Kenji Yasukawa: Hello, everyone. I’m Kenji Yasukawa from Astellas Pharma, Inc. Thank you very much for joining our FY 2021 financial results announcement meeting out of your very busy schedule today. Page 2 is a cautionary statement regarding forward-looking information. I’m not going to read this.

Page 3 is the agenda for today. From Page 4, I’d like to go into the main topics. First, I will explain the major progress in the fourth quarter based on our strategic goals; organizational health goals; and performance goals set in corporate strategic plan, CSP, 2021. These 3 goals are not independent but complementary to each other, so they are intended to show the total picture on where our initiatives are positioned with respect to these goals and how they are progressing. We have -- nonfinancial information is also contained here.

And the stock market is requesting for the disclosure of the nonfinancial information. It can be useful for the stock market to understand what we regard as meaningful progress. That’s why I’m sharing this

with you: first, significant achievements in the fourth quarter. We completed fezolinetant long-term safety studies, obtained PADCEV approval in EU on advanced ASP8731 and [3082] to the clinical stage. Regarding important progress in our sustainability initiatives, we updated the materiality matrix and conducted the first sustainability meeting.

Furthermore, from the organizational health goal perspective, in order to substantially transform our corporate culture, we established Astellas leadership expectations and conducted training to all leaders. Commercial functions such as communication, market research, training and promotional material development, including digital, used to report to each region before, but we reorganized these commercial functions in order to centralize and further standardize the functions of the global organization. As for AT132, our initiatives towards resuming development made progress as scheduled. We reviewed adverse events and made preparation to meet with FDA. On the other hand, recognizing impairment loss had a financially negative impact.

We understand SG&A cost control is a challenge we need to address. Based on this CSP2021 progress in the fourth quarter, I will explain FY 2021 financial results in more detail from the next page. Page 5. In FY 2021, revenue increased and profit decreased. We achieved revenue increase for the first time since FY 2018.

Revenue rose by 4% from the previous year and was slightly behind our full year forecast. Sales of XTANDI and strategic products increased by 19% year-on-year, offsetting sales decrease due to termination of sales and distribution, transfer of product, but were behind our ambitious full year forecast aligned to CSP2021. SG&A expenses rose above our full year forecast. R&D expenses were on track but below our full year forecast excluding one-off factors. Core operating profit was behind our full year forecast due to proactive investment towards the future, temporary slowdown of XTANDI sales in the fourth quarter and cost of sales increase by the yen’s sharp depreciation at the end of FY 2021.

Full-basis operating profit was also behind our full year forecast. As you can see on the slide, we booked impairment losses in the fourth quarter which were not included in our full year forecast. Next, on Page 6, I will explain FY 2021 financial results. Revenue increased to JPY 1.2962 trillion, up 3.7% year-on-year. The achievement against our full year forecast was 98%.

Core operating profit was JPY 244.7 billion, down by 2.6% from the previous year. The achievement against the full year forecast was 90.6%. The bottom half of this page shows our full-basis results. In FY 2021, we booked JPY 104.3 billion as other expense. Operating profit was JPY 155.7 billion, up 14.4% from the previous year.

Profit increased to JPY 124.1 billion, up 2.9% from the previous fiscal year. On Page 7, let me explain the financial results for main products. As for XTANDI, global sales increased to JPY 534.3 billion, up by JPY 75.9 billion or 17% year-on-year. It is a product with over JPY 500 billion sales but continues to make a strong double-digit growth, but sales were behind our full year forecast with the 96% achievement rate. By region, we were behind in U.S.

and EU. In the United States, the impact of COVID-19 led to less sales promotion activities and slowdown of new patient starts. In addition, there was an increased impact from competition in the fourth quarter. We were also affected by the temporary rise in the ratio of patient assistance program, the so-called PAP, which is implemented to ensure access by patients who have difficulty paying for XTANDI drug costs. We think these are one-off factors during the fourth quarter, and these impacts will decrease in FY 2022.

We are expecting continued sales growth in the United States. In EU, the main factors were reimbursement delay in major countries, increased pricing pressure and intensifying competition. XOSPATA global sales increased to JPY 34.1 billion, up JPY 10.2 billion or 43% from the previous year. It captured a high market share in U.S. and Japan within the current indication and expanded sales in each region, but sales against our full year forecast were behind with achievement rate of 96%.

PADCEV global sales increased to JPY 21.7 billion, up JPY 8.9 billion or 70% compared to the previous year. The achievement against our full year forecast was 105%. In the United States, in addition to the existing indication, the additional second-line indication we obtained in July last year has also contributed to sales growth. In Japan, PADCEV was launched in November last year. Initial uptake has been very strong and exceeded expected market penetration.

New prescriptions and adoptions have been increasing more than expected. Evrenzo sales reached JPY 2.6 billion, increasing by JPY 1.5 billion year-on-year. The achievement rate was 36%, substantially behind our full year forecast. Sales in Japan have been rising year-on-year due to the expansion of the HIF-PHI market as a whole but were behind our full year forecast due to the impact of intensifying competition. In EU, Evrenzo was launched in September last year, but sales were behind our full year forecast due to much lower market penetration compared to our assumptions.

As

a background: The impact of COVID-19 led to restriction of sales promotion activities at the launch time. In addition, this is a drug for a disease with relatively established standards of care. And many doctors are careful about prescribing new treatments for the time being, according to our analysis. Mirabegron global sales increased to JPY 172.3 billion, up JPY 8.7 billion or 5% year-on-year, slightly behind our full year forecast with the achievement rate of 98%. Particularly in the United States, which accounts for about half of global sales, sales were behind your full year forecast due to lower-than-expected U.S.

OAB market growth and increased pricing pressure. Next, on Page 8, I will explain cost items compared to the previous fiscal year and full year forecast. COGS ratio decreased by 0.2 percentage point compared to the previous year due to changes in product mix. Towards the end of the fourth quarter, due to the yen’s sharp depreciation against the U.S. dollar and the euro, ForEx impact on elimination of unrealized gain increased the COGS ratio by 0.2 percentage point.

