Eisai's Management Discusses F1Q 2014 Results - Earnings Call Transcript

| About: Eisai Co., (ESALF)

Eisai Co., Ltd. (OTC:ESALF) F1Q 2014 Earnings Conference Call August 1, 2013 3:45 AM ET


Hideki Hayashi - Deputy President, Representative Corporate Officer, and Chief Product Creation Officer

Hajime Shimizu - Representative Corporate Officer, Deputy President, and Chief Financial Officer

Hideshi Honda - Representative Officer, Executive Vice President, and President, Asia Region

Kenji Matsumae - President, Eisai Japan, and Vice President

Ivan Cheung - Vice President, Corporate Strategy and Planning

Takashi Owa - Chief Innovation Officer, Eisai Product Creation Systems


Ryoichi Urushihara - Nomura Securities

Atsushi Seki - Barclays

Fumiyoshi Sakai - Credit Suisse

Unidentified Company Speaker

Thank you very much. It’s time to start our presentation on the results for the First Quarter Fiscal Year 2013 (sic) (2014). Please confirm the handouts, PowerPoint slide for the presentation, the consolidated financial report and reference materials. If you find anything missing from the package, please raise your hand. If it’s alright, then we would like to introduce the attendees from the company: Deputy President, Representative Corporate Officer, Chief Product Creation Officer, Hideki Hayashi; Representative Corporate Officer, Deputy President, CFO, Mr. Hajime Shimizu; Representative Officer and – Hideshi Honda, Executive Vice President, President, Asia Region; Ivan Cheung, Vice President, Corporate Strategy and Planning; President, Eisai Japan, Vice President, Kenji Matsumae.

Today’s presentation will be given by five speakers. First Mr. Shimizu will share with you the results in number and Mr. Matsumae will talk about the Japan business. Ivan Cheung will talk about the BELVIQ and Mr. Honda will talk about Asia emerging markets. And lastly, Mr. Hayashi will talk about R&D status. Now, we’d like to start our presentation. Deputy President, Mr. Shimizu, the floor is yours.

Hajime Shimizu - Representative Corporate Officer, Deputy President, and Chief Financial Officer

Good afternoon, ladies and gentlemen. I would like to present financial results. First slide, before talking about the results for the first quarter, I would like to share with you the focus points for fiscal year 2013. Focus points of proactive approach for recovery from the bottom in 2013. This is the year where we will start a steady progress towards bottoming out. The growth drivers will be focused in order to achieve bottoming out. There are 6 new products as next generation products. The net sales for the year is aimed at ¥115 billion, which is 72% year-on-year growth. In the largest market of the United States, two new products are to be launched.

In mid-June, BELVIQ, anti-obesity drug was already launched. Fycompa, anti-epileptic drug originated in Eisai, it will be launched in the United States upon the clearance of DEA scheduling. China, and the generic business, we aim at over 20% growth. Combining these two, these will be over ¥50 billion annual sales scale for the year. And we will try to transform a cost structure. We will make proactive investment in R&D and also cost optimization shall be pursued.

For fiscal year 2013, R&D expense ratio will be in the range of 22% against the total net sales. SG&A expenses ratio will improve by 3 percentage points to reach the order of 33%. In order to prepare ourselves for investment in the growing area, we like to take the proactive financial policy over 40% of the cash income shall be spent in investment for growth. And if there are any incremental necessary investment and we would like to prepare for such investment by providing a strategic facility for investment.

For fiscal year 2013 forecast is as follows. Sales 1% growth year-on-year and operating income, net income, are aimed at double-digit growth year-on-year. Here we have introduced to you the new index Pharma EBIT. Combining operating income and R&D expenses, this is the complex index. While continuing on the proactive R&D expense investment, we like to generate the operating income. Cash income ¥100 billion ROE will be double-digit and the dividend will be ¥150.

The sales for the first quarter of ¥154 billion, which is the 5% growth year-on-year, and the cost of sales was ¥46.3 billion account for 30% of the net sales, which was 0.6 percentage points down from a year earlier, the ¥108 billion, 4% up from the previous year in gross profit. As we can see in the subtitle, the first increase in revenue and gross profit since the second quarter fiscal year 2010, which is the first time in three years.

R&D expenses were ¥39.6 billion accounting for 25.7% of the net sales. As we have already informed you, co-development, working together with the Quintiles and Lenvatinib Phase 2 study was conducted successfully. Therefore, milestone payment was incurred. And also additional milestone payment for two other products concentrating in the first quarter, therefore 25.7% was the ratio of R&D expenses for the first quarter in the net sales.

