ESAIY (ESAIY) Q2 2027 Earnings Report, Transcript and Summary

Thank you very much for taking your time to attend the briefing session on the financial results from Q2 fiscal 2026 of Eisai Company Limited. Time has come. We would like to now begin. This briefing session will be conducted in hybrid format with in-person attendance here and with live streaming. For those of you who are attending here, we have distributed consolidated financial report, reference data and financial results presentation. If you are watching live stream, please refer to the same materials available on our website. Let me now introduce the speakers today, Mr. Haruo Naito, Representative Corporate Officer and CEO; and Mr. Takuya Oyama, CFO and Chief IR Officer. First, Mr. Oyama, CFO, will present the financial results before overall business report is provided by Mr. Naito, CEO. Mr. Oyama, please.

Everyone, thank you very much for taking time out of your busy schedule to attend this earnings call. Let me begin with the financial highlights for the second quarter of fiscal year 2026. Revenue for the second quarter reached JPY 470 billion, a 17.5% increase compared to the same period of the previous year. The pharmaceutical business, which is our organic business, grew significantly, achieving double-digit revenue growth. Operating profit was JPY 41.4 billion, a 20.4% increase year-on-year and core operating profit was JPY 43.1 billion, a 28.6% increase year-on-year. Double-digit profit growth was achieved, thanks to significant global growth in our 3L products, LENVIMA, DAYVIGO and LEQEMBI. Our progress towards our 2026 performance forecast is on track with revenue at 53% and operating profit at 59%. Next slide, please. This page provides details of our consolidated statement of income for the second quarter of fiscal year 2026. Revenue increased by 17.5% year-on-year to JPY 470 billion, driven by the growth of our pharmaceutical business, which is centered on our main products, 3L, LENVIMA, DAYVIGO and LEQEMBI. Cost of sales was JPY 104.6 billion, and the cost of sales to revenue ratio was 22.3%. Although this is an increase from a year earlier, it is being appropriately controlled within the planned range through cost reduction efforts. As a result, gross profit reached JPY 365.4 billion, a 17.2% increase year-on-year. R&D expenses increased by 16.7% to JPY 88.1 billion, reflecting proactive investment in next-generation key projects. SG&A expenses increased by 15.3% to JPY 235.2 billion due to increased profit sharing expenses associated with increased revenue of LENVIMA and proactive investment in LEQEMBI. As a result, operating profit increased by 20.4% to JPY 41.4 billion. Core operating profit, which represents fundamental earnings calculated by excluding temporary income and expenses from operating profit increased by 28.6% to JPY 43.1 billion. Profit for the period increased by 21.5% to JPY 29.9 billion. The interim dividend of JPY 80 per share was approved at the Board of Directors meeting held today as expected. Our progress towards our full year earnings forecast is on track with revenue at 53.2% and operating profit at 59.2%. However, as only the half the year has passed and unpredictable uncertainties may still exist, we will not be changing our full year forecast. We will continue to focus on ensuring we achieve our target of JPY 70 billion in operating profit. Next slide, please. This page explains the factors that influence increases or decreases in revenue. As shown by the second light blue bar from the left, revenue for our main products, 3L, in total increased by JPY 59.1 billion year-on-year with LENVIMA up JPY 28.2 billion; DAYVIGO, JPY 10.4 billion; and LEQEMBI, JPY 20.4 billion. And revenue for our pharmaceutical business expanded by 17.5% to JPY 462.1 billion. With the strong performance of products other than the 3L, overall revenue increased by JPY 69.9 billion to JPY 470 billion. Next slide, please. This page explains the factors that caused the increase or decrease in operating profit. Gross profit increased by JPY 53.5 billion, driven by the growth of the pharmaceutical business due to the growth of 3L. R&D expenses increased by JPY 12.6 billion as resources continued to be invested in key projects such as the anti-MTBR tau antibody etalanetug and the orexin 2 receptor agonist, ledasorexton. SG&A expenses increased by JPY 31.2 billion due to increased profit sharing costs resulting from LENVIMA's revenue growth and proactive investment in LEQEMBI. There are no significant factors contributing to increase or decrease in other income and expenses. As a result of the above, operating profit was JPY 41.4 billion, and the core operating profit was JPY 43.1 billion, representing a significant increase in profit. This concludes my part. Next, our CEO, Naito, will give you an update on our business.

