Chugai Pharmaceutical Stock

Thank you very much for taking time out of your busy schedules to attend Chugai Pharmaceuticals' FY 2026 Second Quarter Financial Results Presentation today. My name is Miyata from the Corporate Communications and Investor Relations Department. I'll be serving as today's moderator. And today's presentation is being held for investors, analysts and members of the media in a hybrid format combining an in-person presentation and a Zoom webinar. And please note that if the name displayed by the Zoom participant cannot be matched with the registration information, the participant may be removed from the webinar without prior notice.

Today's agenda is shown on the screen at the venue on the webinar screen and on Page 3 of the presentation materials. We'll proceed in accordance with this agenda. This presentation will be conducted in Japanese. Simultaneous English interpretation is also available via the Zoom webinar. [Operator Instructions]

We have set aside approximately 30 minutes for the Q&A session, and we encourage you to actively ask questions. [Operator Instructions]

Now President and CEO, Okuda, will provide an overview of the second quarter of FY 2026. We will pause briefly at the beginning, so please use this opportunity if you would like to take a screen capture.

Okay. Let's get started. I am Okuda, President and CEO. I will provide an overview of the second quarter of FY 2026. Please turn to Slide 5 of the presentation materials. For the first half of FY 2026, we recorded increases in both revenue and profit. This was driven by steady domestic and overseas product sales as well as a significant increase in other revenue. So given the steady progress made in the first half, we expect to achieve our full year forecast. On the business front, we filed 8 regulatory applications in Japan, making steady progress towards achieving our plan for the highest number of regulatory filings ever. We also initiated 2 Phase III studies for NXT007, which we expect to become a next-generation growth driver. Overall, both our financial performance and business activities progressed steadily during the first half. Next slide, please.

This graph shows the changes in revenue compared with the same period last year. Revenue increased by JPY 84.8 billion or 14.7%. I will walk you through the items from left to right. Domestic sales increased by JPY 14.6 billion as growth in mainstay and new products more than offset the negative impact of the NHI drug price revisions and generic penetration. Overseas sales increased by JPY 40.5 billion as increases in export volumes and the positive foreign exchange impact more than offset the decline in export unit prices.

In particular, exports of Hemlibra to Roche and Nemluvio to Galderma increased. Other revenue increased by JPY 29.8 billion due to a significant increase in onetime income as well as higher royalty income, mainly related to Hemlibra and Nemluvio. Domestic sales, overseas sales and other revenue all increased, resulting in overall revenue growth. Next slide, please.

Next, I will discuss 2 Chugai-originated global new products that are important to our revenue growth over the short to midterm. Nemluvio is driving our revenue growth through export sales and royalty income. As announced in Galderma's financial results yesterday, global sales for the first half totaled USD 433 million. Its share of new-to-brand prescriptions was approximately 42% for prurigo nodularis and approximately 9% for atopic dermatitis, indicating continued strong momentum.

In the U.S., Nemluvio is evaluated not only for its efficacy to reduce pruritus, but also for improving skin symptoms. That is leading to a high valuation by doctors and -- leading to prescription. Other than the U.S., we launched Nemluvio in European countries. And for the -- some of the European countries and for these countries, we see a strong growth in the initial sales. And then other countries, we are now undergoing filing, and then we expect to drive sales going forward.

Foundayo, we -- for Foundayo, we launched this product back in May -- back in April in the U.S. for the indication of obesity. And then we started to recognize the royalty revenue based on the local sales back in the second quarter of this year. So this product is prescribed to patients who are naive to GLP-1 products, and then we will expand the overall obesity disease market. And for access, this will be available not only by direct sales, but also a prescription via private insurance and medical -- Medicare is expected. And then we will expand the indication to type 2 diabetes and also -- in the U.S. and then expand the indication in countries other than -- launch in the countries other than the U.S.

And then next, we will share -- I will share the in-house project that will contribute to mid- to long-term growth. REVN24, well, we confirmed biological POC among healthy adults in P1, and we are preparing for Phase II. We achieved a Go criteria for Phase II. And then there is no -- we are now preparing for P2 targeting the post-cardiac surgery complication cases. There is no treatment available, and then we believe that there will be a high unmet medical need. So we will continue to work hard to provide this treatment to patients as soon as possible. And then AQUA07, we achieved -- this is the third macrocyclic peptide project entering the clinical phase.

We received a Fast Track designation by the U.S. FDA in May. So this is -- utilizes our macrocyclic peptide technology. And then the -- binds to different location of ALK fusion protein. And then this is an allosteric inhibitor. And then we expect first-line usage of AQUA07 as a combination therapy with existing agent and efficacy in patients who develop resistance to existing agents.

Lastly, let me share basic policy for capital allocation. We will make an active investment for sustainable business growth. So in order to do that, we established strategic investment department to develop investment strategy, discuss individual initiatives and lead promotion of investment. So this department will drive strategic investment based on mid- to long-term growth strategy and R&D strategy. And also, we will continue a stable dividend payout ratio to shareholders, aiming at 44.7%. We will continue a stable contribution to shareholders. For this year, our expected yearly dividend will be JPY 132 per share. This is an increase in ordinary dividend for 10 years consecutively. That is all from me.

Next, Mr. Kusano will provide an update on the development pipeline. We'll pause briefly at the beginning. So please use this opportunity if you like to take a screen capture.

Okay. Now we're starting. I am Kusano, Head of the Project Lifecycle Management Unit. I will provide an overview of the development pipeline for the second quarter fiscal 2026. These are the key topics for the second quarter. Regarding approvals, Alecensa received approval for an additional indication for advanced or recurrent ALK fusion gene-positive solid tumors. Avastin was also approved for neurofibromatosis type 2, while Rituxan was approved for adult-onset frequently relapsing or steroid-dependent nephrotic syndrome. Regarding regulatory filings, Enspryng was filed in the United States for thyroid eye disease and was granted a Priority Review designation. The FDA has set the PDUFA target action date for October 15.

In Japan, we filed Gazyva for idiopathic nephrotic syndrome and giredestrant for unresectable or recurrent breast cancer and for adjuvant therapy in breast cancer; Tecentriq for maintenance therapy following definitive chemoradiotherapy in locally advanced esophageal cancer; and sparsentan for IgA nephropathy. We also filed the drug component of the Port Delivery Platform with ranibizumab for neovascular age-related macular degeneration and diabetic macular edema. And the medical device component had already been filed in March of this year.

Regarding study initiations for our in-house product, NXT007, generic name zemocimig, we initiated 2 Phase III studies in hemophilia A. For the Roche-originated product, CT388, generic name enicepatide, following the previously reported Phase III study in obesity with type 2 diabetes, Phase III study was initiated in patients with obesity and type 2 diabetes.

Next, tominersen was removed from the pipeline following Roche's decision to discontinue its development for Huntington's disease. Regarding readouts, AVMAPKI in metastatic pancreatic ductal adenocarcinoma, in the Phase Ib/IIa study, the overall response rate was 52% among 29 evaluable patients. In addition, the Phase III study of divarasib in second-line non-small cell lung cancer met its primary endpoint. At medical conferences, we presented Phase III data for PiaSky in atypical hemolytic uremic syndrome or aHUS as well as Phase II data for emugrobart in spinal muscular atrophy, SMA, and FSHD. Zemocimig, vamikibart and Gazyva received orphan drug designation.

This slide shows the key R&D milestones for 2026. The underlined and bolded items indicate changes since the previous earnings announcement, as I've explained so far. We'll also continue to make steady progress on the remaining milestones.

Next, I will introduce AQUA07, an in-house developed allosteric ALK inhibitor. AQUA07 is the third clinical-stage project to apply our proprietary macrocyclic peptide drug discovery platform technology, SnipeTide. We have just received confirmation that the first patient has been dosed in the study for ALK-positive non-small cell lung cancer today.

First, please look at the diagram on the left. All currently approved ALK inhibitors are small molecule ATP-competitive inhibitors. They bind to the ATP pocket indicated by A in the diagram and inhibit ALK activity involved in cancer cell survival and proliferation. In contrast, AQUA07 binds not to the ATP pocket, but to the allosteric site indicated by B in the diagram. Through a binding mode unique to macrocyclic peptides, which enables them to engage a broader surface of the protein, AQUA07 can target a site that is difficult for conventional small molecules to access and inhibit ALK activity through mechanism distinct from existing therapies.

Next, please refer to the illustration on the right. Existing ALK inhibitor sometimes generates resistance around ATP pocket, thereby reducing the efficacy of the drug. AQUA03, on the other hand, binds to different locations than existing drug. So therefore, we expect efficacy among cases with drug resistance. And also in the first-line treatment, we expect higher efficacy by using AQUA07 together with -- as a combination therapy together with existing ALK inhibitor. Well, this AQUA07 received a Fast Track designation by the U.S. FDA in May 2026. So we will aim to achieve resistance -- overcome resistance and also improve treatment for patients with drug resistance. And also, we will continue AQUA07 development in order to achieve first-in-class and deliver this new product option to patients.

Next, we -- I will talk about PiaSky indicated for atypical hemolytic uremic syndrome or aHUS. Let me share the development status. Well, recently, we conducted Phase III COMMUTE-a study targeting adults and adolescents as well as COMMUTE-p study targeting pediatric patients. The result of this study were announced in European Renal Association in June 2026. Primary endpoint was the complete remission rate at week 25 among patients who are naive to complete -- complement inhibitor. The remission rate was 59.5% at COMMUTE-a study and 17.6% for COMMUTE-p study. Both of them were very good. And complete remission rate of 59.5% for COMMUTE-a study exceeded predefined success criteria of 40%.

The secondary endpoint was complete remission maintenance rate for patients who switched from eculizumab and ravulizumab. Then the remission maintenance rate was 100% for both studies, and then we confirmed the maintenance of efficacy to control disease for patients switched from other agents to PiaSky. In addition to that, patients who are on dialysis -- naive patients who were on dialysis at baseline, in all cases, they discontinued dialysis. For safety profile, there was no difference from the already approved profile. And also as an exploratory endpoint, we conducted a survey to check treatment preference. According to the survey, 85% or higher rate of patients and also the caregivers -- over 70% of caregivers who are taking care of pediatric patients preferred PiaSky over existing treatments. We believe that convenience provided by subcutaneous injection form and reduction in burden evaluated highly by patients and its caregivers. So we plan to file a submission for approval in Japan, U.S. and Europe within this year. So we will continue our development activity so that we can provide this new treatment option to this rare and severe disease, which is aHUS.

Next, I will be talking about the -- share the status of DONQ52. DONQ52 is a multispecific antibody, which is an in-house project developed by us targeting celiac disease patients. Through our go and no-go scheme, we accelerated the development speed. And currently, we are holding a Phase IIa study in U.S., Australia and New Zealand. Prevalence of this disease is about 1%, and there is no treatment available. So we expect to contribute to this segment of patients suffering from celiac disease. As for Phase Ia/b study, Phase Ic study, we are considering publishing the data -- announcing the data in academic congresses.

Lastly, this is our submission schedule. The projects with blue star are newly added projects and projects with green stars are the projects where we changed the submission timing -- planning timing. And then divarasib, second-line non-small cell lung cancer, based on the project status, progress of the project, we accelerated the filing timing from 2027 to 2026. And as for inavolisib, we now have a time line for regulatory filing for endocrine therapy-resistant breast cancer. And then also, we -- based on the progress of the project, we changed application timing for endocrine therapy-sensitive breast cancer patients from 2028 to 2029.

In 2026, we have the record-high number of submission planning, but the progress so far is pretty good. So we expect that we bring new treatment options to patients as soon as possible. Subsequent slides are for your reference. So please refer to the subsequent slides.

That concludes my presentation. Thank you.

Next, Mr. Taniguchi will provide an overview of the consolidated financial results for the second quarter of fiscal 2026. We'll pause briefly at the beginning, so please use this opportunity if you'd like to take a screen capture.

Let's get started, and this is Taniguchi speaking. And now I want to discuss the financial results for the second quarter of FY 2026. First, I'd like to report that the revenue for the first half came to JPY 663.3 billion, an increase of JPY 84.8 billion or 14.7% year-on-year. Core operating profit was JPY 329.1 billion, an increase of JPY 57.1 billion or 21% year-on-year.

And now I'll walk you through the details in sequence. Starting with revenue. As I just mentioned, -- so product sales came to JPY 566.5 billion, an increase of JPY 55.1 billion or 10.8% year-on-year. By region, domestic sales came to 237.9% (sic) [ JPY 237.9 billion ], an increase of JPY 14.6 billion or 6.5% year-on-year. Strong performance by new and mainstay products more than offset the impact of NHI drug price revisions and generic penetration. Overseas sales came to JPY 328.6 billion, an increase of JPY 40.5 billion or 14.1% year-on-year, reflecting continued strong exports of mainstay products to Roche. Other revenue came to JPY 96.8 billion, an increase of JPY 29.8 billion year-on-year. This significant increase reflected higher onetime income and royalty income from Roche and third parties.

I will now move on to the cost items. Cost of sales came to JPY 195.9 billion, an increase of JPY 20.7 billion or 11.8% year-on-year. The increase in absolute terms mainly reflected the significant growth in product sales. The cost to sales ratio increased by 0.3 percentage points year-on-year to 34.6%, mainly due to changes in the product mix. R&D expenses increased by JPY 3.9 billion year-on-year to JPY 90.2 billion, reflecting steady progress in drug discovery and early-stage development projects. SG&A expenses increased by JPY 3.6 billion year-on-year to JPY 49 billion. This was mainly due to higher promotional expenses for new products such as Lunsumio and Elevidys in the first quarter as well as increases in enterprise taxes and bonus accruals linked to profit levels.

As a result, operating profit increased by JPY 57.1 billion or 21% year-on-year to JPY 329.1 billion, while the operating margin rose by 2.6 percentage points to 49.6%. Finally, net income after tax came to JPY 238.4 billion, an increase of JPY 44.9 billion or 23.2% year-on-year, partly reflecting an improvement in net financial income and higher interest rates. Next.

The next slide shows the breakdown of changes in product sales. First, at the bottom, domestic sales, which is in dark blue, the oncology area came to JPY 117.4 billion, an increase of JPY 0.8 billion or 0.7% year-on-year. In terms of breakdown, the new product, Lunsumio recorded higher sales, while Polivy also increased following the approval in March of its combination therapy with Lunsumio. Sales of Phesgo also increased steadily more than offsetting the decline in Perjeta. Meanwhile, Avastin continued to decline due to the impact of NHI drug price revisions and generic penetration.

