Q3 2019 Otsuka Holdings Co Ltd Earnings Presentation
Chiyoda-Ku, Tokyo Nov 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Otsuka Holdings Co Ltd earnings conference call or presentation Tuesday, November 12, 2019 at 7:00:00am GMT
TEXT version of Transcript
* Tomohiro Emura
Otsuka Holdings Co., Ltd. - Director of Corporate Planning Department
* Yuko Makino
Otsuka Holdings Co., Ltd. - CFO & Director
Yuko Makino, Otsuka Holdings Co., Ltd. - CFO & Director 
Let me report on the consolidated financial results for fiscal year 2019 Q3.
Please turn to Page 3. These are the 4 agenda items today.
Please turn to Page 4. First, let me outline the consolidated financial results for fiscal year 2019 Q3. Four global products in the pharmaceutical segment increased 37.5% year-on-year, significantly contributing to the consolidated results. In addition, business profit before R&D expenses, a key performance indicator stipulated in our third midterm management plan, rose 30.8% from the previous year. We are confident that our business earnings power is steadily rising.
Please turn to Page 5. This slide compares the business profit this year versus last year. As was explained earlier, 4 global products internally developed in the pharmaceutical segment contributed to the revenue increase of JPY 80.7 billion. Although the details will be given later for each segment, overall business profit was up 55% to JPY 156.3 billion, surpassing the forecast in the revised plan unveiled in August 2019.
Please turn to Page 6. This shows revenue and business profit by segment. The pharmaceutical segment increased both revenue and business profit by 14% and 73.7%, respectively. This has driven the entire revenue and profit increase in the consolidated financial results.
Now let me explain specifics of the pharmaceuticals and nutraceutical-related segments in the next slides. Please turn to Page 7. This shows revenue of the pharmaceutical segment. The sales for 4 global products were up 37.5% to JPY 271 billion, propelling the growth in our third midterm management plan. This made a significant contribution to overall revenue increase. Major factors behind this includes ABILIFY MAINTENA, REXULTI, Samsca and JINARC and domestic products whose sales were brisk. In particular, JINARC grew significantly, and more specifics will be given in the next slide. As a result, sales revenue increased 14% to JPY 672.7 billion.
Please turn to Page 8. This describes JINARC sales in the U.S. The quarterly sales on the local currency basis has expanded ever since 2018 when the product was launched in the market. The sales is now surpassing the revised annual plan announced in August and is growing robustly. The number of monthly cumulative new patients is still revising. In an aim to further contribute to ADPKD treatment and to maximize the product value, we will continue taking solid safety measures and engage in patient enlightenment and clinical data provision activities.
Please turn to Page 9. This slide shows pharmaceutical segment business profit. As was explained before, sales revenue increased largely attributable to 4 global products, which significantly contributed to profit increase. Under other expenses, the impact of one-off litigation-related expenses previously reported were eliminated. Also, cost efficiency efforts contributed to profit increase. R&D expenses saw an increase in clinical trial-related costs for AVP-786, ultrasound ablation system for renal denervation, centanafadine, REXULTI, TAS-120 and Visterra pipelines. As a result, business profit for the segment was up 73.7% to JPY 132.6 billion.
Please turn to Page 10. This summarizes revenue for nutraceutical segment. Functional beverages saw a decrease in category sales because of the unusual weather patterns in Japan in July this year as well as the backlash of scorching heat last summer. However, sales for POCARI SWEAT and other products soared, thanks to promotional activities tailored to regional characteristics and needs, raising product recognition.
Next, functional foods. Although the sales of Nutrition & Santé went down because of foreign exchange rate fluctuations, Daiya Foods plant-based foods were steadily rising. As a result, revenue for nutraceutical segment was down 1.3% year-on-year to JPY 253.2 billion. However, excluding the ForEx impact, it recorded a slight increase from a year earlier.
Please turn to Page 11. I'd like to explain upward and downward factors contributing to the business profit in nutraceuticals-related segment. As was explained on Page 4, the sales for 3 nurture brands, which are expected to make significant contribution in our third midterm management plan, were up 28.5% attributable to effective promotion featured by their differentiation. However, the sales for 3 major brands were down due to intensifying competition and appreciation of the yen. As a result, business profit was up 1.4% from the year earlier to JPY 36.9 billion.
