Chugai Pharmaceutical : Script (including Q&A)

CHUGAI PHARMACEUTICAL CO., LTD.

1Q Results (Jan-Mar 2021) Conference Call

April 22, 2021

Event Summary

[Company Name]	CHUGAI PHARMACEUTICAL CO., LTD.
[Company ID]	4519-QCODE
[Event Language]	JPN
[Event Type]	Earnings Announcement
[Event Name]	1Q Results (Jan-Mar 2021) Conference Call
[Fiscal Period]	FY2021 Q1
[Date]	April 22, 2021
[Number of Pages]	36
[Time]	18:00 - 19:12
	(Total: 72 minutes, Presentation: 40 minutes, Q&A: 32 minutes)
[Venue]	Dial-in
[Venue Size]
[Participants]
[Number of Speakers]	5
	Osamu Okuda	President, CEO
	Toshiaki Itagaki	Executive Vice President, CFO
	Tetsuya Yamaguchi	Senior Vice President, Head of Project &
		Lifecycle Management Unit
	Shinji Hidaka	Vice President, Head of Marketing & Sales
		Division
[Analyst Names]*	Fumiyoshi Sakai	Credit Suisse Securities (Japan) Limited
	Akinori Ueda	Goldman Sachs Japan Co., Ltd.
	Hidemaru Yamaguchi	Citigroup Global Markets Japan Inc.
	Motoya Kohtani	Nomura Securities Co., Ltd.
	Shinichiro Muraoka	Morgan Stanley MUFG Securities Co., Ltd.
	Seiji Wakao	JPMorgan Securities Japan Co., Ltd.

*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A.

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Presentation

Sasai: We will now begin the CHUGAI PHARMACEUTICAL CO., LTD. Q1 2021 conference call.

Thank you very much for taking time out of your busy schedule to join us today. My name is Sasai, and I am the moderator of this session. After the presentation, there will be a 30-minutequestion-and-answer period, during which any questions you may have will be answered.

We will now hear from Dr. Okuda, CEO; Mr. Itagaki, CFO; and Mr. Yamaguchi, Head of Project & Lifecycle Management Unit. Please have your presentation and disclosure materials ready.

We will now begin the presentation.

First of all, Dr. Okuda will give an overall explanation of Q1 results.

Okuda: Thank you. I will now give an overview of the first quarter. Please refer to page 5 of your slides.

Revenues for the January to March period was JPY168.8 billion, down 5.9% from the same period last year. Operating profit was JPY65.4 billion, down 11.7% from the previous year, marking the start of a decline in both revenues and profits.

However, looking at the rate of progress toward the forecast, we are 21.1% of the way toward the JPY800 billion in revenues forecast for the current fiscal year. The figure is 20.4% for the operating profit forecast. This is almost in line with our initial expectations.

Since there is no change in the outlook for earnings growth after April, we expect to achieve the initial forecast of increased revenues and profits for the full year.

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Next, I will discuss the top line. Please see page 6.

In Japan, the oncology product Tecentriq is steadily penetrating the market, and Kadcyla is also performing well. In the primary area, in addition to the steady market penetration of Enspryng, sales of Hemlibra have been growing steadily.

On the other hand, sales of Avastin, Herceptin, and Edirol decreased due to the NHI price revision and the penetration of generics.

Overall sales in Japan decreased compared to the same period last year despite an increase in volume. This is due to the significant impact of the NHI price revision in April last year.

Overseas sales decreased due to a decline in export unit prices and a bias due to the export timing of Actemra.

Royalties and profit-sharing income for Hemlibra and Actemra increased, reflecting the growth in overseas local sales.

Overall, current fiscal year started from decrease in revenues, but are progressing as expected at the beginning of the fiscal year.

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Please see page 7.

On the R&D front, we obtained approval for 2 first-in-class products that are expected to contribute to sales from this fiscal year. We have also made great progress in the development of therapeutic agents for COVID- 19.

Polivy is a novel anti-cancerantibody-drug conjugate indicated for the treatment of relapsed or refractory diffuse large B-cell lymphoma. In overseas clinical trials, a higher complete response rate was observed compared to existing treatments.

Based on these results, the drug has already been approved and launched overseas and is being used by many patients. In the future, we plan to expand the indications to include first-line treatment, and we will work to achieve market penetration as soon as possible.

Secondly, our comprehensive cancer genomic profiling, FoundationOne CDx, launched in June 2019, is already in use at many core and collaborating hospitals for cancer genome medicine. We have now received approval for the FoundationOne Liquid CDx Cancer Genomic Profile, which can detect cancer gene mutations from tumor-derived DNA in the blood.

With the addition of FoundationOne Liquid CDx, a blood sample, to the existing FoundationOne CDx, which uses tumor tissue as a sample, we believe that we can meet the diverse needs of the medical field in a mutually complementary manner. This is the first cancer genomic profiling test to be approved in Japan using blood samples.

Next, we would like to provide an update on the status of our development pipeline for COVID-19, for which there is concern about the spread of mutant strains.

Actemra failed to meet its primary endpoint in the REMDACTA study, which evaluated its efficacy in combination with Remdesivir. Since we have conducted several clinical trials so far, we are currently analyzing the results of those trials in an integrated manner.

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