SG&A expenses increased by 8.8% year-on-year. SG&A cost excluding XTANDI U.S. co-promotion fee increased by JPY 8.2 billion or 2.1% year-on-year, excluding ForEx impact. In our actual business, there was also an increase in our investment in digital transformation and sales promotion expenses for new product launch readiness and post-marketing growth of strategic products, resulting in an increase by about JPY 13 billion from the previous year. On the other hand, costs decreased by about JPY 9 billion year-on-year due to global optimization of personnel aligned with transformation of product portfolio.

As a result, we spent above our full year forecast. R&D expenses increased by 9.6% year-on-year. In addition to an increase in development costs of zolbetuximab, investment related to iota we acquired in FY 2020 also increased our R&D expenditure. Also, according to International Accounting Standards, inventories related to commercial production or pre-approval development project, including drug substance and drug product manufactured for process performance qualification, are booked as R&D expenses. In FY 2021, an increase in zolbetuximab and fezolinetant inventories became another factor to increase our R&D expenditure, which had an impact of increasing the costs by about JPY 8 billion year-on-year.

Excluding these one-off factors, we underspent against the full year forecast. Main factors were a clinical hold of AT132, DMD program termination and a development delay in ASP7317. From here on Page 9, I will explain our initiatives for sustainable growth. On Page 10, regarding XTANDI and strategic products, I would like to explain the progress of major events we expected to achieve during FY 2021, which we presented in April last year. The achievements by the previous results announcement by the third quarter are shown in black, while quarterly updates since are shown in red.

This is not an achievement in the fourth quarter of FY 2021, but we obtained approval for enfortumabvedotin in EU in April last year. As for fezolinetant, we obtained top line results from Phase III long-term safety study SKYLIGHT 4. As was planned at the beginning of the fiscal year, 52-week data is now available from all the 3 Phase III studies. I will explain the details later. Regarding gilteritinib, XOSPATA, we were planning to submit sNDA for full approval in China, but unfortunately, we couldn’t make it.

In China, the product was already launched with conditional approval, and we are expecting almost no impact of the submission delay on our business. Throughout FY 2021, we were able to achieve 7 of the 8 important events we set. On Page 11, I will explain the data on enfortumabvedotin in MIBC, muscle-invasive bladder cancer, patients we presented at a conference the other day. In cohort H of EV-103 study, neoadjuvant EV monotherapy was administered to cisplatin-ineligible MIBC patients. After radical cystectomy, tissue cells were collected for microscopic examination to evaluate antitumor activity.

According to the results, pathological complete response or PCR, which was the primary end point, was observed in 36.4% of the subjects. Pathologic downsizing or PDS, in other words tumor size shrinkage, which was the secondary end point, was observed in 50% of the subjects. On the right panel, you can see our results together with the literature data on neoadjuvant cisplatin-based chemotherapy in MIBC patients eligible for cisplatin which is used as the current standard of care. Due to the small sample size in cohort H and due to differences in protocol inclusion criteria in detail and different patient settlements, we cannot make a direct head-to-head comparison. And we don’t think it’s appropriate to do so, but in -- also in the cis-ineligible patient segment, EV monotherapy demonstrated effect comparable to cisplatin-based chemotherapy.

Based on these results, we are hoping that we can obtain good results from the ongoing Phase III studies in MIBC. Next, on Page 12, I’d like to talk about 2 fezolinetant studies which top line results have become available recently, namely MOONLIGHT 1 and SKYLIGHT 4 studies. First, MOONLIGHT 1 is a pivotal study in women living in Asia. 12-week double-blind period data was evaluated, but unfortunately, the primary end point, change in the frequency and severity of VMS, was not met. Right now we are investigating the reasons why from every angle.

As it’s shown in red in the table, study regions, races, doses, sample size, et cetera are different from SKYLIGHT studies, but we have not yet reached any conclusion about the causes. So far, we have not identified any operational issue during the conduct of the study. In the active-drug fezolinetant arm. In the study, numerical improvements from baseline similar to SKYLIGHT 1 and SKYLIGHT 2 studies were observed. On the other hand, in the placebo arm, response bigger the previous studies was observed, so we could not achieve statistically significant difference between the 2 arms.

12-week safety data was aligned with what was previously observed in other clinical studies. MOONLIGHT and SKYLIGHT are implemented as separate studies aiming for regulatory filings in different regions. SKYLIGHT studies were conducted as U.S. FDA IND studies and are positioned differently from MOONLIGHT study. Our Asian development plan going forward is now under consideration, but we’re anticipating minimal impact of MOONLIGHT 1 study results on CSP2021 peak sales forecast.

Next, let me explain SKYLIGHT 4 study. According to the top line results we obtained in March, the primary end point was met. Overall, we were able to confirm long-term safety profile, which supports proceeding with regulatory filings. Based on these results, we are making preparation for filings such as analysis and document creation together with already available SKYLIGHT 1 and 2 study results. Here I would like to share our plan for upcoming conference presentations.

We are planning to present 12-week data of SKYLIGHT 1 study at ACOG in May and 52-week data of SKYLIGHT 2 study at ENDO in the United States in June. Next, on Page 13. From here on, I will explain the progress of our focus area approach. This page shows in red the quarterly progress of focus area projects in the clinical stage. During our R&D meeting in March, we talked about AT845 data presentation at a conference.

Regarding ASP1951, one of the Immuno-Oncology primary focus assets, we could not meet prespecified POC, proof-of-concept, conditions in the clinical study, so we terminated the project. As for ASP1128 in Mitochondria Biology, we suspended enrollment of new subjects based on the interim analysis, but we officially terminated the project based on the final analysis results. ASP8731, a new project, entered the clinical stage and achieved first subject first treatment in March. In targeted protein degrader, one of the primary focus candidates, lead project [ASP3082] entered the clinical stage. Because of competition, we cannot disclose the details of this project at this moment.

