Thank you very much for joining FY 2025 first quarter financial results Announcement Meeting organized by Astellas Pharma Inc. Out of a very busy schedule today, I'm serving as a facilitator. Today I'm Chief Communications and IR Officer Ikeda. Thank you for your time. After our presentation we will move on to the Q& A session. We will present based on the presentation material posted on the website. Under IR meetings including Q&A session, we have simultaneous translation between Japanese and English. We cannot guarantee the accuracy of simultaneous translation. Thank you for understanding. You can choose the language from the Zoom webinar screen menu. If you select the original sound, you can listen to the original sound without going through the simultaneous translation. This is a disclaimer today. This material oral presentation by representatives for the company and answers and statements by representatives for the Company in the Q& A session includes forward looking statements based on assumptions and beliefs in light of the information currently available to management and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations, promote approved uses in any fashion, nor provide medical advice of any kind. Today's Participants CFO Atsushi Kitamura, CRDO Tadaaki Taniguchi, Chief Commercial and Medical Affairs Officer Claus Zieler, we have three members from our company so we'd like to go into a presentation. Kitamura-san, please. Hello everyone. I'm Atsushi Kitamura from Astellas Pharma Inc. Thank you very much for joining our FY2 025 first quarter financial results announcement meeting out of a very busy schedule today. This is a cautionary statement regarding forward looking information as this was explained by Ikeda earlier. I'm not going to read this page. On page three I will give you highlights of FY 2025 first quarter financial results. FY 2025 first quarter made an exceptional progress outperforming expectations off to a good start in the first quarter, revenue increased substantially year- on- year with underlying growth of 12% excluding forex impact. Strategic brands significantly drove overall revenue growth with underlying growth of 57% excluding foreign exchange impact. As for SG&A expenses, thanks to the steady progress of SMT, our company-wide cost optimization initiative, the SG&A ratio improved by 4.2 percentage points year- on- year. As a result, core operating profit increased substantially year- on- year with underlying growth rate of 69% excluding foreign exchange forex impact. Core operating profit margin rose by 9.5 percentage points year- on- year to reach 28.1%. As for pipeline progress, ASP3082, a flagship program in primary focus targeted protein degradation, achieved PoC also in NSCLC following PoC in pancreatic ductal adenocarcinoma, PDAC. Furthermore, in order to enhance leading position including 18.2, we concluded an exclusive license agreement with Evopoint. Page four is the agenda for today. From the next page I will explain these topics. On page five I will give you an overview of FY2025 first quarter financial results. Revenue reached JPY 505.8 billion, up by 6.9% year- on- year. Core operating profit rose to JPY 142.3 billion, up by 61.1% year- on- year. The forex impact is shown on the right-hand side of the table. Forex had a negative impact on both revenue and core operating profit. Underlying growth rate excluding this impact was 12% for revenue and 69% for core operating profit, demonstrating stronger growth. The bottom half of this page shows our full basis results. In the right bottom of the table we included other expenses booked in the first quarter in response to the termination of certain Xyphos-related programs. We reviewed asset value and booked impairment loss of JPY 11.5 billion accordingly. In the end, operating profit was JPY 94.6 billion, up by 86.8% year- on- year. Profit increased to JPY 68.4 billion, up by 82% year- on- year. On page six I will explain FY2025 first quarter results of our main products. Sales of strategic brands driving our growth, namely PADCEV, IZERVAY, VEOZAH, VYLOY, and XOSPATA, exceeded JPY 110 billion in just three months, substantially up by JPY 36.7 billion or 49% year- on- year. Underlying growth rate excluding forex impact was 57%, showing a strong growth due to high profitability of these brands. They not just contributed to revenues but also made a great contribution to profit growth on a consolidated basis. As a whole, we are expecting this positive growth momentum to continue throughout FY2025. Let me also explain individual strategic brands. I will explain the details of PADCEV, IZERVAY, and VYLOY on later slides. Global sales of PADCEV increased to JPY 55.5 billion, up by JPY 17.1 billion or 45% year- on- year. Robust growth momentum was achieved across all regions with overall progress in line with expectations. As for IZERVAY, sales were JPY 15.9 billion, up by JPY 3.2 billion or 25% yea- on- year, achieving record high quarterly sales. IZERVAY has returned to a growth trajectory after temporary growth slowdown in the second half of last fiscal year. Global sales of VEOZAH expanded in line with expectations to reach JPY 9.6 billion, up by JPY 3 billion or 46% year- on -year. We are expecting steady growth moving forward as well. With regards to VYLOY, global sales reached JPY 14 billion. It has made an exceptional start, exceeding expectations, raising prospects for potential upside. Regarding XOSPATA, global sales reached JPY 17 billion. Underlying growth excluding forex i mpact was 3%, making steady progress overall. As for XTANDI, global sales increased to JPY 233 billion, up by JPY 8.7 billion or 4% year- on- year with solid performance across all regions. With regards to IZERVAY, we organized an online meeting for investors and analysts on 10th of July Japan time, but I'd like to explain IZERVAY's first quarter progress in the United States once again. On page seven, sales of IZERVAY rose to $110 million, up by $29 million or 35% year- on- year. After temporary growth slowdown seen in the second half of the previous fiscal year, first quarter sales increased by 22% from the previous quarter with a return to growth trajectory. IZERVAY has continued to establish its position as the number one chosen treatment for new patient starts with GA, geographic atrophy. New patient start share is estimated at about 55% as the last six months average. This figure is calculated based on the insurance claims data which represents patients actually administered with IZERVAY, so we believe this reflects the real situation. IZERVAY is now available in over 2,000 retina accounts. Over 70,000 patients have been treated since launch. As we explained during the online meeting, in order to unlock GA market potential, we are promoting three drivers: educate retina specialists, educate patients, and educate upstream optometrists and ophthalmologists. Through these initiatives we will further enhance GA diagnosis and treatment rates. We have been able to confirm that the solid growth trend is continuing also in July. We are expecting continued high growth in each quarter ahead. Also, a treated target patient population is expected to rise from the current 15% to over 35% by FY2029. On page 8 I will explain business update for PADCEV and VYLOY. First, about first line metastatic urothelial cancer, MUC is driving growth across all regions and robust growth momentum has continued since last fiscal year, particularly in ex-U.S. region. First line MUC uptake is progressing well. Sales rose substantially by 113% year- on- year. Also in the United States, underlying demand increased