As I said earlier for the full year, R&D expenses ratio against the net sales will be down to 22%. SG&A expenses was ¥54.2 billion accounting for 35.1% of the net sales, 38.3% was the previous term and then 3 percentage points improvement, and we are aiming at 33% in the SG&A expense ratio, and their operating income was ¥14.2 billion, which was 74% of the previous year and the net income was ¥9.4 billion, which was 79% of the previous year. As I said earlier, Pharma EBIT was ¥53.8 billion, which was 13% up from the previous year. Cash income was ¥21.9 billion.

Next slide, in order to grow – drive the bottoming out approach, the next generation six growth drivers at ¥21.3 billion, 34% year-on-year growth for the first quarter this year. In June BELVIQ was launched in the United States. So, the contribution by BELVIQ to the net sales and if I compare it will be launched soon in United States. Therefore for the full year this will be the strong powerful driver for growth.

Next slide, this is the last slide of my part. I would like share with you the analysis of factors for increased or decreased operating income. From the left hand slide the yellow bar representing the ¥19.1 billion which was the operating income for first quarter of fiscal year 2012. The three red bars are representing positive factors first two are the contribution by growing drivers. The left hand side is the contribution made by a six next generation products and next one is the growing segments including Asia region and generic businesses.

The third red bar representing the remainder of remaining half of the difference, the reduction in alliance fee and optimization of the costs. And the two blue bars are due to the productive investment. The first blue bar is investment related to the launch of BELVIQ in United States. The next bar represents the increase in R&D investment because of the progress of the projects and others. So, at this level if you combine all these factors and operating income was ¥20.9 billion. However, this green bar the milestone payment to partners concentrated in the first quarter, so subtracting this expense the actual operating income for this fiscal year for the first quarter was ¥14.2 billion. For full year our R&D expense ratio shall be 22% or so therefore the operating income for full year ¥78.5 billion. We are making a steady progress towards achieving that target.

I am going to introduce the results for Eisai Japan. For the first quarter against the target for this fiscal year we could make the strong start towards achieving the target. Net sales over achieved by ¥1.8 billion achieving 2% growth over that target. And we could achieve 100% year-on-year. Aricept and Pariet could achieve the targets and in generic business ¥5.8 billion in net sales which was 31% growth year-on-year. These were the great factors. Regarding the segment profit, this achieved 118% of the previous year. This fiscal year we are now able to do the independent promotion for Aricept for this fiscal year. And based upon patient’s medical consultation we established two – newly established HHC units under this system MR activities in all 259 medical consultation areas are steady ongoing. I think these all contributed to that good results.

Dementia in Japan and Eisai’s role to be explained now, the top left this represents the ratio of dementia, prevalence of dementia in population aged 65 and over in Japan. So, the older the patient – people become, the more prevalence dementia becomes. So, on the average 15% is the prevalence of dementia in population aged 65 and over in Japan. And top – down left this is the breakdown of the dementia by type of disease. The red represents accounting for 67.6% of all types of dementia which is the Alzheimer’s disease dementia. The total number of Alzheimer disease patients is 4.62 million according to the latest data available as a preliminary stage of dementia so called MCI or mild cognitive impairment represents about 4 million. Therefore in total 8.62 million is said to be the potential patients. So, 3.12 million or so is the number of Alzheimer disease, patients. However, only 1 million patients are receiving Aricept, however, still remaining 2 million are not receiving Aricept and other treatments.

So, we believe that we needed to continue our efforts to strengthen support for increasing the treated patients. In the first quarter, under the new business structure ¥18.3 billion in net sales was achieved in the first quarter representing 4% over the target. In 1999 film-coated tablets of Aricept was launched, since then in 2001, 0.5% fine granule formulation was launched. In 2004 ODT was launched and in 2007 for a severe AD indication was expanded and we launched 10 milligram tablets. In 2009, oral jelly formulation was launched and this year 2013 on June 26th, this year new dry syrup formulation was launched. So, in order to address various needs of the patients we like to continue to provide support.

Next slide, continuous commitment to patients through Aricept in Japan over to last three months, I would like to share with you what we have done. Initiation of potential patients to AD treatment in order to guide them to the early consultation in 238 medical consultation areas we operated specialized activities fitted to local situations. And in a website we tried to enhance the disease awareness activities through E-65.net and Dementia Forum for New Era for consumers. We also provided support for building community support networks. The five year promotion of the treatment measures for the dementia, which is called the 5-Year Orange Plan along with this plan we increased commitment to support community networking.

We are seeking to establish patient support program in the community to help provide early medical consultation and appropriate information. Contribution to patients through Aricept includes our measures to create innovative evidence on Aricept’s efficacy contributive to help prolonged lengths of staying at their home and healthy life span for AD patients. And we plan to hold knowledge sharing meetings with pharmacists to help improve patients’ adherence rate. Through these measures, in the first quarter 64,000 new patients started treatment with Aricept. For your information in the fourth quarter of fiscal 2012, the number was 56,000 therefore additional 8,000 new patients could start treatment with Aricept improved adherence rate at four weeks adherence 69.8% in September 2012, but ratio in April 2013 was increased to by 0.8% up to 17.6%. Therefore under Eisai united as one company a solid achievement has been made under new business model and ¥67 billion for the full year target shall be achieved by all means.