Let me first talk about LENVIMA. In top right, as you can see, since its launch, it has been 11 years. It contributed to the treatment of approximately 650,000 patients with cancer. So this is one of the leading anticancer drugs in the company. Currently, we have indications for across 5 cancer types. Tyrosine kinase inhibitors utilized for treatment of these types of cancer, we can say that LENVIMA has maintained the leading global brand in that category. Please look at the graph on the left. For the first half, revenue was a little less than JPY 200 billion. Year-on-year change was positive 17%, which has shown steady growth over the previous year. We are deepening our confidence in achieving the full year forecast. As you see in the graph, in main markets, our core market is in dark blue portion in the bar, the United States. Here, we have indication for 4 tumor types. And all these tumor types have shown growth in terms of the business for LENVIMA. As you can see in the first bullet, utilizing AI technology for individual stages of the patients are understood and captured by AI-enabled platform through use of online channel, timely and appropriate information has been provided to individual patients over the past several years, and we have been able to see benefits of these efforts, particularly dose management, which is very important for management of safety in order to have the persistence in the treatment. These kinds of commercial activities have brought about the results. And the second bullet on the right, which shows the indication for RCC. Post following the first-line treatment, we have obtained the approval for the second-line treatment for RCC. So let me explain in further details in the following page. As I said earlier, if you take a look at the bottom left corner, in the United States, there are 4 types of cancer where LENVIMA is indicated across all the types of cancers, the growth was achieved in the first half, particularly in RCC. If you look at the left-hand side, the combination therapy of LENVIMA plus KEYTRUDA has gained the top largest share in this category of RCC first line as a treatment option. In addition to this indication, as you see on the right-hand side, combination of WELIREG plus LENVIMA. WELIREG is the RCC treatment by Merck. And following the first-line immuno-oncology therapies, we have obtained approval for the second-line treatment following IO therapies. We are filing for this indication in Japan as well. In the Kaplan-Meier curves show that following the IO treatment, cabozantinib is utilized as the most commonly used treatment following anti-PD-1 and L1 therapy and a statistically significant improvement in PFS has been shown against cabozantinib. And that LENVIMA has gained the position as a backbone therapy in advanced RCC. That is our expectation. Next is DAYVIGO. In DORA segment, DAYVIGO is expanding its share in this category. If you look at the bar graph on the left, revenue is reaching a little less than JPY 40 billion, which has shown a 36% year-on-year growth, which was very strong growth. The blue in the middle shows Japan, which is the main market for us, as you see on the bullet point. In both the revenue as well as the number of treated patients, we have maintained the largest share in the market. The bottom portion in the bar graph, the blue -- dark blue portion is North America, combining the U.S. and Canada, which has shown a 70% positive increase year-on-year. A strong growth has been shown. In the United States, in order to support the access to health care providers, specialist physicians, telehealth initiatives are being promoted. In China and Asia and Latin America, we are seeing the continued growth and in EU and the U.K., this has been under regulatory review. Next is about LEQEMBI. For the first half under review, revenue was JPY 61.5 billion, which was up 50% year-on-year. We could grow that faster than the plan. And if you look at the second bullet on the right, subcutaneous formulation is being launched into the market, particularly aiming at initiation treatment. We are making utmost efforts to launch this formulation for initiation treatment. In the United States, this formulation is provided and launched on August 24 under the brand name of LEQEMBI IQLIK. In Japan, it is called as a brand name of LEQEMBI Pen. On Friday, 13th of November this week, reimbursement will be determined. At the same time, it will be launched in Japan. In China, in early next year, it is expected to be launched potentially, and we believe that these are gaining momentum. And therefore, we are deepening our confidence in achieving the full year forecast of JPY 143.5 billion. Here, I would like to recap the fundamental values of LEQEMBI. Alzheimer's disease is a progressive neurodegenerative disease. Therefore, the treatment of this disease must not be stopped or interrupted. This is what we think. For this disease, Alzheimer's disease, which is -- whose underlying pathologies are amyloid beta protofibrils and amyloid beta plaques, these 2 are cleared in the brain. By doing so, LEQEMBI reduces the rate of progression of AD. That is the pharmacology of LEQEMBI. And what kind of benefits can be brought about by this? There are 3 points at the bottom. First point, clinical efficacy, including benefits associated with early treatment initiation. And second, sustained slowing of disease progression with long-term treatment. We have published a 48-month long-term treatment data and sustained slowing of disease progression is expected. And the third point is in ARIA incidence or infusion-related reaction. Safety profile has been established. These 3 are considered to be the fundamental values of LEQEMBI. Now the launch of subcutaneous formulation or auto-injector for LEQEMBI, what values are going to be provided. On top of these fundamental values of LEQEMBI, there are 4 such values listed here. The first one, patient and family will be involved more in treatment. They will engage or involve in the treatment utilizing or administering the drug by themselves. And the greatest value is to have freedom from IV infusions. This formulation allows once weekly administration. Approximate injection time of each injection takes about 15 seconds, and they will use 2 autoinjectors per administration. Where they live, they will be able to administer by themselves or this formulation can be administered by their caregivers at home or care facilities, and there is no need for adjusting the dose. Fixed dosing regardless of body weight is provided and the cutting-edge auto-injector device with double tapered 29- gauge needle, which may help reduce pain, very convenient and easy-to-use auto-injector is provided. The second point is convenience. At home or on the go, they can be administered by self-injection or injection by caregiver. And also flexibility can be increased in terms of scheduling injectors for -- injections for patients and families even when they are traveling and they can reduce patients' and the families' burden for infusion center or clinic visits, and it can reduce infusion-related time requirements at infusion center or clinic. There is such a high convenience. And third one is from the different perspective of medical institutions. Burdens can be reduced. First of all, there will be no infusion bed or chair arrangements necessary. For various type