solidly by 12% year- on- year and by 7% quarter- on- quarter. The NCCN guidelines, which many physicians are referring to when they determine their prescription, were updated in March this year to position the combination therapy of PADCEV and pembrolizumab as the only category 1 therapy in MUC as first line therapy with the highest recommendation level, which is also supporting the solid growth. First quarter sales include one time inventory channel load benefit in the United States and China, both of which are in line with our plan. We are maintaining strong underlying growth even excluding this impact. Overall we are making progress as expected. Next, about VYLOY. Overall we have made an exceptional start exceeding our expectations, raising prospects for outperforming the initial forecast thanks to our activities to proactively raise awareness and disseminate Claudin 18 testing. The testing rates are above benchmark for other biomarker tests. In addition, through appropriate information provision about potential AE management, discontinuation rate is also lower than our assumptions. These factors are contributing to the overall positive progress. We are also continuing to expand footprint steadily with launches in 25 countries by now, particularly among them. VYLOY was launched in June in China with a big gastric cancer market. China launch was off to a strong uptake reflecting high unmet medical needs there. Aiming to ensure stable sufficient supply, we made strategic inventory build in the first quarter. VYLOY is still in its initial stage after launch, but its progress to date is substantially exceeding our assumptions. We have high expectations for its further growth potential in the future. On page nine I will explain cost items. Overall progress in cost as a whole was on track. Cost optimization through SMT has made steady progress. We realized cost optimization of about JPY 6 billion in total for SG&A expenses and R&D expenditure combined, excluding U.S. XTANDI co- promotion fees. SG&A expenses decreased by 7.7% year- on- year excluding foreign exchange impact. SG&A costs fell by 2.6% from the previous year. SG&A ratio was 26.5%, improving by 4.2 percentage points year- on- year. As SMT progress, we realized cost optimization of about JPY 3 billion through continuous global organizational restructuring, reduction of mature products related expenses, and streamlining IT infrastructure, et cetera. In addition to investments to maximize the potential of strategic brands, we will continue to make investments needed for SMT execution in order to realize further cost optimization. R&D expenditure decreased by 17.4% year- on- year excluding forex impact. It was down by 13.2%. As the main factor behind, we made progress in outsourcing cost reduction through insourcing development capabilities including clinical trials, et cetera, under SMT which led to cost optimization of about JPY 3 billion. Furthermore, due to the completion of large clinical studies, clinical development costs for strategic brands decreased by about JPY 3 billion. In addition, one-time co-development cost payment booked in the first quarter of FY 2024 was another factor for cost decrease year- on- year. In the second quarter onwards, we will expand investments aligned with further expected primary focus PoC achievements and enhance our in-house capabilities. We are expecting cost increase. From here I will explain our pipeline progress. On page 11, I will explain the progress of strategic plan's key events expected in FY 2025. Updates since the last financial results announcement are shown in blue. Regarding IZERVAY, we had Phase II study top-line results, data readout in Stargardt disease where primary endpoint was not met. We will analyze the data in detail and determine a future direction. As for PADCEV, we comprehensively reviewed the data obtained so far from P hase II EV-202 study in head and neck cancer and other solid tumors except for urothelial cancer, Phase I EV-104 study in NMIBC, non-muscle invasive bladder cancer. As a result, we decided to terminate our development for additional indications. Please note that the current peak sales forecast for IZERVAY and PADCEV do not include contributions from these indications. Therefore, we would like to emphasize that the results of this study are not expected to have an impact on the mid- to long- term sales outlook for other products as future events. IZERVAY is awaiting regulatory decisions on its JNDA expecting the third quarter of 2023. PADCEV is expected to have a readout of the interim analysis for both the Phase 3 EV-303 and EV-304 trials targeting MRBC in the second to fourth quarters. VYLOY is expected to have a readout of the final analysis from the P hase II GLEAM trial for pancreatic ductal adenocarcinoma or PDAC in the second quarter or notify you of any future updates when necessary. Other updates include the initiation of the Phase III LUCERNA trial, evaluating the LUCERNA study rather evaluating the efficacy and safety of VYLOY in combination with pembrolizumab and chemotherapy with the first subject dose in June. Page 12 provides an update on progress in the focus area approach for each primary focus. Progress made since the previous financial results announcement is highlighted in blue. ASP3082, inner targeted protein degradation, has achieved proof of concept in non-small cell lung cancer. This marks the second PoC treatment following the PDAC. The next slide will provide an overview of the overall progress of the primary focus. As for ASP2138 in a cancer immunotherapy Phase I trials, water PoC judgment in FY2025 is ongoing with initial clinical data expected to be presented at ESMO in October. ASP7317 for blindness and regional duration has published initial clinical data in May. Further details will be provided later. The current status of other programs is summarized in slide 28 of the appendix. Page 13 provides an overview of progress in primary focus of targeted protein degradation. The flagship program ASP3082 has successfully achieved its second PoC based on data from a Phase I trial in non-small cell lung cancer, second line and after, in conjunction with PDAC. Discussions are ongoing toward early registration studies. The timeline for PoC judgment for colorectal cancer remains unchanged with the second half of the FY2025 targeting. We aim to present clinical trial data by the second half of the FY2025. Following the PoC achievement of ASP3082, we are actively advancing research and development of subsequent programs. ASP5834, the third line from the top, was developed as a pan-KRAS degrader targeting various KRAS variants. In July we obtained IND approval enabling us to begin trials aiming the first patient dose in the second quarter. We will provide further updates as they become available including other programs. Page 14 describes the progress of ASP7317. ASP7317 is being developed as a replacement therapy for retinal pigment epithelial cells targeting the same indication as IZERVAY, GA secondary to AMD. The estimated number of GA patients worldwide is reported to be about 5 million. Currently approved drugs are limited to complement inhibitors and slowing disease progression of GA has been reported. ASP7317 is a direct replacement of retinal pigment epithelial cells to damaged areas from outside of the body, potentially maintaining or restoring visual function. Currently, a Phase Ib clinical trial for patients with GA is underway and the initial data from this trial was presented at the Congress in May regarding safety. To date, no intraocular inflammation has been reported in patients