Sales in the specialty area came to JPY 120.5 billion, an increase of JPY 13.8 billion or 12.9% year-on-year. In addition to the mainstay products, Hemlibra and Vabysmo, the new product, Elevidys also continued to grow steadily. Overseas product sales came to JPY 328.6 billion, an increase of JPY 40.5 billion or 14.1% year-on-year, driven by a significant increase in Hemlibra sales.

The next slide shows the breakdown of the increase in operating profit. Starting from the left, for domestic sales, the significant increase in sales volume more than offset the impact of NHI drug price revisions and contributed positively to operating profit. For overseas sales, so the increase in volume significantly exceeded the decline in export unit prices. So together with the positive foreign exchange impact, this contributed to the increase in operating profit as expected. Other revenue also contributed positively to profit, reflecting an increase in royalty income from Nemluvio. We also began recognizing royalty income from Foundayo. Cost of sales, as I mentioned earlier, increased to some extent, reflecting the increase in product sales. And just for your reference, the next slide shows the quarterly trends in cost items and operating profit, so the trends for every 3 months.

And then the next slide shows the quarterly trend in the components of revenue compared to the previous year second quarter or compared to the previous first quarter, tough comparison. For the overseas sales, quarterly results tend to fluctuate to some extent due to timing differences in revenue, recognition arising from timing of export shipments and other factors. So on this slide, so we are showing our progress as of the end of the second quarter against the full year forecast announced with the financial results in January. Both revenue and profit are showing higher progress rates than in the same period last year. For the pharmaceutical business, we tend to see bigger sales to come in the latter half of the year in general. But currently, we are getting close to 50% progress rate right now even for the operating profit. So we are going quite strong this year compared to last year. Next slide.

Next, this slide demonstrates progress against initial forecast by segment and product. Compared to the previous year, well, as you can see, sales progress is higher in most of the main products. This page demonstrates the impact from foreign exchange rate as usual. So comparing with the last year's actual rate, there was a positive impact of JPY 26.9 billion on revenue and JPY 19.8 billion on operating profit. If you compare this against Swiss franc, actual conversion rate shifted from JPY 171.31 to JPY 183.39. So it's about JPY 12 weaker yen compared to the previous year, which impacted positively on the performance.

So next, this is our financial positioning. Well, the -- as a total -- total asset is JPY 2.4499 trillion, which is down JPY 18.7 billion. This is due to reduced net working capital. And also, there was a special payout of special dividend, so that reduced cash that decreased total asset slightly. However, if you look at net assets, the total equity exceeded the payout of dividends. And so there was an increase by about JPY 20 billion when it comes to net assets. And then as a result, the equity ratio was 82.8%. There was an increase. And also net cash compared to JPY 979.7 billion. So now there was a decrease of JPY 17.1 billion, and now net cash is JPY 962.6 billion. Well, accumulation of cash is progressing well. However, because of the payout of taxes and so on, there was a reduction by JPY 17.1 billion. Then this is the nonprofit -- noncore adjustment as usual. So the amortization, depreciation of intangible assets and also business rebuilding costs are excluded from the IFRS performance. So lastly, this is the major plans for major investment and status of each initiative. That's all from me. Thank you very much.

Thank you for your attention. So now we will move on to the Q&A session. So we will have Mr. Hidaka, Executive Vice President in charge of Sales, will be also present to respond to Q&A sessions. [Operator Instructions]. Please note the audio of your questions together with the presentations will be posted on our website at a later date. We'll first take questions from those participating in person followed by questions from participants joining Zoom webinar. [Operator Instructions] The first on the front.

This is Yamaguchi from Citi. My first question, maybe you don't have an answer to this question, but I need to ask you this about the Foundayo. And the sales hasn't really started to contribute to your business, but I'm sure it's starting including from Q2. I'm sure you had your original prediction or forecast for the full year. So far, compared to your forecast, is there anything you can comment on the progress or the current status? That's my first question.

Thank you very much for your question. Exactly, on Foundayo, sales will be basically handled by Eli Lilly. So I hope you can ask them about the sales status. Overall, not just Foundayo, but as explained earlier, for -- during this first half, looking at the status during the first half, we are making a good progress, pretty good progress. That means for this fiscal year forecast, we believe we are able to accomplish the full year forecast for overall company. Anything to be added? I think that answers the question.

My second question. I know this is a specific question. Sparsentan was applied for. So I think this is proceeding in domestic. I think you had a very high expectation. But can you comment on its potential in the domestic market on this?

Yamaguchi-san, thank you very much for the question. Sparsentan, currently, in IgA nephropathy, there are many different drugs available, endothelin -- mechanical drug atrasentan or iptacopan and also APRIL antibody. So there are multiple new treatment drugs are under development right now. And the sparsentan, you can take once a day on an oral format and you are able to show the reduction in protein, and that is quite effective. And endothelin and also [indiscernible], so we can reach out to the patient who is not getting enough effect in existing treatment, and this can also protect the renal functions as well. So it is quite convenient and has a great effectiveness. And so that's why there is a high expectation compared to other drugs available.

So it's -- I think you come in earlier than the others, so you should be able to maybe get much bigger share in the market?

Well, we have already applied for approval. So I hope we can get this delivered to the patients as early as possible so we can get bigger penetration in the market.

This is Hidaka from sales. It's -- this is the renal area, which we haven't really been in the market for a while, as explained by Kusano. It has a very high potential. So we can well permeate throughout the market. So I hope you can also have your expectation for this drug as well.

Okay. So going to the next person next to the first person, please go ahead.

This is Hashiguchi from Daiwa Securities. The first question is royalty and profit-share revenue. Well, in the appendix, there was a split breakdown with revenue from Roche. The first quarter revenue, excluding Roche revenue, JPY 4.1 billion. Second quarter, it was also JPY 4.1 billion. The revenue for Nemluvio was announced by Galderma. Compared to the first quarter, there was an increase in the second quarter. And Foundayo, you started to recognize the revenue from second quarter. Despite of that, there were no changes in the numbers between quarter 1 and quarter 2. Could you share reasons behind this?

Well, breakdown of the revenue is not to be disclosed. We don't disclose the split. I ask for your understanding. But this is a royalty revenue, as you know, and then so we have a tiered, well, agreement with partners and then the rate might change quarter-by-quarter. Nemluvio relatively progressed really well, and then this was the plan.

Okay. So the rate might change in a tiered basis. If that's the case, that might increase the number in quarter 2 compared to quarter 1. Well, from quarter 1 to quarter 2, excluding Roche revenue, you said January to March, JPY 4 billion. And then second quarter, it's about JPY 8.2 billion, correct?

So for the calculation, how we calculate this value, we don't disclose any method of calculation. I ask for your understanding.

Well, I asked this question. Well, comparing 3 months to 3 months, JPY 4.1 billion and JPY 4.1 billion. And then I wonder if there was no difference between them.

Well, for many different reasons, we didn't make changes to the number.

I understand. The second question is that the -- your policy on allocation on your resource on study and also reorganization, the establishment of strategic investment department. So the capital allocation policy, as you explained, I think, stayed the same. But this new establishment, why did you think the establishment of this new department -- strategic investment department was necessary? Could you give us some explanation on why you established this new department?

And also, my next question is that what do you expect to see from establishing this new department? What can we expect from this division, new department?

Thank you for the question. Well, TOP I 2030 started in 2021. And then in TOP I 2030, there were 3 key drivers. One of them is open innovation. Open innovation, well, we really think in-house projects are very important. And of course, we do collaborate with academia, but we really think it's important to establish modality platform for drug discovery in-house to develop innovative medicines. And we have seen success in these initiatives. Looking around chemical, digital, and then we see a lot of innovations in different areas.

So we think that we need to expand our views collaborating not only with academia, but also with venture -- bioventures, for example, to generate new value. So that's something that we have been working on. As part of this, we established Chugai Fund -- Venture Fund, CBC. And also in the beginning of this year, Chugai Partner Office was set up in the U.S. and then it's in action already. So as we work on this open innovation, well, we considered in-licensing, co-developing, co-licensing and so on. However, we think that we need to step one -- make one step forward. That's the reason behind the establishment of department.

For example, by conducting M&A, we acquire technology and then combining this new technology with our in-house technology, we could provide something new. And also by collaborating with companies that have a target identification technology, we believe that we can deliver new value. And the other element is the change in our financial positioning. As our CFO mentioned, we have accumulated cash. So how to utilize, how to effectively leverage this accumulated net cash has been a theme or a question, I would say, internally. By leveraging this accumulated cash, we can improve -- increase our value and also by introducing assets, we can -- we believe that we can accelerate our growth. So that is why we established this new department, strategic investment department to strengthen these initiatives.

Okay. Next question.

Ozaki from [ Nippon Keizai ] newspaper. I think you mentioned at the beginning, the number of applications you are planning to have the highest number of applications being filed this year. And last year -- at the end of last year, since then, looking at your presentation materials, the number has been changing slightly. And according to the latest number, what -- how many are you planning for this year?

Ozaki-san, thank you very much for your question. Can you take a look at -- please take a look at the zabuton chart. So where it says under application, there are 9 items, and the first one left top, that is application in the United States. And this is not that we file. It is not us who file this, we exclude them. So currently, 8 are filed. And in 2026, going down, and we have -- are expecting 8 more being prepared.

So looking at domestic market, we -- I think we can go up to 16. So at the beginning of the year, we mentioned 15, I think. But now we are adding this green item, divarasib, second-line small cell lung cancer. So we actually accelerated this into this year instead of next year. So at the beginning of the year, we mentioned 15, but now it's 16.

Let me confirm. Tecentriq? Last -- at the end of last year, I think it was already filed, wasn't it? Tecentriq for the bladder cancer? Maybe different indication, I guess. Let me check then.

And another question is Medicare and the NHI price is being introduced, I guess? And what is the impact on this?

Can you repeat the question? In FDA -- it was difficult to listen to your question.

Can you hear me okay? Okay. So in the U.S. MFN price -- drug price issue. So the forced introduction into Medicare. So MFN introduced to Medicare, I think that is in the plan. What is the impact of that? What do you think will be the impact?

So the U.S. is leading this international reference pricing, I'm sure -- I believe you're talking about it. So it's very uncertain when it comes to its forecast. So under such environment, what we are doing is we are trying to deliver the innovative drugs over to patients in a continuous manner. So meaning, the situations are not really fixed right now, confirmed at this point.

So depending on situation, there are many different stakeholders. Of course, the Ministry of Welfare as well, also the Patients Association, not just Ministry of Health and Welfare. So we need to have dialogue with all these different stakeholders in order to deliver innovative drugs over to the market, and we want to continue making efforts.

Okay. So the person behind Tim.

My name is Ueda from Goldman Sachs Securities. My first question is NXT007 and its Phase III study. Well, in global Phase III study, there was a head-to-head comparison with Hemlibra. Well, your -- do you seek to achieve superiority or dosing frequency or device convenience? So do you think you can promote switching with this convenience and dosing frequency? So what's -- could you tell us -- share the more background behind this NXT007 project?

NXT007. Yes, thank you very much for your question. In -- we have 2 -- in 2 studies, we started dosing. One is comparison with Hemlibra, the other is comparison with Factor VIII. So what was announced about this Phase III study is that the number of cases, 360 for the comparison with Hemlibra and 126 for comparison with Factor VIII. Well, superiority or non -- inferiority, at this moment, we have not disclosed this information and also dosing frequency that has to do with our strategy. So at this moment, we don't disclose this information. I ask for your understanding.

By the way -- well, about the device, well, it says drug device combination. Are you considering something like auto-injector?

Auto-injector with higher convenience. Yes, we started the study with auto-injector.

My second question is there well -- progress of cost of sales. If you look at the quarterly number, well, it seems that the cost of sales has increased. Well, export of Hemlibra and also product mix might be impacting this? Do you have any cause for increased cost of sales? Is it exchange rate change?

I will hand this question to CFO.

Yes. Well, to put it simply, it's because of product mix change. And overall, as sales from developing countries increase, our cost of sales will increase. So it's product mix and the geographic mix. But it's just 0.3%. So I appreciate it if you could have a long-term view to look at the annual number of COGS.

Next question then.

Wakao from JPMorgan. My first question is about export sales. So everything is going pretty much in line with the plan, as you mentioned, Hemlibra Actemra and also Nemolizumab included in others. This is according to the results by Roche and Galderma. I think we were able to confirm very strong progress so far. And you're also showing a good progress rate in your performance. It seems like somewhat stronger than expected, but what is the actual situation?

Thank you for the question. In a nutshell, very -- making a very good progress so far. For exporting, it's not the level out demand on a monthly basis. So towards the end of the year, we also order supply for 6 months or so. So it's been going quite stable right now. There is no -- it's not there yet to be able to make any revision to our business performance at this point. So we're making good progress.

So in your plan, you don't really make revisions to your forecast? I know it's quite natural. But compared to the plan, so you are going stronger than the plan? What do you mean by making good progress so far?

In the first half, the first 6 months, is going as expected, slightly better than expected.

I see. Second question, AQUA07. So the nonapproved data Fast Track, I thought it was rare. So what type of data Fast Track that you'd got and Phase I design, I think this is a combination use of lorlatinib. Is the reason why this lorlatinib is selected? Looking at the data so far, lorlatinib could be also a reasonable choice. And so I just wonder why?

Wakao-san, AQUA07 question. Thank you very much for your question. For nonclinical situation, we use Fast Track designation, we are very happy to get this designation. And according to data we submitted, we use AQUA07 or ALK-resistant impact, and also existing ALK inhibitor combination impact and nonclinical data was provided. And so nonclinical data is to be disclosed as an appropriate timing. And also, as explained today, there is a new MOA and that was also appreciated.

Understood. Well, I think. And next, Phase I clinical study. And so why Alecensa not being utilized?

So this is also due to somewhat strategic reasons. So first, we want to start a combination use of lorlatinib and in the future, ATP, ALK-TKI, including Alecensa, we pursue. So we will create more data to allow that to happen.

Okay. Next person.

My name is Miyuki from Yakuji Keizai Magazine. I have a question about Page 17. Well, projects under filing and then projects you plan to file. Sparsentan is in purple. Well, this is the third-party technology, and then I think it's rare for you to file an application for those in-licensed products. Is it a special case for you? Or do you plan to increase those types of filing?

