Eisai Co., Ltd. (OTCPK:ESALF) Q2 2021 Earnings Conference Call November 5, 2020 2:00 AM ET
Company Participants
Ryohei Yanagi - Chief Financial Officer
Ivan Cheung - Senior VP & President of Neurology Business Group
Terushige Iike - Senior VP & President of Oncology Business Group
Takashi Owa - VP and Chief Medicine Creation
Yasushi Okada - Representative Corporate Officer and COO
Teiji Kimura - Chief Discovery Officer
Haruo Naito - CEO Representative Corporate Officer and Director
Conference Call Participants
Hidemaru Yamaguchi - Citigroup Securities
Motoya Kohtani - Nomura Securities Co.
Kazuaki Hashiguchi - Daiwa Securities Co.
Shinichiro Muraoka - Morgan Stanley
Unidentified Company Representative
It is now time. We would like to begin financial results presentation for the Second Quarter of Fiscal 2020 by Eisai Company Limited. The presentation will be live streamed, or it can be heard on telephone lines. Those who are participating on the telephone lines, please refer to the deck of slides that are uploaded on the website of Eisai. Download them and click them yourselves.
Let me introduce the presenter today. Presenter is Representative Director and CEO, Haruo Naito. Now without further ado, presentation will begin.
Haruo Naito
I would like to start the presentation on the financial results for the second quarter of fiscal year 2020. On this slide, we're showing the consolidated statement of income for the first half. As you can see in the headline, during the period under review, there were impacts of COVID-19 pandemic globally. So it's not exaggeration to say that, given these circumstances though, top line revenue was JPY317 billion, up 6% year-on-year. We achieved increased revenue.
Cost of sales ratio was 25.1%, an improve of about 2.7 percentage points from a year earlier. This is mainly due to the improved product mix because of the expansion of in-house developed products. As a result, gross profit was increased by double-digit ratio from a year earlier. And the gross margin ratio was improved by 2.7 percentage points. So it has demonstrated a sound, robust foundation for profit generation.
R&D expenses. In our case, we receive partners' reimbursement, including those reimbursement from partners, R&D expenses account for 30.7%. Therefore among global peers, we are one of the companies which are allocating significantly into the R&D activities among the management resources. Oncology, neurology have been the two major areas where we have significantly allocated a resources.
SG&A day expenses have expanded by about 1.9 percentage points in terms of ratio in the revenue. I would like to touch upon this later, but all of these expenditures were to capture the existing business opportunities or future business opportunities. To capture them, we have allocated resources. Therefore, these have been the proactive investments for future growth. As a result, operating profit was JPY34.1 billion, up 6% year-on-year. Profit for the period was JPY25.8 billion. ROE was 7.6%, although this was the interim number. And at the Board of Directors meeting held today, we resolved interim dividend of ADM per share.
Next slide. Here we are showing the breakdown of migration in revenue. On the left-hand side, you see the actual results for the last fiscal year at JPY299.3 billion. In each region, you see the status of changes in revenue in Japan business, minus JPY6.2 billion in revenue. The number of products designated for premium to promote the development of new drugs has increased. However, because of the factors for decrease of revision of drug prices and the impact of COVID-19 negatively affected the business.
In Americas, there was a strong growth of Lenvima, BELVIQ was discontinued. And although there were also negative impacts of COVID-19, all these factors were overcome to grow by JPY9.6 billion in Americas. China business, during the first quarter, we believe there was significant impact of COVID-19. But during the second quarter, that impact was overcome and made up for, and there was upside of about JPY1.3 billion for the total first half.
Now turning to Europe. Even now, it has been affected significantly by the second wave of COVID-19 pandemic in this region. But given the strong growth of Lenvima, we have had the upside of a positive JPY7.8 billion. In Asia and Latin America business, mainly due to the termination of sales contract of Humira in Taiwan, the revenue was reduced by JPY1.3 billion. And COVID-19 impact is estimated to be about 5% of the revenue.
In the bottom right corner, you see the plus and minus in global brands. Lenvima has shown very robust growth. As a result, revenue increased by JPY17.8 billion year-on-year. Of course, this increase included one-time event, which was the transfer of rights for tazemetostat. There was the revenue received for that one-time event had an impact of JPY13.5 billion in increase to the revenue.
