TOKYO - Chugai Pharmaceutical Co., Ltd. (TOKYO: 4519) announced its financial results for the third quarter of fiscal year 2022.
'Chugai achieved record-high revenues and profits for the first nine months of 2022 following the strong first half of the year. Domestic sales were driven by growing market penetration of new products including Vabysmo, the new ophthalmic drug launched in May 2022, while Hemlibra continued to increase overseas sales. Research and Development also progressed well in the third quarter, particularly for in-house projects which are expected to propel our medium- to long-term growth. The world's first filing for regulatory approval of our anti-C5 recycling antibody, crovalimab, was accepted in China.
In addition, clinical development was initiated for DONQ52, a new bispecific antibody. We will continue to focus all our efforts on innovation to address unmet medical needs so that we can contribute to patients waiting for new treatments,' said Dr. Osamu Okuda, Chugai's President and CEO.
Third Quarter Financial Results (Core results, January to September 2022)
Chugai reported record-high financial results for the first nine months in 2022, as revenues increased by 7.7% and operating profit increased by 2.9% over the same period last year.
An increase in domestic and overseas sales outweighed a decrease in royalties and other operating income, resulting in a 7.7% increase in total revenues. Domestic sales increased by 6.9%. Sales in the Oncology field decreased by 2.4% as the impact of the NHI drug price revision and biosimilars in mature products, including Avastin and Herceptin, exceeded the sales growth from a new product Polivy, which was approved for an additional indication in August this year, and a mainstay product Kadcyla as well as Foundation Medicine business. In the Specialty field, renamed from the Primary field following the organizational change in July, sales increased by 17.1% due to the contributions from the supply of Ronapreve to the government in the first quarter, as well as an approximately 20% increase in sales of the mainstay product Hemlibra. Steady market penetration of new products, including Vabysmo launched in May, also contributed. The increase in overseas sales was driven by a 2-times increase of Hemlibra owing to the full-scale export to Roche at regular shipping price and a more than 20% increase in Actemra, which obtained emergency use authorization and regulatory approval for severe COVID-19 in the U.S. and Europe, respectively, since last June. On the other hand, royalties and other operating income decreased by approximately 40%, mainly due to a significant decrease in royalty income related to the initial shipments of Hemlibra.
Cost to sales ratio improved by 1.2 percentage points year-on-year to 40.7%, mainly due to a change in the product mix. Operating expenses grew by 4.3% as both marketing and distribution and research and development expenses increased, while general and administration expenses decreased. Marketing and distribution expenses increased mainly due to foreign exchange effects. Research and development expenses increased mainly due to the progress of projects under development and foreign exchange effects. General and administration expenses decreased primarily due to decreases in various expenses, as well as recognizing gains on sales of property, plant and equipment. As a result, Core operating profit totaled JPY299.0 billion (+2.9%).
Quarterly Financial Results (Core results, July to September 2022)
Revenues and operating profit for the third quarter (Jul-Sep) both decreased by approximately 20% against the same period last year. The leading cause of the decreases were that the supply of Ronapreve to the government, which was JPY42.8 billion yen in the same period last year, did not occur in the quarter under review, along with the significant decrease in royalty income related to the initial shipments of Hemlibra. Sales decreased by approximately 20%. While overseas sales increased by 3.7%, domestic sales decreased by less than 30% with the impact of Ronapreve, resulting in a decrease in overall sales. In domestic sales, the Oncology field reported a 5.1% decrease as mature products such as sales of Avastin and Herceptin decreased due to the NHI drug price revision and biosimilar impact, despite increases in a new product Polivy and a mainstay product Kadcyla. Sales of the Specialty field decreased by more than 40%, primarily for the supply of Ronapreve to the government last year. Excluding Ronapreve, sales of the Specialty field increased by 1.4%, driven by the contribution from new products including Vabysmo, which was launched in May this year. Overseas sales increased by 3.7% as the increase of Hemlibra owing to the full-scale export to Roche at regular shipping price outweighed a more than 30% decrease in sales of Actemra caused by a delay in production. In addition, we launched Edirol in China in July. Royalties and other operating income decreased by less than 40% chiefly due to the significant decrease in royalty income related to the initial shipments of Hemlibra. The cost to sales ratio improved by approximately eight percentage points against the same period last year, mainly due to a higher proportion of in-house products in total sales. Operating expenses were flat against the same period last year. No changes have been made in the full-year forecasts announced at the beginning of the fiscal year, while revenues and operating profit both decreased for the quarter under review.
R&D activities
The Company also made good progress in research and development. Among in-house projects, which will contribute to the Company's medium-to long-term growth, Maruho launched the anti-IL-31 receptor antibody Mitchga in August as a treatment for itching associated with atopic dermatitis. Maruho is the licensee of the product in Japan. The world's first filing of regulatory application for the anti-C5 recycling antibody, crovalimab, was accepted in China with a priority review designation for the treatment of paroxysmal nocturnal hemoglobinuria (PNH). Clinical development of an existing product Enspryng has started for new indications, myelin oligodendrocyte glycoprotein antibody-associated disease (MOGAD) and autoimmune encephalitis (AIE). In addition, clinical development of a new bispecific antibody project, DONQ52, has been initiated for celiac disease, a disease with no approved drug treatments available. Furthermore, Chugai entered into an agreement with Roche to out-license NXT007, which is being developed as the next-generation project following Hemlibra.
As for in-licensed products from Roche, an additional indication for Polivy was approved as the first new treatment in 20 years for previously untreated diffuse large B-cell lymphoma. Chugai also filed an application for approval of RG6264, a fixed-dose subcutaneous combination of pertuzumab and trastuzumab, for the treatment of HER2-positive breast and colorectal cancer. Pertuzumab and trastuzumab are the same monoclonal antibodies as in Perjeta and Herceptin, respectively. Several new oncology projects have been added to our pipeline, including SHP2 inhibitor RG6433 and KRAS G12C inhibitor RG6330 for solid tumors.
In drug discovery research, Chugai entered into a license agreement with Noile-Immune Biotech in August for their PRIME CAR-T technology, making steady progress in its efforts toward multi-modality drug discovery through external collaboration.
About Core results
Chugai discloses its results on a Core basis from 2013 in conjunction with its decision to apply IFRS. Core results are the results after adjusting non-Core items to IFRS results. Chugai's recognition of non-recurring items may differ from that of Roche due to the difference in the scale of operations, the scope of business and other factors. Core results are used by Chugai as an internal performance indicator, for explaining the underlying business performance both internally and externally, and as the basis for payment-by-results such as a return to shareholders.
Contact:
Tomoko Shimizu
Tel: +81-3-3273-0881
Email: pr@chugai-pharm.co.jp
CHUGAI PHARMACEUTICAL CO., LTD 