Next, Page 14. This is a summary of FY 2021 progress of focus area approach related projects. In the right table, we summarize the changes in the number of projects aiming for POC by the end of FY 2025 as we made public in CSP2021 in May last year. In Genetic Regulation, we had AT702, AT751 and AT753 DMD research programs. We terminated these projects, as we could not obtain efficacy data we expected in preclinical studies.

We also terminated one of the Immuno-Oncology primary focus projects in the research stage. Regarding ASP1948, 1951 and 1128, we could not achieve POC in clinical studies and terminated the development, so we judged POC in 7 projects in FY 2021. As of now, we are aiming for POC in the remaining 24 projects by the end of FY 2025. The table in the middle shows the number of projects which progressed in stages during FY 2021 for each primary focus. Unfortunately, we did not have any project which achieved POC.

When projects advance to late-stage research phase to become new drug candidates to -- we call them CN, candidate nomination, as a milestone to judge the need for investment to prepare for the initiation of the clinical studies. 9 projects in total cleared this milestone and entered the late-stage research phase, and 4 projects newly entered the clinical stage. Primary focus strategy will not be over in FY 2025. We have continued to engage in research energetically. As a result, we have been continuing to create assets advancing to late-stage research phase.

Now Page 15. This is the summary of the main progress made in FY ‘21 with regard to the Rx+ program. The initial targets in the beginning of FY ‘21 was the initiation of pilot marketing of the game application for exercise support; and the initiation of clinical study in Japan for BlueStar, a digital therapeutics for diabetes, but neither were achieved during FY ‘21. For the exercise support game application, we are restructuring our policies and specifications against the original specification that we had initially set. For BlueStar, the product specifications and clinical development strategy were reviewed and the schedule was changed.

Now Page 16. And here I’ll talk about another Rx+ program topic, Phase II results of ASP5354. ASP5354 is a compound that emits light when irradiated with near-infrared light. When administered prior to surgery, it is expected to enable the surgeon to recognize the location of the ureter and reduce the risk of accidentally injuring the ureter during surgery. And also the surgery time can be shortened.

In the Phase II study, the visualization of the ureter was confirmed at different doses of the compound. As a result, it was confirmed that the ureter could be visualized until the end of the surgery with doses of 1 milligram or higher. No major safety concerns were observed. Based on these positive results, the project is currently preparing to conduct a Phase III study, which is scheduled to begin during FY ‘22. If all goes according to plan, we plan to do regulatory submission in the U.S.

during FY ‘23. In addition, since the visualization of the ureter using this compound also requires a device that irradiates near-infrared light, we are considering business partnership with a device manufacturer or -- for future commercialization. Now Page 17. This is the review of the first year of CSP2021; in the top left corner, XTANDI and strategic products that showed sales growth and achieved key development milestones both in line with expectations. In the bottom left corner and focus area approach, we have continued to generate, promote or make decisions on projects.

However, we have yet to obtain projects that will advance to a post-POC stage. Right top corner. In terms of core operating income, we were enabled to flat SG&A in absolute terms. With regard to SG&A expenses, our basic policy in the CSP2021 is to place the highest priority on our investments for long-term growth and future efficiency improvements. Specifically these are company-wide projects to promote innovation and ensure the career success of our talents as set forth in the organizational health goals, DX-related investments such as global e-com and mission-critical business systems and further efforts to maximize the value of new product lines.

On the other hand, it should be regretted that there was a slight delay in dealing with various troubleshooting issues that arise when introducing a new system and in narrowing down traditional cost spendings that should be reduced. Furthermore, regardless the rapid depreciation of the yen at the end of the fiscal year as well as various geopolitical issues, the final cost temporarily -- well, we decided not to cancel or postpone investments that will contribute to the future even if the final costs temporarily exceeded our budget. However, we must accept these challenges with humility. And in the current fiscal year, we have also decided to launch the Dansharism activities, described later, in order to strategically improve the efficient use of management resources and the intellectual and the labor productivity of our employees in order to recover these investments that will contribute to the future. Although we have identified some issues that are needed to be recognized, we believe that overall we have made progress in accordance with the plan and that addressing these issues going forward will be sufficient to achieve the performance targets of CSP2021.

From Page 18, I will then discuss our focus for FY ‘22 and the major events we expect to see in the year. Page 19. We expect revenue and profits to increase in FY ‘22. And we believe that we will be able to secure core OP margin of 20.1%. Also we expect sales of XTANDI, our core products as well as our strategic products to continue to grow; and expect a 24% increase in total sales of these products compared to the previous fiscal year.

R&D expenses will increase overall due to expanded investment in the primary focus area. SG&A budget will be allocated to strategic areas in this year. We will continue to thoroughly review costs not contributing to competitiveness and the corporate value increase. The effect of global optimization of personnel in line with changes in the product portfolio will also continue to contribute to cost reductions. In addition, we will thoroughly reduce sales promotion expenses for activities with lower returns.

And we will also optimize procurement costs to strictly control SG&A expenses. We will apply the concept of Dansharism, which involves cutting out unnecessary things and moving away from excessive attachments to things, to daily operations in order to increase the amount of time devoted to cooperations that need to be performed and improve the labor productivity of Astellas as a whole. This will transform the organization into one in which new innovations can easily occur. As a result, we believe this will contribute to cost reductions through the selection of operations. In this fiscal year, we will promote this concept of Dansharism.

For FY ‘22, we expect to pay a dividend of JPY 60 per share, an increase of JPY 10 per share. We have not changed our basic stance on capital allocation, i.e., to place the highest priority on business investment for realization of growth and to maintain a policy of stable and sustainable dividend growth based on mid- to long-term profit growth. Now Page 20. I will explain the forecast. Revenue is expected to be JPY 1,443 billion, an increase of 11.3% over the previous year.