Let me answer this question. So I talked about capital allocation policy earlier. Well, assets in Japan, well, introduce assets and also acquire assets for the Japanese market is one of our strategies. So sparsentan type of filing, well, developed products and then also if we see attractive products, we plan to acquire, in-license those products. That's part of our strategy -- capital allocation strategy.

Understood. Well, one more question. Sorry, I didn't study much. So on 27 page, well, the Sigmart's progress is 124%. Why do you think this is? Could you share the reason for this?

Well, the progress. Yes, let me answer this question. Sigmart. Well, in China, so there are many things ongoing, like changes in reimbursement system. So originally, we were conservative about price change, and then some of them are pushed back, well delayed. And then that's why our -- the actual were higher than our focus in the beginning of the term. So for long term, I think we will be overall on plan. However, for short term, we see a strong positive here.

And the second from the front row, please?

Shimomura from Nikkan Kogyo. Elevidys, the progress, how do you view the progress at this point?

So Elevidys progress to be explained by Hidaka-san.

Let me answer to your question. This is Hidaka. Regarding Elevidys, in total, things are making good progress according to the plan, especially there is an age restriction. So first, this year, for those who are coming to 8 years old, will be prioritized to make sure they would not miss any treatment opportunities. So we'll consider dosing those patients first. And by the end of the year, things are moving as planned pretty much. And institutions now we -- so they'll be the first case to be starting one after another. So I think we are making good progress so far.

Another question about R&D -- Elevidys R&D. So there's a testing ambulatory patients. The application will be for 2028. So there's no change, is that correct for that timing? Can bring out the tile chart regarding this ambulatory capability for Elevidys? '29 -- sorry, '29. Yes, right top.

shimomura-san, thank you for your question. So nonambulatory indication, as you mentioned, currently still on hold. So still continue to study. So that is why it's set at 2029 and beyond. And that for the ambulatory indication, for EU, we have not got the approval yet, so we continue to discuss with the regulatory authority for the new and the ambulatory global Phase III is to be starting right now. That is in the plan.

Any other questions from the floor? Please raise your hands if you have a question.

Okay. So now we will take questions from online participants joining Zoom webinar. [Operator Instructions] Okay. So the first question, Muraoka-san from Morgan Stanley, please?

This is Muraoka from Morgan Stanley. Do you hear me okay?

Yes.

I have a question about NEMLUVIO. Well, I don't need too much of a detail. However, I'm still wondering. I don't have any visibility, but why loyalty alue was flat. I didn't quite understand. And also the export volume comparing the first quarter and the second quarter, if you compare these 3 months, well we saw a decline. I was wondering why. And then were there any specific special transaction? If you said that there was a special transaction, I can understand, but I don't understand why. Because I don't -- it will make it difficult for me to develop a story going forward. So could you elaborate on this point?

Thank you very much for the question. So basically, the local sales reported by Galderma and our export volume do not align all the time because for -- we have -- based on the binding commitment, we export and sell products to Galderma. But it does not -- it's not in parallel with local sales made by Galderma. So Galderma, they consider what's their safety inventory, appropriate inventory and then they make their purchase plan based on their strategy. So they don't -- these 2 things don't usually align. I ask for your understanding.

I understand. So it's not that the inventory level is very low? Are you aware?

We don't hear anything. But what we do is based on the request for import, based on the shipment strategy, we will meet their demands and requests and export our products, but we don't know how much is their inventory level.

I understand. And then the other thing is, DONQ52. We now entered Phase IIa, which is good news. Well, it has been 4 years since we started Phase I. I think this project is taking a long time. I think everybody thinks so. So can you explain why it took as long as 4 years? And then also, do you think that can -- we can expect that this will accelerate from this point? So let me understand how to interpret this trial.

Thank you very much for your question on DONQ52. As you know, celiac disease, the -- there's no investigational drug approved for the indication of celiac disease. This is a completely new area -- disease area. So we took time to complete Phase I. In addition to that, as we reported the other day, gluten challenge. So this is to intentionally give gluten to a patient, so this was a very challenging study.

So this is a new area and then this study is being conducted outside of Japan. So that's why it may have taken longer time. However, as I said today, now we entered Phase IIa. And then we believe that we can accelerate the process going forward.

Specifically, this project targeting celiac disease, Dr. Dan Leffler, who is a renowned immunologist, we invited this doctor. Well, he's an incumbent immunologist, clinical immunologist. So he sees patients, and then he supports this study as well. And then please, I expect that this will accelerate going forward.

In the next phase, well, after '29, in the time line, DONQ52 is here. So does that mean that you expect to enter Phase III in 2028? What's your expected time line?

Thank you for the question. At this moment, it depends on the result of Phase IIa, currently ongoing. Well, we are not aggressive when we make this plan. But once we see the data result, I'm sure that the subsequent study will be accelerated. We would like to make sure that we confirm proof of concept as soon as possible.

Next question from UBS Securities. Seki-san, please?

Seki from UBS. Regarding capital allocation, I have 2 questions. First question, your stock price has been declining slightly. So is it possible for you to conduct share buybacks? It's not if you intend to do. I'm asking if it's possible to conduct share buyback? So depending on such a restriction, for example, from the market and Roche, your buyback to have the same ratio? Would that be possible? Have you assessed that possibility? That would be my first question.

Seki-san, thank you for your question. This is Taniguchi speaking. If it's possible or not, it is possible, I believe. But of course, there are many stakeholders, and we need to find the best return to the shareholders. So we need to have such a comprehensive review to decide. And that's why we decided to go ahead with a special dividend this time. And we also had a 45% payout ratio as part of the common dividend -- ordinary dividend, and that's what we are proposing. It is possible technically. But as mentioned earlier, so the ratio of floating stocks in TSE is also monitored. And based on the condition, we chose the most relative option by providing a special dividend.

So this Strategic Investment Department that was newly built. So it's very unlikely to assume purchasing the pipelines as is. I think it's going to be a technical technology that you'll be purchasing. How much are you looking at in terms of size? If it's a great quality technology, can you actually go for maybe a hundred -- a few hundred billions of JPY to be spent?

So regarding the size, depending on the cash level of being accumulated and also the cash needed to sustain business operations, and based on those conditions, we will -- we have certain assumption of the investment amount. And at this point, we do not -- we're not able to share specific numbers.

Next from Macquarie Capital, Tony Ren, please?

Tony Ren from Macquarie. My first question is about your Vabysmo sales. So yesterday, Roche reported a fairly, I'll say, modest Vabysmo sales, right? But in Japan, your Vabysmo sales grew 25.8%, right, in the first half of this year. So can you explain why this drug is doing so much better in Japan compared to what Roche reported? Yes, that's my first question.

Well Vabysmo sales -- domestic Vabysmo sales, I will have Hidaka -- Mr. Hidaka to explain about that. But this is under Roche responsibility. Outside of Japan sales, which is under Roche responsibility, we don't make a comment. So let me make a comment about the Japanese market. Well, it has been 3 years since the product was launched. Last year, in May, prefilled cylinders was launched, and then that really accelerated the sales. Especially indication is RVO. For RVO, Vabysmo is used much more than we had initially expected. So that's why domestic sales has been going quite well. At this moment, well, as of June, 30% -- we have a market share of over 30%. So we would like to make sure that Vabysmo's future benefits will be well communicated to doctors.

Okay. Very good. Then I would like to ask you about your AQUA07, again, the allosteric ALK inhibitor. So my understanding is that you -- in the front line, you are looking to combine it towards lorlatinib, right? Have you seen -- can you comment on the toxicity profile? Lorlatinib has a bit of toxicity, right? Higher cholesterol levels, some CNS toxicity. Have you seen any toxicity of your AQUA07 that you think would contribute to additive toxicity?

Tony Ren, thank you very much for your question about AQUA07. At this moment, looking at the nonclinical test study result, both as a single therapy or as a combination therapy, we haven't identified any serious side effects, however, adverse events. However, we need to administer this drug to a patient to see what's really -- what might be a risk. So we will conduct a study to confirm the efficacy and toxicity, both as a single therapy and also as a combination therapy.

Sam Ford, Siebert Stein Securities, Sogei-san, please?

NXT007. So you're talking about this will be the future growth driver. So -- where are you looking at the growth driver target businesses?

Sorry, I wasn't able to hear your question clearly.

Can you hear me okay? Where the business is coming from to drive the growth. So I want to hear your view on that.

Let me explain the background of this question. I think I kind of get what you want. Just according to our guest, well, we have Hemlibra having quite large share with NXT007, Phase III to be successful once we get approval to be launched, what would be the positioning of this NXT007? I think that was the question. And the sales, and whether that can actually also boost the overall contribute to the sales.

Depending on the patients, and some patients could be good with Hemlibra, may not be able to get a good result with the Hemlibra. Also with the patient with high activity who needs much stronger drugs, could be actually switching from Hemlibra. But also at the same time, it is currently true to the situation, but there are many patients who are really satisfied with Hemlibra. So if you look at them in total, so the sales of Hemlibra, certain patients will be switching over to NXT007. And if NXT007, is going to be the incremental sales. In addition, we can expect some incremental sales. So that's why we consider that as a growth driver.

Yes, that's what I meant. Also, the switching from Hemlibra, when that happens, meaning the NXT007 is slightly higher in price. Is that because of that higher price?

It doesn't really make sense to switch because of the higher price. The price is higher when you switch to the NXT007. That can be a growth,additional revenue of sales. But let me explain this. Hemlibra, having a quite large share already. So switching from this existing share, and there are those patients who continue on Hemlibra, and those patients who hasn't used Hemlibra, and Factor VIII preparation patients, there are several kinds. But they may start using NXT007 or maybe Hemlibra. So those are the options. So there could be new patients, and there are switching patients from Hemlibra. So those will be increasing in total in terms of number of patients.

Understood. Okay. So switching from Hemlibra -- switching to NXT007 from Hemlibra. Can that be considered as a growth?

Talking about the price -- at this point, it's very difficult to make any comment about the price. If this can be a growth or not, we don't know yet. But at least, the sales would not be declining. That's what we are forecasting right now.

I see. My second question, AQUA07. So ALK-positive non-small cell lung cancer. There are pretty good drugs available and which are providing clinical benefits to patients right now. And now we are talking about this ALK inhibitor, allosteric inhibitor, it's going to be introduced, which is different from what we -- what's available right now. What is the strategy? So adjuvant or the first line, if you use this, if the lorlatinib is utilized in the second line by having a combined therapy. So by extending the treatment period of the second line to maximize the value -- commercial value of this product. Is that the right understanding?

Sogi-san, thank you very much for the question on AQUA07. For this AQUA07, this is for first line and second line. So in either treatment, we can expect better results and effect. Because for the first line, the combination treatment is considered. The connecting location, the inhibitors are utilized in different locations. So if we combine them together, those treatments, -- so the emergence of the resistance change can be actually suppressed. So compared to the existing drug, PFS will be longer, probably. And that is a further longer PFS than the current first line that is available. So that's one strength.

And the second line, it's going to be on single treatment. The current ALK inhibitor, they are pretty good drug available. But still, you tend to have a resistance, as well. So this is the first time to actually act on non-ATP pocket area, different location. So if this really works well with the existing drug for those patients who got a resistance to the existing drug. So this AQUA07 can actually generate enough effect by single use. So that's why we can see the improved efficacy both on first line and second line.

Next, from Nihon Keizai Shimbun, Mr. Nakada, please. Mr. Nakada, do you hear me?

Yes.

Ms. Nakada, do you hear me okay?

Yes. From Nihon Keizai Shimbun, my name is Nakada. Well, your performance, the impact of foreign currency exchange rate, I would like to ask an impact. So weaker yen, well, higher dollars are progressing. And then do you -- what you see impact? How much do you see an impact on weak yen? And then what do you think is an appropriate exchange rate?

Thank you for the question. CFO will answer the question.

Well, systemically, weaker yen both in terms of revenue and profit, have a positive impact, as you see on this slide. Well, recently, well, yen was weaker against Swiss franc. That have made a positive impact on our performance. But long-term perspective, what will happen? And then if there is any ideal exchange rate. To that question, we are not in a position to answer this question. I hope that this clarifies your question.

So next from SMBC Nikko Securities, Wada-san, please.

This is Wada from SMBC Nikko Securities. I am asking you -- I have a question about AQUA07. Once again, going back to AQUA07. So the first line -- so with the allosteric inhibitor, we have SCEMBLIX and asciminib. So these are used for the first line. They started with the second line, and then they're now utilized on the first line in single use. But can you once again talk about the first line? You're talking about combination therapy, and would that be also a single use also considered in the future beyond the second -- sorry, for the first-line therapy?

Well, thank you very much for asking a question on AQUA07. Now for the first line, single use drug is also effective, I believe. But as I mentioned earlier, we think combination therapy will be better because it can reach a different location. So you can approach to a different location. So comprehensively, we can actually awaken the mechanism to generate resistance on each location. So different approaches utilized by using this combination therapy, I think it would be considered better. Of course, single drug is okay. But with the combination, we have this assumption of having longer PFS.

ATP connection point can be the area which can actually change a lot. But with the allosteric AQUA07 connection point, do you have any study tested to tend to have mutations at that location?

So it's possible to have resistance at this location for AQUA07, but how much resistance is generated is we still don't have the result. So we want to confirm through the clinical studies.

Another question, DONQ52. If it's possible, I think you are looking at licensing on this. So what is the possibility and what is the current status of negotiation of licensing out this drug?

So DONQ52 question. Thank you very much. For a specific project, whether to license in or out, we want to refrain from commenting on that. So currently, we are conducting Phase IIa study and we want to complete this properly. Then based on the result, we want to start looking at where to license out.

Okay. So we have covered all the questions. So now we will conclude question-and-answer session. Thank you.

With that, we will conclude our 2020 -- quarter 2 2022 (sic) [ 2026 ] financial performance announcement meeting. For questions that were not answered, please contact our Corporate Communication IR department. In the last page of the presentation slide, you have the phone number and our e-mail address. Thank you very much again for your time and participation. That concludes the session.

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

Thank you very much for taking time out of your very busy schedules to attend our first quarter FY 2026 earnings call. My name is Miyata from Corporate Communication and IR Department, and I'll be serving as the moderator today. Thank you for your kind attention.

The session will be conducted via Zoom webinar. We will proceed according with the agenda shown on Page 3 of the presentation materials. The briefing will be conducted in Japanese, but we will have simultaneous interpretation in English also available. [Operator Instructions].