dosed with ASP7317 and no signs of cell rejection or graft failure have been observed. Regarding efficacy, the graph on the right shows the change in best corrected visual acuity or BCVA over time. Patients with severe visual impairment following single dose of ASP7317 at an intermediate dose. Red indicates the study eye, the eye that received the transplantation, and blue indicates the fellow eye, the other eye that did not receive the drug. During the 26-week observation period, the study eye showed a trend toward improved BCVA compared to the fellow eye. Although the current data is limited to only three cases, we are proceeding with the planned enrollment of additional cases and remain on track to judge a PoC in the second half of FY2025. Page 15 is explaining the exclusive license agreement with Evopoint, which we announced in a press release in May. Under this agreement, Astellas has obtained an exclusive license for the development and commercialization of XNW27011 worldwide, excluding mainland China, Hong Kong, Macau, and Taiwan. Note that Astellas has assigned the development compound number ASP546C to this asset and this number will be used in future descriptions. The upfront payment under this agreement is $130 million and the development milestones to be paid in the near term may be up to $70 million. Depending on the progress of the program, there may be additional milestone payments or royalty. ASP546C is an antibody-drug conjugate or ADC targeting Claudin 18.2. The payload is a proprietary topoisomerase 1 inhibitor with an average drug- to- antibody ratio of eight. The linker that connects antibodies and drugs is MediLink proprietary technology and is designed to be specifically cleaved within tumor tissue. The FDA has granted fast-track designation for gastric cancer and a Phase III trial has recently commenced in China under the leadership of Evopoint. Astellas is currently planning to initiate a global Phase Ib/II clinical trial. The figure on the right shows preliminary efficacy data from a Phase I/II trial currently underway in China in patients with gastric adenocarcinoma. In this study, cases where 5% or more of tumor cells stained by immunohistochemistry were classified as Claudin 18.2 positive compared to the reference value of 75% for VYLOY. Patients with lower expression levels are also included for this study. As shown in the table, doses exceeding 3 mg per kg, response rates exceeding 60%, and disease control rates approaching 90% were observed as shown in the figure. Tumor regression was observed in most patients. The common treatment-related adverse events were hematologic and gastrointestinal disorders. Astellas has established a leading position in Claudin 18.2 targeted therapy with VYLOY and ASP2138. Through this collaboration, we have acquired a promising asset that further enhances this position. Going forward, we will validate the efficacy of ASP546C in global clinical trials. Page 16 will explain the characteristics of each asset targeting Claudin 18.2 including ASP546C, which was explained earlier. VYLOY is a monoclonal antibody that binds to Claudin 18.2 on the surface of cancer cells, exerting an anti-tumor effect by activating immune cells that attack cancer. Clinical trials have demonstrated prolonged survival when used in combination with chemotherapy for VYLOY as a first-in-class drug. Activities promoting awareness of Claudin 18 testing have been executed and it is aimed to become the standard of care for Claudin 18.2 positive gastric cancer. However, treatment is currently limited to patients with high expression, accounting for approximately 40% of gastric cancer patients. ASP2138 is a bispecific antibody that binds to Claudin 18.2 and CD3 on the surface of T- cells and like VYLOY, its antitumor effects depend on immune cells. By binding to CD3, it is expected to enhance the immune response by bringing T- cells and Claudin 18.2 expressing cancer cells into close proximity. Based on this MOA, if high efficacy is demonstrated in future clinical trials, it may be possible to expand the target population to include all Claudin 18.2 positive patients including those with low expression. Additionally, subcutaneous administration is currently being evaluated in clinical trials and if its usefulness is confirmed, it could provide more convenience for patients and healthcare institutions compared to IV. ASP546C is an ADC that excels in antitumor effects through the direct action of the payload it carries. As shown in the previous slide, preliminary clinical data indicates a promising antitumor activity as monotherapy. If further clinical trials are conducted globally and favorable data are obtained, we anticipate that a chemo-free arrangement may become possible. Furthermore, preliminary clinical data suggests that Claudin 18.2 positive patients, including those with low expression, may be eligible for this treatment. We also believe there is potential to expand the indication to other tumor types beyond gastric and pancreatic ductal adenocarcinoma as a front runner in Claudin 18.2 targeted therapy. We aim to maximize the value of VYLOY and through advancing the development of ASP2138 and ASP546C, we aim to provide multiple treatment options for a broader patient population. Page 17 summary of today's presentation: the first quarter of fiscal 2025 showed exceptional progress outperforming our expectations. We expect the positive momentum to continue throughout FY2025. We expect our key strategic products to have continued strong momentum to drive overall revenue and profit growth. For the focus area approach, we will advance further PoC judgment and flagship programs. We will accelerate research and development with a primary focus, including follow-up programs in alignment with PoC achievement. As for SMT, we will continue to pursue further cost optimization to generate growth investment and improve profit margin. Through these initiatives, we aim to achieve further profit growth throughout FY2025 and enhance the value of our pipeline, serving as a foundation for sustainable growth. While we have now revised our full year forecasting designings report, we plan to review our full year forecasting the second quarter earnings report taking into account the strong performance through the first quarter and the progress for the future. That's all from me. Thank you very much for your attention. That's all as a presentation today, we now would like to entertain questions from the audience. If you have a question, please press the raise hand button you can find at the bottom of the Zoom screen. If you're joining from your smartphone, if you tap details, raise hand function would be shown. Please press that. I'm going to name you one by one. If you're named, please unmute yourself on your screen, mention your name and your affiliation, and then ask your questions. Anyone with a question, thank you for waiting. First, Mr. Yamaguchi from Citigroup Securities, please. Mr. Yamaguchi from Citigroup Securities. Can you hear me now? We can hear you. Sorry. I'm Yamaguchi from Citigroup Securities. I have a few questions. Mr. Kitamura, you had a summary at the beginning and at the end. Q1 progressed very well. As for the costs, you said the cost was in line with the expectation. As for revenue, it was also in line with expectations. There is some inventory above for some areas. Even excluding those factors, Q1 progress was very good as it seems. Is my understanding correct? Excluding special factors, is that in line with your assumptions or not? You also talked about Q2. Could you explain o nce again? Y amaguchi-san, thank you