And SG&A expenses are expected to be JPY 598 billion, an increase of 9.0% year-on-year. SG&A expenses are expected to be -- or rather, SG&A expenses excluding co-promotion expenses for XTANDI in the U.S. were JPY 416 billion, an increase of 1.6% from the previous year. R&D expenses were JPY 254 billion, up 3.2% from the previous year. As a result, core operating profit is expected to be JPY 290 billion, an increase of 18.5% over the previous year.

The lower part of the slide shows the forecast on a full basis. Operating profit is projected to be JPY 269 billion, an 72.8% increase over the previous year or compared to FY ‘21. For AT702, AT751 and 753, the development of them will be terminated. And an impairment loss of $170 million will be booked in the first quarter of FY ‘22 regarding to this. Now Page 22.

This slide shows the FY ‘22 focus for XTANDI and strategic products. First, XTANDI: The FY ‘22 forecast is JPY 642.5 billion, an increase of JPY 108.2 billion compared to the previous year. In the U.S. and Japan and international markets, sales are expected to expand and mainly in the M1 CSPC indication. And we plan to utilize OS data from the ARCHES study to further expand our market share.

In China, we expect continued growth in the indication of M1 CRPC, for which reimbursement started last year. Especially in the U.S., which accounts for about half of global sales, we expect an increase of more than 20% in volume. Although the number of new patients decreased in FY ‘21 due to COVID-19, the most recent data shows an improving trend. And we expect the number of new patients to increase in FY ‘22. In addition, we have been conducting raising-awareness activities since last year to ensure that patients receive new hormonal therapy at the appropriate time; and we expect these activities to be effective.

Now XOSPATA. We forecast JPY 46.2 billion for FY ‘22, an increase of JPY 12.1 billion from the previous fiscal year. Continued growth is expected in the U.S. and Japan, where we have established market leadership positioning. In Europe, the number of countries where the product is reimbursed is expected to further increase.

And we can expect the sales contribution from international markets due to the increase of launched countries. PADCEV. The FY ‘22 focus is JPY 36.5 billion, an increase of JPY 14.8 billion compared to the previous year. In the U.S., we expect continued growth through further market penetration in the current indications. In Japan, where the drug was recently launched, we expect further gain of market share.

In Europe, where the drug was approved this month, we expect to launch drug in major countries. Since the reimbursement process in each country takes a certain period of time, sales is expected to grow gradually. Evrenzo. The focus for FY ‘22 is JPY 9.9 billion, an increase of JPY 7.3 billion from the previous year. In Japan, we expect further growth by reinforcing our market position in the HIF-PH inhibitor class.

In Europe, sales are expected to increase due to an increase in the number of countries where the product is launched and the reimbursement. While many physicians are cautious about new therapeutic agents, market research shows that specialists are highly aware of the new mechanism of HIF-PH inhibitors. And many are interests -- in the convenience of oral administration, effectiveness in patients who record a high dose of ESAs and the ability to reduce iron dosage due to high iron utilization efficiency. With the promotion of information provisioning not only from MRs but from physicians with experience of this product, in other words doctor-to-doctor basis, we will promote the expansion of the HIF-PH inhibitor market. In FY ‘22, the international market will be expected to begin to contribute to sales.

Now Slide 22. Key events for XTANDI and strategic products expected in FY ‘22 are listed along with specific time lines during the fiscal year. The top line results of EMBARK study of XTANDI in M0 CSPC are expected in the second and third quarters. And the U.S. regulatory submission, based on these results, is expected in the third and fourth quarters.

The top line results of China ARCHES study in M1 CSPC or metastatic castration-sensitive prostate cancer are expected in the fourth quarter. The top line results of the EV-103 study cohort K in first-line metastatic urothelial carcinoma are expected in the second to third quarter for the -- enfortumabvedotin. And date of the U.S. submission based on this result is expected in the third to fourth quarter. In addition, top line results from the bridging study EV-203 in pretreated metastatic urothelial carcinoma are expected in the third and fourth quarters for submission in China.

Furthermore, top line results from the EV-202 study, which is being conducted in several solid tumors other than urothelial carcinoma, are expected to be available in the second and third quarters for the early-results cohort. The top -- now this is about zolbetuximab. The top line results of the 2 pivotal studies of gastric adenocarcinoma and GEJ adenocarcinoma are expected in the third and fourth quarters of the fiscal year. The target timing for submission has been moved from FY ‘22, when the CSP2021 was announced, to FY ‘23 due to a delay in the occurrence of events in these trials compared to our initial expectations. For fezolinetant, we plan to file in the second quarter and in the third quarter in the U.S.

and EU, respectively. For AT132, we plan to submit a response to the FDA clinical hold in the third quarter as an action to the authorities for resumption of clinical trials. In FY ‘22, we will also use digital tools to raise awareness among a wide range of stakeholders, including HCPs, patients and payers, about VMS or vasomotor symptoms for which fezolinetant is targeting; and about claudin 18.2, the target biomarker for zolbetuximab. In particular, for fezolinetant, we will conduct disease awareness activities for VMS, with a goal of reaching more than 100,000 HCPs and more than 10 million women; as well as academic discussions with the payer focused on the impact of VMS on women’s lives and the clinical and economic burden of the disease. In addition, we will develop communications based on the deep understanding gained through dialogue with more than 4,800 women and 4,000 HCPs over the past several years.

On Page 23, I will explain the updated potential peak sales forecast for XTANDI and strategic products. Although we have reviewed the assumptions for XTANDI, fezolinetant, PADCEV and XOSPATA taking into account the most recent competitive environment and market research, the peak sales forecast remains unchanged from the time of CSP2021 in May of last year. As a result of reviewing the recent competitive environment for PD-1 antibodies and the recent sales trend and assumptions for the competitive HIF-PH inhibitors for zolbetuximab and Evrenzo, respectively, their potential peak sales forecasts have been revised downward within range of the peak sales forecasts announced in May last year. Regarding AT132, whose asset value was reviewed, the potential peak sales was revised downward to less than JPY 50 billion based on the assumption of the delay in approval timing and a change in the target patient population. Despite the downward revisions for several products in this update, we expect continued strong growth as a growth driver during the period of the CSP.