First, Dr. Okuda to provide an overview of the first quarter of FY 2026.

I am Okuda, President and CEO. I would like to give an overview of the first quarter of FY 2026. Please refer to Slide 5 in the material at hand. In first quarter FY 2026, both domestic and overseas product sales progressed steadily, resulting in both increase in revenue and profit. Growth was driven mainly by Hemlibra exports to Roche as well as increased NEMLUVIO exports and higher royalty income from Galderma.

As a result, compared with the same period last year, revenue increased by 11.5%, operating profit by 17.1% and quarterly profit by 19.6%. As such, first quarter got off to a smooth start in line with our initial expectations. Details of the revenue will be covered on the next slide, Slide 6.

This shows the year-on-year changes in revenue compared with the same period last year. Revenue grew by JPY 33.2 billion, up 11.5%. I will walk through the items from left to right. Domestically, despite the negative impact of the NHI drug price revision and generics penetration, mainstay products as well as the new products performed well, resulting in an increase of JPY 8.4 billion.

Overseas, while export unit price declined, the increase from volume and foreign exchange effects more than offset this, resulting in an increase of JPY 23.4 billion. In particular, Hemlibra exports to Roche and NEMLUVIO exports to Galderma increased significantly, marking solid progress. Other revenues increased year-on-year, primarily due to higher royalty income related to NEMLUVIO despite a decrease in one-time income. Domestic sales, overseas sales and other revenue all increased achieving overall revenue growth.

Please move on to the next slide. I would like to explain about the key progress made in the first quarter. Regarding NXT007, we plan to initiate 2 Phase III trials in the second quarter, aiming for a regulatory filing in 2028. Regarding emugrobart, which is GYM329, we have discontinued development for SMA and FSHD.

On the other hand, based on the clinical results obtained, we believe this will not impact the development for obesity, where the target myostatin is highly prevalent. Therefore, we will proceed with the Phase II trial.

As for Enspryng, we presented the results of the METEOROID study in MOGAD at the American Academy of Neurology in April. Further details will be provided later in Mr. Kusano's section. Regarding giredestrant, while numerical improvement in PFS was observed in the persevERA study for the first-line HR-positive breast cancer, the primary endpoint was not met. Consequently, we have discontinued development for the first-line setting.

Meanwhile, based on the results of the evERA study and lidERA studies, which have already achieved their primary endpoints, we aim to file for the second to third line and adjuvant treatment for HR-positive breast cancer within 2026. For DONQ52, we have commenced an in-house Phase II study targeting celiac disease. Overall, progress remains on track toward achieving a record number of regulatory filings.

Next is Page 8. I will discuss new product launches and indications. In February, we launched Elevidys, Japan's first gene therapy for DMD. We are truly pleased to be able to provide Elevidys patients with DMD, a hereditary muscular disease that has been difficult to treat.

And in March, the combination therapy of Lunsumio and Polivy became the first in the world to receive approval in Japan for relapsed or refractory large B-cell lymphoma. We also launched a subcutaneous formulation for Lunsumio and obtained approval for an auto-injector formulation for Enspryng. And regarding out-licensed products, orforglipron, brand name Foundayo, was approved and launched in the U.S. as a treatment for obesity.

Foundayo is the only once-daily oral GLP-1 receptor agonist that can be taken at any time without any restrictions of food or water intake. Applications for approval are currently pending in over 40 countries for obesity and type 2 diabetes, and we look forward to contributing to further to patients worldwide. For NEMLUVIO, we anticipate further growth, especially as Galderma has raised its peak sales projection to over USD 4 billion.

Finally, I will explain the composition of the Board of Directors. We have launched a new management structure, having newly appointed Ms. Kinuko Mitani, a medical expert as an independent external director and a member of the Nominating Committee. To ensure prompt and decisive management decision-making, the Board maintains an appropriate balance of diversity, including expertise and gender as well as an optimal scale. We'll continue to strive for further enhancement of our corporate governance. That's all. Thank you.

Next from Kusano, we will ask him to provide FY 2026 Q1 overview of development pipeline.

Thank you very much. I am Head of Project Lifecycle Management unit. Please refer to Slide 11 in the materials. These are the topics for Q1. I will go through them from the top. There's 1 launch, Elevidys, a micro dystrophin gene therapy has been launched as the first regenerative medicine product in Japan for DMD approvals. Enspryng has received approval for a new dosage form auto-injector, which we back to improve convenience for the patients.

Foundayo, once-daily oral GLP-1 receptor agonist that can be taken without restrictions on food or fluid intake is our in-house innovation. Our licensee, Eli Lilly has received approval in the United States for obesity and has begun commercialization.

Lunsumio and the Polivy combination therapy has also received approval as indication extension for relapsed or refractory large B-cell lymphoma. There's one filing. We have submitted a regulatory application for the ocular implant for ranibizumab, i.e., filing for ranibizumab formulation dedicated to ocular implant delivery is also planned within the year.

Four studies have started. Inavolisib has initiated Phase III studies for 2 types of PIK3CA mutation breast cancer, respectively. CT-388 is a long-acting GLP-1/GIP receptor agonist. And the Phase III study was initiated for obesity without type 2 diabetes.

In our in-house DONQ52 started Phase II study for celiac disease. There are 4 pipeline removals. Enspryng has been removed from the pipeline following Roche's decision to discontinue the Phase II clinical trial for DMT for strategic reasons. GYM329 in light of the results of the MANATEE study, development for spinal muscular atrophy has been discontinued and based on the result of MANOEUVRE study, development of FSHD has been discontinued.

Tecentriq, based on the results of IMbrave251 study, development for hepatocellular carcinoma, second line has been discontinued. Giredestrant, based on the result of persevERA study, development for first-line hormone receptor positive breast cancer has been discontinued.

Moving on to the second page of the topics. First readouts, Foundayo's ACHIEVE-4 study is a trial evaluating the risk of cardiovascular events in patients with type 2 diabetes at high cardiovascular risk. The results demonstrated non-inferiority versus insulin glargine, meeting the primary endpoint. Our licensee, Eli Lilly plans to submit a filing for Foundayo for type 2 diabetes by the end of the second quarter under Commissioner's National Priority Voucher or CNPV.

Regarding Congress publications, I will provide further details on NXT007 and Enspryng later in this presentation. For NEMLUVIO, results from a Phase II study in children aged 2 to 11 with atopic dermatitis were presented at the American Academy of Dermatology. Favorable skin clearance and itch control similar to adults and adolescents were confirmed in the pediatric population as well.

Regarding orphan drug designation, glofitamab has received the designation for large B-cell lymphoma. We exercised an option right under joint research agreement concluded in 2025 and obtained a license for Araris Biotech's proprietary ADC-linked payload technology or AraLinQ. We aim to combine this with our antibody engineering capabilities to create innovative ADC.

I now will turn to key milestones for 2026. The underlying and involved fronts reflect changes since the previous earnings announcement, and I have described them already so far. Preparation for Phase III studies for NXT007 are well underway.

Next, I will present the results from Part C of the Phase I/II next-stage study for NXT007, which were announced at the European Hematology Association Congress in February. This is the first set of data for patients with hemophilia A, both with and without inhibitors, who switched from emicizumab to NXT007 with a loading dose and no washout period. Consistent with Part B, which targeted emicizumab naive patients, the result demonstrated favorable tolerability when switching from emicizumab to NXT007 without a washout period.

In the high-dose cohort, blood concentrations reached levels expected to provide coagulation of Factor VIII activity equivalent to normal levels and no bleeds requiring treatment were observed. The fact that favorable tolerability was demonstrated when switching from emicizumab to NXT007 without a washout period is a significant finding for advancing safety assessments during the switching process.

We are developing NXT007 with the ambitious goal of achieving coagulation potential equivalent to that of people without hemophilia. Working closely with Roche, we are steadily preparing for the 3 Phase III clinical trials scheduled to begin this year, and we remain committed to delivering this treatment to patients as soon as possible.

Next slide, please. I will present the study results for Enspryng, which targeted adult and adolescent patients with relapsing MOGAD. And in the global Phase III clinical trial for MOGAD, satralizumab significantly reduced the risk of new MOGAD relapse achieving the primary endpoint. It was -- it demonstrated that it reduced the risk of relapse by 68% compared to placebo in the time to first relapse.

Regarding safety, consistent with the data already established in the approved NMOSD indication, no new safety concerns were identified and favorable tolerability was confirmed. Currently, there are no existing therapies approved for MOGAD.

With no established standard of care, there are high expectations for this study as it is the first to verify efficacy in a prospective randomized controlled trial. Furthermore, for this indication, we have obtained orphan drug and SAKIGAKE designations in Japan, and we plan to file for approval within this year.

We look forward to delivering this new treatment options to patients as soon as possible. These data were presented at the American Academy of Neurology Annual Meeting held last week. In recognition of this significance and high impact, it was selected as a presentation topic for the pre-AAN press conference.

Next slide, please. I will discuss our upcoming filing schedule. Projects marked with a light blue star are newly added. While those with a green star indicate a change in the scheduled filing here. And in this update, we have also subdivided projects previously disclosed as 2028 and beyond into 2028 and '29 and beyond.

For NXT007, we plan to file for hemophilia A in 2028. Regarding inavolisib for which new 2 Phase III trials have been initiated, we also plan to file in '28 for each. Additionally, for enicepatide, we expect to file in 2029 or later. The subsequent slides are attached as reference. Please refer to them as necessary. This concludes my presentation.

FY 2026 Q1 consolidated financial review provided by CFO, Taniguchi.

Hello. I will discuss the financial results for the first quarter of FY 2026. I'm Taniguchi, CFO. Let me start by sharing the P&L. The first quarter revenue came to JPY 321.7 billion, up JPY 33.2 billion or 11.5% year-on-year. Core operating profit also increased by JPY 23.8 billion or plus 17.1% to JPY 163.3 billion.

I will now walk you through the details in sequence, starting with the revenue product sales. Product sales were JPY 291.6 billion, up JPY 31.9 billion or 12.3% year-on-year. Looking at by region, domestic sales came to JPY 111.4 billion, up JPY 8.4 billion or 8.2% year-on-year.

New products and mainstream products performed well, fully absorbing the impacts of the NHI drug price revision and generic drug penetration. Overseas, exports of mainstay products to Roche continued to perform strongly, reaching JPY 180.1 billion, up JPY 23.4 billion or 14.9% year-on-year. Hemlibra and NEMLUVIO have increased.

Also royalty, this part increased quite a bit. One-time slightly come down, but the royalty income from Galderma related to NEMLUVIO increased and on a whole, it was positive.

Moving on to cost items. Cost of sales was JPY 92.3 billion, an increase of JPY 4.8 billion or 5.5% increase year-on-year. Now this increase in absolute terms reflects the growth in product sales themselves. The cost of sales ratio declined by 2.0% points year-on-year to 31.7%, which reflects the increase in Hemlibra with a slightly low cost of sales. So that in the background has had some effect.

R&D expenses increased by JPY 1.2 billion year-on-year to JPY 41.9 billion, driven by investments in drug discovery and early-stage development and advancement of development projects.

SG&A expenses, there was a significant increase in new product-related promotional expenses in the first quarter for Lunsumio and Elevidys and others. In addition, enterprise taxes and accruals for bonuses linked to profit levels also increased. The enterprise taxes is local tax, resulting in a year-on-year increase of JPY 3.9 billion to JPY 24.9 billion.

From the second quarter onwards, however, SG&A is expected to trend lower year-on-year and at the year-end is projected to be around JPY 1.2 billion below prior year, in line with our published forecast. As a result, operating profit increased by JPY 23.8 billion year-on-year to JPY 163.3 billion, and the operating margin rose by 2.4 percentage points year-on-year to 52.8%.

Net income after tax was JPY 118.6 billion, an increase of JPY 19.4 billion or 19.6% increase. This is the breakdown of changes in product sales.

Domestic oncology sales was JPY 55.7 billion, up JPY 2.6 billion or 4.9% year-on-year. The key factors increased of Polivy following approval of the combination therapy with Lunsumio in March, a steady growth of mainstay product, Phesgo, which more than offset the decline in Perjeta and the strong launch of new product, Lunsumio. So those were the positive drivers.

And on the other hand, Avastin continued to decline due to NHI drug price revision and generics. Specialty area, JPY 55.7 billion, up JPY 5.8 billion or 11.8% year-on-year. In addition to mainstay products, Hemlibra and Vabysmo, a new product, PiaSky also recorded steady sales growth.

Overseas product sales were JPY 180.1 billion, up JPY 23.4 billion or 14.9% year-on-year. Significant increase by Hemlibra. This is the quarterly trends in P&L items due to revenue recognition timing differences arising from export timing, the trends to some quarter-to-quarter ups and downs.

Overseas sales as well, volume growth significantly exceeded the decline in export unit prices, and this was further supplemented by a positive foreign exchange impact contributing to the increase. So that led to the total amount of increase, JPY 23.8 billion breakdown.

I would like to be very brief. So this is the quarter-based change in profits. There are ups and downs, but compared to first quarter last year, we have a positive operating profit, and you can see the background why this is the case. This is about the revenue, quarterly trend.

Again, export not necessarily gives us the same amount each month. So that leads to some variability. But if you compare first quarter with first quarter, this is what we have. Overseas, domestic, we are seeing a well-balanced increase in all of those segments.

So as of the first quarter, what has been the progress so far against the initial plan?

Both revenue, profit compared to last year, the progress rate are relatively higher. Normally, the progress tends to be low in the first quarter. However, it's trending above last year's level.

Next page talks about per segment, per product progress. And we are showing you the progress as of last first quarter. Across different products, the progress have been trending above last year's level.

Next shows the impact of FX. Last year's exchange rate and this year's exchange rate shows JPY 10 difference. And because of this JPY 10 weaker yen, we had impact of JPY 11.6 billion in terms of revenue and JPY 9.8 billion in terms of OP, both positive.

Next, moving on to the balance sheet. First of all, total assets since the end of last December, it went up by JPY 203 billion and achieved JPY 2,265.1 billion. And we had a payment of tax and the payment of the special dividend.

And in terms of the working capital, we've had the collection of the AR in the first quarter as a result of total asset reduced. However, in terms of the net asset, as it sits here, it decreased by JPY 118 billion to JPY 1,907 billion.

And the rate of decrease in net asset was smaller compared to that of total asset and the equity ratio attributable to owners of the parent rose to 84.2%. In terms of operating cash flow, it was JPY 203.3 billion. However, we had a payment of the corporate tax and the payment of the special dividend. And it was actually negative.

