Daiichi Sankyo Company, Limited

[Interpreted] Thank you very much for joining us. We are now starting the first quarter financial results reporting of Daiichi Sankyo 2025.

My name is Asakura. I'm in charge of Corporate Communication.

I'd like to serve as a moderator today. First, about the language.

We are going to use Japanese and English in this meeting. We have simultaneous translation available.

[Operator Instructions]. Japanese, English and the presentation materials are available on our IR library and financial results reference material at the page of our corporate website.

You can download them. And today's speakers are the -- Koji Ogawa, Senior Executive Officer; and Abe, Head of R&D Division and Executive Officer.

And Ogawa and Abe are going to explain about the outline of the first quarter results, and this meeting is recorded. Now let's begin.

Ogawa, you have the floor.

Ogawa speaking. Thank you very much for joining Daiichi Sankyo's financial results presentation out of your very busy schedule today.

I'm going to explain our FY 2025 first quarter financial results, we announced at 1:00 p.m. on Thursday, July 31, JST, based on the presentation materials.

Please turn to Page 3. This is the agenda for today.

We will cover FY 2025 first quarter consolidated financial results, business update and R&D update in that order. R&D update will be explained by Yuki Abe, R&D Division Head.

We will entertain your questions at the end. Please turn to Page 4.

This is an overview of FY 2025 first quarter consolidated results. Revenue increased by JPY 38.4 billion or 8.8% year-on-year to reach JPY 474.6 billion.

Cost of sales decreased by JPY 2.6 billion from the previous year. SG&A expenses rose by JPY 12.4 billion and R&D expenditure increased by JPY 5.3 billion year-on-year.

As a result, core operating profit increased by JPY 23.4 billion or 32.1% year-on-year to reach JPY 96.3 billion. Operating profit, including temporary gains and losses, increased by JPY 3.7 billion or 4% year-on-year to JPY 96.3 billion.

Profit attributable to owners of the company increased by JPY 0.1 billion year-on-year to reach JPY 85.5 billion. As for the actual currency rates, the U.S.

dollar was JPY 144.60. The yen appreciated by JPY 11.29 against the dollar year-on-year.

The euro was JPY 163.81. The yen appreciated by JPY 4.07 against the euro.

Please turn to Page 5. From here, let me explain positive and negative factors for our revenue compared to the previous year.

Revenue increased by JPY 38.4 billion year-on-year. I'd like to explain its breakdown by business unit.

First, in Japan business unit, et cetera, revenue increased by JPY 2 billion, absorbing the revenue decrease of JPY 5.6 billion realized gains of unrealized gains of inventory for Daiichi Sankyo Espha as sales increased for insomnia treatment Belsomra, direct oral anticoagulant Lixiana, pain treatment Tarlige and anticancer agent Datroway, et cetera. Next, let me explain our overseas business units.

ForEx impact is excluded here. In oncology business, revenue increased by JPY 35 billion due to the growth of anticancer agent ENHERTU sales and Datroway contribution to revenue.

As for American region, sales increased for generic injectables, but sales decreased for iron deficiency anemia treatment, Injectafer and Venofer. So American region revenue decreased by JPY 2.8 billion.

Revenue for EU Specialty business increased by JPY 6.2 billion as sales increased for Lixiana and hypercholesterolemia treatments, Nilemdo/Nustendi. In ASCA business responsible for Asia, South and Central American regions, revenue rose by JPY 12.5 billion due to the growth of ENHERTU mainly in China.

Upfront payment and regulatory sales milestone, et cetera, related to alliance with AstraZeneca and U.S. Merck increased revenue by JPY 4.7 billion due to the booking of regulatory milestone associated with Datroway approval for EGFR [indiscernible] NSCLC in the United States and upfront payment for strategic collaboration with U.S.

Merck for 3DXd ADCs. ForEx impact decreased our revenue by a total of JPY 19.2 billion.

Now please look at Slide 6. Slide 6 shows the factors contributing to the increase or decrease in core operating profit.

We will explain the JPY 23.4 billion increase in profit by item. As explained earlier, revenue increased by JPY 38.4 billion, including JPY 19.2 billion decrease due to foreign exchange effects.

Next, we will explain cost of sales and expenses, excluding foreign exchange effects. Cost of sales increased by JPY 1.5 billion only due to an improvement in the cost ratio resulting from the change in product mix, such as increased sales of in-house developed products like ENHERTU, whereas a JPY 57.6 billion increase in sales revenue, excluding foreign exchange FX.

SG&A expenses increased by JPY 22.3 billion, primarily due to an increase in profit sharing with AstraZeneca. R&D expenses increased by JPY 10.8 billion, primarily due to increased R&D investments with the progress of 5DXd ADCs development.