Now Slide 24. Here are the future plans for primary focus. This slide lists only the lead projects, projects that are already in the clinical phase in each focus area approach. In FY ‘22, we expect to make a judgment on POC in the Genetic Regulation program AT845; and artificial adjuvant vector cells, ASP7517. Amongst approaches, follow-on projects have already passed the late phase of their research.

Together with this follow-on and lead projects, 5 projects are expected to enter the clinical stage in FY ‘22. We are also seeing the benefits of the reorganization in research function that took place in FY ‘21. And we are seeing examples of teams taking appropriate risks and changes and has significantly shortened the duration of clinical study. We hope to show you how we will use this most recent experience to create more projects on an ongoing basis in FY ‘22 than we have in the past. On Page 25, I describe the key events expected in FY ‘22 in Rx+ program.

In the ECG test service in partnership with Nitto Denko and M. Heart, we plan to initiate pilot marketing of the EG Holter, a single-use electrocardiogram. For BlueStar, a digital therapeutics, we are planning to start clinical trials in Japan based on the reviewed product specifications and development plan. As has been mentioned, ASP5354 is scheduled to be administered to the first patient in Phase III trials. Regarding iota’s implantable medical devices, which are listed at the bottom, we will proceed with the preparations for the IDE submission for the first project, with the aim of initiating clinical trial in the first half of FY ‘23.

IDE submission is a clinical trial notification to the authorities equivalent to an IND for pharmaceutical products. Page 26. This is the last slide. As you can see from the slide, our product mix has changed dramatically over the past several years. In FY ‘22, the negative impact of the expiration of the exclusivity and the transfer of the sales will disappear.

And sales of high-margin core products such as XTANDI and strategic products will further expand, and we will aim to increase revenue and profits by improving our profit structure. Furthermore, FY ‘22 will be a pivotal year for achieving our FY ‘25 targets with several important development milestones for our strategic products scheduled to take place in the year. We believe that we will be establishing the foundation for achieving sustainable growth, and we’ll move toward a full-fledged mid- to long-term profit growth trend. That’s all from me for today. Thank you for your attention.

Unidentified

Company Representative: Thank you very much. That’s all the presentation. We now would like to take questions from the audience. We can take your questions through teleconferencing system. You cannot ask a question through live streaming system.

[Operator Instructions] The operator, please.

Operator: Mr. Yamaguchi from Citigroup Securities.

Hidemaru Yamaguchi: Can you hear me?
Unidentified

Company Representative: Yes, we can hear you.

Hidemaru Yamaguchi: Yamaguchi from Citigroup.

I have 2 questions. First, regarding the total picture, in the previous fiscal year, XTANDI co-promotion fees are excluded in your cost control, in the previous fiscal year. And there’s going to be a slight increase this fiscal year, so what are the factors behind why you couldn’t control last year? And what are the factors for the increase this fiscal year?
Unidentified

Company Representative: Thank you for your question. So Kikuoka would like to explain.

Minoru Kikuoka: Your question is about XTANDI in particular.

Unidentified

Company Representative: Excluding XTANDI. Sorry.

Minoru Kikuoka: Yes. As Yasukawa explained, in principle, there are one-off factors, including ForEx impact. That’s one factor behind.

And also, as we mentioned before, towards the end of the fiscal year, XTANDI growth decreased, but still we decided not to constrain the proactive investments, as a management decision. On the other hand, what would constitute the rationalization? Streamlining investment for the future. By doing such investments -- as we said in the presentation, globalizing ERP requires troubleshooting. Honestly speaking, there were such needs as well, but in principle about what we decided to do, we have been implementing as scheduled so, in the current fiscal year and beyond, we will enjoy the benefits. And personally, I’m now joining this team.

So if possible, as Yasukawa explained -- if you go to the first page of the appendix, there is a slide on Dansharism. I joined from March. [indiscernible] [Okamura] and the top management and I had discussions amongst us. There’s this so-called white space in English. Embedding innovation but pursuing efficiency, like a Japanese company, we added -ism to the Japanese word Danshari.

Including our CXO overseas, we had discussions. This was well received. I’m not going to talk too much, but we have 3 steps to proceed, according to procedures for this process. Cost reduction does not necessarily come first, but we have to change mindsets to eliminate any waste. And for the management, this must be thoroughly discussed with their subordinates.

I’m taking over this role from Okamura. I am joining the team and the company as a financial -- or dedicated person. If I don’t improve, there is no meaning for me to join. There are some shortages. Including the management, we have to ensure discipline.

By doing this simultaneously in a more timely fashion, we can reduce our costs. I think we can do this. Sorry for my long answer. The investments, by now, will enter a stage for investment recovery. Then we can control the costs in this way.

Hidemaru Yamaguchi: Second, let’s extend the Q4 factor, centering on the U.S. Well, that -- things tend to happen in January to March, but at the same time, there’s a COVID and also the competitor situations explained by you. So the U.S. volume this time less than 20%. I don’t know if that is aggressive or not.

The previous time, you are too aggressive. That’s why you couldn’t achieve that, but what about this fiscal year? How do you look at the United States? How do you look at the European market? Just a brief explanation is fine with me. Would you please explain that?
Unidentified

Company Representative: Matsui would answer to that question.

Yukio Matsui: Thank you for your question. First of all, U.S.

We see it relatively positively. Well, in February to March, since this COVID-19 pandemic -- newly prescribed patient. And that number was not really increased. That is one of the reason why we couldn’t achieve the target. And looking at their first report of February and March, there is improvement.