Next is about Halaven, continuous commitment to patients through Halaven in Japan we also conducted three measures in utilization of evidence includes including the Phase 2 trial in Japan we had two large scale global clinical studies EMBRACE and Study 301. There have been a series of clinical studies representing – demonstrating clinical significance by focusing on this we are expanding contribution to metastatic breast cancer patients and AACR and ASCO the potential inhibitory effect on tumor metastasis hypothesis and QOL through discussion with QOL vendors so trying to make contribution to patients in earlier lines. And the strengthened approach to customers, we strengthened approach to surgeons who account for more than half of all the doctors that treat breast cancer. And we responded flexibly to medical needs based on local characteristics including hospital clinic collaborations and hospital-hospital collaborations under the new business model which focuses on patient’s consultation behavior and a collaboration among medical institutions for cancer treatment.

And regarding creation of evidence from Japan we accelerated creation of evidence to seek increase in share in earlier lines of MBC treatment including neo-adjuvant therapy. Accelerated creation of evidence as a first choice in recurrent breast cancer patient previously treated with anthracycline and taxane through these measures Halaven sales in Japan reached 23% growth year-on-year due to the new strategy to focus on broad medical districts. As Eisai Japan as I said earlier Aricept and Halaven will continue to be our focus through our continued efforts and measures. Thank you very much.

Ivan Cheung - Vice President, Corporate Strategy and Planning

I am Ivan Cheung responsible for Corporate Strategy. I would like to discuss BELVIQ. BELVIQ in the United States started shipment to distributors on June 7th next week on June 11th through approximately 20,000 pharmacies in the United States BELVIQ delivery to patients started. Since launch the number of prescriptions per BELVIQ is steadily growing as shown in the graph. According to IMS in the week of July 19th, the sixth week since launch, prescription has grown 15% week-on-week to reach 2840. According to Symphony at week six, 3326 prescriptions were written.

Number of prescription and patient demand excluding the week of Independence Day grew according to the schedule and continued double-digit growth week-on-week. And since the launch at week six, around 3900 doctors have written BELVIQ prescriptions. Every week about 650 new doctors started prescribing BELVIQ and prescribing doctors base is steadily growing. On the right hand side box, it shows leading indicator after the launch, our company is providing patient support program and this shows the cumulative number of patients registered in the support program. 14,000 approximately is registered and registered patients receive direct marketing and weight management service. And in the near feature BELVIQ patient base will be enlarged.

And in terms of retention this serves as a very important indicator. And as earlier mentioned the number of prescriptions about 60% or over are patients who have 15 day free trial voucher which means that these patients are able to receive re-prescription and those patients who are receiving samples when the number is high, this means that in the near feature they will be contributing to rapid growth of BELVIQ. In the United States market access team of Eisai is approaching insurance company and large corporations and are negotiating and there is smooth progress. As of now in the United States with anti-obesity drug private insurance coverage is about 30% and with regards to BELVIQ the target is likely to be achieved one year before the schedule and before the end of this fiscal year we would like to achieve 50% insurance coverage. It’s only been about a month and a little over a month since the launch and in the short period of time looking at various indicators the launch of BELVIQ has been successful.

We can say that the launch is being successful. BELVIQ is an anti-obesity drug that was approved for the first time in 13 years in the United States. And even before the launch for medical professionals and from general public there has been much attention. And also from the media there has been much attention paid to BELVIQ on TV and Radio it was reported extensively and in major newspapers and local papers included much media talked about BELVIQ. And more than 300 million people were reached with the news coverage of BELVIQ Times Square and Las Vegas Jumbotrons featured BELVIQ Eisai has established BELVIQ website and medical professionals are accessing and general public are accessing and the number of access is larger than we expected. And this shows the strong degree of interest from the United States nationwide on BELVIQ.

Obesity treatment, there have been various epoch making developments in the second quarter in the obesity treatment. The American Medical Association declared that obesity is a disease. AMA has made that declaration and therefore healthcare providers when it comes to diagnosis, treatment of obesity and weight management control, we expect that there will be change. As a result of the declaration American Association of Clinical Endocrinologists have included pharmacotherapy using anti-obesity drug including BELVIQ as an option of weight management and has included this in the clinical path.