And next is the adjustment of core and noncore. So adjustment items would include the recognition of intangible asset in accordance with the licensing in. And also, we have some depreciation cost and business reconstruction restructuring cost would include the replacement of ERP in SAP. So upgrading the operational platform requires JPY 4 billion.

And next page, list up the CapEx that are already approved internally, and it shows plans going forward. With this, I would like to conclude my part. Thank you very much.

We will now move on to the QA session. For QA, Takano, who is the Head of Sales Division, will also join. [Operator Instructions]. So we will now begin taking questions. [Operator Instructions] From Citigroup, Yamaguchi-san.

I am Yamaguchi with Citigroup. My first question is to Taniguchi-san. You have talked about the overall progress of the entire Q1 based on -- in comparison to your forecast, the impression is that the news were all good. Am I right to understand that the current situation is better than you had expected? Or is right on track?

Yes, short response, we were right on track, and we had expected this. But of course, there are fluctuations. Hemlibra, for example, did well -- considerably well overseas. From that point of view, there are good news. We are not however in the position of making any changes to published forecast.

Second question has to do with NEMLUVIO. Export volume as well as royalty payment, both are doing well. You are not giving specific numbers. So we will have to just guess. [indiscernible] also is above a [ content ]. So locally, speaking for Q1, this was better than what you had expected? Or was it what you had expected?

We say this is what we had expected because we always plan conservatively from a rational point of view. But looking at Q1 track records, it's within the range that we had expected. So if you were conservative this seems more -- well, we cannot really say anything definitive unless we see the situation beyond the second quarter, but it wasn't bad. Okay. It wasn't bad for the first quarter.

Next from JPMorgan Securities, Mr. Wakao, please.

Yes, I am Wakao speaking from JPMorgan. Regarding the export sales, I have a question. Hemlibra, NEMLUVIO for those 2 products. The reason why these 2 are doing better than your expectation? Is it because the sales is trending well in the market, especially for Hemlibra, you are expecting a single-digit growth. And if the actual sales is strong, I think your plan is to -- is going to be overshot. But how should I look at it?

Thank you very much for your question. The first quarter every year showed some purchasing pattern. But this purchasing pattern is quite confusing every year in the first quarter. So is this out outperforming trend going to continue for the rest of the year. If I tell you so I may sound too optimistic. So we say low single digit as our expectation, and this remains unchanged. In that case, from second quarter onward, we may see some ups and downs.

And if single-digit growth expectation is not becoming the reality, and we expect outperformance. I think we need to look at this thing from Roche perspective and Chugai's perspective. I can't talk about Roche's number in my own position, but Chugai's export business wise, export can vary. But we do have visibility into coming 6 months. So based on such the actual results from second quarter onward will be somewhat quite similar to our current forecast.

Thank you. My second question is regarding GYM329. In your presentation, you said SMA, FSHD development didn't work out. But for obesity, you said that there will be no impact. Can you give us more color on that. And Scholar Rock’s apitegromab, their trial is going well for obesity indication. So what is the difference in your compound against the Scholar Rock’s apitegromab? Is it coming from the difference in inhibition activity?

Thank you very much for your question. Kusano would like to respond to your question. Now development on obesity. Is it going to be okay? SMA, FSHD 2 trials in Phase II when we look at their result. Reduction of myostatin has already been confirmed and the increase of muscular mass and improvement of motor function, we couldn't show consistent results, and we were not sure about the efficacy.

Now for FSHD and SMA those like neuromuscular disease, when it comes to that increase in muscle mass does not directly linked to the improvement of the motor function improvement, that's a difficult point. And myostatin volume itself tends to be lower in the patient compared to the healthy people.

So -- we -- and that's why it's said to be very difficult to prove the efficacy of the drug in such target audience. And now when it comes to obesity, it's a chronic metabolic disease. So the damage on nerve and damage on muscle, we don't believe that will lead to this disease.

So -- and incretin, which is a combination drug will induce the reduction in energy consumption. GYM329, maintenance of muscle or increase of muscle would expect or would lead to the increase of the energy consumption. So we are not looking into the improvement of motor function of muscle. So we believe this obesity trial has probability of success.

And regarding Scholar Rock's compound, this increase in muscle volume and improvement of motor function are not really linked directly in this type of disease. And GYM329 in Phase III trial -- this is a Phase II trial different from Scholar Rock, and patient background is also different. So we can't make a head-to-head comparison and primary endpoint and assessment for the motor function is different between us and theirs.

From the UBS Securities [indiscernible].

This is [indiscernible]. Thank you very much for that information. My first question has to do with what Taniguchi-san said. This is [indiscernible] royalty, but this seems to have had a major impact. When are you going to announce this as a separate line item?

Of course, we will be following different criteria, also there are criteria led by auditors, and we will follow their timing. So I'm not going to give you details. I believe that, however, this year is not the best timing. METEOROID standard is 5% or 10%? No, we're not disclosing that.

The second question is to Dr. Okuda. This has to do with how you intend to use cash, especially late phase pipeline your own discovered products from the outside appears to be somewhere in a transition, which means that other companies do try to introduce licensing products to fill the gap. I do understand that you are very actively pursuing this, but maybe you should announce this more.

This is Okuda speaking. Thank you for your question. How we intend to use the cash at hand within Chugai Pharmaceutical Company, we position this as a very important strategic decision. First of all, our innovative pharmaceutical development capability, we would like to very actively invest in acquiring that kind of capacity. So that's one.

And in addition to developing innovative drugs, we want to also invest in delivery of that. For example, what you have just mentioned, late phase development products or those close to launch. So product candidate introduction both to market is something that we are thinking about.

Now in addition to R&D investment, there could be other CapEx for enhancing our production, and there could be investments in order to maintain ecological aspects and also return to shareholders. So those 3, we want to make sure are in balance as we make the most proper decisions. Opportunistic decisions means, I believe, thinking about every possible avenue from a strategic point of view. Thank you.

Next is from Morgan Stanley, MUFG Securities, Mr. Muraoka, please.

Hello. I am Muraoka from Morgan Stanley, MUFG. I have a question regarding nemo. 3 months ago, I was in a -- I was looking at the initial guidance number 3 months ago. And I have a question to Mr. Taniguchi, the increase in export and the royalty income coming from non-Roche partners and Galderma Y-o-Y, JPY 20 billion revenue increase.

If I take all those numbers and do this math, royalty rate, 11% to 12% and the supply of product, 30% to 35% and it seems like the condition of this business is almost comparable to the business with Roche and it sounds really nice. Am I missing out something or am I correct?

Thank you very much, Mr. Muraoka for your question. Now we cannot disclose details. However, arms at -- well with the arm's and length principle in the license agreement with Roche and contract with Galderma and the others, basically, our contracts are based on the arm's and length principle in a very fair manner and license transaction has been almost like standardized in this pharmaceutical industry.

And we've licensed this out in late stage. And in terms of the rate, it's a tiered structure. So towards the end of the year, normally revenue tends to go up and license income also tends to go up. And that's all I can tell you.

In terms of the product supply, when I do my math, I get 30% to 35% as a number, but it was just -- it has just been launched. So the inventory in Galderma was not actively piled up. Am I correct to understand that export has been progressing a little excessively? Well, it depends on Galderma's policy. We have a commitment period specified in the contract. We call it firm order. And we basically follow this firm order. So I can't comment on the inventory in our policy.

I have a question on [indiscernible], I don't think you can answer, but 1,200 prescriptions in week 1 compared to this fiscal year's plan. How do you think of this? I know this is too early question to ask, but how do you interpret this number?

I think this is a good result. But I would like to understand how you see the result of progress so far. Of course, we do have internal budget. We have assumption as well and it's just been launched. So, I don't think it is appropriate to mention any interpretation of ours. When things go on and progress, we may be able to make some comment. But so far, the available data or numbers are quite limited.

From Macquarie Capital, Tony Ren-san.

Congratulations. Very strong first quarter. My first question is for Kusano-san. So congrats that you are starting the DONQ52 trial -- a Phase II trial in celiac disease. Is this Phase II trial registrational? Can it be used for regulatory approval?

Assuming it is not, can you explain to us your current thinking of the Phase III programs for regulatory approval? How many trials are you thinking? How large are these trials? And what are the endpoints you have in mind for this disease where we don't have current approved drugs. Thank you.

Mr. Tony Ren, thank you very much for your question related to DONQ52. Yes, we have started our Phase II study. This is for active celiac disease, randomized, double-blind, placebo-controlled study. And so yes, we believe that this is a pivotal study that can be used for filing. This is looking at the GI tract improvement and also celiac disease. This is looking at the reduction in symptoms.

We are thinking about enrolling 90-plus patients, and we have to make sure that we get good data. For studies beyond that, we will have to wait until the outcome of the Phase II, to think about what we want to do for the subsequent program. So I would keep from talking about that right now.

Okay. Thank you. So the Phase II trial is registrational?

This, of course, is Phase II. So it's not that this is going to be -- become part of the dossier. What we're saying is we would like to look at the outcome of the Phase II to think about the program going forward.

Okay. Understood. The next question is for Taniguchi-san. So this is about Eli Lilly -- the royalty associated with Eli Lilly's Foundayo. So this launch, everyone is paying a lot of attention to. Could you just remind us when will you receive -- has Eli Lilly indicated to you when they will pay you the Foundayo royalty? Would that be -- would that be on a quarterly basis? Whether it would be a 1 quarter lag, so in other words, they will pay you the first quarter royalty in the second quarter?

Thank you very much for the question. Details of the contract, I cannot disclose, but of course, we understand that the approval came on the 6th of April. So for the first quarter, of course, it's not posted. Now -- we, of course, calculate based on our own estimate. And so when they start receiving payments that is going to be reflected in our books, too.

Next Is from Daiwa Securities, Mr. Hashiguchi, please.

Hello, this is Hashiguchi. My first question is related to Elevidys. On 22nd -- 20th of February is the launch date. And your full year guidance is targeting at JPY 12 billion, how do you see the progress so far? Initially, you had taken safety measures. There are many things that you need to do before the actual launch, but what is the feedback from the Healthcare Institute and the patients so far?

I am Takano. I'm the Head of Sales, and I would like to respond to your question. Elevidys been launched. And in the pediatric society of neurology, and we have been working closely, and we are always focusing on the safety. This month we are expecting the treatment start on several cases, but we've been basically focusing on the safety measures but we have been receiving a lot of strong inquiries so far.

And we are now looking into the detailed feedback from the clinical practice. And -- so including NHI drug pricing and we believe the sales and performance will progress smoothly.

Okay. Inavolisib is the second question. On Page 16, you said that 2028, there are 2 indications to be submitted for approval 112 -- 122 and 132 there are 2 Phase III studies and I think their result will be used. Japan's Phase I/II study and Western INAVO120 study are going to be bridged so that -- now the bureau registrant the patient targeted therapy may be filed earlier than planned? Or do you think the fastest possible timing for launch is still 2028?

Thank you very much Hashiguchi-san for your question regarding inavolisib. Partly, we are conducting a bridging the study and we do not disclose our plan for filing submission. Now endocrinology registrant and HER2-positive Phase III are initiated, and that's why we are disclosing the timing for the filing this time.

Although you haven't disclosed, however, you're pursuing the possibility of making filing based on the bridging study. Are you trying to bring forward the submission timing?

Well, although I cannot comment on the timing. However, our aim is to bring this medicine to the breast cancer patients as much or as soon as possible.

My question is to [indiscernible] about GYM329 and some other person have already asked this. Scholar Rock -- in SMA Phase III positive, of course, patient inclusion criteria and primary endpoints were different. Can you give more details about why those difference or how those differences in patient inclusion and endpoints have led to differences in outcomes?

Thank you very much for asking the question. These are 2 separate -- 2 different studies. So it's difficult to compare them head-to-head. But for example, there are differences in primary endpoint, which is exercise tolerance. For example, Scholar Rock’s Phase III, you're looking at expanded Hammersmith enhanced functional assessment.

In our study, we're looking at [ SFM30 ] exercise function assessment. There are differences in the motion as well as sensitivity and the scope of motor function. So it's difficult to compare them. In extended Hammersmith, focuses more on SMA, it's more of a large, for example, trunk mobilities like standing and walking and running, very -- major activities as needed for daily life.

MFM32 is more across -- this is more dexterity using the fingers, that's important in day-to-day activities. This is used across myo-neurological conditions. So it's quite difficult to compare the outcome of these 2 studies.

Thank you. I understand, but what you have provided does tell us that these are very different assessment. Can you give us a background why you have chosen MFM32 as assessment scale?

Thank you for the question. Based on past data as well as our exchanges with key opinion leaders, we have, of course, assessed what is best.

I have another question about DONQ52. Now celiac disease. I am still learning about celiac disease, but it seems that compared between mild and severe there's considerable differences and conditions of patients. DONQ52, what types of patients are you targeting to develop your drug?

Thank you much for your DONQ52 questions. We will be looking at the outcome of studies to decide who to target. We will be looking at very highly active celiac disease to see improvement in gut situation.

We regret the time is drawing to a close. So the next question will be final. Mr. Ueda from Goldman Sachs Securities.

My name is Ueda from Goldman Sachs. I have just one question in terms of the GP margin trend, I would like to understand better. So in Q1, basically cost ratio for the product is within your expectation. And for the fourth quarter or on full year basis, it seems like this number is expected to go up.

Is that because as of the first quarter, the progress of domestic products is slow, while percentage contribution coming from exports to outside of Japan is high? Or is there any other special factor? And I feel like your export business is trending quite well within a certain range. And if the trend goes on, I think your profitability will improve over time. Am I correct?

This is Taniguchi speaking. Hemlibra -- wait, what is the percentage of Hemlibra going forward? That's very important. It's more like how much decline do we see in Actemra. The export of Hemlibra is followed internally. And also, we have an assumption for coming 6 months. And based on the current schedule, cost ratio, our target is 34.9% toward the end of the year and probably this will be the most probable level.

This concludes the first quarter FY 2026 earnings briefing. For questions that we were unable to address due to time constraints please contact Corporate Communication and IR department. The telephone number and e-mail address are provided on the final slide of the presentation material.

Thank you very much for taking time to join us today, taking time out of your very busy schedules. Thank you. This concludes the session.

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

I am Okuda, President and CEO. I will provide a summary of our 2025 performance and the outlook for 2026. Please refer to Slide 5.