So with that, we got relieved in the U.S. COVID situation has settled down to a certain extent and patients returned to the clinics. And just like Yasukawa mentioned a little while ago, in order to accelerate this momentum, from last year, with Pfizer in the United States, we’ve started a patient accelerator program. Patient with prostate cancer got their diagnoses as early as possible and understand the benefit of XTANDI. So this activation program has been promoted.

This is another factor for the increase of our product in the market. And as has been mentioned, over the -- this settle down of COVID situation, our activities and Pfizer’s activity can be further accelerated. Therefore, from -- compared to the growth of FY ‘22 -- ‘21, FY ‘22, our plan is exceeding in terms of the growth level, so we are challenging a very aggressive and ambitious target. That’s how we view the U.S. market.

Now about Europe. If you look at the number of the revenue -- or rather, sales, you might feel this is a bit too conservative, but the reason why we couldn’t achieve FY ‘21 target, the major reason for that, is that -- the delay of the reimbursement and also the impact of reimbursement. In order to get the new indications, just like the case in Japan, there has to be -- there is a request of a reduction of the pricing. That became the negative factor. And volume-wise, in Europe, there is about 16% increase planned.

So again we have such ambitious plan, but the price impact that is incurred in FY ‘21 became the reasons for this single growth in the sales. But whichever the case is, our plan is always quite aggressive to set a target. That’s the way we would like to go.

Operator: Mr. Hashiguchi from Daiwa Securities.

Kazuaki Hashiguchi: Hashiguchi speaking. I have 2 questions. First, genetic -- gene therapy capabilities. There are 3 pipelines whose development are terminated altogether. The reason is that you couldn’t reach the expected efficacy level.

And what do you think about the background in gene therapy, your ideal state of research for genetic therapies is not appropriate, shortage in capabilities? How should we think about the other pipelines? Any clues for this? Is it a factor just limited to DMD? Or is it something common to other pipelines? I’d like to hear about the factors behind. Unidentified

Company Representative: First, I’d like to respond. AAV, we’d like to transfect the target genes in the adeno-associated vector. The size of the genes is not always the same. Even if it’s the same DNA, depending on the base sequence, physical or chemical properties can be different, so technology-wise, it may be easier or sometimes more difficult, depending on the technologies.

As for DMD, it’s rather difficult to transfect. Manufacturing was very costly. And also ODE was not so good. And what was completed was used in the clinical study. Can we beat our competitors in the future? The data did not indicate that it’s going to be possible.

So because of these factors, for DMD, instead of pursuing further, we decided to terminate here. That was our decision. Is it just for DMD? If you ask that way, yes. We may face this kind of a difficulty, technical difficulties, in the future again. The follow-on project -- but as a gene therapy, is there any competitor or not? Any existing therapy, or not? If there is, how much efficacy has been confirmed for the existing therapy and technical difficulties must also be considered comprehensively together with those elements.

There is no one who can talk about more specialized expertise today, so we will explain further when we have an expert.

Kazuaki Hashiguchi: Second question is about the forecast for the dividend. About the -- 1 year ago, JPY 50 with an increase of JPY 8. The pace is a bit -- greatly different from the previous situations. And we discuss if that is only onetime thing or this trend would increase -- or continue, rather.

And at the time, you mentioned that there shouldn’t be the -- any hold or stoppage about this trend. I don’t know if my expression is accurate or not, but that’s what you mentioned, but this time the, yes, JPY 10 increase is not a reduction of the pace, rather, yes, accelerated. So this time, it was set as JPY 60. What’s the reason behind? Because we want to know how we can predict or to -- forecast the dividend now and toward the future. Unidentified

Company Representative: Thank you.

Kikuoka is going to answer that question. Thank you for your question. Kikuoka is going to answer this question.

Minoru Kikuoka: So dividend. For the future, especially the level of that, especially that all depends on the revenue for now and then for the future, but the -- as has been conventional speaking, we have the capital policy set that is used for the growth, first of all; and basically for the dividend.

However, continuously we would like to increase if it’s possible, depending on the profitability. As a result, the cash that we can have in our hands, 250 billion to 300 billion, that is something we would like to maintain. And that is a pre condition, and we can increase that. And we might do the share buyback in a quite a mobilized manner or a flexible manner. So in line with the CSP, if we can fulfill the increase of the revenue, we would decide the level of the dividend based upon the fluidity of the cash that we have.

And this time, JPY 290 billion, that’s what we would like to aim at. And with that, as a condition, we expect that we can provide this level of the dividend, so we decided to increase by JPY 10. That’s all.

Kazuaki Hashiguchi: Compared to the past 250 billion to 300 billion, that is where you would like to achieve. And the share buyback and dividend balance, you -- the balance, the weight is going more toward the dividend.

Is this understanding right?

Kenji Yasukawa: Yasukawa speaking. If you look at Page 36, on the top, you can see the description. The second is the continuous increase of the dividend level. Number three is flexibly execute share buyback. So in this order, we are executing what we are supposed to do.

Operator: Mr. Muraoka from Morgan Stanley Securities.

Shinichiro Muraoka: Muraoka from Morgan Stanley speaking. Can you hear me?
Unidentified

Company Representative: Yes.

Shinichiro Muraoka: Core operating profit of JPY 290 billion, how to achieve this figure.

XTANDI in U.S. and in Europe, you have ambitious numbers for both regions. To reach JPY 290 billion, I would like to ask about the buffer. If XTANDI cannot grow that much, where are you going to make ends meet? Cost-wise, considering ForEx, it can be a difficult figure to achieve. If you cannot grow XTANDI, how are you going to achieve this? How should we think?

Kenji Yasukawa: Thank you for your question.

Kikuoka would like to respond first.

Minoru Kikuoka: Thank you for your question. So this is about if. There can be some additional comments from Matsui later. We think we can achieve this figure with XTANDI, but it may not be perfect.