Next, I would like to share with you the breakdown of operating profit migration. From the left, JPY32 billion was recorded as operating profit for the last fiscal year. And next to it, global brands expanded to contribute JPY18.3 billion has been -- which had shown a strong expansion. And following four items are to capture the immediately available business opportunities or upcoming or future business opportunities to be captured by making these resource investment.
In July, Japan and in June in the U.S., Dayvigo was launched and related cost for the Dayvigo launch were incurred and R&D costs for Lenvima. And the shared profits with partner has increased in line with the expansion of Lenvima and to capture the future opportunities in Alzheimer's disease franchise costs related to AD, we made these investments.
On the right hand side, our one-time event contribution to the increase in operating profit is shown. As a result, all-in-all, there was an increase of operating profit by JPY2.1 billion year-on-year. At the far right, you can see the status of R&D expenses. As I said earlier, we receive reimbursement from partners, which is shown in yellow part. Overall, total R&D expenses seem to have decreased. But this is mainly due to the elenbecestat, the termination of the elenbecestat project, BACE inhibitor project last fiscal year. This was the main reason for the decrease.
Now turning to the business. First, we'd like to share with you our initiatives related to COVID-19 pandemic. In the top half of this slide, we would like to report to you what we are doing about the treatments. First, eritoran. We used to develop this as a candidate treatment for severe sepsis. We reached Phase 3 study, however, could not meet the endpoint. So this was the theme of development.
This eritoran is antagonist for a Toll-like receptor 4, which is at the most upstream of various cytokine gene expression signaling. So the COVID-19 associated pneumonia and cytokine storm is thought to be the cause for such a pneumonia. And this is expected to stop a cytokine storm at the very upstream. And this had been developed until Phase 3. Therefore, the safety profile for this candidate has been completed, and this is now being developed under the international consortium called REMAP-COVID.
And clinical research studies have been started and actual administration in patients have started E6011, which is -- was discovered by the KAN Research Institute as anti-fractalkine monoclonal antibody body. Angiopathy is known to be the frequently observed symptom of COVID-19 infection, and it is expected to be effective in tackling this. And this has been adopted by AMED, and it is being considered to be introduced into clinical trial.
In bottom left, development of treatment agents. Screening, utilizing chemical library under the scheme of Bill & Melinda Gates Foundation. Our unique naturally derived compound library has been provided to the scheme with several potential candidates identified. In bottom right, there is a collaboration for the development of vaccines. Our former Boston research laboratories have succeeded in discovering adjuvant to vaccine. Utilizing this adjuvant the COVID-19 vaccine research is being conducted by Canadian company VBI Vaccines. And we understand that the clinical study is underway -- clinical study discussion is underway.
Next, I'd like to talk about clinical stage pipeline for AD. Today's Eisai, the drug development and discovery for Alzheimer's disease is based upon this scheme. At the top, on the horizontal axis, AD continuum. This is the continuum of disease progression in Alzheimer's disease, which is shown in the horizontal axis. On the vertical axis, ATN, pathophysiological hypothesis is shown. This is hypothesis of pathophysiology. Based upon these two axis and the domains, we are implementing drug creation, preclinical AD, early AD and AD are included in the AD continuum, like this disease is expected to progress. Early disease and amyloid aggregates on the vertical axis.
The domain covered by this, aducanumab is positioned here, amyloid beta antibody. And preclinical AD, if you go back to preclinical Ad in AD continuum, and you see BAN2401, or that is named in under INN as lecanemab, which is positioned here, anti-amyloid beta protofibrils antibody. And ATN, T.T in the ATN, Tauopathy. Of course, this project is covering the entire ATN. But for -- particularly for this tau, our in-house developed an anti-tau antibody, E2814, for which Phase 1 study is ongoing.
And next N, neurodegeneration. In the domain covered by this here, first-in-class synapse regenerant. Synapse regeneration is expected to be the efficacy in-house small molecule compound of E2511. Phase 1 study has been initiated. This E2511 is targeting early AD and later stages of the AD continuum. We expect that this will be efficacious in addressing these stages. At the bottom, dementia with Lewy bodies, which is set to account for about 20% of all dementia.
The drug creation, is shown here. And cyclic GMP is expected to be reduced. And that has been confirmed based on the human biology. PDE9, which is associated with the cyclic GMP. By inhibiting this, it is aimed at maintaining cyclic GMP level. That is the pharmacological effect. Now E2027 is now in the Phase 2/3 study, which is ongoing.