very much. First of all, first quarter was very strong. At the same time, overall this was in line with expectations. There are areas which are better than expected. VYLOY global performance, the speed of uptake XTANDI was also very strong in its growth. On the cost side, in reality, SMT worked on certain measures. We are harvesting its effectiveness ahead of the original schedule. Compared to original forecast, this is working positively, better than expected according to analysis. Thank you very much. As for XTANDI, Medicare policy change could be affecting the product. Since Q4, there was a numerical guidance including such impact is still growing. The actual volume and the impact compared to the full year forecast, you are progressing well. Including the change of the policy, what about XTANDI progress? First, I'd like to briefly give you a whole picture of XTANDI, and if there's anything additional Claus could mention. XTANDI is performing well not just in the United States with a Medicare Part D impact, but also globally as well. Our business is expanding with XTANDI. That's the basis. Of course, in the United States, Medicare Part D impact, what's going to happen to the price is one question, but patient affordability issue and demand is very robust. In combination of these factors, we are maintaining the good performance. Have any additional? Please go ahead. Yeah, thank you, Atsushi, and to your question, Yamaguchi-san, we're seeing a very strong performance of XTANDI across all geographies, and that continues to be driven, we believe, by our EMBARK data that we published about two years ago and that positioning of XTANDI as most probably the most effective molecule in this disease area and certainly the one where we can claim to say that it has the broadest indications. That is just driving acceptance of XTANDI. Now, as Atsushi just said, in the United States, of course, we have a special situation with the Medicare Part D. We have to give a higher discount to the Medicare system. Our growth to net is impacted by that reform of the Medicare Part D design. However, what we are seeing is almost an acceleration of the volume growth, which has been strong, as you know, over the last two years already on the back of the EMBARK data also in the United States. With the Medicare Part D, essentially the Medicare Part D is doing what it was designed to do. It is lowering the co-pay that patients have to afford out of pocket, and it is allowing patients to take that co-pay and spread it over 12 months rather than having to pay it at once. That means more patients are able to access XTANDI from an affordability point of view that were not really able to access XTANDI before, and they probably went into generic options or a PAP program before. That is why we're seeing paid demand on XTANDI growing so significantly in the United States. Just as a number, the Q1 growth of paid demand for XTANDI was 33% versus the same quarter of the previous year. That's a very, very high growth rate of paid demand. We've always been in the twenties in the last quarters, but this is the highest we've seen recently. Thank you very much. Tariff factor is factored in to a certain extent, that's my understanding. U.S. manufacturing is expected to be increased and that trend is likely to continue. Now, new initiative in order to increase their production in the United States. What are the things that they are trying to be done? Still, is there anything you are trying to do? Thank you very much for pointing that question. Including the U.S., there's a lot of discussion that's ongoing and currently internally we have task force teams to collect information, analyze them, and coming up with several potential scenarios so that we can discuss over those scenarios and potential situations. I cannot tell you any specific numbers but for our U.S. business it's extremely important and to a certain extent we are producing products in the United States. For the future, new products, where are they going to be produced? When I think about it, you have to think about the situation in the United States. At this moment nothing is fixed so we are not sure what kind of scenario is actually happening. I rather refrain from making a specific comment. Of course, we are discussing about it internally. That's all. Thank you. Thank you very much. JP Morgan Securities, Mr. Wakao, please. JP Morgan. Wakao is my name. Can you hear me? Yes. Thank you. This might be the follow-up question of Yamaguchi-san. First of all, in the second quarter you are going to collect more information. Top- line, I think you made a detailed explanation and when you are answering to Yamaguchi-san's question for the cost from the earlier phase, you are going to harvest more specifically R&D, SG&A, what is it against the full year plan and against the full year plan what is likely to be if you go into space. As for the tariff in the EU for the pharmaceutical products, it is 15%. You produce the products in Ireland so that percentage is lower than the conventionally expected. Could you make some comment about this if it is possible? Please answer how you are going to incorporate this factor in the revised plan. Wakao-san, thank you very much. We did not say the upward revision at all. For the SG&A, we are harvesting the outcome from SMT and to what extent it is reflected into the revenue and we use that as a fund to add a second, third quarter business for further investment. That kind of discussion is ongoing internally. There are the things that we have to push further or the things that we have to reduce further. Internally we are very active discussing on those matters. For R&D, basically in our initial plan includes the PoC judgment that is coming in the mid to later phase of the fiscal year. Depending on that timing, we need to think about the acceleration if it is necessary. After SMT, what we've learned is that the areas that we can harvest as early as possible we would do that. That is the positive factor for us. Just like having a discussion with Taniguchi, for example, ASP3082, we were able to get the PoC, even the second PoC. How we can accelerate this further. It's not something that we are going to cut everything. Through the effort we come up with certain savings that is going to invest further for further acceleration or it's going to be reflected into the bottom line. That is under discussion these days. That is the response to your first question. As for the tariff matter, 15% in EU, that is the story that came up only recently. Is it really the true story or what would happen in the case of Japan? We have to be cautious about such kind of information. If information is collected in the second quarter, we are going to reflect whatever needed to be reflected. Things that will be decided only after things are all decided clearly. Till then internally, we have downside. Downside is included for making the forecast, but against the buffer we have, the impact would be plus or positive or negative. That is continuously monitored internally. When we see a clear picture, then we incorporate that so that we can report it to you As a follow-up. Fixed costs compared to your internal plan are lower. SG&A costs, others, and R&D expenditure. As for the tariff, according to a recent media report, compared to your assumptions, it is not going to be higher than that. Is my understanding correct? For the latter part of the question? I am told I should not mention this or comment according to IR members, but it is not very much different from what you think because we are factoring in a certain level of risk but not so