In that case, how to curtail costs is going to be an issue. I would be involved. And we would run a PDCA Cycle. We want to control SG&A costs. We overspent in the fourth quarter, unfortunately.

We learned a lesson here. Instead of every quarter, as soon as possible, we’d like to identify the growth of the product. In case we face a situation as you mentioned, we’ll try to strengthen controlling our costs. For example, we’d like to ensure such flexibility. In CSP2021, we showed our direction.

We have no intention to change that direction, but we’d like to be very flexible, yes. I think this is my responsibility as CFO, so we have to identify what can be upfront and what cannot be upfront. That is the concept of Dansharism. It may be very abstract, but this is what we have to do. And in 1 month, 1.5 months after joining the company, I think I feel confident that we can do this.

That’s all.

Shinichiro Muraoka: [Foreign Language] the separation of the cost that you mean, but considering the ForEx, you did maximum effort for the separation of the costs. But even from here, there is still room for the separation through Dansharism. Is it okay to interpret -- Kikuoka-san, you see that possibility is still there.

Minoru Kikuoka: Yes.

As has been explained, this time listening to the opinions from the field, I myself is still on the learning phase, but as you can understand from expecting the situations; for example, ERP. That’s what I call as sample. With introducing that, the conventional business process can be improved, but of course, we see some distortion. And that is whether we have to put more investment as -- that will be the expenses. Of course, that is done, and there is the -- a certain coordination internally.

With that, we see the outcome from this effort. Yes, the troubleshooting would -- costly to a certain extent. However, if we overcome that, we believe that we can suppress the expenses further through these troubleshooting activities. That’s all. Unidentified

Company Representative: Yasukawa-san, did you want to say something about costs?

Kenji Yasukawa: No.

Unidentified

Company Representative: Matsui would like to add.

Yukio Matsui: I cannot -- may not be able to provide information with a message but for main product. As an Astellas policy, we’d like to have a stretched target we’d like to aim for at the highest level so that we can aim for it. In FY 2021, this is what we worked on in U.S. and Europe.

Unfortunately, we were behind, unfortunately, but within these goals, Japan and China exceeded the goals. In the business environment, there may be unexpected positive aspect as well. I may be optimistic, but there can be such events. As Kikuoka mentioned, more than before, on a quarterly basis, priorities should be reviewed. We should run a PDCA Cycle, more than before, to see how we allocate our money and whether we need additional measures or not.

As the management team, we would go deeper and more actively. Now Kikuoka has joined the management team and we are going to execute this. Whether there is any buffer, there is no clear buffer, but in this way, we’d like to achieve these challenging targets.

Shinichiro Muraoka: Another question, last question from me. That’s about XTANDI.

The U.S. number is not strong enough. I understand about the PAP situation, but what about competitors? Is there impact of Lynparza?
Unidentified

Company Representative: I don’t think so. It’s too early.

Shinichiro Muraoka: But when you say competitors, what do you mean? Is it Novartis radio labeling product you’re talking about?
Unidentified

Company Representative: No.

Kind -- our understanding or recognition is that, if we look at it in Q4, Zytiga generic, that is growing unexpectedly. And [indiscernible] is growing gradually. What was most surprising for us is Zytiga generic that is growing more than we have expected in the fourth quarter. Those are the competitors we are talking about. Unidentified

Company Representative: It is true, the generic prescription-wise.

That is quite understandable.

Operator: Mr. Sakai from Credit Suisse Securities.

Fumiyoshi Sakai: Sakai from Credit Suisse. Regarding your main products, you set stretch targets.

According to our policy, if there is any exception, it can be PADCEV, PADCEV in the United States. Seagen, in November and December, they issued a guidance. You’ve -- about half of the U.S. revenue you are booking. Considering this, the numbers would be consistent between the 2 companies.

The Seagen numbers are rather conservative according to some, but depending on the changes in the Seagen guidance, your numbers can also be revised throughout the year or every quarter. Should I understand this way? I’d like to confirm. Unidentified

Company Representative: Thank you for your question. Matsui would like to comment.

Yukio Matsui: First of all, regarding the evaluation, Seagen, has its own evaluation and assessment.

We also have our own assessment. And analysts would look at the speed of penetration for this drug. Analysts expect this should be faster. That’s -- we are grateful for that, but as we have been saying from before, the line extension or the expansion of the indications, particularly the first-line settings, until the first-line additional indication, it would not increase so much, according to our forecast. There’s a slide here.

In summer last year, there was one thing -- there was a cis-ineligible patient. This is not such a big patient population. The most important segment is the cohort K, as you’re expecting. So in FY ‘22, first, in the United States, that is going to grow. In Europe, why so late in spite of the approval obtained? You may wonder.

In Europe, as you know, even if approval is won, drug pricing listing is going to be done in the respective countries. In EU5, Germany and U.K., you can market earlier because of the free pricing. In other countries, to obtain the drug price, it takes time. In the case of France, early access program can enable us to book sales, but in many countries, it takes time. If you take this into consideration on a full scale, for this product to grow, we think it’s going to be in FY 2023 or beyond.

In FY 2022, it may look very conservative, but regarding this drug, in Europe, the drug price listing requires time. But taking that into consideration, these are very aggressive targets for us. That’s all from me.

Fumiyoshi Sakai: Understood. 2 brief questions about the pipeline and fezolinetant Asia MOONLIGHT study.

As Yasukawa-san explained, placebo effect was higher. This means that this is the area that is most difficult to explain, so when FDA asks about this, what would you do? Is it possible for you to prepare backup data? I don’t know if that is possible, but that is one of my biggest concerns, so would you please explain? The second question [indiscernible] zolbetuximab event-driven study. And submission will be delayed from FY ‘22 to FY ‘23, but is this the very final time line that you drew? Is this understanding right? Please explain about that. Unidentified

Company Representative: Thank you for the question, for these 2, these development-related questions. So Bernie would answer these questions.

Bernie, please.