First for aducanumab as has been already announced in the United States. The application has been filed with FDA, and it has been granted a priority review with a PDUFA action date set on March 7, 2021. But it may act -- it may be granted the expedited review for this BLA. Actually this Advisory Committee meeting will be held tomorrow where discussion will be conducted.
In Europe, for EMA, marketing authorization application has been accepted by EMA, and we believe that the review is underway. With PMDA, pre-submission, formal consultation meeting was held, and we are preparing for NDA in Japan. With other additional key markets, we have started preliminary consultation discussions with regulatory authorities.
Next, anti-amyloid beta protofibrils antibody, lecanemab. For your information, L is taken from the name of Professor, Lannfelt, Uppsala University in Sweden, and he is from Eisai and CA is from creation. This is how this candidate has been named lecanemab. For early AD patients, regulatory trial Phase 3 study quality AD.
Although some sites were affected by COVID-19 pandemic, but almost most of those sites have resumed the study. And the form of infusion is utilized on behalf instead of the infusion at hospital or utilizing the telemedicine, we have tried to minimize the delay. Completion of patient enrollment and the final readout of primary endpoints are as planned. And we estimate that this will be completed by the end of second quarter of fiscal year 2022. This has stayed unchanged.
And targeting patients with preclinical AD Phase 3 study AHEAD 3-45 through collaboration with ACTC. In addition to the U.S., but in Japan, Singapore, Australia, and Europe, we plan to initiate the study in over 100 sites. In the United States, first infusion has been achieved already. Lecanemab, as I said earlier, it's positioned in the upstream to cover up to early AD and the AD continuum. That is how we are going to position this drug in development.
Next, novel anti-MTBR Tau antibody, which is related to the tau and the hypothesis E2814. Currently, Phase 1 study is steadily ongoing. Although it is very busy slide, I'm sorry about this, but in the top left corner, you see tau protein horizontally from N terminal to C terminal. This is tau protein. And there are various binding sites and various anti-tau antibodies targeting various binding sites of the tau protein are being developed.
Our E2814, as you can see in the red part, microtubule binding region, MTBR, is specifically engaged by this antibody E2814. This MTBR, what does it stand for? And what is it? And that is represented in the schema below. Tau is propagating through synaptic cleft. And tau fragments associated with the propagation is MTBR in our understanding. Therefore, this antibodies are associated with the trapping of the taus in the synaptic cleft, which are associated with the propagation. Therefore, neurofibrillary tangles, NFT can be prevented or reduced because this is thought to be caused by this propagation of tau.
On the right hand side, as a human biological evidence, various in-brain tau peptides are shown. What is shown in red are related to patients with AD. And on the tau fragments, which are reported to be increasing in the patients with AD are these MTBRs in AD patients based on human biology evidence. MTBR, which is associated with a propagation should be reduced in order to mitigate the tauopathy. This is the expectation we have for this antibody.
And this is the in-house developed novel synapse regenerant, E2541. Currently, Phase 1 study has been initiated. In AD continuum, if you look at the schema and top half of the schema on the right-hand side, cholinergic neurons are significantly vulnerable in AD and known to be causing the synoptic degeneration or damage. And as you can see in the schema for functional neuron, TrkA is expressed here. However, it is known that significant decrease of expression TrkA is happening, and therefore that degenerative changes are taking place.
E2511, as you see in the third bullet, E2511 binds to this TrkA and turns on the survival and signal synapse regeneration of cholinergic neurons, and it is expected to enhance restoration damage to neurons, or these damages of the neuron will be reversed back to the left on the schema. And as you can see potentially it is expressed to suppress brain atrophy caused by neurodegeneration. We expecting these effects will be exhibited by this small molecule compound. We aim to develop new concept of synapse regeneration in the development of AD therapies. We have very high expectation to this new candidate.
Now changing the subject to Lenvima. This year's forecast is JPY158 billion. To achieve this target, we are making good progress. On the left side, there is a bar graph describing the first half performance of Lenvima in all of the five regions growth was achieved 136% or 36% year-on-year growth was achieved with a revenue of JPY68.5 billion.
On the right side, performance by region is given. Central role is played by the biggest market Americas, revenue was JPY41.9 billion. Growth was 48% year-on-year, a very strong growth was recorded. Regarding Americas, I will discuss in more detail. We are maintaining number one share in HCC and indication for endometrial carcinoma was obtained. There were various upside events driving the growth in Americas.
