Message from the President

Hiroshi Nomura Representative Director, President and CEO Hiroshi Nomura Representative Director, President and CEO

I would like to report a summary of our Group's business results for the second quarter of the year ending March 31, 2024 (from April 1, 2023 to September 30, 2023) and express my sincere gratitude for your continuing support and understanding.

For the second quarter of the year ending March 31, 2024, revenue from the three key products of ORGOVYX®, a therapeutic agent for advanced prostate cancer, MYFEMBREE®, a therapeutic agent for uterine fibroids and endometriosis, and GEMTESA®, a therapeutic agent for overactive bladder, grew in the U.S. On the other hand, our consolidated revenue was 152.6 billion yen, a decrease of 166.6 billion yen year-on-year, mainly due to the impact of the expiration of exclusive marketing rights of LATUDA®, an atypical antipsychotic, in the U.S. and the exclusion of Sumitomo Pharma Food & Chemical Co., Ltd. from the Group along with the transfer of all shares.
Core operating loss was 65.8 billion yen, down 90.7 billion yen year-on-year, owing to a significant decrease in gross profit on account of the revenue decline, despite decreases in selling, general and administrative expenses mainly due to the combination of the group companies in the U.S. as well as the recording of other operating income resulting from the transfer of the shares of Sumitomo Pharma Animal Health Co., Ltd. Net loss attributable to owners of the parent was 67.7 billion yen, down 60.5 billion yen year-on-year, mainly due to the recording of business structure improvement expenses following the combination of the group companies in the U.S. and otherwise, despite the recording of forex gains.
As for the consolidated financial forecasts for FY2023, progress of revenue vis-à-vis the forecasts appears modest as of the second quarter in FY2023, but we have decided to leave the forecasts (revenue of 362.0 billion yen, down 193.5 billion yen year-on-year; core operating loss of 62.0 billion yen, down 78.4 billion yen year-on-year; net loss attributable to owners of the parent of 80.0 billion yen, down 5.5 billion yen year-on-year) unchanged as we need to determine the effects of the ongoing expansionary measures. We sincerely apologize for the anxiety caused by these forecasts of negative core operating profit and net profit attributable to owners of the parent.

We are currently partnering with Otsuka Pharmaceutical Co., Ltd. to develop ulotaront, which is in one of our priority disease areas of Psychiatry & Neurology, for three indications of schizophrenia, adjunctive Major Depressive Disorder, and Generalized Anxiety Disorder, with the aim of achieving its early launch and product value maximization. For the two Phase 3 clinical studies in the U.S. evaluating ulotaront in schizophrenia, we received the topline results in July 2023 that neither met their primary endpoint. At present, we are working with Otsuka Pharmaceutical to further analyze the data, in an effort to determine what step to take next. We are planning to finalize our development strategy in the fourth quarter of FY2023. Meanwhile, we gained positive topline results from a Phase 3 clinical study involving GEMTESA®, which we expect to become a blockbuster; it met its co-primary endpoints in September 2023 for overactive bladder with benign prostatic hyperplasia. Based on the results of this study, we are planning to submit an application for approval of additional indication in the fourth quarter of FY2023.

In April 2023, we published the Mid-term Business Plan 2027, which will guide us through the coming five years, in which we will work to establish a foothold for achieving renewed growth after the expiration of the exclusive marketing period for LATUDA® in the U.S. and becoming a “Global Specialized Player (GSP).” Accordingly, we are working to establish a revenue base facilitating sustained growth chiefly through the maximization of value for the three key products and to transform its business structure through R&D, bringing our own innovations to fruition in the form of business. At the same time, we have combined the U.S. group companies to reengineer the group operating structure and will work to change to a flexible and efficient business foundation.

As for our basic policy regarding shareholder returns, we believe it important to distribute surpluses in an appropriate manner, reflecting any improvement in our performance. Accordingly, a performance-linked dividend hike will be considered in addition to a consistent dividend payout. As for the forecast for FY2023, we expect to post a core operating loss due to the significant impact of the expiration of the exclusive marketing period for LATUDA® in the U.S. Consequently, we will suspend dividends for FY2023. As for FY2024, when core operating profit is expected, our policy is to resume dividend payout, and we will aim to pay consistent dividends thereafter.

Based on our “Mid-term Business Plan 2027,” we will work together as one group globally to drive our business strategy and deliver results. We will make every effort to promptly recover our performance and deeply appreciate your kind understanding and continued support.

November 2023