside.
Miki Sogi: [Interpreted] But once again, allow me to ask this question. In this 08, could you explain once more what is the reason that this is positioned as part of a key secondary endpoint?
Akihiro Inoguchi: [Interpreted] Thank you for your question. Regarding the inclusion of biomarkers, in TL08 study, that's included as a secondary endpoint. So you are right. There could be various different views on this point. But in high PD-L1 expressing subpopulation, pembro's treatment is SOC. And as a study design, we have pembrolizumab arm and pembro plus Datroway combination. Those 2 are compared. So this is add-on study. From that viewpoint, as a primary endpoint in ITT, whether we'll be able to expect a positive result, that is one of the background factor.
Miki Sogi: [Interpreted] I see. I am not fully convinced, but understood it.
Operator: [Interpreted] Next, Daiwa Securities, Mr. Hashiguchi, please.
Kazuaki Hashiguchi: [Interpreted] Hashiguchi speaking. I have a question to Inoguchi-san. DS1025 originality is the topic of my question. CD25 is a target. Regulatory T cell will be depleted. Several companies have been developing such a drug. Some came up with ADCs to take the challenge, ADCC activity can be reinforced to give it a try by some other companies. And your drug discovery concept, where is it differentiated? And as for payload, DXd ADC technology is being applied, but it's optimized for immuno-oncology. What's common? -- vis-a-vis the conventional DXd-ADC and what's different and other compounds under development using a payload like this?
Akihiro Inoguchi: [Interpreted] Your question is about DS1025. First, regarding this compound, conventional DXd ADC is not being used. As I explained, our DXd ADC technology is the platform and the foundation, but this is an ADC optimized by targeting the immune cells. Regarding the detailed information about payloads and others, we are sorry to say that we are refraining from sharing -- as for CD25 Treg -- it's an important -- one of the important markers for Treg. So DS1025 would deplete immunosuppressive Treg cells in the tumor microenvironment. That's how this compound is being created with that objective. That's all.
Kazuaki Hashiguchi: [Interpreted] So based on that concept, other companies' products might have been developed. So how -- what kind of differentiation you're expecting from 1025?
Akihiro Inoguchi: [Interpreted] I cannot elaborate on the detail in specifics, but we have built the DXd ADC technologies. We have experiences and the insights, that's a differentiating factor compared to other companies.
Operator: [Interpreted] There are some other people raising their hands, but we have passed the scheduled closing time. Therefore, with this, we'd like to conclude the earnings call. If you have more questions, please contact our IR unit. Thank you for your participation today. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
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