Turning to China. Growth of close to 30% was seen in HCC. We have introduced new patient assistance program to reduce out-of-pocket burden and China market is growing. As for EMEA, although impacted by COVID-19, countries where the drug is indicated is increasing. In order to prevent infection, oral drug for cancer treatment is recommended. And we were able to achieve close to 30% growth year-on-year, and we are maintaining high share in HCC and EC.
As for Asia and Latin America, Asia HCC experts gathered in APPLE, where consensus guideline discussed the HCC recommending Lenvima strongly for endometrial cancer, combination therapy with KEYTRUDA is expanded in a number of Asian countries, with approval from a number of Asian countries. And we would like to make sure to achieve the annual target over JPY158 billion.
Now turning to the important market for Lenvima, which is the United States. For endometrial cancer, hepatocellular carcinoma, renal cell carcinoma, and thyroid -- differentiated thyroid cancer, for these four cancer types Lenvima is indicated. At right top call number situation is given, including in-person and digital calls. April, May and June because of the impact of the pandemic situation was very difficult.
However, including face-to-face calls, it is now on the recovery trend. Starting from October this year, with Merck, regarding EC and HCC, our efforts will be enhanced to increase call level back to pre-COVID level we have reached agreement with Merck on this. And for EC and HCC we are sure that we will be able to make further progress.
At right bottom for each cancer type, revenue ratio by indication is given. Endometrial cancer was added in the first half of this year. Regarding RCC, there is a benefit of reducing the infection by using oral cancer drug. And for DTC, we are maintaining share. Regarding Lenvima, in fiscal 2025, JPY500 billion level is the target. And Lenvima KEYTRUDA combination therapy LEAP studies are underway to contribute to additional indications.
Currently, there are 11 studies ongoing as shown here for submission purposes conducted as randomized control studies. In the middle of this slide towards the left, what we plan to prove our usefulness for is shown. And a number of new patients for these cancers are shown. For each of the cancer type, large number of newly diagnosed patients exist each year, lung cancer, hepatic cancer, bladder cancer, kidney cancer, endometrial cancer, head and neck cancer and melanoma. For each of the cancer type Phase 3 study is underway. There are three RCC, two HCC and two EC studies. So three NSCLC study, two HCC study, one RCC study and two EC studies. Basket trial on mostly solid tumor has yielded good results, which was presented at ESMO 2020.
Of that, I would like to report further on NSCLC. For systemic treatment naive patient LEAP-006 study was conducted. In the safety run in part, 13 subjects were enrolled with a response rate of 69%. We were able to obtain very robust result. And this was present at ESMO 2020. In the main part of the study, in the comparative control part,. we are making good progress in enrolling patients.
In addition, in LEAP-007 study first-line PD-L1 positive study and in LEAP-008 study in the second line study. In these studies as well we are also making good progress in enrolling patients. This major cancer type lung cancer is also an area where we are making efforts to make contribution.
On this slide, basket trial details are given. Colorectal cancer, gastric cancer, ovarian cancer and the late line refractory cancer types, trials are conducted and favorable results are expected. We would like to expand the number of subjects to further our research.
Now, I would like to change gears to discuss structural reform in the regions. First, turning to Japan. Within Eisai Japan, Deputy President was named. HX headquarters and ADF promotional headquarters are established under the Deputy President. HX headquarters stands for health care professional engagement transformation headquarters. Digital will be thoroughly utilized to provide various information to medical professionals and to engage in closer exchange with medical professionals.
Under this headquarters, there are a number of departments, starting from digital solution department, and that's shown in the small bullet points. Patient information will be received, and that information will be processed together with our data to come up with useful information and daily life related data, or digital medicine like -- digital solution can be offered. This will grow in importance. So department responsible for these efforts was established as digital Solution Department to introduce plan and promote digital solution and to build P3 model.
Next is Field Force Support Department. During the COVID pandemic, there were various restraints on sales activities. Digital communication tool grew in importance as a result. CRM, customer relationship management is used and implemented, and there are various tools and programs to support CRM implementation. To enhance digital communication capabilities, that will be the responsibility of Field Force Support Department.