22 million people are covered by Veterans Affairs insurance coverage. And with regards to prescription access of anti-obesity drug, review has been started and republican and democratic bipartisan congress members are proposing treatment reduce obesity act in the senate as well as in the house. If this act is enacted then in Medicare Part D exclusion rule on anti-obesity drug maybe eliminated. Therefore in order to build weight management market over the medium to long-term this will provide a very strong impetus.

This is the last slide in my presentation. Regarding BELVIQ clinical data analysis is newly announced. ADA, American Diabetes Association this responder clinical finding was published. Responder is shown, patients achieved 5% or more weight loss at week 12 in patients with diabetes ratio of responders was 49.2% and more than twice that given placebo. And in patients with type 2 diabetes ratio of responders of BELVIQ was 35.9% and more than three times as much as placebo group. And patients with complications of type 2 diabetes and patients without diabetes in both of these groups BELVIQ has shown high responder rate.

And red line indicates BELVIQ responders and at 52 – at the week 52 on average weight loss was 10.7% and 9.1% respectively and more than 5% or more weight loss was maintained in 86% of the patients and 71% of the patients respectively. From these data BELVIQ responders are as at week 52 were able to enjoy weight loss effect over sustained basis. For Eisai we would like to utilize this type of data to expand and build weight management market.

That concludes my part of the presentation. Thank you.

Hideshi Honda - Representative Officer, Executive Vice President, and President, Asia Region

I would like to discuss Asia and emerging market. First regarding China in the first half 37% over the previous year this is a yen denomination therefore there is weakening yen effect. There are three products in China. Aricept, Pariet and Methycobal these are major products in China and we are focusing our efforts on these three products. And Aricept because of aging of society in China and this is exactly the same as in Japan or in the U.S. Memory clinics are established and there are 128 memory clinics throughout the nation of China. And we are educating the potential patients and 58% growth year-on-year was achieved. ¥1 billion was sold in second quarter and Aricept has achieved that level of growth.

There are many generics, but growth is achieved. With regards to Pariet, two years ago we started independent promotion. Johnson was selling alone and Eisai if you will started from the scratch and currently 62% growth year-on-year is achieved. ¥500 million, exceeding ¥500 million was achieved. And we are providing support to improve endoscopic technology in China as for Methycobal. Methycobal is the top product and there ¥3 billion was achieved in the first quarter and 35% growth year-on-year. It is double-digit growth ¥10 billion product is major product in China and Methycobal has become such a major product, top sales product. And we expect this pace of growth to continue. In Suzhou plant new parental formulation facility is being expanded to strengthen production capacity.

Another point is that in China, we will be creating evidence. Unfortunately, it is difficult to create evidence in Japan now. In China, we will conduct clinical studies to create evidence. And right now ¥3 billion a quarter is achieved. Surprisingly, products that were approved 25 years ago such as Merislon and Myonal, these products have achieved 51% growth year-on-year in the first quarter. Market is growing and weekend effect is also enjoyed and in-house established products are growing. And therefore, Eisai China’s margin is improving although there is transfer pricing issue on a non-consolidated basis. Margin is not growing as fast, but a segment it is improving. It is achieving fast growth.

As for other regions, other than China, in Russia in April, sales subsidiary was established. Halaven will be launched in September. And for epilepsy, Zonegran and Exalief will be launched before the end of this fiscal year. Epilepsy and Halaven, we will be focusing in these areas in Russia. In Canada, Halaven included four products already launched. They are currently being sold in Canada. In addition, Fycompa was approved in April and was launched in July and BELVIQ application was submitted in June. And therefore, number of products carried in Canada will be increasing. Although the monetary amount is not very large, we are increasing product line. In Mexico, including Halaven and Fycompa, seven products are submitted.

Once approval is given, we will start sales and we are ready to start. The preparation is underway. Brazil, Halaven received approval in May, and we are preparing to launch within fiscal 2013. Gliadel has also been approved already and we will begin with oncology in case of Brazil. And as for Asia, I have explained China already and this shows year-on-year growth of other countries in Asia. Asia overall, the increase is 39% year-on-year, and in other countries in Asia, we are still showing double-digit growth, excluding weak yen effect. We are achieving double-digit growth. We have 10 sales subsidiaries and all are achieving double-digit growth. Halaven, Aricept 23 milligram will be launched within fiscal 2013 already in eight countries. Halaven is approved. And we will be selling Halaven in eight countries. Aricept in the second half will be launched in four countries, South Korea, Hong Kong, Thailand, and India, and we hope to increase sales.