Foreign exchange effects reduced expenses by a total of JPY 19.6 billion and core operating profit, excluding foreign exchange impact, increased by JPY 23 billion. Next, I will explain the changes in the profit of the period on Slide 7.

Core operating profit increased by JPY 23.4 billion, including the impact of foreign exchange as explained earlier. As to temporary income and expenses, in the same period of the previous fiscal year, a gain on the sales of shares of Daiichi Sankyo Espha was recorded as temporary income.

Without such impact in the current fiscal year, there was a decrease of JPY 19.7 billion in profit. In terms of financial income and expenses, et cetera, due to the deterioration of foreign exchange gains and losses, profit decreased by JPY 8.5 billion.

Corporate taxes decreased by JPY 4.9 billion due to the decrease in pretax profit as well as a decrease in the effective tax rate compared to the same period last year. As a result, profit attributable to the owner of the company for the current period increased by JPY 100 million compared to the same period last year to JPY 85.5 billion.

Next time, we talk about business update. Please turn to Page 9.

This page shows the status of ENHERTU and Datroway performance. First, I'm going to explain ENHERTU.

FY 2025 first quarter product sales increased year-on-year by JPY 25.6 billion to JPY 155.2 billion due to sales growth mainly in breast cancer. Across main countries and regions such as the United States, Europe, ASCA and Japan, ENHERTU has maintained the #1 new patient share in each of the existing indications, including breast, gastric and lung cancer and established its position as a standard of care.

As for chemo naive HR positive HER2 low or ultra-low breast cancer, since we started promotion in January this year in the United States, solid progress has been made in market penetration. We have already acquired more than 50% new patient share and maintained the #1 market share.

In Europe, we obtained approval for the same indication in March and started promotion in April. With regards to HER2 low breast cancer post chemo, in main countries in Europe, such as Germany, France, Italy and Spain, we have maintained the #1 new patient share.

In addition, in France, reimbursement started in public sector in April. In China, sales are increasing steadily following the inclusion in the NRDL, National Reimbursement Drug List in January this year for each breast cancer indication.

Next, I will explain about Datroway. Sales for the first quarter of 2025 reached JPY 5.3 billion.

Approved for hormone receptor positive and HER2-negative breast cancer with a history of chemotherapy, the product was launched in the United States in January and in Japan in March, and sales have been steadily increasing. We have updated our full year forecast to JPY 21.6 billion, an increase of JPY 16.9 billion from the April forecast.

For better management of adverse reactions such as stomatitis and dry eyes, we distribute pamphlet to educate patients on preventive care and treatment methods as well as educational activities for health care professionals. In Europe, we launched in June following the approval for the same indication.

Additionally, in the United States, we have initiated promotion for EGFR-mutated NSCLC with a history of prior treatment with EGFR-targeted therapy and platinum-based chemotherapy. And it has been adopted in the NCCN guideline, and we have started promotion in June.

We will deepen its penetration where it's already launched and expand further with new launches in other countries and regions. Acquiring approvals on new indications, we will deliver ENHERTU and Datroway to as many patients as possible who need them.

Finally, even though we haven't prepared slides to this, we would like to provide an update on the setting of the cap on share buybacks we announced in April as we received many inquiries. Although it's still the period for the buyback, no shares have been acquired to date.

We will consider share buyback. As to the JPY 200 billion of the cap, comprehensively considering factors such as stock price levels and executed when conditions are met.

Although we have prepared for flexible share buyback, we will commit ourselves to achieve DOE of 8.5% of this fiscal year, even if we do not acquire own stocks. We will continue to provide returns to the shareholders through increase in dividend proportionate to the profit growth and flexible share buyback to enrich the shareholders' value.

Regarding U.S. tariffs and most favored nation treatment for drug prices in relation to the external environment, we are closely monitoring the situation and taking measures to minimize the impact.

Especially in terms of the tariff to minimize its impact, we are trying to expand our own production capabilities in the United States, among other options being considered. We believe the impact to this fiscal year's business performance will be limited at this point, even though it may have been introduced since we have already adjusted inventory levels for ENHERTU.

So this concludes my presentation. And now for the research and development update, I'd like to hand over to Abe-san, Head of Research and Development.

Abe speaking. I'm going to talk about R&D update.

First, an update on 5DXd ADCs. Please turn to Page 12.

As part of the progress of ENHERTU clinical development in HER2-positive breast cancer, I'm going to use two pages to explain DESTINY-Breast09 study we presented at ASCO this year. DESTINY-Breast09 is a Phase III study to evaluate the efficacy and safety of ENHERTU with or without pertuzumab versus standard of care THP in first-line HER2-positive advanced or metastatic breast cancer.