Regarding our full year results for 2025, revenues, operating profit and net income all reached record highs on a core basis. Revenue reached JPY 1,257.9 billion, exceeding our initial forecast by 5.7%. This was primarily driven by higher-than-expected exports of Actemra and Hemlibra to Roche. Operating profit surpassed the JPY 600 billion mark for the first time, representing our ninth consecutive year of profit growth. Operating profit margin also hit a record high of 49.5%.

Moving to our 2026 earnings forecast. We anticipate another year of record-breaking results. We are projecting a revenue of JPY 1,345 billion, up 6.9% year-on-year and core operating profit of JPY 670 billion, up 7.5% year-on-year, fueled by growth in domestic product sales, royalty income and other revenue streams. At the same time, we expect to maintain a high operating profit margin.

The next slide illustrates our revenue trends. We expect revenue to increase by JPY 87.1 billion or 6.9% compared to 2025. Domestic product sales are projected to rise by JPY 25.6 billion as steady growth of new and mainstay products outweigh the negative impact of NHI price revision and generic competition. Overseas product sales are expected to remain flat year-on-year, while NEMLUVIO and Hemlibra will continue to grow. These gains will be offset by lower export unit prices and a decline in Actemra sales due to biosimilar entry. In contrast, other revenues is set to increase significantly, driven by higher royalty and profit share income from NEMLUVIO and orforglipron and Hemlibra alongside an increase in milestone payments.

Next is Page 8. I will discuss our dividend policy. Reflecting our strong 2025 performance, we plan a year-end dividend of JPY 147 per share. This includes an ordinary dividend of JPY 72, up JPY 22 from our initial forecast and 100th anniversary commemorative dividend of JPY 75. Combined with the interim dividend of JPY 125, the total annual dividend will be JPY 272 per share. For 2026, consistent with our policy of targeting an average dividend payout ratio of 45% based on core EPS, we plan to increase the ordinary dividend by JPY 10 from 2025, bringing the forecast annual dividend to JPY 132 per share.

Page 9. Moving on, I would like to review our 2025 management policies and priority items. Under strengthening RED functions and value creation, we successfully confirmed the proof of concept for NXT007. Furthermore, we accelerated our focus strategy by deciding to collectively discontinue 5 in-house development projects and making go/no-go decisions on 6 others. Open innovation also progressed steadily as evidenced by the conclusion of 12 new research and technical collaborations. We've seen maximizing value of life cycle management projects despite the delay in Elevidys launch, we achieved several key milestones. This includes the successful Phase III results and subsequent filings for orforglipron and continued growth of domestic mainstay and new products and strategic in-licensing of sparsentan from a third party.

Regarding strengthening the foundation, while we faced some challenges in meeting our 2030 midterm environmental goals, overall progress is smooth. Key highlights include the rollout of our new HR system and the launch of a company-wide initiative to accelerate business transformation using AI. This slide details the progress of our R&D projects. In early in-house development, MINT91 and the midsized molecule of 001 transitioned to Phase I, while GYM329 for obesity moved into Phase II. Late-stage development also saw significant progress for products expected to drive future domestic growth, including the addition of sparsentan, the transition of trontinemab to Phase III and positive trial data for giredestrant. Additionally, we have successfully obtained regulatory approval for Elevidys. As our project portfolio expanded through the RED shift, we prioritized the selection and concentration of early-stage projects through collective discontinuations and rigorous go/no-go assessment.

Consequently, the number of Phase I projects was reduced from 21 at the end of 2024 to 15, allowing us to focus our resources on high-priority candidates. With 9 projects in Phase II and 28 in Phase III, we continue to maintain a robust and healthy pipeline. 3 projects are currently under regulatory review with approvals expected within this year.

Next, Page 11. We're going to review priority items. For strengthening the hemophilia franchise, development of Hemlibra auto-injector progressed, and we confirmed proof of concept for NXT007. For DONQ52, we confirmed biological proof of concept and are steadily progressing towards initiating Phase II studies. Regarding Elevidys, Chugai's first gene therapy product following a fatal case of acute liver failure in an overseas nonambulatory patient, we strengthened safety measures, while maintaining close coordination with relevant authorities. We aim for a prompt launch following reimbursement approval for ambulatory patients aged 3 to 7 years. Regarding the new HR system launched last January, over 20% of all employees volunteered and proportion of job postings in annual personnel transfers exceeded initial target, reaching over 60%. We'll continue to promote employee autonomy and career development.

Page 12. We will explain progress in the first 5 years of our 10-year TOP I 2030 plan. Regarding the first pillar, realizing global first-class drug discovery, drug discovery projects and midsized molecule pharmaceuticals made steady progress. We also accelerated external partnerships and investments to drive further innovation, including CVF investments and introduction of RaniPill technologies.

For the second pillar, building futuristic business model, we reorganized the value delivery functions of sales, medical and safety. On the production front, we successfully supplied products to meet rapid demand fluctuations and established our own production infrastructure for the future. Simultaneously, we advanced company-wide DX, including projects for the launch of ASPIRE.

Page 13. Based on the progress over the past 5 years, we defined 5 targets for the latter half of TOP I 2030. To achieve annual launches of Chugai originated global products, we will enhance early-stage development capabilities, including pharmaceuticals, while collaborating with partnering functions in Japan, U.S., Europe and Singapore to pursue further drug discovery innovation. In production, we'll establish a stable supply system considering geopolitical risks to prepare for increased supply responsibilities accompanying the growth of in-house global products. Furthermore, in the newly entered CVM field and metabolism field, we will build systems and capabilities to enable advanced development, project management, safety, medical affairs and sales activities that respond to the distinct characteristics of this field and changes in the external environment, thereby maximizing the value delivered to patients. To achieve these goals, we will advance the utilization of AI across the entire value chain and drive business transformation.

We present the management policies and priority items for 2026, the first year of [indiscernible] 5-year period. The management policies are enhancing RED functions and creating value, maximizing value of LCM projects and strengthening business foundations. The priority items are shown on the right. There are 4 of them. We'll continue to strengthen our hemophilia franchise by advancing development towards application for the Hemlibra auto-injector and initiating Phase II studies for NXT007. We also anticipate the highest number of domestic applications to date. These initiatives are expected to drive short- to medium-term growth in domestic sales. In particular, for Lunsumio, one of the products expected to achieve large-scale growth, we aim for early market penetration of combination therapy with Polivy. We also ensure the successful launch of our new ERP system, ASPIRE, and promote the company-wide utilization of AI.

Now looking at the average annual trend in the number of Chugai originated global products launched since 2001, the number has steadily increased in the past. Particularly over the last 5 years, the number of launches of in-house global products have increased, and these products will drive profit growth in the short to medium term. Furthermore, we anticipate that achieving the annual launch of in-house global products target set in TOP I 2030 will lead to further profit growth thereafter.

Moving forward, we'll continue to leverage Chugai's unique drug discovery approach to advance drug discovery, including midsized molecules and develop new modalities, thereby expanding the creation of innovative new drugs that only Chugai can deliver. Through these efforts, we'll achieve the TOP I 2030 goals and realize sustainable growth beyond them.

The next slide, Page 16. Last but not least, regarding the opening of our U.S. partnering office. We opened the Chugai U.S. Partnering Office in South San Francisco, commencing operations this month. We will explore, identify, evaluate and promote collaborations with U.S. academia and venture companies. In addition to the U.S., we will strengthen our partnership network, connecting Tokyo, London and Singapore to advance global open innovation.

Page 17, the last page. This shows the summary of what I said, and that concludes my presentation.

We have the overview of development pipeline from Kusano. We apologize for the disturbance we had, and we will pause for a few moments at the very beginning of the session. I hope you will make use of that opportunity for a screen capture.

Thank you. I am Kusano. I am with Project and Lifecycle Management Unit. Please refer to Page 20 of the slides. This looks at our fourth quarter topics. I will go through these starting from first half. We secured 2 approvals. Tecentriq obtained an indication expansion for nresectable thymic carcinoma. Lunsumio was approved for a new subcutaneous injection formulation. On the filing side, there were also 2 key developments for our in-house product orforglipron. Eli Lilly has filed an application in the United States for its use as an obesity treatment. Regarding Tecentriq, we filed an application yesterday for its use as adjuvant therapy in MRD-positive bladder cancer.

We also initiated 3 Phase III trials for Roche products; trontinemab for Alzheimer's disease; zilebesiran for hypertension and divarasib for first-line non-small cell lung cancer. Additionally, divarasib received orphan drug designation last December for KRAS G12C mutation-positive unresectable advanced or recurrent NSCLC. There were 2 pipeline divisions. Based on the data accumulated to date, we have decided to discontinue the development of BRY10 for chronic diseases. Furthermore, the development of Tecentriq for perioperative NSCLC was discontinued following the results of the IMpower030 trial.

Details regarding recent publications, new contracts and investments by Chugai Ventures Fund are summarized on this slide.

Moving on to the second page of topics. For our in-house product, PiaSky, we achieved positive results for Phase III trial for atypical hemolytic uremic syndrome. Orforglipron also met its primary endpoint in its switching trial following the administration of injectable incretins. Furthermore, I am pleased to announce that Enspryng met its primary endpoint in the Phase III trial for myelin oligodendrocyte glycoprotein antibody-associated disease. Based on recent trial data, we plan to file for Gazyva, giredestrant, ranibizumab and sparsentan within 2026.

Regarding academic conferences, there were 3 presentations. I will provide a more detailed update on giredestrant later in this session. This is a summary of our major R&D events in 2025. The changes from the previous updates are underlined and shown in bold fonts. While a few items have been carried over to the next fiscal period, we consider these results to be generally highly satisfactory. In particular, looking back, the confirmation of POC for our in-house product, NXT007, a major milestone, and the decision to advance it to Phase III represents a significant progress.

Next, I will discuss the major milestones for 2026. A key readout for our in-house portfolio is the Phase III trial of Enspryng for MOGAD, which, as recently announced, successfully met its primary endpoint. Regarding GYM329, we will now refer to it by its international nonproprietary name, INN, emugrobart. We plan to announce results for 3 Phase II trials for emugrobart this year. For SMA and FSHD trials, the data have already been collected, and we look forward to sharing the results with you soon.

For Roche product, pivotal trial readouts are scheduled for divarasib, giredestrant, Lunsumio and sefaxersen. Regarding trial starts, we have listed those that have already been publicly disclosed. For NXT007, we have scheduled 3 Phase III trials, including head-to-head comparison with Hemlibra. We also plan to initiate a Phase II trial for DONQ52 in celiac disease.

Now I will present the results from 2 trials for giredestrant. First is the evERA trial for hormone receptor-positive/HER2-negative breast cancer in patients previously treated with the CDK4/6 inhibitor. Although these results were presented at last year's ESMO Congress, I would like to review them with you today. Giredestrant is an oral selective estrogen receptor degrader or SERD designed to inhibit estrogen receptor signaling regardless of ESR1 mutation status. It is expected to show efficacy even in tumors that have developed resistance to conventional endocrine therapies, including previous generation SERDs.

In, in vitro studies, it demonstrated higher cell proliferation inhibitory activity compared to other oral SERDs. Furthermore, the combination of giredestrant and mTOR inhibitor everolimus is expected to provide superior antitumor activity compared to monotherapy by simultaneously inhibiting 2 key signaling pathways involved in hormone receptor-positive breast cancer proliferation and endocrine resistance.

In the evERA trial, this combination significantly improved investigator-assessed PFS, the primary endpoints in both the ESR1 mutation positive and ITT populations. The therapy reduced the risk of disease progression or death by 62% in ESR mutation positive group and 44% in the ITT population. These results suggest that giredestrant plus everolimus could become a valuable new oral treatment option for patients previously treated with CDK4/6 inhibitors, a segment with limited effective alternatives regardless of their ESR1 mutation status. [indiscernible].

Regarding the giredestrant, I would like to introduce lidERA study, which targeted adjuvant therapy for hormone receptor-positive/HER2 negative early-stage breast cancer. This data was also presented at last year's San Antonio Breast Cancer Symposium. Giredestrant demonstrates stronger growth inhibitory effects than estradiol E2 depletion or tamoxifen in ESR1 wild-type cell models with high estrogen receptor signaling activity and endocrine therapy sensitivity as shown by nonclinical data.

Furthermore, in the Phase II study of non-adjuvant -- neoadjuvant therapy for early breast cancer, giredestrant demonstrated superior proliferation inhibiting effects compared to aromatase inhibitors or tamoxifen. Based on these results, an interim analysis of the lidERA comparing giredestrant monotherapy with standard endocrine therapy as adjuvant therapy for hormone receptor-positive/HER2-negative early breast cancer showed a significant improvement in the primary endpoint of invasive disease-free survival or IDFS, compared to standard endocrine therapy.

In the interim analysis, this reduces the risk of recurrence or death by 30%. These results demonstrate that giredestrant offers the first benefit in approximately 20 years for a new endocrine therapy in early-stage breast cancer, demonstrating the potential to become the new standard of care for adjuvant therapy in hormone receptor-positive/HER2-negative early-stage breast cancer, which accounts for over 70% of early-stage breast cancer cases. Based on evERA and lidERA studies, we plan to file for approval for each this year and look forward to delivering new treatment options to patients.

Next, we'll introduce 3 examples of our efforts to promote open innovation for expanding our drug discovery engine. The first is our collaboration with Gero. Gero excels at identifying targets for age-related diseases using a platform that combines physics-based machine learning models with human dataset analysis. By combining Gero's identified targets with our proprietary antibody engineering technologies, we aim to create first-in-class therapies for age-related diseases.

The second is Araris. We have entered into a joint research and license option agreement with Araris. Their AraLinQ Technology features high stability in blood, preserves the inherent properties of antibodies, including pharmacokinetics and can carry 2 or 3 payloads. By combining this with our antibody technologies, we aim to create highly differentiated ADCs that achieve a broader therapeutic window and enhanced efficacy.

The third is Rani Therapeutics. The company possesses technologies enabling oral administration of biological products featuring painless drug delivery within the intestinal tracts, high drug delivery efficacy and bioavailability comparable to subcutaneous injections. By combining this, again, with our various antibody technologies, we also aim to realize biological products with high convenience through weekly or monthly oral administration with efficacy comparable to intravenous, subcutaneous injections. We will accelerate innovation by collaborating with partners possessing target discoveries and modality technologies that synergizes with our own.

