Astellas Pharma Stock

Welcome, everybody, to Jefferies Global Healthcare Conference in New York. My name is Steve Barker, and I cover Japanese pharma stocks for Jefferies out of Tokyo. It's my pleasure to introduce Astellas Pharmaceuticals this morning, represented by President and CEO, Naoki Okamura, good morning. And also, we have Chief Research and Development Officer, Tadaaki Taniguchi, good morning.

So thank you very much for joining us. I think we have some slides, and hopefully, we'll have some time for some Q&A at the end. Okamura-san?

Thanks very much, Steve. I'm Naoki Okamura, President and Chief Executive Officer of Astellas Pharma. Thank you very much for joining us this morning. We just released new 5-year Corporate Strategic Plan or CSP2026 last week. So let me go through very quickly with the material, which the complete set of information will be available at our website. So we have a vision that says we try to turn innovative science into VALUE for patients. And we define this VALUE, all capital VALUE, very clearly, which is outcomes that truly matters to patients divided by the cost to the entire health care system to deliver those outcomes. So Astellas' aim to create and deliver the VALUE for patients.

So this is kind of at a glance of Astellas. We achieved record high revenue in FY 2025, which is JPY 2.1 trillion revenue. For your information, our fiscal year runs through -- from April to March next year. So FY 2025 means the fiscal year ended March 31, 2026. So with that, we have a 26% core operating profit margin. It is growing very nicely. We are operating in 70-plus countries in regions, but we are headquartered in Tokyo.

We are listed on the Tokyo Stock Exchange, but we believe we are a truly global company, as more than 85% of our revenue comes from outside of Japan. We -- for us, innovation is our lifeline. Therefore, we reinvested 17% of our revenue to research and development for the past 5 years.

This is the nutshell of our Corporate Strategic Plan 2026. We are trying to make Astellas, a sustainable growth company by delivering profitable growth and generate cash, reinvest that cash to accelerate our pipeline-led growth. We established a discipline to allocate how we allocate cash, and we continuously enhance our enterprise productivity so that we can create and deliver greater VALUE faster.

So we set 4 strategic goals for the CSP2026. As I mentioned, we will try to develop -- deliver the profitable growth and generate sufficient cash to reinvest that to accelerate our pipeline-led growth. We have a very strong discipline to how we allocate cash between investment versus shareholder return. We restlessly enhance our enterprise productivity.

Some of the key deliverables to confirm we are achieving those strategic goals. In the research and development area, we are aiming to start 10-plus Phase III or pivotal studies during the CSP2026 period. We say 10-plus, but out of that, 5-plus will come within FY 2027, so in 2-year time frame. In terms of the financial guidelines, we will try to double the sales of the 5 strategic brands, which we -- which I will touch upon later.

We try to do recurring cost optimization commitment, JPY 200 billion at the end of the CSP2026. We try to establish the profitability structure of -- we can maintain the 50% core operating profit before research and development. In other words, we try to establish ourselves to maintain the 30% core operating profit after spending 20% on research and development.

So this is a very illustrative revenue forecast. This year, FY 2026 is going to be the highest revenue year with JPY 2.2 trillion. We have the XTANDI slightly -- gradually decreasing XTANDI sales. Therefore, we hit the inflection point in FY 2029 to go back to the pipeline-led growth. And as I mentioned, we are aiming to achieve the record high revenue at mid-2030s.

So that -- but actually, I would like to emphasize the bold solid black line, which shows that the pipeline -- strategic brands as well as pipeline-led growth has already started. And it continues to go with the strong growth of the strategic brands. And then on top of that, we will have the pipeline programs coming out of our pipeline.

So let me go first, this one. When we say strategic brands, we have PADCEV for bladder cancer, IZERVAY for geographic atrophy, secondary to age-related macular degeneration, VYLOY for gastric cancer, VEOZAH for vasomotor symptoms for the menopausal women, XOSPATA for AML. Actually, during the CSP2021, the previous 5-year strategic plan period, the sales of these 5 strategic brands have grown almost 10x. And we are trying to continue the strong growth of those 5 strategic brands to double the sales from those 3 -- those 5. And it is -- of course, the expansion of the geography for the current indication, but at the same time, we are doing the life cycle management type of additional indications or the additional formulation for some of those products.

So that we are looking at those as the key growth opportunities. Because the growth strategic brands, weight of the strategic brands used to be 23% back in FY 2025, but it is growing, XTANDI is declining. In 2030, the strategic brands will represent more than 50% of our revenue. And those strategic brands are almost fully owned or internally developed. So it is -- we don't have to pay any royalty or milestone payments to third parties.

Therefore, the shift of the weight of those strategic brands, 23% to 50% means we can improve the profitability structure so that we can get to the right-hand side pie chart, you can see the red one core operating profit plus R&D can represent 50% of the revenue. And on top of that, we are committed to continue our cost optimization initiatives and already committed JPY 40 billion in FY '26 and JPY 45 billion in FY '27, we have identified all the measures and initiatives so that we can get to that point. And on top of that, we continue the additional initiatives throughout the period of CSP2026 so that the coming 5 years in aggregate, we are aiming to achieve JPY 200 billion recurring cost optimization target, including the JPY 85 billion (sic) [ JPY 850 billion ] that we have already identified.

Let me turn into the research and development. We take a relatively unique research and development approach, we call focus area approach. We start with the biology with the strong disease linkage, try to identify the best modality of the technology platform to address that biology. And finally, we try to figure out which is the best patient population to benefit from the combination of biology and modality.

So this is a very busy slide, but when we have the triangle of biology modality and disease, we call it a primary focus. And once we establish the triangle, we believe we can produce multiple projects from that triangle.

We have now 4 primary focuses with the value-enhancing BD activities together, we have built up a robust pipeline now. If you look at the pink box at the center of the slides, you have 4 programs coming out of our primary focus that have achieved the clinical PoC and moving into the clinical -- Phase III clinical study or the pivotal study in coming, say, 2 years.

And if you -- it's not that obvious, but there's a gray box under the pre-PoC arrow, which is getting closer to the clinical PoC judgment in FY '26 and '27. And if successful, they are moving quickly to the later-stage clinical development. We are hoping to gain JPY 1 trillion revenue in mid-2030s from all those pipeline programs. And I would like to emphasize that sometimes our focus area approach is very fragmented doing this and that separately.

But eventually, we are aiming to really establish the franchise. For example, the prostate cancer starting from the XTANDI, and we are moving to the newer innovative products in prostate cancer. We also have established Claudin 18.2 franchise with the monoclonal antibody bispecific and ADC. We are doing the same for the ophthalmology, IZERVAY on the market, but ASP7317, which is the cell therapy targeting the same indication coming into the later-stage clinical study.

And we have universal donor cell technology applied cell therapy in the PoC stage. In the R&D, it is critical for us to continuously improve the productivity by integrating the internal and external collaboration. We have introduced a new working operating model, which is empowered small cross-functional team responsible and accountable for end-to-end process of the -- from the drug discovery research to the end of the life cycle.

We are quickly embedding the data-driven decision-making. We are increasing the speed of clinical trial execution by internalizing critical capabilities and using all those technologies. And of course, we have been going through -- constantly going through the ruthless prioritization of the programs based on the value that we can create. Value-enhancing BD. When we see that shape like this, people sometimes ask me, would you not go to the BD activities to fill that dip in the revenue curve. But we decided that we don't do that.

We call it rescue BD because it's cash for cash flow type of transaction, and there are very limited opportunities for us to add value to those assets.

So we are focusing on the value-enhancing BD by proactively strengthening the pipeline that we have now or some technology platform that can really leverage our existing capabilities, so that we can add value after we acquired the asset in our pipeline.

This is the disciplined cash allocation chart. This is very complicated. But if you look at the left-hand side, you see the gray bar. We spent in the past 5 years, JPY 4.2 trillion in R&D, strategic investment and shareholder return. But one of the most important strategic investment, which was the Iveric Bio acquisition was funded through the debt financing. Therefore, the net cash that we generated for these investment was JPY 3.4 trillion, that is JPY 4.2 trillion minus JPY 800 billion.

If you look at the center of the slide, we are forecasting we can generate JPY 4.3 trillion even with the declining XTANDI revenue. And we are -- we have decided to invest JPY 2 trillion in R&D, reserve the JPY 850 billion for the strategic investment, while we reserve the JPY 750 billion for the shareholder return based on the annual JPY 2 per share dividend increase for the entire 5-year period.

So this is a very flexibility-driven strategic plan for us. If something happens to our pipeline, we can use that R&D expense to the strategic investment. If you have more -- if we can generate more cash, we can think about how we allocate that to shareholder return or the additional strategic investment. And we have a very good operating model, end-to-end operating model that I mentioned. We kind of renewed our corporate values and behaviors.

We have a good, robust corporate governance structure. So the CSP2026 has been produced through the thorough discussion with the Board and the executive team. And we have a great monitoring ability -- capability from our Board. So let me finish with the key takeaways. We try to make Astellas, a sustainable growth, company by achieving pipeline-led record high revenues by mid-2030s. How we can do it? We deliver profitable growth and generate cash. We invest that to accelerate pipeline-led growth. We establish discipline for how we allocate cash, and we continuously enhance our enterprise productivity. So that concludes my presentation. Thank you very much for your attention.

Okamura-san, thanks very much. So we do have a few minutes for questions. And there's a microphone available. If you'd like to ask a question, please do speak into the microphone because we need it for the recording.

But I'd like to ask a question, first of all, to you, Taniguchi-san, about your KRAS strategy, Revolution Medicines has been making headlines earlier this week with the pan-RAS candidate, daraxonrasib in second-line pancreatic cancer. Is this good news or bad news for Astellas' KRAS strategy?

Thank you for the question. I think just to step back, what we're actually working on, particularly looking at pancreatic cancer, which is really predominantly caused by KRAS mutation. In the past, like until 5 years ago, this KRAS or RAS is actually regarded as an undruggable target.

But now we have a technology like target protein degradation or molecule that we can tackle with this difficult disease or difficult pathway that we're actually going to be really transforming the way we actually treat cancer like pancreatic cancer.

So just looking at our data and the Revolution data, it's pretty much consistent in early stage Phase I or Phase Ib and so on. And also, we're just aware that the headline that they actually finishing the second-line or later-line pancreatic cancer, which is actually remarkable efficacy actually shown in their trial.

And what we think is that this is also pretty much encouraging for us that our KRAS product potentially work in first-line pancreatic cancer and we actually already started Phase III trial.

Of course, strategically, this is somewhat different because our product, setidegrasib, is purely targets KRAS G12D mutated pancreatic cancer. But of course, their product is more pan-RAS (ON) inhibitor. So degrader versus inhibitor and the target also the difference.

So there's some uniqueness that because of this target and particularly focusing on the safety profile, I think our product, setidegrasib is quite clean product, and it's quite encouraging that we can actually easy to combine with the current SoC like chemotherapy.

So we just started a Phase III trial in U.S., Japan and Europe, and of course, China. I think this is also very important -- strategically very important product we can actually really bringing the new medicine and new value for the patient in near future.

Can you comment on the timeline for this -- the pancreatic cancer first-line study?

Yes. So of course, we just started up the trial. And good news is that we have a very good uptake from investigator who actually bring to putting more patients in the trial.

And our current estimate is that we can have a fast-top line result around 2029, although this is also dependent on how we're actually going to go in terms of the patient recruitment as well as this is an event-driven trial that we need to wait until the time that we have enough event that we can actually analyze the data.

Any questions? Okay. Well, let's keep with the KRAS. You're also developing it for other indications beyond pancreatic cancer, I believe.

Yes. Of course, KRAS G12D mutation is actually occurred around 40% of pancreatic cancer. So initial target is pancreatic cancer. But we also know that around 5% of non-small cell lung cancer is actually have a KRAS G12D mutation, which is 5% of the non-small cell lung cancer. It's not so small, right? Like [ ARK ] is exactly the same 5%.

So we think this is also extremely important, the indication that we're actually going to start the second line, non-small cell lung cancer with KRAS G12D mutation this year, and the trial is going to be compared to the current SoC, chemotherapy plus our setidegrasib monotherapy. And obviously, after the treating first line with the checkpoint inhibitor and chemo, there nothing worked except the chemotherapy. So this is also a huge opportunity that we can actually transform the way we actually treat lung cancer in the near future.

And yes, as you mentioned, the -- your asset, setidegrasib is a degrader. Is there something about degraders for this particular target that could potentially have advantages over the traditional small molecule inhibitor approach?

I think it's inhibitor versus degrader. This is quite different. And inhibitors basically inhibit the pathway of any kind of oncogenic molecule, but I think a degrader is really degrades a target protein per se. At least we've shown in the setidegrasib study that approximately 95% of KRAS G12D is actually degraded by setidegrasib. This is quite encouraging. And the uniqueness of a degrader potentially is that we may have quite different resistant mechanism. If you actually, for example, treating the KRAS with inhibitor, we see that many patients have a KRAS amplification after that. But we don't see that, of course, because we degrade the target protein. So I think this is a quite unique target that we can actually use much broader than even KRAS or RAS target.

And of course, you have another KRAS targeting program, ASP5834, also a degrader. What's the strategy there? How does that fit in with the overall RAS strategy for Astellas?

Yes. I mean if you're thinking of RAS overall, it actually have approximately 70% of cancer actually has some sort of RAS mutation. So -- and 5834 is actually have a multi-RAS degrader. So of course, initially, we can actually start with pancreatic cancer, which has approximately 90% pancreatic cancer has RAS mutation. So what we actually hope is that, of course, setidegrasib, is really purely focusing on the KRAS G12D, but we can expand the target with 5834, which is the pan-RAS degrader. So I think this is also strategically very important that we already started the Phase I trial in the U.S. and Japan. And I think we're actually going to accelerate this program as well to moving forward to actually covering much wider range of the cancer to treat it with degraders.

And you also have a very strong strategy in the Claudin 18.2 area. Obviously, you're a leader in this field with VYLOY, which has been growing a lot faster than I think more certainly than I expected. So that's been a great success. Could you tell us about how these 2 follow-up candidates you have in development, how they will fit into the overall strategy, please?

Yes. As you mentioned, VYLOY is quite successful, not only in Asia like Japan or China, but I think growing very quickly in the U.S., particularly because U.S. also have a lot of gastric cancer patients. And so we think that we can continue to lead the Claudin 18.2 targeted product. And as you may know that there are a lot of companies started coming to this space, but I think we have 2138, which is Claudin 18.2 CD3 T-cell engager, which is already showing encouraging data in frontline gastric cancer in combination with checkpoint inhibitor and chemotherapy that we're actually going to start Phase III study targeting first-line gastric cancer.

But the differentiating from the VYLOY, VYLOY is really focusing on Claudin high, but we actually can actually expand with the 2138 targeting Claudin low to mid that we actually can differentiate from the VYLOY and 2138.

But I think that what I see that the most encouraging data is, of course, one is the durability of the response with this product because this is check -- this is a T cell engager. It's really targeting like an IO as well as we see pretty good safety profile that we're actually showing that. So I think this is also quite encouraging that we can really start a Phase III trial this year.

In addition to that, partnership with Evopoint, we have ASP546C, which is a Claudin 18.2, target ADC. And this product is already moving forward to the Phase III in China, but we also actually partnered with Evo, we are going to start -- we already started the Phase II trial to confirm the data coming from China that we can actually produce in U.S., Europe and Japan. Then we actually plan to start Phase III trial globally next fiscal year.

It's exciting. And -- but of course, all of this clinical development, it costs money, Okamura-san. And I was pleased to see Slide 15, where your cash flow situation looks very healthy.

Thank you. Yes, it is. And as I mentioned, we spent JPY 4.2 trillion in the past 5 years. But out of that, JPY 800 billion was debt-financed. In spite of the declining revenue of XTANDI, we believe that we can generate more than JPY 4 trillion in cash for the coming 5 years. And we can -- of course, with discipline, we are going to allocate that cash to different types of activities, but JPY 2 trillion, which is 30% more than the past 5 years.

We reserve JPY 850 billion, which is almost $1 billion per year of business development activities, covered by this reserve fund. And on top of that, we can return to our shareholders with the minimum annual JPY 2 dividend increase. So -- it's a very flexible plan. And if we can generate more, we can consider how we can reallocate those generated cash. And we can shift the cash from research and development to strategic investment, including the BD activities. So very flexible plan that we have.

Yes. It's -- I mean, you're heading into a significant LOE, obviously. But as you pointed out, the margins that you'll be earning on the newer products, the core products, which are replacing XTANDI is a lot higher. So you're in a very enviable situation where you can actually expand your margins through an LOE, unusual.

Yes. And it's really fortunate that we have not the single big product, but handful of multibillion-dollar potential products. And on top of the profitability of those strategic brands, we continuously executing the cost optimization initiatives, and we have a very good track record of really achieving our commitment, and we try to continue that momentum for the coming 5 years.

Great. Well, I think we're just about out of time. So Okamura-san and Taniguchi-san, thank you very much.

Thank you very much.

Today, thank you very much for joining our briefing on Astellas' corporate strategic plan, CSP 2026 out of your very busy schedule. I'm delighted to serve as MC today. I am Kato, Chief Communications and IR Officer. Thank you very much for your time.

Today after the presentation, we will take questions. Presentation will be made by the meeting materials posted on our website. Including Q&A, we have simultaneous translation available in Japanese and English. We cannot guarantee the accuracy of simultaneous translation. Thank you for your understanding. You can choose the language from the menu on the Zoom webinar screen. If you choose the original language, you can listen to the original sound without going through the simultaneous interpretation. During the Q&A session, we will take questions from investors and analysts first. And then in the remaining 10 minutes or so, we will take questions from members of the media.

And here is a cautionary statement for today. This material or presentation by representatives for the company and their answers and statement in the Q&A session includes forward-looking statements based on assumptions and beliefs in light of the information currently available to management and subject to significant risks and uncertainties. Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representations or advertisements regarding the efficacy or effectiveness of these preparations, promote unapproved uses in any fashion nor provide medical advice of any kind.

Let me introduce the participants from our company: Representative Director, President and CEO, Naoki Okamura; Chief Financial Officer; Atsushi Kitamura; Chief Research and Development Officer, Tadaaki Taniguchi; Chief Commercial and Medical Affairs Officer, Claus Zieler. So we have 4 executives joining this call. So we'd like to start the presentation.

Good afternoon, everyone. I am Okamura from Astellas Pharma. Thank you very much for your time out of your busy schedules to attend today's announcement of Corporate Strategic Plan, or CSP 2026. This is a cautionary statement. Since Kato explained about this, so I will skip this slide.

Phase 3, division of Astellas is on the forefront to health care change to turn innovative science into value for patients. We define value written entirely in uppercase in English as outcomes that matter to patients as the numerator and the cost to the health care system of delivering those outcomes as the denominator. This approach serves as a guiding principle for decision-making throughout the company. Page 4 explains Astellas at a glance. We achieved a record high sales revenue of JPY 2.1 trillion core OP of over JPY 550 billion and core op margin of 26% in FY 2025. By region, more than 85% of the sales revenues from countries and regions outside Japan, making us a global life science company. We operate in more than 70 countries and regions, providing the groundbreaking new medicines to approximately 174 million patients. To create new medicines, we have invested an average of 17.2% of our revenue in R&D over the past 5 years. We have also returned value to shareholders through continuous dividend increases. These achievements form a solid foundation for realizing sustainable growth in the future.

Starting on Page 5, I will explain our CSP 2026. First is about underlying concept as the foundation for the entire CSP 2026. As a sustainable growth company, Astellas aims to achieve pipeline-led record high revenues by mid-2030s. CSP 2026 is a self-funded growth strategy. [ There's a ] profitable growth and generate cash, accelerate pipeline-led growth, allocate cash with discipline, enhance enterprise productivity. By realizing these 4 goals, we will create and deliver greater value faster for patients.

In the following slides, I indicated -- at the top of each slide, I will first explain the overview of this CSP. Then profitability improvement to sustainably deliver value under value delivery and the pipeline that leads to the creation of value under value creation. Then cash allocation will be explained. And finally, I will talk about the organizational structure designed to deliver business outcome.

Page 6. First is an overview of CSP 2026, I will explain goals and deliverables. To achieve pipeline-led record high revenue by the mid-2030s, CSP 2026 sets 4 strategic goals. The first is deliver profitable growth and generate cash. At the core of our growth strategy in CSP 2026, 5 high-margin strategic brands, PADCEV, IZERVAY, VYLOY, VEOZAH, and XOSPATA. These products are already demonstrating solid growth and will be a powerful driver of future profitability. We will maximize revenue based on these products and generate cash to support future growth investments.

The second is accelerated pipeline growth. We expect to drive growth from FY 2029 through pipeline assets. To further accelerate and ensure this growth, we will invest in R&D in a more strategic and focused manner than ever before. Progress in our pipeline is the most important driver of Astellas' sustainable growth.

The third is allocate cash with discipline. To achieve sustainable growth, a balance between growing funding and profitability is extremely important. We will maintain a high margin once -- ensuring sufficient growth and pursue sustainable enhancement of shareholder value -- sufficient growth investment, excuse me.

The fourth is enhanced enterprise productivity. Building on the ways of working, our culture foundation and corporate liveness that we have transformed in the previous CSP, we will further enhance our organizational capabilities and aim to evolve into an organization that delivers the business outcome. To ensure the execution of these strategies and clearly demonstrate their progress, we have established key deliverables to be achieved through [ other ] CSP 2026 period. First, as an indicator of pipeline progress through continued investment in R&D and improvements in productivity, we aim to initiate at least 10 Phase III or pivotal studies by FY 2030. Of this, we expect to start at least 5 studies within the next 2 years, that is by fiscal 2027 to achieve earlier market launch. This will enable us to build a solid foundation that will strongly support our growth from fiscal 2029 onwards. As I [indiscernible] start of indicator, we will generate cumulative quality before R&D expenses of at least JPY 4.3 trillion over the 5-year CSP period.

We are confident that this will enable us to secure a solid internal capital base to support our Astellas strategy. As a key component of this, first, we will expand the sales of strategic brands more than double by fiscal 2030 compared to fiscal 2025. Next, [ to ensure ] solid profitability and sufficient investment in growth and the shareholder returns, where we will achieve cumulative cost optimization of JPY 200 billion in the CSP period. And to achieve flexible yet disciplined cash allocation. We aim for a core OP margin of 50% before R&D expenses. To achieve this, we will reach a core OP margin of 30% by FY 2027, Thereafter, we're investing 20% in R&D. [ What will ] establish a cost structure that allows us to maintain a stable core OP margin of 30%. This will serve as an extremely important foundation for realizing sustainable growth model.

To enhance shareholder value, we plan to continuously raise dividends during the CSP period. Specifically, we will increase the dividend by minimally JPY 2 annually. JPY 2 are set strictly at minimum levels, and we will aim for higher based on our mid- to long-term profit and cash flow plans. If we can achieve these key deliverables, we are confident that by the mid-2030s, we will undoubtedly have become a company achieving pipeline-led record high revenue.

On Page 7, I will explain our revenue outlook. This chart builds upon what I have shown so far, providing even greater detail and more clearly, it illustrates the major turning point Astellas is about to face. First, we project revenue of JPY 2.2 trillion for FY '26 and FY '29 will mark the pipeline at an inflection point. That is the year when pipeline growth truly takes off. After that, the value of the pipeline will be more firmly reflected in our financial results and we aim to achieve regular high revenue by the mid-2030s. What I want to emphasize most here is the growth curve that has already begun shown here by the solid black line. This growth is being strongly driven by our high-margin strategic brands, generating ample cash even before the pipeline led inflection plant. This cash will serve that [indiscernible] Astellas' sustainable growth. But firmly directing the generated cash-wide accelerating R&D we expect that starting in fiscal 2029, our pipeline growth to be more clearly reflected in our financial performance. Furthermore, by realizing this growth story, we are confident to be able to achieve a record high revenue by the mid-2030s. The following slides will explain the growth strategy to achieve this.

Page 8. The next 3 slides are focusing on improving profitability, which is essential for continuously delivering value. First, I will explain our profit outlook. Over the next 5 years, we expect to shift higher profitable P&L structure through the expansion of strategic brands. First, regarding changes in the product mix in revenue. In FY '25, strategic brands accounted for approximately 23% of revenue, and this is expected to expand to over 50% by fiscal 2030. As the product mix changes, the P&L structure will also change. In fiscal 2025, the core op plus R&D expenses to revenue was approximately 40% but this is expected to expand to 50% by FY 2030. In addition to the strategic brands growth, U.S. XTANDI co-promotion fee, which accounted for more than 10% of sales revenue in fiscal 2025 are expected to be virtually eliminated by fiscal 2030 due to declining sales in the U.S. This will also contribute to boosting profitability with achieving a core op margin of 30% by FY '27. And thereafter, while investing 20% in R&D, where we'll establish a cost structure that enables us to consistently generate a core OP margin of 30%. The combined level of 50% for core op and R&D expenses represents an essential indicator for achieving flexible yet disciplined cash allocation. A core op margin of 90% is not a fixed appropriate target, we will reallocate funds to R&D in response to pipeline progress, but we will maintain the total of core op and R&D expenses at around 50%. We aim to enhance profitability by expanding strategic brands at the same time to shift to our P&L structure, that is strengthening investments for future growth so that we can achieve sustainable growth.

I will explain the outlook for strategic brands. Our strategic brands have achieved dramatic growth increasingly above approximately tenfold over the past 5 years and have demonstrated a solid track record of growth. Building on this, we plan to more than double sales by FY 2030 compared to FY 2025. While we expect a continued growth for each of our strategic brands, even with the existing indicators, I will explain the key growth opportunities and that will further drive this growth.

First, PADCEV. We anticipate that the indication for cisplatin-eligible and cisplatin-ineligible MIBC or muscle-invasive bladder cancer will be approved in many regions and expect it to contribute to sales. Furthermore, we have initiated a Phase III study for [ bladder steering ] MIBC. If successful, this will provide an opportunity to further accelerate the growth of PADCEV.

IZERVAY. On top of initiatives to encourage early diagnosis of geographic atrophy or GA to encourage earlier referrals from general ophthalmologists to retina specialists and early initiation treatment, we aim to expand the market and increase a number of new patients. Also, we are developing a [ preferred ] syringe formulation. If successful, we expect this to drive fiber sales growth by improving convenience.

VYLOY. Was just launched last fiscal year in China, the largest market for gastric cancer, and we expect it to be a major growth opportunity going forward. In addition, the Phase III LUCERNA study of the combination of VYLOY with immune checkpoint inhibitors and chemo is currently underway. If successful, we expect this to present an opportunity to expand VYLOY's final sales.

VEOZAH. In addition to continued growth in the U.S., our largest market, we anticipate a further regional expansion with Japan and China, in particular, presenting new growth opportunities. We anticipate to continue to steady growth for XOSPATA.

[ Strategic ] brands are not only a source of sustainable growth driving the CSP, but also they are extremely important product generating cash needed to support a future pipeline led growth. We will work to maximize the value of our strategic brands and strive to maximize sales.

On Page 10, I will explain our disciplined cost optimization. By ensuring the execution of SMT, sustainable margin transformation, our company-wide cost optimization initiative, Astellas has been able to build a robust financial foundation more than ever before. Based on the proven execution of SMT as a foundation, we will also execute disciplined cost optimization under CSP 2026 as well so that we can continue to reinvest for our pipeline growth. Against the target of JPY 150 billion by FY 2027, we achieved cost optimization of about JPY 65 billion over the past two years as planned. For JPY 85 billion, we should aim for -- in the remaining two years, we have already identified initiatives to that end. So we just need to deliver them from now on. From FY 2028 onwards, we will pursue further cost optimization and aim to achieve a total of JPY 200 billion cumulative cost savings over the 5 years during the CSP 2026 period. Main initiatives include business efficiency benefits from global capability center establishment, AI and digital capabilities, where we have invested cost optimization by managing brand life cycle of XTANDI and mirabegron and operating model evolution to drive agility and productivity. We will execute these initiatives steadily by advancing disciplined cost optimization steadily, while we sustain elevated profitability, we will establish a more resilient financial foundation so that we can continue to reinvest for pipeline growth.

On Page 11, I will use 4 pages to explain our pipeline to create value continuously. First, let me explain Astellas R&D strategy once again. Aiming to achieve meaningful outcome in areas with high unmet medical needs, we are adopting R&D strategy called focus area approach. Focus area approach consists of 3 elements: biology, modality, technology and disease. We start where it matters most, understanding the biology of disease and impact on patients' lives. Next, we select optimal modality and technology fit for the biologies characteristics and apply it to patients who would benefit the most. In this way, when the 3 elements are connected strongly in a triangular fashion, this is positioned as a primary focus. By pivoting the triangle purchases, we believe we can create multiple programs with value from one scientific platform. Focus area approach achievements are beginning to be clearly demonstrated during the previous CSP period as well. We position this as an important R&D foundation also under CSP 2026.

On Page 12, I will explain our pipeline-led future growth. As we showed during R&D Day in March, throughout the previous CSP period, we enriched the pipeline by incorporating assets created from primary focus as well as external innovations to form multiple franchises. Under CSP 2026, to accelerate the growth of these pipeline assets, we will make R&D investments more actively, and we will aim to initiate 10 or more Phase III pivotal studies by FY 2030. Centering on the programs where POC was achieved as is shown in pink, we are anticipating the start of 5 or more Phase III or pivotal studies by FY 2027, if progress is made as expected, we assume that we can launch in FY 2029 and beyond. We're hoping that this will be pipeline inflection point to growth. As for programs shown in way, we will promote development for POC judgment by FY '2027. Programs which successfully achieved POC are expected to advance to late-stage development and initiate Phase III or pivotal studies during the CSP 2026 period. Also, with regards to follow-on programs, other than these, we will leverage the insights of [ change ] from the development of proceeding programs that they will lead to early contribution to growth. Through these initiatives to accelerate growth, pipeline revenue contribution is expected to start from FY 2029. We're anticipating pipeline revenue potential of about JPY 1 trillion in the mid-2030s so that we can address the progress of each program and uncertainties such as changes in the competitive environment, we will continue the activities to enable agile enrichment and supplement the pipeline to ensure resilience. I will explain the details later.

Page 13 is about only productivity. In order to accelerate the progress of our pipeline, R&D productivity enhancement is indispensable. At Astellas, we are strengthening internal and external collaboration, implementing an end-to-end operating model and agile ways of working and actively leveraging external innovation through partnerships. Also, we will embed AI and data-driven insights across the entire R&D to enable better decisions of higher quality. Furthermore, we will make strategic investments in new technologies and digital solutions, simplify clinical trial protocols and internalize key clinical operations to increase speed of clinical trial execution. In addition, to build more solid pipeline, we are continuously working to strengthen disciplines of critical in-house capabilities and portfolio management. Through these efforts, we will enhance our R&D productivity and accelerate our pipeline with growth.

On Page 14, let me explain our business development approach. We will actively pursue value-enhancing BD as the core BD approach. We will proactively strengthen the pipeline through acquiring synergistic assets to enhance value. Also, we will focus on moderately derisked assets and predefined therapeutic areas, modalities [ that is Astellas' ] strength to search for opportunities. In licensing of ASP546C from Evopoint and VIR-5500 from Vir Biotechnology are recent examples. We will form franchises together with our existing products and programs and further solidify our pipeline. On the other hand, we will not pursue by default, large-scale swap like rescue BD just to expand size and scale and protect near-term revenue.

On Page 15, I will explain our outlook for cash allocation. We will work to fund growth and deliver sustainable shareholder value enhancement at the same time. The gray bar on the left shows the actual results over the past 5 years. We spent about JPY 4.2 trillion in total, including R&D expenditure, about JPY 1.5 trillion, strategic investments of about JPY 1.2 trillion and shareholder returns of about JPY 670 billion. We utilized debt to acquire Iveric Bio, the most important strategic investments. So net cash generation and spending was about JPY 3.4 trillion. Over the coming 5 years, despite a temporary decrease in revenue with profitability enhancement due to the growth of strategic brands and cost optimization, core operating profit under R&D expenses is expected to reach over JPY 4.3 trillion on a cumulative basis, exceeding the level over the past 5 years to execute the pipeline acceleration supporting our growth from FY 2029 and the investments are expected to see the level over the past 5 years. The expenditure will be 20% versus revenue in principle. But in accordance with the progress of R&D, we will make additional investments by up to 5 percentage points in some fiscal years. We will allocate about JPY 850 billion to strategic investments such as investment for business development, milestones and investment for cost optimization. During the CSP 2026 period, we will be able to secure JPY 750 billion more as a source of funding for annual dividend increase of JPY 2 or more according to our plan. Annual JPY 2 dividend increase is just a minimum. We will aim to enhance shareholder return further, including raising the dividend increase range in line with upside in profit and progressing investments. We will repay interest-bearing debt in a planned fashion based on our approach to capital allocation, we will control gross profit, EBITDA ratio within the range of 1 to 1.5x to secure stable financial foundation.

From Page 16, I will use 3 pages to explain our organization generating outcome. First, about operating model, which has evolved to bring about overall productivity enhancement. During the previous CSP period, we worked on the transformation of our operating model. We shifted the top-level management focus from the traditional regional and functional access to patient access and established an end-to-end operating model. We will empower the cross-functional asset maximization teams and strongly call for agile ways of working, which will accelerate business outcome across the entire value chain. Also, under CSP 2026, we will use this evolved operating model as a basis to build an organizational structure with higher productivity and efficiency. We will create and deliver greater value faster.

On Page 17, I will explain our organizational culture, foundation supporting the execution of our strategy. At Astellas, we have operated our business with patients at the center with a high sense of ethics. Cultural foundation, organizational values and behaviors guide our decision-making behavior and outcome creation consistently across the entire organization so that each one of our employees will be able to take action on his or her own based on [indiscernible] understanding, we will make sure that this organization foundation takes root steadily as a basis of our strategic execution.

On Page 18, let me explain corporate governance. At Astellas, the Board of Directors actively engages from the development stage of our corporate strategy, providing important suggestions at the same time, the Board builds a strong governance structure to provide oversight and effective monitoring of the business execution by the management team through the monitoring process such as the EPM, Enterprise Priority Modeling Group. The Board ensures that management responsibilities executed to achieve revenue pipeline and financial targets. Also, the Board received feedback from shareholders and investors in a timely fashion so that it will be appropriately reflected onto decision-making by the management team. In this way, our corporate governance is serving as an important foundation to support the disciplined execution of our corporate strategy.

Last but not the least, on Page 19, here is a recap of key takeaways. During the 5 years between FY 2026 and FY 2030, we will work hard to deliver profitable growth and generate cash, accelerate pipeline debt growth, allocate cash with discipline and enhance our enterprise productivity. With CSP 2026, Astellas will establish a sustainable growth trajectory and aim to achieve record high revenues by the mid-2030s through pipeline-led growth.

That's all for me. Thank you very much for listening.

The presentation is now completed from us. So we would like to have a Q&A session. The first person asking question, that is Yamaguchi-san from Citigroup Securities.

Can I ask two questions?

Yes. Two questions are fine.

Okay. Then first question for me. For cost efficiency. With regards to that, I think you are making some new things announced. I understand overlapping, what's been mentioned in the past. And this time, from JPY 200 billion and JPY 85 billion is deducted and JPY 115 billion is included. Is this understanding right?

So basic understanding is okay. And this red part, it's not something that we don't know. We are not clear about this. So what we've done so far, it's going -- is actually the foundation to come up with this.

And overall what message this time the revenue was shown in a chart and the profit is not really shared with us. You have a series of pipeline. So for the short term, you'll have the XTANDI matter, but you can overcome in a perspective. So you have the short-term results of the profit, but in the middle of the 2030s, I think there are many things that you would like to emphasize, but [ extend decrease ]. Rather than that, you have important things. So -- you don't -- please don't care about their short-term profit. Is that what you say?

Probably my explanation is not really sufficient. The gray bar on the left, that is the cash before R&D expenses, and this is the graph of the accumulated cash flow. And at the very bottom, you can see the acquisition of Iveric Bio, that is under the horizontal line. The -- it is expensive, but that is from the debt, JPY 3.4 trillion has gained and also JPY 4.2 trillion is utilized together with their debt. But in the coming 5 years, of which we can show you the waveform of the sales graph and if you refer to that, you might expect the profit is going to be decreased, but it is not really so in a 5-year apple-to-apple comparison, the previous 5-year is JPY 3.4 trillion. But next 5-year is JPY 4.3 trillion is going to be raised. And with the R&D and also strategic investment, those amount is going to be allocated. And every year, we would like to increase the dividend at JPY 2. And that way, we can return the shareholders that for that purpose, the resource is now available. That is explained with this slide in detail. If you look at only the top line, you might think that we are in a difficult situation, but we have a high weight of the strategic brands and also cost optimization is advanced. With that, our profitability is going to be on the increase. So the cash raise is going to be more than the previous 5 years. That's the basic message of this slide.

I see. The single year profit, you have no plan to share that with us, right?

The focus for the next fiscal year, just like the purpose today, we are going to share that with you. But the coming 5 years, each year, revenue and also the operating profit doesn't disclosed.

Next, JPMorgan, Mr. Wakao.

JPMorgan, Wakao is speaking. I also have two questions. That's about Page 7. So this is about excess revenue. You shared this chart in the past as well. And what's been expected for me is the bottom line or the profit level. That was what I was -- I had been expecting. This time, there was no specific number presented. But listen to your presentation, FY '29 go emersion, 30%, I think that is what's going to be applied. But on the other hand, R&D ratio level, Considering that OP margin 30% is difficult to be achieved. Though the profit [ level ] might be variable, both bottom line was not shared with us from the beginning. So there might be some background reasons why bottom line is not shared. So could you share with us further ways of thinking bottom line or why you're not disclosing that?

Okay. Could you go to Slide 8. Please look at the graph on the right. What we try to do from now on is as follows. COGS and the SG&A expenses would be controlled within 50%. But doing so, core operating profit before R&D expenses, we will make the ratio to 50% against the revenue. This is what we'd like to continue. And core operating profit margin of 30% and R&D expenditure, 20%, there is a white line in between the two. For the coming few years, revenue would be on a declining trend. But on the other hand, we have very attractive pipeline assets, and we have pipeline assets approaching the late-stage development.

So against the revenue, 20% R&D would be the ratio of R&D expenditure. Are we going to sacrifice the future growth? Or if the pipeline is promising, we can exceed 20% to invest in R&D to secure our future growth.