of disease treatment, infusion capacity or beds or chair can be utilized. Therefore, there will be a reduced burden on the infusion capacity. And the second one is the burden on the health care providers, including nurse and pharmacists, they are in charge of coordination, administration and monitoring related to IV infusion health care. So such health care resources can be reduced. And the fourth one is favorable safety profile. As regards to systemic infusion reaction rate is 1.4%, which is lower than that of IV. ARIA safety profile generally comparable to LEQEMBI IV treatment. In the United States, in the case of IQLIK, how specifically will IQLIK be administered according to what schedule that is shown in this diagram. As shown at the top, based on the need of a patient, dosing options can be selected. So there is a greater degree of freedom of administration, reducing the hurdle of receiving LEQEMBI treatment. That is the major effect. First, for the first 18 months during the initiation treatment period, every 2 weeks, IV infusion can be given or it may be a once-weekly IQLIK injection with 2 auto-injectors per treatment. And it is possible to switch between IV or IQLIK. After 18 months, in case of IV, maintenance treatment will be every 4 weeks. In case of IQLIK maintenance, it will be once weekly with 1 auto-injector administration. And it is also interchangeable between IV or IQLIK. There is much flexibility and degree of freedom in administration. In the past, there was only IV infusion option for LEQEMBI, but that hurdle has been lowered significantly with this added option. Specifically, regarding IQLIK initiation treatment, how is it ramping up after the launch? I would like to walk you through that in the next few slides. As for the patients who are receiving LEQEMBI, looking at the number of treated patients, this is compared between IQLIK and IV. Blue line is LEQEMBI IV treatment. This trend is similar to other AAT. In comparison to that trend, the pace is almost 4x as fast for IQLIK. The number of treated patients uptake is 4x as fast. On the right side shows number of prescribers. In a similar manner, IV trend is more or less comparable with other AAT trend. But in comparison to that, at 6x faster pace, uptake is increasing in the number of prescribers. A very rapid uptake is being realized. On the left side of this slide, the sales in the U.S. by quarter is shown for LEQEMBI. In the past 6 quarters, consecutively, double-digit growth has been achieved. In the latest quarter, in comparison to the previous quarter, growth was 11%. IQLIK was launched for maintenance in the third quarter fiscal '25. And in the second quarter of FY '26, initiation treatment IQLIK was launched. As you can see here, blue part is infusion and green part of the bar represents IQLIK. At this point in time, still the IQLIK proportion to overall LEQEMBI administration or net sales is smaller. Most recently, it has grown to close to 10% ratio for IQLIK. According to this graph, you can see that IV is growing. And on top of that, there is additional growth with IQLIK. Please understand that there is incremental growth achieved by IQLIK. IV growth continues. And as shown at the bottom, LEQEMBI's fundamental value of maintenance treatment is such that disease progression is slowed, and that benefit is much wider -- much widely understood in the U.S. market. In addition, as I've mentioned earlier, in addition to IV infusion, we have SC-AI in the form of IQLIK. And it is possible to switch between these 2 options, lowering the treatment hurdle. And that is also helping the initiation of IV and also increasing the uptake of IQLIK as well. That is represented in this net sales graph. On the right side, this is the number of prescribers of LEQEMBI. As you can see in this graph, IQLIK maintenance treatment launch and IQLIK initiation treatment launch at the time of these launches, you see that the line -- the slope has become steeper, showing more -- greater increase in prescriber count. And I believe this shows the effect of IQLIK. With the launch of IQLIK, as shown at the bottom, LEQEMBI prescriber base has expanded. With lower treatment barrier, physicians with no prior AAT prescribing experience started to prescribe LEQEMBI, who were not receiving AAT treatment. First, those who are living in rural areas or HCPs in rural areas, because of long driving distance, treatment options, it was not considered a viable treatment option. Or in large urban areas, the GPs may have problem of lack of parking space and may not have prescribed AATs. But these physicians, now that IQLIK is available, are beginning to prescribe IQLIK or LEQEMBI. And other AAT prescribers, because of convenience and because of degree of freedom, are prescribing LEQEMBI at an accelerating pace. Turning to the share amongst new patients and amongst the total number of patients treated with AAT. As for a new patient, a share in the new patients, it has been a very competitive situation. But recently, with the launch of IQLIK for initiation treatment, our AAT prescription for new patients has gained a leading share. Objective data is demonstrating this. As for the total anti-amyloid treated patients, and as you can see in the line graph on the right, after the launch of initiation treatment of IQLIK, the difference is increasing. The gap is becoming larger. Fundamental value is being provided and with a lower hurdle through IQLIK in initial -- in new patients and in overall total anti-amyloid treated patients, IQLIK or LEQEMBI is gaining momentum. Another important point is Medicare Part D formulary inclusion. Medicare Part D formulary inclusion, it will start in January 2027. It is expected to start in January 2027 and the new U.S. Pharmacopeia category for AD disease-modifying therapies are established. So this new category was established, and that is the precondition for inclusion in the Part D formulary. Now the condition for inclusion in Part D formulary have been prepared. We continue to engage in negotiations with the relevant authorities and close to 70% may be covered with Medicare Part D from January 2027, covering about 70% of subscriber base. And with the remaining insurers, we are in negotiation, and I am convinced that the coverage will expand further. Effects as a result are summarized at the bottom. As you see in the first bullet point -- the second bullet point, correction. In the first bullet point, MEP -- under MEP, 90% are reimbursed and there is no problem in terms of reimbursement, but there is also a slight challenge of time consumption for MEP procedures. But with the Part D formulary inclusion, there will be an effect of simplified procedures and time saving. The second bullet point shows out-of-pocket payment or expenses. Medicare Part D out-of-pocket payment is capped. And currently, it is at $2,100. Above $2,100, there will be 0 out-of-pocket payment. Those who are on IQLIK treatment, of them, 55% have reached the maximum and therefore, their out-of-pocket cost is 0. Smoothing of drug cost payment is also possible. For example, in next fiscal year and beyond, if there is out-of-pocket costs, then that cost may be spread. For example, to smooth out with a monthly payment, such smoothing mechanism is also allowed. And with that, out-of-pocket cost burden will not pose a major barrier to access in our view, and we will