Now this slide shows market sales for major projects. Global sales are based on guidance from Roche or Galderma. There are no updates from previously disclosed figures. Within the domestic sales, the upper range section represents our in-house products, while the lower blue section represents Roche products. This slide shows the status of our portfolio across each modality. We continue to hold a robust pipeline of in-house developed projects, all progressing steadily. We're also pleased to announce that we have named our drug discovery technologies for midsized molecules, our third pillar of focus, SnipeTide. Snipe embodies the characteristics of our midsized molecules, high precision binding to intracellular targets via oral administration. Tide evokes the peptides that form the basis of this technology, while also expressing our aspiration for it to become a new trend in peptide drug discovery. We'll continue to focus on the continuous creation and development of our proprietary products or in-house products, including midsized molecule drugs to address unmet medical needs.

Last but not least, our projected submissions. Projects marked with light blue stars are newly added ones. Projects marked with green stars have changed since the previous update. Specifically, for giredestrant, we are advancing the application for adjuvant therapy based on the lidERA study that I mentioned to this year. The following slides are attached as reference materials.

That concludes my presentation. Thank you.

Next, we will have from Taniguchi, presentation on FY 2025 consolidated financial overview. We will pause at the very beginning of the presentation. So those of you who wish to take a capture, please use this opportunity to do so.

Hello. I'm Taniguchi. I look forward to working with you today. I would like to describe the full FY 2025 consolidated financial review. As was mentioned by Dr. Okuda, I am pleased to report that cumulative revenue through the fourth quarter reached JPY 1,257.9 billion, up 7.5% year-on-year. Core operating profit also grew to JPY 623.2 billion, a 12.1% increase.

Now I will provide details of these results. First, on the revenue. The pharmaceutical product sales rose to JPY 1,077.8 billion, an 8.0% increase year-on-year. By region, domestic sales were JPY 472.4 billion, up 2.5%. We had strong performance from new and mainstay products, effectively offsetting the impact of generic penetration and NHI price revisions.

Overseas sales reached JPY 605.4 billion, up 12.8%, continuing to benefit from robust exports of mainstay products through Roche. Those are for product sales. Other revenues, including royalties here, increased by JPY 7.4 billion year-on-year to JPY 180.1 billion. While milestone income from third party declined compared to previous year, this was offset by an increase in Hemlibra royalties from Roche, resulting in an overall year-on-year gain.

Turning to expenses. Cost of sales was JPY 351.5 billion, up 4.0% year-on-year. But if you look at the cost ratio, Actemra was relatively high, ratio has dropped slightly from previous year. So negative -- cost of sales ratio for pharmaceutical products improved by 1.3 percentage points to 32.6%.

Regarding SG&A expenses, we successfully maintained these at JPY 103.2 billion, flat more or less year-on-year by driving efficiency to offset rising prices and labor costs. R&D expenses rose by JPY 3.2 billion to JPY 180.1 billion, primarily reflecting the impact of yen's depreciation.

Other operating income saw a modest JPY 2.7 billion decrease, mainly due to lower gains from product transfers. As a result, operating profit rose by JPY 67.1 billion to JPY 623.2 billion, but the operating profit margin expanded 2 percentage points to 49.5%. Net income after taxes reached JPY 451.0 billion, a 13.6% increase.

Next, on the changes from last year in pharmaceutical sales. Starting with domestic at the very bottom, domestic oncology sales were JPY 246.5 billion, a marginal decrease of 0.5% compared to the previous year.

Specifically, steady growth in the new product, Phesgo more than offset the decline in Perjeta sales. Additionally, while Lunsumio is off to a strong start, Avastin sales declined due to generic competition. Specialty sales grew by 5.8% to JPY 255.8 billion. There was, yes, NHI price revisions, but in addition to mainstream products, Hemlibra, Actemra and Enspryng and Vabysmo alongside new products PiaSky, all delivered steady growth.

Overseas pharmaceutical sales grew 12.8% to JPY 68.6 billion, primarily driven by strong exports of Hemlibra and Actemra.

Next summarizes full year export status to Roche of Hemlibra and Actemra. First, Hemlibra. Fourth quarter sales, the final quarter. If you look at that compared to last year, rose by JPY 35.3 billion year-on-year. If you look at the full year cumulative sales, that reached approximately JPY 20 billion above our initial JPY 318.6 billion forecast. Actemra, since biosimilar penetration has been slower than expected, if you look at just the fourth quarter, we have seen -- well, leading to JPY 8.6 billion year-on-year increase on the fourth quarter. Consequently, for the entire year, Actemra forecast of JPY 123 billion was exceeded by approximately JPY 30 billion. So this was increased by about JPY 30 billion.

Next, on the changes, this is like a factor analysis and changes in the operating profit. Starting with the Domestic segment on the left. As noted, there has been an impact of NHI price revision to drive higher operating profit. In the Overseas segment, the more we have sales in the emerging markets, the unit price will become lower.

So volume growth significantly outweighed the impact of lower export unit prices, combined with favorable foreign exchange movements, these factors will keep contributing to the growth of operating profit. The revenue also contributed to the profit increase, primarily through higher Hemlibra royalties. This is the breakdown of the increased profitability of JPY 672.1 billion.

On a quarterly basis, we are comparing P&L trends. Because of the export timing, there will be more ups and downs. If you focus more on the sales, this is by quarter changes. As you can see, the export to overseas, again, because of timing of the product, disease timing, there will be ups and down.

Next is the FY 2025, how the outcome actually landed. So how much of a gap there was to what we have expected. As you can see, both the sales and the profit. And for each segment, we have exceeded the projection. So it was greater than 100%. For the expenses, there were some pluses, but it's been slightly lower. So that led to overachieving the operating profit.

This is the byproduct sales as compared to the forecast at the beginning of the year. And the inventory situations have changed and there was slight negative, but everything else, like Actemra overseas, Hemlibra overseas and domestic. Overall, compared to our forecast, there was a positive number.

Next page is the impact of foreign exchange rate fluctuations and the performance. The actual rate was JPY 161.2, including the forward contracts, which is the basis for the sales recording and JPY 173.57, so JPY 12.50 depreciation. So there was an impact in terms of revenue, JPY 49.6 billion plus and JPY 44.2 billion operating profit on the positive side. And this is the actual rate of pricing compared to the forecast rate. So 80% of the contracts are hedged in the previous year. So 20% are unhedged and use the actual rate, and there's change in exchange rate. So as a result, in 2025, there was a further depreciation of yen. So JPY 5.6 billion in sales and JPY 3.6 billion in plus for operating profit was recorded. And the balance sheet, JPY 2,468.6 billion, which is JPY 260.2 billion increase. There was a working capital increase and also net asset increase because of investments.

And net assets increased by JPY 124.2 billion. Compared to total assets, there was a slight lower increase, but there was some interim payment of dividends and 82.1%, which is shareholders' equity ratio, which is over 80%. And here, you're talking about cash status. And last year, at the end of 2024, JPY 996.3 billion, but now there was a decrease of JPY 160.6 billion. And operating cash flow, JPY 452.1 billion, there was further positive size by income tax payment and dividend payments and JPY 170 billion for special dividend was included. So cash increase was slightly suppressed.

In total, this shows the trends in ROIC and ROE indicators of capital efficiency. We have been focusing on ROIC so far. But depending on the company, the definitions of ROIC may vary. So in our case, the denominator doesn't include cash. So ROIC has been at the higher level, 43.9% for this year, which is 1 percentage point increase from year-on-year.

And as for ROE, which is attracting more attention and definitions are actually universal from company to company for denominator and numerator and 22.1%, which is an increase from the year before. So this is ROE that is way exceeds the capital cost. And this is -- this fiscal's earnings forecast.

As Okuda said, as for revenues, 6.9% increase to JPY 1,345 billion. Core operating profit to increase by 7.5% to JPY 670 billion. That is our forecast. Domestic sales are expected to grow despite the headwinds from drug price revisions and generic penetration. We're expecting JPY 25.6 billion growth because of new products growth, so 2.2% growth, which is exceeding the last year's growth.

As for overseas exports for products for Hemlibra and NEMLUVIO, they are expected to increase, but there will be further marked impact from the biosimilars in Actemra. So there is JPY 3.4 billion, slight decrease is expected. But for the other revenues, JPY 64.9 billion increase is expected from the previous year, but there will be some foreign exchange impact. The cost side is not going to change that much. So there is going to be a support for profit growth.

And this is the slide for the pure product sales aside from the other revenues. And Actemra is significantly negative and Avastin, for various reasons, will remain in the negative territory. But Lunsumio on the other hand, which is a new product, is expected to grow significantly. And Hemlibra overseas will remain on the growth trajectory. And this -- also, this is a core and noncore adjustment. So previously, the intangible asset impairment and also restructuring costs and ERP business foundation system introduction and restructuring costs. These are actually items for core and noncore adjustment items. But in the third quarter, there was also discontinuation of 5 development products that will be recorded.

And this is the capital investments currently approved internally. And last page is just for your reference. We have attached details regarding the status of our 5 Chugai-originated global products.

That concludes my presentation. Thank you for your attention.

We will now move on to a Q&A session. We will also have Hidaka, who heads the sales and [indiscernible] who is also representing marketing and the sales to join. [Operator Instructions]. The content of the Q&A session will be uploaded later together with the presentation materials. We would like to take questions first from those in the room, in the venue, and then we will take questions by Zoom webinar. [Operator Instructions].

I would like to, first of all, ask about the Hemlibra. And you said that on the core base, this grew by double digit. And based on foreign currency denomination, I think it has also increased. But for this term, if you use that, it is negative, what are your thoughts about the volume as well as unit price? How will this change from last year? And for volume, I would like to know what your forecasts are for end user sales and the fluctuations in inventory in Russia.

Thank you very much for the questions. For FY '26 on a whole, you are correct. We expect a positive number. But if we do elemental breakdown analysis at the point in time -- as for volume and the foreign exchange impact, we are not disclosing this at the moment. Now at the JPMorgan conference, they talked about the single-digit growth, so positive growth, which means that we would like to replenish the inventory through our export on a whole. Hemlibra guidance number has been as disclosed.

The second question, in Dr. Okuda's presentation, auto-injector filing for Hemlibra has been mentioned several times. I believe that this is a very important agent in terms of competitiveness. When do you expect this to become available? Is it very close? Or do you still have some issues that needs to be resolved before that can take place? I would like to know more about the progress of this product.

Thank you very much for asking about Hemlibra AI. We are moving along very steadily in terms of development. We are not disclosing the dates, but we would like to provide the Hemlibra AI to the patients as quickly as possible. So we are doing everything possible to move things forward.

The person next to him please.

[ Yokoyama ] from [ Nikkei Medical ]. Giredestrant is what I like to ask about. So many companies are developing oral SERD drugs, but how do you look at the differentiation from competitors? The inavolisib is going to be a set of those, and this is going to be significant with the combination with inavolisib in breast cancer, but there is no schedule for filing for inavolisib. How do you see this?

So giredestrant question. Thank you very much for your question, Yokoyama-san. Other SERD products comparison with those, as I said in the slide, in the in vitro test -- trial, giredestrant compared to other SERD oral product, proliferation suppression inhibitory activities were shown. And in the lidERA study, giredestrant and everolimus combination therapy compared to the conventional standard of care, ESR1 positive patients in addition to that population, ESR1 non-mutant population, there was a PFS that is statistically significantly achieved.

So ESR -- regardless of ESR1 mutation, there was efficacy that was proven in the SERD oral product. So the CKD inhibitor -- previously treated with CDK inhibitor patients had a bad prognosis. So there's high hopes on that. And giredestrant and everolimus combination therapy, if you look at this, they are both oral drugs. So there is no injection to be required. So there's high convenience and 2 different signal pathways can be inhibited simultaneously.

So compared to monotherapy, there is a higher antitumor effect expected and also adjuvant -- compared to endocrine therapy, standard of care at the interim analysis, primary endpoint was achieved. And for early breast cancer as a new endocrine therapy, this is the first one in the last 20 years, new benefit was brought about. So this could become an adjuvant standard of care. So there's a high hope.

And more than 70% of early breast cancer is the target for this study. So we are hoping that giredestrant can contribute to many patients. And as for inavolisib, there is one study with a combination with inavolisib by Roche. But at the moment, the combination of giredestrant and inavolisib, there's no plan for a study with that.

But with the study of giredestrant and everolimus, what sort of strategy can work out will be something that we work with Roche. So that's not my question.

ESR can be covered, but CDK4 and 6 has to be suppressed. But -- there's studies overseas, but Japan has not participated, but Phase II study will be done in Japan, and there will be a bridging study. And then at that timing, the inavolisib can be used for the oral SERD study. So when will it be?

As for inavolisib, as you said, Phase I study is now underway, and there will be bridging with overseas study data to file for approval.

But at this moment, I'm sorry, but we're not in a position to disclose that timing.

So for the timing of filing has not been disclosed. And what you filed for yesterday, the bladder cancer, MRD-positive patients. So for all comers, nivo can be used and [indiscernible] has been presented as part of the data. And so to other -- compared to other products, what will be the superiority of this drug?

I'm not sure who this is addressed to. So Tecentriq adjuvant, the muscular invasive bladder cancer. Thank you for your question. And compared to PFS, in OS, the primary and secondary endpoint, there was a statistically significant benefit that was proven. And in the CDR monitoring, the atezolizumab or we can identify patients that can benefit from atezolizumab. There could be avoidance of overtreatment or personalized medicine can be done with the CDR approach. So the patients with lower risk can avoid overtreatment. That will be the benefit.

We now would like to invite questions who are joining us through Zoom webinar. [Operator Instructions]. From JPMorgan, Wakao-san, please.

Wakao with JPMorgan. The first question -- first of my questions is related to the royalty other than coming from Roche and also other revenues. Royalty from other than Roche is both for orforglipron and nemolizumab sales or increase thereof, I believe, am I right?

If that is the case, orforglipron has not been approved. So I would like to know how you are incorporating that. And we also expect the sales to grow considerably. I would like to have you comment on this.

This is Taniguchi speaking. Thank you Wakao-san. Revenue stream from other than Roche, yes, is expanding in '26. And you are absolutely right in your understanding. Vast majority comes from those 2 product royalties. That's true. But other sales revenue, in general terms, this is like milestone payment.

Now as for the content, this still is not disclosed, including what we are filing today, we have introduced several assumptions and have reflected in what we are saying. I would like you to tell us about how you incorporate the orforglipron. I think because the product is not out there, you must be exercising conservatism?