Bernie Zeiher: Yes. Thank you for the questions. First, with regard to fezolinetant and the MOONLIGHT study, as Yasukawa-san explained, there was a higher-than-expected placebo response. We are investigating it.

We’re continuing to investigate it. And we will have explanations that we could share with FDA, if it comes up, and a couple of things that were already mentioned that were different about this study. Number one is the dose. It only included the 30-milligram dose. It didn’t include the 45 milligram.

And I think the other is really the location and the patient population. We know there’s ethnic differences in the reporting of hot flashes. And this likely contributed to some of the higher placebo effect, but we will be prepared to explain that to FDA. I think most importantly, though, which is always a big concern for FDA in this population, is that there were no new safety signals identified in this study. So I think that’s very encouraging and, I think, will be important for FDA in their review.

Now shifting to zolbetuximab. As you mentioned, the 2 Phase III studies are both event-driven, and as we described, the current best estimate is that they will read out in the third or fourth quarter of this fiscal year. We continue to monitor the events. And these are our best estimates of when those -- we will have sufficient events to close the studies and to look at the readouts. So obviously things can change, but those are our best estimates now.

And assuming it again is in that third or fourth quarter, that would then mean that our filing would be in fiscal year ‘23.

Kenji Yasukawa: Thank you, Bernie. Yasukawa speaking, if I may add a bit. As for zolbetuximab, until recently, patient recruitment was not over. Due to COVID-19, recruitment was affected.

And as for the events, events did not occur at the speed we expected. Patient recruitment is now over, so one parameter has been gone. So now, just about the occurrence of events, we are tracking this. We don’t think the speed is going to change dramatically from now. It’s not absolute, but compared to before, we are making an estimation with a higher accuracy than before.

Regarding fezolinetant, we had similar multiple experiences, Vesicare, mirabegron, in the Western studies, positive; and Asian studies. In this way, we couldn’t meet statistical significance according to the past experiences in the United States, Japan and Western regions. We didn’t experience any impact on the submission in other regions. As you can see on the top of Page 12, MOONLIGHT is a non-IND study for Western submission. Safety data will be included, but efficacy data will not be asked for.

That’s all from me. Unidentified

Company Representative: Thank you. We have limited remaining time. I would like to entertain questions, as many people as possible. Therefore, we would like to answer just one question per person.

Operator: Nomura Securities, Mr. Kohtani, please.

Motoya Kohtani: Kohtani from Nomura Securities. Can you hear me?
Unidentified

Company Representative: Yes.

Motoya Kohtani: I have to ask only just one question.

So my question now is about iota development. So this IDE is planned in FY ‘22, or so the technical issues for the practical use is already solved. That’s -- I assume that’s a small device. You don’t need to change batteries. And the indication is not really described, but the [indiscernible] [NAV] stimulation is possible.

Even the technology improvement is done. What about the competitiveness? Well, this is a small device, no necessity of the battery changes. And also this is implanted device. And you’re doing first-in-human study. The next will be Phase III.

If so, FY ‘25 would be the timing of the launch. What do you view about this?

Kenji Yasukawa: Yasukawa speaking. Thank you for your question. Technically speaking, I think this product is already in a very high level of the completion in the development, but this is very first type of the product for us, so for the commercialization, what do we have to be mindful is need it to be concerned. IDE is equivalent to IND, so we are close to the start of the clinical trials.

And for considering marketing, GMP-equivalent areas are needed to be considered, especially with the perspective of what is necessary to be done more. For that, we need to negotiate with the authorities. The length of clinical trials, even internally, we haven’t really approved the plan yet, so here I cannot tell you when will be the last timing of the -- or when will be the closing of the clinical trial, but I also consider that this is not the conventional type of development like a Phase I, II or III. So I hope that launch will be around FY ‘25. This is the expectation from me as President.

Operator: Mr. Ueda from Goldman Sachs Securities.

Akinori Ueda: Ueda from Goldman Sachs Securities. I’d like to ask you questions about assumptions for your SG&

A plan: XTANDI co-promotion fee increasing by 30.6%, U.S. sales to grow by 27.8%, so the co-promotion fees are increasing at a higher pace.

This can be explained by ForEx impact. Or any special factors behind? And also upfront proactive investments were also explained. How much this is affecting your plan for the FY 2022. Unidentified

Company Representative: The first question will be answered by Matsui. The second question will be answered by Kikuoka.

Yukio Matsui: First, I’d like to confirm your question. XTANDI co-promotion fees are very high, so you’d like to understand why, anything behind. We have an bullish, aggressive target for the sales. And that’s all, no other factor to increase the co-promotion fees. The active investments and proactive investments, before Kikuoka, I’d like

to comment: We Astellas, for a global commercial organization, in FY ‘22 and ‘23, the biggest event is going to fezolinetant, preparing for the launch of fezolinetant.

And dozens of billions of yen was -- proactive investments have been prepared. Fezolinetant can be explosive, according to expectations. We have to invest now. Otherwise, we cannot maximize its future growth. Even if we have to save other expenses, we have to make big investments here.

So because of sales and marketing, even compared to zolbetuximab, in FY 2022, we’d like to prepare for big investments into fezolinetant. We are making preparations for that.

Minoru Kikuoka: If I may add. Proactive investments, when we say it, I think fezolinetant is going to be our main product. With such products -- and we had been completing a series of investments in the previous year for ERP, deployment to other sites.

We’d like to do this, but the biggest element of the proactive investment is -- was explained by Matsui, for the next fiscal year to prepare for the full-scale launch. Commercial functions are making proactive investments. We’d like to examine these investments in detail. If they would contribute to the enhancement of corporate value, we can increase them and reduce other investments. We can be flexible by running the PDCA Cycle.

I hope you understand our approach. That’s all from me. Unidentified

Company Representative: Thank you so much. I’m sure that you are still waiting for asking questions, but that is the time. And with this, we would like to close this earning call.

Everyone, thank you very much for your participation.