Primary endpoint is PFS. Secondary endpoints include OS and ORR, objective response rate.

At ASCO, we reported interim analysis results. In the ENHERTU monotherapy arm, evaluation is ongoing.

On Page 13, I will share the data we presented at ASCO. ENHERTU in combination with pertuzumab showed statistically significant PFS extension compared to the standard of care THP arm.

The median PFS was 40.7 months in the combination therapy arm with 44% reduction in the risk of disease progression or death compared to the control arm. Clinically meaningful PFS improvement was demonstrated.

Safety data in the combination arm was consistent with known profiles of individual treatments. The majority of ILD events were low grade, two Grade 5 ILD events were reported.

Based on the study results, ENHERTU in combination with pertuzumab was granted breakthrough therapy designation by U.S. FDA in July.

We will share efficacy and safety data with regulatory authorities towards regulatory submission aiming to establish a new first-line treatment for HER2-positive breast cancer. Please turn to Page 14.

I will give you an overview of DESTINY-Breast11 study. We are evaluating the efficacy of ENHERTU followed by THP in HER2-positive early breast cancer neoadjuvant settings.

ENHERTU THP therapy demonstrated statistically significant and clinically meaningful improvement in the primary endpoint of PCR pathological complete response compared to the standard of care ddAC THP therapy. No new safety signals were identified.

Safety profile of ENHERTU THP therapy was favorable compared to the standard of care in the control arm. We will present the data at ESMO 2025.

On Page 15, I will explain our efforts to establish an earlier treatment of HER2-positive gastric cancer with ENHERTU. DESTINY-Gastric04 is a Phase III study to evaluate the efficacy and safety of ENHERTU monotherapy versus the current standard of care, ramucirumab and paclitaxel combination therapy in second-line HER2-positive gastric cancer and gastroesophageal junction adenocarcinoma.

In the interim analysis, ENHERTU demonstrated median OS as primary endpoint of 14.7 months, showing clinically meaningful improvement with 30% reduction in the risk of death compared to the control arm. ENHERTU is already approved for second-line HER2-positive gastric cancer in the United States and Europe.

If the second-line indication is established in Japan based on this data, ENHERTU is expected to become a global standard of care indicated for HER2-positive gastric cancer and gastroesophageal junction adenocarcinoma in the second-line settings and beyond. From Page 16, I am going to explain 2 Phase III studies as a new challenge ENHERTU is taking on in the field of gynecological cancer.

First, DESTINY-Endometrial01 study in HER2-expressing mismatch repair proficient pMMR endometrial cancer. DESTINY-PanTumor02 study, which we presented at ESMO 2023 demonstrated encouraging efficacy signals of ENHERTU in HER2-positive endometrial cancer.

Based on that data, we will evaluate the efficacy of ENHERTU in combination with rilvegostomig or ENHERTU in combination with pembrolizumab in primary Stage II, Stage IV or recurrent endometrial cancer in the first-line settings. We initiated the study in June this year.

On Page 17, I will explain the other Phase III gynecological cancer study for ENHERTU. DESTINY-Endometrial02 study.

This is a study to evaluate the efficacy of ENHERTU for adjuvant therapy in high-risk HER2 expressing endometrial cancer with no evidence of disease post surgery. Primary endpoint is DFS, disease-free survival.

Aiming to cultivate early identification of HER2 expressing endometrial cancer and establish a curative treatment, we are planning to start the study in the second half of FY 2025. Please turn to Page 18.

As a new formulation of ENHERTU, we initiated the development of a subcutaneous formulation containing [ hylonidase ]. Currently, ENHERTU is administered intravenously subcutaneous formulation is expected to provide shorter injection time, reduce the burden and enhance convenience for patients, contributing to better POL.

Phase I study consists of dose escalation and dose expansion parts. In the first half of FY 2025, we plan to initiate the study.

Based on this study outcome, a registrational study is to follow. From Page 19, I will cover Datroway.

The first indication for Datroway was HR-positive HER2-negative breast cancer. In June this year, we obtained Datroway's first approval for lung cancer in the United States.

Datroway was approved for the treatment of patients with locally advanced or metastatic EGFR mutated. NSCLC previously treated with EGFR-targeted therapies and platinum-based chemotherapy.

Based on the results of TROPION-Lung05 and TROPION-Lung01 studies, the indication was granted accelerated approval following breakthrough therapy designation and priority review. Right now, TROPION-Lung15 is ongoing as a confirmatory study.

On Page 20, I will explain the results of clinical study data analysis using a biomarker candidate in NSDLC. QCS is a novel computational pathology approach that precisely quantifies and locates targets.