much. Okay. Fixed cost compared to your internal plan lower than lower in the first quarter. We are able to achieve reductions earlier than scheduled. Okay. Secondly, IZERVAY, numbers have been shared and I was able to understand. What about the monthly trends? That is something I would like to know. Growth and sales on a monthly basis. There is something we can see in July or June compared to May, more than a 10% growth. Particularly, growth was seen in the month of July, in June. In June, gross sales, net sales compared to usual, any gap. That is something I would like to know. And our gross sales results, if you know that trend is continuing also in July, since July and onwards, based on the trend, net sales are also going to increase. Could you share anything? Thank you for your question. The numbers Wakao-san is saying, what are you referring to and what is the difference compared to our numbers is a question. For the details, it is difficult to respond, but on our end also in July we see growth still. That is what we can say. Further comment, could you please? Yeah, thank you for your question. I mean, I think there are a few things to note. First of all, this quarter was the strongest quarter for IZERVAY since launch. The expectation that we set out in our last earnings call, that with the label update that was accepted by the FDA in February, we would return to the growth curve that we had before the CRL, that is starting to bear out. This quarter is the first positive data point that we're returning to growth. As you can see, it's a very substantial growth with a 22% quarter-on-quarter evolution. I think the overall trend picture that we had imagined is intact in terms of returning to growth. As Atsushi said, the preliminary data from July further, you know, underlines that this trend is continuing and is in line with our expectations. Now, when we look at demand, we actually had expected a slightly stronger picture in this quarter, which is why we said in the previous IR call in early July this quarter was slightly behind our expectations, and that's mostly due to inventory fluctuations. Inventory was a little bit lower. We had changed the distribution system and we had gotten some returns because of that. That's why this number is slightly lower than we had expected. What's important is that the underlying demand trend is recovering from that CRL period where it had stagnated and is returning to the growth phase exactly as we had imagined. Okay, understood. Lastly, one more question about a most favored nation status. I have a question on that. In reality, the target price, I do not know if it is U.S. government or any other organization. Any contact with them about the target price? How do you see the most favored nation status in terms of the feasibility? Any comment from your side? That is all from me. Thank you for your question regarding MFN, most favored nation status. Based on the facts, on 12th May, an executive order was signed. Within 30 days, the targets or goals are going to be communicated according to the announcement. As of today from the U.S. government, we have not received any notice or notification and we have not started any discussions with the U.S. government as of now since the current status, what is going to happen in the future? As soon as we receive the notice, we will examine the contents and consider what to do. As of now, we have not received any notice and we have not started the discussions with the government yet. What about the feasibility? Whether that is going to be realized or not? What is your view? as of now in the current stage, there is nothing I can comment. Please allow me to refrain from commenting. Understood. That is all from me. Thank you very much. Goldman Sachs Securities, Mr. Ueda, please. Goldman Sachs, Ueda is my name. Thank you very much. Thank you very much. My first question is also related to the tariff. This might be the follow-up question, but currently as Astellas, what kind of countermeasures are you doing? For example, for the United States, you are now building up the inventory, and also you mentioned that for the future perspective you are considering a lot of things, but for example, changing the manufacturing site or you make the further investment to the United States, what kind of items are on your list for further consideration regarding tariff? Thank you for your question. Of course, we are not just waiting without doing anything. For short-term perspective, what we can do, including the build-up of the inventory, what should be done at what point of timing? In the ordinary S&OP process, we are working on it. The investment into the United States. Again, the U.S. is the biggest market for R&D supply chain, including for those who have a lot of business in the United States. For those, what we can say is that conventionally we are working for that. Furthermore, what kind of lever we are going to now make use of, what should be pushed at what point of time for decision making, there are still a lot of uncertainties, and unlike other industries, we cannot change supply chain so easily or quickly. Including that, we still are having the discussions internally. Thank you very much. Second question, that is about R&D, R&D cost or expenses, and in April management system was changed. That is also impacting for R&D cost. What kind of impact experience? R&D expenses progress level is quite low, and as you mentioned, if the PoC of several projects are achieved, then it will be further accelerated. Is it online or is it still underperforming compared to your plan? That's what I want to know. In April, for the R&D primary focus lead, those are going to be integrated to have a new management system. With this kind of organizational changes, what kind of impact have you experienced? If this new management is going to be steady state, then cost or expenses status is going to be further accelerated for a better situation. Thank you for your question. Briefly, first I'd like to talk about the cost of expenses. After that, Taniguchi is going to make a detailed question. As for costs or expenses, as has been pointed out, the foundation, what we have is the reduction is better than we expected. We were planned, so it's accelerated. That's a positive factor for us. On the other hand, we are going to accelerate R&D. PoC were gained or achieved. Therefore, we are going to accelerate this further, we are going to spend saved money for that. For the new organization, what is changed for that, Taniguchi is going to make a comment. Now I'll talk about the cost-related matters, including the current R&D organization. For the change of the organization this fiscal year, from April 1st, this new organization system was launched or started. With that, as has been mentioned, primary focus, lead research as well as development, they become one organization. With that, needless to say, certain synergy including cost reduction was able to be achieved marginally. This cost in the first quarter is low. Just like Kitamura explained since last year, internalization of the clinical trials is ongoing and with that we were able to reduce outsourcing cost and that is more than we expected. I would think this is the biggest factor. You have this much cost reduction effect. Also, for ASP546C from Evopoint, we will develop a new development plan and as has been said, 3082 in PDAC and lung cancer, we are going to accelerate such clinical studies as well. Towards the latter half of the current fiscal year, we would promote and accelerate development, which we would like to focus on and we would like to allocate our costs in