So we had -- we need to have such discussions in the current stage. Next, please go to Page 15. Because of this, as is shown here on the upper right, JPY 2 trillion on the expenditure, the compared to the 20% of the revenue on a comp op basis. This number is a little bigger, up to 5 percentage points, 20% to 25% we will control the R&D expenditure, and we are planning cash allocation of JPY 2 trillion. But assuming that scenario, in some years, it may be 28% by [ 850 minus 92 ] or R&D may not make progress and R&D expenditure might be 19%. Then cooperating profit ratio would be 31%. So I talked about the dotted line in the pie chart, on the expenditure on cooperating profit had a decline in between, that line might fluctuate or shift a bit. So please assume that it may happen, but the right half in pink should be under 50%. We are going to use them with discipline. So profit and R&D would be available always at the 50% level. That's the structure we'd like to aim for.

Understood. Then based on the ratio, you developed your targets, so you are refraining from mentioning specific numbers. So regarding the timing of profits, FY '29 or '28 is my understanding correct? Against the revenue?

Kitamura speaking. Regarding your question, on your end, our intention is as follows. In the coming 5 years, this is going to be a turning point for us. A portfolio will be shuffled and also we have very strong pipeline right now. So 10 or more pivotal studies or Phase III studies will be initiated. If the number changes, this will also change. So at a very detailed timing, how much for what? Rather on [indiscernible] basis for the cash flow for the 5 years, we allocate our cash fund. The revenue bottom is going to be in FY '29. Revenue and profitability and profit, there is a correlation between the two. So what is going to be the bottom, you can imagine for us, rather than the point of time in the coming 5 years, how we are going to make money to invest to create a base for the future, that's -- we think is important. So this is what we are discussing right now. And as Okamura said, revenue might decline, but we can secure earnings for the coming 5 years. So we think we can make investments.

Understood. Very clear. My second question, sorry. I talked about profit is going to bottom in FY '29 but I stopped a bit because of the potential change in the product mix.

Revenue would bottom, but that may not mean that the profit would also bottom in the same year. XTANDI slope maybe neither and compared to assumption, it may be higher, if we begin to think about it [ various ] scenarios, top line shape and the profit shape would not be in sync. That is going to be the future of the coming 5 or 10 years. So how we should explain this rather than looking at the annual revenue and profits, roughly for the 5 years, we have this much capability to generate cash, and this is how we're going to allocate. That's how we are explaining. So that's the biggest reason why.

Understood. Another question. The pipeline on bottom out in the middle of 2030, the record high revenue is what you are aiming and that is a very strong and encourage message. But in pipelines, it says about JPY 1 trillion. What will contribute to what extent? Could you be a bit more specific about this?

If you look at this chart, in the middle of 2030, what is likely to be contributing those in pink. And those in distinct. There are 5 items. And with those, we are going to achieve JPY 1 trillion.

For this JPY 1 trillion. Could you be a bit more specific? Thank you very much.

It's not easy to explain in a simple way. What we want to say here is that this page, Page 12.

Yes. But you see on this slide, Well, of course agility or speed when the real sense of milestone will come, that differs depending on my programs. And in the middle of 2030s that we say is during the period of this plan, it is about 10 years ahead, that is 10 years ahead. What we are doing is that for each program, for each indication. To what extent of the competition is what we are going to face, so what's the level of the sales? And what are the milestones? How many milestones to the launch? And what are the probability of success.

Considering all those factors in the mid-2030s, not the risk, not risk-adjusted total, that is the maximum potential sales, right?

Yes. Based upon the current risk that we see, the sales is discounted and accumulate them. Then for each milestone, the risk is derisked little by little. So the forecast or the perspective of the sales is going to be increased. If we achieve all of them, we can achieve over JPY 1 trillion. So that's a waterfall chart type of things. And for those, what is the probability and what is likely to be considering that in the middle of 2030s, JPY 1 trillion is the number that we come up with. If everything is success, JPY 1 trillion, it is not really so. Potential is better. But considering the risks and opportunities as target, we said about JPY 1 trillion. If we achieve that, then 2030s, the record high revenue that is likely to be achievable. That's one thing. And if you look at these programs, [ our ] rare genetic therapy or genetic regulation or the cancer treatment with a large number of the patients, if you compare them, the potential is different, of course. And which has the highest potential. Relatively speaking, then we can say that cancer program has more or higher level of the contribution. That is a very rational way of thinking. So the focus over each program, we are now reached program sales. We are not disclosing that. Now each program characteristics and also targeted patients and clinical trials, such information are available in the appendix. So first, I would like you to read it.

Well, this time, almost all the slides are something that we've already shown you, not really brand new for you. So I would like you to refer to such slide. And if you come up with further questions, please contact the IR team.

Next, BofA securities, Mamegano-san, please.

BofA Securities, Mamegano is my name. Thank you very much for this opportunity. There's one thing I would like to double check with you. Core operating profit, margin and R&D ratio, 50%. That's the number. Specific profit level is not really disclosed. But in this current plan, basically, you develop your -- the product that is developed in your company, excuse me. That is because the licensing agreement like license out with [indiscernible], you might be able to get further fund for the R&D, but that is not a part of your plan.

Thank you very much for your question. Within the numbers showing this time, R&D compression leading to the reduction of the profit for the future. That is not included. This is a number that we do the all in-house development. But that does not mean that we are not considering that at all. Of course, the partnership with the other company. If that leads to the further enhancement of the product value, then we are going to pursue for such kind of a transaction. And financial engineering and risk to a certain extent to reduce the return to the future, that might be the part of the consideration, but the numbers here is done basically the in-house development assumption. Please do understand in that way.

Next, Goldman Sachs Securities, Mr. Ueda, please.

Ueda speaking from Goldman Sachs Securities. My first question, I have a question about strategic investments. And the field of BD and also size of the deal. I have a question on those topics. According to your slide, Moderately derisked assets, are you assuming that after confirming POC and also the modalities and technologies where you have strength. What kind of areas are you assuming? Looking at the current pipeline, many of these could be in oncology field. I'd like to hear what you're thinking.

And also, the size of investments. I assume that you have a lot of flexibility if there is a big opportunity, you may spend a lot. So I'd like to hear your view here.

Thank you for the question. How should I explain where to start with? First, rescue-type BD, we are not going to pursue rescue-type BD. We often receive a question on this. Because of the [ waveform ], if there is a bottom or we can [ produce ] something from our side to flatten. That's one of the FAQ, but we don't -- there aren't many such deals and the price [ can't ] be higher, it can be very competitive paying cash today and we can get the cash flow of the similar amount. By getting such money by Astellas, there may be almost no value we can generate further according to [indiscernible]. We're not going to do this. But instead, the pipeline we have right now, technology-wise, it could be reinforced or -- when we deliver these two patients, we can expect synergy, for example, and we are going to use our money in those areas. Everything to be paid upfront like a company or asset acquisition, but no. But Evopoint deal, Vir biotechnology deal, were of this kind of a nature, we'd consider a deal structure we may form a licensing agreement or collaboration agreement to share risks, which consider such possibilities. That's the message we wanted to show today. If you go to the next page, strategic investments, a variety of things are included in here. So everything may not be BD. But overall, JPY 850 billion in total for the 5 years. In addition to BD, a CapEx would also be included. Including those elements, roughly speaking, JPY 100 per year, doing deals one after another in a deal with each size exceeding JPY 100 billion. We're not planning to do so. Did that answer your question?

I have my second question. The current -- the progress of the current projects under development, how I should understand compared for the previous CSP technology platforms were considered. I got the impression that you had that on your mind. But after the CSP period in 2030, for example, technology platforms can be built. Is that the image you're assuming? And also, Rx+ was another initiative you had in the previous CSP period. So this would be linked to value generation and value creation. But at this time, there are many pharmaceutical aspects. In 2030, what is going to be the platform for your company and also the portfolio as a whole for Astellas?

Thank you for your question. I would explain broadly. And then Taniguchi can add if necessary. Page 12. If you look at this stage, technology platform, from the same primary focus as the same technology platform for the exit. The therapeutic areas for the product, and the target patients, this and this might be related. So this is going to be a good combination. Sorry. It may be difficult to understand because it's busy and complicated, but primary focus starts from technology and biology. So the exit might be unclear, but it should lead to the exist and we should have focused franchises. And that's what we wanted to show here. So not all the technology platforms are on the [ mature ] phase. However, in the past 5 years, for example, the [ protein ] [indiscernible] and such kind of platform is good enough so that we can compete it, globally. It took more than 10 years. But for the cell therapy as well, finally, we can go into the later phase of the clinical development. And genetic therapy. You might think that we haven't achieved even one POC. However, AT132, we had placed the difficulties, but that was a good learning because they linked to the next overcoming the issues with using different [indiscernible]. So we made really the progress. So for example, bispecific to 138 and such, technology platforms are probably going to be the core of our Astellas. And those are now used in a dispersed manner in here and there, but rather in specific tumor types, some technologies are concentratedly used so that the franchise is generated. That is what we hope.

You asked about Rx+ so let me make a comment about it a little bit. When I started Rx+, we had two objectives. One is that at the time of disruptive technology reform is taking place. If you just stick to the existing business, you cannot catch up with the new technologies. So you need to have high sensitivity for the new technology as well. That's one thing and a prescribing drug, that is a very powerful means but the patient has a long journey and such kind of product can contribute only the part of such a patient journey. So for us, if it is possible, we would like to contribute to the wider area of this patient journey. That's why we would like to combine our new technology in our knowledge. We are not ignoring such kind of concept now and toward the future. Of course, we are going to maintain it. However, currently, our sales portion is going to be reduced, then R&D fund is more required in such a situation rather than Rx+, our main business, that is prescription drug development, and that is where we would like to put more resources on. That is our representation of the intention.

Next, UBS Securities, Mr. Sakai, please.

Page 15, that is about the capital allocation. In what situation, the share buyback is going to take place. How you think about it? For example, R&D, it becomes goes quite well. In the coming 5 years, R&D cost is necessary, and this is JPY 750 billion is used up, you don't have extra cash in that case or pipeline. If that doesn't go well, then in the case, R&D cost is not used. That's why the execution is going to be available. In that case, you have to think about [indiscernible] so there is no high possibility of this. How should we view about this?

Thank you for the question. In order to prevent misunderstanding, let me explain. This graph is not stuck rather flow graph. This is not a snapshot. This is a flow accumulation for 5 years calculated. In the beginning, JPY 4.3 trillion, that is overall height and if it comes higher, of course, we're going to have excessive cash, then how we're going to use it, that might be the dividend that might be used for share buyback. There's a high possibility that, that is going to be useful with the shareholder return. R&D expenses [indiscernible] JPY 2 trillion. As has been mentioned, this is divided into two parts, as you see. The 20% is what basically we want to use and 20% [ minor base ] sufficient in some cases. So every year, about 5 percentage points as a maximum, we might use a little over 20% that is included. That's why -- so it's within 20%, that's because sales has increased, our R&D is efficient. So the -- with this resource, you can do the same thing. There are various reasons, but anyhow, you can get the cash. And also in-house pipeline is really successful, so you don't need to do [indiscernible]. So that is the next box that is a strategic investment that is JPY 850 billion. You might not be able to use that.

So the size of the box compared to the current outlook and the cumulative number for the coming 5 years, are they going to match completely?

The size of the box [indiscernible] be bigger. As a result, putting cash on the financial statements without any reason it would not happen for Astellas. So in that case [indiscernible] make sure of the shareholder return. Sakai-san anything to add?

Yes, this is for the coming 5 years, and this is the range?

More than JPY 4.3 trillion core operating profit before R&D expenses, we are going to create that money, and we think we can do it. And our in-house pipeline, to advance them forward, we can generate from our cash flow. The money we require to do so depending on the progress strategic investments may not be utilized fully, then we'd be flexible in our judgment. It doesn't mean -- it does not mean that we're not going to do anything, but we will monitor the situation every day. So that we can leverage the information.

Number two, I have a question on next page, Page 16. Asset maximization team. You have -- instead of the regional or functional assets, you shift to the patient access. Then globally, many things can occur, and you are reducing your cost. So you can be a leaner association, a leaner organization with fewer headcount. But under this structure, one size fits all, for example, marketing materials in Taiwan could be created in Boston with Gen AI. It may happen. So the granularity meticulousness that can be one of the challenges you may face. What do you think?

Thank you for the question. Just by chance, there was a mention of the marketing materials. So Claus may want to say something. One side fit all, rather, AI is going to play a major role in an era where what we couldn't consider on our own, the individual's preference or regulations in other [indiscernible] countries would be reflected by AI to customize in the output, I am expecting such an era to come before thinking about a lot of things to optimize mine adjustments could not be made, but AI can do that. So I think we are going to move into that direction. And if you globalize, there are two possible directions. One, taking all the things into consideration too much, there are many things which are not useful in most of the cases or you may eliminate so many things. And you just have something just fundamental out of the basics where you don't feel any [indiscernible] or richness. But rather, we have the global capability center to consolidate our capabilities there, then higher efficiency, but effective work can be done. We are not going into those two extreme directions, but rather, we'd identify the best possible way and a slight difference can be reflected by AI in the output. And we'd like to continue to do our work in that way. Did I answer your question? Then that's all. But rather, if you want to hear about the marketing materials, I would ask Claus to add.

This is a great opportunity. So maybe I'd like to hear Claus' [indiscernible] briefly.

Well, let me answer your question on the marketing material. And thank you, Naoki. So we already started 3 or 4 years ago to build the internal processes to automate material content. We call it the content factory. And that usage of that internal engine to create content across the world, for countries across the world has steadily increased since we started building that I think we're now at the point where we not only have a centralized process that saves us agency fees, essentially, but we can also start using AI to create some content. Just as an example, we very recently on the medical affairs side, we created our first abstract using AI and that saved significant amount of time, as you can imagine, from doing it 100% through the human capabilities. Of course, we always have a human [indiscernible] and proofread and make sure that AI did not make any mistakes. But the efficiency gain and the time gain that we are already deriving from deploying both the standardized process internally, but then also the engine on top of that is starting to be very, very significant, and that will contribute to part of the cost discipline that you saw on some of the presentation slides previously.

Next, Morgan Stanley MUFG. Muraoka-san, please.

Morgan Stanley, Muraoka is my name. Since this is for 5 years. I know about that. But then the coming 2 to 3 years, the shareholders, how they deal with Astellas. With that perspective, I'm asking this question. Sales is going to be on decline. Just like you mentioned, R&D is probably going to be an increase. And of course, the dividend is going to be constantly raised, as you mentioned. And pipeline, new drug news is going to be increased. Then now shareholders [indiscernible] looking at the performance, looking at those what I mentioned. Is that what you mentioned? What you meant?

Not thinking about the -- you don't need to think about the revenue or profit, I'm not saying that, as Atsushi mentioned, based upon innovation continuously grow. That is what we would like to realize and cost of goods and SG&A added then it's going to be 50% and R&D investment continues [ to be 20% ] so that it you can come up with 30% profit. The Astellas is working towards that goal. As the investors, I would like you to always look at us from that perspective in criticized eyes. We would like to make an effort that we are not making such -- we are not considered we're not making that at all. The [indiscernible] two years for JPY 150 billion and the 3 years in total, JPY 200 billion. That's what we want to do. And these are the things that what we are aiming at. We have the XTANDI matter, and after that, finally, we are going to be in phase where that we can really offset the growth. BD is taking place here and there, and getting assets from something different and combine those, it's not such a status. Of course, its partnership with various companies taking place that basically based upon the in-house technology, multiple programs are going to go into the clinical phase. We are in such a phase now. So for me, the progress of timeline, how they contribute to the patients, those are data to be focused on so that you can enjoy looking at Astellas now and the [ enter ] of the future. That's my personal opinion, Kitamura-san?

Thank you. There are some parts difficult to answer, but this JPY 4.3 trillion. That is the cooperating profit total before R&D expenses. To put it simple, yearly JPY 800 billion to JPY 900 billion of their core pay before R&D expenses that has a certain level of stickiness in terms of the profit. So I would like to make use of it for the investment into R&D. With that, we can see the progress of the pipeline in that way. I think that is very important and JPY 800 billion to 900 billion profit before the expenses in order to realize that there are two important things. One, that is the strategic brands they are going to make a steady growth twofold in the coming 5 years. And are we on track of that. That's nothing and of course, cost optimization and also additional initiatives in the coming [ 5 years ] to JPY 200 billion. So if you look at this, I think that will be sufficient.

Understood. Now next question, Page 7, yes, this chart. This might be a bit toward the future, but the strategic brands. In this case, 2030 to '31 gradually it is on the decrease. I think LOE is a bit ahead of this time point. But around 2030 and '31, it seems that it's going to -- the strategic brands are going to be picked out. Is this an [ image ]? What's any reason for this?

This is just an image description.

Next, Nomura Securities, Matsubara-san, please.

Matsubara from Nomura Securities. I also have two questions. First, shareholder returns policy, as has been mentioned, XTANDI LOE but still, you would increase the dividend at least by JPY 2. And you generate cash with the growth of strategic products and cost reductions. But the main products did not grow -- may not grow as you expect, you may use a lot of R&D, but still can we expect the JPY 2 annual dividend increase?

JPY 2 dividend increase, I think, is a minimum. This is our commitment even as of now today. Still in this business, we don't know what could happen. Against [indiscernible], regulations may change. Suddenly, we cannot avoid such a situation. For R&D, even if we are confident because of some reason, we may not be successful. Success is not guaranteed. Anything can happen. So it's a completely different shape. But are we going to raise the dividend. If that situation comes then once again, we'd like to -- have to discuss with the shareholders. But even if there is a slight decrease in revenue, are we going to stop the dividend increase? So that's -- such a discussion will not occur. We are considering the cash allocation plan. So that's our current status.

My next question is about SMT. The range of cost reduction effectiveness has been shown. Any [ lower ] limit for the JPY 200 billion, if you can achieve JPY 200 billion, that would be great. And SMT is not going to end as you explained in the earnings calls. Are you going to exceed JPY 200 billion as a possibility, the range for JPY 200 billion and the upper limit or the lower limit?

JPY 200 billion is the commitment we're going to achieve. We have 5 years to cover. So SMT learnings would be leveraged. And also the global capability center, we have built, we'd like to leverage these to work on this. And AI technologies, as was mentioned, are advising a lot. So JPY 200 billion in the 5 years, our commitment we are going to realize. Any upside, it will be considered as we do this. When we started SMT, we were talking about JPY 120 billion to JPY 150 billion. We achieved JPY 150 billion already. So we do have know-how already. So this is a number we are going to achieve. You can perceive this as such.

Next, Sanford C. Bernstein, Ms. Sogi, please.

First of all, I have a question about the pipeline. Of course, in 2029 and beyond your pipeline would begin to contribute to regrowth, you have multiple pipelines. On the other hand, aggressive -- rest of the project [ degrader ], it's a program with the biggest progress. On the other hand, KRAS treatment competition -- the situation can change because of the competition rapidly. [ Revolution Medicines ] RAS activated -- RAS inhibitor data I'm talking about. According to the data, KRAS mutation, regardless of the KRAS mutation activated, RAS can be inhibited broadly and in PDAC, patients who are treated in PDAC, there seems to be a very good data by the competitor. What happens -- what should happen for [indiscernible] aggressive in the change in competitive environment to proceeds with the clinical trials with confidence by Astellas.

Thank you for your question. I'm a late person, but I would like to respond and then Taniguchi is going to add. First of all, safety profile. If this could be the drag [indiscernible] for first line or not. Second, duration of therapy, how long the efficacy can be maintained. Lastly but not least -- resistance mechanism, meaning if it's an inhibitor of course, resistance happens when all the targeted proteins are degradated, and what mechanism of resistance will be raised. So those are the three, are the points that are [ nonspecialists -- not specious idea ]. Taniguchi-san, any comment, please?

Thank you very much. Let me explain. Okamura made an explanation and that is extremely important point. First, this is a characteristic of this [indiscernible]. This is for [ KRAS12D ] this is happening or emerged expressed and the 40% of the PDAC and 5% in lung cancer. Looking at the data, compared to Revolution medicine product, safety profile is likely to be really good. And one of the characteristics is that this is IV administration. So especially for PDAC patients, the oral administration is difficult. So this IV administration is good for the compliance to continue the administration. And listen to the specialist comment, per KRAS better than pan-KRAS, this is KRAS specific. If it's highly selective, such drug is more favorably accepted in other line. In that perspective, against the revolution medicine [indiscernible] aggressive hence the competitive edge. But of course, currently Phase III study is going. So we have to see that data with that the profile is elicited the characteristics and also [indiscernible] points are going to be elucidated further. And only after that, I would like to go into more details.

Thank you very much, I'm looking forward to it. Next question. The new business model that you showed this time or operational model showed this time, how you are going to raise the value cost, speed and the probability success of programs, I think those are the access that you can look at. So this new approach -- how this new approach contribute to these different types of access? It might be difficult, but would you please explain that as much as possible?

If I say that, other [ CXO ] here with me might get angry that so far [indiscernible] historically, as you know, the original [ access ] is the highest access and Japan and Europe, the United States and Asia, they are the kings and they had the [ free ] time. But in that case, there is no best practice sharing and there are no synergy. That's why we decided to have the functional access for the top-level focus. But in the case, that is a function-wise gathering. That's why it is easier to have a better plan and synergy. But in that case, function and function are in lineup in the value chain that is not really making a good mindset for cooperating each other. For example, researchers would like to bring our products to the development as well as possible. The development side, consider the getting approval is their job. So they accept only those likely to be approved. [indiscernible] go back and forth there. The functional axis was the priority, but each has the project team with a different representatives and their team members discuss for the sake of the project and come up with the conclusion. And after that, they go back to the original function and that is communicated to the boss of the boss of the boss. Then there are some orders given from top level. And with all those [indiscernible], they have to come back to the project team meetings again. In that case, that was all the contents available at the time was far from originally discussed. So you have to start from 0 once again. We wanted to avoid this so we decided to have the cost [ functional ] team as a project from the phase of R&D to the very end of the end of the life cycle, one team is going to take responsibility and end to end, although the members might be changed little by little. So far, his or her own convenience [indiscernible] consider that we want to progress this further or no. But we can avoid that kind of approach with this system because team is dedicated, the decision making is going to be quick. And those in the very near to the field mix decision. So if things happened, the change of direction is very easy to do. So as an organization is going to be quite lean, However, more than that, the quality of decision-making is going to be higher, it's going to be speeded up and if you need to change the direction, you can do that his or her own responsibility. So in the -- so we can make a quick decision. So we don't need to spend 6 months for decision-making. So we have this value in uppercase in English, realizing that is [indiscernible]. So bigger value is created earlier. That is possible to be made with this business model. That's my [indiscernible].

I have additional question on governance and accountability. So what is the role in this asset maximization team. In a cross-functional team, there is the impairment they are accountable. In terms of the governance, and to end without anyone's involvement, they are not allowed to do freely. There's a [ stage gate ] in R&D. So good governance is functioning there. And also, we had the function-based organization before. Resources are allocated to projects. So it was like a vendor and the capabilities from the vendors may not be at the level being required. They have a team based on the patient access and then the team may not work. So teams -- to the capability offering function. With this capability, we can change our objectives, so please change. They are able to say so now.

We have a cross-functional team we are building. I often say this, this is to build a house with many people from different disciplines. Carpenters cannot use a saw or they cannot put down the nails. No, that is not going to happen.

We have less than 10 minutes to go. And we also would like to take questions from members of the media. Anyone who would like to ask a question from the media? [indiscernible], please.

I'm [ Yasakawa ] from [indiscernible] newspaper. I have a question about the detail in R&D. Your pipeline is the topic of my question, antibodies, new modalities for [ bio ] by increasing. What is going to be the proportion of small molecules. I would like to get an image ASP3082 as one of the products you are growing for the next generation across the board, what is going to be the proportion of small molecules? What about your resources for small molecules for the future?

Thank you for your question. In terms of the balance across the board, it's difficult to say based on what we're talking about the balance. Antibodies and engineered antibodies, such as bispecifics and ADCs and gene therapies and cell therapies. And their weight is going to go up for sure, mostly. And according to our outlook, the [indiscernible], small molecules or engineered small molecules, as we call -- as you pointed out, targeted protein degradation. In the new pipeline we're beginning to see, it's going to be the only modality. But still, but I'm not saying that there's going to be no drug discovery for small molecules. But compared to small molecules, biologics, will have a higher proportion into the future. But maturity BD is going to be successful, whereas small molecules will be going, there's no place they can go to some has such a pessimistic view internally. This may be the viewpoint side of the company, but [indiscernible] achieved a POC, we have follow-on programs as well. So for the future, for a company, this can be an important modality for our company.

One more question regarding the cost optimization. This may be overlapping with the previous questions, but you implemented SMT in the coming 5 years, as effectiveness, you have a number you're going to achieve. Compared to the previous two years, the amount is very big. In FY '26 and '27, you have large numbers. In the mid- to long term, you're going to work on, but for the short-term wins, I think you're including such figures as well. For example, the optimization of the head count might be included in this?

Thank you. First, the remaining part of SMT, meaning the JPY 85 billion in the coming two years, there are already plans and we are going to execute them. That's our commitment. And the remaining JPY 115 billion in order to achieve JPY 200 billion, that is additional 3 years. So rather than the increase of the reduction level, this is the asset base that we are going to follow. With SMT, we generate asset, and we are going to make use of that so that we will get further the contribution in AI technology is definitely going to change the ways of working. So that is also where we are going to make investments so that we can gain the benefit. So in the coming 5 years, the unprecedented reduction is what we are aiming at. That is not really so. We are going to be more down to the [indiscernible] and we go one by one steadily.

Next, [ Nikkei ] business, [ Hashimoto-san ], please.

[indiscernible] Hashimoto is my name. Page 12, that is about pipeline chart. I want to ask your question. Here, it says for primary focus underneath the value-enhancing BD, that's what it says. According to your explanation, primary focus itself is going to be revisited. The items might be increased. But this is value-enhancing BD. And the Slide two page after that you are going to do whether you can expect synergy. So the rescue BD is not something you are going to pursue for. So with this primary focus basically fixed, and it's not really increasing this to 5 or 6, rather for each primary focus, you're going to continuously discover the drug. Is that your intention?

Thank you for your question. I'm going to explain first and after that, Taniguchi is going to make a supplementary comment. Primary focus itself needs to be refreshed from time to time. We have this pull from a focus and some near to POC or POC is already established. So you might think that this is sufficient. But it's not really so. For the science, there's a phase of maturity and each science has a limitation. So for us, for earlier research, something likely to be the next primary focus. We have to make a continuous effort to find that. Next likely to be primary focus. But can we have 10 or 20 primary focus? In our size, if we do that, we can make a concentrated investment. So spontaneously, we can see the number. It's going to be the bill shape, but it's not going to overwhelm a number. We have a good primary focus now. That doesn't mean that we are going to stop seeking for the -- another primary focus as depending on situations, BD might be one inflecting point to find another primary focus. Taniguchi-san?

Thank you Okamura for the explanation. The science is progressing day by day. The immuno-oncology, targeting protein and also the cell therapy originative therapy, those are the focus [indiscernible] However, now and for the future, again, science is definitely believed to be progressed. So new technology, new science, whenever those are available or emerged as well as possible, we would like to update them so that ultimately, they can be changed -- transformed to the value of the patients. [indiscernible] we would like to prepare for that.

Regarding the number wise, the size-wise, comment as I mentioned about the size, how many is likely to be most optimal?

So for primary focus and primary focus candidate, the maximum number of that is 5 so far. Up until 5, we can manage 6, of course, that depends on the stages, depending on the therapeutic areas. That 5, I think , 6, that's the maximum. If it's over that, managing is going to be difficult. We don't want to do the thinner and wider. We don't want to do that.

Thank very much. We are running over, but we'd like to take the next question -- the last question. Bloomberg, [indiscernible], please.

[indiscernible] from Bloomberg. I have a question on Page 7. Revenue outlook is shown here. And are you expecting a decrease? How much is going to be a decrease? Just a slight decrease for profit as well in the coming 5 years. What is your outlook? And how should I understand?

First of all, XTANDI it's around JPY 900 billion right now as an annual business. XTANDI is a small molecule. So after LOE, generics, we replace XTANDI, so in the end, JPY 900 billion is going to be a very small number in the end. As for profit, XTANDI in the United States. We have a core promotion agreement with Pfizer, 50% of the revenue are paid to Pfizer in the United States. In the rest of the world, we have a royalty we paid to Pfizer in accordance with the amount of sales. So analysts, I think, have their respective models. So you can take these numbers into consideration as well as the speed. On LOE, as you can see in this diagram, it's not going to happen all at once in the world. In small countries, LOE will be seen in small countries. '27, in U.S., '28 in Europe, and '29 in Japan and other countries. So generics, we replaced XTANDI in various countries. One after another, then you can understand the revenue and profit image clearly based on this.

Understood. Thank you very much.

Is that all your question?

Yes, I'm fine. Thank you very much.

Then we are running over a bit. But many people attended to our meeting. Thank you very much. With this, we'd like to close today's briefing session. Thank you once again for joining us today.

Thank you very much for your attendance in this 20 -- fiscal 2025 earnings call by Astellas, Inc. I am Kato, Chief Communications and IR Officer, I would like to serve as a moderator for today. Following our presentation today, we will move on to the Q&A session. The presentation will be based on the presentation materials available on our website. Simultaneous interpretation in Japanese and English should be forwarded throughout the event, including the Q&A session. Please note that we cannot guarantee the accuracy of it.

[Operator Instructions]. This is some note from us. This material or presentation and answers and the statement in the Q&A session includes forward-looking statements based on assumptions and beliefs in light of the information currently available to management and subject to significant risks and uncertainties.

Actual financial results may differ materially depending on a number of factors. They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any advertisements nor provide medical advice of any kind.

Now let me introduce you the participants from Astellas here today. Naoki Okamura, President and CEO; Clinical Research and Development Officer, Tadaaki Taniguchi; Chief Commercial and Medical Affairs officer; Claus Zieler; CFO, Atsushi Kitamura. So this four attending this meeting. Now I would like to start the presentation. Okamura-san the floor is yours.

Hello, everyone. I am Naoki Okamura from Astellas Pharma Inc. Thank you very much for joining our FY 2025 financial results announcement meeting or to a very busy schedule today. This is a cautionary statement regarding forward-looking information. As this was explained by Kato earlier, I'm not going to read this page. Page 3 is the agenda for today.

First, I start with FY 2021 financial results. On Page 4, I will give you an overview of FY 2025 results. Revenue reached over JPY 2.1 trillion and core operating profit exceeded JPY 550 billion, both achieved record high results. significant growth of strategic brands by over JPY 140 billion year-on-year has driven double-digit revenue growth. As for SG&A expenses, thanks to the robust progress of what we call SMT, sustainable margin transformation, a company-wide cost optimization initiative SG&A ratio improved by 2.3 percentage points year-on-year.

Driven by strategic brands growth, and robust cost management through SMT, core operating profit rose significantly, up by 42% year-on-year. Core operating profit margin increased by 5.5 percentage points year-on-year to reach 26%. Our pipeline also progressed substantially. But see made a significant progress in MIBC, muscle invasive bladder cancer development. Following POC achievement by City aggressive PDAC, Pancreatic ductal adenocarcinoma in FY 2024, a total of three POCs were achieved in FY 2025, namely CT deaggressive for NSCLC, ASP2138 and ASP7317.

For CTD aggressive Phase III study was initiated for PDAC in the first-line settings. Promising external assets, ASP 546C VIR-5500 were licensed in and our pipeline expansion made progress. On Page 5, I will explain FY 2025 financial results. gross revenue, core operating profit and full operating profit, we broke records to hit all-time high since the founding of status. Let me explain main items. Revenue exceeded the JPY 2 trillion mark for the first time to reach JPY 2.132 billion, up by 11.9% year-on-year, achieving the double-digit growth for 2 consecutive years.

Core operating profit substantially exceeded the JPY 500 billion mark to reach JPY 555.7 billion, significantly increasing by 41.6% year-on-year. The bottom half of this page shows full basis results. Operating profit was JPY 382.6 billion, and profit was JPY 291.6 billion, both rose significantly year-on-year. On Page 6, I will explain FY 2021 financial results of our main brands. Sales of all brands increased across the board with strategic brand sales combined, strongly growing by over JPY 140 billion in total year-on-year. First, sales of five strategic brands, namely PADCEV, [indiscernible], Vaidoi, Vosa and Zospata reached JPY 480 billion in total. Substantially up by JPY 143.9 billion or 43% year-on-year. Parts and viral in particular, drove the strong growth, increasing by more than JPY 50 billion, respectively.

Strategic brands have high profitability and their growth made a great contribution to the FY 2025 consolidated revenue and profit increase as a whole. Next, I will explain individual strategic brands and XTANDI. PADCEV, sales increased to JPY 221.2 billion, up by JPY 57.1 billion or 35% year-on-year. Global sales growth was driven by strong first-line MUC penetration continuously. Sales expanded in all regions. In addition, any momentum for CIS ineligible MIBC approved in November last year in the United States also contributed greatly to sales expansion.

As for Asava, sales rose to JPY 77.6 billion, up by JPY 19.3 billion or 33% year-on-year. New patient starts, which are important metrics steadily leased. In the recent fourth quarter between January and March, demand grew more than 10% quarter-on-quarter. Treatment rate for complement inhibitors as a whole, including the competitors product rose to about 20%. Market penetration made steady progress. With regards to Vitol, sales reached JPY 63.1 billion, substantially up by JPY 50.9 billion year-on-year, significantly exceeding our initial expectations market penetration progressed extremely well across all regions, high coding '18 testing rates contributed greatly to strong performance.

VOSA and Zospata sales rose steadily, respectively. Extend sales increased to JPY 96.8 billion, up by JPY 48.5 billion or 5% year-on-year, reaching projected peak sales levels 13 years after launch. Page 7 is about cost items. With SMT initiative we realized cost optimization of about JPY 25 billion in FY 2025 for SG&A expenses, R&D expenditure and cost of sales combined. Partly due to the SMT effect excluding U.S. expanded co-promotion fees, SG&A cost ratio improved by 2.3 percentage points year-on-year. Let me explain a specific breakdown of SG&A cost and R&D expenditure. Expenses, excluding ForEx impact, rose by 2.6% year-on-year. while increased our revenue by more than 10%, we are able to manage SG&A expenses at the level almost similar to the previous year.

Investment toward further growth of strategic brands was increased by about JPY 10 billion year-on-year. On the other hand, as an SMP progress, we realize cost optimization of about JPY 11 billion. through steady progress in continuous global organizational restructuring, reduction of mature products related expenses and streamlining IT infrastructures, et cetera. As a result, while fully executing investments for strategic brands, we were able to offset the increase through SMT cost optimization according to assessment. R&D expenditure, excluding Ford impact, decreased by 3.8% year-on-year. While clinical development costs for pipeline such as aggressive SB-546C increased by about JPY 5 billion.

We made progress in outsourcing cost reduction through in-sourcing development capabilities, including clinical trials, et cetera, under SMT, which led to cost optimization of about JPY 10 billion we were able to fully offset the cost increase factors. In addition, with the completion of large clinical studies, development costs for strategic brands decreased by about JPY 5 billion. Page 8 shows life cycle management or strategic brands. Let me explain main achievements in FY 2025. Update since the last financial results announcement are shown in blue, including the achievements in April 2026. Strong development progress was made towards maximization of our strategic brands value, notably for passive. I will explain the latest status of Pat on the next page.

Regarding VOSA, in Phase II study in China, primary endpoint was met in April this year. Based on the study results, we are planning to file a submission in China. On Page 9, I will explain the latest status of passive development in IBC. In addition to development in the perioperative settings we have worked on so far, we also started development for bladder sparing MIBC to potentially maximize passive impact. As for this eligible MIBC, shown on the left, we presented the latest data from EV 304 study at ASCO GU in February. As is shown in the figure, perioperative Pasad pembrolizumab significantly improved EFS, event-free survival, the primary endpoint compared to neoadjuvant chemotherapy.

Also, OS overall survival and QCP, PCR pathological complete response improved significantly as well. Based on the study results, we took procedures for an additional indication globally. Regulatory applications were accepted in Europe in March. In the United States in April this year, in U.S. we were granted priority review designation with PDUFA date set for the 17th of August 2026. Next, let me explain the right-hand side, development for bladder sparing MIBC as an opportunity to further growth.

It is known that about 30% of MIBC patients are ineligible for or refuse radical cystectomy or RC. These patients will not be eligible for EV 303 or EV 304 studies, there are high unmet medical needs for treatment option that delays our voice RC and preserves the bladder. Based on the extremely favorable data obtained consistently from clinical studies in MIBC by now, we initiated development of PADCEV for blood sparing MIBC. EV 209 is a single-arm Phase II study initiated in April. The study enrolls MIBC patients who are eligible for, but select not to undergo RC to evaluate the efficacy and safety of pace and pembrolizumab combination.

[indiscernible] is administered in 9 cycles, the same duration of treatment with MIBC studies so far. Primary endpoint are clinical complete response, CR bladder intact event-free survival, be EFS at 2 years. In addition, EV-309 as a registration of Phase III study is under preparation in parallel. We are planning to start the study in the first half of FY 2026. Also in China, regulatory application is in preparation based on EV 303 and EV 304 studies.

[indiscernible] treatment and China are not factored in to our current peak sales forecast for parts. So if successful, there can be further upside potential. On Page 10, regarding focus area approach, I will explain main achievements in FY 2025. achievements made in April 2026 are also included in here. Over the past 1 year, our pipeline made a significant progress and expansion with 3 POCs achieved 1 Phase III study initiated 3 clinical entries and 2 promising external assets in licensed. 238 in immuno-oncology achieved POC in gastric and GEJ Gastro is for geojunction adenocarcinoma. Preparation is now underway for rapid initiation of Phase III study. Furthermore, as a follow-on program, we licensed in, we are IR500 from Bur Biotechnology, ASP-2998 made clinical entry to expand our portfolio.

[indiscernible] targeted [indiscernible] achieved multiple important progresses in PDAC, where POC was achieved at the end of FY 2024. Phase III study was initiated in the first-line settings. Furthermore, POC was achieved also in NSCLC Phase III study is now under collaboration. In addition, ASB-5834, pancreas [indiscernible] also made the clinical entry pipeline expansion is making steady progress. As for 845 in genetic regulation, additional analysis is ongoing for POC judgment. 957 also made the clinical entry.