And the third is Digital Marketing Department. These very digital tools will be utilized by this department and rather than in-person digitally, information will be communicated to a certain group of experts. That is the Digital Marketing Department. And Real-World Data Marketing department was also established. Medical institutions have real-world data, and we will also be engaged in analyzing and utilizing that information to generate various useful information. Coraban is a system to prevent fall and such a system is an example of efforts by this department.
At the center, ADF promotion headquarters is -- stands for Alzheimer's disease franchise promotion headquarters. Various efforts are to be realized, including brand management. Second is value. This group will be also engaged in age and region, pricing strategy, improvement of access, patient assistance program review. In addition, PET and CSF and future blood diagnosis, dissemination will be responsibilities under this Value Department.
And the third is hAC, each Area Coordination. for each medical region, there will be a network built between family doctors and specialists doctors, diagnostic network, and treatment on network included. The network building will be the responsibility of hAC. And below, network, Eisai currently has dementia cooperation agreement with 167 partners, including with local municipalities. And various efforts with these partners will be promoted by this network, including brain performance, enhancement, effort and improvement to delay shift to NCI.
On the right side under Chief Digital Officers, CX Headquarters was established. CX Headquarters stands for consumer experience transformation headquarters. For dementia ecosystem, we have easiit and easiit will be implemented by this headquarters. We would like to expand the number of members under easiit, and there will be personal health record input by members, including information on diet, walk -- walking, and sleeping and such input can be made more convenient. We would like to develop IoT and other technologies for that purpose. That will be done under marketing department.
And part of is a simple checking of brain performance. This is a digital tool called NouKNOW, and this is already marketed. NouKNOW can be used in the insurance industry or in financial service industry, construction, retail, automotive, fitness, cosmetics, and other industries. We are collaborating with providers in these different sectors using NouKNOW. Partnership with these multisectorial partners will be pursued to further improve convenience of these services. And that is done under Planning and Partnership Department as represented by NouKNOW and easiit, we would like to enhance and improve our ecosystem and would like to add products and services.
Right bottom, there are navy blue boxes, including conversion science. At the center of this ecosystem is the data -- clinical trial data, cohort data that will have to be converted to the input into this ecosystem and that will be done under conversion science. Digital data will be developed, maintaining digital infrastructure, et cetera, and digital security system, security will be the responsibility of tech squad.
As for Easiit, that I've really explained and as you already may know, the characteristics of Easiit are shown at the very top. It is an ecosystem to link daily living domain and medical domain. And the purpose is as shown at the very bottom in the message, to increase awareness of disease and allow for early access to consultation and to bring about behavior modification, we would like to eliminate chasm.
In the daily living domain, PHR, including data on sleep, diet and walk will be input by people. And this also will include NouKNOW information regarding the assessment of brain performance. The easiit part in the daily living domain is where we have collaboration alliance with DNA and current health data visualization, and output and useful information to improve brain performance. And in the future, we would also like to be able to provide information that will be useful in prevention of dementia onset, or prediction of dementia onset.
And the core part is, as shown in the middle. Including the latest biomarker information on dementia treatment, high quality clinical trial results and external cohort data together with AI algorithm. That data part is the core part. And in the medical domain from medical professionals throughout digital media, et cetera, various information will be input as shown on the right. And that information will be processed and patient information can be shown on the dashboard. Treatment effects can be visualized. And side effect detection, imaging diagnosis assistance are also possible output.
In Japan, in the second half of the year, even during the COVID-19 pandemic, we would like to continue to expand contribution to patients. Dayvigo will offer a new option to patients suffering from insomnia and digital included information dissemination is underway steadily. For rheumatoid arthritis, new JAK1 treatment, Jyseleca, will be co-promoted with Gilead Sciences. We are -- since and this is very important opportunity to co-promote Jyseleca in the second half of the year.
In the United States, oncology, epilepsy, insomnia and AD are the full franchises that we are growing in the United States. Turning to China. There are active developments in China. On the left side, there are pie charts shown to indicate their sales performance in China. Year-on-year growth is 3% overcoming COVID pandemic impact. In the blue part in the pie is expansion with global brands, which increased from 16% to 22% as a ratio of total. And these global brands are shown on the right top, Lenvima, Halaven and Fycompa.
As shown on the right bottom, in China long-term products are also as important as these global brands. Through government centralized procurement system, long-term products are purchased regarding Methycobal. We were successfully -- we were a successful bidder in government centralized procurement system. And Methycobal will be procured in a priority fashion by 16 provinces, improving access by patients dramatically. At the right bottom box, Benxi Plant in Liaoning Province is shown in photograph. Generic product in China will have to be qualified for very stringent BE evaluation. Benxi Plant's Loxoprofen passed that qualification and we expect growth going forward.