proactively provide information to patients to support their introduction to treatment. As for Japan, LEQEMBI subcutaneous 250 milligram pen, NHI price listing and launch are scheduled for November 13. As I've mentioned before, as shown in the box, drug price is JPY 27,141 per pen of 250 milligram. And cost of pen device is also reflected in this drug price. For home self-injection, guidance and management fee may be claimed by facilities, which is around JPY 600. And the effects as a result are summarized below. Regarding the expansion of patients initiating treatment, it's similar to the United States, reduced burden of clinic visits, reduced time for administration, freedom from IV infusion and increased treatment uptake through active patient participation in care. And there will be also reduced burden on health care providers, treatment preparation, et cetera, the burden will be lowered. And number 3, number 4, initial treatment facilities, initial 6 months of treatment will be at facilities for initial introduction, and then there will be follow-up facilities to provide subsequent treatment. There are these 2 types of facilities. And in both of these facilities, the number of patients is plateauing, but there will be -- we believe that pen formulation will enable breakthrough. Initial treatment facilities are seeing plateauing because of IV infusion operational issues. And because of that, some facilities are foregoing providing LEQEMBI treatment. And we believe that such facilities account for a double-digit percentage. And we believe that these facilities will start providing LEQEMBI treatment. As for follow-up facilities, in many cases, these are oftentimes general practitioners in cities. And infusion -- IV infusion can be cumbersome and there is also insurance reimbursement procedure burden. And for some clinics, it is difficult to become follow-up facilities, but they will be freed from IV infusion procedures. And there will also be guidance and management fee for home self-injection, and we expect a larger number of follow-up facilities to start providing treatment. And there will be flow of patients from initial treatment facilities to follow-up facilities in a smoother manner. That is also expected. In the next 3 years, I would like to discuss the pipeline in the near term. First, preclinical AD potential indication expansion. As shown in red letter, beyond MCI at a stage earlier, by intervening earlier, we want to delay the onset of Alzheimer's disease or prevent the onset of Alzheimer's disease. Such significant value may be generated by expanding indication to preclinical AD. Left side, AHEAD3-45. This is a registration study, and we have presented this study before. Today, I would like to focus on the right side, DIAN-TU ART. As you are all aware of, there is DIAD, dominantly inherited Alzheimer's disease. This is familial Alzheimer's disease patient population. It is said that there are more than 1,000 families in the world who are DIAD. Their parents have Alzheimer's disease. And if that is the case, at 50% probability, the same mutation will be inherited by the next generation. And almost at the same age, there will be onset of Alzheimer's disease as the previous generation and will follow similar outcome as the previous generation. That is the nature of this population. And DIAD cohort is very well managed in this study. And various information is also provided by Washington University, St. Louis, WashU St. Louis. This is Washington University located in St. Louis in the United States and specifically neurology department of WashU. And over many years, with WashU, we have engaged in a very strong collaboration. And through that collaboration, lecanemab and etalanetug related findings have been obtained. And DIAN-TU ART using this cohort, amyloid removal trial is underway. Lecanemab will be given for 5 years to asymptomatic DIAD cohort. Results of the test are beginning to be obtained and the results are being expanded. This is a Phase III to Phase IV study. And important data from this study, for example, at the age of onset, there are some who do not see the onset of the disease. There are cases of delayed onset and such data will offer very important supportive information as we understand preclinical AD and file submission for preclinical AD. Next is etalanetug. This is anti-MTBR tau antibody including preclinical AD that I've just discussed. And regarding this project as well, with FDA and with regulatory authorities, we are engaging in good consultations as we continue with the trials. Study 202 of etalanetug, we have reported before. This is underway smoothly. So I would like to focus on the right side, Tau NexGen trial, Phase II/III. DIAD around 200 subjects are the target population. Etalanetug is added on top of standard of care LEQEMBI treatment. This is also a very important part. This is going to -- we expect this to provide a strong supportive data for regulatory submission for etalanetug. The third is ledasorexton, which is orexin 2 receptor agonist. And this is a treatment for narcolepsy. On the right side, as you see, Phase II study, LPI was achieved. That is the new piece of information. On the left side, I would like to mention some topics related to when this was discovered from in-house compound library through high-throughput screening, there was a single hit seed compound. And that was the seed compound. And with a lead and MedChem, we have arrived at ledasorexton. In that sense, we were very lucky to identify ledasorexton and we also have experience of synthesizing DAYVIGO and AI brain wave assessments are used in DAYVIGO, including that assessment experience, we are tackling this very difficult compound development and difficult to synthesize small molecule compound is what we found. This is a new compound, a new scaffold compound. As for the characteristics in Phase Ib, we have collected strong efficacy signals and there is also a wide safety margin. And in type 2 narcolepsy, which needs higher dosing, there is a possibility suggested of applying this drug. And once daily dosing may be possible. And this may lead to differentiation with a drug that was launched ahead of us. Conclusion. In the first half, 3L products, LENVIMA, LEQEMBI and lemborexant or DAYVIGO grew and their growth drove organic business performance ahead of plan. In the second half, we will continue our efforts to achieve the full year fiscal '26 forecast by steadily advancing our business operations and maintaining strict budget versus actual spending management. As for SC-AI, in AAT, this is an EPOCH making important advance. Other AAT currently does not have SC-AI project. LEQEMBI initiation treatment and maintenance treatment will face lower barrier and the value for health care provider will be expanded. And we expect growth in the number of patients treated with LEQEMBI significantly. Following SC-AI near-term potential contributions in the Alzheimer's disease area include the potential indication expansion of LEQEMBI into preclinical AD and the potential approval of etalanetug as the world's first treatment targeting tau pathology. Both are expected to have strong supportive data from DIAD target population. And both are breakthrough innovation in AD treatment or groundbreaking innovation in AD treatment. That is our expectation. Thank you very much for your kind patience.