New programs, including ASP-2998 in immuno-oncology will be explained in detail on the next page. ASP7317 in blinders and regeneration achieved in patients with severe vision impairment due to GA, geographic atrophy. The next study plan is now under discussion with the regulatory authorities. Also, we licensed in 56 from EverPoint to further solidify our leadership position in the clothing 18.2 space. On Page 11, I will explain new clinical programs. next-generation innovative programs have advanced into clinical development. ASP-2998 is a program where which leverages a platform called immunostimulatory ODC or IADC generated from joint research with Sutro. Trop2 directed monoclonal antibody is conjugated with 2 payloads, cytodoxis topoisomerase 1 inhibitor and immunomodulator STING agonist.

In nonclinical studies in mouse model, superior efficacy was demonstrated versus the existing TROP2 directed ADCs. From now on, efficacy and safety will be confirmed in human in clinical studies. 957 has been created as a gene therapy for XLMTM X-linked myotubular myopathy, like AT132. It uses a novel muscle-targeted AAV capsid. High muscle specificity and reduced liver targeting was demonstrated in nonclinical studies. This enables clinical study initiation at the dose level, about 100-fold lower compared to AT132. With the progress of ASBE-2957, we decided on a strategic hold for AT132.

Moving forward, we will focus on the development of ASB-2957 as a gene therapy for XLMTM. ASP 2246 is a program to aim for recovery from motor dysfunction associated with ischemic stroke by using an approach called direct reprogramming. Messenger one, including human Neuro-D1 is encapsulated in Novo LNP lipid nanoparticles to enhance efficiency of delivery into cells. Messenger RNA, including human neuron promotes conversion of brain astrocytes into neurons and induces neuronal regeneration in a nonclinical study using the monkey model, improved motor dysfunction was demonstrated with intracerebral infusion of ASB-2246, Phase I/II study enrollment has been intimated by now. First subject dose is anticipated for the first quarter of FY 2026, you can find nonclinical study data of these programs summarized on Page 37 in the appendix. So please refer to it.

From here, I will explain FY 2026 outlook. On Page 13, I will explain an overview of FY 2026 outlook. In FY 2026, our performance is forecasted to reach record high results. Revenue is expected to expand over JPY 2.2 trillion. By growth of strategic brands by over JPY 130 billion year-on-year, according to forecast. Due to the significant growth we're expecting revenue increase, regarding cost items, we will continue some initiative to achieve about JPY 40 billion cost optimization. SG&A ratio is expected to improve by 2.3 percentage points year-on-year.

We plan to increase investment in R&D in line with the growing number of new Phase III trials. COP is expected to increase by 12% to over JPY 600 billion, and the core OP margin is projected to rise to 27.9%. In our pipeline regarding Parse for MBC, we plan to conduct multiple filings and regulatory decisions as well as initiate new Phase III trials. We also plan to initiate the Phase III trials for CT aggressive and ASP 2138. Regarding shareholder returns, we focus dividend per share at JPY 80, up JPY 2.

On Page 14, I will explain the full year focus for FY 2026. For FY 2026, we anticipate revenue of over JPY 2.2 trillion and a core OP of JPY 600 billion, suppressing the record high achieved in FY 2025. First, for ForEx rates, we are assuming JPY 150 to USD 180 to euro for FY '26. We forecast revenue of JPY 2.22 trillion, an increase of JPY 80.8 billion year-on-year. Although we anticipate a decline in sales of XTANDI, we expect to secure overall revenue growth driven by a strong performance of strategic brands.

We forecast SG&A expenses of JPY 800 billion, down JPY 60.3 billion year-on-year. Of this amount, extended co-promotion expenses in the U.S. are expected to decrease in line with the decline in its sales. Excluding copromotion expenses, SG&A is projected to be JPY 584 billion, down JPY 28.1 billion year-on-year. The cost optimization through SMT is estimated to about. The majority of this relates to SG&A optimization is expected to contribute to the reduction in SG&A. R&D expenses are projected to be JPY 355 billion, up year-on-year. This increase is primarily due to the high clinical development costs, including in stations of the Phase III studies.

To further solidify our mid- to long-term growth, we will accelerate investment in promising pipeline candidates such as CT deagressive [indiscernible] 500 in addition to the life cycle management of PADCEV. As development progress, we expect to continue investing at this level or higher. As a result, the focus is core OP of JPY 620 billion, up JPY 64.3 billion year-on-year, representing double-digit growth of 12%, and we anticipate the growth in our strategic brands and the cost optimization through the SMT will contribute significantly to this profit increase.

We expect the [indiscernible] margin to be 27.9%, up 2 percentage points year-on-year. Next is a full basis operating profit as a major adjustment item mix is coded from the core basis, we anticipate amortization of intangible assets of about JPY 140 billion. Additionally, we have factored in about JPY 80 billion in other expenses, this includes impairment loss risk of about JPY 40 billion and costs associated with organizational restructuring. As a result, we focused operating profit of JPY 395 billion, an ease of JPY 12.4 billion year-on-year. Page 15, the explanation, the outlook for our main brands of FY 2026.

The strategic brands will continue to drive growth in consolidated revenue profit with the particular contributions expected from [indiscernible]. We anticipate top-digit growth for each of these brands with total sales expected to exceed the JPY 600 billion mark and reaching JPY 610 billion. on an increase of about JPY 130 billion or 27%. But we expect continued strong growth driven by further market penetration of first-line in particular, we anticipate growth in [indiscernible] also grossing -- in the U.S., in addition to the full year contribution from cisplatin ineligible MIBC, we anticipate sales contributions from the cisplatin eligible MIB indication for which the filing was recently accepted starting diligent fiscal year.

As [indiscernible] expected to see steady sales growth, building on the sales infrastructure expanded last fiscal year, we will further strengthen promotional activities and through DTC initiatives. We will aim to expand the complement inhibitor market and increase the number of new patients. but we anticipate a continued solid growth across all regions, driven by a further increase in testing rates and expansion of the patient base and market share. We expect steady growth for both [indiscernible]. Extended the negative impact of price reduction associated with the IRA, which takes effect in January '27 in the U.S. is expected to become apparent study in the fourth quarter.

In addition, combined with the impact of patent expiration in certain countries, global sales are expected to decrease by about JPY 50 billion year-on-year. Please note that starting in fiscal year 2026, we have discontinued the disclosure of sales focus for individual products. We believe it is important to grow our five strategic brand as of 1 hole and we hope to engage in dialogue focused on third made to long-term growth trajectory rather than being preoccupied with the short-term fluctuations in individual products. Regarding Stand and mirabegron, we anticipate there will be significantly affected by factors such as patent situations in the future.

So as an exception, we are disclosing their sales forecast for your better understanding of our assumptions and outlook going forward through timely and appropriate information disclosure and communication, we will continue to strive to enhance our mid- to long-term corporate value by engaging a constructive dialogue with investors. Page 16 about the second management of the strategic brands, I will explain the major events expected in FY '26, we are expecting multiple regular events across strategic brands.

For PADCEV, we expect regulatory decisions on the EU and Japanese filing based on AB3003 study for cisplatin ineligible first and second halves of the fiscal year, respectively. In addition, we expect the Japanese filing based on the AV 304 study for is eligible MRBs in the first quarter with regulatory decisions for the U.S. and EU submissions anticipated in the second quarter and the second half of the fiscal year, respectively. Furthermore, plan to file in China based on both the EV303 and 304 studies in the first quarter. We also plan to initiate the Phase III EV309 study for blood disparing therapy in the first half of the fiscal year.

As a way, we plan to file in China in the first quarter. There are currently no appropriate treatments in China for geographic atrophy and serious condition and following constructive discussions with the authorities. We plan to follow based on data from overseas clinical trials. [indiscernible], we expect study data RADAR from the STARLIGHT-3 trial, which evaluates long-term safety in Japanese women to become available in the first quarter, and we plan to file in Japan in the second quarter based on those results. We also plan to file in China in the third quarter. On Page 17, this is an outline of the key pipeline events expected in FY '26.

We plan to initiate Phase III trials for SB-2138 in first-line gastric cancer and cited aggressive in second line or later non-small cell lung cancer in the first half of the fiscal year. We are also considering announcing additional data for each of these studies within the current fiscal year. Details will be provided once the announcement is officially conformed. Although this is an event that has already been unshaped, we initiated a global Phase Ib/II study of ASP 546 led by Astellas in April. 7317, we will present additional data from Phase Ib trial at AVO Association for Research and Vision and Ophthalmology in May. AT845, we are currently conducting additional analysis of POC judgment and expect to reach a decision in the first half of the fiscal year.

Finally, I would like to review corporate strategic plan for our SSP 2021. On Page 19, I will explain the transformation of our organizational culture and operating model that we undertook during the CSP 22 in one period. as a foundation to continuously generate innovations, we have implemented various initiatives related to human resources and organization structure and have embedded them across the company. In fostering organizational culture, we established organizational health goals at the start of the CSP 2021 and advancing efforts company-wide.

As reported in the purpose sustainability meetings, we have achieved many results directly linked to our business over the past fiscal years. past 5 years excuse me. Furthermore, in April 2025, we simplified and consolidated our culture foundation to define organizational base and behavior. By ensuring that every employee act based on a clear shared understanding, we aim to strengthen collaboration and create and deliver greater value to patients more quickly. We have also significantly transformed our operating models.

Under the new structure launched in Peru '25, we shifted a top-level management focus from a region or function to patient access and introduce an end-to-end business model. with empowering cost action teams organized around programs and brands and strongly promoting at ways of working, we have enabled a clear and rapid so making thereby improving productivity and efficiency.

Page 20, the review of the performance goes in SSP 2021. Overall, we believe we have succeeded in establishing a foundation to overcome extended exclusivity and deliver sustainable growth beyond it, which was our original objective. Regarding Performance Goal, on revenue, thanks to our newly launched products such as [indiscernible] acceleration of life cycle management centered on PADCEV, the total sales of the strategic brands and exceeded JPY 1.4 trillion. Performance go to pipeline value. We faced a situation where programs already underway at the start of SSP2021 did not progress as anticipated.

However, as explained at the R&D Day in March, we thoroughly focused on our strengthening discipline, improving productivity through the transformation of our R&D organization. And by accelerating the development of priority programs, we achieved significant progress and expansion of the pipeline, including the achievement of a total of full -- about performance goals to core operating margin, while we made investment associated with the launch of [indiscernible] products, the SMT initiative progressed well, achieving cumulative cost optimization of JPY 65 billion over 2 years. As a result, the core OP margin for FY '25 reached 26%, up 4 percentage points compared to FY 2020.

Page 21 to ensure the reliable execution of CSB2281, we see 3 enterprise priorities closely linked to our performance goals and launched full-scale implementation in FY 2020 for growth strategy aims to maximize the potential of strategic brands, broad ambition aims to increase pipeline value and sustainable margin transformation aims for company-wide cost optimization. The following slides will explain the result of each.

Page 22, I will explain the result of maximizing the potential of strategic brands. In addition to [indiscernible] on the market at the start of CSP 2021, we successfully launched [indiscernible] the period of CSP 2021, establishing a diverse high-margin portfolio of strategic brands. Furthermore, we obtained approvals for PADCEV as first-line treatment for MUC, and for the additional indication of MIBC, which serves the key growth drivers, thereby further strengthening our growth foundation.

As a result, our strategic brands expanded robustly, achieving a remarkable growth of 10 poles over 5 years. Since the majority of strategic brands are fully owned and are high margin brands, they have strongly elevated as well as overall revenue and profit growth during the SP 2021 period. The solid track record of build over the past 5 years has further increased the certainty of our future growth. We will carry this growth momentum forward into the next corporate strategic plan. On Page 23, I will explain the increase of pipeline value. We accelerated the development of flagship programs in each primary focus area and achieved a full POC from 3 assets.

Furthermore, we strategically and systematically generated follow-on programs and incorporate external innovation based on our focus area approach, thereby expanding our pipeline. As a result, we have established a franchise in multiple orthopedic areas such as prostate cancer coding 18.2 targeted therapies and retinal diseases where we have cultivated strength through the development and sales of main products thereby building a foundation for sustainable growth. Page 24, I will explain the outcome of the -- since launching the SMT in FY '24, we have achieved cumulative cost optimization of JPY 65 billion over 2 years. Furthermore, cost optimization measures for FY '26 and '27 have already been identified and we are now at the stage of ensuring their reliable execution.

We are fully on track to achieve total cost optimization target of JPY 150 billion. In addition, the SG&A ratio improved by a total of more than 5 percentage points over the 2-year period from FY '24 to '25, and we are gaining clear traction toward improving profitability. Moving forward, we will continue to advance cost optimization through SMT to establish a highly profitable financial structure. Page 25, I will explain the revenue and corp growth over CSP 2021 period. Revenue expanded 1.7 fold over the 5 years, driven by the strong growth of strategic brands. Core OP expanded 2.2 folds over 5 years, driven not only by the revenue growth, but also by significant contributions from cost optimization through SMG starting in FY '24.

The core margin also improved significantly. Page 26, today's key takeaways. Our strategic brands delivered exceptional growth raise in confidence for future expansion. Furthermore, we have established a robust pipeline and build foundation was supposed to extend the loss of exclusivity growth. Additionally, through SMT cost optimization, we have made significant progress toward resilient the cost structure. Over the 5-year period of CSP 2021, we are now fully prepared to overcome the extenders and loss of exclusivity and to continue to grow.

And our next broad strategic plan. We aim to demonstrate how we will achieve sustainable growth by building on the foundation we have established to date. At the end, I would like to remind you of the briefing session of our CSP 2026. It will be held on May '26, and we hope you will be able to attend. That concludes my presentation. Thank you for your attention.

That's all as our presentation. We now would like to entertain questions from the audience. [Operator Instructions]. Thank you very much for your understanding and cooperation. So we'd like to take questions. First, Citigroup Securities, Mr. Yamaguchi, please.

Yamaguchi from Citigroup. My first question is as follows, as you explained during the presentation, for strategic brands, in particular, you would share some forecast for some of the products, but not for strategic brands. So external parties cannot see the forecast. It may be seen as restating. But how you're going to -- what are you going to do about the individual trends of each product? The disclosure of individual product information is not going to happen. What's the reason why could you explain once again?

The results will be explained for each product, as we have been doing up until now. But in the process of the growth of new products, there are uncertainties for each product. There is an increase or decrease for individual products. Focusing on such a fluctuation is not very constructive in our view. So based on that, what kind of action we are going to take and how that's going to be reflected onto the actual results. That's something we won't analysts and investors to see. So this product expected to have this much revenue or sales in this particular region rather than having such discussions. What -- you're hoping to discuss the situation of 5 strategic brands as a whole. So in the mid- to long term, we are going to capture the development and the growth of the products.

So. It may not be the right expression, but you can demonstrate your capabilities. So I'm looking forward to future interactions. So once again, you -- on the May '26 at 4:00 p.m., you're going to explain the next CSP. So you're not going to talk about individual products very much. So between 4:00 and 5:30 p.m., are you going to share the presentation materials on the same day or the previous day, if you change how we can prepare. So after the closure of the market, we are planning -- preparing to disclose the documents after the close of the market like at 3:00 like today. Thank you very much.

Next, JPMorgan Securities, Mr. Wakao, please.

Wakao from JPMorgan speaking. I have a question about Xtend and the five strategic brands, the results in the fourth quarter and also the outlook for the current fiscal year. As for XTANDI, you can just talk about the actual results. Fourth quarter was a little bit weak in the United States. I'd like to know why.

My strategic brands, PADCEV was doing very well. So what's going to happen this year, particularly in MIBC. How we should look at the situation. I'd like to hear your view. And Asavas well, the plan was not achieved, but in principle, it's going to grow continuously in the current fiscal year. I'd like to know more details.

Thank you very much. Make the summarized the comment briefly. And because Claus is here, the rest is going to be explained by him. As has been mentioned, XTANDI in the first quarter, the business is a bit weak and we did our own analysis, and of course, they counter measures for that plan to be executed. But as you know, for XTANDI, in 2027 January, in line with the IRA, the place is going to be revised. So in the history of XTANDI, it's going to be the year of the reduction. And that impact was already explained within my presentation.

And just like you mentioned, in FY '25, the track record is the PACEV monetary value-wise, their growth level is outstanding and by law -- that has just launched in the market. So growth rate is over our expectation. And what is going to be happening for -- in FY '26, we are not going to share with the individual situation. So I don't know if it is right to talk about it. However, for PADCEV first line, other than the United States, it's going to grow further. And the U.S. market as a trigger for MIBC market as well, we expect that the sales is going to contribute it.

And [indiscernible] as well, 2025 is a little bit on a resting situation. However, in this couple of months looking at the track record of the time period. Still, there is a room of the growth. That's why we didn't revise sales forecast. It has to grow further. So we are having such a very expectation [indiscernible] do you have any additional comment?

Yes, just briefly to the 3 brands you asked about XTANDI [indiscernible]. So I think the fourth quarter is indeed a little bit weaker. But we see the entire market being weaker in the ARPI. So I think it's probably a mix of market effect and turbulent competitive and market dynamics for XTANDI in that particular quarter. But we've grown very, very well over the year, and we've now reached the peak sales for XTANDI. So I think that's very strong contribution to our growth rate. Let me turn to PADCEV because PADCEV, I think we need to distinguish between U.S. growth where we have the 303, so the CIS-ineligible MIBC indication already approved. And on approval, as always, with pads we see the market responding very, very quickly and uptake goes up. However, please let me also remind you that uptake usually plateaus after about 6 months.

So we are expecting that also to happen. So U.S. growth is very strong right now, but we do expect the plateau to come in end of Q1 or Q2, whereas Europe and the other ex U.S. countries do not have MIBC in any noticeable fashion in FY '26. Here, we expect a strong growth to be driven by reimbursement come through on the first-line metastatic indication. So you get a very different dynamic in the 2 parts of the world. But overall, I think PADCEV will continue its strong growth trajectory.

Now let me talk about iServe. You do remember about a year ago when the foundation funding dried up the entire market, the new patient starts for the entire market, both in geographic atrophy but also in wet AMD went down significantly. And it has affected sort of the base from which we have regrown as Naoki said, we have regrown from that lower base since then. But we've done it in a very consistent and very successful fashion. It's about 11% quarter-on-quarter that we've grown since that rebasing. And I also would like to draw the comparison to other products in the intravitreal space.

So if you look at, let's say, EYLEA, the [indiscernible], they've actually all decreased in sales EYLEA by 27%, [indiscernible] 10%, SIFOVRI by 4%. And we actually have grown more than 30%. So I think in a very difficult market environment, Either way has really produced a very, very impressive performance of consistently growing from that lower base. And we do expect that to continue as the complement inhibitor class also grows.

Thank you very much for the detail. As a follow-up, MIBC has a good market penetration, but it could reach a plateau quickly, that's understandable. As for 304 to get the approval, so a similar thing can happen. Is that factored in into the forecast? If the uptake is so fast. Overall, there can be a further increase by PADCEV.

So we do expect the 304 approval by the PDUFA date, as stated previously. So that would indeed then produce another uplift on PADCEV.

Thank you very much. My second question. In the past 5 years, XTANDI Cliff is to be exceeded, and you have a platform to increase your product. You have improved pipeline as well. And I have a question to you. Large-sized M&A possibility. How much leverage are you going to use?

I think that's in the appendix. But in principle, according to the pipeline, which is shared with us, you would exceed XTANDI cliff to grow? Is that the assumption? Is my understanding correct? Depending on the status of the products under development, you may need an M&A deal as a base case scenario, you would use your own pipeline to grow. Can I understand that way?

Thank you for your question. Up until now, we said a few times by now. This is an illustrative XTANDI figure XTANDI will decline, strategic products will increase, we would have programs from focus area approach to be added in a chart like this. In 2026, Peak is expected for sales. Then we have -- during the course of CSP 2026, revenue may decline. And then we go back to growth trend once again. And your view and our view may not be so different. Then if there's going to be a dip, a large M&A deal is going to be used to prevent the dip to minimize the dip or to make it flat. If that's your question, we're not going to do such an M&A? That's my response.

This is the so-called risk UBD to rescue from us from the dip will decline. We have no intention to do such a thing because such a deal would have an increasing price because everybody wants such an asset or a transaction. After we get something, if there is a small room for us to get the value, it's not going to a very good cash flow for deal. This is just the exchange for cash. So there aren't many elements to force us to do something like this. If you don't do a rescue deal, then -- are we going to pause BD, you may interpret that way in an extreme fashion.

But as we have been doing before, our franchises and the existing primary focuses to be reinforced by technologies and attractive assets, we are going to pursue such opportunities very actively. Everybody talks about very easily. But in the world of pharma, sharing the risks with the owners, there are many ways to do so back end licensing agreement is one way or milestone payments. To be linked with regulatory outcome by doing so, A huge amount of payment is made at the beginning, but nothing happens. We can prevent such a situation. Of course, we are making such efforts.

Still, having said so, how attractive our pipeline is right now because of this world, failures could occur. So 2030 and beyond the gross we want to achieve could not be envisioned. In that case, we should be able to use flexibility. So under camera, we try to repay the debt as soon as possible gross leverage ratio, EBIT on time up to 1.5x as we declared, we think we already sufficiently within this range. If necessary, large-size BD can be done because we have such extra financial capabilities, EBITDA is growing bigger than before. So the money we earn would be returned to shareholders partially.

But also, we'd like to make R&D investments for future growth. And also various investments will be made by using such a money for the details. On the 26th of May, we will announce our CSP 2026. We'll try to you talk about our plan as much as possible, and you can ask further questions during that meeting. But that's all the information I can share today.

Thank you. Next, UBS Securities, [indiscernible] please.

[indiscernible] my name. Thank you very much for your explanation. First, the cession is about dividend. This time, JPY 80 increased JPY 2. In the past 2x, the increase is every JPY 4, but this time, JPY 2 increase. I believe that you had a lot of discussions about this situation. I believe the discussion was quite difficult. But you have 4 and this time, too. I think that itself includes some message. Now about the CSB but this JPY 2 increase, what's your intention? What's the message?

Kitamura is going to explain.

Thank you for your question. I'm Kitamura, CFO. First of all, this dividend. As Okamura explained, investment for the growth and also return to the shareholders, those are continued. That is our policy for capital allocation. There was no change whatsoever on net. For dividend, a single -- rather than single year performance, mid- to long-term performance, cash flow forecast against that or based upon that, the stable dividend is provided. That is our decision. So JPY 2 per year and the performance was good.

So dividend is increased. It's not something like that. We have a sustainable plan. At this time, to yen, in the past 4 increase, well, whether I'm talking about a single year, again, mid to long term, perspective is necessary. And based upon that, we decided to increase. For details around the end of May, when we make a presentation at next CSP, we would like to give further explanation. Currently, margin is good cash flow is good.

Financial performance is strong. And just like Oka mentioned, when we do something and are fully prepared. So we'd like to be flexible to think about capital allocation.

That's all. The second question is about pipeline. Last week, ACR took place and [indiscernible] competitors' data, Revolution Medicines good data was shared not only data, but also 55, the nonclinical, but data was also good. Based upon such data, your franchise [indiscernible] project, your ways to look at is not different.

The area is still the therapeutic area was investing I am going to make an answer, first of all, and followed by Taniguchi. We consider that KRAS is quite an important target. Their success means that [indiscernible] is definitely target that we should more focus on. So their success is proving it. The difference of mechanism of action. But first of all, that data is a very early phase. So us the benefit due to the difference of mechanism of action is available in our product. So at the very end, when the late phase of data becomes available, and that is the time we can say which wins lose. I think as has been mentioned, thanks to their success that became our confidence of targeting the Karas.

Thank you. Taniguchi speaking. As has been explained by Okamura leverage [indiscernible] medicine data Paras inhibitor by revolution and that data is disclosed. And this is really good data we have the Kras target project. So the Kras itself is quite promising. That's what we've learned, including PDAC, NC and NSCLC is suggested to be a really good target for the treatment. Stress that we have, the first line of PDAC Phase III has just started. Regarding this indication, we are ahead compared to revolution medicine. And our CRAs, GTV targeting set aggressive not only efficacy but safety as well, the approvable result is available.

So it is easier to combine with chemotherapy that is coming to standard of medicine. In the case of PDAC in severe patients, it's difficult to administer the drugs already. So IV infusion, CTD aggressive can be used for such patients as well. That's our expectation as for the data -- we disclosed some of the data already. And based on our data as well, [indiscernible] target, is going to be important into the future for important PDAC and lung cancer targets.

Next, Goldman Sachs Securities, Mr. Ueda, please.

I'm Ueda from Goldman Sachs Securities. My first question your initiatives in SMT, I'd like to know more details. For billion yen, reduction is going to be incorporated into our plan for the current fiscal year. What kind of items are going to be the major ones? In 2027, your measures as was shown here, some are already identified. So what you're planning to do, specifically, if there is -- is there anything you have already decided? What about the certainty of these measures are to be implemented as we said?

We are going to do something which is already identified, so we will just work on it. But still in areas like this, if we do something like this, we may not be able to realize the effect as we planned or it may take more time as we were planning. So the value could be diluted. So there can be such risks. Now that everything is already identified, so we just need to do and work on that. No. And we have to pursue further opportunities for SMT continuously. Kitamura-san can talk about the further details as far as we can share.

In 2026, we are expecting additional JPY 40 billion. by FY 2025, we work on various measures. And we try to invest the benefits there. Specifically, as you know, we have global operations. in order to increase the productivity in FY 2025, we made huge investments, creating new bases. To concentrate operations there to come up with a scale and implemented automation. We took such major action, and we'd like to harvest the effectiveness there. So it will generate a certain level of huge benefits and creating necessary capabilities in-house.

That's also one of the measures we are working on. And also, capabilities integration, including integration with vendors are also ongoing. So sales promotion-related back office or material development. And there can be a lot of synergy, so we are going to harvest the results. So those are the main things we are considering for FY 2026. What about 2027. We will explain in the future, SMT is not a single year initiative, but it's a multiyear initiative in the first year. We worked on lower hanging fruits easier to realize to prepare for the mid- to longer term in 2027. That is going to be the final year.

So action, which requires a longer time, and we are going to harvest the results from our longer-term projects such as supply chain. And legacy projects with longer lead time would be realized in 2027. That's what we are expecting.

Understood. My second question, in the United States, I'd like to ask you about the business environment in the States. Pharmaceutical duties and MFN, are you -- do you have anything you can share in terms of the negotiation with the U.S. government and also MFN and the tariff? How do you see the potential risks in your plan? Is that going to be fully manageable in your plan? So I'd like to ask you this question. Thank you.

Thank you for your question. Needless to say, receiving a letter based on that negotiation with the authorities, by some companies, you know those company names and what was the result? We heard such a rumor. And the first round seems to come to an end. So we haven't received a letter from the U.S. government. But still we don't -- we try to open a channel to discuss with the government authorities.

And looking at the components of the agreement, we can learn what kind of factors incorporated. And for each factor, what we cannot do. Those are, of course, we already considered and discussed. Tariff, there are some rumors, so stores ongoing but we don't know any specific fix. So we have prepared ourselves, but that's not really quantified so that it could be incorporated into the corporate strategic plan. Of course, we do a certain level of risk analysis. We have coming products from a focus area approach. And once they come to the market, our kind of price environment, we will face around that time.

For that purpose, we have to have a very sensitive antenna from marketing access perspective, what can we do and what kind of preparation we need to do those all under the consideration. This might be the repetition regulations and rules. Those are not something we can set by ourselves. The rules and regulations are decided by somebody else and we basically have to follow that. And within -- in order to that we do whatever we can do in a maximum way.

And it was likely to be changed. And if there are some countermeasures conceivable, then we would do so. So that's probably the only way we can do for this type of issue. Is this a big problem? Yes, it is likely to be -- likely to become a big problem. But nothing can be studied just being move make action only with partial information because we have patients, we -- the patients around the world we cannot make a decision. We think about only U.S. patients and not ignoring other countries, patients. We always would like to think about delivering value. in a uniform manner through other world. I think that's probably what we can do. Did I answer your question?

Next, number of securities, Matsubara-san, please.

Matsubara from Nomura speaking. I have two questions as well. The first one is a question related to Ueda-san, a follow-up question about SMT. You might say that please wait up until 2026 announcement. There are some areas you can do the cost reduction. In FY '27 afterwards, cost reduction through SMT is possible to be expected?

Thank you very much. Partly, this is a personal opinion. First of all, cost optimization and journey of that. That is going to be continued. If you were to ask me, have you completed that? Well, that's one way to look at it. But at the same time, technology has been advancing day by day. And my personal perspective, cost optimization never ends. However, cost cut is not only the way, not only pursuing the numbers just in front of us. What is important is to continue to deal with that from a mid- to long-term perspective.

For that purpose, you need a certain mechanism. And when you say cost you tend to talk about on the input, but maximizing output is also important. The bigger value is going to be delivered to the patients as well as possible. With doing that, we need to increase the productivity your question we're going to do this FY '27 afterwards, of course, we will do that. What about approaches? Well, we have a conventional approaches. That is based upon the sustainable margin transformation or SMT with a full year plan and execute those plans and the PTC is tied around. So it will continue the same thing. Well, I myself, this approach so has to be evolved.

So rather than doing the same type of SMT for the next 4 years, rather we are going to accelerate that. So that we can broadly work on this. And such details are going to be further explained -- possible to explain at the time of CSP presentation.

I'm looking forward to that. My second question is about USAA. In Partha study, primary endpoint was not achieved. Peak sales assumption is JPY 100 billion to JPY 200 billion, no change. So what's your view on the peak sales?

Thank you for your question. Unfortunately, primary endpoint was not met. Regarding this indication for us, in principle, we are not going to pursue this indication globally anymore. As for the change in the sales forecast, and what is going to be happening into the future, [indiscernible] is going to add.

Yes. I mean, FESPA is on a stable growth path. It's not a very fast growth path, but it's a stable growth path. So we do expect that to continue. And even in the PACE study, there are some elements which are actually quite interesting for doctors to study our reputation for Sosparta or Giturinib as a FLT3 inhibitor is very much intact even with a lot of first-line competition coming into this market. We expect this agent to continue on that slow single-digit growth path that we've had in the past.

Then for the future in subgroup with gene mutations, administering this to those patients in combination with chemotherapy, primary end point was not met, but this super could be utilized in different types of patients. Is my understanding correct? Can you decide anything to add from you?

Okay. May I? So [indiscernible] study, primary endpoint was not met. And analysis is now underway. Of course, subgroup analysis are included as well from various angles analysis is being performed. As soon as we get the results, we're hoping to share with you. And in which segments we are going to go for or not going for. We are hoping to have such an opportunity so that we can explain.

Next, Morgan Stanley, MUFG Securities, Mr. Muraoka.

Thank you very much. Morgan Stanley, Muraoka speaking. Most of the topics already covered, but XTANDI. Quarterly results quarterly figures, hopefully, we will explain today, it doesn't make sense to talk about the details of each product. But my question is, according to your forecast for FY '26, in the initial 9 months, it may flat or increase. But in the fourth quarter, there can be a big decrease year-on-year. Is that your image? Perhaps if you can share certain image, I'd like to hear.

Thank you. First of all, XTANDI as a whole, Discussing the figures for XTANDI as a whole, we -- it can be dangerous. So we have to discuss U.S. and ex-U.S. separately. As for U.S., as you said in the fourth quarter, I will kick in. So how much is a different question, but it's clear that it's going to be in the negative column. In other countries outside of the United States, there was the pace of growth up until now, it's going to slow, needless to say, because more than 10 years of basic the launch, if it's going to grow at the same pace as before.

No, that's not going to happen. But we have EMBARK data and other data we can use. So we still have room in the market where we can grow or we should grow. That's my basic principle. Claus, anything to add?

No. Only to add that, of course, ex U.S., the patent the exclusivity is much longer '28 in Europe. But in Japan, in Australia, in Russia and some other markets, we have quite a long patent life. So this is not just 1 patent exclusivity that we lose. It's really country by country over many, many years, about over 4 years in total. So that's the only thing I wanted to add.

Thank you very much. One more question to you. Core OP margin has been discussed quite often by now. I may ask your question about CSP. So I hesitate a bit. But operating profit margin is something you are very particular about in pursuing. If that's the case, how you're going to work on this. It's difficult to imagine because of the cliff. How you're going to achieve where are you going to achieve this? This can be a decline and then you go up again. So what's your philosophy and how much you want to be particular about this?

In a word, please looking forward to May 26, but I would like to make a some comment here just a little bit before that day. I think in the past, I mentioned about it, we add the size of a pharmaceutical company. And with the innovation, we try to contribute to the society. This is our style. And as such, biopharma company, cost of goods to 25%, A25 and the cost is reduced a little bit and might be CUSA lipid and vice versa might happen. But anyhow, adding up this to 50% is the level that we would like to manage.

So before the deduction of R&D, the profit is 50%. Out of that, the 20% of sales is allocated to R&D because that leads to the continuous delivery of innovation. My way of thinking. Based upon that, we come up with a number of 30%. The sales is reduced. So you cannot do in that way. I understand you would say in that way, but further details are going to be described on May 26.

Understood. One brief question. [indiscernible], the actual January to March, $180 million. It's increased in that -- to that extent, what's the background of that? I just got a little bit confused.

I can explain about this but Kitamura can explain in a thorough matter. First of all, you asked me a metric with the generic companies, we come to the settlement. In line with that, Other settlements took place. And partially, the royalty aspects agreed, including the royalty as well in the fourth quarter. And afterwards, some adjustment is applied. That is the situation, and that will continue. So please look at the number of mirabetric that as a precondition.

Some others on time factor also added a lease to the increase in the fourth quarter. Rather than onetime, fuses speaking, the transaction not included until the third quarter is now included and agreed patent period. During that period, this will continue. That's the way to look at -- so [indiscernible] number is disclosed. And as you know, the number is not that low. That's because of the inclusion of loyalty adjustment. Thank you.

Next, Macquarie Capital Securities, Tony Ren-san, please

Yes. Okay. Perfect. Yes. Thank you for taking my questions. I have two. So the first one is about your intangible assets on Slide 35. And you commented that you had some impairments for your gene therapy it appears to me that the value for some very successful products, such as VLO and Ezawa have also decreased a little bit. Could you comment, is it because of impairment? Or is it because of normal amortization. So that's my first question.

I think -- thank you for your question. I think the intangible asset is a combination of amortization, especially that is more like move to the sales rate in the market. Product-related intense veracity is now crushed by from the import R&D to the sales rate as us. And sales right, yes, there will be amounts over years. So it's kind of very heady transactions. Now the impairment loss are somewhat bigger in the import because the in-process R&D amount it says it is and up until the product will qualify to take, if we fail to qualify the market, we need to right of close the asset 100%.

Now we didn't have -- we did have the impairment also recorded in one study, that is the gene therapy product asset, but we have the new asset in the [indiscernible] trial. So we shift our focus on 10 to the 29 as already mentioned. So see the definite move in intangible assets. But over all, this time, we make the progress so that we shift to the focus on one project to new project -- and also the amortization start and move as a weak plant because of product is in market. I hope I answered your questions. SP-4

Yes, it's very clear. as. My second question is about your clinical collaboration partner, [indiscernible], so obviously, Eli Lilly acquired Colonia, you have been cooperating with Colonia over CAR-T in Vivo CAR T cell therapy since 20 -- since early 2024. So it's about 2 years now. Have you -- have you guys considered acquiring Colonia, was it because you did not want to compete against the Eli Lilly -- or was it because CAR-T or blood cancer is not part of your key priorities? And how does your collaboration with grower change after the [indiscernible] acquisition?

Thank you for the question. Probably that question should be answered in a very scientific aspect. So I would like Tadaki to answer those.

So thank you. Our Caronia collaboration is actually have on the project. And as you mentioned, that in vivo Cat platform, we work together in a preclinical the program. our decision is that we're not pursuing that project moving forward to the father. So we terminated that project. And so -- that's where we are now. And so I don't think we have any impact that the lead is going to be upward Caronia.

But of course, we have still connection with them, but we don't have any sign project working with them now.

Okay. Did you guys have the discussion over possibly acquiring [indiscernible]?

No, obviously, we haven't -- we have no intention to do that.

Next, Sanford Bernstein, Ms. Sogi, please.

Thank you. First, about Keras, I have a question to you. Revelation medicines [indiscernible]. Phase III results were announced for a second line plus PDAC, as for the first line, they have PDAC program, monotherapy combination. And your TD aggressive KRAS G12D and competitor is going to be earlier. Because of the KRAS for revolution medicine, this one may be more effective or similarly effective KRASG12D specific target is your product. So this can be a disadvantage for your product. [indiscernible] versus Kras, G2D specific. In terms of efficacy, what kind of scenario are you hoping to see.

It's too early to say specifics to explain the differences. But Taniguchi is going to explain as much as he can.

Thank you very much for your question. [indiscernible], it's [indiscernible]. So it's not just limited to KRAS, but us own inhibitor more broadly. Because of this, the target patient population is broader according to understanding. Maybe because of that, we don't know clearly, but I saw their data -- for example, skin-related adverse events and GI-related adverse events seem to be high in the incidence according to our impression.

In -- when this is brought to the clinic, what's going to happen? Regarding our stay aggressive, not just efficacy but safety relatively speaking, is also favorable according to understanding. So we just started PDAC first-line study chemotherapy combination is going to be the main regimen in the study. We are planning to execute. When I discuss with the doctors, the appearance might be different from doctor to doctor, but in the targeted population by the drug and drug with broader coverage, which one to use first.

As far as we have heard from the doctors more targeted product is the one they would like to use. So such a response is more frequent. So once the Phase I data is going to be available. They would decide.

One more question. [indiscernible] stock to targeting IHC that is a new type of ADC. Regarding the [indiscernible] the cancer cells, selectively, it is clicked or outside, especially regarding STING agonist, outside of the cancer cells, when it's released, it comes into the cancer cells for the action. Is it already confirmed? And also, these linkers cleaved only within the cancer cells. For that, I think that has to be the patient selection strategy considering their drop 2 ADC development so far. With this regard, what is your strategy?

Taniguchi is going to explain.

Thank you very much. That is a very scientific question. 2998 has been mentioned, STING agonist and also Topo used a dual payload targeting TROP2, this is such [indiscernible], and if that it is closed around the target, the design is in the way according to my understanding. One of the characteristics of this drug is top 2 target, not only ADC, but because of the existence of Sting, there are tumor or tumor microenvironment then activity is promoted to enhance the antitumor action.