TROP2 NMR by QCS potentially projects the efficacy of Datroway through analyzing the TROP2 expression in the cell membrane relative to total TROP2. TROPION-Lung02 shown here is a study to evaluate the efficacy and safety of Datroway and pembrolizumab with or without platinum chemotherapy in patients with non-actionable genomic alteration NSCLC.

In the analysis of first-line treatment as a whole, which we presented at ASCO, both doublet and triplet showed durable antitumor activity and tolerability of the combination was also good. TROP2 NMR was applied as a biomarker to TROPION-Lung02 study data and retrospective analysis was performed.

And in TROP2 NMR positive patients, improvement of both PFS and OS was observed compared to negative patients. Out of the ongoing Phase III studies for Datroway, we plan to stratify the patients based on TROP2 NMR as a biomarker in AVANZAR and TROPION-Lung10 studies.

On Page 21, I will explain HER3-DXd. HER3-DXd has been under development for EGFR-mutated NSCLC as the first indication.

Based on HERTHENA-Lung01 study results, our regulatory submission was accepted in the United States in December 2023. Its confirmatory study, HERTHENA-Lung02 study met primary endpoint PFS without any new safety concern.

However, based on the subsequent OS results from HERTHENA-Lung02 study and our discussions with U.S. FDA, our application based on HERTHENA-Lung01 study was voluntarily withdrawn in May this year as was already announced in our press release.

On the left, you can find PFS and OS data from HERTHENA-Lung02 study, which we presented at ASCO this year. HER3-DXd is under broad clinical development across multiple solid tumors, including HERTHENA-Breast04 study, which I will explain on the next page.

The position of HER3-DXd in our pipeline has not been changed. Please now look at Slide 22.

The HERTHENA-Breast04 study is a new Phase III study evaluating HER3-DXd for hormone receptor positive HER2-negative metastatic breast cancer with progression after CDK4/6 inhibitor as the first-line therapy with PFS and OS as the primary endpoints. As a prerequisite of this study, ICARUS-Breast01, a Phase II study confirmed the efficacy of HER3-DXd in the setting of post first-line CDK4/6 inhibitors and chemotherapy.

The HERTHENA-Breast04 study is scheduled to begin in the first half of this fiscal year. Now please look at Slide 23.

We obtained promising data of the IDeate-Lung-01 Phase II study in April this year, evaluating I-DXd's efficacy as a second line and beyond on extensive stage small cell lung cancer. In this study, we compared 8.0 milligram per kilogram and 12 milligram per kilogram doses and 12 milligram per kilogram was chosen in the dose extension part.

Data will be presented at upcoming congresses. In extensive stage small cell lung cancer, in addition to this study, IDeate-Lung02 study, a Phase III study as second-line therapy is ongoing.

Slide 24 summarizes the progress of other studies and approval status of 5DXd ADCs. We have initiated a Phase I/II study of HER3-DXd on refractory pediatric cancers.

We have initiated two Phase III studies of I-DXd, namely IDeate-Esophageal01 study on esophageal squamous cell carcinoma as a second-line therapy and IDeate-Prostate01 study on chemo naive metastatic castration-resistant prostate cancer. We have begun two R-DXd studies, namely REJOICE-GI01, a Phase II study to explore signals for gastrointestinal cancers and REJOICE-Ovarian02 Phase Ib/II study evaluating combination therapy for ovarian cancer recurrent after platinum-based chemotherapy.

From Slide 25, I will talk about the next wave update. First, please look at Slide 26.

We have been actively conducting research on immuno-oncology and acquired several candidates for further development. And one of these is the IO ADC, namely ADC effective on cancer immunity, which we are introducing today.

DS3610 is an ADC that combines a STING agonist with an antibody. By delivering our proprietary STING agonist to cancer tissues, it activates antitumor immunity locally in the tumor.

It employs a novel Fc modification technology, which is expected to diminish systemic cytokine release. In the preclinical research, we have confirmed the activation of immune cells and sustained antitumor effects and combination effects with a variety of therapeutic agents were observed as well.

We are planning to begin DS3610 first in-human study in the second half of this fiscal year. From Slide 27, we will discuss updates on the licensed out products.

Now please look at Slide 28. Taletrectinib is an oral ROS1/NTRK inhibitor.

We have discovered as DS-6051 and licensed out to AnHeart Therapeutics in 2018. And currently, Nuvation Bio has extensive -- exclusive rights to develop, manufacture and commercialize it worldwide.

This Taletrectinib received approval in January in China and in June 2025 in the United States, indicated for locally advanced or metastatic ROS1-positive non-small cell lung cancer. We are pleased that the asset we have discovered will be able to contribute to treating patients.