Now we would like to open the floor for Q&A. We would like to take questions from investors and analysts who are attending in person. And we'd like to take questions from those participating online and also questions from media personnel in the venue and lastly, questions from media participating online. This is the order. [Operator Instructions]

My name is Wakao. I am from JPMorgan. Am I able to ask 2 questions or only one?

You can ask 2 questions now.

All right. Then let me ask 2 questions. First question is about IQLIK in the United States, uptake in the market. Could you please elaborate on this?

The hurdle for the treatment has been lowered, and therefore, uptake in the market has been very strong.

Could you please give us more further details? What is contributing?

IV required securing of beds or chairs. By switching to IQLIK, there is no such a cumbersome task. And then those people who are waiting for the treatment may be coming to receive IQLIK or with the high convenience of all people who consider the treatment initiation may come for the initiation treatment. So let me give you further details.

Do you think it can be -- this trend can be sustainable?

Well, as I said in my presentation today, first of all, fundamental values of LEQEMBI should be considered. Repeatedly, we have been communicating these values to the market. 3 years have passed since its launch. These values have been understood widely in the market now. I think this has been the greatest factor. On top of that, another administration option, SC-AI with wider use and it can allow the switching in between the IV and SC. There is such a flexibility. Patients may worry that they would have to visit the hospitals for administration forever. There has been such a negative and grave concern, and this has been reduced significantly with these 2 values contributing to the current momentum in the market. We believe that this has just begun, and we believe that this will be sustained. From the people in the front line, we have Mr. Haruna, who is with us today. So please explain further.

Thank you very much for your question. I am in charge of global LEQEMBI business. My name is Haruna. I'd like to explain further. Regarding IQLIK, IQLIK uptake has been very fast, particularly in the United States, motorized the society. For example, patients have to drive for 2 or 3 hours in order to visit clinics. For the sake of treatment, there has been a heavy burden. When this is switched to the home care, the great benefit can be expected, and that has been evaluated highly by patients. As regards to health care providers, as our CEO, Naito explained earlier, it's not simply securing the chairs, but making appointments and reserving the chairs and also preparations may be burdensome. With the SC-AI, which is an auto-injector, this will eliminate those burdens. That is the great benefit. Based upon this, those physicians who have been using both formulations, considering the clinical values and also the convenience, LEQEMBI IQLIK can be opted for by those physicians who have been prescribing both agents, or those physicians who have never used AAT are starting to use this drug and the number of such physicians is increasing. Weekly sales of IQLIK has been shown to increase week after week, and we highly evaluate such continued increase in the sales.

Thank you very much for your response. Regarding the time to start of the treatment, do you think that the time has been shortened? With the high convenience that there is no need for reserving beds, therefore the duration to the start of the treatment can be shortened.

Thank you very much for your question. Short time -- just a short time has passed since the launch of IQLIK. It' s very difficult to say. But in shortest time, only 2 days were necessary for starting the treatment with IQLIK. There are some other patients who take a longer time. But the fact that they don't have to visit the clinics can bring about a greater benefit of shortening the start of efficacy.

And the second question, I believe that the progress in the first half has been quite strong, but you said that you will keep the forecast -- full year forecast as it is. And there are certain unpredictable uncertainties you mentioned, Oyama-san. Could you please give us any such uncertainties with us as far as you can?

Our CFO, Oyama, is going to respond.

Thank you very much for your question. As of today, quantitative uncertainty factors are not recognized by us yet. However, on the other hand, as far as we can recognize in China, impact of VBP, volume-based pricing, can bring about some impact, and that is being factored in to some extent. However, we have to cautiously monitor what impact will be given on to our performance going forward.

Yes, attendee seated next to Mr. Wakao, please.

I'm Hashiguchi from Daiwa Securities. It seems that cost of goods is increasing in comparison to the first quarter. What is the background? It is increasing in the second quarter, although you have mentioned that this is within the plan, but mix may have changed. LENVIMA in the first and the second quarter was flat. LEQEMBI has increased. On the other hand, because of this change in product mix, was there a higher cost of sales? Or are there other factors?

The question will be addressed by Mr. Oyama, CFO.

Thank you very much for your question. As you rightly mentioned, there is an impact from a change in product mix. And in addition, in the first quarter, production loss was smaller than expected. LEQEMBI production loss was within the expected range. And because of that, from the first quarter, it is increasing by about 0.5 percentage point.

In cancer area, I have a question on business development. In the spring briefing session, there was a mention that you will be focusing on cancer area development. There has not been any update so far. What is the current status?

And we believe that the -- we are making utmost efforts in funding. Should I elaborate on that? But in any event, we are not able to discuss details. So truly, we are making utmost efforts.

So when you have more specifics, please -- I look forward to the update.

Any other questions from investors or analysts who are in the venue? If not, we would like to ask whether there are any questions from investors or analysts who are participating online. UBS, Mr. Sakai.