That is the concept of the design. Looking at the preclinical data. But compared to the conventional ADC targeting top efficacy is superior. So that is where we have higher expectation. And what is the focus of [indiscernible]. If we learn about that, we can share that with you. But so far, I don't remember the data. So I take it back.

I bring back and if I identify some information, I would like to share that.

there are some more waiting for asking questions, but because of the time. Next is the last question. Nikkei Newspaper, Usaki-san.

Usaki from Nikkei newspaper. Can you hear me? This may be a little bit different question. the current Middle East situation. I just wonder if that has an impact into your business? Not the previous time, but for this time? Does it have any impact?

Thank you for your question. Well, the middle is the countries where we have footprint and having operations. Of course, the employee safety is a priority. At the same time, it's the area of the war because it's the area of wall, there are patients who are still requiring our products. So we definitely would like to make sure the delivery of the products to them.

The Strait of Hormuz is now closed. And because of the various type of the oil-related materials are delayed in terms of the delivery. And with that impact, perspective. So far, we can say that there is no big impact on us, and we are not thinking that will have a bigger impact. But our product is one of the component of all of the medicine or health care.

And as mentioned, if there are some more problems that happen for the materials. For example, the infusion back issue or cylinder for the injections. If there were some problems in [indiscernible] of the supply of those there might be the question or problems in card. So we always would like to continue to pay attention.

And as [indiscernible] mentioned, the topic of the U.S. administration, we are not going to be reactive for each individual events. Of course, we do our preparation. We do not consider that the business is going to be over a sudden better or the worse, which is one thing. So we would like to be prepared all the time.

Thank you for many questions. Time has come. So with this, we'd like to close today's meeting here. Thank you very much for joining us once again.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you for taking time out of your busy schedules to join us today for Astellas R&D Day. I am Kato, Chief Communications and IR Officer, and I'll be serving as a moderator today. It is a pleasure to have you here.

Following our presentation, we will move on to the Q&A session. The presentation will be based on the presentation materials available on our website. Simultaneous interpretation in Japanese and English will be provided throughout the event, including the Q&A session. Please note that we cannot guarantee the accuracy of the simultaneous interpretation. [Operator Instructions]

Please note the following. This material or presentation and answers and statement for the company in the Q&A session by representatives includes forward-looking statements based on assumptions and beliefs in light of the information currently available 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 the product under development, but it is not intended to make any representations or advertisement of these preparations. The data we are going to introduce today is based upon the contents presented at the conference meeting.

Let me introduce today's speakers, the presenters are Naoki Okamura, CEO. And Tadaaki Taniguchi, CRDO, Chief R&D Officer. Now presentation is started.

Good morning, everyone. I am Okamura from Astellas Pharma. Thank you very much for taking the time to join us for this briefing today. First of all, Astellas has a very clear vision. It is on the forefront of health care change to turn innovative science into value for patients. At Astellas, we defined this value in bold by placing the outcomes that truly matter to patients in the numerator and the cost to the health care system of delivering those outcomes in the denominator. This approach serves as a guiding principle for decision-making across the entire company, including our R&D strategy. Please go to the Page 5.

We adopt a research and development strategy known as the focus area approach with the goal of delivering meaningful outcomes scenarios with high unmet medical needs. The focus area approach consists of three core elements: biology, modality and technology & disease. We begin by understanding the biology of the disease and its impact on patient lives. Next, we select the optimal modality or technology that aligns with the characteristics of the biology and apply it to the patients who are most likely to benefit. When these three elements are firmly linked to form a solid triangle, we define this as our primary focus. By providing around vertices of this triangle, we believe we can generate multiple valuable programs from a single scientific foundation.

Page 6. We concentrated our R&D resources on areas where we possess deep scientific expertise and have the highest potential to deliver value to patients. We currently have 4 primary focuses: immuno-oncology, targeted protein degradation, blindness and regeneration and genetic regulation. For each primary focus, we have designated flagship programs aiming at proof of concept or PoC judgment by the end of FY 2025 and have been advancing development with a high priority. Of this, we have achieved a PoC for 3 assets, ASP2138, ASP7317 and setidegrasib previously referred to as ASP3082.

Page 7. By making disciplined decisions regarding our portfolio and accelerating high-quality science, we have driven the creation of tangible value for patients. As shown in the slide, we have made significant progress over the 5-year period of our CSP2021. First, we have accelerated our pipeline. Over the past 5 years, we have achieved 12 Phase II first subject dose or FSD for new molecule entities and initiated one new Phase III trial. We have certainly increased our speed and execution capabilities across the entire development process, including achieving a total of 4 PoC from 3 assets. Next, we strengthened our portfolio discipline. We decided to terminate 21 clinical stage programs. And as a result, we reallocated resources to assets with a higher expected value and lower risk. This has significantly improved the quality of our entire pipeline. And also, we built a foundation for sustainable productivity.

We transformed our R&D organization into a patient centric into end-to-end model invested in key capabilities and introduced new ways of working to achieve more consistent results. This series of achievements clearly demonstrates the strength of our focus area approach. This approach will also form the foundation of Astellas' R&D strategy in our next midterm business plan scheduled to be released on May 26.

Page 8. We are implementing initiatives to overcome short-term challenges, including a loss of exclusivity of XTANDI and return to growth. First, we are focusing on maximizing the sales of our strategic brands to mitigate the impact of revenue decline following the loss of exclusivity of XTANDI and to pave the way for future growth. At the same time, we are focusing on accelerating development to build our pipeline to market as quickly as possible. Furthermore, by advancing these efforts and robust operational efficiency and financial discipline, we are building a profitable business structure while addressing current challenges. Through these approaches, we will continue to invest in long-term growth while addressing short-term challenges, thereby maintaining and strengthening our momentum.

Page 9. As part of this strategy, we have introduced a new end-to-end model along the patient axis and have been driving organizational transformation. Under this new operational model, we view research, development and commercialization and life cycle management as an integrated whole, consistently focusing on improving productivity and creating value. By strengthening collaboration across functions, we are able to advance programs more efficiently from the early stages of drug discovery through late-stage development, enabling clearer and faster decision-making.

Page 10. Through our disciplined strategy, we are building a robust pipeline while focusing on areas where we possess deep expertise, we are also leveraging the capabilities of external innovation partners to create meaningful value for patients. In each therapeutic area, we have built a deep pipeline comprising not only our strategic brands already on the market and our primary focus flagship programs, but also follow-on programs externally acquired programs and even early stage research programs that support next-generation innovation, thereby forming multiple franchises. Good examples include the prostate cancer franchise, multi-modality therapies targeting Claudin 18.2 and the acquisition of IZERVAY, which is indicated for geographic atrophy in age-related macular degeneration, GA in AMD, paving the way for retinal pigment epithelial cell based therapies. These efforts have created a balance of sustainable portfolio that will reliably deliver a short-term progress while continuously generating future innovation.

Next, Taniguchi will provide a detailed explanation of our R&D initiatives. Taniguchi-san, please?

Good morning. I am Taniguchi, CRDO. I will now provide a detailed explanation of our R&D initiatives. For those living with serious diseases, science holds the potential to significantly transform their lives; however, many patients still have limited treatment options. Addressing these unmet medical needs is a major driving force behind our R&D strategy. Next slide, please.

Page 12. Astellas has a proven track record of continuously developing innovative medicines and delivering them to patients. The innovative treatments developed by Astellas across multiple therapeutic areas are being used by patients in many countries around the world. Building on our experience accumulated to date, we continue to work toward expanding access to medicines and further improving treatment outcomes while broadening our focus to earlier and more extensive stages of disease.

Page 13. In fact, our efforts to date have fundamentally transformed patients' expectations for treatment. In the oncology field, recent Phase III study results have further solidified the position of PADCEV in urothelial cancer in EV303 and EV304 study.

Regarding XTANDI, the Phase III EMBARK study demonstrated that it significantly delayed disease progression in earlier stage prostate cancer. In gastric cancer, combination data from VYLOY ILUSTRO study support its clinical potential with the checkpoint inhibitor.

In ophthalmology, IZERVAY has demonstrated the ability to inhibit the progression of geographic atrophy. In Women's health, VEOZAH offers a new nonhormonal treatment option for vasomotor symptoms or VMS.

This results demonstrate the ongoing success of Astellas R&D efforts in consistently translating innovation into Value for patients across multiple disease areas.

Page 14. I will explain PADCEV enfortumab vedotin as an example. In February ASCO GU, we presented the latest data from EV-304 trial, the study targeting patients with cisplatin-eligible muscle invasive bladder cancer or MIBC. The perioperative enfortumab vedotin and pembrolizumab significantly improved the primary endpoint, event-free survival, EFS, compared to neoadjuvant chemotherapy. In addition, significant improvements were observed in overall survival, OS, and pathological complete response, pCR. These results further confirm the benefits of PADCEV in the perioperative treatment of MIBC.

Please go to the next slide. Page 15. This slide illustrates progress across the full development spectrum. Our broad pipeline ranges from strategic brands that continue to expand their impact through life cycle management to a diverse range of early-stage development programs that will contribute to future growth. By focusing on the life cycle management of strategic brands in areas such as oncology, ophthalmology, and women's health, we are maximizing value while further strengthening our leadership in each field. At the same time, we are steadily building our pipeline that will underpin our future growth through our Primary Focus Flagship program and several follow-on programs.

Next slide, please. Page 16. In order to address the challenges ahead of us with XTANDI's loss of exclusivity, we need to build a resilient portfolio that will support our mid- to long-term growth. From 2024 to 2026, we fundamentally transformed our R&D organization and governance structure and achieved productivity gains by strengthening the foundation necessary for sustained success. Building on this newly established foundation from 2027 to 2029, we will set clear priorities, generate more high-quality development programs, and further enrich our pipeline. As a result, from 2030 to 2034, we will be able to significantly improve R&D productivity by accelerating the development of higher-value products.

Next slide, please. Now I would like to share more about transformation of our R&D organization.

Next slide, please. Page 18. Since 2024, we have taken bold measures to increase productivity and efficiency in R&D, and these measures are already delivering tangible benefits. Regarding internal and external collaboration, by introducing end-to-end operational model and agile working practices mentioned by Okamura, we have reduced handover processes between departments, enabling teams to advance projects more quickly. Furthermore, by collaborating with right partners, we have been able to create a broader range of value. Through initiatives to accelerate the pipeline, we have shortened development cycle times and enhanced necessary capabilities. We are also actively investing in talent, striving to enhance the skills of R&D teams and expertise of early development stage.

In development, we have established a system capable of conducting our own research clinical trials, reducing costs, and accelerating clinical trial speed and quality improvement. I will explain the details later on. Furthermore, by actively promoting the use of data, including the proactive utilization of real-world data, integration of R&D database, and AI-driven simulation and modeling, we are working to speed up decision making and strengthen evidence base. These initiatives form a cohesive strategy collectively and continuously improving speed, quality and efficiency of our R&D. Next slide, please. Page 19. I will explain how we prioritize our portfolio. We continuously review all programs from preclinical stage to life cycle management based on each probability of success and value. For programs assessed as having both a low probability of success and low value located in the bottom left of the diagram, we make strategic decisions such as lowering the priority or stopping them. This allows us to allocate resources to promising programs in the bottom right, thereby accelerating their development.

As development progresses, we expect the probability of success to increase, shifting those programs to the top right quadrant and enhancing the overall value of the pipeline. Next slide, please. Page 20. We are reducing the time from clinical trial execution to submission and approval through transforming clinical operations, specifically through in-house development of key capabilities ranging from protocol development and clinical trial conduct to data analysis and study reports preparation. We aim to strengthen direct communication with trial sites, thereby improving the quality of protocols, accelerating patient enrollment, and expediting data analysis and study report preparation. As a result of this transformation, in clinical trials, the achievement of milestones such as site selection and first dosing has been accelerated. In the regulatory submission process, the time from submission or acceptance has been significantly reduced. Furthermore, by improving the quality of our submission, we have shortened the time from submission to approval.

In FY2025, we obtained 8 approvals, 4 are strategic brands in major markets. Furthermore, these benefits is not just a onetime event, but can lead to ongoing improvement in our capabilities, such as strengthening relationship with our trial sites and physicians, conducting patient-centered trials, and AI-driven automation, as explained in the next slide. Next slide, please. Page 21. We are investing in cutting-edge technologies, including AI and robotics, to accelerate our digital transformation proactively. For example, in drug discovery research, we aim to accelerate the development of biopharmaceuticals and improve productivity, not only through NVIDIA's AI-powered supercomputing for small molecule drug design that has already been implemented, but also by introducing AI-enabled protein station for research automation. AI-driven gene therapy will lead to precise organ targeting, reduced toxicity, and enhanced treatment. These tools will help us test hypothesis faster and prioritize the strongest programs, accelerating research reproducibility and speed.

In development, leveraging study designer, Evinova's AI-native platform will enable us to efficiently design more sophisticated patient-centric clinical trials. In the future we aim to further improve trial efficiency through initiatives such as clinical trial monitoring using AI agents. Next slide, please. Page 22. We are driving cutting-edge research and building a long-term pipeline. Our research consolidated eight divisions to three Centers of Excellence, namely Oncology Research, Cell and Gene Therapy -- Research, and Innovation Labs expecting they will be our core enablers for our mid- to long-term R&D strategy. By integrating expertise of each research center, we can develop optimum treatment based on the pioneering scientific findings while fully understanding patients' needs and their conditions. Furthermore, these centers act as hubs for collaboration in and outside of the Company, leading cutting-edge science while working closely with partners in academia and biotech sector.

Next slide, please. Page 23. We are strategically building a strategic ecosystem in collaboration with a wide range of partners, incorporating outstanding external technologies and expertise through partnership with biotech companies such as Evopoint and Vir Biotechnology as well as world-leading academia such as Mass General Brigham, MGB. We are combining our deep expertise in Primary Focus with cutting-edge external innovation to drive progress in R&D. As an example of a partnership with academia, Astellas is the only pharmaceutical company partnering with Mass General Brigham, MGB. Through close collaborative research program, we are building early-stage pipeline and translational medicine, accelerating the creation of new therapies in oncology, rare disease, and ophthalmology.

By sharing a long-term vision with our strategic partners and collaborating openly and flexibly, we are strengthening and accelerating innovation. Next slide, please. Page 24. We have built reliable manufacturing and supply capabilities to provide consistent support for R&D innovation from the early development through commercialization. We have established a global manufacturing and supply network with manufacturing sites in Japan, the US, Ireland, and China and through strategic partnerships with CDMOs. We have made strategic investments in our own manufacturing capabilities, including our cell and gene therapy manufacturing sites in the US to ensure we are equipped to handle the diverse and complex modalities emerging from primary focus. By combining this manufacturing infrastructure with our regulatory expertise, we deliver high-quality manufacturing and supply at every scale throughout development.

Next slide, please. Next, I will outline the progress of our pipeline with each primary focus area.

Next slide, please. Page 26. In our Primary Focus Targeted Protein Degradation, we are working to target proteins that have historically been considered undruggable with the ambition to transform treatment options for patients. Our Flagship asset, setidegrasib, is a potential first-in-class targeted protein degrader for solid tumors with KRAS G12D mutations, which had long been considered undruggable. KRAS G12D mutation is found in approximately 40% of PDAC, pancreatic ductal adenocarcinomas, and approximately 5% of NSCLC, non-small cell lung cancers. Alongside our flagship program, we are advancing a follow-on asset, ASP5834, pan-KRAS targeted protein degrader designed to address multiple KRAS alterations, reflecting the expandability of the platform. The progression of both the flagship and follow-on asset illustrates how this platform can be expanded beyond a single target, supporting our ambition to extend to additional cancers and potentially other diseases over time.

I will explain the latest development status on setidegrasib using a few slides. Next slide, please. Page 27. Setidegrasib has achieved the PoC in pancreatic ductal adenocarcinoma, PDAC, and non-small cell lung cancer, NSCLC, both of which have significant unmet medical needs and is currently being developed in parallel across multiple cancer types. For PDAC, we have initiated enrolling patients in a Phase III trial for first-line treatment and primary analysis is anticipated in FY '29. We have also achieved PoC in NSCLC and are currently preparing to initiate a Phase III study for second and later lines. Primary analysis for this is also anticipated in FY2028.

In addition, data generation is in progress in other cancer types with the KRAS G12D mutations. Regarding colorectal cancer, based on the clinical data available to date, we have decided not to pursue late-stage development. Page 28. I will now revisit the data on setidegrasib in PDAC that we presented at the ASCO GI meeting in January, as mentioned earlier. In our Phase I study of KRAS G12D positive PDAC, the combination of setidegrasib and modified FOLFIRINOX as first-line therapy demonstrated antitumor activity and a manageable safety profile. Among the 12 patients whose efficacy could be assessed, the objective response rate, ORR, was 58.3% and the disease control rate, DCR, was 83.3%. Infusion reactions were reported in 72.2% (sic) [ 72.7% ] of patients; however, these were primarily low grade, occurred mostly at the first dose, and were manageable with standard supportive care. There were no treatment discontinuation due to these reactions.

Based on these results, we have initiated patient enrollment for a Phase III trial evaluating the combination of setidegrasib with a modified FOLFIRINOX or NALIRIFOX as first-line therapy for PDAC patients. Page 29. Here, I present clinical data on setidegrasib in patients with advanced or metastatic NSCLC with KRAS G12D mutation. This data were presented at the European Lung Cancer Congress last week and simultaneously on the same day, published in the New England Journal of Medicine. In a cohort of 32 patients receiving second or third-line treatment, the ORR was 37.5%. As shown in the figure on the right, the median progression-free survival or PFS was 11.2 months. No new safety signals were identified. Based on these results, we are preparing to initiate a Phase III trial of setidegrasib monotherapy in advanced or metastatic NSCLC patients.

Next slide, please. Page 30. Next, I will explain our Primary Focus on Immuno-Oncology. Immunotherapy has significantly advanced cancer treatment but many patients still do not achieve sufficient efficacy, leaving a significant unmet medical need. In its primary focus, we aim to achieve high therapeutic efficacy by leveraging diverse modalities that target both the immune system and the tumor microenvironment. Specifically, we are utilizing next-generation platforms such as T-cell engagers, ADCs, and multi-specific antibodies to achieve more effective and sustained treatment outcomes for difficult-to-treat cancers. I'll provide a detailed introduction to our Flagship program, ASP2138 on the next slide. Next, please. Page 31. ASP2138 is a potential first-in-class bispecific antibody designated to activate T-cells and damage cancer cells by binding CLDN18.2 expressing cells to CD3 positive T-cells. CLDN18.2 is expressed in gastric cancer and PDAC, which represent areas of high unmet medical needs. We have already achieved PoC in gastric cancer and are preparing to initiate a Phase III trial targeting first line treatment for patients with low to moderate CLDN18.2 expressing gastric cancer who are not eligible for VYLOY. Primary analysis is anticipated in FY2029.

Next, please. Page 32. Our partnership with Vir Biotechnology is an example of how we are leveraging insights gained in the prostate cancer field to connect our cancer immunotherapy with actual clinical development. Under this strategic partnership, we are advancing the development of VIR-5500, which targets a novel immune-mediated mechanism. VIR-5500 is designed to incorporate a proprietary masking technology that keeps the T-cell engager masked until it reaches the tumor microenvironment, thereby reducing its effect on normal cells and minimizing side effects. Currently, a Phase I study is underway as a monotherapy. An initial antitumor activity and a favorable safety profile have been demonstrated in patients with metastatic castration-resistant prostate cancer or mCRPC with prior treatment. Findings shared at ASCO GU show target engagement and immune activation with manageable safety at doses evaluated today. It was announced in February. These results support the continuation of development and provide crucial data to inform future dose selection and development strategies.

Next slide, please. Page 33. Under Primary Focus, gene therapy, we aim to make AAV gene therapy, which modulates genetic causes of diseases, are more accessible to more patients. Gene therapy holds the potential to treat and address genetic diseases at their source for which many patients worldwide are eagerly awaiting new treatments; however, the development of gene therapy presents various challenges in terms of drug discovery, development, and manufacturing. To address this series of challenges, Astellas has been building internal expertise in R&D and manufacturing while also collaborating with external partners to establish a platform. Our flagship program is AT845, an AAV gene replacement therapy for Pompe disease. The final PoC decision is pending as we review additional analysis of data. Furthermore, we are advancing follow-on programs for neuromuscular and neurodegenerative diseases and are also working on next-generation approaches such as MTM1, a gene replacement for X-linked myotubular myopathy, XLMTM using a novel AAV capsid.

Next slide. Page 34. Next, we turn to Primary Focus, Blindness and Regeneration. Here, we are addressing diseases that lead to irreversible vision loss and those representing a significant unmet need. Our flagship program, ASP7317 is a pluripotent stem cell-derived retinal pigment epithelial cell designed to replace damaged cells in patients with geographic atrophy, secondary to age-related macular degeneration. We have now achieved proof-of-concept, PoC, in patients with severe visual impairment, making a significant milestone. Additional Phase Ib safety and efficacy data are planned to be presented at the ARVO 2026, Association for Research in Vision and Ophthalmology, in May. Details will be communicated there. Alongside ASP7317, we are also progressing ASP2020, a follow-on allogeneic cell therapy for Stargardt-type macular dystrophies, reflecting the broader applicability of this regenerative platform. Next slide, please. Now I will use a few slides to explain direction of our research and development organization for sustaining long-term value creation.

Next slide, please. Slide 36. We anticipate that the R&D transformation and pipeline progress outlined thus far will form the foundation for sustained growth throughout the 2020s. Until 2029, looking ahead to the early 2030s, we aim to significantly improve productivity to reach the top tier of the industry, building a pipeline of high value-added products and accelerate R&D. Next, please. Page 37. We outline our initiatives focused on growth in the 2030s. Firstly, accelerate the development of our flagship programs and our life cycle management initiatives. Next, to expand the pipeline of follow-on programs, we will continuously improve program success rates and decision-making based on data and continuously improve entire R&D productivity. Furthermore, looking ahead, we aim to advance 10 NMEs into late development stage by 2034. Page 39. Astellas is undertaking a fundamental transformation of its R&D organization with the aim of rising R&D productivity to the top tier in the industry.

We are strengthening our pipeline by pursuing higher-quality science through an end-to-end operating model and prioritize investment in modalities and platforms that differentiate our portfolio. Furthermore, by building a robust drug discovery platform, we will generate multiple high-quality assets, thereby maximize pipeline value and accelerate R&D. We will continue to deliver sustainable growth and meaningful outcomes for the patients and the value. This concludes my presentation. Thank you.

This is all from us as a presentation. Now I would like to entertain your questions. [Operator Instructions]

First question is from Citigroup Securities, Yamaguchi-san.

For confirmation. 7317, in the past, the data of improving the vision has been shown. You've been saying PoC judgment. And this time, you mentioned that PoC is achieved. So this time is very first time that you mentioned the PoC is achieved. Is that understanding right?

Yes, you're right.

The second question. 3082 lung cancer data is introduced. Cross-trial comparison does not have meaning and there is no significance in early stage; however, with a simple comparison, ORR and DCR compared to revolution, what is happening? How do you view about this? For the PDAC, the data was really good. But from your perspective, this comparison has been expected, good, unfavorable? Would you make a comment?

Thank you very much. The data shown for setidegrasib this time has been shown, ORR is 37.5%. First of all, existing product therapy, in other words, comparison with the chemotherapy is the right way to be done. 37.5% of ORR compared to the chemotherapy such as docetaxel, this response rate is extremely high. [ EFS, ] this time in median. Well, it's open [ label, ] but this might be adjusted for referential, but 11.2 months. So, docetaxel [inaudible] we referred to, it was around four months of PFS reported. Compared to that, it's more than twofold of PFS extension. That's the data we have. With this, we are getting into Phase III. We are going to make appropriate study design for Phase III. That's what we are planning currently. Thank you very much.

Page 19. You showed a chart of the portfolio review and especially one, two and three, you made a comment about those. It might be difficult for you to talk about the details, but this one, that is the strategic deprioritization. That means in the beginning, you didn't expect, but the situation was changed. But what are the major reasons of this deprioritization? From the beginning, possible value is not really clear or the competitive superiority was lost? Could you share with us?

Basically, these are including the very early stages, not even in the clinical stage. Targeted product profiles are not necessarily completely fixed and such kind of projects are included in here. Based upon that as an assumption or the condition, please listen to my explanation from here. As you know, in a preclinical study, there are various things we have to prove, and we will go through the studies. There are things that this is okay. This is not okay at all. There are something in between. For those, we are going to do some additional studies to identify and make a decision if we can go for that or discontinue that. As has Taniguchi repeatedly saying, the discipline is important here. If discipline is not strong enough, you try to hang on the projects so that the project can survive as long as possible. But this time, completely, we review such discipline. If such factors are not satisfied, we should make a decision of discontinuation. We actually execute that approach.

For each project, the important factors are different and that is different depending on the target disease. If the modality is new, we thought in the beginning, it was really good. But once that development, the efficacy is not really expected. We have roughly six factors for the project evaluation. If five criteria out of those are not satisfied, rather than dragging the development on that, you make a Board decision to discontinue so that you can allocate the value of asset to the more potential asset. That's described here. Did I answer your question?

So, you have done that for 2024, and that is going to be continued. You expect a further improvement in efficiency?

Yes, that's right.

JPMorgan Securities, Wakao-san, please.

JPMorgan, Wakao speaking. My first question is also about setidegrasib. NSCLC PFS data is really good. So far, just like Taniguchi-san mentioned, it's not inhibition, but the degradation is suggesting the continuous efficacy, and it happened, it was really surprising. This might be the same question, but setidegrasib, how do you view about the possibility of being the best-in-class within NSCLC? I believe that it is clear it's going to be the first in-class. But for Revolution pan-KRAS, compared to that seemingly its good. Their PFS data is not available yet. So, I cannot make the head-to-head comparison, but we would like to know how you feel about that.

Another question is about PDAC. Second line, third line OS 10.3 months data is available published in New England Journal of Medicine. For this second line, third line, comparator is not available in Revolution. How do you evaluate this data? Compared to chemotherapy, it is superior, which is clear. But against the coming next-generation types, how do you view it?

Thank you very much. Wakao-san is correct. In comparison to Revolution, we are paying close attention with interest. But as you correctly mentioned, KRAS G12D is the target for those pharmaceuticals, data is not much available. So, head-to-head comparison is rather difficult. Their pan-KRAS oral inhibitor, what is the situation vis-a-vis that is the area that we are paying attention to. The differences, in particular in lung cancer, as we look at the data available on ORR, not much difference between the two versus chemotherapy, it's much better. But according to the publicly available data of them, ORR, not big difference between the two. As for PFS, duration of the effect, their data is rather limited. What is the situation in comparison to that? That is not so sure. But hypothesis that is KRAS G12D decomposing the KRAS protein itself is the strategy. Our hypothesis is being proven, meaning that the durability of the effect is maintained very significantly. That is our impression. Protein degrader and the KRAS suppressor or inhibitor, if you make a comparison, people often talk about the following.

As for inhibitor, the resistance occur. That is the issue. How they are going to overcome them, it's something that we don't know. But the different mutation of KRAS or different pathway may appear that is regarded as a challenge versus our KRAS targeted degrader, we decompose, degrade protein themselves. So, the refractiveness or resistance is less likely to occur in our modality. Therefore, we are going to accumulate in particular Phase III data moving forward. First and foremost, for non-small cell lung cancer, setidegrasib would have a potential to become best-in-class. That is what we want to pay attention to. This is the first point. PDAC and pancreatic ductal cancer -- carcinoma. In that cancer, there was no drug that reported to be efficacious in second line, third line. Setidegrasib and Revolution medicines -- medication inhibitor data were reported this time. More than expected, we got the feeling that it is more effective than we expected. In comparison to second line, third line, with the combination of chemotherapy, higher efficacy is already shown. In the pancreatic ductal cancer development strategy focusing on first line is likely to be a path or is the current path.

So far in the pancreatic cancer, currently, as you know, other than chemotherapy, there is no medication which shows efficacy so far. So, it's very promising. Our compound is very promising. But given the current landscape, so combination of setidegrasib and chemotherapy could be the main line of -- first line of pancreatic cancer. With that in mind, we want to design the study, and we want to conduct enrollment of the study, though we have already started screening.

That is very informative. Second, on page eight, in the midterm exploratory meeting, I believe you're going to explain more in detail. But after the XTANDI LOE, growth, you have strategic brands and the pipeline. As for your pipeline, so the project range that you have highlighted this time will constitute the main body of the pipeline, and you often talked about discipline this time. Beyond FY '27 onward, OP margin, 30% is going to be sustainably generated. As we have the late-stage subsequent development, are we able to maintain OP 30%?

This is not a precise diagram. This is just an illustrative chart. With this assumption, I would like to explain, as Taniguchi mentioned, life cycle management of strategic brands is included in center in red. The light pink, the pipeline, in this chart, according to Taniguchi explanation, are derived from primary focus or depending on the situation, they are the ones that we have already acquired from outside. Those constitute this pink pipeline. As you mentioned, from tomorrow, we will enter into FY '26. From FY '26, those which we obtained PoC will move into late-stage developments. As you mentioned, there will be a high amount of R&D expenses that we will incur. Therefore, we have several meaning of discipline when we say discipline. One, even if things are advanced, we want to prioritize and we inject our capital resources and prioritize ones. It is important to create new things one after another. But after you give it a try, if it doesn't work, we want to give it up, meaning that we don't want to linger on for a long time. That is another meaning of discipline.

We want to transform advancement of science to value of patients. That is our vision. We don't want to sacrifice R&D. We want to improve work efficiency in other areas. We want to invest in R&D while securing profit. That is our mindset in building the next midterm plan or CSP. Depending on the situation, we don't do this to reduce the ratio of R&D expense in sales. But depending on some projects, we want to reduce the R&D expense so that we don't want to sacrifice our future growth. There is some room for us to consider that. That's all.

OP margin, 30%, that is continuously you are going to [indiscernible]. Is this understanding right?

So far, as we mentioned, by FY2027 we achieved 30%. Afterwards, we are going to maintain that. That's what currently we are thinking.

Next, BofA Securities, Mamegano please.

BofA Securities, Mamegano is my name. I have two questions. First is about the prioritization. In your company, there are several points of the evaluations. Based upon that, you prioritize your projects. I'm referring to page 6. There are four primary focus that you have. The rearrangement of this primary focus and also are you going to make major changes? That's a question that I have. That's because they are currently have some oncology update, and I believe you're progressing quite well. Therefore, are you going to focus more on oncology? Are you getting into the gene therapy? You are going to add additional primary focus here? That is the first question for me.

Probably, as you know, this focus area approach, we name it as a focus area approach and officially communicate to you that happened around 2015 and 2016. Considering from them, we see there are some changes in the primary focus as well. For example, we had primary focus, four of them at the very first, the antigen-specific immune modification that is a primary focus that we had and aiming at the allergy treatment. Certain specific modality is utilized there. Based upon the clinical trials, we decided to discontinue that primary focus. This gene therapy that was not included primary focus, but rather candidate, now it is officially within this primary focus. Recently, we have mitochondria. That was another primary focus, but we couldn't come up with the expected result or efficacy. That's why we discontinued that as well. The primary focus is not something that we continue to stick to those once decided, but rather from those primary focus, if multiple expected assets worth continuing available or not. Based upon that, we make a decision about the primary focus.

For each of these four primary focus, I think there's still the expandability. But as Taniguchi explained, with referring to [ I Lab, ] the science is getting newer and newer and how we connect those with drug is our work. The biology is sufficient and robust and modality is appropriate. Also clinically, it is proven. We have this triangle. It's not just one. If we come up with several items as a primary focus with pivoting around these triangles. Based upon that, we decide to prioritize, deprioritize, and so on and so.

Next is about the specific project that is setidegrasib. PDAC first-line Phase III studies started, I believe. The base treatment is FOLFIRINOX and also NALIRIFOX. Those are quite intensive chemo. Even with this chemo, the efficacy is achieved to a certain extent. The Revolution pan-KRAS, nab-Pac Gem is the comparator. Nab-Pac Gem base is probably easier comparator to see the efficacy. But here, you pick up a G12D alone as mutation, meaning that you have confidence in the efficacy. Do you think with the current approach, you can show the clear advantage in efficacy?

PDAC, first line, as has been explained, the combination with the chemo is the center of our strategy. The selection of chemo is FOLFIRINOX and NALIRIFOX are selected because those are mainly utilized in the Western countries. Revolution, Phase III study, if we look at, nab-Pac Gem chemo and monotherapy, and combination with chemotherapy. They have three arms within the study design. That's what we've heard. Fundamentally, there might be a bit of a difference because their product is a pan-KRAS and ours is targeting only KRAS G12D mutation that accounts about 40% of the PDAC. That is the focus. The second has been explained already. In the treatment of PDAC, the biggest issue is the continuation of sustainability of the efficacy. Needless to say, at the same time with the deep regression of the tumor, how long you can extend or sustain the efficacy. That is the key. Looking at the past PDAC study, in the beginning, initial phase, efficacy is higher [ sustainability ]. However, looking at the sustainability of the efficacy, meaning that there is no impact on to the extension of OS.

Therefore, for the PDAC, the continuation of efficacy, especially impacting on the OS, that is the most important key factor that we need to pursue to. Based upon that, we decided this study design. Revolution takes a different strategy. Therefore, ultimately, I think we can see if we make a head-to-head comparison.

Next question from Nomura Securities. Mr. Matsubara, please.

Matsubara from Nomura Securities. 3082 is my question. Good results was shown. Congratulations. I would like to ask about adverse events with administration, infusion-related reaction. 63% stopped the administration in a few cases, transaminase or neutrophil reduction was observed. So will that be the hindrance of development? As for infusion, every time of the administration, infusion-related adverse events may have reduced. Can you comment on those?

As for adverse events, we are focusing very much. As was asked earlier, the selection of combination therapy, the chemotherapy that we select, they are a very potent chemotherapy. Because of that, hematology-related adverse events, including nausea and vomiting, gastrointestinal AEs are observed; however, as for setidegrasib, we showed you mono data earlier. But in practice, the major AE was not observed. AST/ALT increase was shown in some of the cases. But there are not many cases that stopped administration as a result of AST/ALT increase. As for first-line PDAC treatment. First, whether we are able to show effect or not accounts. Will there be continuation of effect. These two keys are crucially important in pancreatic cancer treatment. We also have to think about managing AE. We have to strike a balance between the two. Chemotherapy-related adverse events or setidegrasib AEs, there are such AEs, but continuous treatment is possible in our regimen. For example, due to AE, if we are not able to administer continuous setidegrasib? That is not the case. We don't have such a case.

7317, PoC was achieved. Congratulations. For a launch, development is smoothly underway. How do you differentiate with the IZERVAY. Right type IZERVAY and the severe type 7317, can you tell us how you demarcate with IZERVAY and 7317?

As for IZERVAY, as you know, C5 RNA aptamer. In the past GATHER1, GATHER2 study, I think you understand the situation. In the AMD, progression of geographic atrophy was inhibited. Such data was clearly shown. GA secondary to AMD, the condition deteriorates and it doesn't improve. That is a condition. Stopping the progress of the disease is clinically very significant. That is the reason why we have developed IZERVAY. In comparison to IZERVAY, 7317 though the number of patients was very limited, we showed some data in the past. So the maximum visual acuity was likely to be improved. So we saw such tendency. So with a very different efficacy endpoint, we are going to assess the efficacy. As for IZERVAY -- second point, IZERVAY, suppression of the disease progression. When the visual acuity is impaired, it's rather difficult to use. The early to moderate patients would likely to receive IZERVAY moving forward as well. In comparison to that, as for 7317, it's a cell therapy and the patients for PoC this time, the visual acuity degradation was very significant. Meaning that the severe visual impairment patients were the target for PoC assessment.

We are going to go into Phase III from now on. But as for the target patients, those patients with advanced visual impairment, meaning severe geographic atrophy patients, would likely to be enrolled. What will be the overlap between IZERVAY and 7317? We don't see much overlap, meaning that -- so early or middle -- mild, moderate visual impairment IZERVAY, but when the condition exacerbates with 7317, improvement of visual impairment can be tried.

Next, UBS Securities, Seki-san, please.

UBS Seki. Going back to page 19, 2x2 chart that you showed earlier. The portfolio management, you strike balance between art and science, and it's always a challenge in this industry, as I observed. Now, unless you get PoC, I believe it is rather difficult to understand the value of the program because you never know until you see PoC. Practically, program value and the probability of -- success probability in order to improve the volatility, how, what kind of measures you take?

Horizontally, this is value that means the value when we make success. Usually, if it's early, it is costly beforehand. The sales increase and profit increases that toward the far -- so with a discount, the value is lower and with the probability of the success is multiplied. But this is NPV with a success scenario. We are going to study what's going to happen to the future. If the thing is successful, then how high the value would be, meaning the left bottom, even they make a success, we will not be able to expect a higher value. That's why they should be deprioritized. Those quadrants that we see, X equals something, Y equals something, in terms of the program value. If you apply that to all the Primary Focus, then the oncology product go toward more right. If it is a rare disease, because the targeted patients are limited in number, no matter how successful you are, you cannot come closer to the right side near to the oncology. Just like Taniguchi-san, you mentioned, it's a world of art. If the Primary Focus that should be survived or killed, and for that decision-making and if you apply the universal ways of evaluation, all the value of the rare disease is going to be reduced. How to evaluate the primary focus?

Well, according to this, something left is going to be discontinued, but the right side is going to be continued. For the Primary Focus, each of them are not necessarily evaluated in line with the exact same axis. That's the way we are working on currently.

One thing some technically, that is already wholly explained by Okamura, improve the probability of success and improve the program value, those are important. Then as R&D, what should we do? First, the clear drawing of the target product profile. With having that, you can specify the value further. You can have a tangible view of the value. In order to achieve that, you design nonclinical and clinical studies. As the result of that study is expected or assumed. If the result is in line with that assumption or expectation or not, then you decide the priority of the programs. That's the approach we take in R&D as it's been described in page 18. Decision-making based upon the data. We would like to foster a data-driven culture. We clarify the [ TPP, ] the drug we want to make in the very beginning, in order to achieve or realize that such and such data is necessary. That's why you design the nonclinical and clinical trial study. Of course, it does not always exactly match the expectation we had. We have to consider about the achievability of that target. The criteria is clarified, then based upon that, data is collected and make the judgment.