Next, to change subject about tiered pricing, I would like to explain. Tiered pricing has been explained on several occasions at the Analyst Meeting before, and this is now already implemented. Hong Kong, Philippines, and in Thailand, the product is already launched and patient assistance program is already implemented. In India, next month and the month after next, it will be launched and therefore scheme is being prepared, where insurance coverage is available, patients will be covered by the insurance. And income level, those who are higher in income and those who are lower in income, the categorization is made by the third-party organization, and as for patient out-of-pocket payment, at the high income level 100%. And then at the next level, one cycle will be given for free, and then at the lowest level, all four cycles will be given for free. And based on income such tiered pricing is given to achieve hhc concept and low margin high volume business model in Asia and emerging countries. We are aiming to achieve low margin high volume concept and we will be making efforts to achieve that concept.

Product creation progress is my topic. In the first quarter through partnership, we had three major projects, where progress was observed. First is oncology area, a strategic partnership with Quintiles. From that program, Lenvatinib melanoma Phase 2 study achieved POC. Second major project is co-development with or co-research with BioArctic. This is next generation AD treatment BAN2401. Novel score is used in adaptive design and POC study was started and the third major project is a strategic partnership with Epizyme, E7438 started clinical study for the first time as EZH2 inhibitor in the world. These are major emphasis areas, oncology and AD, we have seen major progress in the pipeline that is the first point I would like to report.

On the other hand, as a result of the milestone achievement as Mr. Shimizu mentioned at the outset, a ¥7 billion little less than ¥7 billion of milestone payment occurred in the first quarter. I would now like to discuss each of the projects. First, Lenvatinib, with Quintiles, we have strategic partnership for development and so far in oncology, we have conducted a review of potential project and Lenvatinib oral, molecular-targeting agent and the POC that we have confirmed for thyroid, hepatocellular carcinoma and endometrial cancer. In addition to that, in Phase 2 study for melanoma, POC was achieved.

And the details is presented here, melanoma standard first line therapy is dacarbazine and the monotherapy dacarbazine was compared with Lenvatinib and dacarbazine combination therapy. As shown on the slide, dacarbazine monotherapy PFS median was 7.0 weeks. In Lenvatinib combination therapy, PFS is 19.1 weeks, it demonstrated a statistically significant 2.74 the increase in PFS. In BRAF wild-type for medical needs is very high with interruptible or a non-responsive patients, then Lenvatinib combination therapy has achieved the 23.9% PFS whereas dacarbazine monotherapy PFS was 6.1 weeks. It was a 3.9 fold increase which is statistically significant. And these findings will be presented – were presented at ASCO this year. Based on these results right now for submission we are having discussion with various countries regulatory authority about the Phase 3 study for submission and we would like to make preparation for that.

Next, thyroid cancer global Phase 2 study using Lenvatinib, it is progressing according to schedule and we are planning simultaneous submission in U.S., Europe, and Japan before the end of fiscal 2013. For thyroid cancer indication, we have received orphan drug designation in U.S., Europe and Japan. Hepatocellular carcinoma in global Phase 3 study was initiated. Next. BioArctic partnership, with BioArctic, we are developing next generation anti-Alzheimer therapy using a protofibril monoclonal antibody. The code name is BAN2401. Antibody drugs are developed in Alzheimer orthopedic area, but they have nothing very successful. On the other hand, BAN2401, what is different from the past antibody drug and the drug is different, BAN2401 is relatively large size of polymer, it is soluble A-beta and neurotoxicity is said to be strong in protofibril and it is specific to protofibril, it is a specific antibody targeting protofibril, which is set to highly neurotoxic that is the difference between the antibodies that preceded BAN2401 in Europe mainly clinical study is conducted in the western countries, MCI in mild AD patients are the target patients.

Target patients are limited to these two groups and MCI and mild AD patients often PET imaging is conducted to look at A-beta and only A-beta positive patients are included in the study. Currently, 64 patients have been registered and the progress is smooth. Another major characteristic of the study is that in the past ADAS-cog, MMSE, and CDR, these cognitive score combined in appropriate fashion to come up with a novel score. This is a composite score that we developed in-house and using this novel cognitive score, we are using this as an endpoint for the study. And with this endpoint, clinical outcome and therapeutic efficacy it can be analyzed in agile fashion.

In conducting Alzheimer’s disease study, this is – and when especially targeting disease modifier for long-term, we have to observe appropriately the change in disease condition and symptoms. And with the conventional score, we were not able to adequately follow the change. And as for the score, we have made a publication in academic societies and were very well received by the experts. And interim analysis of each time patients will be included in a group that has higher safety and efficacy. This is adaptive design that redeveloped in-house. And with this in order to find the appropriate dose and in order to achieve the completion earlier, we will be able to use this study design effectively. As BACE inhibitor E2609 is under development on healthy volunteer multiple-dose and single-dose studies are conducted. And within blood and CSF, A-beta level reduction was already confirmed. And in a similar fashion as BAN2401, development strategy will be used in E2609 and preparation is underway for Phase 2 study.