Next, we would like to make announcement on IR events associated with WCLC and ESMO. Now please look at Slide 30.

We will be hosting IR events in association with WCLC and ESMO. For WCLC, September 18 at 8:00 a.m.

Japan Standard Time and for ESMO on October 21 at 9:00 p.m. Japan Standard Time.

Both events will be held virtually. Slide 31 onwards will cover the upcoming news flow.

Now please look at Slide 32. As for presentations at major congresses, we plan to present the results of the intracranial efficacy analysis of the TROPION-Lung01 study at WCLC 2025.

At ESMO 2025, primary analysis of DESTINY-Breast11 study and the data presentation of TROPION-PanTumor03 study as well as first data presentation of DS-3939, the next DXd-ADC following 5 DXd-ADCs, among others. Regarding regulatory review outcomes for the DESTINY-Breast06 study from Japanese authorities, for TROPION-Breast01 study from Chinese authorities, we expect to receive review results in the first half of this fiscal year.

Regarding the anticipated timing for obtaining key data in the near future, the data of ENHERTU's DESTINY-Breast05 study is expected to come out in the second half of this fiscal year and Datroway's TROPION-Breast02 study for triple-negative breast cancer as the first-line therapy in the second half of this fiscal year. Incidentally, the time line for obtaining data from Datroway AVANZAR study is now anticipated to be the first half of calendar year 2026.

Slide 36 and beyond are the appendices for your later reference. This concludes my presentation.

[Interpreted] Now we'd like to move on to a Q&A session. [Operator Instructions] First question, Mr.

Yamaguchi from Citigroup Securities.

[Interpreted] Yamaguchi from Citigroup Securities. First about AVANZAR study, the timing of disclosure would be later this year, has been postponed from later this year to early next year.

It's an open study. At the end of last year, enrollment was completed, as I heard before.

The reason for the delay, I think is because of the events. If there is a delay in general, we feel a bit worried.

Any impact on the probability of success? It's not blind yet.

So I'm sure you know the data. Anything you can share with us?

[Interpreted] Regarding AVANZAR study, we are waiting for the results as well, but it's been postponed. AZ is very confident in its development.

We don't have any further information on our end. So we will do what we can do.

That's our stance. There's no other impact according to our view.

[Interpreted] another question about I-DXd. I just recalled your commentary before and promising data will be available in April.

And I said -- thought you said that at the last time or is it the very first time you say this? No, this is the first time.

And based on that, since you say this is promising, so in a very early stage, you may be able to file for approval? Or do you have to wait for additional studies?

Otherwise, you cannot go to registration. And you say the data is promising.

And then if it is good enough for the early approval, then I'd like to know that.

[Interpreted] Detail of the data will be presented at the Congress. And at this moment, we just can communicate that we got the promising data.

And before going to the filing for the approval to the timing of the -- when the filing is accepted by the authority, then we'd like to make announcement separately.

[Interpreted] And so you are not really commenting whether you are going to go for the filing or not?

[Interpreted] No, not yet. That's something we are going to consider going forward.

[Interpreted] it's not in time for WCOC, so it's difficult for you to say the timing like when we are going to present the data within the end of this year at Congress.

[Interpreted] next question from Hashiguchi-san of Daiwa Securities.

[Interpreted] This is Hashiguchi speaking. The first question is about the DB02 study and this result, how will it be reflected to the clinical practice?

And doctors amongst those physicians or clinicians, some of them may continue the combination therapy until the progression of disease or rather, if they see the response or tumor shrinkage, then they may stop doing HER2 and then switching to other maintenance therapy. For considering the balance with the safety.

I believe some physicians are thinking like that. Of course, there is no evidence that, that is a better way or right way to do.

But if this regimen is approved and then how will that be actually used? And evidence tells that you can continue until the progression of disease.

So most of the cases, the drug will be used in such a way. But your next -- are you going to consider that kind of usage going forward?

Or practically speaking, there is a possibility that there may be many different uses considered. Then to answer such clinical question, are you going to collect the evidence?

Do you have any plan to collect clinical evidence to answer such questions?

[Interpreted] Thank you, Hashiguchi-san, for your question. So the first question, actually, the speaker didn't work, but you are talking about DB-09, right?

[Interpreted] Yes, yes. And I would like to point this out to the development departments.

And at this moment, DB09 interim results analysis and then from the evidence, the exacerbation or other adverse events or with the desire of the patients in HER2 will be continued and considering the risk over benefit and the benefit supercedes the risk. But what you have just pointed out is going to be discussed amongst our development team.

[Interpreted] Thank you for your comment. Understood.

So at this moment, having any consensus in the clinical practice in terms of the right duration of administration, we are going to get the approval in the first-line usage. That's it.