As Okamura mentioned, so we can work in line with the strong discipline, we are trying to make the culture.

Now 3082 protein degrader, the response of the duration, those are not really ringing a bell for me. For example, mechanism of the resistance, it's not inhibitor but it's a degrader. Are there any change differences in terms of the biological perspective? Looking at the New England Journal of Medicine, degrader probably KRAS G12D degradation is 70.6% or so. I don't think it's not 100% of the degradation. How can we make a decision about this or make understanding about this?

Degrader resistance mechanism that is under the study these days, not yet published. But there are some biological changes likely to cause the degradation is study or changes started to be understood. As soon as the data is ready to be published, we can share that. But as you know, inhibitor and the degrader, we have a strong impression that these two are quite different, extremely different. Also, the resistance mechanisms are different. The way to overcome such resistance are also different that we assume. In clinical trials, in early clinical trial with the combination, such idea is applied for this development. Regarding second question, that is a KRAS G12D. To what extent it should be degraded to demonstrate the efficacy. Regarding that question, as you see, according to the data we shared with you this time, 70% to 75% protein degradation is observed in data. If that is sufficient or not, if we refer to the basic data, the suppression of KRAS pathway to that extent because the tumor goes to the apoptosis and such kind of data is available. This level of suppression or efficacy for the protein degradation, we believe that a sufficient tumor suppression can be achieved.

On top of that, it's sometimes difficult to achieve with the mono. In order to accelerate the efficacy, the chemotherapy combination is used. In line with that, KRAS is also suppressed. They have the add-on effect or the synergistic effect. That's the way it works and the initial data shows that as well.

Last question. Simply, this was not talked about 2998 ADC. Dual payload is attached perhaps was presented at the AACR. Can you explain differentiation of TROP2 is available in some numbers? 2998, as you mentioned, at the end of April, at the AACR. First nonclinical data is likely to be presented.

2998, targeting TROP2, so-called dual payload ADC. What do we do with dual payload based ADC? To base overhead, STING agonist is attached, so which we will announce from now on. As you are going to look at the AACR data, you will know that targeting the existing TROP2 ADC, if we compare with that, what will be the result of 2998 will be presented to you. And if you look at the result of that, you will, I think, understand why we develop this ASP2998.

Next, Morgan Stanley MUFG Securities, Muraoka-san, please.

Morgan Stanley, Muraoka is my name. 7317, the maximum visual acuity improvement was obtained in severe patients. Golden Week, I'm very much looking forward ARVO data. Next step, what will be the next step? Is my question, too early to ask. But [indiscernible] said it's an extremely important success, so I thought you were able to skip significantly. But can you give us a color to what you said?

Muraoka-san thank you for a good question. It's very difficult for me to answer that question. But what we can tell is that the PoC study, based on the data, we nurture the culture for decision-making. Clear PoC criteria is just determined in advance. Based on that predetermined criteria, we overcame. That is why we declared PoC. This is the first point. Second point, I would like you to look at the ARVO data first and foremost. I hope you will have high expectation to that data. As for future development, with the FDA U.S. we have already started interaction. Through this interaction, with FDA, what kind of development strategy can we set up, that is being considered within the Company. Not only in the U.S., but moving forward in Japan, also in Europe and in China, we will engage in worldwide development, most probably. We hope to engage in global development, hopefully. But looking at the region and the countries, how will development be accepted. In the early part of FY '26, we want to scrutinize those things.

Phase Ib, you showed data in small amount, but my impression is that it's taken time significantly. But next step starts. When do you think we will be able to hear the answer for that? In '28, '29, Phase III results will be available, but this 7317, next step update will occur in the same timing? Or do you think it will take a longer time?

As mentioned, next fiscal year, which will start tomorrow. First half of next fiscal year, we will complete the interaction with the authorities. In the latter part of next fiscal year, we should be able to talk about development plan.

Understood. At that time, a program will be updated. 3082, colorectal cancer, second-line stoppage. Can you share with us the background of this? G12D was that the simple reason? Or is that a different reason? What is the background of making decision to stopping?

Setidegrasib colorectal cancer, As you know, KRAS G12D, the mutation is apparent in 15% of the colorectal cancer, and colorectal cancer is a big population. In parallel to lung cancer and PDAC, in Phase I, we looked at the efficacy in CRC -- colorectal cancer. Unlike PDAC and small cell lung cancer, the situation of colorectal cancer is a little different. As soon as we are ready for data, we are going to present. But as of now, we have not shown efficacy that encourages us to go forward with colorectal cancer with 3082. Based on data, we made the decision.

Thank you very much. We have about six minutes. Because a lot of people raising hands and I would like to ask a lot of people to ask questions. From here, we would like to ask you to ask just one question.

Now, [ Sawada-san ] from JPMorgan Asset Management, please.

One question is available. I would like rather -- to ask about the Claudin 18.2 and the peripheral of that, which is not really mentioned within this meeting here today. The low, mid expression of the Claudin 18.2 is the target for the development at this time. VYLOY ILUSTRO Cohort 4b result, that is a really good data. But to put it in another way, 2138 development on a highly expressed patient is likely to be the similar result with the VYLOY. That's why you decided in this way or ILUSTRO Cohort 4b result, how have you evaluated? How do you differentiate? Would you please mention something about here?

Thank you very much. Regarding VYLOY, ILUSTRO Cohort 4b came up with really good data. Claudin highly expressed patients and also CPS also highly evaluated -- highly expressed. That's the target of the development currently. For 2138, as the first indication because our strategy is to do the development for the high unmet needs. Because Claudin high expressed is already developed for VYLOY, so there are patients not indicated for VYLOY that is low to mid expression that accounts for about 1/3 of the gastric cancer patients. We thought it is a favorable way to go for further development.

For the Claudin high expression, what should we do now for the future? Also, considering the IV administration for VYLOY and such characteristic size it has, which is leading to the difficulty of management of the side effects. For this 2138, even with the highly expressed patients, the sufficient efficacy, safety, and also convenience needed to be observed. When it comes to subcutaneous, that is useful. Considering all the factors, we would like to consider if 2138 is needed to be developed for highly expressed patients as well or not.

Next, Barker-san from Jefferies.

Barker speaking, from Jefferies Securities. My question is about 2138 Phase III study. Claudin 18.2 expression, the minimum threshold, how are you going to set that?

Thank you for the technical but important question. In particular, the middle expression is rather easy, but Claudin low expression, what is the degree of that? I think that was your question. According to the Phase I study that we have conducted, a detailed analysis of that was made. Pathologists and we consulted to identify a cutoff to determine low expression or zero expression to delineate between the two. Against this, categorization of low expression cutoff value was set up. By using that, we plan to start Phase III study. The details is described in protocol, but we refrain from informing that yet.

Analysis per expression level will be possible. Do you have a plan to secure the power for that?

Yes. In our protocol, at the central level, the expression will be confirmed. As for enrollment, as far as I'm informed, the site data will be also used based on the confirmation of expression. In Phase III, middle to low expression was observed to see effect. Cutoff value will be confirmed and then we will file submission.

Now in the interest of time, we would like to make the next question as a final question. Sogi-san from Bernstein, please.

In development, AI usage is my question. On page 21, you showed introduction of technology. Study design platform is described on page 21. Honestly, I'm surprised because in the area of development, of course, in the drug discovery also, but in development, the optimization of sites and acceleration of patient recruitment and patient management as well as data management, of course. For the regulatory document preparation, it seems that AI is very useful in those areas. But as of now, what's shown on the slide is the approach that you are going to address at Astellas. As for cost and timeline, I believe there will be impact of AI. That's my view. But how much cost saving as well as shortening of timeline would you like to achieve? In 2030 or 2035, as of that timing, what is your idea?

Thank you very much. Evinova AI-native study designer, that is quite interesting. There are AI agents and they have a discussion of a platform on the design of the protocol and that the minutes is generated. That is quite interesting. That's why we put it in this slide. But as you mentioned for the development, usage of the AI is just a part of our day-to-day work, so I didn't explain about that. Two years ago, and since then, protocol informed consent and all such clinical trial documentation translation into each country's language that is quite cumbersome work. But with using AI translation, we were able to accelerate the speed. For example, for the translation from Japanese to English, it took about two months, but using AI, it can be completed within just a couple of days. Of course, the final confirmation is going to be done by humans. Technical language translated into easy to understand for the patients. Their large language model is utilized and that is completely utilized, but it's already part of our job. That's why I didn't focus on it. Also, CSR generation each team is already using AI for generation of the report.

General document creation is a way that we use the AI, just our day-to-day work. AI agent is quite interesting. This might be the response to the question of your second question. Towards the future cost reduction and also time reduction, we can extremely expect on AI in that terms. We are working on the confirmatory validation work. After that, when we are ready, we would like to share where we would go.

Thank you very much for your participation and asking a lot of questions. Now time is up. With this, we would like to close this R&D Day presentation. Thank you very much for your participation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for joining Astellas Pharma, Inc.'s Sustainability Meeting 2025, out of your very busy schedule today. I'm delighted to serve as MC today. I'm Kato, Chief Communications and IR Officer. Thank you for your time.

Today, after presentation, we will move on to a Q&A session. We will explain based on a presentation posted under Materials section on our website. Including Q&A., simultaneous translation is available in both Japanese and English. We cannot guarantee the accuracy of simultaneous translation. Thank you for your understanding. [Operator Instructions]

This is a cautionary statement. This material or presentation by representatives for the company and their answers and statement in the Q&A session include 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 unapproved uses in any fashion or provide medical advice of any kind.

Let me present the company representatives in this room. Naoki Okamura, President and CEO; Shingo Iino, Head of Sustainability; Katsuyoshi Sugita, EVP, Chief People Officer; Takashi Tanaka, Independent Outside Director, the Chair of the Nomination Committee and the Compensation Committee. We have 4 members in person here.

We would like to start the presentation. Okamura-san, please.

Good morning, everyone. I'm Okamura from Astellas Pharma. Thank you for joining us today at the Sustainability Meeting despite of your busy schedules.

This is a cautionary statement, which is explained by Kato earlier, so I will skip reading it.

In the past 4 meetings, we have explained the progress of our initiatives to enhance sustainability, the outcomes of these efforts and their relationship to enhancing corporate value. The fifth meeting will cover updates on the sustainability function, human resources function and corporate governance previously introduced, including the social impact of our initiatives. Before proceeding to the main topic, I will explain Astellas' vision, our approach to sustainability and our past initiatives and outcomes.

Page 4. Astellas pursues its vision of on the forefront of health care change to turn innovative science into value for patients, striving to create innovative health care solutions. We clearly define this value in capital letters as the truly important outcomes for patients with dividing outcomes that matter to patients by cost to the health care system of delivering those outcomes. We always consider the entire environment surrounding patients. Delivering value to patients means not only achieving better outcomes for them, but also contributing to cost management across the entire health care system.

Page 5. Society strongly expects the health care sector to create innovative solutions in disease areas with high unmet medical needs. For us, as a pharmaceutical company, the starting point for sustainability is addressing societal challenges through our core business to realize our vision. For us, sustainability means creating this virtuous cycle, earning the trust of our stakeholders and further enhancing the sustainability of both society and Astellas. Of course, we will also fulfill our corporate social responsibility by advancing initiatives addressing climate change and other environmental issues, which are highly required by society.

Page 6. Now let me -- let us review our initiatives for evolving sustainability. First, in FY 2021, we updated our materiality metrics, selecting 19 key issues and identifying 9 material issues out of those. We aligned this with CSP2021 and established our sustainability direction in FY '22, building a foundation to connect strategy with the frontline. Since FY '23, we have introduced indicators to measure progress on sustainability initiatives being linked to our annual plans and executed and evaluated company-wide.

Page 7. I will introduce to you now notable specific initiatives and achievements. First, the outcomes of activities promoted by the sustainability function. We have steadily advanced initiatives identified as top priorities in our materiality metrics, such as enhancing access to health and reducing our environmental burden. Additionally, since last year, we have put our efforts on the visualization of these activities. Sustainability activities are meaningful initiatives for both society and the company.

To clearly demonstrate the connection between the resulting social impact and the creation of corporate value, we believe it is important to present quantitative information along with qualitative information. As one effective means to achieve this, we are working on visualizing social impact. At the last Sustainable Meeting last year, we presented the social impact generated by our cancer awareness activities in Malaysia, converted into monetary value. Today, based on our purpose report, we will broaden the scope and introduce our efforts to visualize social impact through converting the effects of our activities on society into monetary value.

Next are the achievements by the human resources function. We work to ensure psychological safety for employees by frequently holding sessions where employees could ask top management anything and by conducting training for managers aimed at improving their management skills. Furthermore, to continuously foster innovation, we are focusing on developing next-generation leaders. In the development program introduced at the last Sustainability Meeting, 41 individuals selected globally participated this year, tackling real business challenges.

Additionally, we simplified and consolidated our Astellas Way culture foundation, introducing Organizational Values and Behaviors. This enhances each employee to act with a clear shared understanding, strengthen collaboration and enhance our ability to create value for patients. These initiatives, based on the organizational health goals set in CSP2021, are steadily fostering a culture that promotes innovation. Sugita later will introduce recent concrete results and findings from the Global Engagement Survey later.

The last one is corporate governance. In June 2025, we welcomed Andreas Busch and also Mark Enyedy as our first independent outside directors with pharmaceutical industry backgrounds and foreign nationality. The Enterprise Priority Monitoring group, or EPM, composed solely of independent outside directors, including those 2, discuss company-wide priorities from an objective standpoint and provides feedback to the Board of Directors. This further strengthens the Board's oversight function and effectiveness.

Personally, I perceive several changes. Firstly, addition of members from the pharmaceutical industry has enabled more equal consultation and discussion. Additionally, the format of Board discussions has shifted from the traditionally Japanese formal style where speakers ask questions only after the Chairperson designates them, to a Western-style approach where members speak without waiting to be called on. Including our long-standing Japanese independent outside directors, I feel the Board's overall discussions have deepened while better leveraging each member's expertise. Today, Mr. Tanaka, an Independent Outside Director and EPM Chair, will explain EPM's activities and the changes in the Board.

Page 8. This shows the logic tree for enhancing enterprise value. This logic tree visualizes how Astellas' financial and nonfinancial initiatives contribute to enhancing corporate value. The content introduced today are those highlighted in colored boxes within the diagram. Among the initiatives for enhancing sustainability, the yellow indicates sustainability function-related efforts and will be introduced by Iino. The blue sections are HR function initiatives related to organizational health goals and will be introduced by Sugita. The green sections involve corporate governance initiatives and will be introduced by Mr. Tanaka, an Independent Outside Director. Through today's presentation, we aim to convey how Astellas is working to enhance corporate value and the outcomes these efforts are achieving.

Page 9 shows today's agenda. Now Iino, Head of Sustainability, will begin his presentation.

Thank you. I am Iino, Head of Sustainability. Today, under the title Visualization of Astellas' Corporate Value, I will discuss our efforts to quantify nonfinancial value and the strategic insights gained from this work.

Page 11. As Okamura explained earlier, the sustainability function is advancing initiatives to visualize nonfinancial activities. At last year's Sustainability Meeting, we introduced the social impact generated by our cancer awareness activities in Malaysia, part of our efforts to improve access to health care. This time, we expanded our scope and converted the impact of Astellas' corporate activities on society into monetary value. We believe that quantification would allow us to more clearly demonstrate the influence our nonfinancial value has on corporate value.

First, I will explain how we perceive corporate value using the analogy of a single tree. The trunk and branches visible above ground represent current results, meaning financial value, such as sales and profits, which is verifiable through financial statements. These are the visible results of activities from the past to the present. On the other hand, the roots spreading underground are invisible, but represent the nonfinancial value that forms the foundation of this company. We believe these roots are the source that generates future corporate value over the mid to long term and serve as leading indicators for predicting growth.

The significance of visualizing nonfinancial value lies in quantifying the certainty of these invisible roots, not as feeling but as objective numbers. By visualizing the nonfinancial value that forms the foundation for generating business outcomes like sales and profits, this project aims to further enhance your expectations for Astellas' sustainable growth.

Page 12. Next, I will introduce the calculation process, specifically how we visualized and quantified these values. This fiscal year, we did monitor evaluation of the social impact generated by Astellas' materiality initiatives. Specifically, we evaluated the following 4 areas.

For product impact, we calculated the medical value that Astellas' products prescriptions provide to patients, their families and health care institutions. Please note that this does not refer to the product sales figures themselves. Next, for human capital impact, we evaluated the impact of employment fairness and appropriate wages and career advancement opportunities on employees.

For environmental impact, we calculated the negative environmental impact such as greenhouse gas emissions and waste generated by business activities. For access to health impact, we evaluated the positive impact on society through initiatives to strengthen health care systems.

This monetary valuation was performed based on international impact accounting frameworks such as RWA, IFVI and VBA, to ensure objectivity and transparency.

Page 13. This shows the monetary value of the results for FY '23 and '24. The table on the left displays the figures for the 4 impact evaluation categories and the components, while the bar chart on the right illustrates these values. Notably, the product impact is overwhelmingly significant. For FY '24, it reached $27.861 billion and increase about 17% year-on-year. This demonstrates that 6 products, including PADCEV and XOSPATA, deliver substantial medical value to society.

Regarding human capital impact, we view this as an indicator that serves as the source for continuously creating future innovative health care solutions. The value generated by career advancement and fair wages creates a positive impact of $5.28 billion.

On the other hand, environmental impact was calculated at a negative $32.7 million. We recognize this as an ongoing challenge requiring our continued attention. Across all categories, product stands out as having the largest of our impact, followed by human capital, environment and access to health.

Page 14. Today, I will explain the important sustainability activities of environmental impact and access to health impact. First, regarding environmental impact, the far right of the left graph showing impact trends represents the latest FY '24 figure, which was minus $32.7 million. The figure has improved annually since FY 2018, with FY '24 showing a reduction of about 19% compared to FY '18.

Looking at individual metrics, we confirm that further reduction potential exists for water consumption, waste and GHG emissions. Since the environmental impact is highly influenced by our activity levels, we also referenced the revenue trends. We confirm that despite increased sales revenue or increased revenue, meaning high activity levels, during the same period, the negative impact continued to decrease. We believe this demonstrates that Astellas' efforts to reduce environmental impact are yielding steady results.

Page 15. Next is access to health or improvement of access to the health care. Here, we calculate the cumulative impact of the 4 health care system strengthening programs currently in operation. The left graph shows the total impact across all 4 programs, while the right graph shows the impact per resident for each program. We found that even programs with a small total impact, like Program B, can have a large impact per resident. Moving forward, we believe we need to aim for expanding total impact by considering both the number of residents reached and the magnitude of impact per resident.

Page 16. Here, I summarize the insights gained from this visualization initiative. Analysis confirmed that product impact is overwhelmingly significant. This reaffirms that our core business, innovative drug discovery itself, delivers the greatest societal impact. Therefore, our efforts to deliver innovative solutions to patients through our core business are crucial, and we recognize this as a very source of our corporate value.

On sustainability activities, especially environment and access to health focus. For the environment impact, a strategic implication is that we must aim to reduce negative impacts exceeding the increase in sales revenue that, in other words, the expansion of our activities. Specifically, we will concentrate efforts on areas with significant reduction potential such as water consumption, waste and GHG emissions, aiming to minimize negative impacts.

For access to health, we must enhance our social impact we make in communities through program partners like NPOs, NGOs. Considering both the number of beneficiaries reached and the magnitude of impact beneficially, we will strive to expand our total impact.

Astellas intends to continue nurturing and strengthening these invisible roots of nonfinancial value, aiming to connect them to significant future financial value.

Next, we'll move on to the explanation by Sugita from Human Resources. Thank you.

Hello, everyone. I'm Chief People Officer, Katsuyoshi Sugita. I'm going to talk about the progress of our initiatives towards achieving organizational health goals, which are part of CSP2021.

Page 18, please. This is a summary of our actions and results of OHG, organizational health goals. In CSP2021, we set up OHGs and have implemented a variety of initiatives to achieve them.

Overall, our employees' productivity increased 1.6x from FY 2020 through FY 2024. We are expecting labor productivity to go up 2.1x based on FY 2025 earnings forecast. We believe we have been able to promote initiatives which are directly linked to business outcomes. With various transformations, our engagement score has risen in stages from 70 to 73 over 5 years. For organizational health goals 1 through 3, there have been a lot of progress and achievements. Let me share some of them.

First, for OHG 1, we promoted a flatter organization and a full remote work policy, ensured improved meeting efficiency and worked on the transformation to build an organization with high productivity. I will give you an actual example later. Transformation resulted in employee behavior changes. Some of them are paving the way for their own career. Innovations are accelerating in the field.

As for OHG 2, succession planning we have promoted strongly by now is bearing fruit. We are promoting the appointment of a lot of new talent and enriching its diversity. Now that we have a larger talent pool of successor candidates, under a fair annual assessment, we have been able to appoint optimal senior leaders to each position.

Also, in the next-generation leadership program, we are achieving outstanding results. Program participants are taking on a challenge to be assigned to new roles and being promoted to assume higher responsibility. We are enhancing their level steadily.

We are also focusing on human resource development with short-term overseas assignments as well. Longer-term overseas assignments of expats would cause a lot of burden on both the company and employees. But in the case of shorter-term assignments, the hurdle to clear is lower up to such assignments. It's possible to accumulate global experiences through the actual work.

We are also supporting younger talent in their career development internally as well. In Japan, transfer of employees with internal job postings is increasing substantially. We hope that more employees will be able to develop their career internally going forward as well.

Regarding OHG 3, by changing the bonus calculation factor from divisional performance to company-wide performance, we put in place the foundation of the organization, pursuing the outcome beyond divisions under one Astellas. Now we are also promoting the delegation of authority from functional unit heads to cross-functional teams. We will incorporate the voice of our employees and create an environment so that we can achieve results more rapidly.

In addition, in April 2025, based on business needs, we established organizational values and behaviors as a culture foundation. We have been able to steadily solidify our foundation so that we can excel as one Astellas. With all of these initiatives working in sync, we have been able to build a strong organization for sure. We believe this will lead to further leap forwards from FY 2026 onwards.

Page 19, please. I will give you one example of creation of innovation in the field. As Okamura also talked about our organizational values and behaviors, this example I'm going to share is exactly the innovation outcome through action based on this culture foundation.

This year, for ASP5834, a pan-KRAS degrader program in a primary focus, targeted protein degradation, we achieved first subject dosing in Phase I trials in a record 27 days after IND, investigational new drug application clearance. We achieved this goal just in 1/3 of our 3-month target at a record fast speed. This case represents the achievement after R&D reorganization in the current fiscal year. So I'd like to add that we are able to realize this through seamless collaboration across the organization.

We think there are 5 keys to success behind this achievement. All of them are based on the culture foundation, organizational values and behaviors. First, we set clear roles with shared objectives and accountability. Next, we collaborated through seamless integration of each person's expertise as One Astellas, with teams contributing to a holistic understanding of the asset's risk-benefit profile.

Also, the project team had early engagement with investigators to reflect their feedback from the clinical settings on protocol design. Fit-for-purpose peer review enabled us to resolve key issues before the protocol was written and avoid delays. Ensuring a sense of urgency led to this final outcome.

All the more, this project team had courage to set ambitious goals and promoted effective collaboration cross-functionally to pursue and achieve desired outcomes. This outcome-focused approach was the biggest key to success. In this way, we are accelerating creation of innovation in the field. We hope this will bring about further achievements to our business.

On Page 20, let me explain research talent exchange Astellas is working on to activate the drug discovery ecosystem in Japan. In Japan, world-class scientific talent exists. On the other hand, the drug discovery ecosystem is not functioning sufficiently as a mechanism to continuously create new drugs through mutual collaboration among companies, academia and startups. So impact of Japan's drug discovery capability is set to be limited according to some. One reason behind is low talent mobility.

Drug discovery cannot be completed anymore by a single company alone. A variety of capabilities, such as basic research, applied research, development, regulatory affairs and clinical must be combined first in order to enable the delivery of drugs to patients. That's the reason why talent mobility to enable persons with required knowledge and experiences to thrive beyond organizations and sectors is important key to make the drug discovery ecosystem function.

So in order to enhance the quality of the drug discovery ecosystem in Japan, Astellas is strategically promoting initiatives to increase talent mobility. We believe this will lead to new opportunities also for Astellas researchers and organization as well. To realize this, we are leveraging secondment program, site drop system, et cetera. Through these activities, we have actual case examples of collaboration between major universities in Japan and Astellas, as well as development of talents who thrive as universities and start-ups while staying employed at Astellas.

Through these initiatives, new value creation beyond Astellas is making progress. As a result, a mechanism is being built where innovations are returning back to Astellas as well.

Drug discovery and advanced medical care is positioned as one of the 17 strategic priority areas for future investments set by the Japanese government. While receiving support from these changes in the external environment, Astellas is aiming to exert active leadership in activating the drug discovery ecosystem.

Next, Page 21. I will explain the results of our Global Engagement Survey. The engagement score in FY 2025 reached 73, the highest in the past 5 years. The response rate increased to 87%, up by 5 percentage points year-on-year, reflecting strong employee engagement and participation. Scores improved across all 43 comparable items versus the previous year, with no declines observed.

Substantial improvement was seen in scores on items such as white space, resource and collaboration. This is thanks to the effect of our initiatives to enhance productivity, such as improved meeting efficiency we mentioned earlier. On the other hand, again, in FY 2025, items such as change communication, pay for performance and promotion practices were identified as opportunities for improvement because of relatively lower scores. These scores improved from the previous fiscal year, but these items were listed from before as issues to be addressed. So we will continue and reinforce our current initiatives.

Over the past 5 years, we have been able to maintain or improve engagement overall. Productivity as an organization has substantially been enhanced over the past 5 years. We believe this is the outcome of a transformation we have promoted based on organizational health goals.

Page 22 is the last page in my section. In response to FY 2024 engagement survey results, Astellas launched a cross-functional task force, including corporate communications, digital IT and HR to deepen analysis of survey results and strengthen our engagement initiatives.

First, we conducted a pulse survey in June 2025 to enhance employee listening. Furthermore, top management visited locations around the world in person, organized town hall meetings and small meetings, and increased opportunities to communicate with our employees. Through in-person dialogue sessions, we were able to gain deeper insights from feedback on the company's policy and organization. So we believe this was a very good initiative.

We, as a company, are promoting the enhancement of productivity, including a full remote work policy, but we also place importance on face-to-face communication as well. So we will continue to keep a good balance in running our organization.

As we have been saying from before, management is the key. We gained similar insights based on the survey analysis findings by the task force. So we are working to enhance management capabilities as the most important initiative. Specifically, we conducted interviews with managers who demonstrate outstanding leadership in certain items such as communication and shared other findings as best practices across the manager community. We also launched management capability enhancement training, focusing on capability development, in communication in particular. We are also holding monthly manager sessions to support managers as well.

As I have explained by now, organizational health goals cannot be achieved overnight. There are still many things we have to work on towards further growth of Astellas, according to understanding. Astellas as a whole will continue to be united to work in order to promote talent strategy which is directly linked to a business outcome.

That's all my presentation on the progress of our initiatives to achieve organizational health goals.

Next up is Mr. Takashi Tanaka. He is an outside director and chairs the Nomination Committee and the Compensation Committee. Tanaka-san, please.

Hello, everyone. I'm Takashi Tanaka, an outside director. I will give you FY 2025 updates on Astellas corporate governance. In particular, I will explain the strengthening of the Board of Directors function and activities by the Enterprise Priority Monitoring Group, EPM in short, which we reported on its establishment in the previous Sustainability Meeting.

On Page 24, the first topic is the Board of Directors structure. I will share 3 highlights related to the Board over the past 1 year based on 3 axes. The first axis is the culture of the Board. In FY 2025, we welcomed as independent outside directors 2 global leaders with deep insights on the pharmaceutical industry. With their participation, we are now having fully bilingual, open and active dialogue more than ever before.

The second axis is the evolution of ways of working. In order to enable effective and efficient discussions, the Board incorporates new ways of working. Early pre-read distribution is ensured to secure enough time for review. Concise presentations on the day of the meetings allow us to streamline routine topics. As a result, we can dedicate about 80% of meeting time to strategic topics.

And the third axis is to strengthen the objective monitoring by fully operationalizing the EPM. EPM is a group which consists of independent outside directors only and was established in November 2024. It sets and tracks KPIs for the 3 enterprise priorities. Through regular updates from accountable CXOs, EPM is beginning to drive meaningful impact. These 3 axes functioning organically positions the Board to deliver stronger governance and long-term value.

Next, Page 25. Regarding EPM, our new initiative by independent outside directors, I will explain specific EPM activities and its focus today. EPM conducts structured periodic KPI reviews and targeted strategic discussions with CXOs. EPM's insights contribute to the enhancement of Board oversight and decision quality. As a track record of its activity, since the establishment in November 2024, EPM has organized 12 meetings in total by now. CXOs were invited 8 times for discussions.

Also, an external adviser was invited to discuss the theme of market trends and Astellas' valuation perspectives. EPM is incorporating multi-angle perspectives. At present, EPM is mainly discussing the 3 enterprise priorities.

The first is to maximize revenue. This is led by our CCMAO, Chief Commercial and Medical Affairs Officer, Claus Zieler, to monitor sales of our strategic brands and XTANDI and market trends. The second one is to accelerate pipeline. This is led by CRDO, Chief R&D Officer, Tadaaki Taniguchi, to discuss R&D program milestones, progress and risks on flagship projects and initiatives to enhance R&D productivity.

The third one is operational efficiency. This is led by CFO, Atsushi Kitamura.

Next page, please. On Page 26, I will explain a specific example of strengthening Board oversight in our third focus, operational efficiency. We have a cost optimization target of JPY 150 billion by FY 2027. EPM is overseeing disciplined execution of sustainable margin transformation. To achieve this target, EPM is breaking down cost optimization initiatives and tracking the amount of investments and savings, with clear accountability under a designated CXO.

Through discussions with CFO, Kitamura, EPM defines path to achieve 30% core operating profit margin for Board discussions on free cash flow allocation strategies. In this way, EPM is not just tracking KPIs, but it's also reflecting its insights it has gained on to Board discussions and ensuring disciplined execution by the management team to enhance the oversight and executive function.

That's all from me.

This concludes the presentation from us. Now we would like to entertain questions from the audience. [Operator Instructions]

So let's start this. The first question, Nissay Asset Management, Yatsunami-san, please.

Nissay Asset Management, Yatsunami speaking. Thank you very much for such a detailed update and also achievements in your explanation.

My question is about the organizational health goals, so that I can have a deep understanding, let me ask you a question. Within the goals, the flattening the organization. So at the disclose of the HR strategies, innovative HR achievement -- or the approach is what you've been working on. And as a result, the productivity, labor productivity improvement and also pipeline progress enhanced, so improvement of the progress in terms of the execution is described. But in order to -- from the perspective of the reforming or change in the organization, how do you evaluate the current situation?

And thinking about the coming 5 years, plotting the organization, you achieve this, so you achieve a certain goal or you try to excel further? What are you trying to do? Would you please share with us your insights?

And also at the same time, innovation, the organization, well, execution capability is something you would like to improve and that is exactly where you see the outcomes. But this deepening the innovation, expansion of innovation -- sorry, this is a quite vague question. But from the Sugita-san's perspective for the coming 5 years, where is the -- or what is the area that you would like to reinforce further or outcomes? Sorry, this is really vague question, abstract question, but it would be great if you could give us an opinion.

Thank you very much, Yatsunami-san. Before Sugita, myself would like to make a bit of the explanation. For this type of approach initiatives, I believe there are no completions. For example, what will be the layers, the number -- what about the number of the subordinates under one manager? Yes, we can come up with such indication or indicator, but there is never the completion.

And also since last April, well, for the management of the pharmaceutical industry region, country and also the HR, finance, development, so the regional axis, functional axis and also product technologies and events axis. So those are the 3 axes. And when we had the Astellas established, the region and the geographic aspect is the highest axis, but that is now shifting toward the function. With that, what can happen?

The organization's to be more layered and siloed. So the collaboration among the functions become difficult. So One Astellas becomes more and more difficult.

So rather, we put up the patient axis or access at the very top. So thanks to that, we now are able to have the cross-functional organizations. They set up the challenges and objectives on their own and they execute what they need to. And if they find something needs to be changed, they modify it. So 5834, 27 days, that is a record high and shortest, but I think we can make it shorter further. That's what I've been saying to the team.

So in this way, overall, we always have the next, and working on those one by one is leading to the organizational innovative culture. Innovation, as you know, if you do the same thing, nothing can be regarded as innovation. You have to do something different, something from the -- different from the others from the past. You learn and you accumulate and you think about the next. That is the culture we need to develop.

Sorry, this is a long answer from me. If you look at the indicators, you think this is good, that is good, this is a completion, but that is not really the case. We have to continue to realize a better organization.

I'd like to hand over to Sugita here. so that he can share his views. Thank you very much.

Thank you for your question. Okamura mentioned all the things I wanted to say in his answer, but let me share my view. To begin with, the second question was about innovation. Today I talked about the 27 days from the acceptance of IND to first patient dosing. And to activate the drug discovery ecosystem, we have talent exchange as our initiatives. These measures must be promoted. We need a mechanism for talent exchange.

This was not thought about by the HR. Research and development leaders thought about this idea and brought the idea to us. When they came to us first, they have an idea like this. According to the company's rules, can we proceed to consider this idea? That was the question. I said, yes, no problem. Please consider. That's all.

Then R&D people discussed what kind of programs will function and succeed. If there is a certain program, research can be motivated to exchange with people outside and we can invite talent from outside. And researchers themselves came up with this kind of an idea. And then just a little bit, how to pay salaries and a secondment program and system, that was supported by HR. But for the rest, business people, for their innovations shared their ideas about what they would like to do and how to make it function. And that is reflected into innovation aspects.

So regarding the layer, in your first question, as you can see on this page, various points are related to the layer. How many meeting participants? How much reduction in the meeting participants? 2 boxes below. If there are deeper layers, we have more participants in meetings. Various people say they are related and many of them join meetings, but we can do away with that, then we can enhance efficiency.

And to the right, in OHG, as Okamura mentioned earlier, cross-functional team have been established. As a company, those at a higher hierarchy are great. No. Experts and cross-functional leaders are important. They have to play a role -- a main role in the businesses so that they can run the organization. And we have to reward them with compensation.

And OHG is shown in the middle, flexible career development. Before, if the size of the organization is large or the size of the budget is big, the rate tended to be higher for people. But rather, cross-functionally, those who lead cross-functionally and those with high expertise to contribute to the company may not have any subordinate or they may not have any particular budget. But still, we want to give a higher grade and higher compensation to them. So hierarchical things are not so important anymore, but the ultimate impact and the impact on to the company and society should be high so that we can evaluate them highly.

And regarding the layers, there is a mention of reduction from 10 to 6, but it can be very difficult to implement this. So we have come this far, so we have to make efforts not to increase these numbers. We have reorganization and budget formulation. We may reorganize our structure substantially at those timings. The number of layers is not increasing. We have a check item to see that there is no increase in the number of layers. It's now 6. So we have a system so that the number is not going to increase beyond 6. So this is what we'd like to do for the time being.

In the future, we have IT advancement, and the scope each person can manage can be expanded. But for the time being, we worked hard to reduce the number of layers to 6. So we'd like to keep this for the time being. That's our reality.

Independent autonomous organization is now turning around within the organization. I understand that quite well.

Next, Tokio Marine Asset Management, Mizuno-san, please.

Mizuno speaking from Tokio Marine Asset Management. I have a couple of things. This might be quite detailed questions. But first of all, now in the Board members, you've invited the non-Japanese speakers with the experience in the pharmaceutical industry. And a couple of years ago, we talked about this with Okamura-san and I believe he mentioned it was difficult to realize that. But what's changed? What made it possible? That's one question.

And now it's realized, but this fact is also reflected into or applied to other organizations within your company?

Ultimately, Tanaka-san will answer, but just like you mentioned, in the past, it was difficult. It might be difficult. The reason why I said that is that the pharmaceutical industry-related people and the Japanese serving as independent outside directors, if we ask them to serve for this position, there is the -- some interest that we have to consider with the former company this person worked for. So Japanese company with historic -- with a history, even they left as a management, but in various ways, they have the continuous relationship with the former companies. Therefore, amongst the Japanese populations, it was difficult to hire to get the outside directors, amongst Japanese, who have the experience in pharmaceutical industry.

Then you would say, then why not non-Japanese? Well, this is the Board of Directors. So the language-wise and manner-wise and process-wise, they are getting more and more complicated. So that is insufficient. And also on the other hand, they have the knowledge and experience. Concerning those balance and trade-off, from this perspective, I said it was difficult.

But now that we have these 2 non-Japanese outside directors, as has been explained or as I explained, once we did that, we learned, it is quite possible and we can do it. That is honest impression that I have. In the past, we worried if we do this, this and that would have happened, our non-Japanese outside directors might react in this way and that way. So it is better not to say that. But once we started it, we are managing it quite well.

So Mr. Tanaka is exactly in the middle of such a new ways of the Board of Directors. So I would like to hear the comment from him.

Well, thank you. I would like to be frank here. Just like Okamura-san mentioned, for the Board of Directors, it was really challenging because there were several challenges that we had to deal with. And these 2 outside directors living in overseas, we have to take into consideration the time difference, time zone difference and how we can secure the time of meeting with them.

Considering those challenges, we came up with more than 5 of such. But we just thought, why not give it a try? So we rather try to solve the issue one by one. And as a result, what happened? Well, we ended up with a great success. Just like Okamura-san mentioned in his presentation, 80% of the meeting time is now possible to be allocated to discuss about the strategic items, which is a great achievement.

And looking back the past, here, there are several factors that we can share with you. First off, this BoD meetings, now the site of the material discussions, so that we can secure that, we shifted or changed some part of the discussion items. And this is a bit different talk, but we have EPM here, the basic KPI monitoring and strategic discussions are possible to be conducted. Therefore, this outside directors from different fields can have the shared and common understanding and insight.

Third, needless to say, we welcome the 2 new directors. They have a pharmaceutical background. They have a lot of experiences, and there's a lot of diversity. We have now 2 additional missing pieces to fill the gap.

In order to have good discussions on the Board, we use both Japanese and English, and we need simultaneous translation as well. So from the company, the management team, we are receiving a lot of support. And various challenges have been resolved in organizing our Board meetings.