Last project is E7438, since two years ago with Epizyme partnership, epigenetic enzyme EZH2 is targeted in oncology drug development. June, in this past June as EZH2 inhibitor for the first time in the world, Phase 1/2 clinical study was initiated. EZH2 is a histone H3 methylation enzyme, one type of that enzyme. And tyrosine, 621st tyrosine, 641st tyrosine when there is mutation then EZH2’s methylation will be out of control. And when methylation is out of control what happens is that histone H3 72nd resin, there will be methylation of the base. And because of strong information of the base, in the downstream, tumor suppressor gene expression is controlled. According to Epizyme research by using EZH2 inhibitor in gene mutation group, lymphoma cell was killed. Based on these results, in order to identify such gene mutations, companion diagnostics is co-developed with Roche Molecular Systems through partnership using this companion diagnostics by identifying patients most likely to benefit from E7438 we would like to design Phase 2 study effectively. As for EZH2, it is believed to be a critical player in maintaining genetic characteristics of cancer stem cells, especially for very malignant type of cancer. And therefore, we would like to pursue of research of novel mechanism for targeting cancer stem cell. In oncology area and in AD area, not only in-house development, but through partnership, we are expanding pipeline. We are increasing the value of the pipeline. With that, I would like to conclude my presentation. Thank you for your kind patience.

Unidentified Company Speaker

Thank you very much. We would now like to open the floor for Q&A. Now, we would like to invite anyone in the room for questions. Please raise your hand if you have any.

Question-and-Answer Session

Ryoichi Urushihara - Nomura Securities

Thank you for your presentation. My name is Ryoichi Urushihara, I am of Nomura Securities. First question, I have two questions, the first question is about business of BELVIQ, for April-June quarter, what was the actual sales generated in the quarter? If possible, please tell me? If possible and if you can share with us the monthly sales for the month of July which ended yesterday, can you share its number with us, if you can please?

Ivan Cheung

In English to answer this question, for the first quarter as you know only June has the sales numbers and the June number represents the initial stock shipping out to the wholesalers. So, on a gross sales basis just above $10 million – just above $10 million in that three weeks of June. Now, as I explained earlier to build up the initial patient base fast as we could, we have been very aggressive with our voucher program and a discount card program. As I explained earlier, 60% of the initial patients are on the voucher program, which is exactly what we wanted. And because of that, the June gross to net ratio was high as expected. Throughout the year, that gross to net ratio will shrink as the patients convert into ongoing users and as the insurance coverage expands. So, for the first quarter from an accounting perspective, we just put in the gross to net adjustment which was high on a conservative basis, but over the full year basis, we will adjust the gross to net ratio. So, I don’t think that June gross to net ratio is that meaningful and is not that representative of a full year number, but again on a gross sales basis, just above $10 million in June. And in July, I think you can see prescription trend is continuing, which is critically important for this class of therapy, because you don’t want the patients to take the initial dose and not want to continue. You can see the trend is continuing up, is not dropping. And I can also tell you that, just six weeks of data, we have already seen repeat patients coming back in that prescription number. So, that’s all I could disclose at this moment. Thank you for your question.

Ryoichi Urushihara - Nomura Securities

Second question is related to the cost of the promotion for BELVIQ, what is the total amount estimated for the full year? First quarter, I think that ¥2 billion was sort of a spend for the promotion for BELVIQ? So, the full year forecast, could you please give us the number how much are you going to spend for promotion of BELVIQ? Mr. Cheung will continue to answer.

Ivan Cheung

Full year, we expect to spend over $100 million in terms of the total sales and marketing budget for BELVIQ. In the first quarter, we spend approximately $25 million in the first quarter. Thank you.

Ryoichi Urushihara - Nomura Securities

Thank you very much.

Unidentified Company Speaker

The person seated in the middle row please.

Unidentified Analyst

(indiscernible) from Tokio Marine Asset Management. I have a follow-up question. In June, $10 million, this is shipment to the wholesaler or is it end sales number, $1 billion is wholesale shipment number net sales. And in May briefing session, Mr. Naito said that on an annual basis, $2 million sales if that is achieved that will be good, and $150 million was mentioned by the media as annual target, is this net or gross? Mr. Cheung will address that question.

Ivan Cheung

As you know, the launch of BELVIQ was unfortunately pushed into the mid-June timeframe given the DEA scheduling timeline, which has been an issue for many pharmaceutical companies in the U.S these days. So, that was somewhat unfortunate that we only have about 9.5 months in this fiscal year to do BELVIQ and given such a kind of that kind of product, every month really matters in the first fiscal year, but having said, you mentioned about $200 million, $150 million, you know of course as a company, we have a very hopeful aspiration for this product given the indicators I have shown you. We believe – we firmly believe this is going to be one of the largest markets we will see in this decade, at least in the U.S. market. We have no doubt about it. Now, for this fiscal year, whether the $150 million or $200 million, those are not firm guidance, those were hopeful aspirations that we have expressed. At this moment, I think it’s very premature to give out any firm financial guidance for this fiscal year. And from my perspective, as we go into the second quarter and the third quarter and as we see the prescription trend and a sales trend, at that moment I think that will be the time to talk about what we expect to really do this fiscal year as official basis. So, I hope I answered your question. Thank you.