[Interpreted] secondly, I have a question about Datroway. Your sales forecast revision in May or rather in April, there was a forecast.

You made a lot of changes or revisions. Compared to your assumptions, what was different?

How did you change your assumptions in what respect? Any specific comment?

[Interpreted] Thank you for your question. Regarding the changes in the assumptions in detail, there's nothing, unfortunately, we can explain.

But with regards to the market penetration, it have not been able to predict the market penetration accurately. That's why there is a big gap, but it's a positive gap.

The adoption at institutions is making steady progress. In Japan, U.S., respectively, initial uptake has been positive and strong, particularly in the United States.

HER2 breast cancer, late line settings, share is rising there. In lung cancer, we have just started.

So it's going to be seen from now on. In lung cancer, there are high unmet medical needs in the target patient population.

So there are needs to a certain degree in our view. At any rate, regarding our revised forecast, the proportion in sales breast cancer has a large proportion.

[Interpreted] So most of the revision is from breast cancer, right, in the current forecast. That's all for me.

[Interpreted] next question is from Wakao-san of JPMorgan, please.

[Interpreted] This is Wakao of JPMorgan. I have a question.

In the first quarter of this year, the gross margin was quite favorable. And are there any special factors?

Or is it just because of the product mix? That is my first question.

[Interpreted] Thank you for your question. In principle, it is coming from the product mix.

ENHERTU and [ Lixiana ] are selling very nicely. And this is the first quarter result.

So this may change going forward. But in the latter half of the fiscal year, we will be selling more vaccines.

And as the cost ratio, the vaccine may give some impact. So the annual rate -- the cost ratio is as expected, but the major factor is the product mix.

So [Interpreted] ENHERTU and Datroway margin didn't change, right?

[Interpreted] No. No, we do not expect.

[Interpreted] as a follow-up question, profit share looks small. Any special factors here?

[Interpreted] Nothing we are aware of, particularly special background. Profit sharing regions based on the sales and half of the gross profit is booked.

[Interpreted] Yes. Yes.

Nothing coming over the different period. And when we consider the tariff impact, then can you eliminate the impact?

Well, of course, we need to consider the duration. And there is grace period 1 year, 1.5 years.

And then some companies are telling that they are going to bring the manufacturing site all over to the United States. And of course, you are considering the manufacturing site in the United States.

But if the duration of the grace period is only 2 years, then how much can you make a transfer? Do you think that you can make a sufficient amount of the transfer during this period?

[Interpreted] Thank you for your question. Yes, we are still considering that seriously and investigating that.

And in the timeline, it is told that 1.5 years or 2 years, and we are now considering what we can do in that period. And production location, especially in terms of ADC we have the steps to manufacture such as the antibody conjugation or whatsoever.

So what would be done where? And considering the tariff mechanism, we are considering a variety of different scenarios so that we can cope with the situation as much as possible.

And that actually will depend upon the amount and also the rate of the tariff should also be considered. Therefore, it really depends upon the tariff rate.

And on top of that, in a 2-year time line, how much can we prepare? Apart from that, internally or maybe externally manufacturing site may be considered and also where -- what we put in what part of the world in terms of our supply chain, and we are now considering that internally.

[Interpreted] Understood. So no problem for this term, but we may expect uncertainty in the next year?

[Interpreted] Well, of course, it really depends upon the tariff rate. But if the tariff rate is not that high, then you think that you can -- you believe that is manageable.

Well, of course, it really depends upon the rate and also how the tariffs are levied in what part. And of course, it really depends upon how the financial evaluation or the amount will be evaluated.

So it really depends upon those factors. And therefore, it's so difficult to make any forecast of a specific amount of the financial impact.

[Interpreted] once the rules are determined, please let us know.

[Interpreted] next question BofA Securities, Mamegano-san, please.

[Interpreted] Mamegano from BofA Securities. [ Asamuchi-san ] asked the question, there is some overlap with his question.

I'd like to know about the data in small cell lung cancer. In the dose expansion part, there's going to be a promising data.

Does that include dose extension as well? Last year at WCLC, 80 milligram was already presented at the Congress.

80 cases rather. But the additional 100 cases are included in the data?

[Interpreted] Yes. There's mentioned dose extension, but dose expansion is included as well, although the slide says dose extension.

[Interpreted] I'd like to confirm in the earlier question, by the end of this year, you're going to present at congress. So by the end of December?

Another question is about HER3. HERTHENA-Breast03, you mentioned the result.

But what is the population? Is that -- there may be overlapping with CB06?

Is there any cannibalization you are considering or not? And how are you going to market HER3?

[Interpreted] Thank you for your question. There's no overlap.