Another point about China is, or another topic about China is our partnership with Jing Dong Group, which is a very strong platform group in China. The joint venture was established with Jing Dong Group. Jingyi Weixiang Health Industry Development Limited Company that appears in the Middle East, the joint venture. Dementia related one-stop digital service platform will be built.
Jing Dong has an excellent network and has a very strong track record in e-commerce. Eisai also has a wealth of knowledge in Alzheimer's disease and dementia and disease understanding can be enhanced. Self awareness can been enhanced, online clinical work can be improved and nursing care referral will also be supported on the malls, merchandise of various products will become possible. This is centering around China for dementia patients and for their families. We would like to offer a one-stop digital service, and we would like to take the first step in building dementia ecosystem in China.
Now, lastly, I would like to share with you the full year forecast. Leveraging expansion of Lenvima, as shown in the headline, and towards 2025, we will be entering into the second half of EWAY called EWAY Future and we will be making active investments. Revenue forecast is JPY719 billion, 3% growth year-on-year, and we will continue to grow gross profit and we'll be making active investment of resources through the use of costs of sales. As a result, operating profit forecast is JPY88 billion. Profit for the year forecast is JPY67 billion. ROE forecast is 9.7%. Annual dividend per share of JPY160 is something that we have confidence achieving.
With that, I'd like to conclude. Thank you very much for your attention. We would like to start the Q&A session.
Question-and-Answer Session
Operator
We would like to invite questions first from those participating through telephone conferencing system. [Operator Instructions] First person to ask a question is from Citigroup Securities, Mr. Yamaguchi. Mr. Yamaguchi of Citigroup. Please have the floor.
Hidemaru Yamaguchi
This is Yamaguchi. Can you hear me.
Yasushi Okada
Yes, we can.
Hidemaru Yamaguchi
Thank you. This is Citi. It's Yamaguchi. I have one question. It may be complex in my way of asking this question, but regarding the FDA's Advisory Committee, yesterday evening there was a briefing document published, released, and in neutral [ph] briefing document, typically harsh comments may be appearing. I have never read through all the documents, but scientific evidence, or it's touched upon neutrally, but for successful study, that will be okay. But for unsuccessful studies how are we going to combine them in order to get data for supporting your submission? And that is the discussion in the briefing document. It's very difficult to ask this, but once you saw it and towards the end of this week, there'll be the voting by the other Advisory Committee. For you, Mr. Naito, I know that you are confident but inclusive of what is happening immediately, recently -- well, so I know that you are not in a position to make comments, but inclusive of the plan and progress made to date with Biogen regarding the development of aducanumab. So could you please give us your take on the current status? Anything, any comment will be welcomed.
Haruo Naito
Thank you very much for your question. Exactly as you pointed out, Advisory Committee meeting will be held tomorrow. So it is right before us. So we are at such a moment waiting for the committee. So I don't think I am in a position to make any comments. So currently we'd like to refrain from making any comments now. But if I may give you one comment, as my personal observation, please allow me to say that. And I'd like to share my personal thoughts looking back at the history of new drug development in Alzheimer's disease. Aricept, our drug was first approved in the U.S. in 1996. This was the start of the history. And after that in 2003, memantine was approved as the most recent one, as regards to the approved drugs in Alzheimer's disease. Over the past 17 years and still today, there has been a long duration of blank without any new drug approved. And we look forward to a good discussion at the Advisory Committee meeting to be held tomorrow.
And regarding the clinical trials for aducanumab, there have been many patients, other stakeholders like caregivers and clinicians, investigators, we like to thank all those stakeholders around the world who have participated in aducanumab clinical trials. Thank you.
Hidemaru Yamaguchi
Thank you very much. After the voting by Ad Com, if you could share your personal thoughts once again on that occasion, I would appreciate it.
Haruo Naito
Thank you very much.
Operator
Next, we have Mr. Kohtani from Nomura Securities. Mr. Kohtani.
Motoya Kohtani
Thank you very much. This is Kohtani from Nomura speaking. Can you hear me?
Haruo Naito
Yes.