Unidentified Analyst

Sorry to be persistent, but it may not be an official guidance, but generally speaking, your company or the number that you are talking about Arena in your company, is it gross or net?

Ivan Cheung

I can’t really answer your question now, but then as I mentioned earlier, the key here is to build the initial patient base. So, we have the free trial voucher program and then we have the discount card program, savings – the savings card program to encourage the patients to continue on BELVIQ as we try to get more insurance coverage. And so the gross to net ratio becomes quite critical for the first fiscal year. So, as I mentioned as we see the second quarter and the third quarter numbers, I think we can give a much more firm guidance on what the number is going to be, but I think what we should focus on at this moment is all the leading indicators that I have shown you and I think they are looking very good right now as a huge market. Thank you.

Atsushi Seki - Barclays

Seki of Barclays. If I may ask the follow-up question regarding BELVIQ, according to IMS, a number of prescriptions what is the capture ratio of that prescription based upon the IMS data? And Qsymia competitor, what is the number of prescriptions? I believe that the growth of the momentum for growing the prescription number in the Qsymia has not changed. So, therefore, the share in the market and if you have any numbers regarding the share in the market as well as the number of prescription and patients, please share them with us?

Ivan Cheung

With regard to the IMS data, as of this moment, IMS captures approximately 75% of the nation’s prescription data. However, as you know when IMS presents the data, they have a projection methodology in which they are supposed to extrapolate or project the data that they do not capture. Usually at the beginning, the first few months, the data is somewhat premature. So, these numbers, that’s why you see the gap between the Symphony data and the IMS data. Hopefully, over time, a few months later, those two lines will converge as both IMS and Symphony get a better grasp of what the market is going to be. To your second question about Qsymia, I mean, I am not in a position to talk about the Qsymia, I think as you see in this market, I think one of the message I try to covey is that now this market is seeing momentum from the federal government from the payers, from the medical association, from the patient groups. So, this will become a real market, a very big market and obviously multiple players will thrive in this market. And that’s our belief. And we still believe that in the very near future, BELVIQ will be the leader in this category of drugs. Thank you.

Atsushi Seki - Barclays

Thank you very much. Another question regarding Lenvatinib, the design of Phase 3 trial has been discussed with the authorities and regarding the indications for melanoma, the treatment paradigm has been changed frequently, let’s say, every year paradigm has changed with the introduction of new therapies. So, that goals pursued by players are changing. So, do you think that your trial design is appropriate to meeting such changes in the environment and what is the target in the design? I think it is one of the hot topics, I wonder if how much we can disclose this, but Dr. Owa will explain this.

Takashi Owa

Thank you very much for your questions. The therapy regimen for melanoma has been changing every year. Yes, as you pointed out that is the case. One point which is important is the BRAF gene mutant and wild-type was identified. That was the time when there was a transformation in the regimen and the difference to me in this year’s ASCO, two new compounds were filed and got approval, BRAF and MEK inhibitors doublet, so BRAF mutant patients, there have been a transformation, dramatic changes in the therapy but for the BRAF wild type still there is a high unmet need, medical need. As you know cancer immunotherapy PB-1 antibody or PB-1 ligand or the antibodies against these targets are now being developed are in Phase 1. After Phase 1 and Phase 2 it skips and then going into Phase 3 that kind of approach is approved by the authorities.

And on the other hand, ipilimumab which is already approved which is for both wild type and the mutant patients. But for the wild type BRAF still given this new tendency but still the chemical compound is used. Dacarbazine is an old compound, however, it is received as the first line therapy with the low cost and so Lenvatinib which is being revoked by us Dacarbazine combined well together with Lenvatinib with the full dose or a little less than full dose 24 milligram or 20 milligram combination therapy was used for this Phase 2 trial. So, add on could be possible and we didn’t observe the serious adverse events so combination can be done so Dacarbazine plus Lenvatinib as add on for BRAF wild type we believe – still believe that there is a great opportunity.

Regarding the protocol design, we believe that we needed to negotiate with the authorities, but irrespective of whether the available cancer immunotherapy, but even after a cancer immunotherapy is used even after that this drug can be used and what is not approved yet and also if there any issues regarding the reimbursement and then combination therapy with Dacarbazine can be a one option therefore we don’t want to miss the opportunity. Given this trend we would like to pursue the wild type indication. Thank you very much.