But for TPC, the physician can choose ENHERTU if they like. Therefore, the study is designed in such a way.

But HER3-DXd with ICARUS-01Breast study, it has a very good result or promising result. Therefore, HER3-DXd is the area that it covers.

And also we have a different safety profile. Therefore, having more option for the treatment, we would like to focus HER3-DXd in this area.

[Interpreted] Well, I don't understand what you mean by not overlapping the HER2 negative breast cancer. That is IHC0 but also 1 plus or 2 plus.

You are talking about HER2 low or ultralow are included, right? Am I correct?

[Interpreted] Well, I would like to explain more. HERTHENA-Breast04 study is CDK4/6 inhibitors and also the hormonous therapies.

And following that therapy, it will be used. Therefore, there is no direct competition.

with CD4/6 inhibitor. And let me also repeat the TPC group and HER2 can also be an option so doctors can choose it if they like.

So that is the situation. But still, as I said, the HER2-DXd is going to be developed in this treatment line.

That is our idea.

[Interpreted] Then -- so that may be used before the HER2. You are considering that, too.

[Interpreted] Yes. Yes, that's right.

So yes, that's why we are designing the study in that way.

[Interpreted] Next question. Sanford Bernstein, Miki Sogi, please.

[Interpreted] At ASCO, you presented TL02 QCS analysis, looking at the data for AVANZAR study positive results can be expected with higher confidence. On your end, doublet results were very good.

If you look at the patient population and the dose being used, that was different from the triplet cohort. Still, the results were very good.

So based on these results, what kind of clinical studies are you going to proceed in lung cancer with Datroway.

[Interpreted] Thank you for your question. you asked two questions.

First, biomarker candidate and with the higher possibility or probability of development of Datroway in lung cancer in NSCLC, if there is a biomarker, we have a higher probability that is a learning for us. That's how we see this.

That's one question to your -- answer to your question. Next, doublet and triplet results were available and recruitment was not sufficient.

So we are going to do more. But as for learning in both triplet and doublet, there was sustained efficacy we are able to confirm.

So treatment option is being expanded. DL07, 08, based on our ideas, we are proceeding, including AVANZAR, kind of combination therapies are good, we'd like to discuss and based on the results, we'd like to proceed with new clinical studies.

Did I answer your question?

[Interpreted] I have another question. ENHERTU subcutaneous formulation is what I'd like to talk about.

And ENHERTU has a variety of indications right now. But ultimately, the Phase III should be carried out by a different indication.

[Interpreted] First, we have to do the clinical study for the subcutaneous formulation. That is the beginning.

And then the target population. I will be now checking.

Yes, for development, that will be discussed going forward.

[Interpreted] next, Morgan Stanley MUFG Securities, Mr. Muraoka, please.

Muraoka from Morgan Stanley speaking. First question, share buyback.

We have not used the limit yet. You have not reached the criteria yet.

If I may, the stock price was in the early 3,000 level, but you don't think that it's a low level. Is my understanding correct?

[Interpreted] It's difficult to judge. As for the stock price, there are a variety of factors for the share price, so looking at the stock prices, whether our corporate value is reflected completely, there may be some of the enterprise value, which may not be fully reflected in our view.

But still reacting to everything to buy back shares. No, that's not really the case.

We have to consider comprehensively. We will look at the stock price level to execute share buyback.

And that's why we set the limit for share buyback. And you may wonder what kind of conditions we have set.

But as of now, we will judge comprehensively and be flexible. That's why we have set the limit.

[Interpreted] in other words, the stock price of JPY 3,200 or so, if that is that law, you didn't execute that exercise. So -- but once the year has end, then the DOE -- well, if the unused portion could be returned to shareholders or not.

Can we see the situation in such a way?

[Interpreted] Well, The stock price level, of course, it really depends upon that time -- the consideration timing and also it depends upon the background. In April, when we set the cap of the buyback, and it was written in the press release.

And in the release, considering the stock price level and we will be operating flexibly that was stated in the press release. And based on the stock market condition, we may exercise or we may not exercise a complete amount to the limit.

And in the financial result, the summary, and we have also made announcement of the comprehensive decision of our securities and we have to make investment for the long-term growth. Therefore, we have to make investment and also we have to invest to R&D.

And at the same time, the business is expanding and also operating cash is now expanding. So we have to consider these factors.

But at the same time, we would like to establish a good balance to the return to the shareholders. And in terms of the return to the shareholders and our policy is that stable dividend payment.

And proportionate to the increase of the profit, we will increase the return. So we have committed DOE of 8.5%...