Motoya Kohtani
Aducanumab and Ad Com information I've reviewed and a biomarker cognitive function, behavior function, improvement in NPI 10, agitation and other psychological symptoms, significant improvement were shown. And exceptionally persuasive was the wording from FDA, which I also can agree. I don't think you will be able to comment on this briefing document. So I would like to ask in a different way. About ENGAGE study, which was a failure, and this was a surprise to me, first progressor because of faster progressor, the efficacy was not proven high dose in placebo. And in low dose, there were only four or five, but in high-dose group, there were nine fast progressors. There's only a difference of four subjects. And about Phase 3 study of BAN2401, there's only one dose. And so there -- I don't think there's a problem of lack of dose in the ENGAGE study, but if there are unbalance of fast progressor, same problem can occur in Phase 3 study of BAN2401. How are you responding to the lack of balance of faster progressors? If there are abnormal distribution, are you able to analyze to eliminate that imbalance?
Haruo Naito
Thank you for your question. Neurology Business Group President Ivan Cheung will address the question.
Ivan Cheung
Thank you very much. And this is Ivan Cheung, Neurology Business Group. With regard to this matter, I would point out a few things for you. Number one in the Clarity AD study, yes, there is only one dose. That's a high dose. But please remember that the Clarity AD study for BAN2401, there is no titration. So it's flat, was dose high dose from the very beginning. That's point one. Point two is, if you look at the sample size power because we only have one dose in the study, the sample size is, I would say very, very robust to ensure that we can detect the most appropriate efficacy signal taking into consideration a number of different potential factors, including the one that you just mentioned. So these are the two points I want to refer you to. Thank you very much.
Haruo Naito
Are you satisfied with the answer, Mr. Kohtani?
Motoya Kohtani
Yes. I have second question. I'd like to ask you a question about Lenvima. Melanoma second-line LEAP-004, LEAP-005 indication. In principle, I think that the treatment has not been established for these patients. So increasing the number of patients, and I think it will be able to file for approval. LEAP-006 study, you have obtained a very good data comparators [indiscernible] plus Avastin, a test 25 Opdivo plus Avastin, and about 60% ORR has been shown in this study. So the Lenvima is utilized and I think that in terms of the side effects, and I think you will have unfavorable position.
Haruo Naito
Regarding this question, thank you for your question. Oncology Business Group, who is in charge of science, Dr. Owa is going to respond.
Takashi Owa
Mr. Kohtani, thank you very much for your question. As you pointed out, melanoma LEAP-004 in basket trial in each type of a cancer included in the basket trial and Amy aiming at increasing the number of patients to be enrolled and to make that more robust in order to explore the potential of approval, we will explore them. And at the same time, the endpoint is made as a survive -- the end of point in the largest scale study. And comprehensively, we'd like to explore the potential of getting approval. And we've tried to initiate discussion with the regulatory authorities. LEAP-006, targeting the all-comers study for lung cancer, yes, as you said, the antibody medicine Avastin. Avastin and Lenvima are compared for HCC. And FDR, the inhibition, it can be expected only with Lenvima, and that is shown as a significant the inhibition by biomarkers as well. We have understood that therefore, in terms of efficaciousness, we will be able to differentiate against Avastin. And from this preclinical data, as well as the comparison within other types of cancer, with a higher response rate and longer survival period. And I think that we will be able to explore these full potential approval. Thank you very much.
Operator
Next we have Mr. Hashiguchi from Daiwa Securities. Mr. Mr. Hashiguchi?
Kazuaki Hashiguchi
Thank you very much. This is Hashiguchi from Daiwa Securities. Thank you for the presentation. Page 4 about AD related expense of JPY7.4 billion decline, this is AD related. In the first quarter. I don't think this description was given. Is this a temporary expense or as shown on Page 16 and Page 17 to prepare for a launch because of these efforts to prepare for launch, there is going to be a continuous expense. And as of now, the expense level as indicated on Page 4, that is my first question.
Haruo Naito
Thank you for your question. CFO, Mr. Yanagi will respond.
Ryohei Yanagi
Thank you for your question. I am Yanagi, CFO, speaking. Regarding Page 4, waterfall chart, AD related expense of JPY7.4 billion. As you correctly pointed out, for AD products, to prepare for launch, personal costs, costs of goods sold are all included here, and this is not a one-time special factor. And depending on the circumstances in the future about Alzheimer related next generation product preparation related costs will be incurred. And in some cases, may be incurred accelerated fashion. So this cost, I believe, will be continuously shown on during the quarterly results going forward. On a consolidated our annual performance, this is also reflected. So cost of goods sold is growing at double-digit. This is an intentional increase in cost and cost of goods sold is growing at double-digit, and that includes this AD related costs. And this is a very positive future investment.