those areas under this structure. Understood. Thank you very much. That's all from me. Mamegano-san from BofA Securities. Can you hear me? Yes. Oh, sorry. Mamegano from BofA. I wanted to ask you a question about R&D. 3082 achieved PoC in lung cancer following PDAC as well. And how going to proceed after PoC achievement, around when you can talk about the next stage? That's my one question first, and also I have another question. PADCEV NMIBC study is to be terminated. What's the reason why? Earlier you might have explained. If that's the case, sorry, but I'd like to confirm. Thank you very much. So I would respond first, 3082. As you said, in PDAC and NSCLC, a PoC was achieved in both indications. We will publish the data from now. The abstracts should be accepted first. Then when to publish which data can be shared? Phase III registrational trial would be considered. Needless to say, we have to accelerate when, at what timing, what kind of studies should be initiated into the future. Once we determine our plan, we are hoping to explain we are accelerating so that we can start early. We are making such efforts internally. Once such a timing comes, we'd like to explain. As for PADCEV, non-muscle invasive bladder cancer you're talking about, right? Regarding this study, we are working with Pfizer to implement the study and the data is being finalized. We had a variety of discussions about the safety and efficacy and the data. We also judged the competitive situation right now comprehensively and decided not to proceed with the development. That's the decision by Pfizer and Astellas. Thank you very much. Additionally, in the second quarter onwards, MIBC interim analysis results will be announced. There's going to be no impact on that part. MIBC is already in Phase III, enrollment is over and final events are being collected and we are waiting for analysis results. Of course, regarding MIBC, it's not PADCEV monotherapy, but combination with pembrolizumab mainly as a regimen. Regarding NMIBC, our termination decision in NMIBC would not affect MIBC indication. Understood. Thank you very much. Thank you very much. Next, Morgan Stanley MUFG Securities. Mr. Muraoka, please. Thank you very much. Muraoka from Morgan Stanley speaking. First, I have a question to Kitamura-san. Second quarter, you said that you may not necessarily make an upward revision in the second quarter. I believe that it can be an upward revision. I think I felt such a nuance because of the good results. I have a question. If the profit figures are going to increase the dividend payout JPY 74 up by JPY 4, is that going to be the plan or the dividend? JPY 78. You may slow down the dividend payment, but what's your plan? I'd like to hear your view on your thinking behind the dividend. Regarding the dividend, according to the principles of capital allocation, needless to say to you, for growth, we should make investments. For growth, expenses or investments can be a question. Finally, as Taniguchi said, we have good signs of science. We'd like to invest in those areas for sure. Stable return to shareholders. As part of those measures we have a dividend and it's not the decision in a single year. We have to look at the situation multiple years in order to strengthen balance sheet we would repay debts and we're doing those things a lot. Because of the good results in the first quarter. Are we going to increase the dividend payment and increase the pace of dividend payout? Not necessarily. Overall we have to judge. Understand. So profit momentum is really good. The guidance for this year, you might think that the guidance dividend is too low. It is not like that. JPY 4. It is just like last year, four yen increase of a dividend. There is no change since last year. Single year, the performance is good. That is why there is increase or decrease. It is not something like that. For a certain period of time, we observe the cash flow to make a decision. Also, this is related to stock prices. The current yield of the dividend is to a certain extent. That is why with those, the decision making for the decision making factors, the JPY 4 increase is not changed. There is consistency here. Of course, a lot of factors incorporated, capital allocation principles plus balance sheet enhancement. Those are considered in a comprehensive manner and the discussion is always ongoing. Thank you very much. Data book, the country-wise sales is what I refer to. In China, JPY 29.4 billion year- on- year, + JPY 800 million in China, and the strategic buildup of the inventory is what you are trying to do. My question is, + JPY 10.8 billion out of this. What kind of the strategic buildup of this inventory? It does not have to be necessarily the number. Just, can I, could you tell the situation? Cannot tell you the overall amount, but a third, for example, I think it is the same thing. Basically, China is a big market. In the past, Surface launched last year in China, and this June, VYLOY is launched. In that perspective, our focus brand or strategic brands, the setting for selling them is well prepared. Claus, do you have any comments? Yeah, I mean you have to differentiate between the established portfolios. So tacrolimus and XTANDI and XOSPATA and the launch products. Right. When you launch products into a large market like China, you need to build a certain inventory because you just do not know how quickly the uptake will be. That is what we did. We made sure that we imported into China both for PADCEV and for VYLOY, which are the two launch brands, a sufficient amount of goods that is then registered as sales upon import, and that is what you see. Now, over time, we will then of course be able to judge more clearly what is the in-market demand, and we will update you when we have those numbers. Thank you very much. One last question for me, IZERVAY. In the United States, if the sales is low, it might end up with impairment loss. That's what I often talk with the other investors. If this momentum continues, $4 million impairment loss risk is not necessary for us to discuss. We don't need to worry about that kind of impairment loss. Could you make a comment about this? Thank you very much. The IZERVAY sales right in the United States, the intangible asset is sales right, and it is started to be depreciated. The remaining value is now on the decrease. Just like Claus mentioned, the growth momentum is returned and treatment rate 15%, and for that we would like to increase it to over 35%. If that happens, we don't need to worry about impairment loss. Thank you very much. That's all, Thank you very much. Next, Sanford C. Bernstein, Sogi-san please. Thank you very much. First of all, the question is about PADCEV. Last fiscal year, quarter- over- quarter, PADCEV your sales is quite flat, that is my understanding. This is a demand basis, the growth is about 12%. For a quarter consecutively, it's been flat, but now 12%, that means that there's some changes happens and the NCCN guideline is updated. That contributes to the increase of the new patients. Could you explain the background of this situation? As for PADCEV, Demand in the previous fiscal year. In reality, there was a change of the distributor to have some inventory built. Excluding that, 7% growth has been recorded. In reality, as you pointed out, NCCN updated guidelines is one factor to contribute and there is a very strong momentum by taking a high market share to be maintained and also to be expanded. Further comments, please go ahead. Yes, Sogi-s an, thank you for your question. I would like to go back to the uptake curve that we've been discussing with you on several