In the end, as a result, as Okamura-san said, we can do this. It was feasible. Until then, everybody made his or her effort. That's why it's now functioning very well with the success. Personally, in this sufficient way and in this meaningful fashion, including global directors, we have been able to have such good discussions on the Board. So these are the results we can be proud of. That's something I'd like to say. Sorry for my long answer, and that's all from me.

So OHG action is taken by the Board itself to show results by taking on a challenge. That's my understanding. And in the field of R&D, sales DX is making progress and you use AI as well. Listening to the presentations, this is applicable to the Board and the OHG measures to reduce the number of layers. By leveraging AI, many things are going smoothly. Or by applying AI into the future, you can expect further achievements. What do you think?

Of course, we are using AI now as well as digital tools. However, the outcome we are seeing so far is as follows. We use AI a lot for parts of drug discovery. We have been able to do something great in combination with robotics. And for customer engagement, we're using AI to come up with great results. So it's on an individual basis.

Before, as Sugita explained, we reduced the number of layers in the organization to shift to cross-functional teams by the delegation authority. We are changing our ways of working by human beings, and we have a lot of outcomes on results. Based on that, if you can do this, then we will democratize data, use AI to work further. It's easier to do so now. Before it was a closed organization. Even if we use AI, we can do something just within the organization. But now cross-functionally, we can use AI and digital, then we can achieve greater results. That's my expectation.

This is a pressure to my employees. Although I don't know whether they are listening to this or not, the substantial innovation acceleration will occur. And also, we can expand the impact on society as a result. That's my view.

We'd like to move to the other question, Citigroup Securities and Mr. Yamaguchi, please. Yamaguchi from Citigroup Securities.

I have 2 simple questions. First, product impact and access to medicine, you showed specific numbers today. If possible, looking at the indicators for the impact, there is a higher impact compared to sales and revenues for some products. And in access to medicine, there are a variety of things under that category. What kind of products would have a higher impact? And what kind of product would not have a higher impact? That's my first question.

Thank you very much. It's better that Iino is going to explain about this.

Thank you very much. The characteristics of products this time, 6 products, well, individual product result is not disclosed, but looking at all those 6 products, the therapeutic area wise, there are only 2. One is oncology and the other is urology.

According to the currently available data, urological disease, the impact is likely to be more easier to be confirmed. That is because of the number of the patient is larger. And also the products are launched on the market. And if time is going to be passed a little more, the situation is going to be changed. That's what we've been discussing within our team. So if the number of the patient is larger, then the sales also becomes the bigger or the number of the patients is larger, so before the sales increase, the impact is likely to be visible further.

And what about the survival?

Well, this time, the quality is utilized as a base for the calculation. And your first question, comparison with the sales, well, the sales or the revenue and the impact, the direct comparison is what's been often discussed with the impact accounting field. So we cannot do the direct comparison. However, impact tends to show the bigger trend, and that is the situation. So it will be appreciated if you could understand in that way.

What about access to health?

Access to health? That is going to be more complicated. Depending on the disease, depending on the country, depending on the region, the impact is going to be greatly different or completely different. So far as Astellas especially, the countries where the health care system is fragile or health literacy is lower, we prioritize those countries and regions to provide support.

And with having such criteria, RFP, request for proposal, are placed by NGO/NPO as the request for the support. And each one of them is a wonderful proposal. So it's very difficult to select one out of those. But we have a certain criteria within our company so that we can select some.

And as a result of the impact analysis, what kind of programs are appropriate to be selected? We were able to get certain tips for that process. This response might be a bit not -- off from your actual intention of the question, but that is the current situation. Various factors engage each other, so it's very difficult to respond within this limited time.

The next question is the organizational health and sustainable margin transformation, SMT. Those are likely possible to be collapsed each other -- collide each other. But you are doing it quite well. If you can make it well, they are not colliding each other. Because if you try to do that, it doesn't work. That is something happening in my organization.

I think we are looking towards the same direction, meaning that the organization becomes healthier. That means -- well, as you know, we have missions, the value of the patients in capital letters. That is something we would like to deliver. We put our best effort for that. If we want to do that, those hindering the that should be reduced one by one, even if it is things, even people.

And looking at SG&A, those making -- creating such a value and delivering such value so that they can function better, that are supporting people. But at the same time, there are some breaking such activities, putting a break for such activities, saying that there is no precedent of that in the past and so on and so.

So just like layers, we have this cross-functional teams, after discussion, we have good proposals. But before execution of them, each member within each organization have to report to their boss, their boss of their boss. And when the outcome comes down to the very bottom of the team members, the good proposal is deviated from the original intention.

So within the team, it's going to be completely separated, and that's why they have to do real work. So it is better to eliminate the layers, and with having autonomous cross-function team, we can enhance organizational health and something excessive can be reduced. And rather, we can have a more percentage of activities that bear the culture. So overall, SMT works well and the organizational health improves as well.

Sugita would like to add.

Please. I'd be brief. Please show Page 18. Regarding the question we have just received, Okamura already explained the details. But on top, if you look at the top portion of this page, labor productivity per head, core operating profit per head and engagement right next to it is shown here. There is a reason for this kind of slide.

As Yamaguchi-san asked the question, engagement and organizational health items are listed here, and productivity. Generally speaking, it's difficult to achieve both in parallel. But what we wanted to do this time is as follows. We want to enhance productivity and efficiency, but we would also like to enhance innovation and employee engagement to create a positive cycle.

We aimed for a positive cycle and did a lot of things. We may not be perfect, but we are working on many things. As you can see here, engagement, innovation are making progress, and productivity is being enhanced as well at the same time. So in this direction, we'd like to contribute to our business and employee innovation, and engagement would also be enhanced. That's what we'd like to promote. That's all for me.

Next, Morgan Stanley, MUFJ Securities, Muraoka-san, please.

Muraoka from Morgan Stanley. I have a question about EPM. I have asked -- I'd like to ask a question to Tanaka-san. An external adviser was invited by EPM once. According to the slide, the market trends and Astellas valuation were the topic, according to the slide. So I'm sure that you are paying a lot of attention to stock price. So I was very pleased to see that.

I have a question to you. At EPM, this is the first time to invite an external adviser, and you selected this market expert. What's the background behind? What kind of people would be invited to hear your views -- hear their views going forward?

Tanaka-san, please.

Thank you for the question. We invited an external adviser because we wanted to know the market and also the perspective of an external adviser. We had a major objective to share that among the directors. That's why we invited an external adviser.

What is going to happen for the future? The stock price is trending higher these days, and EPM has a target. And the deadline is the end of this fiscal year, the end of CSP2021. That's our tentative goal for deadline. We are discussing the next CSP.

Accordingly, how we are going to think about this will be discussed from now on. So once the right timing comes, we hope you can ask the same question again so that we can respond. So as of now, the next invitation has not been decided yet.

We do have certain concerns, you would like to address further?

Not really. The next CSP is the main agenda item. So after that, we are going to discuss those issues you have just mentioned.

Still, the stock price has risen this much, maybe because of the effectiveness of the EPM. I have another question to you. On Page 18, I think, regarding the reward system. The bonus calculation factor has been changed from divisional performance to company-wide performance. It's not about Astellas, but pharmaceutical companies usually face LOE. And then the company-wide performance will decline because of the patent expiry. Any company will face that.

Bonus calculation based on company-wide performance. R&D people may identify great things, but the bonus might be reduced. In our industry, that can be a dissatisfaction element as a trend or tendency. Are you approaching this timing so to make ends needs or to be aligning everyone in the right direction? What's your approach here?

Before Sugita, let me make a brief comment. So let me explain what happened in the past. This is about the compensation, especially the yearly rewards, so recognition of individual contribution. And in the past, there is the function of division-wise, and also after that, the company-wide evaluation or recognition. So we had those 3 layers. Those in lower grades, the individual aspect is higher in terms of the percentage. On top of that, the division and also company as a whole are added. And if you are in higher in layers, rather than the individual, the division or company-wide evaluation portion are bigger. That's the past.

What does this mean, however? Well, individual important. However, rather than individual, the division is more important. So you tend to have such a culture. So we removed such components, so we have the individual and the company-wide. So that layer lower, then individual percentage is higher. And if you are up to -- you are up in the layers, then of course, there's a percentage of the individual, but the company-wide or division-wide, function-wise portion will be bigger.

Of course, LOE is one thing we need to think about. But basically, we have the target for this year. How you can achieve it or not is evaluated. So the sales is reduced, so your evaluation is reduced. It's not that simple. So the reduction of the sales is predicted. However, to what extent you can stop that? That is possibly evaluated. So the performance up and downs are not directly related -- reflected into the evaluation.

Just like you mentioned, the sales worked this hard and we came up with this performance, but R&D didn't work well. So company-wide performance becomes this and that. Of course, that would happen. But we want to realize One Astellas. Nobody says something like that. We face something good, something bad, but everyone cheer-ups and support each other. Japan is good, U.S. business is good, or sales division is good or R&D function is good. So there are ups and downs and there are differences. However, as One Astellas, so that we can realize that, what would be the appropriate compensation method or approach? That has been the thinking.

I think we don't have -- I don't have much to say here, but the explanation was exactly right. So the target is not absolute like year-on-year this and that. It's not something. We have the target or objectives for a while, and if you achieve it or not, is needed to be considered. That's why LOE is also managed when we set up with such organizational goals. So there will be no problem.

And division performance or company-wide performance reflected into the bonus? The way of thinking differs depending on the organizations. Whatever you do, there are always the benefits and disadvantages. So what do we want to do? What do we want to promote this time? It's not division-wise, but the company as a whole.

Cross-function -- cross-functional collaboration is good for the company, it's good for myself or each individual. That is the mechanism we would like to establish. So each individual need to think about the company-wide performance, total performance, horizontal function performance.

If you think to that extent, then benefit will come on to you as well. It's not something that everything is okay if you think about only your own function. So again, whatever method you would introduce, there are always goods and bads. But throughout the company-wide organizations, let's go towards that as One Astellas. That's what we wanted to realize. I hope you feel that.

So what is easy for me is, instead of me, Okamura can explain everything for this perspective, which means that we have a common understanding and we can do it as One Astellas. I understand our management is also one Astellas.

Thank you for the question. I believe some are still waiting for the questions, but this is the time to close. So with this, we would like to close the Sustainability Meeting 2025. Thank you very much for your participation out of your busy schedule. Thank you very much. Thank you, everyone.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Thank you very much for your joining with us. This is the FY '25 third quarter earnings call. My name is Kato. I'm serving as the moderator for today. I am Chief Communications and IR Officer. Today, following our presentation, we will proceed to the Q&A session. The presentation will follow the presentation materials available on our website. The session, including Q&A, will be conducted with simultaneous interpretation in Japanese and English. Please note that we cannot guarantee the accuracy of the simultaneous interpretation.

[Operator Instructions] This is some notes for today's presentation. This material presentation and answers and statement by representatives for the company in the Q&A session includes forward-looking statements based on assumptions and benefits -- or beliefs, rather, 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 unapproved uses in any fashion nor provide medical advice of any kind.

The participants for here today is Atsushi Kitamura, CFO, Chief Financial Officer; Tadaaki Taniguchi, CRDO, Chief Research and Development Officer; Claus Zieler, Chief Commercial and Medical Affairs, CCMAO. We have 3 of them with us here today. We start the presentation now. Kitamura-san, the floor is yours.

Hello, everyone. I am Atsushi Kitamura from Astellas Pharma Inc. Thank you very much for joining our FY 2025 third quarter year-to-date 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 Kato earlier, I'm not going to read this page.

On Page 3, I will explain the highlights of FY 2025 third quarter year-to-date financial results. Strong momentum from the first half of FY 2025 continues. Based on this, we have made another upward revision of our full year forecast. Continued strong growth of strategic brands by over JPY 100 billion year-on-year has driven double-digit revenue growth.

As for SG&A expenses, thanks to the robust progress of what we call SMT, sustainable margin transformation, our company-wide cost optimization initiative, SG&A ratio improved by 2.7 percentage points year-on-year. Due to the growth of strategic brands and robust cost management through SMT, core operating profit rose significantly, up by 49% year-on-year. Core operating profit margin increased by 7.1 percentage points year-on-year to reach 27.6%.

Based on this strong momentum, like the second quarter year-to-date results announcement, we made another upward revision of our full year forecast by JPY 70 billion for revenue, by JPY 30 billion for core operating profit and by JPY 100 billion for full operating profit, respectively.

Regarding our pipeline, there were 4 major important progresses. For PADCEV, as part of life cycle management of strategic brands, development for MIBC, muscle invasive bladder cancer, made a substantial progress. The additional indication based on EV-303 study was approved in the United States. Also in EV-304 study, positive top line results were obtained.

Regarding VYLOY, promising combination data in gastric cancer was obtained. Phase III study for combination therapy is ongoing. As for focus area approach, for ASB-3082, promising first-line PDAC data was obtained. We plan to start Phase III study by March. Furthermore, regarding ASP2138, PoC was achieved in gastric cancer. Phase III study is now under preparation.

Page 4 is the agenda for today. From the next page, I will explain these topics.

Page 5 shows FY 2025 third quarter year-to-date financial results. Revenue and core operating profit, respectively, increased by about JPY 150 billion year-on-year. Full operating profit increased significantly as well.

Let me explain main items. Revenue reached JPY 1,601.3 billion, up by 10.2% year-on-year. Core operating profit rose to JPY 442.1 billion, up by 48.6% year-on-year. The bottom half of this page shows our full basis results. Operating profit was JPY 333.9 billion, and profit was JPY 248 billion, both grew significantly year-on-year.

Page 6 shows FY 2025 third quarter year-to-date results of our main brands. Sales of all brands increased across the board with strategic brand sales combined growing by over JPY 100 billion in total year-on-year. First, third quarter year-to-date sales of 5 strategic brands, namely PADCEV, IZERVAY, VYLOY, VEOZAH and XOSPATA exceeded JPY 350 billion in total, substantially up by JPY 109.3 billion or 45% year-on-year. PADCEV and VYLOY in particular, drove the strong growth.

We are expecting total sales of strategic brands as a whole to reach close to JPY 500 billion on a full year basis. Also, these brands have high profitability and their growth made a great contribution to core operating profit increase. We are expecting further growth to continue in FY 2026 as well.

Next, I will explain individual strategic brands and XTANDI. PADCEV, sales increased to JPY 162.6 billion, up by JPY 45.6 billion or 39% year-on-year. While robust global growth has been continuing, overall progress is exceeding our expectations, mainly driven by the strong trends in the United States and Europe. As a major progress in the third quarter, in November last year, based on EV-303 study, the additional indication of cis ineligible MIBC was approved in the United States. Uptake after approval is on track. And in December, PADCEV was included in the NCCN guideline many physicians are referring to.

In addition, in EV-304 study in cis-eligible MIBC, positive top line results were achieved. We are now preparing for filing of submission. MIBC is expected to drive further growth of PADCEV in FY 2026. As for IZERVAY, sales rose to JPY 55.8 billion, up by JPY 11.4 billion or 26% year-on-year. New patient starts, which are important metrics are steadily increasing. IZERVAY continues to grow double digit quarter-on-quarter, both in terms of sales and volume. Overall progress is in line with our expectations vis-a-vis our full year forecast we updated in the second quarter. We continue to have high expectations on IZERVAY as one of the important growth drivers.

With regards to VYLOY, sales reached JPY 46.1 billion, performing well at a pace higher than our full year forecast we revised upward in the second quarter. Continuously from the first half, high Claudin 18 testing rates and lower-than-expected discontinuation rates are contributing to the overall good progress.

We are meticulously conducting information provision activities about AE management. By focusing on the prevention of nausea and vomiting, particularly in the initial cycle, we believe we can reduce discontinuation and enhance treatment continuation rate. Regional footprint is expanding steadily with approval in 48 countries and launches in 30 countries by now. VYLOY since launch has been performing extremely well by now. We're expecting further growth also in FY 2026 and beyond.

Sales of VEOZAH increased to JPY 35.2 billion, up by JPY 10.8 billion or 44% year-on-year, demonstrating a solid growth continuously. With recent new coverage starting in January this year, commercial lives covered expanded to about 80%. With improved access, we're expecting stable growth also into the future. A new non-hormonal drug was launched in the United States, but the launch impact as of now is in line with our assumptions. With the launch of another treatment in the same class, we are hoping that the market will expand further going forward.

Regarding XOSPATA, sales reached JPY 53.5 billion. Overall, it's making steady progress. Top line results are expected in the first half of calendar year 2026 for Phase III PASHA study with newly diagnosed AML as a potential new indication, where we have high expectations as a future growth driver for XOSPATA. If approved, we can offer this treatment option to a new patient population, so we're expecting contribution to sales.

Last but not the least, XTANDI. Sales increased to JPY 732.2 billion, up by JPY 29.1 billion or 4% year-on-year. Progress is exceeding expectations, driven by continued global demand growth. We're expecting XTANDI to reach its peak level in the current fiscal year.

Page 7 is about cost items. SMT initiative is progressing ahead of our plan. We realized cost optimization of about JPY 20 billion in total for SG&A expenses, R&D expenditure and cost of sales combined. We are fully on track to achieve FY 2027 cost optimization target of JPY 150 billion. Excluding U.S. XTANDI co-promotion fees, SG&A cost ratio improved by 2.7 percentage points year-on-year.

Let me explain a specific breakdown of SG&A costs and R&D expenditure. SG&A expenses trended at a similar level compared to the previous year. SG&A cost ratio was 27%. As an SMT progress, we realized cost optimization of about JPY 9 billion through continuous global organizational restructuring, reduction of mature products-related expenses and streamlined IT infrastructure, et cetera. In addition to investments to maximize the potential of strategic brands driving our future growth, we will continue to make investments needed for SMT execution in order to realize further cost optimization from next fiscal year onward.

R&D expenditure decreased by 12.9% year-on-year. As a main factor behind, in addition to ForEx impact, we made progress in outsourcing cost reduction through in-sourcing development capabilities, including clinical trials, et cetera, under SMT, which led to cost optimization of about JPY 8 billion. Furthermore, due to the completion of large clinical studies for strategic brands, clinical development costs decreased by about JPY 9 billion. Onetime co-development cost payments booked in FY 2024, et cetera, was another factor for the year-on-year cost reduction.

Up to the third quarter, we were in a transitional period with the completion of large clinical studies for strategic brands moving on to prepare for new late-stage development studies. From now on, we are planning to initiate multiple Phase III studies. From the fourth quarter and FY 2026 onwards, we are expecting investments to increase aligned with the progression to late-stage development.

Page 8 is about the revised full year forecast of FY 2025. Based on strong momentum through the third quarter, we have again revised upward our full year forecast for revenue, core and full OP. The core OP margin is expected to increase by 4.2 percentage points year-on-year to achieve 24.8%. Regarding foreign exchange assumptions, we have revised the full year forecast exchange rates to JPY 150 per U.S. dollar and JPY 174 per euro. For the fourth quarter, we assume an exchange rate of JPY 154 per U.S. dollar and JPY 180 per euro.

Revenues are projected to reach JPY 2.1 trillion, an upward revision of JPY 70 billion from the previous forecast in the second quarter announcement incorporating the upward revision of full year forecast for XTANDI and mirabegron as well as the impact of the change in exchange rate assumptions. SG&A expenses, excluding U.S. co-promotion fee for XTANDI are projected at JPY 600 million. Excluding the ForEx impact, this is the similar level as the previous forecast.

R&D expenses are projected at JPY 315 billion, reflecting the prioritization of programs in the research phase. As a result, core operating profit has been revised upward by JPY 30 billion from the previous forecast. We expect our core operating profit to reach JPY 520 billion, exceeding the JPY 500 billion mark for the first time since Astellas's inception.

Next, full basis operating income. We have incorporated JPY 30 billion into the latest forecast under other income, including changes in the fair value of contingent consideration related to VYLOY following the discontinuation of PDAP program booked in the third quarter. Additionally, we partially released JPY 40 billion of other expenses, including an impairment loss risk previously booked at the start of the period, reflecting this in the latest forecast. As a result, full year operating profit is projected at JPY 340 billion.

We will now discuss pipeline progress. Page 10, progress on key events expected in FY '25 for our strategic products -- strategic brands. Particularly significant advancement as shown in the center of the slide was approval in the U.S. last November for the expanded indication of PADCEV based on EV-303 trial for cisplatin ineligible MIBC patients. Noteworthy is the remarkable speed of this approval achieved just 1 month after the submission was accepted in October, more than 4 months ahead of the PDUFA date.

Following the U.S., we submitted for this expanded indication in Europe in November and in Japan in January. Furthermore, the EV-304 trial for cisplatin-eligible MIBC also met its primary endpoint. Detailed data from this trial will be presented at the February ASCO GU meeting. VYLOY data from the Phase II ILUSTRO trial was presented at ASCO GI in January. Details are provided on the following pages.

As other updates, as noted in the table photo, we obtained favorable top line results from the Phase III STARLIGHT 2 study, the pivotal Japanese trial for VEOZAH. We plan to submit for regulatory approval in Japan after obtaining results from the STARLIGHT 3 trial, evaluating long-term safety.

Page 11 shows the latest status of VYLOY. We presented promising data at ASCO GI supporting its combination with immune checkpoint inhibitors plus chemotherapy. Cohort 4B of the Phase III ILUSTRO trial evaluated the efficacy and safety of VYLOY in combination with nivolumab and chemotherapy for first-line treatment of gastric cancer. The median PFS, progression-free survival, the efficacy endpoint was 14.8 months across the entire cohort, 18 months in patients with Claudin 18.2 high expression. And as indicated by the red line in the graph, 23.6 months in patients with both Claudin 18.2 high and CPS1 or higher. This significantly exceeded previously reported data for combination therapy with chemotherapy alone.

Currently, the Phase III LUCERNA trial is underway as a confirmatory study for the combination therapy. The LUCERNA trial evaluates the efficacy and safety of the combination therapy of pembrolizumab and chemotherapy in gastric cancer patients with Claudin 18.2 high expression CPS 1 or higher who demonstrated the longest PFS in the ILUSTRO trial. Patient enrollment is progressing smoothly with interim analysis data expected to become available in FY '27 or later. We anticipate that this combination therapy will further contribute to the treatment of gastric cancer, an area of high unmet medical need and maximize the product value of VYLOY.

Page 12, regarding the focus area approach, we describe the progress of the flagship programs for each primary focus. For ASP3082 and targeted protein degradation, clinical trial data for PDAC was presented at ASCO GI in January. Details are provided on the following page.

ASP2138 and immuno-oncology achieved critical milestones by demonstrating proof of concept in gastric adenocarcinoma and GEJ adenocarcinoma. This is based on the promising first-line data presented at ESMO last October. Preparations are underway to initiate Phase III trials promptly. Clinical trials for AT845 in gene regulation and ASP7317 in blind and regeneration are progressing as planned with the PoC judgment still targeted by March.

Page 13. Progress on ASP3082 and primary focus targeted protein degradation regarding ASP3082 for first-line PDAC, pancreatic ductal adenocarcinoma treatment, promising data was presented at ASCO GI, and we anticipate to initiate the Phase III by March. PDAC is a disease with a high unmet medical need as the current standard chemotherapy-based treatment struggles to achieve sufficient efficacy.

In evaluating ASP3082 in combination with chemotherapy as first-line treatment for PDAC, we also observed high antitumor activity and ORR of 58.3% and DCR, disease control rate, of 83.3%. ORR stands for objective response rate. The safety profile showed no major concerns, yielding promising findings supporting further development in PDAC. Based on these results, preparations are underway for Phase III trial targeting first-line treatment of PDAC scheduled to start by March.

For NSCLC, development plans are being reviewed to initiate the registrational studies earlier. For colorectal cancer, PoC judgment is anticipated by March.

Regarding follow-on program progress, ASP5834, a pan-KRAS degradation, received fast track designation from the FDA for NSCLC. We anticipate this will accelerate its development. ASP4396, which is being developed as a drug targeting the same KRAS G12D mutation as ASP3082 has been terminated based on data obtained to date. Going forward, we will focus development efforts on ASP3082, which has demonstrated promising data for this target.

Page 14, today's summary. Strong momentum continued in the third quarter. Strategic brands maintained strong growth. Cost optimization through SMT progressed well with SG&A ratio continuing to improve. Following the Q2 earnings announcement, we have made another upward revision of our full year forecast of revenue by JPY 70 billion, core OP by JPY 30 billion and full OP by JPY 100 billion.

Our pipeline also made significant advancement. As for strategic brands, life cycle management progressed, notably for PADCEV and VYLOY. In the focus area approach, ASP3082 and ASP2138 progress towards initiation of Phase III trials. We'll continue pursuing further profit growth and enhancing pipeline value.

At the end, this is an update on upcoming events. Our annual Sustainability Meeting is scheduled for the 26th of this month. We will present Astellas' sustainability philosophy, specific initiatives and the outcomes achieved through these efforts. We really encourage you participating. Next, we plan to hold an R&D Day in late March. This session will provide an in-depth explanation of our current R&D status and further direction. In late April, we will hold the FY '25 earnings call. Then in late May, we plan to hold a briefing on our next corporate strategic plan. We hope to demonstrate how Astellas will achieve sustainable growth beyond the expiration of XTANDI's exclusivity. Details for all these events will be announced as soon as they are finalized. We look forward to your continued interest. That's all for me. Thank you very much for your attention.

[Operator Instructions]

First, Mr. Yamaguchi from Citigroup Securities.

My first question is about the upward revision. In the second quarter, you made an upward revision. And once again, in the third quarter, this is a very positive message to the market. Mirabegron, XTANDI, ForEx and SMT R&D are the factors. The main factor is the upside of the important products on a full year basis. Do you think you can have some room for another upward revision? We still have Q4.

I'd like to confirm a bit. There was some noise. Sorry for that. We made another upward revision, and you'd like to ask about the factors behind ForEx, XTANDI and mirabegron. We made another upward revision. Up to the third quarter, there was a very strong momentum. And we are seeing a lot of progress in cost optimization we are seeing. In the third quarter, everything to be updated to create another forecast? No. Rather, we create an annual plan and we check the progress in PDCA cycle. And at the end of the third quarter, we made a review. If there's anything major in the third quarter and others can be updated.

Now this time, up to the third quarter, we have seen a strong momentum. We didn't include everything into the upward revision on a full year basis. We selected some. That was a major factor. Overall, priority strategic brands are growing very strongly in accordance with our plan. And we see some great performance. And in a month or 2 months to come, we didn't touch on that very much.

Mirabegron and XTANDI, clearly speaking, overachievement is continuing. So we decided to reflect it as well as the ForEx rate. And also regarding the visible cost elements, we did some update. And full basis numbers are also revised upward. Full basis cost in the second quarter, the visibility did not change much. So we didn't change. But at the end of the third quarter, we reviewed and full basis costs had a higher visibility as well. So we decided to reflect that as well. With this, in the fourth quarter, did we redo from the bottom up? Not really. We do what we need to do. And based on our plan for FY 2026 and beyond, we are developing our plan. So thank you for your understanding.

Okay. Just briefly, another question about IZERVAY. In the second quarter, you made a revision and you said you are on track. XTANDI cliff. In order to deal with that, I believe this is quite an important asset. So what you are doing currently or new initiatives you are trying to do? If there's something, would you please answer that?

Thank you for your question. As has been pointed out, IZERVAY is extremely important brand for us. So we're doing different activities. So rather than me, Claus is going to explain what we are doing currently. Claus, please?

Yes, Yamaguchi-san, thank you for your question. Let me just briefly sketch what we see in the U.S. market for geographic atrophy. As you're aware, in the beginning of the fiscal year, we had a significant turbulence in the market due to affordability issues with the foundations withdrawing, and that meant certain patients couldn't afford their co-pay.

Since that time, we have seen demand coming back steadily. So we now have 2 quarters in a row where we see the underlying demand, so the new patient starts growing by about 10% quarter-over-quarter. So that gives us the confidence that we will be able to achieve the forecast that we made in -- at the end of Q2. Does that answer your question?

Yes. Is there any new initiative if you have at the moment or not?

Not since our disclosure in forecast too. So at the end of Q2, you may remember that we had reorganized our market access team to provide better support for the retina clinics. That is ongoing, and we see very good success from that. We are continuing to focus our promotion on the retina specialists because we think that, that's the education that first needs to be embedded, and we're seeing good progress there. So there's nothing new, if you want. Of course, our DTC campaign is continuing to educate patients. So there's nothing new, but just a continuation of the activities we started after Q2.

Thank you very much, Yamaguchi-san. Let me make some additional comment. So Claus was very modest. He just explained what should be done is done. But during the DTC, what is actually working, what kind of message is communicated? Of course, we have to make a new market as well. So the PDCA is turning around in terms of the contents of what we are doing. We have to establish a market for that. We are working as a team effort. And also this product is launched in Japan as well. So not only U.S., but also we are thinking about global expansion. So as a company, as a big world, we are currently working on that.

Next, JPMorgan, Wakao-san, please.

Page 8 of your presentation. I have a question on the slide. SG&A and R&D expenses based upon the current currency level, is quite suppressed. Seemingly, it's on the increase, but I have an impression that those are quite well controlled. And now my question is, next fiscal year, SG&A, excluding XTANDI co-promotion fee, then how do you feel about R&D -- for R&D expenses. For SG&A, with this ForEx status, it is suppressed in this way. SMT is ongoing in a very smooth manner. In that case, absolute value basis, next fiscal year, the direction is -- will be on the decrease. And at the same time, R&D, you are going to set some more pivotal studies, so it's likely to increase. That's the view that I have. Would you please make a comment?

Regarding the numbers for next fiscal year, we will explain the details when we announce the FY 2025 full year results. But basically, we should continue the good momentum, and we are trying to develop a plan for revenue and profit increase. SMT is optimizing the cost by JPY 20 billion this year. We have still balance to go. So we have to handle this. That's important. We do have a plan. So we have to increase the accuracy of our execution so that we can front-load our planning.

What about SG&A costs in the end?

For me to say this is going to be the situation, it's not appropriate. But needless to say, we have to clarify where to increase and where to reduce. Based on the SMT philosophy, there is a huge room for reduction. So we're assuming that we are going to work on it. As for R&D expenditure, clearly, late-stage development is something we are going to move on to. So there's going to be an increase there.

Overall, to what extent we can offset? So in the budgeting process, we are discussing right now. Increasing the revenue because we increase the revenue or increase the R&D, it may not lead directly to R&D cost increase. So how we can take measures to optimize our costs first. This fiscal year -- last fiscal year, that's how we have been addressing. So that approach is not going to change in principle. Regarding the specific numbers, please wait for some more moment.

I have a follow-up question. SMT target is JPY 150 billion. Its effectiveness will be higher in FY 2026 rather than compared to FY 2025. That's my understanding. You will have sales promotion, but it doesn't mean that you have a new drug to be launched. So SMT effectiveness can be seen more easily in terms of the balance. Am I wrong?

SMT effectiveness up to FY 2027, we are going to reduce the cost by JPY 150 billion. And JPY 40 billion out of that was done last year. This year's plan was JPY 20 billion. On a cumulative basis, it's going to be added up. On a cumulative basis, this year's target, JPY 40 billion last year and JPY 20 billion this year. So that's JPY 60 billion in total. We had to do this by the end of March according to our plan. And right now, as of December last year, we reached JPY 60 billion cost reduction. We have JPY 90 billion to go to reach JPY 150 billion target. So how to do this is the SMT's approach and philosophy.

What we are discussing right now is as follows: how we can realize the remaining part in the next fiscal year at an accelerated pace. Late-stage development studies will be initiated, as you said. And as a company, it's not a net increase, but rather, we can manage the cost to a certain degree. But anyway, it's working well.

Understood. My second question, ASP3082, I have a question. ASP3082, ASCO GI had a presentation about good data. Revolution Medicines are the competitors. And the data was similar according to the presentations. How you can differentiate is something I'd like to know. One element is going to be the speed. Anything else as well? 4396 was discontinued. 4396 had higher expectations at certain timing. So terminating this program, what's the intention behind? 3082 data is better. That's why you terminated 4396?

3082, our philosophy, including the competitive edge against the competitors. On that point, first, Taniguchi is going to explain.

Let me explain first, 3082, particularly from the differentiation perspective compared to Revolution Medicines' products, Revolution Medicines' drugs, oral KRAS inhibitors. 3082 and their products are completely different. Our agent is targeted protein degrader. Protein with KRAS mutation is going to be degraded by agent. The target is the same, but MOA is different.

Then how it is represented within the clinical data? Of course, we have to look to the data, especially needless to say when it comes to the protein inhibitor, the resistance against inhibitors quite frequently reported. So we have to have our eyes on it. And at the same time, our protein degrader against the 3082, some resistance is under the research in our end as well.

Likely to be the biggest difference is the continuation level of the efficacy. We are going to accumulate more data to look at the sustainability of the effect as well. And in our knowledge, the first-line study of the pancreatic cancer hasn't been started by the competitor. So we would like to accept our speed so that we can start the combination treatment with the chemotherapy for the PDAC. For PDAC or pancreatic cancer, the prognosis is quite poor. So we would like to start clinical trials as early as possible so that we can deliver better therapies to the patients.

And 4396 termination of the development. For 4396, KRAS G12D is a target. So it is exactly the same target as 3082. One difference is E3 ligase is cereblon type. So 3082 VHL with that, it is quite different. 4396 and 3082 efficacy compared according to our original plan. If there are some differences, we are going to consider about that. That was our plan. We haven't opened the data yet, but 4396, the data is not better than 3082. Because 3082 is more advanced compared to it, so we decided to prioritize 3082 in terminating 4396.

Next, Goldman Sachs Securities, Ueda-san, please.

Ueda from Goldman Sachs Securities. First question, that's about the progress of SMT. I have additional question about that. Currently, your core OP margin, FY '27, 30% is the target. And currently, I think your progress level is more than you've expected or this effect of SMT is way more effective than expected. Is that how you view? Please explain about this.

Thank you, Ueda-san. SMT, by FY '27, JPY 150 billion net benefit is what we would like to realize. Then within 2 years, JPY 40 billion and JPY 20 billion in total, JPY 60 billion. So the speed is not extremely fast. Rather, with the wider scope, we see that it's in line with the plan a little earlier than planned. Last year, it was JPY 40 billion, but we achieved -- we worked toward only the lower-hanging fruits because it came up with the result quickly.

But on the other hand, transformation type of measures, that takes a bit more time. Last year, we've been working on the planning before coming up with the result. And from this year, that transformation realizing measures started to be working or operating. Because this is a transformation, so it takes a relatively longer time. And for those, you have to change something. So you have to spend a certain level of the money. That's why including that time is JPY 20 billion.

Without such initial investment, it could be more beneficial. But currently, we are focusing on transformation part now. So it's not extremely faster than expected. Basically, it is on track of the plan. But if you look into more details, there was something that we could be more accelerated in terms of the speed. So that is exactly currently what we are working.

My second question, the trend of the main brands in the United States. In the quarter between October and December, XTANDI at the end of the year did not have a high level of sales unlike usual years, PADCEV in the United States. Quarter-on-quarter, it was almost flat according to my image. Any sense of deceleration? Or what's the current trend of the businesses here?

Thank you for your question. So I'd like to briefly respond. And then I'd like to hand over to Claus later so that you can have more information. What you have said is different from our perspective. As for PADCEV in the United States also, there is a very good progress being made. In the third quarter, that is continuing as well on a continuous basis. XTANDI, in terms of the volume, there is a strong demand growth, which is continuing. So there is no slowdown in our viewpoint. Claus, anything to add from you, please?

Yes, no. You're absolutely right. So PADCEV is continuing to surprise us positively. You noted the very fast approval by the FDA of our -- the MIBC, the 303 MIBC indication. And we're already seeing uptake in that indication. It's been included in the NCCN guidelines. So all of that is going very, very well. Please do note, however, that our experience with PADCEV has consistently been that we see a very fast uptake in the first 6 months and then a very sharp plateau as we penetrate the relevant patient population. And I think that's exactly what's happening right now. The uptake right now is faster than we expected, which is why we are saying it's above expectations, but there will be a plateau after about 6 months as we penetrate the new patient population completely.

What about XTANDI?

So XTANDI is, I mean, continuing at an amazing pace for a drug that's on the market for, what is it, almost 14 years now. So the underlying demand growth in paid demand in the U.S., but also outside of the U.S. is continuing at a double-digit pace. So in the U.S., more than 20% demand growth in paid demand. So that's continuing. However, we do see a consistent slowing of the increase in paid demand from the high 20s and 30s to now the lower 20s. So you're right, there's some slowing, but it's still at an amazingly robust pace, which is why we're increasing the guidance of XTANDI at this point in time.

Matsubara-san from Nomura Securities, please.

My first question is about VEOZAH. There is now a competitor, but it's within your assumptions in terms of the progress. If I look at the third quarter, the growth rate is slowing a bit. New patient starts and the existing patients, VEOZAH and the competitor's product, what about the shares and how it's going to grow? I'd like to hear about your assumptions, Astellas' assumption.

Matsubara-san, thank you very much. Regarding VEOZAH, I'd like to briefly comment. If there's anything to add, I would like to ask Claus to comment. As for VEOZAH, basically, it's on track. As is described here, there is now a competitor, which is launched, but the real impact to be judged will require more time. But as of now, it's not very different from our assumptions as of now. This is a new nonhormonal drug. So it's important to create a market here. And we have been working on this by now. One of the important elements here is access. How to enhance and increase access? We have been working on this. In January this year, our new commercial coverage started, and it's now 80% coverage by commercial lives coverage. So we'd like to continuously increase further. Claus, anything to add from you?

Yes. So I think there are 3 factors to note on VEOZAH, and VEOZAH is just chugging along. It's very consistent in its -- the underlying demand growth. So it's fully on track and in line with expectations, both -- especially in the United States.

Now as Kitamura-san noted, it's very early days to judge the market share distribution between the competitor and VEOZAH. We do have now 80% of lives covered in the U.S. from a market access standpoint. And that gives us a very good basis, which the competitor first has to establish. So I think it will be some time before we can fully judge how the market decides between the 2 products. Right now, it's fully aligned with our expectations, as Kitamura-san said.

I think the more important factor, however, is how will 2 companies trying to develop this market, how will we be able to displace the SSRIs and the other off-label nonhormonal drugs in this market. Remember, VEOZAH right now only has about 14%, 15% of the non-hormonal market. So there's a lot of room to grow, and I think 2 companies working on that will be more effective than one company alone. So that is what I really would like to watch as the new year unfolds.