Yes, for anything that is uncertain, our basic thinking is to make sure that we will use reasonable assumptions.

Second question is about 45% dividend payout ratio. The operating profit in the mid- to long term will lead to greater profit and you are focused more on ROE, which means that at some point in time in the future, you will raise payout ratio. There are no reasons for you not to. Are you discussing this internally of raising the payout ratio to above 45%? And if you have decided no, why?

Thank you Wakao-san for that question. We have provided last year at this timing, our capital allocation policies, and we wanted to target 40% stably. And so dividend payment included is based on that. For the time being, we have no plans of revising or reviewing this. And I'm sure you understand that.

Now the question is, will we ever consider revisiting? Are we not going to revise this ever? Well, we cannot say anything definitive at this point in time. We'll be looking at the objectively our situation as well as our financial conditions. Now ROE, yes, we are looking at our cost of capital, and we have disclosed this, we consider to be about 7%, which means that our ROE is well above that. So it's not that we are going to make active adjustment of the capital. We don't think that we are at the situation where we need to boost ROE today. In any case, we should continue to maintain and try to strive for improvement of capital efficiency.

Muraoka-san, MUFJ Securities. Mr. Muraoka, please.

I'm Muraoka from Morgan Stanley. My question is also addressed to Taniguchi-san for the forecast or guidance for a more detailed way of interpretation. The Slide 7, the forecast by product. So overseas and others, there will be an increase of JPY 70 billion, which is significant. And NEMLUVIO export will probably the biggest contributor. And if that's the case, then the royalties from entities other than Roche, the increase of JPY 730 billion compared to NEMLUVIO also would be larger. That's our guess. Is that something that is valid?

Thank you very much for your question, Taniguchi speaking. For the breakdown of royalties for the portions that are not from Roche, those 2 that you mentioned is overwhelmingly important. That's what I can tell you. But as for the allocation between these 2, at the moment, we cannot answer that question.

So also orforglipron, it has not been launched yet. And you have to look at the timing of launch, which is quite difficult discussion. So we remain undisclosed for the allocation. As for exports. As for NEMLUVIO exports, so this was recorded in the previous fiscal year. But for this fiscal year, we still continue to expect growth, and that has been incorporated in our guidance that we provided at this time. Does that answer your question?

So overseas others, JPY 32.6 billion, JPY 17 billion year-on-year, it is mostly from NEMLUVIO.

Yes.

And also the breakdown of this Page 7, the domestic and specialties and others sales, JPY 33.3 billion year-on-year growth of JPY 12 billion. Tamiflu is not going to grow. So what's included in this number? Earlier, you talked about P&L cost of goods -- cost of sales ratio that is assumed to increase. So maybe the products that are included here have higher cost of sales. So those that are not in the pipeline, but there is something that you are going to start to sell. That's my personal guess, but am I wrong?

For the cost of sales ratio, compared to '25, in 2026, there's a positive growth. The background, there is a lot of factors. But if you compare domestic and overseas sales, the cost of sales ratio is much higher in domestic products. So this is related to products. So overseas, there's JPY 3.4 billion decline, but JPY 20 billion increase for domestic sales. So domestic product ratio has increased, and that has brought up the cost of sales overall.

As for more details, it is not disclosed, but you mentioned Tamiflu. There are various factors involved, products that are not mentioned and that are expected to grow this year that are included in others.

So that those are expected to grow are not in the pipeline or the filing schedule on Page 39. Those are not included in those schedules?

No, no, no. That's not the case. There are some that are included. So -- but all that are expected to be filed are anticancer drugs.

Well, Hidaka from sales speaking. As you said, there's still uncertainty, a lot of uncertainty. But Elevidys, gene therapy sales are incorporated to some extent. And maybe that would satisfy your question.

Next, from Citigroup, Yamaguchi-san, please.

Yes. At the very beginning about the update of midterm business plan. You talked about the production efficiency of blockbusters have improved from 0.3 to 0.6. My understanding, of course, is you are aiming for 1. Although there are different risks based on current pipeline, do you think that you are achieving what you can achieve? So what are your thoughts about this 0.6 vis-a-vis 2026 and 2030?

This is Okuda speaking. Thank you, Yamaguchi-san, for your questions. So you're looking at this slide, right? Looking back, in the 2000s, it was 0.1. So 1 per 20. In the 2010, it tripled. And in the 5 years since we began the Strategy 2030, we have actually launched 3. You talked about, Yamaguchi-san, blockbusters, but this is about global in-house original product being successfully developed and launched. We are focused on antibody plus a small molecule that we have achieved launch targets between 2026 through to 2030.

So in the latter half of TOP I 2030, our strategy is to further increase this. As we talk about midsized molecule, middle molecule, the white will gradually become more purple. If we succeed beyond 2031, this could become like 1 every year or greater global launch that will further drive growth or even better than that.

With increased modality, there's this growth will increase because of the midsized module.

Yes, we will look at antibody, small molecule, mid-molecule and our imbalance. And we're talking about other modalities. We were discussing this in the TOP I 2030 strategy discussion. We hope to achieve multi-modalities. So we want to increase that.

The other question is giredestrant, which you have explained in length, and we have high expectations. What is your peak sales forecast? Or is it too early?

Well, thank you for that question. For giredestrant, we are not disclosing that.

What would be the TAM in Japan? So the targeted market size. Number of patients or the existing market size is probably quite large, but I would like to know which segment you are targeting? If you don't have that information, if you could provide information later?

Yes, we would like to confirm and get back to you.

From Macquarie Capital, Mr. Tony Ren, please.

The first question I would like to ask is about your CapEx. You commented on the Araris partnership for ADCs, right? My understanding is that the CapEx can be very intensive for ADCs. In fact, one of your peer companies recently announced a very large CapEx project for their ADCs. So I just wanted to see how are you thinking about the CapEx related to the ADC drugs? Are you building the production capacity internally? Are you using CDMOs? Are you using facilities from Roche? Is this included in your CapEx budget for 2026? So that's my first question.

Thank you very much for your question, Mr. Tony Ren. As for the CapEx, for the current status, Araris and Chugai Pharmaceutical are now engaged in joint research. So we haven't discussed the CapEx. We just engaged in joint research. Therefore, as for the 2026 in the CapEx budget, this was not included.

Okay. Very good. My second question is on the development of your GYM329/emugrobart in obesity. So the [indiscernible] Phase II trial of emugrobart in obesity. If we look at the clinicaltrials.gov, the primary completion is August 2026. Can you confirm that you will be releasing Phase II results roughly around that time as well?

GYM329 Phase II trial. Thank you very much for your question on that. So at the outset, as I said in the presentation, the result of the clinical study is going to be released by the end of this fiscal year.

[indiscernible] from UBS Securities, we have [indiscernible].

I'm [indiscernible] with UBS. We congratulate you on an excellent performance. In other revenues, this royalty or milestone is -- it includes something -- some items that are outside of Chugai's control. If the actual revenue, other revenue, does that meet your target? What are some avenues that will change or don't we need to worry about this because you are being very conservative?

Thank you very much [indiscernible], I am Taniguchi. The latter, we have exercised conservatism. But if it is so unexpected happen, we cannot negate the possibility that something will happen outside this. But how this will be absorbed within the entire portfolio? This is something that we will be communicating to you in the quarterly earnings call. So we will keep you appraised or updated within the project planning.

The second question has to do with biological POC of DONQ52. And I would like you to supplement my understanding. What does this mean? In Phase I study like PBMC, like peripheral blood monocytes? Or are you looking at that kind of response at the cellular level?

Thank you very much for that question about the DONQ52. We have conducted what we call Phase IC study. This is celiac disease patients who are stable after administering DONQ52 in such patients for 3 days, we challenge them with [indiscernible]. And gluten-dependent immune response is what we are trying to induce. And then we give DONQ52 to see if gluten-dependent immune response can be suppressed. In this study, in addition to PK, we'll be looking at pharmacological action. T-cell activation suppression due to gluten ingestion is also looked into as well as other biomarkers.

What was the outcome of the 3-day challenge study?

We are now in the process of analyzing this. And when we are ready to publish data, we would like to do so.

Next, from SMBC Nikko Securities, Mr. Wada, please.

Wada from SMBC Nikko Securities. So I'd like to also ask about DONQ52. So licensing out schedule, how do you look at that schedule and development. As you saw, Phase II study is going to be initiated. So as I heard, this is going to be licensed out to other companies. I think that is the main strategy. Maybe it would be the Phase II timing that you're going to do that. But this is going to be -- Phase II is going to be performed by your own company on your own. So what will be the timing of Phase II as you see it?

So Wada-san, thank you very much for your question on DONQ52. For licensing out strategy and timing of individual products, we cannot answer those questions. But the Phase II study that we announced this time would be performed by Chugai Pharmaceutical. Just for clarification. So in the Roche pipeline, this is in Phase I.

So you're not aligned with Roche on this particular product. Is that correct?

Probably. This is not described in the Roche material or pipeline. We don't have the information that they have introduced this. So in the Roche pipeline, Chugai's projects are also described, but this is -- this doesn't show that they have licensed in our product. As Yamaguchi-san asked Page 15, TOP I 2030, 1 per year global product launch that is target. And I'd like to ask about the strategy of research and development. So from 2011 to 2020, 0.3 per year, but '21 to '25 0.6 per year, it has doubled. But R&D around 2015, JPY 80 billion was spent. And in '23, JPY 160 billion. So this was doubled as well.

So that's why the number of launches has been increased. I understand that. But between now and 2030, if you are to launch 1 per year, then 1.5x R&D expenses will be required. So in order to achieve on 1 launch per year, what is your expectation on the R&D expenses or spending?

Okuda will answer that question first. And then for the future R&D investments, I would like to ask Taniguchi to answer the question.

So the R&D expenses and number of launches, whether they are correlated or linked, it's not necessarily the case. So the number of launches, what would be the function of this? So R&D -- aside from R&D, but the cycle time of development, the speed of development and probability of success, those will be significant factors. So there is a time line between R&D activities and launch of the products. So there is not that simple correlation.

So as a principle for R&D activities, high-quality products have to be developed. So this has been the case in the past, but with a higher probability of success, we came up with the molecule in the Phase III development. The first indication has achieved 100% success probability. So that quality principle has to be maintained or expanded while engaged in this drug development. So R&D expenses and number of launches are not directly related necessary.

But on the other hand, if you look at R&D expenses, it includes the personnel cost, and this is a very important resources to drive research. So this R&D expenses have been increased in accordance with the profit increase. So I'd like to ask Taniguchi to add up.

Compared to 2025, 5.5% increase was recorded. That was a fact. But as Okuda said -- so the productivity increase is something that we give priority and that is also true for R&D by utilizing AI and go or no-go decision will be further refined. So we are hoping to enhance productivity. So it doesn't necessarily mean that R&D expenses are going to keep going up rapidly. And the target for percentage of R&D expenses, there is no such figure that we have in mind. But as the projects make progress, there could be increase in development expenses. That could be the one that we might end up with, but we're also keeping an eye on productivity and efficiency so that we can maximize our efforts.

Next from Bernstein, Sogi-san, please.

About Hemlibra. I have two questions. The first question is related to overseas sales. This time in 2026, the assumption on Swiss franc, I mean, you are expecting 6% depreciation of the yen. If that is your assumption, Hemlibra, I understand the plan is to decrease.

Of course, sales in the international market, I mean, by Roche or by Hemlibra going up, you said will lead to lower unit price. Even if the volume increases, the lower unit price will have greater effect. So you're selling more, but is it possible that the yen amount exports come down? Is that possible?

Thank you very much, Sogi-san, this is Taniguchi speaking. Hemlibra forecast for this year, and you're asking about the breakdown, which, of course, is related to unit price, volume and foreign exchange factors. I would like to keep from giving you any responses in detail, but it is true that there has been a foreign exchange effect, positive. What about the net of that? Then we have the unit price multiple wide by volume. Unit price actually has to do with the weighted average in the market previous year applied. So we will be looking at market price and that sort of decides what the export price is going to be.

Volume is something that's updated every term in emerging markets, not just the emerging markets, but it is possible that volume increase globally. This has happened in the past. So there's no reason to think that this will not happen in the future. And that multiplied by unit price will give us the results.

Also about Hemlibra. And this is related to auto-injector. By launching this, what level of upside do you expect? Hemlibra, I believe, has penetrated the market. Uptake has been great. So who are the patients that have not been able to capture without the auto-injector? And I also would like to understand what Roche has in mind related to this.

Well, I would like to respond. Auto-injector development for Hemlibra, we have been striving with the aim of raising convenience of our patients. If we have auto-injector of Hemlibra, we expect the uptake to increase, but [indiscernible] competition could come up with a very convenient device. So please do understand that we are being defensive -- we're taking a defensive approach to that, too.

Because of time, we would like to take one last question from Goldman Sachs, we have Ueda-san.

Ueda from Goldman Sachs securities. The first question is about the U.S. partnering office that has been launched. So at the moment, in the previous activities, what were the challenges that you faced to trigger this? And what kind of effects that you're expecting out of this initiative?

Thank you for the question. Well, as for U.S. partnering office, this is located in South San Francisco and the West Coast, and it just started operation. So in Silicon Valley, there are many bioventures and universities in the U.S. There are numerous universities located there. And of course, we can keep communication from Japan, but by physically locating in the area, bioventures and academia and venture capitals, we will have closer communication with those parties so that we can achieve open innovation. The drug discovery capabilities increase is the primary purpose, but there will be effective results that we can expect.

So that's why we've decided to locate our office in West Coast or South San Francisco. But ahead of this, there was a corporate venture capital that was established in 2023 in Boston, and it's been already 2 years since the start of the operation. And we went into venture communities and from venture companies or start-up companies, there was a lot of information that we received. So as the technology reaches maturity, we could have a joint collaboration with those, and there's a link there as well.

But it's not just in the U.S., but in Singapore, there is a similar function. And there's also a partnering function in London and Chugai headquarters, Tokyo headquarters, has this function. So by establishing a global partnering network, we are hoping to increase our drug discovery capabilities. That's our intention.

Thank you very much. With that, we would like to conclude Chugai Pharmaceutical fiscal year 2025 financial results presentation. We apologize for the difficulty that you experienced at the first half of the presentation. We will provide backup information via web. If there are any questions that you were not able to ask, please do contact us at the corporate IR. The phone number as well as mail address is shown on the last page of the presentation material. Thank you very much once again for joining us, taking time out of your various schedules.