occasions where PADCEV is quite particular. It ramps up very, very quickly. Within six months we come to a shoulder where the progression of the brand in the market starts flattening off. That's exactly what we've seen. We've always said after that shoulder we would be in the mid single digits in terms of growth rate and that's exactly what we've seen. We believe that in the United States in the first line indication for urothelial cancer, we're now starting to be pretty much at the peak market share that we can imagine. In the outside of the U.S. that's where we still see, we're still in that steep take up curve. That's where we see much higher growth rates because we haven't hit that shoulder yet. Because the U.S. launched first, you know, we're just more progressed in terms of the uptake curve and we are in that more single digit growth phase that I believe will continue in the future. I don't think we're going to see double digit growth in this indication in the future in the U.S. Thank you for clarification. Thank you. Next, regarding the E pipeline products, KRAS targeting protein degraders, I have a question to you. KRAS targeted degraders G12D two G12D for IND is approved and the first patient trial is going to start. To begin with, G12D, you have two similar products for the future. In the end, you're going to converge into either of the two programs or pan-KRAS compared to the G12D of the products ahead of you. What kind of development are you considering to differentiate from the existing or the degraders ahead of you? I would like to respond. First of all, KRAS G12D, we have two products, 3082 and 4396, regarding the two E3 ligase. That's the difference between the two. The physical property is also different. These two molecules are under development in Phase II. 3082 has been discussed from before already. In two tumor types, we achieved PoC for registration study. We are going to proceed. As for 4396, what are we going to do with this? Physical properties are slightly different right now. PDAC, lung cancer, and CRC are the indications right now. We will see the results. The data to proceed in parallel or are we going to decide whether to discontinue this product, we will discuss. We are collecting data right now. Once we are able to collect the data and once we make a final decision, I would like to communicate to you. Pan-KRAS 5834, pan-KRAS covers not just K12D but other KRAS to be degraded. It's more broad indications which could be possible. For example, in PDAC, about 90% of the pancreatic cancer, a certain KRAS mutation is being seen according to the publication. More broad pancreatic cancer or PDAC coverage could be possible. As for lung cancer, 25%-30% of lung cancer have a certain KRAS mutation. According to my memory, G12D in lung cancer is about 5%. More broad lung cancer indication can be targeted by us. 5834 just at the time of IND. That is accepted. So clinical trial is going to be started. In that way, we'd like to prepare the situation to get more data. G12D mutation target. That's the start point to move to the pan-KRAS as well. Is that because you've changed the ways of thinking? Or G12D degrader? The development itself is easier. What's the background of this As a product. If it is easy or not, that's one thing. Of course, if the target is wider, the efficacy on the tumors and the safety is also different. Currently, we know that based upon the preclinical data. Using such kind of information as reference, we are working for the development for both. Also, we get opinions from the experts for this field. Further targeted products better to be developed fast. That is one opinion that was received. From the perspective of the patients, wider indications is better for easiness of use for patients and doctors. That's why we are working on the development for both. Thank you very much. Thank you very much. Sogi-san, next Nomura Securities. Matsubara-san, please. Matsubara from Nomura Securities. Can you hear me? Yes. thank you. First question is about MFN. In a previous comment, said that you don't have any particular discussions currently with the United States, but looking at the other overseas pharmaceutical companies in order for the negotiation with the U.S. government. You are thinking about. They are thinking about the direct sales to the U.S. market. You think about the direct sales in the U.S. market? As we mentioned, we don't have the specific information yet. Therefore, it's very difficult to make a comment in that situation. This and that. That is not so m eaningful. The next question about VEOZAH. Bayer came up with elinzanetant and the approval was delayed by three months. That is a positive situation for you. However, in other markets, the competitor's product is already launched and also the blood test requirements lower than VEOZAH. What is this situation impacting onto your performance? What's your view? Just like you mentioned, the PDUFA was postponed. We were thinking about the decision making depending on the label that they are granted. It is likely that it's going to be delayed in some of the countries this product, competitor's product is approved. That's what we know. That is not impacting onto the discussion about changing the directional honor because the U.S. market is too big for us. Thank you for the question. I want to emphasize that the label that we've seen for elinzanetant in the U.K. is very, very, very similar to the label that we had at launch. Remember that the liver side effects is a very rare side effect that has not been seen in clinical studies, neither in the Bayer compound nor in our own compound. What you are seeing today in the label that Bayer has obtained in the U.K. is really almost identical to the label that we had when we launched because the liver side effects simply have not been observed yet in real practice. The question then becomes, what happens over time? Will elinzanetant over time accumulate the same AEs that we saw as we started building a patient base, or will they not? The real question is, is it a class effect or is it not a class effect? We will not know that for a number of months, if not maybe six months, nine months, something like that. I think this will be something where you can't expect us to say, oh, now the label has been published, now we know exactly what the impact of elinzanetant will be in the competitive behavior with VEOZAH. It's a picture that will become clearer over a fairly medium-term time frame as more data is gathered. The other thing I would like to say is actually I welcome the entry of Bayer with another NK antagonist. It's not exactly the same target that their molecule has versus the NK3 that we target very, very specifically, but it is also a non-hormonal treatment for vasomotor symptoms. We know that that market is very large. We also know that that market takes time to develop. With two companies communicating and educating in this marketplace, I think this market will grow more quickly than if one company does it alone. You have to see in my mind the entry of Bayer, both as a competition to our position with VEOZAH, but also as a benefit for the development of the market as a whole. Thank you very much. Additionally, your VEOZAH, when it was approved in the United States, there was a delay by three months. What kind of discussions did you have with FDA, why there was a delay, as far as you can share? Could you talk about it, if p ossible? You are smiling, so maybe you want to. Yeah, I mean it's really impossible to answer that question because it's a decision of the agency in their internal processes. We don't have insight