The third factor, maybe just to complete is the question of different monitoring requirements and different side effects like the somnolence that our competitor has. We don't know yet how that will play out. But we can say for VEOZAH that the wobble in the market that we had when we had the label update on the liver monitoring, in the U.S., that has washed out, and we're back on that growth track. Ex U.S., where the label update came later, we're seeing the same pattern replay, right? A certain uncertainty in the market, then a stabilization, then a reuptake of the growth. So we're seeing exactly the same pattern ex U.S. as we had in the U.S. just with a delay in timing. So that's why I say it's in line with our expectations because we're seeing the same pattern replay in the ex-U.S. market. I hope that answers your question.

Next is AT845. And in the fourth quarter, you are going to judge the PoC and adenovirus is administered. And I just want to confirm if any liver adverse event has not taken place and the stability is maintained for 13 years or so, I think that is being mentioned. So considering the risks, I would like you to explain about this liver toxicity matter.

Let me explain about that. AAV8 vector is utilized as the gene therapy, that is AT845 and this is targeting Pompe disease. And currently, the patient enrollment is completed, and we're just waiting for the data readout becomes available.

For liver toxicity, of course, I wouldn't say there is no liver toxicity at all. Just like other AAV8, the increase of the liver enzyme is observed in a couple of -- or some cases. But so far, it is not really a big issue. Therefore, as has been planned, the end of March -- by the end of March, data is going to be collected and we make the final analysis, looking at the balance of efficacy and safety, then we are going to make a judgment on PoC.

Next, Sanford C. Bernstein, Sogi-san, please.

First question, that's about PADCEV. Year-to-date number and updated guidance. If we look at that, Q3, you showed a strong growth. But for Q4, the growth level is a bit lower according to your guidance. That's my understanding. And full year guidance, you think there is a potential for further upside or Q3, Q4 for the phasing, are there any background?

As for the full year forecast, Sogi-san, as I said at the beginning, revisiting everything to update? No. We saw the strong momentum and updated some elements. If you look at the numbers by brand, for strategic brands, we have the same numbers as before. We are not expecting a slowdown in the fourth quarter. But rather than updating that, we wanted to reflect what's working well right now to discuss what we are going to see for the next fiscal year. That's how we are steering our operations on a full year basis.

If we update everything, the numbers might be different, but we do whatever we need to do in the current fiscal year and how to address the further growth next fiscal year. So that's how we are discussing. Thank you for understanding.

Okay. Next, about R&D costs. From the fourth quarter, R&D cost and expenditure will increase because it will shift to more investments. Full year and year-to-date numbers can be compared. Then in the fourth quarter, a little less than JPY 100 billion will be spent according to my understanding. In 2026, Phase III in oncology would be initiated. At that pace, you're going to proceed? Is my understanding correct?

And also, you have SMT initiative, and it would take time for transformation and initial investment period will transition to harvest the fruits. How it's going to be offset into the future?

Let me start with SMT. Your basic understanding is correct. Upfront investments are being made. So we are going to recover those investments. So you're right. However, we have things to do in the remaining 2 years. So we would recover investments and we make another investment to recover the investment. So this is a series of activities. It's not just for a short term in a single year, but this is more continuous activity. So for each product, you're right. But overall, it's going to be slightly different. In the end, by FY '27, we are going to optimize the cost by JPY 150 billion.

Regarding R&D expenditure in the fourth quarter, you may think the number look large. We understand your concern, but what about this space, including the outlook for next fiscal year and so forth? We'd like to explain when we announce our forecast next fiscal year. It's not [ 1,000 ] times 4.

Next, UBS Securities, Seki-san, please.

Seki from UBS Securities. On Page 24, I have also a question about SMT. It's now JPY 150 billion without the lower limit of JPY 120 billion. 30% core operating margin is going to be achieved even after XTANDI LOE?

Our confidence level is enhanced. The answer is yes. In the summer of 2023, we started SMT. In 2024, we disclosed this activity to you. At that time, multiple year plan was developed. Back then, what we can do and there are other elements we are not sure about. So 70% was the plan. The remaining 30% gap must be filled. We worked on the execution together. And to build our ideas, we have accumulated that much. Our confidence level is higher. The answer is yes.

If you do this after XTANDI LOE, is it going to be sufficient? No, maybe. FY '27 -- up until FY 2027, before XTANDI LOE starts, we are going to do this. After LOE, we have to address that situation. And the state of the company after LOE must be discussed. So this is not going to be the end of the story. By FY 2027, this is what we are going to do as a preparation.

But once it starts -- or after it starts, what's the aspirational state of the company?

We would develop a new corporate strategic plan, which we are discussing. In May this year, we will explain further details.

We are looking forward to May. Next question is about XTANDI. This is extremely big product. Therefore, are there some possibilities in Japan, U.S., Europe, the generic market launch is going to be delayed. Could that kind of a scenario is conceivable? How do you view about it?

Could you repeat your question once again?

Well, that's XTANDI. In this pharma world, after the exclusivity expired, generics are not going to be launched in a timely manner. Do you view that is also possible for XTANDI as well?

I will make a brief comment. If there is additional, Claus, please. Well, first of all, because of LOE, everything is done. It's not really so, how we can continuously provide the value of this drug? That is an extremely important point. Having said that, this is again a very big product, and there are the matters of generics to be launched. So our corporate plan is not the assumption that we can protect completely. Of course, we have a certain assumption, but it's not something that we are looking at situation that is on a decrease of the sales. We are thinking about the countermeasures to what extent we can protect XTANDI? That is also something we are discussing under the new strategic plan. Claus, do you have any additional comments?

Yes, a few considerations maybe. So I think the first consideration is that the patent that we have, the compound patent for XTANDI expires at different times in different geographies. So in FY '26, we'll already see patent expiry in some geographies like Brazil, like Turkey, like Korea, China, then '27, the patent expires in the U.S., '28 in Europe. But we do have some geographies like Japan, which you mentioned, which go all the way to 2030. And there are some other geographies as well, which have a very, very long patent life.

So the first comment I would like to make is that this is not one timing, but it's more a curve as different geographies where the patent expires come into play. We do expect generics to enter as soon as they can because it is a big asset, and it is a big market. And we've seen that also with abiraterone when abiraterone went generic. However, the one -- the other thing I would like to mention is that we have 2 formulations in the market, a capsule formulation and a tablet formulation. For the tablet, we have a formulation patent, which extends the life and the protection of the tablet into the early 30s.

Now how the market is going to play between capsule generics and protected tablets is going to be a tricky analysis, and then we're working on that right now. But we do see some potential to maybe protect XTANDI partially with the formulation patent on the tablets that we have in place.

Next, SMBC Nikko Securities, Wada-san, please.

SMBC Nikko Securities, my name is Wada. Can you hear me?

Yes, please start.

Full base operating profit increase is my question. Impairment loss risk and that is released partially, I think that's what it is about. But would you please explain the background of that? This time, focus area approach for programs coming up with the favorable result of that data and that impairment loss risks are likely to be now lowered down. And when it comes to strategic brands, IZERVAY, VEOZAH, they are on track. So impairment loss risks, I think there are no supporting backgrounds for that. That's how we look at it. But the question is, could please explain the background of this? That's one thing.

Focus area approach with 4 programs. If you achieve POC in March for everything, next fiscal year, you can move on to late-stage development. Is there any such possibility?

Thank you very much, Wada-san, for your question. Full basis review. Core was increased in the second quarter and also in the third quarter as well for the upward revision. Because of the increase in the core, the full was also increased in the second quarter. After 3 months, we reviewed everything, and we are conservative in developing the initial numbers. So we could review. We are checking the progress of various programs and projects. But it has not achieved a PoC. We cannot guarantee that it's going to work for sure.

But the assets in question, what about the probability of each, that's how we check. It's not just about the impairment loss. But there was a change or remeasurement of the fair value on contingent consideration. In some, we review noncore costs and additional JPY 100 billion forecast for revenue as an assumption this time after upward revision. If we achieve PoC for all 4 programs, are we going to go to Phase III in next fiscal year? That's our wish. Yes.

One more question, ASP3082. There was a mention of the discontinuation and termination of 4396 and E3 ligase, which is cereblon. Did you see the depreciation in 4396 E3 ligase can be seen here?

We haven't disclosed the data yet. So I'd like to refrain from touching on the details. As we said, 3082 and 4396, the difference is the E3 ligase. What would be the results? I know you're very interested. As soon as we have the data, including 4396, we are hoping to disclose as soon as possible.

Due to the limited time, the next question is going to be the last question. Morgan Stanley, MUFG Securities, Mr. Muraoka, please.

Muraoka from Morgan Stanley speaking. MFN tariff, I have a question to you. Western major companies by the end of the year were able to settle. But for Japanese companies, no one has mentioned this yet at all. For your company, on a stand-alone basis, have you negotiated already and you have an outlook? Or by country, it's negotiated in group by country. You may say that you cannot tell us at all. But in the near future, can we expect that this is going to be settled and resolved because you have a high proportion of your business in the United States and Medicare, I am very concerned?

Muraoka-san, thank you very much. As you said, there are things we can tell you and there are things we cannot tell you. Thank you for your understanding. Mega pharmas are discussing with the U.S. government. So we are monitoring. And as of now, an official letter has not been received by us as of now. So that's the status right now.

Internally, as we said from before, there are a variety of potential scenarios. So we are discussing such scenarios. Still, there's nothing we can comment as anything specific. As for the tariff, as we said in the previous meeting, we have U.S. business whose size is quite large. We have a large proportion of manufacturing in the United States, that's like 70%. We don't know about other companies, but for us, given the current status of the supply chain, tariff is going to be a big obstacle for us. We don't think so according to analysis. But this is a very important topic. So internally, we are discussing and doing simulations right now to respond to your question.

And one more question. This is the second big revision, upward revision. The question is dividend. In the beginning of the fiscal year, you came up with the level of dividend and that is maintained. What's the background of not changing it?

Thank you for your question. Basically, our principle for capital allocation has been changed. We continue to invest for the growth and at the same time to the shareholders, we are going to return in a stable manner. If there is an excessive fund, we are going to purchase our shares so that it can be returned to the shareholders and Iveric Bio is acquired and the net is increased and that is considered to be returned according to the capital allocation.

And for the dividend, it's not something that we are thinking with just 1 year performance. We are considering for the couple of years when we think about the cash flow. So it was good this year. That's why it will be increased. And next year it was not really good. So reduced. It's not something like that. So that is our basic principle for our capital allocation, and we stick to that. That is how we are.

Understood. One last question from me. That is a follow-up question by Wada-san a little while ago. That's about IZERVAY. It is about impairment loss related. I would like to confirm, especially about IZERVAY. This time, the range of the impairment is reduced and IZERVAY business is ongoing quite well. So IZERVAY U.S. impairment loss proportion is not something that you have as a concern for the operation?

For IZERVAY, there's no change. We have to continue to grow it as well, and we are working on the initiative one by one. We do not think -- of course, we don't think that the sales would be flat as it is. Of course, we have to grow it further. That is an assumption with our activities, but we haven't seen any big impairment loss risk. And ex U.S., well, it's been mentioned that the approval here in Japan is also granted and also the launches of sales is started, and this is an asset not amortized, but it is now in that process. So for the IZERVAY, the situation is ongoing quite well.

Thank you very much for giving us so many questions. The time is up. With this, we would like to close this earnings call. Thank you very much for your participation.

Good afternoon. Welcome to the J.P. Morgan Healthcare Conference. I'm Seiji Wakao, Japan pharma analyst. And it's my pleasure to introduce Okamura-san, CEO of Astellas, and welcome him to the conference. Please go ahead, Okamura-san.

Thank you, Wakao-san. Hello. Good afternoon, everybody. My name is Naoki Okamura. I'm President and Chief Executive Officer of Astellas Pharma, Inc. I'm excited to be back in the J.P. Morgan Healthcare Conference. I hope some of you know a little bit about Astellas, but probably there are someone who, for the first time, start engaging with us. So I would like to talk about where we are today, where we are going to be in the near, mid to long term and more importantly, how we get there. Actually, we feel strong confidence in our growth trajectory in the longer term, so that I would like to share some excitement as well as the momentum that we feel today.

So first of all, we have a very clear, simple vision, which is to turn innovative science into VALUE for patients. When we use this, all capital, VALUE, it is clearly defined among the people at Astellas, which is outcomes that truly matter to patients divided by the costs to the entire health care system. It's not the cost to us. It's about the health care system. Therefore, if we are to explore increasing value, that means we try to create better outcomes for the patients and try to help managing the health care costs as the entire ecosystem. So we put patients at the center of everything we do at Astellas, and it has become our DNA as a company.

So let me show you a kind of snapshot where we are today. Our fiscal year starts at April 1 and ending at the March 31 the following year. Therefore, the most recent full year for our accounting is we call fiscal year 2024 that ended March 31 last year. In FY 2024, we recorded JPY 1.9 trillion revenue, which is -- in accordance with the current foreign exchange, it is like $13 billion in revenue with JPY 392 million core operating profit, which represents 20.5%. And we have guidance for revenue as well as the core operating profit for FY 2025, which is going to be JPY 2.0 trillion revenue with 24.1% core operating profit. So that's the size, that's the scale of our company.

And even though we are a company based in Japan, Tokyo, Japan, actually, we have a global reach. As you can see at the bottom left, more than 85% of our revenue comes from outside of Japan. We are operating by ourselves more than 70 countries, and we have a good global commercial capabilities to deliver our outcomes to the patients all over the world. And thirdly, I would like to point out, we are investing 17%, 1-7 percent of our revenue back to research and development because we are exploring innovation, constantly exploring innovation, and it is required to reinvest part of our revenue back to our research and development.

Astellas was created through the merger of 2 Japanese pharmaceutical companies back in 2005 20 years ago, and at the time, Astellas was nobody in oncology. Neither of the combined company had any oncology pipeline or in-market sales for oncology products. But after 20 years, now the oncology products are representing 75% of our revenue, and the strongest track record is the journey that we had with XTANDI, which is over $6 billion prostate cancer drug.

Not only it is a privilege to have more than $6 billion prostate cancer drug. That has made the difference in the lives of over 1.3 million men with prostate cancer over the time, but at the same time, we are acquiring many different capabilities to run this great product. For example, we have to have the brand maximization capability with the life cycle management. We have to have the global reach because prostate cancer patients are all over the world. And we have to ensure that the patients can get this drug. In order to do that, we have to have the good market access capabilities as well.

So these capabilities will be a foundation to really have the strong growth of the next generation of our products, which consists of 5 strategic brands, as you can see on the slide, from PADCEV, which is the bladder cancer drug antibody drug conjugate; VYLOY, which is the most recent addition to our oncology pipeline for gastric cancer; XOSPATA, acute myeloid leukemia drug; IZERVAY for geographic atrophy secondary to age-related macular degeneration; and last but not least, VEOZAH, which is the first nonhormonal therapy for vasomotor symptoms of the menopausal women. So as you can see, each of them has a blockbuster potential, and we are confident that these 5 strategic brands are going to get us to the growth trajectory even after XTANDI.

So we have deliberately executed the strategy to overcome the XTANDI loss of exclusivity. This is something that we knew that would come, so we deliberately created the 5 strategic -- portfolio of 5 strategic brands so that we have the -- kind of elevate the peak, flatten the dip and then inflect to growth even after XTANDI loss of exclusivity. And we need to maximize the revenue of our XTANDI as well as the strategic brands. We have to accelerate the pipeline so that they come to the marketplace as fast as possible. And at the same time, in order to maintain our reinvestment to the research and development, we have to do -- we have to establish the financial discipline so that we can improve the profitability structure of the company.

XTANDI, we have a co-promotion arrangement with -- initially with Medivation but now part of Pfizer. Therefore, we have to pay out almost 50% of our sales in XTANDI back to Pfizer. Now the 5 strategic brands are majority fully owned programs that is highly profitable compared to the XTANDI situation. Therefore, even with the kind of dip and regrowth trajectory of the top line, from the profitability standpoint, we will have much better core operating profit margin structure, which we aim to reach 30% by fiscal year 2027 and sustain that 30% level going forward.

Now let me shift the gear to our lifeline, which is the R&D. Probably, you hear many pharmaceutic companies define themselves by, for example, therapeutic area or the key technology platform, like we are oncology company. We are ADC company. But Astellas doesn't. We are taking a very unique research and development strategy, which we call focus area strategy. We start from biology that has a strong disease linkage. Then, we try to identify the best modality to address the biology. And finally, we are figuring out who are the best patient population to benefit from the combination of this biology and modality. Once this triangle of biology, modality and disease is established, we believe we can produce multiple projects from that triangle by pivoting either points of the triangle. That's the beauty of our focus area approach.

This is most likely the unique way of showing our marketed products and the pipeline. Usually, you see the table format. Why we created this chart? Because we tried to show you that we have a good focus especially for oncology, the majority of the production pipeline are from oncology. But at the same time, we have a properly diversified portfolio, for example, ophthalmology product and programs, rare diseases as well as the very selected specialty therapeutic areas.

We are not trying to be as exclusively focused on some technology platform or the therapeutic area, but we have to have decently diversified portfolio. That is our aim.

As I mentioned, once the triangle of biology, modality and disease is established, we call it primary focus. And we have currently 4 primary focuses starting with the targeted protein degradation, which is initially aiming for oncology indications. Secondly, immuno-oncology. We have a broad pipeline to address the immuno-oncology. Third one is blindness and regeneration, which is mostly the cell and gene therapy targeting ophthalmology indications; and last but not least, genetic regulation with the gene therapy.

Let me take a couple of examples how we use this focus area approach and how this primary focus can strengthen our leadership position in some of the areas that we're in. First, let me talk about KRAS. Targeted protein degradation flagship program is targeting KRAS G12D mutation, which is -- which has become relatively hot topics for the past couple of years. We are addressing the -- used to be undruggable target, KRAS, by combining 2 small molecules with linkers. Astellas has a very strong legacy of a small molecule medicinal chemistry. This targeted protein degradation is the best area for us to move forward and leverage our heritage of the medicinal chemistry.

The leading pipeline 3082 has the KRAS G12D mutation -- targeting KRAS G12D mutation. But as I mentioned, once the primary focus is established, we hope that we can produce multiple projects from that triangle. As you can see, we have another follow-on programs, which is ASP5834, just entered into clinic. And this 5834 is targeting not only one single mutation, but pan-KRAS mutated cancers.

This is one of the data that we presented, and ASP3082 with the combination of the standard of care presented a good overall response rate with duration of efficacy. We hope it's going to be longer. And because of the safety profile, we have, the patients can tolerate this product so that they can complete the treatment cycle. And the -- we have our Chief Research & Development Officer, Tadaaki Taniguchi here. So after this presentation, if you have any question about those programs, he will be able to address those questions.

So the next example is the Claudin 18.2 franchise. We have the traditional monoclonal antibody product, VYLOY, which targets Claudin 18.2. The program -- the product is on the market already, and the product is receiving very strong support from the medical community.

The issue, if there is an issue, VYLOY needs to be targeting relatively high Claudin 18.2 expression level. Therefore, we need to cover the entire spectrum of the Claudin 18.2. We started as part of the immuno-oncology primary focus the bispecific T cell engager with targeting Claudin 18.2. We hope to have a wide range of Claudin 18.2 expression patients, can be subject to this bispecific T cell engager. We also have recently in-licensed ADC for Claudin 18.2 from a Chinese company, Evopoint, so not only traditional monoclonal antibody bispecific engager ADC programs so that we can have the unique leadership position in the Claudin 18.2 space.

This is one of the data from ASP2138 in gastric cancer. Probably, you cannot see it, but the color of the bar represents the level of expression of Claudin 18.2. So across different level of Claudin 18.2, ASP2138 presented a good overall response. And if you can see the spider chart on the right-hand panel, we expect that 2138 is a much longer duration of efficacy. And we are using the subcutaneous dosing so that we can minimize the risk of safety profile of cytokine release syndrome.

On top of those maximizing the brands and accelerating the research and development, we are committed to make the cost optimization initiatives. We are committed to deliver JPY 150 billion annual recurring benefit by FY 2027 so that it contributes to get to the core operating profit margin of 30%.

In order to navigate the company through a significant transformation, of course, we need to have a strong management team as well as the Board. As you see, Tadaaki comes from other companies in the pharmaceutical industry. Other members of the management team comes from other companies or even other industries so that we can learn from those different companies.

And the most recent Board refresh added Andreas and Mark as the independent outside directors. This is for the first time for Astellas to have someone has the pharmaceutical industry expertise on the Board. And just after 6 months, they are making significant contribution to the Board dynamics and the interaction with the executive team. We really feel grateful for their experience, guidance and valuable insights.

So in summary, I would like you to take away 3 major messages from me today. Number one, we are maximizing our revenue to address the XTANDI loss of exclusivity. Five strategic brands has a strong growth trajectory for now, and we are expecting them to continue to grow in the coming years. Number two, we are accelerating our pipeline so that we have -- we can deliver the product onto the marketplace as fast as possible from 4 primary focuses that we have. Number three, not only just maximizing the revenue or accelerating the pipeline, but we are committed to establish the financial discipline so that we can improve the profitability. So by these levers, we are aimed to turn innovative science into, all capital, VALUE for patients, and we believe that is creating a value for shareholders as well.

Thank you very much for your kind attention. Thank you.

I start the Q&A session. From here, Taniguchi-san, Chief Research & Development of Astellas will also be joining us. If you have a question, please raise your hand and wait for microphone.

First question from me. Regarding the share price, how do you view the share price performance following the second quarter earnings announcement? The share price has been performing very well in our view. As CEO, how do you assess the key drivers behind this performance?

Thank you for the question. So under the current corporate strategic plan 2021, which is a 5-year corporate strategic plan, we have 3 performance goals and which based on that, we create the 3 initiatives, which is growth strategy; bold ambition for the pipeline; three, strategic margin transformation. So we have been doing these 3 initiatives constantly, and the current share price is probably the reflection of that we have started delivering against those performance goals.

And looking back a couple of years ago, we felt that we lost the trust from the investment community because of the different peak sales guidance and not delivering the commitment against the commitment. But now I feel -- as I mentioned at the very beginning of my presentation, I feel the momentum. The investment community recognizes the delivery against our commitment, and that brings us somewhat trust back to Astellas. So those -- that is my reflection to the current share price performance. Thank you.

Any questions from floor? Okay. So I'd like to ask about how do you overcome the XTANDI LOE. Could you share the rationale and the level of confidence behind your view that the company can overcome the impact of XTANDI LOE and the return to growth?

So first of all, it is a privilege to have $6 billion product that helped over 1.3 million patients over the world. But every single product has the loss of exclusivity, and it is known far before that loss of exclusivity actually comes into place. Therefore, we have the deliberate strategy to create not the single product replacing XTANDI but a portfolio or the group of products to really compensate the loss of XTANDI.

And we believe we have good group of strategic brands, each of which has blockbuster potential not like XTANDI, and those strategic brands, most of them are acquired -- completely acquired or internally developed. Therefore, the profitability -- the gross margin of the product is much higher compared to that of U.S. XTANDI. And on top of that, we are trying to establish the real financial discipline so that we can, even on top of those efforts, we try to improve our profitability.

So from -- as I show you the chart of crisscrossing, declining XTANDI and the growing strategic brands, from the top line perspective, we have -- it looks like we have a dip. But from the profitability standpoint, we continue to grow our profit so that we can meet our shareholders' expectation.

Any question? Okay. So please, wait a microphone.

Could you comment on the first year or so of sales of VEOZAH and how you're thinking about that product?

Thank you. We first thought VEOZAH is kind of a different product from other prescription medicine, but eventually, we noticed that VEOZAH is another prescription drug. So we had to go through convincing the prescribing doctors. We have to have the payers negotiated. Then, we have to go to patients to increase the disease awareness.

When we noticed this, VEOZAH needs to be another prescription medicine, we downgraded our peak year sales. But after that, the VEOZAH sales performance is on track, and we are diligently following those 3 steps of convincing the prescribing doctors. We are going through all the negotiation with the payers, and then we try to have the disease awareness campaign to encourage patients to talk to their doctors.

I think it is not as quick as we originally expected, but after the revision, VEOZAH is following the on-track performance of our expectation. So we have significant confidence in the disclosed peak year sales numbers for VEOZAH. Does that answer your question? Thank you.

Any other questions? Please.

My question is as you focus on strategic brands, XTANDI and the 3 main priorities you have there, how is Astellas thinking about talent products, whether they're still patent protected or already post LOE?

Thank you. Those are -- those products continue to be important cash generator. That's for sure. For example, Prograf, after, I don't know, 15 years of patent expiry, Prograf is generating over $1 billion cash year-over-year. So we are not saying that we stop doing anything for those mature products, but in order -- from the strategic standpoint, we want organization to focus on those new strategic brands because we have to maximize the value of those programs. So we have -- as far as we have the patients who need our products, of course, we continue to support those programs, but from the strategic focus prioritization standpoint, we will shift our focus to those new strategic brands. Thank you.

Any other questions? Yes, I'd like to discuss about core OP, 30%. So as XTANDI approach LOE in 2027, how do you plan to achieve and sustain a core OP margin of 30%?

As I mentioned, because of the co-promotion arrangement with Pfizer, we have to pay back 50% of the U.S. XTANDI sales, which is close to 10%, 11%, 12% of the entire company revenue. As XTANDI goes loss of exclusivity, of course, we are getting rid of this 10%-ish payout of our entire revenue. So as I mentioned, we are shifting from the 50% profitable XTANDI U.S. to largely in-house developed or fully acquired programs. So the profitability will be significantly better compared to XTANDI versus those 5 strategic brands.

So it is not easy to get to 30% and sustain that 30% after XTANDI, but it is manageable. It is doable. We are committed to get there and sustain the 30% core operating profit margin.

Okay. So let's move into the pipeline discussion. So ASP -- I'd like to -- I mean just in ASP3082, you presented the panc PDAC data for ASP3082 at ASCO GI. How do you plan to differentiate this asset versus competing programs like Revolution Medicines. Today, Revolution Medicines updated their first-line PDAC data. We believe their first-line -- your first-line data appear competitive with favorable safety profile. How do you build this -- your positioning?

Thank you. Yes, first of all, I am no scientist, but I would like to point out there are significant difference of the mode of action. Revolution Medicines' program is inhibitor, whereas ours is a targeted protein degradation. So the entire protein KRAS is going to be destroyed to be efficacious.

And this difference of mode of action, at least from our clinical study, we have confirmed that this mode of action is actually happening in the human body. That will be reflected on the clinical data in the future. But still, we are in the early days of clinical development, so we haven't presented compelling difference between inhibitor and protein degrader. But with that, we have Tadaaki. Probably he can make additional comments about the difference between those 2.

Thank you, Naoki. So just talking about competitors as KRAS G12D, as Naoki mentioned, competitor actually have inhibitor. We have a degrader. And degrader is actually first in class in targeting KRAS G12D. So if you're looking at the recent presentations, just last week at ASCO, we published the first-line and second-line PDAC data. And obviously, the biggest advantage of our product is really safety profile, which is -- because targeting purely G12D compared to RMC is more targeting pan-KRAS, is quite different.

The secondly, I must say that we see a pretty good duration of response, particularly in our second line, but we also have combination with modified FOLFIRINOX in the first-line pancreatic cancer. We also started seeing the good duration response because, as you see, pancreatic cancer always challenging there to have, of course, one is that enough response, tumor shrinkage but also how to maintain the tumor shrinkage that translate into the longer survival. It's going to be extremely important. So I think that still need to work out, but I think there's a lot of advantage to the degrader over the inhibitor. But I think we are also going to report once we have more data coming up from a clinical trial.

Okay. Any other questions? So regarding Claudin 18.2 asset, given the strong market penetration of VYLOY and there are encouraging result from ASP2138, your expectations for Claudin assets appear to be increasing. Could you share your view on this potential?

Thank you. As I mentioned, we are about to establish the very strong leadership position in the Claudin 18.2 space with VYLOY for high expression level patient population with T cell -- bispecific T cell engager for the entire coverage of the Claudin expression level with a much safer profile with the subcutaneous dosing. And we added Claudin 18.2 ADC, which maybe chemo-free treatment is possible based -- if successful, based on the clinical study. So those are the overall strategy that we dominate the Claudin 18.2 space, but, Tadaaki, if you have any additional comments, please.

Yes. So Claudin 18.2, again, last week, we had the ASCO GI here in San Francisco. We disclosed the gastro study, which is actually a treatment of gastric cancer, first-line gastric cancer with VYLOY and CPI plus chemotherapy, which is actually showing remarkable efficacy to extend PFS to 40.8 months compared to VYLOY plus chemo is around 8 to 9 months, and checkpoint inhibitor plus chemo is around 7 to 8 months. So this is a significant improvement of duration of response by combining VYLOY plus CPI and chemotherapy.

And we already started, by the way, Phase III trial based on this. Because this is open-label trial, we know the high level results. We haven't seen any event last 3, 4 months, but we decided to disclose now because I think that just waiting another event doesn't make sense. So that's a huge differentiation of VYLOY. But also, as Naoki mentioned, we have 2138, which is the bispecific targeting same Claudin 18.2 with CD3 T cell engager, which is also showing the very promising data in first-line gastric cancer, but I think it's much broader population because VYLOY is just basically focusing on driving high, which is 70% or higher. But if you're looking at [ 20% ] just Naoki has presented, regardless of the Claudin expression, we see the profound efficacy and long duration response, which is remarkable.

So many KOLs we met during ASCO GI is so excited with the data. I think this is going to be a very important treatment in the future of gastric cancer and other GI cancer. But we -- certainly, we also have [ 5 4 6 drug-related ] entry point to targeted ADC, which is the collaboration with Evopoint. And we're going to start the trial pretty soon in -- outside with China. And this data -- product also showing really strong data, particularly late line of gastric and pancreatic cancer with a high response rate and longer duration. So these 3 products that we're actually going to continue to bring to the GI cancer, and we continue to be a leader in this space.

We have only 1 minute. So Okamura-san, could you share a few closing remarks?

Thank you. As you can see on the slide, let me summarize that we have 3 points that you can take away. One, we are trying to maximize the revenue, especially the 5 strategic brands over XTANDI. We are trying to accelerate our pipeline. We have already declared 2 clinical PoCs for ASP3082, 1 for pancreatic cancer and then the non-small cell lung cancer. We're waiting for another 3 clinical PoC to come within the quarter, not only the revenue or the R&D. We are trying to establish the financial discipline so that we can improve our profitability to get to the core operating profit margin of 30% in FY 2027 and sustain that over time.

We are trying to innovation -- turn innovative science into outcomes that truly matter to patients divided by the cost to the entire health care system, and we believe that is the viable way to create and deliver value to shareholders as well. Thank you very much for your attention.

Thank you. Thank you very much for your time. I appreciate your presentation and Q&A. I hope to see you soon. Thank you.

Thank you.

Everyone, thank you very much for joining this Q2 YTD FY 2025 Earnings Call by Astellas. I would like to serve as a moderator for today. I'm Chief Communications and IR Officer, [indiscernible]. Thank you for this opportunity.

Today, first of all, we would like to give you the presentation. And after that, we'll have a Q&A session. On our website, presentation material is available. And in line with that, we are going to make a presentation. Including Q&A, we will provide you the simultaneous interpretation service between Japanese and English. For simultaneous interpretation service, we are not going to guarantee the accuracy of it. When it comes to the language for this meeting, you can select from the Zoom webinar screen. And if you select original, then you can listen to the original voices without hearing the interpret.

This is some notes. This material or 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 are subject to significant risks and uncertainties. Actual financial results may therefore, differ materially depending on a number of factors. So please do understand about this.

They contain information on pharmaceuticals, including compounds under development, but this information is not intended to make any representations or out of participants regarding the efficacy or effectiveness of these preparations, promote approved uses in any fashion or provide medical advice of any kind.

Now I'd like to introduce your participants here. Representative Director, President and CEO, Naoki Okamura; Chief Research and Development Officer, Tadaaki Taniguchi; Chief Commercial and Medical Affairs Officer, Claus Zieler; Chief Financial Officer, Atsushi Kitamura. We have these 4 presenters here.

Now first of all, Okamura is going to start the presentation.

Hello, everyone. I'm Naoki Okamura from Astellas Pharma Inc.

Thank you very much for joining our FY 2025 second quarter year-to-date financial results announcement meeting out of your very busy schedule today. This is a cautionary statement regarding forward-looking information. As this was explained by [ Kato ] earlier, I'm not going to read this page.

On Page 3, I will explain the highlights of FY 2025 second quarter year-to-date financial results. Overall, we have made exceptional progress outperforming expectations. We have made a significant upward revision of our full year forecast. Driven by continued strong growth of our strategic brands, revenue increased significantly year-on-year with underlying growth of [ 2% ] year-on-year, excluding [indiscernible] ForEx impact. As for SG&A expenses, thanks to the robust progress of SMT, sustainable margin transformation, our company-wide cost optimization initiative, SG&A ratio improved by 3.1 percentage points year-on-year.

Due to the growth of the strategic brands and robust cost management through SMT, core operating profit rose significantly year-on-year with underlying growth of 57%. Core operating profit margin increased by 7.9 percentage points year-on-year to reach 27.4%. Based on this exceptional progress exceeding our expectations, we revised our full year forecast upward by JPY 100 billion for revenue, and by JPY 80 billion for both core and full operating profit, respectively.

Regarding pipeline progress for PADCEV, we have unprecedented [ EV-303 ] study data in MIBC, muscle invasive bladder cancer. And our sBLA for additional indication was accepted in the United States. As for focus area approach, we obtained promising initial data with ASP3082 and ASP2138 and registrational studies are now under preparation.

Page 4 is the agenda for today. From the next page, I will explain these topics. Page 5 shows FY 2025 second quarter year-to-date financial results. Revenue, core and full operating profit all increased by about JPY 100 billion year-on-year. Let me explain main items.

Revenue reached [ JPY 1,301 billion ], up by 10.1% year-on-year. Core operating profit rose to JPY 282.6 billion, up by 54.4% 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, excluding this impact, was 12% for revenue and 57% for core operating profit, demonstrating a stronger growth. The bottom half of this page shows our full basis results. Operating profit was JPY 199.4 billion, up by 112.8% year-on-year. Profit increased to JPY 147.6 billion, up by 100.8% year-on-year.

Page 6 shows FY 2025 second quarter year-to-date results of our main brands. Strategic brands grew substantially, driven primarily by strong growth in PADCEV and Vyloy. First, second quarter year-to-date sales of 5 strategic brands driving Astellas growth, namely PADCEV, IZERVAY, VEOZAH, Vyloy and XOSPATA exceeded JPY 220 billion in total, substantially up by JPY 66.2 billion, or 43% year-on-year. Underlying growth, excluding ForEx impact, was 47%, 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 the strong growth momentum to continue in the second half of FY 2025.

Next, I will explain individual strategic brands and XTANDI. PADCEV, global sales increased to JPY 102.5 billion, up by JPY 27.1 billion, or 36% year-on-year. Robust global growth has been continuously driven by strong first-line mUC demand momentum. Regional expansion in the first-line indication is also making steady progress. First-line mUC approval expanded to 25 countries. We are expecting further expansion of countries with approval, as well as an increase in the number of countries where reimbursement will start.

Mainly based on the robust progress in the United States and Europe and FY 2025 second half outlook, we revised our forecast upward by JPY 10 billion to expect JPY 210 billion on a full year basis. Next growth opportunity is expected from potential MIBC indication approval. [ EB-303 ] study [indiscernible] ineligible MIBC presented at ESMO the other day, demonstrated extremely promising results, exceeding our expectations. Based on these results, we already filed a submission in the United States. We're expecting contribution to sales post approval.

Furthermore, based on this exceptional data exceeding our expectations, we are analyzing the possibility of any upside to our sales forecast, including peak sales. Also taking into account the status of [ EV-304 ] study for this eligible MIBC, we will share our latest outlook as soon as we complete our analysis.

As for IZERVAY, sales rose to JPY 34.1 billion, up by JPY 6 billion, or 21% year-on-year. On a quarterly basis, double-digit growth is continuously maintained, but patient affordability headwinds weighed on new patient starts and sales, so progress was lower than initially expected. Based on the second quarter year-to-date progress and FY 2025 second half outlook, we revised our forecast downward by JPY 25 billion and are expecting JPY 80 billion on a full year basis. We revised our full year forecast downward, but we are expecting continuous growth. Also from now on, one factor behind this new patient starts recovery. Although it's moderate, we are seeing signs of recovery in new patient starts from August. The share is also improving from the lower 50% level in June to the upper 50% level in August.

Another factor is the use of GATHER2 open-label extension study data presented at AAO, American Academy of Ophthalmology this month. Over 3.5 years post IZERVAY dosing, increased benefit was demonstrated according to long-term efficacy data. In addition, favorable long-term data was obtained also in terms of safety and tolerability as well. By broadly disseminating this kind of data in the market, we will aim to further increase the awareness of the importance of treating [ IGA ] and the benefit of IZERVAY. You can find the GATHER2 extension study data on Page 34 and 35 in the appendix for your reference. Please refer to those pages at your leisure.

We believe in the mid- to long-term potential of IZERVAY, and we are expecting that we can reach the peak sales forecast range. We have high expectations on IZERVAY as an important growth driver for Astellas also into the future. Global sales of VEOZAH increased to JPY 22.9 billion, up by JPY 8.1 billion, or 55% year-on-year, demonstrating a solid growth continuously. We are anticipating the steady growth trajectory ahead in the second half of FY 2025.

With regards to Vyloy, global sales reached JPY 26.6 billion. Its outstanding performance is exceeding expectations. Due to active awareness campaign, we were able to realize exceptional [indiscernible] testing rate penetration and lower treatment discontinuation through appropriate information provision activities on adverse event management.

Regional footprint is expanding steadily with approval in 47 countries and launches in 26 countries by now. Based on this strong global momentum as a whole, we have made a substantial upward revision of our full year forecast from JPY 40 billion to JPY 60 billion, which is 1.5x compared to the initial forecast. Regarding XOSPATA, global sales reached JPY 34.4 billion. There are some regional differences, but overall performance is largely on track. We are anticipating a moderate growth trend within the current indication of relapsed or refractory [ AML ]. As a future growth driver, top line results for the additional indication in newly diagnosed AML are anticipated in the first half of FY 2026. If approved, we can offer a treatment option to a new patient population. So we are hoping for contribution to sales. Last but not the least, XTANDI. Global sales increased to JPY 477 billion, up by JPY 25.3 billion, or 6% year-on-year. Sales expanded in all regions, reflecting strong global performance as a whole, we revised our full year forecast upward.