Kazuaki Hashiguchi
Thank you for that answer. Regarding Lenvima sales -- my next question is, well Lenvima sales. The progress to date is up 43% in comparison to full year plan, and the second quarter is lower than the first quarter result. What is the probability of achieving annual target? And sales milestone forecast is given on Page 34. What is the probability of achieving these milestones?
Haruo Naito
Thank you for that question. Oncology Business Group President, Mr. Iike will respond.
Terushige Iike
Mr. Hashiguchi, thank you for your question. As for annual forecast of JPY150 billion, there's no change about this full year target, annual target. As mentioned by Mr. Naito, CEO, during the presentation, in the first quarter, we were impacted by COVID pandemic in the United States and other region as well, but in particular in the United States we were not able to have face-to-face contact with our customers. And there are speaker programs or national broadcast programs, and temporarily they were put on hold, but after summer, these programs were resumed. And in the second half of the year, actively together with Merck, we are engaged in activities. In the second quarter, especially in the United States for HCC in actual clinical practice, Real-World evidence will be utilized. Based on actual clinical practice and since it's an oral agent, everolimus for RCC, in combination with everolimus, another oral agent in RCC is also showing growth. And therefore in the second half, we believe that we are able to fully catch up and achieve annual target. And therefore, regarding the milestone related revenues, we expect to achieve these milestones. With Merck, we are working as one team. Thank you for your question.
Operator
Thank you very much. With the constraint of time we would like to entertain one last person from Morgan Stanley Securities, Muraoka -- Mr. Muraoka, could you please have the floor? Are you ready?
Shinichiro Muraoka
This is Muraoka speaking. I'm from Morgan Stanley. As a follow-up to the question asked by Mr. Hashiguchi for Lenvima, and second quarter seems to be a little weaker. Is it because of the fluctuation of the inventory level? Were there any sorts of specific reasons or rather it is just a little weaker than expectation, therefore, as you said, the various measures will be taken to increase. Could you please elaborate on that response again?
Haruo Naito
Thank you very much for your question. We'd like to ask Mr. Iike to respond.
Terushige Iike
Thank you very much for your question. Particularly during the first quarter, mainly in the U.S., newly diagnosed patients had reduced consistently as a temporary phenomenon. So that means that there was a little time lag in transitioning of the inventory into sales. The access or visit by patients to medical institutions is recovering. Therefore, I think that this will be positive -- positively working to the second half.
Shinichiro Muraoka
I have another question regarding aducanumab. And then after passing through the review and getting the approval, after getting through the Ad Com, and if there is a need for PET and subsidies for the testing, or maybe you are coming up with the support program for test, and I know the number of sites is not enough. How are you going to have a steady ramp up in the initial stage of launching? I don’t see any answer by myself, but I don't think that the widely available diagnostics, it's not launched yet and what measures are you thinking about as far as possible. Could you please share with us any ideas?
Haruo Naito
Thank you for your question. I would like to call up on Neurology Business Science, Mr. Kimura is going to respond -- in charge of Science of Neurology Business Group.
Teiji Kimura
Thank you for your question. My name is Kimura. I am from Neurology Business Group. Regarding your question about PET, how we can improve the access to PET test. We understand that will be necessary. And in-brain amyloid positivity is judged by PET and CSF and also synthesis in the lumbar spine. And we are thinking about this and as far as possible, PET, CSF and PET and [indiscernible] shall be increased. And we are taking various measures to increase the access, and furthermore, blood. In the end of course, PET and CSF measurement shall be replaced by this blood testing. That's what we are expecting to see. But before that, by having blood testing, I think higher risk patients will be accessing the PET or CSF testing. It's beneficial in terms of health economics. And it is also beneficial thinking about the burden on patients and CSF access will be restricted. So such various measures will be taken. Those patients with higher risk will have access to prescription of aducanumab. For that purpose, we are thinking about various measures. Thank you. Thank you very much.
Unidentified Company Representative
It is now time. We would like to conclude financial results presentation session on the second quarter of fiscal 2020 by Eisai company limited. Thank you very much for your time. Thank you for your participation.
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