[Interpreted] one more question about Datroway on Page 39, there was future [indiscernible] TL07, 08 by the end of next fiscal year, according to the update, it's earlier than before. And AVANZAR is being delayed.

So it may become available almost the same timing or later in the fiscal year, T07, T08 not include biomarkers. QCS is not included in here.

Even without QCS, it's going to be fine. What's your rationale?

Why you think so?

[Interpreted] TL07, 08 FY 2026, according to a [indiscernible] on the slide, when please allow us to refrain from commenting on that specifically.

[Interpreted] The other question was about sorry, QCS it's not included in these studies, but is it going to be fine? What's the rationale behind?

Why you think it's going to be fine? In 07,08 studies, we have clinical study results to date.

So we are proceeding with confidence. And also QCS MR for patients is desirable.

If that's the case, what to do with this, we will do our best in development?

[Interpreted] We are discussing internally. So regarding how we are going to proceed, it's now under consideration and discussions.

TL07,08, we are proceeding with the development with confidence right now.

[Interpreted] Okay. So QCS is not included in both of them.

Am I correct?

[Interpreted] Yes, that's right. Yes, that's correct.

[Interpreted] Next question from Goldman Sachs, Ueda-san. Sakai-san UBS Securities, please.

[Interpreted] Well, the time is limited. So I would like to just one question.

Abe-san, this is a retrospective question. I'm sorry about that.

On Page 21, HER3 data. And when I look at OS data, and actually, there's no difference or rather placebo or the standard of care versus this seems to be better than the drug.

So it's so difficult to verify this. But what actually is causing this phenomenon?

Have you analyzed that? And based on such a result, once you get the PFS, you have two endpoints and you are going to use PFS and the first for filing and then you will follow up with the OS data later.

And can you do that? And have you discussed that matter with Merck?

And as lessons learned for the future, I would like to ask for your comment.

[Interpreted] The most important part is the lessons learned after the clinical trial. So what it actually means is now being discussed in the working level.

And we have also learned that ORR or PFS cannot -- and when we cannot expect the OS extension, then what data will be required so that we can carry out the clinical trial to get the early and expedited approval. That's now being discussed also.

That's what we can tell you right now.

[Interpreted] once you conclude the discussions, please give us an educational lecture. Can we ask you lessons learned should be shared, so including Congress in a formal way, we'd like to present even in such a format, we'd like to have another opportunity to explain.

[Interpreted] Thank you very much. Your comment is heard.

[Interpreted] The next question is from Barker-san from Jefferies.

[Interpreted] and my question is about the share buyback. And according to your presentation, the major goal and purpose is the DOE KPI to achieve.

So I believe this is one of the tools to achieve that. That's my interpretation.

And looking at the results, you have more profit than you have originally planned. Then without a share buyback, you may be able to achieve DOE.

Therefore, there's no necessity for you to buy back the share right now. Am I correct?

[Interpreted] Thank you for your question. In terms of DOE, as I have just explained, the 8.5% can be achieved without any share buyback.

That's how we see it. But on the other hand, in terms of the share buyback, considering the stock price level, we would like to be flexible.

That's what I have just said, and that's our position right now. So stock price level and the situation in the stock market, we may -- we will behave flexibly.

The last question is from Tony Ren from Macquarie.

Okay. Perfect.

Yes. So first of all, a quick one.

So about your effective tax rate on Slide #7, it looks like there is quite a bit of decline in the first quarter compared to previously. Do you think this is sustainable?

[Interpreted] Corporate tax rate this year, in the first quarter, if you look at the tax rate on a quarterly basis, it's calculated based on the simplified method or abbreviated method. This can be subject to change.

The tax rate expected in FY '25 is 19.9%, we're expecting, but this can be subject to further change from now on.

Okay. Perfect.

Then yes, I would like to ask about your new STING agonist ADC, DS3610. This -- so first of all, about the mechanism of action here.

Looking at the [ cartoon ], historically, all your ADCs has been internalized by the tumor cells and then the payload is released, right, conditionally within the tumor cells. Looking at the [ cartoon ], it looks like the here, it's the T cells that's doing the antitumor -- eliciting the antitumor activity and the payloads will be released into the tumor microenvironment.

Just want to understand if my understanding is correct.

[Interpreted] thank you very much for your question. The detail of this research in the interest of time will be explained more in detail in other opportunity.

Well, this is our original STING agonist, how it is released, including that information. And at the time, we would like to give you the information.

But we are very glad that you are interested in that.

Okay. Perfect.

Yes, we look forward to more information on the antibody linker and payload.

I see more hands, but we have exceeded the scheduled closing time. So with this, we would like to conclude today's financial results reporting.

And if you have more questions, please contact our IR or the public relations members. Thank you very much for your attendance and attention.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]