Page 7 is about cost items. SMT initiative made more progress than our expectations. We realized cost optimization of about JPY 16 billion in total for SG&A expenses, R&D expenditure and cost of sales combined. Excluding U.S. XTANDI co-promotion fees, SG&A ratio improved by 3.1 percentage points year-on-year. Let me explain a specific breakdown of SG&A costs and R&D expenditure.

SG&A expenses fell by 1.3% year-on-year, trending at a similar level compared to the previous year. SG&A ratio was 26.9%. As SMT progress, we realized cost optimization of about JPY 7 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 driving our future growth, we will continue to make investments needed for SMT execution in order to realize further cost optimization. R&D expenditure decreased by 16.9% year-on-year.

As a main factor behind, in addition to ForEx impact, we made progress in outsourcing cost reduction through in-sourcing development capabilities, including clinical trials, et cetera, under SMT, which led to cost optimization of about JPY 7 billion. Furthermore, due to the completion of large clinical studies for strategic brands, clinical development costs decreased by about JPY 6 billion. In addition, onetime co-development cost payment booked in FY 2024 was another factor for cost decrease year-on-year.

In the second half of FY 2025 onwards, we are expecting expansion of investments aligned with primary focus progress. In April this year, we implemented R&D organizational restructuring, enabling activities from research to development all throughout. By pursuing operational efficiency, we are creating a cycle of making investments needed for the future continuously.

Page 8 is about the revision of FY 2025 full year forecast. Based on the robust progress exceeding our initial forecast up to the second quarter, we have made a significant upward revision of revenue, core and full operating profit. We are expecting core operating profit margin of 24.1%, improving by 2.9 percentage points compared to the initial forecast. We revised our full year forecast ForEx assumptions to JPY 145 against the U.S. dollar, and JPY 170 against the euro. From the third quarter onwards, we are assuming ForEx rates of JPY 144 against the dollar, and JPY 172 against the euro.

We have made an upward revision of revenue forecast by JPY 100 billion, including JPY 20 billion for Vyloy, JPY 10 billion for PADCEV and JPY 70 billion for XTANDI. We are expecting revenue of [ JPY 2.03 billion ], exceeding the JPY 2 trillion mark for the first time since the establishment of Astellas. We are expecting SG&A expenses, excluding U.S. XTANDI co-promotion fees to decline from the initial forecast if we exclude ForEx impact, reflecting robust progress of SMT, we are expecting JPY 586 billion.

As for R&D expenditure, reflecting operational efficiency in R&D reorganization, we are expecting JPY 322 billion. Reflecting the strong progress in our core business, core operating profit is revised upward by JPY 80 billion from the initial forecast now expected to be JPY 490 billion. Full base operating profit is also revised upward by JPY 80 billion from the initial forecast now projected to be JPY 240 billion. We continue to incorporate a certain amount into the forecast for other expenses to prepare for risks such as impairment losses.

Next, I will explain the progress of our pipeline. Page 10 shows the progress of key events expected in FY '25 for our strategic brands. Particularly significant development, as shown in the center of the slide is the successful completion of the PADCEV [ EV-303 ] trial and acceptance of its supplemental BLA in the U.S. Details are provided on the next page. IZERVAY was approved in Japan in September for the indication of suppression of GA growth in [ atrophic AMD ].

Aiming to rapidly deliver this treatment for severe GA with a high unmet need to Japanese patients, the development team engaged in constructive discussions with the authorities. This lead to a submission based on overseas clinical trial results using the conditional approval system, resulting in approval just 7 months later. Furthermore, as noted in outside of the table, approval was obtained in Australia in October as well. We'll continue to pursue further submissions in other countries and regions with the aim of delivering IZERVAY to patients worldwide.

In addition, we presented efficacy and safety data from the GATHER2 open-label extension study covering up to 3.5 years after administration of VEOZAH at the AAO in October. The final analysis results of the Phase II [ GLIM ] trial of [ VO ] in pancreatic ductal adenocarcinoma, or PDAC, became available and the primary endpoint was not met. We are currently analyzing the detailed data. As part of the life cycle management of Vyloy, the Phase III [ LUCENA ] trial evaluating its combination with pembrolizumab and chemotherapy in gastric cancer is ongoing.

Page 11 shows the latest status of PADCEV MIBC development. For details, please refer to the materials from last week's online briefing on our oncology pipeline. EV-303 trial yielded unprecedented data suggesting that the PADCEV has the potential to become a new standard of care for cisplatin ineligible MIBC. EV-303 trial compared the efficacy and safety of PADCEV plus pembrolizumab as adjuvant therapy before and [indiscernible] cystectomy, the current standard of care in patients with MIBC who were ineligible for [indiscernible] declined cisplatin-based chemotherapy versus surgery alone.

The figure shows the efficacy results from the first interim analysis. The left panel displays the primary endpoint, event-free survival, or AFS. And the right panel shows the key secondary endpoint of overall survival, or OOS. Compared to surgery alone, the combination therapy group or [ arm ] showed a hazard ratio of 0.40 for [ EFS ], representing a 60% reduction in the risk of tumor recurrence, disease progression or death, and a hazard ratio of 0.50 for [ OS ], indicating a 50% reduction in the risk of death. Subgroup analysis confirmed consistent improvements in EFS and OS regardless of age or PD-L1 expression status. The safety profile of the combination therapy arm was consistent with the previously reported trials with no new safety concerns identified.

Following the top line results in August, we rapidly advanced the process for additional indications. Within just over 2 months, the [ U.S. BLA ] was accepted and granted prior review designation with a target PDUFA date set for April 7, 2026. We're also progressing discussions with the regulatory authorities in other regions towards submissions. Furthermore, the Phase III EV-304 trial for [ cisplplatin-treated ] MIBC is ongoing with the interim analysis data anticipated in the latter half of fiscal year 2025.

Page 12 for focus area approach. I will explain the progress on flagship programs. ASP3082 targeted protein degradation and ASP2138 immuno-oncology presented promising clinical trial data in October. While details were already explained during last week's online briefing, the following slides briefly recap the current status.

Clinical trials for [ AT845 ] in genetic regulation and ASP7317 in blindness and regeneration are progressing as planned with [indiscernible] assessment still scheduled for the second half of FY '25. The current status of other programs is summarized on Slide 41 in the appendix.

Page 13 explains the progress of ASP3082 and the primary focus targeted protein degradation. Specifically, ASP3082 has presented promising data in NSCLC, or non-small cell lung cancer, and we have initiated preparations for registration studies targeting PDAC and NSCLC. ASP3082 has achieved [ POC ] in both PDAC and SCLC. This time, we presented clinical data for its monotherapy in second line and later treatment settings for NSCLC at an October Congress. Last week's online briefing preceded the congress presentation. So we provided an explanation aligned with the abstract. Today, however, we will use the data presented at the congress as shown in the figure on the right. NSCLC has a high unmet medical need. The objective response rate with the existing standard of care in the second line, and beyond is reported to be in the single digits, reaching a maximum of around 18%.

ASP30828 monotherapy demonstrated significantly superior antitumor activity compared to standard of care, achieving an ORR of 37.5% across all second line and beyond and 42.9% specifically in second and third line. Furthermore, the median duration of response was 9.72 months, and median progression-free survival PFS in second and third line was 8.25 months, confirming sustained efficacy. The safety profile showed no major concerns with no treatment-related adverse events leading to discontinuation observed at the data cutoff date.

Development of ASP3082 across various tumor types is progressing for [ PDAC ]. Preparations are underway to initiate a pivotal trial for first-line treatment in the latter half of FY '25 with data presentation also targeted for the latter half of FY '25. For NSCLC, planning is ongoing to initiate the registrational studies as early as possible. For CRC, colorectal cancer, the POC judgment remains targeted for the second half of FY '25. Furthermore, research and development for follow-on programs is advancing. ASP5834, a pan-KRAS degradation targeting diverse [ KRAS ] variants achieved its first subject dosing in August. Under the new R&D structure launched in April, the team achieved its first subject dosing in a record 27 days after the FDA IND clearance, thanks to close cross-functional collaboration. We will provide progress updates as the data becomes available from clinical trials.

Page 15 details progress on ASP2138 in primary focus immuno-oncology. Specifically, ASP2138 is demonstrating the benefit of subcutaneous administration in combination with the standard of care, steadily progressing toward PUC achievement. Phase I trials are currently underway for gastric and gastroesophageal junction adenocarcinoma, or [indiscernible] as well as PDAC. These trials evaluate ASP2138 as a monotherapy in combination with standard of care [indiscernible] and subcutaneous across multiple treatment lines. Data presented at ESMO in October showed no major safety or tolerability concerns and supported combination with current standard of care.

Furthermore, the ORR when combined with the standard of care by a convenient biweekly subcutaneous administration demonstrated high antitumor activity in gastric cancer at a 2,000 microgram dose, 62.5% in first line, and 37.5% in second line. In the figure above right, the values indicated in red represent the [indiscernible] 18.2 expression levels for each subject. By [ low it ] targets patients with high expression of 5 and above. This data confirms efficacy not only in high expression patients, but also in those with moderate to low expression levels, suggesting the potential to expand the patient population eligible for this treatment.

A POC judgment is planned for the latter half of FY '25 and further data accumulation. Given the compelling data obtained thus far, we have initiated discussions on the development plan to enable the prompt execution of the registration trial following achievement. For [ Claudin 18.2 ] targeted therapy, we aim to provide treatment options to a broader patient population. To strengthen our leading position, we are advancing the development of the antibody drug conjugate, ASP546C, in addition to ASP2138.

Research and development of follow-on programs are also progressing. Multiple programs utilizing a similar mechanism of action, including the clinical stage ASP1002 are advancing, including bispecific. Additionally, research is advancing toward clinical trials for [indiscernible], immunostimulatory antibody drug conjugate utilizing new antibody modification technologies. We will provide updates, including detailed explanations as progress is made in each program.

Page 15 shows today's key takeaways. The second quarter delivered exceptional financial results. PADCEV and Vyloy led the way with strategic brands demonstrating strong growth. SMT progressed well, achieving robust cost optimization. Based on this strong progress in our core business, we have revised our full year revenue forecast upward by JPY 100 billion and both core and full operating profit by JPY 80 billion. Our pipeline also showed robust progress. PADCEV showed unprecedented data in the [ EB-303 ] trial, significantly advancing its development for MIBC.

In the focus area approach, promising data was obtained for ASP3082 and ASP2138, and preparations are underway to conduct registration trials. Throughout FY '25, we will aim for further profit growth and enhanced pipeline value.

At the end, I would like to announce upcoming events. On Tuesday, December 9, we plan to hold a discussion session with outside directors. At this session, we will explain the evolution of Astellas governance structure. Additionally, directors newly appointed in June will share their perspectives on joining the Astellas Board of Directors, as well as their experiences and impressions from the first 150 days in office. We encourage your participation. That concludes my presentation. Thank you very much for your attention.

[Operator Instructions]

First, Mr. Yamaguchi from Citigroup Securities.

I'm Yamaguchi from Citigroup. Yes, we can hear you. First, about PADCEV. The data was better than you expected. Global sales is going to be JPY 400 billion to JPY 500 billion. MIBC is ineligible, or data was better than expected. In this area, what is going to be the potential impact? How better compared to your initial expectations?

Thank you for your question. I will respond briefly. And then regarding sales forecast, Claus may add. And the data per se where necessary can be explained by Taniguchi.

First of all, as I showed on the slide, 303 study results, even we are not experts see the separation in the Kaplan-Meier curve and the hazard ratio is 0.4 or 0.5, we don't see these numbers so often. We presented this at ESMO. In the first-line [indiscernible], we said the same. We made a presentation at Congress, and there was a standing ovation naturally in the audience. So we think we had unprecedented data. This great data exceeded our expectations.

Then is this going to lead to the sales forecast directly? Not necessarily. MIBC and after metastasis in the urothelial cancer, MUC, it's not clearly separated completely. In the current indication, some part is covered in the United States. If the additional indication is approved, how much we can expand the target patient population?

It's difficult for us to say clearly how much we can expand. This ineligible patient population was studied in 303 study. Patients on cisplatin 304 study is ongoing. And we'd like to look at the distribution of these patients in detail to share our sales forecast with you.

First, Taniguchi-san, anything from you?

Thank you very much. From me, regarding this data, I'd like to add a bit. As Okamura explained, at ESMO, there was a very good response from the audience.

First, the primary endpoint, EFS hazard ratio was 0.40. This is unprecedented in terms of the risk reduction. Secondary endpoint, overall survival, consistently 0.5. Regarding secondary endpoint, whether we could meet this in the interim analysis, but we made this much reduction. There was a statistically significant difference clearly. And number three, PCR ratio was 57%, or even exceeding that level and 8.6% for the control group. This much pathological CR was seen at such a high probability.

Such a drug is unprecedented. This was highly evaluated as well. So these are the 3 effects. And as for safety, PADCEV pembrolizumab combination, it was consistent in terms of safety. In that regard, this data is very innovative and unprecedented. And ineligible was the indication [indiscernible] population at high risk. Or with a variety of complications, the drug could be utilized in such patient population. So there are high expectations because of this.

Yes. So the question that you asked is how this translates into a sales forecast. And there are a few considerations. Clearly, such an unprecedented data will help us convince physicians that this should be the new standard of care in the labeled indication of locally advanced, and then after approval also in the MIBC indication. There is, however, a difference between the two.

If you look at the clinical trial in MIBC, there are two parts to it. There is the so-called neoadjuvant use. So you give it before you do the cystectomy, the removal of the bladder. And then you have the adjuvant use, which is after the surgery has been done. In clinical practice, these two parts are likely to be different from the clinical trial setting. And we need to observe carefully, exactly how the market adopts the usage of PADCEV and pembro in these two different phases of the MIBC. So that's things we still have to learn. And I think once we have more data points, we can make a more accurate sales forecast.

Brief question. Again, this time, performance was really good. However, from the midterm perspective, mirabegron and XTANDI are going to face the cliff of the patent and next year. And afterwards, a new midterm plan is going to be presented. So toward that, your foundational business is quite improved.

So toward the next fiscal midterm plan, this performance level and also SMT included. How do you view about it? Would you give us a comment?

Thank you very much. We are still in the middle of the discussion about this. So I think it is inappropriate to come into the details about this here. However, the XTANDI and mirabegron where that the patent is expired and we are going to extend their life in order to cover the loss of those sales, we will do something, including business development or BD. That's not something like that. Rather than that, we have the strategic brands in our hands. Those are getting stronger. So we would like to maximize its strength. So that's going to be the focus of the next midterm plan. That's what we expect, meaning that from the outsider's perspective, the breakdowns of the products are not really matters, rather the sales of the products will be reduced. That is one thing.

However, we are already having the three important strategic brand products in the growth phase. So we would like to maximize the value of that. That focus is going to be incorporated into the next midterm plan. And also focus area approach, key products achieving the clinical POC, or coming to the phase of the POC judgment. So for the next 5 years, those flagship are going to get into the late phase of the development. And on top of that, the original focus area benefit that is when initial compound is successful, then with the same triangle, we come up with the follow-on programs. We introduced some of the follow-on programs today. So that will happen.

So we have the 5 strategic brands. And on top of that, further ahead of the growth can be expected in these approaches. And if that is recognized in that way also, it is going to be the one key aspect of the midterm plan. And the current product sales increase is the job needed to be done by [indiscernible]. And the next preparation is Taniguchi's job and Kitamura, who is here is to think about -- needs to think about changing the company with appropriate financial discipline for -- in terms of the operation of this company based upon such background information.

Now I would like to move on to the next question. That is JPMorgan, Mr. Wakao.

Regarding strategic brands, how do you assess those products as of now? You made an upward revision. But XTANDI, mirabegron before in the previous upward revision. If you look at the total sales, the JPY 470 billion, although the breakdown is different. And you're progressing according to your initial forecast, [ EV-303 ] is successful and there are other factors as well. So what is your current assessment? And also the future outlook of strategic brands, IZERVAY how it's going to go up? That might be part of the question as well.

Thank you for your question. I'd like to give you a rough overview where necessary, Claus can add. As I mentioned before, how Astellas is going to be from now on XTANDI, mirabegron, such mature products, how we can increase their value from now on is one question. But we made an upward revision.

If you look at the face value, these two may be covering the majority of the upward revision at a glance. But IZERVAY, unfortunately, on a dollar basis, $750 million was revised downward to $550 million, but that reduction is covered by PADCEV and Vyloy because of their good performance, we are more than offsetting that decline. So in total, there is no change in the strategic brands. You may say so from outside, but there are special circumstances for IZERVAY and it may be difficult to perform as expected.

But are we going to reduce the strategic brands? No. We would like to cover and more than offset this decline. And Astellas in the mid- to long term need to go. To that end, this is going to be very important. So in the world of pharmaceuticals, regulations may change, and there can be something unexpected. We often see such events in this sector. So instead of saying that this is what we can do only, if there is something negative, we'd like to offset the negative, and we can recover in the top line figures. And also, we'd like to do our best to control the cost, and we would like to achieve core operating profits and the bottom line. That's our discipline and how our management of the company should be.

Anything additional from Claus about individual products?

I think, Naoki, you've summarized it very well. I think the 5 strategic brands as a group have the potential to replace XTANDI and maybe even grow beyond that. I personally think the total potential is beyond that of XTANDI as a single brand.

Now the different brands will vary and also in their phases. We see VEOZAH as a primary care -- pretty much primary care product with a much slower trajectory than an oncology drug, which has a very, very fast uptake, and we saw that -- we've seen that both with PADCEV and with Vyloy now. So I think each therapeutic area has its own dynamic. But as a group, the potential of these products are, as I said, in my estimation, at least the size of XTANDI.

Secondly, SMT initiative status is something I'd like to know more. In the second quarter, cost reduction was achieved, and I'm very surprised. And regarding your plan, OP margin is to improve. So I think this was great. And SMT is making very good progress. As of now, core OP, 30% or higher.

What do you think in terms of this progress, you may have other hurdles to clear? Or are you approaching the achievement? You may need to invest in R&D for some of the products. So what is the current progress? Thank you very much.

In the end, operating profit was revised upward. If you look at the guidance, 24.1% for operating profit margin. Are we satisfied? No. We are not completely satisfied yet. But still, in FY '27, we are targeting to achieve 30%. Towards that goal, we are beginning to solidify our basis. That's how I feel. But it's not easy to improve just 5% overnight. So there are many things we have to do. As you pointed out, development costs would go back to the original number. So we shouldn't sacrifice the development cost. We have to do something else elsewhere.

Anything to add from Kitamura-san?

Thank you very much. Regarding SMT, in the past, I've already made an explanation saying that this is not the single year short period of time of activity. This is the regular activities. I've mentioned that it's going to be JPY 120 billion to JPY 150 billion. And at the time of the announcement, it is clear that for the 70%, yes, we will do that and we will execute the plan and the remaining 30% idea is going to be generated. That was the approach. And currently, it is JPY 150 billion internally, we accumulated our ideas and they are going to be executed. That's the next phase. That's the current status.

Thanks to SMT, JPY 40 billion of the impact was realized. And this fiscal year throughout the year, we are expecting to be JPY 20 billion for 2 years, it will be JPY 60 billion. In the first half, it is JPY 16 billion. So against the target of JPY 20 billion, I think we are doing quite well. But as has been mentioned by Okamura, this is not an easy road. So we have to be steadily -- we have to steadily execute the plan. So we have to have that in our mind. But as long as we do what we need to do, we definitely can see the result. Therefore, we have a commitment. We have a confidence about it.

Next. Goldman Sachs Securities, Mr. Ueda, please.

Goldman Sachs, Ueda is my name. My first question is about the follow-up question is the currently discussed point. So R&D for this fiscal year, you changed the presumption for the ForEx, meaning that there's a wide range of review or revisit during the quarter. So what did you do to come up with these big changes?

And also in the current new plan compared to the initial plan, the accuracy was increased. So would you please make your explanation for these two points? Thank you very much.

First of all, in my presentation, as I've already mentioned, in terms of year-on-year, the major clinical trials of the strategic brands are completed to as the first phase. So from a year-on-year perspective in the last year first quarter, one-off cost increase was canceled. And because of that, similarly, there was a decrease.

But over all flow, depending on that -- because of that, the cost is reduced. But towards the second half of 2025, the [ Focus ] program achieved the POC. It came to -- will come to the later phase of the development, and this will come back. This portion will come back. That's why we have this guidance. And on top of that, of course, we are doing the continuous work. But this time, within the SMT and strategy discussions, portfolio prioritization started to be more and more rigorous. So with that, selected projects with the keen eyes will receive more and more investment. So our R&D investment usage is shown in that way.

And also clinical trials, we overall relied on the external CRC, but those are currently conducted more and more internally. So outsourcing cost is reduced. And that is replaced as the internal expenses. So seemingly, you see that the substraction calculation leads to this reduction level as a number.

However, with a long-term perspective with having this approach, we can realize more effective clinical trials, which leads to the shorter period of time of the study and clinical study design is going to be further precise. And with our execution of the studies, we can make the fine-tuning during the study. I think that's the way it should be for conducting clinical trials, and I believe we can realize that. And under Taniguchi, the R&D was separated, but now it's merged as one organization. So research division and the development divisions, those -- exchange between these two business units became smooth. Outsourcing change to in-sourcing and it was just a simple deduction come up with this number. Well, you see only this because it's just started. But for a longer time, thinking about the next plan, business plan, I think it's going to be more financially reflected into our actual business way of doing.

Taniguchi-san, please?

Thank you very much. Most of the things already explained by Okamura. If I may add one thing, in-sourcing of clinical trials. Through in-sourcing we can reduce outsourcing costs we paid before. And then we should develop our own system. AI and automation is fully leveraged for further cost reduction. And also the speed of enrollment, where are the patients and how much -- which institutions we should go to, we want to roll this out globally. By doing this, further business and clinical trial efficiency can be enhanced, as well as the acceleration of the speed. And then we can reduce further cost reduction as well. So we're expecting an increase in the late-stage development and costs would also rise as much as possible, we'd like to enhance the cost efficiency so that we can cover.

As a follow-up question, originally, compared to the initial forecast, in terms of the gap compared to the initial forecast, overall, all the items are progressing smoothly. Should I understand that way?

Basically, that understanding is fine.

Okay. Understood. Secondly, regarding the U.S. business environment, how do you see it right now? Up until now, regarding the tariff, the situation is still unclear. And it was difficult for you to comment, as you said before. But right now, you have a large exposure to the United States, including the risk of being imposed tariff, how are you addressing the situation? Or how are you planning to address the situation from now on?

And also the -- including MFN, the drug prices, how do you see the risk factors? I'd like to hear from you. Thank you very much.

First, as for the tariff, at one point in time, we didn't know what could happen. From there, the situation is settling a lot. I shouldn't say that's our assessment, but we are feeling relieved.

As we said before, from your perspective, Astellas revenue times U.S. ratio times COGS times tariff, it's going to be a huge amount, you may say so. But in reality, what we sell in the United States, a majority of those products are manufactured in the United States, as we said before. If that's the case, the denominator is small where tariff is going to be imposed. So it's not going to be a huge amount. That's our response.

But the tariff might be imposed. There can be such announcement into the future. So we have a supply chain and by understanding our supply chain, if there's going to be any great impact, as I said before, our profit should not decrease. And if the profit may decrease, where are we going to recover elsewhere? We should start such discussions.

And also the MFN pricing, [ mostly nation pricing ], as you might have heard in the press report, 17 companies received letters. And this does not include Astellas. In particular, Pfizer reached agreement with the authorities or the government according to the media report. We didn't receive such a letter. So we don't know what are the contents of the letter. But in the industry through a variety of routes, what is being communicated in the letter is captured by us. And regarding the agreement with the government and Pfizer, we don't know the details. But we can assume and imagine what's going on and what's being done.

Before we receive a letter, nothing will be done by us or overreaction and doing a lot of things too much in advance, rather monitoring the situation to take necessary action where necessary. Of course, experts in the company gathered to form a team, and they are monitoring the situation all the time. If we need to take action, if it's time to take action and move forward, the team will come to the executives, management team so that we can discuss and take the best action.

Next question Nomura Securities, Mr. Matsubara, please.

Thank you, Matsubara speaking. First question, that is about SMT. In the previous discussions, SMT is exerting its strength. And if that is so, then this fiscal year, we are going to see further cost reduction?

Originally, JPY 20 billion is our plan and to the full second quarter, we came to the JPY 16 billion. And can you achieve JPY 32 billion? The calculation is not in that way. What is decided is steadily being conducted. That's one thing. However, we've been always looking for what else -- other -- something else we can do.

So if we make a certain evaluation for a certain idea, even a certain advanced investment is necessary, then still we try to secure [ CMT ]. So in the first 2 quarters, what's been planned is already realized, and you came up with the cost reduction. But at the same time, you can think about the investment to the next idea. So we have to take the balance of reduction and investment. So that is going to be a final end of FY '25.

Of course, the planned JPY 20 billion, that is something we would like to secure. But at the same time, something it might go beyond. Is that going to be reflected in the profit? It's not necessarily so. So please do understand in that way.

Kitamura-san, please?

Okamura mentioned is exactly right. Again, this is a repetition. SMT is not a single year, but rather multiple year programs. So there are something should be done with a short period of time and mid- to long term. Those are going in a parallel manner. If things can be realized in an accelerated manner, then we can get the benefit in earlier phase. That's true.

Understood. Next question is about VEOZAH. On Slide -- Page 6, it is true that the competition is available. So that is the market competition considered. But the competitor has less -- not necessary to do the blood testing and specific for the driving in the case of the -- it is an attempt. And what do you think about it?

Yes, of course, there's an advantage for the predecessor, our level is not perfect, but we've been doing our activities. So definitely, there are advantage as the first comer or pioneer for this. And within just one sentence, what I wanted to say is that another company, or the competitor rather, is very strong in this treatment area, and we are not really so. So compared to us doing the business in this field alone, together with them, the 2 companies to the same target of patients with the same efficacy products, we can do the patient educational awareness increase activities.

With that, I think we can increase the awareness more. However, they are very strong in this field. So until then, we are the -- have the just player in the market, but now we have [ two ] and they have experience. So the share is going to obviously smaller. But to what extent we can have -- to what extent of the market share we can have, that is, of course, something that we can tell from the data. The clinical data is well controlled, total number of the subjects are controlled. So the competitor launched their products and what kind of data will be available in the actual market or real market. I think that really decides the competitive situation of these two companies.

Claus?

Yes, I think two points. One, Naoki already made very, very well, which is this is a market we have to develop and two companies developing a market is always much better than a company doing it alone. So I think in that sense, the entry of a competitor actually helps grow the class.

The other point I would make is that the label that [ elanzentetant ] has received in the U.S. takes into account the fact that this particular molecule acts on 2 receptors, the [ NK1 ] and the [ NK3 ]. So they have a warning on inducing sleep. So we will not know how the market will react to that. That is not something that's in our label.

You pointed out that they have less liver monitoring. That is true. But that's what we also had -- when we began this journey. So what real-world evidence will then produce over time because remember, these liver incidences are very, very rare. You don't see them in clinical trials. You only see them in real-world practice. So again, only time will tell how that really plays out in the marketplace.

Next, we'd like to receive questions from USB Securities, Mr. Sakai, please.

Sakai from UBS speaking. Initially, sorry for a negative question, but [indiscernible] didn't work in PDAC? You are now examining the details of your data. [ Claudin 18.2 ] and any learnings in association with Claudin 18.2 as the reason for the failure of the study. ASP2138, this is also Claudin 18.2 targeting PDAC. You are planning a clinical development, including these compounds. Could you give us an update on this? That's my first question.

Well, it's technical and experts, so I shouldn't say too much. But I'd like to hand over to Taniguchi from the beginning.

Thank you very much. First of all, Vyloy [indiscernible] study for PDAC, it was a Phase II study, but a randomized trial in Phase II. If the results are good, it could be registrational so that we can file a submission. That's how we were discussing with the regulatory authorities. In this study, Vyloy and first line pancreatic cancer, chemotherapy combination and chemo monotherapies were compared. This was close to POC study.

We are analyzing the results of the study through the analysis in what kind of patients there was a good response. And in what kind of patients, no response. We can know more details by analyzing. So in the [ GLEAM ] study, we haven't made public the results yet. Once we are able to analyze the details with a deeper understanding, then we'd like to share.

And regarding the results of the study, [ 21SB2138 ] targeting Claudin 18.2, this is a bispecific antibody. This is [ CD3 ] or T cell engager is also added to this [ bispecific ] antibody. ASP2138 in PDAC. How this -- any potential impact on PDAC with this compound? CD3 T cell engager portion. How it's going to affect PDAC?

In clinical studies, Phase Ib right now, we are studying that part. We haven't published the data yet. But in the near future, once we collect the data, we will announce the results including our future outlook. This bispecific antibody and [indiscernible] and the differences between the 2 can also be examined. So once we have the data, I will explain such a perspective as well. [ Claudin 18.2 ], so you haven't changed your way of thinking in the development concept. As a concept, the GLEAM study, ASP2138, any direct impact? I could say no impact.

Another question is about your response of the midterm plan. Okamura-san, you mentioned that the very reinforced the strong, or something like that. But if that is case, the number you come up with might be drastic. That is a bit of the concern that I feel. You are working on making the numbers. So you would not probably disclose anything specific, but the comment you made a little while ago is probably your honest thinking. And based upon that, we have to also come up with the forecast or our numbers.

So is -- do you think -- is it okay that we approach in this way? Thank you very much.

We get learnings every day. For example, [ CSD 2021 ] review is currently ongoing. And based upon that, we are going to come up with the next plan. Frankly speaking, [indiscernible] underperform that such criticism is what we've already accepted. And so that we can avoid the repetition of that, we can place more discipline and well-balanced plan, corporate plan, that is going to be announced in that sense, Kitamura is looking at the numbers with a perspective and Claus as well, based upon that number is calculated and coming up with. So you can feel safe about that as well.

Next, Morgan Stanley, MUFG. Mr. Muraoka, please.

I'm Muraoka from Morgan Stanley. I think almost all the questions are covered already. But just one question. It was like this last year. So it will be okay this year. This may be a bit mean question. That is about IZERVAY, impairment loss risk is the question.

Last year, in the second quarter, it was okay in Europe. But in the third quarter, impairment loss was incurred. And this time, the U.S. sales is a relatively bigger reduction. And looking at this number, thinking about the future value, impairment loss triggered risk is likely to be higher compared to 3 months ago. I wouldn't say -- of course, you cannot say it's all right, no problem. However, how can we evaluate these potential risks?

The valuation base is the sales prediction and forecast. Claus is going to make additional comment if necessary. But the way of my description is that when valuation is conducted, the uncertainty is increased. That's the kind of status. So if you ask me, impairment loss is higher. At this moment, I wouldn't think that impairment loss risk is higher. But for the valuation, compared to what we've originally considered, kind of situation is lower. That is true. So if this is going to be recovered or ultimately, this will decide the trajectory of IZERVAY. That's something we have to always have a sharp eyes.

And just like Claus mentioned, peak sales. We do not think that we have to revisit it right away.

So undoubtedly, there's in the U.S. market, a dynamic on the affordability part where a part of the patients can't afford the co-pay that they need to contribute for their injections. That is that is different from saying -- from when we look at the peak potential and the size of the market that we can still develop in this disease. So one is a timing effect.

The other is effect of -- is the question of what's the potential of this agent in the geographic atrophy market. I'm very confident that the long-term potential for IZERVAY is intact. The question, how do we solve the current dynamic in the U.S. is a tactical problem that we are working through, and we hope to find solutions in time to come.

Kitamura also has a comment.

May I add -- sorry. Yes, please. Last year regarding IZERVAY impairment loss, the trigger was whether we can get the approval or not. It was about that probability. Now as you know, IZERVAY intangible assets in U.S. and outside of U.S. as we are registering, U.S. intangible because of the launch in United already, we're going to sell it out. Including the competitors, our drug is also a new treatment. How to develop the market is the main task for us. It's our job. [indiscernible] is going to do a good job according to him. So we think we can do it.

Of course, there is a big asset number on the balance sheet. So I have to evaluate and assess it. I will do so. The company's stance has not changed. And we had impairment loss, which was incurred last year, but the root cause is different. So please understand.

One more question, if I may. Earlier, you talked about CSP, midterm business plan. I know you say don't ask so many questions on this. Regarding the dividend, I understand the message that there can be a decrease. But the dividend level during the course of the next CSP on an absolute basis, do you think you can maintain the amount? Can we feel assured?

Sorry. What do you mean by decline? Which -- what are you talking about? The top line may decrease on a temporary basis. If you're talking about it, yes, you are right. But that may not necessarily lead to a decline in the bottom line.

Regarding the specific numbers in May next year, CSP 2026 will be announced according to plan. So please wait until then. And I think this is [indiscernible] scope of responsibilities, but I also have my own views. So allow me to speak. Regarding the dividend, just increasing the dividend would not happen. And also, even if the company's overall performance is good or bad, it's not something we should change dramatically. I'm talking about the dividend.

For the past few years by now, intentionally, the dividend level may be too low and to increase it to a competitive level. So we increased the dividend at quite a fast pace. But from now on, for the company's growth in the longer term, we'd like to gradually increase the dividend in line. That's Astellas basic stance.

In the next 5 years, with the CSP, there's going to be some dip in revenues. So we have no intention to decrease the dividend because of that. So in that sense, you can feel assured. Kitamura-san, please.

As Okamura said, I may be repeating myself, but a stable return to shareholders is an important factor as part of the capital allocation according to understanding, we're doing this already. So it's not going to change in my view.

But on the other hand, when it comes to dividend, how much profit do we have? Cash flow is better or balance sheet is better. So we are working on this meticulously. Whatever is going to happen, we should have funds for investments for stable growth, and we have to have a stable return to shareholders. This is my -- including my personal view. I think this is an important factor. It's not going to change substantially according to my assumptions.

Next, Macquarie Capital Securities, Tony Ren-san, please.

Tony Ren from Macquarie. The first question is a simple one on gross profit margin. Your cost of sales in the first half appears to be increasing faster than revenue, which probably suggests that the gross margin is declining a little bit. I just wanted to understand why that might be the case?

Thank you. So I think the simple answer to your question is the change in the product mix. But if you would like to know a little bit more in detail, I will pass the button to Atsu.

It's all about product mix.

Okay. Perfect. And understood. Yes. The second question and my last question is about your ASP2138. It appears to me that you guys are really pursuing this clinical asset as part of combination therapies, but not as monotherapy.

At ESMO 2025, which I attended, I think the monotherapy response rate was fairly modest. And the KOLs who I spoke to also think that the duration of response was good, but probably not something that knocked it out of the park. So what's your thinking about using ASP2138 either as combination or as a monotherapy?

Thank you very much for the question. I will ask Taniguchi-san to answer those questions.

Thank you, [ Christian ]. So as you described, if you take a look at monotherapy of 2138, the ORR is relatively modest, but it's around the 15% range. But I think this is quite consistent what we've seen in other CPI such as PD-1, or PD-1 inhibitors. So -- and it's also seeing a very similar tendency that we see once tumor actually responded the duration of response is longer. This is exactly what we've seen in other immuno-oncology product.

So when I think -- that this is also quite encouraging data from monotherapy. By saying that if you're thinking about PD-1, most of the case is actually coming through the earlier line in combination with other agents like chemotherapy, or ADC, as you see in PADCEV and pembrolizumab. So what we believe that thinking about the development of 2138, we believe that it makes sense for us to go into the earlier line in combination with the current standard of care. So that's what we believe this is the space that we can actually working on.

But I think that this is also based on the data coming up from Phase I, current ongoing Phase I. So please wait the data is coming up. But I think we believe that this data we actually shown in ESMO is quite encouraging.

Because of the time, we would like to ask the next question is the last question. Sanford C. Bernstein, Mr. Sogi, please.

MIBC, commercial potential, how do you feel about that? I would like you to explain more details. To simply put, the patient number times market share times duration of therapy times price. It seems it's not that simple. Listening to you, first-line early line treatment overlapping in actual clinical practice, adjuvant, neoadjuvant usage differentiation seems also complicated. So could you be a little bit more specific about this?

And also on top of that, this adjuvant neo adjuvant for MIBC. Regarding first line and second line, the number of the patients, including the China major markets number were disclosed. But for MIBC, China is excluded according to the description here. Is this significant? Would you please explain about these two points?

Your first question, your understanding is correct. We do research we should be able to respond with responsibility. And then we'd like to respond to your question. So please give us some more time until then.

And I don't know the background of the second question. Claus, do you know the background for the second question?

They would have to come back on China. Yes, I would have to come back.

Sorry. Among all the participants today, we do not have a full understanding of the background. So we'd come back to you through our IR team at a later date.

Okay. Next about IZERVAY. I have a question. IZERVAY, of course, you're going to expand the market from now on. You're still on the way. On the other hand, this year, from the first half, [ Good Day ] is a charity Foundation. And for patients on Medicaid, patient support funding is no longer available and there was such an impact on your business. So what's the current status right now?

Yes. So you're absolutely right. The drying up of the foundation funding in the United States is causing some patients to drop off from therapy because they simply can't afford the co-pay that the foundations picked up in the past. Now we see that both in the geographic atrophy market. We also see that in the [ wet AMD ] market. And what we see the retina clinics doing in the U.S. is trying to adjust to that new situation.

I mean, remember, it's not all the patients who can't afford the co-pay. There's still 70%, or something like that. It's an estimate, but it's at least 60% of the patients who can afford the co-pay. So I think it's a question for the clinics now to understand when they accept patients. How do they deal with a patient that can afford, versus what support mechanisms are available for patients who can't afford. That's the turbulence in the market that we're seeing right now.

We believe also on the basis of past [indiscernible] analogs that the market will learn how to triage that and how to provide the right solution for different patient types. How long that will take, and what the curve after that will be, that is the part that I'm still exactly struggling with. And that's why we've been more cautious to take down the projections for this year.

Great. So if we did have funding this year, so would that fill the gap that you currently lowered in your guidance?

Well, it would for the coming quarters, but we have lost time. So I don't think the original forecast is realistic simply because of the timing element that we have within the fiscal year.

Now time has come. So with this, we'd like to close today's explanatory meeting. Thank you very much for joining us today.