Please turn to Page 12. Finally, I'd like to explain performance forecast for fiscal year 2019. Both sales revenue and R&D expenses for 4 global products in the pharmaceutical segment were revised. As a result, business profit is likely to exceed the revised forecast in August by JPY 10 billion. Meanwhile, considering a potential impairment loss of tangible fixed assets in Q4, both operating profit and net profit remained the same. As was timely disclosed today, we decided to continue developing AVP-786. At this stage, it has no impact on the performance forecast for fiscal year 2019.
That concludes my presentation on the consolidated financial results for fiscal year 2019 Q3. Thank you very much.
Tomohiro Emura, Otsuka Holdings Co., Ltd. - Director of Corporate Planning Department 
Let me report you on pharmaceutical development update. Please turn to Page 18. These are the 4 agenda items today.
Please turn to Page 19. The table summarizes the key development progress in Q3 2019. LONSURF has obtained an indication for the treatment of unresectable advanced/recurrent gastric cancer in Japan in August and in Europe in September. Following the approval in the U.S. in February, it has so far been approved for gastric cancer in the 3 regions, namely, Japan, the U.S. and Europe.
Moreover, the preliminary version of the Japanese gastric cancer treatment guidelines was unveiled on the website in September where LONSURF has been added to the recommendation level A category together with nivolumab and irinotecan as a treatment option for tertiary treatment for unresectable advanced/recurrent gastric cancer. As for the progress on colorectal cancer, the product has obtained an indication in China in August for metastatic colorectal cancer patients who have been received fluoropyrimidine, oxaliplatin and anti-VEGF antibody treatment. ABILIFY long-acting injection for intramuscular use made an NDA submission to be indicated for suppressing recurrence and relapse of mood episodes in bipolar disorder in Japan in September. Because the conditions require long-term treatment, the long-acting injection is expected to exert a stable therapeutic effect in the patients.
ASTX295 has initiated Phase I and II studies on solid tumor patients in the U.S. in July. This drug is an MDM2 inhibitor discovered by Astex. MDM2 is a protein that regulates the tumor suppressor gene p53. By inhibiting MDM2, the drug activates p53. In the studies, we will ascertain characteristics of the drug based on knowledge obtained through preclinical studies.
Pertaining to canerpaturev, we withdrew the application for malignant melanoma in Japan in September when Takara Bio has revised its development plan from the perspective of management strategy.
Please turn to Page 20. I'd like to introduce some key topics. TAS-115 has been developed as a second-generation multikinase inhibitor. We are conducting 2 Phase II studies involving the agent, one for CRPC, castration-resistant prostate cancer; and the other for IPF, idiopathic pulmonary fibrosis. Of those, I'd like to update on IPF today.
IPF is a type of idiopathic interstitial pneumonia, which is a designated intractable disease. The disease is a pulmonary disorder with poor prognosis. With chronic and progressive advancement of the disease, advanced fibrosis occurs, eventually causing irreversible honeycomb lung formation. The median survival in Japan is approximately 3 years since the patient is registered as a new designated disease case. The prognosis is poor similar to advanced cancer. Prevalence in Japan is slightly below 15,000. About 10 per 100,000 people are set to be affected in Japan. Treatment options are limited. There are only 2 agents, namely nintedanib and pirfenidone, that are recommended by the 2015 IPF guideline.
Please turn to Page 21. TAS-115 is an oral multikinase inhibitor whose MOA involves the inhibition of PDGFR and VEGFR. It is supposed that the suppression of fibroblast growth plays an important role for IPF. Part of the mechanism involves PDGFR inhibition, which holds the key.
In addition, angiogenesis inhibition by VEGFR inhibition, together with the suppression of chemokine production through CSF-1R inhibition, are considered to suppress fibrosis overall. The interim results from the Phase II study indicated that the drug was confirmed to alleviate the lowered FVC or forced vital capacity in the patients who are judged to be nonresponsive to prior treatment with nintedanib or pirfenidone. Gastrointestinal toxicity, which has been a challenge with the existing drugs, was relatively mild with the agent. Based on the final results, we are now preparing to proceed to a next step.
Please turn to Page 22. The table indicates when the Phase III studies are expected to complete for the major projects. The trials in the red box on the left panel are scheduled to complete by the end of 2019. For the 305 study for AVP-786, as was reported by Makino, we will continue the study as was timely disclosed today.
Please turn to Page 23. The slide shows the projects planned for NDA submission and Phase III advancement in 2019. The red font indicates the projects that made progress in the current year. Brexpiprazole initiated a Phase III study for PTSD in October. We will be reporting the results in the briefing for Q4 financial results. For your reference, major projects by category are shown in the appendix.
With that, I'd like to conclude my presentation on the pharmaceutical development update. Thank you very much.