This is Sakai speaking from UBS Securities. I'd like to ask you about the status of LEQEMBI in U.S. market. According to the earnings call by Biogen, 50% of covered lives. And on Page 15, 67%. Is this something that can be apple-to-apple comparable? And according to the formulary coverage, step therapy is not added. So this seems to be quite easy to use coverage. How would you regard or evaluate this? And 50%, do you think it includes the 250 milligram in August briefing session? And both will be -- Haruna-san mentioned that he expected that both will be included in the formulary. 350 ml has been confirmed to be in the list, but what about the 250 ml?

Mr. Haruna, who is in charge of global LEQEMBI business, is going to respond to your question.

Thank you very much for your question. I will answer one by one. 250 ml is included. Yes, this percentage shows the 250 milligram included. No difference between the initiation and maintenance treatment. As has been announced by Biogen, as you can see in this slide, this is ongoing. Therefore, the status is changing day by day. As regards to Medicare Part D, about 67% will be secured, and there has been progress towards that.

And comparing to the response by Biogen, is it apple to apple?

Yes, because we are sharing information between the 2 companies, this is apple to apple. And step therapy is not added. You mentioned. No necessity for step therapy. Therefore, LEQEMBI IQLIK can be used from the initiation. So this will be secured from January.

And 67% on subscriber base and 250 and 350 milligram can be both utilized by these patients?

Yes, that is correct.

Next, Yamaguchi-san from Citigroup.

This is Yamaguchi from Citi. Can you hear me?

Yes. We can hear you.

I apologize that I'm participating online. The first question is related to the earlier question. January next year when coverage starts and until then, I'm sure you will be making various efforts. But after the coverage starts in a nonlinear fashion, do you think that prescription will increase, or because you're already making efforts, you do not anticipate such nonlinear increase? That is the first question.

Mr. Haruna responsible for global LEQEMBI will respond.

Thank you for your question. From January, because of the inclusion in formulary, we believe that there will be a further uptick, an increase in usage. And the major reason for that is, as it was mentioned in the presentation earlier, insurance reimbursement remains at high level, but out-of-pocket costs will decrease for patients once there is inclusion in formulary. And from medical exception process, if there is change to formulary, the procedures will be simplified. Because of these various benefits from January, we believe that there will be further increase in the prescription. That is what we expect.

And you showed the share of AAT earlier. Among new patients, there was no graph, but what is the level?

Roughly speaking, total number of treated patients only was shown in the graph. Top share, leading share, so it's above half. Above half. I think it's English expression. So please understand that it is above half. Yes.

So that is a total number of treated patients.

Yes, out of the...

From Morgan Stanley Securities, Mr. Muraoka, could you please unmute?

This is Muraoka from Morgan Stanley. I have a question about the pipeline. First one is narcolepsy treatment. And for NT1 and NT2, the results of the study will become available in March, as has been mentioned earlier. How are you going to present this? For both NT1 and NT2, the results will be released through press release by March? And after that, in June, there seems to be a big congress meeting, and the detailed information will be provided at the meeting. Is this something that you are planning?

Dr. Ido, in charge of R&D, is going to address your question.

Yes. This is Ido speaking, and I am responsible for R&D. Thank you for your question. As you said, Phase II is progressing steadily. As planned, we are going to obtain the top line results by the end of this fiscal year. Detailed results data, as you pointed out, will be presented at the International Congress meeting in the next fiscal year. But as soon as the details are determined, we would like to release that. And even before that, regarding the disclosure of results from the study will be considered regarding how those data will be disclosed.

NT2 as well, Phase II results will become available. And for Eisai, NT2 segment, do you think that you can be potentially #1?

So we will be disclosing the data for NT2 as well at the same time.

So after that, pivotal study will be started for NT1 and NT2. With that in your mind, you are waiting for the results to come out?

Yes, that is correct.

I have another question about the pipeline as regards to tau, anti-tau antibodies. In summer next year, I think the results from Phase II study will become available after you get the results. And then you will prepare for the Phase III study. I think -- I'm sorry, I have touched upon this several times, but do you think that you will consider partnering potentially? Or are you continuing to run stand-alone on Eisai itself?

I think there are various options. It has not been determined yet.

Not determined means that you will consider after seeing the results from the study?

Considering everything, considering comprehensively. So we are considering both.

Not based on the results of the study, but considering the business as well as financial status. That is what you mean?

Well, I haven't been able to respond to your question, Muraoka-san. Every time you ask me, we are not -- I am not giving you a perfect answer. But inclusive of what I have just mentioned, costs, development costs and so forth. There are many things to be considered as you know, Mr. Muraoka. So inclusive of all these, we will also consider conditions of business. As regards to the results from the study, we believe that there has been a robust progress. Therefore, we do not have a grave concern. But when it comes to business conditions, which I believe should be fully taken into account, that is the main point. Are you satisfied with my answer?

I could read between the lines a lot. Yes, I'm looking forward to seeing the results from the study.

Next, from Macquarie Securities, Mr. Tony Ren.

Can you guys hear me? Hello? Hello? Can you hear me?

Could you try again? Mr. Tony Ren, we cannot hear you clearly. Could you try to speak again?

Yes, can you guys hear me okay?

There's a lot of background noise. If you could speak up, please.

Let me try again.

We would like to come back to you, Mr. Ren. In the meantime, Ms. Sogi from Sanford C. Bernstein.

