Sumitomo Dainippon Pharma : Jul. 29, 2021 Q1 FY2021 Conference Call transcript(PDF/746KB)

Summary of Conference Call for Q1 FY2021

Date/time: Thursday July 29, 2021; 17:00-17:45 (Q&A Session: 17:10 - approx. 35 minutes) Attendees from Sumitomo Dainippon Pharma:

Hiroshi Nomura	Representative Director, President and CEO
Toru Kimura	Representative Director, Executive Vice President/Chief Scientific Officer
Hisayoshi Kashima	Senior Director, Finance & Accounting Department

Disclaimer:

This is a summary of the Q1 FY2021 call and clarifies certain information provided. Myovant Sciences Ltd. ("Myovant") is listed on the New York Stock Exchange, and the Group holds approximately 53% of the outstanding shares of Myovant. As a result, Myovant is consolidated into the results. This material contains information about Myovant, which is based on information disclosed by Myovant. For more information on Myovant, please visit https://www.myovant.com/.

Opening remarks

(Nomura) Thank you very much for joining us on the conference call concerning our financial results for the first quarter of the fiscal year ending March 31, 2022 (FY2021). I would like to take this opportunity to express my appreciation to you all for your interest in our business and your valuable comments. I imagine you want to know more about the numbers we announced earlier today, such as year-on-year comparisons and progress vis-à-vis our full-year forecasts. I am happy to answer questions you may have as long as our time permits.

Presentation

(Kashima) It is my pleasure to be able to walk you through our financial results for the first quarter of fiscal 2021, as well as the clinical development status. Please refer to the presentation material.

1

Please turn to Slide #3.

Here we have the IFRS financial results for the first quarter of fiscal 2021, which are calculated on the core basis. Revenue amounted to 131.2 billion yen, down by 2.7 billion yen year-on-year. While the China segment recorded revenue growth, revenue decreased in Japan, North America, and Other Regions segments.

SG&A expenses increased by 14.2 billion yen, primarily due to the start of full-scale marketing activities by Sumitovant Biopharma's subsidiaries and increased amortization of intangible assets. Meanwhile, R&D expenses decreased, mainly because of a drop in the oncology area and spending by Myovant Sciences.

As a result, core operating profit was 8.5 billion yen, down by 15.8 billion yen year-on-year.

With no major increases/decreases in fair value of contingent consideration and other non-recurring items from the previous fiscal year, operating profit came in as 8.3 billion yen, down by 15.0 billion yen year-on-year.

Net profit attributable to owners of the parent, which reflects adjustment for the non-controlling interests in Myovant Sciences, dropped sharply by 13.5 billion yen to 4.8 billion yen.

Our revenue and profit on each level made a somewhat slow start in the first quarter, but we have not revised our original guidance for the full year as we currently expect additional revenue from a possible new alliance and sales expansion of new products in the North America segment.

2

Please turn to Slide #4 for revenue of major products in Japan. Revenue was 38.7 billion yen, down by 1.1 billion yen year-on-year.

Sales of LATUDA®, Trulicity®, and other products grew, but the segment total declined due to lower sales of Equa®/EquMet® on the back of the National Health Insurance (NHI) drug price revisions, and a decline in sales of long-listed drugs.

Progress versus the full-year forecasts for the segment was 25.8%, which is in line with our expectations.

On Slide #5 is revenue of major products in the North America and China segments.

3

Segment sales in North America decreased by 2.7 billion yen year-on-year to 71.4 billion yen. LATUDA® sales decreased by 3.1% year-on-year to 51.4 billion yen. This is primarily because channel inventory built up in response to high sell-out in December 2020, and lingering until May 2021. We believe that the inventory level had returned to normal by June 2021.

BROVANA® also saw a decline in sales as its exclusivity was lost in June 2021.

New product offerings from Sumitovant's subsidiaries, including Urovant Sciences and Myovant Sciences, include ORGOVYX™, a therapeutic agent for prostate cancer released in January 2021, GEMTESA®, a therapeutic agent for overactive bladder released in April 2021, and MYFEMBREE®, a therapeutic agent for uterine fibroids released in June 2021. GEMTESA® was released by Urovant Sciences and ORGOVYX™ and MYFEMBREE® were released by Myovant Sciences. Myovant Sciences expects sales from ORGOVYX™ and MYFEMBREE® to increase going forward, and we expect the same from GEMTESA®. Based on our internal forecasts and information from Myovant Sciences, the progress of these products in the first quarter versus the full-year forecasts is in line with our expectations. Further, lump-sum payments to Myovant Sciences resulting from its alliances for relugolix is reported under "Others."

Segment sales in China amounted to 8.5 billion yen, up by 66.3% year-on-year. This significant increase is a reaction to sluggish shipments due to COVID-19 in the corresponding period in the previous year. Progress versus the full-year forecasts is in line with our expectations.

Slide #6 shows financial results by segment.

In the Japan segment, core segment profit decreased by 1.3 billion yen to 6.7 billion yen. This is because there was a revenue decline as well as an increase in SG&A expenses as spending rebounded after being curbed in the corresponding period last year due to COVID-19.

4

In the North America segment, core segment profit decreased by 17.7 billion yen to 18.1 billion yen. This is primarily owing to an increase in expenses following the start of full-scale marketing activities by Myovant Sciences and Urovant Sciences and an increase in the amortization of intangible assets, in addition to a revenue decline.

In the China segment, core segment profit increased by 1.6 billion yen, as an increase in expenses was more than offset by revenue growth.

In the Other Regions segment, core segment profit decreased as a high level of sales in the corresponding period of the previous year was largely achieved as trading partners built up their inventories.

Please skip to Slide #8.

Let me move on to talk about our development pipeline. This table shows our development pipeline by stages.

Indicated in red are changes that have been made since May this year, which I will come back to on the next slide.

Also, SEP-363856 now has a generic name, ulotaront.

5