into why they decide to ask for an additional 90 days. Maybe the reviewer felt sick and had to come back. We don't know all these things. Yeah. Please accept that that's not something that a company that is making the application would ever understand. It's the decision of the agency to ask for more time. It is based on their own internal processes, the time they need to make an assessment. We're not privy to that information. Understood. Thank you very much. Matsubara-san, thank you very much. Next, UBS Securities. Mr. Sakai, please. Sakai from UBS speaking. I have two questions. First, Huya forecast revision was mentioned in the first quarter. Listen to your explanation. Strategic brands are growing and the profit has more impact on mirabegron and PROGRAF legacy products. The profit is almost 100% for these products. On the other hand, strategic brands, there are still promotion costs needed soon. The profit upside in the results could be seen with progress and mirabegron background, which we need to watch closely. There is no Mirabegron background generics. If there are generics in the second quarter and beyond, what would be the impact? If I can calculate, I can tell what kind of risks should we assume? That is my first question to you. So, Sakai-san, thank you very much for your question. First, we would like to sell strategic brands for sure. That is the most important thing. We are working on this to do so. With SMT, we have additional funding so that we can invest to continue a good cycle, which we think is very important. If you look at year- on- year, progress, progress, what is the biggest profit driver like last year? Strategic Brands growth, I should say, so that is our first priority. At the same time for XTANDI, as there was a question and Claus responded, it is doing very well and we have to discuss. We are discussing LOE, but we are doing whatever we can right now because of the big business. There is a positive impact. As for mature products, how to maintain, how to protect those products is a question. Myrbetriq in the United States, for example, there are generic versions. What kind of action we are going to take to protect our products. This is a strategy for defense, which is working very well right now. Last year, to a certain degree, we factored in some level of risk against the initial forecast. We are able to achieve a lot of upside and we are continuing a similar defense strategy. Sometime we will have LOE. Of course, as Sakai-san pointed out, if you calculate, you may be able to tell to a certain degree, but I would watch that. Based on the assumption that that is going to happen, we would like to grow our strategic plans to build a foundation for growth. That is our first priority and we will continue this into the future as well. Mirabegron generics, there are two generics by two companies. You can prevent the further entry of generics Other than the two, the formula or formulation patterns. We have litigation action we are taking. There is a favorable decision for us right now. Of course, generics companies may appeal additionally, but for the time being there is a favorable decision for us when actually it's going to be in February next year or beyond. In February and beyond you will see the outcome of the litigation. The litigation will start in February and beyond and then we will see the results after that, the February 9th. That's the start of the litigation or trial. One more point. I have a question to Taniguchi. Claudin 18.2 as a new biomarker, it may not be new, but as a biomarker it can be very useful. According to the rising assessment of these newer products. Which page was it? You have three modalities right now. Monoclonal antibody and bispecific antibody and ADC. This time your future strategy modality would be expanded. Is that going to be the direction all three modalities would have a deep dive? What's your view? And expansion of tumor types including 18.2 expressing cancers include lung adenocarcinoma and what else? Bladder cancer, which are seen as promising. Are you going to address those with your ADC? One more question. So this deal with Evopoint, the U.S. pharmaceutical companies acquire the Chinese biological companies, smaller companies in the earlier phase that they are trying to acquire. I believe that this is the very first time for you to acquire the company in that sense. Taniguchi-san, for the Chinese biological companies, do you think this kind of trend is going to be further accelerated, especially from Japan as well, and as Astellas, are you going to enrich further on this kind of approaches to Chinese market or Chinese companies? Thank you. Thank you for your question. The modality of Claudin 18.2, just like you mentioned, VYLOY, ASP2138, and Evopoint ASP546C, we have those three. We are going to increase the modalities furthermore. So far, with using these three different modalities, we are thinking about establishing strategies for Claudin 18.2. VYLOY is already launched, and Claudin 18.2 here, Claudin 18.2 highly expressed tumor types, we believe we can expect this business a lot, so the clinical trial is studied, and gastric cancer, checkpoint inhibitor, chemotherapy combination study is proceeded. That more useful and more efficacious drug is what we can realize. For 2138, this is a bispecific antibody. CD3 is added as a T- cell engager, so the CD3 compared to VYLOY, for example, how efficacious it will be, in order to learn that, Phase I study is ongoing. That data is going to be available soon, so based upon that result, for what kind of patients will be targeted so that this ASP2138 could be active enough within our portfolio targeting Claudin 18.2, when the result becomes available, we would like to talk more about this. For 546C, in China already, Evopoint is going to start their Phase III study. It has very robust data for gastric cancer and also the pancreatic cancer as well for the second line and afterwards. We would like to promote the development in other countries than China. That is under consideration currently. The second question, that is about the pancreatic cancer or PDAC or gastric cancer. Other than those, what would be the strategies, including that we are going to have more considerations, especially to what level of Claudin expression level would require what kind of modalities or what kind of combinations. Those are all related. Depending on the discussions throughout the future, further wider indications on top of gastric cancer and PDAC would be a conceivable scenario. Once around the time the data becomes available, how we are going to horizontally expand this could be possible to be explained to you. The third one, question that is biological company in China. This time we have license agreement with Evopoint and while we are working day to day, biologic company in China or tech company in China, they come up with new modalities or new drugs developed especially for Chinese market and we see more and more companies emerged. This time we came to the agreement with Evopoint value as biotech companies but on top of that as Astellas throughout the world, such biotech startup companies are candidates for the collaboration if there is any opportunity. In China, such a biotech industry is quite matured. That is the impression that we have. In the future, further collaboration with China origin companies will be taking place if there is any opportunity. Thank you very much. Thank you Mr. Sakai, I'm sure that you still have many questions but time is up. With this, we would like to close this earning call. Everyone, thank you very much for your participation.