First about IQLIK Medicare Part D inclusion and insurance reimbursement. Once that happens, then regarding -- in comparison to medical exception process, patients' out-of-pocket payment will decrease. How much decrease? Is this a meaningful decrease? And will patients understand that there is a difference? Is that the magnitude of the reduction in out-of-pocket expense? And I think it's Part B coverage for IV. And what is the -- how does it compare between IV and IQLIK in terms of patients' out-of-pocket expenses?

Mr. Haruna, responsible for global LEQEMBI will respond.

Thank you for your question regarding out-of-pocket expenses. Depending on the insurance, there is a huge difference. When there is inclusion in formulary, although different from insurer to another, there is going to be a meaningful reduction in the cost and the cost to be borne by patients. We expect that there will be meaningful reduction. As for the comparison of cost between IV, it is difficult to make a simple comparison. For example, in case of IV, infusion cost and there is also drug cost and not only drug cost, but there is also transportation cost to go to the clinic. There are various types of costs that are borne by patients and health care providers. But in case of IQLIK, it will be only drug cost. And depending on the situation, IQLIK may be lowering cost or IV may be lowering cost in terms of out-of-pocket expenses for patients. But generally, it will be similar between the 2.

I now have a question to CFO about expenses, R&D, et cetera. The progress ratio in comparison to budget is very fast. On a full year basis, you have not changed guidance. And towards the second half, do you expect that there will be some deceleration in the pace?

Mr. Oyama, CFO, will respond.

Thank you for your question. About cost, from -- we have always said that the impact on the profits from the exchange rate is limited. And even excluding exchange rate impact, the 3Ls have shown strong growth. Revenue, cost of sales and research and development expenses, all are to a degree affected by exchange rate. And that has led to higher progress rate in comparison to plan. As for research and expense -- development expense, in the first quarter, some amount was expected, but it progressed faster. It is not exceeding significantly, but as cost item, it is -- it may exceed the level that was planned. But as for profit, we are targeting JPY 70 billion.

Does that mean that -- were there any activities that were concentrated in the first half, but instead, it's basically because of FX impact?

That is correct. And as for R&D expenses, there were some that were expected to occur in the first quarter, and that is also included in some part.

Mr. Tony Ren, are you ready to ask question now?

Can you guys hear me?

Could you please speak up?

Yes. Can you hear me now? Hello?

Yes, we can.

Okay. Perfect. For LEQEMBI in the U.S., amongst the new patient starts, right, what percentage of the patients currently use IV? And what percentage use LEQEMBI IQLIK for initiation? So that's my first question. And the second question is, on Slide #17, you mentioned you are conducting a study, the DIAN-TU ART study. And you are using patients who were treated in the DIAN-TU-001 study who were treated with gantenerumab in the open-label extension, right? There was also an active control arm -- sorry, an active arm, a treatment arm of solanezumab. Is there any particular reason why you chose the gantenerumab-treated patients, but not the solanezumab-treated patients? Yes, so that's my second question.

Mr. Haruna, who is in charge of global LEQEMBI, is going to respond to the first question.

Thank you very much for your question. [ SC ] IQLIK versus IV, it depends on the timing of getting your information as well as granularity different. Therefore, new initiate the IQLIK and IV split cannot be answered now -- as of now. And for the second question, Dr. Lynn Kramer, who is in charge of clinical development or -- yes, Lynn please.

Yes. I'm Lynn Kramer. I'm the Chief Clinical Officer of Eisai. The DIAN ART study started a number of years ago, and the initial cohort did include solanezumab. And all patients were then converted to gantenerumab later for several years. And when gantenerumab was discontinued, now all those patients are treated with lecanemab. So patients who were on solanezumab originally have now been on gantenerumab and finally lecanemab. I believe that answers your question. Is that clear?

We would like to take the next question from among the members of the media.

I'm [ Nakada from Nikkei ]. Operating profit achieved a high progress rate in comparison to plan. There was also FX impact as you have noted earlier. Is there a possibility of exceeding the full year forecast?

Mr. Oyama, CFO, will respond.

Thank you for your question. Up to the second quarter, we have seen a strong progress, and we are ahead of the plan. Operating profit of JPY 70 billion needs to be achieved. And if possible, we would like to achieve higher number. At the moment, we do not have ground that warrants a change in the full year forecast.

Another question. Last week -- the midterm election results in the U.S. were announced last week. And based on the results, do you expect any change in the environment in the United States or change in assumptions?

Mr. Yasuno, responsible for Americas, will respond.

Thank you for your question. I'm Yasuno, responsible for Americas. Your question is whether there are any change in business environment. It has been only 1 week. So immediately, there has not been an impact in our local business. We have not seen impact or do not expect immediate impact. But as you have seen in both the Senate and in the House, Democrats have captured majority. And in order for the Trump administration to implement its policies, its interaction with the Congress will be a major challenge. And we also expect that there will be stronger scrutiny and oversight by the Congress on the Trump administration. And as you may know, Democrats are also considering pharmaceutical drug and affordability as an important agenda. And so we expect that there will be -- there will continue to be strong interest in pharmaceutical drug and access. As for what is related to Eisai, MFN tariff, China-related bills, how these will develop will be something that we will keep monitoring closely and we'll be responding accordingly.

Any other questions from the media who are attending in the venue?