Unidentified Company Speaker

Thank you. Before moving on to the next question earlier (indiscernible) from Tokio Marine Asset Management raised a question and there is a clarification point from IR. The guidance that we issue with regards to BELVIQ, we have not issued any official guidance, but gross to net ratio so that there will be no misunderstanding going forward. Net sales guidance is given by Eisai and right now there is a difference between gross and net but every quarter the gap will be diminishing and eventually we will be able to announce official guidance and gross versus net issue on a consistent basis in (indiscernible) fashion we would like to announce net figure as we do for other products.

Unidentified Company Speaker

Next question please, audience members seated in the front row please.

Fumiyoshi Sakai - Credit Suisse

Sakai from Credit Suisse. I have two points about products brief questions. Halaven in the United States, what is the current status, is this going to be trending – are you going to increase sales but it seems that it’s difficult and as for Aricept in Japan I believe since May 5 milligram is okay approved and what is the change and earlier there was a mention of U.S. Congress Treat and Reduce Obesity Act was mentioned. Is Eisai engaged in lobbying activity whether the act is going to be passed or not will be dependent on lobbying activities to a certain degree and what is the strategy regarding lobbying activity, but there is any such strategy, please. Halaven U.S. and the BELVIQ U.S. congress discussion Mr. Cheung will address those questions, and then for Aricept Japan Mr. (indiscernible) Senior Executive Officer will respond. Mr. Cheung please?

Ivan Cheung

Thank you for the question. As you know, the U.S. breast cancer markets are most competitive markets in the world given how new drugs can pickup sales and market share very quickly. As you know in the U.S. breast cancer marketplace in the past two years, we got three new products Afinitor, Perjeta and TDM-1, obviously those three products have made an impact in terms of the Halaven sales growth trajectory. I am happy to report to you that our first quarter Halaven sales number in the U.S. we have been able to stabilized the number versus the fourth quarter and the third quarter of the previous year that’s the first step a stabilized market share despite the new entrants.

And then looking towards second quarter and the second half of this fiscal year we will do two things to revitalize the growth of Halaven. One is that we will launch direct to patient campaign to emphasize the benefits of overall survival and number two we will introduce more beneficial contracting strategy with group purchasing organizations. Why am I saying these two things because as this new breast cancer drugs coming into the market, now in breast cancer patients in the U.S. you see six lines, seven lines, eight lines of therapies. What does that mean, that means third line and fourth line especially third line treatments in the past many patients do not – many physicians do not focus on life extension anymore. But now we go six and seven lines of therapies, what that means that the third line we need to tell half of the physicians who do not believe in life extension and tell them you got six, seven lines now. So, if third line you should only focus on life extension and thus far we have reactivated of course our sales force activities and also supplement that with the direct with patient campaign. If you go to the Halaven website now as a patient you can download a brochure and bring that to the physician, you explain to the physician why life extension is important even the third line and fourth line therapies.

With regard to BELVIQ, as you know we have an office in Washington DC in terms of our government affairs team and of course we engage in very positive conversations with the house members and the senate members in terms of addressing one of the most critical epidemics in the U.S. which is obesity. So, we believe that this act we hope it will pass and we think it will pass hopefully in about 18 or 24 months. If this act passes this market will become much more important market not only from a commercial payer perspective, also from a government payer – medicare perspective. Thank you for your questions.

Unidentified Company Speaker

Mr. (indiscernible) will discuss Alzheimer’s or Aricept Japan situation.

Unidentified Company Speaker

Good evening. My name is (indiscernible) responsible for Aricept. Thank you for the question. On June 22 for severe Alzheimer’s the product patent expired, we arrived. And revised PI was published and we have begun our activities. As of now 10 milligram tablet so far as we look at the trend we do not see any major impact. As Mr. Matsumae mentioned earlier on the point of Eisai as we have been saying since the past for one thing with high quality we have very wider line up of this Aricept product and appropriate use information is being provided and new information is created and the latest information will be provided and we will continue to adopt that attitude and based on Orange plan in each American consultation areas as we have explained before Aricept knowledge leader there are 35 Aricept knowledge leaders in the entire nation of Japan and local MR will be working with the knowledge leader and we will be working to establish coordination between home doctors and major hospitals so that care can be delivered in a manner that is comfortable to the patients in a manner that gives comfort to the patients.

Fumiyoshi Sakai - Credit Suisse

Thank you.

Unidentified Company Speaker

We believe that you do have many more questions including the audience through resulting conversation, but the time is pressing therefore if you have any further questions please inquire the IR Corporate Communication department. So, with this we would like to conclude the briefing on the results for the first quarter for Eisai Company Limited. Thank you very much for your attendance.

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