My name is Watanabe from Nikkan Chemical Daily, Kagaku Nippo. Regarding LEQEMBI, could you please give us your view of the potential in China? Postponing the inclusion in the NRDL, but the inclusion in another commercial list. So based upon that what is your take on the potential in this market?

First of all, we were not the ones who postponed the inclusion on the NRDL. The government thought that it is not the timing to include on to the NRDL. All right?

Yes, that is fine.

My name is Sasaki.

Sasaki who is in charge of China market is going to respond.

This is Sasaki. I am responsible for China. As CEO Naito mentioned, the postponement of inclusion in the NRDL occurred. However, the cutting-edge innovative drugs was evaluated. Therefore, this has been listed in the list of formularies under the commercial insurance. Therefore, there has been an expansion of use. From FY 2027 onwards, there will be impacts of the inclusion on the list. And therefore, it will expand the access for many more patients. On the other hand, the increase of the consultation ratio or BBM simplified diagnostic pathway are coming potentially. Therefore, these will be more important for expansion of the access to this drug. As we mentioned earlier, there has been approval of the SC subcutaneous formulation, which is expected to be launched in next -- early next year. And this will further reduce the burden of patients. Therefore, we have high expectation to that market.

Do you think that there is a possibility of inclusion of this drug onto the NRDL? Or is this something that you are aiming for?

Of course, we are talking about a huge market of China. So NRDL inclusion is one important option in order to expand access to patients. But as CEO Naito mentioned, this kind of AD drug to be included in the NRDL to provide reimbursement or access to wider population or utilizing the private commercial insurance to provide access to the drug, that is something to be determined by the government. And this is subject to the government's decision. And also, we have to consider the competitive landscape in consideration of the potential inclusion on the list.

Next question, please.

I'm [ Kozaki from Kokusai Iyakuhin Joho ]. About LEQEMBI and tau compound in preclinical AD, I have a question for clarification regarding development. First, participation in DIAN-TU, does that mean that in preclinical, you are trying to validate efficacy? Is that the correct way to understand? And another question. Going forward, blood biomarker and blood screening technologies will become available. And so in conjunction with that, I believe you have plans to develop in preclinical AD. And how much development has there been in concrete terms?

This fiscal year -- was it in June in London? It was in July. In July, I attended family event of DIAD in London and gave a keynote lecture. Family members included many younger people and regarding your mutation, I think you may have understanding, but asymptomatic people, whether for them to be able to remain asymptomatic or similar to their previous generations, are they going to see onset of the disease? That is a very serious question. And therefore, DIAD study is considered very important by Eisai as well. And we have engaged in these efforts because of the importance. And the data, we are sure, will provide some pieces of important information in the submission for preclinical AD.

About blood biomarker, could you also touch upon that?

Do you mean, are we using blood biomarker in DIAD? Well, this is a different story, but with blood, it is possible to detect amyloid without using PET.

On the spot, will the start of treatment become possible?

Dr. Ido, responsible for research and development, will respond.

Thank you for your question. Regarding your question, as shown on the left, AHEAD can be cited as one example already. [ p-tau217 Abeta 42/40 ] ratio and baseline amyloid accumulation, these are considered for long-term treatment screening. And including scientific validity of this, we believe we will be able to introduce our findings in the readout.

Any other questions from the media in this venue? Any question? [ Inami-san ] from Toyo Keizai who are participating online.

My name is [ Inami ] from Toyo Keizai. I have 2 questions. My first question is about 3-year plan. FY 2028, JPY 90 billion for core operating profit is set as a target. In the next year, FY 2027, what is your forecast? According to what you explained, SC-AI will expand and then accelerate the growth of LEQEMBI, which is expected. But on the other hand, for LENVIMA, there is a potential reduction of price because of the IRA. Could you please give us a very broad view, Oyama-san, perhaps? Could you please respond?

Our CFO, Oyama, is going to answer your questions.

Thank you very much for your question. Under the 3-year plan, FY 2028 core operating profit at JPY 90 billion. And for this fiscal year, JPY 70 billion is set as the target for the operating profit. So you can assume that somewhere in between the 2. And as you mentioned, we are considering the potential impact by IRA in revisiting our business plan. JPY 70 billion for this fiscal year should be achieved. And we like to -- we hope that we can disclose the plan, which will exceed that level, but please wait for the timing when we will be able to disclose the actual plan.

My second question is about orexin 2 receptor agonist, ledasorexton, that was explained earlier. The development itself is being promoted globally. But where are going to be the peak markets and what is the estimated peak sales? Could you please give us your rough idea to the extent possible? Why am I asking this question? Narcolepsy treatment by Takeda only for type 1, peak sales is estimated to be JPY 2 billion or JPY 3 billion and in Japan, JPY 7 billion or so. So I thought that this is going to be mainly promoted outside of Japan. So could you please give us your image?

Mr. Haruna, who is in charge of global DAYVIGO business -- it's not a DAYVIGO.

Thank you very much for your question. First of all, we believe that this drug will gain the status as a blockbuster. Therefore, we believe that this drug or candidate has a great potential. As regards to the market, considering the disease prevalence, I believe that there shouldn't be any big difference when compared to the other companies because the U.S. still is the largest market.

Any other questions? If you have any further questions, please contact IR or PR. With that, we would like to conclude the briefing session on the financial results from the second quarter fiscal 2026 of Eisai Company Limited. Thank you once again for your time. [Statements in English on this transcript were spoken by an interpreter present on the live call.]